Sri Lankan President Anura Kumara Dissanayake’s visit to India, his first international trip as per tradition, underscores the continuity in India-Sri Lanka bilateral relations.
What are the current China-related challenges in India-Sri Lanka relations?
Geopolitical Tensions: Sri Lanka’s historical ties with China, particularly during the Mahinda Rajapaksa regime, have raised concerns in India regarding potential Chinese influence in the region.
China’s investment in Sri Lanka, particularly in the Hambantota Port, is closely tied to its broader String of Pearls strategy.
Economic Dependency: Sri Lanka’s reliance on Chinese investments has created a “debt trap” scenario, limiting its ability to align with Indian interests fully. The need for economic assistance from both nations complicates Sri Lanka’s foreign policy decisions, as it seeks support without alienating either side.
Balancing Act: Sri Lanka is attempting to navigate its relationships with India and China, which often puts it in a difficult position.
President Anura Kumara Dissanayake has expressed intentions to strengthen ties with India while maintaining relations with China, indicating a desire for a balanced approach. However, this balancing act is complicated by India’s concerns over Chinese influence and activities in the Indian Ocean.
How can India and Sri Lanka enhance their economic and strategic partnerships?
Trade Agreements: There is a push for an upgraded India-Sri Lanka Free Trade Agreement (FTA) to facilitate bilateral trade and investment. This could include provisions for Foreign Direct Investment (FDI) protection and expanded coverage of goods and services.
Production-Linked Incentive (PLI) Scheme: Implementing a regional PLI scheme could encourage Indian businesses to invest in Sri Lanka, particularly in sectors like renewable energy and electronics. This initiative would help build regional supply chains and reduce dependency on imports.
B2B Engagement: Strengthening business-to-business ties, especially between smaller enterprises, could enhance economic collaboration. This involves increasing participation in trade fairs and fostering connections between businesses in southern Indian states and Sri Lanka.
What role does regional stability play? (Way forward)
Security Cooperation: Regional stability is crucial for both nations as they address external threats, particularly from China. Dissanayake’s assurance that Sri Lankan territory will not be used against Indian interests is vital for maintaining security cooperation and trust between the two countries.
Economic Recovery: As Sri Lanka recovers from its recent economic crisis, stable relations with India are essential for securing ongoing support from international financial institutions like the IMF. Enhanced cooperation can serve as a model for regional partnerships that promote stability and economic growth across South Asia.
Geopolitical Balance: A collaborative approach can help mitigate risks associated with external influences and ensure that both nations can pursue their national interests without compromising sovereignty.
Mains PYQ:
Q What do you understand by ‘The String of Pearls’? How does it impact India? Briefly outline the steps taken by India to counter this. (UPSC IAS/2013)
By the end of 2023, China emerged as the leading debt collector, holding over 25% of the world’s bilateral external debt.
Two decades ago, Japan, followed by Germany, France, the United States, and the United Kingdom, dominated global lending, with China rarely extending loans.
What is China’s ‘Debt Trap Policy’?
China’s “Debt Trap Policy” (also known as the ‘slicing strategy’) refers to a strategy where it provides excessive loans to developing countries, often for large infrastructure projects, which these nations struggle to repay. This policy is primarily associated with China’s Belt and Road Initiative (BRI).
When countries default on their loans, they may be forced to cede control of critical assets to China, effectively creating a debt-for-equity swap.
Notable examples include Sri Lanka’s Hambantota port, which was leased to China for 99 years after the country failed to meet repayment obligations.
Which countries have been affected by China’s debt trap policy?
Sri Lanka: Struggled with $8 billion in debt, leading to the leasing of the Hambantota port.
Pakistan: Owes approximately $22 billion, close to 60% of its bilateral debt.
Laos: Faces significant economic challenges with $6 billion owed to China, over 75% of its bilateral debt.
Angola: Owes $17 billion, about 58% of its external debt. These countries often find themselves in financial distress due to high interest rates and the burden of debt repayments consuming essential public resources.
How are developing countries managing their debt to China?
Developing countries are employing various strategies to manage their debts to China:
Debt Restructuring: Nations like Zambia are negotiating terms to restructure their debts in light of economic difficulties.
Attracting Investment: Countries are seeking new foreign investments or loans from other nations or institutions to alleviate their financial burdens.
Engaging in Bilateral Talks: Some nations are attempting to engage China in discussions aimed at debt forgiveness or more favourable repayment terms. However, China’s reluctance to forgive debt complicates these negotiations.
What are the implications of this debt burden on regional and global geopolitics?
The implications of China’s debt policies extend beyond economics into geopolitics:
Increased Influence: By becoming the largest creditor, China gains substantial leverage over debtor nations, potentially influencing their foreign policy and strategic decisions. This is particularly evident in South Asia and Africa, where countries may align more closely with Chinese interests due to their indebtedness.
Economic Dependency: Nations heavily reliant on Chinese loans risk becoming economically dependent on China, which can limit their sovereignty and decision-making capabilities. This dependency can also lead to geopolitical tensions with other powers, such as India or the United States.
Potential Instability: The growing debt burden could lead to financial crises in several nations, resulting in political instability. The inability of countries like Sri Lanka and Pakistan to manage their debts raises concerns about broader regional stability and economic health.
What are the challenges to India due to this policy?
Rising Chinese Influence and Strategic Risks: China’s lending practices are expanding its influence in South Asia, particularly in nations like Pakistan, Sri Lanka, and Nepal, undermining India’s role as a regional leader.
This includes control over strategic assets such as Sri Lanka’s Hambantota Port and infrastructure under the China-Pakistan Economic Corridor (CPEC) in the POK region, which poses direct security threats to India.
Geopolitical and Economic Competition: China’s assertiveness in the Indo-Pacific region, coupled with favorable loan terms, challenges India’s investments and diplomatic efforts.
Regional Instability and Spillover Effects: Debt-driven economic instability in countries like Sri Lanka results in political unrest and humanitarian crises, which can spill over into India, necessitating responses to refugee inflows and potential destabilization in the region.
Way forward:
Strengthening Regional Partnerships: India should enhance economic and strategic cooperation with neighbouring countries through competitive financing, capacity-building initiatives, and infrastructure projects under transparent terms to counter China’s influence and foster regional stability.
Promoting Multilateral Solutions: India can collaborate with global institutions like the IMF, World Bank, and Quad partners to offer alternative financial support.
Mains PYQ:
Q The China-Pakistan Economic Corridor (CPEC) is viewed as a cardinal subset of China’s larger ‘One Belt One Road’ initiative. Give a brief description of CPEC and enumerate the reasons why India has distanced itself from the same. (UPSC IAS/2018)
Sovereign gold bonds provide a safer and more cost-effective alternative to holding physical gold, as they reduce risks and storage expenses. However, the central government is considering discontinuing the SGB scheme.
What is the Sovereign Gold Bond scheme?
About
GOI launched it on October 30, 2015.
Structural Mandate
Nodal Agency:Ministry of Finance;
Issued by RBI on behalf of the GOI.
Aims and Objectives
To reduce dependence on gold imports and shift savings from physical gold to paper form.
Targeted Beneficiaries
Residents of India, including individuals, HUFs, trusts, universities, and charitable institutions.
Funding Mechanism
The Sovereign Gold Bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government of India. This ensures a sovereign guarantee for both the principal and interest payments.
The bonds are made available for subscription in tranches. The RBI notifies the terms and conditions for each tranche, including the subscription dates and issue price, which is based on the average closing price of gold of 999 purity published by the India Bullion and Jewellers Association (IBJA).
SGBs are sold through various channels, including scheduled commercial banks (excluding small finance banks), designated post offices, Stock Holding Corporation of India Limited (SHCIL), and recognized stock exchanges like NSE and BSE.
Features
Sovereign gold Bonds are issued in 1-gram denominations with an 8-year tenure and early exit from the 5th year.
The minimum investment is 1 gram, a maximum 4 kg for individuals, and 20 kg for trusts.
Benefits include security, interest, and loan collateral.
What are the concerns regarding sovereign gold bonds?
High Cost of Financing: The government perceives the cost of financing its fiscal deficit through SGBs as disproportionately high compared to the benefits provided to investors. This perception has led to a significant reduction in the issuance of SGBs, dropping from ten tranches annually to just two.
Limited Issuance in Current Financial Year: In the financial year 2024-25, no new sovereign gold bonds have been issued so far, and net borrowing through these bonds has been significantly reduced from previous estimates.
Market Competition from Physical Gold: The recent reduction in customs duty on gold from 15% to 6% has led to a surge in demand for physical gold. Investors may prefer holding physical gold over waiting for returns from debt securities like SGBs, which require maturity periods before realizing gains.
What are the challenges due to the import of Gold?
Impact on Trade Deficit: Gold imports are a major contributor to India’s trade deficit, with a record $14.8 billion spent in November 2024, which weakened the rupee. Between 2016 and 2020, gold imports made up 86% of the country’s gold supply, leading to significant foreign exchange outflows and economic instability.
Encouragement of Smuggling: High import duties on gold have driven a rise in smuggling, with 65% to 75% of smuggled gold entering India through air routes. This illegal trade undermines government revenue and complicates market regulation.
Way forward:
Increase Liquidity and Accessibility: Similar to gold-backed ETFs in the U.S. and Gold Bullion Securities in Australia, India can enhance the liquidity of SGBs by allowing them to be traded on stock exchanges, providing easy access and better market engagement for investors.
Encourage Regular Investments: Drawing inspiration from Germany’s gold savings plans, India can introduce flexible investment options such as monthly or quarterly contributions, enabling dollar-cost averaging and attracting retail investors over time.
Mains PYQ:
Q Craze for gold in Indian has led to surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of Gold Monetization scheme. (UPSC IAS/2015)
Landslides: Movement of a mass of rock, debris, or earth down a slope under the direct influence of gravity.
It is estimated that 30% of the world’s landslides occur in the Himalayan ranges.
In the Nilgiris alone, unprecedented rains in the region triggered about 100 landslides.
The mean rate of land loss is to the tune of 120 meters per kilometer per year and the annual soil loss is about 2500 tons per square kilometer.
Landslide Vulnerability Zones:
Very High Vulnerability Zone: Highly unstable, relatively young mountainous areas in the Himalayas and Andaman and Nicobar, Western Ghats and Nilgiris, the north-eastern regions.
High Vulnerability Zone: All the Himalayan states and the states from the north-eastern regions except the plains of Assam.
Moderate to Low Vulnerability Zone: Areas that receive less precipitation such as Trans- Himalayan areas of Ladakh and Spiti (Himachal Pradesh), Aravali, rain shadow areas in the Western and Eastern Ghats and Deccan plateau.
Rockfalls: Rapid descent of individual rock fragments. Example: Landslides along mountainous roads, like the Kedarnath landslide in India (2013).
Debris Flows: Fast-moving mix of water, soil, and debris. Example: The Oso landslide in Washington, USA (2014).
Mudslides: Slurry of waterlogged soil and debris. Example: The Sierra Leone mudslides in Freetown (2017).
Landslide Avalanches: Large-scale, fast-moving landslides. Example: The Randa rockslide in Switzerland (1991).
Creep: Slow, gradual downhill movement of soil or rock. Example: Ongoing creep on hillsides globally.
Earthflows: Sluggish flow of saturated soil and debris. Example: The Vaiont Dam landslide in Italy (1963).
Lateral Spreads: Horizontal movement of soil and rock. Example: The Hope Slide in British Columbia, Canada (1965).
Criteria to Declare:
The Indian government typically relies on a combination of criteria and monitoring systems to declare landslides and issue alerts. These criteria may include:
Geological Studies: Assessment of factors like soil types, rock formations, and past landslide history.
Rainfall Data: Heavy and prolonged rainfall can saturate the soil, increasing the likelihood of landslides.
Ground Movement Monitoring: Technologies like inclinometers and GPS are used to detect ground movement or slope instability in vulnerable areas.
Remote Sensing: Satellite imagery and aerial surveys are employed
Weather Forecasts: Meteorological data and weather forecasts are examined that could trigger landslides.
Historical Data: Past landslide events and their impact on specific regions are considered when assessing the risk of future landslides.
Early Warning Systems: Many states in India have early warning systems in place to provide alerts to residents in landslide-prone areas when conditions become hazardous.
Causes:
Natural
Heavy Rainfall: Prolonged or intense rainfall can saturate the soil, making it more susceptible to sliding.
Steep Slopes: Slopes with steep gradients are more prone to landslides.
Earthquakes: Ground shaking from earthquakes can dislodge rocks and soil, leading to landslides.
Volcanic Activity: By altering the landscape or generating pyroclastic flows.
Erosion: Natural erosion processes, such as rivers undercutting hillsides.
Soil Type: Loose, poorly compacted soils are more likely to fail.
Freeze-Thaw Cycles: In colder climates, freeze-thaw cycles can expand and contract water within rocks and soil, leading to fracturing and landslides.
Wildfires: Fires can destroy vegetation and alter soil properties, increasing the risk of landslides during subsequent rainfall.
Anthropogenic:
Deforestation: The removal of trees and vegetation makes slopes more susceptible to sliding.
Human Modification: Changes in land use and urbanization can increase the risk of landslides.
Human Activities: Excavation, mining, construction, and irrigation can alter the natural landscape and trigger landslides.
Lack of Drainage: Inadequate drainage systems can lead to water accumulation in the soil, increasing its weight and instability.
Restriction on the construction and other developmental activities.
Limiting agriculture to valleys and areas with moderate slopes.
Control on the development of large settlements in the high vulnerability zones.
Promoting large-scale afforestation programmes.
Constructions of bunds to reduce the flow of water.
Terrace farming should be encouraged in the northeastern hill states where Jhumming (Slash and Burn/Shifting Cultivation) is still prevalent.
Landslide Risk Mitigation Scheme (LRMS):
The Scheme envisages financial support for site specific Landslide Mitigation Projects recommended by landslide prone States, covering “disaster prevention strategy, disaster mitigation and R&D in monitoring of critical Landslides” thereby leading to the development of Early Warning System and Capacity Building initiatives.
NDMA Guidelines:
Do’s
Move away from landslide paths or downstream valleys quickly without wasting time.
Keep drains clean,
Grow more trees that can hold the soil through roots,
Identify areas of rock fall and subsidence of buildings, cracks that indicate landslides and move to safer areas. Even muddy river waters indicate landslides upstream.
Ensure that the toe of slope is not cut, remain protected, don’t uproot trees unless re-vegetation is planned.
Listen for unusual sounds such as trees cracking or boulders knocking together.
Stay alert, awake and active (3A’s) during the impact or probability of impact.
Try to stay with your family and companions.
Check for injured and trapped persons.
Mark path of tracking so that you can’t be lost in the middle of the forest.
Don’ts
Try to avoid construction and stay in vulnerable areas.
Do not touch or walk over loose material and electrical wiring or poles.
Do not build houses near steep slopes and near drainage paths.
Do not drink contaminated water directly from rivers, springs, wells but rain water if collected directly without is fine.
Do not move an injured person without rendering first aid unless the casualty is in immediate danger.
Way Forward:
India has a high degree of vulnerability towards the occurrence of Landslides. It is therefore not possible for the government to completely stop their occurrence. Although, it can definitely curtail their adverse impact by developing robust resilience in consonance with the Sendai Framework for Disaster Risk Reduction 2015-2030.
Urban Floods: It is caused by the combination of meteorological, hydrological and human factors. Flood peaks from 1.8 to 8 times and flood volumes by up to 6 times.
The global Urban Exposure to flooding increased more than four-fold from 16,443 km2 in 1985 to 92,233 km2 in 2018.
The most notable growth occurred in Asia (74.1%), followed by Europe (11.6%), Northern America (8.7%), Africa (2.9%), Southern America (2.2%), and Australia (0.5%).
Floodplains only accounted for 5.5% of the global land areas, 12.6% of the urban expansion occurred in the floodplains from 1985 to 2018.
Nodal Ministry: Min. of Housing and Urban Affairs (MHUA)
Maharashtra: Cities like Mumbai and Pune are known to experience urban floods.
West Bengal: Kolkata and other low-lying regions.
Tamil Nadu: Chennai has faced significant urban flooding incidents in recent years.
Kerala: Cities like Kochi and Thiruvananthapuram are prone to flooding, due to their topography and heavy rains.
Gujarat: Urban areas in Gujarat, such as Ahmedabad, can experience flooding during heavy rainfall events, as the state is susceptible to both coastal and riverine flooding.
Assam: Guwahati and other cities in Assam face urban floods due to their location in the flood-prone Brahmaputra River basin.
Uttar Pradesh: Cities like Lucknow and Kanpur are at risk of urban flooding, often exacerbated by rapid urbanization and poor drainage infrastructure.
Bihar: Cities along the Ganges River, like Patna, are susceptible to urban flooding during monsoons and heavy rain events.
Delhi: The national capital region, including Delhi, is at risk due to urban development, inadequate drainage, and the seasonal overflow of the Yamuna River.
Andhra Pradesh and Telangana: Cities like Hyderabad are prone to urban flooding, with incidents occurring due to heavy rainfall and rapid urban expansion.
Types of Urban Floods:
Sewer Backup Flooding: Happens when sewage systems fail, leading to inundation. Example: Bengaluru’s sewer backup flooding in low-lying areas.
Infrastructure Failure Flooding: Caused by failures in urban infrastructure, such as dam breaches or canal breaches. Example: The 1979 Machu Dam failure in Gujarat led to urban flooding.
Criteria to Declare:
In India, the criteria to declare an urban flood can vary by state and local authorities, but some common factors considered include:
Rainfall Intensity: The amount and intensity of rainfall over a specified period, often exceeding the local drainage capacity.
Waterlogging: Extensive waterlogging in urban areas, leading to disruptions in daily life and traffic flow.
River Water Levels: Rising river levels that breach their banks and inundate urban areas can trigger a flood declaration.
Drainage System Capacity: Overflow or failure of drainage systems, including stormwater drains and sewers.
Impact on Infrastructure: Damage to critical infrastructure like roads, bridges, and public utilities due to water accumulation is also assessed.
Evacuation Needs: The necessity of evacuating residents from affected areas due to flooding is a significant factor in declaring an urban flood.
Causes:
Encroachments on the natural drains and the river floodplains.
Improper disposal of solid waste.
Dumping of construction debris.
Sudden release or failure to release water from dams.
The urban heat island effect has resulted in an increase in rainfall.
Global climate change results in increased episodes of high-intensity rainfall events.
Mitigation:
Estimation and identification of emergency needs and resources.
Preparation of well-designed plans for the entire post-flooding response.
Take all necessary measures for planning, capacity building, and other preparedness.
It includes the development of identification of Teams for maintaining the drains and roads,
Mobilization of resources and taking measures in terms of equipping, providing training, conducting exercises for prevention of water logging/inundation etc.
NDMA Guidelines:
Battery operated torch
Extra batteries
Battery operated radio
First aid kit and essential medicines
Emergency food (dry items) and water (packed and sealed)
Candles and matches in a waterproof container
Knife
Chlorine tablets or powdered water
Thick ropes and cords
Shoes
Way Forward:
Need For Holistic Engagement: Urban floods of this scale cannot be contained by the municipal authorities alone. Floods cannot be managed without concerted and focused investments of energy and resources.
The Metropolitan Development Authorities, National Disaster Management Authority, State Revenue and irrigation departments along municipal corporations should be involved in such work together.
Developing Sponge Cities: Sponge cities absorb the rainwater, which is then naturally filtered by the soil and allowed to reach urban aquifers.
Wetland Policy: There is a need to start paying attention to the management of wetlands by involving local communities.
To improve the city’s capacity to absorb water, new porous materials and technologies must be encouraged or mandated across scales. Examples of these technologies are bioswales and retention systems, permeable materials for roads and pavement, drainage systems that allow stormwater to trickle into the ground, green roofs, and harvesting systems in buildings.
The Central Zoo Authority has initiated the development of the National Wildlife Health Policy (NWHP) through a consultative workshop held in New Delhi.
About theNational Wildlife Health Policy (NWHP):
Details
An initiative launched by the Central Zoo Authority (CZA) to improve wildlife health and control zoonotic diseases.
CZA, established in 1992 under the Wildlife Protection Act, 1972, is a statutory autonomous body under the MoEFCCC.
Part of the National Wildlife Action Plan (2017-31) and follows the One Health approach, which integrates human, animal, and environmental health.
Aims and Objectives
Prevent and Control Zoonotic Diseases: Strengthen monitoring and control of diseases.
Improve Disease Surveillance: Develop systems for early epidemic detection.
Promote One Health Principles: Integrate human, animal, and environmental health.
Community Advocacy: Increase awareness on wildlife health and conservation.
Programs/Initiatives Under the Policy
Wildlife Health Management Unit (WHMU): A dedicated unit to implement wildlife health programs.
Disease Surveillance and Early Detection: Early detection of diseases, especially in protected areas.
Biosecurity Protocols: Strengthen measures to minimize disease risks.
Epidemic Preparedness and Response: Response strategies for wildlife disease outbreaks.
One Health Approach Integration: Coordination between health sectors for better management.
Structural Mandate and Implementation
Wildlife Health Management Unit (WHMU) (proposed) to oversee wildlife health programs.
Collaboration Across Agencies: Coordination with MoEF&CC, Wildlife Institutes, and state wildlife authorities.
Surveillance and Monitoring: Monitor and track wildlife diseases, with research support from Indian Veterinary Research Institute (IVRI).
Capacity Building: Training programs for wildlife health professionals.
Funding and Resources: Significant resources for surveillance, research, and capacity building.
The 11th plenary of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) took place in Namibia to discuss key scientific findings and evidence addressing the global biodiversity crisis.
About IPBES
IPBES aims to improve the interface between science and policy on biodiversity and ecosystem services.
Membership: Comprises over 130 member governments.
Purpose: Provides scientific assessments to guide governments, the private sector, and civil society in decision-making on biodiversity and ecosystems.
Establishment:
Formally established in April 2012 when 90 countries signed its founding statement.
Originated from a 2010 UN General Assembly resolution urging the UN Environment Programme to convene a meeting for its formation.
Structural Mandate:
Led by a Plenary (main decision-making body) with representatives from member states.
Operates on a consensus principle, meeting annually to decide on work programs, budgets, and reports.
Key Functions:
Assessments: Develop global and regional assessments on biodiversity themes.
Policy Support: Provide tools and methodologies for policymakers.
Capacity Building: Enhance knowledge and capabilities among members.
Outreach: Ensure effective communication and impact.
Notable Achievements:
2019: Released the Global Assessment Report on biodiversity and ecosystem services.
2020: Preliminary report on international cooperation to reduce pandemic risks.
2021: Co-sponsored a biodiversity and climate change workshop report with IPCC.
2022: Awarded the Gulbenkian Prize for Humanity, shared with IPCC.
Unique Contributions:
Introduced the term “Nature’s Contributions to People” (NCPs) as an alternative to ecosystem services.
Compiles knowledge from diverse sources, including scientific literature, indigenous knowledge, and local expertise.
Key Highlights on the Global Environment:
Biodiversity Loss: 1 million species face extinction due to habitat destruction, climate change, and pollution.
Climate Change Impact: Global warming is significantly threatening ecosystems and species.
Deforestation: Large-scale deforestation disrupts ecosystems and contributes to carbon emissions.
Water Scarcity: Freshwater ecosystems are under threat from pollution and over-extraction.
Ecosystem Services: Decline in vital services like clean air, water, and food.
Global Cooperation: Urgent need for global action to address climate change, biodiversity loss, and sustainable development.
Biodiversity and Health: Emphasis on the One Health approach to link human, animal, and environmental health.
Key Highlights on the Asian Region:
Biodiversity: Asia hosts half the world’s biodiversity but faces major threats from habitat loss and climate change.
Pollution and Urbanization: Rapid urbanization is increasing pollution, affecting health and the environment.
Climate Change: Vulnerable to floods, droughts, and rising sea levels impacting agriculture and settlements.
Forest Loss: Deforestation, especially in Indonesia, India, and Malaysia, threatens ecosystems.
Marine Biodiversity: Marine life is under pressure from overfishing and pollution.
Sustainable Agriculture: Promoting sustainable farming to reduce environmental impact.
Protected Areas: Despite progress, conservation management remains a challenge.
PYQ:
[2012] The Millennium Ecosystem Assessment describes the following major categories of ecosystem services-provisioning, supporting, regulating, preserving and cultural. Which one of the following is supporting service?
Bitcoin surged to a record high of over $107,000 after President-elect Donald Trump reaffirmed plans to create a US bitcoin reserve, boosting investor excitement.
Do you know?
The legal status of cryptocurrency in India is uncertain.
RBI has warned against cryptocurrencies, citing risks to investors and confirming they are not legal tender.
In 2018, the Supreme Courtoverturned an RBI ban on financial institutions dealing with cryptocurrencies.
In the 2022-23 Union Budget, the Government of India announced a 30% tax on cryptocurrency transfers.
A strategic reserve is a stockpile of critical resources, used in times of crisis or disruptions in supply.
Examples:
US Strategic Petroleum Reserve: Largest global emergency oil stockpile, created in 1975 after the 1973-74 oil embargo.
Canada’s Maple Syrup Reserve: The only global strategic reserve for maple syrup.
China’s Reserves: Includes resources like metals, grains, and pork.
How Would a U.S. Strategic Bitcoin Reserve Work?
Establishing the Reserve: Unclear if it would require executive powers or Congress approval. Some suggest an executive order to manage bitcoin through the U.S. Treasury’s Exchange Stabilization Fund.
Content of the Reserve: Includes seized bitcoin (200,000 tokens, worth approx. $21 billion).
Additional Purchases: Possible purchase of more bitcoin from the open market.
Benefits and Risks of a Bitcoin Reserve
Benefits:
Global Market Dominance: Could enhance U.S. control over the global bitcoin market, especially against competitors like China.
Economic Advantages: Could reduce U.S. fiscal deficit and strengthen the U.S. dollar.
Risks:
Volatility: Bitcoin’s value is uncertain due to volatility and lack of intrinsic use.
Security: Vulnerability to cyber-attacks and market fluctuations.
The Arctic Tundra, a frozen treeless biome, has traditionally served as a carbon sink, storing vast amounts of carbon for thousands of years.
However, recent changes in this ecosystem are turning it into a source of greenhouse gases (GHGs), primarily carbon dioxide (CO2) and methane (CH4) according to National Oceanic and Atmospheric Administration (NOAA).
What is Arctic Tundra?
Arctic Tundra is cold, treeless biome located in the northernmost regions of Earth, primarily within the Arctic Circle.
Climate:
Experiences long, harsh winters and short, cool summers.
Temperatures range from -28°C in winter to 3°C in summer.
Ground is permanently frozen, restricting plant root growth and shaping the ecosystem.
Experiences 24-hour daylight in summer and long polar nights in winter.
Biodiversity and Vegetation:
Limited to low-growing vegetation like mosses, lichens, grasses, and small shrubs, adapted to short growing seasons.
Hosts animals like Arctic foxes, polar bears, caribou, and migratory birds, though overall biodiversity is low.
Adaptations:
Animals: Thick fur and fat layers in species like polar bears to survive extreme cold.
Plants: Shallow roots for quick nutrient absorption during short summers.
How does the Arctic Tundra store Carbon?
The Arctic tundra stores carbon primarily through a process where plants absorb carbon dioxide (CO2) from the atmosphere via photosynthesis.
This carbon gets trapped in the soil and organic matter (plants and animals) that accumulate over time.
The cold Arctic climate slows the decomposition of plant and animal remains, meaning that organic materials, including carbon, remain locked in the permafrost.
This permafrost acts as a natural storage system, preventing CO2 from being released back into the atmosphere.
Scientists estimate that the Arctic tundra holds about 1.6 trillion metric tonnes of carbon, which is roughly double the amount of carbon in the Earth’s atmosphere.
Why is the Arctic Tundra emitting more carbon than absorbing it?
Rising temperatures in the Arctic are causing the permafrost to thaw at an accelerated rate.
When permafrost thaws, microbes in the soil become active, breaking down the organic material trapped in the frozen ground, which results in the release of carbon dioxide (CO2) and methane (CH4), two potent greenhouse gases.
The Arctic has been warming at a rate four times faster than the global average.
2024 was the second-warmest year on record for the region, contributing significantly to the thawing of the permafrost.
Wildfires in the Arctic have become more frequent and intense, further accelerating the thawing of permafrost. Wildfire smoke also contributes to the release of greenhouse gases.
Between 2001 and 2020, the combination of rising temperatures and increased wildfires led to the Arctic tundra releasing more carbon than it absorbed, marking a significant shift in its role from a carbon sink to a carbon emitter.
PYQ:
[2012] Climate is extreme, rainfall is scanty and the people used to be nomadic herders. The above statement best describes which of the following regions?
Q) “Besides being a moral imperative of a Welfare State, primary health structure is a necessary precondition for sustainable development.” Analyse. (UPSC CSE 2021)
Mentor’s Comment: UPSC mains have always focused on major issues like the Conflict of interest in the public sector (2017) and Life Expectancy (2022).
Tobacco is responsible for approximately 1 million deaths annually in India, accounting for about 17.8% of total deaths in the country. This includes deaths from both direct tobacco use and secondhand smoke exposure.
The proposal to levy a higher Goods and Services Tax (GST) rate on tobacco products and sugared beverages has sparked significant discussion in India. This editorial explores the implications of such a move, the current tax structure, and the anticipated outcomes of the proposed changes.
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Let’s learn!
Why in the News?
The proposal to levy a higher Goods and Services Tax (GST) rate on tobacco products and sugared beverages has sparked significant discussion in India.
What is National Calamity Contingent Duty (NCCD)?
• It is a type of excise duty imposed by the Indian government on specific manufactured goods, particularly those considered harmful to public health, such as tobacco products and certain beverages. • Established under Section 136 of the Finance Act, 2001, NCCD is intended to generate revenue that can be utilized for disaster relief and other national calamity responses. • In the Union Budget for 2023-24, the government proposed increasing NCCD rates by approximately 16% for specified cigarettes, reflecting ongoing efforts to regulate tobacco consumption through higher taxation.
Background of the news:
Over the past seven years since the Goods and Services Tax (GST) was introduced in India, there have been a few significant increases in GST rates for harmful products like tobacco and sugar-sweetened beverages.
Apart from two small hikes in the National Calamity Contingent Duties (NCCD) on tobacco, the tax rates have largely remained unchanged. This lack of increase has made these products more affordable, which undermines efforts to reduce their consumption.
In this context, the recent proposal by the Group of Ministers (GoM) to raise the highest GST rate on tobacco and sugar-sweetened beverages from 28% to 35% is a positive development. This increase could help discourage the consumption of these harmful products.
However, it is important to note that additional tax reforms are necessary to effectively address the public health issues and fiscal challenges associated with tobacco and sugary drinks.
What is the current GST structure?
Under the existing GST framework, tobacco products and aerated beverages are taxed at a base rate of 28%, with additional cess rates that can range significantly.
For tobacco, these cesses can be as high as 290%, making it one of the most heavily taxed sectors in India.
Aerated beverages also face a 12% compensation cess on top of the standard GST rate, leading to a total tax burden that is among the highest globally.
What is the Rationale behind the recent Proposal?
Public Health Concerns: Higher taxes on tobacco and sugary drinks are often justified by their negative health impacts. Increasing GST rates could deter consumption and promote healthier choices among consumers.
Revenue Generation: The Indian government is looking for ways to bolster its revenue streams, especially in light of potential shortfalls from other sectors. By raising taxes on these “sin products,” it aims to offset losses from reductions in taxes on essential goods and services, such as health insurance premiums.
Alignment with Global Practices: Many countries impose high taxes on tobacco and sugary beverages as part of public health strategies. By following suit, India could align itself with global best practices aimed at reducing the consumption of harmful products.
What were the Market reactions to the potential GST Increase?
Stock Price Impact: Following the news, ITC’s shares fell by about 3%, while Varun Beverages dropped by 5%. This decline reflects investor concerns over how higher taxes might affect profitability.
Historical Performance: Both companies had previously enjoyed strong stock performance, with ITC’s stock rising 110% and Varun Beverages increasing by 424% in recent years.
However, the prospect of increased taxation has caused a correction, with both stocks down around 12% from their recent highs.
Analyst Insights: Analysts believe that while higher taxes could reduce sales volumes, they might also boost government revenues if managed well.
Way Forward:
Engage with Stakeholders: Regular consultations with industry stakeholders, including manufacturers and health experts, can provide valuable insights into the potential impacts of tax changes and help create balanced policies that consider both public health and economic factors.
Consider Broader Tax Reforms: The government could explore broader tax reforms that align with health objectives, such as revising tax structures for other products or services that impact public health, ensuring a comprehensive approach to taxation.
Implement the Proposed GST Increase: The government should proceed with the Group of Ministers (GoM) recommendation to raise the GST on tobacco and aerated beverages from 28% to 35%. This move aims to discourage the consumption of these harmful products while increasing government revenue.
Enhance Public Awareness Campaigns: Alongside tax increases, the government can launch public health campaigns to educate citizens about the dangers of tobacco and excessive sugar consumption. This could further support efforts to reduce demand for these products.
