Daily Prelims Notes 4 May 2022

Daily Prelims Notes

4 May 2022

Table Of Contents

1. Role of Inflation-Expectation
2. Rising Current Account Deficit
3. Open Network for Digital Commerce (ONDC) project
4. Lokpal
5. XE Covid Variant
6. Cost of Invasive Species on Indian Economy
7. AIP Technology for Submarines
8. Governor’s assent to bill
9. Maharashtra’s gene bank project

1. Role of Inflation-Expectation

Subject: Economy

Section: Monetary Policy

Context:

The RBI released the Inflation Expectations Survey of Households (IESH) for March on Friday.

Details:

It presented gender based differences in the inflation expectations i.e women have systematically higher inflationary expectations compared to men.

Cause:

The traditional gender roles that explain this divergence women, arguably homemakers, traditionally do more frequent grocery shopping than men.

Impact of Inflation expectation on Inflation:

• Increase Inflation-If individuals anticipate high inflation, they would negotiate wages or rents to compensate against a potential fall in their purchasing power. Increased wages raise the cost of production, making expectations self-fulfilling and, therefore, playing a pivotal role in determining inflation.
• Harm saving-consumption behaviour-as having ramifications on an individual’s long-term wealth.

Policy Measures

• Central banks raise interest rates to stabilize high inflationary expectations primarily when price shocks are temporary, on account of drought or disruption in global supply chains,so that inflation expectations do not transmit into actual inflation.

Issue:

Change in inflation expectation mainly due to changes in price of daily use items-the prices of the lower-priced potatoes, milk, or apples frequently purchased shape the aggregate inflation expectations more than that of infrequent purchase of a high-priced car or a washing machine, even though they constitute a substantial expenditure share of the individual.

Therefore, generalising aggregate inflation expectations for making general views of prices in the economy could be misleading and could lead to perverse policy making. 

Alternative:

Supply management of volatile goods purchased daily could be more effective in anchoring inflationary expectations.

2. Rising Current Account Deficit

Subject: Economy

Section: External Sector

Context:

For the third quarter of 2021-22, India’s current account deficit (CAD) has reached $23 billion, which is a nine-year high.

Cause–

• Rise in import-India’s exports are doing well, but as imports are growing faster, widening of the trade deficit is likely in the near term- owing to global inflation and currency depreciation
• Capital outflows-
  • Foreign portfolio capital flows, which are a large component of foreign investment in India, have turned negative/ net sellers during the last 6 month. The imminent interest rate hike in the US is one possible, others being uncertain global growth prospects due to COVID and Ukraine War.
  • Private equity/Venture capital (PE/VC) funding slowing down

A combination of these unfavourable economic factors has led to a sharp decline in forex reserves.

Indicators of growing external vulnerability:

• Capital outflows
• Reducing forex and import cover
• Imported Inflation and related currency depreciation
• Rising current account deficit
• Forex composition- it is made up entirely of liabilities, namely the foreign capital inflows. This makes India’s forex reserves more vulnerable to the threat of a sudden exodus of foreign capital.

Foreign Direct Investment:

FDI is the process whereby residents of one country (the home country) acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country). FDI includes capital flows to listed and unlisted companies and private equity/venture capital (PE/VC) funding.

It is different from Foreign Portfolio Investment where the foreign entity merely buys stocks and bonds of a company. FPI does not provide the investor with control over the business.

Flows of FDI comprise capital provided (either directly or through other related enterprises) by a foreign direct investor to an enterprise. FDI has three components, viz., equity capital, reinvested earnings and intra-company loans.

• Equity capital is the foreign direct investor’s purchase of shares of an enterprise in a country other than its own.
• Reinvested earnings comprise the direct investors’ share (in proportion to direct equity participation) of earnings not distributed as dividends by affiliates, or earnings not remitted to the direct investor. Such retained profits by affiliates are reinvested.
• Intra-company loans or intra-company debt transactions refer to short- or long-term borrowing and lending of funds between direct investors (or enterprises) and affiliate enterprises.

3. Open Network for Digital Commerce (ONDC) project

Subject: Economy

Context:

The Government claims that ‘as UPI is to the digital payment domain, ONDC is to e-commerce in India.’

Details:

ONDC is incorporated as a private non-profit (Section-8) company to establish the public digital infrastructure needed to expand access to India’s e-commerce ecosystem – pegged as a US$200 billion opportunity by 2027.Now in its pilot phase, ONDC has been rolled out in five cities – Delhi NCR, Bengaluru, Bhopal, Shillong, and Coimbatore. It will be expanded to 100 cities by October 2022.

ONDC was incubated by the Department for Promotion of Industry and Internal Trade (DPIIT) at the Quality Council of India.

ONDC goes beyond the current platform-centric digital commerce model where the buyer and seller have to use the same platform or application to be digitally visible and do a business transaction. Thus, it is an alternative to platform aggregators like Amazon and Walmart-owned Flipkart, who have thus far monopolized India’s e-commerce landscape.

ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform. The ONDC platform will allow buyers and sellers to connect and transact with each other online, no matter what other application they use. ONDC is not platform-centric, and its objective is to match the online consumer’s demand with the nearest available source of supply. Consumers can thus find any seller, product, or service via any compatible application or platform – offering real freedom of choice.

Thus, sellers and consumers would be able to use any compatible application of their choice for the exchange of information and carrying out transactions over ONDC.

ONDC shall not mandate sharing of any transaction-level data by participants with ONDC. Will work with its participants to publish anonymised aggregate metrics on network performance without compromising on confidentiality and privacy.

Example:

Suppose a seller X is registered on platform A, while the consumer is registered on platform B, the consumer can directly purchase products of seller X without registering on platform A from the ONDC

What are the potential benefits of ONDC?

• For sellers:
  • Access to more buyers
  • Better discoverability of products and cost
  • Autonomy in terms because of multiple choices for being digitally visible
  • Lower cost of doing business
  • More options for value chain services like logistics and fulfillment
• For Buyers:
  • Access to more sellers and therefore more choices
  • Better service and faster deliveries due to access to hyper-local retailers
  • Better customer experience

What is ONDC not?

• A government regulatory body
• A super aggregator application or a platform
• A central intermediary
• A medium to help digitize business

What does ‘open source’ mean?

To make a process or a software ‘open source’ implies that the technology or code deployed for the process is freely made available for everyone to use, redistribute, and modify.

For instance, while the operating system of iOS is closed source (it cannot be legally modified or used), the android operating system is open source, making it possible for smartphone manufacturers, such as Samsung, Nokia, Xiaomi, etc., to modify it for their respective hardware.

ONDC aims at fostering open networks developed on open-sourced methodology, using open specifications and network protocols, and independent of any specific platform.

4. Lokpal

Subject: Polity

Section: National Bodies

Context: Lokpal to get a new office at World Trade Centre building

Background:

• On March 19, 2019, Justice Pinaki Chandra Ghosh was appointed India’s first Lokpal along with eight other members.
• The appointment itself was made five years after the Lokpal and Lokayukta Act was passed in 2013 to investigate cases of corruption against certain categories of public servants.

Lokpal and Lokayuktas Act 2013: 

• The Act allows for setting up of anti-corruption ombudsman called Lokpal at the Centre.
• Composition: The Lokpal will consist of a chairperson and a maximum of eight members. 
  • Chairperson should have been a Chief Justice of India, or is or has been a judge of the Supreme Court, or an eminent person who fulfils eligibility criteria as specified.
  • 50% of the members are to be judicial members provided that not less than 50% of the members belong to the Scheduled Castes, Scheduled Tribes, OBCs, minorities, and women.
• Inquiry Wing: Lokpal will have an Inquiry Wing for conducting preliminary inquiry into any offence alleged to have been committed by a public servant punishable under the Prevention of Corruption Act, 1988.
• Prosecution Wing: It will also have a Prosecution Wing for the prosecution of public servants in relation to any complaint by the Lokpal under this Act.
• Powers:
  • The Lokpal will have the power of superintendence and direction over any investigation agency including CBI for cases referred to them by the ombudsman.
  • As per the Act, the Lokpal can summon or question any public servant if there exists a prima facie case against the person, even before an investigation agency (such as vigilance or CBI) has begun the probe. Any officer of the CBI investigating a case referred to it by the Lokpal, shall not be transferred without the approval of the Lokpal.
  • An investigation must be completed within six months. However, the Lokpal or Lokayukta may allow extensions of six months at a time provided the reasons for the need of such extensions are given in writing.
  • Special courts will be instituted to conduct trials on cases referred by Lokpal.
• Jurisdiction of Lokpal: It covers a wide range of public servants — from the Prime Minister (PM), ministers and MP, to groups A,B,C,D officers of the central government including the chairperson and members of the Lokpal. However, there are some exceptions for PM:
  • Lokpal cannot inquire allegations against the PM relating to international relations, external and internal security, public order, atomic energy and space.
  • Also, complaints against the PM are not to be probed unless the full Lokpal bench considers the initiation of inquiry and at least 2/3rds of the members approve it.
• Such an inquiry against the Prime Minister (if conducted) is to be held in camera and if the Lokpal comes to the conclusion that the complaint deserves to be dismissed, the records of the inquiry are not to be published or made available to anyone.

Selection committee:

• Once the search committee submits its recommendation for the Lokpal and its members, a selection committee will consider those names and forward them to the President for his consideration.
• The five-member selection committee comprises the following –Prime Minister (chairperson), Lok Sabha Speaker, Leader of the Opposition, Chief Justice of India and An Eminent jurist nominated by the President. 

5. XE Covid Variant

Subject: Science and Technology

Section: Biotechnology

Context: India has a confirmed case of the XE variant of Covid, according to the Indian SARSCoV2 Genomics Sequencing Consortium (INSACOG) bulletin. The Union Health Ministry is yet to confirm the same or issue a statement on the findings.

Concept:

• In the weekly bulletin for April 25, INSACOG said Omicron (BA2) is the dominant variant in the country.
• 2.10 and BA.2.12 are BA.2 sub-lineages that have been detected, and many old BA.2 sequences have been reclassified into these new sub-lineages. So far, these sub-lineages are not reported to be associated with increased severity of disease.
• Meanwhile, a multi-institutional study has again confirmed the airborne transmission of SARS-CoV-2, highlighting the need for masks to reduce the risk of contracting the virus.

XE Covid Variant:

• The XE variant of coronavirus is a sub-variant of Omicron, which caused the third wave of Covid-19 in India in January 2022.
• It is a “recombinant virus” that cross between two strains of the Omicron variant, namely BA.1, which is the original strain, and BA.2, which is the more infectious strain.
• This was first discovered in the United Kingdom in January 2022, and so far, more than 600 samples of XE have been found in different countries.

To know about Variants, refer: https://optimizeias.com/variants-of-corona-virus/ and https://optimizeias.com/variant-of-concern/

6. Cost of Invasive Species on Indian Economy

Subject: Environment

Section: Biodiversity

Context: As many as 10 invasive alien species (IAS), out of 330 that are known to be invasive in India, have cost the economy $127.3 billion (Rs. 8.3 trillion) in the last 60 years, according to a recent analysis that points to glaring knowledge gaps in costs incurred by these species to the Indian economy.

Concept:

• As many as 330 species are declared invasive out of more than 2,000 alien species in India and the costs of $127.3 billion as documented in the study comes from only 10 of these 330 species, making India the second topmostinvasion-cost bearing country after the United States. 
• The negative economic impacts are documented and available only for 3% of the known invasive species and unavailable/masked/underrepresented for the rest 97% of invasive species in India.
• Based on this global analysis, going by India’s GDP, we must have spent about$3.4 trillion on invasive species in the last six decades; going by India’s population, we must have spent about $1,700 trillion in the last six decades.
• The analysis finds that invasions by semi-aquatic and aquatic taxa have been causing a greater monetary burden to the economy compared to taxa inhabiting terrestrial ecosystems. The semi-aquatic costs were driven solely by a single species, the yellow fever mosquito, reflecting the substantial human healthcare costs associated with this taxon.
• Adopting a ‘whitelist’ approach to import any living species–every non-native species is considered potentially dangerous till proved to be safe by a risk profiling–as in effect in the island nations is more stringent and hence more effective in controlling potential invasions.
• In contrast, the more widely implemented approach of a ‘blacklist’, wherein every species is acceptable for import unless specifically banned, relies on scientists needing to prove that a species is problematic, with all the associated caveats when it would go against economic pressure.
• For example, Lantana camara, a tropical American shrub with pretty flowers is considered one of the top 10 worst invasive species by the IUCN; escaping manicured gardens it has stealthily made its home in India since its introductionin 1809 with an estimated cost of $70 per hectare for its control.
• Besides, there is a concern over the “unexplored and silent impact” of invasive species in central India, east India and northeast India’s biodiversity-rich regions for which not even a single cost report is available. So far, reports were only focussed south, west and north India.Because, Western and southern India’s ties to travel, trade, and commerce – provide opportunities for invasive species to hitch a ride into the country.
• The analysis shows that in India, as much as 35% of all costs are caused by animals, 15% by plants, 1% by fungi and bacteria, and the rest attributed to diverse/unspecified species- trends that are quite unusual when compared to the global cost distribution.
• All animal costs were caused by insects. Not a single mammal, bird, fish, reptile or amphibian species, or none of the spiders, worms, crabs, snails and other gastropods are represented in these costs. Although the number of invasive plant species (173 species) outnumber invasive animals (157 species) in India’s invasive species list, the cost of invasive plants was 1,000 times less compared to invasive animals.
• Most costs come from anthropocentric sectors such as fisheries, agriculture, health, social welfare, and administration. The costs related to forests and other non-anthropocentric ecosystems are almost absent.
• The impacts of invasive species are still under explored. With Aedes mosquitoes causing some of the world’s most deadly diseases, for example, the focus has always been on the effect (health) than on the cause (invasive species). The dialogue on fall army worm (Spodopterafrugiperda) is centred on an agricultural perspective, but not as an invasive species problem.
• One of the main reasons why invasive species can spread so fast to foreign lands is planetary warming. On the other hand, tackling the problem of invasive species will help in arresting the climate crisis as well.

7. AIP Technology for Submarines

Subject: Defence and Security

Section: Submarines

Context: France’s Naval Group, one of five shortlisted Original Equipment Manufacturers (OEM) for the Navy’s P-75 India (P-75I) project to build six conventional submarines within the country, announced it would not bid for the project. The reason was that the Request for Proposal (RFP) “requires that the fuel cell AIP be sea proven, and the French Navy does not use such a propulsion system.”

Concept:

P75 & P75I Project:

• In June 1999, the Cabinet Committee on Security approved a 30-year plan for the Navy to indigenously build and induct 24 submarines by 2030. In the first phase, two lines of production were to be established— the first, P-75; the second, P-75I. Each line was to produce six submarines.
• The contract for P-75 was signed in 2005 with the Naval Group, then known as DCNS, in partnership with Mazagon Dock Shipbuilders Ltd (MDL). The first KalvariClass (Scorpene Class) submarine under the project was commissioned in December 2017. Another five submarines have been built since; the final one, Vagsheer, was launched last month, and will be commissioned by late 2023.
• While P-75 deliveries were delayed, P75I has seen long delays even before it has kicked off. The first Request for Information was issued in 2008, then again in 2010, but the RFP was issued only in July 2021.
• This will be India’s first project under the Strategic Partnership Model—the government will give the contract to an Indian Strategic Partner (SP), which will partner with a foreign OEM to build AIP-powered submarines in the country.

AIP Technology:

• AIP refers to Air-Independent Propulsion, a technology for conventional— that is, non-nuclear — submarines.
• There are different types of AIP mechanisms available; what India is looking for under the P-75I project is AIP based on fuel cells. These cells convert chemical energy into electrical energy, recharging the batteries of the submarine.
• AIP has a force multiplier effect on lethality of a diesel electric submarine as it enhances the submerged endurance of the boat several folds.
• Diesel electric submarines must come to the surface or close to it (2-3 days) to run their generators to recharge the batteries that propel them under water. AIP is a mechanism that allows the batteries to be charged even while the boat is submerged. However, even with AIP, the submarine needs to surface every three weeks or so (14 days).
• While the six P-75 submarines are diesel- electric, they can be fitted with AIP technology later in their lives. By the time P-75I is completed under the 30-year project, India is projected to have six diesel-electric, six AIP-powered, and six nuclear attack submarines (yet to be built).
• India has been working to develop AIP technology indigenously as well. A tableaux of the DRDO at this year’s Republic Day parade showcased AIP. In March2021, the Defence Ministry had said DRDO had achieved an “important milestone in the development of AIP System by proving the land-based prototype”. However, experts have certain doubts about it.
• Around 10 countries have developed or are close to building AIP technology, and almost 20 nations have AIP submarines.

Concerns:

• The Australian paper says “installing AIP increases the length and weight of the boats, requires pressurised liquid oxygen (LOX) storage on-board and supply for all three technologies”. Also, “MESMA and the Stirling engine have some acoustic noise from moving parts; and the…submarine’s unit cost [increases] by around10%.”
• Second is the requirement to demonstrate a sea-proven fuel cell AIP. While some manufacturers may have the technology, it may not have been proven at sea yet.
• Another problem for the OEMs, sources said, is the transfer of technology. Sources believe that the OEMs are unwilling to share all their expertise, especially the niche technologies that they have built.

What submarines does India have now?

• India has 16 conventional diesel-electric submarines, which are classified as SSKs. After the last two Kalvari Class subs are commissioned under P-75, this number will go up to 18.
• India also has two nuclear ballistic submarines, classified SSBN.
• Of the 16 SSKs, four are of ShishumarClass, which were bought and then built in India in collaboration with the Germans starting 1980s; eight are Kilo Class or Sindhughosh Class submarines bought from Russia (including erstwhile USSR) between 1984 and 2000; and four are Kalvari Class built in India at MDL.

8. Governor’s assent to bill

Subject: Polity

Section: Federalism

Context: The State of Tamil Nadu has been witnessing a confrontation between the elected government and the State Governor on the question of giving assent to the National Eligibility cum Entrance Test (NEET) Bill passed by the State Assembly.

Assent to bills under article 200 (i.e. assent of the Governor to the bills passed by the state legislature):

• Giving assent to a Bill passed by the legislature is a normal constitutional act performed by the Governor.
• The Governor is an appointee of the President, which means the Union government.
• Article 154(1) of the Constitution vests in the Governor the executive power of the State, he is required to exercise that power in accordance with the Constitution. In other words, the Governor can act only on the aid and advice of the Council of Ministers.
• While there is not much deviation from the language used in the Government of India Act of 1935 in the context of the powers of the British era Governors, It is a settled constitutional position that the Governor is only a constitutional head and the executive power of the State is exercised by the Council of Ministers.
• When a  bill  is  sent  to  the  governor  after  it  is  passed  by  state legislature, he can:
  • (a) Give his assent to the bill, or
  • (b) Withhold his assent to the bill, or
  • (c) Return the  bill  (if  it  is  not  a  money  bill)  for  reconsideration  of  the state
• However, if  the  bill  is  passed  again  by  the  state legislature  with  or  without  amendments,  the  governor  has  to  give his assent to the bill, or
  • Reserve the  bill  for  the  consideration  of  the  president( article 201).  In  one case  such  reservation  is  obligatory,  that  is,  where  the  bill  passed by  the  state  legislature  endangers  the  position  of  the  state  high court.
  • In addition,  the  governor  can  also  reserve  the  bill  if  it  is  of the following nature:
    • (i) Ultra-vires, that is, against the provisions of the Constitution.
    • (ii) Opposed to the Directive Principles of State Policy.
    • (iii) Against the larger interest of the country.
    • (iv) Of grave national importance.
    • (v) Dealing with  compulsory  acquisition  of  property  under  Article the Constitution.

9. Maharashtra’s gene bank project

Subject: Science and Tech

Section: Biotechnology

Context:  Maharashtra’s gene bank project is about using science to secure future.

Gene bank project:

• The country’s first-of-its kind gene bank project in Maharashtra was approved by the state cabinet.
• The project will be implemented by the Maharashtra State Biodiversity Board.The MSBB will coordinate with institutions like the National Institute of Oceanography (NIO) Goa to document and conserve rare and endangered marine species.
• It has the potential to use modern scientific methodology to separate the chaff from the grain from the massive pool of traditional Indian wisdom.
• It will introduce crop cultivars and livestock breeds for better adaptation to climate change and variability.
• It is a collaborative process of knowledge generation, documentation, validation and propagation of successful community driven practices of conservation of biodiversity.
• The Maharashtra Gene Bank Project will work on seven themes —
  • marine, crop,
  • veterinary,
  • freshwater,
  • grassland biodiversity,
  • protection and management of forest right areas, and
  • regeneration of forests.
• It brought together several grass-root workers and social scientists, and marginalised communities together towards achieving a common goal of conservation of biodiversity.