Note4Students
From UPSC perspective, the following things are important :
Prelims level: UNESCO heritages in India
Mains level: Not Much
The Union Ministry for Culture has launched the National List of Intangible Cultural Heritage (ICH) of India.
Various art forms (either tangible or intangible) are hotspots for Prelims. We can expect a direct description based question. For example, a question based on Manipuri Sankirtana was asked in CSP 2017.
National List of ICH
Following UNESCO’s 2003 Convention for Safeguarding of Intangible Cultural Heritage, this list has been classified into five broad domains in which intangible cultural heritage is manifested:
- Oral traditions and expressions, including language as a vehicle of the intangible cultural heritage
- Performing arts
- Social practices, rituals and festive events
- Knowledge and practices concerning nature and the universe
- Traditional craftsmanship
Why need such a list?
- India houses a repository of unique ICH traditions, 13 of which have also been recognized by UNESCO as Intangible Cultural Heritage of Humanity.
- The National ICH List is an attempt to recognize the diversity of Indian culture embedded in its intangible heritage.
- The list aims to raise awareness about the various intangible cultural heritage elements from different states of India at the national and international level and ensure their protection.
- This initiative is also a part of the Vision 2024 of the Ministry of Culture.
Pls go through this link for complete details of 13 ICH : https://www.indiaculture.nic.in/national-list-intangible-cultural-heritage-ich
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Helicopter Money, Quantative easing
Mains level: Not Much
With the coronavirus-hit economy falling deeper and deeper into a chasm with each passing day, Telangana chief minister KC Rao earlier this month has said helicopter money can help states come out of this crisis.
Various monetary policy tools are being considered to boost consumer demand in the economy which is stricken by the coronavirus pandemic. Helicopter Money is one such tool.
What is Helicopter Money?
- This is an unconventional monetary policy tool aimed at bringing a flagging economy back on track.
- It involves printing large sums of money and distributing it to the public. American economist Milton Friedman coined this term.
- It basically denotes a helicopter dropping money from the sky.
- Friedman used the term to signify “unexpectedly dumping money onto a struggling economy with the intention to shock it out of a deep slump.”
- Under such a policy, a central bank “directly increases the money supply and, via the government, distributes the new cash to the population with the aim of boosting demand and inflation.”
Is helicopter money the same as quantitative easing (QE)?
- Quantitative easing involves the use of printed money by central banks to buy government bonds.
- But not everyone views the money used in QE as helicopter money.
- It sure means printing money to monetize government deficits, but the govt has to pay back for the assets that the central bank buys.
- It’s not the same as bond-buying by central banks “in which bank-owned assets are swapped for new central bank reserves.
- Helicopter money is also different from a central bank directly financing the debt of a government.
Pros and cons of helicopter money
Pros
- Helicopter money does not rely on increased borrowing to fuel the economy, which means that it doesn’t create more debt and interest rates can remain unchanged.
- Generally, helicopter money boosts spending and economic growth more effectively than quantitative easing because it increases aggregate demand – the demand for goods and services – immediately.
- While government money drops that come from debt might not boost consumer spending, due to the debt needing to be repaid, it is often thought that ‘money finance’ will stimulate the economy.
Cons
- Unlike quantitative easing, using helicopter money as a tactic is not reversible, and many argue that it’s not a feasible solution to revive the economy.
- A country’s central bank sets its interest rates to reach economic growth targets.
- However, a helicopter drop means that a central bank cannot use interest rates to recover any costs, because the money is not linked to a borrowed asset (loan).
- Instead, the money is given directly to the public. This may lead to over-inflation and cause damage to the central bank’s financials.
- One of the main risks associated with helicopter money is that it could lead to a significant devaluation of the currency on the foreign exchange market.
- As more money is printed and supply increases, the value of the domestic currency could significantly decrease.
- It could also discourage speculators from buying the currency as it is less likely to perform well.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- A stimulus package to deal with the economic disruption of pandemic is suggested by various experts. What should be its size and how effective it would be in your opinion?
This op-ed discusses the latest projections by the IMF. The latest projection and suggestions by IMF are the bleak reminder of economic disruption we have been experiencing.
IMF discards its previous projections
- Less than two months ago, IMF had asserted that “global growth appears to be bottoming out” (i.e. announcing the worst is over).
- But the pandemic induced ‘Great Lockdown’ has forced the IMF to junk all its previous projections for economic output in 2020.
- Faced with the stark reality of sweeping shutdowns of almost entire economies worldwide, the fund last week acknowledged that the current “crisis is like no other”.
- The IMF slashed its projection by 6.3 percentage points from its January forecast for 3.3% growth to a 3% decline.
- This is the sharpest contraction in world output since the Great Depression of the 1930s.
- Comparison with 2009 slowdown: In contrast, the recession of 2009 saw world output contract by a mere 0.1%.
- The IMF was blindsided by the comments from Chinese authorities and WHO.
- Which is clear from the fact that as recently as February 22, the fund’s chief, Kristalina Georgieva, told G20 Finance Ministers that “global growth would be about 0.1 percentage points lower” than forecast in January.
- China’s GDP, she projected, would expand by 5.6% this year, 0.4 percentage points slower than assumed in January.
Latest projections for China by the IMF
- Last week, the IMF slashed China’s forecast to a growth of 1.2%, citing data on industrial production, retail sales, and fixed asset investment that, it said, suggested a contraction of about 8% in the first quarter.
- China reported a 6.8% first-quarter contraction.
- Still, in projecting an annual expansion in Asia’s largest economy, the fund is rather optimistically foreseeing a sharp rebound in activity over the rest of the year.
The following data of the revised projections gives us an idea about the extent to which the crisis has been damaging the economy. There are also suggestions about the strategy to deal with the crisis and that includes a stimulus package.
Projections and suggestions for India
- On India, the IMF has cut its projection for growth in the fiscal year that started on April 1, from January’s 5.8%, to 1.9%.
- This projection is base on two assumptions given below.
- 1. This again appears predicated on the fund’s baseline scenario that assumes that the pandemic would ‘fade in the second half of 2020’, allowing containment efforts to be unwound and economic activity to normalise.
- 2. Another key assumption by the IMF’s economists is the availability of policy support to nurture the revival once activity restarts.
- Suggestion for India: Jettisoning its storied fiscal conservatism, the IMF’s chief economist, Gita Gopinath, has advocated ramping up a broad-based and coordinated stimulus once the disease has been contained.
- Such measures would help avoid the errors of the Great Depression years when premature efforts to prune budget deficits prolonged the downturn.
- Inadequate fiscal measures in India: In this context, India’s fiscal measures pale in terms of scale when compared with what several other nations have undertaken.
Conclusion
Given the size of the informal sector in India as well as the anticipated prolonged disruption in labour supply even in more formal parts of the economy, the Centre needs to proactively commit to a substantial stimulus package in order to ensure that once the economy reopens, it has the legs to run.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: FDI in India.
Mains level: Paper 3- Implications of growing Chinese investment in India.
This editorial discusses the implications of growing Chinese investment in India. After People’s Bank of China bought 1 per cent stake in HDFC bank, Indian government made prior government approval mandatory for investment from countries sharing border with India. Various aspects of the move are discussed here.
No separating commerce and security in dealing with China
- India’s move to prevent a predatory Chinese hunt for Indian companies comes at a time when the stock market has been badly bruised by the coronavirus.
- It underlines the emerging perception in India that there is no separating commerce and security in dealing with China.
- India’s concerns are similar to those being expressed elsewhere in the world.
- A number of European countries have already moved in that direction.
- In recent years, apprehensions have grown, in both the developing and developed world, that China is targeting their infrastructural, industrial and technological assets for control.
- But many governments were willing to give the benefit of doubt to Beijing.
- That willingness has rapidly eroded in the wake of the corona crisis that has devastated the Western world.
Taking economic advantage of other nation’s misery
- Although few world leaders want to join the US President in publicly attacking China.
- Many of them know that Beijing bears some responsibility for letting a health emergency in one of its cities become a global pandemic.
- That Chinese companies, with access to easy money and strong political support in Beijing, are now taking economic advantage of other nations’ misery has added insult to injury.
- While most leaders are preoccupied with the corona crisis, they are not likely to let Beijing have its way.
- Even in Britain, where the Boris Johnson government is now taking a second look.
- Last week, the British Foreign Secretary, said there will be no going back to “business as usual” with China.
China’s growing influence has been posing challenges for India on various fronts. Its growing footprint on India’s economy is one of such challenges. The UPSC frames question in relation to China from various angles. So, the penetration of China in India economy is also an important aspect from the Mains perspective.
Rethinking the commercial engagement with China
- Beyond the question of accountability for the spread of the coronavirus, many countries are rethinking the very nature of their commercial engagement with China.
- Gaming the system by China: On a host of issues ranging from trade and investment to intellectual property protection, there is an inescapable sense that China has gamed the global system for unilateral gains.
- India late in learning: India certainly has had a longer learning curve than the West in recognising the relationship between commerce and national security.
- Since the early 1990s, Delhi bet that expanding economic cooperation with China will help mitigate political disputes.
- But the differences have only become intractable even as China became stronger economically.
- India gave China an easy pass into the WTO.
- India’s trade deficit: It let cheap imports from China undermine India’s manufacturing sector and run up a massive trade surplus.
- India allowed massive Chinese penetration of its telecom, digital and other advanced sectors only to discover the multiple negative consequences.
- India’s new approach: The last few years have seen a new approach that has seen India oppose China’s Belt and Road Initiative and walk out of the RCEP negotiations citing the trade imbalance with China.
Conclusion
The decision on Chinese FDI can be seen as one of the piece of the puzzle India has to face on the various front. But the puzzle of dealing with a rising China’s strategic economic onslaught will test India for a long time.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- How effective is the democratic system in dealing with the pandemics like Covid-19?
The article deals with the fundamental differences between democratic states and one-party state against the backdrop of response to Covid-19. The second part of the article focuses on post-Covid-19 scenarios like changes in the supply chains and the state of the China’s economy.
Two aspects of Chine’s propaganda campaign
- China, with the lack of transparency inherent in its one-party authoritarian system, contributed to the spread of Covid-19.
- There is a desperate effort on the part of China to erase its culpability in unleashing COVID-19 across the world.
- It has sought to overcome the damaging global public opinion which it has suffered by a subsequent sustained propaganda campaign.
- This has two aspects.
- 1. Highlighting the success: One highlights the success China claims to have achieved in arresting the pandemic within the country through drastic measures on a massive scale.
- Thereby demonstrating the superiority of its authoritarian system.
- This authoritarian system is contrasted with the delayed and often less-than-effective measures taken in democratic European countries and the US in particular.
- 2. Publicity of assistance provided to other countries: The other seeks blanket publicity of much-needed medical equipment and medical teams to assist affected countries.
- The main target is Europe, though assistance to other countries is also given prominence.
- Chinese diplomats are using Twitter, Facebook and other social media platforms to create an image of a benign China providing public goods to a grateful community of beleaguered nations.
- In reporting on India, Chinese media has often highlighted the plight of migrant workers and the frequent violations of social distancing regulations.
- It is true that India has sought and received much-needed medical supplies from China.
What China would like us to believe?
- China wants us to believe that COVID-19 virus did erupt in Wuhan, but it may not have originated in China.
- That there may have been a delay in acknowledging the seriousness of the crisis, but this was due to missteps by the local leadership in Wuhan city and Hubei province.
- Once the gravity of the situation was recognised, Chinese leaders promptly informed the WHO and shared the DNA sequence of the virus with it and other countries.
- The unprecedented measures adopted by Chinese authorities bought valuable time for the rest of the world to get prepared to deal with the pandemic.
- Having achieved notable success in arresting the spread of the virus, valuable assistance is now being provided to affected countries in the spirit of solidarity.
- China’s economy is beginning to recover and this will contribute to the recovery of the global economy.
China has been highlighting its success in dealing with Covid-19 as an achievement of its single-party system. So, it is important to understand why it is not entirely true. And UPSC can frame a question like “To what extent has democratic system helped India in dealing with the corona crisis? “. Following points highlight the advantages of democracy in this regard.
Democracy Vs. One-party system
- Has China demonstrated the superiority of China’s one-party system as compared to democracies? No!
- There is no escaping the fact that COVID-19 may not have become a pandemic if China were a democracy.
- With a free flow of information through an independent media and accountable political leadership, the rest of the world would have been alerted in time.
- There are democracies which have done as well if not better than China without resorting to its sledgehammer tactics.
- Notably, there is Taiwan, which is constantly bullied by China.
- There is South Korea, which has even held parliamentary elections after having brought the pandemic under control.
- Even in India, the government is providing daily updates on the spread of the virus.
- Conclusion: The bottom line is that as a result of being a democracy, we have a better chance of knowing the true dimensions of the crisis.
- With the democracy we have a better chance of being able to obtain constant feedback on people’s reactions and access the best advice from multiple sources.
China’s assistance and resentment against it
- One must acknowledge China’s assistance to affected countries despite reports of defective and low-quality materials.
- But recipients have often been “persuaded” to express fulsome praise for China.
- This accompanying publicity overdrive has caused resentment rather than gratitude
- Then there have been reports from Guangzhou on racial discrimination against stranded African students.
- This has led to a sharp reaction from African countries.
- This will be difficult to live down.
The revival of China’s economy
- There is no doubt that economic activity in China is beginning to revive after a steep drop of 6.8 per cent (year on year) in GDP during the first quarter of 2020.
- Latest estimates are that the Chinese economy is now functioning at about 80 per cent of the level last year, which is impressive.
- Less dependence on export: China’s economy is not as export-dependent as it has been in the past.
- Exports were 5 per cent of GDP in 2018 against 32.6 per cent in 2008.
- But the external economic environment is critical for China’s globalised economy.
- It is a significant node in the most important regional and global supply chains.
Changes in supply chains in the future and opportunity for India
- China’s position as a significant node will be impacted by countries re-shoring production or opting for shorter and closer-to-home supply chains.
- Japan will spend $2.2 billion to assist Japanese companies to shift units from China back to Japan or relocate to South East Asia.
- In 2012, when China-Japan tensions were at a peak, there was a similar move and India was seen as an alternative.
- But that opportunity was lost. Perhaps India has a second chance.
- Decoupling from the US economy: China will suffer from accelerated “decoupling” from the US economy with COVID-19 sharpening the already fraught bilateral relations.
- In a sense, China was already decoupled from the US by denying entry to US tech giants, Google, Facebook, Microsoft and Amazon.
- This even while its own tech multinationals like Huawei and Alibaba have built markets in the West.
- This cannot be sustained.
- The winners in the more digital world which will emerge post-COVID-19 will be the American tech giants, even though the US is politically dysfunctional.
- Democracies sometimes win even if their politics is frustrating.
Conclusion
Rather than express envy of Chinese authoritarianism, Indians should be thankful that we are a democracy. We need more democracy, not less, to overcome the COVID-19 challenge. India should also be ready to grab the opportunities in the post-Covid-19 era in the economic realms.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: LTRO, Repo and Reverse repo rate
Mains level: Read the attached story
Context
- The Indian economy’s slowdown during 2018 and 2019 is becoming much worse in 2020 with the spread of COVID-19 and the stalling of almost all economic activity.
- Like most other central banks in the world, the RBI, too, has tried to cut interest rates to boost the economy.
- However, unlike in the past, when the RBI used its repo rate as the main instrument to tweak the interest rates, today, it is the reverse repo rate that is effectively setting the benchmark.
We can expect a straight forward question based on this newscard. For example: “Critically examine the efficacy of reverse repo rate as benchmark interest rate in the Indian economy. “
What are repo and reverse repo rates?
- The repo rate is the rate at which the RBI lends money to the banking system (or banks) for short durations.
- The reverse repo rate is the rate at which banks can park their money with the RBI.
- With both kinds of the repo, which is short for repurchase agreement, transactions happen via bonds — one party sells bonds to the other with the promise to buy them back (or repurchase them) at a later specified date.
- In a growing economy, commercial banks need funds to lend to businesses.
- One source of funds for such lending is the money they receive from common people who maintain savings deposits with the banks. Repo is another option.
Repo as benchmark
- Under normal circumstances, that is when the economy is growing; the repo rate is the benchmark interest rate in the economy.
- This is because it is the lowest rate of interest at which funds can be borrowed and, as such, it forms the floor rate for all other interest rates in the economy.
- For instance, the interest rate consumers would have to pay on a car loan or the interest rate they will earn from a fixed deposit etc.
What has changed now?
- Over the last couple of years, India’s economic growth has decelerated sharply.
- This has happened for a variety of reasons and has essentially manifested in lower consumer demand.
- In response, businesses held back from making fresh investments and, as such, do not ask for as many new loans.
- Add to this, the pre-existing incidence of high non-performing assets (NPAs) within the banking system.
- Thus, the banks’ demand for fresh funds from the RBI has also diminished. This whole cycle has acutely intensified with the ongoing lockdown.
Consequences: Rise in Liquidity
- As such, the banking system is now flush with liquidity for two broad reasons.
- On the one hand, the RBI is cutting repo rates and other policy variables like the Cash Reserve Ratio to release additional and cheaper funds into the banking system so that banks could lend.
- On the other, banks are not lending to businesses, partly because banks are too risk-averse to lend and partly because the overall demand from the businesses has also come down.
So, how has reverse repo become the benchmark rate?
- The excess liquidity in the banking system has meant that banks have been using only the reverse repo (to park funds with the RBI) instead of the repo (to borrow funds).
- As of April 15, RBI had close to Rs 7 lakh crore of banks’ money parked with it.
- In other words, the reverse repo rate has become the most influential rate in the economy.
What has the RBI done?
- Recognising this, the RBI has cut the reverse repo rate more than the repo (see graph) twice in the spate of the last three weeks.
- The idea is to make it less attractive for banks to do nothing with their funds because their doing so hurts the economy and starves the businesses that genuinely need funds.
Will the move to cut reverse repo, work?
- It all depends on the revival of consumer demand in India.
- If the disruptions induced by the outbreak of novel coronavirus continue for a long time, consumer demand, which was already quite weak, is likely to stay muted.
- Businesses, in turn, would feel no need to borrow heavily to make fresh investments.
- If consumer demand revives quickly, the demand for credit will build up as well.
Concerns of lower reverse repo
- From the banks’ perspective, it is also important for them to be confident about new loans not turning into NPAs, and adding to their already high levels of bad loans.
- Until banks feel confident about the prospects of an economic turnaround, cuts in reverse repo rates may have little impact.
Back2Basics: Long Term Repo Operations (LTRO)
- The LTRO is a tool under which the RBI provides 1-3 year money to banks at the prevailing repo rate, accepting government securities with matching or higher tenure as the collateral.
- Funds through LTRO are provided at the repo rate.
- But usually, loans with higher maturity period (here like 1 year and 3 years) will have a higher interest rate compared to short term (repo) loans.
- According to the RBI, the LTRO scheme will be in addition to the existing Liquidity Adjustment Facility (LAF) and the Marginal Standing Facility (MSF) operations.
- The LAF and MSF are the two sets of liquidity operations by the RBI with the LAF having a number of tools like repo, reverse repo, term repo etc.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: SDR mechanism
Mains level: Issues with SDR mechanism
- Finance Minister has said that India could not support a general allocation of new Special Drawing Rights (SDR) by the IMF because it might not be effective in easing coronavirus-driven financial pressures.
- FM Nirmala Sitharaman has stated that such a global liquidity boost by the IMF could produce potentially costly side-effects if countries used the funds for “extraneous” purposes.
Details of SDR mechanism:
What is SDR?
- The SDR is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries.
- To participate in this system, a country was required to have official reserves.
- This consisted of a central bank or government reserves of gold and globally accepted foreign currencies that could be used to buy the local currency.
- It is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro, pound sterling and Chinese Renminbi.
- It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members.
- The value of the SDR is not directly determined by supply and demand in the market but is set daily by the IMF on the basis of market exchange rates between the currencies included in the SDR basket.
Who can hold SDRs?
- SDRs can be held and used by member countries, the IMF, and certain designated official entities called “prescribed holders”.
- It cannot be held, for example, by private entities or individuals.
- Its status as a reserve asset derives from the commitments of members to hold, accept, and honour obligations denominated in SDR.
- The SDR also serves as the unit of account of the IMF and some other international organizations.
General allocation of SDRs
- An SDR allocation is a low-cost way of adding to members’ international reserves, allowing members to reduce their reliance on more expensive domestic or external debt for building reserves.
- The IMF has the authority under its Articles of Agreement to create unconditional liquidity through “general allocations” of SDRs to participants in its SDR Department (currently, all members of the IMF) in proportion to their quotas in the IMF.
The SDR Interest Rate
- The interest rate on SDRs, or the SDRi, provides the basis for calculating the interest rate that is charged to member countries when they borrow from the IMF and paid to members for their remunerated creditor positions in the IMF.
- It is also the interest paid to member countries on their own SDR holdings and charged on their SDR allocation.
- The SDRi is determined weekly based on a weighted average of representative interest rates on short-term government debt instruments in the money markets of the SDR basket currencies, with a floor of five basis points.
How many SDRs have been allocated so far?
The general SDR allocation of August 28, 2009 is by far the biggest allocation to date:
- SDR 9.3 billion was allocated in yearly installments in 1970–72.
- SDR 12.1 billion was allocated in yearly installments in 1979–81.
- SDR 161.2 billion was allocated on August 28, 2009.
What happens to the SDRs once they are allocated?
- The IMF’s SDR Department keeps records of members’ SDR allocations and holdings; the SDR Department is also the channel through which all transactions and operations involving SDRs are conducted.
- Once allocated, members can hold their SDRs as part of their international reserves or sell part or all of their SDR allocations.
- Members can exchange SDRs for freely usable currencies among themselves and with prescribed holders; such exchange can take place under a voluntary arrangement or under designation by the Fund.
- IMF members can also use SDRs in operations and transactions involving the IMF, such as the payment of interest on and repayment of loans, or payment for future quota increases.
Issues with new allocations
- New reserves are allocated according to members’ quotas — or shares in the IMF.
- A great deal of the benefit in 2009 went to advanced economies that didn’t need help in accessing markets or financing fiscal deficits.
- If the same system is being used now, only 40 per cent of the total would be given to the emerging economies. That is not good enough.
Other reasons
- The possible extraneous purposes FM could be referring to maybe misuse of resources for terror funding or some such purpose by neighbours.
- This may seem far-fetched to some, but is par for the course for the government.
- The other possibility is that India is merely trying to prove its loyalty to the Trump administration.
- India has already requested to access the US Fed’s currency swaps.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Big Bang Nucleosynthesis (BBN)
Mains level: BBN and its significance in the formation of our solar system
Indian researchers have discovered hundreds of Li-rich giant stars produced during BBN indicating that Li is being produced in the stars and accounts for its abundance in the interstellar medium.
Most of the space based theories and missions are focussed on the formation of our solar system. BBN is the most basic auxillary among them.
What is Big Bang Nucleosynthesis (BBN)?
- BBN is the production of nuclei other than those of the lightest isotope of hydrogen during the early phases of the Universe.
- Primordial nucleosynthesis is believed by most cosmologists to have taken place in the interval from roughly 10 seconds to 20 minutes after the Big Bang.
- It is calculated to be responsible for the formation of most of the universe’s helium in various isotopic forms.
- Essentially all of the elements that are heavier than lithium were created much later, by stellar nucleosynthesis in evolving and exploding stars.
Lithium in space
- Lithium (Li), is one of the three primordial elements, apart from Hydrogen and Helium (He), produced in the Big Bang Nucleosynthesis (BBN).
- However, the present measurement of Li in the interstellar medium and very young stars is about 4 times more than the primordial value.
- Thus, identifying sources of Li enrichment in our Galaxy has been a great interest to researchers to validate BBN as well as a stellar mixing process.
- In general, stars are considered as Li sinks. This means that the original Li, with which stars are born, only gets depleted over stars’ life-time as Li burns at relatively very low temperatures.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Blazars
Mains level: Black Holes, Blazars
Researchers from the Indian Institute of Astrophysics (IIA), Bangalore have conducted the first systematic study on the gamma-ray flux variability nature on different types of Blazars.
Strange terminologies from space-based studies are very important from prelims point of view. We can expect a statement based question seeking to identify the term which is being referred to in the paragraph.
What are Blazars?
- At the center of most galaxies, there’s a massive black hole that can have mass of millions or even billions of Suns that accrete gas, dust, and stellar debris around it.
- As these material falls towards the black hole, their gravitational energy gets converted to light forming active galactic nuclei (AGN).
- A minority of AGN (~15%) emit collimated charged particles called jets travelling at speeds close to the speed of light.
- Blazars are AGN whose jets are aligned with the observer’s line of sight.
- Some blazars are thought to host binary black holes in them and could be potential targets for future gravitational-wave searches.
Studying blazars
- Blazars are the most luminous and energetic objects in the known universe were found to be emitters of gamma-rays in the 1990s.
- It is only with the capability of Fermi Gamma-ray space telescope (launched in 2008) to scan the entire sky once in three hours one is able to probe the flux variability characteristics of blazars on a range of time scales.
- Gamma-ray band is one of the bands of the electromagnetic spectrum on which there is limited knowledge on the flux variability of blazars.
- Major problem while studying them is to localize the site for the production of gamma-rays.
Significance
- The study of blazars could provide clues to the processes happening close to the black hole, not visible through direct imaging.
- Exploring blazars will provide key inputs to constrain the high energy production site as well as the high energy emission processes.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Mt. Matterhorn and its location
Mains level: Not Much
Switzerland has expressed solidarity with India in its fight against the coronavirus pandemic by projecting the tricolour on the famous Matterhorn Mountain in the Swiss Alps.
It has been long time since a question on global mountains/mountain ranges has not been asked in the prelims. Gear up for the uncertainty. Make a special sheet of geographical locations in news.
Mt. Matterhorn
- The Matterhorn is a mountain of the Alps, separating the main watershed and border between Switzerland and Italy.
- It is a large, near-symmetric pyramidal peak in the extended Monte Rosa area of the Pennine Alps, whose summit is 4,478 metres.
- It is one of the highest summits in the Alps and Europe (Mont Blanc being highest).
- The four steep faces, rising above the surrounding glaciers, face the four compass points and are split by the Hörnli, Furggen, Leone/Lion, and Zmutt ridges.
Its formation
- The Matterhorn is mainly composed of gneisses originally fragments of the African Plate before the Alpine orogeny.
- The mountain’s current shape is the result of cirque erosion due to multiple glaciers diverging from the peak, such as the Matterhorn Glacier at the base of the north face.
Back2Basics: Alps mountain range
- The Alps are the highest and most extensive mountain range system that lies entirely in Europe.
- It stretches approximately 1,200 kilometres across eight Alpine countries (from west to east): France, Switzerland, Monaco, Italy, Liechtenstein, Austria, Germany, and Slovenia.
- The mountains were formed over tens of millions of years as the African and Eurasian tectonic plates collided.
- Extreme shortening caused by the event resulted in marine sedimentary rocks rising by thrusting and folding into high mountain peaks such as Mont Blanc and the Matterhorn.
- Mont Blanc spans the French–Italian border, and at 4,809 m (15,778 ft) is the highest mountain in the Alps.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various policy rates of the RBI.
Mains level: Paper 3- What were the measures announced by the RBI to deal with the impact of Covid-19 on economy and how far were the measure successful in achieving the intended goals?
To deal with the damage inflicted by the corona crisis on the economy, both the RBI and the government are planning various monetary and fiscal measures. In its latest measures, the RBI has further reduced the reverse repo rate. This article discusses the impact of these measures and explains why the first round of measures failed in achieving the desired result.
What was announced in the second round of policy measures by the RBI?
- RBI reduces the interest on money banks keep in the central bank (reverse repo down by 25 basis points).
- RBI gives ₹50,000 crores to banks through targeted long-term repo operations or TLTRO 2.
- And another ₹50,000 crores to Small Industries Development Bank of India (Sidbi) and National Bank for Agriculture and Rural Development (Nabard) to lend to microfinance institutions (MFIs) and non-banking financial companies (NBFCs).
Banks not transmitting the money
- Banks globally have a problem.
- They are not transmitting the money that central banks are providing to businesses that need the money.
- Imagine that the world has been put into a business coma as we wait for the pandemic to recede.
- Money to pay rents, interest and salaries is needed by the business to stay alive during this period and banks are showing reluctance to step in.
- Firms and tiny entrepreneurs need to borrow to stay afloat.
- Banks typically lend to the larger part of the market and NBFCs and MFIs to the rest—they provide the last mile that banks do not.
Measures by the RBI to increase the money supply in the market
- The US Fed buying bonds directly: The US Federal Reserve has taken to buying corporate bonds directly rather than through banks.
- RBI has not gone that far, but is using its firepower to nudge banks to lend to those who are credit-worthy and who desperately need the money.
- It has done two things to facilitate this.
What reduction in Reverse Repo rate by the RBI means?
- What is reverse repo rate? This is the rate at which banks lend to the central bank—they keep their surplus money with the RBI and get some interest on it.
- Banks borrow from RBI at the repo rate, which is 4.4% right now.
- A few weeks ago, the central bank had reduced the reverse repo by a larger percentage than the repo to decrease the incentive to banks to keep money with RBI.
- But that had a limited impact as on 15 April, banks still had almost ₹7 trillion with the RBI under this window.
- In the second round, RBI has cut the reverse repo by another 25 basis points to 3.75% to increase the difference between the borrowing rate and the lending rate.
- What would be the impact of the second reduction in the reverse repo? The RBI is hoping that this would make banks lend to firms, rather than keeping their money safe with RBI.
- The difference between the rate of borrowing and lending is now 65 basis points.
An issue of monetary policy transmission is a recurring one. The RBI always try to ensure the transmission but there are several factor that prevent it. Make note of these factors.
Risk aversion of the banks
- Banks are displaying deep risk aversion—the desire to keep their capital safe rather than risk investing in investment-worthy bonds.
- The first round of money put into the system through TLTRO 1.0, brought ₹1 trillion.
- TLTRO is long-term (one-to-three years) funding to banks at the repo rate or a short-term rate.
- TLTRO money didn’t reach small and medium firms: Banks took the cheap loan and lent to high-rated public sector units (PSUs) and AA-plus firms—essentially entities who had enough liquidity.
- The money did not find its way to smaller and medium firms, NBFCs and MFIs—entities that actually reach the last mile.
- RBI has put another ₹50,000 crores as part of TLTRO 2.0.
- Banks can only get this money if they lend to NBFCs and MFIs.
- For A and A-minus (these are still investment-worthy) bonds issued by firms in these sectors, banks stand to get a return of between 10-14%.
- Banks are borrowing at 4.4% and have the option to lend at a multiplier.
- That is the incentive given by the RBI to get money down the pipeline.
- Banks stand to lose 65 basis points if they seek the safety of money with the RBI or stand to gain almost 6-10 percentage points in interest if they lend.
- It remains to be seen if banks take this nudge and begin lending to lower than the highest safety bonds.
Refinance to three institutions
- Another ₹50,000 crores is being provided as a refinance to three institutions-Sidbi, Nabard and National Housing Bank.
- These banks reach the small-scale firms, rural sector, housing finance firms, NBFCs and MFIs.
- Again, this should help money reach the last mile.
- Clearly, there is too much competition at the top end of the market—everybody wants the safe paper and deals.
The UPSC could ask a direct question with reference to the issue of policy transmission and how it is a serious challenge in crisis such as Covid -19. So, following are some suggestions to deal with this issue.
Way forward
- Rethink the bank architecture: With transmission, or the liquidity given by the central bank not going down the line, maybe this is a good time for the government and the RBI to rethink its bank architecture.
- Develop bond a corporate bond market: There is very little action at the middle and lower end of the market. The development of a robust corporate bond market will help.
- Early alarm system: The setting up of an early alarm system as proposed by the Financial Resolution and Deposit Insurance (FRDI) Bill to prevent a financial firm failure that takes the whole system down would be a step in the right direction.
Back2Basics: What is the transmission of monetary policy?
- Monetary transmission refers to the process by which a central bank’s monetary policy signals (like repo rate) are passed on, through the financial system to influence the businesses and households.
- There are many monetary policy signals by the RBI; the most powerful one is the repo rate.
- When repo rate is changed, it brings changes in the overall interest rate in the economy as well.
- As a result of a decrease in repo rate, the interest rate on loans by banks also changes and this encourages consumption and investment activities of businesses and households.
- In an economy, both consumption and investment are often financed by borrowings from banks.
- As the repo rate brings changes in market interest rate, the repo rate channel is often referred to as interest rate channel of monetary transmission.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Social democracy.
Mains level: Paper 2- What were the factors that helped Kerala deal most effectively with the Covid-19 pandemic?
This article is an analysis of Kerala’s success in dealing with the Covid-19. Factors that emerge are-strong emphasis on the social democracy, the participation of civil society and strong social compact between the government and citizenry. We have also covered the same subject in a previous article but focus there was more on the administrative level.
Kerala’s success story
- Kerala was the first State with a recorded case of coronavirus and once led the country in active cases.
- It now ranks 10th of all States and the total number of active cases (in a State that has done the most aggressive testing in India) has been declining for over a week and is now below the number of recovered cases.
- Given Kerala’s population density, deep connections to the global economy and the high international mobility of its citizens, it was primed to be a hotspot.
- Yet not only has the State flattened the curve but it also rolled out a comprehensive ₹20,000 crore economic package before the Centre even declared the lockdown.
Why does Kerala stand out in India and internationally?
- Kerala’s much-heralded success in social development has invited endless theories of its cultural, historical or geographical exceptionalism.
- But taming a pandemic and rapidly building out a massive and tailored safety net is fundamentally about the relation of the state to its citizens.
- From its first Assembly election in 1957, through alternating coalitions of Communist and Congress-led governments, iterated cycles of social mobilisation and state responses have forged what is in effect a robust social democracy.
- The current crisis underscores the comparative advantages of social democracy.
Kerala’s success is built on social democracy in the state. Following are the factors that constitute the social democracy in the state which is helping it fight against the Covid-19 pandemic with considerable success. These factors are also important from the Mains point of view if the question is framed on Kerala’s success story.
How social democracy is practised in Kerala?
- Social democracies are built on an encompassing social pact with a political commitment to providing basic welfare and broad-based opportunity to all citizens.
- In Kerala, the social pact itself emerged from recurrent episodes of popular mobilisation.
- Popular mobilisations include the temple entry movement of the 1930s to the most recent various gender and environmental movements.
- These movements nurtured a strong sense of social citizenship.
- These movements also drove reforms that have incrementally strengthened the legal and institutional capacity for public action.
- Second, the emphasis on rights-based welfare has been driven by and in turn has reinforced a vibrant, organised civil society.
- This civil society demands continuous accountability from front-line state actors.
- Third, this constant demand-side pressure of a highly mobilised civil society and a competitive party system has pressured all governments in Kerala.
- The pressure made governments to deliver public services and to constantly expand the social safety net, in particular a public health system that is the best in India.
- Fourth, that pressure has also fuelled Kerala’s push over the last two decades to empower local government.
- Nowhere in India are local governments as resourced and as capable as in Kerala.
- Finally, all of this ties into the greatest asset of any deep democracy, that is the generalised trust that comes from a State that has a wide and deep institutional surface area.
- That on balance treats people not as subjects or clients, but as rights-bearing citizens.
How the built-in social democracy is helping in dealing with the pandemic?
- A government’s capacity to respond to a cascading crisis such as the COVID-19 pandemic relies on a very fragile chain of –(1)mobilising financial and societal resources, (2)getting state actors to fulfil directives, (3)coordinating across multiple authorities and jurisdictions and maybe, most importantly, (4)getting citizens to comply.
- First, an effective response begins with programmatic decision-making.
- From the moment of the first reported case in Kerala, Chief Minister convened a State response team that coordinated 18 different functional teams.
- The CM held daily press conferences and communicated constantly with the public.
- Kerala’s social compact demanded no less.
- Second, the government was able to leverage a broad and dense health-care system.
- The health-care system, despite the recent growth of private health services, has maintained a robust public presence.
- Kerala’s public health-care workers are also of course highly unionised and organised, and from the outset the government lay emphasis on protecting the health of first responders.
- Third, the government activated an already highly mobilised civil society.
- As the cases multiplied, the government called on two lakh volunteers to go door to door, identifying those at risk and those in need.
- A State embedded in civil society — the women’s empowerment Kudumbasree movement being a case in point.
- Kudumbasree movement was in a good position to co-produce effective interventions, from organising contact tracing to delivering three lakh meals a day through Kudumbasree community kitchens.
- Fourth, you can get the politics right and you can have a great public health-care system, but its effectiveness in a crisis like this will only be as good as the infamous last kilometre.
- And this is where two decades of empowering local governments have clearly paid off.
Conclusion
At a time when India is dealing with this unprecedented crisis, it is important to be reminded that Kerala has managed the crisis with the most resolve, the most compassion and the best results of any large State in India. And that it has done so precisely by building on legacies of egalitarianism, social rights and public trust. Other states and the Central government must learn from Kerala’s experience.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Anti-defection law.
Mains level: Paper 2- What are the solution to the issue of bypassing of the anti-defection law by the political parties?
The article discusses the recent event in Madhya Pradesh where a group of legislature resigned bringing down the government. A most important issue arising out such incidents is circumventing of the laws made to avoid such things from happening. Several such issues along with their solutions are described here.
New method to bypass the anti-defection law
- The political activities in Madhya Pradesh represent a new method of bypassing the anti-defection law and toppling elected governments.
- The government in Karnataka was brought down in July last year in a similar manner with 17 MLAs of the ruling coalition resigning and joining the BJP.
- What method was used? Under this novel method, a set of legislators of the party in power is made to resign from the Assembly to reduce the total strength of the House enough for the opposition party to cross the halfway mark to form the government.
- In the ensuing by-elections, the members who resigned were then fielded as ruling party candidates (most of whom have been re-elected in the case of Karnataka).
- The same practice is likely to be repeated in Madhya Pradesh soon.
A question based on anti-defection law and its implication for healthy debate in the parliament was asked in 2013. And that issues still persist. So, take note of these issues.
Exploiting the loophole in the Tenth Schedule
- This method of mass defection circumvents the provisions of the Tenth Schedule of the Constitution (better known as the anti-defection law)
- What is the Tenth Schedule? The tenth schedule prescribes the grounds for disqualification of legislators: voluntarily giving up party membership and voting or abstaining to vote against party directions.
- Resignation is not mentioned as a ground for disqualification.
- However, the Speaker in Karnataka disqualified them for the rest of the Assembly’s term, thereby barring them from contesting the by-polls.
- While the Supreme Court upheld the disqualification.
- It stuck down the bar from contesting by-polls.
- In Madhya Pradesh, since the Speaker has accepted the resignation of the MLAs, the defectors can in any case contest the by-polls.
Damaging the underpinnings of democracy
- The recurrence of this model of defection signals the exploitation of the inherent weaknesses of the anti-defection law.
- While solo legislators jumping ship might have reduced now, “horse-trading” seems to have gone from retail to wholesale.
- This threatens the underpinnings of India’s electoral democracy since such surreptitious capture of power essentially betrays the people’s mandate in a general election.
Kihoto case is an important case in relation to the anti-defection law.
Time to reframe the anti-defection law
- In this context, it is important to examine whether the anti-defection law fulfils any purpose.
- This law raises fundamental concerns regarding the role of a legislator in a parliamentary democracy.
- Issues with the law: It denies the legislator the right to take a principled position on a policy matter and reduces her to an involuntary supporter of the whims of party bosses.
- Challenge to the constitutionality: The constitutionality of the Tenth Schedule was challenged for violating the Basic Structure of Constitution with regard to parliamentary democracy and free speech.
- Judicial review of the Speaker’s decision: The Supreme Court in Kihoto Hollohan v. Zachillhu (1992) in a 3-2 verdict upheld the law while reserving the right of judicial review of the Speaker’s decision.
What are the shortcomings in the anti-defection law?
- Restriction on the freedom of legislator: The anti-defection law, on the one hand, severely restricts the freedom of a legislator and makes her a slave of party whips.
- Failure in preventing the horse-trading: On the other hand, it has not been able to meet its primary objective of preventing horse-trading and continues to be circumvented to bring down elected governments.
- This calls for reforms that address concerns at both ends of the spectrum.
Following two are the solutions offered here. They are important from Mains point of view. As solutions are often asked for the pressing issues.
Dinesh Goswami Committee and other suggestion
- Restrict the scope of the binding whip: For addressing the first issue, as the Dinesh Goswami Committee also suggested, the scope of the binding whip should be restricted to a vote of confidence.
- For addressing the second issue, it is best to institutionalise the Karnataka Speaker’s decision to bar the defected members from contesting in the ensuing by-poll, if not for a longer period.
- This will disincentivise MLAs from jumping ship.
- These reforms would require a constitutional amendment to the Tenth Schedule, an uphill task under the current circumstances.
Conclusion
We are facing a deeper challenge of the corrosion of India’s parliamentary system, for even in jurisdictions without such anti-defection laws, we do not see “horse-trading” and “resort politics”. Hence, beyond institutional fixes, we also need a popular articulation of an ethical politics that causes the public to shun such political manoeuvres.
Back2Basic: What is the Tenth Schedule?
- The Tenth Schedule was inserted in the Constitution in 1985.
- It lays down the process by which legislators may be disqualified on grounds of defection by the Presiding Officer of a legislature based on a petition by any other member of the House.
- A legislator is deemed to have defected if he either voluntarily gives up the membership of his party or disobeys the directives of the party leadership on a vote.
- This implies that a legislator defying (abstaining or voting against) the party whip on any issue can lose his membership of the House.
- The law applies to both Parliament and state assemblies.
- Exceptions under the law: Legislators may change their party without the risk of disqualification in certain circumstances.
- The law allows a party to merge with or into another party provided that at least two-thirds of its legislators are in favour of the merger.
- In such a scenario, neither the members who decide to merge nor the ones who stay with the original party will face disqualification.
- Is there any time limit to decide on the matter? The law does not specify a time period for the Presiding Officer to decide on a disqualification plea.
- Given that courts can intervene only after the Presiding Officer has decided on the matter, the petitioner seeking disqualification has no option but to wait for this decision to be made.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various terms mentioned in the newscard
Mains level: RBI measures to boost the pandemic stricken economy
To deal with the crippling effects of the pandemic on the economy the government has unveiled certain fiscal measures. After announcing the first round of monetary measures the RBI has unveiled the second round of policy announcements to align itself with the government in its efforts to review the economy. Following are the measures announced by the RBI in its second such announcement.
- The IMF has called the ongoing economic crisis due to Covid-19 as “The Great Lockdown” and termed it to be the worst recession since the Great Depression.
- The total estimated loss to global economic growth is pegged at $9 trillion — more than three times India’s GDP.
- However, while the rest of the world is certain to contract, India is hoping to be one of the few countries that expand their overall GDP, regardless of how small that increase may be.
- In this regard, both the Centre and state governments, as well as the RBI, have been coming out with policy announcements that mitigate economic distress.
UPSC can frame the question based on the measures announced by the RBI like “What measures were announced by the RBI to deal with Covid-19 impact on the economy?”. Also, pay attention to various terms and their effect on the economy from the macroeconomic point of view. That understanding helps us to answer the question based on basic concepts.
What are the announcements made by RBI?
A) Cutting Reverse-Repo Rate
- To begin with, the RBI has cut the reverse repo rate further by 25 basis points (100 basis points make up one full percentage point).
- The reverse repo rate now stands at 3.75 per cent while the repo rate is 4.40 per cent.
- The idea behind repeatedly cutting reverse repo more than the repo is to incentivise banks to borrow from it at low rates and lend it forward to customers.
B) Targeted Long Term Repo Operations
- RBI has announced another TLTRO of Rs 50,000 crore but this time it has mandated that 50 per cent of this amount borrowed by the banks must go to small and mid-sized NBFCs and Micro Finance Institutions (MFIs).
- Again, the benefits of this move are two-fold. One, it provides more liquidity.
- More importantly, it also provides it targeted to those institutions that are most hit by the economic slowdown and, as such, most in need of funds to survive themselves.
C) Credit to NBFCs and MFIs
- All India financial institutions (AIFIs) such as the NABARD, etc. will be provided special refinance facilities for a total amount of Rs 50,000 crore by the RBI.
- This credit will help the end consumer, especially in the rural sector, small industries, and housing finance companies.
D) Expanding Ways and Means Advances (WMAs)
- On the issue of providing liquidity and fulfilling its role as “the lender of last resort”, the RBI also announced that it will provide more funding to state governments — under the WMA facility.
- The WMA is essentially is a facility by which state governments borrow from the RBI to meet the shortfall between their revenues and their expenditure.
- But the WMA is a short-term measure, only meant for exigencies.
E) Easing NPA norms
- Apart from easing liquidity in the system like in the past, the other focus has been to provide an easier regulatory regime.
- The global lockdown has almost completely halted economic activity.
- Under the circumstances, it is natural that business will struggle to pay back their loans and there will be a steady accretion of non-performing assets (NPAs) across the board.
- Similarly, to ensure that loans given to real estate projects, that are getting delayed due to the crisis, do not turn into NPAs, the RBI provided an extension of another year before they are recognised as NPAs.
F) Easing LCR norms
- Lastly, given the stress on the system and the demand for cash, the RBI has allowed Scheduled Commercial Banks to reduce their Liquidity Coverage Ratio from 100 per cent to 80 per cent with immediate effect.
- The LCR essentially mandates the amount of cash that a bank is required to keep with itself.
- At 100 per cent LCR, a bank would have been required to keep 100 per cent of the net cash it expects to flow out of the bank over the next 30 days.
- With this being reduced to 80 per cent, banks would have more cash to deal with.
Though no direct question on monetary policy was asked in the recent past, understanding the basic concepts stands us in good stead while writing the related answer in the exam. So, the terms mentioned above like-TLTRO, WMAs etc. are important from exam point of view.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: OBICUS
Mains level: Not Much
The Reserve Bank of India has launched the latest round of quarterly order books, inventories and capacity utilization survey (OBICUS) of the manufacturing sector.
OBICUS is something new than we often get to hear from RBI…. Most recent was Ways and Means Advances. We can expect prelims question like- “Order books, inventories and capacity utilization survey (OBICUS) of the manufacturing sector is held by” – with options like NSSO, Labour Bureau etc.
OBICUS
- OBICUS survey on the manufacturing sector is published quarterly by the RBI since March 2008.
- It provides an insight into the demand conditions faced by the Indian manufacturing sector.
- It covers over 2500 public and private limited companies in the manufacturing sector.
- The company-level data collected during the survey are treated as confidential and never disclosed.
Items included in OBICUS
- The information collected in the survey includes quantitative data on new orders received during the reference quarter, backlog of orders, pending orders, total inventories with a breakup between work-in-progress (WiP) and finished goods (FG) inventories and item-wise production.
Significance of OBICUS
- The survey provides valuable input for monetary policy formulation.
- It represents the movements in actual data on order books, inventory levels of raw materials and finished goods and capacity utilization.
- These are considered as important indicators to measure economic activity, inflationary pressures and the overall business cycle.
- The survey also gives out the ratio of total inventories to sales and ratio of raw material (RM) and finished goods (FG) inventories to sales in percentages.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: STPI and thier functioning
Mains level: Role of STPI in facilitating start-ups and IT industries
Government of India has given 4 months’ Rental Waiver to the IT Companies Operating from Software Technology Parks of India (STPI) Centers.
STPI which witness multi-million transactions every day are the most promising workplaces for startups in India. They have gained popularity not among Indians, but also on an international platform for its state of the art infrastructure, world-class working conditions and amenities. We can expect a mains question like “Discuss the role of STPIs in making India a hub of ITeS exports”.
Why this waiver?
- The rental waiver will provide relief to the industry in this crisis situation emerged due to COVID19 pandemic.
- Most of these units are either Tech MSMEs or startups.
- This effort is also in the larger interest of around 3,000 IT/ ITeS employees who are directly supported by these units.
What are STPI?
- An STPI is a society established in 1991 by the Ministry of Electronics and Information Technology.
- The objective of an STPI is to encourage, promote and boost the export of software from India.
- STPI maintains internal engineering resources to provide consulting, training and implementation of IT-enabled services.
STPI Scheme
- The STP Scheme is a 100 per cent Export Oriented Scheme for the development and export of computer software, including export of professional services using communication links or physical media.
- This scheme is unique in its nature as it focuses on one product/sector, i.e. computer software.
- The scheme integrates the government concept of 100 per cent Export Oriented Units (EOU) and Export Processing Zones (EPZ) and the concept of Science Parks / Technology Parks, as operating elsewhere in the world.
Who can get a floor on STPI?
- An Indian company
- A subsidiary of a foreign company
- A branch office of a foreign company
Features of the STPI
- The STP Scheme provides various benefits to the registered units, including 100% foreign equity, tax incentives, duty-free import, duty-free indigenous procurement, CST reimbursement, DTA entitlement, and deemed exports.
- STPI centres also provide a variety of services including high-speed data communication, incubation facilities, consultancy, network monitoring, data centres and data hosting.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Kisan Rath
Mains level: Supply-chain dynamics of Agricultural produce and its bottlenecks
The Union Ministry of Agriculture & Farmers’ Welfare has launched a mobile application to facilitate farmers & traders in searching for transport vehicles for movement of Agriculture & Horticulture produce.
Initiatives as such are less likely to be asked in the prelims as the name and purpose create no different analogy. But for the sake of information and mains perspective, it is vital to remember ‘Kisan Rath’ while emphasizing on Agricultural marketing reforms.
“Kisan Rath” mobile app
- The app aims to facilitate Farmers and Traders in identifying the right mode of transportation for movement of farm produce ranging from foodgrains, fruits & vegetables, oilseeds, spices, fibre crops etc.
- Primary transportation would include movement from Farm to Mandis, FPO Collection Centre and Warehouses etc.
- Secondary Transportation would include movement from Mandis to Intra-state & Inter-state mandis, Processing units, Railway station, Warehouses and Wholesalers etc.
- It also facilitates traders in transportation of perishable commodities by Reefer (Refrigerated) vehicles.
Utility of the app
- Transportation of Agri produce is a critical and indispensable component of the supply chain.
- Kisan Rath will ensure smooth and seamless supply linkages between farmers and the market.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Qubit, superposition.
Mains level: Paper 3- What do you understand by quantum technology? What are its applications? How it is different from the classical computer technology?
The article suggests that the corona crisis would speed up research in the field of quantum computing. The tremendous speed offered by quantum computers will help us find a cure for diseases like Covid-19 in a much shorter duration. This article explains the limitations of classical computers, working of quantum technology, and how quantum computer overcomes these limitations.
Use of supercomputer to find the cure of Covid-19
- The whole world is pressurized into quickly discovering a vaccine and a cure for covid-19.
- IBM’s Summit, the world’s fastest supercomputer, was used for running numerous simulations and computations.
- These simulations and computations help scientists find promising molecules to fight the pandemic.
- The latest update says the Summit has been able to identify 77 candidate molecules that researchers can use in trials.
- This was achieved in just two days, while, traditionally, it has taken months to make such progress.
Computing capacity as a limit on molecular discoveries
- Today, faster molecular discoveries are limited by computing capacity.
- Molecular discoveries are also limited by the need for scientists to write codes for harnessing the computing power.
- It is no secret that classical computing power is plateauing (e. it is not growing anymore)
- And till we have scalable artificial intelligence (AI) and machine learning (ML), scientists will have to write code for not only different scenarios but also for different computing platforms.
- So, what we need today is more computing power.
The following points explain the limits of classical computers. Pay attention to the Moore’s law, and how it explains the development of semiconductor technologies and in turn computers as a whole.
What is the solution to the limits of classical computers?
- Given that we have already neared the peak of classical computing, the solution probably is quantum computing.
- Not just vaccines, quantum computing can accelerate many innovations, such as hyper-individualized medicines, 3-D printed organs, search engines for the physical world etc.
- All innovations currently constrained by the size of transistors used in classical computing chips can be unleashed through quantum computing.
- Moore’s law: In 1965, Gordon Moore had said the number of transistors that can be packed into a given unit of space will double about every two years.
- Subsequently, in an interview in 2005, he himself admitted that this law can’t continue forever.
- He had said: “It is the nature of exponential functions, they eventually hit a wall.”
- Over the last 60 years, we reaped the benefits of Moore’s law in many ways.
- For instance, compared to initial days of the Intel 4004, the modern 14nm processors deliver way bigger impact—3,500 times better performance and 90,000 times improved efficiency, at 1/60,000th the cost!
- Yet, we are also seeing his 2005 statement coming true. All the experts agree that the ‘wall’ is very near.
- So, what next? The answer again is probably the same—quantum computing.
Quantum technology is one of the emerging and revolutionary technologies, you should be aware of the terms and general principle which lies at the heart of such technology. So, terms like superposition, qubit, binary etc are important if you want to answer a questions related to this technology.
Quantum computing and its applications
- It is no more a concept, there are working models available on the cloud.
- How it works: Quantum computing uses the ability of sub-atomic particles to exist in multiple states simultaneously, until it is observed.
- The concept of qubits: Unlike classical computers that can store information in just two values, that is 1 or 0, quantum computing uses qubits that can exist in any superposition of these values,
- This superposition enables quantum computers to solve in seconds problems which a classical computer would take thousands of years to crack.
- Applications: The application of this technology is enormous, and just to cite a few, it can help with the discovery of new molecules, optimize financial portfolios for different risk scenarios.
- It can also crack RSA encryption keys, detect stealth aircraft, search massive databases in a split second and truly enable AI.
Investment in the development of technology
- In the Union budget this year, the Indian government announced investments of ₹8,000 crores for developing quantum technologies and applications.
- Globally, too, countries and organizations are rushing to develop this technology and have already invested enormous capital towards its research.
Conclusion
Historically, unprecedented crises have always created more innovations than routine challenges or systematic investments. Coincidentally, current times pose similar opportunities in disguise for the development of quantum technologies.
Back2Basics: Difference between bit and qubit
- A binary digit, characterized as 0 and 1, is used to represent information in classical computers.
- A binary digit can represent up to one bit of information, where a bit is the basic unit of information.
- In classical computer technologies, a processed bit is implemented by one of two levels of low DC voltage.
- And whilst switching from one of these two levels to the other, a so-called forbidden zone must be passed as fast as possible, as electrical voltage cannot change from one level to another instantaneously.
- There are two possible outcomes for the measurement of a qubit—usually taken to have the value “0” and “1”, like a bit or binary digit.
- However, whereas the state of a bit can only be either 0 or 1, the general state of a qubit according to quantum mechanics can be a coherent superposition of both.
- Moreover, whereas a measurement of a classical bit would not disturb its state, a measurement of a qubit would destroy its coherence and irrevocably disturb the superposition state.
- It is possible to fully encode one bit in one qubit.
- However, a qubit can hold more information, e.g. up to two bits using superdense coding.
- For a system of n components, a complete description of its state in classical physics requires only n bits, whereas in quantum physics it requires 2n−1 complex numbers.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- What are the factors that helped Kerala deal with Covid-19 successfully compared to the rest of the country?
With figures emerging of Kerala’s success in dealing with the Covid-19, the rest of the nation has lessons to learn from it. This article describes the approach adopted by Kerala, and how various factors like robust health infrastructure, past experience etc. are helping it.
Kerala stands out in India: some figures and facts
- The COVID curve in Kerala is flattening.
- Every day, for a week now, the number of recoveries has exceeded the number of new infections.
- The recovery rate in Kerala is nearly 50 per cent while the all-India average is around 11.
- While the mortality rate among the infected is 5 per cent in Kerala, the all-India average is 3.4 per cent.
- The transmission rate of a primary carrier is 6 while in Kerala it is only 0.4.
With Covid-19, we are in unknown territory in many ways. If Kerala emerges as the success model, the question can be framed from that perspective. So, note down the factors described below that are helping the state in tackling Covid-19 successfully.
Preparing for the next challenge
- Kerala is preparing for the next challenge, the outcome of which will determine the result of the war against COVID.
- Lifting of the lockdown is going to result in an influx of returning migrants from foreign countries and other states.
- Hundreds of thousands would have to be quarantined, tested and, if positive, treated, ensuring there is no secondary spread.
- State authorities have already identified accommodation and other facilities for more than two lakh persons.
- Use of big data analytics: The state is also exploring the possibility of big data analytics to plan a strategy and, if necessary, for reverse quarantining.
- Authorities have access to WHO data covering nearly two-thirds of the state`s population.
- Integrating this data with the information currently being generated, we will be able to map vulnerable sections of the population, simulate scenarios and plan ahead.
- Exit strategy: An exit strategy from the lockdown is being prepared to protect livelihoods and stimulate the economy.
Strength of the public health system of Kerala
- The single most important factor that enabled Kerala to be prepared for the COVID is the strength of the public health system.
- Kerala’s health system is a proud legacy of our past.
- It has had a big push in infrastructure and equipment investment of around Rs 4,000 crore from the Kerala Infrastructure Investment Fund Board.
- Five thousand seven hundred and seventy-five new posts have also been created.
- The Aardram Health Mission was launched with a focus to transform the PHCs into family health centres.
- Distinctive feature: There is also the distinctive flavour of Kerala — mass participation in preventive and palliative healthcare.
- Training to health workers: The morale of health personnel has been exceptionally high.
- Special training, protective gear, scientific duty rotation and, most importantly, societal empathy and solidarity, have all contributed.
Learning from the past experience
- Nipah outbreak experience: The recent experiences of successful containment of the Nipah outbreak and management of the two post-flood health situations have provided a kind of herd immunity to the health workers to crisis situations.
- Covid-19 preparedness: Once news of the Wuhan pandemic came, the Kerala health system scrambled to readiness — the control room was set up, mock drills were organised and the first influx was contained.
- Once migrants from the Gulf and Europe began to return, things began to get out of hand.
- But now this battle has been successfully concluded.
Testing and tracing in Kerala
- A route map of each COVID positive case is prepared and given publicity, alerting everybody who might have been in contact.
- The protocol of cycles of intense test, trace, isolate and treatment has been the norm.
- Kerala has the highest test rate in the country.
- Break the Chain Campaign to promote social distancing has been successful.
- Lockdown by itself is not going to contain the COVID spread. It would continue to multiply within households and dormitories.
- Testing has been woefully insufficient in the national response so far.
Welfare payment in Kerala more than the rest of the country
- In Kerala, 55 lakh elderly and disadvantaged have received Rs 8,500 as welfare payments.
- An equal number of workers have been paid Rs 1,000-3,000 each from the welfare funds.
- Every family has been provided with a food kit.
- Interest-free consumption loan of Rs 2,000 crore has been distributed.
- Besides, nearly 4 lakh meals are distributed every day to the needy from community kitchens set up by local governments.
- Local governments are also duty-bound to monitor the camps of migrant workers, set up new ones and ensure medicine and food to them.
Decentralisation paying off in Kerala
- All the above was not made possible by the state government alone.
- It is the synergy generated by integrating state government plans and programmes with the local governments, the co-operatives, women neighbourhood groups (Kudumbashree) and civil society organisations that make Kerala distinct.
- The floods and the pandemic have given testimony for the potential of democratic decentralisation.
- It is a case of multi-level planning with technical committees and groups working at the state level coordinated by the chief minister.
Conclusion
Though it is too early to declare Kerala as a success story, still there are many lessons to be learned by the rest of the country in its fight against Covid-19.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: IBC, difference between operational and financial creditor, threshold limit to file insolvency case etc.
Mains level: Paper 3- Purpose and issues with IBC, its various provisions and changes that needs to be made in the wake of Covid-19.
This article argues the suspension of IBC for six months. The issues arising out of suspension like damage to the creditors are also dealt with here. Reading of this article will help us understand the finer details of IBC that are relevant from the UPSC point of view. We have also covered one article from livemint dealing with the same issue, but that article covered the issue in a broader sense.
Who are operational and financial creditors?
- After the lockdown is over, several companies are likely to default on their dues to both operational and financial creditors.
- Who is a financial creditor? The financial creditors include banks and others who have given financial assistance to a company in the form of loans and debentures.
- According to a 2018 amendment to the Insolvency and Bankruptcy Code (IBC) 2017, flat purchasers are also deemed as financial creditors.
- An operational creditor is just about anyone who has to receive money from a company.
- The IBC provides a fast-track mechanism to deal with companies which are unable to repay their creditors and have become financially unviable.
- Section 22 of the Code mandates the appointment of a Resolution Professional (RP) who is expected to miraculously turn around the company in 330 days.
- If this attempt fails, the company goes into liquidation.
The two types of creditors were in the news, so pay attention to these terms.
Increase in threshold limit to file an insolvency petition
- The IBC’s provisions have been extensively used by various creditors whose dues were not paid.
- What was the threshold limit? Initially, the threshold limit was just Rs 1 lakh and the IBC became an effective recovery mechanism for all operational creditors.
- What is the limit now? Just before the lockdown, the finance minister raised the threshold for invoking the insolvency provisions to Rs 1 crore.
- This limit was raised to prevent proceedings being initiated against small and medium enterprises.
Possibility of the domino effect after the lockdown is over
- After the lockdown, several enterprises, large, medium and small, might not be able to pay their dues, at least in the short-term.
- The easiest way for a creditor to recover money is to initiate insolvency proceedings against the debtor company and threaten it with liquidation.
- The shutdown of business after the lockdown could have a domino effect.
- How would the domino effect come into play? If an auto-manufacturer has shut down its operations, the ancillary units will not get their dues.
- This would then lead to non-payment to downstream vendors and service providers as well.
- It might take at least three to four months for the situation to stabilise.
Steps that should be taken to avoid the domino effect
- Moratorium on the IBC: The most important, and immediate, step that needs to be taken is to have a six-month moratorium on the IBC.
- It may be necessary to promulgate an ordinance suspending the prospective operation of Sections 7 and 9 of the IBC so that no fresh petition is filed against a company.
- Impact on creditors: While this could hurt some of the creditors, the damage that could be done to the corporate sector by invoking the IBC is likely to be far greater.
- A distressed creditor is not without a remedy as he can always approach the civil courts for relief, which will not be so severe on a defaulting company.
- If an insolvency petition is filed and the RP appointed, it is difficult to stop the insolvency process.
- The IBC requires a financially-stressed company to be taken over by a financially-sound
- For example, Essar Steel was taken over by ArcelorMittal and Bhushan Steel was taken over by Tata Steel.
- In the current scenario, it will be difficult, if not impossible, for an RP to find a suitable buyer and the only option would be to liquidate the company.
- Using the insolvency process to recover dues is contrary to the IBC’s objectives.
The objective of the IBC is not just insolvency but the reorganisation of companies, maximisation of value of assets and the need to balance the interests of all stakeholders. Pay attention to this point.
How the suspension of the IBC will be beneficial?
- Suspending the IBC for a short period would enable several companies to return to normalcy.
- It will help them function without the constant threat of an insolvency application and its Board of Directors and management being taken over by the RP.
- Moreover, the National Company Law Tribunal benches will simply be unable to take any additional workload.
Conclusion
Suspending the IBC for six months would be a much-needed step to prevent further damage to the economy. It would be in the larger public interest. Indeed, at this critical stage, permitting the legal remedy of insolvency could be the last nail in the coffin of many companies.
Back2Basics: What is the Insolvency and Bankruptcy Code?
- IBC provides for a time-bound process to resolve insolvency.
- When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency.
- Under IBC debtor and creditor both can start ‘recovery’ proceedings against each other.
- Insolvency and Bankruptcy Code 2016 was implemented through an act of Parliament.
- It got Presidential assent in May 2016.
- The law was necessitated due to huge pile-up of non-performing loans of banks and delay in debt resolution.
- Insolvency resolution in India took 4.3 years on an average against other countries such as United Kingdom (1 year) and United States of America (1.5 years), which is sought to be reduced besides facilitating the resolution of big-ticket loan accounts.
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