Note4Students
From UPSC perspective, the following things are important :
Mains level: Paper 3- Transparency in RBI's policy making
Context
Modern inflation targeting central banks are often bound by explicit statutory mandates. Critics have argued that the RBI ignored its statutory inflation targeting duty.
Why transparency and predictability of the central bank is important?
- Prior to the 1990s, central banks preferred secrecy.
- Surprising market: The common wisdom was that the efficacy of monetary policy depended on taking markets by surprise.
- This belief started changing gradually with the adoption of inflation targeting.
- Influencing the inflation expectations: Targeting inflation required central banks to influence households’ and firms’ decisions.
- Thus emerged the need for central banks to be transparent and predictable.
Independence with accountability of the Central bank
- There was growing international recognition that central banks as monetary authorities should enjoy a relatively higher degree of independence from governments.
- In a democratic polity, this could only be expected in exchange for increased accountability.
- As a result, regulatory governance gradually emerged as a relevant consideration for independent central banks over the last three decades.
Regulatory governance at the RBI
- The regulatory governance discourse in India came into the focus with the report of the Financial Sector Legislative Reforms Commission in 2013.
- Like a state, regulators usually enjoy significant legislative, executive and judicial powers and should be subject to appropriate accountability mechanisms.
- These should include internal separation of powers; a well-structured regulation making process overseen by the board, through public consultation and cost-benefit analysis; duty to explain its actions to regulated entities and public at large; regular reporting requirements; and judicial review.
- Based on these recommendations, the Ministry of Finance released a handbook in 2013 for voluntary adoption of these enhanced governance standards by all financial sector regulators.
- These developments turned the spotlight on the RBI’s regulatory governance.
Reasons for the criticism of the RBI
- Targeting exchange rate: The central bank appears to have ventured into uncharted legal territory by possibly targeting the exchange rate instead of inflation.
- Regulatory governance issues: Separately, critics have also highlighted broader regulatory governance challenges at the RBI.
- For instance, its alleged use of informal nudges to restrict a foreign player’s access to the Indian payment ecosystem goes against an adverse Supreme Court ruling.
- Such criticisms underline an urgent need to improve the credibility of the central bank’s rule of law quotient.
- Least responsive in legislative function: A 2019 research paper found the central bank’s legislative functions to be the least responsive in comparison to three other regulators – SEBI, TRAI and AERA.
- RBI’ss consultation papers usually presented only one solution and did not offer merits and demerits of multiple possible solutions.
Implications of weak regulatory governance: Judicial scrutiny
- Weak regulatory governance resulted in weak regulations, inviting judicial scrutiny.
- Changes in master circular: In 2019, the Supreme Court effectively rewrote RBI’s master circular on wilful defaulters to provide additional procedural safeguards to borrowers.
- Striking down of crypto ban: In 2020, the court struck down an RBI circular that sought to ban its regulated entities from dealing or settling in virtual currencies.
- The court found that the RBI had neither adduced any cogent evidence of the likely harm, nor had it considered any less intrusive alternative before issuing the circular.
RRA 2.0 suggestions for the RBI
- The recent report of the Regulations Review Authority 2.0 (RRA) offers useful suggestions to improve the central bank’s regulation-making process.
- The RBI had set up the Review Authority 2.0 (RRA) in April 2021 to streamline its regulations.
- Skill improvement in regulatory drafting: RRA has advocated for skill development in regulatory drafting inside the RBI.
- Public consultation: To improve regulatory governance at the RBI, RRA suggested that its regulatory instructions should be issued only after public consultation, except if they are urgent or time sensitive.
- They must contain a brief statement of objects and reasons clearly explaining the rationale behind their issuance.
- Although much softer than the FSRLC standards, RRA nevertheless signal a progressive step forward.
Conclusion
The RBI should heed these recommendations. It should ideally hardcode the suggested principles into a secondary legislation that is binding on itself. That would be the best way to signal that the central bank takes regulatory governance and rule of law seriously.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Soil Health Card
Mains level: Paper 3- Soil degradation
Context
A key element of sustainable food production is healthy soil because nearly 95 per cent of global food production depends on soil. The current status of soil health is worrisome.
The threat posed by soil degradation
- The challenge to food security: Soil degradation on an unprecedented scale is a significant challenge to sustainable food production.
- About one-third of the earth’s soils is already degraded and alarmingly, about 90 per cent could be degraded by 2050 if no corrective action is taken.
- Soil degradation in India: While soil degradation is believed to be occurring in 145 million hectares in India, it is estimated that 96.40 million hectares — about 30 per cent of the total geographical area — is affected by land degradation.
- The FAO’s latest ‘State of the World’s Land and Water Resources for Food and Agriculture’ says: “…soil pollution is also an issue. It knows no borders and compromises the food we eat, the water we drink and the air we breathe.
- Globally, the biophysical status of 5,670 million hectares of land is declining, of which 1,660 million hectares (29 per cent) is attributed to human-induced land degradation, according to the Food and Agriculture Organisation’s ‘State of Land, Soil and Water’ report.
Cause of the problem
- Use of agrochemicals: The excessive or inappropriate use of agrochemicals is one cause of the problem.
- The global annual production of industrial chemicals has doubled since the beginning of the 21st century, to approximately 2.3 billion tonnes.
- Extensive use of fertilisers and pesticides led to the deterioration of soil health and contamination of water bodies and the food chain, which pose serious health risks to people and livestock.
- Salination: Another challenge comes from salinisation, which affects 160 million hectares of cropland worldwide.”
About Soil Health Card Scheme
- Soil Health Card (SHC) scheme is promoted by the Department of Agriculture & Co-operation under the Ministry of Agriculture and Farmers’ Welfare.
- An SHC is meant to give each farmer soil nutrient status of his/her holding and advice him/her on the dosage of fertilizers and also the needed soil amendments, that s/he should apply to maintain soil health in the long run.
- SHC is a printed report that a farmer will be handed over for each of his holdings.
- It will be made available once in a cycle of 2 years, which will indicate the status of soil health of a farmer’s holding for that particular period.
- The SHC given in the next cycle of 2 years will be able to record the changes in the soil health for that subsequent period.
- Under the programme as of date, soil health cards have been distributed to about 23 crore farmers.
- The scheme has not only helped in improving the health of the soil, but has also benefited innumerable farmers by increasing crop production and their incomes.
Progress made so far on soil restoration
- India is well on course to achieving the restoration of 26 million hectares of degraded land by 2030.
- A study conducted by the National Productivity Council in 2017 on this programme revealed that there has been a decrease in the use of chemical fertilisers in the range of 8-10 per cent as a result of the application of fertilisers and micro-nutrients as per the recommendations on the soil health cards.
- Overall, an increase in crop yields to the tune of 5-6 per cent was reported as a result.
- First organic state in the world: “A Healthy Planet for Healthy Children’’ published by the United Nations Institute for Training and Research and the World Future Council highlighted success stories from various countries — including Sikkim in India, which became the first organic state in the world.
Way forward
- Natural farming: Several studies have established that natural farming and organic farming are not only cost-effective but also lead to improvement in soil health and the farmland ecosystem.
- Agro-ecological practices: With the threat to food security looming large globally, the need of the hour is to adopt innovative policies and agro-ecological practices that create healthy and sustainable food production systems.
Conclusion
The time has come for collective global action involving governments and civil society to reverse the alarming trend of soil degradation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: IMF
Mains level: Pakistan economic crisis, Debt trap
Pakistan’s foreign exchange reserves have been depleting during the last one year and is heading towards a default risk as Sri Lanka did.
Pakistani economy is said to have been crippling since the discontinuance of US ‘military’ aid which it had used
What is the news?
- The Pakistani rupee has been on free fall; from 150 in April 2021 to 213 against the dollar on 21 June, an all-time low.
- This would mean high oil and electricity prices, to outrage the people who are already to the streets due to ousted PM Imran Khan.
- The government-International Monetary Fund (IMF) talks have remained complicated.
Options available for Pakistan
- Pakistan is under deep Balance of Payment (BoP) crisis (as was India in 1991).
- Pakistan has exhausted all credit options as SL did.
- Even the China Pakistan Economic Corridor (CPEC) is at standstill.
- Even the Saudi’s and so called ‘caliphate’ of Turkey has not come to Pakistan’s rescue.
Only option left: IMF bail out
- The immediate future of Pakistan’s economy would depend on IMF resuming its support.
- Despite an intense discussion between the two, there has not been a consensus until now.
What is IMF bail-out?
- Bailout is a general term for extending financial support to a company or a country facing a potential bankruptcy threat.
- When a country asks the IMF for a loan, the country is facing a major economic crisis.
- In particular, it does not have enough foreign currency (‘dollars’) to pay for imports and the repayments on its loans. In short, the country cannot pay its international bills. So, it need a bailout.
- The IMF will give the country an aid, which is ‘cash’ in the sense that it does not have to be spent on a particular project. This money can be used to pay its bills.
- But, the IMF will impose certain conditions. The basic condition is to spend less – both domestically and internationally.
- This belt-tightening is not easy – people lose jobs, prices rise, etc. And, one has to repay the loan.
- These conditions are necessary to ensure that the money is being spent where it is supposed to.
Pakistan and IMF: A track record
- Pakistan’s relationship with the IMF has remained complicated. It sees conditions laid as a breach of sovereignty.
- Though Islamabad has been negotiating with the IMF repeatedly, there has been an economic nationalism, mostly jingoistic, against approaching the IMF in recent years.
- Imran Khan, the former PM made statements and fuelled the sentiments against the IMF.
- After becoming the PM in 2018, he preferred approaching friendly countries (China and Saudi Arabia) and avoiding the IMF.
- The new government is now back to the IMF; it expects the IMF to release the payments, expand the support programme, and give a longer rope to repay.
Conditions laid out by IMF for recent bail-out
- The IMF is willing to support Pakistan but has some conditions regarding macroeconomic reforms.
- It wants Pakistan to be transparent about its debt situation, including what Islamabad owes to China, as a part of the CPEC.
- Terror-financing in Pakistan is the most favored type of investment!
- The IMF may agree to support after a few more promises by the government.
- But the relief may be less than what Pakistan would hope for.
A vicious cycle
- Since its inception, Pakistan has spent more years inside an IMF programme than outside of it.
- Every leader took the money, imposed massive hardships on the population through austerity and demand suppression and then reneges on its commitment through a patchy implementation.
- Radical fanaticism and anti-India sentiments are successful tools of public appeasement.
Will Pakistan pursue macroeconomic reforms?
- In Pakistan, budgets have remained populist.
- The economic governance declined due to corruption, lack of financial institutions’ independence, and the export decline.
- The subsidies in the energy sector — fuel, oil and electricity — remain high to appease the public.
- With the present coalition government facing elections, they are less likely to take any further bold decisions.
Will “friendly countries” support Pakistan without preconditions?
- Saudi Arabia and China have been supporting Pakistan. MBS has already pulled his hands.
- Riyadh’s support is not unconditional.
- It can ask Pakistan “to return the money at any time if the two countries have divergent views regarding their relationship or ties with a third country, or some other issue.”
- China has been another significant source for Pakistan. Islamabad has been regularly seeking loans from China within and outside the CPEC projects.
- However, since the attack on Chinese citizens by Baloch Fighters, China appears to have been disgusted with Pakistan.
- CPEC is also at a standstill.
FATF clearance is no panacea
- During the latest Financial Action Task Force (FATF) meeting, there was an understanding that Pakistan has met its requirement.
- The FATF has agreed to explore the possibilities of removing Pakistan from the grey list.
- However, even when Pakistan was on the grey list, the IMF had been holding talks with Islamabad.
- The big two — China and Saudi Arabia — were not constrained by Pakistan’s listing in the FATF.
- So, the relaxation is less likely to open gates for big investments.
Will Pakistan go the Sri Lankan way?
- The situation was similar in Sri Lanka — the falling value of rupee, declining foreign exchange reserves, differences with the IMF, and rising fuel prices.
- All of them led to public protests in Sri Lanka against the government.
- The economic and energy crises in Pakistan have not snowballed into a political storm as it had happened in Sri Lanka.
- The dope of “threats to Religion” works effectively there.
Conclusion
- The experiment of Pakistan (as a separate nation) has failed on various fronts.
- To conclude, Pakistan’s economic and energy situation is serious and demands bold decisions.
- The situation will worsen in the short term before it gets better, but this has been Pakistan’s history in the last 75 years.
- With a relief from the IMF, after a protracted negotiation, a few band-aids, and the US intervention, Islamabad may muddle through this time as well, until the next crisis.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MGNREGA
Mains level: Read the attached story
Certain groups has asked to discontinue manual attendance for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) work sites with more than 20 workers and use a mobile phone-based application.
What is MGNREGA?
- The MGNREGA stands for Mahatma Gandhi National Rural Employment Guarantee Act of 2005.
- This is labour law and social security measure that aims to guarantee the ‘Right to Work’.
- The act was first proposed in 1991 by P.V. Narasimha Rao.
Features of the scheme
- MGNREGA is unique in not only ensuring at least 100 days of employment to the willing unskilled workers, but also in ensuring an enforceable commitment on the implementing machinery i.e., the State Governments, and providing a bargaining power to the labourers.
- The failure of provision for employment within 15 days of the receipt of job application from a prospective household will result in the payment of unemployment allowance to the job seekers.
- Employment is to be provided within 5 km of an applicant’s residence, and minimum wages are to be paid.
- Thus, employment under MGNREGA is a legal entitlement.
What is so unique about it?
- MGNREGA is unique in not only ensuring at least 100 days of employment to the willing unskilled workers, but also in ensuring an enforceable commitment on the implementing machinery i.e., the State Governments, and providing a bargaining power to the labourers.
- The failure of provision for employment within 15 days of the receipt of job application from a prospective household will result in the payment of unemployment allowance to the job seekers.
- Any Indian citizen above the age of 18 years who resides in rural India can apply for the NREGA scheme. The applicant should have volunteered to do unskilled work.
- Employment is to be provided within 5 km of an applicant’s residence, and minimum wages are to be paid.
- Thus, employment under MGNREGA is a legal entitlement.
Answer this PYQ in the comment box:
Q.Among the following who are eligible to benefit from the “Mahatma Gandhi national rural employment guarantee act”?
(a) Adult members of only the scheduled caste and scheduled tribe households.
(b) Adult members of below poverty line (BPL) households.
(c) Adult members of households of all backward communities.
(d) Adult members of any household.
Post your answers here.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Snake Island
Mains level: Not Much
Ukraine has said it has caused “significant losses” to the Russian military in airstrikes on Zmiinyi Island, also known as Snake Island, in the Black Sea.
Snake Island
- Zmiinyi Island, also known as Snake or Serpent Island, is a small piece of rock less than 700 metres from end to end, that has been described as being “X-shaped”.
- It is located 35 km from the coast in the Black Sea, to the east of the mouth of the Danube and roughly southwest of the port city of Odessa.
- The island, which has been known since ancient times and is marked on the map by the tiny village of Bile that is located on it, belongs to Ukraine.
Why does Russia seek to control the Black Sea?
- Domination of the Black Sea region is a geostrategic imperative for Moscow.
- The famed water body is bound by Ukraine to the north and northwest, Russia and Georgia to the east, Turkey to the south, and Bulgaria and Romania to the west.
- It links to the Sea of Marmara through the Bosporus and then to the Aegean through the Dardanelles.
- It has traditionally been Russia’s warm water gateway to Europe.
- For Russia, the Black Sea is both a stepping stone to the Mediterranean as well as a strategic buffer between NATO and itself.
- Cutting Ukrainian access to the Black Sea will reduce it to a landlocked country and deal a crippling blow to its trade logistics.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Sao Joao Festival
Mains level: Not Much
As in every monsoon, Catholics in Goa will celebrate Sao Joao, the feast of St John the Baptist.
Note: The name typically sounds like a North-Eastern festival, but it is not.
What is Sao Joao and where is it celebrated in Goa?
- In Goa, Catholics celebrate all the feasts of the Roman Catholic Church, which include the feast of St John the Baptist on June 24.
- John the Baptist is the person who he had baptised Jesus Christ on the river Jordan.
- Traditionally, there are spirited Sao Joao festivities in the villages of Cortalim in South Goa and Harmal, Baga, Siolim and Terekhol in North Goa.
- However, over the years, pool parties and private Sao Joao parties in Goa have been a “complete package of merriment and joy” for tourists.
Course of celebration
- The celebrations will include revellers sporting crowns made of fruits, flowers and leaves, and the major draw of the feast is the water bodies – wells, ponds, fountains, rivers – in which the revellers take the “leap of joy”.
- Enjoyed by children and adults alike, the festival also includes playing the traditional gumott (percussion instrument), a boat festival, servings of feni, and a place of pride for new sons-in-law.
What does jumping into water bodies symbolise?
- The youngsters in Goa celebrate this occasion with revelry and perform daredevil feats, by jumping into over flowing wells or rivulets.
- The boys are found merrily jumping into the water to commemorate the leap of joy, which St John is said to have taken in the womb of his mother St Elizabeth when virgin Mary visited her.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Green mobility
Mains level: NA
Mo Bus, the bus service of Odisha’s Capital Region Urban Transport (CRUT) authority, has been recognized by the United Nations as one of 10 global recipients of its annual Public Service Awards for 2022.
Mo Bus service
- The Mo Bus service was launched on November 6, 2018.
- It aimed to ensure transformation of the urban public transport scenario in the city and its hinterland through use of smart technology, service benchmarking and customer satisfaction.
- The buses are designed to integrate smart technologies such as free on-board Wi-Fi service, digital announcements, surveillance cameras, and electronic ticketing.
- CRUT says that to increase women’s participation in the workforce, and to make women riders feel safer, it is committed to ensuring that 50% of Mo Bus Guides (conductors) are women.
What is the recent award?
- The public transport service has been recognised for its role in “promoting gender-responsive public services to achieve the SDGs (Sustainable Development Goals)”.
- The “impact” is that 57 per cent of the city’s commuters now use the Mo Bus, the UN said.
- Mo E-Ride is estimated to reduce pollution by 30-50 per cent.
About UN Public Service Award
- The UN describes its Public Service Awards as the “most prestigious international recognition of excellence in public service”.
- The first Awards ceremony was held in 2003, and the UN has since received “an increasing number of submissions from all around the world”.
- It is intended to reward the creative achievements and contributions of public service institutions that lead to a more effective and responsive public administration in countries worldwide.
- Through an annual competition, the UN Public Service Awards promotes the role, professionalism and visibility of public service.
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