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GS Paper: GS3

  • [pib] Godavari and Cauvery River Linking Project

     

    The draft Detailed Project Report (DPR) of the Godavari and Cauvery River Linking Project has been completed by National Water Development Agency (NWDA).

    Godavari– Cauvery Link Project

    • The project consists of 3 links viz., Godavari (Inchampalli/Janampet) – Krishna (Nagarjunasagar), Krishna (Nagarjunasagar) – Pennar (Somasila) and Pennar (Somasila) – Cauvery (Grand Anicut).
    • This proposal to link Godavari, which is prone to flooding, and Krishna, which doesn’t have enough water, has been around for several decades.
    • While river-interlinking for the purposes of navigation as an idea was mooted by the British in India, in 1972, engineer and Union Minister KL Rao proposed the linking of Godavari and Krishna for irrigation.
    • The decades-old proposal finally took shape in the 2000s, and in 2016, the Andhra government linked the two rivers with the Pattiseema-Polavaram Lift Irrigation project, in Andhra’s West Godavari district.

  • [pib] Exercise AJEYA WARRIOR-2020

    Fifth edition of Joint Military Exercise AJEYA WARRIOR-2020 between India and United Kingdom will be conducted at Salisbury Plains, United Kingdom.

    Ex. AJEYA WARRIOR

    • Exercise AJEYA WARRIOR with United Kingdom is an important exercise in terms of the security challenges faced by both the nations in the realm of changing facets of global terrorism.
    • The exercise will comprise of 120 soldiers each from Indian and United Kingdom Army who would be sharing their experiences gained during conduct of various counter insurgency and counter terrorist operations in the past.
    • The aim of this exercise is to conduct company level joint training with emphasis on counter terrorists operation in Urban and Semi Urban areas.
    • The exercise is conducted alternatively in United Kingdom and India.

  • India’s rerun of its protectionist folly mars the liberalization era

    Context

    The latest budget’s import tariff hikes signal that a three-decade commitment to trade openness has been all but abandoned.

    Detrimental effects of protectionism

    • In brief, both economic theory and a vast weight of evidence point to the detrimental effects of protectionism. These are-
      • Fostering inefficiency: Far from jump-starting the domestic industry, tariffs, quotas and other trade restrictions foster inefficiency among domestic firms that survive only because of
      • And do not become more productive under it, as the government’s threat to withdraw the protection is never credible.
      • The consumer is the ultimate loser: Meanwhile, upstream industries suffer higher than necessary input costs.
      • Consumers of final goods end up footing the bill.
      • Governments earn some tariff revenue, but never enough to warrant the distortion costs to the economy.
    • Tariff inversion: The tariff “spikes” cause greater distortion than a revenue-equivalent uniform tariff, and may lead to the problem of tariff “inversion”.
      • What is tariff inversion? A situation in which intermediate goods are taxed more heavily than final goods, thus paradoxically further disadvantaging, rather than aiding, domestic producers of final goods.
    • Rent-seeking by domestic industries: Tariffs worsens rent-seeking by domestic industries-
      • Protectionism increases lobbying: A force which would be muted in a world where tariffs are locked at a uniform level by statute, and, as a result, industries individually have less of an incentive to lobby for tariffs that are to be applied economy-wide rather than only for their own benefit.
      • Economists Arvind Panagariya and Dani Rodrik had formalized this intuition many years ago, and it matches both common sense and observation.
      • The apparently random list of sectors that would benefit from tariff increases in the recent budget-strongly suggests the possibility of rent-seeking behaviour.

    Conclusion

    Ample experience of import substitution in economies across the emerging world and over many decades, including in India until 1991, attest to the fact that protectionism, especially abetted by rent-seeking behaviour, is like a rabbit-hole: once inside, one keeps going deeper and deeper, and egress is difficult at best.

  • RO-based water filtration systems

    • The Union Environment Ministry has issued a draft notification that seeks to regulate membrane-based water filtration systems in areas where the source of water meets drinking water norms of the Bureau of Indian Standards.
    • This primarily affects reverse osmosis (RO)-based water filtration systems and the rules, at least in letter, effectively prohibit homes from installing domestic RO systems.

    What is reverse osmosis (RO)?

    • RO was originally a technology devised to desalinate sea water. The idea exploits the principle of osmosis.
    • Take a tube, twist it into a ‘U’-shape and insert a semi-permeable membrane (a material with very small holes that will allow only certain molecules to filter through) at the point where the tube curves.
    • Fill half the tube with salt water and the other with freshwater. Over time, fresh water will cross over into the salty arm until the proportion of salt and water in both arms is the same.
    • This is due to osmotic pressure which dilutes a region with a higher concentration of solute (in this case, the salt).
    • It would need to create some external pressure that will counter the osmotic pressure and suck all the water from the salty arm into the freshwater arm while leaving the salt behind. This is the essential principle of an RO system.
    • To create external pressure, RO relies on a pump and electric motors. It uses “activated carbon” components, such as charcoal and carbon black that can filter out contaminants as well as organic substances such as bacteria.
    • It all depends on the filtering material and the number of filters that incoming tap water must pass through.
    • However, it is possible to deploy a wide array of membranes and multiple stages of filters to filter a wide variety of solutes — arsenic, fluoride, hexavalent chromium, nitrates, bacteria — that come mixed in water.

    What is the problem with RO?

    • In making tap water pass through multiple stages of cleaning, RO systems end up wasting a lot of water.
    • Anywhere between three-five times more water is wasted by them than they produce and given the challenges that cities and government face in providing potable water.
    • It is as part of this legal dispute, which began in March 2019 that led the Environment Ministry to move to regulate RO systems.
    • Another concern with RO is that it filters out calcium, zinc, magnesium, which are essential salts needed by the body; drinking such water over time could be harmful.
    • However, many manufacturers claim to overcome this challenge by “post-treatment”.
    • This increases costs and reduces the incentive for public-funded water distribution systems to supply clean water to the vast majority of the country who can ill-afford such systems.
    • The average RO system only aims to reduce Total Dissolved Solids, ensure water is odourless and has a pH from 6.5-8.5.
    • The National Institute of Virology (NIV) claimed that most filtration methods did not eliminate Hepatitis E virus. A combination of filtration systems can eliminate most contaminants.

    How is the quality of piped water in the country?

    • Under the Jal Jeevan Mission, the Prime Minister has committed to provide tap water to the entire country by 2024. However, studies show that the existing quality of piped water is deficient in much of India.
    • Last year, the Department of Consumer Affairs undertook a study through the Bureau of Indian Standards (BIS) on the quality of piped drinking water being supplied in the country.
    • Most samples drawn from various places did not comply with the BIS’s requirements.

  • Genome India Project

     

    The Union Govt. has given clearance to an ambitious gene-mapping project, estimated to be worth Rs 238 crore.

    Genome India Project

    • The Genome India Project has been described by those involved as the “first scratching of the surface of the vast genetic diversity of India”.
    • It involves over 20 scientists from institutions including the Indian Institute of Science (IISc) in Bengaluru and a few IITs.
    • One of the most comprehensive genome mapping projects in the world is the Human Genome Project (HGP), which began in 1990 and reached completion in 2003.
    • The international project, which was coordinated by the National Institutes of Health and the US Department of Energy, was undertaken with the aim of sequencing the human genome and identifying the genes that contain it.
    • The project was able to identify the locations of many human genes and provide information about their structure and organisation.

    What is Genome Mapping?

    • According to the Human Genome Project, there are estimated to be over 20,500 human genes.
    • Genome refers to an organism’s complete set of DNA, which includes all its genes and mapping these genes simply means finding out the location of these genes in a chromosome.
    • In humans, each cell consists of 23 pairs of chromosomes for a total of 46 chromosomes, which means that for 23 pairs of chromosomes in each cell, there are roughly 20,500 genes located on them.
    • Some of the genes are lined up in a row on each chromosome, while others are lined up quite close to one another and this arrangement might affect the way they are inherited.
    • For example, if the genes are placed sufficiently close together, there is a probability that they get inherited as a pair.
    • Genome mapping, therefore, essentially means figuring out the location of a specific gene on a particular region of the chromosome and also determining the location of and relative distances between other genes on that chromosome.

    Applications

    • Significantly, genome mapping enables scientists to gather evidence if a disease transmitted from the parent to the child is linked to one or more genes.
    • Furthermore, mapping also helps in determining the particular chromosome which contains that gene and the location of that gene in the chromosome.
    • Genome maps have been used to find out genes that are responsible for relatively rare, single-gene inherited disorders such as cystic fibrosis and Duchene muscular dystrophy.
    • Genetic maps may also point out scientists to the genes that play a role in more common disorders and diseases such as asthma, cancer and heart disease among others.
    • Researchers from several international institutions mapped the handful of genes whose mutation causes several different kinds of cancers.

  • New rice variety: Muktoshri (IET 21845)

    Researchers have developed and commercialized a rice variety that is resistant to arsenic.

    Muktoshri

    • The new rice variety, Muktoshri — also called IET 21845 —, was developed jointly by the Rice Research Station at Chinsurah coming under West Bengal’s Agriculture Department and the National Botanical Research Institute, Lucknow.
    • A gazette notification for the commercial use of Muktoshri was made by West Bengal last year.
    • During our multilocational trials, it was found that this variety uptakes very less amount of arsenic from soil and water in comparison to other varieties of rice.
    • The rice is long and thin, and aromatic. Across the State, thousands of farmers have started cultivation, even in areas where arsenic in groundwater is not an issue, because of the aroma and the yield.

    Significance

    • West Bengal is among the States with the highest concentration of arsenic in groundwater, with as many as 83 blocks across seven districts having higher arsenic levels than permissible limits.
    • Several studies have shown that arsenic from groundwater and the soil can enter the food chain through paddy.
    • According to the WHO, long-term exposure to arsenic, mainly through drinking water and food, can lead to poisoning. Skin lesions and skin cancer are the most characteristic effects.

  • What is Fermentophone?

     

    Fermentation, the chemical breakdown of a substance by microorganisms such as bacteria or yeasts, results in some of the most delicious foods and beverages, including cheese, chocolate and wine.  Now, research has shown it can result in music, too.

    Fermentophone

    • The chemical processes of fermentation can be used to create spontaneous tunes.
    • Researchers has built multiple art exhibits called Fermentophone to showcase how fermentation can make music.
    • First, different fruits and veggies are placed in glass jars and fermented.
    • As the fermentation kicks off, the yeast — or bacteria — present in the food chows down on the foods’ sugars, which results in the release of carbon dioxide bubbles.
    • The release of these bubbles creates a tiny sound, which is picked up by underwater microphones.
    • A computer processes the sounds and, with the help of algorithms plugged in, electronic music is created.

  • Agartala-Akhaura Railway Link

     

    The landmark Agartala-Akhaura railway line to connect the northeastern region with Bangladesh is expected to be ready by the end of 2021.

    About Agartala-Akhaura Link

    • MoU for Indo-Bangla Railway connectivity project viz. Agartala-Akhaura new Broad Gauge line (15.06 Km) was signed on 16.02.2013 between India and Bangladesh.
    • The link will connect Gangasagar in Bangladesh to Nischintapur in India and from there to Agartala.
    • The Project was at standstill because of the sharp increase in the cost of land for the sections in India.
    • The Railway Ministry would bear the cost of laying the 5.46-km track on the Indian side and the cost of the 10.6-km track on the Bangladesh side was being borne by the Ministry of External Affairs.

  • The high cost of raising trade walls

    Context

    India’s international trade posture appeared to turn protectionist in the past week, with two indicators the government sent out.

    What were the two indicators?

    • The first-Signal sent out in the Budget: The first indicator, which played out live on television was contained in the Union Budget.
      • Laying out the Budget for the year, the finance minister made several references to the problems with free trade and preferential trade agreements (FTAs and PTAs).
      • Raise in tariffs, changes in the act: The Budget raised tariffs on the import of more than 50 items and changed the Customs Act provisions substantially to penalise imports suspected to originate from third countries.
    • The second- India declined negotiations: The other indicator was that India declined to attend a meeting of trade negotiators in Bali that was discussing the next step in the Association of Southeast Asian Nations (ASEAN)-led Regional Comprehensive Economic Partnership (RCEP) trade agreement.

    Issues with the Free Trade Agreement

    • What the FM told Parliament: It has been observed that imports under Free Trade Agreements (FTAs) are on the rise.
      • Undue claims of FTA benefits have posed a threat to the domestic industry.
      • Such imports require stringent checks, adding that the government will ensure that all FTAs are aligned to the conscious direction of our policy.
    • What could be the consequences of the Govt. policy?
      • Discouragement to imports: While the Govt. motive may be to protect Indian markets from dumping-primarily by Chinese goods-
      • The consequence of the changes will be to put Indian importers on notice and discourage imports in general.
      • Even as the government reserves the right to modify or cancel preferential tariffs and ban the import or export of any goods that it deems fit.

    The rise in the trade deficit and decision to walk out of FTA

    • The trade deficit with FTA partners: The government’s problem with FTAs was a key theme in its decision to walk out of the RCEP negotiations (of 16 countries) the rise in trade deficits with FTA partners.
    • Review of all agreements: The government says it will now review all those agreements and wants to “correct asymmetry” in negotiations with new partners. The agreement that would be reviewed includes-
      • TAs signed with the 10-nation ASEAN grouping (FTA).
      • Japan (Comprehensive Economic Partnership Agreement, or CEPA).
      • And South Korea (CEPA).

    Why it would not be easy to negotiate bilateral treaties

    • The bilateral agreement would not be a priority for other countries: If India makes a complete break with RCEP, negotiating the bilateral trade agreements (TAs) will not be a priority for the other countries until RCEP is done.
      • The process of legal scrubbing is likely to take most of the year, and any talks with India will probably only follow that.
      • Difficulty in getting better deal: It is also hard to see any of them being able to offer India a better deal bilaterally once they are bound into the multilateral RCEP agreement.

    India’s pending talks on bilateral treaties

    • Negotiations of CECA with Australia: The case of the Comprehensive Economic Cooperation Agreement (CECA) being negotiated with Australia, will be a difficult task, not the least due to its history.
      • India and Australia began CECA talks in 2011.
      • However, talks hit a dead-end in September 2015. With the focus on RCEP, no progress has been made since then.
    • Negotiations of FTA with the UK: A similar scenario awaits the announcement of the India-United Kingdom FTA talks.
      • It is unlikely that the U.K. will actually be able to talk until next year after terms for the K.’s full withdrawal from the European Union (EU) are completed.
    • Negotiation of BTIA with the EU: Bilateral Trade and Investment Agreement (BTIA) negotiation are also unlikely to make headway until the UK’s complete withdrawal from the EU.
      • Both sides will have to decide how to revive from where they left off in 2013.
      • Why the negotiations are pending? Making the negotiations harder is the government’s decision to scrap all bilateral investment treaties with 57 countries including EU nations, and bringing in a new Bilateral Investment treaty (BIT) model in 2015.
      • Only Kyrgyzstan, Belarus and most recently Brazil have agreed to sign a new investment treaty based on that model.
    • The US-India trade issue: Finally, there is the much-anticipated resolution of U.S.-India trade issues ahead of the visit of U.S. President.
      • The talks in that visit could also include talks on an FTA.
      • At present, there have only been some non-paper talks on the issue.
      • And given that the U.S. has expressed deep misgivings about India’s BIT model, these talks will also take several years to come to fruition.

    Why India should rethink its stand on FTA

    • First-Prospect of no dispute settlement mechanism: The decline of multilateralism, accelerated by the retrenchment of the U.S. and China’s intransigence have all meant the World Trade Organization (WTO) has lost steam as a world arbiter.
      • This leaves states that are not part of arrangements without a safety net on dispute settlement mechanisms.
    • The second-trade deficit of other countries with India: The government has invoked the massive $57-billion trade deficit with China to explain protectionist measures, but it forgets its own trade surpluses with smaller economies.
      • Particularly in the neighbourhood, where Indian exports form more than 80% of total trade with Nepal, Bangladesh, Bhutan and Sri Lanka, respectively.
    • Third- The rise of regional agreements: It is clear that most of the world is now divided into regional FTAs, for example-
      • The North American Free Trade Agreement (NAFTA) for North America.
      • The Southern Common Market (MERCOSUR for its Spanish initials) for South America.
      • The EU, the Eurasian Economic Union (Russia and neighbours).
      • The African Continental Free Trade Agreement (AfCFTA).
      • The Gulf Cooperation Council (GCC) FTA in West Asia.
      • And now the biggest of them all, RCEP, which minus India, represents a third of the world’s population and just under a third of its GDP.
    • Fourth- Finally, the trend across the world does not favour trade in services the way it does in goods.
      • India’s strength in the services sector and its demand for more mobility for Indian employees, is thus becoming another sticky point in FTA negotiations.

    Conclusion

    India’s demographic might is certainly attractive for international investors, but only if that vast market has purchasing power and is not riven by social unrest and instability. India’s demographic might is certainly attractive for international investors, but only if that vast market has purchasing power and is not riven by social unrest and instability.

     

  • RBI’s growth push

    Context

    February signalled a new dynamic-Monetary policy is no longer driven by MPC.

    What changed after December MPC review

    • Pause in the rate cut by MPC: In its December policy, the Reserve Bank of India suddenly paused on cutting rates, putting the ball in the government’s court to support growth.
    • Conservative union budget: With last week’s Union Budget belying expectations of short-term growth boosters, the ball was back in the RBI’s court.
      • The Budget opted for fiscal conservativism over activism, consolidating the fiscal deficit to 3.5 per cent of GDP in 2020-21 from 3.8 per cent in 2019-20– bypassing any ambitious expenditure boost or significant tax cuts.
    • Rise in the inflation in Dec-Feb interval: Meanwhile, the policy arithmetic turned more complicated for the MPC.
      • At the time of the December policy meeting, CPI inflation was trending close to 5 per cent (the October reading was 4.6 per cent).
      • Since then a combination of supply-side shocks, which led for example to unseasonally high vegetable and protein prices, buoyed inflation to over 7 per cent, nearly 140 basis points above the RBI’s upper bound comfort zone of 6 per cent.
      • As a primarily inflation-targeting central bank, this effectively stopped the MPC from easing further. 

    Key takeaways from February MPC meeting

    • The February policy meeting removed two key uncertainties in the current policy scenario.
    • First, the RBI is still very concerned about growth and the burgeoning negative gap between the current growth trajectory and potential growth.
    • Second, monetary policy is no longer strictly limited to the MPC’s decision-making.
      • Because of the risk of supply-side shocks hitting inflation, it is understandable that the RBI has summarised its outlook on inflation as “highly uncertain”.
      • Hence, of the policy measures that the RBI has at its disposal, the MPC’s “conventional” arrow of rate cuts was left unused.
      • Instead, the RBI has opted for macroprudential intervention, unveiling two other “unconventional” policy arrows.

    RBI opting for macroprudential intervention in two ways

    • Policy transmission via LTRO-the first arrow: The primary macro challenge has been transmission via the credit channel — banks are not lowering their deposit rates.
      • Why? This is due to competition from the small savings rate and to protect saver, and in turn are keeping lending rates high.
      • How it impacts economy: Sectors considered higher risk (real estate, MSMEs) find themselves credit-starved.
      • In a move that seems inspired by the European Central Bank’s quantitative easing in 2011, the RBI’s announcement on long term repo operations (LTROs) has been aimed at promising banks longer-duration liquidity at the repo rate, which is cheaper relative to their current deposit rates.
      • The aim is to nudge them to kick-start the credit cycle.
      • The exemption of cash reserve ratio for incremental loans to MSMEs and the retail sector is also aimed at lowering costs for banks, which ideally should be passed onto these sectors.
    • Managing the stress in financial system-the second arrow: It is aimed at managing the looming stress in the financial system from bad loans, especially as deleveraging becomes more difficult during an economic slowdown.
      • Extension to restructuring durations: The extension of the restructuring scheme on MSME loans and projects in the commercial real estate sector is aimed at releasing capital for banks in the short term.
      • Though banks will ultimately need to recognise loans that are non-performing.
      • Easing guidelines on the classification of loans: Similarly, easing guidelines on the classification of loans for projects in the commercial real estate sector that have been delayed is essentially designed to provide some breathing space to banks.

    What does this mean for the macro outlook?

    • Recovery in demand is a must: The RBI’s new macroprudential measures, its “unconventional” policy arrows, while well-meaning, are ultimately supply-side measures.
      • For the RBI to attain its goals, be it on asset quality or transmission, there eventually needs to be a recovery in demand conditions.
      • ECB’s LTRO experience: To be fair, even the ECB’s LTRO programme has had mixed success — a central bank can flood the market with liquidity, but the ultimate onus on releasing it to the real economy rests with banks.
      • So far, excess liquidity has not benefitted segments considered high risk (real estate developers, MSMEs).

    Conclusion

    The ECB introduced the LTRO programme when growth was weak and the euro area was struggling with a severe sovereign debt crisis. With the RBI embarking on something similar, albeit on a smaller scale, the niggling concern is if there is more financial instability lurking around the corner but not yet evident in the current data.