Score:
10/15
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GS3
Economy
15 marks
Recently, the RBI permitted banks to finance corporate mergers & acquisitions and allowed rupee-denominated loans to neighboring countries while keeping the repo rate unchanged at 5.5%. In this context, discuss how these measures reflect India’s shift towards regional financial influence and strengthening of capital markets.
Student’s Answer
Evaluation by SuperKalam
Demand of the Question
- Discussion of RBI's recent measures
- Link to India's regional financial influence
- Impact on strengthening capital markets
- Integration between both aspects
What you wrote:
The RBI (Reserve Bank of India) recent measures reflect a strategic, two-pronged approach to bolster India's financial standing internally and project influence regionally.
The RBI (Reserve Bank of India) recent measures reflect a strategic, two-pronged approach to bolster India's financial standing internally and project influence regionally.
Suggestions to improve:
- Can begin with specific data (e.g., "With India's forex reserves reaching $640 billion and bilateral trade with neighbors growing at 15% annually, RBI's recent measures...")
- Could mention the specific neighboring countries targeted by these measures
What you wrote:
Strengthening Domestic Capital Markets:-
1. Allowing bank finance for corporate mergers & Acquisitions provides crucial liquidity for consolidation and restructuring.
2. It reduces the corporate sector's reliance on expensive foreign funding, fostering deeper and more vibrant domestic capital markets.
3. This enhances market efficiency and supports the growth of large, globally competitive Indian corporations.
Strengthening Domestic Capital Markets:-
1. Allowing bank finance for corporate mergers & Acquisitions provides crucial liquidity for consolidation and restructuring.
2. It reduces the corporate sector's reliance on expensive foreign funding, fostering deeper and more vibrant domestic capital markets.
3. This enhances market efficiency and supports the growth of large, globally competitive Indian corporations.
Suggestions to improve:
- Could include recent M&A examples (e.g., Air India-Vistara merger worth $4.3 billion)
- Can mention the current size of India's M&A market ($91 billion in 2022)
- Could discuss how this aligns with regulatory frameworks like SEBI's takeover code
- Can explore the multiplier effect on allied sectors like investment banking
What you wrote:
Expanding Regional Financial Influence:-
1. Permitting rupee-denominated loans to Neighbouring countries is a key step in internationalizing the Indian rupee (INR).
2. It creates a sphere of rupee-based trade and finance, reducing the region's dependence on the US dollar and mitigating forex risks for all parties.
3. This positions India as a regional financial stabilizer and a provider of capital, deepening economic integration.
Expanding Regional Financial Influence:-
1. Permitting rupee-denominated loans to Neighbouring countries is a key step in internationalizing the Indian rupee (INR).
2. It creates a sphere of rupee-based trade and finance, reducing the region's dependence on the US dollar and mitigating forex risks for all parties.
3. This positions India as a regional financial stabilizer and a provider of capital, deepening economic integration.
Suggestions to improve:
- Could mention specific bilateral arrangements (e.g., special rupee vostro accounts with 18 countries)
- Can discuss successful examples like India-Nepal RuPay card integration
- Could highlight competition with China's regional financial initiatives
- Can mention role of SAARCFINANCE and other regional cooperation mechanisms
What you wrote:
Ensuring Macro economic stability:-
1. The decision to maintain the repo rate at 5.5%, is the foundational element. It ensures macroeconomic stability, controls inflation, and maintains the rupee's attractiveness.
2. A stable currency is a prerequisite for its international use and for attracting long-term investment into capital markets.
These measures are not isolated actions but a cohesive strategy. The mergers and acquisitions financing rule fortifies the internal market, while rupee-lending projects this financial strength externally, collectively advancing India's ambition of becoming a pivotal regional financial hub.
Ensuring Macro economic stability:-
1. The decision to maintain the repo rate at 5.5%, is the foundational element. It ensures macroeconomic stability, controls inflation, and maintains the rupee's attractiveness.
2. A stable currency is a prerequisite for its international use and for attracting long-term investment into capital markets.
These measures are not isolated actions but a cohesive strategy. The mergers and acquisitions financing rule fortifies the internal market, while rupee-lending projects this financial strength externally, collectively advancing India's ambition of becoming a pivotal regional financial hub.
Suggestions to improve:
What you wrote:
These measures are not isolated actions but a cohesive strategy. The mergers and acquisitions financing rule fortifies the internal market, while rupee-lending projects this financial strength externally, collectively advancing India's ambition of becoming a pivotal regional financial hub.
These measures are not isolated actions but a cohesive strategy. The mergers and acquisitions financing rule fortifies the internal market, while rupee-lending projects this financial strength externally, collectively advancing India's ambition of becoming a pivotal regional financial hub.
Suggestions to improve:
- Can conclude with specific targets (e.g., "These measures align with India's goal of becoming a $5 trillion economy and establishing the rupee as a preferred regional currency")
- Could mention potential challenges and mitigation strategies
Marks: 10/15
Demand of the Question
- Discussion of RBI's recent measures
- Link to India's regional financial influence
- Impact on strengthening capital markets
- Integration between both aspects
What you wrote:
The RBI (Reserve Bank of India) recent measures reflect a strategic, two-pronged approach to bolster India's financial standing internally and project influence regionally.
The RBI (Reserve Bank of India) recent measures reflect a strategic, two-pronged approach to bolster India's financial standing internally and project influence regionally.
Suggestions to improve:
- Can begin with specific data (e.g., "With India's forex reserves reaching $640 billion and bilateral trade with neighbors growing at 15% annually, RBI's recent measures...")
- Could mention the specific neighboring countries targeted by these measures
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