GS PAPER: III

RBI keeps repo rate at 6.5% raises GDP growth forecast

Context

• The Reserve Bank of India’s Monetary Policy Committee (MPC) has decided to keep key interest rates unchanged, raise its GDP growth projection to 7%, and maintain an average inflation forecast at 5.4%.
• The RBI Governor warns that inflation could spike through November and December due to supply shocks. The key repo rate remains at 6.5%, and food inflation is expected to be influenced by uncertain food prices. The policy stance focuses on “withdrawal of accommodation.” 

Growth hopes

• The MPC revised its growth forecast for 2023-24 to 7%, with Q3 and Q4 showing 6.5% and 6% growth respectively.
• The revised forecast was prompted by a 7.6% real GDP increase in Q2, surpassing expectations. The MPC also projected growth and inflation numbers for Q1-2025.

RBI Repo rate

• The repo rate is the interest rate at which the RBI lends to commercial banks.
• Even though food inflation has decreased from double-digit levels in July to 6.2% in October, the governor stated that fluctuating food prices will have a significant impact on inflation expectations. “Monetary policy must ensure that spikes in food prices do not become widespread, even as it may consider isolated shocks.”

Why has RBI hiked Repo Rate and CRR?

• The Reserve Bank of India (RBI) has raised the repo rate and CRR to combat rising inflation due to geopolitical tensions.
• Inflation has reached its highest level in the last 3-4 decades, with global crude oil prices remaining volatile and above USD 100 per barrel.
• The RBI aims to maintain inflation at 7% and monitor money flow into the banking system.
• Inflation has also spiked in India, with a spike in headline CPI inflation to 6.95% in March 2022.
• However, there is a collateral risk if inflation remains elevated at these levels for too long, which is the risk of loss arising from errors in the nature, quantity, pricing, or characteristics of collateral used to secure a transaction.

What would be the Impact of Repo Rate and CRR Hike?

Repo Rate

• It is anticipated that the banking system’s interest rates will rise. Equated Monthly Installments (EMIs) on personal and business loans for cars, homes, and other items are probably going to increase.
• Rates on deposits—primarily fixed-term rates—are also expected to increase.
• Demand and consumption may be impacted by the increase in repo rates.

CRR

• The banking system will lose Rs 87,000 crore as a result of the increase in CRR. Banks’ lendable resources will decrease correspondingly.
• Additionally, it implies that funding costs will rise and that banks’ net interest margins may suffer.
• The difference between a bank’s or other financial institution’s interest income and the interest it pays to its lenders—such as depositors—relative to the amount of interest-earning assets in the institution is known as net interest margin, or NIM.

GS PAPER – II

LALDUHOMA: sworn it as a newly elected chief minister of Mizoram

Why in news?

In the recently conducted state election in Mizoram Mr Lalduhoma from ZPM won the state election and sworn in as chief minister on 8^th December.

Who is Lalduhoma?

• He is a former IPS officer who served as a security in charge for then Prime Minister Indira Gandhi.
• He resigned from the IPS in 1984 and joined Indian National congress and was elected to Loksabha later that year.
• First MP to be disqualified under antidefection law in 1988 after he resigned from the congress.
• Involved in state eletion since then elected to assembly in 2003 and 2008 and formed ZPM in 2017.

Recent cabinet:

• The oath ceremony happened in the presence Governor Hari Babu Kambhampati .
• With 40 member’s assembly, Mizoram can have 12 ministers.
• Along with Mr Lalduhoma, 11 others also took oath as state ministers.
• The first woman candidate was elected from Lunglei East constituency. She will hold the Health social welfare and tribal affairs ,women and child development and tourism portfolios.

GS PAPER – II

Mahua Moitra expelled from member of parliaments for Cash and Query charges

Why in news?

• An Trinmool congress MP expelled from member of parliament after the Ethics committe ,headed by BJP MP vinod kumar sonkar.
• It held Ms. Moitra guilty of “Unethical conduct” and contempt of the house by sharing her Loksabha credentials user ID and password of the Loksabha member portal.

What was the allegation?

Trinmool congress MP was accused for taking bribes ,including expensive gifts ,from Dubai based businessman Darshan Hiranandani in return for asking questions in parliament.

What is ethics Committee?

• The Ethics committee was constituted in 2000 to oversee the moral and ethical conduct of members and examine cases of unethical conduct referred to it.
• The complaint is filed against members of the house by other members, outsiders through a member or referred by a speaker.
• Committee makes a Prima facie enquiry before deciding to examine complaint and presents its reports to the speaker who places it before the house for the consideration.

GS PAPER – II

Russian presidential election for new terms and Putin’s stand

Why in news?

Vladimir Putin announced to prolong to his presidency career and went ahead with presidential election next march.

Vladimir presidential career:

• He had a tight control over Russia’s political system from 20 years.
• Prominent critics who could challenge him on ballot are either in jail or living abroad and most independent media have been banned. Opposition leader Alexei Navalny is imprisoned.
• Costly war in Ukraine that has taken thousands of his country men’s lives and even attack on Kremlin has no such negative impact on his aura.
• The short termed rebellion by mercenary leader Prigozhin in June has also not left any major scars.
• He has already served as president for longer than any other ruler of Russia.

Russia presidential election:

• The Russian constitution bars more than two consecutive presidential terms.
• But a New constitutional amendment in July 2020 hasn’t changed the two term limit in theory, but in practice, it resets Mr Putin’s terms.
• According to that referendum, the current president can stay in power for two more six years terms (until 2036) after his terms expires in 2024.