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Hello everyone! Good day! 

Let us dive into some news from past week 

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Economic Ramifications of Farmers' Protests

The PHD Chamber of Commerce and Industry (PHDCCI) has expressed concern about the ongoing farmers' protest in northern states, predicting a significant negative impact on businesses and employment. They estimate daily economic losses of over Rs 500 crore. Micro, Small and medium enterprises (MSMEs) in Punjab, Haryana, Delhi, and parts of Uttar Pradesh and Rajasthan are particularly affected, as they rely on raw materials from other states for production. Industries such as food processing, textiles, automobiles, IT, trade, tourism, and transport will suffer due to disrupted supply chains caused by the protests.

Why are farmers protesting?  

The farmers are protesting the absence of a law guaranteeing Minimum Support Prices (MSPs), despite their repeated requests. They feel the government is ignoring their other demands as well. The MSP represents the price at which the government commits, officially, to buying agricultural produce from farmers. Currently, MSPs exist for 22 crops, mainly focusing on grains, pulses, oilseeds, paddy, and copra. 

What is the government's response to it?  

The Union government has consistently stated that it cannot commit to announcing a guaranteed MSP. Agriculture Minister Arjun Munda emphasized that considering a law for guaranteed MSP would require a thorough examination of all perspectives. Despite four rounds of discussions, no consensus has been reached between the farmers and the central government. On Wednesday, the central government offered to commence the fifth round of talks with union ministers and farmer leaders. Additionally, the Cabinet approved an increase in the Fair and Remunerative Price for sugarcane

Could Ousting BYJU's CEO Solve the Company's Problems? 

Investors in the edtech company Byju's parent Think & Learn Pvt. Ltd. have expressed concerns. They're worried about management's handling of the acquisition of Aakash Educational Services Ltd (AESL) and agreeing to unfavorable loan terms with Davidson Kempner (DK). They're demanding the removal of founder Byju Raveendran and his family from leadership roles, alleging lack of transparency and seeking details on federal agency investigations and terms for new investors. 

To address financial challenges, the company has raised $200 million through a rights issue, albeit at a significantly reduced valuation. They also plan to revamp the board by adding two new directors with input from shareholders. Byju Raveendran believes this funding will help address current liabilities and fuel growth. 

CRISIL Forecasts Rate Cuts, But Liquidity Deficit Remains a Challenge 

Financial conditions in India have tightened, leading to a deeper liquidity deficit and pushing short-term rates upwards according to CRISIL. The research report by CRISIL Market Intelligence and Analytics report highlights that foreign investors selling out of Indian assets further exacerbated the liquidity crunch. 

Despite the tightening, the transmission of interest rates to deposit and lending rates hasn't been complete. The cumulative rise in these rates remains lower than the 250 basis point increase in the repo rate implemented by the Reserve Bank of India (RBI) since May 2022. This incomplete transmission is what prompted the RBI to keep interest rates unchanged in its recent decision. 

Looking ahead, CRISIL predicts the RBI will stay active in managing liquidity and take steps to prevent excessive credit growth. They even foresee potential rate cuts starting from June 2024. However, the current liquidity deficit and its impact on money market rates, hovering above 6.75%, present significant challenges. 

More news from the week ...

  • Fintech loan disbursals double in 5 years : The personal loan disbursals increased from 1.1 million to 41.6 million in the past 5 years. Also, the average value of loans saw a decline from ₹26,794 to ₹9,816. 

  • Reliance Industries-backed BharatGPT group introduces Hanooman AI : Hanooman is a multimodal AI model and can respond in text, speech, and video formats. Hanooman AI offers solutions in 11 Indian languages for healthcare, governance, finance & education.

  • Nvidia’s stellar earnings report adds $277 billion in market cap in a single day : Following a stellar earnings report, Nvidia shares jumped by 16% on a single day, adding immense wealth to the investors. Nvidia's Q4 2023 net margins witnessed a significant increase, exceeding 700%, alongside a 250% revenue growth in Q4 to $22 billion compared to the same quarter the previous year. 

  • Gurugram police to fine blocking of emergency vehicles: Gurugram police have announced a fine of ₹10,000 under Section 194E of the Motor Vehicle Act for blocking emergency vehicles like ambulances, fire trucks, etc. The Dept will fine based on video recording of the incident if emergency vehicles are blocked amid heavy traffic jams

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The Lixinsha Bridge in Guangzhou, China, collapsed after being struck by an empty container ship, causing a section of the roadway to collapse along with vehicles. The captain of the cargo ship has been detained. Among the five vehicles that fell from the bridge, including a bus and a motorbike, two landed in the river while the rest fell onto the vessel. 

Test you knowledge !

What is the current repo rate in India ? 

[A]  6%

[B]   8% 

[C]   6.8%  

[D]   6.5%

The Reserve Bank of India (RBI) utilizes the repo rate as a key tool to manage the Indian economy. Currently set at 6.50%, this rate dictates the cost of borrowing for banks, indirectly impacting loan rates for individuals and businesses. The Reserve Bank of India (RBI) revises the repo rate based on several key factors, often considering a combination of economic indicators and policy objectives. Some key factors considered by RBI are inflation, growth, liquidity, external factors, policy priorities, etc. RBI typically reviews the repo rate at its bi-monthly monetary policy committee (MPC) meetings. However, it can also hold unscheduled meetings and announce rate changes if economic conditions warrant it. 

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