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  • What is Index of Industrial Production (IIP)?

    Last week saw the release of the Index of Industrial Production (IIP), which recorded a contraction of 1.6% in January.

    Index of Industrial Production (IIP)

    • Index of Industrial Production data or IIP as it is commonly called is an index that tracks manufacturing activity in different sectors of an economy.
    • The IIP number measures the industrial production for the period under review, usually a month, as against the reference period.
    • IIP is a key economic indicator of the manufacturing sector of the economy.
    • There is a lag of six weeks in the publication of the IIP index data after the reference month ends.
    • IIP index is currently calculated using 2011-2012 as the base year.

    IIP Index Components:

    • Mining, manufacturing, and electricity are the three broad sectors in which IIP constituents fall.
    • The relative weights of these three sectors are 77.6% (manufacturing), 14.4% (mining) and 8% (electricity).
    • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40 per cent of the weight of items included in the IIP.

    Basket of products

    There are 6 sub-categories:

    1. Primary Goods (consisting of mining, electricity, fuels and fertilisers)
    2. Capital Goods (e.g. machinery items)
    3. Intermediate Goods (e.g. yarns, chemicals, semi-finished steel items, etc)
    4. Infrastructure Goods (e.g. paints, cement, cables, bricks and tiles, rail materials, etc)
    5. Consumer Durables (e.g. garments, telephones, passenger vehicles, etc)
    6. Consumer Non-durables (e.g. food items, medicines, toiletries, etc)

    Who releases IIP data?

    • The IIP data is compiled and published by CSO every month.
    • CSO or Central Statistical Organisation operates under the Ministry of Statistics and Programme Implementation (MoSPI).
    • The IIP index data, once released, is also available on the PIB website.

    Try this PYQ:

    Q. In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight?

    (a) Coal production

    (b) Electricity generation

    (c) Fertilizer production

    (d) Steel production

    Who uses IIP data?

    • The factory production data (IIP) is used by various government agencies such as the Ministry of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for analytical purposes.
    • The data is also used to compile the Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.

    IIP base year change:

    • The base year was changed to 2011-12 from 2004-05 in the year 2017.
    • The earlier base years were 1937, 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.

    IIP vs ASI

    • While the IIP is a monthly indicator, the Annual Survey of Industries (ASI) is the prime source of long-term industrial statistics.
    • The ASI is used to track the health of industrial activity in the economy over a longer period. The index is compiled out of a much larger sample of industries compared to IIP.
    • The IIP essentially tracks the change in the volume of production in Indian industries.

  • What are AT1 Bonds?

    The decision of the Securities and Exchange Board of India (SEBI) to slap restrictions on mutual fund (MF) investments in additional tier-1 (AT1) bonds has raised a storm in the MF and banking sectors.

    What are AT1 Bonds?

    • AT1 Bonds stand for additional tier-1 bonds. These are unsecured bonds that have perpetual tenure. In other words, the bonds have no maturity date.
    • They have a call option, which can be used by the banks to buy these bonds back from investors.
    • These bonds are typically used by banks to bolster their core or tier-1 capital.
    • AT1 bonds are subordinate to all other debt and only senior to common equity.
    • Mutual funds (MFs) are among the largest investors in perpetual debt instruments and hold over Rs 35,000 crore of the outstanding additional tier-I bond issuances of Rs 90,000 crore.

    What action has been taken by the Sebi recently and why?

    • In a recent circular, the Sebi told mutual funds to value these perpetual bonds as a 100-year instrument.
    • This essentially means MFs have to make the assumption that these bonds would be redeemed in 100 years.
    • The regulator also asked MFs to limit the ownership of the bonds to 10 per cent of the assets of a scheme.
    • According to the Sebi, these instruments could be riskier than other debt instruments.

    Try this PYQ:

    Consider the following statements:

    1. The Reserve Bank of India manages and services the Government of India Securities but not any State Government Securities.
    2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
    3. Treasury bills offer are issued at a discount from the par value.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 3 Only

    (c) 2 and 3 only

    (d) 1, 2 and 3

    How MFs will be affected?

    • Typically, MFs have treated the date of the call option on AT1 bonds as the maturity date.
    • Now, if these bonds are treated as 100-year bonds, it raises the risk in these bonds as they become ultra long-term.
    • This could also lead to volatility in the prices of these bonds as the risk increases the yields on these bonds rises.
    • Bond yields and bond prices move in opposite directions and therefore, the higher yield will drive down the price of the bond, which in turn will lead to a decrease in the net asset value of MF schemes holding these bonds.
    • Moreover, these bonds are not liquid and it will be difficult for MFs to sell these to meet redemption pressure.

    What’s the impact on banks?

    • AT1 bonds have emerged as the capital instrument of choice for state banks as they strive to shore up capital ratios.
    • If there are restrictions on investments by mutual funds in such bonds, banks will find it tough to raise capital at a time when they need funds in the wake of the soaring bad assets.
    • A major chunk of AT1 bonds is bought by mutual funds.

    Why has the Finance Ministry asked Sebi to review the decision?

    • The FM has sought withdrawal of valuation norms for AT1 bonds as it might lead to mutual funds making losses and exiting from these bonds, affecting capital raising plans of PSU banks.
    • The government doesn’t want a disruption in the fund mobilization exercise of banks at a time when two PSU banks are on the privatization block.
    • Banks are yet to receive the proposed capital injection in FY21 although they will need more capital to face the asset-quality challenges in the foreseeable future.
    • Fitch’s own estimate pegs the sector’s capital requirement between $15 billion-58 billion under various stress scenarios for the next two years, of which state banks account for the bulk.

  • Martian ‘Blueberries’

    In 2004, NASA’s Mars exploration rover ‘Opportunity’ found several small spheres on the planet, informally named Martian blueberries which find a resemblance to the similar formation in India’s Kutch region.

    There have been several missions to the red planet this year. Make a note of all of them.

    Martian blueberries

    • Opportunity’s mini spectrometers studied mineralogy and noted they were made of iron oxide compounds called haematites.
    • This caused excitement, as the presence of haematites suggests that there was water present on Mars.
    • The widely accepted formation mechanism of hematite concretion [hard solid mass] is precipitation from aqueous fluids.
    • Hematite is known to form in oxidizing environments hence it can be inferred that water must have played a crucial role in the formation of grey hematite on Mars.

    What makes them so special?

    • Indian researchers have been studying hematite concretions in Kutch called the Jhuran formation.
    • These formations are 145 and 201 million years old.
    • Detailed geochemistry and spectroscopic investigations of the haematite concretions in this area revealed that they resemble the ones on Mars.
    • They have similar morphology – spherical, often doublet and triplet – and similar mineralogy – a mixture of haematite and goethite.
    • Hence, several types of research have shown that the Kutch area is a potential Martian analogue locality.

  • Raman Thermometry check on health of power lines

    Researchers at IIT Madras have demonstrated that by using Raman thermometry on fibre optic cables, they can achieve the monitoring of power transmission cables.

    What is Raman Thermometry?

    • Raman spectroscopy is well known as an analytical method for identifying chemical compounds and characterizing the chemical bonding and solid-state structure of materials.
    • Perhaps less well known is the fact that one can use Raman spectroscopy to determine the temperature of the material being analyzed.

    For that, we need to get familiarized with Raman Effect

    • India’s first and so far only Nobel laureate in physics, C.V. Raman, won the prize for his discovery of the Raman Effect.
    • This consisted of experimental observations on the scattering of light.
    • In the Raman Effect, when light is scattered off an object, say a molecule, two bands are observed, with a higher and lower frequency than the original light, called the Stokes and anti-Stokes bands, respectively.
    • By studying the relative intensity of the two bands, it is possible to estimate the temperature of the object that scattered the light.
    • The anti-Stokes component of Raman scattering is strongly dependent on the temperature that the material is subjected to.

    Thus, by measuring the intensity of the anti-Stokes scattered light we can estimate the temperature. This is Raman thermometry.

    Try this PYQ:

    Q.Which Indian astrophysicist and Nobel laureate predicted rapidly rotating stars emit polarized light?

    (a) Subrahmanyan Chandrasekhar

    (b) CV Raman

    (c) Ramanujan

    (d) Amartya Sen

    What has IITM achieved?

    • The temperature measurement was performed in not just one location, but in a distributed manner using an optical fibre.
    • To achieve this, a pulse of light was launched into the optical fibre and the backscattered radiation was observed.
    • The time of flight of the backscattered radiation provided an estimate of the distance from which the light is backscattered.
    • This can go up to tens of kilometres. This technique is married to Raman thermometry to get the results for actual measurements over tens of kilometres.

    What makes this experiment special?

    • The distribution Sector considered the weakest link in the entire power sector.
    • We are much aware of Transmission and Distribution loss that is incurred to our DISCOMS.
    • This IITM technology helps analyze transmission efficiencies in a better way.
    • The present method devised by the team is both economical and provides real-time information.

  • Genetics of Eye Color

    Researchers from London have found that eye colour in Asians with different shades of brown is genetically similar to eye colour in Europeans ranging from dark brown to light blue.

    Human Eye Colour

    • Human eye colour ranges from black, brown to blue, green, and even red.
    • Eye colour is primarily determined by melanin abundance within the iris pigment epithelium, which is greater in brown than in blue eyes.
    • There are two forms of melanin – eumelanin and pheomelanin – and the ratio of the two within the iris as well as light absorption and scattering by extracellular components are additional factors that give irises their colour.
    • Absolute melanin quantity and the eumelanin–pheomelanin ratio is higher in brown irises, while blue or green irises have very little of both pigments and relatively more pheomelanin.

    Try this PYQ:

    Q.Recently, LASIK (Lasser Assisted In Situ Keratomileusis) procedure is being made popular for vision correction. Which one of the following statements in this context is not correct?

    (a) LASIK procedure is used to correct refractive errors of the eye

    (b) It is a procedure that permanently changes the shapes of the cornea

    (c) It reduces a person’s dependence on glasses or contact lenses

    (d) It is a procedure that can be done on the person of any age

    What has the research found?

    • Previously a dozen genes (mainly HERC2 and OCA2) were found to influence eye colour.
    • The researchers have now identified 50 new genes for eye colour.
    • Genetic analysis of nearly 0.2 million people across Europe and Asia helped the researchers to identify the new genes.
    • The findings collectively explain over 53% of eye colour variation using common single-nucleotide polymorphisms.

    Outcome of the research

    • Overall, the study outcomes demonstrate that the genetic complexity of human eye colour considerably exceeds previous knowledge and expectations.
    • These findings will help improve our understanding of eye diseases such as pigmentary glaucoma and ocular albinism where pigment levels play a role.

  • 15th March 2021 | Prelims Daily with Previous Year Questions

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  • It takes just one attempt to clear UPSC IAS| Fine-tune your preparation | Fill Samanvaya for IAS 2021/2022 (get free Tikdam ebook)

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  • These mistakes might cost you an UPSC IAS attempt | Fill Samanvaya for IAS 2021-22 and discuss how to avoid them.

    These mistakes might cost you an UPSC IAS attempt | Fill Samanvaya for IAS 2021-22 and discuss how to avoid them.

    Fill Samanvaya form given below to discuss and resolve your UPSC IAS preparation issues and doubts with us. Get FREE Tikdam e-book and IAS starter material after form submission.

    There are some fundamental mistakes that many serious aspirants make. And no, we’re not talking about ignoring daily current affairs, not writing answers, or attempting tests.

    Based on our interaction with 2500 aspirants in the past two months who have not been able to clear this exam after multiple attempts, there are five deadly mistakes for an UPSC aspirant. Before we start fill Samanvaya form if not done already.

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    Starting with our list of deadly mistakes you should avoid.

    1. Ignoring or failing to understand what UPSC expects from you.

    UPSC through this exam has to maintain the merit in the Indian administration. For that, they are constantly evolving w.r.t. the exam process – questions and the manner in which they ask questions. Just go through the last three years’ UPSC Prelims question papers and you will realize it yourself.

    Just knowing the syllabus and sources is not enough. Neither is it about finishing the syllabus only. It has to be done in a certain manner. Only when you know what UPSC wants you can make an effort in that direction. Fill Samanvaya form below to discuss the expectations of UPSC and more.

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    2. Not having a workable strategy

    Internet and youtube are flooded with IAS toppers’ strategy. While it worked for the toppers, what will work for you is a strategy that is based on your situation (UPSC experience, education, background, etc.), your learning style, the time you have, consideration for your job commitments, etc.

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    3. No mechanism to identify your mistakes

    Even if you’ve taken multiple attempts you are bound to make some mistakes, much more for UPSC beginners. These are inevitable. And this makes it essential for you to put up a mechanism to find out and highlight those mistakes in your preparation on a regular basis.

    Eg. Finished Modern History (or any subject), only to realize after a month that you don’t seem to remember a thing or solve a UPSC level MCQ. This realization that you’re doing it wrong should have come to you on the first or second day itself. You could’ve saved your precious time, efforts and attempt.

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    4. Inability to rectify your mistakes

    Maybe due to inertia or ignorance or fear of change, most of the aspirants are not able to rectify their mistakes.

    Eg. Even after finishing Laxmikant for Polity a couple of times you can’t understand why you are scoring miserably low marks in Polity pre-mocks. Or, not able to improve your mains answers.

    Only those who are able to rectify their mistakes on a frequent basis are able to clear this exam. What issues with your preparation you feel are difficult to resolve? Fill Samanvaya and let us help you resolve them.

    5. Integrate these learnings in your preparation

    After you have developed the awareness of the mistakes and what should be done, you must integrate it asap with your preparation. The required unlearning and re-learning must take on a regular basis.

    Eg. You were scoring less in answer writing and realized that it was due to either missing out on the demand of the question or not giving examples to support your arguments. Don’t stall the process of improvement. Do it asap.

    Instead of regressing or stopping, you should always be moving forward, closing the loops of progress, and returning to the most effective path.

    Whatever be the stage of your IAS exam preparation, these mistakes must be avoided at all costs and nipped-in-the-bud.

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    More than 10.5 lakh applied, but only 796 are going to clear UPSC IAS 2020. It is going to be much more challenging in 2021 and 2022.

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    How to prepare for upsc 2021? Strategy for upsc 2021? Answer writing for 2020
    Daily target monitoring.

    3. The third and the most personalized tier is the dedicated 1 on 1 mentor allotment who stays with you through the course of your UPSC preparation – always-on chat and on scheduled calls to help you assess, evaluate, and chart the next milestone of your IAS 2021/2022 journey.

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    1. Working Junta? If you are preparing for IAS 2021/2022 and working simultaneously, we can help you strategize and decipher the IAS exam and design a timetable that fits right in your hectic schedule.
    2. First-time prep? If you are in the last year of college or thinking of dropping a year and preparing for IAS 2021/2022 full time, we’ll help you pick the right books and craft a practical & personal strategy.
    3. Have appeared before? and weren’t successful. We’ll help you identify your mistakes, rectify them for the necessary course correction. Let this be your final and successful attempt.

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  • Need for national security shield in FDI

     

    Relaxation on Chinese FDI

    • Last April, India had subjected all Chinese FDI to mandatory government screening.
    • The aim was to curb opportunistic takeovers of Indian companies, a concern fuelled by sharp corrections in equity markets in March 2020.
    • Several economies including the US, Australia, Canada and Germany faced similar concerns.
    • They blocked specific takeover attempts, using special laws for national security screening of inward FDI.
    •  In the absence of similar legislation, India did not differentiate between investments which raised genuine national security concerns and those that did not.
    • This is a crucial shortcoming.
    • With market indices now hovering at their peaks, reportedly India may allow Chinese FDI up to 25 per cent in equity under the automatic route.

    Regulation of FDI and issues with it

    • India regulates foreign investments primarily through FEMA.
    • FEMA clearly provides two specific macro-prudential objectives — facilitating external trade and payments; and promoting orderly development and maintenance of foreign exchange markets in India.
    • Accordingly, it empowers the central government and the RBI, acting in consultation with each other, to regulate capital account transactions.
    • These regulations determine who can invest through the FDI route, in which sector and how much.
    • In practice, however, FEMA regulations have often responded to concerns not strictly related to macro-prudential objectives.
    • One such concern has been national security.

    Need for the law to scrutinise FDI from national security angle

    • Shortcoming of FEMA underscores the need for India to emulates its western peers and enact a statute specifically designed for national security screening of strategic FDI.
    • Unlike FEMA, this new statute must explicitly lay down legal principles for determining when a foreign acquisition of an Indian company poses genuine national security threats.
    • In this regard, a policy paper published by the Peterson Institute for International Economics three types of legitimate threats from foreign acquisitions.

    3 Types of threat from foreign acquisitions

    1) Dependency on foreign supplier

    • The first threat arises if a foreign acquisition renders India dependent on a foreign-controlled supplier of goods or services crucial to the functioning of the Indian economy.
    • For this threat to be credible, it needs to be further established that the industry in which the acquisition is supposed to take place is tightly concentrated, the number of close substitutes limited, and the switching costs are high.

    2) Technology transfer

    • The second threat emanates from a proposed acquisition transferring a technology or an expertise to a foreign-controlled entity that might be deployed by that entity or a foreign government in a manner harmful to India’s national interests.
    • The credibility of this threat again depends on whether the market for such technology or expertise is tightly concentrated or if they are readily available elsewhere.

    3) Threat of infiltration, surveillance or sabotage

    • The third threat arises if a proposed acquisition allows insertion of some potential capability for infiltration, surveillance or sabotage via human or non-human agents into the provision of goods or services crucial to the functioning of Indian economy.
    • This threat is particularly credible when the target company supplies crucial goods or services to the Indian government, its military or even critical infrastructure units and the switching costs are high.

    Way forward

    • The above stated 3 types of threats could provide conceptual clarity in the new statute could make national security assessments objective, transparent and amenable to the rule of law.
    • On procedure, the statute must empower only the finance minister to reject certain strategic foreign acquisitions on national security grounds.
    • Both the power and accountability mechanisms should be hardcoded into the statute itself, as is the case in some mature parliamentary democracies.
    • For instance, the Australian Foreign Acquisitions and Takeovers Act, 1975 empowers the treasurer to block certain foreign acquisitions on national security grounds.
    • Similarly, the Investment Canada Act, 1985 empowers a minister to reject certain foreign acquisitions.

    Consider the question “India needs to recognise the national security threat emanating from strategic FDI. This requires identifying threats. In lights of this, examine the types of threats and suggest the ways to deal with it.” 

    Conclusion

    Overall, India’s tryst with Chinese FDI underscores the importance of identifying specific national security threats emanating from strategic FDI and addressing them objectively. This is too sensitive a matter to be left to capital controls under FEMA. A dedicated statute for national security screening of inward FDI would be best suited for handling such issues.

  • Factors driving India’s growing security footprints in West Asia

    The article examines the factors that are leading to a growing footprint of Asian economies in West Asia.

    Growing interest of Asian Economies  in West Asia

    • This month, a contingent of the Indian Air Force participated in a multi-nation exercise hosted by the United Arab Emirates (UAE) named Desert Flag (March 3-27).
    • Other than India and the UAE, Bahrain, France, Saudi Arabia, South Korea and the United States are also participating.
    • While joint exercises in West Asia between Arab states and their western counterparts is common, the 2021 edition’s involvement of contingents from India and South Korea.
    • This showcases the growing interests of Asian economies.
    • As net importers of crude oil, these Asian economies rely heavily on the West Asian states for their supplies,
    • And, by association, Asian economies have increased stakes in the safety and security of the region from the perspective of political and economic stability.
    • And more importantly, in the protection of vital sea lanes in areas such as the Strait of Hormuz, the Gulf of Aden and the Red Sea stretching out into the Arabian Sea and the wider Indian Ocean.

    Declining U.S. influence

    • In April 2020, Saudi Arabia was India’s top supplier of oil followed by Iraq.
    • For South Korea, in late 2019, it was also Saudi Arabia as the top supplier.
    • The participation of both India and South Korea in these exercises in the Persian Gulf is reflective of these trends and growing concerns in Asian capitals over an eroding U.S. security blanket in the region.

    Tension in Iran-U.S. relations

    • Both India and South Korea have found themselves caught in regional tensions as the pressure on Iran to restart the 2015 nuclear agreement (Joint Comprehensive Plan of Action, or JCPOA) increases.
    • Both India and South Korea have faced carbon-copy consequences over the past decade as the West first negotiated with Iran, and later tried to manage the fallout of the JCPOA collapse.

    India’s role in protecting it’s energy interests

    • The idea of Asian nations having to band together to protect their energy interests in West Asia is not new.
    • Former Indian diplomats have even suggested an idea equitable to an ‘importers OPEC’ led by Asian states which today have a much larger stake in West Asia’s oil than the West.
    • The Indian Navy has made multiple port calls from the UAE and Kuwait to Iran and Qatar in recent years.
    • In 2020, India had also planned its first bilateral naval exercise with Saudi Arabia.

    Consider the question “Examine the factors responsible for India’s growing security footprint in West Asia and how India is achieving its objectives?”

    Conclusion

    Regional states will become more responsible for their own security, and as Asian economies become stronger stakeholders, their geopolitics will become more visible across this geography.

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