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  • Terrorism and Challenges Related To It

    Designation of Terrorists in India

    | Security Issues | Mains Paper 3: Organized Crime & Terrorism

    The Union Home Ministry has designated Hafiz Talha Saeed, son of Hafiz Mohammad Saeed, chief of the Pakistan-based terror outfit Lashkar-e-Taiba (LeT), as a terrorist under the Unlawful (Activities) Prevention Act (UAPA).

    About Unlawful (Activities) Prevention Act (UAPA)

    • The UAPA is aimed at effective prevention of unlawful activities associations in India.
    • Its main objective was to make powers available for dealing with activities directed against the integrity and sovereignty of India
    • It is an upgrade on the Terrorist and Disruptive Activities (Prevention) Act TADA, which was allowed to lapse in 1995 and the Prevention of Terrorism Act (POTA) was repealed in 2004.
    • It was originally passed in 1967 under the then Congress government led by former Prime Minister Indira Gandhi.
    • Till 2004, “unlawful” activities referred to actions related to secession and cession of territory. Following the 2004 amendment, “terrorist act” was added to the list of offences.

    Designation of Terrorists

    • The Centre had amended UAPA, 1967, in August 2019 to include the provision of designating an individual as a terrorist.
    • Before this amendment, only organisations could be designated as terrorist outfits.
    • Section 15 of the UAPA defines a “terrorist act” as any act committed with intent to threaten or likely to threaten the unity, integrity, security, economic security, or sovereignty of India or with intent to strike terror or likely to strike terror in the people or any section of the people in India or in any foreign country.
    • The original Act dealt with “unlawful” acts related to secession; anti-terror provisions were introduced in 2004.

    Who makes such designation?

    • The UAPA (after 2019 amendment)seeks to empower the central government to designate an individual a “terrorist” if they are found committing, preparing for, promoting, or involved in an act of terror.
    • A similar provision already exists in Part 4 and 6 of the legislation for organizations that can be designated as a “terrorist organisations”.

    How individuals are declared terrorists?

    • The central government may designate an individual as a terrorist through a notification in the official gazette, and add his name to the schedule supplemented to the UAPA Bill.
    • The government is not required to give an individual an opportunity to be heard before such a designation.
    • At present, in line with the legal presumption of an individual being innocent until proven guilty, an individual who is convicted in a terror case is legally referred to as a terrorist.
    • While those suspected of being involved in terrorist activities are referred to as terror accused.

    What happens when an individual is declared a terrorist?

    • The designation of an individual as a global terrorist by the United Nations is associated with sanctions including travel bans, freezing of assets and an embargo against procuring arms.
    • The UAPA, however, does not provide any such detail.
    • It also does not require the filing of cases or arresting individuals while designating them as terrorists.

    Removing the terrorist tag

    • The UAPA gives the central government the power to remove a name from the schedule when an individual makes an application.
    • The procedure for such an application and the process of decision-making will is decided by the central government.
    • If an application filed by an individual declared a terrorist is rejected by the government, the UAPA gives him the right to seek a review within one month after the application is rejected.
    • The central government will set up the review committee consisting of a chairperson (a retired or sitting judge of a High Court) and three other members.
    • The review committee is empowered to order the government to delete the name of the individual from the schedule that lists “terrorists”, if it considers the order to be flawed.
    • Apart from these two avenues, the individual can also move the courts challenging the government’s order.

     

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  • RBI Notifications

    RBI proposes ATM cash withdrawals using UPI

    | Economics | Mains Paper 3: Indian Economy

    The RBI’s Monetary Policy Committee (MPC) has proposed to make cardless cash withdrawal facility available at all ATMs, irrespective of banks, through the Unified Payment Interface (UPI).

    What is UPI?

    • UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions.
    • The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

    How will cash withdrawals via UPI work?

    • While the RBI did not disclose specific details on how the process will work, a person having knowledge about the matter said ATMs soon will show an option to withdraw cash using UPI.
    • Upon selecting that option, a user would have to add the amount they wish to withdraw following which a QR code would be generated on the ATM machine.
    • The user would then have to scan that code on their UPI app and enter their pin following which the ATM will dispense cash.

    Why such move?

    • Allowing cash withdrawals through UPI would increase the security of such transactions.
    • The absence of the need for physical cards for such transactions would help prevent frauds such as card skimming and card cloning, among others.

    What are the current ways of cardless cash withdrawals at ATMs?

    • At the moment, a few banks such as ICICI Bank, Kotak Mahindra Bank, HDFC Bank and SBI, allow their users to withdraw cash from their ATMs without a card.
    • This was a feature introduced in the wake of the Covid-19 pandemic.
    • However, it is a long-drawn process.
    • Users have to install apps of their respective banks and first select the option of cardless cash withdrawal on the app, followed by adding beneficiary details and the withdrawal amount.
    • After confirming the mobile number of a user, the bank will send an OTP and a nine-digit order ID to the beneficiary’s phone.
    • Post that, the beneficiary would have to visit an ATM and key-in the OTP, order ID, amount for transaction and mobile number to get the cash.

    Could this impact debit card usage?

    • Debit cards are currently the most popular way of cash withdrawals at ATMs.
    • As of now, there are more than 900 million debit cards in the country, and experts have cautioned that allowing cash withdrawals through UPI could negatively impact debit card usage.
    • There could be a potential first-order impact on debit cards as this step would reduce the need to carry debit cards.

    What’s next in the UPI pipeline?

    • It is projected that in the next 3-5 years, UPI would be processing a billion transactions a day, and to enable that, a number of initiatives have been introduced.
    • Chief among these is UPI’s AutoPay feature, which has already seen increased adoption owing to RBI’s disruptive guidelines on recurring mandates.
    • According to industry experts, the AutoPay feature will be crucial to increasing daily transactions on the platform.
    • The RBI has also announced UPI123 on feature phones without an Internet connection, which is expected to open up the payments system to more than 40 crore individuals who use such devices.
    • This will expand digital financial inclusion and add to the number of transactions made on the platform.

     

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  • ISRO Missions and Discoveries

    GSLV-F10

    Prelims Only | Science Tech | Mains Paper 3: Indigenization Of Technology

    The Geosynchronous Satellite Launch Vehicle (GSLV) with improvements added to its cryogenic upper stage (CUS) is expected to be ready in the second half of this year.

    What is GSLV?

    • GSLV is an expendable space launch vehicle designed, developed, and operated by the ISRO to launch satellites and other space objects into Geosynchronous Transfer Orbits.
    • GSLV is 49.13 m tall and tallest among all other vehicles of ISRO.
    • It is a three-stage vehicle with a lift-off mass of 420 tonnes.
    • ISRO first launched GSLV on April 18, 2001 and has made 13 launches since then.

    Stages in GSLV

    • The first stage comprises S139 solid booster with 138-tonne propellant and four liquid strap-on motors, with 40-tonne propellant.
    • The second stage is a liquid engine carrying 40-tonne of liquid propellant.
    • The third stage is the indigenously built Cryogenic Upper Stage (CUS) carrying 15-tonne of cryogenic propellants.

    Variants in GSLV

    • GSLV rockets using the Russian Cryogenic Stage (CS) are designated as the GSLV Mk I while versions using the indigenous Cryogenic Upper Stage (CUS) are designated the GSLV Mk II.
    • All GSLV launches have been conducted from the Satish Dhawan Space Centre in Sriharikota.

    Difference between PSLV and GSLV

    • GSLV has the capability to put a heavier payload in the orbit than the Polar Satellite Launch Vehicle (PSLV).
    • PSLV can carry satellites up to a total weight of 2000 kg into space and reach up to an altitude of 600-900 km.
    • GSLV can carry weight up to 5,000 kg and reach up to 36,000 km.
    • PSLV is designed mainly to deliver earth observation or remote sensing satellites, whereas, GSLV has been designed for launching communication satellites.
    • GSLV delivers satellites into a higher elliptical orbit, Geosynchronous Transfer Orbit (GTO) and Geosynchronous Earth Orbit (GEO).

    Back2Basics: ISRO’s transportation modules

    (1) SLV

    • In the space transportation domain, the commissioning of the Satellite Launch Vehicle-3 (SLV-3) project in the early 1970s was the first indigenous experimental satellite launch vehicle.
    • As a four stage, all solid, launch vehicle, SLV-3 had its successful launch in July 1980, thrusting India into the select league of six countries with the capability to launch satellites on their own.
    • The ASLV- Augmented Satellite Launch Vehicle project, in the early 1980s, was the next step of evolution in launch vehicle technology.

    (2) PSLV

    • In mid 80s came the Polar Satellite Launch Vehicle (PSLV) project. PSLV was successfully launched in 1994.
    • The vehicle has proven to be a workhorse of ISRO, logging over 50 successful missions, launching national as well as foreign satellites.
    • On 15 February 2017, PSLV created a world record by successfully placing 104 satellites.
    • The nation embarked upon a highly challenging quest to master the complex cryogenic technology.

    (3) GSLV

    Discussed above.

    (4) SSLV

    • The Small Satellites Launching Vehicles (SSLVs) used for commercial launching of small satellites is under incubation.
    • It is a small-lift launch vehicle being developed by the ISRO with payload capacity to deliver:
    1. 600 kg to Low Earth Orbit (500 km) or
    2. 300 kg to Sun-synchronous Orbit (500 km)
    • It would help launching small satellites, with the capability to support multiple orbital drop-offs.
    • In future a dedicated launch pad in Sriharikota called Small Satellite Launch Complex (SSLC) will be set up.

     

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  • Festivals, Dances, Theatre, Literature, Art in News

    Artform in news: Yakshagana

    Prelims Only | History | Mains Paper 1: Arts & Culture

    Many students from Madhya Pradesh, Uttar Pradesh, West Bengal, Gujarat, and Rajasthan are enrolling for training of Yakshagana theatre.

    What is Yakshagana?

    • Yakshagana is a traditional theater, developed in Dakshina Kannada, Udupi, Uttara Kannada, Shimoga and western parts of Chikmagalur districts, in the state of Karnataka and in Kasaragod district in Kerala.
    • It emerged in the Vijayanagara Empire and was performed by Jakkula Varu.
    • It combines dance, music, dialogue, costume, make-up, and stage techniques with a unique style and form.
    • Towards the south from Dakshina Kannada to Kasaragod of Tulu Nadu region, the form of Yakshagana is called as ‘Thenku thittu’ and towards north from Udupi up to Uttara Kannada it’s called as ‘Badaga Thittu‘.
    • It is sometimes simply called “Aata” or āṭa (meaning “the play”). Yakshagana is traditionally presented from dusk to dawn.
    • Its stories are drawn from Ramayana, Mahabharata, Bhagavata and other epics from both Hindu and Jain and other ancient Indic traditions.

     

    Try this question from CSP 2017:

    Q.With reference to Manipuri Sankirtana, consider the following statements:

    1. It is a song and dance performance.
    2. Cymbals are the only musical instruments used in the performance.
    3. It is performed to narrate the life and deeds of Lord Krishna.

    Which of the statements given above is/are correct?

    (a) 1, 2 and 3.

    (b) 1 and 3 only

    (c) 2 and 3 only

    (d) 1 only

     

    Post your answers here.

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  • Innovations in Biotechnology and Medical Sciences

    Microbots for Drug Delivery

    Prelims Only | Science Tech | Mains Paper 3: Achievements Of Indians In S&T

    An Indian researcher has found that it is possible to use light as a fuel to move microbots in real-body conditions with intelligent drug delivery that is selectively sensitive to cancer cells

    Microswimmers for drug delivery

    • Made from the two-dimensional compound poly (heptazine imide) carbon nitride (aka PHI carbon nitride), these microbots are nothing like the miniaturised humans.
    • They range from 1-10 micrometre (a micrometre is one-millionth of a metre) in size, and can self-propel when energised by shining light.
    • While carbon nitride is an excellent photo-catalyst, the two-dimensional PHI has a sponge-like structure full of pores and voids and charge storage properties.
    • The researchers found that the ions in the salty solution passed through the pores of PHI carbon nitride.
    • Thus, there was little or no resistance from the salt ions.

    How do they swim across the blood?

    • The PHI carbon nitride microparticles are photocatalytic.
    • Like in a solar cell, the incident light is converted into electrons and holes.
    • These charges drive reactions in the surrounding liquid. The charges react with the fluid surrounding them.
    • This reaction, combined with the particle’s electric field, makes the microbots (micro-swimmers) swim.
    • As long as there is light, electrons and holes are produced on the surface of the swimmers, which in turn react to form ions and an electric field around the swimmer.
    • These ions move around the particle and cause fluid to flow around the particle.
    • So this fluid flow causes the micro-swimmers to move.

    How does the ion movement occur?

    • The ions move from the bright surface of the micro-swimmer to the rear end.
    • The diffusion of the swimming medium in one direction propels the micro-swimmer in the opposite direction.
    • This is like a boat moving in the direction opposite to the oar strokes.
    • The particles are nearly spherical, and the incident light illuminates one-half of the sphere, leaving the other dark.
    • As photocatalysis is light-driven, it occurs only on the brightened hemisphere.
    • As the ions move from the bright side to the dark side, micro-swimmers march in the direction of the light source.

     

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  • Russian Invasion of Ukraine: Global Implications

    BRICS and the creation of a multipolar world

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Context

    The current crisis in Ukraine will consolidate BRICS as the group will make further efforts to become a real alternative to the West to create a real multipolar world.

     BRICS’ efforts to change world economic system

    • The group was brought together by geopolitical rather than economic considerations and this can be seen in the strategic interests shared by Russia and China.
    • Inclusion of non-Western states in international financial institutions: BRICS is actively involved in the efforts to change the world economic system by increasing the number of non-Western states in international financial institutes.
    • The BRICS countries decided to create the $100 billion BRICS Development Bank and a reserve currency pool worth over another $100 billion to offer an alternative to countries in the non-Western world when it comes to choosing the sources of funding for development or coping with serious economic crises.

    Consequences of Ukraine crisis for BRICS

    •  It demonstrates that the West has not abandoned the idea of a unipolar world and will continue building it up by drawing into its foreign policy orbit issues it calls “international” or even “common to mankind.”
    • Many non-Western states look at this as a new wave of colonialism.
    • This will increase the desire of non-Western countries to enhance their coordination and perhaps the current conflict is already showing signs in this respect.
    • The BRICS states are different in many respects and their disagreements with the West are rooted in different historical and political circumstances.
    • The current crisis in Ukraine will consolidate BRICS as the group will make further efforts to become a real alternative to the West to create a real multipolar world.
    • RIC controls 22 per cent of the global GDP and 16 per cent of global exports of goods and services.
    • The fallout from Russia’s alienation from the G-8 group of nations, raises the prospect that — tactically at least — Russia, India, and China might be playing their own triangular integrationist card within BRICS at Moscow’s initiative.
    • Eurasian integrationist core: This will create a north Eurasian integrationist core within BRICS, whichever way Moscow’s relations with the US and Europe play out.

    Implications for India

    • Both the Asian giants — India and China — may stand to reap the “best of both worlds” as the Ukraine imbroglio plays out.
    • Investment: This could mean greater industrial and energy cross investments between Russia and India as well as between Russia and China.
    • Additionally, the proposed arrangement for rupee-ruble cross currency pairing could result in settlement of payments in non-dollar currencies with more countries looking at India’s sovereign Financial Messaging Systems (SFMS), while also remaining connected with a central system like SWIFT.
    • Dedicated payment mechanism: This should also anchor India’s quest to build a dedicated payment mechanism for energy-related payments and settlements as a long-haul measure.
    • This could change the contours of the global payments landscape and benefit the rupee immensely.

    Spotlight on India

    • As the war progresses, New Delhi has been receiving a stream of high-profile visitors from around the world.
    • This has included delegations from the US, Australia and Japan, India’s partners in the Quad.
    • The foreign minister of Greece has also been to India and the Israeli prime minister is scheduled to visit soon.
    • Even traditional rival China is making overtures to India at this time, with Foreign Minister Wang Yi’s visit.
    • Another suitor is Russia, which is now also becoming a supplier of discounted crude oil to India as Moscow recoils from sanctions enforced by western consumers of its natural gas.

    Conclusion

    New Delhi is basking in its well-deserved spotlight with well-crafted diplomacy. India could be looking at a new dawn.

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  • Foreign Policy Watch: India-Sri Lanka

    What caused Sri Lanka’s worst economic crisis?

    op-ed snap | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    Context

    Sri Lanka’s ruling Rajapaksa family is facing mounting public anger, calls for resignations and political defections amidst the island’s worst economic crisis in its post-independence history.

    Reasons for the crisis

    • 1] Overnight switch to organic farming and import ban on fertiliser: There was the decision to ban fertiliser imports and switch overnight to organic farming.
    • The decision was reversed after sustained farmer protests but not before damage had already been done to crop yields.
    • 2] Then, precious foreign exchange was wasted in propping up the rupee while imposing controls on key imports that led to shortages and price rise.
    • 3] For several months, as the crisis deepened with rolling power-cuts and shortages of essentials, the government refused to seek IMF assistance.
    • It has now relented on the IMF, but Sri Lanka’s economic distress has been prolonged and deepened by this indecision.

    Contradictions in the Sri Lanka’s politics

    • While the immediate causes of popular anger are explicable, the crisis also reveals a more enduring contradiction at the foundation of Sri Lanka’s politics.
    • Sinhala nationalist-inspired policies: What this crisis shows is that Sinhala nationalist-inspired policies are no longer financially or politically viable.
    • Hardline approach toward Tamils: The Rajapaksas first rode to power in September 2005 on the wave of Sinhala nationalist antipathy against the then-ongoing Norwegian-mediated peace process with the LTTE.
    • Upon his election as president, Mahinda expanded the military and launched a full-frontal military offensive that ended with the LTTE’s total defeat and destruction in May 2009.
    • After the war, instead of seeking a political settlement with the Tamils, Mahinda Rajapaksa unrolled a de-facto militarised siege of the Tamil-speaking areas and population.
    • Assertive foreign policy: The hardline approach to the Tamils and their demands was also linked to a new, more assertive foreign policy.
    •  The government turned away the long-established pattern of alignments with Western states and India.
    • Mistrust of India: There is a long-standing mistrust of India amongst Sinhala Buddhist nationalists who see it as the source of historic Tamil invasions.
    •  The Rajapaksas translated this sentiment into policy, pushing back against Indian attempts to forge closer economic ties and a constitutional settlement of the Tamil question.
    • Ties with China: In place of these ties, the Rajapaksas ostentatiously set out to forge new alliances, principally with China.
    • The Rajapaksas also bet on a new geo-political optimism.
    • They believed that with China’s rise, Sri Lanka’s location on east-west trade lanes would become a prized asset.
    • They were confident that in the global competition for power triggered by China’s rise, international actors would be compelled to seek Sri Lanka’s favour for fear of “losing” it to the other side.
    • With this geo-political calculus in mind, they assuredly rebuffed Western and Indian demands.
    • None of the great powers who were supposed to be competing for Sri Lanka’s favour have stepped up to offer a bailout, although the sums are quite small by global standards.
    • The bid for total sovereign autonomy has crash-landed and yet the alternatives are also politically difficult.

    More leverage to international actors

    • The irony of Sri Lanka’s push for total sovereign autonomy is that it has given international actors more leverage than they had before.
    • Going to the IMF will require concessions on human rights and good governance to secure preferential access to European markets.
    • At the same time, Indian bilateral assistance has conditionalities on clearing controversial investments.

    Way forward

    • Push non-reversible changes: International actors who really want to help Sri Lanka should use this leverage to push for tangible and non-reversible changes in the treatment of Tamils and Muslims whatever leadership emerges in Colombo.
    • Eemilitarisation and normalisation of relations with the Tamils and Muslims: The crisis can serve as a reality check for the Sinhala nationalist leadership and electorate. The model of economic and political governance they have pursued is unsustainable, and the alternatives must be faced.
    • The most pressing of these is the demilitarisation and normalisation of relations with the Tamils and Muslims.
    • Sinhala political attention can perhaps then be turned to the other pressing failures of governance that have brought Sri Lanka to this state.

    Conclusion

    The Rajapaksas may be the principal protagonists of this crisis but the underlying script they have followed is a Sinhala Buddhist one and until Sri Lanka finds a new script it cannot find peace or stability.

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  • Foreign Policy Watch: India-SAARC Nations

    Fulfilling the potential of the Bay of Bengal community

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Context

    The celebrations to mark the 25th year of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) have been accompanied by the announcement of several new initiatives.

    Important outcome of BIMSTEC Summit

    The summit had several important outcomes: Expanding the grouping’s agenda, deepening cooperation between the member countries and planning systematically for consistency and coherence.

    1] Finalisation of charter

    • The Bay of Bengal Community was launched in 1997. But its charter, finalised last week, was more than two decades in the making.
    • The 20-page document adopted at the fifth BIMSTEC Summit articulates the purpose, principles and legal standing of the organisation.
    • It also delineates the process to admit new members – this requires the consensus of the members.
    •  The emphasis on consensus is important, given the sensitivities of the member countries.
    • One important provision in the charter is to keep regular meetings on track and provide enough scope to the BIMSTEC Permanent Working Committee to keep the process energised.

    2] Development on connectivity issues

    • Amongst the important decisions is the one related to the BIMSTEC Master Plan for Transport Connectivity.
    • The region requires seamless connectivity through multi-modal channels that improve links within and amongst the member countries.
    • These channels should be in sync with the regulatory frameworks of the member countries.
    • There are proposals to extend the trilateral highway project between Thailand, Myanmar and India to Laos and Cambodia. Bangladesh, Bhutan and Nepal have also evinced interest in the project.
    • Digitisation has enhanced cooperation in customs regulations and facilitated and improved cargo clearance procedures. All this will surely enhance investment linkages and improve regional trade.

    3] A systemic approach to streamline the evolution of BIMSTEC.

    • Establishing an Eminent Persons’ Group (EPG) for formulating a vision document for the region will help in articulating the aspirations of the collective.
    • EPGs have been quite useful in the EU and ASEAN.
    • For instance, the ASEAN-India Eminent Persons Group (AIEPG) was constituted in 2005 after the Eighth ASEAN-India Summit.
    • Its recommendations still guide the grouping’s work.
    • In 2011, the EU constituted an EPG  to suggest a roadmap to address the challenges arising from the resurgence of intolerance and discrimination in Europe.

    4] MoU for legal assistance and mutual cooperation

    • The MoU for legal assistance in criminal matters and additional MoUs for mutual cooperation between diplomatic academics and training institutes would help in creating an ecosystem of deeper knowledge-related cooperation.
    • The technology transfer facility proposed in Colombo is likely to augment these efforts.

    India’s leading role

    • India has promised $1 million to set up a Secretariat in Dhaka.
    • India has identified several other areas where it will support the collective.
    • Delhi will provide a $3 million grant to the BIMSTEC Centre for Weather and Climate, promote collaboration between industries and start-ups, and launch programmes that will help in the adoption of international standards and norms.
    • Agricultural trade analysis: Delhi has also suggested a regional value chain based agricultural trade analysis – this will be conducted by the RIS.
    • The Asian Development Bank and the New Delhi-based ICRIER have stewarded awareness programmes on trade facilitating measures in the member countries.
    • Support to Sri Lanka and Nepal: The pandemic has created fresh challenges and aggravated old ones in the countries of the region, particularly Sri Lanka and Nepal.
    • India’s support to these countries, especially in financial matters, could help in reducing undesirable external intervention in the region.

    Way forward

    • Need for FTA: The early completion of the regional free trade agreement could provide a fillip to the organisation’s efforts.
    • Promote research on cultural and civilisation linkages: Besides economic links, the Bay of Bengal countries share a cultural and civilisational legacy.
    • The role of institutions like Nalanda University in promoting research on cultural and civilisational linkages and improving the adoption of sustainable practices would be equally significant.

    Conclusion

    The collective’s fifth summit that concluded in Colombo showcased member nations’ resolve to facilitate connectivity and security and enhance the prosperity of the region.

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  • Monetary Policy Committee Notifications

    RBI shift on monetary policy

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Context

    The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Friday gave a surprise, with a formal start to policy normalisation. This was contrary to the predominant market expectations of a hold.

    RBI on the path of policy normalisation

    • Focus on target of 4% +/- 2%: While the MPC voted unanimously to remain accommodative, in a change of language, the focus would now be on “withdrawal of accommodation to ensure that (CPI) inflation remains within the target (of 4 per cent +/- 2 per cent) going forward”.
    •  Remember, the RBI had become a (flexible) inflation-targeting central bank since FY17, whose primary objective is price stability, that is, inflation management.
    • The Liquidity Adjustment Facility (LAF) corridor was narrowed back to the conventional 0.25 percentage points from the earlier extraordinary pandemic widening in late March 2020.
    • The cap of the erstwhile corridor was the repo rate and the floor was the reverse repo.
    • Now, while the repo rate was held at 4.0 per cent and the latter at 3.35 per cent, the floor of the corridor was increased by 0.4 percentage points from 3.35 per cent.
    • There was also a change in the monetary policy orientation, of which the stance is one component.
    • The priority for monetary policy now is inflation, growth and financial stability, in that order.

    Reasons for unexpected tightening of policy

    • Inflation concerns: Despite uncertainty over growth impulses and demand concentrated at the upper-income level households, inflation has increasingly emerged as a big concern.
    •  Given that inflation is likely to average 6.1 per cent in Q4 of FY22, this increases the risk of inflation remaining above the 6 per cent upper target for three consecutive quarters, necessitating an explanation to the government by the MPC.
    • One comforting aspect of this scenario is that household inflation expectations remain anchored, with the median of three months to one year ahead expectations (as of March ’22) rising by only 0.1 percentage points from the earlier January readings.
    • Stabilisation of demand: On demand conditions, the RBI scaled-down the FY23 real GDP growth projection to 7.2 per cent (from 7.8 per cent), indicating that a combination of continuing supply dislocations, slowing global economy and trade, high prices and financial markets volatility are likely to take a toll.
    • One possible reconciliation with modest GDP growth is continuing weakness in services, which is also borne out by channel checks.
    • Certainly, continuing high inflation is likely to lead to some demand destruction, which will act as an automatic stabiliser.
    • A relatively loose fiscal policy is likely to offset some of this reduced demand, particularly with continuing subsidies to lower-income households.
    • Financial stability: This has multiple dimensions – interest and foreign exchange rates, market volatility, banking sector asset stress, and so on.
    • An important objective for the RBI is the management of money supply and system liquidity.
    • In a rising rate cycle, with a large borrowing programme of the Centre and state governments, interest rates on sovereign bonds are likely to increase without a measure of support from the RBI through Open Market Operations (OMOs).
    • This will entail injecting more liquidity into an already large surplus, which might add to inflationary pressures.
    • The introduction of the overnight Standing Deposit Facility (SDF) was a significant measure in this context.
    • Unlike the reverse repo facility, the RBI will not need to give banks government bonds as collateral against the funds they deposit.
    • This is thus a more flexible instrument should a shortage of government bonds in RBI holdings actually transpire under some eventuality, say the need to absorb large capital inflows post a bond index inclusion.

    What are the implications?

    • Interest rates will begin to increase but, for bank borrowers, this is likely to be a very gradual process.
    • For corporates and other wholesale borrowers, who also borrow from bond markets, this increase is likely to be faster as the surplus system liquidity is gradually drained.
    • How this is likely to affect demand for credit is uncertain, given the capex push of the government, some revival of private sector investment and likely continuing demand for housing.

    Conclusion

    This cycle of policy tightening will present a particularly difficult mix of economic and financial trade-offs, but RBI has demonstrated the ability to innovatively use the multiple instruments at its disposal to ensure an orderly transition.

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    Back2Basics: Liquidity Adjustment Facility corridor

    • Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks to borrow money through repurchase agreements or repos.
    • LAF is used to aid banks in adjusting the day to day mismatches in liquidity (frictional liquidity deficit/surplus).
    • The liquidity adjustment facility corridor is the excess of repo rate over reverse repo.

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  • NGOs vs. GoI: The Conflicts and Scrutinies

    No Fundamental or Absolute Right to receive Foreign Donations: Supreme Court

    SC Judgements | Governance | Mains Paper 2: NGO, SHG & Civil Society

    The Supreme Court upheld amendments introducing restrictions in the Foreign Contribution Regulation Act (FCRA) while holding that no one has a fundamental or absolute right to receive foreign contributions.

    What is FCRA?

    • The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
    • First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
    • The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
    • It is mandatory for all such NGOs to register themselves under the FCRA.
    • The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.

    Why was FCRA enacted?

    • The FCRA sought to consolidate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals, associations or companies.
    • It sought to prohibit such contributions from being used for activities detrimental to national interest.

    What was the recent Amendment?

    • The FCRA was amended in September 2020 to introduce some new restrictions.
    • The Government says it did so because it found that many recipients were wanting in compliance with provisions relating to filing of annual returns and maintenance of accounts.
    • Many did not utilise the funds received for the intended objectives.
    • It claimed that the annual inflow as foreign contributions almost doubled between 2010 and 2019.
    • The FCRA registration of 19,000 organisations was cancelled and, in some cases, prosecution was also initiated.

    How has the law changed?

    There are at least three major changes that NGOs find too restrictive.

    • Prohibition of fund transfer: An amendment to Section 7 of the Act completely prohibits the transfer of foreign funds received by an organisation to any other individual or association.
    • Directed and single bank account: Another amendment mandates that every person (or association) granted a certificate or prior permission to receive overseas funds must open an FCRA bank account in a designated branch of the SBI in New Delhi.
    • Utilization of funds: Fund All foreign funds should be received only in this account and none other. However, the recipients are allowed to open another FCRA bank account in any scheduled bank for utilisation.
    • Shared information: The designated bank will inform authorities about any foreign remittance with details about its source and the manner in which it was received.
    • Aadhaar mandate: In addition, the Government is also authorised to take the Aadhaar numbers of all the key functionaries of any organisation that applies for FCRA registration or for prior approval for receiving foreign funds.
    • Cap on administrative expenditure: Another change is that the portion of the receipts allowed as administrative expenditure has been reduced from 50% to 20%.

    What is the criticism against these changes?

    • Arbitrary restrictions: NGOs questioning the law consider the prohibition on transfer arbitrary and too heavy a restriction.
    • Non-sharing of funds: One of its consequences is that recipients cannot fund other organisations. When foreign help is received as material, it becomes impossible to share the aid.
    • Irrationality of designated bank accounts: There is no rational link between designating a particular branch of a bank with the objective of preserving national interest.
    • Un-ease of operation: Due to Delhi based bank account, it is also inconvenient as the NGOS might be operating elsewhere.
    • Illogical narrative: ‘National security’ cannot be cited as a reason without adequate justification as observed by the Supreme Court in Pegasus Case.

    What does the Government say?

    • Zero tolerance against intervention: The amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters.
    • Diversion of foreign funds: The changes are also needed to prevent malpractices by NGOs and diversion of foreign funds.
    • Fund flow monitoring: The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds.
    • Ease of operation: The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely.

    What did the Supreme Court observed now?

    • The apex court reasoned that unbridled inflow of foreign funds may destabilise the sovereignty of the nation.
    • The petitioners have argued that the amendments suffered from the “vice of ambiguity, over-breadth or over-governance” and violated their fundamental rights.
    • But the court countered that the amendments only provide a strict regulatory framework to moderate the inflow of foreign funds into the country.
    • Free and uncontrolled inflow of foreign funds has the potential to impact the socio-economic structure and polity of the country.
    • No one can be heard to claim a vested right to accept foreign donations, much less an absolute right, said the verdict.

    Supreme Court’s assessment of Foreign Funds

    • Philosophically, foreign contribution (donation) is akin to gratifying intoxicant replete with medicinal properties and may work like a nectar.
    • However, it serves as a medicine so long as it is consumed (utilised) moderately and discreetly, for serving the larger cause of humanity.
    • Otherwise, this artifice has the capability of inflicting pain, suffering and turmoil as being caused by the toxic substance (potent tool) — across the nation.

    Way forward

    • The court said charity could be found at home. NGOs could look within the country for donors.
    • Fundamental rights have to give way in the larger public interest to the need to insulate the democratic polity from the “adverse influence of foreign contributions”.
    • The third-world countries may welcome foreign donations, but it is open to a nation, which is committed and enduring to be self-reliant.
    • An unregulated inflow of foreign donations would only indicate that the government was incapable of looking after its own affairs and needs of its citizens.

     

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