Daily Current Affairs for UPSC Civil Services Exam – 24 October 2020

Daily Current Affairs for UPSC Civil Services Exam – 24 October 2020

In Today’s News:

  1. MPC is cautious of Inflation.
  2. Forex Reserves hit a record high.

1. MPC is cautious of inflation.

News Summary

Monetary Policy Committee has said in its minutes that monetary policy needs to be accommodative as there is a chance of the second wave of COVID-19 threat to India. The RBI has left the interest rates unchanged.

Prelims GS – Economic Development

Monetary Policy Committee:
  • The Monetary Policy Committee (MPC) is a committee of the Reserve Bank of India, headed by the RBI Governor, which is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level.
  • Monetary Policy Committee will have six members:
    • the RBI Governor (Chairperson),
    • the RBI Deputy Governor in charge of monetary policy,
    • one official nominated by the RBI Board and
    • the remaining three members would represent the Government of India.
  • MPC was set up to task RBI with the responsibility for price stability and inflation targeting.
  • The MPC takes decisions based on the majority vote (by those who are present and voting). In case of a tie, the RBI governor will have the second or casting vote.
  • The decision of the Committee would be binding on the RBI.

2. Forex reserves hit a record high

News Summary

The Foreign Exchange Reserves of India have touched a record high of $555.12 billion. The major reason for the rise in Forex Reserves this week is due to the sharp jump of Foreign Currency Assets from $3.539 billion to $512.322 billion.

Prelims GS – Economic Development

Foreign Exchange Reserves:
  • Foreign Exchange Reserves of India consists of :
    • Foreign Currency Assets
    • Gold
    • SDRs
    • Reserve position in the IMF.
  • The major part of Forex reserves is occupied by Foreign currency assets followed by Gold, SDRs, and Reserve position in the IMF.
Foreign Currency Assets:
  • FCA (Foreign Currency Assets): FCA is maintained as a multi-currency portfolio comprising major currencies, such as US dollar, Euro, Pound sterling, Japanese yen, etc. and are valued in terms of US dollars.
SDR: (Special Drawing Rights)
  • The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
  • The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
  • The SDR serves as the unit of account of the IMF and some other international organizations.
  • The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members.
  • SDRs can be exchanged for these currencies.
Reserve position in the IMF:
  • A reserve tranche is a portion of the required quota of currency each member country must provide to the International Monetary Fund (IMF) that can be utilized for its own purposes—without a service fee or economic reform conditions.
  • The IMF is funded through its members and their quota contributions.
  • The reserve tranche is basically an emergency account that IMF members can access at any time without agreeing to conditions or paying a service fee. That is, a portion of a member country’s quota can be withdrawn free of charge at its own discretion.

 

 

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