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  • What is the Yen Carry Trade? Why is it unwinding right now?

    Why in the news?

    The global stock and bond markets, especially Japan’s, are experiencing turmoil due to the unwinding of the immensely popular yen carry trade.

    What is Yen carry trade?

    • The yen carry trade is a popular currency trading strategy that involves borrowing Japanese yen at low interest rates and using the funds to invest in higher-yielding assets denominated in other currencies, with the goal of profiting from the interest rate differential.

    Why is it unwinding right now?

    • Strengthening Yen: The Japanese yen has appreciated significantly, rising over 3% against the dollar after the Bank of Japan (BoJ) raised interest rates to 0.25% and announced a reduction in bond purchases. This strengthening of the yen diminishes the profitability of the carry trade, which relies on a weaker yen to remain viable.
    • Interest Rate Changes: Expectations of imminent interest rate cuts by the U.S. Federal Reserve have contributed to the dollar’s weakness, further impacting the carry trade. As the interest rate differential narrows, the incentive to maintain yen carry positions decreases.

    How does it work?

    • Mechanism: The yen carry trade involves borrowing yen at low interest rates and converting it into higher-yielding currencies. Investors use the borrowed yen to purchase assets in currencies that offer better returns, such as U.S. dollars or Australian dollars.
    • Investors typically aim for annualized returns of around 5% to 6% on dollar-yen carry trades, which is the difference between U.S. and Japanese interest rates. The strategy can be lucrative as long as the yen does not appreciate significantly against the currencies in which the investments are made.

    How did it begin?

    • The yen carry trade can be traced back to 1999 when Japan lowered its policy rates to zero following an asset price bubble burst. This led Japanese investors to seek better returns in international markets, effectively turning Japan into the world’s largest creditor nation.
    • The contemporary form of the carry trade gained prominence in 2013 under Prime Minister Shinzo Abe’s quantitative easing policies, coinciding with rising U.S. rates and a depreciating yen. This trend intensified in 2022 and 2023 as the Federal Reserve raised rates rapidly while the Bank of Japan maintained negative short-term rates.

    How large Is It?

    • The estimated size is about $350 billion in short-term external loans by Japanese banks attributed to yen-funded carry trades. However, this figure may not fully capture the extent of the trades, as it could include commercial transactions or loans to foreign businesses.
    • The actual size of yen carry trades could be larger due to the leverage used by hedge funds and computer-driven funds.

    Is it coming to an end?

    • The Bank of Japan has recently started raising rates, which has led to a stronger yen. As a result, the yield gap between Japanese and other currencies has narrowed, diminishing the profitability of carry trades.
    • The appreciation of the yen (by about 13% in a month) has prompted leveraged investors to unwind their positions, leading to a sell-off in global stock and bond markets. This unwinding is driven by the need to repay yen loans as the currency strengthens, causing further declines in asset prices internationally.

    Conclusion: The yen carry trade is unwinding due to the strengthening yen and narrowing interest rate differentials. As the yen appreciates, profitability decreases, prompting investors to exit positions, leading to global market sell-offs. This trend signifies a shift in monetary policies and changing economic conditions affecting currency trading strategies.

  • The hormone Oestrogen

    Why in the News?

    • “Osteoporosis” is a condition where bones become weak and brittle, with over 10 million cases annually in India.
      • It predominantly affects ageing women due to decreased oestrogen levels post-menopause.
    A recent study in Nature by researchers at the Universities of California uncovered a brain-derived hormone, CCN3, which increases bone mass in postpartum lactating mothers.

     

    What is Oestrogen?

      • Oestrogen is a primary female sex hormone essential for reproductive and sexual development.
      • It regulates the menstrual cycle and is crucial for the development of secondary sexual characteristics like breast development. 
      • Oestrogen also plays a vital role in maintaining bone density and cardiovascular health.
    • It is produced mainly in the ovaries but also in smaller amounts by the adrenal glands and fat tissue. 
    • The hormone influences various tissues, including the brain, heart, skin, and bones.
    • Imbalances in oestrogen levels can lead to various health issues, such as osteoporosis and cardiovascular disease.

    Role of Oestrogen in Bone Growth

    • Oestrogen is crucial for bone growth and formation, acting as a manager signaling the bone construction crew.
    • During breastfeeding, oestrogen production drops to focus on milk production, which should weaken bones.
    • Contrary to expectations, mothers’ bones become stronger to meet their babies’ high calcium demands.

    How does the ‘Hidden’ Hormone Keep Mice Mothers’ Bones Healthy?

    • During breastfeeding, the body suppresses oestrogen production to focus on milk production, which should weaken bones.
    • Despite low oestrogen, mothers’ bones strengthen.
    Researchers found that KISS1 neurons in the hypothalamus (a part of the brain) release the CCN3 hormone, which helps maintain and even increase bone mineralisation.

    Experimental Findings:

    • In experiments with genetically modified mice, those lacking the oestrogen receptor alpha still maintained healthy bones due to CCN3.
    • When CCN3 was introduced to skeletal stem cells, it significantly increased bone formation, showing its potential to strengthen bones independently of oestrogen.

    PYQ:

    [2019] ‘RNA interference (RNAi)’ technology has gained popularity in the last few years. Why?

    1. It is used in developing gene silencing therapies.
    2. It can be used in developing therapies for the treatment of cancer.
    3. It can be used to develop hormone replacement therapies.
    4. It can be used to produce crop plants that are resistant to virtual pathogens.

    Select the correct answer using the code given below.

    (a) 1, 2 and 4

    (b) 2 and 3

    (c) 1 and 3

    (d) 1 and 4 only

  • [pib] New Schemes for Co-operatives

    Why in the News?

    The Ministry of Cooperation, since its inception on 6th July 2021, has taken many initiatives to strengthen and deepen the cooperative movement at the grassroots level.

    What is a Co-operative?

    • A cooperative is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise”.
    • Cooperatives are democratically owned by their members, with each member having one vote in electing the board of directors.

    Evolution of Cooperatives in India:

    Pre-Independence Era:

    • First Cooperative Act (1904): Enacted after the Indian Famine Commission (1901) suggested cooperative credit societies to tackle rural debt.
    • Cooperative Societies Act (1912): Amended the 1904 Act to include non-credit societies and support the cooperative movement.
    • Maclagan Committee (1915): Evaluated the cooperative movement’s economic and financial stability.
    • Montague-Chelmsford Reforms (1919): Made cooperation a provincial subject, boosting regional cooperative initiatives.
    • Post Economic Depression (1929): Various committees in regions like Madras, Bombay, Travancore, Mysore, Gwalior, and Punjab restructured cooperatives.
    • Gandhian Influence: Gandhi promoted cooperatives for a socialistic society and decentralization. Established the Phoenix Settlement and Tolstoy Farm as cooperative settlements in South Africa.

    Post-Independence Era:

    • First Five-Year Plan (1951-56): Emphasized cooperatives for comprehensive community development.
    • Multi-State Co-operative Societies Act (2002): Regulated the formation and functioning of multi-state cooperatives.
      • Amendment (2022): Introduced the Co-operative Election Authority to oversee board elections in multi-state cooperatives.
    • 97th Constitutional Amendment (2011): Made the right to form cooperatives a fundamental right under Article 19.
      • Added Part IX-B to the Constitution, establishing “The Co-operative Societies” (Articles 243-ZH to 243-ZT).
      • Empowered Parliament to legislate for multi-state cooperative societies and state legislatures for other cooperatives.
    • Union Ministry of Cooperation (2021): Created to oversee cooperative affairs, previously under the Ministry of Agriculture.

    Initiatives Making Primary Cooperatives Economically Vibrant and Transparent

    Details
    Model Bye-Laws for Primary Agricultural Credit Societies (PACS)
    • Prepared and circulated to all States/UTs.
    • Enables PACS to undertake over 25 business activities.
    • Adopted by 32 States/UTs.
    Establishing New Multipurpose PACS/Dairy/Fishery Cooperatives
    • Plan to cover all Panchayats/villages in 5 years.
    • 6,844 new PACS, Dairy, and Fishery cooperative societies registered.
    World’s Largest Decentralized Grain Storage Plan
    • Create warehouses and agri-infrastructure at PACS level.
    • Pilot project extended to 500 additional PACS.
    Formation of New Farmer Producer Organizations (FPOs) by PACS
    • 1,100 additional FPOs to be formed by PACS.
    • 992 FPOs formed by NCDC.
    PACS Given Priority for Retail Petrol/Diesel Outlets
    • Included in Combined Category 2 (CC2) for allotment.
    • 270 PACS from 25 States/UTs applied online.
    PACS Eligible for LPG Distributorship
    • Allowed to apply for LPG distributorships.
    • 31 PACS from four States/UTs submitted applications.
    PACS as Pradhan Mantri Bharatiya Jan Aushadhi Kendra
    • Promote PACS to operate Janaushadhi Kendras.
    • 2,594 PACS given initial approval, 674 received drug licenses.
    PACS as Pradhan Mantri Kisan Samriddhi Kendras (PMKSK)
    • Ensure easy accessibility of fertilizer and related services.
    • 38,141 PACS functioning as PMKSK.
    Convergence of PM-KUSUM at PACS Level
    • Farmers can adopt solar agricultural water pumps and install photovoltaic modules.
    Micro-ATMs to Bank Mitra Cooperative Societies
    • Provide doorstep financial services.
    • 2,700 micro-ATMs distributed in Gujarat.
    Rupay Kisan Credit Card to Members of Milk Cooperatives
    • Provide credit at lower interest rates.
    • 48,000 Rupay KCC distributed in Gujarat.
    Formation of Fish Farmer Producer Organization (FFPO)
    • 69 FFPOs registered by NCDC.
    • Department of Fisheries allocated work to convert 1000 fisheries cooperative societies into FFPOs.

     

    Initiatives Strengthening Urban and Rural Cooperative Banks

    Details
    Urban Cooperative Banks (UCBs) Allowed to Open New Branches
    • Open up to 10% (max 5 branches) without prior RBI approval.
    Doorstep Services by UCBs
    • Provide banking facilities at home.
    Extended Time Limit for Priority Sector Lending (PSL) Targets
    • Timeline extended to March 31, 2026.
    Nodal Officer in RBI for UCBs
    • Designated for regular interaction.
    Increased Housing Loan Limit by RBI
    • Doubled for UCBs to Rs. 60 lakhs.
    • Increased to Rs. 75 lakhs for Rural Cooperative Banks.
    Rural Cooperative Banks Lending to Real Estate/Residential Housing
    • Diversify business to benefit Housing cooperative societies.
    Non-scheduled UCBs, StCBs, and DCCBs Notified as MLIs in CGTMSE Scheme Risk coverage up to 85% on loans.
    Doubled Monetary Ceiling for Gold Loan by RBI Increased from Rs. 2 lakhs to Rs. 4 lakh.
    Umbrella Organization for UCBs Approval given to NAFCUB for formation, providing IT infrastructure and operational support.

     

    PYQ:

    [2011] In India, which of the following have the highest share in the disbursement of credit to agriculture and allied activities?

    (a) Commercial Banks

    (b) Cooperative Banks

    (c) Regional Rural Banks

    (d) Microfinance Institutions

  • Inaugural Rashtriya Vigyan Puraskar, 2024 announced 

    Why in the News?

    G Padmanabhan, the Chandrayaan-3 team, Annapurni Subramaniam, and 30 others have been chosen for the inaugural Rashtriya Vigyan Puraskar (RVP), India’s new national science awards established last year.

    What is Rashtriya Vigyan Puraskar?

    • The RVP comprises four awards:
    1. Vigyan Ratna for lifetime achievement.
    2. Vigyan Shri for scientists of all ages.
    3. Vigyan Yuva for scientists under 45 years.
    4. Vigyan Team for collaborative research work.
    • These awards were instituted last year, replacing all existing science awards, including the prestigious Shanti Swarup Bhatnagar Prize.
    • The Vigyan Yuva now serves as a replacement for the Bhatnagar Prize, which also recognized outstanding scientists below 45 years.

    Ceremony Details:

    • These awards shall be announced on the National Technology Day (11th May) every year.
    • The Award Ceremony for all categories of awards shall be held every year on the National Space Day on 23rd August.
    • The Hon’ble President of India / The Hon’ble Vice President of India may confer the Awards.

    Notable Awardees

    • G Padmanabhan: At 86, G Padmanabhan, a renowned biochemist known for his work on the malaria parasite, has been named a Vigyan Ratna, recognizing his lifetime achievement in science. Padmanabhan is a towering figure in Indian science and has been honored with the Padma Shri and Padma Bhushan.
    • Chandrayaan-3 Team: The team behind Chandrayaan-3, which successfully landed India’s first spacecraft on the Moon last year, has been awarded the Vigyan Team award for their collaborative research work.
    • Vigyan Yuva Puraskar Recipients:
      • Vivek Polshettiwar (Tata Institute of Fundamental Research, Mumbai): A chemist working on carbon capture technologies.
      • Urbasi Sinha (Raman Research Institute, Bengaluru): A leading expert in quantum research.
      • Roxy Mathew Koll (Indian Institute of Tropical Meteorology, Pune): A climate scientist.
    • Annapurni Subramaniam:
      • Among the 13 scientists selected for the Vigyan Shri award, Annapurni Subramaniam’s main research focuses on the formation and evolution of star clusters and galaxies.
    • Other Vigyan Shri Recipients:
      • Jayant Bhalchandra Udgaonkar: A biologist and former director of IISER Pune.
      • Naba Kumar Mondal: A particle physicist from Saha Institute of Nuclear Physics, Kolkata.

    PYQ:

    [2009] For outstanding contribution to which one of the following fields is Shanti Swarup Bhatnagar Prize given?

    (a) Literature

    (b) Performing Arts

    (c) Science

    (d) Social Service
  • [7th August 2024] The Hindu Op-ed: Powering up to get to the $30-trillion economy point

    [7th August 2024] The Hindu Op-ed: Powering up to get to the $30-trillion economy point

    PYQ Relevance:

    Mains:

    Q1 Define potential GDP and explain its determinants. What are the factorsthat have been inhibiting India from realizing its potential GDP?  (UPSC IAS/2020) 
    Q2 Explain the difference between the computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC IAS/2021) 

    Note4Students: 

    Mains:  Challenges related to Indian economy ;

    Mentor comments: India aims to achieve a $30 trillion GDP by 2045-2050, driven by robust consumption and exports. Current projections estimate GDP growth at around 6.3% annually, with nominal growth potentially reaching 10-12%. To realize this ambitious target, India must enhance private sector involvement, improve infrastructure, and foster industrial clusters. Urbanization and technological advancements in agriculture will also play crucial roles in boosting productivity and employment. Maintaining a steady growth trajectory is essential for transforming India into a global economic powerhouse while addressing income inequality challenges.

    Let’s learn!

    __

    Why in the News? 

    India should pursue rapid economic growth through liberal policies that harness the potential of the private sector, remaining undeterred by criticisms regarding income inequality.

    Demographic Dividend

    • India’s demographic dividend is poised to peak around 2041 when the share of the working-age population (20-59 years) is expected to hit 59%. This window of opportunity provides a chance for India to achieve higher economic growth by engaging more people in the workforce.
    • By 2020, India had one of the youngest populations in an ageing world, with a median age of just 28, compared to 37 in China and the US, 45 in Western Europe, and 49 in Japan. This youthful population can drive innovation and productivity.

    Gender Disparities

    • Female Labor Force Participation Rate (FLFPR): India’s FLFPR stands at 37%, significantly lower than that of countries like China and Japan, which range between 60%-70%. This disparity represents a vast untapped resource, as increasing women’s participation in the workforce could lead to substantial economic benefits and poverty reduction.
    • Post-COVID Recovery: The FLFPR was reported at 26% in 2019, but post-COVID-19, many women have returned to work, primarily in agriculture. This trend underscores the importance of creating more diverse employment opportunities for women in various sectors.

    Economic Growth and Poverty Reduction

    • Historical Context: From 1991 to 2011, India’s economic liberalization led to a significant reduction in poverty, with the poverty rate dropping from approximately 50% to around 20%. This period saw 35 crore people lifted out of abject poverty, illustrating the direct correlation between economic growth and poverty alleviation.
    • Growth Elasticity of Poverty Reduction: The growth elasticity of poverty reduction in India is relatively low, at just over 0.12 between 1995 and 2012.
      • In contrast, countries like China exhibit a higher elasticity (0.28), suggesting that while growth has reduced poverty in India, it has not done so as effectively as in other nations, indicating room for improvement in how growth translates into poverty alleviation
    The growth elasticity of poverty reduction measures how much poverty decreases in response to economic growth, typically expressed as the percentage reduction in poverty per percentage increase in income.

    Structural Challenges

    • Labour Utilization: India has struggled to leverage its surplus labour effectively in low-end manufacturing sectors. The inability to transition workers from low-productivity sectors like agriculture to manufacturing hampers economic diversification and growth potential.
    • Dependency on High-Tech Sectors: The IT sector has provided an alternative growth pathway, but it has limitations in terms of employment generation. 

    Economic Growth Requirements

    • Sustained Growth Rate: To avoid falling into the middle-income trap, India needs to maintain a nominal growth rate of around 8% until 2047. This is crucial for increasing its GDP and per capita income significantly, especially given that it grew at approximately 9% over the last 25 years.
    • 3I Strategy: The World Bank recommends a “3I strategy”—Investment, Infusion, and Innovation. While investment and infusion (adopting foreign technologies) have been effective in the past, India must now focus on fostering innovation to escape the middle-income trap.
      • Countries like South Korea successfully implemented this strategy, which included substantial investments in education and public universities to develop necessary skills for growth.

    Way Forward: 

    • Focus on Manufacturing and Exports: To maximize the potential of its workforce, India should prioritize low-skilled, employment-intensive manufacturing with a strong focus on exports.
      • Historical examples from South Korea, Taiwan, and Vietnam demonstrate that such strategies can lead to sustained economic growth and job creation.
    • Investment in Human Capital: Enhancing education and skill development is essential for preparing the workforce to meet the demands of a rapidly evolving economy. This investment will help improve productivity and earnings, thereby reducing poverty.
    • Avoiding Protectionism: As India seeks to attract global manufacturers, it is crucial to maintain an open trade policy to facilitate growth. High tariffs could hinder the import of necessary goods and technologies, which are vital for boosting domestic industries and exports.

  • RBI Report on Currency and Finance (RCF), 2023-24

    Why in the News?

    The Reserve Bank of India (RBI) released the “Report on Currency and Finance (RCF)” for the year 2023-24 with the theme – India’s Digital Revolution.

    What is the Report on Currency and Finance (RCF)? 

    • The RCF is an annual publication by the Reserve Bank of India (RBI).
    • It covers various aspects of the Indian economy and financial system, providing insights and analysis on current economic conditions, financial stability, and policy issues.
    • The theme for the 2023-24 report is “India’s Digital Revolution.”
    • Focus: It focuses on the transformative impact of digitalization across various sectors in India, especially in the financial sector.
    • Highlights: The report highlights how digital technologies are reshaping economic growth, financial inclusion, public infrastructure, and the regulatory landscape. It also addresses the opportunities and challenges associated with digitalization.

    Key Highlights of the RCF:

    [1] Digital Revolution

    • The RCF emphasizes India’s leading role in the global digital revolution.
    • With robust digital public infrastructure (DPI), evolving institutional frameworks, and a tech-savvy population, India has emerged as a frontrunner in this arena.
    • Key initiatives such as Aadhaar, the world’s largest biometric-based identification system, and the UPI, a real-time, low-cost transaction platform, have revolutionized service delivery and financial inclusion.

    [2] Digitalization in Finance

    • The above-discussed initiatives have made retail payments faster and more convenient, while the RBI’s pilot runs of the E-Rupee position India at the forefront of digital currency initiatives.
    • The digital lending ecosystem is also vibrant, with the Open Credit Enablement Network and the Open Network for Digital Commerce (ONDC) driving growth.

    [3] Remittance Inflows in India

    • India continues to lead as the highest remittance recipient globally, with US$ 115.3 billion in 2023, accounting for 13.5% of the world’s total remittances.
    • The RCF highlights that more than half of India’s inward remittances in 2021 came from the Gulf countries, with North America contributing 22%.
    • The remittance-to-GDP ratio for India has risen from 2.8% in 2000 to 3.2% in 2023, surpassing the gross FDI inflows to GDP ratio of 1.9% in 2023.
    • Looking forward, India is poised to remain a leading supplier of labor, with its working-age population expected to rise until 2048, potentially propelling remittances to around $160 billion by 2029.

    [4] Smartphones Penetration

    • India’s mobile penetration has seen remarkable growth, with internet penetration reaching 55% in 2023 and an increase of 199 million internet users over the past three years.
    • The cost per gigabyte of data in India is the lowest globally, at an average of Rs. 13.32 per GB.
    • India has one of the highest mobile data consumption rates worldwide, with an average per-user per-month consumption of 24.1 GB in 2023.
    • The number of smartphone users in India was about 750 million in 2023, expected to reach 1 billion by 2026. 
    • The RCF projects that India will become the second-largest smartphone manufacturer within the next 5 years.

    PYQ:

    [2017] Which of the following is the most likely consequence of implementing the ‘Unified Payments Interface (UPI)’?

    (a) Mobile wallets will not be necessary for online payments.
    (b) Digital currency will replace physical currency in about two decades.
    (c) FDI inflows will drastically increase.
    (d) Direct transfer of subsidies to poor people will become very effective.

  • The Physics of Pressure

    Why in the News?

    • Pressure is an indispensable part of life, often unnoticed but always present.
      • It’s the interaction of microscopic particles with the macroscopic world, creating phenomena like air pressure.

    What is Pressure?

    • Pressure is defined as the force exerted per unit area on a surface. 
    • For example, an apple weighing 100 g exerts a force of about 1 newton (N) on your hand and a pressure of approximately 500 Pa.
    • Atmospheric pressure is around 100,000 Pa, equivalent to the pressure exerted by about 200 apples on your hand.

    Everyday Examples of Pressure

    (1) Measuring Blood Pressure:

    • Blood pressure, measured in mm of mercury (mmHg), is an example of pressure in a different context.
    • Blood pressure is measured using a sphygmomanometer, which balances the pressure in an arm cuff with the pressure of the blood in the arteries.
    • The readings, such as 120/80 mmHg, represent the pressure during heartbeats (systolic) and between beats (diastolic).
    • Mercury, being 15 times heavier than water, allows for portable blood-pressure machines.

    (2) Pressure Cookers:

    • The whistle of a pressure cooker is a direct result of the increased pressure cooking the food efficiently.
    • The pressure cooker exemplifies the practical application of pressure in cooking, making it an indispensable kitchen tool.

    PYQ:

    [2021] In a pressure cooker, the temperature at which the food is cooked depends mainly upon which of the following?​

    1. Area of the hole in the lid​

    2. Temperature of the flame​

    3. Weight of the lid​

    Select the correct answer using the code given below.​

    (a) 1 and 2 only ​

    (b) 2 and 3 only​

    (c) 1 and 3 only ​

    (d) 1, 2 and 3​

  • GST on Health and Life Insurance Premiums

    Why in the News?

    • Insurance premiums on health and life policies have increased this year, and the 18% Goods and Services Tax (GST) has made insurance less affordable for many people.
      • Medical inflation, estimated at 14% towards the end of last year, along with increased premiums, has made buying medical insurance difficult for many.

    What is the GST on Health and Life Insurance Premiums?

    • GST replaced all indirect taxes like service tax and cess from July 1, 2017.
    • Currently, GST on health and life insurance policies is fixed at 18%.
    • According to the formula, the Centre collects 9% GST with a matching collection by states.
      • Before GST, life insurance premiums were subject to 15% service taxes, including Basic Service Tax, Swachh Bharat cess, and Krishi Kalyan cess.

    Rational behind the Tax

    • GST Council Recommendations:
      • GST rates and exemptions on all services, including insurance, are prescribed on the recommendations of the GST Council, which includes the Union Finance Minister and ministers nominated by state governments.
      • Insurance is considered a service, and policyholders pay tax on their premiums, generating significant revenue for the government.
    • Tax Deductions:
      • Insurance policies allow certain deductions while computing income tax under Sections 80C and 80D of the Income Tax Act, 1961. Customers can avail deductions on the premium, including the GST applicable.

    Arguments for Withdrawing the GST on Premiums

    • High Premium Increases:
      • Significant increases in premiums on health insurance policies this year have been observed, with some public sector insurers hiking premiums by 50%.
      • The renewal rate of policies is declining due to frequent premium hikes and medical inflation.
    • Comparative GST Rates:
      • The Confederation of General Insurance Agents’ Associations of India points out that GST on insurance in India is the highest in the world.
      • The high GST rate is seen as a deterrent to insurance penetration, which conflicts with the goal of “Insurance for All by 2047”.
    • Recommendations for Rationalisation:
      • The Standing Committee on Finance recommended rationalising the GST rate on insurance products to make them more affordable.
      • Suggestions include reducing GST rates for health insurance, especially for senior citizens, micro-insurance policies, and term policies.

    Insurance Penetration in India:

    • According to a Swiss Re Sigma report, insurance penetration in India’s life insurance sector reduced from 3.2% in 2021-22 to 3% in 2022-23, while the non-life insurance sector remained stagnant at 1%.
    • Overall insurance penetration reduced to 4% in 2022-23 from 4.2% in 2021-22.

     

    PYQ:

    [2018] Consider the following items:

    1. Cereal grains hulled

    2. Chicken eggs cooked

    3. Fish processed and canned

    4. Newspapers containing advertising material

    Which of the above items is/are exempted under GST (Goods and Services Tax)?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4

  • Why was a Customs Duty hike imposed for Lab Chemicals?   

    Why in the News?

    The Finance Ministry has reversed the proposed post-Budget customs duty hike on imported laboratory chemicals following an outcry from scientists.

    What are the different kinds of chemicals which are imported into the country?  

    • Inorganic Chemicals: This category includes substances like ammonia, phosphoric acid, and sulfuric acid, which are essential for various industrial applications.
    • Organic Chemicals: Key imports in this category are methanol, acetic acid, and phenol, which are used in the production of plastics, solvents, and pharmaceuticals.
    • Petrochemicals: Significant imports include polyethene, polypropylene, and styrene, which are crucial for manufacturing plastics and synthetic materials.
    • Speciality Chemicals: Chemicals such as ethyl vinyl acetate and maleic anhydride are imported for specific applications in industries like adhesives and coatings.
    • Agrochemicals: This includes various pesticides and herbicides, which are vital for agricultural productivity and crop protection.

    How important are these chemicals for scientific research?    

    • Foundation for Experimental Work: Laboratory chemicals are essential for conducting experiments in various scientific fields, enabling researchers to test hypotheses and validate results.
    • Facilitate Innovation: These chemicals allow for the development of new products and technologies, driving advancements in industries such as pharmaceuticals, biotechnology, and materials science.
    • Support Medical Diagnostics: Laboratory chemicals play a crucial role in medical testing and diagnostics, aiding in disease detection and treatment monitoring, which is vital for public health.

    What was the issue?

    • Steep Duty Increase: The hike in customs duty on laboratory chemicals alarmed the scientific community, with prices of essential chemicals projected to rise dramatically, such as a batch that typically costs ₹1,00,000 now estimated at ₹2,50,000.
    • Impact on Research: Researchers expressed concerns that the increased costs would hinder scientific research and experimentation, as many essential chemicals are imported and the hike could disrupt ongoing projects.

    Is Ethanol also imported into the country?

    • Import Volume: India imported approximately 635 million liters of ethanol in 2022, primarily for use as fuel and in industrial applications.
    • Types of Ethanol: There are two main types of ethanol relevant to India:
      • Denatured Ethanol: This type is mixed with additives to make it unfit for consumption and is primarily used in laboratories and industrial applications. India has reduced the import tariff on denatured ethanol to encourage its use in manufacturing.
      • Undenatured Ethanol: This type incurs a higher import tariff of 150% and is generally used for beverage production.
    • Domestic Production Challenges: Although India has a significant capacity for ethanol production, it often faces challenges such as insufficient molasses supply. The government has set ambitious goals for ethanol blending in gasoline, aiming for a 20% blend by 2025.

    How was the issue resolved?

    • The Finance Ministry clarified that all imported laboratory chemicals, except undenatured ethyl alcohol, will be taxed at the original 10% customs duty rate instead of the proposed 150% hike.
    • The customs department had initially hiked the duty to 150% to curb the import of undenatured ethyl alcohol that was being mis-declared as laboratory chemicals to avoid the higher 150% duty on undenatured ethanol.

    Way forward: 

    • Strengthen Local Production of Niche Chemicals: Need to invest in domestic manufacturing capabilities for niche and specialty chemicals to reduce dependency on imports, enhance self-sufficiency, and lower costs for research institutions.
    • Facilitate Smooth Import Processes: Govt. should streamline import regulations for essential laboratory chemicals, ensuring clear guidelines and minimal delays, while maintaining necessary checks to prevent misclassification and misuse.

  • Powering India’s future  

    Why in the News?

    In her seventh consecutive Budget address, the Finance Minister unveiled initiatives demonstrating India’s dedication to advancing its clean energy transition.

    Recent Observations

    • In a seventh consecutive Budget speech, the Finance Minister announced measures indicating India’s commitment to its clean energy transition, including developing policies on pumped hydro storage, energy transition pathways to support nuclear energy, and energy efficiency.
    • The memories of this summer’s record-breaking heatwaves, which drove up power demand, reflect both a growing economy and a warming climate.
    • India has achieved 3 key milestones in the last decade: 
      • Near-universal electrification through the Saubhagya scheme;
      • Five-fold increase in installed renewable energy capacity making India the fourth-largest country globally, and
      • 40% drop in aggregate losses of power distribution companies.
    • India’s annual electricity demand has been growing by 7-9% every year since the COVID-19 pandemic, with peak demand rising even faster. Climate change-induced weather extremes further exacerbate these challenges.
    • In 2023 alone, China added 300 GW of solar and wind capacity, while the European Union added 73 GW. As of March, India’s cumulative renewable capacity stood at 144 GW, with another 128 GW in the pipeline

    Investing in a cleaner, flexible, and resilient power grid will help our economy grow sustainably and create jobs in the clean energy sectors

    • Infrastructure Development: The government has allocated significant resources for infrastructure development, recognizing that a robust energy grid is crucial for economic growth.
    • Renewable Energy Capacity Goals: India aims to achieve 500 GW of renewable energy capacity by 2030. This goal is part of a broader strategy to increase the share of renewables in the energy mix, which currently stands at only 13%.
    • Job Creation: Investments in clean energy infrastructure are expected to create numerous jobs.
    • Diverse Clean Energy Resources: The Budget encourages the faster deployment of various clean energy resources, including solar and wind, to meet rising energy demands.
    • Energy Storage Solutions: The emphasis on developing pumped energy storage systems and battery storage solutions is crucial for addressing the intermittency of renewable energy sources, enhancing grid flexibility and reliability.
    • Taxonomy for Climate Finance: The introduction of a taxonomy to identify green activities aims to attract climate finance, facilitating investments in clean energy projects and supporting the transition to a sustainable energy economy.

    Way forward:

    • Accelerate Renewable Energy Deployment: Need to expedite the deployment of solar, wind, and other renewable energy projects to meet the 500 GW target by 2030.
    • Enhance Energy Storage and Grid Resilience: Need to develop robust energy storage solutions, such as pumped hydro and battery storage, to address renewable energy intermittency.

    Mains PYQ:

    Q Clean energy is the order of the day.’ Describe briefly India’s changing policy towards climate change in various international fora in the context of geopolitics. (2022)