[Current] April-Week1-P1: Economy-Monetary Policy update,GI Tagging for Kanauj Attar,Predatory Pricing by Spicejet, BIS new labelling guidlines for electronics

RBI repo rate historic trend graph

[Current] April-Week1-P1: Economy-Monetary Policy update,GI Tagging for Kanauj Attar,Predatory Pricing by Spicejet, BIS new labelling guidlines for electronics

  1. [Act 1] Economy
  2. E1: RBI: Monetary Policy April 2014
  3. E2: GI Tagging & EC model code
    1. #1: Dharmavaram Pattu Silk Sarees: Andhra
    2. #2: Kannauj Attar, UP
    3. #3: Muradabad Metal craft UP
    4. #4: Saharanpur woodcraft, UP
    5. #5: Firozabad Glassware, UP
  4. E3: Predatory pricing by Aviation Companies
  5. E4: BIS New labelling guidelines for Electronics

[Act 1] Economy

Current Affairs for April week 1 (1st to 7th April). Total three parts

  1. Part 1/3: Economy= You’re here. (bank license topic discussed separately)
  2. Part 2/3: Environment, Biodiversity, Polity and Culture click me
  3. Part 3/3: Diplomacy-international relations (click me)

E1: RBI: Monetary Policy April 2014

  • Make sure you know the theory of repo, reverse repo, LAF, MSF, CRR, SLR, if not then click me
  • 28th Jan 2014: Monetary policy (and Rajan said he’d update it after two months = Feb, March)
  • 1st April 2014: monetary policy update

Key rates unchanged:

RBI repo rate historic trend graph

Bank Rate 9%
Marginal standing facility (MSF) 9%
LAF Repo rate (policy rate) 8%
Reverse Repo rate 7%
Reserve ratios Cash Reserve ratio (CRR) 4%
Statutory liquidity ratio (SLR) 23%

These rates are one and same like previous update (Feb 2014).

Rajan did not change the policy rate (repo rate) for the following reasons

Graph India WPI CPI trend 2014

  1. Yes, inflation has declined but not sufficient enough where repo rate should be reduced.
  2. Rajan fears that even in 2015, (CPI) inflation will not go below 8%, because…
  3. Geo-political developments (like Ukrain) and their (negative) impact on crude oil, gold & other international commodity prices.
  4. El Nino effect = less monsoon = less food production
  5. fuel, fertilizer and electricity subsidies = more money supply (from government’s side)
  6. MSP (Minimum support prices) on foodgrains. = more money supply (from government’s side)

Other measures

  1. Accepted some recommendations of Urjit Patel Committee, like targeting CPI (combined) inflation. Detailed coverage of Urjit Patel, pros/cons discussed already in earlier article click me.
  2. KYC norms are being simplified for Foreign Portfolio Investors. (FIIs)
  3. To reduce volatility of FII investment in Government securities (G-Sec), Rajan made new rule- those FIIs can only invest in G-sec only with maturity of one year or above.
  4. will allow more companies /entities to get Banking correspondence (BC) license.

Rajan’s other projections:

Chart India GDP growth Rate 2010 to 2014

2013-14 2014-15
GDP growth rate% 5 5-6
CAD as % of GDP 2%

Minimum Balance

  • Rajan asked banks not to levy penal charges on customer, if he doesn’t maintain minimum balance. (but bank may suspend his facilities on until he puts money)
  • Counter argument:= since banks have to incur expenses for record maintenance, staff salary even on such non-minimum balance dormant accounts. So banks will raise the charges on ATM, Debit card etc. on all customers, to cover those losses and keep profit margin same.

Table: Penalty rates at the moment:

Bank Min. Balance necessary (monthly) penalty (Urban) Penalty (rural)
SBI 1000 204 102
ICICI
  • 10000 (Urban)
  • 5000 (rural)
250-350 250-350
HDFC
KOTAK MAHINDRA
HSBC 1.5 lakh 350
Citibank 2 lakh 500

E2: GI Tagging & EC model code

GI registration withheld EC code of conduct

  • What is Geographical indicator tag, what benefit does it offer? = already covered in my old article Click ME
  • Geographical indications (GI) registry is one type of quasi-judicial body.
  • But as per Election commission’s model code of conduct, even they had to pause giving new GI-registration.
  • Following is the list of product awaiting GI registration:
Dharmavaram handloom silk sari Andhra
Firozabad glass UP
Kannauj perfume UP
Moradabad metal craft UP
Saharanpur woodcraft UP

These places/items become important at two places

  • MCQ : theory / static content
  • GS Mains Paper 1: (Geography) location factor of various industries.

#1: Dharmavaram Pattu Silk Sarees: Andhra

Location factors:

  1. Climate: semi-arid tropical = less rainfall = good because silk yarn breaks easily in rainy weather.
  2. Water quality-soft = best suited for “degumming” and dying the silk.
  3. Raw silk as such as harsh and unsuitable for dye treatment.
  4. Hence it is subjected to degumming treatment= soak in boiling water with soap and soda ash.
  5. But if water is hard, then soap/soda won’t dissolve easily. That’s why soft water essential.
  6. >1000 ft. above sea level = temperature ~25-40 degree = good atmosphere for labor. Because Dharmavaram silk is essentially handloom woven and not power loom.
  7. This town is ~50 kms away from Anantapur in the Rayalaseema region of Andhra Pradesh= good transportation facilities

Raw material:

  • 100% pure mulberry silk only. (no mixing with cotton etc.)
  • Zari brought from Surat. (lightweight, non-perisable) hence silk industry doesn’t need to be setup near Surat’s zari. PS: Surat Zari also enjoys GI status.

Designs:

  • Lepakshi temple murals (near Anatapur)
  • various flora, fauna and epic scenes.

Acid Dye (theory)

  1. Acid dyes can easily color protein fibres like silk and wool. (Hence acid dyes used in silk industry and not alkaline dyes).
  2. Acid dye colors highly durable and can last upto 50 years.
  3. Applied generally in the presence of an organic or inorganic acid and hence are called acid dyes.
  4. After dyeing phase is over, workers mix Sodium Hydroxide to remaining dye => acid neutralized=> effluent discarded in the drainage. Hence the process eco-friendly. No chemical diseases reported in the region.

Product:

  • Silk Pattu Sarees And Paavadas for grand occasions
  • also for Bharath Natyam and Kuchipudi dancers.

#2: Kannauj Attar, UP

History:

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