Daily Prelims Notes 30 November 2020

November 30, 2020
Posted by: OptimizeIAS Team
Category: DPN

Table Of Contents

Subject: Economics

Context: The weakness in the dollar following the large stimulus rolled out by the US has resulted in currencies of most emerging economies strengthening sharply from April this year. Yet, the rupee has been the worst performer among Asian currencies in 2020, losing 3.59 per cent against the greenback.

Concept:

This is despite strong tailwinds in the form of foreign portfolio flows and shrinking trade balance. The RBI’s intervention in the currency market appears to be largely responsible for the rupee’s weakness.

Despite FPI/FDI Inflows:

The weakness in the rupee is surprising given that there have been copious inflows from foreign portfolio investors over the last two months. India and China have been the only Asian countries where FPIs have invested heavily in 2020.
The current account balance, therefore, moved in to the positive territory in the June 2020 quarter, after 16 years.
But despite these positive, the rupee has been weakening, largely due to the RBI’s interventions. While the central bank sold dollars to support the rupee in March and April, it has been a net buyer of dollars since then. The RBI’s net purchases hit a high of $15.9 billion in July, when the rupee was trading around 75 against the greenback.
While data on RBI purchase and sale of dollar are not available beyond September, the increase in forex reserves from around $540 billion to $575 billion since October indicates the central bank has once again been mopping up dollars over the last two months.
The RBI’s intervention seem aimed at helping exporters, who benefit from a weaker rupee, but experts question the need for continuing this policy .

Problems :

Bank loan rates are lower than equivalent rated bonds due to surplus liquidity created by the RBI’s dollar purchases. This can impact banking sector profits and set off asset-liability mismatch, if the spread is more prevalent for lower rated borrowers.
Given the higher domestic inflation, it would do no harm for the RBI to lean with the wind and let the rupee appreciate, which would reduce imported inflation when metal prices are rising.

2. CHINA’S SUPER DAM

Subject: International Events

Context: China will build a “super” dam on the lower reaches of the YarlungZangboriver close to the Line of Actual Control (LAC) in Tibet, in a move that could have a far-reaching impact on northeast India’s water security.

Concept:

Originating in the Tibet Autonomous Region (TAR), the trans-border YarlungZangbo flows into Arunachal Pradesh where it is called Siang and then to Assam as Brahmaputra before flowing into Bangladesh.
The dam could come up in the Medog county of TAR, which is close to Arunachal Pradesh.
China has already built several smaller dams on the YarlungZangboriver.
The new dam’s ability to generate hydropower could be three times that of central China’s Three Gorges Dam, which has the largest installed hydropower capacity in the world.

3. PULICAT LAKE

Subject: Environment

Context : The Union Ministry of Environment, Forests and Climate Change grants environment clearance for opening the bar mouth in pulicat lake permanently at a cost of ₹27 crore, the State government has informed the Madras High Court.

Concept:

Over 90,000 birds, including storks and pelicans, have come from faraway places to the lake this year attracting both domestic and foreign tourists.
Pulicat Lagoon is the second largest brackish water lagoon in India, after Chilika Lake. It is present in the Coromondal Region i.e. Andhra Pradesh–Tamil Nadu Border.
The barrier island of Sriharikota separates the lake from the Bay of Bengal and is home to the Satish Dhawan Space Centre.
The primary inflows to the Pulicat Lake are Arani, Kalangi and Swarnamukhi.
About 96% of the Pulicat Lake is present in Andhra Pradesh while only 3% is present in Tamil Nadu.

4. OIC

Subject : International Organizations

Context: India, ‘strongly’ rejected the criticism of its Kashmir policy by the Organisation of Islamic Cooperation (OIC).

Concept:

The Organisation of Islamic Cooperation (OIC) is the second largest intergovernmental organization after the United Nations with a membership of 57 states.
It is the collective voice of the Muslim world. It endeavors to safeguard and protect the interests of the Muslim world in the spirit of promoting international peace and harmony among various people of the world.
It was established upon a decision of the historical summit which took place in Rabat, Kingdom of Morocco on the 25th of September 1969.
Headquarters: Jeddah, Saudi Arabia.
India is not a member of the OIC. However, India was invited as a guest of honour at 46th Session of the Council of Foreign Minister in 2019. 2019 is the 50th anniversary of OIC.

5. POINT CALIMERE

Subject: Environment

Context: The arrival of flamingos from far flung areas has started at Point Calimere, one of the popular destinations in the State for the winged visitors.

Concept:

It is located in Nagapattinam district of Tamil Nadu spreads across an area of 30 sq.km and comprises sandy coastal, saline swamps and thorn scrub forests around the backwater.
It is a protected area(Wildlife Sanctuary) and a Ramsar site.
It harbors the single-largest stretch of the unique dry-evergreen forest in the country besides open grasslands and tidal mudflats is of interest to tourists.
Around 100 species of birds including the Greater Flamingo, Painted Stork, Little Sting, Sea Gull and Brown-headed gull have been making their presence felt since September.
Blackbuck (AntilopeCervicapra) is the flagship species of the sanctuary.
Other important animals are the spotted deer, black-napped hare, wild boar, Indian jackal, feral horses, palm civet, short-nosed fruit bat, jungle cat and monitor lizard.

6. ECO BRIDGE

Subject: Environment

Context: In a first-of-its-kind initiative, the Uttarakhand Forest Department has built a special eco bridge in the Ramnagar forest division of Nanital district for reptiles to cross over the busy jungle road.

Concept:

The highway to Nainital is a very busy one and a large number of vehicles ply on it during the tourist season. The jungle next to it is home to many reptiles including pythons and monitor lizards.
This is a dense forest, and elephants, leopards, deer, and blue bulls move in this area. Drivers can see them from some distance and slow down or stop, but they rarely do for snakes, lizards, monitors, or squirrels.
So, the bridge was built to provide a safe passage for the reptiles from the vehicles coming from both sides.
The bridge will have four camera traps for monitoring purposes and it will be studied as a model by the Forest Department, Ramnagar Divisional Forest Officer (DFO).

Eco- Bridge:

An eco-bridge or the eco conduct is an overpass that allows easy crossing of animals across human-made barriers.
The intervention requires the laying of fertile soil to grow grass and plants over the structure, so that fragmentation of the reserve forest is camouflaged.

7. COMPETITION BILL

Subject: Governance

Context: After incorporating certain reforms suggested by the CLRC, the draft Competition (Amendment) Bill, 2020 (Bill) was released for public comments. Now , Government is planning to table the bill in parliament.

Concept:

The Competition Bill, 2020 seeks to amend the Competition Act.
If the changes proposed by the MCA to the Competition Act are enacted, buyers forming a cartel may be penalised.
It has sought to give monetary and penal powers to the director general for investigation under the CCI.
It also seek to empower the director general for investigation to send a person to prison for up to 6 months or impose a fine of Rs 1 crore if the latter refuses to produce any document the former has asked for.
The Bill has a provision of income, on which penalty could be imposed under Section 27 of the Competition Act.
It has the word ‘income’ included in the Act, which may provide a legal basis to the CCI to impose penalties on individuals.

Clauses introduced

The draft amendments also call for introducing a “commitment and settlement” clause in the Competition Act.
The enabling clause will allow those found in contravention of the competition law to commit to correct their ways to avoid action even before investigation is completed.
Even in cases where investigation is over, evidence has been found, and the adjudicating process has started, the companies can still enter a settlement.
The companies will have to pay fine and avoid legal proceedings after ensuring that any anti-competitive practice will be corrected.

What does the Bill have to say about hub-and-spoke cartel?

The proposed amendment seeks to provide clarity to these cartels.
The MCA suggested hubs also be covered under Section 3(3), which deals with cartels that hinder competition.
A hub-and-spoke cartel is basically an arrangement between companies where a dominant player (hub) is wooed by other firms (spoke), to destroy competition by, say, increasing or lowering prices.
The hub-and-spoke agreements were not specifically covered under the Competition Act.

Impact on CCI’s powers

The CCI has imposed penalties by independently invoking Section 3(1) of the Competition Act.
However, the CCI’s powers to invoke Section 3(1) independently are pending adjudication before the Supreme Court.
The proposed amendments also seek to expand the composition of the CCI by including part-time members in the Commission.
The Commission is currently a 4-member body, including the chairman.

8. FDI INFLOW

Subject: Economics

Context: During April-September 2020, India attracted FDI worth $7.12 billion from the U.S. and $2 billion from Mauritius, which slipped to fourth position, the DPIIT (Department for Promotion of Industry and Internal Trade) data showed.

Concept:

Key Takeaways:

The U.S. has emerged as the second biggest source of foreign direct investment (FDI) into India, replacing Mauritius, during the first half of the current financial year, according to data of the Commerce and Industry Ministry.
Mauritius was the second biggest FDI source during the same period previous year. The U.S. was the fourth biggest investor during that period.
Singapore with $8.30 billion foreign inflows continued to be the top source of FDI for India in April-September 2020-21. The country has received $2.1 billion inflows from Cayman Isands.
The islands was followed by Netherlands ($1.5 billion), U.K. ($1.35 billion), France ($1.13 billion), Japan ($653 million) , Germany ($202 million), and Cyprus ($48 million).

Foreign Direct Investment

FDI is the process whereby residents of one country (the home country) acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country).
It is different from Foreign Portfolio Investment where the foreign entity merely buys stocks and bonds of a company. FPI does not provide the investor with control over the business.
Flows of FDI comprise capital provided (either directly or through other related enterprises) by a foreign direct investor to an enterprise.
FDI has three components, viz., equity capital, reinvested earnings and intra-company loans.
Equity capital is the foreign direct investor’s purchase of shares of an enterprise in a country other than its own.
Reinvested earnings comprise the direct investors’ share (in proportion to direct equity participation) of earnings not distributed as dividends by affiliates, or earnings not remitted to the direct investor. Such retained profits by affiliates are reinvested.
Intra-company loans or intra-company debt transactions refer to short- or long-term borrowing and lending of funds between direct investors (or enterprises) and affiliate enterprises.

Routes through which India gets FDI:

Automatic Route: In this, the foreign entity does not require the prior approval of the government or the RBI.
Government route: In this, the foreign entity has to take the approval of the government.
The Foreign Investment Facilitation Portal (FIFP) facilitates the single window clearance of applications which are through approval route.

9. ITU

Subject: International Organisation

Context: Three new technologies including ‘5Gi’ submitted by the Telecommunications Standards Development Society India (TSDSI) have completed “successful evaluation” and conform with rigorous performance requirement, according to International Telecommunication Union (ITU) statement.

Concept:

The technologies are — 3GPP 5G-SRIT and 3GPP 5G-RIT submitted by the Third Generation Partnership Project (3GPP), and 5Gi submitted by Telecommunications Standards Development Society India (TSDSI).

International Telecommunication Union (ITU):

It is an agency of the United Nations (UN) whose purpose is to coordinate telecommunication operations and services throughout the world.
Originally founded in 1865, as the International Telegraph Union, the ITU is the oldest existing international organization.
Headquarters are in Geneva, Switzerland.
The ITU consists of three sectors:
Radiocommunication (ITU-R) — ensures optimal, fair and rational use of the radio frequency (RF) spectrum.
Telecommunication Standardization (ITU-T) — formulates recommendations for standardizing telecommunication operations worldwide.
Telecommunication Development (ITU-D) — assists countries in developing and maintaining internal communication operations.

Membership:

There are 193 Member States of the ITU, including all UN member states except the Republic of Palau, plus the Vatican City.
Membership of ITU is open to only UN members, which may join the Union as Member States, as well as to private organizations like carriers, equipment manufacturers, funding bodies, research and development organizations and international and regional telecommunication organizations, which may join ITU as non-voting Sector Members.

India and the ITU:

India has been an active member of the ITU since 1869 and has been a regular member of the ITU Council since 1952. In November 2018, India was elected as a Member of the ITU Council for another 4-year term (2019-2022).

10. Herd Effect vs Herd Immunity

Context: Plan for nationwide roll of covid -19 vaccine

Concept:

Herd Immunity: The proportion of subjects with immunity in a given population. When a vaccine is rolled out and increasing proportion of people get vaccinated, herd immunity level increases and decease frequency decreases in the vaccinated population.

Herd Effect is defined as the reduction of infection or disease in the unimmunized segment as a result of immunizinga proportion of the population.