Daily Prelims Notes 10 January 2024

Daily Prelims Notes

10 January 2024

Table Of Contents

1. Majority of cities far from clean air target, says study
2. Over 100 active permafrost structures identified in Jhelum basin, can cause catastrophic disasters in future: Study
3. Bosnian Serbs are ‘mentally’ in Serbia, their leader says
4. A look at Project Tiger, 50 years on
5. Traditional Medicine Morbidity codes of Ayurveda, Siddha and Unani
6. Regulation by statute does not rob a varsity of minority status, observes SC
7. Why International Law Matters
8. India’s Inclusion in Bloomberg EM Index

1. Majority of cities far from clean air target, says study

Subject :Environment

Section : Pollution

Context:

• The National Clean Air Programme (NCAP) in India aimed to decrease average particulate matter concentrations by 40% by 2026 in 131 cities.
• However, an analysis showed that out of 49 cities with consistent data over five years, only four cities met or surpassed the targeted decline in PM 2.5 levels.

Details:

• Some major cities like Delhi, Navi Mumbai, Mumbai, and others experienced marginal declines or even rises in pollution levels.
• Cities like Varanasi, Agra, and Jodhpur (50%) demonstrated significant reductions in PM 2.5 levels, showcasing positive progress.
• Uttar Pradesh cities such as Kanpur (50%), Meerut (42%), and Lucknow (41%) also saw substantial reductions. Yet, concerns persist as nearly 18 of the top 20 polluted cities for PM 2.5 are concentrated in the Indo-Gangetic Plain (IGP), with Delhi and other northern/eastern cities peaking during winter due to adverse meteorological conditions. Only Guwahati and Rourkela, outside the IGP, were among the 20 most polluted cities for PM 2.5
• The concentration of continuous ambient air quality monitors varies widely among cities, with only a few cities possessing a sufficient number.
• Geographical locations,emission sources, and meteorological influences significantly impact pollution levels, necessitating further study to understand their contributions.
• Despite positive strides in reducing pollution, challenges remain.
• The NCAP’s revised goal underscores a commitment to ambitious environmental targets, with the addition of new air quality monitoring stations expected to provide a clearer understanding of the problem and aid in better mitigation measures.

About NCAP:

• Launched by the MoEFCC in January 2019 as a long-term, time-bound, national-level strategy that features:
  • Making determined efforts to deal with the air pollution problem across the country in a comprehensive manner.
  • Achieving 20% to 30% reduction target in Particulate Matter concentrations by 2024 where 2017 is kept as the base year for the comparison of concentration.
• Identification of 122 non-attainment cities (presently 131 non-attainment cities) across the country based on the 2014-2018 Air Quality data.
• Non- Attainment Cities are the cities which do not meet the National Ambient Air Quality Standards.
• Preparation of the city-specific action plans including measures to strengthen the monitoring network, reduce vehicular/industrial emissions, increase public awareness etc.
• Implementation of the city-specific action plans to be regularly monitored by Committees at Central and State level namely Steering Committee, Monitoring Committee and Implementation Committee.
• Facilitating collaborative, multi-scale and cross-sectoral coordination between the relevant central ministries, state governments and local bodies.
• Establishing the right mix with the existing policies and programmes which include the National Action Plan on Climate Change (NAPCC) and other government initiatives related to climate change.
• Constant change, activity and progress evolved based on the additional scientific and technical information as they emerged.
• Increasing the number of monitoring stations in the country including rural monitoring stations, and technology support.
• Emphasis on awareness and capacity-building initiatives.
• Setting up certification agencies for monitoring equipment, source apportionment studies, emphasis on enforcement, specific sectoral interventions etc.
• The NCAP tracker is a joint project of the Carbon Copy portal and Maharashtra-based Respirer Living Sciences.
• Objective:
  • To augment and evolve effective and proficient ambient air quality monitoring networks across the country.
  • To have efficient data dissemination and public outreach mechanisms for timely measures for prevention and mitigation of air pollution.
  • To have a feasible management plan for the prevention, control and abatement of air pollution.

2. Over 100 active permafrost structures identified in Jhelum basin, can cause catastrophic disasters in future: Study

Subject :Environment

Section :Climate Change

In the news:

• A recent study mapped over 100 rock glaciers in the Kashmir Himalayas, revealing signs of movement or melting in these permafrost structures.

Details:

• Termed ‘active glacial rocks,’ these formations are potentially linked to natural disasters as the region experiences warming.
• While permafrost research is extensive in areas like Greenland and Alaska, knowledge about Himalayan rock glaciers remains limited.

Active glacial rocks:

• Rock glaciers form when debris-covered ice transforms due to receding or thawing glaciers.
• The process might have accelerated during warmer periods in the Earth’s recent interglacial era.
• These structures are often mistaken for regular ground, leading to settlements being planned on unstable terrain.
• The melting permafrost poses risks to nearby communities and infrastructure, as seen in Canada’s Nunavik area.
• Researchers identified these rock glaciers using satellite images and field visits, constructing a ‘Permafrost Zonation Map’ pinpointing 207 rock glaciers across 50 square kilometres in the Jhelum basin. They categorized these formations as ‘active’ or ‘relict’ based on permafrost status.
• Reports highlight the shift from glaciers to rock glaciers in the Kashmir valley’s southwestern parts, indicating a serious transition in glaciation stages.
• Experts anticipate rock glaciers will become more common due to increased debris concentrations in melting glaciers, a trend already observed in the Jhelum basin’s debris-covered glaciers.
• This underscores the importance of mapping permafrost distribution in the Himalayan region due to the potential risks associated with melting permafrost in rock glaciers.

Dangers posed & a benefit:

• The study identifies dangers posed by rock glaciers, particularly near glacial lakes like Chirsarand Bramsar Lakes, increasing the risk of glacial lake outburst floods (GLOFs).
• These permafrost formations, located at steep slopes, could lead to slope failures and subsequent melting, potentially causing GLOFs and more frequent landslides.
• The presence of waterbodies resembling ‘thermokarst lakes’ suggests hidden permafrost in the Jhelum Basin.
  • Thermokarst is a type of terrain characterised by very irregular surfaces of marshy hollows and small hummocks formed as ice-rich permafrost thaws. The land surface type occurs in Arctic areas, and on a smaller scale in mountainous areas such as the Himalayas and the Swiss Alps. These pitted surfaces resemble clusters of small lakes formed by the dissolution of limestone in some karst areas.
• These permafrost structures hold significant water volumes, approximately a trillion litres across the Jhelum basin, amid dwindling water sources.

Source: Down To Earth

3. Bosnian Serbs are ‘mentally’ in Serbia, their leader says

Subject :IR

Section :Places in news

Context:

• Celebrations are due on 9 January, to mark 32 years since Bosnian Serbs proclaimed a “republic” deemed anti-constitutional by both Bosnia’s central government and the Organisation for Security and Cooperation in Europe (OSCE).

Details:

• Three months after the proclamation of their republic — Republika Srpska — on January 9, 1992, an inter-ethnic war broke out in Bosnia, claiming around 1,00,000 lives.
• Since the 1992-1995 war, Bosnia and Herzegovina comprises two semi-independent entities — the mostly-Orthodox Christian Serbs’ Republika Srpska, and the Federation of Bosnia and Herzegovina, made up of mostly-Muslim Bosniaks and mostly-Catholic Croats.

Bosnia and Herzegovina:

• Country in Southeast Europe, situated on the Balkan Peninsula.
• Borders Serbia to the east, Montenegro to the southeast, and Croatia to the north and southwest. In the south, it has a 20 kilometres (12 miles) long coast on the Adriatic Sea, with the town of Neum being its only access to the sea.
• Moderate continental climate with hot summers and cold, snowy winters.
• Herzegovina, the smaller, southern region, has a Mediterranean climate and is mostly mountainous. Sarajevo is the capital and the largest city.

Serbia:

• A landlocked country at the crossroads of Southeast and Central Europe, located in the Balkans and the Pannonian Plain.
• Borders with Hungary to the north, Romania to the northeast, Bulgaria to the southeast, North Macedonia to the south, Croatia and Bosnia and Herzegovina to the west, and Montenegro to the southwest.
• It claims a border with Albania through the disputed territory of Kosovo.
• Its capital Belgrade is also the largest city.

Bosnia- Serbia relations:

• The modern-day countries of Bosnia and Herzegovina and Serbia both originated from Yugoslavia. 
• The main dispute in Bosnia arose from the dissolution of Yugoslavia, when most Serbs did not support the country’s independence, but instead joined the Serbian war effort to dismember Bosnia and attach Serb-controlled areas to Serbia.
• While this plan was thwarted, the Dayton Peace Accords that ended the war recognized the Serb Republic (Republika Srpska, RS) as one of the country’s two entities.
• Bosnian statehood does not enjoy strong support among Bosnia Serbs and many prefer RS to become independent or join Serbia.
• On the other hand, many Bosniaks and Croats opposed the existence of the RS, considering that it was established through ethnic cleansing and there was only a slim majority of Serbs living on its pre-war territory.
• Currently, the RS enjoys far-reaching autonomy as a weak federal state.
• Since its recognition in 1995 through the Dayton Accords, both the autonomy of the RS and its Serb dominance have been weakened by the Office of the High Representative (OHR), the international agency that oversees the peace process.
• Relations between Serbs and other nations in Bosnia have been largely peaceful since the end of the war, but contacts remain limited as most Serbs live separately from Bosniaks and Croats within Bosnia.

Organisation for Security and Cooperation in Europe (OSCE):

• OSCE is an intergovernmental organization focusing on regional security in Europe, North America, and Asia.
• Mandate includes arms control, promoting human rights, freedom of the press, and ensuring free and fair elections.
• Employs approximately 3,460 people, mainly in field operations, Vienna secretariat, and institutions.
• Observer status at the United Nations.
• Originated in 1975 as a forum for discussions between the Western Bloc and Eastern Bloc during the Cold War.
• Comprises 57 participating countries, mostly in Europe, with some in Asia and North America.
• Focuses on early warning, conflict prevention, crisis management, and post-conflict rehabilitation.

Source: The Hindu

4. A look at Project Tiger, 50 years on

Subject :Environment

Section :Environmental law and body

Project Tiger:

• Launched in 1973, Project Tiger introduced India’s Tiger Reserves – which have since rapidly ascended in status. From an administrative category arbitrarily constituted and administered by the forest bureaucracy, Tiger Reserves became a statutory category in 2006. Today, Tiger Reserves are hailed worldwide as India’s miraculous success story in environment and forest conservation, especially in this age of climate change.
• From only nine Reserves in 1973 encompassing 9,115 sq. km, there are 54 in 18 States, occupying 78,135.956 sq. km, or 2.38% of India’s total land area.
• Critical Tiger Habitats (CTH) cover 42,913.37 sq. km or 26% of the area under National Parks and Wildlife Sanctuaries.
• The initial tiger count in 1972 was 1,827 using the pug-mark method. By 2022, 3,167-3,925 tigers were estimated via the more reliable camera-trap method.
• India claims to host 75% of the world’s tigers, growing at 6.1% annually.
• The Wildlife (Protection) Act in 1972 established National Parks and Wildlife Sanctuaries, altering forest-dwellers’ rights.
• Project Tiger, previously a Centrally Sponsored Scheme, introduced Critical Tiger Habitats and Buffer Areas, leading to conflict due to the displacement of people coexisting with tigers.

The September 2006 amendment:

• A five-member ‘Tiger Task Force’ was established in 2005 in response to concerns about tigers’ dwindling numbers in Sariska, Rajasthan, despite heavy investments.
• The Task Force identified flaws in the approach of using guns, guards, and fences and highlighted conflicts between forest authorities and locals coexisting with tigers.
• The September 2006 amendment to the Wildlife (Protection) Act formed the National Tiger Conservation Authority (NTCA) and introduced a conservation plan.
• Forest-dweller rights were modified; possible relocation was considered, and wildlife killings were permitted if they threatened human lives.
• The Scheduled Tribes and Other Traditional Forest Dwellers Act, enacted four months later, recognized traditional forest rights, empowering Gram Sabhas to manage forests.
• This act safeguarded the livelihoods of around 20 crore Indians, half of whom were tribals, across 1.79 lakh villages.
• The FRA introduced Critical Wildlife Habitat (CWH), preventing diversion for non-forestry purposes, a demand made by Adivasi movements during negotiations.

India’s basis for CTHs:

• Tiger Reserves were initially meant to be created democratically based on scientific criteria, considering the interests of people living in these areas.
• Critical Tiger Habitats (CTHs) are founded on scientific evidence of human activities’ irreversible damage to wildlife, requiring potential modifications to forest dwellers rights and possible relocation after consultation.
• CTH establishment shouldn’t infringe upon Scheduled Tribes’ or other forest dwellers’ rights.
• Buffer Areas aim to balance human-animal coexistence while respecting local people’s rights, determined by objective criteria and expert committee input.
• Except for Similipal in Odisha, the CTHs had no Buffer Area.
• However, all Tiger Reserves in India were notified without meeting these requirements, lacking informed consent from forest-dwelling communities, leading to conflict-prone situations for both tigers and forest-dwellers.

Relocation vs Rehabilitation:

• The Wildlife (Protection) Act (WLPA) permits only voluntary relocation based on mutually agreed terms, while the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (LARR) Act 2013 outlines compensation and rehabilitation procedures.
• LARR mandates compensating relocated individuals twice the market value of land,asset values, allowances, housing, basic amenities, and more, ensuring consent and proper resettlement.
• However, the government has limited compensation to Rs 15 lakh, not meeting legal requirements, and transferring responsibility to State governments.
• Officials often obtain minimal consent for relocation.
• As of 2019, over 57,000 families lived in Critical Tiger Habitats (CTHs) across 50 Tiger Reserves.
• Tiger Reserves face resistance to recognizing forest rights, causing conflict.
• NTCA initially barred FRA rights recognition in CTHs, later withdrawing after the Union Environment Ministry issued guidelines.
• There’s a clash between FRA’s provisions for public utilities and the Union Environment Ministry’s insistence on wildlife clearance for small-scale diversions from protected areas.
• India’s expanding tiger population and reserves may escalate conflicts rather than foster biodiversity in the future.

5. Traditional Medicine Morbidity codes of Ayurveda, Siddha and Unani

Subject : Science and Tech

Section :Health

Context:

• Traditional Medicine Morbidity codes of Ayurveda, Siddha and Unani Chapter to be included in  International Classification of Diseases (ICD) 11 as Module 2 .
• The initiative will take place at a World Health Organization(WHO) event in New Delhi on 10th January, 2024.

About WHO ICD classification:

• The data and terminology relating to diseases based on Ayurveda, Siddha, Unani systems will now be included in the WHOs ICD11 classification.
• This effort will lead to global uniformity in ASU (Ayurveda, Unani, and Siddha) medicine as a code of vocabulary defining diseases. 
• The World Health Organization (WHO) has developed a classification series called International Classification of Diseases (ICDs) to classify diseases internationally.
• The classification of data and terminology relating to diseases based on Ayush systems such as Ayurveda, Siddha, Unani etc. is not yet included in the WHO ICD series.
• The Ministry of Ayush has already developed the Code for Ayurveda, Siddha, and Unani Medicine through the National Ayush Morbidity and Standardized Electronic Portal (NAMSTE).
• Central Bureau of Health Intelligence (CBHI) is an agency under the Ministry of Health and Family Welfare that serves as the WHO Collaboration Centre for ICD-related activities.
• The Ministry of AYUSH has also signed a Donor Agreement with the World Health Organization for the same.

Benefits of this Classification:

• This effort will further strengthen and expand India’s public healthcare delivery system, Ayush insurance coverage, research and development and policy-making systems. 
• These codes will also be used in the formulation of future strategies to control various diseases in the society.
• Infectious diseases like Malaria and lifestyle diseases like chronic insomnia are included in this classification.
• Vertigo Guidance Disorder  is commonly recognized by the three traditional systems, as a nervous system disorder known in Ayurveda as ‘Bhramaha’, in siddha as ‘AjalKirkrippu’ and in Unani as ‘Sadra-o-Dwar’.

About Central Bureau of Health Intelligence (CBHI):

Establishment:

• The Central Bureau of Health Intelligence (CBHI) was  established in 1961 under the Directorate General of Health Services (DGHS) with the vision to have “A strong Health Management Information System (HMIS) in the entire country”.

Its mission:

• To strengthen the Health Information System (HIS) in each of the districts in the country up to the facility level for evidence based decision making in the Health Sector.

Few Objectives of CBHI are:

• To collect, analyze& disseminate Health Sector related data of the country for evidence based policy decisions, planning and research activities.
• To identify & disseminate innovative practices for Health Sector Reforms.
• To develop Human Resources for scientifically maintaining medical records in both Government & private medical Institutes in India.
• To Carry Out Need Based Operational Research for Efficient implementation of Health Information System & use of Family of International Classifications in India.
• CBHI Provides Internship and Health Management Programmes for the students of National Universities and Institutes.

Functions:

It functions as WHO Collaborating Centre on Family of International Classifications (ICD – 10 & ICF) in India to promote the development & use of the WHO Family of International Classifications (WHO-FIC) including the International Statistical Classification of Diseases and Related Health Problems (ICD), the International Classification of Functioning, Disability and Health (ICF).

About NAMASTE Portal:

• It is an acronym for “National Ayush Morbidity and Standardized Terminologies Electronic Portal”
• It is a Comprehensive web-portal for Standardized Terminologies and National Morbidity Codes of Ayurveda, Siddha and Unani Systems of Medicine and WHO-ICD-10 and ICD-11.
• It was developed by the Ministry of Ayush.
• Its objective is to make the clinical data generated byAYUSH system understandable to the whole world.
• The portal is meant for unambiguous reporting, electronic data submission through individual institutions and gradually moving towards adopting Electronic Health Records (E.H.R.).

About ICD:

• The International Classification of Diseases (ICD) is a globally used medical classification used in epidemiology, health management and for clinical purposes. 
• It is maintained by the World Health Organization (WHO) which acts as a  directing and coordinating authority for health within the United Nations System.
• The ICD is revised periodically and is currently in its 11th revision.

6. Regulation by statute does not rob a varsity of minority status, observes SC

Subject :Science and Tech

Section : Health  

Context

• A seven­ judge Bench headed by Chief Justice of India D.Y. Chandrachud observed that an educational institution does not lose its minority status merely on the ground that its administration is regulated by a statute.

More about News

• The legal dispute over Aligarh Muslim University’s (AMU) minority character, dating back 57 years, stems from the interpretation of Article 30(1) of the Constitution, which empowers religious and linguistic minorities to establish and administer educational institutions. This dispute has seen multiple court interventions, shaping the trajectory of AMU’s status as a minority institution.

Historical Background:

• AMU’s origins trace back to the Muhammadan Anglo-Oriental (MOA) College, established in 1875 by Sir Syed Ahmad Khan. It aimed to address educational backwardness among Muslims, evolving into a university in 1920 under the AMU Act. The Act acknowledged its role as a “teaching and residential Muslim University.”

Genesis of Dispute:

• The legal challenge emerged in 1967, questioning amendments to the AMU Act made in 1951 and 1965. Changes altered the University’s structure, provoking a Supreme Court ruling that, in 1967, declared AMU was not established or administered by the Muslim minority. The court emphasized that while Muslims may have initiated the university, its recognition by the Indian government necessitated a central Act.

Persistent Dispute:

• Post the 1967 ruling, nationwide protests ensued, prompting a 1981 amendment affirming AMU’s minority status. This led to Section 2(l) explicitly stating it was “an educational institution of their choice established by the Muslims of India.” However, legal challenges persisted, with the Allahabad High Court overturning a reservation policy in 2005, citing the 1967 verdict. The Union government, along with other petitioners, contested this decision in the Supreme Court in 2006.

The Importance of Minority Institutions:

• Preserving Diversity: Minority institutions play a pivotal role in preserving cultural and religious diversity by providing a platform for communities to impart education aligned with their ethos.
• Inclusive Education: These institutions contribute to inclusive education, offering students from minority communities an environment that respects and values their cultural identity.
• Empowerment: Recognizing minority institutions empowers communities to actively participate in the educational landscape, fostering a sense of ownership and agency.
• Constitutional Intent: While Article 30(1) emphasizes minority rights, the AMU case raises questions about the balance between autonomy and state recognition, as the 1967 verdict highlighted the central Act’s role.
• Policy Implications: The legal tussle has implications for reservation policies and the autonomy of minority institutions, with potential ramifications on inclusive education.
• Educational Autonomy: The dispute has implications for the autonomy of educational institutions and the extent to which the government can regulate their character.
• Minority Rights: It raises broader questions about minority rights and the interpretation of these rights in the context of educational institutions.

7. Why International Law Matters

Subject :IR

Section :Int Conventions

Context:

• Despite flaws and challenges in enforcement, international law remains important. International law helps hold powerful nations accountable for their actions, as seen in cases like Israel’s actions in Gaza and conflicts like the Russia-Ukraine war.

United Nations Charter

• The Charter of the United Nations is the founding document of the United Nations.
• It was signed on 26 June 1945, in San Francisco, at the conclusion of the United Nations Conference on International Organization, and came into force on 24 October 1945.
• The UN Charter codifies the major principles of international relations, from sovereign equality of States to the prohibition of the use of force in international relations.
• It has been amended five times since 1945.

Article 1

The Purposes of the United Nations are:

1. To maintain international peace and security, and to that end: to take effective collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace, and to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations which might lead to a breach of the peace;
2. To develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, and to take other appropriate measures to strengthen universal peace;
3. To achieve international co-operation in solving international problems of an economic, social, cultural, or humanitarian character, and in promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction as to race, sex, language, or religion; and
4. To be a centre for harmonizing the actions of nations in the attainment of these common ends.

Article 2

The Organization and its Members, in pursuit of the Purposes stated in Article 1, shall act in accordance with the following Principles.

1. The Organization is based on the principle of the sovereign equality of all its Members.
2. All Members, in order to ensure to all of them the rights and benefits resulting from membership, shall fulfill in good faith the obligations assumed by them in accordance with the present Charter.
3. All Members shall settle their international disputes by peaceful means in such a manner that international peace and security, and justice, are not endangered.
4. All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations.
5. All Members shall give the United Nations every assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to any state against which the United Nations is taking preventive or enforcement action.
6. The Organization shall ensure that states which are not Members of the United Nations act in accordance with these Principles so far as may be necessary for the maintenance of international peace and security.
7. Nothing contained in the present Charter shall authorize the United Nations to intervene in matters which are essentially within the domestic jurisdiction of any state or shall require the Members to submit such matters to settlement under the present Charter; but this principle shall not prejudice the application of enforcement measures under Chapter Vll.

8. India’s Inclusion in Bloomberg EM Index

Subject :Economy

Section :External Sector

Bloomberg Index Services Ltd (BISL) has proposed the inclusion of India’s Fully Accessible Route (FAR) bonds in the Bloomberg EM Local Currency Index.

Boost to Foreign Portfolio Investments (FPIs):

• India’s imminent inclusion in the Bloomberg Emerging Market (EM) Index is anticipated to stimulate foreign portfolio investments in the country’s debt market in 2024.

Support for Debt Issuances:

• The inclusion is expected to bolster increased debt issuances by the Indian government in the coming years, providing support for economic activities.

Frontloading by Foreign Investors:

• Foreign investors, particularly Foreign Portfolio Investors (FPIs), are expected to front load investments in the Indian debt market ahead of the official inclusion in global indices, aligning with the record $7.1 billion invested in Indian government bonds by FPIs in 2023.

Inflow Projections:

• Economists and analysts estimate that India’s inclusion in the Bloomberg EM bond index could generate inflows of $23 billion over five months, beginning in September. The larger JP Morgan EM bond index is expected to attract FPI inflows of $30 billion over ten months, starting in June.

Impact on Government Securities (GSecs):

The inclusion is seen as good news for Government Securities (GSecs), with expectations of reduced G-Sec yields to 6.8% in FY25.

Improved Demand-Supply Dynamics:

• Inclusions in global indices are expected to enhance demand-supply dynamics for sovereign bonds, tapping into a significant but underrealized investor group. This can support fiscal discipline while addressing infrastructure needs.

Balancing Fiscal Discipline:

• The anticipated portfolio inflows may prompt authorities to passively absorb flows, reinforcing defenses and maintaining a stable path for the Indian rupee.

Optimism for Growth Prospects:

• With optimism surrounding India’s growth prospects, coupled with the boost from bond index inclusion and expectations of US rate cuts, foreign inflows into Indian government bonds reached a six-year high in Q4 2023.

Record Inflows in 2023:

• Foreign investors bought a net ₹35,000 crore in bonds between October and December 2023, contributing to the highest annual inflows since 2017, totaling ₹59,800 crore.

Impact on Indian Economy

Positive Boost to Forex Reserves:

• The anticipated $3 billion additional Foreign Portfolio Investments (FPIs) in the Indian debt market will contribute to an increase in foreign exchange reserves. This is crucial for maintaining a robust external position and ensuring liquidity in the economy.

Stabilization of Rupee:

• Increased FPI inflows typically lead to a strengthened Indian rupee. A stable and appreciating currency enhances investor confidence, attracts further investments, and helps in controlling inflation by making imports more affordable.

Lower Borrowing Costs:

• Higher FPI investments in Indian debt instruments can result in increased demand for government bonds. This heightened demand often leads to lower yields and, consequently, reduced borrowing costs for the government. This is favorable for fiscal management.

Support for Economic Growth:

• The injection of foreign capital into the debt market provides a vital source of funding for the government. These funds can be channeled into various economic development initiatives, infrastructure projects, and social welfare programs, contributing to overall economic growth.

Market Liquidity and Depth:

• FPI inflows enhance liquidity and depth in the debt market.
• A more liquid market is better equipped to handle large transactions, and increased depth ensures a broader range of investment opportunities for both domestic and international investors.

Confidence in Indian Financial Markets:

• Positive sentiment generated by substantial FPI inflows signals confidence in the stability and attractiveness of Indian financial markets. This confidence can attract further foreign investments across various asset classes, including equities and bonds.

Balance of Payments Improvement:

• Higher FPI inflows positively impact India’s balance of payments by improving the current account balance. This, in turn, contributes to the overall stability of the country’s external sector.

Potential for Lower Interest Rates:

• As FPIs increase their exposure to Indian debt, the resulting demand can lead to lower interest rates in the domestic market. Lower interest rates stimulate borrowing and spending, providing a boost to economic activities.

Investment in G-Secs and Corporate Bonds:

• FPIs investing in government securities (G-Secs) and corporate bonds can diversify their portfolios and contribute to the development of the Indian corporate debt market.

Risks and Policy Response:

• While FPI inflows bring several benefits, there may be challenges, such as potential currency appreciation. The central bank may implement policy measures to manage such risks and maintain a balanced economic environment.

In summary, the anticipated FPI inflows into the Indian debt market are expected to have multifaceted positive impacts, ranging from currency stabilization to economic growth support and enhanced market dynamics.