1. GOVERNMENT CUTS INTEREST RATES ON SMALL SAVING SCHEMES
News: The government has sharply slashed the rates on all small savings instruments for the first quarter of 2021-22, bringing the rate of return on the Public Provident Fund down from 7.1% to 6.4% and effecting cuts ranging from 40 basis points (0.4%) to 110 basis points (1.1%) through a notification on Wednesday.
The sharpest cut was seen in the quarterly interest rate paid on one-year term deposits, from 5.5% in the January to March quarter to 4.4% in this quarter.
The rate of return on the Senior Citizen Savings’ Scheme was cut from 7.4% to 6.5%, while the Sukanya Samriddhi Account Scheme’s return was reduced from 7.6% to 6.9%.
While the government resets the interest rate on small savings instruments every quarter, this round of rate cuts assumes significance as retail inflation has been breaching the 6% mark and the government is keen to lower interest rates to make it easier to execute its borrowing plans for the year and spur growth.
Inflation is the decline of purchasing power of a given currency over time.
A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time.
The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.
Inflation can be contrasted with deflation, which occurs when the purchasing power of money increases and prices decline.
As a currency loses value, prices rise and it buys fewer goods and services. This loss of purchasing power impacts the general cost of living for the common public which ultimately leads to a deceleration in economic growth.
The consensus view among economists is that sustained inflation occurs when a nation’s money supply growth outpaces economic growth.
2. PAKISTAN ALLOWS IMPORT OF COTTON AND SUGAR FROM INDIA
News: Partially reversing a two-year-old decision to suspend all trade with India, Pakistan announced on Monday that it would allow the import of cotton and sugar from across the border.
Trade between the subcontinental neighbours has always been linked to their political interactions, given their tumultuous relationship.
For instance, India’s exports to Pakistan dropped by around 16 per cent to $1.82 billion in the 2016-17 financial year from $2.17 billion in 2015-16. This coincided with the rise in tensions between the two countries following the terrorist attacks in Uri in 2016, and the surgical strikes by India against Pakistan-based militants.
Trade between the two countries grew marginally in subsequent years despite continuing tensions, with India’s exports to Pakistan increasing nearly 6 per cent to $1.92 billion in 2017-18, and by around 7 per cent to $2.07 billion in 2018-19.
Pakistan’s decision to suspend bilateral trade with India in August 2019 was primarily a fallout of India’s decision to scrap Article 370 — the constitutional provision that recognised the special status of the state of Jammu and Kashmir and afforded it a certain amount of autonomy.
However, an underlying reason for suspending trade between the two countries was also the 200 per cent tariff imposed by New Delhi on Pakistani imports — a move that India implemented earlier that year after revoking its status as a Most Favoured Nation following the suicide bomb attack on the CRPF in Pulwama.
The proposal to lift the ban on cotton imports came in the backdrop of a shortfall in raw material for Pakistan’s textile sector, which has reportedly been facing issues due to a low domestic yield of cotton in the country. On top of this, imports from other countries like the US and Brazil have reportedly been more expensive, and take longer to arrive in the country.
Where sugar is concerned, trade experts feel it is a result of a long-standing interdependence between India and Pakistan over such agricultural commodities and a potential shortage in domestic supply.
If finally approved, cotton and sugar would be the second and third commodities allowed for export from India to Pakistan after Islamabad lifted the ban on medicine and related raw material imports in May 2020 to ensure sufficient supplies of essential drugs during the Covid-19 pandemic.
The country imported $183.18 million worth of organic chemicals and pharmaceutical products from India from April-January 2020-21.
3. VACCINE EXPIRY DATE
News: The Health Ministry on Wednesday told the States and the Union Territories that there was no value in conserving vaccines for the second dose and directed that prompt supply should be ensured to all government and private hospitals where there was a demand.
All Vaccine doses come with an expiry date after which they become ineffective or dangerous to use.
About Vaccine Vial Monitor:
A vaccine vial monitor (VVM) is a thermochromic label put on vials containing vaccines which gives a visual indication of whether the vaccine has been kept at a temperature which preserves its potency.
The labels were designed in response to the problem of delivering vaccines to developing countries where the cold chain is difficult to preserve, and where formerly vaccines were being rendered inactive and administered ineffectively due to their having been denatured by exposure to ambient temperature.
The vaccine vial monitor consists of a heat sensitive square within a circle.
If the monitor is exposed to heat it changes color with time and with increasing speed in hotter conditions.
If the square becomes the same color as the circle or becomes darker than the circle, then the vaccine contained in the vial is damaged and the vial should be discarded.
Electronic time–temperature indicators (another technology) can detect all temperature changes, including issues of freezing vaccines which heat-detecting VVMs would not detect.
4. MILITARY FARMS
News: Military farms have been closed after 132 years of service, the Army said. The formal closing ceremony was held on Wednesday to mark the occasion.
The farms were set up with the sole requirement of supplying hygienic cow milk to troops in garrisons across British India. The first military farm was raised on February 1, 1889, at Allahabad.
Post-Independence, they flourished with 30,000 heads of cattle in 130 farms all over India. They were even established in Leh and Kargil in the late 1990s.
It is credited with pioneering the technique of artificial insemination of cattle and introduction of organised dairying in India, providing yeoman service during the 1971 war, supplying milk at the Western and Eastern war fronts as well as during the Kargil operations to the Northern Command.
There have been several recommendations in the past to shut down the farms.
5. PRODUCTION LINKED INCENTIVE SCHEME
News: The Union Cabinet on Wednesday approved a production-linked incentive scheme for the food processing industry with an outlay of ₹10,900 crore.
The objectives of the scheme were to “support creation of global food manufacturing champions”, “strengthen select Indian brand of food products for global visibility and wider acceptance in the international markets”, “increase employment opportunities of off-farm jobs” and “ensuring remunerative prices of farm produce and higher income to farmers”.
The scheme would cover ready-to-cook and ready-to-eat foods, processed fruits and vegetables, marine products and mozzarella cheese. Organic products, free-range eggs, poultry meat and egg products were also covered.
The implementation of the scheme would facilitate expansion of processing capacity to generate processed food output of ₹33,494 crore and create employment for nearly 2.5 lakh persons by the year 2026-27
The applicants selected for the scheme would be required to invest in plant and machinery in the first two years.
The conditions of stipulated Minimum Sales and mandated investment will not be applicable for entities selected for making innovative/ organic products.
The second component relates to support for branding and marketing abroad to incentivise emergence of strong Indian brands.
For promotion of Indian Brand abroad, the scheme envisages grant to the applicant entities for – in store Branding, shelf space renting and marketing.
Scheme will be implemented over a six year period from 2021-22 to 2026-27.
The scheme will be rolled out on All India basis.
The scheme shall be implemented through a Project Management Agency (PMA).
The PMA would be responsible for appraisal of applications/ proposals, verification of eligibility for support, scrutiny of claims eligible for disbursement of incentive.
The incentive under the scheme would be paid for six years ending 2026-27. The incentive payable for a particular year will be due for payment in the following year. The duration of the scheme will be six years i.e. 2021-22 to 2026-27.
The scheme is “fund-limited”, i.e. cost shall be restricted to the approved amount. The maximum incentive payable to each beneficiary shall be fixed in advance at the time of approval of that beneficiary. Regardless of achievement/ performance, this maximum shall not be exceeded.
The implementation of the scheme would facilitate expansion of processing capacity to generate processed food output of Rs 33,494 crore and create employment for nearly 2.5 lakh persons by the year 2026-27.
The Scheme would be monitored at Centre by the Empowered Group of Secretaries chaired by the Cabinet Secretary
Ministry of Food Processing Industries would approve selection of applicants for coverage under the scheme, sanction and release of funds as incentives.
The Ministry will prepare Annual Action Plan covering various activities for implementation of the scheme.
A third party evaluation and mid-term review mechanism would be built in the programme.
A National level portal would be set-up wherein the applicant enterprise could apply to participate in the Scheme.
All the scheme activities would be undertaken on the National portal.
nder Pradhan Mantri Kisan Sampada Yojana (PMKSY) implemented by MoFPI, small and medium food processing enterprises are supported in terms of strengthening of supply chain infrastructure, expansion of processing capacities, augmenting availability of industrial plots, facilitating skill development, R&D, provision of testing facilities etc.
A number of schemes implemented by other Ministries/ Departments viz Departments of Agriculture Co-operation & Farmers’ Welfare, Animal Husbandry & Dairying, Fisheries, Promotion of Industry and Internal Trade, Commerce etc have direct or indirect bearing on the growth of food processing sector.
The Applicants covered under the proposed scheme will be permitted for availing services, wherever feasible, under other schemes. Towards that end, it has been envisaged that coverage under the PLI Scheme will not affect eligibility under any other scheme and vice versa.
6. GOVERNMENT RETAINS 4% INFLATION TARGET FOR RBI
News: The Centre has decided to retain the inflation target of 4%, with a tolerance band of +/- 2 percentage points for the Monetary Policy Committee of the RBI for the coming five years, a top finance ministry official said.
The inflation target for the period April 1, 2021, to March 31, 2026… has been kept at the same level as it was for the previous five years.
About Inflation Targeting:
Inflation targeting is a monetary policy strategy used by central banks for maintaining inflation at a certain level or within a specific range.
In general, central banks normally follow a policy of keeping inflation sufficiently low.
However, in inflation targeting, there is a preset, publicly declared target.
Using methods such as interest rate changes, the central bank and other monetary authorities are expected to guide inflation to a targeted level or range.
Such a policy makes the central bank focus on a single variable and imposes a penalty if the target is not adhered to.
This policy was initially adopted by New Zealand in 1990, although other countries, most notably Germany, had evolved something close to inflation targeting considerably earlier.
Contrary to conventional wisdom that the RBI should focus on core inflation and ‘look through’ volatile and transient food-price inflation, we find that food-price inflation can de-anchor expectations and spill over into core inflation; by implication, monetary policy should respond. Food prices account for a much larger share of consumption baskets in India than in many other countries
7. FACTS FOR STATE SERVICES
State Bank of India (SBI) has signed a loan agreement amounting to up to $1 billion with the Japanese Bank for International Cooperation (JBIC).