Daily Prelims Notes 17 March 2022

March 17, 2022
Posted by: OptimizeIAS Team
Category: DPN

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Daily Prelims Notes

17 March 2022

Table Of Contents

1. Foreign Direct Investment

Subject: Economy

Section: External Sector

Context- 347 FDI proposals received from countries sharing land border with India; 66 approved.

Concept-

In April 2020, the government had made its prior approval mandatory for foreign investments from countries that share land border with India to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic.
Countries which share land border with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.
As per that decision, FDI proposals from these countries need government approval for investments in India in any sector.
The 66 approved proposals are from sectors including automobile (7), chemicals (5), computer software and hardware (3), pharma (4), education (1), electronics (8), food processing (2), information and broadcasting (1), machine tools (1), petroleum and natural gas (1), power (1), services sector (11).

FDI Policy in India:

Non-residents investing in India are required to comply with India’s Foreign Direct Investment Policy (FDI Policy) and other foreign investment and foreign exchange regulations, including the Foreign Exchange Management Act (FEMA).
The FDI Policy is issued and revised from time to time by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, Government of India (GOI).
Non-resident investors do not require any prior licensing or registration for foreign direct investment (FDI) in India.
India regulates FDI depending on the sector in which the investment is proposed to be made.
FDI is permitted in most sectors under two routes:
- the automatic route and
- the approval route.
Under the automatic route, the investment may be made without any approval from any government agency.
- Examples of sectors under the automatic route include, among others, infrastructure, healthcare, manufacturing and renewable energy
Under the approval route, prior government approval is required for FDI.
- Sectors under the approval route include, among others, multi-brand retail, broadcasting, banking, defense, mining, print media and biotechnology.
FDI is prohibited in a limited number of sectors such as manufacturing of tobacco, trading in transferrable development rights, real estate business (subject to limited exceptions), and gambling and betting, including casinos.

****For further reading refer to https://optimizeias.com/fdi-2/

2. Daylight Saving Time (DST)

Subject: Science and Tech

Section: Msc

Context- The United States Senate unanimously passed a law making daylight saving time (DST) permanent, scrapping the biannual practice of putting clocks forward and back coinciding with the arrival and departure of winter.

Concept-

With clocks in the US going back an hour, the time difference between New York and India will increase from the current nine and a half hours to ten and a half hours.
In the Southern Hemisphere, where countries have “sprung forward”, the time difference with India has reduced.

What is DST?

DST is the practice of resetting clocks ahead by an hour in spring, and behind by an hour in autumn (or fall).
During these months, countries that follow this system get an extra hour of daylight in the evening.
Because the spring to fall cycle is opposite in the Northern and Southern Hemispheres, DST lasts from March to October/November in Europe and the US, and from September/October to April in New Zealand and Australia.
By law, the 28 member states of the EU switch together — moving forward on the last Sunday of March and falling back on the last Sunday in October.
In the US, clocks go back on the first Sunday of November.

How many countries use DST?

DST is in practice in some 70 countries, including those in the European Union.
India does not follow DST; since countries near the Equator do not experience high variations in daytime hours between seasons.
- There is, however, a separate debate around the logic of only one-time zone in a country as large as India.

What does DST means to achieve?

The key argument is that DST is meant to save energy.
The rationale behind setting clocks ahead of standard time, usually by 1 hour during springtime, is to ensure that the clocks show a later sunrise and later sunset — in effect a longer evening daytime.
Individuals will wake an hour earlier than usual, complete their daily work routines an hour earlier, and have an extra hour of daylight at the end.
However, DST clock shifts sometimes complicate timekeeping and can disrupt travel, billing, record keeping, medical devices, and sleep patterns.

3. Circular Economy

Subject: Environment

Section: Sustainable Development

Context- In the Budget speech this year, the Finance Minister, Nirmala Sitharaman, emphasised the role of cleaner technologies such as solar energy and batteries in India’s future economic growth. In addition, she mentioned the importance of transitioning to a circular economy from the existing linear one.

Concept-

According to the International Renewable Energy Agency (IRENA) — the cumulative waste generated by India’s total installed solar capacity could be as high as 325 kilo-tonnes by 2030.
A study by the Council on Energy, Environment and Water (CEEW) has estimated that India would need over 5,630 GW of solar and 1,792 GW of wind energy to achieve its net-zero target in the year 2070.

Six steps to nurture a circular economy in the Indian renewable energy industry:

First, policymakers should revise existing electronic waste management rules to bring various clean energy components under their ambit.
- These rules are based on extended producer responsibility that identiﬁes component producers as responsible entities to manage their waste products.
Second, dumping and burning of diﬀerent components should be banned.
- Currently, in the absence of any regulation, landﬁlling is the cheapest and most common practice to manage renewable energy waste. However, it is not environmentally sustainable.
Third, the renewable energy industry should invest in the research and development of recycling technologies.
- Recycling is a multistep process that includes dismantling, disassembly, and extraction.
Fourth, there has to be a creation of innovative ﬁnancing routes for waste management.
- The central government should nudge public and private sector banks to charge lower interest rates on loans disbursed for set- ting up renewable energy waste recycling facilities.
Fifth, there needs to be an improvement in product design and quality.
- Renewable energy component manufacturers should ﬁnd substitutes for toxic metals such as cadmium and lead used in their products and simplify product designs to reduce recycling steps.
Six, the Union and State governments should set stringent quality control standards for components used in their tenders. This will prevent premature end-of-life of components, and consequent waste creation.

What is circular economy?

Aluminium as circular economy

4. Coal Reserves In India

Subject: Geography

Section: Economic geography

Concept-

Coal Reserves in India:

India holds 107,727 million tons (MMst) of proven coal reserves as of 2016, ranking 5th in the world and accounting for about 9% of the world’s total coal reserves of 1,139,471 million tons (MMst).
India has proven reserves equivalent to 111.5 times its annual consumption.
- This means it has about 111 years of Coal left (at current consumption levels and excluding unproven reserves).

Coal Production & Consumption in India:

India is the second largest producer and consumer of coal after China, mining 716 million metric tons in 2018.
Coal supplies over 40% of energy in India.
Around 30% of coal is imported.

Deucha-Pachami Mines:

Deucha-Pachami-Dewanganj-Harinsinga coal block is the second-largest coal block in the world; it is the largest in India.
It is located in Deucha and Panchamati area under Mohamad bazar community Development Block of Birbhum district, West Bengal.
This coal mine or block belongs to Birbhum coalfield area.
This coal mine is the largest coal mine or coal block in Asia, due to the amount of coal reserves. It is the newest coal mine in West Bengal.
The block has a thick coal seam trapped between equally thick layers of rocks, mostly basalt. It has a great economic value.
The existence of these thick basalt layers, however, makes mining of coal difficult; foreign investment and technology will be hence needed for mining.

Read further

What is coal?

Import of coal

5. Blue Hydrogen Not Really Green

Subject: Environment

Section: Sustainable development

Context- Reliance Industries on February 12 announced an intent to become “the world’s top blue hydrogen producer” by repurposing a Rs 30,000 crore synthetic gas plant to manufacture the fuel. Globally, there is an increased interest in blue hydrogen.

Concept-

Hydrogen Fuel:

Hydrogen is a nontoxic, nonmetallic, odorless, tasteless, colorless, and highly combustible diatomic gas.
Hydrogen fuel is a zero-emission fuel burned with oxygen.
It can be used in fuel cells or internal combustion engines. It is also used as a fuel for spacecraft propulsion.
But hydrogen does not exist on its own. It is mostly present in water in the oceans and needs to be extracted to be used as a fuel.
Most commonly, this is done by electrolysis wherein current is passed through water to split hydrogen and oxygen.

Types of Hydrogen:

Grey Hydrogen: Constitutes India’s bulk Production.
- Extracted from hydrocarbons (fossil fuels, natural gas).
- By product: CO2
Blue Hydrogen: Sourced from fossil fuels.
- By product: CO, CO2
- By products are Captured and Stored, so better than gey hydrogen.
- However it is not considered to be clean since extraction of natural gas invariably results in atmospheric leakage of methane, a gas with 25 times the warming potential of carbon dioxide.
Green Hydrogen: Generated from renewable energy (like Solar, Wind).
- Electricity splits water into hydrogen and oxygen.
- By Products : Water, Water Vapor
Electric current from fossil fuel gets yellow hydrogen and from nuclear power gets pink hydrogen.

National Hydrogen Energy Mission

6. Nuclear Batteries

Subject: Science & Tech

Section: Nuclear energy

Context- From fuel to outer space power plants, the world is developing different usages of nuclear energy to explore the deep space.

Concept-

About Nuclear Batteries:

A radioisotope thermoelectric generator (RTG, RITEG) is a type of nuclear battery that uses an array of thermocouples to convert the heat released by the decay of a suitable radioactive material into electricity by the Seebeck effect.
This type of generator has no moving parts.
RTGs have been used as power sources in satellites, space probes, and uncrewed remote facilities such as a series of lighthouses built by the Soviet Union inside the Arctic Circle.
RTGs are usually the most desirable power source for unmaintained situations that need a few hundred watts (or less) of power for durations too long for fuel cells, batteries, or generators to provide economically, and in places where solar cells are not practical.
In 2021, NASA invited proposals from industries to design nuclear power systems for lunar applications.
- By 2030, the space agency plans to set up a plant that will continuously provide 10 kilowatts (kW) of power—the average annual power intake of a home on Earth.
Now China is hoping to do one better.
In 2021, Indian Space Research Organization (ISRO) took its first step by inviting companies to develop a 100-watt RTG.
- India till now relied only on solar power for its outer space missions.

Nuclear Fuel as Rocket propellants:

Countries are also trying to develop spaceships that will use nuclear energy as fuel.
In the meantime, kerosene, alcohol, hydrazine and its derivatives, and liquid hydrogen grew popular as rocket fuel or propellants.
Nuclear propellants are twice as efficient as their chemical counterparts.
Their energy density, or the amount of energy they can produce, is 4 million times higher than hydrazine, the most commonly used chemical fuel for outer space missions.
They are also faster: a round-trip mission to Mars could take more than three years through conventional means. Nuclear propellants might be able to accomplish this in about two years.

7. De-dollarization

Subject: Economy

Section: External Sector

Concept:

De-dollarization is a process of substituting the US dollar as the currency used for:

Trading oil and/ or other commodities

Buying US dollars for the forex reserves
Bilateral trade agreements
Dollar-denominated assets

It happens when the leading central banks diversify their reserves away from the USD to other assets or currencies like the Euro, Renminbi or gold.

The USD (United States Dollar) has been the world’s dominant currency since the conclusion of the second world war. Dollar has also been the most sought reserve currency for decades, which means it is held by central banks across the globe in significant quantities. Dollar is also primarily used in cross-border transactions by nations and businesses.

This unique position not only makes the US the leader in the financial and monetary system, but also provides incomparable leverage when it comes to coercive ability to shape decisions taken by governments, businesses, and institutions.

Causes of this shift:

The USD as a sanctions weapon-The US has for long used imposition of sanctions as a tool to achieve foreign policy and goals, which entails restricting access to US-led services in payment and financial transaction processing domain
The emergence of China,
Slowdown in the US economy,
European Union’s independent policy assertion,
Russia-US detachment, and us-china trade war
increasing voices from across the world to create a polycentric world and financial system in which hegemonic capacities can be muted.
The rise of digital or cryptocurrencies at an increasing pace.

Examples

Dedollarization emerged as a priority for Russia in 2014 in response to the imposition of Western sanctions following the annexation of Crimea that limited the ability of state firms and banks to raise financing in Western markets.
Between 2013 and 2020, the Russian central bank halved its dollar-denominated reserves. In 2021, it revealed plans to completely ditch all dollar assets from its sovereign wealth fund and increase holdings in euros, yuan, and gold instead, thus acquiring a quarter of the world’s yuan reserves.
China also began seeing value in this initiative after the onset of the US-China trade war in 2018 and the use of punitive financial measures by the US.
EU members had switched to INSTEX (Instrument in Support of Trade Exchanges) which acts as a special-purpose vehicle to facilitate non-USD trade with Iran to avoid US sanctions
The EU remains the largest investor as well the biggest trade partner for Russia, with trade taking place in euros, instead of dollars.
Further, in recent years, Russia has also switched to settlements in national currencies with India (for arms contracts) and the two traditionally strong defence partners are aiming at exploring technology as means for payment in national currencies.

Impact

Reduce trade volatility and risk-The “de-dollarisation” by several central banks is imminent, driven by the desire to insulate them from geopolitical risks, where the status of the US dollar as a reserve currency can be used as an offensive weapon.
As an alternative to economic sanctions.
Reduce demand of USD thus, relative depreciation of USD and imported inflation in the USA.
Push to globalisation
Reduce3 spillover effect of economic crisis in one country to global economy

Challenges

Finding alternatives to the dollar-currency with the right amount of availability, acceptability and stability.
Given the psychological bias, the world will continue to prefer the USD as a “store of value” and a “medium of exchange”, fulfilling the basic functions of money.
Sudden dumping of dollar assets by adversarial central banks will also pose balance sheet risks to them as it will erode the value of their overall dollar-denominated holdings.
No full proof from sanctions – increasing reliance on the euro and thus greater exposure to EU sanctions;
Finding true exchange rate-US dollar being the link currency for determining the exchange value of any two currencies
A new international payments system that could operate as an alternative to the US-dominated SWIFT, as international trade needs a payment and financial system to take place
Dollar’s continued primacy as the medium of exchange in international currency markets, selling euros in exchange for rubles is likely to be difficult without going through the dollar, as Iran learned a few years ago.
Increase economic autonomy

De Dollarization and India:-India, currently among the most dollarized countries (in invoicing) and hence relatively difficult to switch to other modes given the economic and political relation with the USA. However,

While others accumulate dollars from their earnings of trade surplus, India maintains a large forex reserve even though India imports less than it exports. In India’s case, the dollar reserves come through infusion of Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI), which reflects the confidence of foreign investors in India’s growth prospects. Thus, India is less impacted by economic sanctions of the USA.
Just like Chinese renminbi, Indian rupee is also not yet fully convertible at the exchange markets. While this means that India can control its burden of foreign debt, and inflow of capital for investment purposes in its economy

India remains vulnerable to policy changes by other nations’ monetary policies which are beyond India’s own control. For instance, it has been often highlighted that a tightening of the US monetary policy leads to capital outflows (capital flight) from India, thus impacting India adversely.

Alternatives: Instead of switching dependence from the USD to any other currency like euro, yuan or backing currency to the ‘old gold’ will not solve the problem but repeat the crisis the global economy went through pre-Bretton Woods times.

Currency swap agreements
A central bank digital currency (CBDC) that bypasses the dollar-China submitted a “Global Sovereign Digital Currency Governance” proposal at the Bank for International Settlements to influence global financial rules via its digital currency, the e-Yuan.
A global currency or an arrangement like the IMF’s SDR
Introduction of a new Russia-China payment system, bypassing SWIFT and combining the Russian SPFS (System for Transfer of Financial Messages) with the Chinese CIPS (Cross-Border Interbank Payment System).
National electronic payments system-like Russia’s Mir or India’s UPI

8. UNSC Vote

Subject: IR

Section: International Organisation

Context: Recent voting by India on Ukraine issue

Concept:

UN Security Council Voting System:

The voting system in the UNSC is rigid. Every vote counts as the resolutions adopted by the UNSC are mandatory for all members of the UN.
Chapter VII of UN charter ‘Actions with respect to the Peace, Breaches of the Peace and Acts of Aggression’ and resolutions made under it are more significant as it involves war (in the case of Iraq).

Article 27 of the UN Charter states that:

Each member of the Security Council shall have one vote.
Decisions of the Security Council on procedural matters shall be made by an affirmative vote of nine members.
Decisions of the Security Council on all other matters shall be made by an affirmative vote of nine members including the concurring votes of the permanent members; provided that, in decisions under Chapter VI, and under paragraph 3 of Article 52, a party to a dispute shall abstain from voting.

Right to Veto

The creators of the United Nations Charter conceived that five countries — China, France, the Union of Soviet Socialist Republics (USSR) [which was succeeded in 1990 by the Russian Federation], the United Kingdom and the United States —, because of their key roles in the establishment of the United Nations, would continue to play important roles in the maintenance of international peace and security.
They were granted the special status of Permanent Member States at the Security Council, along with a special voting power known as the “right to veto”. It was agreed by the drafters that if any one of the five permanent members cast a negative vote in the 15-member Security Council, the resolution or decision would not be approved.
All five permanent members have exercised the right of veto at one time or another. If a permanent member does not fully agree with a proposed resolution but does not wish to cast a veto, it may choose to abstain, thus allowing the resolution to be adopted if it obtains the required number of nine favourable votes.
In decisions under Chapter VI (Pacific settlement of disputes), a party to a dispute shall abstain from voting. It means abstention by a permanent member would amount to veto.
Now, it is agreed that if a permanent member does not fully agree with a proposed resolution, but does not wish to cast a veto, it may choose to abstain. Thus, resolution will be adopted if it obtains the required number of nine favorable votes.
An additional provision is the explanation of vote before and after the vote. The former acts as ‘canvassing for votes of others’ and the latter amounts to ‘taking with the left hand what has been given with the right’ – E.g., India’s abstention on Russia’s invasion.

To know more about UNSC, refer: https://optimizeias.com/unsc-resolutions-2/

9. Patent Rights On Covid-19 Jabs

Subject: Science and tech

Section: Intellectual Property Rights

Context: According to a proposal by the EU, Intellectual Property Rights (IPR) held by international pharmaceutical companies on Covid-19 vaccines may be relaxed for up to five years.

Background: A two-year-old dispute at the WTO involve India, the US, South Africa and the EU. India and South Africa’s proposal suggested a waiver for all WTO members on the implementation of certain provisions of the TRIPS Agreement in relation to the prevention, containment or treatment of COVID-19.

Concept:

EU’s waiver proposal will be applicable only to jabs and not to drugs and diagnostic devices.
This waiver will allow Pharma companies in developing countries not only to make but also further down export vaccines without explicit permission from the patent holders.
A clause in the current text said that these “waivers” would apply to developing countries that have not exported more than 10% of the Covid-19 vaccines in 2021.
As many developing countries including India, already have a system of Compulsory licensing, it is unclear to what extent this proposal will benefit Indian manufacturers who have entered into licensing arrangements with global pharma companies and also developed indigenous vaccines.

To know about WTO and TRIPS, refer: https://optimizeias.com/wto-trips-2/

To know about compulsory licensing, refer: https://optimizeias.com/compulsory-licensing/