Daily Prelims Notes 24 May 2024

Daily Prelims Notes

24 May 2024

1. Indian forces using Kuki and Myanmar groups to wage war: NSCN

Sub: Geography

Sec: Human geo

Tag: Kuki

Context:

• The Indian armed forces are using a Kuki extremist outfit and a pro-democracy armed group in civil war-torn Myanmar to wage a war against the Naga Army along the India-Myanmar border, the National Socialist Council of Nagalim (NSCN) said.

Details:

• The NSCN said the Assam Rifles (AR) and the India Army’s para regiment have been using the Kuki National Army (Burma), or KNA(B), and the People’s Defence Force (PDF) for a proxy war to kill its members.
• The KNA(B) has a Manipur-based wing called the KNA.
• The PDF is the armed wing of the exiled National Unity Government that has been fighting the Tatmadaw, which staged a coup on February 1, 2021.
  • The Tatmadaw or Sit-Tat is the military of Myanmar. It is administered by the Ministry of Defence and composed of the Myanmar Army, the Myanmar Navy and the Myanmar Air Force.
• The Assam Rifles is in charge of guarding the 1,643 km India-Myanmar border.
• The NSCN claimed the Indian armed forces supplied combat materials to the KNA(B) and the PDF in Myanmar’s Chin Province bordering Mizoram and Manipur.
• Phaiyang is a village in Myanmar close to the border with India facing Namlee village in Manipur’s Kamjong district.

List of extremist/insurgent organizations of the Northeast region declared as “unlawful associations” and/or “terrorist organizations” under the Unlawful Activities (Prevention) Act, 1967: 

Main ethnic groupings of Manipur:

• The Meitei, Naga and Kuki-Zomi-Mizo are the three main ethnic groupings in Manipur.
• The Meiteis, the largest community, account for about 53% of the State’s total population of 27.21 lakh (2011 Census).
• The Nagas and the Kuki-Zo which are categorised into 34 Scheduled Tribes constitute 17% and 26% of the population respectively.

Suspension of Operation (SoO):

• Suspension of Operations (SoO) is a tripartite agreement between the Government of India, the Manipur government, and Kuki-Zo insurgent groups that was signed in 2008.
• The agreement requires insurgents to remain in designated camps and keep their weapons in locked storage for regular monitoring.

Naga Insurgency and origin of NSCN:

Background:

• The Naga National Council (NNC) was formed in April 1946 to carry out social and political upliftment of the Nagas.
• After the return of the radical leader of the Naga cause, Angami Zapu Phizo, from Burma in 1947, the faction of NNC demanding full impendence grew strong.

Shillong Accord and the split of NNC:

• The Shillong Accord was signed in 1975 by the Government of India with a section of the NNC leaders.
• As part of the accord, the leaders agreed to abjure violence and work towards the solution of the Naga problem within the framework of the Indian Constitution.
• It was opposed by Phizo, Isak Swu and Muivah. Later, Isak Swu and Muivah formed the “National Socialist Council of Nagaland (NSCN)” in January 1980.
• Later, NSCN split into two factions, namely NCSN (I-M) led by Isak & Muivah and NCSN (K) led by Khaplang.

Demand for Greater Nagaland:

• The NSCN-IM has been demanding:
  • ‘Greater Nagaland,’ an extension of Nagaland’s borders by including Naga-dominated areas in neighbouring Assam, Manipur and Arunachal Pradesh, to unite more than 1.2 million Nagas,
  • a separate flag and
  • a constitution.

Naga Peace Accord:

• Since 1997, NSCN (I-M) has been involved in negotiations with the Government of India and signed many ceasefire agreements.

2015 Framework Agreement (FA)

• On August 3, 2015, the Centre signed a framework agreement with the NSCN (I-M) to resolve the Naga issue.
• The agreement was only a framework, with many details still to be hammered out.
• Talks were being held regularly to chart out the finer details of the FA.
• In June 2022, talks broke down after the NSCN accused the interlocutor appointed by the Centre of excluding three political points.

About Assam Rifles:

• The Assam Rifles, one of the central armed police forces, is the leading counter-insurgency force in the Northeast.
• Background: 
  • It is the oldest paramilitary force in India.
  • The unit can trace its lineage back to a paramilitary police force that was formed under the British in 1835 called Cachar Levy.
  • Since then, the Assam Rifles have undergone a number of name changes—the Assam Frontier Police (1883), the Assam Military Police (1891) and Eastern Bengal and Assam Military Police (1913), before finally becoming the Assam Rifles in 1917.
  • Role: It is tasked with the maintenance of law and order in the North East along with the Indian Army and also guards the Indo-Myanmar border in the region.
  • It is also known as ‘Sentinels of the Northeast’.
  • HQ: Shillong, Meghalaya.
  • Motto: Friends of the Hill People.
• Control: 
  • It is the only paramilitary force with a dual control structure.
  • While the administrative control of the force is with the Ministry of Home Affairs, its operational control is with the Indian Army, which is under the Ministry of Defence.

India-Myanmar border:

• India and Myanmar share a 1,643-km border along the Northeastern states of Manipur, Mizoram, Nagaland and Arunachal Pradesh.
• It is a porous border of which only 10 km is fenced in Manipur.

About Free Movement Regime (FMR):

• The FMR with Myanmar was formalized in 2018 following the agreement between India and Myanmar on land border crossing.
• It allowed tribes living along the border on either side to travel up to 16 km inside the other country without a visa and stay up to two weeks.
•  It was implemented in 2018 as part of the Narendra Modi government’s Act East policy.

Benefits of FMR:

• FMR  is considered an “enabling arrangement for movement of people” which would “facilitate regulation and harmonization” of the already existing free movement rights of people living along this border.
  • The Chin people living in the Chin state of Myanmar is contiguous with Mizoram and are of the same ethnicity as the Mizos and the Kuki-Zomis of Manipur.
  • There is also a sizable Naga population in Myanmar residing largely in the Naga Self-Administered Zone in Myanmar’s Sagaing region.
• The Mizo-Chins and Nagas on both sides of the border share close social, economic and day-to-day ties.

Why did the Indian government end FMR?

• Security issues with respect to the FMR.
• To check the influx of illegal immigrants, drugs and gold smuggling.
• To  “stop the misuse of FMR” by insurgent groups to carry out attacks on the Indian side and escape into Myanmar.
• “Fears of a demographic change” which had been triggered by the settling of “Kuki brothers” in the forests of Manipur.

Source: TH

2. Azad Engineering bags contract for advanced turbo gas generator engine from DRDO lab GTRE

Sub: Science and tech

Sec: Defence

Context:

• Azad Engineering secured a contract with DRDO laboratory Gas Turbine Research Establishment (GTRE) for the manufacturing, assembly, and integration of advanced turbo gas generator engines.

Details of the advanced turbo gas generator engines:

• The engine features a single-spool turbojet design with a 4-stage axial flow compressor, annular combustor, single-stage axial flow uncooled turbine, and fixed exit area nozzle.
• Azad Engineering will serve as the sole industry partner for this project.

About Gas Turbine Research Establishment (GTRE):

• A laboratory of DRDO in Banglore, Karnataka.
• It is one of the pioneering Research and Development Organizations under the Ministry of Defence, Government of India.
• Goal: To design and develop gas-turbine engines for military applications, besides carrying out advanced research work in the area of gas-turbine sub-systems.

Indigenisation of Defence:

• The ‘Aatmanirbharta in Defence’ initiative aims to reduce import dependency and foster domestic defence manufacturing capabilities, issuing approximately 350 new industrial licenses over the last seven years.
• Encouraged by government initiatives, private players are developing defence equipment manufacturing capacity to meet the armed forces’ requirements and address programme delays, cost overruns, and quality issues.

Source: TH

3. New study reveals extent of microplastic pollution in Ashtamudi Lake

Sub: Environment

Sec: Protected area

Tag: Ashtamudi Lake

Study on Microplastic Pollution in Ashtamudi Lake

• Study Title: “Microplastic contamination in Ashtamudi Lake, India: Insights from a Ramsar wetland”
• Conducted by: Department of Aquatic Biology and Fisheries, University of Kerala
• Supported by: Ecomarine Project, Erasmus Programme of the European Union

Key Findings

• Extent of Contamination:
  • Microplastics are found in fish, shellfish, sediment, and water of Ashtamudi Lake.
  • Fish accounted for 19.6% and shellfish for 40.9% of the microplastics in macrofauna.
  • Types of microplastics: Fibers (35.6%), fragments (33.3%), and films (28%).
  • The majority of particles were small, indicating high bioavailability to aquatic organisms.
• Composition and Risks:
  • Microplastics contain polymers such as nylon, polyurethane, polypropylene, polyethylene, and polysiloxane.
  • Detected heavy metals included molybdenum, iron, and barium.
  • The presence of these substances poses risks to both aquatic life and human health.
• Sources of Pollution
  • Untreated Waste: Municipal solid waste and plastic debris entering the lake.
  • Domestic Waste: Discharges from nearby residences and resorts.
  • Solid Waste Management: Inadequate handling of plastic waste in surrounding watershed areas.
  • Fishing Equipment: Nets, cages, and monofilaments contribute significantly to nylon fibre pollution.

Significance and Recommendations

• Urgent Actions Needed:
  • Continuous monitoring of microplastics in lake water.
  • Development of strategies to reduce microplastic pollution.
  • Address potential public health concerns due to contaminated fish and shellfish consumption.

About Ashtamudi Lake:

• Location: Kollam District, Kerala.
• It possesses a unique wetland ecosystem and a large palm-shaped (also described as octopus-shaped) water body, second only in size to the Vembanad estuary ecosystem of the state.
• Ashtamudi means ‘eight hills or peaks ‘ in the local Malayalam language. The name is indicative of the lake’s topography with its multiple branches.
• The lake is also called the gateway to the backwaters of Kerala and is well known for its houseboat and backwater resorts.
• Ramsar Status: Designated in 2002 due to its hydrological functions, biodiversity, and support for fish.
• Eight arms of Ashtamudi estuary: Thevally Kayal, Kadapuzha Kayal, Kandachira Kayal, Kanjirottu Kayal, Kumbalathu Kayal, Kuripuzha Kayal, Perumon Kayal, Thekkumbhagum Kayal.
• Kallada River is a major river discharging into the Ashtamudi Lake.

About Microplastics:

• Microplastics are tiny bits of various types of plastic found in the environment.
• They are a result of the fragmentation and degradation of larger plastic items, as well as the direct release of tiny plastic particles, often intentionally added to consumer products like cosmetics and cleaning agents.
• The name is used to differentiate them from “macroplastics” such as bottles and bags made of plastic.
• There is no universal agreement on the size that fits this bill — the U.S. NOAA (National Oceanic and Atmospheric Administration) and the European Chemical Agency define microplastic as less than 5mm in length.
• Environmental Impact:
  • Microplastics are not biodegradable.
  • Thus, once in the environment, primary and secondary microplastics accumulate and persist.
  • They can be ingested by marine organisms, leading to potential harm to aquatic life and bioaccumulation along the food chain.
  • They can also carry toxic chemicals and pollutants, posing additional risks to organisms and ecosystems.

Source: TH

4. Sweet sorghum is a hardy, nutritious, biofuel crop that offers solutions in drought-hit southern Africa

Sub: Geography

Sec: Eco geography

Tag: Sweet sorghum

The southern African region is battling with drought at present.

• Drought Cause: Result of El Nino, affecting global weather patterns.
• Impact: Severe drought in southern Africa, hitting agricultural productivity hard.
• Affected Countries: Malawi, Zambia, and Zimbabwe have declared a state of disaster and are seeking food aid.
• Economic Implications: Over 70% of rural populations in the region rely on agriculture for their livelihoods.

Agricultural Sector’s Response to Climate Change

• Need for Adaptation: Importance of preparing for and mitigating climate impacts in agriculture.
• Biofuel Crops: Cultivation of biofuel crops as a measure to reduce greenhouse gas emissions.
• Biofuel Crops
  • Conventional Crops: Sugarcane, maize, grain sorghum, sugar beet, rapeseed, and sunflower.
  • Drawbacks: Susceptibility to extreme weather, high investment costs, competition with food production.

Sweet Sorghum:

• Origin: Most likely Ethiopia region.
• Sweet sorghum or sorgo is any of the many varieties of sorghum grass whose stalks have a high sugar content.
• It thrives better under drier and warmer conditions than many other crops and is grown primarily for forage, silage, and syrup production.
• Sweet sorghum syrup is known as sorghum molasses in some regions of the United States.

Potential of Sweet Sorghum:

• Multipurpose Use: Provides grains, animal feed, and sugary juice.
• Nutritional Value: Comparable to maize, rich in energy, proteins, carbohydrates, fibre, and essential minerals such as potassium, calcium, sodium and iron.
  • It has good antioxidant properties.
• Bioethanol Production: High yield of 8,102 litres per hectare, significantly more than maize.
• Resilience: Drought resistance, can go dormant and resume growth post-drought, uses stalk juice during water scarcity.
• Other Uses:
  • Animal Feed: High nutritional residue post-harvest.
  • Ethanol Production: Contains sucrose, glucose, and fructose for bioethanol.

Recommendations for Investment and Awareness

• Underutilized Crop: Despite its potential, sweet sorghum is not widely cultivated or researched in Africa.
• Government Role: Use agriculture extension services to promote awareness and benefits of sweet sorghum.
• Research and Development: Invest in developing recipes and industrial products to enhance the feasibility of sweet sorghum farming.
• Global Examples: Successfully cultivated in the US, Brazil, and China.

Source: DTE

5. The ‘chilling cover-up’ of the U.K.’s infected blood scandal

Sub: Science and tech

Sec: Health

Context:

• The Infectious Blood Inquiry led by former judge Brian Langstaff catalogs preventable failures by doctors and successive governments that led to decades-long treatment disasters in the U.K.

About the scandal:

• Between the 1970s and 1990s, more than 30,000 people were infected with HIV, Hepatitis C and Hepatitis B after receiving contaminated blood and blood products imported from the U.S.
• This made it the “worst treatment disaster” in the history of Britain’s state-funded National Health Service (NHS).

Key highlightings of the investigation:

• The public inquiry in the UK was commissioned in 2017 to examine the circumstances in which men, women, and children were treated by National Health Services.
• The blood scandal revealed failures at an individual, collective and systemic level.
• The affected included two groups: those with hemophilia (and similar blood disorders), and people who received blood transfusions during surgeries and childbirth.
• At least 3,000 people have died due to receiving infected blood.
• Deaths and infections linked to contaminated blood were also recorded in Australia, Canada, China, France, Ireland, Italy, Japan, Portugal, and the U.S.

What is Haemophilia?

• Hemophilia is a rare disorder in which the blood doesn’t clot in the typical way because it doesn’t have enough blood-clotting proteins (clotting factors). 
• This results in people bleeding for a longer time after an injury, easy bruising, and an increased risk of bleeding inside joints or the brain.

There are two main types of hemophilia: 

• Hemophilia A, which occurs due to low amounts of clotting factor VIII, and
• Haemophilia B, which occurs due to low levels of clotting factor IX.
• They are typically inherited from one’s parents through an X chromosome carrying a nonfunctional gene.
• Most commonly found in men, hemophilia can affect women too, though very rarely.
• A woman would need to inherit two affected X chromosomes to be affected, whereas a man would only need one X chromosome affected.
• Haemophilia C, which occurs due to low levels of factor XI, Von Willebrand disease, which occurs due to low levels of a substance called von Willebrand factor, and parahemophilia, which occurs due to low levels of factor V

Treatment:

• Up until the 1970s, treatment options included administering the frozen blood product cryoprecipitate. It carried a low risk of passing on an infection since it was formulated from a single blood donation, but cryo was hard to store and harder to administer to patients.
• Enter Factor VIII, a revolutionary ‘wonder treatment’ made using concentrating pooled plasma from tens of thousands of donors.
• Factor VIII had a high risk of infection.
• Even one blood sample, if infected with HIV or Hepatitis C, could contaminate the entire batch.

Other Blood related infections:

• The agent for Hepatitis C was identified in 1988, and the first case of AIDS in the U.K. was recorded in 1981.
• Research as early as the 1940s shows transfusions or the use of plasma could transmit “serum hepatitis,” which could be fatal or lead to long-term diseases such as liver failure and cancer.

About Hepatitis:

• Hepatitis is an inflammation of the liver that can be caused by various infectious viruses and non-infectious agents, leading to potentially fatal health issues.
• There are five main types of the hepatitis virus—A, B, C, D, and E.
• Each type causes liver disease but varies in transmission modes, illness severity, and geographic prevalence.
• Types B and C are particularly significant as they often lead to chronic conditions and are the major causes of liver cirrhosis, liver cancer, and deaths related to viral hepatitis.
• There is no vaccine for hepatitis C.
•  Patients with the hepatitis C virus can recover completely.
•  Hepatitis B is dangerous because it is a “silent infection,” which means it can infect people without them knowing it. 

About HIV:

• HIV attacks CD4, a type of White Blood Cell (T cells)in the body’s immune system. 
• T cells are those cells that move around the body detecting anomalies and infections in cells.
• After entering the body, HIV multiplies itself and destroys CD4 cells, thus severely damaging the human immune system. Once this virus enters the body, it can never be removed.
• The CD4 count of a person infected with HIV reduces significantly. In a healthy body, CD4 count is between 500- 1600, but in an infected body, it can go as low as 200.
• Weak immune system makes a person prone to opportunistic infections and cancer. It becomes difficult for a person infected with this virus to recover from even a minor injury or sickness.
• HIV can be treated and prevented with antiretroviral therapy (ART).
• Untreated HIV can progress to AIDS, often after many years.

6. Karnataka govt seeks cancellation of MP Prajwal Revanna’s diplomatic passport

Sub: Polity

Sec: legislation in news

Tags: diplomatic passport

Context:

• Karnataka home minister urges Centre to cancel Hassan MP Prajwal Revanna’s diplomatic passport in a high-profile scandal.

More on news:

• The Special Investigation Team (SIT) wrote to the Ministry of External Affairs (MEA), seeking the cancellation of his diplomatic passport.
• This happened after the Special Court for Elected Representatives, Bengaluru, issued an arrest warrant against Prajwal in a rape case registered by a former domestic help in their house on April 28.

What is a diplomatic passport? Who can get one?

• Unlike normal passports, which have dark blue covers and are valid for 10 years (for adults), diplomatic passports have maroon covers, and are valid for five years or less.
• Holders of such passports are entitled to certain privileges and immunities as per the international law.
• Various immunities available to diplomatic passport holders are immunity from arrest, detention, and certain legal proceedings in the host country.
• The MEA’s Consular, Passport & Visa Division issues diplomatic passports (‘Type D’ passports) to people falling in  broadly five categories:
  • those with diplomatic status;
  • government-appointed individuals traveling abroad for official business;
  • officers working under the branches A and B of the Indian Foreign Service (IFS), normally at the rank of Joint Secretary and above; and
  • relatives and immediate family of officers employed in IFS and MEA.
  • Diplomatic passports are also issued to select individuals who are authorized to undertake official travel on behalf of the government.
  • This includes union ministers and MPs who often travel abroad representing the government. The validity of these passports is concurrent with the term of the MP.

What is Passport Act:

• The Passports Act is an act of the Parliament of India , for the issue of passports and travel documents, to regulate the departure from India of citizens of India and for other persons and for matters incidental or ancillary thereto.
• The Act applies to the whole of India extending to citizens of India living outside the country.
• The Act replaced the Indian Passport Ordinance 1967 and was enacted by Act 15 of 1967 with retrospective effect from 5 May 1967.
• The act describes the procedures in getting an Indian passport, which replaced the British Indian passport and The Passport Act of 1920.

Various types of passports in the country:

Physical/offline passports

Blue personal passport or type P Passport

• The Type P passport is a personal passport issued to Indian citizens for personal travel purposes. It is the most common passport type in India.
• Its dark blue cover characterizes it, and is available to individuals who have completed their education beyond the 10th grade.
• This passport lets holders travel internationally for leisure, business, education, or other personal reasons.

White service passport

• The white service passport is designated for individuals employed in various government services or public sector organizations, excluding diplomatic or consular officials.
• This passport, distinguished by its white cover, is issued to government officials and employees traveling abroad for official duties, conferences, or training programs.
• IAS (Indian Administrative Service) officers, along with other government officials and employees traveling abroad for official duties, are typically issued the white service passport.

Orange emigration passport

• The orange emigration passport is specifically designed for Indian citizens who are emigrating to other countries for employment opportunities.
• It is issued to individuals who have not completed their formal education and seek overseas employment.

Maroon diplomat passport

• India’s diplomatic passport is exclusively issued to diplomats, consular officers, and other high-ranking government officials representing India abroad.
• It is characterized by its maroon cover and grants holders diplomatic immunity and privileges per international conventions.

Yellow passports:

• Tibetans seeking refugee status in India are commonly issued the yellow Indian passport as their identity card.
• For individuals without a formal education, particularly those who have only completed up to the 10th grade, the appropriate passport to apply for would be the orange passport, also known as the Emigration Check Required (ECR) passport.

Online or e-passports

• India has introduced e-passports as part of its efforts to enhance the security of its travel documents.
• E-Passports, also known as biometric passports, contain an electronic chip. This chip holds the biometric information of the passport holder, which can include fingerprint and iris data alongside the traditional personal details found in a passport.
• The introduction of e-passports aims to streamline the immigration process through automated identity verification, reduce passport forgery, and enhance overall security.

7. IMF Warns France to Cut Debt, Sees Higher Deficit

Sub: Economy

Sec: Fiscal policy

TAG: Debt

Context:

• The IMF urged France to take more measures this year to reduce its debt load, warning that the budget deficit will be sharply higher than forecast in 2027.

More on news:

• The IMF said that France’s deficit will reach 5.3 percent of gross domestic product this year, slightly higher than the 5.1 forecast by the government.
• Consolidation measures are recommended over the medium term, starting in 2024 in order to bring debt on a downward trajectory, while making space for targeted growth-enhancing spending

About IMF:

• The International Monetary Fund, or IMF, promotes international financial stability and monetary cooperation.
• It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty.
• It is a major financial agency of the United Nations, and an international financial institution funded by 190 member countries, with headquarters in Washington, D.C.
• The organization was formed on Established in 27 Dec 1945.

What is Fiscal Deficit?

Fiscal deficit refers to the shortfall in a government’s revenue when compared to its expenditure.

When a government’s expenditure exceeds its revenues, the government will have to borrow money or sell assets to fund the deficit.

What is Fiscal surplus?

• When a government runs a fiscal surplus, on the other hand, its revenues exceed expenditure.
• It is, however, quite rare for governments to run a surplus.
• Most governments today focus on keeping the fiscal deficit under control rather than on generating a fiscal surplus or on balancing the budget.

Difference Between debt and deficit: 

• The fiscal deficit should not be confused with the national debt.
• The national debt is the total amount of money that the government of a country owes its lenders at a particular point in time.
• The national debt is usually the amount of debt that a government has accumulated over many years of running fiscal deficits and borrowing to bridge the deficits.

8. The World Health Assembly to prepare a global toolkit for future pandemics

Sub: IR

Context:

• The World Health Assembly will convene from May 27 to June 1 to discuss amendments to the International Health Regulations.

Key Amendments:

• A package of amendments, based on 300 proposals made by member countries after the pandemic, will be the star of the agenda.
• These amendments to the International Health Regulations will target improving the ability of countries to respond to public health emergencies of international concern.

About The International Health Regulations (IHR):

• The International Health Regulations (IHR) was first adopted by the WHA in 1969 and last revised in 2005.
• It was aimed  to maximize collective efforts to manage public health events while minimizing disruption to travel and trade. 
• There are 196 State Parties to the IHR, comprising all 194 WHO Member States plus Liechtenstein and the Holy See.
• The IHR provides an overarching legal framework that defines countries’ rights and obligations in handling public health events and emergencies that have the potential to cross borders.
• They also introduce important safeguards to protect the rights of travelers and other persons in relation to the treatment of personal data, informed consent and non-discrimination in the application of health measures under the Regulations.
• The IHR is an instrument of international law that is legally binding on 196 countries.
• The IHR focuses on building countries’ capacities to detect and respond to public health events, which could take on international dimensions.
• The draft pandemic accord focuses on a coordinated international response to pandemics, with equitable access to vaccines, therapeutics, and diagnostics at the center.

Various Surveillance systems in IHR:

• The IHR requires that all countries have surveillance systems capable of detecting acute public health events in a timely manner.
• The goal of country implementation is to limit the spread of health risks to neighboring countries and to prevent unwarranted travel and trade restrictions.

About World Health Assembly:

• The World Health Assembly is the forum through which the World Health Organization is governed by its 194 member states. 
• It is the world’s highest health policy setting body and is composed of health ministers from member states.
• The members of the WHA generally meet every year in May in Geneva at the Palace of Nations, the location of WHO Headquarters.
• The main tasks of the WHA are to decide major policy questions, as well as to approve the WHO work programme and budget and elect its Director-General (every fifth year) and annually to elect ten members to renew part of its executive board.
• Its main functions are to determine the policies of the Organization, supervise financial policies, and review and approve the proposed programme budget.

9. Rising Interest, Falling Savings: Substantiating the Article with Data and Figures

Sub: Economy

Sec: National Income

TAG: Falling savings 

Household net financial savings as a percentage of GDP have seen a decline due to increased borrowing and structural economic shifts, rather than just changes in savings patterns. This has raised concerns about financial stability and the need for macroeconomic policies that support household income growth.

Key Points from the Article:

• Decline in Household Financial Savings:
• The household net financial savings to GDP ratio declined by 2.5 percentage in FY22-23.
• The increase in physical savings to GDP ratio was only 0.3 percentage points.
• The borrowing to GDP ratio increased by 2.5 percentage, resulting in a net decline in overall household savings.
• Structural Shifts:
• This shift indicates a structural change in the economy, reflecting higher borrowing and increased financial stress on households.
• Higher Borrowing and Interest Burden:
• The net financial savings to GDP ratio declined while borrowing increased, indicating higher debt levels and interest payment burdens.
• Fisher Dynamics:
• The debt-income ratio has risen due to higher interest rates and lower nominal income growth.
• This phenomenon, explained by Irving Fisher, indicates that when income growth lags behind interest rates, households face increased financial stress.
• Macroeconomic Challenges:
• Interest Rate and Income Growth Gap: There is a need to reduce the gap between interest rates and income growth to slow down the debt-income ratio’s growth.
• Aggregate Demand: High interest payments and debt commitments may lead households to cut consumption, reducing overall demand in the economy.
• Policy Implications: To address these challenges, macroeconomic policies should aim to stimulate household income growth, alongside managing inflation and government debt targets.

Supporting Data and Figures:

• Changes in Components of Savings to GDP Ratio (Figure 1):
• Net Financial Savings to GDP Ratio: Declined by 2.5 percentage points.
• Physical Savings to GDP Ratio: Increased by 0.3 percentage points.
• Borrowing to GDP Ratio: Increased by 2.5 percentage points.
• Overall Savings to GDP Ratio: Declined by 1.7 percentage points.
• Lending Rate and Household Growth (Table 1a):
• Average Lending Rate (RBI):

1. 2019-20 to 2021-22: 9.3%
2. 2019-20 to 2022-23: 9.4%

• Average Household GDI Growth Rate:

1. 2019-20 to 2021-22: 8.0%
2. 2019-20 to 2022-23: 9.3%

• Household GDI Growth Rate minus Average WALR:

1. 2019-20 to 2021-22: -1.3%
2. 2019-20 to 2022-23: -0.1%

Current Economic Context:

• Inflation-Adjusted Growth of Household Savings: Remained positive during 2022-23.
• GNI Growth Rate in 2023-24: Lower than the average WALR.
• Debt Servicing Ratio: India’s debt servicing ratio is still lower than that of many other countries.

Analysis:

• The data indicates a significant structural shift in the household savings pattern, with increased borrowing and financial stress.
• The declining household net financial savings to GDP ratio and the rise in borrowing underscore the financial strain on households.
• The average growth rate of household disposable income being lower than the lending rate indicates higher financial burdens and increased debt levels.

Implications:

The declining household financial savings to GDP ratio and increased borrowing highlight the financial vulnerabilities of households. The growing debt-income ratio and higher interest payment burdens point to deeper structural issues that require comprehensive macroeconomic policies focused on supporting household income growth and stabilizing the economy. This approach will be crucial in mitigating financial stress and sustaining economic growth.

Debt Servicing Ratio measures the proportion of household income required to meet debt obligations, including both interest and principal payments.

Significance:

• Indicates the financial burden of debt on households.
• A lower DSR means households can manage their debt payments comfortably.
• A higher DSR suggests households are under financial stress, as a larger share of their income is needed for debt repayment.

Fisher Dynamics

Fisher dynamics, named after economist Irving Fisher, describe the relationship between interest rates, income growth, and the debt-to-income ratio.

Key Components:

1. Interest Rate (i): The cost of borrowing money.
2. Nominal Income Growth Rate (g): The rate at which household income is increasing.
3. Debt-Income Ratio (D/Y): The ratio of total household debt (D) to household income (Y).

Mechanism:

• Rising Debt-Income Ratio: If the interest rate (i) is higher than the nominal income growth rate (g), the debt-to-income ratio (D/Y) will increase over time, leading to higher financial stress.
• Falling Debt-Income Ratio: If the income growth rate (g) exceeds the interest rate (i), the debt-to-income ratio (D/Y) can decrease, easing financial stress.

10. After RBI Bonanza, Centre to Rake in More Cash via Critical Mineral, Spectrum Auctions

Sub: Economy

Sec : Fiscal policy

Following a substantial surplus transfer from the Reserve Bank of India (RBI), the Indian government is set to receive further financial boosts through spectrum and critical mineral auctions.

Additionally, improved performance by Central Public Sector Units (CPSUs) and Public Sector Banks (PSBs) is expected to contribute significantly to the public exchequer.

Key Points:

• Record RBI Surplus Transfer:
• The RBI has approved a record transfer of ₹2,10,874 crore to the central government for the financial year 2023-24.
• Spectrum Auction:
• The Department of Telecommunications (DoT) will conduct a telecom spectrum auction early next month.
• The DoT expects to raise at least ₹40,000 crore from the auction based on the earnest money deposited by telecom service providers (TSPs) last week.
• A total of 10,513.15 MHz of spectrum worth ₹96,317.65 crore is being auctioned.
• Major TSPs such as Bharti Airtel, Reliance Jio, and Vodafone-Idea have pre-qualified as bidders with earnest money deposits of ₹1,050 crore, ₹3,000 crore, and ₹300 crore respectively.
• Critical Mineral Auction:
• The government plans to generate revenue from the sale of critical mineral blocks.
• New rules propose a cap on upfront payments and performance-security payments at ₹500 crore.
• Performance security for a composite license is capped at ₹250 crore before issuing the license and ₹500 crore before issuing a mining lease.
• The first tranche of 20 critical-mineral blocks was put up for auction in November, with winners of 6-7 blocks expected to be announced around July. Another seven blocks received fewer than three bidders and were re-auctioned in March. The Centre values the first 20 blocks at ₹45,000 crore.
• Dividends from CPSUs and PSBs:
• Enhanced profitability of CPSUs and a consistent dividend policy are expected to yield substantial dividends for the government.
• According to Finance Ministry guidelines from 2016, CPSUs should pay an annual dividend of 30% of profit after tax (PAT) or 30% of the government’s equity, whichever is higher.
• A 2020 advisory suggests that CPSUs making higher payouts may consider paying quarterly dividends.

Implications for Fiscal Consolidation:

• These anticipated cash inflows will likely be factored into the full Budget expected in July after the new government is sworn in.
• Economists suggest that these revenues will aid in fiscal consolidation, potentially revising the projected fiscal deficit for FY25 from 5.1% of GDP as outlined in the Interim Budget.

The combination of these financial strategies underscores the government’s proactive measures to bolster its fiscal position through diversified revenue streams, enhancing economic stability and growth prospects.

Components of Government Budget

The government budget is broadly divided into two main components: the Revenue Budget and the Capital Budget.

1. Revenue Budget

The Revenue Budget consists of Revenue Receipts and Revenue Expenditure. These are related to the regular functioning of the government and do not directly impact its assets or liabilities.

Revenue Receipts: Income earned by the government through its routine operations.

• Components:
  • Tax Revenues:
    • Direct Taxes: Taxes directly levied on individuals and corporations, such as income tax, corporate tax, and wealth tax.
    • Indirect Taxes: Taxes on goods and services, such as excise duty, customs duty, and GST (Goods and Services Tax).
  • Non-Tax Revenues:
    • Interest Receipts: Income from loans given by the government to states, public sector enterprises, and other governments.
    • Dividends and Profits: Earnings from public sector enterprises where the government has an equity stake.
    • Fees and Charges: Income from various services provided by the government.
    • Fines and Penalties: Revenue from fines and penalties imposed by various government agencies.
    • Grants and Contributions: Financial assistance received from other governments and international organizations.

Revenue Expenditure:

• These are expenditures that do not result in the creation of assets or reduction of liabilities. They are incurred for the normal functioning of government departments and maintenance of existing assets.
• Components:
  • Salaries and Wages: Payments to government employees for their services.
  • Interest Payments: Payments on the interest for government borrowings.
  • Subsidies: Financial assistance to support specific sectors, such as agriculture, food, and fuel.
  • Pensions: Payments to retired government employees.
  • Administrative Expenses: Costs associated with the day-to-day administration and operation of government departments.
  • Grants: Financial assistance given to state governments, local bodies, and other institutions.

2. Capital Budget

The Capital Budget includes Capital Receipts and Capital Expenditure. These are related to the investment activities of the government and have a direct impact on its assets and liabilities.

Capital Receipts:

• These are receipts that either create liabilities or reduce assets. They are mainly obtained through borrowing or asset sales.
• Components:
  • Borrowings:
    • Market Loans: Loans raised by issuing government securities in the domestic or international markets.
    • External Loans: Loans from foreign governments and international organizations.
    • Short-term Borrowings: Borrowings through treasury bills and other short-term instruments.
  • Disinvestment Receipts: Proceeds from the sale of government’s stake in public sector enterprises.
  • Recovery of Loans: Repayments received from states, public sector enterprises, and other entities.
  • Small Savings and Provident Funds: Funds mobilized through small savings schemes and provident funds.

Capital Expenditure:

• These are expenditures that lead to the creation of assets or reduction of liabilities. They are typically long-term investments in infrastructure and development projects.
• Components:
  • Infrastructure Projects: Investments in building and upgrading physical infrastructure like roads, bridges, ports, airports, and railways.
  • Public Health and Education: Investments in hospitals, schools, colleges, and universities.
  • Defence: Expenditure on acquiring new defense equipment and infrastructure.
  • Loans to States and UTs: Financial assistance provided to state governments and union territories for various development projects.
  • Repayment of Borrowings: Payments made to reduce the principal amount of government debt.
  • Equity Investments: Capital infusion in public sector enterprises and financial institutions.

Summary

The Revenue Budget focuses on the regular income and routine expenditure of the government, ensuring smooth functioning and maintenance of services. The Capital Budget deals with investment in long-term assets and infrastructure, crucial for the economic development and growth of the country.

11. BSE Calls Off Merger with NSE Arm at IFSC

Sub: Economy

Sec: Capital market

TAG: BSE, NSE

The planned merger between India INX and NSE IX, the stock exchange subsidiaries of BSE and NSE operating at the International Financial Services Centre (IFSC), has been called off.

Key Points:

• Merger called-off:
  • BSE decided to call off the merger discussions with NSE IX.
• BSE’s Stance:
  • BSE’s board assessed the merger proposal thoroughly and concluded that it is more beneficial to invest in and develop their exchange independently.
• Regulatory Response:
  • IFSCA mentioned that as long as BSE is committed to investing in and expanding its products at the IFSC, the authority supports their decision.

This development signifies BSE’s strategic choice to focus on independent growth rather than merging with NSE IX at the IFSC.

What are BSE and NSE?

BSE is short for the ‘Bombay Stock Exchange’. Founded in 1875, BSE is the first and one of the largest securities markets based out of Mumbai in India. NSE is short for the ‘National Stock Exchange’. Founded in 1972, it offers a country-wide stock market similar to BSE. While BSE is older, NSE is larger with greater daily trades and a higher turnover rate.

What are Sensex and Nifty?

While BSE and NSE are stock markets, both Sensex and Nifty are stock market indices. A stock market index summarises the movements of the market in real-time. A stock market index is created by grouping together similar kinds of stock. Sensex, which stands for ‘Stock Exchange Sensitive Index’, is the stock market index for the Bombay Stock Exchange. Nifty stands for ‘National Stock Exchange Fifty’ and is the index for the National Stock Exchange.