SYLLABUS SECTION: GS III (ECONOMY)
WHY IN THE NEWS?
Recently, the Reserve Bank of India had announced a slew of measures to enhance foreign exchange flows and rein in the value of the stabilize rupee which touched record low nearing Rs. 80 to the dollar.
- the rupee had depreciated by 4.1% against the dollar.
- Widening trade deficit have led to a sharp depreciation in the Indian rupee to new lows against the dollar.
STEPS TAKEN BY RBI:
- The Reserve Bank has been closely and continuously monitoring the liquidity conditions in the forex market and has stepped in as needed in all its segments to alleviate dollar tightness with the objective of ensuring orderly market functioning.
- It has announced limited period exemption from statutory pre-exemptions for a limited period.
- Barring portfolio investments, capital flows remained stable with an adequate level of reserves providing a buffer against external shocks.
- It has allowed overseas investors to buy short-term corporate debt
- It has opened more government securities under the fully accessible route.
- Doubling in the overseas borrowing limit for corporates | STABILIZE RUPEE.
- Removal of interest rate ceilings for NRIs’ foreign currency deposits
- Banks have been exempt from maintaining the stipulate Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on incremental FCNR(B) and NRE term deposits mobilize up to November 4.
- It also freed banks to temporarily raise fresh FCNR(B) and NRE deposits without reference to extant regulations on interest rates.
- The choice of government bonds available for investment under the fully accessible route (FAR) would be widened
Challenges of the Indian Economy:
- In India the challenges of policy makers in the current global environment are clouded with recessionary risks and high inflation.
- Elevated inflation is eating into household balance sheets
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Source: ECONOMIC TIMES