Daily Prelims Notes 26 July 2021

Daily Prelims Notes

26 July 2021

Table Of Contents

1. UNESCO flags risk to Australia’s Great Barrier Reef
2. IFC lends $250 million to HDFC Ltd to boost green housing finance
3. India’s falling unemployment rate in 2019-20
4. Flip side of forex reserves
5. Dwindling Great Indian bustard
6. India-China deal on Gogra and Hot Springs likely soon
7. Over 35% of government schools and anganwadis do not have tap water
8. Telangana temple gets World Heritage tag

1. UNESCO flags risk to Australia’s Great Barrier Reef

Subject: Environment

Context:

• Australia on Friday avoided having the Great Barrier Reef listed as an endangered world heritage site by UNESCO, despite extensive climate change-spurred damage to the ecosystem’s corals.
• The move by the UN body has faced criticism by environmental activists as 21-country World Heritage Committee on Friday ignored a scientific assessment from the UN’s science and culture organisation, Unesco, that the reef was clearly in danger from climate change and so should be placed on the list.

The World Heritage Convention

• The World Heritage Convention is one of the most important global conservation instruments Created in 1972, the primary mission of the Convention is to identify and protect the world’s natural and cultural heritage considered to be of Outstanding Universal Value.
• The convention defines the kinds of natural or cultural sites that can be included on the World Heritage List.
• The 191 nations that have signed the convention have pledged to conserve their World Heritage Sites.
• The World Heritage Committee compiles another list of sites it considers to be “in danger” of losing their heritage status.
• This time last year, UNESCO threatened to list the Great Barrier Reef as in danger, amid controversy over a plan to dump dredged sediment from a port expansion near the reef. Declining water quality, climate change and coastal development were also cited as threats to the reef’s health.
• The “in danger” list is designed to tell the international community about the conditions that threaten the very characteristics for which a property was added to the World Heritage List in the first place, and to encourage governments to take action to protect the sites.
• A country can ask for one of its sites to be listed in order to receive help to address the threats
• The listing would enable the World Heritage Committee to allocate funds to help protect a site. It would also alert the international community who might contribute funds or technical expertise to save an endangered site.
• If a site loses the characteristics which determined its inscription on the World Heritage List, it could be deleted from both the List of World Heritage in Danger and the main World Heritage List.
• It has only happened twice.

About Great Barrier Reef:

• It is the world’ s most extensive and spectacular coral reef ecosystem composed of over 2,900 individual reefs and 900 islands.
• The reef is located in the Coral Sea (North-East Coast), off the coast of Queensland, Australia.
• It can be seen from outer space and is the world’s biggest single structure made by living organisms.
• This reef structure is composed of and built by billions of tiny organisms, known as coral polyps.
• It was selected as a World Heritage Site in 1981.

Coral Reef

• Largest Coral Reef Area:
  • Indonesia has the largest coral reef area in the world.
  • India, Maldives, Sri Lanka and Chagos have the maximum coral reefs in South Asia.
  • The Great Barrier Reef of the Queensland coast of Australia is the largest aggregation of coral reefs.
• Coral Reef Areas in India:
  • India has four coral reef areas: Gulf of Mannar, Andaman and Nicobar Islands, Lakshadweep islands and the Gulf of Kutch.

2. IFC lends $250 million to HDFC Ltd to boost green housing finance

Subject: International Organisation

Context: Housing Development Finance Corporation Ltd (HDFC) and IFC have partnered to promote affordable green housing finance for low-income borrowers.

Concept:

• Green housing is largely regarded as a luxury market in the country, but given its climate benefits, IFC intends to challenge that perception and help boost green affordable housing by partnering with HDFC, with its deep penetration in the Indian housing market and significant commitment to promoting green
• Green affordable housing can help India on its path to deliver on its commitments under the Paris Agreement, to reduce a third of its carbon emissions by 2030 from 2005 levels
• According to IFC estimates, there is a $1.25-trillion investment opportunity in green residential housing in the country by 2030.
• IFC has invested over $920 million in housing finance companies in India – 85 per cent in the last five years – for on-lending to retail buyers of affordable housing and developers of affordable and green housing.

IFC

3. India’s falling unemployment rate in 2019-20

Subject: Economy

Context:

• The latest annual report of the Periodic Labour Force Survey (PLFS) has surprised everyone by claiming that the unemployment rate fell in a year when India’s GDP growth was at its weakest

Concept:

Major unemployment trend in India

1. The proportion of people in the working-age who seek to participate in the economy is considerably lower than other economies.
2. The extremely low LFPR for women in India.
3. Despite a low LFPR, India’s unemployment rate has been quite high.
4. In 2019-20, India’s LFPR improved, and, the unemployment rate. So the LFPR went up, albeit marginally, and the unemployment rate went down

Table 1: LFPR is increasing while unemployment rate falls

The PLFS

• The PLFS is an annual survey conducted by the National Statistical Office.
• It was started in 2017 and it essentially maps the state of employment in the country.
• It collects data on several variables such as the level of unemployment, the types of employment and their respective shares, the wages earned from different types of jobs, the number of hours worked etc.
• Earlier this job was done by Employment-Unemployment Surveys, which were conducted once in five years.

Calculation Methods

There are two ways and they differ in terms of the reference period.

The Usual Status (US),

• The survey ascertains whether a person had been employed for enough days in 365 days preceding the survey.
• The Usual Status is the only one that is showing a reversal in the unemployment trend
• The NSO unemployment number most routinely quoted is the one based on Usual Status.

The Current Weekly Status (CWS),

• The survey tries to figure out whether a person was adequately employed in the seven days preceding the survey.
• But this approach is not comparable with either the global norm (say the one followed by International Labour Organization) or the private sector practice (such as the surveys done by the Centre for Monitoring Indian Economy or CMIE).
• The CWS is closer to the global norm. The CWS method shows that unemployment didn’t really fall
• The CWS is also more relevant because it is this approach that the NSO uses for understanding quarterly changes in unemployment. So if we start looking at the unemployment rate and LFPR trends compiled using the CWS approach, the emerging picture is more in sync with either the data from CMIE or indeed all the other indicators of the broader

Reason

• The rise in LFPR and the apparent fall in the unemployment rate are explained: “by the rise in distress”.
• The annual report one finds that increased labour force participation rate is happening because work opportunities have shrunk and incomes have fallen.
• People are being forced to take up self-employment often of the kind designated as “helper in household enterprise” even as the relative share of wage (or salaried) employment falls.

Table 2: Unemployment rate differs dramatically between US and CWS methods

Table 3: CWS data shows a completely different picture

Source: PLFS 2019-20

4. Flip side of forex reserves

Subject: Economy

Context:

• The build-up in foreign exchange reserves to $610.01 billion as on July 2, an increase of around $33 billion over March 2021 and $96.8 billion on a y-o-y basis, comes amid an overall decline in India’s macroeconomic performance. The accumulation of reserves has its benefits as well as associated costs, raising complex questions and dilemmas on the trade-off between the quantum of reserves and the costs of managing them.

How does India’s forex reserve compare with its neighbour?

• India is the fourth largest holder of forex reserves in the world but to put the number in perspective, India’s reserves now are just 18 per cent of the forex reserves held by neighbouring China, which reported $3,362 billion of forex reserves and is the country with the highest reserves, followed by Japan ($1,376.5 billion) and Switzerland ($1,074.8 Billion).
• The components of the forex reserves as on July 2include the foreign currency asset or ($567 billion), gold ($36.4 billion), special drawing rights or SDR ($1.6 billion) and reserve tranche with IMF ($5.1 billion). Reserve assets constituted 67.2 per cent of the total international financial assets and 21.4 cent of GDP as on March 2021.

Benefits of large forex reserve:

• The build-up of reserves helps meet the challenges of the balance-of-payments (BoP) along with the pressure on depreciation in the exchange rate, thereby providing a source of comfort in addressing disorderly market conditions.
• The accumulation of reserves has its benefits as well as associated costs, raising complex questions and dilemmas on the trade-off between the quantum of reserves and the costs of managing them. the build-up of reserves helps meet the challenges of the balance-of-payments (BoP) along with the pressure on depreciation in the exchange rate, thereby providing a source of comfort in addressing disorderly market conditions

History of forex reserve build up:

• A look at the trends in the increasing reserves in nominal terms (including valuation) reveals that on four occasions there were significant reserves built up — 2007-08 ($101 billion), 2017-18 ($83 billion), 2019-20 ($66 billion) and 2020-21 ($103 billion) — which aggregated $353 billion, accounting for nearly 61.2 per cent of the total reserves
• (up to March 2021).

Contributing factors

• In 2020-21 the contributing factors are the current account surplus ($23.9 billion) and net capital flows ($63.7 billion).
• On the other three occasions (2007-08,2017-18, 2019-20), the net capital in flows contributed to forex reserves after meeting the current account deficit.

Periods of decline:

• In contrast to this, in the period immediately after the global financial crisis, there were three episodes of decline in forex reserves — in 2008- 09 ($20.1 billion), 2011-12 ($12.8 billion) and 2018-19 ($3.3 billion). The decline in forex reserves was on account of a higher current account deficit and lower net capital flows.

Where are forex reserves invested?

• The Reserve Bank of India Act, 1934, provides an overarching legal framework for the deployment of reserves in different foreign currency assets (FCA) and gold.
• By end- March 2021, out of the total FCA of $536.69 billion, $359.88 billion or 67.1 per cent was invested in securities, $153.39 billion or 28.6 per cent was deposited with other central banks and the BIS and the balance of $23.43 billion or 4.4 per cent comprised deposits with commercial banks overseas.

Returns from investment:

• According to the RBI Annual Report 2020-21, the income from foreign sources decreased by 2 per cent from ₹82,367.02 crore in 2019- 20 to ₹80,715.82 crore in 2020-21. The rate of earnings on foreign currencyassets was at 2.10 per cent in 2020-21 as compared with 2.65 per cent in 2019-20.

Challenges of maintaining huge forex reserves:

• Fiscal Cost: The fiscal cost of sterilisation of durable liquidity emanating from capital flows. If we take into account only the fixed overnight reverse repo, which carries an interest rate of 3.35 per, the fiscal cost thus works out to 1.25 per cent (3.35 per cent minus 2.10 per cent). But the fiscal cost works out to be much higher if the OMO purchase/sale of securities is considered. Thus, the fiscal cost is a burden when we build up forex reserves. This is essentially the outcome of interest rates abroad being lower than the interest rates In India.
• The forex reserves build-up has the potential risks of growing debt liabilties and facing the vagaries of “hot” money. The Reserve Bank of India Act, 1934, provides an overarching legal framework for the deployment of reserves in different foreign currency assets (FCA) and gold
• The increase in forex reserves aggregated $99.2 billion. Such an increase in the flow of reserves has resulted in an appreciation of the rupee against the dollar
• Sterilization is a monetary action used by central banks in order to stem the negative effects emerging from capital inflows or outflows from a country’s economy.
• Classical sterilization involves central banks conducting buy and sell operations in open markets.
• Usually, central banks modify classical sterilization by including fiscal policy measures in order to overcome problems like inflation.
• Sterilization most frequently involves the purchase or sale of financial assets by a central bank and is designed to offset the effect of foreign exchange intervention.
• The sterilization process is used to manipulate the value of one domestic currency relative to another and is initiated in the foreign exchange market.
• Sterilization requires a central bank to look beyond its national borders by getting involved in foreign exchange.
• Another important aspect is the adequacy of forex reserves. Our reserves can meet 17.5 months’ imports nas against the benchmark of three months. The Guoditti-Greenspan rule, however, suggested “liquidity- at–risk” to measure adequacy of reserves.

5. Dwindling Great Indian bustard

Subject: Environment

Context: The government informed Rajyasabha that there were no great Indian bustard in Kutch bustard sanctuary in Gujarat on January 1 this year

Concept:

• The great Indian bustard are the largest among the four busted species occur in India the other three being Queens bustard, lesser florican and Bengal florican
• They prefer grasslands spend most of the time on ground occasionally flying from one part of their habitat to another they feed on insects lizards grass seeds
• The great Indian bustard are considered as parameters of healthy grassland ecosystem
• The conference of parties to the UN convention on migratory species of wild animals held in gandhinagar the centre said that The great Indian bustard population has fallen to just 150 including 128 in Rajasthan, 10 in kutch and a few in Maharashtra Karnataka and Andhra Pakistan is to believe to host a few great Indian bustard
• Are categorised as critically endangered by IUCN

Kutch national park

• The wildlife institute of India has been highlighting the thread from overhead power transmission lines found in Rajasthan
• It was notified in 1992 it is spread over to km2
• it’s a sensitive zone is only 220 square kilometre covers most of the present a core region of great Indian bustard habited
• The following the creation of the great Indian bustard population grows from 30 to 1999 245 in 2007 but with the installation of windmills and power lines their population began to decline

Conservation measures

• The court has found a three member committee and  bastard specialist group of iucn to help our companies comply the order
• The great Indian species recovery programme under the wildlife institute of India and Rajasthan Forest department have jointly setup conservation breeding centres, where great Indian bustard x harvested from the wild are incubated artificially and hatched raised in a controlled environment to create an insurance against the threat of extinction and to release the third generation of these capital birds

6. India-China deal on Gogra and Hot Springs likely soon

Subject : International Relations / Defence

Context : India and China are set to hold the 12th round of Corps Commander-level talks aimed to resolving the standoff in Eastern Ladakh soon and an agreement for disengagement at Gogra and Hot Springs is likely to be reached

Concept :

• China had proposed the 12th round of Corps Commander-level talks on Monday, but India, which observes July 26 as Kargil Day to commemorate the victory over Pakistan in the 1999 Kargil War, asked for the discussions to be postponed by a few days.
• The Corps Commander-level talks are now likely to take place in the first week of August, or perhaps earlier, sources said.
• The last Corps Commander-level talks to discuss the disengagement and eventual de-escalation in eastern Ladakh, where India and China are involved in a stand-off since May 2020, were held in April this year.

Kargil Vijay Diwas

• The Kargil Vijay Diwas is marked on July 26. It is celebrated in the honour of Kargil war heroes. The Kargil conflict is also referred to as Operation Vijay.
• There were three major phases in Kargil war. First, Pakistan captured the Indian controlled section of Kashmir at various high points.
• In the second phase, India responded by capturing several strategic high points. In the third phase, India succeeded in pushing the Pakistani forces back to the Line of Control.
• During the war, the Indian Air Force launched Operation Safed Sagar.
• The war was fought with great difficulties. This is because Kargil, the site of conflict is located at a height of around 16,000 to 18,000 feet above the sea level.
• Thus, the aircrafts were required to fly at 20,000 feet. At these heights, the density of air is 30% less as compared to that of the sea level.

7. Over 35% of government schools and anganwadis do not have tap water

Subject : Government Schemes

Context : Over a third of government schools and anganwadis still do not have tap water access even ten months after the Jal Jeevan Mission launched a 100-day campaign to provide the facility

Concept :

About the Jal Jeevan Mission:

• JJM envisages supply of 55 litres of water per person per day to every rural household through Functional Household Tap Connections (FHTC) by 2024.
• It is under the Ministry of Jal Shakti.

It also encompasses:

• Prioritizing provision of FHTCs in quality affected areas, villages in drought prone and desert areas, Sansad Adarsh Gram Yojana (SAGY) villages, etc.
• Providing functional tap connection to Schools, Anganwadi centres, Gram Panchayat buildings, Health centres, wellness centres and community buildings.
• Technological interventions for removal of contaminants where water quality is an issue.

Implementation:

• The Mission is based on a community approach to water and includes extensive Information, Education and Communication as a key component of the mission.
• JJM looks to create a jan andolan for water, thereby making it everyone’s priority.
• The fund sharing pattern between the Centre and states is 90:10 for Himalayan and North-Eastern States, 50:50 for other states, and 100% for Union Territories.

8. Telangana temple gets World Heritage tag

Subject: Culture

Context : India’s nomination of Rudreswara Temple, (also known as the Ramappa Temple) at Palampet, Mulugu district, near Warangal in the state of Telangana has been inscribed on UNESCO’s World Heritage list. This is India’s 39th World Heritage Site.

Concept :

• The decision was taken at the 44th session of the World Heritage Committee of UNESCO today.

About Ramappa temple

• Ramappa temple, a 13th century engineering marvel is named after its architect, Ramappa.
• The Rudreswara temple was constructed in 1213 AD during the reign of the Kakatiya Empire by RecharlaRudra, a general of Kakatiya king Ganapati Deva.
• The presiding deity here is Ramalingeswara Swamy.
• The temple complexes of Kakatiyas have a distinct style, technology and decoration exhibiting the influence of the Kakatiyan sculptor.
• The foundation is built with the “sandbox technique”, the flooring is granite and the pillars basalt.
• The lower part of the temple is red sandstone while the white gopuram is built with light bricks that reportedly float on water.