Daily Prelims Notes 25 June 2024

Daily Prelims Notes

25 June 2024

1. Kerala Assembly passes resolution to rename State as ‘Keralam’

Sub: Polity

Sec: Constitution

Context:

• The Kerala Legislative Assembly unanimously passed a resolution on June 24 to amend the Constitution and change the state’s name from ‘Kerala’ to ‘Keralam’.

Details:

• Chief Minister Pinarayi Vijayan moved the resolution, invoking Article 3 of the Indian Constitution to update the First Schedule.
• This effort follows a previous attempt from last year, which was returned by the Central government due to procedural issues.
• Initially, the state aimed to amend the names in all languages listed in the Eighth Schedule of the Constitution to ‘Keralam’.
• However, upon advice from the Union Home Ministry, the focus shifted to only amending the First Schedule, leading to a revised resolution passed on August 9, 2023. The change is intended to align the official name with the Malayalam pronunciation.

The procedure of renaming the state can be initiated by either the Parliament or the State Legislator and the procedure is as follows:

• The renaming of a state requires Parliamentary approval under Articles 3 and 4 of the Constitution.
• A bill for renaming a state may be introduced in the Parliament on the recommendation of the President.
• Before the introduction of the bill, the President shall send the bill to the respective state assembly for expressing their views within a stipulated time. The views of the state assembly are not binding, neither on the President nor on the Parliament.
• On the expiry of the period, the bill will be sent to the Parliament for deliberation. The bill in order to take the force of a law must be passed by a simple majority.
• The bill is sent for approval to the President. After the approval of the said bill, the bill becomes a law and the name of the state stands modified.

Article 3 of the constitution:

• Formation of new States and alteration of areas, boundaries or names of existing States:
• Parliament may by law:
  • Form a new State by separation of territory from any State or by uniting two or more States or parts of States or by uniting any territory to a part of any State
  • Increase the area of any State
  • Diminish the area of any State
  • Alter the boundaries of any State
  • Alter the name of any State
• According to Article 4 which deals with Laws made under articles 2 and 3 to provide for the amendment of the First and the Fourth Schedules and supplemental, incidental and consequential matters provides that law made under Article 2 and 3 shall not be deemed to be an amendment of this Constitution for the purposes of article 368.

Why Keralam

• Kerala is the English word for the Malyali Keralam. There are several theories regarding its etymological roots. The earliest mention of the word can be found in Emperor Ashoka’s Rock Edict II, dated to 257 BCE. The edict reads: “Everywhere in the dominions of King Priyadarsin, Beloved of the gods, as well as those of his frontier sovereigns, such as the Chodas, Pandyas, Satiyaputra, Ketalaputra [Keralaputra]…” (translated by epigraphist D R Bhandarkar).
• Keralaputra, literally “son of Kerala” in Sanskrit, refers to the dynasty of the Cheras, one of the three main kingdoms of southern India. German linguist Dr Herman Gundert noted that the word ‘keram’ is Canarese (or Kannada) for ‘cheram’, which is used to refer to the coastal land between Gokarna (in Karnataka) and Kanyakumari (Tamil Nadu, India’s southern tip). The origin of the term could possibly be from ‘cher’, which means to join in Old Tamil.

Story of statehood

• The demand for a united Malayalam-speaking state first gathered momentum in the 1920s, and aimed to integrate the princely states of Travancore and Cochin, and the Malabar district of the Madras Presidency.
• After independence, on July 1, 1949 the two Malayalam-speaking princely states were integrated to form the state of Travancore-Cochin. The state of Kerala was finally created after the State Reorganisation Commission’s recommendation creating states on linguistic-bases. The Commission under Syed Fazl Ali recommended the inclusion of the district of Malabar and the taluk of Kasargod to the Malayalam-speaking people’s state.
• It also recommended the exclusion of the four Southern taluks of Travancore viz Tovala, Agastheeswaram, Kalkulam and Vilayankode together with some parts of Shenkottai (all these taluks now part of Tamil Nadu).
• The state of Kerala came into being on November 1, 1956.

Source: TH

2. Human dignity versus religious practices

Sub: Polity

Sec: Constitution

Context:

• On May 17, the Madurai Bench of the Madras High Court allowed the resumption of “annadhanam” (offering free food) and “angapradakshanam” (circumambulation) at Nerur Sathguru Sadasiva Brahmendral’s final resting place on the eve of his Jeeva Samathi day.
• The practice of “angapradakshanam” by rolling on plantain leaves left by devotees after eating was halted by a 2015 Division Bench order in a public interest litigation (PIL) petition.

Madras HC’s Ruling:

• Justice G.R. Swaminathan reinstated the practice by invoking Article 25(1) of the Constitution, which guarantees the right to freely profess, practice, and propagate religion.
• He linked the belief in deriving spiritual benefits from the practice to the right to privacy, a fundamental right under the Constitution, equating “spiritual orientation” with “gender and sexual orientation.”
• The judge argued that actions should not affect the rights and freedoms of others and are protected as long as they do not cross this boundary.
• He sums it up by holding that the customary practice is protected as a fundamental right under Articles 14, 19(1)(a), 19(1)(d), 21 and 25(1) of the Constitution.

Division Bench’s 2015 Order and Criticism:

• The 2015 Division Bench order stopped the practice, citing violations of human dignity and the rights to equality and life under Articles 14 and 21 of the Constitution.
• The Division Bench relied on a similar case from Karnataka pending in the Supreme Court, where a similar practice at the Kukke Subramanya temple was stayed in December 2014.

State’s Duty

• The State has a duty to change religious and customary practices that are unhealthy, harmful, and undermine human dignity.
• Instead of outright rejection, the State could educate believers through reason and rational discussions to foster a community inclined towards inquiry and humanism.

About Article 25 of Indian Constitution:

• Article 25 says that all persons are equally entitled to freedom of conscience and the right to freely profess, practice, and propagate religion. The implications of these are:
• Freedom of conscience: Inner freedom of an individual to mould his relation with God or Creatures in whatever way he desires.
  • Right to profess: Declaration of one’s religious beliefs and faith openly and freely.
  • Right to practice: Performance of religious worship, rituals, ceremonies, and exhibition of beliefs and ideas.
  • Right to propagate: Transmission and dissemination of one’s religious beliefs to others or exposition of the tenets of one’s religion. But it does not include the right to convert another person to one’s own religion. Forcible conversions impinge on the ‘freedom of conscience’ guaranteed to all the persons alike.
• Thus, Article 25 covers not only religious beliefs (doctrines) but also religious practices (rituals).
• Moreover, these rights are available to all persons–citizens as well as non-citizens.
• However, these rights are subject to public order, morality, health, and other provisions relating to fundamental rights.

Source: TH

3. How the PESA has boosted forest conservation in India

Sub: Polity

Sec: Legislation in news

Policy Approach to Conservation in India:

• India faces conflicts between conservation and resource extraction by local communities, and conservation versus economic development.
• The state’s approach has been inconsistent, often favouring big capital over local communities due to centralised political power.
• Conservation efforts tend to be top-down, leading to loss of access to traditional forest lands for local communities.

Proposed Policy Solution:

• Mandated political representation for marginalised communities boosts both forest conservation and their economic interests.
• There should be a combination of decentralisation and democratisation, where local communities have actual decision-making power in resource management.

Methodology:

• The study draws on the Panchayat (Extension to Scheduled Areas) Act (PESA), passed in 1996, which mandates representation for Scheduled Tribes (ST) in local government councils in Scheduled Areas.
• The authors use a “difference-in-differences” framework, comparing villages with and without mandated ST representation and tracking forest cover changes using remote-sensing data from 2001-17.
• This paper uses “remote-sensing microdata that has recently become available from satellites such as LANDSAT, Sentinel, and DMSP.”
• They use two such datasets — the MEaSURES Vegetation Continuous Fields (VCF), and the Global Forest Cover (GFC) dataset for 2001-17.

Findings:

• Mandated ST representation led to an average increase in tree canopy by 3% per year and a reduction in deforestation rates, particularly in areas with more forest cover initially.
• The positive impact on forest conservation began only after the introduction of PESA elections with ST quotas.
• The paper finds that prior to PESA, areas close to mines experienced higher rates of deforestation. But the introduction of PESA elections led “to a greater reduction in deforestation for PESA villages close to mines”.
• The study found that the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (FRA) had no additional conservation impact beyond that of PESA.

Mechanisms:

• Empowered ST communities had economic incentives to protect forests, opposing commercial timber and mining.
• Increased ST representation enabled resistance to mining and large-scale commercial operations, reducing deforestation near mines.

Conclusion

• Mandated political representation for marginalised communities is effective for conservation.
• A single institution empowering marginalised voices is better for balancing development and conservation goals.
• The study offers promising evidence for policymakers to protect the rights and welfare of forest-dwelling ST communities while achieving conservation objectives.

What is the PESA Act 1996, and why was it enacted?

• The Panchayats Extension to Scheduled Areas (PESA) Act 1996 was brought in as a response to the long-standing demands of the tribal communities in India for greater autonomy and control over their own affairs.
• Enacted on 24 December 1996 to enable tribal self-rule in fifth schedule areas. The Act extended the provisions of Panchayats to the tribal areas of Fifth Schedule states.
• The PESA Act drew inspiration from the provisions of the 73rd and 74th amendments of the Indian constitution.
• It aimed to provide greater autonomy to the Scheduled areas, which are predominantly tribal in nature, and protect their rights over land and forest.
• The PESA Act gives special powers to the Gram Sabhas in Scheduled Areas, especially for managing natural resources.

What are the significant provisions of the PESA Act?

• Gram Sabha: The PESA Act establishes the Gram Sabha, a forum for the participation of the community in the development process. The Gram Sabha is responsible for the identification of development projects, the preparation of development plans, and the implementation of these plans.
• Village-level institutions: The Act provides for establishing village-level institutions to carry out development activities and provide basic services to the community. These institutions include the Gram Panchayat, the Gram Sabha, and the Panchayat Samiti.
• Powers and functions: The PESA legislation gives the Gram Sabha and the Gram Panchayat significant powers and functions in relation to the management of natural resources, the protection of the environment, and the regulation of economic activities.
• Consultation: According to the Act requires that the Gram Sabha be consulted before any development projects or activities are undertaken in the Scheduled Areas.
• Funds: The Act allows transferring funds to the Gram Sabha and the Gram Panchayat to enable them to perform their functions.
• Land: The Act provides for the protection of the land rights of the tribal communities in the Scheduled Areas and requires that their consent be obtained before any land is acquired or transferred.
• Cultural and social practices: The Act protects the cultural and social practices of the tribal communities in the Scheduled Areas and prohibits any interference in these practices.

Source: TH

4. What is in Great Nicobar, site of NITI Aayog’s mega project?

Sub: Polity

Sec: Species in news

Great Nicobar: Location and Environment

• Great Nicobar is the southernmost tip of India, part of the Andaman and Nicobar archipelago with over 600 islands.
• It is hilly, covered with lush rainforests, and receives about 3,500 mm of annual rainfall.
• The island hosts endangered and endemic species like the giant leatherback turtle, Nicobar megapode, Great Nicobar crake, Nicobar crab-eating macaque, and Nicobar tree shrew.
• It has an area of 910 sq km with mangroves and Pandan forests along its coast.

Giant leatherback turtle	It is the largest turtle in the world. It is the only species of sea turtle that lacks scales and a hard shell. They are named for their tough rubbery skin and have existed in their current form since the age of the dinosaurs. These turtles are highly migratory and can swim over 10,000 miles a year between nesting and foraging grounds. They are also accomplished divers with the deepest recorded dive reaching nearly 4,000 feet deeper than most marine mammals. It has a unique thermoregulatory adaptation that allows them to maintain core body temperatures at extremely cold depths. Distribution: It is found in every ocean except the Arctic and Antarctic. They have the widest global distribution of any reptile, with nesting mainly on tropical or subtropical beaches. Conservation status IUCN: Endangered CITES: Appendix I
Nicobar megapode	The Nicobar megapode or Nicobar scrubfowl (Megapodius nicobariensis) is a megapode found in some of the Nicobar Islands (India). Like other megapode relatives, it builds a large mound nest with soil and vegetation, with the eggs hatched by the heat produced by decomposition. The Nicobar Islands are on the edge of the distribution of megapodes, well separated from the nearest ranges of other megapode species. Being restricted to small islands and threatened by hunting, the species is vulnerable to extinction. The 2004 tsunami is believed to have wiped out populations on some islands and reduced populations on several others.
Great Nicobar crake	Usually found near water bodies, the Great Nicobar Crake is a thick and short bird, with heavy legs and moderately longer toes and short claws. It has a moderately long neck and a short tail. The presence of a pale green bill, heavy orange-red legs and black banded-under parts together makes it different from other known members of Water Crakes.
Nicobar crab-eating macaque	The Nicobar long-tailed macaque (Macaca fascicularis umbrosa, popularly known as the Nicobar monkey) is a subspecies of the crab-eating macaque (M. fascicularis), endemic to the Nicobar Islands in the Bay of Bengal. This primate is found in three of the Nicobar Islands—Great Nicobar, Little Nicobar and Katchal—in biome regions consisting of tropical and subtropical moist broadleaf forests. IUCN: Vulnerable
Nicobar tree shrew	The Nicobar treeshrew (Tupaia nicobarica) is a treeshrew species within the Tupaiidae. It is endemic to the Nicobar Islands where it inhabits the islands’ rainforests. It is threatened by habitat loss. Although previously listed as an endangered species, the Nicobar treeshrew is now commonly found in its appropriate habitats. The Nicobar treeshrew was first described by Johann Zelebor in 1868. The Nicobar treeshrew only occupies the Indian Islands of Great Nicobar and Little Nicobar and can be found on the highest points of these two islands, 640 m above sea level.

Communities on Great Nicobar:

• Shompen: Approximately 250 individuals, living mostly in interior forests, isolated, hunter-gatherers, classified as a Particularly Vulnerable Tribal Group (PVTG).
• Nicobarese: Engage in farming and fishing, divided into Great Nicobarese (450 individuals, resettled in Campbell Bay post-2004 tsunami) and Little Nicobarese (850 individuals, living in Afra Bay, Pulomilo, and Little Nicobar).

Settler Population:

• The majority are settlers from mainland India, including retired military servicemen and their families settled between 1968 and 1975 from various states (Punjab, Uttar Pradesh, Bihar, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu).
• Around 330 households settled in seven revenue villages on the east coast: Campbell Bay, Govindnagar, Jogindernagar, Vijaynagar, Laxminagar, Gandhinagar, and Shastrinagar.
• Campbell Bay is an administrative hub with local offices.
• There were additional migrations of fisherfolk, labourers, businesspersons, and administrative staff post-2004 tsunami.
• The total population of settlers is approximately 6,000.

Source: TH

5. Flamingos under threat: Climate impact jeopardising delicate balance of Tanzania’s Lake Natron

Sub: Environment

Sec: Species in news

Threats to Flamingos at Lake Natron- Tanzania:

• Millions of pink flamingos transform Lake Natron, Tanzania, into a dazzling sight, but this is under threat due to human activities and climate change.
• Lake Natron and Lake Bogoria in Kenya, part of Africa’s Great Rift Valley, are hostile to most life but ideal for flamingos due to their caustic soda and hypersaline water.
• Lake Natron, a Ramsar site, has the perfect conditions for flamingos, but this balance is being disrupted.

Causes of Disruption:

• Factors like agriculture, pollution, and climate change are altering water levels and salinity, impacting flamingo nesting sites.
• Extreme weather causes flooding and salinity reduction, affecting algae growth which is crucial for flamingo food.
• Prolonged dry seasons concentrate salinity beyond algae tolerance, causing food shortages for flamingos.

Human Impact and Conservation Efforts:

• A proposed soda ash extraction project in 2006, abandoned in 2008, exemplifies ongoing threats to the ecosystem.
• Mining activities near the lake could force flamingos to abandon it due to disturbance, crucial for their nesting and reproduction.
• Local communities are educating about sustainable water practices to protect the flamingos and balance human-wildlife needs.
• Flamingos attract tourists, contributing significantly to Tanzania’s GDP and foreign exchange revenues.
• Flamingos across Africa’s Great Rift Valley face similar threats, making them vital environmental indicators.

Flamingo:

• Flamingos are a type of wading bird in the family Phoenicopteridae, which is the only extant family in the order Phoenicopteriformes.
• There are four flamingo species distributed throughout the Americas (including the Caribbean), and two species native to Afro-Eurasia.
• A group of flamingoes is called a “flamboyance”.
• Species: Six extant flamingo species are recognized by most sources and were formerly placed in one genus (have common characteristics) – Phoenicopterus.

Species	Geographic location
Greater flamingo (Phoenicopterus roseus)	Parts of Africa, S. Europe and S. and SW Asia (most widespread flamingo).
Lesser flamingo (Phoeniconaias minor)	Africa (e.g. Great Rift Valley) to NW India (most numerous flamingos).
Chilean flamingo (Phoenicopterus chilensis)	Temperate S. South America.
James’s or Puna flamingo (Phoenicoparrus jamesi)	High Andes in Peru, Chile, Bolivia and Argentina.
Andean flamingo (Phoenicoparrus andinus)	High Andes in Peru, Chile, Bolivia and Argentina.
American or Caribbean flamingo (Phoenicopterus ruber)	Caribbean islands, Caribbean Mexico, southern Florida, Belize, coastal Colombia, northern Brazil, Venezuela and Galápagos Islands.

Lake Natron:

• Lake Natron is a salt or alkaline lake located in the north Ngorongoro District of Arusha Region in Tanzania at the border with Kenya.
• It is in the Gregory Rift, which is the eastern branch of the East African Rift.
• The lake is within the Lake Natron Basin, a Ramsar Site wetland of international significance.
• It is the only regular breeding area for Africa’s lesser flamingoes, although this habitat is not protected and is under threat from planned development projects.

Lake Bogoria:

• Lake Bogoria (formerly Lake Hannington) is a saline, alkaline lake that lies in a volcanic region in a half-graben basin south of Lake Baringo, Kenya, a little north of the equator.
• Lake Bogoria, like Lake Nakuru, Lake Elementeita, and Lake Magadi further south in the Rift Valley, and Lake Logipi to the north, is home at times to one of the world’s largest populations of lesser flamingos. 
• The lake is a Ramsar site and Lake Bogoria National Reserve has been a protected National Reserve since November 29, 1973.
• Lake Bogoria is shallow (about 10 m depth), and is about 34 km long by 3.5 km wide, with a drainage basin of 700 km2. It is Located in Baringo County.

Source: DTE

6. Critical Minerals: First Six Blocks Awarded

Sub: Geography

Sec: External Sector

Key Points:

• New Auction Tranche:
  • Union Mines Minister G. Kishan Reddy introduced a fresh tranche of auctions for 21 blocks of critical and strategic minerals.
• First Six Blocks Awarded:
  • Winners announced for six blocks from the first auction held last November.
  • Mining activity in these blocks will focus on phosphorite, lithium, graphite, and manganese.
  • Locations: Odisha, Tamil Nadu, Uttar Pradesh, and Chhattisgarh.
• Offshore Mineral Auctions:
  • Auction process for offshore minerals to start within the first 100 days in office.
  • Initial auction will include 10 offshore blocks that have been identified.
• Government’s Commitment:
  • Mines Secretary emphasized that the awarded mines will begin production at the earliest possible.
  • Aim to achieve self-sufficiency in the import-dependent sector.

Highlights:

• Introduction of fresh auction for 21 critical and strategic mineral blocks.
• First six blocks awarded targeting key minerals like phosphorite, lithium, graphite, and manganese.
• Upcoming offshore mineral auctions to commence with 10 identified blocks.
• Government’s focus on quick production and self-sufficiency in critical minerals.

Key Facts about Critical Minerals:

• Essential for Modern Technologies and Economies: Critical minerals are vital for the functioning of modern technologies, economies, or national security.
• Supply Chain Risk: There is a risk that the supply chains of these minerals could be disrupted.

Dynamic Criticality:

• The ‘criticality’ of minerals changes over time as supply and societal needs shift.

Applications:

• Advanced Technologies: Used in mobile phones, computers, fiber-optic cables, semiconductors, banknotes, defense, aerospace, and medical applications.
• Low-Emission Technologies: Essential for electric vehicles, wind turbines, solar panels, and rechargeable batteries.
• Common Products: Crucial for products like stainless steel and electronics.

Examples of Critical Minerals:

• Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Lithium, Vanadium, etc.

Critical Minerals in India:

• List of 30 Critical Minerals: Includes Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE, Phosphorous, Potash, REE, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium, and Cadmium.

Rare Earth Elements (REE):

• Seventeen Elements: REE are a set of seventeen elements in the periodic table, including the fifteen lanthanides plus scandium and yttrium.
• Metals: REE are all metals, often referred to as the “rare earth metals.”

Abundance and Mining:

• Relatively Abundant: Despite being called “rare,” they are relatively abundant in the Earth’s crust.
• Mining Difficulty: They are difficult to mine due to their typically low concentrations in geologic deposits.

Properties and Sale:

• Similar Properties: Many similar properties cause them to be found together in geologic deposits.
• Oxide Compounds: Often sold as oxide compounds, hence also referred to as “rare earth oxides.”

7. India’s Current Account Surplus in Q4 FY24

Sub: Economy

Sec: External Sector

India’s current account recorded a notable surplus of $5.7 billion (0.6% of GDP) in Q4 FY24, a significant turnaround from a deficit of $1.3 billion (0.2% of GDP) a year ago.

This marks the first surplus after ten consecutive quarters of deficit. The surplus is attributed to several factors, including a reduction in the merchandise trade deficit and a rise in net services receipts.

Key Highlights:

• Current Account Surplus:
  • $5.7 billion surplus (0.6% of GDP) in Q4 FY24.
  • Reversal from a $1.3 billion deficit (0.2% of GDP) in Q4 FY23.
• Trade Deficit:
  • Narrowed to $50.9 billion in Q4 FY24 from $52.6 billion in Q4 FY23.
  • Reduced trade deficit significantly contributed to the current account surplus.
• Services Exports:
  • Grew by 4.1% year-on-year (YoY), driven by rising software exports, travel, and business services.
• Financial Account:
  • Net foreign direct investment (FDI) flows: $2 billion in Q4 FY24, compared to $6.4 billion in Q4 FY23.
  • Net foreign portfolio investment (FPI) inflows: $11.4 billion in Q4 FY24, up from a net outflow of $1.7 billion in Q4 FY23.
  • Net inflows under external commercial borrowings: $2.6 billion in Q4 FY24, up from $1.7 billion a year ago.
  • Non-resident deposits: Higher net inflow of $5.4 billion in Q4 FY24, compared to $3.6 billion in Q4 FY23.
• Foreign Exchange Reserves:
  • Accretion of $30.8 billion in Q4 FY24 (excluding valuation effects), compared to $5.6 billion a year ago.
• Primary Income Account:
  • Net outgo mainly on payments of investment income rose to $14.8 billion from $12.6 billion YoY.
• Private Transfer Receipts:
  • Representing remittances by overseas Indians, rose to $32 billion, an increase of 11.9% YoY.

Annual Overview FY24:

• Overall Current Account Deficit:
  • Moderated to $23.2 billion (0.7% of GDP) from $67.0 billion (2% of GDP) in FY23.
• Net Invisibles Receipts:
  • Higher during FY24, mainly due to increased services and transfers.
• Portfolio Investment:
  • Recorded a net inflow of $44.1 billion in FY24, reversing from a net outflow of $5.2 billion in FY23.
• Net FDI Inflow:
  • $9.8 billion in FY24, down from $28 billion in FY23.

Significance and Implications

• Economic Stability: The surplus in the current account in Q4 FY24 indicates improved economic stability and resilience.
• Foreign Investment: Despite a reduction in net FDI inflows, significant FPI inflows suggest renewed investor confidence.
• Policy Impact: The narrowing of the trade deficit and growth in services exports reflect positively on the policies aimed at boosting India’s export capabilities.

Summary:

India’s current account recorded a $5.7 billion surplus in Q4 FY24, marking the first surplus in ten quarters. This improvement was driven by a narrowing trade deficit, higher services exports, and increased financial inflows. Overall, the FY24 current account deficit moderated to $23.2 billion, significantly lower than the previous year. Key contributors included higher net invisibles receipts and portfolio investment inflows, despite a drop in net FDI inflows.

Current Account Deficit (CAD) vs. Current Account Surplus (CAS)

• Current Account Deficit (CAD):
  • Definition: Occurs when a country’s imports of goods and services are greater than its exports.
  • Implication: Indicates a net outflow of domestic currency to foreign markets. It can lead to borrowing from foreign sources, impacting national debt and economic stability.
  • Investor Sentiment: High CAD can deter foreign investment due to concerns about the country’s economic health.
• Current Account Surplus (CAS):
  • Definition: Occurs when a country’s exports of goods and services exceed its imports.
  • Implication: Indicates a net inflow of foreign currency, strengthening the local currency and increasing foreign exchange reserves.
  • Economic Health: Generally seen as a sign of economic strength, as it suggests that the country is competitive in international markets and has robust foreign currency reserves.

Twin Deficits: 

CAD and Fiscal Deficit: Together, they form the twin deficits that can impact the stock market and investor confidence.

Fiscal Deficit: The gap between the government’s expenditure requirements and its receipts, indicating the money the government needs to borrow during the year.

Implications:

• Economic Impact:
  • Significance: CAD affects the overall economy, stock markets, and individual investments.
  • Investor Sentiment: A lower CAD can improve investor sentiment, making the country’s currency more attractive.
• Foreign Exchange Reserves:
  • Surplus Impact: A surplus in the current account means more money is flowing into the country than out, boosting foreign exchange reserves and the value of the local currency.

8. India-UK FTA Negotiations

Sub: Economy

Sec: External Sector

Visas Not a Priority

• Indian High Commissioner to the UK, Vikram Doraiswami, stated that visas are not the primary concern for India in the Free Trade Agreement (FTA) with the UK.
• Despite frequent British media reports emphasizing visa issues, India’s main focus lies elsewhere in the FTA discussions.

India’s Priorities

• India seeks ease of movement for highly skilled professionals, particularly in IT and healthcare, to deliver services in the UK.
• There is also a push for tariff reductions on various goods exported to the UK.

UK’s Priorities

• The UK aims for greater access to India’s services sector.
• The UK also seeks reduced duties on goods such as whiskey and cars.

Specifics on Skilled Movement

• India is not aiming to use the FTA primarily to increase migration to the UK.
• The focus is on Mode 4 of the General Agreement on Trade in Services (GATS), which deals with the movement of natural persons delivering services in a trade partner’s territory.
• Doraiswami highlighted the need for easier intra-company transfers, noting the presence of over 970 Indian subsidiaries in the UK.

Student Visas

• Student visas and post-study work visas were not positioned as critical to the FTA by Doraiswami.
• The attractiveness of the UK as a study destination will be judged against other countries like the US, Canada, and Australia, which offer post-degree work opportunities.

Indo-Pacific and Security

• Without directly mentioning China, Doraiswami stressed the importance of a rules-based order and freedom of navigation in the Indo-Pacific for India.
• The UK and European countries share this interest, presenting an area for potential collaboration.

Context of FTA Negotiations

• The India-UK trade agreement negotiations have been ongoing since 2022, with the 14th round concluded before the Indian elections in April 2024.
• The India Global Forum event, where these comments were made, is an annual platform for Indian and British policymakers, industrialists, and others to discuss bilateral issues

This nuanced approach underscores the broader and more strategic elements of the FTA discussions between India and the UK, beyond the often-highlighted visa issues.

General Agreement on Trade in Services (GATS)

GATS: The General Agreement on Trade in Services is a treaty of the World Trade Organization (WTO) that came into effect in January 1995. It aims to create a credible and reliable system of international trade rules, ensure fair and equitable treatment of all participants, stimulate economic activity through guaranteed policy bindings, and promote trade and development through progressive liberalization.

Key Features:

Coverage: GATS covers all service sectors, except those supplied in the exercise of governmental authority.

Principles: Non-discrimination (Most-Favored Nation Treatment and National Treatment), transparency, and the progressive liberalization of services

The 4 Modes of Supply under GATS

Mode 1: Cross-Border Supply

Services are supplied from one country to another, without the movement of either the supplier or the consumer.

Example: A software company in India providing software services to a client in the United States via the internet.

Implication: This mode deals with services that can be delivered digitally or through other means without physical presence, such as online consultancy or data processing.

Mode 2: Consumption Abroad

Consumers or firms use a service in another country.

Example: A tourist from France traveling to India and utilizing services such as hotels, tours, or medical treatments.

Implication: This involves the movement of the consumer to the location where the service is provided. It’s significant in sectors like tourism, education, and healthcare.

Mode 3: Commercial Presence

A service provider establishes a presence in another country to provide services.

Example: A UK-based bank opening a branch in India.

Implication: This mode involves foreign direct investment (FDI) and requires businesses to set up subsidiaries or branches in the host country. It covers sectors like banking, retail, and telecommunications.

Mode 4: Presence of Natural Persons

Individuals travel from their home country to another country to supply services.

Example: An Indian IT consultant working temporarily on a project in Germany.

Implication: This mode involves the temporary movement of workers to provide services in another country. It’s often associated with professional services, IT, and consultancy.

9. Satnamis and their History of Protests

Sub: History

Sec: Art and Culture

Context: A large group from the Satnami community in Chhattisgarh’s Baloda Bazar district engaged in extensive vandalism, setting fire to numerous vehicles, throwing stones at police officers, and burning down the Superintendent of Police office.

• The unrest stemmed from dissatisfaction with the police’s management of a case concerning the desecration of a ‘Jaitkhamb’, a sacred structure significant to the Satnami community, demanding instead a CBI investigation.

Who are Satnamis?

• Originally, they were a militant sect of Hindu Worshippers.
• Founded by a saint named “Birbhan” in 1657 in Narnaul in Haryana.
• The major religious activity of this sect is to chant and meditate on the true names (Sat-Nam) of God, specially Rama and Krishna.
• This sect is thought to be an offshoot of Ravidasi sect and comprised lower strata of the Hindu society, particularly, leather workers, sweepers, carpenters, Goldsmiths etc.
• The followers of this sect kept their heads shaven (thus called Mundiyas) and abstained from liquor and meat.
• The religious granth of the Satnamis is called Pothi.

Principles and Influence

The Satnamis emphasize three main principles:

• Adorning the attire of a Satnami devotee
• Earning money through proper means
• Not tolerating any injustice or oppression in any form

Satnami Revolt under Aurangzeb:

• Occurred in 1672 during Aurangzeb’s reign.
• Triggered by a Mughal soldier killing a Satnami, leading to widespread revolt.
• Reasons included resentment against Aurangzeb’s strict Islamic policies: revival of Jizya tax, banning music and art, and temple destruction.
• Initially successful in establishing their administration in Narnaul and advancing towards Shahjahanabad (Old Delhi).
• Suppressed by Aurangzeb personally commanding troops with artillery.

Revival and Leadership under Jagjivandas:

• Revived under Jagjivandas near Lucknow, emphasizing Nirguna worship (worship of an abstract form of God).
• Promoted worship through self-discipline but did not advocate for the elimination of caste, which remains central to Satnami beliefs.

Ghasidas and the Satnam Panth:

• In 1820, Ghasidas founded his own offshoot of the Satnami sect in Chhattisgarh.
• Advocated for social equality and provided a religious and social identity for lower-caste people.
• Defied derogatory treatment by upper-caste Hindus and exclusion from Hindu temple worship.

Jaitkhamb and Giraudpuri:

• Giraudpuri in Baloda Bazar district, Chhattisgarh, birthplace of Ghasidas, is a pilgrimage center.
• Guru Ghasidas Jaitkhamb, a 77-meter-high tower, is a significant landmark and pilgrimage site for Satnamis.
• Jaitkhamb symbolizes their distinct sectarian identity and is an object of worship.

Geographical Distribution and Influence:

• Presently, Satnamis primarily reside in Chhattisgarh, Delhi, and Uttar Pradesh.
• Became a permanent subdivision of Hindus in the Central Provinces during the British period.

10. Bank deposits are growing but how well are they protected?

Sub: Economy

Sec: Monetary Policy

Context: With interest rates rising, deposits have grown. On an absolute basis, the year-on-year growth in value of insured deposits was 3.4 per cent from September 2022 to September 2023. The rise was higher in previous years at 6.4 per cent from 2021 to 2022, and 10.9 per cent from 2020 to 2021.

But how well protected are FDs? It turns out that only 44 per cent of bank deposits were covered by insurance as of September 2023.

And this proportion has been on a decline since 2021, per RBI data. In September 2022, 49 per cent of deposits were insured down from 50.9 per cent in September 2021 and 2020.

Deposit Insurance:

• Deposit insurance is a protection cover for deposit holders in a bank when the bank fails and does not have money to pay its depositors.
• This insurance is provided by Deposit Insurance and Credit Guarantee Corporation (DICGC) which is a wholly owned subsidiary of the RBI.
• DICGC insures all bank deposits, such as savings, fixed, current and recurring deposit for up to the limit of Rs 5 lakh per bank.
• DICGC covers depositors of all commercial banks and foreign banks operating in India, state, central and urban co-operative banks, local area banks and regional rural banks provided the bank has bought the cover from DICGC.
• The DICGC does not include the following types of deposits:
  • Deposits of foreign governments.
  • Deposits of central/state governments.
  • Inter-bank deposits.
  • Deposits of the state land development banks with the state co-operative bank.
  • Any amount due on account of any deposit received outside India.
  • Any amount specifically exempted by the DICGC with previous approval of RBI.