Daily Prelims Notes 19 April 2022

April 19, 2022
Posted by: OptimizeIAS Team
Category: DPN

Daily Prelims Notes

19 April 2022

Table Of Contents

Subject: Science & Tech

Context- PM Modi, along with World Health Organization (WHO) Director-General Dr Tedros Ghebreyesus, will perform the groundbreaking ceremony for the first-of-its-kind WHO Global Centre for Traditional Medicine (GCTM) in Jamnagar, Gujarat.

Concept-

What will the GCTM be about?

The WHO GCTM is to be established under the Ministry of AYUSH (Ayurveda, Yoga, Naturopathy, Unani, Siddha, Sowa-Rigpa and Homoeopathy).
The WHO GCTM will be the first global centre for traditional medicine.
The GCTM will aim to focus on evidence-based research, innovation, and data analysis to optimise the contribution of traditional medicine to global health.
Its main focus will to develop norms, standards and guidelines in technical areas relating to traditional medicine.
It will seek to set policies and standards on traditional medicine products and help countries create a comprehensive, safe, and high-quality health system.
The GCTM will support efforts to implement the WHO’s Traditional Medicine Strategy (2014-23).
It will serve as the hub, and focus on building a “solid evidence base” for policies and “help countries integrate it as appropriate into their health systems”.

What is Traditional Medicine?

The WHO describes traditional medicine as the total sum of the “knowledge, skills and practices indigenous and different cultures have used over time to maintain health and prevent, diagnose and treat physical and mental illness”.
Its reach encompasses ancient practices such as acupuncture, ayurvedic medicine and herbal mixtures as well as modern medicines.
According to WHO estimates, 80% of the world’s population uses traditional medicine.

Traditional medicine in India:

It is often defined as including practices and therapies — such as Yoga, Ayurveda, Siddha — that have been part of Indian tradition historically, as well as others — such as homeopathy — that became part of Indian tradition over the years.
Ayurveda and yoga are practised widely across the country.
The Siddha system is followed predominantly in Tamil Nadu and Kerala.
The Sowa-Rigpa System is practised mainly in Leh-Ladakh and Himalayan regions such as Sikkim, Arunachal Pradesh, Darjeeling, Lahaul&Spiti.

2. Guru Tegh Bahadur

Subject: Art & Culture

Context- The government will celebrate the 400th birth anniversary of Guru Tegh Bahadur with a two-day event at the Red Fort.

Concept-

About Guru Tegh Bahadur (1621–1675):

guru tegh bahadur

Guru Tegh Bahadur was the ninth of ten Gurus of the Sikh religion.
He was born at Amritsar in 1621 and was the youngest son of Guru Hargobind.
His term as Guru ran from 1665 to 1675.
His 115 hymns are included in Sri Guru Granth Sahib, the main text of Sikhism.
He was originally named Tyag Mal but was later renamed Tegh Bahadur after his gallantry and bravery in the wars against the Mughal forces.
He built the city of Anandpur Sahib.
Guru Tegh Bahadur was executed on the orders of Aurangzeb, the sixth Mughal emperor, in Delhi.
Sikh holy premises Gurudwara Sis Ganj Sahib and Gurdwara Rakab Ganj Sahib in Delhi mark the places of execution and cremation of Guru Tegh Bahadur respectively.
He is fondly remembered as ‘Hind di Chadar’.

3. East Timor

Subject: Geography

Context- East Timor, also known as Timor Leste, holds the second and final round of its presidential election on Tuesday, with frontrunner and Nobel laureate Jose Ramos-Horta running against incumbent leader Francisco “Lu Olo” Guterres.

Concept-

History:

The territory was colonised by Portugal in the 18th century and remained under is control until 1975.
When the Portuguese withdrew, troops from Indonesia invaded and annexed East Timor as its 27th province.
The East Timorese voted for independence in a 1999 UN-supervised referendum, but that unleashed even more violence until peace-keeping forces were allowed to enter.
The country was officially recognised by the United Nations in 2002.
East Timor has applied to be a member of the Association of Southeast Asian Nations (ASEAN). It currently holds observer status.

Geography:

East Timor comprises the eastern half of Timor island, the western half of which is part of Indonesia.
It spans a 15,000 square km (5,792 square mile) land area – slightly smaller than Israel – and it’s 1.3 million people are predominantly Roman Catholic.
Located in between Southeast Asia and Oceania, the island of Timor is part of Maritime Southeast Asia, and is the largest and easternmost of the Lesser Sunda Islands.
To the north of the island are the Ombai Strait, Wetar Strait, and the greater Banda Sea.
The Timor Sea separates the island from Australia to the south.

4. GST Rates Rationalisation

Subject: Economy

Context- The Group of Ministers (GoM) will deliberate and finalise recommendations which will be sent to the GST Council, headed by Finance Minister Nirmala Sitharaman and comprising state finance ministers.

Concept-

There was a thought in some quarters that the slab of 5 per cent may be broken into 3 per cent and 8 per cent, and the remaining slabs of 12, 18 and 28 per cent will continue.

GST Council:

It is a constitutional body under Article 279A.
It makes recommendations to the Union and State Government on issues related to Goods and Service Tax and was introduced by the Constitution (One Hundred and First Amendment) Act, 2016.
The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of all the States.
It is considered as a federal body where both the centre and the states get due representation.
Every decision of the Goods and Services Tax Council shall be taken at a meeting by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely:
- the vote of the Central Government shall have a weightage of one third of the total votes cast, and
- the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.

5. Resilience and Sustainability Trust

Subject: Economy

Section :External sector

The Executive Board of the International Monetary Fund (IMF) approved the establishment of the Resilience and Sustainability Trust (RST) to help countries build resilience to external shocks and ensure sustainable growth, contributing to their long-term balance of payments stability.

Resilience and Sustainability Trust:

On April 13, 2022, the Executive Board of the International Monetary Fund (IMF) approved the establishment of the Resilience and Sustainability Trust (RST) with effect from May 1, 2022.

The RST will complement the IMF’s existing lending toolkit by focusing on longer-term structural challenges— including climate change and pandemic preparedness—that entail significant macroeconomic risks and where policy solutions have a strong global public good nature .

It will channel Special Drawing Rights (SDRs) contributed by countries with strong external positions to countries where the needs are the greatest, providing policy support and affordable longer-term financing to strengthen members’ resilience and sustainability and thereby contributing to prospective balance of payments stability.

The RST will be a loan-based trust, with resources mobilized on a voluntary basis. About three quarters of the IMF’s membership will be eligible for longer-term affordable financing from the RST, including all low-income countries, all developing and vulnerable small states, and lower middle-income countries.

Access will be based on the countries’ reforms, strength and debt sustainability considerations and capped at the lower of 150 percent of quota or SDR 1 billion. The loans will have a 20-year maturity and a 10½-year grace period, with borrowers paying an interest rate with a modest margin over the three-month SDR rate, with the most concessional financing terms provided to the poorest countries.

The RST will stand ready to commence lending operations once a critical mass of resources from a broad base of contributors is achieved and once sufficiently robust financial systems and processes are in place, which is anticipated to occur by the end of the year. Fundraising toward the estimated total resource needs of about SDR 33 billion (equivalent to US$45 billion) will be initiated immediately.

6. External Benchmark Lending Rate

Subject: Economy

Section :Monetary Policy

The Reserve Bank of India’s (RBI) endeavor to improve monetary transmission to banks’ lending rates has gained traction with the advent of EBLR regime

Transmission of Monetary Policy:

The transmission of monetary policy describes how changes made by the Reserve Bank to its monetary policy settings flow through to economic activity and inflation. This process is complex and there is a large degree of uncertainty about the timing and size of the impact on the economy. In simple terms, the transmission can be summarized in two stages.

Changes to monetary policy affect interest rates in the economy.
Changes to interest rates affect economic activity and inflation.

RBI measures to strengthen monetary policy transmission:

Internal Benchmark Lending Rate (IBLR): The Internal Benchmark Lending Rates are a set of reference lending rates which are calculated after considering factors like the bank’s current financial overview, deposits and non performing assets (NPAs) etc. BPLR, Base rate, MCLR are the examples of Internal Benchmark Lending Rate.
- Benchmark Prime Lending Rate (BPLR)-BPLR was used as a benchmark rate by banks for lending till June 2010.Under it, bank loans were priced on the actual cost of funds. However, the BPLR was subverted, resulting in an opaque system. The bulk of wholesale credit (loans to corporate customers) was contracted at sub-BPL rates and it comprised nearly 70% of all bank credit. Under this system, banks were subsidising corporate loans by charging high interest rates from retail and small and medium enterprise customers.
- Base Rate:-Loans taken between June 2010 and April 2016 from banks were on base rate. During the period, base rate was the minimum interest rate at which commercial banks could lend to customers. Base rate is calculated on three parameters — the cost of funds, unallocated cost of resources and return on net worth. Hence, the rate depended on individual banks and they changed it whenever their cost of funds and other parameters changed.
- Marginal Cost of Lending Rate (MCLR): It came into effect in April 2016. It is a benchmark lending rate for floating-rate loans. This is the minimum interest rate at which commercial banks can lend. This rate is based on four components—the marginal cost of funds, negative carry on account of cash reserve ratio, operating costs and tenor premium. MCLR is linked to the actual deposit rates. Hence, when deposit rates rise, it indicates the banks are likely to hike MCLR and lending rates are set to go up.

Issues Related to IBLR Linked Loans:

The problem with the IBLR regime was that when RBI cut the repo and reverse repo rates, banks did not pass the full benefits to borrowers.
In the IBLR Linked Loans, the interest rate has many variables including bank’s spread, their current financial overview, deposits and non performing assets (NPAs) etc.
Due to this, such internal benchmarks did little to facilitate any swift change in interest rates as per changes in RBI repo rate policy.
The opacity in interest rate setting processes under the internal benchmark regime hinders transmission to lending rates.
External Benchmark Lending Rate-To ensure complete transparency and standardization, RBI mandated the banks to adopt a uniform external benchmark within a loan category, effective 1st October, 2019. Unlike MCLR which was internal system for each bank, RBI has offered banks the options to choose from 4 external benchmarking mechanisms:
- The RBI repo rate
- The 91-day T-bill yield
- The 182-day T-bill yield
- Anny other benchmark market interest rate as developed by the Financial Benchmarks India Pvt. Ltd.

Benefits:

Banks are free to decide the spread over the external benchmark. However, the interest rate must be reset as per the external benchmark at least once every three months.
Being an external system, this means any policy rate cut decision will reach borrowers faster.
The adoption of external benchmarking will make the interest rates transparent.
The borrower will also know the spread or profit margin for each bank over the fixed interest rate making loan comparisons easier and more transparent.

7. Cost-Push Inflation

Subject: Economy

Section :Inflation

It is “supply-side, cost-push” factors which affect the prices of most of the items constituting the CPI.

The clear worry is that the recent Monetary Policy Committee move could potentially raise costs for all borrowers and lead to further price increases.

Cost-Push Inflation:

Cost push inflation is inflation caused by an increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods. While the demand remains constant, the prices of commodities increase causing a rise in the overall price level.

Apart from rise in prices of inputs, there could be other factors leading to supply side inflation such as :

Natural disasters or depletion of natural resources,
Monopoly-single seller selling limited goods at comparatively higher price.
Government regulation or taxation- especially indirect tax that raises price of of commodity
Change in exchange rates-currency devaluation or depreciation making imports expensive
Imported inflation-rise in price of imported goods

Generally, cost push inflation may occur in case of an inelastic demand curve where the demand cannot be easily adjusted according to rising prices.

Cost-Push vs. Demand-Pull Inflation:

Cost-push is one of the two causes of inflation. The other is demand-pull inflation. Demand-pull inflation is the primary cause of inflation. It occurs when the aggregate demand for a good or service outstrips aggregate supply, and it starts with an increase in consumer demand. Sellers try to meet the higher demand with more supply. If they can’t, then they raise their prices.