December 2019

Daily Current Affairs (23-12-19)

ECONOMY

OPERATION TWIST

Related Topic in KAS Prelims Syllabus:

Economy [Paper-II]: Recent fiscal and monetary policy issues and their impact, structure of Indian Banking and Non- Banking Financial Institutions and reforms

News

On December 19, 2019, the Reserve Bank of India decided to conduct its version of ‘Operation Twist’ through simultaneous purchase and sale of government securities under Open Market Operations (OMOs) for Rs 10,000 crore each on December 23.

What is Operation Twist?

  • Operation Twist is the name given to a monetary policy tool that the US Federal Reserve had initiated to influence the prevailing rate of interest in the markets.
  • The tool essentially aims at changing the shape of the yield curve (hence the name — twist) through simultaneous buying and selling of long- and short-term government bonds.
  • In India, the RBI put through its version of Operation Twist by buying 10,000 crore worth of 10-year government bonds while selling four shorter-term government bonds adding up to the same value.
  • The intent is to moderate high long-term interest rates in the market and bring them closer to the repo rate.

Why Operation Twist now?

  • The RBI slashed repo rate by 135 points to 5.15 percent this year but banks passed on only part of it.
  • The one-year median marginal cost of funds based lending rate (MCLR) has declined only 49 basis points (bps).
  • Operation Twist normally leads to lower longer-term yields, which will help boost the economy by making loans less expensive for those looking to buy homes, cars and finance projects, while saving becomes less desirable because it doesn’t pay as much interest.
  • The central bank is keen that long-term rates are brought down to kickstart investment and revive the economy.
  • The idea is that business investment and housing demand were primarily determined by longer-term interest rates.

What actually RBI is planning to do?

  • The central bank has decided to purchase Rs 10,000 crore worth of one security — the 6.45 percent GS 2029. This is a long term 10-year bond.
  • On the sell side, it has proposed to sell four securities for a total of Rs 10,000 crore6.65 percent GS 2020, 7.80 percent GS 2020, 8.27 percent GS 2020 and 8.12 percent GS 2020.
  • All these four securities are short term, and maturing in 2020. When the RBI purchases 6.45 percent bond, demand is expected to rise, leading to lower long-term yield.
  • On the other hand, sale of short-term securities will push up the short-term rate.

Operation Twist in US

  • In 1961, the John F Kennedy administration proposed a solution to revive the weak economy through lower longer-term interest rates while keeping short-term interest rates unchanged.
  • The US Fed employed the policy. The Fed then implemented the ‘Operation Twist’ programme in late 2011 and 2012 to stimulate the economy hit by the global financial crisis.

What are Open Market Operations (OMOs)?

  • Reserve Bank of India manages and controls the liquidity, rupee strength and monetary management through purchase and sale of government securities (G-Secs) in a monetary tool called Open market Operations.
  • OMOs are the market operations conducted by the RBI by way of sale and purchase of G-Secs to and from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
  • When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity.
  • Similarly, when the liquidity conditions are tight, the RBI may buy securities from the market, thereby releasing liquidity into the market.
[Source: Indian Express]

 

HYBRID ANNUITY MODEL (HAM)

Related Topic in KAS Prelims Syllabus:

Economy [Paper-II]: Infrastructure in Indian Economy, Rural and Urban Insfrastructure, Ports, Roads, Airports, Railways

News

  • Asian Development Bank (ADB) and the Government of India signed a $490 million loan for public- private partnership (PPP) project to upgrade about 1,600 km of state highways and major district roads (MDRs) from single-lane to two-lane widths in the state of Madhya Pradesh.
  • An additional $286 million investment will be mobilised through private sector participation under the PPP modality.

About the Project

  • The project will upgrade 750 km of state highways and 850 km of MDRs in Madhya Pradesh to two-lane and all-weather standards with road safety features.
  • It will also develop an e-maintenance system, which can record defects or required maintenance, along with a training program to develop capacity on contract implementation and project finance in the Madhya Pradesh Road Development Corporation.

What is Hybrid Annuity Model (HAM)?

  • HAM is a mix of EPC (engineering, procurement and construction) and BOT (build-operate-transfer).
  • This passes the responsibility of design, implementation, and operation and maintenance obligations to the private sector, while attracting some private sector financing.
  • Under this model, the government will release 60% of the total project cost during construction, to be paid to the concessionaire in tranches linked to completion milestones.
  • The remaining 40% is arranged by the concessionaire in the form of equity and commercial debt.
  • Once the project is completed, the government will repay the concessionaire’s financial investment over 10 years.

About ADB

  • It is a regional development bank established on 19 December 1966, which is headquartered in Manila, Philippines.
  • It envisions a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty in the region.
  • ADB in partnership with member governments, independent specialists and other financial institutions is focused on delivering projects in developing member countries that create economic and development impact.
  • As a multilateral development finance institution, ADB assists its members and partners by providing loans, technical assistance, grants, and equity investments to promote social and economic development.
  • ADB is composed of 68 members, 49 of which are from the Asia and Pacific region.
  • Although the majority of the Bank’s members are from the Asia-Pacific region, the industrialized nations are also well-represented.
  • Top 5 shareholders in ADB are: Japan (15.6%), United States (15.6%), China (6.4%), India (6.3%) and Australia (5.8%)
  • India was a founding member of ADB, but operations in the country began only in 1986, when India opted to become a borrowing member.\
[Source: PIB]

 

SCIENCE & TECHNOLOGY

FUTURE SKILLS

Related Topic in KAS Prelims Syllabus:

Science and Technology [Paper-II]: Institutes and Organization in India promoting intergration of S&T and Innovation, their activities and contributions,

Why in News?

Wipro Ltd has partnered with the National Association of Software and Services Companies (NASSCOM) to launch the ‘Future Skills’ platform for new age technologies like AI that will reach 10,000 students from over 20 engineering colleges in India.

News in Detail

  • This is a part of Wipro’s Corporate Social Responsibility programme, TalentNext, which aims to enhance the quality of engineering education by preparing faculty and academic leaders to train students.
  • The programme has now been extended to students directly through FutureSkills.
  • FutureSkills is a new age platform built to bridge the industry-academia skill gap and help students keep pace with the emerging technologies — Artificial Intelligence, Big Data, Cloud Computing, Cybersecurity and Internet of Things (IoT) – to make them future-ready.
  • This initiative will create a talent pool of students, certified by Wipro and Nasscom.
  • The platform will enable learning the skills required in emerging technologies. It will also help individuals to develop an aptitude for learning.

About NASSCOM

  • NASSCOM is a notfor-profit industry association and is the apex body for the 180 billion dollar IT Business Process Management (BPM) industry in India.
  • It was established in 1988 and is focused on building the architecture integral to the development of the IT BPM sector through policy advocacy, and help in setting up the strategic direction for the sector to unleash its potential and dominate newer frontiers.
  • It is headquartered in New Delhi.
[Source: Economic Times]

 

FACTS OF THE DAY

ARUNACHAL TO MARK SCHOOLS AS ‘HARD’ AND ‘SOFT’
  • Arunachal Pradesh has launched approved the Arunachal Pradesh Teachers Transfer & Posting Policy, 2020, which will help rationalize transfer and posting of teachers serving under the state government.
  • Under the new policy, all government schools will be divided into three categorieshard, medium and soft — based on topography, accessibility and degrees of difficulty in staying at the place of posting.
  • All new recruits will be given a hard posting for a mandatory three years, inclusive of their probation period.
  • The next five years will be in schools with levels of medium difficulty, followed by posting in soft schools.
  • Geography, lack of infrastructure and reluctance of teachers to work beyond their comfort zones are the reasons for this categorisation.
STRATEGIC TUNNEL UNDER ROHTANG PASS TO BE RENAMED AFTER ATAL BIHARI VAJPAYEE
  • Union Cabinet chaired by PM Modi has decided to honour the contribution of former Prime Minister Atal Bihari Vajpayee by naming the Strategic Tunnel under Rohtang Pass after him on December 25, 2019, which happens to be his birthday.
  • The historic decision to construct a strategic tunnel below the Rohtang Pass was taken on June 03, 2000 when late Atal Bihari Vajpayee was the Prime Minister.
  • The foundation stone for the Access Road to the South Portal of the tunnel was laid on May 26, 2002.
  • The 8.8-kilometre long tunnel is the world’s longest tunnel above an altitude of 3,000 metres.
  • It will reduce the distance between Manali and Leh by 46 kilometres and save crores of rupees in transport costs.
  • It is a 10.5-metre wide single tube bi-lane tunnel with a fire proof emergency egress tunnel built into the main tunnel itself.
MICRODOT TECHNOLOGY
  • Union Ministry of Road Transport & Highways (MoRTH) has notified that the manufacturers who are affixing microdot identifiers in the motor vehicles and their parts, components, assemblies, sub-assemblies shall conform to Automotive Industry Standards (AIS)-155 as amended from time to time.
  • Microdot technology involves spraying the body and parts of the vehicle or any other machine with microscopic dots, which give a unique identification.
  • Use of this technology will help check theft of vehicles and also use of fake spare parts.
  • The microdots and adhesive will become permanent fixtures/affixation which cannot be removed without damaging the asset, which is the vehicle itself.
FISHERIES AND AQUACULTURE INFRASTRUCTURE DEVELOPMENT FUND (FIDF)
  • The first tripartite Memorandum of Agreement was signed between the Department of Fisheries Government of India, NARBARD and the Government of Tamil Nadu for the implementation of Fisheries and Aquaculture Development Fund (FIDF).
  • FIDF is a dedicated fund that has been created with a total of 7522.48 crore to address the infrastructure requirement for fisheries sector.
  • FIDF provides concessional finance to the eligible entities, cooperatives, individuals and entrepreneurs for development of identified fisheries infrastructure.
  • The National Bank for Agriculture and Rural Development (NARBARD), National Cooperatives Development Corporation (NCDC) and all scheduled banks are Nodal Loaning entities (NLEs) to provide concessional finance under the FIDF.
  • The Department of Fisheries, Ministry of Fisheries, Animal Husbandry and Dairying under the FIDF provides interest subvention up to 3% per annum for providing the concessional finance by the NLEs at the interest rate not lower than 5% per annum.

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