News Excerpt
The Reserve Bank of India (RBI) recently announced several measures to ensure orderly functioning of financial markets, which includes two tranches of special open market operations (OMOs) in bonds and a hike in the held-to-maturity (HTM) limit under the statutory liquidity ratio (SLR) for banks.

Pre-Connect
The steps came against the backdrop of a sharp rise in bond yields after the Monetary Policy Committee left interest rates unchanged and also against the contraction of GDP in the first quarter of financial year 2020.
To counter the rise in market interest rates, the RBI said it will undertake the following steps:
•    Conduct special open market operation with simultaneous purchase and sale of government securities for an aggregate amount of Rs 20,000 crore in two tranches. The auctions took place on September 10 and September 17.
•    The RBI also said it remains committed to conducting more such auctions as warranted by market conditions.
•    The central bank will hold term repo operations for an aggregate amount of Rs 100,000 crore at floating rates in mid-September. This is being done to counter any liquidity pressures that may emerge due to advance tax payments.
•    In addition, banks that had availed funds under the long term repo operations are being allowed to refinance their borrowings via these term repo auctions at lower costs. This is being done to ensure that banks don’t get stuck with higher cost funds as policy rates fall.
•    The RBI has allowed banks to hold fresh government securities acquired from Sept. 1, 2020 in the held-to-maturity bucket up to an overall limit of 22% of deposits till March 31, 2021. This will increase demand for government bonds without banks fearing mark-to-market losses due to fluctuation in bond yields.
The measures are being taken to “continue to ensure orderly market conditions and congenial financial conditions.
Open Market Operations    G-Securities    Term Repo    Held-To-Maturity (HTM)
Open market operations or OMOs are conducted by the Reserve Bank of India (RBI) by way of sale and purchase of G-Secs (government securities) to and from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the Reserve Bank feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
    Open market operations or OMOs are conducted by the Reserve Bank of India (RBI) by way of sale and purchase of G-Secs (government securities) to and from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the Reserve Bank feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
    A term repo is a repo of more than one-day duration. The word term denotes longer period. Hence it is a way for banks to avail money from the RBI for more than one-day duration. As in the case of repo, the loan seeking bank should submit securities to the RBI. Since the loan is for more duration, the bank should give higher interest than the repo rate.
Under the RBI’s new restructured liquidity framework, the term repo is named as Variable Rate Term Repo. It is called variable rate repo because the interest rate is varied depending upon the auction rate.
    Held-to-maturity securities are debt security investments which the holder has the intention and ability to hold them until specific date of maturity. The investments classified under HTM need not be marked to market and will be carried at acquisition cost, as subsequent changes in market value are ignored because the return is predetermined. Therefor this type of security is reported at amortized cost on a bank’s balance sheet.

Way forward
To maintain the congenial financial conditions, mitigate the impact of Covid-19 and restore the economy to a path of sustainable growth while preserving macroeconomic and financial stability the RBI is committed to using all instruments at its command to revive the economy. The move taken by the RBI guarantees the orderly functioning of the financial market after its proper implementation.
The Global Innovation Index (GII)
News Excerpt
The GII 2020 has been recently released, where India has shown a growth and ranked 48 position.

Pre-Connect
•    The Global Innovation Index (GII) is a ranking of countries as per their success and capacity in innovation.
•    The GII is co-published by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO), a specialized agency of the United Nations.
•    GII 2020 ranks 131 economies based on 80 indicators, compiled under 7 pillars.
•    The GII relies on two sub-indices i.e., the Innovation Input Sub-Index and the Innovation Output Sub-Index, each built around pillars.
•    It was first released in the year 2007 with an aim to provide insightful data on innovation and, in turn, to assist economies in evaluating their innovation performance and making informed innovation policy considerations.
•    The 2020 edition of the GII drawn expertise from the Confederation of Indian Industry (CII).

Analytica
    In GII 2020, Switzerland bagged the first spot in the GII ranking followed by Sweden, United States of America, United Kingdom and Netherlands.
    China, India, the Philippines and Vietnam have made the most progress on the index in recent years, with all four now among the top 50,
    China, which is the only middle-income economy among the top 30, now holds the 14th place.
    India has been ranked as the 48th most innovative nation in the world in 2020; entering the top 50 nations for the first time.

India’s Achievement
    India has retained its position as the most innovative country among Central and South Asian countries.
    India was at the 52nd position in 2019 and was ranked 81st in the year 2015. It is a remarkable achievement to be in a league of highly innovative developed nations all over the globe.
    India ranks in the top 15 in indicators such as ICT services exports, government online services, graduates in science and engineering, and R&D-intensive global companies.
    India increased the most in three pillars: Institutions (61st), business sophistication (55th), and creative outputs (64).
    For the first time, an Indian city, Bengaluru, figured in the top 100 science and technology clusters globally.
    The WIPO had also accepted India as one of the leading innovation achievers of 2019 in the central and southern Asian region, as it has shown a consistent improvement in its innovation ranking for the last 5 years.
    The consistent improvement in the global innovation index rankings is owing to the immense knowledge capital, the vibrant startup ecosystem, and the amazing work done by the public & private research organizations.

Way Forward
India must aim high and double its efforts in improving its ranking in the global innovation index. The call for AatmaNirbhar Bharat by the Central government could only be realized if India punches above its weight class and compete with global superpowers in developing scientific interventions. It is time that India brings a paradigm shift and aims to be in the top 25 countries in the next global innovation index rankings.

Gross Domestic Product (GDP)
    GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year. GDP growth rate is an important indicator of the economic performance of a country.
    GDP can be calculated in three ways: using the production, expenditure, or income approach. All methods should give the same result.
    The formula for calculating GDP with the expenditure approach is: GDP = private consumption + gross private investment + government investment + government spending + (exports – imports).