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16th September 2017 Part-1: Daily News Analysis
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Export currency mechanism explained

Jatin Verma is teaching live on Unacademy Plus

Jatin Verma
Have appeared in UPSC CSE thrice. Have been taking Unacademy Plus courses Academics- Polity, Economics & Current Affairs.

U
Unacademy user
mam.. you are awesome ....thanks for condensing the information....it saves really a lot of time .
questions - answers a) if any country wants to decrease fiscal deficit of the country they need to do many things a) reduces the expenditures of countries b) increase economic growth c) increase in taxes but on a limit d) bailout e) changes in policies so here ans would be option 1 and 3 second question - Capital Budget consists of capital receipts and capital payments. a) capital receipts are loans raised by Government from public, called market loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State and Union Territory Governments and other parties. b) Capital payments consist of capital expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances granted by Central Government to State and Union Territory Governments, Government companies, Corporations and other parties. so answer is all three options are correct third question - madhesi belongs from nepal even according to nepal government madhesi issue raised in nepal because of india. there are many relatives of madhesi people are from india b) rohingya from myanmar c) khurd not from Bangladesh they are from Syria
Shashank jain
2 years ago
sir please review my answers
Jatin Verma
2 years ago
Reviewed. Try to save your time by not writing so much here. Make your own notes
Shashank jain
2 years ago
ok sir thank you so much
sir,that means depreciation of rupee makes country's current account surplus.. but is value of rupee depriciation favourable for economic growth of country.? because if value of rupee depreciate then it will be less import goods.. so how our industries based on imported oriented will grow...? sir please clear this doubt..
Abhishek Gupta
2 years ago
CAD is not a certain indicator of economic growh there are other factors too. In one way if a country has CAD(not toooooooo much) then it means that country is having high demands i.e. people have money there with them, it means economy is growing there is no slowdown.
Abhishek Gupta
2 years ago
Also as India is having very high population in middle income group, so it is likely to have trade deficit with other countries. Its normal; but if CAD is in India's favour then it will certainly help economy.
Poonam Bamel
2 years ago
@sagar pandey yes, Depreciation can improve current account balance but do not confuse it with favourable economic growth coz imports are comparatively much lesser as compared to Govt. foreign debt which improves with appreciation of rupee (GOI now pays less rupees as interest payments e.g. earlier 70 billion but now only 63 billion). Hope that helps!!
Sir the remittances India receives from NRIs is an example of export as it is inflow of money, and India was recently ranked as one of the top remittances receiving country. How does remittances affect CAD. please explain
Yash M
2 years ago
plz correct me if i am conceptually wrong anywhere.
Abhishek Gupta
2 years ago
more remittances means more strengthening of economy. Because remittances comes in form of foreign currency so availability of foreign currency reserve in India increases, thus value of rupee increases i.e. rupee strengthens in global market thus reducing CAD(coz of foreign reserve availability, Indin govt can trade with respective foreign country thus our rupee will be less in global market i.e. rupee gains more value)
Sagar Sharma
2 years ago
Remittance received is inflow of money but it can't be categorized into exports as no good or services is going outside the country... It's basically called "Transfer Money".. It helps in reducing CAD considering import has not increased.... Overall there are many domestic and international factors that affects CAD and Exchange rate... I recommend you to read the last chapter of Class XII Ncert "Introductory Macroeconomics" for better clarity..
Yash M
2 years ago
So basically if there is an option in prelims saying remittances reduces CAD so it will be true but remittances means export will be false. Thanks @Abhishek & @Sagar
Yash M
2 years ago
However if remittances strengthens money, doesn't it mean it will widen CAD, as Jatin sir explained in this lesson that a powerful money lures people to import more (say buying more Iphones) thus on a macroeconomic level it will cause CAD. So does it imply more forex leads to more CAD? Please correct any conceptual mistakes. Thanks!
Sagar Sharma
2 years ago
Obviously, Remittances doesn't means exports.... Any funds received in the country will be Inward Remittances and funds going outside the country will be Outward Remittances... Whether the funds are against Exports, Transfer payments(A2 payments), for FDI or Merchant Exports doesn't matter... The Inflow will always reduce CAD considering less fluctuation in domestic demand... Now, Whether Remittance strengthen money, Not always.... Rupee appreciation leads to more import and thus increase CAD.... Now, Forex leads to more CAD,, Of course not... In import the Forex is not coming instead we are paying , So, increase in Forex Reserve will reduce CAD... It's little confusing,,, Hope I have helped you... Hope you have gone through the NCERT, it's very basis but will surely help.. I worked in Trade Finance, so my interpretation may confuse you....
Yash M
2 years ago
Ok thanks I will read ncert macroeconomics last chapter
i hv gv one suggestion or request plz provide model answer atleast one for every week send same info on telegram that u send on fb tc
Thank you so much sir ☺. After mains if you get time please do make a course on economy. You really explain it so well.
Hungry Lion
2 years ago
i think jatin bhai 18 k liye prepare kr rahe h
  1. DAILY NEWS ANALYSIS from THE HINDU September 2017 By Jatin Verma Educator Unacademy


  2. News Articles to be discussed I. Rupee, gold widen current account gap- Rupee Appreciation explained! 2. Exports climb 10.3% reversing 5-month slowdown 3. External debt dips 2.7% to $471.9 bn as NRI deposits fall 4. Unions toughen stand on reforms 5 'Recurving, cyclones reduced rain in August. 6. Pay relief in cases of unnatural jail death: SC. 7. SC issues notice on student safety 8. Centre plans to borrow for infra development 9. Will push Myanmar on refugees, India tells Dhaka 10. Indigenous artillery gun sets new record in range. II. Astra missile completes development trials 12. World News. North Korea fires missile over Japan. News Editorials I. Understanding the slowdown 2. The arc to Tokyo


  3. ..al 81%. 11:56 stl 81 % 11 :57 Jatin Verma Follow 155k Followers Daily Current Affairs MCQs for August 2017 Ratings & Reviews 421 Ratings WhatsApp Roman Saini Facebook A great course by Jatin Verma where he has literally covered all the important news from The Hindu. Must watch Copy to Clipboard Mohit Rai + More If i achieve my aim, my first salary will go to this great individual making this great informative and well-researched videos. I should take this opportunity to thank and congratulate him for the wonderful work he is doing for all the aspirants. He is meticulous and almost perfect in his approach and understanding. Please keen making such videos as a single Targeted For All G.K. based Government Exams Objective This is a daily recurring course on impartant 26k Enrollments Enroll 5.4k Enrollments


  4. Business Pagel3-Rupee, gold widen current account gap A stronger rupee, in addition to gold imports before the Goods and Services Tax regime kicked in, has led to a sharp widening of the current account deficit (CAD) to $14.3 billion in the April June period, which was 2.4% of the GDP. In the year earlier period, the CAD was $0.4 billion, which was 0.1% of GDP ion or 0.6% of GDP in the January-March period. The widening of the CAD on a year-on-year basis was primarily on account of: -A higher trade deficit ($41.2 billion) brought about by a larger increase in merchandise imports relative to exports. -The rise in CAD was due to a spike in gold imports before the GST kicked in from July I. -The stronger rupee had encouraged imports


  5. Effect of Rupee appreciation on import price of Goods: Rs70,000 I$ equal to Rs 70]. Rs 63,000 I$ eual to Rs. 63] Result: More Imports Price $ 1000 Effect of Rupee appreciation on Exporters Cost= 6500 Rs Intex Phone Rs. 7000 in India I$-Rs 70. Price in 100 Intex Phone Rs. 7000 in India. I$Rs 63. Price in 100 Rs. 6300


  6. Business Pagel 1:Exports climb 10.3% reversing 5-month slowdown India's merchandise exports grew 1 0.3% year-on-year to $23.8 billion in August, reversing a declining trend witnessed for five straight months. Goods imports grew 21.02% during August to $35.46 billion. This resulted in the trade deficit widening to $11.6 billion, from $7.7 billion in August 2016. However, the shortfall was lower than the $11.45 billion seen in July. Trade Deficit-Goods Imports-Goods Exports. Reasons behind the increase: [iIThe jump in shipments was driven mainly by engineering goods, petroleum products and chemicals. [i]Indian exporters who seem to be benefiting from recovery in major global markets, including the key economies of the U.S. and Europe. 26 out of 30 major product groups were in positive growth territory in August, Labour intensive sectors such as gems and jewellery,leather, apparel and handicraft either posted negative growth or modest growth, which is a worrisome sign.


  7. . August data was in continuance with the positive growth exhibited by goods exports since September 2016.While their performance has been staying in the positive growth territory for the previous I I months, what gave a greater relief to the exporting community was that the 10.3% growth in August had reversed the trend of a fall in growth for five consecutive months since 27.6% in March-down to a minuscule 3.9% in July mainly due to the weakness in many labour-intensive segments. In August 2017,the major commodity groups of exports showing positive growth over the corresponding month of last year were -engineering goods (19.53%). -Petroleum Products (36.56%) -organic and inorganic chemicals (32.41 %), -drugs and pharmaceuticals (4.21 %), and -ready-made garments of all textiles (0.56%). Non-petroleum and non gems & jewelry exports rose 14.47% to $17.74 billion, Major commodity group of imports showing high growth in August 201 7 were -petroleum, crude & products (14.22%) -electronic goods (27.44%) -machinery, electrical & non-electrical (18.35%) -gold (68.90%) and -pearls, precious & semi-precious stones (30.88%). I


  8. Oil imports during August jumped 14.22% to $7.75 billion, while non-oil imports during the month rose 23.07% to $27.7 billion. Goods exports during April-August 2017-18 increased by 8.57% to $ 1 18.57 billion, while imports for the same period grew 26.63% to $ 1 81 .71 billion. . Trade deficit during April-August was $63.I billion almost double the $34.3 billion in the corresponding period of the last fiscal GST challenges flagged: Federation of Indian Export Organisations (FIEO) said it was worried about future growth as the order booking position from October was not encouraging due to: [i]rising global uncertainties, [ii]rupee volatility and s on the domestic front including those stemming from the Goods and Services Tax (GST): Exporters have stopped taking orders with least or no working capital at their disposal due to blockage of funds under GST and uncertainties looming large on refunds for the months of July to October. FIEO called for an in-depth sectoral analysis to pinpoint factors responsible for decline in such sectors to help all employment generating, small and micro exporters


  9. Business Page l 3: External debt dips 2.7% to $471.9 bn as NRI deposits fall Long-term debt declines 4.4%, short-term debt drops 5.5% Total external debt for the financial year 2016-17 stood at $471.9 billion, declining 2.7% from the previous year's level. . India's external debt stock stood at $471.9 billion at end-March 2017, decreasing by $13.1 billiorn (2.7%) over the level at end-March 2016. . The decline in external debt was due to the decrease in long-term debt particularly NRI deposits and commercial borrowings. At end-March 2017, long-term external debt was $383.9 billion, showing a decrease of 4.4% over the level at end-March 2016," the release said Long-term external debt accounted for 81.4% of total external debt as compared to 82.8% at end-March 2016. Short-term external debt increased by 5.5% to $88 billion as of the end of March 2017 This was due to the increase in trade related credits.


  10. An inter-country comparison based on 'International Debt Statistics 2017'of the World Bank, which presents the debt data for 2015, shows that India continues to be among the less vulnerable countries with its external debt indicators comparing well with other indebted developing countries The ratio of India's external debt stock to gross national income at 23.4% was the fifth lowest and in terms of the cover provided by foreign exchange reserves to external debt, India's position was sixth highest at 69.7% in 2015. . Question: There has been a persistent deficit budget year after year.Which action/actions of the following can be taken by the government to reduce the deficit? [Prelims 2016] I.Reducing Revenue Expenditure 2.Introducing new welfare scheme 3.Rationalizing subsidies 4.Reducing import duties


  11. Business Page-13:Unions toughen stand on reforms A Group of Ministers on labour reforms led by Finance Minister asked the Labour Ministry to discuss five contentious proposals in the Code on Industrial Relations Bill with central trade unions.These include: [i] allowing bigger companies to retrench workers without the government's permission, [ii]increasing the severance pay by three times, in trade union leadership. [iv]changing the definition of workers' and [vlprocedure for recognition of trade unions. Central trade unions continue to oppose the government's plans to ease retrenchment norms and to restrict trade union membership under the Industrial Disputes Act. What are the demands of Trade Unions: -The government should discuss the industrial relations Bill in full detail. -It should not interfere [with] the trade union composition and -not allow factories to retrench workers without the government's nod


  12. . With the Centre's plans to amend the Industrial Disputes Act 1947 taking time, States are going ahead with their own labour law changes to ease retrenchment norms in a bid to attract business locally with Assam joining the race recently. Since labour is a concurrent subject, the Assam Assembly passed amendments to the Industrial Disputes Act to allow companies with a staff of up to 300 to retrench workers without government permission, up from the present requirement of up to 100 workers giving industries with large workforce more flexibility in retrenchment. However,the Assam government's approved Bill will need the Centre's nod to become a law. '3 Codes into one The proposed Bill will combine: [i] Trade Unions Act, 1926, [ilthe Industrial Employment (Standing Orders) Act, 1946, and [ii]Industrial Disputes Act, 1947, into a single code. Till date, apart from Assam, Madhya Pradesh, Haryana, Rajasthan, Andhra Pradesh, Uttarakhand and d have allowed larger firms to retrench workers without seeking its permission by bringing their own amendments to the Industrial Disputes Act.


  13. PAGE-5: 'Recurving' cyclones reduced rain in August. The India Meteorological Department (IMD) had predicted normal monsoon rains in August, typically the second most bountiful monsoon month after July. . A strange pattern of tropical cyclones (TC) in the Western Pacific appear to be the reason for the drying up of monsoon rains in August across India. During the monsoon months, cyclones in the Western Pacific move westwards towards India and aid rain-bearing systems over the sub-continent. But during some years they 'recurve',or start to swing north-east, and do not give as much of a push to the rains as they do in the good monsoon years. . This re-curving frequently happens during the El Nino years but this time it inexplicably occurred when an El Nino hasn't yet taken shape. El Nino years are those when sea surface temperatures in the east equatorial Pacific rise, and often dampen the monsoon. While several international meteorological agencies had raised concerns about a likely El Nino forming in August or September this year, it didn't happen.


  14. Page-8: Pay relief in cases of unnatural jail death: SC. Prison inmates: Custodial Deaths[GSM-2: Polity & Governance] The Supreme Court directed the Chief Justices of all High Courts to register petitions suo motu to identify the kin of prisoners who died unnatural deaths from 2012 and order the States to award them compensation. It is important for the Centre and the State governments to realise that persons who suffer an unnatural death in a prison are also victims sometimes of a crime and sometimes of negligence and apathy or both There is no reason at all to exclude their kin from receiving compensation only because the victim is a criminal. Why and how the compensation to the relatives of those died in Custody is denied: []Normally, the National and State Human Rights Commissions award compensations in cases of custodial torture and deaths. However,compliance by State governments is low as these commissions do not exercise any power of contempt. [i]Besides, the States go for a long-drawn appeal in the High Courts and later on in the Supreme Court, if necessary. HCs in charge: This judgment is significant as the High Court will now directly award compensation and ensure compliance by the States.


  15. Page-8: Centre plans to borrow for infra development Incentives for well-performing States . To break the vicious cycle of low performance leading to low budgetary allocation, the Urban Affairs Ministry is planning to go for market borrowings to incentivise good performance by the States. To overcome the severe infrastructure deficit accumulated over long years, a huge order of investments is required. To meet various contingencies and to ensure fund availability to meet the targets under the new urban mission, we are thinking of mobilising resources from the market." . The concept stems from the eariler Jawaharlal Nehru National Urban Renewal Mission, in which several projects remained incomplete when the Mission was wound up in 2014, primarily due to slow pace of execution and corresponding low provisioning of Central support


  16. Page-9:Will push Myanmar on refugees, India tells Dhaka China Myanmar India Bangladesh India-Banglades . External Affairs Minister assured Bangladesh Prime Minister Sheikh Hasina that New Delhi has been putting pressure on the Myanmar government to ease the situation. MEA said India would push Myanmar both bilaterally and multilaterally to take back their refugees. . India and Bangladesh are "in close touch" over the issue, but that it was "too early" to say whether India and Bangladesh will present a united front at the UNGA, where Bangladesh has made it clear it will call for international pressure on Myanmar. Analysis: The telephone call brings into sharp focus India's continuing dilemma of balancing its interests between two neighbours Bangladesh and Myanmarover the issue, which has seen Delhi shift its position several times since last Thursday, when Prime Minister was in Myanmar for talks with State Councillor Aung San Suu Kyi Humanitarian Assistance: . Operation Insaniyat: India has launched operation Insaniyat (Humanity), demonstrating as it said in its reply to the UNHRC that criticised the deportation plan, that the concern for India's national security does not mean a"lack of compassion". India sent another consignment of aid for Rohingya refugees in Bangladesh.


  17. Deportation row Adding to the complications for the MEA is the Ministry of Home Affairs's move to deport 40,000 Rohingyas who fled to India during violence in 2012. The UNHRC has criticised the move and the Supreme Court will deliberate on it on September 18. . The MHA's move has been particularly perplexing, as it has been unable to explain where the Rohingyas would be deported to, given that Myanmar has reportedly mined its borders to ensure they cannot return, and Bangladesh is filled to capacity with more than 800,000 refugees already. Myanmar refuses to accept around 1.3 million Rohingya that lived in its Rakhine state, bordering Bangladesh, as Myanmar citizens, and consequently, has refused to allow about 5,00,000 that fled earlier and 4,00,000 more that have fled in the last few weeks, to return. Question: Consider the following pair: [Prelims-2016] Community sometimes mentioned in the news In the affairs of I.Kurd Bangladesh 2.Madhesi - Nepal 3.R ohingya Myanma


  18. Page-10:World News. North Korea fires missile over Japan. North Korea fired a ballistic missile over Japan and into the Pacific, responding to new UN sanctions with its furthest-ever missile flight in what analysts called a demonstration of its ability to target Guam North Korea has repeatedly vowed to continue these tests amid what it calls U.S. hostility, by which it means the presence of tens of thousands of U.S. troops in Japan and South Korea. That missile is linked to North Korea's declaration that it means to contain the U.S. Pacific island territory of Guam, which is the home of important U.S. military assets and appears well within the Hwasong-12's range. Missile travelled about 3,700 kilometres and reached a maximum height of 770 kilometres