April – June Quarter GDP numbers out. Quarterly growth pegged at 7%
- Quarterly growth is the GDP growth of the country in that quarter (3 months)compared to the same quarter of the previous year.
- The growth in the April-June is lower than the 7.5% growth pegged in the previous quarter but is higher than the corresponding quarter growth rate of 6.7% of previous year.
- The Central Statistical Office has used a different approach to measure GDP in 2015 by adopting the concept of GVA (Gross Value Added) and is expanding the category of companies in the calculation
- Gross Value Added is the economic measure of the value of goods and services produced in an area, industry or sector of an economy.
- In accounts of a Nation, GVA is output minus intermediate consumption.
- So GDP is calculated by adding the taxes collected to the GVA and subtracting the subsidies.
- Eight core sectors including Steel and Cement which together constitute nearly 38% of our country’s factory output showed signs of negative growth as they fell to 1.1 % in July as compared with 3% in the month of June.
- The RBI governer has indicated that he would consider cutting rates further after looking at the inflation trend. The rates have already been cut thrice by cumulative 75 basis points this year.
RBI designates SBI and ICICI as DSIBs
- DSIB are Domestically systemically important banks
- SBI and ICICI have been designated as DSIBs by the RBI on 31 August as they have many cross jurisdictional opportunities , having complex operations and have penetrated to almost every area of the Indian Financial system.
- More Importantly Failure of these banks will subsequently impact the Indian Economy drastically.
- Designation of these banks as DSIBs will mean that RBI will now monitor them closely.
- This will also result in increase in the Capital Adequacy Ratio of these banks which is expected to be much higher than the required amount as stipulated by Basel norms.
The impact of Yuan Devaluation
- Chinese economy is reliant on exports rather than the internal demand generated owing to poverty in the Chinese interior regions.
- Devaluation of the yuan makes its exports cheaper and offer stiff competition to local products.
- Competitive devaluation which occured in the 1920s by the leading global economies was one of the reasons of Great Depression of 1929.
- The Silk road project of China is looking to connect rural regions of Xinjiang and Tibet with central Asia and SEA thereby providing economic corridors of development and alleviating poverty in these regions.
- The competitiveness of Indian exports is expected to go down as yuan gets cheaper.
- This will effect India’s GDP numbers.
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