Daily Prelims Notes 10 March 2022

Daily Prelims Notes

10 March 2022

Table Of Contents

1. Asset Monetisation
2. Mines and Minerals
3. Rajiv Gandhi Assasination case
4. Global Water System Project
5. Colour Revolutions
6. Old Pension Scheme Vs New Pension Scheme
7. Amazon Rainforest
8. Central Bank Digital Currency (CBDC)
9. Terms of trade

1. Asset Monetisation

Subject: Economy

Section: Fiscal Policy

Context: Cabinet nod for new firm to monetise land assets

Concept:

National Land Monetisation Corporation to undertake monetisation of non-core assets such as surplus land of Central Public Sector Enterprises and government agencies. The new company will have an initial authorised share capital of ₹5,000 crore and paid-up share capital of ₹150 crore.

The Board of Directors of NLMC will comprise senior Central Government officers and eminent experts to enable professional operations and management of the company. The chairman, non-government directors of the NLMC will be appointed through a merit-based selection process.

Functions

• Government assets will be transferred to NLMC to hold, manage and monetise.
• Advise and support other government entities, including CPSEs, in identifying their surplus non-core assets and monetising them in a professional and efficient manner to generate maximum value realisation.
• NLMC will undertake surplus land asset monetisation as an agency function.
• NLMC will act as a repository of best practices in land monetisation, assist and provide technical advice to the government in implementation of the asset monetisation programme.

Importance

• Revenue to government
• Enable productive utilisation of under-utilised assets
• Encourage private investment and participation in the economic development
• Boost local economy
• Employment generation
• Development of infrastructure

2. Mines and Minerals

TOPIC: Geography

Section: Economic Geography

Context- The Cabinet on Wednesday opened up mining of a new group of minerals as part of its strategy to boost domestic mining and to reduce import dependence.

Concept-

• The Cabinet approved an amendment to the second schedule of the Mines and Minerals (Development and Regulation) Act, 1957, specifying the rate of royalty of certain minerals that include glauconite, potash, emerald, the platinum group of metals (PGM), andalusite, sillimanite and molybdenum.
• The amendment will lead to the auction of these mineral blocks for the first time in India.
• It is also expected to reduce imports of potash fertilisers and other minerals, and ensure availability of minerals for downstream industries and support agriculture.
• It will reduce the country’s foreign dependence through the local production of minerals.

Minerals and their uses: 

• Glauconite, a major component of greensand, is a common source of potassium (K+) in plant fertilizers and is also used to adjust soil pH.
• Andalusite is used as a refractory in furnaces, kilns and other industrial processes. South Africa possesses by far the largest portion of the world’s known andalusite deposits.
• Sillimanite minerals are mainly utilised in the production of mullite or high-alumina refractories. 95% of the world’s consumption of these minerals is used for this purpose in the manufacture of metals, glass, ceramics and cement.
• Molybdenum is a mineral that you need to stay healthy. Your body uses molybdenum to process proteins and genetic material like DNA. Molybdenum also helps break down drugs and toxic substances that enter the body
• High quality emeralds are used almost exclusively for making fine jewelry. Emerald is regarded as the traditional birthstone as well as the traditional gemstone for the astrological signs of Taurus, Gemini, and sometimes Cancer. Emerald is a variety of beryl.
• The platinum group metals (PGMs) are among the rarest mineral commodities in Earth’s crust. They include iridium, osmium, palladium, platinum, rhodium and ruthenium. Today, the leading use of PGMs is in catalytic converters that clean harmful exhaust from vehicle engines.

3. Rajiv Gandhi Assasination case

TOPIC: Polity

Section: Executive

Context- SC grants bail to Rajiv Gandhi case convict.

Concept-

Rajiv Gandhi Assasination case:

• Rajiv Gandhi was assassinated on the night of May 21, 1991 at Sriperumbudur in Tamil Nadu by a woman suicide bomber, identified as Dhanu, at an election rally.
• The Special Investigative Team had named 41 accused in its charge sheet – including 12, who died in the blast and three who was absconding – before a TADA court in Chennai, 1998.
• In May 1999, the Supreme Court had upheld the death sentence of four, including Murugan, Santham, Perarivalan and Nalini, commuted the death sentence of three to life, and freed the remaining 19.
• In 2000, the death sentence of one of the accused S Nalini, was reduced to a life sentence by the then Tamil Nadu Governor, at the instance of then Congress president Sonia Gandhi.
• In 2014, the Supreme Court commuted the death sentence of Murugan, Santhan, and AG Perivalan to life.
• The convicts in the case – Nalini, Santhan, Murugan (Nalini’s husband), A.G. Perarivalan, Robert Payas, Jayakumaran, and Ravichandran —are serving life terms across various jails in Tamil Nadu.
• The convicts have been in jail for over 27 years.
• In 2016, Tamil Nadu government wrote to Centre seeking its views on its decision to free them which was rejected by the Centre.
• Supreme Court gave the Centre three months to decide the Tamil Nadu government’s proposal to remit the sentences of the seven life-term convicts.
• Finally, the Supreme Court asked the Tamil Nadu Governor to consider the mercy petition of Perarivalan.

MERCY PLEAS:

Pardoning Power of the President in India:

• Under Article 72 of the Constitution, the President shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence where the sentence is a sentence of death.
• However The President cannot exercise his power of pardon independent of the government.
• In several cases, the SC has ruled that the President has to act on the advice of the Council of Ministers while deciding mercy pleas. These include
  • Maru Ram vs Union of India in 1980, and
  • Dhananjoy Chatterjee vs State of West Bengal in 1994.
• Although the President is bound by the Cabinet’s advice, Article74 (1) empowers him to return it for reconsideration once.
• If the Council of Ministers decides against any change, the President has no option but to accept it.

Pardoning Power of the Governor:

• Article 161: The Governor of a State shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence against any law relating to a matter to which the executive power of the State extends.

Difference Between Pardoning Powers of President and Governor:

• The scope of the pardoning power of the President is wider than the pardoning power of the Governor which differs in the following two ways:
  • Court Martial: The power of the President to grant pardon extends in cases where the punishment or sentence is by a Court Martial but Article 161 does not provide any such power to the Governor.
  • Death sentence: The President can grant pardon in all cases where the sentence given is the sentence of death but the pardoning power of the Governor does not extend to death sentence cases.

4. Global Water System Project

TOPIC: Environment

Section: Conservation

Context- The Sustainable Water Future Programme (Water Future) is building on a decade of coordinated international research from the Global Water System Project (GWSP).

Concept-

About GWSP:

• The GWSP was a joint project of the Earth System Science Partnership (ESSP), scientifically sponsored by the International Council for Science (ICSU) and its four Global Environmental Change (GEC) programmes:
  • International Human Dimensions of Global Environmental Change Programme (IHDP)
  • DIVERSITAS
  • International Geosphere-Biosphere Programme (IGBP)
  • World Climate Research Programme (WCRP).
• Since 2004, GWSP spearheaded a broad research agenda and initiated new ways of thinking about water as a complex global system, emphasizing the links between natural and human components.
• GWSP led the way to provide well-researched, integrative solutions, involving the biological and physical sciences together with economists and social sciences, to reduce the vulnerability of the Earth system and to give guidance to societies through assessments and future projections of the state of the global water system.
• Water Future has evolved from GWSP, based on the recommendations outlined in the Bonn Water Declaration, with a clear objective of promoting the adoption of science-based evidence into the formulation, implementation and monitoring of goals for sustainable development.

5. Colour Revolutions

TOPIC: IR

Section: Events

Context- Aggravating the situation is the fact that Ukraine was, in a sense, a child of a series of ‘Colour Revolutions’ that shook parts of the Rus- sian Empire in 1991.

Concept-

About Colour Revolutions:

• Worldwide media use the term color revolution to describe various protest movements and accompanying attempted or successful change of governments that took place in several countries of the former Soviet Union, the former Yugoslavia and People’s Republic of China during the early 21st century.
• The term has also been more widely applied to several other revolutions elsewhere, including in the Middle East and the Asia-Pacific region and South America, dating from the late 1980s to the 2020s.
• Some of these movements have had a measure of success, for example, the
  • Federal Republic of Yugoslavia’s Bulldozer Revolution (2000),
  • Georgia’s Rose Revolution (2003),
  • Ukraine’s Orange Revolution (2004) and
  • Kyrgyzstan’s Tulip Revolution (2005).
  • Lebanon’s Cedar Revolution (2005) and
  • Kuwait’s Blue Revolution (2005).
  • Coconut Revolution: In 2019, citizens of Bougainville voted for independence from Papua New Guinea.
  • Velvet Revolution: In 1989, a peaceful demonstration by students and contributed to the collapse of the communist government in Czechoslovakia.
  • Saffron Revolution: In Myanmar a series of anti-government protests were referred to in the press as the Saffron Revolution after Buddhist monks took the vanguard of the protests.
    • A previous, student-led revolution, the 8888 Uprising on 8 August 1988, had similarities to the colour revolutions but was violently repressed.

6. Old Pension Scheme Vs New Pension Scheme

TOPIC: Governance

Section: Schemes

Context- Recently, Rajasthan and Chhattisgarh announced the restoration of the old pension scheme (OPS) for government employees for the year 2022-2023.

Concept-

NPS vs OPS:

The old pension scheme was done away with in December 2003 by the BJP-led central government when Atal Bihari Vajpayee was prime minister. Its substitute, the National Pension Scheme (NPS), took effect from April 1, 2004.

Pension Fund Regulatory and Development Authority:

• It is the statutory Authority established by an enactment of the Parliament, to regulate, promote and ensure orderly growth of the National Pension System (NPS).
• It works under the Department of Financial Services under the Ministry of Finance.
• It performs the function of appointing various intermediate agencies like Pension Fund Managers, Central Record Keeping Agency (CRA) etc.
• It develops, promotes and regulates the pension industry under the NPS and also administers the Atal Pension Yojana.

7. Amazon Rainforest

TOPIC: Environment

Section: Conservation

Context- More than 75 percent of the Amazon rainforest has been likely heading towards a tipping point since the early 2000s, according to a new study.

Concept-

• The Amazon’s rainforest is home to 30 per cent of the world’s species, comprising 40,000 plant species, 16,000 tree species, 1,300 birds and more than 430 species of mammals.
• Deforestation is on the rise. According to reports, it totalled 430 square kilometres in January 2022, five times higher than the same month last year.
• This loss will affect the amount of rainfall. Trees take up water through the roots, releasing it into the atmosphere, influencing precipitation over South America.
• The rainforest is also a carbon sink — a place that absorbs more carbon dioxide than it releases. It plays an essential role in combating climate change.
• But increasing temperatures due to human-induced climate change and deforestation are pushing the rainforest to transform into a carbon source: Places that release more CO2 than they absorb.

About Amazon Rainforest:

• Comprising about 40% of Brazil’s total area, it is bounded by the Guiana Highlands to the north, the Andes Mountains to the west, the Brazilian central plateau to the south, and the Atlantic Ocean to the east.
• These are large tropical rainforest occupying the drainage basin of the Amazon River and its tributaries in northern South America and covering an area of 6,000,000 square km.
• Tropical forests are closed-canopy forests growing within 28 degrees north or south of the equator.
• They are very wet places, receiving more than 200 cm rainfall per year, either seasonally or throughout the year.
• Temperatures are uniformly high – between 20°C and 35°C.

8. Central Bank Digital Currency (CBDC)

Subject : Economy

Section :Monetary Policy and Banking

Context: Proposed digital currency by RBI to speed up transactions , reduce cost of cash

The Reserve Bank of India is planning to come out with a central bank-backed digital currency, using blockchain technology in 2022-23.

A Central Bank Digital Currency (CBDC), or national digital currency, is simply the digital form of a country’s fiat currency. Instead of printing paper currency or minting coins, the central bank issues electronic tokens. This token value is backed by the full faith and credit of the government. CBDC is a legal tender issued by a central bank in a digital form. It is similar to a fiat currency issued in paper and is interchangeable with any other fiat currency.

Merits 

• Reduce the cost of currency management
• May reduce inflation – as a high currency to GDP ratio is inflationary (might decline unnecessary cash holdings.
• Digital Rupee transactions will be instantaneous as opposed to the current digital payment experience.
• Enabling real-time payments without any inter-bank settlement thus, reducing transaction cost and time.
• The cost of printing, transporting and storing paper currency can be substantially reduced.
• Financial inclusion.
• Better targeting of beneficiary of cash subsidy schemes
• Counter the growth of private forms of digital money.
• The state-backed digital currency can provide investor/consumer protection, the private can confidently invest in the associated infrastructure without any doubts over its regulation.
• Less volatile than other private digital currency as regulated by the RBI
• Better monetary policy transmission
• The central bank would be able to keep a track of the exact location of every unit of the currency, thereby curbing money laundering, terror financing and counterfeiting.
• Reduce dependence on dollar for international transaction

Concerns

• Digital illiteracy
• Lack of internet and smartphone penetration
• Technology related exclusion from welfare schemes
• Cyber threat
• Collect certain basic information of an individual so that the person can prove that he’s the holder of that digital currency thus privacy concerns
• Technological issues- underlying technology, the validation mechanism and distribution architecture.
• Sudden flight of money from a bank under stress is another point of concern.
• Eliminate the large infrastructure of banking and financial institutions.

9. Terms of trade

Subject: Economy

Section: External sector

Context: The surge in energy prices due to the Russia-Ukraine conflict could trigger a ‘terms-of-trade’ shock for large net energy importers like India

Concept:

Terms of trade are defined as the ratio between the index of export prices and the index of import prices. If the export prices increase more than the import prices, a country has a positive terms of trade, as for the same amount of exports, it can purchase more imports.

An abrupt change in a country’s terms of trade (e.g. -A drastic fall in the price of a primary product that is a country’s main export) can cause serious balance-of-payments problems if the country depends on the foreign exchange earned by its exports to pay for the import of its manufactured goods and capital equipment.

Factors determining terms of trade of a country

• Reciprocal demand, i.e. “the strength and elasticity of each country’s demand for the other country’s product”-If India’s demand for Russia’s Natural gas becomes more intense (inelastic), the price of natural gas (India,s import) rises more than the price of India’s export, the commodity terms of trade will move against India and in favour of Russia.
• Tariff-When a country imposes tariffs on imports from the foreign country, it implies a lesser willingness to absorb the foreign products, likely to improve the terms of trade for the tariff- imposing country.
• Tastes or preferences of the people in India shift from the natural gas of Russia  to its own Coal, the terms of trade will become favourable to India. In an opposite situation, the terms of trade will turn against this country.
• Changes in factor endowment-If there is an increase in the supply of labour in India, specialising in the production of labour-intensive commodity cloth, the fall in labour cost will lower the price of cloth (export). Consequently, more quantity of cloth will be offered by India for the same quantity of Natural gas from Russia resulting in the terms of trade becoming unfavourable toIndia. If labour becomes scarcer in this country, the terms of trade are likely to become favourable for it.
• Changes in technology-As there is technological improvement in the home country, say A, there is rise in productivity and/or a fall in the cost of producing exportable commodities, say cloth. If technological progress is labour-saving in this labour-intensive export sector (cloth industry) there will be worsening of the terms of trade.

In case this type of technical progress takes place in the import-competing sector in this county, there will be an improvement in the terms of trade. If capital-saving technical progress takes place in the labour-intensive export sector, there can still be the possibility of improvement in the terms of trade.

• Growth-As the supply of labour in the labour- abundant country A increases or growth takes place. The cost and price of exportable commodities falls leading to the terms of trade decline for the growing home country A, although the volume of trade will get enlarged.

If the supply of scarce factor capital increases, subsequent to growth, the cost and price of importable good steel will fall relative to the price of cloth. This will cause the improvement in the terms of trade for the growing home country A but the volume of trade will get reduced.

• Devaluation causes a lowering of export prices relative to import prices, the terms of trade are supposed to get worsened after devaluation of the home currency.
• Balance of Payments Position-If a country is faced with a deficit in balance of trade and payments and it has to adopt measures intended to restrict import and enlarge exports such as internal deflation, devaluation, import and exchange controls, the terms of trade are likely to get worsened.
• International Capital Flows-An increased flow of capital from abroad involves larger demand for the products of the creditor country and consequent rise in the prices of imported goods.
• Import Substitutes-If there is sufficient production of close substitutes for import goods within the home country, its reciprocal demand for the foreign products will be weak and the terms of trade are likely to become favourable for the home country.

Impact of worsening terms of trade due to Ukraine war- (impact of ukraine war already explained)

A decline in the terms of trade means the price of exports falls relative to imports. Thus, following impact:

• Imports become more expensive leading to current account deficit
• Imported inflation
• Capital outflows
• Depreciation of domestic currency
• Need for export for a given import- supply disruption
• declining living standards and lower GDP leading
• reduce export revenue and make it harder to pay foreign external debt
• Decline of forex reserve
• Stagflation-high inflation and lower output