Daily Prelims Notes 11 March 2022

Daily Prelims Notes

11 March 2022

Table Of Contents

1. Current Account Deficit
2. Xeno transplantation
3. India’s coal import
4. Biological and Chemical weapon
5. India fertilizer import
6. UPI123Pay- RBI’s new payments service for feature phones
7. Gold- safe haven
8. Aerosol Pollution
9. Oil Palm

1. Current Account Deficit

Subject: Economy

Section: External sector

Context: It is expected that the current account deficit of India will widen to a 10-year high of 3 percent of GDP in FY23 due to the Ukraine War

Concept:

Balance of Payments

Balance of Payments (BoP) of a country can be defined as a systematic statement of all economic transactions of a country with the rest of the world during a specific period usually one year.

For preparing BoP accounts, economic transactions between a country and the rest of the world are grouped under – Current account, Capital account and Errors and Omissions. It also shows changes in Foreign Exchange Reserves.

• Current Account: It shows export and import of visibles (also called merchandise or goods – represent trade balance) and invisibles (also called non-merchandise). Invisibles include services, transfers and income.Thus,
  • The balance of trade in goods
  • The balance of trade in services.
  • Net current income e.g. profit from overseas investment.
  • Transfer payments e.g. payments to the EU.

The balance of exports and imports of goods is referred to as the trade balance. Trade Balance is a part of ‘Current Account Balance’.

• Capital Account: It shows a capital expenditure and income for a country. It gives a summary of the net flow of both private and public investment into an economy. External Commercial Borrowing (ECB), Foreign Direct Investment, Foreign Portfolio Investment, etc form a part of capital account.
• Errors and Omissions: Sometimes the balance of payments does not balance. This imbalance is shown in the BoP as errors and omissions. It reflects the country’s inability to record all international transactions accurately.
• Changes in Foreign Exchange Reserves: Movements in the reserves comprises changes in the foreign currency assets held by the Reserve Bank of India (RBI) and also in Special Drawing Rights (SDR) balances.

Overall the BoP account can be a surplus or a deficit. If there is a deficit then it can be bridged by taking money from the Foreign Exchange (Forex) Account

Current Account Deficit-

It is expected that the current account deficit of India will  widen to a 10-year high of 3 percent of GDP in FY23 due to the Ukraine War

A current account deficit occurs when the total value of goods and services a country imports exceeds the total value of goods and services it exports. If there is a deficit on the current account, there will be a surplus on the Financial/Capital account to compensate for the net withdrawals.

The size of current account deficit/surplus is affected by several factors including:

• Overvalued exchange rate-If the currency is overvalued, imports will be cheaper, and therefore there will be a higher quantity of imports. Exports will become uncompetitive, and therefore there will be a fall in the quantity of exports
• Economic growth-If there is an increase in national income, people will tend to have more disposable income to consume goods. If domestic producers cannot meet the domestic demand, consumers will have to import goods from abroad.
• Saving rates – influencing the level of import spending, thus increasing the deficit.
• Decline in competitiveness/export sector-In the UK, there has been a decline in the exporting manufacturing sector because it has struggled to compete with developing countries in the far east. This has led to a persistent deficit in the balance of trade.
• Higher inflation-If India’s inflation rises faster than our main competitors then it will make UK exports less competitive and imports more competitive. However, inflation may also lead to a depreciation in the currency to offset this decline in competitiveness.
• Recession in other countries-If India’s main trading partners experience negative economic growth, then they will buy less of our exports, worsening India’s current account.
• Borrowing money-If countries are borrowing money to invest e.g. third world countries, then this will lead to deterioration in current account position.
• Financial flows to finance the current account deficit.-If a country can attract more financial flows (either short-term portfolio investment or long-term direct investment), then these flows on the financial account will enable the country to run a larger current account deficit.

Impact for the economy 

• Cost Push inflation- due to supply shortage
• Rise in import bill
• Decline in forex reserve
• Rise capital inflows- If there is a deficit on the current account, there will be a surplus on the Financial/Capital account to compensate for the net withdrawals. However, capital flows are likely to be lower than the current account deficit due to war led outflows.
• Higher external borrowing

2. Xeno transplantation

Subject: Science & Tech

Section: Biotechnology

Context- A patient whose failing heart had been replaced with the heart of a genetically altered pig in a landmark surgery at the University of Maryland Medical Centre in Baltimore, United States, died on Tuesday (March 8), two months after the operation.

Concept-

Cross-species transplant:

• According to the FDA, xenotransplantation is “any procedure that involves the transplantation, implantation or infusion into a human recipient of either
  • (a) live cells, tissues, or organs from a nonhuman animal source, or
  • (b) human body fluids, cells, tissues or organs that have had ex vivo contact with live nonhuman animal cells, tissues or organs”.
• Xenotransplantation is seen as an alternative to the clinical transplantation of human organs whose demand around the world exceeds supply by a long distance.
• Xenotransplantation involving the heart was first tried in humans in the 1980s.
• A well known case was that of an American baby, Stephanie FaeBeauclair, better known as Baby Fae, who was born with a congenital heart defect, and who received a baboon heart in 1984.
  • The surgery was successful, but Baby Fae died within a month of the transplant after the baboon heart was rejected by her body’s immune system.
• Xenotransplantation, if found compatible in the long run, could help provide an alternative supply of organs to those with life-threatening diseases.

Why the heart of a pig?

• Pig heart valves have been used for replacing damaged valves in humans for over 50 years now.
• There are several advantages to using the domesticated or farmed pig (Susscrofadomestica) as the donor animal for xenotransplantation.
• The pig’s anatomical and physiological parameters are similar to that of humans, and the breeding of pigs in farms is widespread and cost-effective.
• Also, many varieties of pig breeds are farmed, which provides an opportunity for the size of the harvested organs to be matched with the specific needs of the human recipient.

3. India’s coal import

Subject: Geography

Section: Economic geography

Context- India’s coal imports from Russia in March could be the highest in more than two years, data showed, as Indian buyers continue buying the fuel from a market that is now increasingly isolated by sanctions.

Concept-

• Russia, usually India’s sixth-largest supplier of coking and thermal coal, could start offering more competitive prices to Chinese and Indian buyers as European and other customers spurn Russia because of sanctions.

Coal:

• Coal is a combustible black sedimentary rock, formed as rock strata called coal seams.
• Coal is mostly carbon with variable amounts of other elements; chiefly hydrogen, sulfur, oxygen, and nitrogen.
• Coal supplies about a quarter of the world’s primary energy and two-fifths of its electricity.
• India has the fifth largest coal reserves in the world.
• India is the second largest producer of coal in the world, after China.

Import & Export of Coal in India:

• India does not have enough reserves of good quality coal especially coking coal that is used as a raw material in steel making and allied industries.
• Most of it is imported from Indonesia, South Africa, Russia and Australia.
• As per the present Import policy, coal can be freely imported (under Open General Licence) by the consumers themselves considering their needs based on their commercial prudence.
• Coking Coal is being imported by Steel Authority of India Limited (SAIL) and other Steel manufacturing units mainly to bridge the gap between the requirement and indigenous availability and to improve the quality.
• Coal based power plants, cement plants, captive power plants, sponge iron plants, industrial consumers and coal traders are importing non-coking coal.
• Coke is imported mainly by Pig-Iron manufacturers and Iron & Steel sector consumers using mini-blast furnace.

Distribution of coal imported into India in 2019, by country of origin:

• Indonesia – 49%
• Australia- 20%
• South Africa- 16%
• USA- 5%
• Russia- 3%
• Others- 8%

4. Biological and Chemical weapon

Subject: IR

Section: International Agreement

Context- Russia claimed that U.S. had Chemicals and bio-weapons labs in Ukraine.

Concept-

About Biological and Toxic Weapons Convention 1972:

• The Biological Weapons Convention (BWC), or Biological and Toxin Weapons Convention (BTWC), is a disarmament treaty that effectively bans biological and toxin weapons by prohibiting their development, production, acquisition, transfer, stockpiling and use.
• The treaty’s full name is the Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on their Destruction.
• This agreement was signed in 1972. It came into force in 1975.
• As of 2019, 109 countries have signed the treaty and 183 nations are party to this treaty. Tanzania was the most recent country to become a party to the treaty.
• It was the 1st multilateral disarmament treaty to ban the production of Biological Weapons.
• India ratified this treaty in 2015.

Bio Weapons:

• There are 3 types of agents used based on the ability and extent of damage that can be caused. They are:
  • Category A: High-priority agents. Example: Anthrax, Ebola virus.
  • Category B: Moderate-priority agents. Example: Brucellosis, Q fever
  • Category C: Low-priority agents. Example: Yellow fever virus, Hantavirus.
• Some of the deadliest biological weapons that have been used are:
  • Anthrax: Caused by bacteria named Bacillus Anthracis. It is one of the deadliest agents to be used as a biological weapon. It has been used with food, water, spray, powders. It is completely tasteless and odourless.
  • Botulinum Toxin: It is caused by naturally found bacteria named Clostridium Botulinum. It can be used by contaminating food and water. It was known to be used by Japan on Prisoners of War (POW) during the occupation of Manchuria.
  • Francisella Tularensis: As per a former Soviet Union scientist, this was used as a biological weapon against the Nazi Army of Germany by the Soviet Union Army in the Battle of Stalingrad of World War II.
  • Aflatoxin: Iraq had produced and deployed different weapons armed with Aflatoxin. It was noted by the United Nations Special Commission (UNSCOM) in 1995. However, it was destroyed during the Gulf War.

Chemical Weapons Convention:

• A Chemical Weapon is a chemical used to cause intentional death or harm through its toxic properties.
• CWC is a multilateral treaty banning chemical weapons and requiring their destruction within the stipulated time.
• Negotiations for the CWC began in 1980 at the United Nations Conference on Disarmament.
• The convention was drafted in September 1992 and opened for signature in January 1993. It became effective from April 1997.
• It makes it mandatory to destroy old and abandoned chemical weapons.
• Members should also declare the riot-control agents (sometimes referred to as ‘tear gas’) in possession of them.
• It has 192 state parties and 165 signatories.
• India signed the treaty in January 1993.
• Convention Prohibits:
  • The development, production, acquisition, stockpiling, or retention of chemical weapons.
  • Transferring of chemical weapons.
  • Using chemical weapons.
  • Assisting other States to indulge in activities that are prohibited by the CWC.
  • Using riot-control devices as ‘warfare methods’.

5. India fertilizer import

Subject: Geography

Section: Economic Geography

Context: Shortage of fertilizers

Concept:

India is the 3rd largest producer of fertilizer after China & the US.

India is the 2nd largest consumer of fertilizer after china.

India also ranks 2nd in the production of nitrogenous fertilizers and 3rd in phosphatic fertilizers. Potash requirement is met through imports since we have limited reserves of potash.

Although India progressed a lot with respect to the production and consumption of fertilizers, it still lags behind several countries in consumption per hectare.

Pakistan, China, and Bangladesh have more consumption per hectare of fertilizer than India.

The self sufficiency in urea production achieved by 2000 was lost due to unfriendly policies which discouraged further investments in the sector for two decades and also due to the privatisation move and closure of a number of plants on account of low energy efficiency which paved the way for large-scale imports.

India depends heavily on imports for meeting its fertilizer raw materials (natural gas, sulphur and rock phosphate), intermediates (ammonia and sulphuric and phosphoric acids), and finished products (diammonium phosphate, potash and complex fertilizers) requirements.

• India, the world’s largest urea importer, Urea imports amount to 8-9 million tonnes per annum mostly from China, Oman, Ukraine, and Egypt.
• On an average, five million tonnes of phosphatic fertilizers are imported to India mostly from China, Morocco, Saudi Arabia, Russia and Jordan
• Potash supplies (around four million tonnes a year) are fully imported from Canada, Russia, Belarus Jordan, Lithuania, Israel, and Germany
• major suppliers of DAP to India-Saudi Arabia, Morocco and China.

Currently, the fertilizer production of the country is 42-45 million tonnes, and imports are at around 18 million tonnes. India’s fertilizer consumption in FY20 was about 61 million tonnes — of which 55% was urea. Since non-urea (MoP, DAP, complex) varieties cost higher, many farmers prefer to use more urea than actually needed.

The government has taken a number of measures to reduce urea consumption. It introduced neem-coated urea to reduce illegal diversion of urea for non-agricultural uses. It also stepped up the promotion of organic and zero-budget farming.

Subsidy

• Subsidy on Urea: The Centre pays subsidy on urea to fertilizer manufacturers on the basis of cost of production at each plant and the units are required to sell the fertilizer at the government-set Maximum Retail Price (MRP).
• Subsidy on Non-Urea Fertilizers: The MRPs of non-urea fertilizers are decontrolled or fixed by the companies. The Centre, however, pays a flat per-tonne subsidy on these nutrients to ensure they are priced at “reasonable levels”. Examples of non-urea fertilizers: Di-Ammonium Phosphate (DAP), Muriate of Potash (MOP).

Russia produces 50 million tonnes of fertilizers annually accounting for 13 per cent of the world’s total output. Russia is the second largest producer of ammonia, urea, potash and the fifth-largest producer of complex phosphates. It is also the largest exporter of urea, NPKs, ammonia, UAN and ammonium nitrate, and the third-largest potash exporter.

6. UPI123Pay- RBI’s new payments service for feature phones

Subject: Science & Tech

Section: IT related

Context- The unified payments interface (UPI) service, which was limited to smartphones to date, will be now available for feature phones without internet, courtesy the Reserve Bank of India’s (RBI) UPI123Pay.

Concept-

How does one use UPI123Pay:

• UPI123Pay is a three-step method to initiate and execute services for users.
• The users will be able to undertake a host of transactions based on four technology alternatives including-
  • App-based Functionality: An app would be installed on the feature phone through which several UPI functions, available on smartphones, will also be available on feature phones.
  • Missed Call: This will allow feature phone users to access their bank account and perform routine transactions such as receiving, transferring funds, regular purchases, bill payments, etc., by giving a missed call on the number displayed at the merchant outlet. The customer will receive an incoming call to authenticate the transaction by entering UPI PIN.
  • Interactive Voice Response (IVR): UPI payment through pre-defined IVR numbers would require users to initiate a secured call from their feature phones to a predetermined number and complete UPI on-boarding formalities to be able to start making financial transactions without internet connection.
  • Proximity Sound-based Payments: This uses sound waves to enable contactless, offline, and proximity data communication on any device.
• The scan-and-pay function of UPI, available on smartphones, is not there on UPI123Pay.

How does it take the UPI programme forward:

• Even though UPI can alternatively be accessed through the National Unified USSD Platform using the code *99#, the process has not seen an uptick in adoption or popularity.
• However, with UPI123Pay, it would reach 40 crore feature phone users in the country, potentially making a material improvement in the way they access the popular payments platform.

What is Unified Payments Interface (UPI)?

• NPCI launched UPI with 21 member banks in 2016.
• It is an advanced version of Immediate Payment Service (IMPS)-round–the-clock funds transfer service to make cashless payments faster, easier and smoother.
• UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
• UPI is currently the biggest among the National Payments Corporation of India (NPCI) operated systems including National Automated Clearing House (NACH), Immediate Payment Service (IMPS), Aadhaar enabled Payment System (AePS), Bharat Bill Payment System (BBPS), RuPay etc.
• The top UPI apps today include PhonePe, Paytm, Google Pay, Amazon Pay and BHIM, the latter being the Government offering.

7. Gold- safe haven

Subject: Economy

Section: External sector

Context: Gold prices rising

Concept :

A safe haven is a type of investment that is expected to retain or increase in value during times of market turbulence. Investors seek out safe havens in order to limit their exposure to losses in the event of market downturns.

For years, gold has been considered a store of value.

• As a physical commodity, it cannot be printed like money-limited supply
• Its value is not impacted by interest rate decisions made by a government.
• Less volatile-Because gold has historically maintained its value over time, it serves as a form of insurance against adverse economic events.
• Also, when there is a threat of inflation, the value of gold increases since it is priced in U.S. dollars. However inflation is negatively correlated with stocks and bonds hence, serve as safe havens for investors.
• General acceptability among public

8. Aerosol Pollution

Subject: Environment

Section: Pollution

Context- Scientists say that accurately modelling the intensity of aerosol effects on climate change is vital to humanity’s future but aerosol complexity makes it difficult to model and understand. 

Concept-

• Aerosols are fine particulates that float in the atmosphere.
• While there has not been significant change in presence of natural aerosols, human-caused aerosols have increased rapidly.
• An immense aerosol cloud regularly swirls over India, China and Southeast Asia, fed by particles of ash, soot and organic carbon compounds.

About Aerosols:

• Aerosols are a mixed bag of substances, liquid and solid, that differ from their gassy brethren.
• They tend to hang in the atmosphere near their source, or move as localised or regional masses via air currents.
• They range in size from a few atoms across to the width of a human hair.
• They include:
  • crystals of sulphate,
  • balls of almost pure black carbon (commonly, though not entirely accurately, called soot),
  • droplets of nitric or sulfuric acid, spores of pollen.
• They may be salt freed from the crests of breaking waves, or desert sand whipped up by the wind.
• Natural Aerosols: One of the largest natural sources of aerosols are plankton, which breathe out dimethyl sulphide (DMS), a strong-smelling chemical that gives the sea it’s familiar pungent odour.
  • DMS reacts with oxygen to produce clouds of sulfuric acid.
  • Sulphur dioxide released by volcanoes does the same.
• Ninety percent of aerosols in the atmosphere are naturally occurring, but their levels have remained relatively constant over time.
• Anthropogenic Aerosols: On the other hand anthropogenic, or human-made aerosols are emitted from:
  • vehicle exhausts;
  • the smokestacks of factories,
  • ships and coal-burning powerplants;
  • by farmers burning field stubble and land grabbers clearing Amazon forest with fire;
  • by gas flares on oil rigs and discarded plastic shopping bags.
  • Even tumble driers release microplastic fibres that float skyward.
• These sources have increased dramatically over the industrial period, roughly in step with greenhouse gases.
• Most aerosols help cool the planet by reflecting sunlight back out into space, reducing the amount of radiant energy that reaches Earth’s surface.
• They also help create clouds or brighten existing clouds, by acting as condensation nuclei around which water vapor condenses.
• Aerosols first came to public attention in the 1970s, not so much because of their cooling impact, but due to acid rain.
• The worst aerosols are very fine particulates that can penetrate deep into the lungs and may even enter the blood stream exacerbating respiratory and cardiovascular conditions.

9. Oil Palm

Subject: Environment

Section: Biodiversity

Context- Expansion of oil palm in northeast India that encroaches on forest land to meet the goals of the Indian government under its National Mission on Edible Oils- Oil Palm (NMEO-OP) may lead to more negative encounters with elephants in northeast India, warn experts.

Concept-

• Goalpara is considered to be one of the worst affected districts for human-elephant conflict in Assam.
• Apart from being a hotspot for human-elephant conflicts, Goalpara is also a pioneer in oil palm cultivation in Assam.
• The first oil palm plantation in the state was set up in Khungkhrajani village, around 6 km from Dudhnoi town, back in 2015.
• Over the years, many monoculture plantations, including rubber, banana, tea, and areca nut, have sprung up in Goalpara.
• According to the recent India State of Forest Report (ISFR), 2021, Goalpara has only 22.18% of its geographical area under forest cover, which is one of the lowest in the state.
  • Also, only 13.73 square km of the district falls under the Very Dense Forest (tree canopy of 70% or more) category.
• The Assam government has plans to start oil palm cultivation in 17 districts, including heavily forested ones like KarbiAnglong and Dima Hasao.

*** For further information refer to DPN 19 August 2021.