macroeconomics newsletter 17th-21st sectionb group8

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  • Submitted by: Group 8 Abhishek Jayant


    Adarsh K A M


    Ainnie Abbas


    Akanksha Gupta


    Bibhas Mishra


    Chinkal Nagpal


    November 17 -November 21


  • 17th

    Nov 2014

    Moderate inflation a passing phase: Economists

    A monsoon deficit is likely to affect the agriculture output, which could have an impact

    on the food inflation

    The sharp fall in inflation over the past few months has raised the

    clamour for interest rate cuts. With the Consumer Price Index-

    based inflation falling to 5.5 per cent in October from 6.5 per cent a

    oth ago, is elo the etal aks taget of si pe et January 2016, the pressure on the Reserve Bank of India (RBI) to

    loosen monetary policy is mounting. While so far RBI resisted

    pressure to reverse its stance, the decision to cut interest rates is

    likely to be guided by whether the moderation in inflation is


    The recent slowing in retail inflation has been driven largely by food inflation, which fell from 7.7 per cent in

    September to 5.6 per cent in October, due to lower prices of fruits, vegetables and sugar. According to CRISIL,

    The seasoall adjusted oth o oth oetu i food iflatio as uted at 0.0 pe et. This suggests the recent decline was largely due to the strong base effect.


    Banks cut lending on gold as prices fall

    Banks have swung into action as gold prices continue to slide.

    Reduced loan-to-value ratio (LTV), cautious lending, and a close

    monitoring of the gold loan portfolio have prompted them to hedge

    their loan books against the reduction in prices.

    The yellow metal has lost 14.5 per cent in the past year and fallen to

    Rs 26,660 for 10 gm from Rs 31,190 for 10 gm a year ago. In the past

    six months, the speed of slide has increased, with gold losing 10 per


    To safeguard themselves, lenders have reduced the LTV (the part that can be given as loan) on gold. For

    instance, Federal Bank was earlier financing up to 70-75 per cent of LTV on gold ornaments, and has reduced

    it to around 60 per cent for a one-year tenure.


  • Spotlight on Europe's economy

    As large parts of Europe's economy grind almost to a halt,

    attention will focus this week on the latest assessments of

    business confidence in the euro zone and Germany, which

    has just narrowly avoided a recession.

    While the United States economy has accelerated and China

    holds a slower but steady course, euro zone countries have

    remained sluggish, with overall growth in output slowing to

    a trickle.

    "The euro zone is the best part of 20 per cent of the global

    economy," James Knightley, an economist with ING, said.

    "The longer the stagnation goes on the more Japan-like it becomes."

    The euro zone's problems have raised expectations that the European Central Bank is preparing to loosen its

    purse strings further to try to rekindle growth.

    Against this backdrop, Germany's Centre for European Economic Research's (ZEW) monthly barometer of

    sentiment, due on November 18, will provide more insight into business confidence levels. The Ukraine crisis is

    a major drag on business and investor sentiment, especially as there have been new reports of Russian troops

    pouring into eastern Ukraine.


    Germany wants to help India in Ganga rejuvenation plan

    The European nation has an impressive record in cleaning its rivers and has

    expressed readiness to join hands with the issue here

    Germany is the latest country to show interest in the Narendra Modi government's Ganga rejuvenation plan.

    The European nation has an impressive record in cleaning its rivers and has expressed readiness to join hands

    with the issue here.

    A team from Germany recently visited India and met finance ministry officials. It showed interest in getting

    exposure on public-private partnership (PPP) practices in India, including pilot schemes.

    In September, the government of Australia had offered to support the Ganga rejuvenation effort. The two

    prime ministers had announced an extension of their agreement on water cooperation. India is also receiving

    financial and technical aid from Japan for cleaning the river Earlier, Modi had called for making Ganga

    rejuvenation a mass movement. He wanted action plans to unite the strength of various sections of society

    dedicated to "Ganga Seva." He said the first priority in this mission should be to stop fresh generation of



  • 18th Nov 2014

    Kisan Vikas Patra to be relaunched today; money to double in 100 months

    The government will relaunch the Kisan Vikas Patra scheme on Tuesday,

    hoping to lure investors away from gold and fraudulent schemes by

    offering attractive terms. There won't be any upper limit on investments,

    the minimum denomination being Rs 1,000.

    Investors will be able to double their money in 100 months but the

    government has bundled in a number of features to enhance liquidity of

    the instrument as the new regime looks to raise the level of financial

    savings that fell to 7.1 per cent of GDP in FY13 from more than 12 per cent in FY10.


    India readies new steps to curb surge in gold imports source India is likely to announce new measures to curb gold imports as early as Tuesday, a senior finance ministry

    source said, and they could include restrictions on a group of private trading firms that have been allowed to

    bring in the precious metal.

    Shipments to the world's second-largest gold buyer jumped fourfold in October from a year earlier to $4.18

    billion, raising concern about India's fragile balance of payments.

    Officials from the finance ministry and Reserve Bank of India (RBI) were considering whether to reimpose

    import restrictions on "star trading houses" that were eased earlier this year.

    Japan in recession as economy contracts 1.6%

    Japan's economy unexpectedly slipped into recession in the third quarter,

    setting the stage for Prime Minister Shinzo Abe to delay an unpopular

    sales tax hike and call a snap election two years before he had to go to

    the polls.

    The recession comes nearly two years after Abe returned to power

    promising to revive the economy with his "Abenomics" mix of massive

    monetary stimulus, spending and reforms, and is unwelcome news for an

    already shaky global economy.

    Gross domestic product (GDP) shrank by an annualised 1.6 per cent in July-September, after plunging 7.3 per

    cent in the second quarter following a rise in the national sales tax, which clobbered consumer spending.

    The world's third-largest economy had been forecast to rebound by 2.1 per cent, but consumption and exports

    remained weak, saddling companies with huge inventories to work off.


  • 19th Nov 2014

    Japan LNG imports to fall 'a little' in 2015: Government official

    Japan's 2014 liquefied natural gas (LNG) imports will drop off "a

    little" in 2015 as nuclear power plants resume operations, a

    government official said on Wednesday, the first decline since the

    Fukushima crisis in 2011. LNG use by the world's largest importer of

    the fuel has surged since the crisis led to the shutdown of all the

    Japan's nuclear power generation, sending prices up sharply. The first

    nuclear plants are expected to come back online next year, but a

    Reuters survey of Japanese utilities showed they would cut more

    expensive fuel oil and crude generation before gas-fired plants.

    Earlier this month regional authorities in Japan approved the restart of the idled Sendai nuclear plant, paving

    the way for a revival of some of the 48 offline reactors.


    European Union insurance watchdog warns on "undue" investment incentives

    The European Union's (EU) top insurance watchdog on Wednesday

    warned against giving insurers strong enticements to invest in

    particular asset classes, saying this would run counter to prudent

    supervision. "We need to emphasise continually that undue

    incentives to buy any asset class should not be part of a risk-based,

    prudent regime," Gabriel Bernardino said in the text of a speech to a

    financial conference. European politicians want insurers to put more

    of their 8.5 trillion euros in assets under management into

    investments that will boost the bl