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Economics Club
CURRENT AFFAIRS - PREPARATION

19 September 2019
 Economics Club
How to begin the Current Affairs Prep?
• Decides Themes and focus:
• Generic – Business, Economy, Finance and Politics
• Specific – Depends upon the target sector (Banking, Markets, etc.)

• Select a few themes and focus on the news pertaining to the field of interest

• Form opinions to gain a better understanding of the issue. Logical flow of thought and deductions

• National and International Affairs, Business Deals

• Understand Recent Crisis, latest development initiatives, and ties between various countries

• News Apps could be helpful

• Read Articles, Editorials etc.

 Economics Club
Bank Merger
• Recently government announced to merge 10 state-owned banks to create four large banks.
• Merger will bring number of Public scheduled bank from 27 to 12.
• Benefits of Bank merger –
• Volume of Inter-bank transaction come down- reduce cost. • Reduce NPA
• Better Risk Management which helps banks to give bigger loans • Good customer service
• Improve regulation – as easier to monitor few banks • Potential to become global bank
• Challenges-
• The bigger the bank the bigger the repercussion if there is huge loss
• Job loss
• Cultural clash between merged banks
• Some bank are formed to cater regional requirement. Merger overlook that regional requirement
• Deterioration in service and as the merger in under way causing further slow down
• Steps to be taken
• Standard process for merger should be formed
• Consultation with stake holder
• Reduce the NPA first
 Economics Club
US China Trade War
• US blamed China for being the currency manipulator. Imposed heavy taxes on chinese good especially
steel and aluminium items from China. US also showed anger on Made in China 2025 strategic plan by
China.

• Global Impact- Lower World GDP, Impact on currencies, coupling with brexit impacted exports badly in
many countries, restructuring of GVC (Global value chain) as tension causes shrink in trade and weaken
GVC model, Gain for textile industries in South Asia as textile import of US from china has shifted towards
other countries

• Implication on India(Positive)- Growth in export between India-China and India-US, Benefit to some
domestic companies due to increase in export-3 sector that are beneficial is garment, ICT and some extent
to automotive component, increase FDI and benefit to steel sector.

• Implication on India (Negative)- Value of the rupee weaken due to weakening of US dollar, Indian stock
market will drop as the investor will take cautious step amidst such scenarios, India – US duties as US has
imposed duties on steel and aluminium which causes cost of production to rise up due to rise in price of
raw materials.
 Economics Club
Automobile Sector Meltdown
• Automobile contributes 7% of the GDP

• The reasons for slow down

• NBFC crisis- half of vehicles sold in rural market are financed by NBFC
• Multiple shocks –GST and demonetization
• Shared mobility – Ola and Uber reduced demand for cars in urban market
• Growing organized pre owned vehicle market
• Policy reset- like leapfrogging from BS IV to BS VI, sudden diesel ban and Electric vehicle push in the market

• Impact on economy:
• Overall economy – have many backward and forward linkage like steel , chemical and other sector will effect
• Job loss- Potential to effect 1 million jobs
• Revenue loss- Auto industry accounts to 11% of the GST revenue. Slowdown can thus cause decrease in revenue.
 Economics Club
Government get INR 1.76 lakh crore from RBI
• RBI pays dividends to the government every year, based on the profits from its investments and printing
of notes and coins.

• The higher surplus is due to the long-term forex swaps and the open market operations (OMO)
conducted by the central bank over the last fiscal.

• A committee headed by Bimal Jalan recommended that RBI should keep 5.5% to 6.5% of its total
assets as the contingency risk buffer (CRB) to meet any emergency fund requirements and transfer the
remaining funds to the government.

• The recent transfer includes Rs 1.23 lakh crore of surplus for 2018-19 and Rs 52,637 crore of excess
provisions identified under a revised Economic Capital Framework (ECF) adopted by the RBI board.
 Economics Club
Bond yield inversion
• A bond is a debt instrument issued by a country’s government or by a company to raise funds and
having a maturity period of more than one year.

• It is a graphical representation of yields for bonds (with an equal credit rating) over different time
horizons.

• Yield inversion happens when the yield on a longer tenure bond becomes less than the yield for a
shorter tenure bond.

• A yield inversion typically signals a recession. Since 1950, all major recession in US is preceded by
yield inversion

• The yield inversion depicts that the demand for money would be much lower than what it is today and
hence the yields are also lower.
 Economics Club
Petrol and Diesel price hike
• Petrol and diesel price hike 5-6 Rs per litre in the next few days.

• Cause due to drone attack on the world’s largest oil processing factory Aramco in Saudi Arabia

• The Hike is short lived due to diversified crude procurement from other sources.

• India is world 3rd largest oil importer- 80% of our oil requirement is imported

• This can cause India’s import bill to inflate and disrupt India’s fiscal position
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Thank You!
ANY QUESTIONS?