Daily Prelims Notes 28 January 2022
- January 28, 2022
- Posted by: OptimizeIAS Team
- Category: DPN
Daily Prelims Notes
28 January 2022
Table Of Contents
- First Information Report (FIR)
- Foreign Investment
- Artificial Snow
- Surge in oil prices amid Russia-Ukraine conflict
- Conditional Market Authorisation
- Free power transmission for green hydrogen
- Anti-Microbial Resistance(AMR)
- Understanding the Budget formulation
Subject – Polity
Context – Mumbai Police on Wednesday (January 26) registered an FIR against Google CEO Sundar Pichai, along with four other executives including Gautam Anand, managing director of YouTube (which is owned by Google), in a case of alleged infringement of copyright.
To know about FIR, and how to file an FIR, please refer October 2021 DPN.
Subject – Economy
Context – Allegation going around that foreign e-commerce marketplaces indulge in “capital dumping”.
- Foreign investment involves capital flows from one country to another, granting the foreign investors extensive ownership stakes in domestic companies and assets.
- Foreign investment denotes that foreigners have an active role in management as a part of their investment or an equity stake large enough to enable the foreign investor to influence business strategy.
- A modern trend leans toward globalization, where multinational firms have investments in a variety of countries.
- Foreign direct investments include long-term physical investments made by a company in a foreign country, such as opening plants or purchasing buildings.
- Foreign indirect investment involves corporations, financial institutions, and private investors that purchase shares in foreign companies that trade on a foreign stock exchange.
- Commercial loans are another type of foreign investment and involve bank loans issued by domestic banks to businesses in foreign countries or the governments of those countries.
Direct vs. Indirect Foreign Investments
- Foreign investments are typically defined as either direct or indirect. Foreign direct investments are when investors purchase a physical asset such as a plant, factory, or machinery in a foreign country. In contrast, foreign indirect investments are when investors buy stakes in foreign companies that trade on their respective stock exchanges.
- Generally speaking, direct foreign investments are favored by the foreign country over indirect foreign investments because the assets they purchase are considered long-term. Therefore, they help boost the foreign country’s economy over time.
- Alternatively, indirect foreign investments are typically shorter-term investments that aren’t always used for the growth and development of another country’s economy over time.
Benefits of FDI:
Economic development stimulation:
- FDI can stimulate a target country’s economic development and create a more conducive environment for companies, the investor, and stimulate the local community and economy.
Easy international trade:
- Countries usually have their own import tariffs, which makes trading rather difficult. A lot of economic sectors usually require presence in the international makerts to ensure sales and goals are met. FDI makes all of these international trade aspects a lot easier.
Employment and economic boost:
- FDI creates new jobs and more opportunities as investors build new companies in foreign countries. This can lead to an increase in income and mor purchasing power to locals, which in turn leads to an overall boost in targetted economies.
- Of course — taxes. Foreign investors receive tax incentives that are very beneficial regardless of your selected field of business. Everybody loves a tax write-off.
Development of resources:
- The development of human capital resources is a big advantage of FDI. The skill gained by the workforce through training increases the overall education and human capital within a country. Countries with FDI are benefiting by developing their human resources all while maintaining ownership.
- Foreign direct investment allows for resource transfers and the exchanges of knowledge, technologies, and skills.
- Foreign direct investment can reduce the disparity between revenues and costs. With such, countries will be able to make sure that production costs will be the same and can be sold easier.
- The facilities and equipment provided by foreign investors can increase a workforce’s productivity in the target country.
Increase in a country’s income:
- Another big advantage of foreign direct investment is the increase of the target country’s income. With more jobs and higher wages, the national income normally increases which promotes economic growth. Large corporations usually offer higher salary levels than what you would normally find in the target country, which can lead to an increment in income.
Subject – Science and Tech
Context – Artificial snow needs to be pumped to pull off the Olympics in Beijing
- Snow that is injected with water to harden it and then treated with chemicals to keep the hardened snow in place, is a form of artificial snow that is recommended for winter competitions.
- The Loughborough University report states that by 2050, only 10 of the 20 venues that have hosted the Winter Olympics since 1924 will be able to produce an amount of snow that is capable of holding an international-level competition like the Winter Olympics. The survival of the Winter Games is based on the production of artificial snow.
How is artificial snow produced?
- High volumes of water and energy are required to create slopes of artificial snow that are competition-ready. In a world where natural snowfall is steadily reducing, the usage of artificial snow, especially for sports, has significantly increased.
- For the 2014 Sochi Olympics, Russia used 80% of artificial snow for competitions. That figure rose to 90% for the Pyongyang Winter Games. The 2010 Vancouver Games were also infamous for having to use helicopters to fly in snow for the competitions.
- For the Beijing Winter Games, snow making machines from an Italian company called TechnoAlpin have been brought in. Since November 2021, these machines have been pumping out artificial snow.
- These machines produce this snow by pumping out ice particles at the same time as a thin mist of water vapour.
- Both these particles are launched upto 60 metres in the air where they combine to become snow and then fall to the ground.
Why is it problematic that Beijing is producing artificial snow?
- The region of Beijing is notoriously low on water.
- This has been achieved through an over-reliance on groundwater coupled with the ice glaciers around the area steadily melting since the 1950s at an unsustainable rate.
- According to a Greenpeace study in 2018, China’s glaciers had melted by 82% and one-fifth of the ice cover had been lost since the 1950s.
Is it beneficial for competition?
- Artificial snow helps in improving technique.It’s kind of a challenge because you’re skiing more on ice than snow. It’s faster and challenging in terms of balance.
- The cons are that artificial snow creates harder and faster slopes and therefore the risk of athletes falling and hurting themselves is higher.
Subject – Economy
Context – Rising tensions between Russia and Ukraine are leading to a surge in oil prices, with Brent breaching the $90-a-barrel mark overnight on Thursday — the first time since 2014.
- Crude oil prices have risen sharply since the beginning of the year as a surge in Covid-19 cases around the world owing to the Omicron variant of the novel coronavirus has not lowered demand for crude oil in line with expectations.
- Geopolitical tension in the Middle East and fresh tensions between Russia and Ukraine are leading to speculations of supply disruptions. Key oil-producing countries have also kept increasing crude oil supplies despite rising demand.
- OPEC+ had agreed to sharp cuts in supply in 2020 owing to Covid-induced travel restrictions, but the organisation has been slow to boost production since then.
What is the impact on rising oil prices on Budget and inflation?
- Not only do rising prices feed into inflation, but also increase the amount of LPG and kerosene subsidy the government is required to pay.
- However, on the positive side, government revenues on taxes of oil and related products have also been rising over the last two years.
- The country’s retail inflation, which is measured by the Consumer Price Index, has already risen to a five-month high of 5.59 per cent in December. Wholesale price index-based inflation rose to 13.56 per cent during the same month.
- High inflation will force the government to cut taxes on oil and related products, especially since rising prices are a key factor ahead of upcoming Assembly elections in five states.
- The Oil import bill is already up by more than 70 per cent from last year and it affects the balance of payments adversely.
- Prices of petrol and diesel fell in November as the Central government cut excise duties by Rs 5 and Rs 10 per litre respectively. Most states have also reduced Value Added Taxes on petrol and diesel. Since the cut in taxes, Oil Marketing Companies have not revised their prices.
Subject – Economy
Context – The drug regulator on Thursday granted Serum Institute of India’s Covishield and Bharat Biotech’s Covaxin Covid-19 vaccines “conditional market authorisation” for the country’s adult population.
- Since January last year, the two vaccines have been available under “Emergency Use Authorisation” (EUA), under which 140.89 crore doses of Covishield and 22.95 crore doses of Covaxin have been administered so far.
- Not every vaccine is granted EUA before it receives full approval. The EUA route, referred to in India as restricted use in emergency situations, is invoked in public health emergencies like the pandemic — provided the regulator, based on initial data from phase 3 of clinical trials, determines that the potential benefits of the vaccine, when used to prevent Covid-19, outweigh its potential risks.
- However, since the two vaccines now meet the high standards of safety, effectiveness, and manufacturing quality that the Drugs and Cosmetics Act, 1940 requires of a new vaccine, they have been upgraded to “conditional market authorisation”.
- This, however, is still not full market authorisation, sources in the government said.
Do international regulators also grant conditional market authorisation?
- The European Medicines Agency (EMA), the European Union agency tasked with the evaluation and supervision of medicinal products, grants conditional marketing authorisation if four key criteria are met:
- The benefit-risk balance of the vaccine is positive; it is likely that the applicant will be able to provide comprehensive data post-authorisation; the vaccine fulfills an unmet medical need; and the benefit of the immediate availability of the vaccine to patients is greater than the risk inherent in non-availability of additional data.
- Such an approval is valid for one year, and can be renewed annually, the EMA says.
How does India’s conditional market authorisation differ from full market authorisation?
- The Union Health Ministry said that conditional market authorisation is a new category of authorisation that has emerged during the Covid-19 pandemic.
- The approval pathways through this route are fast-tracked with certain conditions to enhance the access to certain pharmaceuticals for meeting the emerging needs of drugs or vaccines.
- The conditional market authorisation for Covishield and Covaxin will be similar to the conditional market authorisation that, say, the United States Food and Drug Administration (FDA) has granted to Pfizer’s mRNA Covid-19 vaccine, or the Medicines and Healthcare products Regulatory Agency (MHRA) in the United Kingdom has granted to AstraZeneca’s Covid-19 vaccine.
What will change for ordinary recipients of the two vaccines with the grant of conditional market authorisation? – Not much.
- A drug or vaccine that has received full or general market authorisation would be available in pharmacies or chemist shops for purchase — either as an over-the-counter product, or against a doctor’s prescription.
- However, Covishield and Covaxin will still not be available in regular pharmacies, and you will not be able to buy them as a retail product, with or without a prescription.
- The vaccines will be available for private hospitals and private clinics to procure though, against required documentation and payment, government sources said.
- However, the sources said, as and when a private hospital or clinic administers a dose, it will still have to capture it on CoWin, the government’s digital vaccination platform.
- The two vaccines will be supplied under “programmatic setting”, which means only those whom the government has made eligible for the precautionary dose — frontline workers, healthcare workers, and the elderly population with comorbidities — can access the third dose.
- Hospitals will be able to administer the third dose of Covishield or Covaxin to others only after the government makes a change in its policy.
How then is this stage of conditional market authorisation different from the existing EUA for the vaccines?
- For individual recipients of the vaccines, not much changes. But conditional market authorisation relaxes somewhat the regulatory requirements on monitoring the safety of the vaccines.
- Under EUA, manufacturers have to submit safety and efficacy data every 15 days or a month. Under the conditional market authorisation, the Health Ministry said, they have to submit the data every six months.
- Also, the ministry said, while adverse event following immunisation (AEFI) and adverse event of special interest (AESI) shall continue to be monitored, the two companies will have to submit AEFI and AESI data with due analysis on a six-monthly basis or as and when available, whichever is earlier as per the New Drugs and Clinical Trial Rules, 2019.
- This means hospitals will need to still have all AEFI monitoring systems in place, and will have to continue to systematically record and report adverse events to the vaccine manufacturer.
Subject – Polity
Context – Supreme Court’s order in AlapanBandyopadhyay case is worrying. In setting aside the Kolkata High Court’s ruling by citing lack of jurisdiction, the apex court has narrowed scope of writ remedies
To know about Tribunals, please refer September 2021 DPN.
To know about writ jurisdiction of SC and HC, please refer November 2021 DPN.
Subject – Environment
Context – A national green hydrogen policy which will provide free power transmission for production of green hydrogen is set to be announced soon, Power Minister RK Singh said Thursday.
- A national green hydrogen policy which will provide free power transmission for production of green hydrogen is set to be announced soon, Power Minister RK Singh said.
- The Centre aims to swap use of grey hydrogen produced using fossil fuels with green hydrogen produced from renewable energy.
- The petroleum refining and fertiliser sectors are among the largest users of hydrogen in India.
To know about National Hydrogen Mission, please refer August 2021 DPN.
To know about Green Hydrogen, please refer September 2021 DPN.
Subject – Science and Tech
Context – There is an urgent need to replenish the antimicrobial pipeline, as many antibiotics are now ineffective in combating infections
- AMR occurs when microbes (bacteria, viruses, fungi, and parasites) change over a period and stop responding to medicines intended to treat them. This results in longer treatments, severe illness, and death. AMR is already having a detrimental effect on medical advances made over decades. This is especially true for diseases like tuberculosis and various cancers.
- With only a few replacement antibiotics in the pipeline, AMR could lead us to a scenario in which common infections could be fatal once again. In addition, most of the antibiotics in the pipeline offer only short-term solutions.
- The WHO noted decreasing private investment and lack of innovation in the development of new antibiotics.
- The World Health Assembly recognised the seriousness of this crisis and adopted a Global Action Plan on AMR in May 2015.
- The plan sets out five clear objectives with regard to combating AMR. These include improving awareness concerning AMR, strengthening knowledge through increased surveillance of AMR, and optimising the use of antimicrobial medicines.
- The plan also required that every country has an aligned national action plan in place by 2017.
- In 2017, the Indian government released the National Action Plan (NAP) on AMR with an additional sixth priority of developing India’s leadership in combating AMR.
AMR in India
- AMR becomes especially relevant in India as it is among the nations with the highest burden of bacterial infections.
- The NAP envisages a ‘One Health Approach’ based system towards combating AMR in India. This would include increasing surveillance for AMR to a wider range of sources beyond humans such as animals, poultry, and food samples.
- The policy also calls for regulatory frameworks to limit the unrestricted use of antimicrobials across the entire spectrum including food and animals.
- There are multiple ways by which AMR can spread. Misuse and overuse of antimicrobials is a primary driver of AMR. These resistant microbials can then spread between individuals or between people and animals.
- The government recognises the cruciality of the threat of AMR and has taken certain steps to curb the same.
- The Ministry of Health and Family Welfare has merged the schemes to strengthen branches of the National Centre for Disease Control, strengthening inter-sectoral coordination of prevention and control of zoonotic diseases, and surveillance of viral hepatitis and anti-microbial resistance have been merged into one.
- The proposed budgetary allocation for the scheme is ₹52 crore for the year 2020-21.This is a step in the right direction to make India a global leader in the fight against AMR.
- To address the problem of growing antimicrobial resistance, the government has launched the ‘National Programme on Containment of Antimicrobial Resistance’ under the 12th Five Year Plan with the National Centre of Disease Control (NCDC) as the coordinating centre. Under this programme, IEC (information, education and communication) activities are being conducted for creating awareness in the community for rational use of drugs.
- Moreover, the Drugs and Cosmetics Rules of 1945, have been amended to regulate the overuse of 24 antibiotics and other drugs through over-the-counter sale without prescription by the pharmacies.
- Schedule H1 drugs can be sold only on production of a valid prescription by a registered medical practitioner and a warning to this effect is printed on the label in a box with red border and Rx symbol.
- Today, pharmacists must file details of the patient, co-ordinates of the prescribing doctor and the name and dispensed quantity of the drug in another register, which would be frequently inspected by the officials in the drug control department. This register must be preserved for a minimum of three years.
To know about AMR, please refer April 2021 DPN.
Subject – Economy
Context – With the economy still hurting from the pandemic, the Budget on February 1 is likely to address concerns around growth, inflation and spending.
What are the major components of the Budget?
- There are three major components — expenditure, receipts and deficit indicators.
- Depending on the manner in which they are defined, there can be many classifications and indicators of expenditure, receipts and deficits.
- Based on their impact on assets and liabilities, total expenditure can be divided into capital and revenue expenditure.
- Capital expenditure is incurred with the purpose of increasing assets of a durable nature or of reducing recurring liabilities. Consider the expenditure incurred for constructing new schools or new hospitals. All these are classified as capital expenditure as they lead to creation of new assets.
- Revenue expenditure involves any expenditure that does not add to assets or reduce liabilities. Expenditure on the payment of wages and salaries, subsidies or interest payments would be typically classified as revenue expenditure.
- Depending on the manner in which it affects different sectors, expenditure is also classified into (i) general services (ii) economic services, (iii) social services and (iv) grants-in-aid and contribution.
- The sum of expenditure on economic and social services together form the development expenditure.
- Economic services include expenditure on transport, communication, rural development, agricultural and allied sectors.
- Expenditure on the social sector including education or health is categorised as social services.
- Again, depending on its effect on asset creation or liability reduction, development expenditure can be further classified as revenue and capital expenditure.
- The receipts of the Government have three components — revenue receipts, non-debt capital receipts and debt-creating capital receipts.
- Revenue receipts involve receipts that are not associated with increase in liabilities and comprise revenue from taxes and non-tax sources.
- Non-debt receipts are part of capital receipts that do not generate additional liabilities. Recovery of loans and proceeds from disinvestments would be regarded as non-debt receipts since generating revenue from these sources does not directly increase liabilities, or future payment commitments.
- Debt-creating capital receipts are ones that involve higher liabilities and future payment commitments of the Government.
- Fiscal deficit by definition is the difference between total expenditure and the sum of revenue receipts and non-debt receipts. It indicates how much the Government is spending in net terms.
- Since positive fiscal deficits indicate the amount of expenditure over and above revenue and non-debt receipts, it needs to be financed by a debt-creating capital receipt.
- Primary deficit is the difference between fiscal deficit and interest payments.
- Revenue deficit is derived by deducting capital expenditure from fiscal deficits.
What are the implications of the Budget on the economy?
- The Budget has an implication for aggregate demand of an economy. All Government expenditure generates aggregate demand in the economy since it involves purchase of private goods and services by the Government sector.
- All tax and non-tax revenue reduces net income of the private sector and thereby leads to reduction in private and aggregate demand. But except for exceptional circumstances, the GDP, revenue receipt and expenditure typically show a tendency to rise over time. Thus, the trend in absolute value of expenditure and receipts in themselves has little use for meaningful analysis of the Budget.
- The trend in expenditures and revenue is analysed either by the GDP or as growth rates after accounting for the inflation rate.
- Reduction in expenditure GDP ratio or increase in revenue receipt-GDP ratio indicates the Government’s policy to reduce aggregate demand and vice-versa. For similar reasons, reduction in fiscal deficit-GDP ratio and primary deficit-GDP ratios indicate Government policy of reducing demand and vice versa.
- Since different components of expenditure and revenue can have different effects on income of different classes and social groups, the Budget also has implications for income distribution.
What are fiscal rules and how do they affect policy?
- Fiscal rules provide specific policy targets on the basis of which fiscal policy is formed. Policy targets can be met by using different policy instruments. There exists no unique fiscal rule that is applied to all countries. Rather, policy targets are sensitive to the nature of economic theory and depend on the specificity of an economy.
- In India’s case, its present fiscal rule is guided by the recommendations of the N.K. Singh Committee Report. Allowing for some deviations under exceptional times, it has three policy targets — maintaining a specific level of debt-GDP ratio (stock target), fiscal deficit-GDP ratio (flow target) and revenue deficit-GDP ratio (composition target).
- Though both expenditure and revenue receipts can potentially act as policy instruments to meet a specific set of fiscal rules, tax rates within the existing policy framework happen to be determined independent of the expenditure requirement of the economy.
- Accordingly, in the present institutional framework in India, it is primarily the expenditure which is adjusted to meet the fiscal rules at given tax-ratios.