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GS Paper: GS3

  • ISRO’s goal for Venus Mission

    India’s Venus mission has been conceived. The project report for ‘Shukrayaan-I’ – the name given to ISRO’s Venus mission

    About Venus

    • Venus is the second planet from the Sun and is Earth’s closest planetary neighbor.
    • It’s one of the four inner, terrestrial (or rocky) planets, and it’s often called Earth’s twin because it’s similar in size and density.
    • Venus has a thick, toxic atmosphere filled with carbon dioxide and it’s perpetually shrouded in thick, yellowish clouds of sulphuric acid that trap heat, causing a runaway greenhouse effect.
    • It’s the hottest planet in our solar system, even though Mercury is closer to the Sun.
    • Surface temperatures on Venus are about 900 degrees Fahrenheit (475 degrees Celsius) – hot enough to melt lead.
    • Venus has crushing air pressure at its surface – more than 90 times that of Earth – similar to the pressure you’d encounter a mile below the ocean on Earth.

    Do you know?

    Venus rotates on its axis backward, compared to most of the other planets in the solar system. This means that, on Venus, the Sun rises in the west and sets in the east, opposite to what we experience on Earth. (It’s not the only planet in our solar system with such an oddball rotation – Uranus spins on its side.)

    What is Shukrayaan-I Mission?

    • Shukrayaan will be India’s first orbiter mission to Venus after sending similar missions to the Moon and Mars.
    • The mission aims to study the surface of the hottest planet in our solar system and unravel the mysteries under the Sulphuric Acid clouds enveloping it.
    • The orbiter is the third mission announced to the inferno world of Venus after NASA announced two probes followed by a spacecraft by the European Space Agency.
    • The probes will investigate the world looking for clues to understand the destructive past of Earth’s mysterious twin, which scientists believe once had vast reserves of water similar to our planet.

    Stated objectives

    • Investigation of the surface processes and shallow sub-surface stratigraphy, including active volcanic hotspots and lava flows
    • Studying the structure, composition, and dynamics of the atmosphere
    • Investigation of solar wind interaction with the Venusian Ionosphere

    Delay with the launch

    • The ISRO is eyeing the December 2024 window for launch with orbital maneuvers planned for the following year.
    • This is when earth and Venus would be so aligned that the spacecraft could be put in the neighboring planet’s orbit using a minimum amount of propellant.
    • The next similar window would be available in 2031.

     

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  • India must seize the trade opportunity opening now

    Context

    Slower global growth, an adverse geopolitical environment, the shadow of recurring waves of the pandemic and prolonged supply chain issues are likely to weigh on export growth this year.

    Trade growth in 2021 and uncertainties in 2022

    • The year 2021 was a record one for trade despite the pandemic.
    • In terms of volumes, merchandise trade rose 9.8 per cent, while in dollar terms, it grew 26 per cent.
    • The value of commercial services trade was also up 15 per cent.
    • India has had a good export run in line with global trends, witnessing record goods exports of $419 billion, while touching $250 billion in services exports.
    • However, global growth forecasts have now been pared down.
    • Slower global growth, an adverse geopolitical environment, the shadow of recurring waves of the pandemic and prolonged supply chain issues are likely to weigh on export growth this year.

    Taping into opportunities

    • Ukraine and Sri Lanka are major exporters of agricultural products and the vacuum created by their limited presence in global trade will open up agricultural export opportunities for India.
    • This will not only spur overall exports but will also help to support the recovery of the agrarian economy through higher realisations.
    • Tea and wheat: As many as 25 African countries import more than one-third of their wheat from Russia and Ukraine and for 15 of them, the share exceeds 50 per cent.
    • Sri Lanka is also a major player in the global tea market and produces around 300 million kg annually.
    • Almost 98 per cent of its annual production is exported.
    • India, the second-largest producer of tea with an annual production of 900 million kg, is in a good position to exploit the opportunity and fill the gap.
    • Textile: Apart from tea and wheat, newer export opportunities have arisen for textiles.
    • Sri Lanka exports $5.42 billion worth of garments and prolonged power cuts in the island nation will hurt its production and export capacity.

    Suggestions

    • 1] Work on non-tariff barriers: One, work on non-tariff barriers for agricultural trade with a special focus on harmonising the sanitary and phytosanitary (SPS) requirements.
    • 2] Autonomy in tea sector: To support tea exports, traditional tea boards are seeking a greater role and autonomy for optimising the development, promotion, and research in the sector.
    • Quicker implementation of the proposed Tea Promotion and Development Act is of utmost importance.
    • 3] Integration with global supply chains: India must double down on its integration with global supply chains.The commerce ministry has negotiated a slew of trade deals.
    • 4] Reduce tariff rates for intermediate inputs: Tariff rates for intermediate inputs should be reduced to either zero or should be negligible for India to become an attractive location for assembly activities.
    • 5] Realignment of specialisation patterns: India must persist with the creation of an enabling ecosystem that realigns its specialisation patterns towards labour-intensive processes and product lines.
    • The labour market reforms must be taken to their logical conclusion.
    • 6] Pro-active FDI policy: A continuous and pro-active FDI policy is also critical as foreign capital and technology are key enablers for entry into global production networks even as local firms play a role as subcontractors and suppliers of intermediate inputs to MNEs.
    • 7]Power supply and logistical bottlenecks: Lastly, exports could suffer if basic issues such as availability of power and logistical bottlenecks keep rearing their ugly heads.
    • The Economic Survey 2019 had recommended that low levels of service link costs (costs related to transportation, communication, and other tasks involved in coordinating the activity etc) are prerequisites to strengthen their participation in GVCs.
    • This should not be neglected.

    Conclusion

    If India were to tap export opportunities in developed markets, it must act on the suggestions above.

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  • Let’s make GST a good and simple tax

    Context

    The GST has been a remarkable achievement and a unique experiment in cooperative federalism. In this, both the Union and the state governments gave up their tax autonomy in favour of harmonising domestic trade taxes.

    Multiple rates: A major shortcoming in the structure of GST

    •  One of the most important shortcomings in the structure of GST is multiple rates.
    • The committee headed by the Chief Economic Adviser estimated the tax rate at 15-15.5 per cent.
    • It further recommended that in keeping with growing international practice, India should strive towards a single rate in the medium-term to facilitate administrative simplicity and compliance, but in the immediate context, it should have a three-tier structure (excluding zero).
    • The structure finally adopted was to have four rates of 5, 12, 18, and 28 per cent besides zero, though almost 75 per cent of the revenues accrue from the 12 and 18 per cent slabs.
    • Why single rate structure? The reasons for adopting a single rate structure in most countries are to have a simple tax system, prevent misclassifications and litigations arising therefrom, and to avoid an inverted duty structure of taxes on inputs exceeding those on outputs requiring detailed scrutiny and refunds.
    • Why multiple rates? The main reason for rate differentiation is equity.
    • But it is argued that this is an inefficient way of targeting benefits for the poor. 
    • Although the exempted and low-rated items are consumed relatively more by the poor, in absolute terms, the consumption may be more by the rich. 

    Suggestions

    • Focus on the expenditure side: The ideal way of targeting the benefits to the poor is on the expenditure side, through targeted cash transfers to vulnerable groups and providing quality education and healthcare.
    • Of course, unprocessed food items have to be exempted for reasons of administrative difficulty, but the list should be kept small.
    • Right time to rationalise the rates: Now, in fact, is the opportune time to rationalise the rate structure.
    • The economy is in recovery mode and more importantly, GST revenues have shown reasonably high buoyancy with collections of over Rs 1 lakh crore in the last 10 months and touching a record of Rs 1.68 lakh crore in April 2022.
    • Role of e-invoicing: The revenue increase has not come about only due to the economic recovery.
    •  The more important reason seems to be that at last, the GSTN has been able to stabilise the technology platform.
    • Mandating the issue of e-invoicing for all businesses above Rs 100 crore has enabled better invoice matching and detection of fake invoices that were used to claim the input tax credit.
    • This has helped to improve tax compliance and has also enabled better enforcement.
    • With time, the GSTN should be able to enforce e-invoice requirements on all businesses above Rs 10 crore, which will cover more than 95 per cent of taxpayers.
    • Dealing with the excessive rate differentiation: The GST council is concerned about the problems arising from excessive rate differentiation and has set up a seven-member ministerial panel .
    • But it has been widely reported that the committee is thinking of increasing the lower tax rate from 5 per cent to 8 per cent and moving some essential items from the 5 per cent category to the 3 per cent slab.
    • This will be retrograde because a rate category will be added. The need of the hour is to reduce the rate categories.
    • Merge 12 and 18 per cent categories: It would be preferable to merge the 12 per cent and 18 per cent categories into a 15-16 per cent slab and move the items in the 5 per cent category to the 8 per cent slab and remove the 28 per cent category altogether. 

    Conclusion

    The merger of 12 and 18 per cent categories will result in the GST structure with two rates and as the cesses will cease after 2026 when the compensation requirement is over, it will really become a “good and simple tax”.

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  • How India’s new VPN rules change the Status Quo?

    Recently, the Indian Computer Emergency Response Team (Cert-In) issued new directives that require Virtual Private Network (VPN) providers to store user data for five years.

    What is VPN?

    • VPN describes the opportunity to establish a protected network connection when using public networks.
    • It encrypts internet traffic and disguise a user’s online identity.
    • This makes it more difficult for third parties to track your activities online and steal data.
    • The encryption takes place in real time.

    How does a VPN work?

    • A VPN hides your IP address by letting the network redirect it through a specially configured remote server run by a VPN host.
    • This means that if you surf online with a VPN, the VPN server becomes the source of your data.
    • This means your Internet Service Provider (ISP) and other third parties cannot see which websites you visit or what data you send and receive online.
    • A VPN works like a filter that turns all your data into “gibberish”. Even if someone were to get their hands on your data, it would be useless.

    Why do people use VPN?

    • Secure encryption: A VPN connection disguises your data traffic online and protects it from external access. Unencrypted data can be viewed by anyone who has network access and wants to see it. With a VPN, hackers and cyber criminals can’t decipher this data.
    • Disguising whereabouts: VPN servers essentially act as your proxies on the internet. Because the demographic location data comes from a server in another country, your actual location cannot be determined.
    • Data privacy is held: Most VPN services do not store logs of your activities. Some providers, on the other hand, record your behaviour, but do not pass this information on to third parties. This means that any potential record of your user behaviour remains permanently hidden.
    • Access to regional content: Regional web content is not always accessible from everywhere. Services and websites often contain content that can only be accessed from certain parts of the world.
    • Secure data transfer: If you work remotely, you may need to access important files on your company’s network. For security reasons, this kind of information requires a secure connection. To gain access to the network, a VPN connection is often required.

    What does the new CERT-IN directive say?

    • VPN providers will need to store validated customer names, their physical addresses, email ids, phone numbers, and the reason they are using the service, along with the dates they use it and their “ownership pattern”.
    • In addition, Cert is also asking VPN providers to keep a record of the IP and email addresses that the customer uses to register the service, along with the timestamp of registration.
    • Most importantly, however, VPN providers will have to store all IP addresses issued to a customer and a list of IP addresses that its customers generally use.

    What does this mean for VPN providers?

    • VPN services are in violation of Cert’s rules by simply operating in India.
    • That said, it is worth noting that ‘no logs’ does not mean zero logs.
    • VPN services still need to maintain some logs to run their service efficiently.

    Does this mean VPNs will become useless?

    • The Indian government has not banned VPNs yet, so they can still be used to access content that is blocked in an area, which is the most common usage of these services.
    • However, journalists, activists, and others who use such services to hide their internet footprint will have to think twice about them.

    Why such move?

    • Crime control: For law enforcement agencies, a move like this will make it easier to track criminals who use VPNs to hide their internet footprint.
    • Curbing dark-net activities: Users these days are shifting towards the dark and deep web, which are much tougher to police than VPN services.

    Back2Basics: Indian Computer Emergency Response Team (CERT-IN)

    • CERT-IN is an office within the Ministry of Electronics and Information Technology.
    • It is the nodal agency to deal with cyber security threats like hacking and phishing. It strengthens the security-related defense of the Indian Internet domain.
    • It was formed in 2004 by the Government of India under the Information Technology Act, 2000 Section (70B) under the Ministry of Communications and Information Technology.

     

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  • Inflation control needs another model

    Context

    At the conclusion of the April meeting, the Monetary Policy Committee had already warned that the focus will henceforth be on inflation. Yesterday it raised the repo rate somewhat sooner than was expected by the market.

     Discourse on inflation engaged in by the western central banks

    • Inflation reflects an excess of output over its ‘natural’ level.
    • Inflation targeting refers to the policy of controlling inflation by raising the interest rate over which the central bank has control, i.e. the rate at which it lends to commercial banks, the ‘repo rate’.
    • This, it is argued, will induce firms to stay their investment plans and reduce inventories, lowering production.
    • As economy-wide output declines, becoming equal to the natural level of output, inflation will cease.
    • This story does not just legitimise a policy of output contraction for inflation but sees it as optimal.
    • The natural level of output itself is the productive counterpart of the natural level of employment, the level that obtains in a freely functioning labour market.
    • So, at the natural level of output, the economy is deemed to be at full employment.
    • Salient in the context is the fact that the natural level of output is unobservable.
    • Hence inflation as a reflection of an “overheating” economy is something that must be taken on trust.

    Inflation control in India

    • Not surprisingly for a theory based on an unobservable variable, the proposition that inflation is due to an overheating economy fares poorly when put to a statistical test for India. 
    • There is not a single demonstration of the empirical validity of the model of inflation presented in the RBI report of 2014, which recommended a move to inflation targeting.
    • On the other hand inflation in India can be explained in terms of the movement of the prices of agricultural goods and, to a lesser extent, imported oil.
    • How effective is monetary policy in controlling inflation: The implication of this finding is damaging for the claim that monetary policy can control inflation, for neither the price of agricultural goods nor that of imported oil is under the central bank’s control.
    • The only route by which monetary policy can, in principle, control inflation is by curbing the growth of non-agricultural output, which would in turn lower the growth of demand for agricultural goods.
    • As the demand for agricultural goods slows, so will inflation, but this comes at the cost of output and employment.
    • At least, this is the theory.
    • Whether this takes place in practice depends upon the extent to which changes in the repo rate are transmitted to commercial bank lending rates.

    Way forward

    • Focus on supply of agricultural goods: The implication for the policymaker that inflation is driven by agricultural goods prices, as is the case in India presently, is that the focus should be on increasing the supply of these goods.
    • Growing per capita income in India has shifted the average consumption basket towards foods rich in minerals, such as fruits and vegetables, and protein, such as milk and meat.
    • But the expansion of the supply of these foods has been lower than the growth in demand for them.
    • So a concerted drive to increase the supply of food other than rice and wheat holds the key.
    • Costly food threatens the health of the population, as people economise on their food intake, and holds back the economy, as only a small part of a household’s budget can be spent on non-agricultural goods.

    Conclusion

    Monetary policy manoeuvres, typified by the RBI’s raising of the repo rate is not an efficient solution for agricultural price-driven inflation. Any lasting inflation control would require placing agricultural production on a steady footing, with continuously rising productivity.

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  • With repo rate hike, RBI has done what’s necessary

    Context

    The RBI has decided to take the bull by the horns. It has raised the repo rate by 40 basis points and the cash reserve ratio (CRR) by 50 basis points to fight inflation.

    Why major central banks across the world are hiking rates?

    • Across the world, major central banks have of late gone on a rate hike spree, waking up to the realisation of inflationary pressures not being transitory in nature.
    • Record high inflation in the US: The US Fed has been on the offensive battling a 40-year high surge in prices.
    • It has tapered its bond purchase programme drastically while suggesting in no uncertain terms the pace of rate hikes needed to combat inflation.
    • The European Union has been slow to respond but voices are growing to correct the path at the earliest.
    • Banks like the Central Bank of Brazil or the Russian Central Bank have increased the interest rate to double digits.
    • Emerging economies have been doubly hit — the days of easy liquidity are well behind them even as their economic resources remain constrained to support an uneven proportion of population hit by pandemic.
    • Including the RBI’s decision today to push the benchmark rate to align with the current market realities, 21 countries have increased interest rates so far.

    Analysing the RBI’s decision to hike interest rates

    • To this extent, the decision by the RBI to frontload the rate hikes ahead of the Fed decision is again an attempt to stem capital outflows.
    • Accommodative policy stance; The most interesting aspect of the rate hike today is the continuation of the accommodative policy stance.
    • The CRR hike may be just an attempt to build up a war chest on the liquidity front.
    • Liquidity inflows to the financial system could be either policy induced by the central bank for example changes in reserves, open market operations etc or non-policy induced such as foreign exchange reserves, government cash balances, and currency in circulation.
    • Given that non-policy induced liquidity inflows have been recently impacted (outflows of portfolio capital) and given the huge size of the government borrowing programme, the RBI also needs to support the market through some means.
    • Impounding bank reserves through the CRR (Rs 87,000 crore) could give some space to the central bank to conduct open market purchases of bonds from banks and thus inject concomitant liquidity some time in the future if the need so arises.
    •  The CRR rate hike is thus an important tool to possibly manage G-sec yields.

    Inflation dynamics in India

    • The inflationary pressures can be attributed mainly to adverse cost-push factors, coming from supply-side shocks in food and fuel prices.
    • The RBI statement thus cites food inflation as a major source of discomfort.
    • Additionally, nominal rural wages for both agricultural and non-agricultural labourers picked up during the second half 2021-22.
    • However, such wage growth has remained soft.
    • Measures to ameliorate supply-side cost pressures would be thus critical at this juncture, especially in terms of a calibrated reduction of taxes on petrol and diesel.
    • On the policy side, however, it would mean that even after rate hikes, inflation may continue to remain high for some time.
    • The MCLR (Marginal Cost of Funds based Lending Rate) linked loans have a share of around 53 per cent in the overall loan kitty.
    • With the rise in CRR and expected future hikes in the benchmark rates, there would be an increase in MCLR due to a negative carry.

    Conclusion

    The RBI has acted prudently in responding to market forces that could impact India’s growth prospects if inflationary concerns were not addressed now. At the same time, by pledging to remain accommodative to spur, and reinvigorate growth, it has reaffirmed its commitment to being a trusted partner in the growth of the country.

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  • GST Compensation dues

    The West Bengal CM has said that slashing State levies on petrol and diesel will be possible only if the Centre clears its outstanding dues of over ₹97,000 crore, which includes compensation for implementing the Goods and Services Tax (GST).

    What is GST?

    • GST launched in India on 1 July 2017 is a comprehensive indirect tax for the entire country.
    • It is charged at the time of supply and depends on the destination of consumption.
    • For instance, if a good is manufactured in state A but consumed in state B, then the revenue generated through GST collection is credited to the state of consumption (state B) and not to the state of production (state A).
    • GST, being a consumption-based tax, resulted in loss of revenue for manufacturing-heavy states.

    Compensation under GST regime

    • Due to the consumption-based nature of GST, manufacturing states like Gujarat, Haryana, Karnataka, Maharashtra and Tamil Nadu feared a revenue loss.
    • Thus, GST Compensation Cess or GST Cess was introduced by the government to compensate for the possible revenue losses suffered by such manufacturing states.
    • However, under existing rules, this compensation cess will be levied only for the first 5 years of the GST regime – from July 1st, 2017 to July 1st, 2022.
    • Compensation cess is levied on five products considered to be ‘sin’ or luxury as mentioned in the GST (Compensation to States) Act, 2017 and includes items such as- Pan Masala, Tobacco, and Automobiles etc.

    Distributing GST compensation

    • The compensation cess payable to states is calculated based on the methodology specified in the GST (Compensation to States) Act, 2017.
    • The compensation fund so collected is released to the states every 2 months.
    • Any unused money from the compensation fund at the end of the transition period shall be distributed between the states and the centre as per any applicable formula.

    Significance of GST compensation

    • States no longer possess taxation rights after most taxes, barring those on petroleum, alcohol, and stamp duty were subsumed under GST.
    • GST accounts for almost 42% of states’ own tax revenues, and tax revenues account for around 60% of states’ total revenues.
    • Finances of over a dozen states are under severe strain, resulting in delays in salary payments and sharp cuts in capital expenditure outlay amid the pandemic-induced lockdowns and the need to spend on healthcare.

    What is the status of the outstanding GST compensation due to the States?

    • The Finance Ministry said that outstanding GST compensation dues to States for 2021-22 stood at ₹78,704 crore.
    • This means that dues have been remitted to States for the eight-month period of April 2021 till November 2021.
    • Normally, compensation for 10 months from April-January of any financial year is released during that year and the compensation for February-March is released only in the next financial year.
    • The pending amount will also be released as and when the amount from cess accrues in the compensation fund.

    Also read:

    [Burning Issue] GST Compensation

     

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  • RBI surprises with 40 bps rate increase in Repo Rate

    The Reserve Bank of India (RBI), in a sudden move, raised the repo rate by 40 basis points (bps) to 4.4% citing inflation that was globally rising alarmingly and spreading fast.

    Why in news?

    • The repo rate increase was the first since August 2018.
    • The MPC retained its ‘accommodative’ policy stance even as it focuses on withdrawal of accommodation to keep inflation within the target range while supporting growth.
    • Due to Ukraine War, persistent and spreading inflationary pressures are becoming more acute with every passing day.

    Hues over the REPO spike

    • The move — to have such a meeting and to raise the interest rates — is, at two different levels, both surprising and obvious.
    • It is surprising because the RBI’s MPC meets once every two months — and the meeting this week was not scheduled.

    What is Repo Rate?

    • Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds.
    • It is used by monetary authorities to control inflation.
    • In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank.
    • This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

    How does the repo dynamics work?

    • When there is a shortage of funds, commercial banks borrow money from the central bank which is repaid according to the repo rate applicable.
    • The central bank provides these short terms loans against securities such as treasury bills or government bonds.
    • This monetary policy is used by the central bank to control inflation or increase the liquidity of banks.
    • The government increases the repo rate when they need to control prices and restrict borrowings.
    • An increase in repo rate means commercial banks have to pay more interest for the money lent to them and therefore, a change in repo rate eventually affects public borrowings such as home loan, EMIs, etc.
    • From interest charged by commercial banks on loans to the returns from deposits, various financial and investment instruments are indirectly dependent on the repo rate.

    What is accommodative stance of policy?

    • Accommodative monetary policy is when central banks expand the money supply to boost the economy. Monetary policies that are considered accommodative include lowering the Federal funds rate.
    • These measures are meant to make money less expensive to borrow and encourage more spending.

    What triggered the RBI to take sudden decision?

    • Inflation has been rising for over two years: By law, the RBI is supposed to target retail inflation at 4%. Inflation constantly above 4% since last year.
    • Inflation has not been “transitory”: The reasons for high inflation have tended to change over the months due to wide range of reasons like war, crude oil prices rise, taxes on fuels etc.
    • Spike in crude oil prices is not new: The RBI has pointed to high crude oil prices in the wake of the Ukraine war, as one of the key reasons for high inflation in India.
    • High core inflation: The core inflation which is essentially the inflation rate stripped of the effect of fuel and food prices has been rising up. This is more worrisome for RBI since it cannot be altered overnight.
    • Monetary policy has lags. RBI waited too long: If the RBI wanted to contain inflation in May, it should have acted in February or at least in April. Raising rates right now may not bring down the inflation rate immediately.

    Try this PYQ from CSP 2020:

    Q.If the RBI decides to adopt an expansionist monetary policy, which of the following it would NOT do?

    1. Cut and optimize the statutory liquidity ratio
    2. Increase the Marginal Standing Facility Rate
    3. Cut the Bank Rate and Repo Rate

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 2 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”u0fhdp0i3d” question=”Please leave a feedback on this” opened=”1″]Post your answers here:

    [/wpdiscuz-feedback]

     

     

     

    Back2Basics: Monetary Policy Committee (MPC)

    • The Monetary Policy Committee (MPC) is a committee of the RBI, which is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level.
    • The RBI Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC to bring more transparency and accountability in fixing India’s Monetary Policy.
    • The policy is published after every meeting with each member explaining his opinions.
    • The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.
    • Suggestions for setting up a MPC is not new and goes back to 2002 when YV Reddy committee proposed to establish an MPC, then Tarapore committee in 2006, Percy Mistry committee in 2007, Raghuram Rajan committee in 2009 and then Urjit Patel Committee in 2013.

    Composition and Working

    • The committee comprises six members – three officials of the RBI and three external members nominated by the Government of India.
    • The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
    • The Governor of RBI is the chairperson ex officio of the committee.
    • Decisions are taken by a majority with the Governor having the casting vote in case of a tie.
    • They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.

     

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  • France pulls out of P-75I Project

    Ahead of PM Modi’s scheduled visit, France has denounced its participation in the P-75 India (P-75I) project under which six conventional submarines are to be built in India for the Indian Navy.

    Why did France pull out?

    • The reason was that the Request for Proposal (RFP) requires that the fuel cell AIP be sea proven, which not the case is for us yet since the French Navy does not use such a propulsion system.
    • AIP refers to Air-Independent Propulsion, a technology for conventional — that is, non-nuclear — submarines.

    Backgrounder: Project 75

    • Project 75 India is a part of India’s thirty-year-old submarine building plan by which all the six submarines which are under the project should already be sailing and it should have been followed by the submarines now for which the RFP has been issued.
    • It is a long-awaited and long-overdue project.
    • This should have happened way back but it got delayed because it was difficult to find a strategic partnership model.

    What is P-75I?

    • The Project 75I-class submarine is a follow-on of the Project 75 Kalvari-class submarine for the Indian Navy.
    • In the late 1990s, around the time of Kargil war, a three-decade plan took shape for indigenous construction of submarines.
    • It was known to have two separate series of submarine building lines – codenamed Project 75 and Project 75I — in collaboration with foreign entities.
    • Under this project, the Indian Navy intends to acquire six diesel-electric submarines, which will also feature advanced air-independent propulsion systems.
    • This is for enabling them to stay submerged for longer duration and substantially increase their operational range.

    What is the status of the project?

    • The navy is slightly behind the curve on P-75I.
    • The project faces choppy waters; the Naval Group has already announced it is pulling out, and sources said the Russian and Spanish companies might also not proceed with their bids.
    • Among the concerns, is the requirement to demonstrate a sea-proven fuel cell AIP.
    • While some manufacturers may have the technology, it may not have been proven at sea yet.
    • Another problem for the OEMs is the transfer of technology, which is built into the process.

    Why does the Navy want AIP subs?

    • Simply put, AIP technology allows a conventional submarine to remain submerged for much longer than ordinary diesel-electric submarines.
    • All conventional submarines have to surface to run their generators that recharge the batteries that allow the boat to function under water.
    • However, the more frequently a submarine surfaces, the higher the chances of it being detected.
    • AIP allows a submarine to remain submerged for more than a fortnight, compared to two to three days for diesel-electric boats.
    • IP has a force multiplier effect on lethality of a diesel electric submarine as it enhances the submerged endurance of the boat several folds.

    What submarines does India have now?

    • India has 16 conventional diesel-electric submarines, which are classified as SSKs.
    • After the last two Kalvari Class subs are commissioned under P-75, this number will go up to 18.
    • India also has two nuclear ballistic submarines, classified SSBN.

    Strategic importance of submarines development

    • Ageing arsenal: Currently, India has less number of submarines than what is required with some more of those from both types being at various stages of construction.
    • Combat roles in near future: The nuclear powered and diesel-electric submarines have their designated roles in the Carrier Battle Groups, which are formations of ships and submarines with Aircraft Carriers at the lead role.
    • Strategic deterrence: As per the basic principles of submarine deployment and the minimum requirement for India to create a strategic deterrence, there is a specific number of submarines of both types that India needs to have in active service.

    Significance of P-75 I

    • ‘Make in India’ Projects: It will serve to facilitate faster and more significant absorption of technology and create a tiered industrial ecosystem for submarine construction in India.
    • Self-Reliance: From a strategic perspective, this will help reduce current dependence on imports and gradually ensure greater self-reliance and dependability of supplies from indigenous sources.
    • Securing Indo-Pacific: China is increasing its presence in the Indian Ocean Region (IOR) and this is creating pressure on the Indian Navy in sprucing up the submarine arm.

     

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  • Russia officially quits the International Space Station (ISS)

    Russia is responding to the Western sanctions. It has decided to walk out of the International Space Station.

    International Space Station

    • The ISS was launched in 1998 as part of joint efforts by the U.S., Russia, Japan, Canada and Europe.
    • The idea of a space station originated in the 1984 State of the Union address by former U.S. President Ronald Reagan.
    • The space station was assembled over many years, and it operates in low-earth orbit.
    • Since its inception, it has served as a laboratory suspended in space and has aided multiple scientific and technological developments.
    • The ISS was originally built to operate for 15 years.

    Why was ISS launched?

    • A space station permits quantum leaps in research in science, communications, and in metals and lifesaving medicines which could be manufactured only in space.
    • ISS has consistently maintained human presence for the past 21 years, providing astronauts with sophisticated technologies for scientific research.

    What is Russia’s role in maintaining the ISS?

    • The ISS is built with the co-operation of scientists from five international space agencies — NASA of the U.S., Roscosmos of Russia, JAXA of Japan, Canadian Space Agency and the European Space Agency.
    • Each agency has a role to play and a share in the upkeep of the ISS.
    • Both in terms of expense and effort, it is not a feat that a single country can support.
    • Russia’s part in the collaboration is the module responsible for making course corrections to the orbit of the ISS.
    • They also ferry astronauts to the ISS from the Earth and back.
    • Until SpaceX’s dragon spacecraft came into the picture the Russian spacecrafts were the only way of reaching the ISS and returning.

     

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