- [Act 1] Economy
- E1: RBI: Monetary Policy April 2014
- E2: GI Tagging & EC model code
- E3: Predatory pricing by Aviation Companies
- E4: BIS New labelling guidelines for Electronics
Current Affairs for April week 1 (1st to 7th April). Total three parts
- Part 1/3: Economy= You’re here. (bank license topic discussed separately)
- Part 2/3: Environment, Biodiversity, Polity and Culture click me
- Part 3/3: Diplomacy-international relations (click me)
- Make sure you know the theory of repo, reverse repo, LAF, MSF, CRR, SLR, if not then click me
- 28th Jan 2014: Monetary policy (and Rajan said he’d update it after two months = Feb, March)
- 1st April 2014: monetary policy update
Key rates unchanged:
|Marginal standing facility (MSF)||9%|
|LAF||Repo rate (policy rate)||8%|
|Reverse Repo rate||7%|
|Reserve ratios||Cash Reserve ratio (CRR)||4%|
|Statutory liquidity ratio (SLR)||23%|
These rates are one and same like previous update (Feb 2014).
Rajan did not change the policy rate (repo rate) for the following reasons
- Yes, inflation has declined but not sufficient enough where repo rate should be reduced.
- Rajan fears that even in 2015, (CPI) inflation will not go below 8%, because…
- Geo-political developments (like Ukrain) and their (negative) impact on crude oil, gold & other international commodity prices.
- El Nino effect = less monsoon = less food production
- fuel, fertilizer and electricity subsidies = more money supply (from government’s side)
- MSP (Minimum support prices) on foodgrains. = more money supply (from government’s side)
- Accepted some recommendations of Urjit Patel Committee, like targeting CPI (combined) inflation. Detailed coverage of Urjit Patel, pros/cons discussed already in earlier article click me.
- KYC norms are being simplified for Foreign Portfolio Investors. (FIIs)
- To reduce volatility of FII investment in Government securities (G-Sec), Rajan made new rule- those FIIs can only invest in G-sec only with maturity of one year or above.
- will allow more companies /entities to get Banking correspondence (BC) license.
Rajan’s other projections:
|GDP growth rate%||5||5-6|
|CAD as % of GDP||–||2%|
- Rajan asked banks not to levy penal charges on customer, if he doesn’t maintain minimum balance. (but bank may suspend his facilities on until he puts money)
- Counter argument:= since banks have to incur expenses for record maintenance, staff salary even on such non-minimum balance dormant accounts. So banks will raise the charges on ATM, Debit card etc. on all customers, to cover those losses and keep profit margin same.
Table: Penalty rates at the moment:
|Bank||Min. Balance necessary (monthly)||penalty (Urban)||Penalty (rural)|
- What is Geographical indicator tag, what benefit does it offer? = already covered in my old article Click ME
- Geographical indications (GI) registry is one type of quasi-judicial body.
- But as per Election commission’s model code of conduct, even they had to pause giving new GI-registration.
- Following is the list of product awaiting GI registration:
|Dharmavaram handloom silk sari||Andhra|
|Moradabad metal craft||UP|
These places/items become important at two places
- MCQ : theory / static content
- GS Mains Paper 1: (Geography) location factor of various industries.
- Climate: semi-arid tropical = less rainfall = good because silk yarn breaks easily in rainy weather.
- Water quality-soft = best suited for “degumming” and dying the silk.
- Raw silk as such as harsh and unsuitable for dye treatment.
- Hence it is subjected to degumming treatment= soak in boiling water with soap and soda ash.
- But if water is hard, then soap/soda won’t dissolve easily. That’s why soft water essential.
- >1000 ft. above sea level = temperature ~25-40 degree = good atmosphere for labor. Because Dharmavaram silk is essentially handloom woven and not power loom.
- This town is ~50 kms away from Anantapur in the Rayalaseema region of Andhra Pradesh= good transportation facilities
- 100% pure mulberry silk only. (no mixing with cotton etc.)
- Zari brought from Surat. (lightweight, non-perisable) hence silk industry doesn’t need to be setup near Surat’s zari. PS: Surat Zari also enjoys GI status.
- Lepakshi temple murals (near Anatapur)
- various flora, fauna and epic scenes.
Acid Dye (theory)
- Acid dyes can easily color protein fibres like silk and wool. (Hence acid dyes used in silk industry and not alkaline dyes).
- Acid dye colors highly durable and can last upto 50 years.
- Applied generally in the presence of an organic or inorganic acid and hence are called acid dyes.
- After dyeing phase is over, workers mix Sodium Hydroxide to remaining dye => acid neutralized=> effluent discarded in the drainage. Hence the process eco-friendly. No chemical diseases reported in the region.
- Silk Pattu Sarees And Paavadas for grand occasions
- also for Bharath Natyam and Kuchipudi dancers.
(ya this type of stupid MCQs are asked whether abc ancient text mention xyz thing or not?….dig last CDS and CSAT- Kalhan’s Rajtarangini and Huen Tstang respectively.)
- Perfume dates back to over 5,000 years to the Indus valley civilization. Excavation of perfume distillation sites.
- Perfumes even mentioned in ancient Pali and Islamic texts.
- 1St AD: Greek text Periplus mentions sandalwood imported from India.
- ~600AD: Emperor Harshvardhan made Kannauj his capital and encouraged the perfume industry. Some perfumer makers were so influential, they were allowed to mint their own coins!
- ~1550AD: In Aain-e-Akbari, Abul Fazal mentions Emperor Akbar was fond of perfumes. His court chamber was continuously scented.
- ~1600AD: Tojak-e-Jahangiri, claims that queen Noorjahan invented a perfume called “rooah-e-gulab”.
- Perfumes are essential oils from flowers, mixed with a “base” material.
- Essential oils are volatile, liquid aroma compounds, usually sourced from plants. Essential oils are not oils in a strict sense, but have oil like properties e.g. poor solubility in water.
- Essential oils often have an pleasant odour, hence used in food flavouring and perfumery.
Raw material: base
- Base is the liquid in which flowers are sunk to extract the essential oil.
- Sandalwood oil is the best base for attar making. (source: Karnataka and Kerala)
- but scarcity of sandalwood= sky high prices, hence traditional perfumer makers nowdays use artificial chemical base such as liquid paraffin and Di-Octyl Phthalate (DOP)- for making cheaper attars.
- Attars are made using the centuries old copper vessels called Deg (Kettle) or Still and Bhapka (Receiver).
- The Deg & Bhapka system is based on hydro-distillation technique.
Raw material: flowers:
Local crops of Kannauj= Jasmine, Kadamb, Merigold, Henna etc. remaining flowers brought from other states.
|Rose||Hathras and Aligarh in Uttar Pradesh and Palanpur in Himachal Pradesh|
|Chameli||Chandoli in Jaunpur district,|
|Raat Rani||Viaywara district (Andhra Pradesh),|
|Kewra||Burahanpur, Ganjam in Orissa|
|Saffron||Jammu & Kashmir.|
|Spices and herbs||North-East States of India and Himalaya|
Products: Fragrances (attars), incense sticks, dhoop/hawan material, gulkand (made of rose petals and sugar), Rose water and scent sprays.
- Mughals brought Kansa (an alloy of copper, zinc and tin) from Iran, Turkey, Egypt. Some migrants also settled here and started crafting kitchen utensils.
- Designs influenced from Iranian style. Usually, king travelling on elephant, Mughal monuments etc.
- Present city established during Akbar’s time.
- boost in demand due to Kanuaj Attar business (perfume bottles).
- today >2000 cr export, >25000 cr artisans employed.
- Brass= 60% copper + 40% Zinc – but proportion can be varied according to product.
- Bass has low melting point (~900C) = easy to melt and moult.
- Electroplating technique used for changing surface properties
- wood/timber of mango, rosewood and shesham
- Timber should be less than 15% moisture content = become seasoned.
- Seasoning process- drying of timber to remove the moisture contained in walls of the wood cells.
|Srinagar Woodcraft||geometrical designs|
|Mysore woodcraft||human and animal motifs|
|Saharanpur woodcraft||Monuments of Sultanate & Mughal age, grapevines, floral patterns.|
- Wax polish used to increase brightness.
- Earlier woodcrafting done manually with handtools, nowadays use of machinery.
Products: Coat Hangers, Cupboards, Dressing Tables, Embroidery Frames, Table Tops, Tea Carts.
- Soda ash and Silica
- Glass ware manufactured using mouth blown technique
- The artisans use to roll glass layer on wooden rods, which were cut into the shape of bangles
- nowhere else done in the world
- Hence Firozabad = World Glass Bangles Capital.
Products: glass bangles, chandeliers, glass status of gods and goddess
- What is predatory pricing: how is it good/bad for business/ economy?
- Why is Spicejet accused of predatory pricing?
- What has DGCA done in this regard?
What is Predatory Pricing?
- Means deliberately selling product below the cost price, to eliminate competition.
- Usually predatory pricing is done by firms with deep pockets (like Walmart), because they can afford to make such temporary losses.
- in short, it may appear good to customers- because products available @cheap rate
- But in long term, the firm establishes monopoly and starts exploiting the same customers.
- Sometimes the strategy misfires, company makes heavy losses (e.g. AirDeccan and Kingfisher).
Why Spicejet accused of Predatory pricing?
- They’ve launched a scheme “Rajiv Gandhi One Rupee Air ticket”
- Sounds good? but there are hidden terms and conditions
- Offer valid only if you book tickets during April 1 to 3.
- Only one or two seats offered in each flight under “One rupee” scheme.
- So this is both “predatory pricing” + misguiding customers.
- Spicejet already making losses, and now they’ve launched this scheme=> other aviation companies will also be forced to launch similar schemes to stay on competition => everyone starts bleeding and making losses=> ultimately some get on verge of collapse like Kingfisher= staff salary not paid, loss EMIs not paid, Bank NPA increases and so on….
What has DGCA done?
- Directorate General of Civil Aviation (DGCA) is empowered to take action against such predatory pricing (under Aircraft rule #135)
- He has ordered Spicejet to immediately stop this scheme.
Q. (GS2-Regulatory bodies) What is BIS? Why is the electronics industry opposed its new labelling guidelines? (200 marks)
- Bureau of Indian standards is a statutory body under Consumer affairs ministry, to set the quality standardization criteria for consumer goods.
- It has recently updated the labelling guidelines for IT & electronics industry- for products such as printers, scanners, wireless keyboards, set-top boxes and microwave ovens.
- Earlier companies had to merely put stickers on the products.
- But as per new guidelines, BIS requires them to screen print, emboss or engrave the labels onto the product and its packaging material.
- Manufacturers also need increase their font size such that product description is clearly visible.
IT & electronics Industry is opposed to this guideline because:
- Increase in the production cost. In certain cases almost by 100%.
- BIS ordered the companies to implement this from April 2014, a deadline almost impossible to achieve.
- Difficult to engrave certificates on some delicate gadgets such camera, tablets and mobiles.
- No apparent benefit to customers.
- No such labelling rules followed anywhere else in the world.
Visit Mrunal.org/CURRENT for entire Archive weekly current affairs compilations published so far.