The Bank of Japan (BOJ) cut its benchmark interest rate below zero for the first time. The benchmark rate now stands at -0.1 per cent.
1. What does negative interest rate mean?
A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with banks.
Negative interest rates will be adopted on the basis of a three-tier system. The current account that each financial institution maintains at the BoJ will be divided into three tiers, on which a positive, zero and negative interest rate will be applied.
2. Which other central banks have pursued a similar policy?
In June 2014, the European Central Bank became the first major central bank to adopt negative interest rates. It charged banks 0.3 per cent for holding their cash overnight. Sweden, Denmark and Switzerland also have deposit rates below zero.
3. Why has BoJ adopted such an unconventional monetary stance?
BoJ seems to be worried about a slide into deflation territory. Consumer prices have remained stubbornly low, suggesting that demand continues to remain muted with consumers postponing purchases. This could derail the recovery.
According to analysts, collapsing inflation expectations is the key reason for the unexpected move. While the BOJ governor is previously reported to have said that it would hit the two per cent mark by 2016, BoJ now forecasts core inflation to average 0.2 to 1.2 per cent between April 2016 and March 2017.
4. What will be the impact of this unconventional policy move?
By charging banks for holding their money, BoJ is hoping that it will spur banks to lend. Theoretically, if bank lending expands, it could boost consumption and investment, and push growth.
Lower rates could also help push down the Yen which could help boost Japanese exports. It might also trigger another round of competitive devaluations as countries try to increase their share in global trade.
5. How have banks behaved while in a negative interest rate scenario?
Many fear that in practice if banks make their customers pay to hold their money, it might lead to a situation where consumers hold on to cash.
It is equally possible that banks may not pass on the charge to their customers. According to economists at the Deutsche Bank, banks in Europe have not passed these costs onto customers and have preferred to lower their profit margin between lending and deposit rates.
A broad risk is that a negative return on parking funds with the central bank might encourage banks to invest in riskier assets to secure a return, potentially driving new asset bubbles and more pain further down the line.
Sweden and Denmark have introduced negative deposit rates on a temporary basis in recent years. In Denmark, the aim was to cap an unwanted rise in its currency, which was pushed higher when foreign money flooded into the country as investors looked for safe havens outside the crisis-ridden Eurozone. The move to negative deposit rates did not cause financial meltdown, with the Danish central bank issuing plenty of advance warning. Nor did it lead to a noticeable change in the interest rates charged by banks for bank loans.
@Based on agency reports.
New Delhi : The Centre’s fiscal deficit touched Rs 4.9 lakh crore by the end of December 2015, constituting 87.9 per cent of the budgeted Rs 5.5 lakh crore, official figures showed on Friday.
This meant that the government would need to limit its excess its expenditure over revenue by Rs 60,000 crore in the next three months. However, the target of the deficit is not only in absolute terms, but more importantly as 3.9 per cent of the country’s gross domestic product (GDP). With revision of GDP numbers on Friday and expected lower nominal growth than over 11 per cent assumed in the Budget for 2015-16, would require the government to limit the deficit by another Rs 29,000 crore, economists said.
The deficit had surpassed the Budget estimate by this time a year ago. The fiscal deficit was 87 per cent of the estimate till November.
The government’s capital expenditure rose 33.45 per cent to Rs 1.9 lakh crore till December from Rs 1.4 lakh crore in the corresponding period of 2014-15. Revenue expenditure was up three per cent to Rs 11.3 lakh crore from Rs 10.9 lakh crore a year ago. Of this, Rs 27,000 crore increase went to interest payments and non-interest revenue expenditure was up just Rs 3,000 crore because of lower fuel subsidies. Total receipts at Rs 8.2 lakh crore accounted for 67.6 per cent of the Rs 12.2 lakh crore Budget estimate. This was much higher than in the corresponding period of 2014-15 when receipts were 55.7 per cent of those budgeted.
Tax revenue swelled to Rs 6.2 lakh crore till December, 67.6 per cent of the Rs 9.2 lakh crore estimated. By December 2014 tax revenue accounted for 55.8 per cent of estimates. This is despite a likely shortfall of Rs 25,000-Rs 30,000 crore in direct taxes in 2014-15. Non-debt capital receipts were Rs 22,000 crore, 27 per cent of the budgeted Rs 80,000 crore for 2015-16. The government could not even start strategic sales, which were budgeted to generate Rs 28,500 crore. Disinvestment has so far not yielded half of the budgeted Rs 41,000 crore.
The government’s non-tax revenue was Rs 1.8 lakh crore, 90 per cent of the budgeted Rs 2.2 lakh crore, and higher than the 70 per cent of estimates during the first nine months of 2014-15.
The government has budgeted for a fiscal deficit of 3.9 per cent of the GDP in 2015-16. While economists say the deficit will be reined in at Rs 5.5 lakh crore as budgeted, it will be higher than 3.9 per cent of the GDP because the nominal economy did not grow as expected. Besides nominal GDP for 2014-15 was revised down to Rs 124.9 lakh crore in 2014-15 from Rs 125.4 lakh crore estimated earlier.
NEW DELHI: BlackBerry is likely to abandon its BlackBerry 10 (BB10) operating system and switch to Google’s Android for its mobile phones in the future, a move aimed at reviving its ailing hardware business, which contributes a majority of its revenue globally.
The company indicated the change at the launch of its first Android-based phone, PRIV, in India on Thursday.
New Delhi : Government of India has marginally revised downward the economic growth for 2014-15 to 7.2 per cent from the earlier estimate of 7.3 per cent after factoring in latest data on agriculture and industrial production.
“The real GDP or GDP at constant (2011-12) prices for the years 2014-15 and 2013-14 stands at Rs 105.52 lakh crore and Rs 98.39 lakh crore, respectively, showing growth of 7.2 per cent during 2014-15, and 6.6 per cent during 2013-14,” said Central Statistics Office’s (CSO) revised estimates of national accounts released on Friday.
GDP growth rate for 2013-14 has also revised downwards to 6.6 per cent from earlier estimate of 6.9 per cent.
According to the statement, estimates of GDP and other aggregates for the years 2011-12 to 2013-14 have also undergone revision due to use of latest available data on agricultural production and industrial production.
Last year, the CSO had estimated the GDP growth rate for 2014-15 and 2013-14 at 7.3 per cent and 6.9 per cent, respectively.
The office said in terms of real GVA (Gross Value Added) at constant (2011-12) basic prices, there has been a growth of 7.1 per cent in 2014-15 as against growth of 6.3 per cent in 2013-14.
The GVA for 2014-15 was earlier estimated at 7.2 per cent.
GVA as a concept was introduced by the CSO last year to measure value addition in the economy.
The downward revision in GVA for 2014-15 is on account of subdued performance of secondary sector comprising manufacturing, electricity, gas, water supply & other utility services, and construction.
The growth rate in secondary sector estimated at 5.4 per cent down from earlier projection of 6.3 per cent. However the growth rate for the primary (farm and allied activities) and tertiary (services) sectors have been revised upwards to 1.3 per cent and 10.3 per cent, from earlier estimates of 0.3 and 10.2 per cent respectively.
@ Agency report
The Smart city plan is a dream project announced by Prime Minister Narendra Modi. The plan aims to develop 100 cities in the country as Smart Cities.
These cities will be developed to have basic infrastructure through assured water and power supply, sanitation and solid waste management, efficient urban mobility and public transport, IT connectivity, e-governance and citizen participation.
The first list of 20 cities were declared and the implementation will start soon.
In the coming years, the government will announce 40 cities each to be developed as smart cities as per Prime Minister Narendra Modi’s plan to develop 100 smart cities in the country.
The government plans to build 20 smart cities by 2022 to help accommodate swelling urban population, which is set to rise by more than 400 million people to 814 million by 2050. For participation in this project , a competition was held.
The cities are competing on a variety of matrices, including urban reforms and their plan of action in four key areas — Swachh Bharat, Make in India, good governance (modern accounting system, rationalisation of property taxes) and e-governance.
A total of 15.20 million (1.52 crore) citizens had participated in the preparation of the ambitious Smart City plans at various stages.
Some sent their ideas to city officials via Twitter, Facebook or SMS. Others entered local contests for designing logos or writing essays. Bhubaneswar, the capital of the eastern state of Orissa, unfurled a 10-kilometer-long canvas banner across the city and invited residents to scroll down their suggestions.
Many of the proposals mentioned a need for better transportation, sewage treatment or trash management.
The Rajasthani heritage cities of Jaipur and Udaipur, and Agra, the city of the iconic Taj Mahal, all wanted to clean up their downtown tourist areas, while people in Amritsar, best known for its Golden Temple and location near Pakistan, suggested CCTV cameras and an emergency call center to address their main concerns about safety and security.
The Smart City plans will demonstrate how integrated planning and smart technologies can deliver better a quality of life.
The Centre and states will equally split the overall cost of the project estimated at Rs 96,000 crore. The central government will provide on an average Rs. 100 crore per chosen city per year. The project cost of each smart city will vary depending upon the level of ambition, model, capacity to execute and repay.
Raising funds is the key challenge as also is developing older cities with limited scope to overhaul. Heavily populated areas may need complete rebuilding which will then involve temporarily rehabilitating people and, in some cases, acquiring land.
The states selected 97 cities for Smart City Plan.
Caracas : Venezuela has recorded 4,700 suspected cases of people infected by the Zika virus, which is thought to cause brain damage in babies, the health ministry said.
The estimate followed thousands of other suspected cases in Latin America which have raised a world health scare over the mosquito-borne virus.
“We have reports of 4,700 patients suspected of being infected with the Zika virus” based on their symptoms, Health Minister Luisana Melo told reporters yesterday.
It was the first such toll from the government in the South American country of 30 million people, which is struggling with an economic and political crisis.
Melo said there were likely far more cases of Zika than the suspected cases so far recorded because most patients do not realise they have the virus since the symptoms are usually mild.
World health authorities suspect that the virus is to blame for a recent rise in the region in cases of microcephaly, a condition in which babies are born with abnormally small heads.
The World Health Organisation said yesterday that Zika is “spreading explosively” in the Americas and the region may see up to four million cases.
Venezuela is among more than 20 countries and territories that have reported cases.
Melo said Venezuela had not yet identified any cases of microcephaly linked to Zika.
She said the government was launching a program to eliminate the Aedes aegypti mosquito, the insect that carries Zika and other tropical fevers.
Melo insisted the authorities were equipped to treat the disease, despite recent shortages of medical supplies due to the country’s severe economic crisis.
She added that Venezuela had also recorded 90 cases of Guillain-Barre syndrome, a neurological disorder that can cause paralysis or even death.
That disease has also been linked to Zika but Melo said there was so far no evidence to link the cases in Venezuela with that virus.
@Agency report.
Panaji : Newly formed Goa Forward party has opposed the release of a book on Mahatma Gandhi’s killer Nathuram Godse scheduled for tomorrow on the death anniversary of the Father of the Nation.
The book, titled ‘Nathuram Godse – The Story of an Assassin’ and written by Anup Ashok Sardesai, is scheduled for release tomorrow at the government-owned Ravindra Bhavan in Margao by BJP leader and the bhavan’s chairman Damodar Naik.
“The use of government premises for such an unpatriotic cause should be stopped. We will hold ‘satyagraha’ in front of Ravindra Bhavan if the government allows the function to happen,” Goa Forward’s secretary Mohandas Lolienkar said.
@Agency news.
