Note4Students
From UPSC perspective, the following things are important :
Prelims level: Micronesia
Mains level: Not Much
The Federated States of Micronesia is one of the latest places on Earth to experience an outbreak of Covid-19, after two and a half years of successfully protecting itself from the virus.
Where is Micronesia?
- FSM is located in the Western Pacific, in the Micronesia sub-region of Oceania.
- It consists of four island states, Yap, Chuuk, Kosrae and Pohnpei (where the capital Palikir is located), all in the Caroline Islands.
- Also known as the Carolines, it is a scattered archipelago of small islands that are divided between Micronesia and the Republic of Palau.
- FSM is composed of 607 islands and islets with a total land area of 702 square km.
Its geography
- While this area is rather small, the islands stretch across an estimated 2,900 sq. km of sea, giving the nation the 14th largest Exclusive Economic Zone (EEZ) in the world.
- EEZs grant countries special right over marine resources up to 370 km from their coasts.
- The Federated States of Micronesia shares its sea borders with other small island nations and territories in the Micronesia region like Guam, the Republic of Marshall Islands, Palau, Kiribati, and the Mariana Islands.
- Its larger neighbouring states — separated by large swathes of the Pacific Ocean — including the Philippines in the west, Hawaii in the east, Papua New Guinea and Australia to the south, and Japan to the north.
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From UPSC perspective, the following things are important :
Prelims level: Tetrapods
Mains level: Not Much
In Mumbai, the unusual vibrations (like earthquakes), coinciding with high-tide times, were the result of the relocation of tetrapods as part of the ongoing Coastal Road Project (MCRP).
What are tetrapods?
- Tetra pod in Greek means four-legged.
- These are four-legged concrete structures that are placed along coastlines to prevent erosion and water damage.
- Tetrapods were first used in France in the late 1940s to protect the shore from the sea.
- They are typically placed together to form an interlocking but porous barrier that dissipates the power of waves and currents.
- These are large structures, sometimes weighing up to 10 tonnes, and interlocked tetra pods act as a barrier that remains stable against the rocks when buffeted by waves.
- Tetrapods, each weighing about 2 tonnes, were placed along Marine Drive in the late 1990s to break and dissipate waves and maintain the reclaimed shoreline in South Mumbai.
How do we know that the removal of the tetrapods was responsible?
- The BMC has provided vibration monitoring instruments at the site to study the impact of the phenomenon.
- While the corporation has not officially stated that the removal of the tetrapods caused the vibrations, it has agreed to re-install the structures.
- They would be put back over the next two-three days during low tide.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Dollar Index
Mains level: Paper 3- Depreciation of rupee
Context
Rupee hits the all-time low of 80 against US dollar recently. The enormity of the challenges can be gauged by these numbers: Since the beginning of war, foreign exchange reserves have declined by $51-billion, total portfolio outflows have been $23 billion, and the current account deficit is now certain to breach $100 billion.
Is depreciation of rupee sign of weak domestic fundamentals?
- In case of strong domestic fundamentals: In an ideal world, if domestic economic fundamentals are strong, the depreciation of the rupee should be accompanied by an appreciation of the Dollar Index (DXY) along similar lines.
- In case of weak fundamentals: Between January 2008 and February 2012 and October 2012 and May 2014, on a cumulative basis, the rupee had lost a whopping 48.7 per cent against the USD, even as the DXY had appreciated by a modest 5.2 per cent.
- This indicates that much of the decline in rupee value then was purely because of weak domestic macro fundamentals.
- Current scenario: The rupee has depreciated by a modest 5.6 per cent since the Russian invasion of Ukraine, though the DXY has appreciated by 11.3 per cent.
- Thus, the recent decline in the rupee has been more because of the strengthening of the dollar and not because of weak fundamentals at home.
Reasons for the dominance of dollar
- In principle, Bretton Woods ensured that the dollar would be a “trust” currency.
- The US sits at the centre of an international financial system where its assets have been in high demand.
- For instance, frantically growing Asian economies whose penchant for US government securities have also made them susceptible to sudden changes in expectations and economic sentiments sweeping the globe.
- The recent disturbances in the global supply chain and volatile commodity prices have only made the job more difficult.
What explains the recent strengthening of dollar
- High interest rates in the US: The recent gains in the dollar have come along expectations of aggressive monetary policy by the US Fed compared to other major jurisdictions, particularly, the Eurozone and Japan.
- Markets expect the Fed to continue on its path of interest rate normalisation with multiple rate hikes.
- Low interest rates in the Eurozone: The European Central Bank (ECB) appears behind the curve, its communication with markets is as uncertain as the political and climatic hot winds criss-crossing the Eurozone.
- Low interest rates in Japan: The Bank of Japan has taken a completely divergent path, continuing its accommodative monetary policy despite the hammering of the yen.
- This has augured well for the dollar, obscuring the question of how the Fed failed to anticipate the surge in inflation.
Measures by the RBI and the government
- As currencies reel under the weight of an unrelenting dollar, questions on the rupee’s performance and future are a natural corollary, more so in the wake of hitting the psychological mark of Rs 80/dollar.
- In 2013, when the rupee was in a free fall, stability was finally restored but it came at a cost — a debt buildup of $34.5 FCNR(B).
- This time, the RBI and government have taken a long-term view of bolstering dollar inflows, which is perfectly justified.
- The RBI, in close tandem with the government, has been supportive of the rupee, and is also now embarking on an unprecedented journey to internationalise the currency.
Conclusion
A direct casualty of the Ukraine war is that the Indian rupee has now depreciated by 5.6 per cent against the dollar. In terms of relative performance, however, the rupee has done quite well compared to most of its counterparts.
Back2Basics: US Dollar Index
- The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to a basket of foreign currencies.
- The USDX was established by the U.S. Federal Reserve in 1973 after the dissolution of the Bretton Woods Agreement.
- It is now maintained by ICE Data Indices, a subsidiary of the Intercontinental Exchange (ICE).
- The six currencies included in the USDX are often referred to as America’s most significant trading partners, but the index has only been updated once: in 1999 when the euro replaced the German mark, French franc, Italian lira, Dutch guilder, and Belgian franc.
- Consequently, the index does not accurately reflect present-day U.S. trade.
Bretton Woods Agreement and Systems
- The Bretton Woods Agreement was negotiated in July 1944 by delegates from 44 countries at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire.
- Thus, the name “Bretton Woods Agreement.
- Under the Bretton Woods System, gold was the basis for the U.S. dollar and other currencies were pegged to the U.S. dollar’s value.
- The Bretton Woods System effectively came to an end in the early 1970s when President Richard M. Nixon announced that the U.S. would no longer exchange gold for U.S. currency.
FCNR(B)
- An FCNR ( Foreign Currency Non-resident) account is a type of term deposit that NRIs can hold in India in a foreign currency.
- FCNR (A) was introduced in 1975 to encourage NRI deposits.
- The Reserve Bank of India (RBI) guaranteed the exchange rate prevalent at the time of a deposit to eliminate risk to depositors.
- In 1993, the apex bank introduced FCNR (B), without exchange rate guarantee, to replace FCNR (A).
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Transition to renewable
Context
As the fallout of Russia’s invasion of Ukraine ripples across the globe, the response of some nations to the growing energy crisis has been to double down on fossil fuels, pouring billions more dollars into the coal, oil and gas that are deepening the climate emergency.
Need for transition to renewable energy
- Fossil fuels are the cause of the climate crisis.
- Renewable energy can limit climate disruption and boost energy security. Renewables are the peace plan of the 21st century.
- But the battle for a rapid and just energy transition is not being fought on a level field.
- Investors are still backing fossil fuels, and governments still hand out billions in subsidies for coal, oil and gas — about $11 million every minute.
- The only true path to energy security, stable power prices, prosperity and a livable planet lies in abandoning polluting fossil fuels and accelerating the renewables-based energy transition.
- We must reduce emissions by 45 per cent by 2030 and reach net-zero emissions by mid-century.
- But current national commitments will lead to an increase of almost 14 per cent this decade.
- Reducing cost: The cost of solar energy and batteries has plummeted 85 per cent over the past decade.
- The cost of wind power fell by 55 per cent. And investment in renewables creates three times more jobs than fossil fuels.
- Nature-based solutions: Of course, renewables are not the only answer to the climate crisis.
- Nature-based solutions, such as reversing deforestation and land degradation, are essential.
- So too are efforts to promote energy efficiency.
- But a rapid renewable energy transition must be our ambition.
Five point plan to boost renewable
- 1] Renewable energy technology as global good: We must make renewable energy technology a global public good, including removing intellectual property barriers to technology transfer.
- 2] Improve global access: We must improve global access to supply chains for renewable energy technologies, components and raw materials.
- In 2020, the world installed five gigawatts of battery storage.
- We need 600 gigawatts of storage capacity by 2030.
- Shipping bottlenecks and supply-chain constraints, as well as higher costs for lithium and other battery metals, are hurting the deployment of such technologies and materials.
- 3] Fast-tracking : We must cut the red tape that holds up solar and wind projects.
- We need fast-track approvals and more effort to modernise electricity grids.
- 4] Shifting energy subsidies: The world must shift energy subsidies from fossil fuels to protect vulnerable people from energy shocks and invest in a just transition to a sustainable future.
- Increase investment in renewables: We need to triple investments in renewables.
- This includes multilateral development banks and development finance institutions, as well as commercial banks.
Conclusion
When energy prices rise, so do the costs of food and all the goods we rely on. So, let us all agree that a rapid renewables revolution is necessary and stop fiddling while our future burns.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Anti-defection law
Mains level: Paper 2- Inner-party democracy
Context
The ousting of Boris Johnson as leader of the British Conservative Party is the latest in a series of coups periodically mounted by the party’s MPs. What is instructive about this whole process, however, is how much power ordinary MPs have over the Prime Minister.
Lack of inner-party democracy in India
- A Prime Minister in UK has to be able to maintain the confidence of his own backbencher MPs at all times or risk political oblivion.
- If there is a sense that the leader is no longer acceptable to the country, then a well-oiled machine springs into action to protect the party’s electoral gains by providing fresh leadership.
- In India, PM exercises absolute authority over party MPs, whose ability to even diverge slightly from the official government line on routine policy matters is almost non-existent.
- Impact of anti-defection law: The Prime Minister’s power is strengthened by India’s unique anti-defection set-up, where recalcitrant MPs who do not manage to carry two-thirds of their colleagues with them can always be disqualified.
- Lack of autonomy: In effect, MPs do not enjoy any autonomy at all to question and challenge their party leadership.
- Prime Ministers or Chief Ministers at the State level are chosen by party high command, and then submitted to MPs/MLAs to be rubber stamped.
Way forward
- Strengthening local constituency party: It is time for India to seriously consider empowering its elected representatives, to ensure accountability for party leadership.
- MPs in the U.K. are able to act boldly because they do not owe their nomination to the party leader, but are selected by the local constituency party.
- In India, however, it is the party leadership that decides candidates, with an informal consultation with the local party.
- Amending anti-defection law: Neither do MPs in the U.K. stand a risk of disqualification if they speak out against the leader, a threat perpetuated in India through the anti-defection law.
- These factors are the biggest stumbling blocks towards ensuring inner-party democracy in India.
- System on the lines of 1922 Committee in UK: In U.K. where individual Conservative MPs write to the 1922 Committee (which comprises backbench MPs, and looks out for their interests) expressing that they have “no confidence” in their leader.
- If a numerical or percentage threshold (15% of the party’s MPs in the U.K.) is breached, an automatic leadership vote is triggered, with the party leader forced to seek a fresh mandate from the parliamentary party.
- Of course, the only way such a model would work is if an exception is made to the anti-defection law.
Conclusion
Inner-party democracy is a essential for keeping the spirit of democracy alive. Westminster model dictates that control over candidates must shift from central party leaders to local party members.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: WMD Bill
Mains level: Read the attached story
External Affairs Minister S Jaishankar has introduced The Weapons of Mass Destruction (WMD) and their Delivery Systems (Prohibition of Unlawful Activities) Amendment Bill, 2022, which will amend the 2005 Act.
What is the WMD Bill?
- The Bill amends the WMD and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 which prohibits the unlawful manufacture, transport, or transfer of WMD (chemical, biological and nuclear weapons) and their means of delivery.
- It is popularly referred to as the WMD Act.
- The recent amendment extends the scope of banned activities to include financing of already prohibited activities.
- The WMD and their Delivery Systems (Prohibition of Unlawful Activities) Act came into being in July 2005.
India’s 2005 WMD Act defines-
- “Biological Weapons” as “microbial or other biological agents, or toxins…of types and in quantities that have no justification for prophylactic, protective or other peaceful purposes; and weapons, equipment or delivery systems specially designed to use such agents or toxins for hostile purposes or in armed conflict”; and
- “Chemical Weapons” as “toxic chemicals and their precursors” except where used for peaceful, protective, and certain specified military and law enforcement purposes; “munitions and devices specifically designed to cause death or other harm through the toxic properties of those toxic chemicals”; and any equipment specifically designed for use in connection with the employment of these munitions and devices.
What was the purpose of the original WMD Act?
- Its primary objective was to provide integrated and overarching legislation on prohibiting unlawful activities in relation to all three types of WMD, their delivery systems, and related materials, equipment, and technologies.
- It instituted penalties for contravention of these provisions such as imprisonment for a term not less than five years (extendable for life) as well as fines.
- The Act was passed to meet an international obligation enforced by the UN Security Council Resolution (UNSCR) 1540 of 2004.
What is the UNSCR 1540?
- In April 2004 the UN Security Council adopted resolution 1540 to address the growing threat of non-state actors gaining access to WMD material, equipment or technology to undertake acts of terrorism.
- In order to address this challenge to international peace and security, UNSCR 1540 established binding obligations on all UN member states under Chapter VII of the UN Charter.
- Nations were mandated to take and enforce effective measures against proliferation of WMD, their means of delivery and related materials to non-state actors.
- It was to punish the unlawful and unauthorised manufacture, acquisition, possession, development and transport of WMD became necessary.
UNSCR 1540 enforced three primary obligations upon nation states —
- To not provide any form of support to non-state actors seeking to acquire WMD, related materials, or their means of delivery;
-
To adopt and enforce laws criminalising the possession and acquisition of such items by non-state actors;
- To adopt and enforce domestic controls over relevant materials, in order to prevent their proliferation.
What has the Amendment added to the existing Act?
- The Amendment expands the scope to include prohibition of financing of any activity related to WMD and their delivery systems.
- To prevent such financing, the Central government shall have the power to freeze, seize or attach funds, financial assets, or economic resources of suspected individuals (whether owned, held, or controlled directly or indirectly).
- It also prohibits persons from making finances or related services available for other persons indulging in such activity.
Why was this Amendment necessary?
- India echoes these developments for having made the Amendment necessary.
- Two specific gaps are being addressed-
- As the relevant organisations at the international level, such as the Financial Action Task Force have expanded the scope of targeted financial sanctions and India’s own legislation has been harmonised to align with international benchmarks.
- With advancements in technologies, new kinds of threats have emerged that were not sufficiently catered for in the existing legislation.
- These notably include developments in the field of drones or unauthorised work in biomedical labs that could maliciously be used for terrorist activity.
- Therefore, the Amendment keeps pace with evolving threats.
What more should India do?
- India’s responsible behaviour and actions on non-proliferation are well recognised.
- It has a strong statutory national export control system and is committed to preventing proliferation of WMD.
- This includes transit and trans-shipment controls, retransfer control, technology transfer controls, brokering controls and end-use based controls.
- Every time India takes additional steps to fulfil new obligations, it must showcase its legislative, regulatory and enforcement frameworks to the international community.
- It is also necessary that India keeps WMD security in international focus.
Setting up a precedence
- There is no room for complacency.
- Even countries which do not have WMD technology have to be sensitised to their role in the control framework to prevent weak links in the global control system.
- India can offer help to other countries on developing national legislation, institutions and regulatory framework through the IAEA (International Atomic Energy Agency) or on bilateral basis.
Could the Amendment become troublesome to people on account of mistaken identity?
- In the discussion on the Bill in Parliament, some members expressed concern on whether the new legislation could make existing business entities or people in the specific sector susceptible to a case of mistaken identity.
- The External Affairs Minister, however, assured the House that such chances were minimal since identification of concerned individuals/entities would be based on a long list of specifics.
What is the international significance of these legislation?
- Preventing acts of terrorism that involve WMD or their delivery systems requires building a network of national and international measures in which all nation states are equally invested.
- Such actions are necessary to strengthen global enforcement of standards relating to the export of sensitive items and to prohibit even the financing of such activities.
Way forward
- Sharing of best practices on legislations and their implementation can enable harmonization of global WMD controls.
- India initially had reservations on enacting laws mandated by the UNSCR.
- This is not seen by India as an appropriate body for making such a demand.
- However, given the danger of WMD terrorism that India faces in view of the difficult neighbourhood that it inhabits, the country supported the Resolution and has fulfilled its requirements.
Conclusion
- It is in India’s interest to facilitate highest controls at the international level and adopt them at the domestic level.
- Having now updated its own legislation, India can demand the same of others, especially from those in its neighbourhood that have a history of proliferation and of supporting terrorist organisations.
Back2Basics:
Nuclear Security Contact Group
- The NSCG was established in 2016.
- The NSCG or “Contact Group” has been established with the aim of facilitating cooperation and sustaining engagement on nuclear security after the conclusion of the Nuclear Security Summit process.
- The Contact Group is tasked with:
- Convening annually on the margins of the General Conference of the International Atomic Energy Agency (IAEA), and, as may be useful, in connection with other related meetings
- Discussing a broad range of nuclear security-related issues, including identifying emerging trends that may require more focused attention
Nuclear Suppliers Group
- NSG is a group of nuclear supplier countries that seeks to contribute to the non-proliferation of nuclear weapons through the implementation of guidelines for nuclear exports and nuclear-related exports.
- The NSG was set up as a response to India’s nuclear tests conducted in 1974.
- The aim of the NSG is to ensure that nuclear trade for peaceful purposes does not contribute to the proliferation of nuclear weapons.
Comprehensive Nuclear-Test-Ban Treaty
- CTBT was negotiated at the Conference on Disarmament in Geneva and adopted by the United Nations General Assembly in 1996.
- The Treaty intends to ban all nuclear explosions – everywhere, by everyone.
- It was opened for signature in 1996 and since then 182 countries have signed the Treaty, most recently Ghana has ratified the treaty in 2011.
Fissile material cut-off treaty
- FMCT is a proposed international agreement that would prohibit the production of the two main components of nuclear weapons: highly-enriched uranium (HEU) and plutonium.
- Discussions on this subject have taken place at the UN Conference on Disarmament (CD), a body of 65 member nations established as the sole multilateral negotiating forum on disarmament.
- The CD operates by consensus and is often stagnant, impeding progress on an FMCT.
- Those nations that joined the nuclear NPT as non-weapon states are already prohibited from producing or acquiring fissile material for weapons.
- An FMCT would provide new restrictions for the five recognized nuclear weapon states (NWS—United States, Russia, United Kingdom, France, and China), and for the four nations that are not NPT members (Israel, India, Pakistan, and North Korea).
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From UPSC perspective, the following things are important :
Prelims level: NAMASTE Scheme
Mains level: Sanitation workers and their upliftment
The Government has formulated a National Action Plan for Mechanized Sanitation Ecosystem- NAMASTE scheme for cleaning of sewers and septic tank.
NAMASTE Scheme
- The scheme is a joint venture of Department of Drinking Water and Sanitation, Ministry of Social Justice and Empowerment and the Ministry of Housing and Urban Affairs.
- It aims to achieve outcomes like:
- Zero fatalities in sanitation work in India
- No sanitation workers come in direct contact with human faecal matter
- All Sewer and Septic tank sanitation workers have access to alternative livelihoods
- The Ministry has shortlisted type of machineries and core equipments required for maintenance works, safety gear for Safai Mitras.
Why such move?
Ans. Prevalence of manual scavenging in India
What is Manual Scavenging?
- Manual scavenging is the practice of removing human excreta by hand from sewers or septic tanks.
- India banned the practice under the Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013 (PEMSR).
- The Act bans the use of any individual for manually cleaning, carrying, disposing of or otherwise handling in any manner, human excreta till its disposal.
- In 2013, the definition of manual scavengers was also broadened to include people employed to clean septic tanks, ditches, or railway tracks.
- The Act recognizes manual scavenging as a “dehumanizing practice,” and cites a need to “correct the historical injustice and indignity suffered by the manual scavengers.”
Why is it still prevalent in India?
- Low awareness: Manual scavenging is mostly done by the marginalized section of the society and they are generally not aware about their rights.
- Enforcement issues: The lack of enforcement of the Act and exploitation of unskilled labourers are the reasons why the practice is still prevalent in India.
- High cost of automated: The Mumbai civic body charges anywhere between Rs 20,000 and Rs 30,000 to clean septic tanks.
- Cheaper availability: The unskilled labourers, meanwhile, are much cheaper to hire and contractors illegally employ them at a daily wage of Rs 300-500.
- Caste dynamics: Caste hierarchy still exists and it reinforces the caste’s relation with occupation. Almost all the manual scavengers belong to lower castes.
Various policy initiatives
- Prohibition of Employment as Manual Scavengers and their Rehabilitation (Amendment) Bill, 2020: It proposes to completely mechanise sewer cleaning, introduce ways for ‘on-site’ protection and provide compensation to manual scavengers in case of sewer deaths.
- Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013: Superseding the 1993 Act, the 2013 Act goes beyond prohibitions on dry latrines, and outlaws all manual excrement cleaning of insanitary latrines, open drains, or pits.
- Rashtriya Garima Abhiyan: It started national wide march “Maila Mukti Yatra” for total eradication of manual scavenging from 30th November 2012 from Bhopal.
- Prevention of Atrocities Act: In 1989, the Prevention of Atrocities Act became an integrated guard for sanitation workers since majority of the manual scavengers belonged to the Scheduled Caste.
- Compensation: As per the Prohibition of Employment of Manual Scavengers and their Rehabilitation (PEMSR) Act, 2013 and the Supreme Court’s decision in the Safai Karamchari Andolan vs Union of India case, a compensation of Rs 10 lakh is awarded to the victims family.
Way forward
- Regular surveys and social audits must be conducted against the involvement of manual scavengers by public and local authorities.
- There must be proper identification and capacity building of manual scavengers for alternate sources of livelihood.
- Creating awareness about the legal protection of manual scavengers is necessary.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Taper Tantrum, Rupee depreciation impacts
Mains level: Read the attached story
The Indian rupee breached the psychologically significant exchange rate level of 80 to a US dollar in early trade.
Free fall of Indian Rupee
- Since the war in Ukraine began, and crude oil prices started going up, the rupee has steadily lost value against the dollar.
- There are growing concerns about how a weaker rupee affects the broader economy.
- Certainly it presents challenges to policymakers, especially since India is already grappling with high inflation and weak growth.
What is the rupee exchange rate?
- The rupee’s exchange rate vis-à-vis the dollar is essentially the number of rupees one needs to buy $1.
- This is an important metric to buy not just US goods but also other goods and services (say crude oil) trade in which happens in US dollars.
Benefits of Rupees fall
- Broadly speaking, when the rupee depreciates, importing goods and service becomes costlier.
- But if one is trying to export goods and services to other countries, especially to the US, India’s products become more competitive.
- Depreciation makes these products cheaper for foreign buyers.
How bad is it for the rupee?
- If the rupee depreciates at a rate faster than the long-term average, it goes above the dotted line, and vice versa.
- In the last couple of years, the rupee has been more resilient than the long-term trend.
- The current fall has brought about a correction.
Rupee’s exchange rate against the dollar
- Another thing to note is that, at least as of now, the rupee is still more resilient (against the dollar) than it was in some of the previous crises such as the Global Financial Crisis of 2008 and the Taper Tantrum of 2013.
- Moreover, the US dollar is just one of the currencies Indians need to trade.
- If one looks at a whole basket of currencies, then data suggests the rupee has become stronger (or appreciated against that basket).
- In other words, while the US dollar has become stronger against all other major currencies including the rupee, the rupee, in turn, has become stronger than many other currencies such as the euro.
Is it a cause of worry?
- It is important to remember that it is more of a story of the dollar strengthening than the rupee weakening.
- This suggests that as things stand, India is still not facing an external crisis.
- Take for instance the issue of external debt.
- Long-term data shows that India is in a relatively comfortable position.
Can we be comfortable with this free-fall?
- While India is fine as of now, trends suggest things are getting worse.
- For instance, forex reserves have fallen by over $50 billion between September 2021 and now.
- In these 10 months, the rupee’s exchange rate with the dollar has fallen 8.7%, from 73.6 to 80. For context, historically the rupee depreciates by about 3% to 3.5% in a year.
- What’s worse, many experts expect the rupee to weaken further in the coming 3-4 months and fall to as low as 82 to a dollar.
Why are the rupee-dollar exchange rate and forex reserves falling?
- To understand movements on these variables, one must understand India’s Balance of Payment (BoP)
- The BoP is essentially a ledger of all monetary transactions between Indians and foreigners. Here it is shown in US dollar terms.
- If a transaction leads to dollars coming into India, it is shown with a positive sign; if a transaction means dollars leaving India, it is shown with a minus sign.
How did BoP come to the picture?
- The BoP has two broad subheads (also called “accounts”) — current and capital — to slot different types of transactions.
- The current account is further divided into the trade account (for export and import of goods) and the invisibles account (for export and import of services).
- So if an Indian buys an American car, dollars will flow out of BoP, and it will be accounted for in the trade account within the current account.
- If an American invests in Indian stock markets, dollars will come into the BoP table and it will be accounted for under FPI within the capital account.
- The important thing about the BoP is that it always “balances”.
India’s vulnerability on the external debt front
- In 2021-22, India had a trade deficit of $189.5 billion.
- That is, the country imported more goods (such as crude oil) than it exported, and the net effect was negative.
- At the end of the year, the BoP was at a surplus of $47.5 billion — that is, the net effect of all transactions on current and capital accounts was that $47.5 billion came into India.
What may happen ahead?
Now, two things can happen from here:
(1) Huge BoP surplus would lead to the rupee appreciating
- This will bring about a change in people’s buying and investing preferences.
- For instance, India’s exports will become costlier and import cheaper. Over time, the trade deficit will alter (will reduce or turn into a surplus) to “balance” the BoP.
(2) RBI swoops in and removes all the surplus dollars
- RBI purchases dollars to increase its forex reserves.
- In 2021-22, for instance, India’s forex reserves went up by $47.5 billion.
- The RBI keeps monitoring the BoP every week and keeps intervening in such a manner which ensures that the rupee’s exchange rate does not fluctuate too much.
What will be the effect on the economy?
- Since a large proportion of India’s imports are dollar-denominated, these imports will get costlier.
- A good example is the crude oil import bill.
- Costlier imports, in turn, will widen the trade deficit as well as the current account deficit, which, in turn, will put pressure on the exchange rate.
- On the exports front, however, it is less straightforward.
- For one, in bilateral trade, the rupee has become stronger than many currencies.
Should policymakers prevent the fall?
- It is neither wise nor possible for the RBI to prevent the rupee from falling indefinitely.
- Defending the rupee will simply result in India exhausting its forex reserves over time because global investors have much bigger financial clout.
- Most analysts believe that the better strategy is to let the rupee depreciate and act as a natural shock absorber to the adverse terms of trade.
What should policymakers do?
- The RBI (which is in charge of monetary policy) should focus on containing inflation, as it is legally mandated to do.
- The government (which is in charge of the fiscal policy) should contain its borrowings.
- Higher borrowings (fiscal deficit) by the government eat up domestic savings and force the rest of the economic agents to borrow from abroad.
- Policymakers (both in the government and the RBI) have to choose what their priority is: containing inflation or being hung up on exchange rate and forex levels.
- If they choose to contain inflation (that is, by raising interest rates) then it will require sacrificing economic growth. So be prepared for that.
Conclusion
- We can conclude that the rupee’s exchange rate and forex reserves levels are two sides of the same coin.
Back2Basics: Taper Tantrum
- After the 2007-2009 global financial crisis and recession, the US Federal Reserve started a bond-buying program (known as quantitative easing) to infuse liquidity.
- With these funds, the investors started investing in global bonds and stocks.
- In 2013, the US Federal Reserve decided to reduce (taper) its quantum of a bond-buying program which led to a sudden sell-off in global bonds and stocks.
- As a result, many emerging market economies, that received large capital inflows, suffered currency depreciation and outflows of capital.
- This was called globally a ‘taper tantrum‘.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Citizenship of India
Mains level: Brain drain from India
Over 1.6 lakh Indians renounced their citizenship in 2021, highest in the past five years, according to information provided by the Ministry of Home Affairs (MHA).
Destination US
- Over 78,000 Indians acquired the US citizenship, the highest among all other countries.
- India does not allow dual citizenship (Pakistan does allow).
- As many as 362 Indians living in China also acquired Chinese citizenship.
Citizenship in India
- Citizenship is in the Union List under the Constitution and thus under the exclusive jurisdiction of Parliament.
- The Constitution does not define the term ‘citizen’ but gives, in Articles 5 to 11, details of various categories of persons who are entitled to citizenship.
- Unlike other provisions of the Constitution, which came into being on January 26, 1950, these articles were enforced on November 26, 1949 itself, when the Constitution was adopted.
Various provisions for Indian Citizenship
Article 5
- It provided for citizenship on the commencement of the Constitution.
- All those domiciled and born in India were given citizenship.
- Even those who were domiciled but not born in India, but either of whose parents was born in India, were considered citizens.
- Anyone who had been an ordinary resident for more than five years, too, was entitled to apply for citizenship.
Article 6
- Since Independence was preceded by Partition and migration, Article 6 laid down that anyone who migrated to India before July 19, 1949, would automatically become an Indian citizen if either of his parents or grandparents was born in India.
- But those who entered India after this date needed to register themselves.
Article 7
- Even those who had migrated to Pakistan after March 1, 1947 but subsequently returned on resettlement permits were included within the citizenship net.
- The law was more sympathetic to those who migrated from Pakistan and called them refugees than to those who, in a state of confusion, were stranded in Pakistan or went there but decided to return soon.
Article 8
- Any Person of Indian Origin residing outside India who, or either of whose parents or grandparents, was born in India could register himself or herself as an Indian citizen with Indian Diplomatic Mission.
Various Amendments for Citizenships
- According to Article 11, Parliament can go against the citizenship provisions of the Constitution.
- The Citizenship Act, 1955 was passed and has been amended four times — in 1986, 2003, 2005, and 2015.
- The Act empowers the government to determine the citizenship of persons in whose case it is in doubt.
- However, over the decades, Parliament has narrowed down the wider and universal principles of citizenship based on the fact of birth.
- Moreover, the Foreigners Act places a heavy burden on the individual to prove that he is not a foreigner.
(1) 1986 amendment
- The constitutional provision and the original Citizenship Act gave citizenship on the principle of jus soli to everyone born in India.
- However, the 1986 amendment to Section 3 was less inclusive as it added the condition that those who were born in India on or after January 26, 1950 but before July 1, 1987, shall be an Indian citizen.
- Those born after July 1, 1987 and before December 4, 2003, in addition to one’s own birth in India, can get citizenship only if either of his parents was an Indian citizen at the time of birth.
(2) 2003 amendment
- The then government made the above condition more stringent, keeping in view infiltration from Bangladesh.
- Now the law requires that for those born on or after December 4, 2004, in addition to the fact of their own birth, both parents should be Indian citizens or one parent must be Indian citizen and other should not be an illegal migrant.
- With these restrictive amendments, India has almost moved towards the narrow principle of jus sanguinis or blood relationship.
- This lay down that an illegal migrant cannot claim citizenship by naturalization or registration even if he has been a resident of India for seven years.
(3) Citizenship (Amendment) Act, 2019
- The amendment proposes to permit members of six communities — Hindus, Sikhs, Buddhists, Jains, Parsis and Christians from Pakistan, Bangladesh and Afghanistan — to continue to live in India if they entered India before December 14, 2014.
- It also reduces the requirement for citizenship from 11 years out of the preceding 14 years, to just 6 years.
- Two notifications also exempted these migrants from the Passport Act and Foreigner Act.
- A large number of organisations in Assam protested against this Bill as it may grant citizenship to Bangladeshi Hindu illegal migrants.
Losing of Indian Citizenship
- The Citizenship Act, 1955 also lays down the three modes by which an Indian citizen may lose his/her citizenship.
- It may happen in any of the three ways: renunciation, termination and deprivation.
(1) Renunciation
- An Indian Citizen of full age and capacity can renounce his Indian citizenship by making a declaration to that effect and having it registered.
- But if such a declaration is made during any war in which India is engaged, the registration shall be withheld until the Central Government otherwise directs.
- When a male person renounces his citizenship, every minor child of him ceases to be an Indian citizen.
- Such a child may, however, resume Indian citizenship if he makes a declaration to that effect within a year of his attaining full age, i.e. 18 years.
(2) Termination
- If a citizen of India voluntarily acquires the citizenship of another country, he shall cease to be a citizen of India.
- During the war period, this provision does not apply to a citizen of India, who acquires the citizenship of another country in which India may be engaged voluntarily.
(3) Deprivation
- Deprivation is a compulsory termination of citizenship of India.
- A citizen of India by naturalization, registration, domicile and residence, may be deprived of his citizenship by an order of the Central Government if it is satisfied that the Citizen has:
- Obtained the citizenship by means of fraud, false representation or concealment of any material fact
- Shown disloyalty to the Constitution of India
- Unlawfully traded or communicated with the enemy during a war
- Within five years after registration or neutralization, been imprisoned in any country for two years
- Ordinarily resident out of India for seven years continuously
Try this PYQ:
Q.With reference to India, consider the following statements:
- There is only ‘one citizenship and one domicile’.
- A citizen by birth only can become the Head of State.
- A foreigner once granted the citizenship cannot be deprived of it under any circumstances.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) 1 and 3 only
(d) 2 and 3 only
Post your answers here.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MICA, Stablecoins
Mains level: Read the attached story
The Markets in Crypto-Assets (MiCA) law of European Parliament is the first comprehensive regulation for cryptos, and some expect it to become a trendsetter for crypto regulation globally.
What is MiCA Legislation?
- The MiCA law seeks to address concerns like money-laundering, protection of consumers and investors, accountability of crypto firms, stablecoins and the environmental footprint of crypto mining.
- It would regulate the “wild west” of crypto assets and provide legal certainty for those issuing crypto assets, while ensuring high standards for investors and consumers.
- It also excludes non-fungible tokens, but the EU may make a horizontal legislation for NFTs in 18 months, after a separate assessment.
How will MiCA regulate stablecoins?
- The efficacy of stablecoins, which claim to be less volatile that other cryptos, came into question after the crash of some crypto-currencies.
- The MiCA would mandate that stablecoin issuers maintain minimum liquidity to provide for sudden large withdrawals by users, and the reserves must also be protected from insolvency.
- The European Banking Authority (EBA) has been brought in to supervise stablecoins, and the law asks stablecoin issuers to provide claims to investors free of charge.
- In addition, large coins which are used as a means of payment will be capped at €200 million worth of transactions per day.
How will the new law regulate money laundering?
- MiCA requires the EBA to maintain a public register of non-compliant crypto asset service providers (CASPs).
- Additional checks will be required, in line with the EU Anti-Money-Laundering (AML) framework.
How does it address green concerns?
- Under MiCA, crypto companies will be required to declare their environmental and climate footprint.
- The European Securities and Markets Authority will develop regulatory technical standards on methodologies, content and presentation of such information.
- The EC will also have to provide a report on the impact of crypto assets on environment.
- It would introduce mandatory minimum sustainability standards for mining mechanisms, especially the proof-of-work system which raises overall computing power.
Will it affect Indian regulations?
- India’s crypto regulations seem to have taken a back seat at the moment.
- Industry executives and experts say the government and industry are more concerned about taxation.
- India levied a 30% tax on income from transfer of cryptos from April, and added a 1% tax deduction at source from 1 July.
- This, along with the overall bear market, has depressed trading volumes, and revenues of crypto exchanges.
- Indian regulators are also expected to consider rules being developed in the US before taking concrete decisions.
Back2Basics: Stablecoins
- Stablecoins are cryptocurrencies where the price is designed to be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities (such as precious metals or industrial metals).
- Advantages of asset-backed cryptocurrencies are that coins are stabilized by assets that fluctuate outside of the cryptocurrency space, that is, the underlying asset is not correlated, reducing financial risk.
- Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape widespread price falls without exiting the market or taking refuge in asset backed stablecoins.
- Furthermore, such coins, assuming they are managed in good faith, and have a mechanism for redeeming the asset(s) backing them, are unlikely to drop below the value of the underlying physical asset, due to arbitrage.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Curtailing unparliamentary expressions
Context
The Lok Sabha secretariat recently released a booklet of unparliamentary words that will henceforth be banned and if used, will be expunged, it created an uproar among the opposing parties.
Historical Background
- In the early days of parliamentary functioning in England, members would challenge one another to a duel if they felt dishonoured by another member’s speech.
- It led to the Speaker of the House of Commons removing the offending words from the written proceedings.
- In 1873, the constitutional theorist Erskine May started recording words and expressions that the Speaker considered unparliamentary in an eponymous guide to parliamentary procedure.
- Later editions of the book laid down the principle of parliamentary language.
Who decides the nature of a word
- MPs have freedom of speech in Parliament.
- But the presiding officers of Parliament have the final authority on what gets recorded in the day’s proceedings.
- MPs can also draw attention to any unparliamentary words and urge the chair to delete them.
- Any reporting of the parliamentary discussion that includes the deleted portion is a breach of parliamentary privilege and invites the ire of the House.
- Deleted words are then added by the parliament secretariat to its compilation of unparliamentary expressions.
- Why context is important? In any language, the context in which an individual uses a word is critical.
- “Context” means how the word is said, the circumstances in which it is said and when it is said.
Issues with addition of unparliamentary words
- Effectiveness of measure: The first issues about the list is its effectiveness in maintaining decency in parliamentary debates.
- Impact on the debate: The second that that needs to be considered is the effectiveness of such a list help in promoting or stifling discussion.
- Role of technology: Technological advances have ensured that Parliament can no longer control how its proceedings are recorded and disseminated.
- As a result, even if Parliament edits its record, the unparliamentary expression will be available online.
- In such a scenario, a compilation of the words classified as unparliamentary will not deter an MP from using them.
Conclusion
Parliament is all about the cut and thrust of debate. And in a political discussion, a restriction of unparliamentary expression, without considering context, will unnecessarily stifle the voices of MPs.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Environmental Impact Assessment
Mains level: Paper 3- Climate change and its impact on India
Context
In the absence of COVID-19, climate change-induced disasters would have been India’s biggest red alert in recent years.
India’s vulnerabilities
- Temperatures over the Indian Ocean have risen by over 1°C since the 1950s, increasing extreme weather events.
- India is the fourth worst-hit in climate migration.
- Heat waves in India have claimed an estimated 17,000 lives since the 1970s.
- Labour losses from rising heat, by one estimate, could reach ₹1.6 lakh crore annually if global warming exceeds 2°C, with India among the hardest hit.
- Extreme heat waves hit swathes of India. Heatwaves are aggravated by deforestation and land degradation, which also exacerbate fires.
- Agriculture, being water-intensive, does not do well in heat wave-prone areas.
Way forward
- Two part approach: India needs a two-part approach:
- Adaptation: one, to adapt to climate impacts by building resilience against weather extremes, and
- Mitigation: to mitigate environmental destruction to prevent climate change from becoming more lethal.
- Climate resistant agriculture: Agricultural practices which are not water-intensive and to support afforestation that has a salutary effect on warming.
- Financial transfers can be targeted to help farmers plant trees and buy equipment — for example, for drip irrigation that reduces heavy water usage.
- Crop diversification: Climate-resilient agriculture calls for diversification — for example, the cultivation of multiple crops on the same farm.
- Climate-resilient agriculture calls for diversification — for example, the cultivation of multiple crops on the same farm
- Managing vulnerable regions in coastal zones: Floods and storms are worsened by vast sea ingress and coastline erosion in the low-lying areas in the south.
- It is vital to map flood-risk zones to manage vulnerable regions.
- Environment Impact Assessments must be mandatory for commercial projects.
- Design changes: Communities can build round-shaped houses, considering optimum aerodynamic orientation to reduce the strength of the winds.
- Roofs with multiple slopes can stand well in strong winds, and central shafts reduce wind pressure on the roof by sucking in air from outside.
- Moving away from fossil fuels: Adaptation alone will not slow climate damages if the warming of the sea level temperatures is not confronted.
- Leading emitters, including India, must move away from fossil fuels.
- Expanding and protecting forest cover: a big part of climate action lies in protecting and expanding forest coverage.
- India gains from being part of the Glasgow declaration on forest protection that 141 countries signed in 2021.
- Management of dams: Nearly 295 dams in India are more than 100 years old and need repairs.
- In stemming landslides in Uttarakhand, regulations must stop the building of dams on steep slopes and eco-fragile areas, as well as the dynamiting of hills, sand mining, and quarrying.
- Climate financing: India’s share in disaster management should be raised to 2.5% of GDP.
- Climate finance is most suited for large-scale global funding from the World Bank, the International Monetary Fund, and the Asian Development Bank.
- But smaller-scale financing can also be vital.
Conclusion
For public pressure to drive climate action, we need to consider climate catastrophes as largely man-made.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: I2U2
Mains level: Paper 2- Geopolitics in the Middle East
Context
The US President’s visit to Saudi Arabia and Israel highlights not only some new trends that are reshaping the region but also eternal truths about international politics that are lost in the din of public discourse about the Middle East.
What is the significance of the visit
1] The US is not abandoning the Middle East
- Contrary to the popular perception in the US, the region, and India, the US is not about to abandon the Middle East.
- Many in the US political class believed that given America’s oil independence from the Middle East no longer needed the region.
- American withdrawal from Afghanistan last year intensified these concerns and the region looked for alternative means to secure itself.
- But as in the Indo-Pacific and Europe, the Biden Administration has concluded that it can’t cede its regional primacy in the Middle East and is ready to reclaim its leadership.
- But as in the Indo-Pacific and Europe, the Biden Administration has concluded that it can’t cede its regional primacy in the Middle East and is ready to reclaim its leadership.
2] No direct involvement
- While the US will stay put in the Middle East, it is certainly changing the manner in which it acts.
- In the past, the US saw itself as the sole provider of regional security and was ready to send its troops frequently into the region.
- While the US does not want to be drawn directly into the region’s wars, it is determined to help its partners develop capabilities to secure themselves.
- Arab-Israel reconciliation: Efforts are also being taken to produce greater reconciliation among Arabs and Israel and create stronger networks within and beyond the region to strengthen deterrence against adversaries.
- The current effort to craft a Middle East Air Defence coalition is an example of this,
- The I2U2 signals that the US no longer views the Middle East in isolation from its neighbourhood.
3] Setting aside the differences on democracy vs autocracy debate
- Biden had to modify his sweeping rhetoric about the “conflict between democracies and autocracies” as the principal contradiction in the world.
- To sustain the US position in the region, Biden had no option but to sit with leaders of monarchies and autocracies that are America’s long-standing partners.
4] Nation above identities
- Biden’s focus on national interest found an echo in the Middle East, which is learning to put nation above other identities such as ethnicity and religion.
- In the past, the region seemed immune to nationalism as it focused on transcendental notions of “pan Arabism” and “pan Islamism”.
- Although the idea of Arab solidarity on the Palestine issue endures, many Arab leaders are not willing to let that come in the way of normalisation of relations with Israel.
- A critical section of the Arabs, long seen as irreconcilably opposed to Israel, are now joining hands with the Jewish state to counter threats to their national security from Iran.
- Many Gulf kingdoms, including Saudi Arabia and the UAE, are now consciously promoting a national identity among their peoples.
- Despite shared religion, Turkey’s leader Recep Erdogan has in recent years sought to undermine many of the Arab regimes.
- Qatar has often found itself closer to non-Arab Turkey and in opposition to its Gulf Arab neighbours.
Conclusion
Delhi, whose Middle East policy today is imbued with greater realism, can hopefully discard the inherited ideological inertia, avoid the temptation of seeing the Middle East through a religious lens, and strive hard to realise the full possibilities awaiting India in the region.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Forest landscape restoration
Context
This month is time for Van Mahotsav, which literally means “celebrate the forest”.
Why tree planting matters
- According to the International Union for Conservation of Nature (IUCN), deforestation and forest degradation contribute around 12% of global greenhouse gas emissions.
- The total area occupied by primary forests in India has decreased by 3.6%.
- Tree planting comes with varied environmental and ecological benefits.
- Forests are integral in regulating ecosystems, influencing the carbon cycle and mitigating the effects of climate change.
- Annually, forests absorb roughly 2.6 billion tonnes of carbon dioxide.
- This absorption includes nearly 33% of the carbon dioxide released from burning fossil fuels.
- Livelihood: Forests are a boon for local communities and their livelihoods by functioning as a resource base for goods and services.
- Enrich soil fertility: According to academics from the World Resources Institute, forest ecosystems enrich soil fertility and water availability, enhancing agricultural productivity, and in turn the rural economy.
- Prevents erosion and flooding: Tree planting prevents erosion and stems flooding.
- Sustainable forest crops reduce food insecurity and empower women, allowing them to gain access to more nutritional diets and new income streams.
- Agroforestry lessens rural-to-urban migration and contributes to an increase in resources and household income.
- Planting trees is deeply linked to the ‘wholistic’ well-being of all individuals, the community, and the planet.
Afforestation through forest landscape restoration
- Typically, governments have relied on afforestation and reforestation as a means of establishing trees on non-treed land. These strategies have now evolved.
- Focus on forest landscape restoration: The focus is now on forest landscape restoration — the process of regaining ecological functionality and improving human welfare across deforested or degraded forest landscapes.
- Community participation: Forest landscape restoration seeks to involve communities in the process of designing and executing mutually advantageous interventions for the upgradation of landscapes.
- Nearly two billion hectares of degraded land in the world (and 140 million hectares in India) have scope for potential restoration as forest land.
- Ensuring diversity of species: A crucial aspect of this process is to ensure the diversity of the species while planting trees.
- Natural forests with diverse native tree species are more efficient in sequestering carbon than monoculture tree plantations.
- Planting diverse species is also healthier for local communities and their livelihoods.
- An international study published earlier this year in the journal, Science, found that diversifying species in forest plantations has a positive impact on the quality of the forests.
Programs and initiative for forest restoration
- The span 2021-2030 is the UN Decade on Ecosystem Restoration, emphasising efforts to restore degraded terrestrial ecosystems including forests.
- Bonn Challenge: In 2011, the Bonn Challenge was launched with a global goal to restore 150 million hectares of degraded and deforested landscapes by 2020 and 350 million hectares by 2030.
- India joined the Bonn Challenge in 2015, pledging to restore 26 million hectares of degraded and deforested land by 2030.
- An additional carbon sink of 2.5 billion-3 billion tonnes of carbon dioxide equivalent through forest and tree cover is to be created by 2030.
- There are a myriad government programmes such as Compensatory Afforestation, the National Afforestation Programme, the National Mission for a Green India (Green India Mission), the Nagar Van scheme and the Forest Fire Prevention and Management Scheme to name a few.
- The Green Skill Development Programme is for the youth who aspire to attain employment in the environment and forest sectors.
Challenges
- Forest restoration in India faces hurdles in terms of the identification of areas for restoration, a lack of importance accorded to research and scientific strategies in tree planting, stakeholders’ conflicts of interest, and financing.
Way forward
- To be successful, forest landscape restoration must be implemented proactively, bolstering landscapes and forest ecosystems to be durable and adjustable in the face of future challenges and societal needs.
- Involvement of stakeholders: It also needs the involvement and the alignment of a host of stakeholders including the community, champions, government and landowners.
- Participatory governance: The restoration of natural forest ecosystems can be strengthened through participatory governance by engaging stakeholders.
- Taking into account socio-economic context: Vulnerable forest-dependent communities should be factored in, and any effort should be tailored to the local socio-economic context and landscape history of a region.
Conclusion
In today’s world, forests need to be celebrated more than ever before. Simultaneously, more forests need to be created and restored.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: IMF
Mains level: Pakistan economic crisis, Debt trap
The latest IMF press release maintains it would consider an extension of the current Extended Fund Facility (EFF) to end June 2023 and augment the fund amount to $7 billion for Pakistan.
Pakistan seeks IMF bailout
- Surprisingly, it took five months to reach the staff-level agreement.
- The total disbursement under the current EFF to Pakistan has now been $4.2 billion.
- The talks were originally aimed at releasing a tranche of $900 million.
What is Extended Fund Facility (EFF)?
- The EFF was established by the IMF to provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.
- An EFF provides support for comprehensive programs including the policies needed to correct structural imbalances over an extended period.
What was the Pakistani EFF?
- The 39-month EFF between the two was signed in July 2019 to provide funds amounting to Self-Drawing Rights (SDR) — $4,268 million.
- The EFF was signed by Pakistan to address the medium-term balance of payment problem, and work on structural impediments and increase per capita income.
Why did the talks take longer to conclude?
- The IMF placed demands (all of which seem impossible for Pakistan) includes :
- Fiscal consolidation to reduce debt and build resilience
- Market-determined exchange rate to restore competitiveness
- Eliminate ‘quasi-fiscal’ losses in the energy sector and
- Strengthened institutions with transparency
- Ousted Pakistani PM eased fuel prices. This was considered a major deviation under the EFF benchmarks.
- Then govt gave tax amnesties to the industrial sector, impacted the tax regime and a structural benchmark for fiscal consolidation.
- The IMF insisted on its demands before approving any release of the tranche.
How important is the IMF support to Pakistan?
- Pakistan’s economic situation is dire.
- According to the Economic Survey of Pakistan 2022, the fiscal deficit in FY 22 was $18.6 billion, and the net public debt at $252 billion, which is 66.3% of the GDP.
- The power sector’s circular debt is $14 billion.
Why have the Pakistan-IMF relations remained complicated?
- Structural reforms require long-term commitment, which have been sacrificed due to Pakistan’s short-sighted political goals.
- Hence the urge to go to the IMF for fiscal stability has been repeated over time.
Risks posed by a failed Pakistan
- There is also a narrative that Pakistan has the fifth largest population with nuclear weapons that cannot be allowed to fail.
- A section within Pakistan also places the geo-strategic location of the country would provide an edge for cooperation, rather than coercion.
- Hence, this section believes, the IMF would continue to support.
- Given the IMF’s increased assertion, Pakistan’s political calculations and the elections ahead, the relationship between the two is likely to remain complicated.
What lies ahead for Pakistan and the IMF?
- Despite the latest agreement, the road ahead for the IMF and Pakistan is not an easy one.
- Political calculations and the elections ahead will play a role in Pakistan’s economic decision-making.
- However, one thing is eminent Pakistan will certainly collapse someday badly like Sri Lanka.
Try this PYQ from CSP 2022
“Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following?
(a) Asian Development Bank
(b) International Monetary fund
(c) United National Environment Programme Finance initiative
(d) Word bank
Post your answer here.
Back2Basics: Special Drawing Rights (SDRs)
- SDRs, created by the IMF in 1969, are an international reserve asset and are meant to supplement countries’ reserves.
- Adding SDRs to the country’s international reserves makes it more financially resilient.
- Providing liquidity support to developing and low-income countries allows them to tide over the balance of payments (BOP) situations like the one India has been experiencing due to the pandemic and the one it faced earlier in 1991.
- SDRs being one of the components of foreign exchange reserves (FER) of a country, an increase in its holdings is reflected in the BOP.
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From UPSC perspective, the following things are important :
Prelims level: Religious and linguistic minorities
Mains level: Not Much
The minority status of religious and linguistic communities is “State-dependent”, said the Supreme Court.
What did the Supreme Court say?
- Every person in India can be a minority in one State or the other.
- One can be a minority outside his/her State.
- Similarly, a Kannada-speaking person may be in minority in States other than Karnataka.
What was the petition about?
- The court was hearing a petition complaining that followers of Judaism, Bahaism and Hinduism are the real minorities in Ladakh, Mizoram, Lakshadweep, Kashmir, Punjab and the North-East States.
- However, they cannot establish and administer educational institutions of their choice because of the non-identification of ‘minority’ at the State level.
- Religious communities such as Hindus here are socially, economically, politically non-dominant and numerically inferior in several States.
Various states on Minorities
- The Centre gave the example of how Maharashtra notified ‘Jews’ as a minority community within the State.
- Again, Karnataka notified Urdu, Telugu, Tamil, Malayalam, Marathi, Tulu, Lambadi, Hindi, Konkani and Gujarati as minority languages within the State.
Who are the Minorities?
- Muslims, Sikhs, Christians, Buddhists, Jain and Zoroastrians (Parsis) have been notified as minority communities under Section 2 (c) of the National Commission for Minorities Act, 1992.
- As per the Census 2011, the percentage of minorities in the country is about 19.3% of the total population of the country.
- The population of Muslims are 14.2%; Christians 2.3%; Sikhs 1.7%, Buddhists 0.7%, Jain 0.4% and Parsis 0.006%.
- Minority Concentration Districts (MCD), Minority Concentration Blocks and Minority Concentration Towns, have been identified on the basis of both population data and backwardness parameters of Census 2001 of these areas.
Defining Minorities
- The Constitution recognizes Religious minorities in India and Linguistic minorities in India through Article 29 and Article 30.
- But Minority is not defined in the Constitution.
- Currently, the Linguistic minorities in India are identified on a state-wise basis thus determined by the state government whereas Religious minorities in India are determined by the Central Government.
- The Parliament has the legislative powers and the Centre has the executive competence to notify a community as a minority under Section 2(c) of the National Commission for Minorities Act of 1992.
Article 29: It provides that any section of the citizens residing in any part of India having a distinct language, script, or culture of its own, shall have the rights of minorities in India to conserve the same. Article 29 is applied to both minorities (religious minorities in India and Linguistic minorities in India) and also the majority. It also includes – rights of minorities in India to agitate for the protection of language.
Article 30: All minorities shall have the rights of minorities in India to establish and administer educational institutions of their choice. Article 30 recognizes only Religious minorities in India and Linguistic minorities in India (not the majority). It includes the rights of minorities in India to impart education to their children in their own language.
Article 350-B: Originally, the Constitution of India did not make any provision with respect to the Special Officer for Linguistic minorities in India. However, the 7th Constitutional Amendment Act, 1956 inserted Article 350-B in the Constitution. It provides for a Special Officer for Linguistic Minorities appointed by the President of India. It would be the duty of the Special Officer to investigate all matters relating to the safeguards provided for linguistic minorities under the Constitution.
Try this PYQ:
Which one of the following categories of Fundamental Rights incorporates protection against untouchability as a form of discrimination?
(a) Right against Exploitation
(b) Right to Freedom
(c) Right to Constitutional Remedies
(d) Right to Equality
Post your answers here.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSP system, Crop Seasons in India
Mains level: Legal backing for MSP
The Centre has finally constituted a committee headed by former Union Agriculture Secretary Sanjay Agrawal here to look into the issues of Minimum Support Price (MSP), as promised to protestant farmers after the repeal of three farm laws.
Panel on MSP: Terms of reference
- The panel will consist of representatives of the Central and State governments, farmers, agricultural scientists and agricultural economists.
- This panel will be constituted:
- To promote zero budget-based farming,
- To change crop patterns keeping in mind the changing needs of the country
- To make MSP more effective and transparent
- It also says that the committee will discuss methods to strengthen the Agricultural Marketing System as per the changing requirements of the country
- It would ensure higher value to the farmers through remunerative prices of their produce by taking advantage of the domestic output and export.
- On natural farming, the committee will make suggestions for programs and schemes for value chain development, protocol validation, and research for future needs.
- It would support area expansion under the Indian Natural Farming System through publicity and through the involvement and contribution of farmer organizations.
What is MSP?
- The MSP assures the farmers of a fixed price for their crops, well above their production costs.
- MSP, by contrast, is devoid of any legal backing. Access to it, unlike subsidized grains through the PDS, isn’t an entitlement for farmers.
- They cannot demand it as a matter of right. It is only a government policy that is part of administrative decision-making.
- The Centre currently fixes MSPs for 23 farm commodities based on the Commission for Agricultural Costs and Prices (CACP) recommendations.
Fixing of MSPs
- The CACP considered various factors while recommending the MSP for a commodity, including the cost of cultivation.
- It also takes into account the supply and demand situation for the commodity; market price trends (domestic and global) and parity vis-à-vis other crops; and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors.
What changed with the 2018 budget?
- The Budget for 2018-19 announced that MSPs would henceforth be fixed at 1.5 times of the production costs for crops as a “pre-determined principle”.
- Simply put, the CACP’s job now was only to estimate production costs for a season and recommend the MSPs by applying the 1.5-times formula.
How was this production cost arrived at?
- The CACP projects three kinds of production cost for every crop, both at the state and all-India average levels.
- ‘A2’ covers all paid-out costs directly incurred by the farmer — in cash and kind — on seeds, fertilizers, pesticides, hired labor, leased-in land, fuel, irrigation, etc.
- ‘A2+FL’ includes A2 plus an imputed value of unpaid family labor.
- ‘C2’ is a more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL.
How much produce can the government procure at MSP?
- The MSP value of the total production of the 23 crops worked out to around Rs 10.78 lakh crore in 2019-20.
- Not all this produce, however, is marketed. Farmers retain part of it for self-consumption, the seed for the next season’s sowing, and also for feeding their animals.
- The marketed surplus ratio for different crops is estimated to range differently for various crops.
- It ranges from below 50% for ragi and 65-70% for bajra (pearl millet) and jawar (sorghum) to 75% for wheat, 80% for paddy, 85% for sugarcane, 90% for most pulses, and 95%-plus for cotton, soybean, etc.
- Taking an average of 75% would yield a number of just over Rs 8 lakh crore.
- This is the MSP value of production that is the marketable surplus — which farmers actually sell.
Nature of MSP
- There is currently no statutory backing for these prices, nor any law mandating their enforcement.
Farmers demand legalization
- Legal entitlement: There is a demand that MSP based on a C2+50% formula should be made a legal entitlement for all agricultural produce.
- Private traders’ responsibility: Some says that most of the cost should be borne by private traders, noting that both middlemen and corporate giants are buying commodities at low rates from farmers.
- Mandatory purchase at MSP: A left-affiliated farm union has suggested a law that simply stipulates that no one — neither the Government nor private players — will be allowed to buy at a rate lower than MSP.
- Surplus payment by the govt.: Other unions have said that if private buyers fail to purchase their crops, the Government must be prepared to buy out the entire surplus at MSP rates.
- Expansion of C2: Farm unions are demanding that C2 must also include capital assets and the rentals and interest forgone on owned land as recommended by the National Commission for Farmers.
Government’s position
- The PM has announced the formation of a committee to make MSP more transparent, as well as to change crop patterns — often determined by MSP and procurement.
- The panel will have representatives from farm groups as well as from the State and Central Governments, along with agricultural scientists and economists.
Issues with legal backing
- Demand-supply dynamics: Economic theory, as well as experience, indicates that the price level that is not supported by demand and supply cannot be sustained through legal means.
- States responsibility: The Centre has suggested that the States are free to guarantee MSP rates if they wish, but also offers two failed examples of such a policy:
[I] Sugar FRP
- In the sugar sector, private mills are mandated to buy cane from farmers at prices set by the Government.
- Faced with low sugar prices, high surplus stock, and low liquidity, mills failed to make full payments to farmers, resulting in an accumulation of thousands of crores worth of dues pending for years.
[II] Withdrawal of traders
- The other example is a 2018 amendment to the Maharashtra law penalizing traders with hefty fines and jail terms if they bought crops at rates lower than MSP.
- As open market prices were lower than the (legalized) MSP levels declared by the State, the buyers withdrew from the market and farmers had to suffer.
Will a legal backing for MSP solve all the ills that plague the Agriculture sector?
- Only one side of the coin: Actually, no. Remunerative price or MSP is only one part of the problems farmers face. Farmers face many other issues other than price, which itself is not guaranteed given the influence of politicians and cartels in mandis.
- Information deficit: They lack information on which crop to grow, when to sow, apply plant nutrients and which pest is attacking their crop.
- Lack of technology: Farmers are also short of post-harvest technologies to ensure a better shelf life for their produce.
- Irrigation and storage problem: They do not get adequate facilities to irrigate their lands, with nearly 50 percent of the land being rain-fed and lacking ample warehouses to store their produce at the village level, besides proper roads to connect them to the mandis.
- Threat of new loopholes: Legal backing for the MSP could also lead to the danger of the trade keeping away from places where the law is implemented vigorously.
Fiscal cost of making the MSP legally binding
- The MSP value of the total output of all the 23 notified crops worked out to about Rs 11.9 lakh crore in 2020-21.
- Taking an average of 75% yields a number – the MSP value of production actually sold by farmers – just under Rs 9 lakh crore.
- The government is further, as it is, procuring many crops. The MSP value of the 89.42 mt of paddy and 43.34 mt of wheat alone bought during 2020-21 was around Rs 253,275 crore.
- All in all, then, the MSP is already being enforced, directly or through fiat, on roughly Rs 3.8 lakh crore worth of produce.
- Providing a legal guarantee for the entire marketable surplus of the 23 MSP crops would mean covering another Rs 5 lakh crore or so.
Conclusion
- A growing consensus among economists for guaranteeing minimum “incomes”, as against “prices”, to farmers.
- That would essentially entail making more direct cash transfers either on a flat per-acre (as in the Telangana government’s Rythu Bandhu scheme) or per-farm household (the Centre’s PM-Kisan) basis.
- The resource requirement of such interventions will be so huge that no government will be left with resources to help farmers through other means like investment in public infrastructure, irrigation, and other incentives.
- The danger of over-reliance on MSP is already visible in the state of Punjab. Agriculture has reached an almost static stage there.
- The state is unable to diversify away from crops like paddy, which is destroying its natural resources and environment, marring long-term prospects of farming.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: India's defence exports
Our defence exports have increased seven times in the last eight years, informed the Prime Minister. We had achieved defence exports worth ₹13,000 crore and of this 70% was from the private sector.
Why in news?
- The Indian Defence sector, the second largest armed force is at the cusp of revolution.
India’s Defence Exports
- India has put out a range of military hardware on sale which includes various missile systems, Light Combat Aircraft (LCA), helicopters, warship and patrol vessels, artillery guns, tanks, radars etc.
- From 2016-17 to 2018-19, the country’s defence exports have increased from ₹1,521 crore to ₹10,745 crore, a staggering 700% growth.
Steps taken by the Centre to boost defence production
- Licensing relaxation: Measures announced to boost exports since 2014 include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
- Lines of Credit: Specific incentives were introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence product.
- Policy boost: The Defence Ministry has also issued a draft Defence Production & Export Promotion Policy 2020.
- Indigenization lists: On the domestic front, to boost indigenous manufacturing, the Government had issued two “positive indigenization lists” consisting of 209 items that cannot be imported.
- Budgetary allocation: In addition, a percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.
- Defence Industrial Corridors: The government has also announced 2 dedicated Corridors in the States of TN and UP to act as clusters of defence manufacturing that leverage existing infrastructure, and human capital.
- Long-term vision: The vision of the government is to achieve a turnover of $25 bn including export of $5 bn in Aerospace and Defence goods and services by 2025.
- Push for self-reliance: The govt has identified the Defence and Aerospace sector as a focus area for the ‘Aatmanirbhar Bharat’ or Self-Reliant India initiative.
Issues retarding defence exports
- Excess reliance on Public Sector: India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.
- Policy delays: In the past few years, the government has approved over 200 defence acquisition worth Rs 4 trillion, but most are still in relatively early stages of processing.
- Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D and the inability to manufacture major subsystems and components hamper the indigenous manufacturing.
- Long gestation: The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. By that time newer technologies make products outdated.
- ‘Unease’ in doing business: An issue related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.
- Multiple jurisdictions: Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India’s capability of defence manufacturing.
- Lack of quality: The higher indigenization in few cases is largely attributed to the low-end technology.
- FDI Policy: The earlier FDI limit of 49% was not enough to enthuse global manufacturing houses to set up bases in India.
- R&D Lacunae: A lip service to technology funding by making token allocations is an adequate commentary on our lack of seriousness in the area of Research and Development.
- Lack of skills: There is a lack of engineering and research capability in our institutions. It again leads us back to the need for a stronger industry-academia interface.
Way forward
- Reducing import dependence: India was the world’s second-largest arms importer from 2014-18, ceding the long-held tag as the largest importer to Saudi Arabia, says 2019 SIPRI report.
- Security Imperative: Indigenization in defence is critical to national security also. It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
- Economic boost: Indigenization in defence can help create a large industry which also includes small manufacturers.
- Employment generation: Defence manufacturing will lead to the generation of satellite industries that in turn will pave the way for a generation of employment opportunities.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fast Radio Burst (FRB)
Mains level: Not Much
A strange radio signal (called Fast Radio Bursts) has been detected in a galaxy several billion light-years from Earth, a recent study claimed.
What is an FRB?
- The first FRB was discovered in 2007, since when scientists have been working towards finding the source of their origin.
- Essentially, FRBs are bright bursts of radio waves (radio waves can be produced by astronomical objects with changing magnetic fields).
- Its durations lie in the millisecond scale, because of which it is difficult to detect them and determine their position in the sky.
Who discovered it?
- The X-ray portion of the simultaneous bursts was detected by several satellites, including NASA’s Wind mission.
- Further, a NASA-funded project called Survey for Transient Astronomical Radio Emission 2 (STARE2) also detected the radio burst.
Why are they significant?
- First noticed in 2018 by the Canadian observatory the waves have created ripples across the globe for one reason — they arrive in a pattern.
- This gave birth to theories that they could be from an alien civilization.
- Initially, it was believed that the collision of black holes or neutron stars triggers them.
- But the discovery of repeating FRBs debunked the theory of colliding objects.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Agri-GDP
Context
The United Nations latest report, “Population Prospects” forecasts that India will surpass China’s population by 2023, reaching 1.5 billion by 2030 and 1.66 billion by 2050.
Poverty eradication: Lessons from China
- China’s story since 1978 is unique – the country has achieved the fastest decline in poverty.
- Its experiences hold some important lessons for India, especially because in 1978, when China embarked on its economic reforms, its per capita income at $156.4 was way below that of India at $205.7.
- Today, China is more than six times ahead of India in terms of per capita income – China’s per capita income in 2021 was $12,556, while that of India was $1,933 in 2020.
- China started its economic reforms in 1978 with a primary focus on agriculture.
- Contribution of agriculture: It broke away from the commune system and liberated agri-markets from myriad controls.
- Increase in agri-GDP: As a result, during 1978-84, China’s agri-GDP grew by 7.1 per cent per annum and farmers’ real incomes grew by 14 per cent per annum with the liberalisation of agri-prices.
- Creation of demand: Enhanced incomes of rural people created a huge demand for industrial products, and also gave political legitimacy for pushing further the reform agenda.
- The aim of China’s manufacturing through Town and Village Enterprises (TVEs) was basically to meet the surging demand from the hinterlands.
- Population factor: China introduced the one-child per family policy in September 1980, which lasted till early 2016.
- It is this strict control on population growth, coupled with booming growth in overall GDP over these years, that led to a rapid increase in per capita incomes.
- Chinese population growth today is just 0.1 per cent per annum compared to India’s 1.1 per cent per annum.
Growth story of Indian agriculture
- Over a 40-year period, 1978-2018, China’s agriculture has grown at 4.5 per cent per annum while India’s agri-GDP growth ever since reforms began in 1991 has hovered at around 3 per cent per annum.
- Market and price liberalisation in agriculture still remains a major issue, and at the drop of any hint of food price rise, the government clamps down exports, imposes stock limits on traders, suspends futures markets, and pushes other measures that strangle markets.
- Implicit taxation of farmers: The net result of all this is reflected in the “implicit taxation” of farmers to favour the vocal lobby of consumers, especially the urban middle class.
Way forward
- Population control: The only way is through effective education, especially that of the girl child, open discussion and dialogue about family planning methods and conversations about the benefits of small family size in society.
- Effective education: As per the National Family Health Survey-5 (2019-21), of all the girls and women above the age of 6 years, only 16.6 per cent were educated for 12 years or more.
- Based on unit-level data of NFHS5 (2019-21), it is found that women’s education is the most critical determinant of the status of malnutrition amongst children below the age of five.
- Unless a focused and aggressive campaign is launched to educate the girl child and provide her with more than 12 years of good quality education, India’s performance in terms of the prosperity of its masses, and the human development index may not improve significantly for many more years to come
- If government can take up this cause in sync with state governments, this will significantly boost the labour participation rate of women, which is currently at a meagre 25 per cent, and lead to “double engine” growth.
- Nutrition interventions: The NFHS-5 data shows that more than 35 per cent of our children below the age of five are stunted, which means their earning capacity will remain hampered throughout life. They will remain stuck in a low-level income trap.
Conclusion
From a policy perspective, if there is any subsidy that deserves priority, it should be for the education of the girl child. This policy focus can surely bring a rich harvest, politically and economically, for many years to come.
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