You might have heard of Rishi Sunak of Indian origin who has been elected as the new Prime Minister of UK . But do you know what were the preceding events leading up to it? Liz Truss who was the previous PM tried to put forth various economic reforms which failed miserably forcing her to quit which ultimately paved the way for Sunak.
This is just one of the crazy news stories from last month which was full of happenings. Let’s now look at some of the most important economic events that conspired last month in this edition of current affairs.
Elon buys twitter
Elon musk finally completes his Twitter purchase on 27th October to officially become owner and CEO after firing its top executives including its CEO Parag Agarwal. It all began when Elon started buying twitter shares in the January of 2022, eventually becoming the company’s largest shareholder in April with a 9.1 percent ownership stake. Due to his stake in the company, Elon was offered a position among the board of directors which he rejected and offered to buy the whole company for a whopping $44 billion. While the shareholders resisted in the beginning, they eventually went ahead to accept the offer towards the end of April.
But later in July, Elon announced this intention to terminate the contract citing that twitter failed to operate by their agreement. Then the company decided to file a lawsuit against him for not abiding the contract. Weeks before the trial was set to begin, the course again took a turn with Musk announcing that he would move forward with the acquisition, finally closing the deal on 27th. The reception to his acquisition has so far been mixed with people praising his vision and criticizing the results it may bring in long run.
India’s growth prediction slashed
The International Monetary Fund (IMF) was set up along with the World Bank after the Second World War to ensure the stability of the international monetary system — the system of exchange rates and international payments that enables countries to transact with each other. World Economic Outlook is a survey by the IMF publishes twice a year in the months of April and October. It analyzes and predicts global economic developments during the near and medium term.
Recently IMF released the latest edition of World Economic Outlook 2022 where it has cut its forecast for India’s Gross Domestic Product (GDP) growth in 2022 to 6.8 %, from 7.4 % for the fiscal year 2022. For 2023 it has predicted a growth rate of 6.1% in India’s GDP. Globally it has predicted a slowdown in growth from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023 which is the weakest growth profile since 2001, except for the global financial crisis and the vulnerable phase of the Covid-19 pandemic. A slowdown in the Europe is expected to deepen in 2023, and growth in China is projected to hit its lowest rate in decades apart from the initial COVID times. Global inflation is also forecast to rise from 4.7% in 2021 to 8.8% in 2022 but to decline to 6.5% in 2023 and to 4.1% by 2024.
Rupee vs Dollar battle
Finance Minister Nirmala Sitharaman has defended that the rupee has not weakened but it is the dollar that has strengthened when questioned about the currency 8% fall against the dollar this year. The rupee has touched another record low of Rs 82.68 against the dollar on month of October and the fall doesn’t look to stop. According to the Reserve Bank of India (RBI), India’s forex reserves have fallen by USD 110 billion in the last 13 months from selling dollars from the forex reserves to support the rupee’s fall. The intervention was done to stop free fall of the rupee and reduce volatility in the market. But has it really reaped rewards.
While the rupee has depreciated against the US dollar, but so has other currencies across the world. The dollar is soaring in value and when compared to others, rupee isn’t doing bad. The dollar index, which is a measure of the dollar’s value against a basket of 6 other global currencies is at a 20-year high. This is all due to the US Federal Reserve in a bid to fight inflation, are ramping up interest rates faster than most global economies in the world. This also made lot of investors flock their money into US seeking a safer option in the midst of inflation, thus increasing its value further. About 67% of the decline in reserves during the current financial year was due to valuation changes arising from an appreciating US dollar and higher US bond yields.
Tokenisation of Cards in India
Recently, the Reserve Bank of India (RBI) has made tokenisation mandatory for all credit and debit cards used in online, point-of-sale, and in-app transactions. Tokenisation refers to the replacement of actual card details with a unique alternate code called the ‘token’, which shall be unique for a combination of card, token requester (The entity which accepts requests from the customer for tokenisation of a card and passes it on to the card network to issue a corresponding token) and the device used.
E-commerce companies save sensitive card details which when hacked poses a real problem as all the card data will become easily accessible. So, to take care of the security concerns, RBI has come up with the Tokenization system, which guarantees that the customers’ details cannot be breached and cannot be misused by anybody. A tokenized card transaction is considered safer as the actual card details are not shared with the merchant during transaction processing. Real card data, tokens and other relevant information are stored securely by the authorized card networks.
New digital banking units in India.
Digital banking units are in a way similar to bank branches but without the tedious paper work process. It is completely digital, where are there necessary infrastructure to for opting digital services, such as opening of savings account, balance-check, print passbook, transfer of funds, investment in fixed deposits, loan applications etc., without relying on the bank staffs, letting people do whatever they want in self service mode 24X7. It also has people to assist in case some has any trouble through their process thus also providing digital financial literacy
Recently, the Prime Minister of India has dedicated 75 DBUs across 75 districts in the country. This is seen as a great step in promoting the Digital banking services across the country, letting common people experience the benefits of it and creating awareness. This is only seen as a start and the number is expected to grow in the coming years.