Daily Prelims Notes 17 October 2023

Daily Prelims Notes

17 October 2023

Table Of Contents

1. SC verdict on same sex marriages
2. Can AAP be an accused in Delhi excise policy case
3. SC seek Rajya Sabha secretariat reply on AAP MP petition
4. Why is marital status of women a must for surrogacy high court ask center
5. How do some Cancer Cells survive Chemotherapy?
6. Global Maritime India Summit 2023
7. Global Partnership on AI summit
8. Inflation in India
9. Role of WTO in e-Commerce
10. Significance of natural gas in India’s energy landscape
11. Plea seeks stay on Jewar Airport until wetland protected, UP govt to inform about status in 4 weeks
12. Two labs in India take on the bulk of testing for cough syrup samples for export
13. Biodiversity technical body meets in Nairobi to gauge progress on Kunming-Montreal Global Biodiversity Framework
14. Tropical crops at risk from pollinator loss due to climate change, shift in land use, finds study
15. Wayanad is summer home for elephants, says a study
16. Bond issuance by India Inc rises
17. RBI likely selling dollars to keep rupee off record low

1. SC verdict on same sex marriages

Subject : Polity

Section: Constitution

Context: A five-judge bench headed by Chief Justice of India DY Chandrachud has pronounced the verdict on marriage equality today.

More about the news:

• A five-judge Supreme Court bench, led by Chief Justice DY Chandrachud, issued a unanimous ruling against legalizing same-sex marriage in India, also rejecting civil unions for non-heterosexual couples in a 3:2 verdict.
• They stated that Parliament should decide on the issue, emphasizing the inability of the court to alter provisions or interpretations of the Special Marriage Act.
• The petitions aimed for a gender-neutral reading of the Special Marriage Act to include same-sex marriages, but the majority view was that there is no fundamental right to marry.
• The court deliberated for ten days in April and May, considering various arguments related to equality, privacy, legal rights, and the impact on children.
• Opponents included the Central government, the NCPCR, and the Jamiat-Ulama-i-Hind.

What is Special Marriage Act:

• The Special Marriage Act of 1954 (SMA) provides an alternate route to religious laws for marriage.
•  It governs a civil marriage where the state sanctions the marriage rather than the religion.

Who can get married under the Special Marriage Act:

• The applicability of the Act extends to the people of all faiths, including Hindus, Muslims, Sikhs, Christians, Sikhs, Jains, and Buddhists, across India.
• The minimum age to get married under the Special Marriage Act is 21 years for males and 18 years for females.

What are the provisions of Special Marriage Act:

• As per Section 5 of the Act, the parties to the marriage are required to give a notice, in writing, to a “Marriage Officer” of the district in which at least one of the parties has resided for at least 30 days immediately preceding the notice.
• The parties and three witnesses are required to sign a declaration form before the Marriage Officer.
• Once the declaration is accepted, the parties will be given a “Certificate of marriage” which is essentially proof of the marriage

2. Can AAP be an accused in Delhi excise policy case

Subject : Polity

Section: Elections

Context: The Enforcement Directorate considers implicating AAP in a money laundering probe tied to scrapped Delhi excise policy.

More about the news:

• The Enforcement Directorate (ED) told the Supreme Court that it is contemplating adding the Aam Aadmi Party (AAP) as an accused in its money laundering probe linked to the Delhi government’s now-scrapped excise policy.
• ED said that it is planning to invoke Section 70 of the Prevention of Money Laundering Act to probe the role of AAP in this regard.
• Main allegation of the ED is that AAP was the recipient of the proceeds of crime in the excise scam.

What is the law under which a political party can be booked for money laundering:

• Section 70 of the Prevention of Money Laundering Act (PMLA) deals with offenses by companies.
  • Section 70 of the PMLA 2002 states that if a company commits a contravention of any provision of the Act, every person who was in charge of the company’s business at the time of the contravention is also liable.
  • The provision to Section 70 states that the person in charge of the company’s business can defend themselves by proving that the contravention took place without their knowledge or despite all due diligence.
• Despite political parties not being incorporated as ‘companies’ under the Companies Act 2013, the PMLA’s Section 70 contains a significant explanation that could potentially subject political parties to anti-money laundering regulations.
  • The explanation defines a ‘company’ as any corporate entity, encompassing firms and other associations of individuals.
  • The term ‘association of individuals’ is expansive enough to include political parties. The Representation of the People Act, Section 29A, defines a political party as an association or body of Indian citizens registered with the Election Commission, self-identifying as a political party.

Has a political party ever been booked for money laundering:

• If AAP is directly named as an accused in the excise scam under the PMLA, it would be the first instance of a political party being accused of money laundering.
• However, political parties have been booked and investigated under the Income Tax Act.
• Trusts and NGOs are already under the PMLA ambit.
• In May, the Finance Ministry in a notification included trustees of an express trust also within the PMLA.

Some facts Enforcement Directorate:

• It is a Multi-Disciplinary Organization mandated with the task of enforcing the provisions of two special fiscal laws – Foreign Exchange Management Act, 1999 (FEMA) and Prevention of Money Laundering Act, 2002 (PMLA). 
• The origin of this Directorate goes back to 1st May, 1956, when an Enforcement Unit Was formed, in Department of Economic Affairs, for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 .
• In the year 1957, this Unit was renamed as ‘Enforcement Directorate’.
• The administrative control of the Directorate was transferred from Department of Economic Affairs to Department of Revenue in 1960.
• The Directorate enforces two laws;
  • FEMA, a Civil Law having quasi-judicial powers, for investigating suspected contraventions of the Exchange Control Laws and Regulations with the powers to impose penalties on those adjudged guilty.
  • PMLA, a Criminal Law, whereby the Officers are empowered to conduct enquiries to locate, provisionally attach/confiscate assets derived from acts of Schedules Offenses besides arresting and prosecuting the Money Launderers.
• The ED has its headquarters in New Delhi and has many regional offices all over the country.
• Composition– Besides directly recruiting personnel, the Directorate also draws officers from different Investigating Agencies, viz., Customs & Central Excise, Income Tax, Police, etc. on deputation.
• It is headed by the Director of Enforcement, who is an IRS officer Other functions:

What is ED’s Jurisdiction:

• Both FEMA or PMLA apply to the whole of India. So, the ED can take action against any person on which this act applies.
• Cases under FEMA may lie in civil courts where PMLA cases will lie in criminal courts.
• The agency has jurisdiction over a person or any other legal entity who commits a crime.
• All the public servants come under the jurisdiction of the agency if they are involved in any offence related to money laundering.
• ED can not take an action suo motu. One has to complain to any other agency or Police first and then ED will investigate the matter and will identify the accused.
• The ED will investigate the matter and may attach the property of an accused person and also make an arrest and start proceeding with the violation of the provisions of FEMA and PMLA act.
• The matter will be resolved by way of adjudication by courts or PMLA courts.

3. SC seek Rajya Sabha secretariat reply on AAP MP petition

Subject : Polity

Section: Parliament

Context: SC seeks Rajya Sabha secretariat’s reply on AAP MP’s petition

More about the news:

• The Supreme Court has agreed to examine the plea of AAP leader Raghav Chadha challenging his indefinite suspension from the Rajya Sabha.
• Chadha’s suspension was due to his involvement in including names of some Rajya Sabha members in a select committee without their consent.
• The top court has issued a notice to the Rajya Sabha Secretariat and scheduled the hearing for October 30.
• The suspension’s duration, according to Chadha’s argument, should not extend beyond the particular session during which it was imposed.
• The privileges committee is expected to provide a report on the matter.

Who can suspend an MP:

• It is the role and duty of the Presiding Officer i.e Speaker of Lok Sabha and Chairman of Rajya Sabha to maintain order so that the House can function smoothly.
• In order to ensure that proceedings are conducted in the proper manner, the Speaker/ Chairman is empowered to force a Member to withdraw from the House.

What are the rules under which the Presiding Officer/Chairman acts:

For Lok Sabha

• Rule Number 373 of the Rules of Procedure and Conduct of Business
  • The Speaker can order a member to immediately leave the House if the member’s conduct is disorderly.
  • Those directed to withdraw must do so promptly and stay absent for the remainder of the day’s sitting.
• Rule 374:
  • The Speaker can name a member who disrespects the Chair’s authority or persistently obstructs House business.
  • The named member faces suspension from the House, but this suspension should not exceed the remainder of the session.
  • The suspended member must leave the House premises.
• Rule 374A (Added in December 2001):
  • In cases of gross violations or serious charges, if named by the Speaker, a member is automatically suspended from the House’s service for five consecutive sittings or the remaining session, whichever is shorter.

For Rajya Sabha:

• Rule 255 of the Rule Book of Rajya Sabha:
  • It empowers the Chairman of Rajya Sabha to direct any Member to withdraw immediately from the House for any disorderly conduct.
• Rule 256
  • This rule empowers the Chairman to name the members who persistently disregards the authority of the Chair or abuses the rules of the Council.
  • After that, the House may adopt a motion suspending the Member for a period not exceeding the remainder of the session.
• It should be noted that, unlike Lok Sabha (under rule 374A), Rajya Sabha can not suspend its members without passing a motion for the same.

What are the terms of Suspension:

• The maximum period of suspension is for the remainder of the session.
• Suspended members cannot enter the chamber or attend the meetings of the committees.
• He will not be eligible to give notice for discussion or submission.
• He loses the right to get a reply to his questions.

Can courts intervene in a matter of suspension of MPs:

• Article 122 of the Indian Constitution establishes the principle that parliamentary proceedings are not subject to questioning in a court of law.
• Nevertheless, there have been instances where the judiciary has intervened in the procedural workings of legislatures.
• One such case involves the Maharashtra Legislative Assembly, which, during its 2021 Monsoon Session, passed a resolution to suspend 12 BJP MLAs for a year. This matter eventually reached the Supreme Court, which ruled that the resolution’s legal effect extended only for the duration of the Monsoon Session and not beyond.

4. Why is marital status of women a must for surrogacy high court ask center

Subject : Polity

Section: Constitutions

Context: The Delhi High Court has questioned the government on why marital status is a requirement for women to be eligible for surrogacy under the law

More about the news:

• The Delhi High Court questioned the government regarding the requirement of marital status for women to access surrogacy under the law.
• The court’s division bench, headed by Chief Justice Satish Chandra Sharma and Justice Sanjeev Narula, asked the government’s counsel to explain why a woman’s marital status is linked to her eligibility for surrogacy.
• The government’s counsel said they would seek instructions on this matter, with the case scheduled for the next hearing on October 31.

What is this case all about:

• The case revolves around a 44-year-old single, unmarried woman challenging section 2(1)(s)of the Surrogacy Act that limits surrogacy access to Indian widows or female divorcees, excluding women like her.
• The petitioner also challenges the regulation forcing single women (widows or divorcees) to use their own eggs for surrogacy.
• She argues that her age makes it medically inadvisable to use her own gametes and that she wishes to use donor female gametes.
• Her brother has consented to donate his gametes for genetic connection.
• The plea argues that the Act’s provisions unfairly restrict reproductive choices based on marital status, and the court also requested a medical opinion supporting the petitioner’s inability to use her own gametes.

What is Surrogacy:

• Surrogacy is defined as a practice wherein one woman bears and gives birth to a child with the intention to thereafter hand it over to the intending couple.
• While commercial surrogacy is not allowed in India such procedures are allowed only for altruistic purposes with many restrictions on the person seeking to apply under the law.

What are the Surrogacy Laws:

• In 2021, the Indian Parliament passed two key laws:
  • The Surrogacy (Regulation) Act, which governs surrogacy practice in India. It offers a ten-month gestation period for existing surrogate mothers to safeguard their well-being.
  • The Assisted Reproductive Technology (Regulation) Act, designed to regulate and supervise assisted reproductive technology clinics and banks. This law permits services for women aged 21 to 50 and men aged 21 to 55, covering procedures such as gamete donation, intrauterine insemination, and in-vitro fertilization (IVF).

What is Surrogacy Act 2021:

• The Act sought to regulate the surrogacy part of a rather flourishing infertility industry in the country.
• It is defined as a practice where a woman undertakes to give birth to a child for another couple and agrees to hand over the child to them after birth.
• Altruistic surrogacy:
• The Act allows ‘altruistic surrogacy’ — wherein only the medical expenses and insurance coverage is provided by the couple to the surrogate mother during pregnancy.
• No other monetary consideration will be permitted.
• The intending couple:
  • Any couple that has ‘proven infertility’ is a candidate.
  • The ‘intending couple’ as the Act calls them, will be eligible if they have a ‘certificate of essentiality’ and a ‘certificate of eligibility’ issued by the appropriate authority.
  • The former will be issued if the couple fulfills three conditions:
    • A certificate of infertility of one or both from a district medical board;
    • An order of parentage and custody of the surrogate child passed by a Magistrate’s court;
    • Insurance cover for the surrogate mother.
• Eligibility Certificate:
  • An eligibility certificate mandates that the couple fulfill the following conditions:
    • They should be Indian citizens who have been married for at least five years;
    • The female must be between 23 to 50 years and the male, 26 to 55 years;
    • They cannot have any surviving children i.e biological, adopted or surrogate;
    • However, this would not include a ‘child who is mentally or physically challenged or suffers from life threatening disorder or fatal illness.’
• Surrogate mother:
  • Only a close relative of the couple can be a surrogate mother, one who is able to provide a medical fitness certificate.
  • She should have been married, with a child of her own, and must be between 25 and 35 years,
  • She can be a surrogate mother only once.
• Regulating Body:
  • The Centre and State governments are expected to constitute a National Surrogacy Board (NSB) and State Surrogacy Boards (SSB) respectively.
  • This body is tasked with enforcing standards for surrogacy clinics, investigating breaches and recommending modifications.
  • Further, surrogacy clinics need to apply for registration within 60 days of the appointment of the appropriate authority.
• Offenses:
  • Offences under the Act include commercial surrogacy, selling of embryos, exploiting, abandoning a surrogate child etc.
  • These may invite up to 10 years of imprisonment and a fine of up to Rs. 10 lakh.

5. How do some Cancer Cells survive Chemotherapy?

Subject : Science and Tech

Section: Health

Context:

• Researchers at the Netherlands Cancer Institute have conducted a recent study to investigate drug resistance in cancer cells, focusing on resistance to a drug known as Taxol.
• It studied Chemotherapy and cancer relapse, particularly when a small number of cancer cells resist treatment and remain dormant, potentially leading to a resurgence of the disease.

Chemotherapy and its limitations

• Cancer cells are characterized by uncontrolled and rapid division.
• Chemotherapeutic drugs aim to halt this proliferation, often triggering programmed cell death, known as apoptosis, in response to halted cell division.
• However, this approach also damages healthy dividing cells, leading to adverse side effects.

Fine-Tuning Cancer Treatment

• Oncologists face the challenge of finding an effective drug dose that eliminates cancer cells while minimizing unbearable side effects for patients.
• One approach has been the development of antibody-drug conjugates (ADCs) that target specific proteins found mainly on cancer cells, sparing non-cancerous cells.

Unraveling Drug Resistance

• P-gp Protein: Some cancer cells escape drug treatments by overexpressing a protein called P-gp (permeability glycoprotein), which acts as a pump, expelling toxic compounds, including chemotherapeutic agents.
• ABCB1 Gene: The production of P-gp is controlled by the ABCB1 gene, and cells that produce excessive P-gp can flush out chemotherapy drugs, preventing them from accumulating at levels needed to trigger apoptosis.

Role of Cellular Location

• Recent Findings: The study examined the sensitivity of cells to Taxol and identified that the location of the ABCB1 gene within the cell’s nucleus plays a crucial role.
• Nuclear Envelope: In sensitive cells, the ABCB1 gene is located close to the nuclear envelope. In resistant cells, the gene has detached from the envelope and moved further inside the nucleus, resulting in a 100-fold increase in ABCB1 gene-related RNA.

Key Protein: Lamin B Receptor (LBR)

• LBR’s Influence: Researchers discovered that the presence or absence of a protein called Lamin B Receptor (LBR) affects the location of the ABCB1 gene.
• Depletion of LBR: When LBR is depleted, cells can activate the ABCB1 gene when exposed to Taxol. However, the absence of the LBR gene itself does not immediately increase ABCB1 expression, indicating the involvement of additional factors.
• Diverse Responses: Different cancer types exhibit varying responses to LBR depletion, highlighting the complex mechanisms governing gene expression and silencing.
• A simple analogy illustrates the diversity: Different bathrooms offer various options for drying clothes, and cancer cell types rely on different mechanisms to tether genes to the nuclear envelope.

Significance

• These findings emphasize the need for further research into the diverse ways cancer cells express or suppress genes.
• Understanding drug resistance mechanisms opens avenues for developing strategies to maintain the potency of anti-cancer drugs while minimizing side effects, ultimately benefiting patients on their path to recovery.

6. Global Maritime India Summit 2023

Subject :IR

Section: Msc

Context: PM to inaugurate the Global Maritime India Summit 2023

More about the news:

• Indian Prime Minister Narendra Modi inaugurated the Global Maritime India Summit 2023 via video conferencing in Mumbai.
• He unveiled ‘Amrit Kaal Vision 2047,’ a blueprint for India’s maritime blue economy, and laid the foundation stone for projects worth over Rs 23,000 crores in line with this vision.
• He emphasized the importance of India’s maritime capabilities in global trade and detailed the government’s efforts to strengthen the sector.
• The summit serves as a platform to attract investment in India’s maritime industry, promoting port development, sustainability, and international collaboration.
• Modi invited global investors to contribute to India’s development as it aims to become a developed nation by 2047.
• The event witnessed the participation of ministers and stakeholders from around the world to discuss various aspects of the maritime sector.

What is Global Maritime India Summit 2023

• Global Maritime India Summit 2023 is a premier maritime sector focused event to bring together pivotal figures from the industry to explore opportunities, understand challenges, and stimulate investment within India’s maritime sector.
• Building upon the legacy of its preceding editions, this third installment aims to unveil broader prospects for domestic and international maritime stakeholders and investors.
• The summit will witness the participation of Ministers from across the globe representing countries from Europe, Africa, South America, and Asia including central Asia, Middle East and BIMSTEC region.
• The summit is also to be attended by Global CEOs, Business leaders, Investors, Officials, and other stakeholders worldwide.
• Further, several Indian states will also be represented at the summit by the Ministers and other dignitaries.

7. Global Partnership on AI summit

Subject :IR

Section: MSc

Context: PM Modi invites Google to ‘contribute’ to the AI summit.

More about the news:

• Prime Minister Narendra Modi held a virtual interaction with Google and Alphabet Inc CEO Sundar Pichai.
• He invited Google to participate in the Global Partnership on AI Summit in December, discussed Google’s role in expanding India’s electronics manufacturing, and encouraged AI tools in Indian languages and for good governance.
• The Prime Minister welcomed Google’s fintech operations center plans in Gujarat, focusing on financial inclusion and development in India.

What is Global Partnership on AI summit:

• The Global Partnership on Artificial Intelligence (GPAI) is a multi-stakeholder initiative which aims to bridge the gap between theory and practice on AI by supporting cutting-edge research and applied activities on AI-related priorities.
• Its establishment was announced during the 2018 G7 Summit by Canadian PM Justin Trudeau and French President Emmanuel Macron.
• GPAI was officially launched on June 15, 2020
• The Global Partnership in Artificial Intelligence is described as the ‘fruition of an idea developed within the G7.’
• At present, GPAI has twenty-nine member states i.e Australia, Belgium, Brazil, Canada, Czech Republic, Denmark, France, Germany, India, Ireland, Israel, Italy, Japan, Mexico, the Netherlands, New Zealand, Poland, the Republic of Korea (South Korea), Singapore, Slovenia, Spain, Sweden, the United Kingdom, the United States, and the European Union (EU).
• India joined the GPAI in 2020 as a founding member.
• Its Secretariat is hosted at the OECD.
• Currently, India has assumed the  presidency Global Partnership on Artificial Intelligence (GPAI) for 2022-23
• The 2022 GPAI Summit took place in Tokyo, Japan

What is the composition and structure of GPAI 

• GPAI has a Council and a Steering Committee, supported by a Secretariat hosted by the OECD, and two Centres of Expertise: one in Montreal (CEIMIA, the International Centre of Expertise in Montreal for the Advancement of Artificial Intelligence) and one in Paris (at INRIA, the French National Institute for Research in Digital Science and Technology).
• These Centers of Expertise will facilitate GPAI’s four working groups and their research and practical projects, across various sectors and disciplines. The working groups will initially focus on four themes:
  • Working Group on Responsible AI (Montreal)
  • Working Group on Data Governance (Montreal)
  • Working Group on the Future of Work (Paris)
  • Working Group on Innovation and Commercialization (Paris)

8. Inflation in India

Subject : Economy

Section: Inflation

Context:

1. Inflation: Inflation refers to the general increase in prices and the fall in the purchasing power of money. It occurs when the demand for goods and services surpasses their supply, leading to an increase in their prices. High inflation can erode the value of savings and income, leading to reduced consumer spending and economic instability.

Types of inflation include:

• Demand-pull inflation: Caused by increased consumer demand that outpaces supply.
• Cost-push inflation: Caused by an increase in production costs, such as wages or raw materials, leading to higher prices.

2. Deflation: Deflation is the opposite of inflation and refers to a sustained decrease in the general price level of goods and services. It occurs when the supply of goods exceeds demand, leading to reduced prices. Deflation can discourage spending, as consumers may delay purchases in anticipation of lower prices, which can further slow down economic growth and potentially lead to recession.
3. Hyperinflation: Hyperinflation is an extremely high and typically accelerating inflation. It occurs when the price levels rise rapidly, eroding the value of the currency. This phenomenon often results from a collapse in the currency and is detrimental to the economy, leading to a loss of confidence in the currency and undermining economic stability.
4. Stagflation: Stagflation is a situation characterized by a combination of stagnant economic growth, high unemployment, and high inflation. It presents a challenge for policymakers, as traditional measures to stimulate economic growth, such as increasing the money supply, may exacerbate inflation.
5. Reflation: Reflation is an attempt to stimulate an economy that is experiencing deflation. It involves the implementation of monetary or fiscal policies to increase the money supply and boost aggregate demand, with the aim of reversing deflation and stabilizing prices.
6. Disinflation refers to a slowdown in the rate of inflation. While prices may still be rising, they are doing so at a slower pace compared to the previous period. Disinflation does not imply a decrease in prices, as is the case with deflation, but rather a reduction in the rate of increase of the general price level in an economy. Disinflation can occur for various reasons, such as increased productivity, reduced consumer demand, or a drop in the prices of commodities.

• Types of Inflation:

Demand-pull inflation occurs when aggregate demand surpasses aggregate supply, while cost-push inflation results from reduced aggregate supply due to factors like labor, land, and capital shortages or hoarding.

• Factors Causing Inflation:

Demand-side inflation arises from increased consumption, high exports leading to a devalued currency, and excessive money circulation that reduces the purchasing power of money.

Cost-push inflation is influenced by shortages in factors of production and artificial scarcity due to hoarding.

• Measurement of Inflation: In India, inflation is primarily measured through two indices: the Wholesale Price Index (WPI) and the Consumer Price Index (CPI), which track changes in wholesale and retail-level prices,

WPI and CPI: Understanding the Difference

Wholesale Price Index (WPI):

• WPI measures the average change in prices of goods at the wholesale level before they reach the retail level.
• It includes goods such as raw materials, manufactured products, and commodities traded in bulk.
• WPI primarily reflects the price movements experienced by producers and businesses in the wholesale markets.
• It is considered a leading indicator of price changes that might occur at the consumer

Consumer Price Index (CPI):

• CPI calculates the average price change paid by consumers for a basket of goods and services commonly consumed.
• It reflects the cost of living for the general population, encompassing various sectors like food, housing, healthcare, and education.
• It is widely used to determine adjustments in salaries, pensions, and various government benefits to ensure they keep pace with the cost of living.

Core Inflation:

Core inflation represents the long-term trend in the price level and factors out short-term volatility caused by external factors such as energy and food prices. It excludes highly volatile commodities like food and energy, which can undergo rapid price fluctuations due to seasonal and market conditions. By eliminating these volatile elements, core inflation provides a more accurate reflection of the underlying inflationary trends in the economy.

Central banks often use core inflation as a key indicator when formulating monetary policies and making adjustments to interest rates. It allows policymakers to focus on the persistent inflationary pressures in the economy, enabling them to make informed decisions that can maintain price stability and promote sustainable economic growth.

Headline Inflation,

Headline Inflation refers to the complete inflation figure including all goods and services within the consumer price index basket. It encompasses all items, including those that are highly volatile, such as food and energy. Headline inflation is the most commonly reported measure of inflation and is what is typically referenced in the news and by the general public. While headline inflation provides a comprehensive view of the overall price levels, it can be influenced by temporary factors that do not reflect the underlying inflationary pressures.

• Impact of Inflation on the Indian Economy:

Inflation leads to a decrease in the purchasing power of currency, increased cost of living, and a slowdown in economic growth. However, a moderate level of inflation can encourage spending and discourage excessive saving.

• Inflation Targeting in India:

The Ministry of Statistics and Programme Implementation in India measures inflation.

The Reserve Bank of India (RBI), through its Monetary Policy Committee, uses various tools to regulate money supply and control inflation.

The government has set a 4% Consumer Price Index (CPI) inflation target, with an upper tolerance limit of 6% and a lower tolerance limit of 2%, valid from August 5, 2016, to March 31, 2021.

9. Role of WTO in e-Commerce

Subject :Economy

Section: External Sector

Context:

• India’s Pitch at WTO: New Delhi’s emphasis on collaborative efforts among member countries to counter the dominance of a few large MNCs in the global e-commerce industry.
• Uneven Division of Benefits: India’s communication stressed that the current benefits of e-commerce are disproportionately skewed in favor of a select group of major multinational corporations (MNCs).
• Opposition to Plurilateral Talks: Developing nations, including India and South Africa, have been resisting the plurilateral talks, citing violations of the WTO’s foundational principles.
• Promotion of Competition: India proposed the sharing of experiences among member countries to enhance competition in digital markets and recommended improved cooperation between regulatory authorities to achieve this objective.
• Local Investigations: In India, companies like Amazon and Flipkart have faced inquiries by the Competition Commission for alleged instances of anti-competitive practices.
• Collaboration Between Regulators: The paper underscored the necessity of close collaboration among regulators from different jurisdictions, particularly considering the global nature of internet and digital businesses.
• Capacity Building for Developing Countries: India urged developing countries, including LDCs, to identify their constraints in adopting policies for ensuring fair competition in the e-commerce space. It sought suggestions for capacity-building initiatives.

Geneva package

Under 12th Ministerial Conference of the WTO agreed to a series of deals relating to the temporary waivers on Covid-19 vaccines, a moratorium on e-commerce trade, food security, and setting limits on harmful fishing subsidies.

Together these agreements are referred to as the “Geneva Package”.

Ministerial Conference (MC)

The Ministerial Conference is the WTO’s top decision-making body and usually meets every two years. All members of the WTO are involved in the MC and they can make decisions on all matters covered under any multilateral trade agreements. The WTO’s 12th Ministerial Conference was held in Geneva.

Key takeaways

Curtailing harmful fishing subsidies

A multilateral agreement was passed to curb ‘harmful’ subsidies on illegal, unreported, and unregulated fishing for the next four years, to better protect global fish stocks.

Global Food Security

Members agreed to a binding decision to exempt food purchased by the UN’s World Food Programme (WFP) for humanitarian purposes, from any export restrictions. However, countries would be allowed to restrict food supplies to ensure domestic food security needs.

Covid-19 vaccine production

Members agreed to temporarily waive intellectual property patents on Covid-19 vaccines without the consent of the patent holder for 5 years, so that they can more easily manufacture them domestically. The waiver did not cover all medical tools like diagnostics and treatments.

E-commerce transactions

All members agreed to continue the long-standing moratorium on custom duties on e-commerce transmissions until the subsequent Ministerial Conference.

India’s interest secured

India and other developing countries were able to win some concessions on fishing subsidies. They successfully lobbied to remove a section of the proposal that would threaten some subsidies which would assist small-scale artisanal fishing. The agreements hold that there would be no limitation on subsidies granted or maintained by developing or least-developed countries for fishing within their exclusive economic zones (EEZ).

Current moratoriums on electronic transmissions been extended

• Member countries agreed to extend the current moratorium on not imposing customs duties on electronic transmission (ET) until MC13.
• ETs consist of online deliveries such as music, e-books, films, software, and video games. They differ from other cross-border e-commerce since they are ordered online but not delivered physically.
• Proponents had put forth that the moratorium would help maintain certainty and predictability for businesses and consumers, particularly in the context of the pandemic.
• India and South Africa, citing data from the UN Conference on Trade and Development submitted that extending duty-free market access due to the moratorium resulted in a loss of $10 billion per annum globally — 95% of which was borne by developing countries. 

World Trade Organization (WTO)

The WTO is the primary global international organization responsible for trade regulations among nations.

History

• General Agreement on Tariffs and Trade (GATT) originated from the 1944 Bretton Woods Conference.
• The Havana Charter, intended to establish the International Trade Organization (ITO), never came into force.
• GATT, signed by 23 countries in 1947, was the only multilateral instrument governing trade until the establishment of the WTO in 1995.
• The Uruguay Round from 1987 to 1994 led to the Marrakesh Agreement, establishing the WTO.

Governance

• Ministerial Conference: The WTO’s top decision-making body, convening every two years.
• General Council: Represents all member governments and acts on behalf of the Ministerial Conference.
• Dispute Settlement Body (DSU): Deals with disputes between WTO members according to the Understanding on Rules and Procedures Governing the Settlement of Disputes.
• Appellate Body: Established in 1995, it is a standing body of seven members hearing appeals from reports issued by panels in WTO member disputes.

10. Significance of natural gas in India’s energy landscape

Subject: Economy

Section: Msc

• OPEC’s Projections: OPEC’s latest World Oil Outlook predicts that the share of natural gas in India’s energy mix will rise to 10.6% by 2045, whereas the Indian government aims for it to reach 15% by 2030.
• Current Gas Share: According to the Petroleum and Natural Gas Regulatory Board (PNGRB), India’s current share of gas in the energy mix is at 5.78%.
• BP’s Projections: The OPEC projections align closely with those made by bp in its recent Energy Outlook, which anticipates a natural gas share of 7-11% in the global primary energy mix by 2050.
• Impact on Coal Usage: Increasing the share of gas in the energy mix can lead to a reduction in coal usage, contribute to the mitigation of CO2 emissions, and facilitate the integration of intermittent renewable energy sources like wind and solar power.
• City Gas Distribution: The government is actively promoting the expansion of city gas distribution (CGD) systems, aiming to reduce the reliance on traditional cooking fuels in the residential sector. This expansion is expected to significantly increase gas consumption in the residential and commercial sectors.
• LNG-Powered Vehicles: Initiatives to promote natural gas vehicles, such as those offered by companies like Essar Group-led GreenLine, could provide further impetus to the use of natural gas in the transportation sector, particularly for long-range heavy-haul logistics.
• Gas-Fired Power Plants: Despite the suboptimal utilization of gas-powered plants in India due to a lack of domestic gas supplies and high LNG prices, there is potential for increased utilization in the future. OPEC’s report suggests that India’s gas demand could more than triple by 2045, reaching levels of 4.1 million barrels of oil equivalent per day (mboe/d) in the outlook period.

About OPEC (Organization of the Petroleum Exporting Countries):

1. Founded in Baghdad, Iraq, in September 1960 by five countries: Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
2. It is a permanent, intergovernmental organization with a primary objective to coordinate and unify petroleum policies among Member Countries.
3. Aims to secure fair and stable prices for petroleum producers, ensure an efficient and regular supply of petroleum to consuming nations, and provide a fair return on capital to industry investors.
4. OPEC is headquartered in Vienna, Austria.
5. Membership in OPEC is open to any country that is a significant oil exporter and shares the organization’s ideals.
6. 13 Member Countries: – Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, United Arab Emirates (UAE), Saudi Arabia, Venezuela.

About OPEC+:

1. OPEC and a coalition of non-OPEC oil-producing nations, which includes Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Oman, Russia, South Sudan, and Sudan, have formed an informal alliance known as ‘OPEC+’ or the ‘Vienna Group’. This collaboration was established in 2016 to collectively reduce oil production with the aim of stabilizing global oil prices.
2. OPEC+ is an alliance of crude producers that has been implementing supply adjustments in the oil markets since 2017.

Primary goals of OPEC and OPEC+

1. Collaborative efforts to stabilize the global oil market and ensure fair prices for petroleum products.
2. Implementation of production restrictions and adjustments to balance supply and demand dynamics.
3. Coordination of policies to secure a steady and efficient supply of petroleum to consumer nations.
4. Support for the stability and sustainability of the oil industry and related investments.

OPEC+ holds more influence than OPEC: –

1. Expanded control: OPEC’s 14 members control 35 percent of global oil supplies and 82 percent of proven reserves. With the inclusion of 10 non-OPEC nations such as Russia, Mexico, and Kazakhstan, those shares increase to 55 percent and 90 percent respectively. This affords OPEC+ a level of influence over the world economy never seen before.
2. Greater market share: OPEC+ collectively commands a significant share of the global oil market, giving the coalition more leverage in decision-making and a heightened ability to impact global oil prices.
3. Enhanced decision-making power: With a broader coalition and increased representation, OPEC+ has an amplified ability to shape and influence global economic conditions, making it a more formidable force in the oil industry.

About Petroleum and Natural Gas Regulatory Board (PNGRB):

• The Petroleum and Natural Gas Regulatory Board (PNGRB) was established under the Petroleum and Natural Gas Regulatory Board Act, 2005.
• Its primary purpose is to regulate downstream activities in the petroleum and natural gas sector.
• The PNGRB is responsible for overseeing the laying and expansion of transmission pipelines for both gas and petroleum, as well as city/local gas distribution networks.
• Entities operating in the petroleum and natural gas sector are required to register with the PNGRB. This includes entities involved in marketing petroleum products and natural gas, operating LNG terminals, and establishing storage facilities beyond a specified capacity.
• The PNGRB has the authority to monitor prices related to piped natural gas (PNG) and can implement corrective measures to prevent entities from engaging in restrictive trade practices.
• In the event of disputes, the PNGRB possesses the same powers as a civil court to settle such matters.
• The Appellate Tribunal established under the Electricity Act serves as the designated Appellate Tribunal for matters falling under the jurisdiction of the Petroleum and Natural Gas Regulatory Board Act, 2005.

Objectives of the National Gas Grid:

1. To address regional imbalance within the country by ensuring equitable access to natural gas and facilitating the availability of clean and environmentally friendly fuel across the nation.
2. To establish a robust network that connects gas sources to major demand centers, ensuring the smooth and consistent supply of gas to consumers across various sectors.
3. Facilitate the development of City Gas Distribution Networks in multiple cities, enabling the efficient supply of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) to households and industries.

11. Plea seeks stay on Jewar Airport until wetland protected, UP govt to inform about status in 4 weeks

Subject :Environment

Section: Protected Area

Context:

• A petition has been filed to stay the construction of Jewar Airport until Dhanauri Wetland is granted protection.
• Now, NGT has granted 4 week’s time to U.P. state government to inform about the status of notifying the Dhanauri wetland of Greater Noida as Ramsar wetland site.
• The proposal for the same is pending before the Uttar Pradesh Wetland authority.

Dhanauri wetland:

• Dhanauri wetland is also known as Balmiki Ramsar Wetland and Sarus Sanctuary/Conservation Reserve.
• Mapped in the National Inventory of Wetlands and spread across around 98 hectares, the Dhanauri Wetlands is located among the villages of Dhanauri, Thasrana, and Aminpur Bangar in Dankaur Tehsil, Greater Noida, Gautam Budha Nagar.
• Yamuna Expressway Industrial Development Authority (YEIDA), the land-owning agency, gave a no-objection certificate on June 9, 2022 to declare it as a Ramsar Site and Sanctuary.
• The conservation report on the impact of the airport project on Dhanauri Wetlands had been prepared by the Wildlife Institute of India (WII).
• Dhanauri Wetland is home to over 217 species of birds and has been recognised as an important birding area by Bird Life International.
• Dhanauri Wetlands is home to over 150 Sarus Crane, which is UP’s state bird.

Ramsar site:

• The Ramsar Convention on Wetlands is an intergovernmental treaty that provides the framework for the conservation of wetlands and their resources.
• The convention was adopted in the Iranian city of Ramsar in 1971 and came into force in 1975.
• Every three years, representatives of the contracting parties meet as the Conference of the Contracting Parties (COP), the policy-making organ of the convention which adopts decisions (site designations, resolutions and recommendations) to administer the work of the convention and improve the way in which the parties are able to implement its objectives.
• In 2022, COP14 was co-held in Wuhan, China, and Geneva, Switzerland.

Source: IE

12. Two labs in India take on the bulk of testing for cough syrup samples for export

Subject :Science and Tech

Section: health

Context:

• The Directorate General of Foreign Trade under the Department of Commerce, Ministry of Commerce and Industry issued a notification early this year for amendment in the export policy for cough syrups, making it compulsory from June 1 for cough syrup manufacturers to secure a certificate of analysis from a government-approved laboratory before exporting their products.

Details:

• The order came following a World Health Organization (WHO) product alert in cases of syrup products being exported from India.
• The country has 15 Central and State-run laboratories engaged in cough syrup sample testing, including the Regional Drugs Testing Laboratory, Kerala.
• One Central and one State testing laboratory in India are currently bearing the bulk of cough syrup sample analyses brought in for testing before their export.
  • These two centers are: CDTL, Mumbai; and the Food and Drug Laboratory, Gujarat.
• CDSCO and the Ministry of Health and Family Welfare under the Drugs and Cosmetics Rules 1945, have brought in various measures to maintain the standard of drugs being exported from India.
  • The amendments include mandating that before the grant of a manufacturing license, the manufacturing establishment is to be inspected jointly by the drugs inspectors of the Central government and State government.
  • The number of sanctioned posts in the CDSCO has been significantly increased in the last 10 years, and an amendment has also been brought in, making it mandatory for applicants to submit evidence of stability, safety, etc. to the State licensing authority before the grant of manufacturing license by the authority.

Drug manufacturing in India:

• The pharmaceutical industry in India was valued at an estimated US$42 billion in 2021 and is estimated to reach $130 billion by 2030.
• India is the world’s largest provider of generic medicines by volume, with a 20% share of total global pharmaceutical exports. It is also the largest vaccine supplier in the world by volume, accounting for more than 60% of all vaccines manufactured in the world.
• Indian pharmaceutical products are exported to various regulated markets including the US, UK, European Union and Canada.
• According to Economic Survey 2023, the turnover in the domestic pharmaceutical market was estimated to be $41 billion.
• India’s pharmaceutical exports revenue was $25.3 billion in fiscal year 2022–23, according to the data released by Pharmexcil.
• India ranked third globally in terms of dollar value of drugs and medicines exports.
• Major pharmaceutical hubs in India are: Vadodara, Ahmedabad, Ankleshwar, Vapi, Baddi, Sikkim, Kolkata, Visakhapatnam, Hyderabad, Bangalore, Chennai, Margao, Navi Mumbai, Mumbai, Pune, Aurangabad, Pithampur, and Paonta Sahib.

Source: TH

13. Biodiversity technical body meets in Nairobi to gauge progress on Kunming-Montreal Global Biodiversity Framework

Subject :Environment

Section: International conventions

Context:

• The Subsidiary Body on Scientific, Technical and Technological Advice (SBSTTA-25) is taking place between October 15-October 19, 2023 at Nairobi, Kenya to guide the implementation of the Kunming-Montreal Global Biodiversity Framework Some 670 participants from 135 countries are in Nairobi for the meeting.

SBSTTA-25:

• Since its inception in 1995 in Paris, France, SBSTTA has produced a total of 250 recommendations to the Conference of the Parties.
• The recommendations made by SBSTTA-25 at this Nairobi meeting will be sent for agreement at COP16, scheduled to be held in 2024.

Details:

• The Kunming-Montreal Global Biodiversity Framework was adopted at CoP15 of CBD in 2022.
• Discussions at SBSTTA-25 are on the monitoring framework needed to support implementation of the framework.
• Goal A is to increase the abundance of native wild species to healthy and resilient levels by 2050.
• Experts will also discuss the recently released assessment report by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services on invasive alien species.

About Kunming-Montreal Global Biodiversity Framework (GBF):

• The framework has 4 long-term goals to be achieved by 2050 and 23 targets that the world needs to achieve by 2030.
• In 2020, the world failed to meet the last set of targets, the Aichi Targets.
• The countries will monitor and report every five years or less on a large set of indicators related to progress.
• The CBD will combine national information submitted by late February 2026 and late June 2029 into global trends and progress reports.

4 Long-term goals are:

The 23 targets are:

Source: DownToEarth

14. Tropical crops at risk from pollinator loss due to climate change, shift in land use, finds study

Subject :Environment

Section: Climate change

Context:

• Tropical crops like coffee, cocoa, watermelon and mango, face a potential crisis due to the loss of insect pollinators, according to a new study led by researchers from the University College London and the Natural History Museum.
• Three-fourths of the world’s flowering plants and about 35 per cent of the world’s food crops depended on animal pollinators to reproduce, according to the United States Department of Agriculture.

Study findings:

• Combined pressures of climate change and agricultural activities have led to large reductions in insect pollinators.
• Altered climate and change in land-use have reduced the number of insects pollinating key tropical crops.
• The number of insects that pollinate those plants declined by 61 per cent.
• Most affected regions: Sub-Saharan Africa, South America and Southeast Asia.
  • In terms of total production potentially at risk, China, India, Indonesia, Brazil and the Philippines emerged as being most at risk.
• Most affected crops:  Cocoa (at highest risk), mango, watermelon.
• The main factors driving this decline were identified to be destruction of habitat, improper land-use such as grazing, fertilisers and crop monoculture of farming, along with high pesticide use.
• Impact: Increased income insecurity for small-scale farmers, reduced production and productivity, threat to biodiversity, region may become prone to Invasive Alien Species (IAS), spread of plant and animal diseases among others.

Source: DownToEarth

15. Wayanad is summer home for elephants, says a study

Subject :Environment

Section: Protected Areas

Context:

• The Wayanad plateau witnesses high footfall of elephants in summer compared to the surrounding areas in the Nilgiri landscape, a new study finds.

Details:

• Researchers say that some forest areas in the plateau act as functional corridors for elephants to move between forest patches which need the same recognition as historical elephant corridors.
• Considering the landscape’s prominence in times of climate change, the study calls for strategic protected area expansion and acquisition of swamps and riparian forests close to forest areas as one of the conservation investments for the species.

Water bodies and trees act as summer coolers for elephants:

• Swamps and forests of Wayanad provide the elephants with shade and opportunities to take mud baths as a buffer against thermal stress.
• Elephants visit Wayanad during summer while during winter they prefer other habitats to the east of the Nilgiri landscape that comprises protected areas like Bandipur and Nagarahole tiger reserves.

About the Wayanad plateau:

• The Wayanad Plateau forms a continuation of the Mysore Plateau, the southern portion of Deccan Plateau which links the Western Ghats with the Eastern Ghats.
• It is set high in the Western Ghats with altitudes ranging from 700 to 2100 meters. VellariMala, a 2,240 m (7,349 ft) high peak situated on the trijunction of Wayanad, Malappuram, and Kozhikode districts, is the highest point in Wayanad district.
• The Wayanad plateau in the Brahmagiri‐Nilgiri‐Eastern Ghats landscape of peninsular India supports the largest breeding population of Asian elephants (Elephas maximus) globally.
• This area provides year‐round water availability and forage to elephants.

Wayanad plateau needs better protection and conservation measures:

• Out of 344 sq km of Wayanad Wildlife Sanctuary, almost 100 sq km area is plantation.
• This high fragmentation of forests is one of the main reasons for increasing conflict between humans and elephants.
• Other factors including the increased population of elephants, especially the male elephants from better protection measures in the recent past, depletion of palatable plant species for herbivores due to the spread of invasive plant species, changing forest fire dynamics, etc. are pushing elephants out of forests and towards plantations and human habitations.
• There is a call for long-term research to fully comprehend the importance of Wayanad as a dry season habitat for elephants in the Nilgiri landscape.
• The study suggests a strategic protected area expansion and acquisition of swamps and riparian forests close to forest areas as one of the conservation investments in the landscape.
• Minimize habitat degradation from various factors like the spread of invasive plants, grazing, monoculture plantations, man-made large fires, etc through eco-restoration plans.

Asiatic elephants:

• The Asian elephant (Elephas maximus) is the only living species of the genus Elephas and is distributed throughout the Indian subcontinent and Southeast Asia, from India in the west, Nepal in the north, Sumatra in the south, and Borneo in the east.
• Three subspecies are recognised—E. m. maximus from Sri Lanka, E. m. indicus from mainland Asia and E. m. sumatranus from the island of Sumatra. Formerly, there was also the Syrian elephant or Western Asiatic elephant (Elephas maximus asurus) which was the westernmost population of the Asian elephant (Elephas maximus).
• This subspecies became extinct in ancient times. Skeletal remains of E. m. asurus have been recorded from the Middle East: Iran, Iraq, Syria, and Turkey from periods dating between at least 1800 BC and likely 700 BC.
• It is one of only three living species of elephants or elephantids anywhere in the world, the others being the African bush elephant and African forest elephant.
• It is the second largest species of elephant after the African bush elephant.
• The Asian elephant is the largest living land animal in Asia.
• The Asian elephant is a globally endangered species with 50,000 individuals remaining in the wild. About 60 percent of the population is in India with 25 percent in the global biodiversity hotspot of the Western Ghats.
• The existing habitat is highly fragmented with many anthropogenic pressures coupled with other factors like climate change leading to the degradation of these patches.
• With their habitats lost or fragmented, elephants are increasingly coming into conflict with humans.

16. Bond issuance by India Inc rises

Subject :Economy

Section: Capital market 

Context: India Inc raised 54% more resources via bonds in H1 of FY24

Key Points:

• Several corporates are preferring corporate bonds over bank loans to meet their financing needs. The principal reason for the surge is bond yields that are comparable to interest rates apart from the greater liquidity that bonds offer over bank loans.
• India Inc. raised 54 per cent more resources via bonds in the first half (H1) of FY24, moving away from bank finance.
• The amount raised through corporate bonds in H1FY24 at ₹4,93,191 crore was on the higher side compared to H1FY23 at ₹3,21,070 crore.
• The momentum could turn sluggish for a couple of months due to tight liquidity in the system and a rise in bond yields

Who were the main issuers:

• The main borrower during the first quarter of FY24 was HDFC Ltd., which extensively tapped the bond market before merging with HDFC Bank.
• Public sector undertakings and large NBFCs, called flow-issuers, are very regular in tapping the bond market.
• Many first-time issuers, corporates, InvITs, REITs, and banks — Infra, Tier-2, and Tier-1 bonds — and lower credit-rated issuers through structured finance tapped the bond market during H1FY24.

Why are bonds being preferred currently?

• Corporate issuers and banks may prefer to tap funds through money market instruments due to the expectation of a reversal in the interest rate cycle starting in the second quarter of the next fiscal.
• The yield difference between Indian Government Bond and AAA-rated large/PSU Corporate bonds, too, are compressed in the range of 10 basis points (bps) to 30 bps only.
• Lower credit-rated issuers, too, have been successful in raising funds through bond markets, either through the private placement route or the public issuance route.
• NBFCs too are looking for fresh funds over and above bank funding and are also trying to refinance the erstwhile TLTRO (Targeted Long-Term Repo Operations) loans availed from banks during the Covid period.
• Lastly the market is finding increased investment appetite from HNI (high net worth individuals) clients in high-yield instruments due to a change in income tax rules, which has affected MLD (market-linked debentures) issuances and debt MFs.

What are the general differences between bond vs bank finance?

• Corporate bonds provide more liquidity to issuers compared to bank loans. Mostly, the interest is payable annually and the principal is paid at the end of the redemption period for corporate bonds, compared to bank loans, where interest is generally payable monthly and the principal is payable quarterly.
• Further, corporate bonds are mostly carrying fixed-rate coupons compared to bank’s floating-rate loans.
• Banks don’t lend funds for acquisition deals, unlike bonds. Entities borrowing funds through the bond market to fund acquisitions are on the rise this fiscal.

17. RBI likely selling dollars to keep rupee off record low

Subject :Economy

Section: External Sector  

In News: RBI activity keeps Rupee in a narrow band.

Key Points:

• The rupee was at 83.24 against the U.S. dollar, barely changed from its close at 83.26 in the previous session, despite the weakness its Asian peers and the jump in oil prices.
• Reserve Bank of India is likely selling dollars via state-run banks to ensure that the rupee does not fall to a record low.

Why are Asian currencies under pressure?

• Their weakness comes as the U.S. central bank maintained a hawkish stance, raising the prospects of further rate hikes and widening the rate differentials between U.S. and Asian economies.

Why is crude oil price linked with weakening of Rupee?

• India imports close to 85 per cent of its crude oil requirement and any increase in global prices causes the import bill to shoot up. Since large payments have to be made in dollars to buy crude, the rupee takes a hit vis-a-vis the American currency.

The falling rupee – Reasons for fall

Reason 1 – Interest rate hike in the US

• An indirect reason for the falling rupee is the Federal Reserve’s increasing interest rate in the US.
• Investors like to move to investment options where the interest rate is increasing. Assume you invested in the equity market because the fixed deposit rates were low. You made good returns on your equity investment, and at the same time, the fixed deposit rates are increasing. Would you not withdraw your money from equity and invest in fixed deposits?
• The same is happening in the US. The Fed has increased policy rates by 75 basis points for the third consecutive time. As a result, the funds from India are moving to the US. The demand for the local currency (rupee) has declined, and it has fallen.
• Second, we are witnessing a rare scenario where inflation is higher in the US compared with India. The Fed has no choice but to increase the interest rate. With rising interest rates, the interest rate differential between the US and India has come down to 2.6%. The difference has also led to the recent depreciation of the rupee.

Reason 2 – Crude Oil prices

• The crude oil prices have increased sharply in the last year or so. India imports 86% of its oil demand – millions of barrels a day and the crude oil transactions are done in the dollar.
• The equation is simple – when the crude oil prices go up, we need to buy more dollars to purchase oil by selling the rupee. The US dollar becomes stronger, and the rupee value depreciates. The same has happened recently and caused the rupee depreciation.
• What can RBI do to stop further rupee depreciation?
• We import crude oil in billions. Hence, the depreciation of the local currency is harmful to the economy. RBI has to intervene to stop the sharp depreciation. Below are some ways RBI can stop the rupee depreciation:
• Sell forex reserves: RBI can sell (it is already doing it) a part of its foreign forex reserves to control the falling rupee. In 2021, India’s foreign exchange reserves stood at $642 billion. The latest data (September last week) show that the forex reserves have fallen to $545 billion. It had prevented a sharp fall in the Indian rupee, unlike other currencies.
• Not everyone is happy about the depleting foreign forex reserves, but the purpose of having high forex reserves was to use them in situations like these, right? It is important to note that this measure is only to counter volatility and cannot be RBI’s policy.
• Boost capital inflows in NRI accounts: The RBI can take measures to encourage capital flows in NRI deposits. When the NRIs start to deposit money in India, they would be selling dollars to convert it to a rupee, which will help the cause. RBI can reach out to banks so banks can offer non-residents higher interest rates on deposits and short-term bonds.
• Buy/sell swap: In a buy/sell swap, the Indian currency is injected into the banking system, while taking out dollars. The swap will help the RBI keep the currency rates in check, although, in a limited way.

Can RBI continue to sell foreign reserves?

• Of all the measures mentioned above, the one that works in real-time is selling forex reserves. Can RBI continue to sell it? The answer is No.
• The RBI has to keep an adequate level of foreign exchange reserves. It is measured in relation to import cover and short-term foreign currency debt.
• India’s import bill in September 2022 was nearly $60 billion. As per a conservative estimate, India needs to have a reserve equivalent of 10–11 months. By this estimation, RBI won’t be comfortable selling further as we are down to 9 months reserve equivalent.
• Another way to look at adequate forex reserves is to check the country’s total short-term debt due in the next one year. For India, it is over $100 billion. According to this method, RBI will be comfortable.

Conclusion

The rupee-dollar equation is not simple, and one cannot take a side – falling rupee is good or bad? RBI’s role is to look at the Indian economy from all angles – not just the dollar-rupee equation.

18. Is the global debt worries an indicator of another crisis?

Subject: Economy

Section: External Sector

Key Points:

• Record debts, high interest rates, the costs of climate change, health and pension spending as populations age and fractious politics are stoking fears of a financial market crisis in big developed economies.

Which countries are most concerned?

• The United States, where it almost came to a default because of high debt.
• Italy and Britain are of most concern owing to high debt.
• Italy’s 2.4 trillion-euro debt pile is the focus in Europe, where the IMF has said high debt leaves governments vulnerable to crisis.

What are other factors that increase concern?

• Most of the developed countries have an ageing population. This means a less active work force and the added burden of pensions and healthcare.
• Growth too is slow and thus makes debts at current levels unsustainable. In addition as central banks increase interest rates the surging interest payments with high rates add to the pressure.
• There is an absence of political consensus in these countries neither for austerity measures nor for increased taxes.
• The resolution of this crisis is for taxes to be raised, particularly in the United States and Britain, along with some spending cuts.