RBI Grade B 2014 - (Phase 2)

Bank PO
141


RBI Economics & Social Issues 2012-13 Paper

Q.  'Monetary policy is not a panacea for India's long term economic challenges'. Discuss. ........10 Marks


Answer:

Times of India

After a devastating blowback from the market, government and RBI must stop their crosstalk

Aug  19, 2013, 12.00AM

Statements from different officials have conveyed the impression that India's central bank is not on the same page as the government. This has spread confusion and undermined the efficacy of monetary policy. Signals from monetary policy are most effectively transmitted when communication is clear. Crosstalk doesn't help. Raghuram Rajan will take over as RBI governor against the backdrop of markets going into free fall, whether be of currency or equities. As he chooses his course of action, he will be aware that the government is financially stretched and politically hamstrung by looming general elections.

 India's problems with different deficits, fiscal and current account, are well known. What makes things worse is that not only is the US central bank likely to soon begin rolling back its huge monetary stimulus, but it is likely to do so under a new chairman. Global financial markets' perceptions of the new, and as yet unknown, chairman just add to the uncertainty about the manner in which trillions of dollars will move around.

 Monetary policy is not a panacea for India's long-term economic challenges. Prosperity can only be brought about by structural changes to make the economy more productive. That is entirely in the hands of governments - at the Centre and in states. Monetary policy can, at best, be a tool to smoothen ups and downs of economic activity in the short run.

In the recent past monetary policy has been largely ineffective. Particularly, actions to defend the rupee have not only yielded disappointing results but also spread confusion about the policy's goals. Responsibility for this does not lie only with the RBI. It rests as well at the door of the government. Given the challenges that lie ahead, government officials must at the very least restrict comment on monetary policy and avoid public display of differences.

 Moreover, credibility will come only by letting market forces play out. The cost of restraining them is now prohibitive. Events of the last week are a stark example of the crisis that can be triggered by experiments of curb and control from the socialist era. The response was a devastating blowback from the market. Together, the government and RBI can steer the economy through troubled waters by complementing each other and letting the market work without arbitrary intervention.


https://drive.google.com/file/d/0B65KNDNdGizOQmlxQnRiTnBTUjg/edit?usp=sharing


142

Sharing a PDF on 

Major Issues Confronting Indian Economic Policy. Povery , Inequality & INCLUSIVE GROWTH


https://drive.google.com/file/d/0B65KNDNdGizOQ2JGVTY0M3FkN28/edit?usp=sharing


143


http://www.thehindu.com/business/Industry/finance-ministry-orders-forensic-audit-on-dena-bank-obc/ar...

If you have not seen it yet


144

can anybody post any concrete article on sustainable development?


145


Question: Examine foreign exchange reserves and external commercial borrowings as

Methods of financing deficit in Balance of Payments. (10 marks paper II 2012)

Answer: Led by fuel imports, India trade balance has always been unfavorable. That in turn led to current account deficit. However in normal course of business capital account inflow has been sufficient to finance this current deficit. But lately due to global and domestic uncertainties deficit has widened and capital inflow moderated. Therefore under this scenario, foreign exchange reserves and external commercial borrowings as methods of financing deficit have been resorted to.

Forex reserve works as cushion against inflexible fuel import. Since oil prices are perceptible to international geopolitics, which are beyond our control. Also in case of ay large capital out flow our forex reserve should be sufficient to discharge the obligation. Therefore any short fall in forex reserve could lead us in deep waters. While in short term there is no harm in financing BoP, in longer term it must be ensured that trade balance become sustainable.

Same is the issue with ECB, since it is a foreign debt it increase debt to GDP ratio and affects sovereign rating. Moreover ECB exposes us to uncertain exchange risk, which is again a function of wider imitational economic balance. Thus there must be judicious upper limit as per our risk appetite as to how much external debt and risk India could sustain.


146

Hie alll....wanted some notes on multiculturism....not able to find much online....pls help....thanks in Advance


147


Will we get to know our phase 2 scores before interview?

148

Hi Ppl,

Agriculture related concepts for e.g. - APMC, Land Reforms etc. (Chap 8 of Indian Economy, Ramesh Singh) need to be covered??? I dont see any related questions in the past year papers. But still a point of concern.

149

Will they provide any extra sheet for precis writing or not ?? Can anyone enlighten me about the layout of precis writing that should be followed in the exam.........!!! (particularly if any1 have exp. ) @sanju142857  @maverik02 n others


150

Puys, Phase II Answer booklet will be plane or with lining ?

151

Question asked in CSAT paper 1 today..

If the interest rate is decreased in an economy, it will

a) decrease the consumption b) increase the tax collection of the government c)increase the investment expenditure in the economy d) increase the total savings in the economy. 

152

C

153

In questions like "Discuss Recent changes in monetary policies of RBI" .... What extent of "recent"  are we expected to go for??

154

How does increase in Repo rate by RBI (leading to increase in intt. rate by comm. banks) affect inflation?

First Case: Bank raises interest rates.... Manufacturers dont borrow..... Supply goes down..... Inflation increases.

Second Case: Bank raises interest rates. Public is instigated to put more money in savings and Deposits.... Also they borrow less.... Demand goes down... Inflation decreases.

So which of the above is correct?

155

What material are you guys using for phase 2 preparation? Please share the book names.

156

Any one frm south zone got an official reply regarding preexam training

157

RBI phase 2 clashing with RRB, please help what to do? whom to sent email????


158

Guys, I went through a circular on persmin website regarding candidates declared unfit for various posts in Civil Services 2013. About 67 candidates are unfit for various posts. It is really sad to know that a color blind is unfit for all posts whereas people suffering from myopia and low vision and even blind are eligible for the ias, irs etc. For example Ankit Asthana, rank 91, ias is unfit for all posts because he is color blind. I am a color blind and working in SBI for the last five years and I was also working as div. accountant in central govt. before that. I never found any need to identify colors in my routine job. I fail to understand how a color blind is unfit for all posts when he has otherwise perfect eyesight. Only he is not able to distinguish some colors which is required only in defence, traffic or police services.


159

plz dont join kalinga ias or buy any study material from there. it is fake.



160

please can anyone tell me  the word limit for answering a 10 mark question?? Economic and social Issues- Paper 2 RBI