Note4Students
From UPSC perspective, the following things are important :
Prelims level: MPC
Mains level: Paper 3- Tackling inflation while maintaining the availability of easy money
The MPC decided on Friday to leave the Repo rate unchanged at 4%. However, the RBI faces a dilemma over the excess liquidity in the economy while tackling inflation.
Limits of monetary policy
- Even though our economy slumped into a recession in the first half of 2020-21, there seems little further RBI can do with monetary policy to spur growth.
- Its monetary decision to leave its main policy rate unchanged at 4%, the rate at which it lends money to banks, thus seems appropriate.
- This is because retail inflation has hovered above its 6% upper tolerance limit for much of this year.
- It is the first time its 2016-adopted price-stability framework looks poised for failure.
- Meanwhile, it has announced wider coverage of an earlier scheme by which banks buy bonds issued by firms in specific stressed sectors–a way to ease credit.
Poor credit demand
- Supply-side measures have their limits of efficacy, with aggregate demand observed to be in a bad way and investments restrained by uncertainty.
- Therefore, RBI’s focus had to shift to the inflationary effects of excess liquidity detected in the economy.
- Oddly, this doesn’t seem to have happened.
- With over ₹6 trillion still being parked daily by banks with RBI at its reverse repo window, a reflection of poor credit demand.
Dilemma RBI faces in maintaining low interest rate
- Plus, India has seen a large sum of dollars coming into India.
- To keep the rupee’s global value stable and Indian exports competitive, RBI has been buying those dollars, thus raising our foreign exchange reserves and pumping more liquidity into the domestic arena.
- Sterilizing the inflationary effect of this usually requires bonds to be sold, which increases their market supply and pressures yields up-a dilution of its stance on easy money.
- This poses a dilemma that RBI may soon have to grapple with.
- RBI’s core task as a central bank, of watching both the external and internal stability of the currency under its charge, may get more complex than ever if capital inflows stay high, global investors see an opportunity in ‘carry trade’ profits, and price trends don’t go by its expectations.
Conclusion
If India’s broad policy frame is being pushed by our covid crisis towards a major reset, with the Centre’s fisc granted a freer run and its debt burden to be partially inflated away over the years, then that would call for another debate.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: APMC Act
Mains level: Paper 3- Farmers protest against Farms Acts
Farmers protest against the Farm laws is based on the multiple reasons. The article analyses these concerns of the protesting farmers.
Three farm laws and response to it
- Three Farm Bills were passed by the Central government in September 2020.
- In the process, the regulatory role the state played hitherto with regard to these issues was watered down to a great extent.
- Apart from complex challenges that rural India confronts today, there is a substantial body of studies that demonstrates how the vagaries of the market and the role of the middlemen reinforce agrarian distress in India.
- However, organised farmers’ bodies are not in sync with the reasoning of the government.
Role of the states
- There is a debate around the constitutional provisions with regard to the respective domains of the State and the Union with regard to agricultural marketing,
- However, issues affecting the farming community have a far greater bearing on the States relative to the Centre.
- Ideally, given its immediacy, the States are the apt agencies to respond to a host of concerns faced by the farming community, which includes agricultural marketing.
- While enacting the Farm Bills, the Centre extended little consideration to the sensitivity of the States.
Role of APMC
- In Punjab and Haryana, tweaking the APMC system and its resultant bearing on Minimum Support Price (MSP) is seen by the farmers as a threat to an assured sale of their produce at a price.
- MSP system provides a cushion, wherein the farmer can anticipate the cost of opting for these crops and tap the necessary supports through channels he has been familiar with.
- Farmers are apprehensive of the vagaries of a competitive market where he would eventually be beholden to the large players including monopolies.
- There is widespread apprehension that the measures proposed by the Farm Acts in addition to the existing agrarian distress, are only going to make the lot of the farmer even more precarious.
- All across the country, the farming community is prone to sympathise with the demand to scrap the new laws, as they have little to offer to them in a positive sense.
Conclusion
Those with large holdings and produce for the market — are spearheading the present stand-off against the Farm Bills, as it affects them very deeply. But farming distress is shared in common by the different strata within the farming community, even though it has a differential impact on them.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Analysis of economic recovery post-Covid
The economies across the world are showing recovery driven by profits. However, one cannot neglect the implication of such recovery for the long term growth given the pressure such recovery has been exerting on the labour markets. The article deals with this issue.
3 Ways to look at GDP
- The first is what they tell us about the past.
- Here, the news has generally been better-than-expected.
- The US and India saw a much stronger recovery last quarter than previously envisioned.
- The second is sectoral, production side-agriculture, manufacturing, services- and the functional, expenditure side consumption, investment, net exports.
- But there’s a third way — the income side.
- Value addition must ultimately accrue to the different factors of production.
- On the income side, therefore, GDP is simply the sum of profits, wages and indirect taxes.
Profit-driven growth and impact on employment
- The economic recovery in many parts of the world is driven disproportionately by capital than labour.
- In India, the net profits of listed companies grew 25 per cent (in real terms) last quarter. This despite revenues shrinking.
- Revenue shrank because firms aggressively cut costs, including employee compensation.
- This implies that if listed company profits are growing 25 per cent, and yet GDP contracted 7.5 per cent, it reveals (by construction) significant pressure on profits of unlisted SMEs, wages and employment.
- Labour market pressures are evident in India too.
- Household demand for MGNREGA remains very elevated, suggesting significant labour market slack.
- The employment rate in some labour market surveys still reveal about 14 million fewer employed compared to February, and nominal wage growth across a universe of 4,000 listed firms has slowed from about 10 per cent to 3 per cent over the last six quarters.
Why this matters
- It may be rational for any one firm to boost profits by cutting employee compensation.
- But if every firm pursued that strategy, that simply reduces future aggregate demand and profitability for all firms.
- This is quintessential fallacy of composition that Keynes enumerated.
- Weak demand, in turn, disincentivises re-hiring, reinforcing the risks of settling into a sub-optimal equilibrium.
Need to remain vigilant about labour market
- Remaining vigilant about labour markets is particularly important for India.
- Private consumption was increasingly financed by households running down savings and taking on debt pre-COVID-19.
- Consequently, if job-market pressures induce households into perceiving this shock as a quasi-permanent hit on incomes, households will be incentivised to save, not spend in the future.
Way forward for fiscal consolidation
- While economic momentum is expected to slow as pent-up demand wears off, the level of output will progressively reach pre-COVID levels as the economy normalises.
- The question is what will drive growth after that?
- India’s fiscal response has been restrained thus far, with the Centre’s total spending similar to last year and state capex under pressure.
- It’s therefore important for the Centre to step up spending in the remaining months.
- More importantly, public investment, and a large infrastructure push, must be the leitmotif of the next budget.
- This will be crucial to boost demand, create jobs, crowd-in private investment and improve the economy’s external competitiveness.
- If higher infrastructure spending is financed by higher asset sales, the headline fiscal deficit (which matters for bond markets and interest rates) can be slowly reduced, even as the underlying fiscal impulse (which matters for growth and jobs) remains positive.
- This is the only way to undertake fiscal consolidation without incurring a fiscal drag.
- Monetary policy has led the charge in 2020. But with inflation continuing to remain sticky and elevated, the RBI has fewer degrees of freedom going forward.
Conclusion
The stronger-than-expected GDP print is very encouraging. But this is the start of a long journey back. Much, therefore, remains to be done. The excitement around the vaccine shouldn’t obscure this fundamental premise.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Cannabis
Mains level: Cannabis and its de-regulation
The United Nations Commission on Narcotic Drugs (CND) voted to remove cannabis and cannabis resin from Schedule IV of the 1961 Single Convention on Narcotic Drugs, decades after they were first placed on the list.
Q. Too much de-regulation of Cannabis could lead to its mass cultivation and a silent economy wreaking havoc through a new culture of substance abuse in India. Critically analyse.
What is Cannabis?
- Cannabis, also known as marijuana among other names, is a psychoactive drug from the Cannabis plant used primarily for medical or recreational purposes.
- The main psychoactive component of cannabis is tetrahydrocannabinol (THC), which is one of the 483 known compounds in the plant, including at least 65 other cannabinoids, including cannabidiol (CBD).
- It is used by smoking, vaporizing, within the food, or as an extract.
UN’s decision and India
- Currently in India, the Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985, illegalizes any mixture with or without any neutral material, of any of the two forms of cannabis – charas and ganja — or any drink prepared from it.
- The WHO says that cannabis is by far the most widely cultivated, trafficked and abused illicit drug in the world. But the UN decision could influence the global use of medicinal marijuana,
- India was part of the voting majority, along with the US and most European nations.
- China, Pakistan and Russia were among those who voted against, and Ukraine abstained.
Cannabis in India
In India, cannabis, also known as bhang, ganja, charas or hashish, is typically eaten (bhang golis, thandai, pakoras, lassi, etc.) or smoked (chillum or cigarette).
Under international law
- The Vienna-based CND, founded in 1946, is the UN agency mandated to decide on the scope of control of substances by placing them in the schedules of global drug control conventions.
- Cannabis has been on Schedule IV–the most dangerous category– of the 1961 Single Convention on Narcotic Drugs for as long as the international treaty has existed.
Fuss over Cannabis
- Cannabis has various mental and physical effects, which include euphoria, altered states of mind and sense of time, difficulty concentrating, impaired short-term memory and body movement, relaxation, and an increase in appetite.
- But global attitudes towards cannabis have changed dramatically, with many jurisdictions permitting cannabis use for recreation, medication or both, despite it remaining on Schedule IV of the UN list.
- Currently, over 50 countries allow medicinal cannabis programs, and its recreational use has been legalized in Canada, Uruguay and 15 US states.
Impact of the decision
- The reclassification of cannabis by the UN agency, although significant, would not immediately change its status worldwide as long as individual countries continue with existing regulations.
- The decision would add momentum to efforts for decriminalizing cannabis in countries where its use is most restricted, while further legalizing the substance in others.
- Scientific research into marijuana’s medicinal properties is also expected to grow.
- Legalising and regulating cannabis will “undermine criminal markets” as well as its smuggling and cultivation.
Risks of Legalizing Cannabis
(1) Health risks continue to persist
- There are many misconceptions about cannabis. First, it is not accurate that cannabis is harmless.
- Its immediate effects include impairments in memory and in mental processes, including ones that are critical for driving.
- Long-term use of cannabis may lead to the development of addiction of the substance, persistent cognitive deficits, and of mental health problems like schizophrenia, depression and anxiety.
- Exposure to cannabis in adolescence can alter brain development.
(2) A new ‘tobacco’ under casualization
- A second myth is that if cannabis is legalized and regulated, its harms can be minimized.
- With legalization comes commercialization. Cannabis is often incorrectly advertised as being “natural” and “healthier than alcohol and tobacco”.
- Tobacco, too, was initially touted as a natural and harmless plant that had been “safely” used in religious ceremonies for centuries.
Way ahead
- It’s important to make a distinction between legalization, decriminalization and commercialization.
- While legalization and decriminalization are mostly used in a legal context, commercialization relates to the business side of things.
- For India to liberalise its policy on cannabis, it should ensure that there are enough protections for children, the young, and those with severe mental illnesses, who are most vulnerable to its effects.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Municipal Bonds
Mains level: Fund raising mechanisms for local bodies
Bonds issued by the Lucknow Municipal Corporation (LMC) got listed on the Bombay Stock Exchange. It’s the ninth city in the country to raise capital through municipal bonds.
Find out the rest eight cities issuing Municipal Bonds in India. Do let us know in the comment box.
What are Municipal Bonds?
- A municipal bond or muni bond is a debt instrument issued by municipal corporations or associated bodies.
- These local governmental bodies utilise the funds raised through these bonds to finance projects for socio-economic development through building bridges, schools, hospitals, providing proper amenities to households, et al.
- Such bonds come with a maturity period of three years, whereby municipal corporations provide returns on these bonds either from property and professional tax collected or from revenues generated from specific projects or both.
- The Securities and Exchange Board of India (SEBI) revised the guidelines related to the issuance of municipal bonds in 2015 in an attempt to enable ULBs or local government bodies to raise finances from such sources.
- Following this measure, different cities have capitalized on the new guidelines to fund initiatives such as Atal Mission for Rejuvenation and Urbanisation Transformation (AMRUT) and Smart Cities Mission.
Their types
There are primarily two types of municipal bonds in India, categorised as per their usage. These are –
(1) General Obligation Bonds
- These are issued to raise finances for general projects such as improving the infrastructure of a region.
- Repayment of the bond, along with interest, is processed through revenue generated from different projects and taxes.
(2) Revenue Bonds
- These are issued to raise finance for specific projects, such as the construction of a particular building.
- Repayment of such bonds (principal and accrued interest) shall be paid through revenues explicitly generated from the declared projects.
Advantages of such Bonds
There are multiple advantages of investing in municipal bonds which include –
(1)Transparency
Municipal bonds that are issued to the public are rated by renowned agencies such as CRISIL, which allows investors transparency regarding the credibility of the investment option.
(2)Tax benefits
In India, municipal bonds are exempted from taxation if the investor conforms to certain stipulated rules. In addition to such conformation, interest rates generated on such investment tools are also exempt from taxation policy.
(3) Minimal risk
Municipal bonds are issued by municipal authorities, implying involvement of minimal risk with these securities.
Their limitations
The disadvantages of municipal bonds are enumerated below –
(1) Long maturity period
- Municipal bonds come with a lock-in period of three years, imposing a burden on the liquidity requirements of investors.
(2) Low-interest rates
- Even though interest rates on municipal bonds, in some cases, are higher than other debt instruments, these rates are considerably low when compared to returns from market-linked financial instruments such as equity shares.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: HL-2M Tokamak, Nuclear fusion and fission
Mains level: Artificial Sun
China successfully powered up its “artificial sun” nuclear fusion reactor for the first time marking a great advance in the country’s nuclear power research capabilities.
Scratch your school basics to answer this PYQ:
Q.The known forces of nature can be divided into four classes, viz, gravity, electromagnetism, weak nuclear force and strong nuclear force.
With reference to them, which one of the following statements is not correct? (CSP 2012)
(a) Gravity is the strongest of the four
(b) Electromagnetism act only on particles with an electric charge
(c) Weak nuclear force causes radioactivity
(d) Strong nuclear force holds protons and neutrons inside the nuclear of an atom.
HL-2M Tokamak
- The HL-2M Tokamak reactor is China’s largest and most advanced nuclear fusion experimental research device.
- The mission is named Experimental Advanced Superconducting Tokamak (EAST).
- Located in Sichuan province and completed late last year, the reactor is often called an “artificial sun” on account of the enormous heat and power it produces.
- It uses a powerful magnetic field to fuse hot plasma and can reach temperatures of over 150 million degrees Celsius- approximately ten times hotter than the core of the sun.
- Scientists hope that the device can potentially unlock a powerful clean energy source.
Back2Basics: Nuclear Fusion
- Nuclear fusion is a reaction in which two or more atomic nuclei are combined to form one or more different atomic nuclei and subatomic particles (neutrons or protons).
- Fusion is the process by which the sun and other stars generate light and heat. It is a nuclear process, where energy is produced by smashing together light atoms.
- It is the opposite reaction of fission, where heavy elements like Uranium and Thorium are split apart.
Nuclear Fusion Reaction
- For a nuclear fusion reaction to occur, it is necessary to bring two nuclei so close that nuclear forces become active and glue the nuclei together.
- Nuclear forces are small-distance forces and have to act against the electrostatic forces where positively charged nuclei repel each other.
- This is the reason nuclear fusion reactions occur mostly in high density, high-temperature environment (millions of degree Celsius) which is practically very difficult to achieve under laboratory conditions.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Indian Cancer Genome Atlas (ICGA)
Mains level: Burden of non-communicable diseases on India
The Ministry of Science & Technology has inaugurated the 2nd Cancer Genome Atlas (TCGA) 2020 Conference.
Do you know?
According to the World Cancer Report by the WHO, one in 10 Indians develops cancer during their lifetime and one in 15 dies of the disease!
The Cancer Genome Atlas
- The Cancer Genome Atlas (TCGA) is a landmark project started in 2005 by the US-based National Cancer Institute (NCI) and the National Human Genome Research Institute (NHGRI).
- The idea was to make a catalogue of the genetic mutations that cause cancer.
- This meant collecting tumour samples and blood samples (known as the germline) from patients and processing them using gene sequencing and bioinformatics.
- The TCGA is a continuing effort even after fifteen years and has generated over 2.5 petabytes of data for over 11,000 patients.
- This data is available to researchers all around the world and has been used to develop new approaches to diagnose, treat and prevent cancer.
Indian Cancer Genome Atlas (ICGA)
- On similar lines, the establishment of an ICGA has been initiated by a consortium of key stakeholders in India led by CSIR in which several government agencies, cancer hospitals, academic institutions and private sector partners.
- It is aimed at improving clinical outcomes in cancer and other chronic diseases.
Why need such Atlas?
- Diverse molecular mechanisms- including genetic and lifestyle factors contribute to cancer, posing significant challenges to treatment.
- Therefore, it is necessary to better understand the underlying factors- patient by patient.
- In this context, it is important to create an indigenous, open-source and comprehensive database of molecular profiles of all cancer prevalent in Indian population.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Operation Trident
Mains level: Liberation of Bangladesh
Every year, India celebrates December 4 as Navy Day to commemorate Operation Trident – a key offensive during the 1971 India-Pakistan War. This year, it is the 50th anniversary of the victory in the 1971 War.
This newscard is crucial for the CAPF aspirants. It hardly holds any importance for CS prelims. But the grit, glory and honour of our armed forces is a matter of pride that every CS aspirants should know.
Operation Trident
- The India-Pakistan War of 1971 had begun on December 3, when the Pakistan Air Force launched pre-emptive strikes on airfields in Western India.
- Following the Battle of Longewala, the Indian Navy inflicted heavy damage on Pakistani vessels in Karachi harbour.
- India responded by formally declaring war in the wee hours of December 4.
- On December 4, under Operation Trident, the Indian Navy sank three vessels near the Pakistani port city of Karachi.
- The Indian Air Force also played a crucial role, when Karachi’s Kemari oil tanks were strafed by the IAF on the same day in an independent operation which it did not claim.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Bhashan Char Island and its location
Mains level: Rohingya Crisis
Bangladesh has transported more than 1,600 Rohingya refugees to a low-lying island in the first phase of a controversial planned relocation of 1,00,000 people.
Can you see, what the so-called champions of tolerance and human rights doing to the refugees in their own country!
Bhashan Char Island
- Bhasan Char also known as Char Piya, is an island in Hatiya, Bangladesh.
- Located 34 kilometres (21 miles) from the mainland, its name in Bengali means “floating island.”
- The island was formed with Himalayan silt in 2006 spanning 40 square kilometres.
- It is underwater from June to September annually because of the monsoon, and it has no flood fences.
- In June 2015, the Bangladeshi government suggested resettling Rohingya refugees on the island under its Ashrayan Project.
- The proposal was characterized by the UN Refugee Agency as “logistically challenging”.
Extraditing to another hell
- Bhashan Char is a flood-prone island that emerged from the sea 20 years ago.
- The refugees had been coerced into going to this flood-prone island which is also vulnerable to frequent cyclones.
- This compact island is too small to occupy and nurture the Rohingya population and there is chronic overcrowding in camps.
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