Daily Prelims Notes 20 December 2023

December 20, 2023
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Category: DPN

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Daily Prelims Notes

20 December 2023

Table Of Contents

1. US announces 10-nation force to counter Houthi attacks in Red Sea

Subject : IR

Section: Places in news

Context:

More about the news:

The U.S. and several other nations have initiated a new force, Operation Prosperity Guardian, to protect ships in the Red Sea that are under attack by drones and ballistic missiles from Houthi-controlled areas of Yemen.
The attacks have led to shipping companies ordering their vessels to hold in place.
The new multinational security initiative aims to provide collective action against the attacks.
Operation Prosperity Guardian will not necessarily escort specific vessels but will offer umbrella protection to as many ships as possible in the southern Red Sea.
The U.K, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles, and Spain have joined the maritime security mission.
China, despite having warships in the region, is notably absent.
The new initiative will be coordinated by the existing Combined Task Force 153, established in April 2022 to enhance maritime security in the region.
The U.S. has also called on the United Nations Security Council to take action against the Houthi attacks on commercial vessels.

What is Combined Task Force 153:

Combined Task Force 153 (CTF 153) is a task force that focuses on maritime security and capacity building in the Red Sea, Bab al-Mandeb, and Gulf of Aden.
It was established on April 17, 2022, and is one of five task forces operated by the Combined Maritime Forces (CMF)

What is Combined Maritime Forces (CMF):

Who are the Houthis:

The Houthis are a large Zaidi Shia clan that began a movement against the dictatorship of Ali Abdullah Saleh in the 1990s.
Today, they are a faction in the bloody civil war that has raged in Yemen since 2014.
The Houthis are backed by Iran and control territory in the west and northwest of Yemen, including the capital Sana’a.
They are fighting against the Sunni-led internationally recognised Yemeni government, backed by Saudi Arabia and the UAE.

2. Host’s last minute withdrawal leaves historic Science Congress in the lurch

Subject :Science and Tech

Section: Msc

Context:

A month after announcing that it would host the 109th edition of the Indian Science Congress, the Jalandhar based Lovely Professional University (LPU) has backed out.

What is the India Science Congress?

With a history dating back to 1914, the Science Congress is a one-of-its-kind event in the country.
It brings together scientists and researchers not just from the premier institutions and laboratories but also science teachers and professors from colleges and universities.
It offers a platform for their interaction with students and the general public on matters related to science.
It is a celebration of Indian science that has had an illustrious past, with the who’s who of Indian science participating and organizing.
The first session of the Indian Science Congress was held in 1914.

Organiser:

It is organized by Indian Science Congress Association (ISCA).
ISCA is an independent body functioning with the support of the Department of Science and Technology (DST) in the central government.

Decline of Science Congress:

In more recent times, the event has attracted attention for all the wrong reasons:
Lack of serious discussion, the promotion of pseudoscience, outlandish claims by random speakers, and the absence of useful outcomes.
As a result, several top scientists have advocated the discontinuation of the event, or at least withdrawal of government support.
For organising the Science Congress, the government provides an annual grant.
Besides this, the government has no role to play in organising the ISC.

3. Tax ‘HFSS’ foods, view it as a public health imperative

Subject :Science and Tech

Section: Health

India’s Dietary Shift:

India, a major producer and consumer of sugar, has seen a sharp rise in high-fat sugar-salt (HFSS) food consumption.
The processed food industry consumes 50%-60% of produced sugar, salt, and fat. Sales of snacks and soft drinks exceeded $30 billion, indicating concerning dietary trends impacting health and the economy.

Global Health Risks:

Consumption of HFSS foods is a major contributor to health problems like obesity, diabetes, and high blood pressure.
The World Bank’s 2019 report highlighted that 70% of overweight individuals live in Low- and Middle-Income Countries (LMICs), with a 55% increase in rural areas.
India’s Non-Communicable Diseases (NCDs) burden has surged from 38% in 1990 to 65% in 2019, causing 1.2 million annual deaths due to dietary risks alone. The economic impact was estimated at $23 billion in 2017, projected to reach $480 billion by 2060 if unaddressed.

Global Trends in HFSS Taxation:

Many countries are using fiscal measures like taxation to combat obesity. While sugar-sweetened beverage (SSB) taxes are common, HFSS food taxes are gaining traction.
Countries like Denmark, France, Mexico, and the UK have implemented dedicated taxes, setting models for others.
India experimented with a ‘fat tax’ in Kerala in 2016, later absorbed into the Goods and Services Tax (GST) in 2017.

Justification for HFSS Taxation:

HFSS consumption creates societal costs in increased healthcare expenses and internal harm due to limited consumer understanding influenced by aggressive marketing.
Taxes serve as a targeted tool to reduce detrimental habits, proven effective in reducing the purchase of unhealthy items in various nations.

Purpose of HFSS Tax:

Unlike revenue-raising taxes like those on tobacco or alcohol, HFSS taxation aims to incentivize industry reformulation towards healthier alternatives and encourage individuals to opt for healthier diets.
Properly designed, these taxes can be non-regressive and fiscally neutral.
The current GST rates on ultra-processed foods don’t consider nutritional content, applying uniform taxes regardless of varying impacts. This oversight limits the shift towards healthier alternatives.

Public Health Imperative:

HFSS taxation in India should be viewed beyond economics—it’s a public health necessity.
Effective taxes can deter HFSS consumption, promote healthier choices, drive food reformulation, improve public health, reduce healthcare burdens, and contribute to a sustainable food system when combined with nutrition education and effective labelling.

Key terms:

High Fat Sugar Salt foods (HSSF) are known for their negative impact on health.

A negative externality is something that impacts a person or people who are uninvolved in a situation. Example: Smoking cigarettes or burning coal.
Internalities: Harm caused to individuals due to limited understanding influenced by marketing.
Non-regressive Tax: A tax that does not disproportionately burden lower-income individuals.

Source: The Hindu

4. How do animals see in the dark?

Subject :Environment

Section: Species in news

Photoreception:

Photoreception is the activation of a biological process by light.
Most organisms, including humans, respond to light. Some animals react to light waves not perceived by humans.
Vertebrates have two types of photosensitive cells, rods and cones, so called because of their shape.
- The rods, which are long and fat, contain large amounts of visual pigment and they mediate vision under dim illumination (scotopic vision).
- The cone cells, which are relatively small, mediate daylight vision (photopic vision) and colour sensation.

Vision of Human Eyes:

The retinas of animals active both day and night, as are those of humans, contain both rods and cones.
In parts of the human retina, the rods and cones are intermingled and the nervous system provides a switching mechanism that permits adjustment for light conditions.

Vision in nocturnal and diurnal animals:

In diurnal animals, the lens is smaller and the front surface is flatter. Thus the focal length is longer and so the image on the retina is larger and dimmer than in the nocturnal eye. As a result, the resolution is higher.
The retinas of diurnal animals have localised areas with a high density of cone cells. (The eyes of most birds have two such areas.)
In nocturnal animals, the optical arrangement of the eyes suggests that resolution is sacrificed for high light-gathering power.
In nocturnal animals, the retina is mainly made up of rod cells.Rhodopsin, a photosensitive pigment present in rods, is decolourised by photons (light particles) and slowly regenerated in the dark. This ensures better vision for them in dim light.

Source: The Hindu

5. Volcano erupts in southwest Iceland after weeks of earthquakes

Subject: Geography

Section: Geomorphology

Context:

A volcano erupted close to an Iceland power plant after weeks of intense seismic activity southwest of Reykjavik. The eruption was only 3-km from the evacuated fishing port of Grindavik on the Reykjanes peninsula.

Geography of Iceland:

Iceland, situated just south of the Arctic Circle in the North Atlantic Ocean, is profoundly shaped by its geography and location on the Mid-Atlantic Ridge—a boundary between the North American and Eurasian tectonic plates. While mostly submerged, this ridge emerges above the ocean surface in the form of Iceland itself.
Iceland’s geological features include geysers, glaciers, mountains, volcanoes, and vast lava fields. It hosts 33 active volcanoes, the highest count in Europe.
Human settlement in Iceland dates back to 874 when Norsemen, primarily from Scandinavia, established Reykjavik, the capital.
The Reykjanes Peninsula, had not seen any volcanic activity for the past 800 years, has experienced four eruptions in less than three years, indicating a potential new phase of volcanic activity.
Eyjafjallajokull Eruption (2010): Eyjafjallajokull is a volcano on Iceland’s south coast. Its two eruptions in 2010 led to an ash cloud spreading from western Siberia to North America’s eastern seaboard.

Source: Down To Earth

6. El Nino-fuelled Northeast monsoon caused the deluge in south Tamil Nadu

Subject: Environment

Section: Climatology

Context

Many parts of southern Tamil Nadu got flooded due to Cyclone Michaung in early December. The cause for this is an active Northeast monsoon (NEM) fuelled by the El Nino phenomenon, which is peaking right now.

Details:

The El Nino is the warmer-than-normal phase of the El Nino Southern Oscillation Phenomenon (ENSO) in the central and eastern Pacific Ocean and generally enhances rainfall extremes during the NEM.
El Nino provides the intensity while low-pressure systems or cyclonic circulations around the region provide the required moisture convergence for rainfall events to the NEM.
- Cyclonic circulations are whirls of winds in the upper layers of the atmosphere. They usually induce low-pressure areas in the atmosphere’s lower layers, which eventually cause rainfall. Sometimes, the cyclonic circulations can cause rainfall all by themselves by bringing moisture-laden winds into the region.
- Upper-level divergence is the spreading out of air in the upper layers of the atmosphere, which causes air from below to rise. This leads to other winds taking their place. This process is known as ‘low-level convergence’.

What are North-East Monsoons (NEM)?

Also known as the “retreat of monsoon”, NEM enters India from the northeast. The wind blows from the sea to the land in this type of monsoon.
The monsoon trough weakens and shifts southward as the monsoons retreat. As a result, the pressure gradient is minimal.
The moisture from the Indian Ocean (Bay of Bengal region) is carried by the monsoon winds.
It is limited to south India, bringing rain to Tamil Nadu, Puducherry, Karaikal, Yanam, Andhra Pradesh, Kerala, Mahe, and south interior Karnataka from October to December.
Low-pressure systems, depressions, and cyclones cause the associated rainfall, also known as the winter monsoon.
This is Tamil Nadu’s main rainy season, with the state receiving 48% (447.4mm) of its annual rainfall during these three months.

Source: Down To Earth

7. Reconstitution of National Start-up Advisory Council

Subject :Economy

Section: National Income

The National Start-up Advisory Council (NSAC) has been reconstituted by the Indian government.
31 non-official members have been nominated for the NSAC, representing various stakeholders in the startup ecosystem.
Non-official members include founders of successful start-ups, veterans with experience in scaling companies, individuals representing the interests of startup investors, and representatives from associations.
Notable individuals nominated include Abhiraj Singh Bhal from Urban Company and Kunal Bahl from Snapdeal.
The term of non-official members is typically two years. The reconstitution follows the completion of the initial term.
The NSAC serves as an advisory body to the government, providing guidance on measures to strengthen the innovation and startup ecosystem in India.
The Department for Promotion of Industry and Internal Trade (DPIIT) had originally constituted the council in January 2020.
The council suggests measures to foster a culture of innovation, particularly among citizens and students. It also aims to promote innovation across all sectors of the economy, including semi-urban and rural areas.
The eighth meeting of the NSAC is scheduled to take place under the chairmanship of the Commerce and Industry Minister on December 19.
The council meets regularly to discuss and recommend initiatives that contribute to the growth and development of the startup ecosystem in the country.
Presidents of industry chambers like CII (Confederation of Indian Industry) are also part of the NSAC, providing a holistic perspective.
One of the council’s objectives is to promote innovation not only in urban areas but also in semi-urban and rural regions, ensuring a broader impact.

In summary, the reconstitution of the NSAC reflects the government’s commitment to fostering innovation and supporting the startup ecosystem in India. The diverse representation of stakeholders contributes to a comprehensive approach in addressing challenges and promoting growth in the startup sector.

National Startup Advisory Council (NSAC):

The NSAC was constituted by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Union Ministry of Commerce and Industry.
The primary objective of NSAC is to advise the Government on measures aimed at building a robust ecosystem for nurturing innovation and startups. The ultimate goal is to drive sustainable economic growth and generate significant employment opportunities.
Composition:
- Chairman: The council is chaired by the Minister for Commerce & Industry.
- Ex-officio Members: These include nominees from concerned Ministries/Departments/Organizations, not below the rank of Joint Secretary.
- Non-official Members: The council includes non-official members representing various stakeholders, such as founders of successful startups and veterans who have contributed to the growth and scaling of companies in India.
NSAC plays a crucial role in identifying areas for intervention to expand the startup ecosystem. It engages in ideation and nurturing national programs under the Startup India initiative.

In summary, the National Startup Advisory Council is a key mechanism in driving the objectives of the Startup India initiative, aligning with the government’s vision to promote innovation, entrepreneurship, and economic growth in India.

Start-up India Initiative:

Launch Date: The Startup India initiative was launched in 2016.
Flagship Initiative: Startup India is a flagship initiative of the Government of India, to catalyze a startup culture and establish a strong, inclusive ecosystem for innovation and entrepreneurship in the country.
Startup India seeks to provide support and encouragement to startups through various policy measures, incentives, and initiatives. By nurturing startups, the initiative aims to contribute to sustainable economic development and job creation on a large scale.

Startup India Seed Fund Scheme (SISFS):

The Startup India Seed Fund Scheme (SISFS) is an initiative by the Government of India to provide financial assistance to startups in their early stages.
The primary goal of SISFS is to support startups by providing them with seed funding to help them kickstart their operations and contribute to their growth.
Under the scheme, eligible startups receive financial assistance to meet their initial funding requirements, fostering a conducive environment for their development.
The government allocates funds to the Startup India Seed Fund Scheme to facilitate the provision of financial support to qualifying startups.
Startups can utilize the funds for various purposes, including product development, market entry strategies, proof of concept, prototype development, and other early-stage activities.

8. RBI Tightens Norms for Lenders Investing in AIFs: Key Points

Subject :Economy

Section: Monetary Policy

Objective:
- The Reserve Bank of India (RBI) has tightened norms for lenders investing in Alternative Investment Funds (AIFs) to address concerns related to evergreening of stressed loans.
Concerns Addressed:
- The central bank aims to curb transactions involving the substitution of direct exposure of lenders to borrowers with indirect exposure through investments in AIF units, which may conceal the true status of stressed loans.
Restrictions on Downstream Investments:
- Lenders are prohibited from investing in any scheme of an AIF with downstream investments, either directly or indirectly, in a company that has borrowed from them in the preceding 12 months. If lenders have such investments, they must liquidate them within 30 days. Failure to do so requires them to make a 100% provision on such investments.
Circular Applicability:
- The norms are part of the RBI’s circular on ‘Investments in AIFs,’ applicable to REs (Regulated Entities) i.e. commercial banks, urban cooperative banks, all-India financial institutions, and non-banking finance companies, including housing finance companies.
Deduction from Capital Funds:
- Full deduction from the lender’s capital funds is prescribed if they have investments in the subordinated units of any AIF scheme with a ‘priority distribution model.’
Priority Distribution Model:
- Under this model, certain AIF schemes have a distribution waterfall where one class of investors has priority in distribution over others, leading to a deduction from the lender’s capital funds.
Background:
- The tightening of norms follows RBI Governor Shaktikanta Das’s mention of instances where lenders used innovative methods to conceal the actual status of stressed loans.
- Industry participants express concerns that the circular makes it virtually impossible for RBI-regulated entities, especially banks and NBFCs, to invest in AIFs, reducing the pool of investable assets for AIFs.
- Industry participants plan to seek further clarity from the RBI on the circular’s implications and requirements.

The RBI’s move aims to enhance transparency and prevent the misuse of AIF investments for concealing the true state of stressed loans by financial institutions.

Upstream and Downstream Investment in Foreign Direct Investment (FDI):

Upstream Investment in FDI:Upstream FDI involves foreign investments in activities related to the early stages of the production process, such as exploration, extraction, and initial processing of raw materials or resources in a host country.Examples: A foreign company investing in the exploration and extraction of natural resources (oil, minerals, etc.) in another country. Investment in agricultural activities, including farming or cultivation of raw materials.
Downstream Investment in FDI:Downstream FDI pertains to foreign investments in activities associated with the later stages of the production process, including processing, manufacturing, distribution, and marketing of finished products in a host country. Foreign investment in manufacturing plants for converting raw materials into finished goods. Investment in retail chains, distribution networks, or marketing activities in a host country.

About AIFs:

As per Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, AIFs refer to privately pooled investment funds, either from Indian or foreign sources, in the form of a trust, company, body corporate, or Limited Liability Partnership (LLP).

AIFs do not include funds covered under SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999, or any other regulations of the Board regulating fund management activities.

Categories of AIFs:

AIFs are classified into three categories based on their investment focus and activities.

Category I:

Category I AIFs primarily invest in start-ups, small and medium-sized enterprises (SMEs), or sectors deemed economically and socially viable by the government.

Category II:

Category II AIFs include private equity funds or debt funds that do not receive any specific incentives or concessions from the government or any other regulator.

Category III:

Category III AIFs encompass hedge funds or funds aimed at making short-term returns, along with open-ended funds that do not receive any specific incentives or concessions from the government or any other regulator.

About Evergreening of Loans:

Evergreening of loans refers to the practice where banks or lenders provide additional funds or take other measures to artificially sustain a loan that is not being repaid as scheduled.

The primary objective is to avoid classifying the loan as a non-performing asset (NPA) which could necessitate setting aside more provisions for potential losses.

Purpose of Evergreening:

Evergreening is a temporary measure employed by banks to maintain the appearance of a performing asset, thereby safeguarding their profitability and financial stability.

Risk Associated:

While evergreening loans may temporarily alleviate the stress on a bank’s balance sheet, it can conceal the true extent of non-performing assets and potentially lead to a more significant financial crisis if not addressed effectively.

Classic Evergreening

Instances of non-bank lenders selling stressed loans to AIFs partially set up by the lender itself, with the fresh funds being used to repay the original debt to prevent the loans from turning bad, is “classic evergreening”.

Definition of Non-Performing Asset (NPA):

NPA refers to a classification for loans or advances that are in default or are in arrears on scheduled payments of principal or interest.

Categories of Non-Performing Assets:

Sub-standard Assets:

Sub-standard assets are those classified as NPAs for a period less than or equal to 12 months.

Doubtful Assets:

Doubtful assets are those that have been non-performing for a period exceeding 12 months.

Loss Assets:

Loss assets are considered uncollectible, with little or no hope of recovery, and require complete write-off from the bank’s books.

9. Highlights on MoD and PAC Disagreement on Soldiers’ Needs

Subject: Polity

Section: National Body

Contention Over Winter Supplies:
- The Ministry of Defence (MoD) and Lok Sabha’s Public Accounts Committee (PAC) disagree over issues related to winter clothing, equipment, and ration for soldiers deployed at high altitudes.
Funding Challenges:
- PAC emphasizes the need for separate budgets for such requirements to avoid delays and the supply of recycled materials. The panel challenges MoD’s repeated claim of no dearth of funds.
Quality Standards and Expired Items:
- PAC flags serious discrepancies in quality standards and the supply of expired items. The Directorate General of Quality Assurance (DGQA) faces reprimand for overlooking troop acceptance of technical specifications.
Recommendation for DGQA:
- PAC insists on bringing DGQA under the Services to enhance responsiveness and accountability.
Budgetary Allocation Issues:
- Expenditure on High Altitude Clothing and Equipment (HACE) faces challenges as it is met from the allotment under ‘General Stores and Clothing,’ which caters to the entire Army. PAC recommends separate budget heads to cater specifically to high-altitude needs.
Impact on Troops:
- Procedural delays, non-supply or supply of recycled items affect the health and hygiene of troops in high-altitude areas. Lack of research and development and dependence on imports contribute to the challenges.
Contradictions in Ministry’s Replies:
- PAC notes contradictions in MoD’s replies, stating that budgetary constraints do not affect procurement, while also acknowledging shortages due to budget limitations.
Justification for Separate Budgets:
- PAC justifies the recommendation for separate budget heads, emphasizing better fund management, monitoring, and timely revisions for clothing, equipment, housing, and ration in high-altitude areas.
Response to Audit Findings:
- Instances of procedural delays and non-supply highlighted during the audit contradict MoD’s claim of no budgetary constraints affecting procurement.
Panel’s Persistence on Recommendations:
- Despite MoD’s earlier replies and persistence on existing fund allocation methods, PAC stands by its recommendation for separate budget heads, considering the terrain-specific needs.

Directorate General of Quality Assurance (DGQA):

DGQA is a regulatory body responsible for ensuring the quality and reliability of defense products and services in India.
It was established to oversee quality assurance in defense production and procurement.
DGQA operates under the Ministry of Defence and plays a crucial role in maintaining the standards of defense equipment.
The primary function is to provide regulatory oversight, inspection, and quality assurance for defense-related products, including weapons, ammunition, vehicles, and electronic systems.
In summary, DGQA is a key institution in India’s defense establishment, focusing on maintaining high-quality standards in defense production to meet the operational needs of the armed forces.