💥Join UPSC 2027,2028 Mentorship (August Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Distribution: weekly

  • Maintaining the inflation target at 4%

    On the last day of the financial year 2020-21, the Finance Ministry announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4% (+/-2 %).

    Inflation targeting in India

    • India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.
    • Many developed countries had adopted an inflation-rate focus as an anchor for policy formulation for interest rates rather than past fixations with metrics like the currency exchange rate or controlling money supply growth.
    • Emerging economies have also been gradually adopting this approach.

    Try this PYQ:

    Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

    (a) Curbing imports of non-essential goods and promoting exports

    (b) Encouraging Indian borrowers to issue rupee denominated Masala Bonds

    (c) Easing conditions relating to external commercial borrowing

    (d) Following an expansionary monetary policy

    What is the rate of consumer price inflation?

    • Moody’s Analytics recently pointed out that volatile food prices and rising oil prices had already driven India’s consumer price index (CPI)-based inflation past the 6% tolerance threshold several times in 2020.
    • While inflation headwinds remain, especially with oil prices staying high, there was some speculation that the Central government may ease up on the inflation target by a percentage point or two.
    • This would have given the Reserve Bank of India (RBI) more room to cut interest rates even if inflation was a tad higher.

    What is the RBI’s position on this?

    • The RBI had, in recent months, sought a continuance of the 4% target with the flexible tolerance limits of 2%.
    • The 6% upper limit, it argued, is consistent with global experience in countries that have a large share of food items in their consumer price inflation indices.
    • Accepting inflation levels beyond 6% would hurt the country’s growth prospects, the central bank had asserted.

    Why should these concern consumers?

    • The central bank’s monetary policy and the government’s fiscal stance may not have necessarily reacted to arrest inflation pressures even if retail price rise trends would shoot past 6%.
    • As high oil prices spur retail inflation higher, the central bank is unhappy as its own credibility comes under a cloud if the target is breached.
    • If the upper threshold for the inflation target were raised to 7%, the central bank may not have felt the need to seek tax cuts (yet).
    • Thus, the inflation target makes the central bank a perennial champion for consumers vis-à-vis fiscal policies that, directly or indirectly, drive retail prices up.

    Back2Basics:

    Types of Inflation: Demand Pull, Cost Push, Stagflation, Structural Inflation, Deflation and Disinflation

  • Places in news: Chenab Arch Bridge

    A half-a-kilometre long arch, the defining feature of the world’s highest railway bridge over river Chenab, is set to be completed today.

    Chenab Arch Bridge

    • The bridge is part of an ambitious 272-km rail link project and is being constructed by the Northern Railway at an estimated cost of ₹28,000 crores.
    • The bridge will be able to withstand earthquakes with a magnitude of up to eight and high-intensity blasts.
    • The bridge, which will include a 14-metre dual carriageway and a 1.2-metre-wide central verge, will have a design speed of around 100 kilometres per hour with a lifespan of 120 years.

    Its inception

    • The preparations of the rail link began in 2002 and the initial plan was to connect Kashmir’s northernmost city Baramulla to New Delhi.
    • Work on the bridge started again in July 2017 with the aim of completing the construction by the end of 2019 but due to contractual issues in 2018, it was delayed.
    • Steel was specifically chosen for the construction of the bridge as it will make the project more economical.
    • The metal will also be able to resist temperatures of minus 20 degree Celsius and wind speeds of above 200 kilometres per hour.

    Significance

    • A railway bridge like this, with this kind of geography, has not been made anywhere in the world, according to the Railways.
    • It will symbolise the Kashmir rail link, to be ready for at least a century.
    • In other words, a train from Kanyakumari can reach all the way to Kashmir uninterrupted.
    • The cable crane that will do the job of completing the arch itself measures around 900 meters and is said to be the longest in the world, made especially for this project.

  • The conundrum of financial distress and higher household savings amid covid

    The article explains the paradoxical increase in savings of Indian households during the pandemic.

    Increase in savings during lockdown

    • Counterintuitively, the financial savings of people went up in April-June 2020.
    • Data compiled by the RBI reveal that in April-June 2020, household financial savings was ₹8.16 trillion.
    • For a perspective on how big this is, in April-June 2019, household financial savings was ₹2.02 trillion.
    • In July-September 2019, it was ₹4.85 trillion and in the two following quarters, it was ₹4.2 trillion and ₹5.14 trillion, respectively.
    • As a percentage of GDP, it was 21% of GDP in April-June 2020 (the lockdown quarter) against 4% of GDP in April-June 2019.

    So, what happened to savings in the next quarter?

    • In the immediate quarter after April-June 2020, would you expect savings to move up, as things were opening up gradually?
    • Again, counter-intuitive.
    • In July-September 2020, household savings was ₹4.92 lakh crore, or 10.4% of GDP.

    What explains such saving behaviour?

    • This has got to do with the human response to an emergency situation.
    • When things are looking bleak, one does not know how worse it can get.
    • Discretionary spending was cut down.
    • One section of the population was losing jobs and opting for moratorium on loans.
    • Now we know, in hindsight, that it was not the entire population—people with access to means were rather saving than spending.
    • Household financial savings is the net of flow of financial assets minus flow of financial liabilities.
    •  In April-June 2020, flow of financial assets at ₹7.38 trillion was much higher than ₹3.83 trillion of April-June 2019.
    • The big difference was the flow of financial liabilities.
    • In April-June 2020, it was a negative ₹0.78 trillion over a positive ₹1.81 trillion in April-June 2019.
    • That is, people paid off their liabilities in April-June 2020, whereas usually they add to it.
    • Things normalized in July-September 2020.
    • The flow of financial assets rose to ₹7.47 trillion, but the flow of financial liabilities was ₹2.55 trillion i.e., people added to financial liabilities.
    • The household debt to GDP ratio rose to 37.1% in July-September 2020 from 35.4% in April-June 2020.

    What do we learn from all this?

    • In a pandemic-induced financial distress phase, a majority of the people preferred to save.
    • One basic tenet of financial planning is that you have an emergency fund equivalent to, say, six months of expenses.
    • People usually follow the principle of Income – Expenses = Savings/Investments.
    • Ideally, it should be Income – Savings/Investments = Expenses.

    Consider the question “What explains the increased saving of Indian households during the quarter of lockdown? What lessons we can draw from this for reliance on the demand-led recovery from the pandemic?”

    Conclusion

    The data from the RBI attest to the well-established fact that people tend to save in emergencies. This also suggests that the demand-led recovery path during emergencies faces the risk of failure.

  • Prakash Singh Judgment on Police Reforms, 2006

    Political interference in police postings continues despite the landmark Prakash Singh judgment nearly a decade-and-a-half ago that addressed the issue and was pegged to be a watershed moment in police reforms.

    Politics is a perplexing, but fascinating game. It takes ages to unravel the intricate secrets that shroud the kernel of closed room politics. But contrary has happened with the Maharashtra Police.

    What is the SC’s Prakash Singh judgment on police reforms?

    • Prakash Singh, who served as DGP of UP Police and Assam Police besides other postings, filed a PIL in the Supreme Court post-retirement, in 1996, seeking police reforms.
    • In a landmark judgment, the Supreme Court in September 2006 had directed all states and Union Territories to bring in police reforms.
    • The ruling issued a series of measures that were to be undertaken by the governments to ensure the police could do their work without worrying about any political interference.

    What measures were suggested by the Supreme Court?

    • The seven main directives from the Supreme Court in the verdict were fixing the tenure and selection of the DGP to avoid situations where officers about to retire in a few months are given the post.
    • In order to ensure no political interference, a minimum tenure was sought for the Inspector General of Police so that they are not transferred mid-term by politicians.
    • The SC further directed postings of officers being done by Police Establishment Boards (PEB) comprising police officers and senior bureaucrats to insulate powers of postings and transfers from political leaders.
    • Further, there was a recommendation of setting up the State Police Complaints Authority (SPCA) to give a platform where common people aggrieved by police action could approach.
    • Apart from this, the SC directed the separation of investigation and law and order functions to better improve policing, setting up State Security Commissions (SSC) that would have members from civil society and forming a National Security Commission.

    How did states respond to these directives?

    • The Commonwealth Human Rights Initiative (CHRI), in its report of 2020 has some useful data.
    • It tracked changes made in the police force following the 2006 judgment.
    • It has found that not even one state was fully compliant with the apex court directives and that while 18 states passed or amended their Police Acts in this time, not one fully matches legislative models.

    What has been the response of the Supreme Court to these issues?

    • Prakash Singh said that he has followed up on these issues and has had nearly five contempt petitions issued in the past decades to states found to be non-compliant.
    • Singh said that bigger states like Maharashtra, Tamil Nadu and UP have been the worst when it comes to bringing about systemic changes in line with the judgment and that it is only the North-Eastern states that have followed the suggested changes in spirit.
    • Singh said states like Maharashtra make their own laws that are not effective.
    • The need of the hour is an all-India Act that all states have to follow and small changes can be made in exceptional cases relating to the situation in a particular state.

  • Harmonized System of Nomenclature Code

    It has been made mandatory for a GST taxpayer having a turnover of more than Rs 5 crore in the preceding financial year, to furnish 6 digits HSN Code (Harmonized System of Nomenclature Code). This comes into effect from April 1.

    HSN code

    • The Harmonized System, or simply ‘HS’, is a six-digit identification code developed by the World Customs Organization (WCO).
    • Called the “universal economic language” for goods, it is a multipurpose international product nomenclature.
    • Over 200 countries use the system as a basis for their customs tariffs, gathering international trade statistics, making trade policies, and monitoring goods.
    • The system helps in harmonizing customs and trade procedures, thus reducing costs in international trade.

    What makes the 6 digit code?

    • A unique six-digit code has numbers arranged in a legal and logical structure, with well-defined rules to achieve uniform classification.
    • Of the six digits, the first two denote the HS Chapter, the next two give the HS heading, and the last two give the HS subheading.
    • The HS Code for pineapple, for example, is 0804.30, which means it belongs to Chapter 08 (Edible fruit & nuts, peel of citrus/melons), Heading 04 (Dates, figs, pineapples, avocados, etc. fresh or dried), and Subheading 30 (Pineapples).

  • Exercise ‘Shantir Ogroshena’

    Indian Army team comprising officers, junior commissioned officers (JCOs) and soldiers from the Dogra regiment will participate in the multilateral exercise ‘Shantir Ogroshena’ (front runner of peace).

    The name very much suggests that the exercise is hosted by Bangladesh. But one must note, it’s a multilateral exercise.

    Shantir Ogroshena

    • Indian Army will participate in Multinational Military Exercise namely SHANTIR OGROSHENA -2021 in Bangladesh.
    • The nine days exercise will start on the 4th of this month to commemorate the birth centenary of Bangladesh Father of the Nation, Bangabandhu Sheikh Mujibur Rahman and mark glorious 50 years of liberation.
    • The theme of the exercise is ‘Robust Peace Keeping Operations’. Military observers from the US, UK, Turkey, Kingdom of Saudi Arabia, Kuwait and Singapore will also be in attendance throughout the exercise.
    • Military observers from the USA, UK, Turkey, Saudi Arabia, Kuwait and Singapore will also be in attendance throughout the exercise.

  • What are Small Savings Instruments?

    The government has sharply slashed the rates on all small savings instruments for the first quarter of 2021-22 (Update: The order has been slashed now)

    What is the news?

    • The government has sharply slashed the rates of return on the Public Provident Fund down from 7.1% to 6.4% and effecting cuts ranging from 40 basis points (0.4%) to 110 basis points (1.1%).

    What are Small Savings Instruments?

    • Saving schemes are instruments that help individuals achieve their financial goals over a particular period.
    • These schemes are launched by the Government of India, public/private sector banks, and financial institutions.
    • The government or banks decide the interest rate for these schemes and are periodically updated.
    • You can use the savings you make through these schemes for emergencies, retirement, higher education, children’s education, marriage, at the time of job loss, to reduce debts and more.

    Why are they significant?

    Saving schemes are important for individuals of a country and, in turn, for an economy because of the following reasons:

    • Safety: Depositing your hard-earned excess money in saving schemes will help secure it for your future needs. Holding on to liquid money may not be safe.
    • Retirement Funds: Periodically, depositing money in long-term saving schemes can help you build a retirement corpus..
    • Tax Savings: Many saving schemes offer one or the other kind of tax benefits—may it be tax deductions, exemption, or both.
    • Avoid Unwanted Expenses: When you have all the money at hand, you may end up spending it on unwanted items.

  • [pib] Emergency Credit Line Guarantee Scheme (ECLGS) 3.0

    The Government has extended the scope of Emergency Credit Line Guarantee Scheme (ECLGS) through introduction of ECLGS 3.0 to cover business enterprises in Hospitality, Travel & Tourism, Leisure & Sporting sectors.

    ECGL Scheme

    • Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
    • The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
    • The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.

    Aims and objectives

    • The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line.
    • The main objective is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers.
    • It aims to provide a 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.

    Salient features

    • The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
    • Tenor of the loan under Scheme shall be four years with a moratorium period of one year on the principal amount.
    • No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
    • Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.

    ECLGS 3.0

    • It would involve extension of credit of upto 40% of total credit outstanding across all lending institutions.
    • The tenor of loans granted under ECLGS 3.0 shall be 6 years including moratorium period of 2 years.
    • Further, the validity of ECLGS i.e. ECLGS 1.0, ECLGS 2.0 & ECLGS 3.0 have been extended upto 30.06.2021 or till guarantees for an amount of Rs. 3 lakh crore are issued.
    • The revised operational guidelines in this regard shall be issued by National Credit Guarantee Trustee Company Ltd (NCGTC).

     

  • Baikal Gigaton Volume Detector

    Russian scientists have launched one of the world’s biggest underwater neutrino telescopes called the Baikal-GVD (Gigaton Volume Detector) in the waters of Lake Baikail, the world’s deepest lake situated in Siberia.

    Try this PYQ from CSP 2020:

    Q. The experiment will employ a trio of spacecraft flying in formation in the shape of equilateral triangle that has sides one million km long, with lasers shining between the craft.” the experiment in the question refers to?
    (a) Voyager-2
    (b) New horizons
    (c) LISA pathfinder
    (d) Evolved LISA

    Baikal GVD

    • The Baikal-GVD is one of the three largest neutrino detectors in the world along with the IceCube at the South Pole and ANTARES in the Mediterranean Sea.
    • The construction of this telescope, which started in 2016, is motivated by the mission to study in detail the elusive fundamental particles called neutrinos and to possibly determine their sources.
    • It will help understanding the origins of the universe since some neutrinos were formed during the Big Bang while others continue to be formed as a result of supernova explosions or because of nuclear reactions in the Sun.
    • An underwater telescope such as the GVD is designed to detect high-energy neutrinos that may have come from the Earth’s core, or could have been produced during nuclear reactions in the Sun.

    What are fundamental particles?

    • So far, the understanding is that the universe is made of some fundamental particles that are indivisible.
    • Broadly, particles of matter that scientists know about as of now can be classified into quarks and leptons.
    • Explorations has led to the discovery of over 12 such quarks and leptons, but three of these (protons, neutrons and electrons) is what everything in the world is made up of.
    • Protons (carry a positive charge) and neutrons (no charge) are types of quarks, whereas electrons (carry a negative charge) are types of leptons.
    • These three particles make what is referred to as the building block of life– the atom.

    Why do scientists study fundamental particles?

    • Studying what humans and everything around them is made up of gives scientists a window into understanding the universe a better way.
    • This is one reason why scientists are so keen on studying neutrinos (not the same as neutrons), which are also a type of fundamental particle.
    • Fundamental means that neutrinos, like electrons, protons and neutrons cannot be broken down further into smaller particles.

    So where do neutrinos fit in?

    • What makes neutrinos especially interesting is that they are abundant in nature, with about a thousand trillion of them passing through a human body every second.
    • In fact, they are the second most abundant particles, after photons, which are particles of light.
    • But while neutrinos are abundant, they are not easy to catch, this is because they do not carry a charge, as a result of which they do not interact with matter.
    • One way of detecting neutrinos is in water or ice, where neutrinos leave a flash of light or a line of bubbles when they interact.
    • To capture these signs, scientists have to build large detectors.

    Back2Basics: Lake Baikal

    • Lake Baikal is a rift lake located in southern Siberia, Russia, between Irkutsk Oblast to the northwest and the Buryat Republic to the southeast.
    • It is the largest freshwater lake by volume in the world, containing 22 to 23% of the world’s fresh surface water.
    • With a maximum depth of 1,642 m it is the world’s deepest lake.
    • It is among the world’s clearest lakes and is the world’s oldest lake, at 25–30 million years. It is the seventh-largest lake in the world by surface area.
    • Lake Baikal formed as an ancient rift valley and has a long, crescent shape, with a surface area of 31,722 km2 (12,248 sq mi), slightly larger than Belgium.
    • The region to the east of Lake Baikal is referred to as Transbaikalia or as the Transbaikal and the loosely defined region around the lake itself is sometimes known as Baikalia.
    • UNESCO declared Lake Baikal a World Heritage Site in 1996.

  • OCI card holders no longer required to carry old passports for India travel

    People of Indian origin (PIO) and the Indian diaspora having Overseas Citizens of India (OCI) cards are now not required to carry their old, expired passports for travel to India.

    UPSC can ask statement based question in prelims based on the definition and privileges of OCI card-holders.

    Who is an Overseas Citizen?

    • An OCI is a category introduced by the government in 2005.
    • Persons of Indian Origin (PIOs) of certain categories as specified in the Citizenship Act, 1955 are eligible for being OCI cardholders.
    • Some of the benefits for PIO and OCI cardholders were different until 2015 when the government merged these two categories.
    • The MHA defines an OCI as a person who was a citizen of India on or after January 26, 1950; or was eligible to become a citizen of India on that date; or who is a child or grandchild of such a person, among other eligibility criteria.
    • According to Section 7A of the OCI card rules, an applicant is not eligible for the OCI card if he, his parents or grandparents have ever been a citizen of Pakistan or Bangladesh.

    Privileges to an OCI

    • OCI cardholders can enter India multiple times, get a multipurpose lifelong visa to visit India, and are exempt from registering with Foreigners Regional Registration Office (FRRO) no matter how long their stay.
    • If an individual is registered as an OCI for a period of five years, he/she are eligible to apply for Indian citizenship.
    • At all Indian international airports, OCI cardholders are provided with special immigration counters.
    • OCI cardholders can open special bank accounts in India, they can buy the non-farm property and exercise ownership rights and can also apply for a driver’s license and PAN card.
    • However, OCI cardholders do not get voting rights, cannot hold a government job and purchase agricultural or farmland.
    • They cannot run for public office either, nor can they travel to restricted areas without government permission.

    Why such a move?

    • There had been inconvenience caused to members of the Indian diaspora due to certain OCI card rules as they undertook to travel to India during the pandemic.
    • He said some of the passengers were not allowed to board flights to India and were sent back from airports as they were not carrying their old foreign passports, which was required as per government rules.
    • The OCI card, among other benefits, allows multiple entries, multi-purpose lifelong visa to an Indian-origin foreign national to visit India.
    • Under the provisions of the OCI card, which gives the cardholder a lifelong visa to India, those below 20 years and above 50 years need to renew their OCI card every time they have their passport renewed.

    Back2Basics: PIO vs. OCI