Daily Prelims Notes 20 August 2024

Daily Prelims Notes

20 August 2024

Table Of Contents

1. RBI’s Directive on P2P Lending
2. India – Russia Trade
3. Chinese yaks stray onto Indian side, held by villagers in eastern Ladakh
4. How the Banni grasslands of Kachchh, Gujarat can be restored
5. When Vultures Die, We Die
6. A change in India’s power export rules
7. Mandyam Srinivasan of bee studies fame faces misconduct allegations
8. Scientists discover liquid water on Mars for the first time: What a new study says

1. RBI’s Directive on P2P Lending

Sub: Eco

Sec: Monetary policy

RBI’s Directive on P2P Lending:

• The Reserve Bank of India (RBI) has issued a warning to Non-Banking Financial Company – Peer-to-Peer (NBFC-P2P) lending platforms, stating they cannot promote P2P lending as an investment product with features like tenure-linked assured minimum returns and liquidity options.

Prohibition on Fund Utilization:

• NBFC-P2P platforms are not allowed to use a lender’s funds to replace the funds of other lender(s).

Regulatory Violations:

• Some platforms have been found violating the 2017 Master Directions issued by the RBI for NBFC-P2P lending platforms by:
  • Promoting P2P lending as an investment product.
  • Violating the prescribed funds transfer mechanism.
  • Acting as deposit takers or lenders, rather than just a platform.
• Pricing Policy Requirements:
  • The pricing policy for NBFC-P2P platforms must be objective. Fees must be disclosed upfront (ab initio) at the time of lending.
  • Fees should be a fixed amount or a fixed proportion of the principal amount and not dependent on the borrower’s repayment.
  • Matching or mapping participants within a closed user group, whether sourced through an outsourced agency or otherwise, is not allowed. Examples include borrowers or lenders sourced through an affiliate/service provider to the NBFC-P2P.
  • Lenders must bear the entire loss of principal or interest (or both) in respect of funds lent on the platform, and this must be disclosed to lenders as part of the fair practices code.
• Restrictions on Cross-Selling:
  • NBFC-P2P platforms can only cross-sell loan-specific insurance products. They cannot sell insurance products that provide credit enhancement or credit guarantee.
• Cap on Lender Exposure:
  • A lender’s aggregate exposure across all P2P platforms is capped at ₹50 lakh.
  • If a lender’s exposure exceeds ₹10 lakh, they must produce a certificate from a practicing Chartered Accountant certifying a minimum net worth of ₹50 lakh.
• Branding and Transparency:
  • NBFC-P2P lending platforms must clearly display their name (as per the Certificate of Registration) along with their brand name, if any, across all customer interfaces, promotional materials, and communications with stakeholders.

Peer-to-Peer (P2P) Lending

Peer-to-Peer (P2P) Lending is a form of financial technology (fintech) that allows individuals to lend and borrow money directly from one another without the involvement of traditional financial institutions like banks.

• In 2017, the Reserve Bank of India brought this service under its regulatory purview.
• Only an NBFC can register as a P2P lender with the permission of RBI.
• Every P2P lender should obtain a certificate of registration from the RBI.
• The minimum capital requirement to set up a P2P platform is fixed at Rs. 2 Crores.

How P2P Lending Works:

• Platform Role: P2P lending platforms operate as intermediaries, connecting borrowers with lenders. These platforms assess the creditworthiness of borrowers, set interest rates, and facilitate the loan transactions.
• Borrowers: Individuals or small businesses can apply for loans on these platforms. The loans can be used for various purposes such as personal loans, business loans, debt consolidation, or even real estate.
• Lenders: Individuals or institutional investors can lend money to borrowers in exchange for interest payments. Lenders can often choose specific borrowers or diversify their investments across multiple loans to reduce risk.

2. India – Russia Trade

Sub: Eco

Sec: External sector

• US Sensitization of Indian Companies:
  • The United States is sensitizing Indian companies about certain items that should not be exported to Russia, including chemicals, defense equipment, and aeronautical parts and components.
  • These items can potentially be used in missile systems and may aid Moscow in its war against Ukraine, which could lead to secondary sanctions from the West.
• Rising Exports Amidst Tensions:
  • The warning comes at a time when India’s exports of engineering goods and chemicals to Russia are on the rise.
  • The US has held consultations with Indian exporters to raise awareness about economic sanctions against Russia and the risks involved in exporting certain items.
• Impact of Ongoing War:
  • Russia’s war with Ukraine, which began in February 2022, has caused significant loss of lives, livelihoods, and property, as well as global turmoil.
  • In response, the US and its Western allies have been tightening sanctions against Moscow.
• Indian Companies Affected:
  • Some Indian companies have already been affected by these actions.
  • Si2 Microsystems, a Bengaluru-based company that designs and manufactures electronics equipment, was sanctioned by the US, followed by the EU and Japan, for allegedly aiding Russia militarily.
• Sanctions on Indian Individuals and Entities:
  • Recently, two Indian individuals and some entities operating from India were placed on the sanctions list of the US Treasury’s Office of Foreign Assets Control for collaborating with Russia.
• Potential Impact on Exports:
  • Washington’s increased scrutiny could act as a dampener on India’s growing exports to Russia, especially in the sectors of engineering goods and chemicals.
• India’s Rising Exports to Russia:
  • In the fiscal year 2023-24, India’s exports to Russia increased by 35.41%, reaching $4.26 billion.
  • Engineering goods shipments doubled to $1.22 billion, while chemical exports increased to over $500 million in the same period.

Overview of India-Russia trade focusing on imports and exports

Overview of India-Russia Trade:

• Bilateral Trade Volume: India and Russia’s trade relationship has seen significant growth, particularly after the Ukraine war began in February 2022. The bilateral trade volume reached USD 65.7 billion in the financial year 2023-24.
• Trade Imbalance: The trade relationship is marked by a significant imbalance, with India’s imports from Russia far outpacing its exports.

Top 3 Indian Exports to Russia:

• Pharmaceutical Products:
  • India exports a substantial amount of pharmaceutical products to Russia, including generic drugs, vaccines, and active pharmaceutical ingredients (APIs).
  • Trend: The demand for Indian pharmaceutical products has grown due to Russia’s need to secure reliable sources for essential medicines amid Western sanctions.
• Engineering Goods:
  • This category includes machinery, electrical equipment, and parts for vehicles and aircraft. These goods have been a significant part of India’s exports to Russia.
  • Trend: The export of engineering goods doubled in 2023-24 to USD 1.22 billion, driven by Russia’s increasing need for these products as it seeks alternatives to Western suppliers.
• Chemicals:
  • India exports a variety of chemicals to Russia, including organic and inorganic chemicals, dyes, and pigments.
  • Trend: Exports of chemicals to Russia have increased notably, reaching over USD 500 million in 2023-24. This growth is partly due to the sanctions on Russia, which have prompted it to seek new suppliers.

Top 3 Indian Imports from Russia:

• Crude Oil and Petroleum Products:
  • Crude oil is by far the largest import from Russia, accounting for 88% of India’s imports from Russia.
  • Trend: Imports of crude oil surged by about 8,300% from 2020-21 to 2023-24 due to favorable trade terms and Russia’s need to find new markets. This strategic procurement has led to a significant increase in India’s overall oil import bill.
• Fertilizers:
  • Russia is a major supplier of fertilizers to India, including urea, potash, and phosphates.
  • Trend: Fertilizer imports have been consistent, given India’s agricultural demands. The trade has grown due to Russia’s efforts to maintain its export levels despite sanctions.
• Coal:
  • India imports a considerable amount of thermal coal and coking coal from Russia, used in power generation and steel manufacturing.
  • Trend: Coal imports have been stable, with occasional spikes due to fluctuations in global coal prices and India’s energy needs.

Recent Trade Trends:

• Post-Ukraine War Dynamics: The ongoing conflict and Western sanctions have led to a significant shift in India-Russia trade. India has increased its imports from Russia, particularly crude oil, which has driven the trade deficit higher.
• Local Currency Trade: There are discussions around settling trade in local currencies to mitigate the impact of sanctions. However, challenges persist due to the limited international use of the Indian rupee and Russia’s reluctance to accumulate it beyond a certain limit.
• Strategic Partnerships: India and Russia have set a bilateral trade target of USD 100 billion by 2030, indicating a strong intent to deepen economic ties despite the current challenges.

3. Chinese yaks stray onto Indian side, held by villagers in eastern Ladakh

Sub: Env

Sec: Protected Area

Context:

• Around 40 Chinese yaks ventured into Indian territory in the Demchok area of eastern Ladakh and are now under the control of local villagers.

Disputed Areas and LAC Perceptions:

• Incidents of graziers straying across the LAC are common due to differing perceptions of the boundary.
• Demchok is one of the two mutually agreed disputed areas in eastern Ladakh, with varying claims in the Charding La area.
  • Demchok nomads lost access to the Lungkar Valley in 2022 and Nilung Valley in 2017, affecting their livelihood, as livestock is a crucial source of income.
• China set up tents on the Indian side of Charding Nala before the 2020 stand-off, expanding their presence as the situation escalated.
• Since 2020, both sides have disengaged from five friction points:Galwan, North and South Banks of Pangong Tso, and Patrolling Points 15 and 17A in the Gogra-Hot Springs area.
• However, talks have stalled over disengagement from Depsang Plains and Demchok, with China arguing that these issues predate the 2020 stand-off.

About Himalayan Yaks in India:

Source: TH

4. How the Banni grasslands of Kachchh, Gujarat can be restored

Sub: Env

Sec: Protected Area

Grasslands and Their Importance:

• Grasslands are among the largest ecosystems globally, found mainly in semiarid and arid regions, including savannahs and grassy shrublands.
• They support unique species, offer ecosystem services such as carbon storage and climate mitigation, and face degradation due to deforestation, overgrazing, agriculture, and urbanization.
• About 49% of grasslands worldwide are estimated to be degraded.

Grasslands in India:

• In India, grasslands cover approximately eight lakh sq. km, or 24% of the country’s land area.
• These grasslands are threatened by agricultural conversion, plantation projects, invasive species, and large development projects.
• There is a bias towards forest conservation, often at the expense of grasslands.

Banni Grasslands in Gujarat:

• Banni,one of India’s largest grasslands in Gujarat’s Kachchh district, once spanned 3,800 sq. km but has now reduced to 2,600 sq. km.
  • The Banni Grassland is a salt-tolerant ecosystem.
  • It is said to be Asia’s largest grassland.
  • The climate is arid and semi-arid, with extremely hot summers (temperatures above 45°C) and mild winters (12°C to 25°C), receiving 300-400 mm of annual rainfall mainly during the monsoon.
  • It is inhabited by pastoral communities like theMaldharis, who rely on livestock grazing (cattle, buffalo, and sheep) for their livelihood.
  • Agriculture is limited due to arid conditions, with some areas used for salt production.
  • Flora: Grasses such as Dichanthium, Sporobolus, and Cenchrus species, with salt-tolerant plants, shrubs, and trees like Acacia and the invasive Prosopis juliflora.
  • Fauna: Indian wolf, hyena, chinkara, Great Indian Bustard, flamingos, and various raptors, reptiles, and invertebrates.
• A study by KSKV Kachchh University assessed the restoration potential of different Banni areas based on ecological value.
• Findings of the Study:
  • The Banni grassland was divided into five zones for restoration:”highly suitable” (937 sq. km), “suitable” (728 sq. km), “moderately suitable” (714 sq. km), “marginally suitable” (182 sq. km), and “not suitable” (61 sq. km).
  • Zones categorized as “highly suitable” and “suitable” can be restored with adequate water sources.
  • Restoration in “marginally suitable” and “not suitable” zones can be aided by interventions like terracing and protection from erosion.
• Study Methodology and Impact:
  • The study used a holistic approach, analyzingsoil characteristics (nutrients, acidity, texture, etc.) and satellite data (land use, slope).
  • Soil samples were collected from 45 locations, with data obtained from the U.S. Sentinel 2 satellite and ASTER.
  • The findings could help create evidence-based policies for sustainable grassland management, enhancing biodiversity conservation and local livelihoods.

Importance of Grassland Conservation:

• The study’s findings support conservation efforts, particularly given the role of grasslands in carbon sequestration.
• Many bird species, like the great Indian bustard, rely on grasslands for breeding, but these habitats are shrinking due to human activities.
• There is a critical need for government action to conserve grasslands for future generations.

Source: TH

5. When Vultures Die, We Die

Sub: Env

Sec: Species in news

Context:

• From 2000-2005,India saw approximately 500,000 deaths and an annual economic loss of Rs 58,110 crore ($69.4 billion) due to the loss of vultures.
• The study “The Social Costs of Keystone Species Collapse” highlights the devastating effects of the functional extinction of vultures in India.

The Role of Vultures as a Keystone Species:

• Vultures are critical to the Indian ecosystem, serving as scavengers that prevent the spread of diseases by consuming carcasses.
• India once had 40 million vultures, but the introduction of diclofenac, a veterinary drug, led to their drastic decline, especially affecting four species now listed as “Critically Endangered.”
  • Nine of the world’s 23 species of vultures exist in India; five of them belong to the genus Gyps and the rest are monotypic (that is, a genus that contains only one species).

Consequences of Vulture Decline:

• The absence of vultures led to a significant increase in carcasses, resulting in the proliferation of dogs and rats, leading to more rabies cases and other diseases.
• India accounts for 36% of global rabies deaths, a rise linked to the vulture population’s collapse.
• The study found an annual increase of 104,386 deaths due to the decline of vultures in areas suitable for their habitats.
• The estimated economic damage due to increased mortality is $69.4 billion annually.

Challenges in Vulture Conservation:

• Despite a ban on diclofenac in 2006, enforcement is weak, and toxic Nonsteroidal anti-inflammatory drugs (NSAIDs) like nimesulide and flunixin are still in use.
• Vulture breeding programs exist but are challenged by the continued presence of toxic drugs and the introduction of new ones.

Steps Toward Vulture Conservation:

• SAVE (Saving Asia’s Vultures from Extinction): The consortium of like-minded, regional and international organizations, created to oversee and co-ordinate conservation, campaigning, and fundraising activities to help the plight of South Asia’s vultures.
• The Action Plan for Vulture Conservation in India (2020-2025) aims to eliminate diclofenac and monitor vulture sites, but the success depends on strict enforcement.
• Experts emphasize the need for pre-licensing drug testing to prevent future collapses of keystone species like vultures.

6. A change in India’s power export rules

Sub: Geo

Sec: Eco Geo

Context:

• Adani Power emphasised their commitment of supplying electricity to Bangladesh, stating that the recent amendment does not affect its existing contract.

Amendment:

• Recently, an amendment was introduced to India’s power export rules.
• It allows Indian power exporters to reroute their output to Indian grids if there is a delay in payments from partner countries.

About Godda project:

• The Godda plant is India’s first transnational power project that supplies all the power generated to another nation.
• The ultra super-critical thermal power plant in Godda supplies 1,496 MW of power to Bangladesh.
• This power transfer is facilitated under a Power Purchase Agreement (PPA) entered with the Bangladesh Power Development Board (BPDB) in 2017 for a period of 25 years.

Criticism about the project:

• The project has been criticised for the use of coal imported from the Carmichael mine in Australia into India to produce power for Bangladesh.
• This has led to excessive prices compared to domestic plants.

Why does Bangladesh need imports?

• The power plants in Bangladesh are underutilised.
• This situation was exacerbated by the global energy crisis following Russia-Ukraine war.

7. Mandyam Srinivasan of bee studies fame faces misconduct allegations

Sub: Sci

Sec: Msc

Context:

• Two scientists have flagged what they have called evidence of “problematic behaviour” in multiple scientific papers co-authored by Mandyam Srinivasan, an eminent scientist.
• The papers are concerned with the honeybee waggle dance, a mode of communication between bees that plays a crucial role in pollination.

About waggle dance:

• Bees use two kinds of dances to communicate information: the waggle dance and the circle dance.

Purpose:

• The purpose of either dance is to communicate to others the location of a flower patch with more nectar or pollen.
• One bee dances, while the others watch it to figure out the directions.

Pattern of motion:

• During a waggle dance, the bees move in a figure of eight formation.
• The waggle dance indicates both the distance and the direction to the patch.
• The straight line in the figure of eight formation is called the waggle run.
• In a circle dance, the bees move in a circle. It indicates only the distance to the hive.

8. Scientists discover liquid water on Mars for the first time: What a new study says

Sub: Sci

Sec: Space sector

Context:

• According to a new study, there could be oceans’ worth of liquid water deep in the rocky outer crust of Mars.
• While scientists have known about water ice at the Martian poles for a long time, this is the first time they have discovered liquid water on the planet.

About the study:

• The study, ‘Liquid water in the Martian mid-crust’, was published in the journal Proceedings of the National Academy of Sciences (PNAS).
• The researchers used the data from NASA’s Mars Insight Lander, which was equipped with a seismometer.
• The lander had recorded of seismic waves created by Marsquakes and meteorite impacts deep inside the planet for four years.
• The researchers examined the speed of these seismic waves and were able to determine what material they were most likely to be moving through.

Findings:

• The data are best explained if, deep below the surface of Mars, there lies a layer of fractured igneous rock, such as granite, whose cracks are filled with liquid water.
• That layer is located at depths of about 10 to 20 km in the Martian crust.
• The study suggests that the water could have seeped from the surface billions of years ago when Mars harboured rivers, lakes, and possibly oceans.

Implications:

• The findings could help researchers better understand the water cycle of Mars, the evolution of the planet’s climate, surface, and interior.
• Discovery of liquid water raises the possibility of finding a habitable environment.