📰 RBI cuts interest rate by 25 bps, revises GDP growth to 7%
The decision of the Monetary Policy Committee of the RBI was unanimous;
•The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India reduced the repo rate at its second meeting this year by 25 basis points to 5.75% to address growth concerns. The stance of the policy has also been changed from neutral to accommodative. The decision was unanimous.
•“The MPC notes that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy,” the RBI said.
•The RBI has revised GDP growth projection for the current financial year from 7.2% to 7%. “The path of CPI inflation is revised to 3.0-3.1% for H1:2019-20 and to 3.4-3.7 % for H2:2019-20, with risks broadly balanced,” it said.
•RBI targets 4% CPI inflation over the medium term.
•The governor said banks transmitted only 21 basis points of the cumulative 50 basis points rate cut (in February and April).
•“Our expectation is that as we go forward, there will be higher and faster transmission,” he said, adding the impact of the same will be seen in consumer and two-wheeler loans.
•While yield on the 10 year benchmark government bond dropped 9 bps to close at 6.93%, equity indices settled in the negative territory.
Digital transactions
•The banking regulator also took steps to boost digital transactions as it decided to waive off the charges for fund transfer by Real Time Gross Settlement System (RTGS) — which is meant for large-value instantaneous fund transfers and the National Electronic Funds Transfer (NEFT) System for other fund transfers.
•In addition, a committee has also been formed to review the charges in transactions in automated teller machines. The rate cut could lead to reduced EMIs on housing, vehicle and personal loans if banks decide to pass on the benefit.
•Economists expect another rate cut in the August policy review to boost growth as inflation risks are likely to remain muted on a back of a normal monsoon. “Although the RBI revised its growth forecast lower for FY20, there could be further downside risks to their H1 growth estimates, warranting more rate cuts this year,” said Abheek Barua, Chief Economist, HDFC Bank.
•“We believe that another rate cut could be in the offing in August, assuming that inflation risks remain muted,” Mr. Barua said.
He also speaks of need for more coordination between the MEA and economic Ministries.
•Building connectivity in the South Asian region and coordinating economic issues will be top priorities of the Ministry of External Affairs (MEA) , said its new Minister S. Jaishankar, who leaves on Friday for Bhutan, his first destination abroad a week after he took office.
•Mr. Jaishankar indicated that the government had chosen to invite leaders of BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) rather than leaders of SAARC (South Asian Association for Regional Cooperation), because there was a higher likelihood of making progress with BIMSTEC, as it doesn’t include Pakistan.
•“SAARC has certain problems which are known to all. Even if you put the terrorism issue aside, there are trade and connectivity issues…BIMSTEC leaders were invited for the swearing-in ceremony because we see today an energy and a possibility in BIMSTEC and a mindset which fits in with that very optimistic vision of economic cooperation that we want,” Mr. Jaishankar told an audience of businessmen organised by the CII (Confederation of Indian Industry), think tank Ananta and Swiss consultancy Smadja and Smadja, in his first public comments as Minister.
•Mr. Jaishankar also spoke on need for more coordination between the MEA and economic ministries. He said he had spent a substantial part of his first week in office dealing more with Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal.
•The comments reflect the economic challenges the government faces immediately, given the United States decision to withdraw India’s ‘GSP’ preferential trade status, and the emerging costs of replacing Iranian oil after sanctions. Mr. Jaishankar will receive U.S. Secretary of State Mike Pompeo on June 25-26, where many of the trade issues, including data localisation and Washington’s push to have Chinese telecom major Huawei banned by friendly countries, are likely to be raised.
Huawei issue
•In a veiled reference to the Huawei issue, Mr. Jaishankar said it showed that the line between economics and politics was “vanishing”. “When a country invokes tariffs on national security basis, the line is pretty much gone,” he observed and asserted that India had a “strong tradition of independence” which it would adhere to.
•The MEA announced on Thursday that Mr. Jaishankar would travel to Thimphu on June 7-8 to meet with the King of Bhutan, Prime Minister Lotay Tshering, and Foreign Minister Tandi Dorji. Hinting at a possible visit by Prime Minister Narendra Modi in the near future to Bhutan, the MEA, in a statement, said the two sides would discuss “upcoming high-level exchanges, economic development and hydro-power cooperation”.
•Mr. Jaishankar emphasised the need for more regional exchanges, saying India needed to “incentivise cooperation in the neighbourhood” by being “generous” to smaller neighbours. “It cannot be reciprocal by the very fact that we have more resources and in many ways have a larger interest in the region,” he said, referring to the improvement in relations with Bangladesh in recent years as an example of how India’s neighbours can “leverage” their relationship for benefits.
“Never dreamt this”
•Mr. Jaishankar, who demitted office as Foreign Secretary last year and joined Tata Sons as their President for Global Corporate Affairs, said he did not expect his appointment as External Affairs Minister. He told the gathering that until a few days ago he was part of the executive committee organising the very event he was addressing, and had wondered which minister they would invite. “I must confess that I never dreamt that I would be the minister in question,” he said, drawing laughter from the audience.
•He also credited his predecessor Sushma Swaraj for helping “’Indians in trouble worldwide”, and declared that he would follow in her footsteps.
📰 Trump threatens to ramp up trade war
Says he could target ‘at least’ another $300 billion worth of Chinese goods; Beijing remains defiant
•President Donald Trump threatened to hit China with tariffs on “at least” another $300 billion worth of Chinese goods but said he thought both China and Mexico wanted to make deals in their trade disputes.
•Tensions between the world’s two largest economies have risen sharply since talks aimed at ending a festering trade war broke down in early May.
•While Mr. Trump said on Thursday that talks with China were ongoing, no face-to-face meetings have been held since May 10, the day he sharply increased tariffs on a $200 billion list of Chinese goods to 25%, prompting Beijing to retaliate.
•“Our talks with China, a lot of interesting things are happening. We’ll see what happens... I could go up another at least $300 billion and I’ll do that at the right time,” Mr. Trump told reporters.
•“But I think China wants to make a deal and I think Mexico wants to make a deal badly,” said Mr. Trump before boarding Air Force One at the Irish airport of Shannon on his way to France for D-Day commemorations.
•Later, he said he would wait until after a G20 meeting in Japan at the end of the month before deciding on the tariffs. “Additional tariffs on China? You mean, when am I going to put the extra $325 billion worth of tariffs?” Mr. Trump said on his trip to northern France in response to a question from a reporter about when the new tariffs were coming.
•“I will make that decision over the next two weeks, probably right after the G20,” he said, adding that he would hold talks with Chinese counterpart Xi Jinping at the summit in Osaka on June 28-29. “One way or the other I will make that decision after the G20,” Mr. Trump added. “I will be meeting with President Xi (at the summit) and we’ll see what happens.”
Tribute to war veterans
•Mr. Trump also sought to reassure allies rattled by his nationalist rhetoric by saying the bonds between them were “unbreakable” on the 75th anniversary of the D-Day landings.
•He joined other world leaders in northern France where thousands of well-wishers gathered to pay tribute to the ever-dwindling number of veterans of the famed landings which shaped the outcome of Second World War.
•“To all of our friends and partners, our cherished alliance was forged in the heat of battle, tested in the trials of war and proven in the blessings of peace. Our bond is unbreakable,” Mr. Trump said in Colleville-sur-Mer.
•French President Emmanuel Macron, in a pointed message targeting Mr. Trump’s “America First” slogan, said: “America is never as big as when it is fighting for the freedom of others.”
•Responding to Mr. Trump’s threat on tariffs, China’s Commerce Ministry struck a defiant tone. “If the United States wilfully decides to escalate tensions, we’ll fight to the end,” Ministry spokesman Gao Feng told a regular news briefing.
•“China does not want to fight a trade war, but also is not afraid of one. If the United States wilfully decides to escalate trade tensions, we’ll adopt necessary countermeasures and resolutely safeguard the interests of China and its people.”
•The Commerce Ministry also issued a report on how the U.S. has benefited from years of economic and trade cooperation with China, saying U.S. claims that China has taken advantage in bilateral trade were groundless.
•“Since the new U.S. administration took office, it has disregarded the mutually beneficial and win-win nature of China-U.S. economic and trade cooperation, and has advocated the theory that the United States has ‘lost out’ to China on trade,” the Ministry said in a research report. “It has also taken the trade deficit issue as an excuse to provoke economic and trade frictions.”
•Adding to concerns China may target U.S. companies in the trade war, the Ministry last week said it was drafting a list of “unreliable entities” that have harmed Chinese firms’ interests.
•Mr. Gao said the list did not target specific industries, companies or individuals, and details would be disclosed soon. Companies that abide by Chinese laws and market rules had nothing to worry about, he added.
•The International Monetary Fund warned on Wednesday that escalating tariff threats were sapping business and market confidence and could slow global growth that is currently expected to improve next year.
•U.S. Treasury Secretary Steven Mnuchin is scheduled to meet People’s Bank of China Governor Yi Gang this weekend at a gathering of G20 finance leaders in Japan, the first face-to-face discussion between key negotiators in nearly a month.
•Mexican and U.S. officials are also set to resume their talks in Washington on Thursday aimed at averting an imposition of tariffs on Mexican goods.
•After saying that “not enough” progress on ways to curb migration was made when the two sides met on Wednesday, Mr. Trump said on Thursday that Mexico had made progress in the talks but needed to do more.
•He reiterated that 5% tariffs on all Mexico's exports to the United States due to start on Monday would go ahead if progress was not made. The tariffs can rise to as much as 25% later in the year.
•“Mexico was in yesterday. They're coming back this morning... I think a lot of progress was made yesterday, but we need to make a lot of progress,” Trump said.
•“They have to step up and they have to step up to the plate and perhaps they will.”
📰 Russia willing to drop New START pact: Putin
•President Vladimir Putin said on Thursday that Russia was prepared to drop a nuclear weapons agreement treaty with the U.S. and warned of “global catastrophe” if Washington keeps dismantling a global arms control regime.
•Speaking to heads of global news agencies at an economic forum, Mr. Putin said Washington showed no genuine interest in conducting talks on extending the New START treaty, which caps the number of nuclear warheads well below Cold War limits. “If no-one feels like extending the agreement — New START — well, we won’t do it then,” said Mr. Putin. “We have said a hundred times that we are ready (to extend it),” Mr. Putin said.
•Mr. Putin said the potential implications of letting New START treaty expire would be huge, suggesting its demise could fuel a nuclear arms race. “If we don’t keep this ‘fiery dragon’ under control, if we let it out of the bottle — God forbid — this could lead to global catastrophe,” Mr. Putin said.
📰 Keeping close watch on NBFCs, says Shaktikanta Das
RBI Governor says will ensure NBFC sector remains healthy; draft norms for ‘on tap’ licence for small finance banks released
•The Reserve Bank of India (RBI) is closely watching developments unfolding in the NBFC sector, which is facing a liquidity crunch, and is committed to see that the sector remains robust and healthy, Governor Shaktikanta Das said on Thursday during the post monetary policy announcement press conference.
•The recent liquidity crisis faced by NBFCs was triggered by mortgage lender Dewan Housing Finance Corporation Ltd. (DHFL) as it delayed interest payment to its non-convertible debenture investors, causing it to be downgraded to default grade. “[The] RBI remains committed that we have a robust, well-functioning NBFC sector. [The] RBI will not hesitate to take whatever steps are required to ensure financial stability is not adversely impacted in any manner by any development,” he said.
•On Tuesday, DHFL said it had delayed repayment to its investors but said will make the payments in the next seven days to avoid default.
IL&FS saga
•Post the IL&FS crisis in August last year, which faced cash crunch and had a series of defaults, cost of funds for NBFCs have significantly shot up. Mr. Das said that the RBI was monitoring major NBFCs and housing finance companies (HFCs). “RBI does not regulate housing finance companies. Nonetheless, banks have significant exposure to the HFCs. The RBI is mandated to look after the financial stability of the entire economy. “Against that background, we have been closely monitoring the activity and the performance and the developments in the NBFC sector, including the HFCs,” he added.
•NBFCs have demanded the opening up of funding from banks to tide over the liquidity crisis. “We urge the RBI to open up funding to retail NBFCs through banks that will stimulate consumer spending,” said Umesh Govind Revankar, MD and CEO, Shriram Transport Finance.
•Khushru Jijina, MD, Piramal Capital and Housing Finance, said the credit crunch in the NBFC sector had witnessed a corresponding decline in manufacturing and construction activities in the last two quarters of 2018-19.
•“We anticipate more decisive and proactive policy measures to address the current liquidity crisis, that will enable the NBFCs to restore lending activities, especially to these critical sectors,” Mr. Jijina added.
Draft norms
•In a separate move, the RBI also announced draft norms for ‘on tap’ licensing for small finance banks after these entities furthered financial inclusion. “A review of the performance of small finance banks reveals that they have achieved their priority sector targets and thus attained their mandate for furthering financial inclusion.
•“Hence, there is a case for more players to be included to enhance access to banking facilities to the small borrowers and to encourage competition,” the RBI said. Ten entities have so far been granted small finance bank licences.
•However, for payments banks, the RBI said ‘more time is needed’ to review the performance before considering the licensing of this category of banks to be put ‘on tap’.
📰 Delhi’s ‘poor’ air quality days down 33%: Javadekar
‘From 300 in 2014 to 206 in 2018’
•Air quality in Delhi-NCR has improved with the number of “poor” air quality days coming down from 300 in 2014 to 206 in 2018, Union Environment Minister Prakash Javadekar said on Thursday.
•Speaking at an event to mark the World Environment Day, which was on June 5, the Minister said the situation “is not as bad” as being portrayed in the media.
•“Number of poor air quality days in Delhi in 2016 used to be 246, and in 2014 it used to be around 300, in 2017 it came down to 213 and now it has come down to 206 (in 2018). I am confident that when 2019 figures will come, the number of poor air quality days will further come down. This is a tremendous success. The days of poor quality air have reduced. It is a significant improvement,” he said.
•The number of “poor” air quality days has come down by 33% in 2018 as compared to 2014. He also said that the number of days with ‘moderate’ to ‘good’ air quality has increased from 108 in 2016 to 159 in 2018.
•“Moderate to good days have increased. 108 days of moderate air quality in 2016 have increased to 152 in 2017 and now they have gone up to 159 days. This progress in good air days are the result of concerted efforts of last four years for the Capital and NCR,” he said, adding that air quality monitoring systems which record the air quality index (AQI) show improvement in air quality.
•Calling for people’s participation, the Minister said that just wearing masks will not help and every individual has to act responsibly towards environment.
📰 AIR may have to power off short wave transmissions
Prasar Bharati has asked it to come up with a proposal to phase out SW transmitters
•If Prasar Bharati has its way, All India Radio will have to stop all global short wave transmissions — eighty years after it began international broadcasting in 1939. AIR is resisting the move arguing that it will curtail its global reach.
•There are about 46 short wave transmitters that run both domestic and external services. Out of these, 28 are used for the external services alone. Barring three transmitters that were recently installed, all the others will have to be shut down over the next six-months. The external services are broadcast to 150 countries in 13 Indian languages and 15 foreign languages.
•Prasar Bharati had written to the AIR in May third week asking it to come up with a proposal to phase out the short wave transmitters.
‘Whimsical’
•A high-ranking AIR official called it a whimsical decision. “There will be a huge implication on external services. The short wave is the only effective way to reach to any part of the world. FM and other modes don’t work. Even live streaming on web can’t be complete substitute to this due to varied penetration of internet connectivity. Any country that wants to scuttle Indian radio can just shut down our web channel.”
•Prasar Bharati CEO Shashi Shekhar Vempati denied that discontinuing short wave will impact global outreach. He said there would be fresh investments in expanding in DD India, AIR World Service and Prasar Bharati’s Gobal Digital Platform. “Going forward, AIR world service will be primarily a digital service which will leverage FM and Medium Wave capabilities where available and short wave in a limited way for strategic purposes. We will also explore hiring airtime in transmitters outside India on a need basis where feasible,” he told The Hindu.
•China has recently started buying air time on Nepalese radio channels for its programmes. India too may soon follow suit.
Limited audience
•A study on short wave transmitters conducted by the Prasar Bharati had revealed that shutting down these transmitters would save the AIR nearly ₹60-70 crore. The majority of the transmitters were nearly 25 years old and obsolete. “Short Wave, as a mode of transmission, has very limited audience, which is further dwindling with time. The short wave network will be rationalised so we are able to invest more in content and in newer ways of broadcasting, like Internet streaming, digital radio and in future satellite radio. We will, however, preserve a limited set of short wave for strategic purposes and national interest,” Mr. Vempati added.
•Prasar Bharati also felt that the short wave transmission did not bring in revenue and there was no way to assess the actual size of the audience that tune in to it. Questions were also raised about lack of editorial scrutiny.
•“The reality is that international opinion is not made on radio any more... the primary vehicle has to be digital,” a Prasar Bharati official said.
📰 NGT forms panel to discuss plea seeking ban on plastic packaging
Committee to ascertain whether further norms required
•Following a plea seeking a ban on the plastic packaging of food products, the National Green Tribunal (NGT) has constituted an expert committee to ascertain whether further norms are required to restrict the use of plastic packaging.
•A Bench headed by NGT chairperson Justice Adarsh Kumar Goel constituted the panel comprising representatives from the Central Pollution Control Board, Food Safety and Standards Authority of India (FSSAI), Bureau of Indian Standards and the Directorate of Health Services.
•Directing the FSSAI to be the nodal agency for coordination and compliance of the order, the Bench said,
‘Subject of restrictions’
•“We are of the opinion that the question of whether any further regulatory provisions are required on the subject of restrictions on the packaging by use of plastic material, after the steps already taken…are to be examined by an expert committee.”
•The directions came when the green panel was hearing a plea moved by NGO Him Jagriti Uttaranchal Welfare Society that sought a ban on the use of plastic bottle and multilayered or pet bottles.
•The NGT also noted the submissions made by the Ministry of Environment, Forests and Climate Change pertaining to the fact that phasing out multilayered plastic may not be immediately possible without alternatives.
•The NGO, however, contended that the Ministry had only focused on waste management and not on the issue of restrictions to be imposed on the use of plastic as packaging material.
📰 A policy on AI, cyber security on the cards
There is a need to skill our people in AI and machine learning: V.K. Saraswat.
•The NITI Aayog has come up with a policy on artificial intelligence and cyber security and it would be taken up by the Union Cabinet soon, disclosed V.K. Saraswat, member of NITI Aagyog.
•Speaking at the seminar, he said the policy announcement was delayed owing to the recent elections.
•At a time when the government promoted the digitisation programme and India emerged the second country with most Internet access, the protection of data becomes crucial — be at home, workspace or institutions.
•Dr. Saraswat also emphasised the need for giving access to National Knowledge Network for setting up centres of excellence for research on AI for which funding would be provided by the Union Government.
•“Digitisation has brought in enormous data and like oil, it will impact the economies of the world. Thus, data protection becomes crucial. A global data protection and regulation Act is coming up and in this context, thus cyber security becomes important too,” he said. Communication is digitised in every sector and the C.R. Rao Advanced Institute has been focusing on cyber security, which is undergoing paradigm changes due to induction of AI and ML, he explained.
•“This disruptive technology is used by various sectors, including agencies for crime control. The market to provide cyber security cover runs into billions of dollars,” he said.
•He said those itching to cause harm are also becoming smarter with AI necessitating 24x7 protection of the entire command and control of data network. But the main challenge to use AI is to get highly trained manpower. “We have to skill our people in AI, machine learning, augmented reality and others. The C.R. Rao Institute, by collaborating with University of Hyderabad, is striving to bring skilled manpower into the area,” he said.
📰 Ecologists have 596 reasons to cheer
224 new species of plants and 372 animal species discovered in India last year
•Scientists and taxonomists have documented 596 new species of flora and fauna from India in the year 2018. The details of the discoveries were made public on Thursday by the Botanical Survey of India (BSI) and the Zoological Survey of India (ZSI) in the publications Plant Discoveries 2018 and Animal Discoveries 2018 .
•Of the 596 species, 372 come under fauna (311 invertebrates and 61 vertebrates). The newly identified 224 plant species include seed plants, pteridophytes, bryophytes, fungi and lichen.
•About 31% of the plant species were discovered in the Himayalas. In the case of animals, the Western Ghats remained a biological hotspot from where about 50% of the species were found.
•“The plants discovered this year includes close wild relatives of many potential horticulture, agriculture, medicinal and ornamental plants. The discoveries include plants belonging to groups Amomum (wild cardamom), Cycads, Rubus (raspberry), Syzygium (wild jamun), Terminalia, Balsams, Zingibers and also seven trees and 10 orchids,” said A.A. Mao, director of BSI.
•He added that the BSI has placed emphasis on molecular DNA technology and phylogeny to confirm the discoveries.
Taxonomic tools
•Kailash Chandra, director of ZSI, said that modern taxonomic tools, like DNA analysis, helped in the discovery of frogs and reptiles
•“Of the 61 species of vertebrates discovered this year, reptiles dominate (30 species),” Mr. Chandra said. 21 species of fishes, nine species of amphibians, and one mammalian sub-species were also found.
•Kerala recorded the highest number of discoveries with 59 species. West Bengal, a state with both Himalayan and coastal ecosystems, recorded 38 and Tamil Nadu recorded 26.
•With these new discoveries, the updated list of animal species in India has risen to 1,01,681 which is about 6.49% of all the species in the world, Mr. Chandra said.
•S.S. Dash, head of the publication of BSI, said that the number of plant species in the country has been updated to 49,441 which is 11.5% of all flora in the world. “Over the past ten years, BSI has recorded discovery of 3,225 plant species,” he said.
•Other than the discoveries, 139 species of animals were added to the fauna of India as new records. In terms of plants, 193 taxa of plants were added to flora of India as new records.
•Last year, 539 new species of plants and animals were discovered, which included 300 species of animals and 239 species and sub-species of plants.
