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The document discusses several topics:
1) The state of agriculture in India and factors contributing to its low growth rate such as changes in consumption patterns and lack of credit.
2) Direct cash transfers as an efficient strategy for reducing poverty and curbing corruption, though it requires large initial investment.
3) An increase in repo rates by the RBI would lead to higher interest rates on loans and possibly lower interest rates on deposits, as well as a decrease in GDP and inflation.
The document discusses several topics:
1) The state of agriculture in India and factors contributing to its low growth rate such as changes in consumption patterns and lack of credit.
2) Direct cash transfers as an efficient strategy for reducing poverty and curbing corruption, though it requires large initial investment.
3) An increase in repo rates by the RBI would lead to higher interest rates on loans and possibly lower interest rates on deposits, as well as a decrease in GDP and inflation.
The document discusses several topics:
1) The state of agriculture in India and factors contributing to its low growth rate such as changes in consumption patterns and lack of credit.
2) Direct cash transfers as an efficient strategy for reducing poverty and curbing corruption, though it requires large initial investment.
3) An increase in repo rates by the RBI would lead to higher interest rates on loans and possibly lower interest rates on deposits, as well as a decrease in GDP and inflation.
Summarize the content of the material in 250 words
The article throws light on the state of agriculture in India and the limited growth it has registered as % GDP. The green revolution added to the cereal cultivation but the consumption patterns have changed over the years. This along with a lack of soft & hard credit, insufficient manpower available, low yield and decline in area under cultivation has led to low growth in agriculture. Contract farming is when a farmer sells his produce under a forward contract with the buyer. Punjab and Andhra Pradesh have already system in place for directing contract farming. Contract farming in India at present is prohibitive & restrictive with Agricultural Produce Marketing Committee dictating terms in many states. The Government of India is trying to introduce reforms in marketing of crops via model legislation and reforming the APMC act at state level. One of the key challenges being faced by Indian Government is spending on resources and subsidies not reaching their beneficiaries. A major problem with subsidies in India is that they are provided on non merit goods where consumption is rival and exclusion is possible, leading to cost recovery. Government spending can be streamlined by fiscal discipline and efficient public spending. Direct cash transfer (DCT) is the government transferring cash to the needy. It is an efficient strategy for reducing poverty. It involves a large initial investment but the cost of DCT reduces with time. DCT is also efficient in curbing corruption and reducing administrative costs.
2. Assuming all other factors remaining constant, what will be the effect of increase in Repo rate by RBI on a. Loans given by banks to consumers An increase in repo rates would lead to a higher interest rate for loans. b. Deposits taken by banks from consumers In case of fixed deposits, depending upon the magnitude of hike in repo rates the interest rate being given by the bank may be lowered. If the percentage increase in repo rates is less, it may lead to no effect on the fixed deposits. c. GDP of the India With an increase in repo rates the GDP of India will come down. d. Inflation rate of India An increase in repo rate would lead to a decrease in the inflation rates.
3. Write a short note on Ukraine debacle The Ukraine Debacle is a term used to describe the bailout of Ukraine on the European Union just before signing an accord. It is considered to be one of the biggest strategic mistakes of all times. Background: In 1991 when the cold war was on, Ukraine declared its independence from USSR. Even after separation Ukraine remained heavily dependent on Russia (then USSR) for oil & natural gas. Ethnic Russians constituted 58% of Ukraines population as per 2001 census. In February 2010 Viktor Yanukovych was declared as the winner of general elections. Back in 2004 he had been accused of widespread vote rigging and owing to Orange Revolution, had to step down as the Prime minister. His pro Russian stance is well reported in the media. His main rival in 2010 elections Yulia Tymoshenko is taken into custody for abuse of power and sentenced to 7 year imprisonment. The Bailout:
The talks of an agreement for closer ties of Ukraine & EU had been in place since 2008. However, the sentencing of Yulia Tymoshenko in 2011 strained the dialogue. The EU had opposed her imprisonment and later sentencing. On 21 November 2013, President Yanukovych and his cabinet rejected Ukraine European Union Association Agreement establishing political association between them. Ukraine also rejected the proposal to let Yulia Tymoshenko leave the country for medical treatment. The Impact: Widespread protests erupted by late November 13 and around 100,000 protesters gathered in Kiev. By December Kiev had emerged as the centre of protests being termed by the media as a tent city owing to the large number of protesters. On 26 November the Ukrainian President gave an interview where he accepted the delay in accepting the agreement in the first place was due to Russia. Russia saw this agreement as a security threat & had pressurized Ukraine to bail out. On 30 th November 2013, the protestors were violently dispersed leading to riots in early December. On 17 December 13 Russia pledges a $ 15 billion (USD) relief package to Ukraine and reduce the gas prices by one-third. President Yanukovych was removed from power by a revolution and an interim government replaced him. New Ukrainian Prime Minister Arseniy Yatseniuk signed the association agreement for political terms in Brussels before the elections. Presidential elections in May elected Petro Poroshenko as the new president. EU and Ukraine are supposed to sign the trade agreement on 27 June 2014.
4. Write a short note on Bitcoin and its future Bitcoin is a virtual currency wherein each transaction is recorded on a public ledger in terms of bitcoin. It is based on the vision of a peer to peer trustless transaction. The bitcoins do not have a single repository and can be obtained in exchange for regular money, products and services and as rewards by individual involved in recording transactions on the public ledger (mining). Mining since 2013 has emerged to be competitive and special hardwares are designed to enable miners note transactions onto the public ledger. As all transactions are recorded in a public ledger bitcoin has privacy issues. They do not have the option of reversal of a transaction leading to security issues in its usage. Although a number of virtual currencies are in place such as facebook credits, QQ coins they have no value for the outside world. Facebook credits have revenue of $1 bn per year and QQ coins were so popular that the Chinese government had to crack down on its usage. Bitcoin sees revenue of $ 30 mn in a day and a volume of $ 5mn. This leads to $ 2bn of bitcoin each year. The thing which sets apart bitcoin from other virtual currencies is the power of speculation and non existence of a controlling body. On the future of bitcoin the world is divided in its opinion. A segment thinks of bitcoins as the new big thing. With virtual currency getting a foothold, its role in fields like ecommerce shall be substantial. As it is based on mistrust and a decentralized model it is free of hyperinflation, devaluation and credit bubbles. They are also popular in war torn states & countries suffering from financial instability as no government can confiscate or devalue bitcoin. Another faction holds the opinion that the speculative nature of bitcoin shall lead to its downfall. Websites such a Silk Road which led to the bust of first bitcoin bubble indicate the criminalized use of bitcoin. Another issue with bitcoin is that they are highly sensitive to media. The value of bitcoin changes rapidly by websites such as twitter and also the news media. The kind of returns one can get is high with bitcoin however the safety issue and sensitivity take it far from being an ideal replacement for conventional money. The future of
bitcoin is open for dialogue but one will have to wait to see whether advantages or disadvantages of this virtual currency drive its growth. 5. Write a short note on the recent monetary policy According to the first bi-monthly monetary policy statement 2014-15, the following decisions have been taken a. The policy repo rate under the liquidity adjustment facility has been kept unchanged. b. The cash reserve ratio of scheduled banks is unchanged at 4.00% of net demand & time liability (NDTL) c. The liquidity provided under the 7-day & 14-day term repos has been increased to 0.75% of NDTL. Liquidity provided by overnight repos under the LAF is decreased to 0.25% of NDTL with immediate effect. d. Introduction of a special term repo facility of 0.25 per cent of NDTL to compensate fully for the reduction in access to liquidity under the ECR with immediate effect. Lead indicators are pointing at sluggish growth rates in Indian Economy for the first quarter of 2014-15. Owing to meteorological predictions of delay in monsoon, the agricultural sector looks at slow growth. The April estimate of real GDP growth for b2014-15 is in line with the central estimate of 5.5%. Reduction in the production of consumer durables and capital goods along with moderate corporate sales and non gold imports shows a continued weakness in consumer demand and weakness. Retail inflation has increased for two consecutive months in April. Indias current account deficit for 2013-14 has narrowed to 1.7% of GDP owing to a reduction in gold imports. In April 2014 the trade deficit narrowed sharply due to positive export growth after 2 months of decline and shrinking of import demands. This is a positive sign and as world trade gathers momentum the exports should improve further. The CPI headline inflation has risen due to sharp increase in food prices. The RBI is committed to take the economy on a disinflationary course with an aim of CPI inflation of 8% by Jan 2015 & CPI inflation of 6% by Jan 2016.
6. Write the differences between WPI and CPI in India Wholesale Price Index (WPI) Consumer Price Index (CPI) WPI is based on the idea that wholesale price covered the general idea of capturing all transactions carried out in the domestic market. CPI measures price change from the perspective of retail buyer. Latest WPI index has a basket of 676 items with 5482 quotations Latest CPI has 200 weighted items. Indicates headline inflation. Indicates inflation affecting an individual. WPI is calculated on an all India basis. CPI includes urban and rural prices and state wise price
changes as well. It is calculated at specific centres and this is then aggregated to an all India index. WPI gives weightage to food products and energy products. Miscellaneous items are not a part of WPI. CPI gives weightage to food products energy products and miscellaneous items Only a single WPI is calculated. 4 CPIs are calculated for different set of workers namely CPI for Industrial workers, CPI for agricultural labourers, CPI for rural labourers & CPI for urban non manual employees. WPI is compiled & published by office of the Economic advisor on a weekly basis. CPI is compiled & published by the labour bureau on a monthly basis.
7. Suggest measures of implementing E-voting option In India (preferably for working professionals and away students) based on the successful models across the world To ensure an inclusive voting system with high voter turnout, we can adopt an Estonia like model. In 2007 Estonia conducted its first e voting election. Methodology: This voting system is built on the base of a national ID card. As India has introduced UID scheme, it can be expanded for voting as well. UID has a good reach into the every nook & corner of the country and it is one card whose data can be modified online without much hassle. However, the government would have to make possession of Aadhar card mandatory for all the citizens. A remote secure network is to be established for ensuring a secure way of voting via the internet. A citizen can cast electronic vote a few days before the actual elections and gets the right to modify it till the date. On the date of the election a citizen may choose to go to a polling station to cast his/her vote which would override his/her e vote. A person cannot change their vote on the Election Day. This methodology provides flexibility to professionals and students who are away from their home constituencies and owing to the large pool of talented IT professionals, such a system can be designed and easily implemented in India.
References i. http://www.reuters.com/article/2013/12/19/us-eu-ukraine-idUSBRE9BI0S420131219 ii. http://euobserver.com/foreign/122578 iii. http://www.bostonglobe.com/opinion/columns/2014/03/03/cold-war-over-russia-isn-zero- sum/Df9VSHeJFpKUz3tRKDjUXJ/story.html iv. http://www.bbc.com/news/world-middle-east-26248275 v. http://en.wikipedia.org/wiki/Ukraine%E2%80%93European_Union_Association_Agreement#History vi. http://news.rapgenius.com/Felix-salmon-the-bitcoin-bubble-and-the-future-of-currency-annotated vii. http://en.wikipedia.org/wiki/Bitcoin viii. http://www.forbes.com/sites/paularosenblum/2014/01/27/bitcoin-the-currency-of-the-future/ ix. http://eaindustry.nic.in/wpi_data_display/display_data.asp x. http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30911 xi. http://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=31329 xii. http://en.wikipedia.org/wiki/Electronic_voting_examples xiii. http://en.wikipedia.org/wiki/Electronic_voting_in_Estonia