Daily Prelims Notes 23 July 2024

July 23, 2024
Posted by: OptimizeIAS Team
Category: DPN

Daily Prelims Notes

23 July 2024

Table Of Contents

Sub: Eco

Sec: National Income

The Economic Survey is a detailed annual document prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance. It is formulated under the supervision of the Chief Economic Advisor (V Anantha Nageswaran is the current CEA of India) and provides a statistical and analytical overview of the economy.

The survey covers a range of topics, including GDP growth, inflation, employment, sectoral performance, and budget deficits. Its primary purpose is to inform policymakers, businesses, and the public about the economic conditions and the challenges ahead.

The first Economic Survey was introduced in 1950-51 and was initially part of the budget documents. In the 1960s, it was separated from the budget and presented a day before the Union Budget. Over the years, the survey has evolved to include various themes that reflect the country’s economic priorities.

2. Economic Survey 2023-24 key takeaways

Sub: Eco

Sec: National Income

The key takeaways of Economic Survey 2023-24

Economic Growth

The survey projects a real GDP growth rate for the current financial year (FY 2024-25) between 6.5% and 7%, slightly lower than the 8.2 per cent growth estimated for the previous financial year.
Domestic growth drivers supported economic growth in FY24 despite uncertain global economic performance.
To sustain post-pandemic recovery, there has to be heavy lifting on the domestic front.

Inflation

While the overall headline inflation rate is largely under control, specific food items have seen elevated prices.
The survey projects the inflation rate to be 4.5 per cent in FY25 and 4.1 per cent in FY26.

Government Policy

India’s policy adeptly steered through challenges, ensuring price stability despite global uncertainties.
Tax compliance gains, expenditure restraint, and digitisation helped India achieve fine balance in govt’s fiscal management.
Reaching agreements on key global issues like trade, investment, and climate has become extraordinarily difficult.

Agriculture

The survey describes agriculture as “one area ripe for and in need of a pan-India dialogue”.
Smallholder farmers need to shift from traditional crops to high-value agriculture, including fruits, vegetables, fisheries, poultry, dairy, and meat.
This shift is seen as essential for increasing farmers’ incomes and spurring a manufacturing revolution, similar to what China experienced between 1978 and 1984 when the real incomes of farmers doubled in just six years.
The survey also highlights the growing significance of allied sectors such as animal husbandry, dairying, and fisheries in enhancing farmers’ incomes.
The performance of the agriculture sector has been growing at an average rate of 4.18% over the last five years

Financial Sector

Outlook for India’s financial sector appears bright.
Improved balance sheets in the private sector will strengthen private investment.
However, Private capital formation may turn more cautious due to fears of cheaper imports from countries that have excess capacity.
Capital markets becoming prominent in India’s growth story; market resilient to global geopolitical, economic shocks.

Private sector

The survey advocates for a tripartite compact involving the central government, state governments, and the private sector to achieve the higher aspirations of Indians and complete the journey to a developed India by 2047.
“Job creation happens mainly in the private sector. Many issues influencing economic growth, job creation, and productivity are in the domain of state governments,”
As much as 54 per cent of disease burden due to unhealthy diets; need transition towards balanced, diverse diet. The survey suggests that embracing traditional practices can help the private sector lead in the global market.

Retail investment

The Economic Survey highlights the significant increase in retail investors in the stock market, calling for careful consideration to avoid overconfidence and speculation.
It warns against the over-financialization of the economy, which has historically led to crises in developing countries.

Remittances

Remittances to India to grow at 3.7 per cent to $124 billion in 2024, 4 per cent in 2025 to reach $129 billion.

China Challenge

India continues to be overly dependent on China for imports, especially for renewable energy.
China has not let go of the low-skills manufacturing space that India wanted to occupy.

AI threat

The Survey notes that while there has been a boom in telecommunications and Internet facilitated business process outsourcing (BPO), the next wave of technological evolution might bring the curtains down on it.

Employment:

The Indian economy needs to generate an average of nearly 78.5 lakh jobs annually until 2030 in the non-farm sector to cater to the rising workforce.

Regulatory bottlenecks

The Licensing, Inspection and Compliance requirements that all levels of the government continue to impose on businesses is an onerous burden.
MSME is one sector that needs to be relieved of regulatory burden the most.

Building state capacity

What is needed in the economy now is not big reforms but the grunt work.
To this end it advocated building up state capacity for sustaining and accelerating India’s progress.

China Plus One strategy

The Economic Survey suggests that India can benefit from the China Plus One strategy by integrating into China’s supply chain or promoting Chinese foreign direct investment (FDI).
This strategy would help India reduce its trade deficit with China and boost its exports to advanced economies.

About China-plus one strategy

China Plus One, also known simply as Plus One, is the business strategy to avoid investing only in China and diversify business into other countries.
It was coined in 2013 as a global business strategy.
Many overseas companies once moved operations to China due to the low cost of labor, but companies are now reevaluating their setup in this country and diversifying their manufacturing strategies.
The driving factors range from China’s cost advantage diminishing in recent years to growing geopolitical distrust between China and the West.

Need for sustainable reforms

Focus on sustainable and inclusive growth is essential for addressing the challenges of job creation, productivity improvement, and economic growth.
“Big-ticket reforms have been initiated and done. The Government’s focus must turn to bottom-up reform and the strengthening of the plumbing of governance.”

3. Finance Minister Nirmala Sitharaman will present the first Budget of the third successive government under the leadership of Prime Minister Narendra Modi

Subject: Economy

Sec: National Income

Context:

Budget presentation is typically a quinquennial event in India.
Once every five years, the Union Budget is presented twice — first as an interim budget (in February) by the outgoing government and then as a full budget by the newly-formed government.
Sitharaman had presented an interim Budget for the current financial year (2024-25) on February 1.

What is the Budget?

An exercise where the government tells the Parliament (and through it, the whole country) about the health of its finances.
This means coming clean on three main things:
- Income
- Expenditure
- Borrowing
Typically comes at the end of one financial year and the start of another.
Essentially discusses the citizen’s money. The government’s borrowing (the fiscal deficit) is, in no uncertain terms, an addition to a debt that citizens and their future generations will have to pay back.

Why does it matter?

The fact is that there is no such thing as government money — it is all taxpayer’s money. Conservative British Prime Minister Margaret Thatcher once explained in the House of Commons of the UK:
“The state (government) has no source of money other than the money people earn themselves. If the state (government) wishes to spend more, it can do so only by borrowing your savings or by taxing you more. It is no good thinking that someone else will pay. That someone else is you.”

Union Budget influence the economy:

One is by tweaking who it taxes and how much.
If a government wants to incentivise businesses in one segment of the economy — presumably because it believes such a move will leverage India’s demographic profile, create jobs and bring prosperity — it can lower the tax rate.
Lowering the tax rate may not necessarily lead to lower revenues; it is quite possible that the increased economic activity (thanks to the lower tax rate) leads to higher overall revenues despite a lower tax rate.
Second is by tweaking where a government spends and how much. While the budget is only for a year, budgets at the start of a new government’s term (as is the case this time) can often signal a broader shift in how the government wants to spend its money.
The biggest macroeconomic policy shift of the last government (2019-2024) was the focus on incentivising investments by the private sector.

Interim Budget:

An Interim Budget is presented by a government that is going through a transition period or is in itslast year in office ahead of general elections.
The purpose of the interim budget is to ensure the continuity of government expenditure and essential services until the new government can present a full-fledged budget after taking office.

Union Budget:

According to Article 112 of the Indian Constitution, the Union Budget of a year, also referred to as the annual financial statement, is a statement of the estimated receipts and expenditure of the government for that particular year.

Terms related to budget

Budget and Revised Estimate

Budget Estimates represent the idea of upcoming government projects and their progression. The revised Estimate explains the expenses that are going to happen.
Budget estimates work like a critical process and show the transparency work and budget fund of the government. The budget estimates session committee asks every finance minister and public services about their action decisions and advice for upcoming projects for public benefit.
Revised estimates only get sanction permission if the previous original sanctioned estimates go more than 5% due to material quality matter and rates. It also covers the fact of material quantity.
It is an evaluation that is presented in the middle of the year.

Deficits in the budget

Fiscal deficit by definition is the difference between total expenditure and the sum of revenue receipts and non-debt receipts. It indicates how much the Government is spending in net terms.
Since positive fiscal deficits indicate the amount of expenditure over and above revenue and non-debt receipts, it needs to be financed by a debt-creating capital receipt.
Primary deficit is the difference between fiscal deficit and interest payments.
Revenue deficit is derived by deducting capital expenditure from fiscal deficits.

FRBM Act and amendment

It was enacted in August 2003.
It aims to make the Central government responsible for ensuring inter-generational equity in fiscal management and long-term macro-economic stability.
The Act envisages the setting of limits on the Central government’s debt and deficits.
It limited the fiscal deficit to 3% of the GDP and mandates that the revenue deficit should be brought down to zero.
To ensure that the States too are financially prudent, the 12th Finance Commission’s recommendations in 2004 linked debt relief to States with their enactment of similar laws.
The States have since enacted their own respective Financial Responsibility Legislation, which sets the same 3% of Gross State Domestic Product (GSDP) cap on their annual budget deficits.
It also mandates greater transparency in fiscal operations of the Central government and the conduct of fiscal policy in a medium-term framework.
The Budget of the Union government includes a Medium Term Fiscal Policy Statement that specifies the annual revenue and fiscal deficit goals over a three-year horizon.
The rules for implementing the Act were notified in July 2004.

Amendment in 2018

The rules were amended in 2018, and most recently to the setting of a target of 3.1% for March 2023.
The NK Singh committee (set up in 2016) recommended that the government should target a fiscal deficit of 3% of the GDP in years up to March 31, 2020 cut it to 2.8% in 2020-21 and to 2.5% by 2023.

Expenditure

Capital expenditure:
- Capital expenditure is incurred with the purpose of increasing assets of a durable nature or of reducing recurring liabilities.
- Consider the expenditure incurred for constructing new schools or new hospitals. All these are classified as capital expenditure as they lead to creation of new assets.
Revenue expenditure:
- Revenue expenditure involves any expenditure that does not add to assets or reduce liabilities.
- Expenditure on the payment of wages and salaries, subsidies or interest payments would be typically classified as revenue expenditure.

Receipts

The receipts of the Government have three components —revenue receipts, non-debt capital receipts and debt-creating capital receipts.
Revenue receipts involve receipts that are not associated with increase in liabilities and comprise revenue from taxes and non-tax sources.
Non-debt receipts are part of capital receipts that do not generate additional liabilities. Recovery of loans and proceeds from disinvestments would be regarded as non-debt receipts since generating revenue from these sources does not directly increase liabilities, or future payment commitments.
Debt-creating capital receipts are ones that involve higher liabilities and future payment commitments of the Government.

4. Coal India bags first critical mineral asset

Subject: Geo

Sec: Eco Geo

Context:

The first critical mineral asset, a graphite block, in Madhya Pradesh.
Owning a graphite asset will give Coal India an advantage in powering green energy transition momentum to an extent, according to a statement.
Coal India Ltd (CIL) has successfully opened its account in domestic critical mineral asset emerging as the preferred bidder for Khattali Chotti graphite block in Alirajpur district of Madhya Pradesh.
The company accounts for more than 80 per cent of domestic coal output.
The country imports about 69 per cent of its graphite needs – natural, synthetic and end-use products.
Graphite has its utility as an anode material in lithium-ion battery manufacturing due to its relatively low cost and energy density.
With the electric vehicle market and energy storage systems fast gaining traction, where lithium-ion cells are used, graphite has a big market.
The market size for graphite is projected to take a big leap with the absolute demand projected to shoot up at the rate of 25-27 per cent by FY35 from the current level.

CIL acquired the composite licence for the 599.76-hectare graphite block:

Firm is the first major player in the critical mineral auction.
It won the bid by quoting a mining premium of 150.05% of the mineral despatch value.
Coal India is also actively pursuing lithium blocks in Chile, Australia, and various African nations

Graphite:

It is an opaque, non-metallic carbon polymorph that is blackish silver in colour and metallic to dull in sheen.
Since it resembles metal lead, it is also known colloquially as black lead or plumbago.
Formation: It is formed by the metamorphosis of sediments containing carbonaceous material.
Molecular structure
- It consists of a ring of six carbon atoms closely bonded together hexagonally in widely spaced layers.
- The bonds within the layers are strong, but the bonds between the layers are less in number and therefore weaker.
Properties:
- It is a naturally occurring form of crystalline carbon and is a stable form of carbon.
- It is extremely soft, cleaves with very light pressure, and has a very low specific gravity.
- In contrast, it is extremely resistant to heat and nearly inert in contact with almost any other material. These extreme properties give it a wide range of uses in metallurgy and manufacturing.
Applications: It is used in pencils, lubricants, crucibles, foundry facings, polishes, arc lamps, batteries, brushes for electric motors, and cores of nuclear reactors.
Globally it is mined extensively in China, India, Brazil, North Korea, and Canada.

5. No case is made out for special category status for Bihar, Govt tells Parliament

Sub: Polity

Sec: Federalism

Context: On the eve of the Union Budget presentation, the government told Parliament on Monday that the case for special category status for Bihar is not made out.

Details:

The minister said the special category status for plan assistance was granted in the past by the NDC to some states that were characterised by a number of features necessitating special consideration.
Earlier the request of Bihar for special category status was considered by an inter-ministerial group (IMG), which submitted its report on March 30, 2012. The IMG came to the finding that based on existing NDC (National Development Council) criteria, the case for special category status for Bihar is not made out

What are criteria for special category status ?

These included hilly and difficult terrain, low population density or sizeable share of tribal population, strategic location along borders with neighbouring countries, economic and infrastructural backwardness and non-viable nature of state finances

6. Why Liberia might relocate its capital city Monrovia

Sub: IR

Sec: Places in news

Context:

Senators in Liberia have proposed relocating the capital city Monrovia due to recurring flash floods.
The proposal follows torrential rains that caused flash floods, affecting over 50,000 people.
Monrovia, home to 1.5 million people and located on the Atlantic coast, was among the worst affected.

Causes of Recurrent Flooding in Monrovia:

The primary cause is rising sea levels.
In the West Point slum of Monrovia, sea level rise and coastal erosion displaced over 6,500 people and destroyed 800 houses between 2013 and 2018.
By 2030, the Greater Monrovia District is expected to see a sea level rise of 16 cm, putting nearly 675,000 people and 9,500 hectares of land at risk.

Global Sea Level Rise:

The global sea level has risen by about 8–9 inches (21–24 cm) since 1880.
The rate of increase has accelerated since 1993, more than doubling from 0.07 inches (0.18 cm) per year in 1993 to 0.17 inches (0.42 cm) per year currently.
Drivers of Sea Level Rise:
- Global warming is the main driver, causing glaciers and ice sheets to melt and add water to the ocean.
- Thermal expansion, where warmer water expands in volume, also contributes to sea level rise.

About Liberia:

Officially known as the Republic of Liberia.
Located on the West African coast, bordered by Sierra Leone, Guinea, Ivory Coast, and the Atlantic Ocean.
Official language: English, with over 20 indigenous languages reflecting ethnic and cultural diversity.
Capital and largest city: Monrovia.

Source: IE

7. Teen who died of Nipah in Kerala had local fruit from neighbourhood where fruit bats thrive

Sub: Env

Sec: Species in news

Context: A day after a 14-year-old boy in Malappuram succumbed to the Nipah virus, Kerala health department Monday confirmed that he had consumed hog plum fruit from his neighbourhood, where the presence of fruit bats, known as reservoir of the zoonotic virus, was confirmed.

Flying fox bats:

Pteropus (suborder Yinpterochiroptera) is a genus of megabats which are among the largest bats in the world.
They are commonly known as fruit bats or flying foxes, among other colloquial names.
They live in South Asia, Southeast Asia, Australia, East Africa, and some oceanic islands in the Indian and Pacific Oceans.
Flying foxes eat fruit and other plant matter, and occasionally consume insects as well.
They locate resources with their keen sense of smell. Most, but not all, are nocturnal. They navigate with keen eyesight, as they cannot echolocate.
There are at least 60 extant species in the genus.
They are generally considered a vermin as they raid orchards.
It had a similar official status under the Schedule V of the Wildlife (Protection) Act of 1972 until it was put on the Schedule II list, entailing a higher degree of protection.
Ecological role:
- It is a keystone species.
  - A keystone species is one that has a disproportionately large effect on its natural environment relative to its abundance, impacting many other organisms in an ecosystem and helping to determine the types and numbers of other species in an ecological community.
- It causes seed dispersals of many plants in tropical systems.
- Vigilance behaviour.
- Being external roosters, the flying fox is exposed to predators and disturbances apart from environmental indicators such as heat and light.
Threats:
- The biggest threat to the flying fox is from humans.
- Hunting for meat and medicine and probable threats like the felling of roost trees have contributed to the dramatic decrease in the population of the species.

8. West Bengal governor questions legality of TMC MLAs’ oath, imposes Rs 500 fine on attending Assembly

Sub: Polity

Sec: Parliament and state legislature

Context: CV Ananda Bose questioned Speaker Biman Banerjee administering oath to the legislators when he had authorised Deputy Speaker Asish Banerjee to do so.

Details:

Weeks after Trinamool Congress MLAs Sayantika Banerjee and Reyat Hossain Sarkar were sworn in, West Bengal Governor CV Ananda Bose has questioned the legality of the process and asked the leaders to pay a fine of Rs 500 each day they take part in Assembly proceedings.
There has been an impasse with the governor regarding the swearing-in of the newly-elected MLAs. While Bose had invited the two MLAs to take the oath at the Raj Bhavan in Kolkata, they declined and instead asked him to administer the oath to them in the Assembly or authorise Biman Banerjee to do so.
The Assembly speaker had summoned a special session amid the impasse. Hours after the announcement of the session, Bose had authorised Deputy Speaker Asish Banerjee to administer the oath to the MLAs.
The governor in a letter to the MLAs said that the speaker had “no jurisdiction in the matter” as the “constitutional head of the state designated someone to administer the oath”.

What does constitution say on this matter?

As per Article 188

Every member of the Legislative Assembly or the Legislative Council of a State shall, before taking his seat, make and subscribe before the Governor, or some person appointed in that behalf by him, an oath or affirmation according to the form set out for the purpose in the Third Schedule.

9. In painstaking steps, scientists piece the neutrino universe together

Sub: Sci

Sec: Space sector

Context:

Researchers conducting an experiment with the Large Hadron Collider reported observing electron-neutrinos in a particle collider for the first time.

What is Neutrino?

Neutrinos are a type of subatomic particle which do not have an electric charge but have a small mass, and are left-handed (a physics term meaning the direction of its spin is opposite to the direction of its motion).
They are the second-most abundant particles after photons (particles of light) and the most abundant among particles that make up matter.
The study of neutrinos is an area of immense current interest among particle physicists and astrophysicists.
These particles are produced when particles called leptons interact with matter.
- For example, when a type of lepton called a muon interacts with matter, the interaction produces a muon-neutrino.

Neutrinos are the best information carriers because neutrinos pass through most matter untouched, they can carry information across large distances.

What is NOvA?

The NOνA (NuMI Off-Axis νe Appearance) experiment is a particle physics experiment designed to determine the role of neutrinos in the evolution of the cosmos.
NOvA is managed by the Fermi National Accelerator Laboratory.
NOvA does this by trying to understand which neutrino type has the most mass and which type has the least.

What is Neutrino oscillation?

Neutrino oscillation is a quantum mechanical phenomenon in which a neutrino created with a specific lepton family number can later be measured to have a different lepton family number.
The probability of measuring a particular flavor for a neutrino varies between three known states, as it propagates through space.
Neutrino oscillation is of great theoretical and experimental interest, as the precise properties of the process can shed light on several properties of the neutrino.

Global neutrino experiments.

Super-K III in Japan
Sudbury Neutrino Observatory (in its new SNO+ avatar) in Canada
MiniBOONe, the MicroBOONe, and NOvA in the U.S.
Double CHOOZ in France
Jiangmen Underground Neutrino Observatory in China
OPERA experiment in Switzerland
IceCube Neutrino Observatory in Antarctica.

What is the status of India in neutrino study?

India’s own India-based Neutrino Observatory, funded by the Department of Atomic Energy, was supposed to come up in Tamil Nadu but currently faces an uncertain future over procedural lapses and lack of political support.