Vishleshan for Regulatory Exams: Check Daily News Analysis 9 June 2025
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Newspapers impact the way people see things. They help us form social, political, and economic opinions. They are also knowledge powerhouses. This is the prime reason why they help candidates prepare for all the major competitive exams like RBI Grade B, SEBI Grade A, and NABARD Grade A. And this makes aspirants hunt for sources that can make this task easy and effective. And this is where ‘Vishleshan’ for regulatory bodies comes into the picture. It is dedicated to covering the analysis of all the important and relevant articles from major financial newspapers like Mint. From today onwards, we’ll be sharing with you the analysis of all the important financial newspapers in a way that you’ll never forget! Read on to get enlightened with today’s Daily Vishleshan targeting all regulatory body exams.
Context: The World Bank has announced a new poverty line to show how many people live in “extreme poverty”. Many people globally suddenly find themselves counted as “poor”. But for India, the extreme poverty rate has been revised downwards.
Source: Mint
Poverty, at its core, signifies a state where individuals lack the minimum resources necessary for a dignified and healthy life. Understanding and measuring poverty is crucial for global development efforts. The World Bank, a prominent international financial institution, plays a significant role in defining and tracking global poverty levels through its international poverty lines.
What is a “Poverty Line”?
A poverty line is a minimum level of spending required to meet an individual’s basic needs for nutrition, clothing, and shelter. Individuals whose expenditure falls below this threshold are classified as “poor.”
How the World Bank Arrives at This Income Level: The International Poverty Line
Measuring poverty globally is complex due to varying economic conditions and currency values across countries. To address this, the World Bank developed an international poverty line in 1990. This line is adjusted for Purchasing Power Parity (PPP).
Purchasing Power Parity (PPP): PPP is an economic concept that compares the cost of a fixed basket of goods and services in different countries to determine the relative value and purchasing power of their currencies. In essence, it helps to make different currencies comparable by considering what each currency can actually buy within its own country. For example, if a basket of goods costs $10 in the US and ₹700 in India, the PPP exchange rate would be $1 = ₹70.
The World Bank’s International Comparison Program (ICP) regularly updates the PPP factors, necessitating adjustments to the international poverty line to account for global inflation and changes in economic conditions.
Initially, the first global standard for extreme poverty was set at $1 a day (at 1985 PPP). The latest update, driven by the 2021 PPP updates (released by the ICP last year) and improved data collection methods, revised the extreme poverty line to $3 a day at 2021 PPPs. This new benchmark is higher than the previous $2.15 a day (at 2017 PPPs), even when adjusted for inflation.
Latest World Bank figures point to a sharp decline in the ratio of extreme poverty in India. It fell to 5.3% in 2022-23 from 27.1% in 2011-12, with 269 million individuals lifted out of such indigence during that period. By this measure, based on the $3-per-day international poverty line (at 2021 prices), India’s number of extremely poor stood at about 75.24 million in 2022-23, a sharp drop from 344.47 million just over a decade earlier. Even on multidimensional poverty, World Bank data shows a notable decline to 15.5% in 2022-23 from 53.8% in 2005-06.
Different Income Level Thresholds for Different Categories of Countries
The World Bank employs not just one, but multiple poverty lines to reflect the varying economic realities of different country income groups:
Extreme Poverty Line: This line, set at $3 a day (at 2021 PPPs), is the median of the national poverty lines of low-income countries. It is applied globally to identify individuals living in “extreme poverty,” meaning they are poor even by the standards of the poorest nations.
Lower-Middle-Income Countries Poverty Line: Revised from $3.65 to $4.20 a day, this line is more relevant for countries like India.
Upper-Middle-Income Countries Poverty Line: Revised from $6.85 to $8.30 a day.
Impact of the New Poverty Line on the World and India
The introduction of the new, higher poverty line has significant implications:
Global Impact: The higher threshold means that globally, many more people will now be classified as “poor.” When the World Bank issued its last estimate in September 2024, it counted 9% of people in the world as poor in 2022 based on the old $2.15-a-day threshold. With the new $3-a-day yardstick, the figure for 2022 is now reckoned at 10.5%, implying that an additional 125 million people were classified as poor in 2022. It’s crucial to understand that this increase doesn’t necessarily mean more people have become poor, but rather that more people are now classified as poor due to the updated methodology.
Impact on India: Interestingly, for India, the estimate of people living in extreme poverty has been revised downwards. This is primarily due to a confluence of factors, most notably the World Bank’s adoption of India’s first official household consumption expenditure survey (CES) in 11 years, conducted in 2022-23.
Previously, due to the absence of recent official CES data, the World Bank relied on alternative sources, estimating 12.9% of Indians as poor in 2021 (based on the $2.15-a-day line).
With the new CES data and the new $3-a-day poverty line, the estimate for extreme poverty in India stands revised to 5.3% for 2022.
If the old benchmark ($2.15 a day) were applied to the 2022 CES data, approximately 2.4% of Indians would be considered poor.
For lower-middle-income poverty (using the $4.20-a-day benchmark), 23.9% of Indians were poor in 2022, a decline from the 28.1% estimated by the old poverty line.
Challenges in Comparison: Direct comparisons of current poverty rates with past data are ill-advised. The 2011-12 CES, while offering retrospective figures of 16.2% ($2.15 a day) and 27.1% ($3 a day), is hardly comparable with the newer surveys. The new surveys (2022-23 and 2023-24) record higher consumption due to:
Fundamentally improved data collection practices.
Asking respondents to detail spending on 405 items instead of 347.
Assigning consumption values to subsidized goods and services obtained from state-run schemes, thereby raising the overall value of household consumption.
While precise quantification of progress is difficult due to methodological changes, it is evident that poverty rates in India have likely fallen significantly in the past decade.
Government of India’s Schemes and Missions to Combat Poverty
The Indian government has implemented numerous schemes and missions aimed at poverty alleviation, focusing on various aspects like employment, food security, social protection, and access to basic services. Here are some prominent examples:
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): This landmark scheme guarantees 100 days of wage employment in a financial year to adult members of any rural household willing to do unskilled manual work. It aims to enhance livelihood security in rural areas, create durable assets, and reduce distress migration.
Pradhan Mantri Jan Dhan Yojana (PMJDY): This mission aims for financial inclusion, ensuring access to financial services like banking, savings, credit, insurance, and pension in an affordable manner. By bringing the unbanked into the formal financial system, it empowers them and provides pathways out of poverty.
Pradhan Mantri Awas Yojana (PMAY): This scheme aims to provide affordable housing to all eligible urban and rural poor by 2022 (extended further). It assists beneficiaries in constructing or acquiring their own homes, fulfilling a fundamental need.
National Food Security Act (NFSA), 2013: This act provides for subsidized food grains to approximately two-thirds of the population, ensuring food and nutritional security. It entitles eligible households to receive up to 5 kg of food grains per person per month at highly subsidized prices.
Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PMJAY): The world’s largest health insurance scheme, PMJAY provides a health cover of ₹5 lakh per family per year for secondary and tertiary care hospitalization to over 10.74 crore poor and vulnerable families. This significantly reduces out-of-pocket health expenditures, a major cause of impoverishment.
Pradhan Mantri Ujjwala Yojana (PMUY): This scheme provides LPG connections to women from Below Poverty Line (BPL) households, aiming to replace traditional cooking fuels (like firewood and dung cakes) with clean energy. This improves health, reduces drudgery, and empowers women.
Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM): This mission aims at poverty reduction through promoting diversified and gainful self-employment and wage employment opportunities for the rural poor. It focuses on mobilizing rural poor households into self-help groups (SHGs) and strengthening their capacity to access financial services and livelihood opportunities.
Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): This scheme provides income support to all landholding farmer families across the country to supplement their financial needs for procuring various inputs related to agriculture and allied activities. It provides ₹6,000 per year in three equal installments.
These schemes, among many others, demonstrate the Indian government’s multi-pronged approach to address poverty, focusing on economic empowerment, social security, and access to essential services.
RBI’s Rate Cut – June 2025
Context: The Monetary Policy Committee of the RBI has recently cut the policy repo rate by 50 basis points. This act has initiated a debate among economists and experts over RBI’s decision. Some argue the rate cut would propel economic growth, which largely remains underwhelming at the moment. Others are wary of the decision. Today’s Mint edition has several articles on the topic. We will cover all of them.
Source: Mint
The Reserve Bank of India (RBI), as the central bank of India, plays a pivotal role in maintaining monetary stability and fostering economic growth. Its primary tool for achieving these objectives is its monetary policy, which is formulated and implemented by the Monetary Policy Committee (MPC).
The Monetary Policy Committee (MPC): Formation, Mandate, and Composition
The Monetary Policy Committee (MPC) is a statutory body constituted in 2016 under Section 45ZB of the Reserve Bank of India Act, 1934 following the recommendations of the Urjit Patel Committee. It was formed to bring greater transparency and accountability to monetary policy decisions.
Mandate: The primary mandate of the MPC is to determine the policy interest rates required to achieve the inflation target set by the Government of India. As per the Monetary Policy Framework, the inflation target is typically 4% with a band of +/- 2% (i.e., 2% to 6%). This flexible inflation targeting framework aims to strike a balance between price stability and growth. The MPC is responsible for ensuring that inflation remains within this comfortable range while simultaneously supporting economic growth.
Composition: The MPC comprises six members:
Three officials from the RBI: The Governor of the Reserve Bank of India (who acts as the ex-officio Chairperson), the Deputy Governor in charge of monetary policy, and one officer nominated by the Central Board of the RBI.
Three external members: These are appointed by the Central Government, and they are experts in the fields of economics, banking, finance, or monetary policy. Their appointment is for a period of four years and they are not eligible for re-appointment.
Pivotal Role in the Economy: The MPC is pivotal to the economy because its decisions on policy interest rates directly influence the cost of borrowing for banks, businesses, and consumers. By adjusting these rates, the MPC impacts:
Inflation: Higher rates can curb demand and cool inflation, while lower rates can stimulate demand.
Economic Growth: Lower rates encourage investment and consumption, fostering growth.
Exchange Rate: Interest rate differentials can affect capital flows and the value of the rupee.
Financial Stability: Prudent monetary policy helps prevent asset bubbles and maintain the health of the financial system.
Inter-connectedness of Repo Rate, MSF, and SDF
The RBI uses several instruments to manage liquidity and control interest rates. The key inter-connected rates are:
Repo Rate: This is the rate at which commercial banks borrow money from the RBI by selling securities with an agreement to repurchase them. A cut in the repo rate makes borrowing cheaper for banks, which in turn should lead to lower lending rates for businesses and consumers, thereby stimulating economic activity. The article “Market geared for fresh surge after RBI surprise” mentions that the repo rate cut by 50 basis points on Friday triggered an aggressive selling of Nifty put options, indicating confidence in market upside.
Marginal Standing Facility (MSF) Rate: This is a penalty rate at which banks can borrow money from the RBI overnight when they face a severe shortage of funds. The MSF rate is typically higher than the repo rate, acting as a ceiling for the overnight interbank rate. It ensures that banks have access to funds even in stressed situations, preventing liquidity crises. The provided content doesn’t explicitly state the MSF rate, but it is generally linked to the repo rate.
Standing Deposit Facility (SDF) Rate: Introduced more recently, the SDF is a tool for absorbing excess liquidity from the banking system without the need for collateral. The SDF rate is typically lower than the repo rate, acting as a floor for the overnight interbank rate. It provides an additional avenue for the RBI to manage surplus liquidity effectively.
The articles indicate that the RBI also adjusted the cash reserve ratio (CRR) by 100 bps, moving it from 4% to 3%. The CRR is the portion of deposits that banks must keep with the RBI, thus impacting the amount of money banks have to lend. This reduction further injects liquidity into the system.
Analysis of Today’s Articles
Here’s a breakdown of the key arguments and analyses presented across the articles:
1. “The Reserve Bank’s leap of faith: A jumbo rate cut is hard to justify”
Argument against the large rate cut: The central argument here is that the RBI’s decision for a 50 basis points (bps) repo rate cut is a “jumbo rate cut” and is hard to justify given the prevailing economic conditions and the RBI’s past record.
Questioning the rationale for growth: The article implies that growth projections might not be strong enough to warrant such an aggressive cut. It subtly suggests that the RBI might be taking a “leap of faith” on growth recovery.
MPC’s Credibility and Inflation Mandate: The article brings up concerns about the Monetary Policy Committee (MPC) having missed its inflation mandate for 11 months, raising questions about its effectiveness and credibility. It suggests that the latest estimate of inflation was around 5.3%, which would be above the target range of 4% +/- 2%. This historical performance makes a large rate cut, ostensibly to support growth, seem less justified if inflation control is still a challenge.
Liquidity Management and CRR: It notes that the Cash Reserve Ratio (CRR) was lowered by 100 bps, injecting ₹2.3 trillion in liquidity into the banking system. The article questions whether such a large liquidity injection, combined with the rate cut, is truly necessary or optimal for the economy.
Data Collection and Consumption Surveys: The article briefly mentions improvements in data collection methods, such as the Household Consumption Expenditure Survey (CES) in 2022-23 and 2023-24, noting that these new surveys record higher consumption due to improved practices and a larger number of items surveyed (405 vs. 347 earlier). This point, while not directly related to the rate cut’s justification, provides context on the evolving statistical base for economic analysis.
2. “RBI’s stimulus is a bold wager on price stability”
Argument for the bold stimulus: This article frames the RBI’s aggressive monetary easing as a “bold wager on price stability,” suggesting that the central bank is confident in its ability to maintain inflation within target limits even while stimulating growth.
RBI’s Evolving Role and Maturity: It argues that the RBI has reached a “maturity” in its role in managing India’s economic stability, particularly in its ability to cap inflation. This implies that the RBI has gained sufficient expertise and tools to manage potential inflationary risks arising from a large stimulus.
2025-26 as a “Crucial Test Year”: The article highlights 2025-26 as a pivotal period for evaluating the success of the current monetary policy easing. This suggests that the full impact of the stimulus on both growth and inflation will become clear during this fiscal year.
Complementary Fiscal Measures: It acknowledges the positive impact of the government’s fiscal consolidation efforts on macroeconomic stability, implying that fiscal prudence provides the RBI with more flexibility for monetary easing.
Liquidity Injection for Credit Flow: The article explicitly states that the RBI aims to “free up more money for banks to lend” by reducing the CRR, expecting to inject a massive ₹9.5 trillion into the system since January. This is intended to boost credit growth and, consequently, economic activity.
3. “Market geared for fresh surge after RBI surprise”
Argument for Market Optimism: These articles jointly argue that the stock market is poised for a “fresh surge” following the RBI’s unexpected and significant rate cut.
Bullish Market Sentiment: The 50 bps repo rate cut is described as a “surprise” that triggered “aggressive selling of Nifty put options,” which is a strong bullish signal. This indicates that traders expect the market to rise significantly.
Technical Indicators and Nifty Targets: Specific technical data is presented, such as the increase in Open Interest (OI) for Nifty’s weekly 25,000 strike put options, suggesting market participants expect the Nifty to climb above 25,000. The target for Nifty is mentioned as potentially reaching 24,900-25,000.
Impact on Rate-Sensitive Sectors: The articles predict that rate-sensitive sectors like banks, NBFCs (Non-Banking Financial Companies), and auto companies will be the primary beneficiaries of the rate cut, as lower interest rates typically boost demand and profitability in these areas.
Foreign Investment: The articles also mention the significant inflow of Foreign Institutional Investor (FII) funds, with FIIs purchasing ₹17,046 crore worth of stocks in March and ₹1.2 trillion in May, indicating strong foreign investor confidence in the Indian market.
4. “Has RBI unloaded its arsenal too soon for economy?”
Argument for Premature Easing: This article raises a critical question about whether the RBI has acted “too soon” by deploying such an aggressive monetary easing (unloading its “arsenal”).
Confidence vs. Liquidity: A key argument is that the economy needs “confidence more than liquidity” to truly spur investment and demand. Simply injecting money into the system (liquidity) might not be sufficient if there’s a lack of fundamental confidence among businesses and consumers.
Stalled Demand and “Opportunity Starved” Banks: The author contends that “demand has slowed” and that banks, while not necessarily “capital starved” (implying sufficient funds due to CRR cuts), are “opportunity starved.” This means banks may have funds to lend, but there aren’t enough viable projects or willing borrowers to take on new loans, hindering credit growth.
Underestimation of Inequality: The article subtly touches upon concerns that official consumption surveys might underestimate inequality, particularly at the top of the consumption pyramid, which could impact the accuracy of overall demand assessments.
Need for Broader Reforms: The author implies that beyond monetary policy, broader economic reforms and a sustained improvement in business sentiment are crucial for sustained growth, suggesting that monetary policy alone might not be a panacea. It highlights that “firm demand needs more than liquidity—it needs the conviction of private capital decision makers.”
In essence, while some articles laud the RBI’s bold move as a necessary stimulus for growth, others raise cautious questions about its timing, potential risks to inflation control, and the fundamental drivers of economic demand beyond just liquidity. The market, however, has reacted with clear optimism, anticipating a significant uplift.
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