January 5, 2024 | Your One-Stop Solution for Daily Preparation
Monetary Policy | Explained
Monetary policy plays a pivotal role in shaping the economic landscape of any country. It serves as a crucial tool for managing economic stability, influencing inflation rates, and fostering sustainable growth. In the context of India, the Reserve Bank of India (RBI) is the primary architect of monetary policy, employing a range of tools to achieve its objectives. In this blog, we will explore the key monetary policy tools in India, their functions, and the challenges faced by the RBI in implementing effective policies
Highlights of the Day
1. Aditya-L1: India's Solar Observatory Nears Crucial Orbit Binding Maneuver at Lagrangian Point L1
Aditya-L1, India's solar observatory, launched on September 2, 2023, will attempt a crucial maneuver on January 6 to bind it to an orbit around the Sun-Earth Lagrangian point L1, 1.5 million km away. The ISRO mission involves continuous observation of the Sun without occultation, aided by seven payloads studying the photosphere, chromosphere, and corona. Equipped with a propulsion system, the spacecraft aims to provide essential data on coronal heating, mass ejections, space weather dynamics, and particle propagation during its five-year mission at L1, joining four operational spacecraft.[1].
2. Nepal and India Ink 10,000 MW Power Export Deal and Renewable Energy Cooperation
Nepal and India signed a significant long-term agreement for Nepal to export 10,000 MW of power to India over the next decade. The deal, inked during the 7th Nepal-India Joint Commission meeting, also included an MoU on renewable energy cooperation. Jointly inaugurated by the foreign ministers, three cross-border transmission lines were completed with India's assistance. Discussions covered diverse areas like bilateral ties, trade, connectivity projects, defense, agriculture, tourism, and cultural exchange. India's External Affairs Minister, S Jaishankar, hailed the power agreement as a breakthrough for Nepal's energy sector, while Nepal's PM Prachanda expressed satisfaction with the multifaceted discussions[2].
3.Egypt's Ambitious Expansion: Doubling the New Administrative Capital Amidst Economic Visions
Egypt is investing billions to double the size of its New Administrative Capital (NAC), 45 km east of Cairo, aimed at accommodating the growing population and fostering economic development. Critics argue it diverts resources and raises debt. Phase one includes a 70-storey tower, opera house, mega mosque, and housing units. With 48,000 daily employees, the city plans to float a 5-10% stake by end-2024. The second phase, covering 40,000 feddans, is set to begin this year. ACUD, 51% military-owned, spent $16 billion on phase one, with an additional $8-9 billion estimated for phase two infrastructure[3].
4. Security Concerns Surge as Indian Exporters Navigate Red Sea Trade Route Challenges
Indian shippers, exporters, and freight forwarders are seeking increased security in the Red Sea trade route due to growing concerns over Houthi attacks on commercial ships. Major shipping companies express inability to absorb additional costs, leading to potential 25-30% surge in freight rates for Indian shipments to Europe and Africa. The government is assessing the impact, with exporters holding back shipments and calling for heightened security. The External Affairs Ministry is closely monitoring the situation, emphasizing the importance of freedom of navigation. Ongoing attacks by Houthi rebels prompt warnings from the US and allies, as disruption in the Red Sea could significantly impact India's economy and security[4].
5.Maharashtra Cabinet Grants Option for Old Pension Scheme to Post-2005 State Employees
The Maharashtra Cabinet, led by Eknath Shinde, has approved a proposal allowing state government employees who joined after November 2005 to opt for the old pension scheme (OPS). This decision, prompted by recent strikes, provides a one-time option for employees joining service on or after November 1, 2005, based on pre-November 2005 recruitment advertisements. The OPS offers a monthly pension of 50% of the last drawn salary without employee contributions, while the New Pension Scheme (NPS) involves a 10% employee contribution. Approximately 9.5 lakh state employees who joined before November 2005 already enjoy OPS benefits[5].
Source: The Hindu | TOI
Practice Questions for Prelims
Q1: 'Eutrophication' is caused primarily by an excess of:
a) Nitrogen and phosphorus
b) Carbon dioxide
c) Heavy metals
d) Chlorofluorocarbons (CFCs)
Q2: The 'Drake Passage' is situated between:
a) Africa and Europe
b) South America and Antarctica
c) Asia and Australia
d) North America and Greenland
Q3: Match the following space missions with their respective space agencies:
1. Apollo Program A. NASA
2. Chandrayaan Mission B. CNSA
3. Columbus Mission C. ESA
4. Chang'e Mission D. ISRO
a) 1-A, 2-D, 3-B, 4-C
b) 1-A, 2-C, 3-B, 4-D
c) 1-D, 2-A, 3-B, 4-C
d) 1-A, 2-D, 3-C, 4-B
Q4: The 'HDI (Human Development Index)' is calculated by considering which of the following factors?
I. Life expectancy at birth
II. Gross National Income (GNI) per capita
III. Educational attainment (mean years of schooling and expected years of schooling)
Select the correct answer using the codes below:
a) I and II only
b) II and III only
c) I and III only
d) All of the above
Q5: Which organization publishes the 'World Economic Outlook' report?
a) International Monetary Fund (IMF)
b) World Bank
c) United Nations Development Programme (UNDP)
d) World Trade Organization (WTO)
Today’s Question for Mains Answer Writing
"How do the key monetary policy tools employed by the Reserve Bank of India, such as the repo rate, CRR, and OMOs, contribute to the delicate balance between controlling inflation and promoting economic growth? Discuss the recent trends and challenges faced by the RBI in executing effective monetary policies, and analyze their implications for India's economic stability. This question aims to assess the candidate's understanding of the intricate mechanisms of monetary policy and their impact on the broader economic landscape."
Need help in writing or evaluation?
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