{"id":40614,"date":"2024-04-21T07:21:35","date_gmt":"2024-04-21T01:51:35","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=40614"},"modified":"2025-04-25T04:31:04","modified_gmt":"2025-04-24T23:01:04","slug":"global-financial-stability-report-2","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/global-financial-stability-report-2\/","title":{"rendered":"Global Financial Stability Report"},"content":{"rendered":"<h2>What\u2019s in today\u2019s article?<\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>What is the Global Financial Stability Report (GFSR)?<\/li>\n<li>What is the IMF\u2019s Worry About Inflation?<\/li>\n<li>What Does it Mean for India?<\/li>\n<li>What About the Private Credit Market?<\/li>\n<\/ul>\n<h2>Why in News?<\/h2>\n<ul>\n<li>The International Monetary Fund (IMF) released the latest Global Financial Stability Report 2024 (with the central theme &#8211; \u2018The Last Mile: Financial Vulnerabilities and Risks\u2019).<\/li>\n<li>It warns about the risks to the global financial system from persistent high inflation, rising lending in the unregulated credit market, and increasing cyber-attacks on financial institutions.<\/li>\n<\/ul>\n<h2>What is the Global Financial Stability Report (GFSR)?<\/h2>\n<ul>\n<li><strong>The GFSR is a semiannual report <\/strong>by the International Monetary Fund (IMF) that assesses the stability of global financial markets and emerging-market financing.\n<ul>\n<li>It is <strong>released twice per year<\/strong>, in April and October.<\/li>\n<\/ul>\n<\/li>\n<li><strong>It focuses on current market conditions<\/strong>, highlighting systemic issues that could pose a risk to financial stability and sustained market access by emerging market borrowers.<\/li>\n<li>The Report draws out the financial ramifications of economic imbalances highlighted by the IMF&#8217;s World Economic Outlook.<\/li>\n<\/ul>\n<p><img decoding=\"async\" src=\"https:\/\/vajiram-prod.s3.ap-south-1.amazonaws.com\/Global_Financial_Stability_Report_key_highlights_54c3a1519f.webp\" alt=\"Global Financial Stability Report- key highlights\" \/><\/p>\n<h2>What is the IMF\u2019s Worry About Inflation?<\/h2>\n<ul>\n<li>The IMF has flagged rising enthusiasm among investors that the <strong>fight against high inflation<\/strong> over the last few years <strong>has almost come to an end.<\/strong><\/li>\n<li>However, the IMF believes that <strong>investor enthusiasm about slowing inflation<\/strong> and a possible cut in interest rates by central banks <strong>may be quite premature.<\/strong><\/li>\n<li>The fall in inflation has probably stalled in some major advanced and emerging economies <strong>where core inflation in the most recent 3 months has been higher <\/strong>than in the previous 3 months.<\/li>\n<li>The IMF has also warned that<strong> geopolitical risks such as the ongoing war in West Asia and Ukraine<\/strong> could affect aggregate supply and lead to higher prices.\n<ul>\n<li>This might stop central banks from lowering rates anytime soon.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>What Does it Mean for India?<\/h2>\n<ul>\n<li>The IMF notes that fund flows into emerging markets have been strong till now due to optimism over central banks easing interest rates.<\/li>\n<li>In fact, India was the second-largest recipient of foreign capital after the U.S., in the calendar year 2023.<\/li>\n<li><strong>But things could change quickly<\/strong> if western central banks signal that they could keep interest rates high for a long time.<\/li>\n<li><strong>This could cause investors to pull money out of emerging markets like India<\/strong> and increase pressure on their currencies.<\/li>\n<li>The Indian rupee has already been depreciating and traded at <strong>a new low of 83.57 against the U.S. dollar last week <\/strong>despite likely intervention by the Reserve Bank of India (RBI).<\/li>\n<li>A severe outflow of capital if western central banks fail to lower interest rates could cause further <strong>depreciation of the rupee <\/strong>and have effects on the country\u2019s financial system.<\/li>\n<li>In such a scenario, the RBI is likely to defend the rupee by curbing liquidity to raise interest rates, which could cause the economy to slow down.<\/li>\n<\/ul>\n<h2>What About the Private Credit Market?<\/h2>\n<ul>\n<li>The IMF in its report also noted that the <strong>growing unregulated private credit market<\/strong>, in which non-bank financial institutions lend to corporate borrowers, is a growing concern.<\/li>\n<li><strong>The IMF is worried <\/strong>that the borrowers in the private credit market may not be financially sound and noted that many of them do not have current earnings that exceed even their interest costs.<\/li>\n<li><strong>India <\/strong>has seen the growth of a small private credit market with the rise of Alternative Investment Funds (AIFs).\n<ul>\n<li>These funds lend money to high-risk borrowers who are not catered to by the traditional banking system and non-bank financial companies.<\/li>\n<li>They have also invested in distressed assets that have come up for sale under the Insolvency and Bankruptcy Code (IBC) regime.<\/li>\n<li>The SEBI notes that investments made through these funds, although still small, <strong>have more than tripled<\/strong> from \u20b91.1 lakh crore in 2018-19 to \u20b93.4 lakh crore in 2022-23.<\/li>\n<li>As financial regulators, both the RBI and SEBI have been noticing this trend and tried to<strong> increase scrutiny over these funds.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q.1. What is the IMF World Economic Outlook (WEO) for India?<\/h3>\n<p>According to the IMF&#8217;s WEO, growth in India is projected to remain strong at 6.8% in 2024 (FY25) and 6.5% in 2025 (FY26), with the robustness reflecting continuing strength in domestic demand and a rising working-age population.<\/p>\n<h3>Q.2. What is the Insolvency and Bankruptcy Code (IBC)?<\/h3>\n<p>The IBC 2016 is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/business\/Economy\/what-is-the-outlook-on-the-global-economy-explained\/article68088796.ece\" target=\"_blank\" rel=\"nofollow noopener\"><u>What is the outlook on the global economy? | Explained<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Global Financial Stability Report 2024 warns about the risks to the global financial system from persistent high inflation, rising lending in the unregulated credit market, etc.<\/p>\n","protected":false},"author":5,"featured_media":40615,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-40614","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40614","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=40614"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40614\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/40615"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=40614"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=40614"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=40614"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}