Daily Quiz: UPSC Prelims Marathon – December 4, 2018

The Trade and Development Report (TDR), launched in 1981, is issued every year for the annual session of the Trade and Development Board.

The Report analyses current economic trends and major policy issues of international concern, and makes suggestions for addressing these issues at various levels.

First, bank rate is the rate at which central bank (in case of India, it is RBI) of a country provides re-financing facilities or provides loans to the commercial banks.

When bank rate is lowered, it is called ‘cheap money policy’. Money supply in the economy is increased. Commercial banks now can borrow from the RBI at cheaper rates and can pass on this change to their customers through by providing loans at cheaper rate. Now, say if you want to get a home loan, your cost of getting that loan gets decreased. Generally, RBI lowers the bank rate during a period of recession/slowdown or sluggish economic activity. Reduced costs of loans, encourage companies/manufacturing units etc to borrow more for increasing production and consumers to spend more. Thus, economic activity in the country picks up.

ADB is multilateral lending agency based in Manila, Philippines.  It is dedicated to reduce poverty in Asia and the Pacific region through inclusive economic growth, environmentally sustainable growth, and regional integration.

Statement 2 is wrong:

ADB has 67 members – 48 from the Asia-Pacific region including India and is collectively owned by these 67 members. The non Asia pacific region members are only developed countries.

Most of the ADB’s lending (~80%) is concentrated public sector lending in five operational areas viz. Education; Environment, Climate Change & Disaster Management; Finance Sector Development; Regional Cooperation & Integration and Private sector lending.

It provides finance to both sovereign countries as well as private parties. It provides hard loans to middle income countries while soft loans to poorer countries.

When RBI increases bank rate, it is called ‘dear money policy’. Money becomes costlier. RBI, does so, generally, during a period of inflation. Commercial banks are compelled to pay higher interest to the RBI which in turn prompts them to raise the interest rates on loans they offer to customers. The customers then are dissuaded in taking credit from banks, leading to a shortage of money in the economy and less liquidity. So, while on the one hand, inflation is under controlled as there is less money to spend, growth suffers as companies avoid taking loans at high rates, leading to a shortfall in production and expansion.

Angel investors invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur’s family and friends. The capital angel investors provide may be a one-time investment to help the business propel or an ongoing injection of money to support and carry the company through its difficult early stages. Angel investors provide more favorable terms compared to other lenders, since they usually invest in the entrepreneur starting the business rather than the viability of the business. Angel investors are focused on helping startups take their first steps, rather than the possible profit they may get from the business. Essentially, angel investors are the opposite of venture capitalists.

Angel investors are also called informal investors, angel funders, private investors, seed investors or business angels. These are affluent individuals who inject capital for startups in exchange for ownership equity or convertible debt. Some angel investors invest through crowdfunding platforms online or build angel investor networks to pool in capital.

CPI is a measure of change in retail prices of goods and services consumed by defined population group in a given area with reference to a base year. The formula for calculating Consumer Price Index is Laspeyre’s  with base year 2010.It is calculated by Central Statistics Office (CSO) < In the Ministry of Statistics and Programme Implementation (MOSPI)

The WPI measures the price of a representative basket of wholesale goods. WPI captures price movements in a most comprehensive way.  It is calculated by – Office of the Economic Adviser <In DIPP (Department of Industrial Policy and Promotion) < In Ministry of Commerce & Industry.

Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an economy and captures the general level of industrial activity in the country. It is a composite indicator expressed in terms of an index number which measures the short term changes in the volume of production of a basket of industrial products during a given period with respect to the base period(2004).It is calculated by Central Statistics Office (CSO) < In the Ministry of Statistics and Programme Implementation (MOSPI)

Infrastructure Debt Fund (IDF), Asset Finance Co.s (AFC), Infrastructure Finance Company, Investment Co.s, Factor Company(Factoring business ex. HSBC) etc are regulated by Reserve Bank of India (RBI)

Merchant Banking Companies, Venture Capital Fund, Stock Brokers, Mutual Funds are regulated by Securities and Exchange Board of India (SEBI).

Concepts of Money Supply:

Ml = C + DD + OD

Where, C = Currency with the public

DD = Demand deposits with the public in the commercial and cooperative banks.

OD = Other deposits held by the public with Reserve Bank of India

M2 = M1 + Savings deposits with the post office savings banks.

M3= M1+ Time Deposits with the banks.

M4 = M3 + Total Deposits with Post Office Savings Organisation.