Daily Prelims Notes 7 December 2024

December 7, 2024
Posted by: OptimizeIAS Team
Category: DPN

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Daily Prelims Notes

7 December 2024

Table Of Contents

1. Balancing Growth and Inflation in India’s Economy

Sub : ECO

Sec : Monetary Policy

Key insights from RBI Governor Shaktikanta Das on inflation, growth, and liquidity management.

Inflation-Growth Dynamics:

Current State:
- The balance between inflation and growth is currently unsettled, primarily due to higher-than-expected inflation in September and October, driven by food prices.
- Growth has moderated, with GDP growth projections for FY25 revised to 6.6% from 7.2%.
RBI’s Commitment:
- The RBI aims to restore this balance using various policy instruments while preserving the credibility of the flexible inflation targeting framework.
- Focus remains on bringing inflation closer to target levels for sustainable economic growth.

Liquidity Conditions:

Tight Liquidity Outlook:
- Expected due to factors like tax outflows (direct taxes in December, GST thereafter), increased currency circulation during the busy credit and agricultural season, and capital outflows from Foreign Portfolio Investors (FPIs).
- The recent Cash Reserve Ratio (CRR) hike, termed a temporary measure, has served its purpose and is being normalized.

Growth Projections and Investment Challenges:

Growth Slowdown:
- Q2 GDP slowdown is attributed to challenges in:
  - Demand Side: Weak investment activity.
  - Supply Side: Decline in manufacturing due to reduced sales growth caused by inflation affecting urban consumers.
- Future Outlook:
- The RBI projects a gradual recovery in the growth rate to 6.9%-7.3% in the second half of the fiscal year and into FY26.

Secured Overnight Rupee Rate (SORR):

New Benchmark:
- Replaces the Market Repo Overnight Rate (MROR) with the SORR to include all secure transactions such as TREPS (Treasury Bill Repurchase Agreements), which accounts for 60% of the market.
- Improves market liquidity monitoring and transparency.

Food Inflation and Policy:

Discussions with the government aim to tackle food inflation, though specific measures were not disclosed. Addressing food inflation is vital to achieving broader inflation goals.

Secured Overnight Rupee Rate (SORR) –

It is a benchmark for interest rates in India that is based on secured money market transactions. The Reserve Bank of India (RBI) proposed the SORR to improve the credibility of interest rate benchmarks and develop the interest rate derivatives market. It will replace the Mumbai Interbank Offer Rate (MIBOR):

A trade-based rate that will be based on actual transactions in secured money markets, such as basket repo and TREP. This will make it more resistant to manipulation and reflective of real market dynamics.

Secured Overnight Financing Rate (SOFR)

It is a benchmark interest rate used for dollar-denominated loans and derivatives, designed to replace the London Interbank Offered Rate (LIBOR). It is based on actual transactions in the Treasury repurchase market, where overnight loans are backed by U.S. Treasury securities.

It is preferred over LIBOR as it is derived from observable market data rather than estimates.

What is LIBOR?

The London Interbank Offered Rate (LIBOR) has been a global benchmark interest rate for short-term borrowing between banks.

What is MIBOR?

The Mumbai Interbank Offered Rate (MIBOR) is India’s equivalent of LIBOR and is a benchmark interest rate used for short-term lending between banks in the Indian interbank market. It is a polled rate derived by collecting data from participants and averaging the responses after excluding outliers.

2. Why low-intensity Cyclone Fengal caused large-scale destruction

Sub : Geo

Sec : Climatology

Context:

Cyclone Fengal caused widespread destruction despite being a low-intensity storm.

Comparison with Past Cyclones:

Fengal was categorised as a cyclonic storm with wind speeds of 75-95 kmph.
Odisha Super Cyclone (1999): 260 kmph
Cyclone Phailin (2013): 215 kmph
Cyclone Amphan (2020): 185 kmph
While these storms caused extensive damage due to their high wind speeds, Cyclone Fengal caused significant destruction despite being relatively weaker.

Impact of Cyclone Fengal:

Casualties: 12 deaths (mostly in Tamil Nadu).
Rainfall Records:
- Mailam village (Villupuram): 510 mm in 24 hours.
- Puducherry: 490 mm in one day, surpassing the 2004 record of 211 mm.
Flooding and Inundation:
- Highways submerged, disrupting air, rail, and road transport.
- Overflowing rivers and lakes caused widespread damage to property and crops.

Reasons for High Destruction:

Slow Movement of Fengal:
- Cyclone Fengal moved at speeds as low as 6 kmph and became stationary for 12 hours after landfall.
- This prolonged its impact over affected regions, leading to excessive rainfall and flooding.
Prolonged Rainfall:
- Continuous heavy rains overwhelmed drainage systems and caused waterlogging in urban and rural areas.
Persistence After Landfall:
- Unlike typical cyclones that weaken after hitting land, Fengal retained its strength, amplifying the damage.
Precedents in Recent Cyclones:
- In comparison, more intense cyclones (e.g., Cyclone Dana in October 2023) resulted in minimal casualties due to faster movement and better preparedness.

Key Takeaways:

Cyclone intensity is not the sole determinant of its destructive potential; movement, duration, and rainfall also play crucial roles.
Slow-moving cyclones, like Fengal, pose unique challenges by causing prolonged impact, particularly through flooding and infrastructure damage.
Enhanced planning for slow-moving storms, including improved drainage systems and evacuation strategies, is essential to mitigate future risks.

Cyclone Categories by IMD:

The India Meteorological Department (IMD) classifies cyclones based on wind speed:
Low pressure: < 31 kmph
Depression: 31-49 kmph
Deep depression: 50-61 kmph
Cyclonic storm: 62-88 kmph
Severe cyclonic storm: 89-117 kmph
Very severe cyclonic storm: 118-221 kmph
Super cyclone: > 222 kmph

Source: IE

3. Living under a dust blanket in Haryana’s Mahendragarh

Sub: Env

Sec: Pollution

Context:

The situation in Khatoli Ahir and surrounding villages in Haryana’s Mahendragarh district paints a grim picture of the human and environmental costs of unchecked industrial activity, particularly stone crushing.

Key Issues:

Health Hazards

Respiratory and Skin Diseases: Villagers frequently suffer from tuberculosis, laboured breathing, skin allergies, and eye irritation.
- Statistics: Cases of airborne diseases doubled from 2011 (21,329) to 2019 (42,309), coinciding with the rise of stone crusher units.
- Children at Risk: Severe cases include kidney ailments and breathing difficulties among children as young as five.
Dust Exposure: Despite keeping doors and windows shut, homes and food are perpetually covered in dust. The constant inhalation and ingestion of stone dust have made chronic illnesses commonplace.

Environmental Degradation

Aravali Mountain Range: The rampant mining and stone-crushing damage this ecologically sensitive region.
Agriculture: Dust settling on crops reduces yield despite fertile, irrigated land.
Flora and Fauna: Trees and vegetation are perpetually cloaked in layers of grey dust, inhibiting photosynthesis and growth.

Socioeconomic Challenges

Marginalized Communities: Families allotted land under welfare schemes are among the worst affected, as many live near crusher units.
Economic Strain: Rising medical bills leave families with little for other necessities.
Marriage Prospects: Young women face stigma due to health concerns in the area, affecting their prospects.

Legal and Administrative Failures:

Supreme Court and NGT Orders Ignored: Despite repeated closure directives and penalties on stone-crushing units, implementation remains weak.
- NGT Orders (2019-2023): Directed the closure of illegal units and imposed fines under the “polluter pays” principle, yet many units continue operating.
Inconsistent Data: Official figures on operational stone crushers vary, undermining effective regulation.
Collusion Allegations: Locals allege complicity of authorities and politicians with the stone-crushing mafia.

Key Guidelines By CPCB:

The CPCB guidelines cover various aspects of stone crushing, such as source emissions, product storage, transportation, water consumption and legal compliance. Some of the key features of the guidelines are:
The stone crushers should obtain consent to establish and consent to operate (CTO) from the State Pollution Control Board (SPCB) before starting their operations.
Stone crushing unit shall comply with emission norms prescribed under the Environment (Protection) Rules, 1986 and conditions laid down in CTO by the concerned SPCB/PCC.
They should install adequate pollution control devices, such as dust suppression systems, covers, screens and sprinklers, to reduce the dust emissions from crushing, loading and unloading activities.
They should also store their products in covered areas or silos to prevent wind-blown dust.
The stone crushers should use water judiciously and ensure its availability and quality and procure their raw material from legal sources and maintain proper records of their transactions.
A District Level Committee is to be constituted under the chairmanship of the District Magistrate/Deputy Commissioner so that surprise inspections for surveillance of stone-crushing units located under their jurisdiction can be carried out on a regular basis.
Health surveys of workers should be carried out by the stone crusher on a half-yearly basis.

About Aravalli Mountain Range:

The Aravalli Mountain Range is one of the oldest mountain systems in the world, located in northwestern India. The range extends from Gujarat in the southwest to Delhi in the northeast, spanning a length of approximately 800 kilometers. It traverses through the states of Rajasthan, Haryana, and Delhi.

Geological Significance:

The Aravallis are Precambrian in origin, dating back to nearly 2.5–3 billion years.
They are primarily composed of igneous and metamorphic rocks, such as granite, marble, and quartzite.
The range has been heavily eroded over millions of years, leaving behind low hills and ridges.

Physical Features:

Guru Shikhar, located in Mount Abu in Rajasthan, is the highest peak of the Aravalli Range, rising to an elevation of 1,722 meters.
The range acts as a natural barrier, preventing desert winds from the Thar Desert from advancing into the fertile plains of northern India.

Environmental Importance:

The Aravalli Range is home to a diverse range of flora and fauna, including dry deciduous forests and wildlife such as leopards, sloth bears, and a variety of bird species.
The range helps in groundwater recharge and acts as a green lung for the region.
It plays a critical role in regulating the local climate by influencing rainfall patterns.

Human and Cultural Significance:

The range is rich in mineral resources, including marble, granite, and non-ferrous minerals like zinc and lead.
Historical forts and temples, such as the Dilwara Temples in Mount Abu and the Kumbhalgarh Fort, are located in the Aravalli region, showcasing its cultural heritage.
Cities like Jaipur and Udaipur lie in the foothills of the Aravallis, benefiting from its resources and tourism potential.

Challenges:

The Aravallis face significant threats due to deforestation, illegal mining, and urbanization.
Environmental degradation has led to loss of biodiversity, declining groundwater levels, and desertification in surrounding areas.

4. Bird flu: One mutation is all that remains before the H5N1 virus spreads from human to human

Sub : Sci

Sec: Health

Context:

The H5N1 avian influenza virus is one mutation away from becoming infectious to humans, enabling it to spread from one person to another, scientists have revealed.

Background:

H5N1 Strain: The clade 2.3.4.4b strain of H5N1, widespread among poultry, wild birds, and mammals, has triggered a global epizootic event.
Current Human Infections: While no human-to-human transmission has been confirmed, 58 humans have contracted the virus from dairy cattle and poultry exposure in the U.S. this year.

Findings:

Mutation Discovery: Researchers from Scripps Research identified a mutation, Gln226Leu (Q226L), in hemagglutinin protein from a cow in Texas. This mutation significantly enhances the virus’s ability to bind to human-like glycan receptors, increasing its potential infectivity.
Single Mutation Concern: Historically, at least three mutations were needed for avian flu viruses to adapt to humans. Now, just one mutation shows significant adaptability.
Additional Mutation: The Asn224Lys mutation was found to further stabilize the virus’s hold on human cells.
Other Contributing Mutations: Genetic changes such as PB2-E627K, which enhance viral replication in human cells, may still be necessary for sustained human-to-human transmission.

Implications:

Pandemic Risk: The WHO has warned of a 52% fatality rate for bird flu and urged enhanced surveillance in poultry and wild birds to monitor mutations.
Potential Adaptation Pathways: The study echoes historical patterns seen in past influenza pandemics (1918, 1957, 1968, and 2009), where receptor-binding switches played a key role.
Experimental Observations: In ferret studies, PB2-E627K mutations facilitated airborne transmission. Similar mutations have been observed in human infections in Canada.

Current Assessment:

Risk to Humans: The CDC currently classifies the risk of human-to-human H5N1 transmission as low. However, increasing animal-to-human cases and adaptive mutations warrant vigilance.
Challenges: The virus’s ability to bind human glycan receptors alone is insufficient for efficient transmission; additional mutations are required to stabilize and replicate in human hosts.

Scientific Outlook:

Surveillance and Research: Experts call for enhanced monitoring of viral mutations in infected animals and humans.
Precautionary Measures: Mitigating high viral concentrations in environments such as poultry farms and cattle herds is critical.
Policy Implications: Strengthening biosecurity measures and pandemic preparedness plans remains crucial to prevent a potential crisis.

Source: DTE

5. How the Supreme Court hears cases

Sub: Polity

Sec: Judiciary

Context:

The Supreme Court of India faces a significant backlog of cases, with over 82,000 pending cases. To address this issue, Chief Justice of India (CJI) Sanjiv Khanna has implemented a new case prioritization system.
The Court is currently focusing on special leave petitions (SLPs), which are appeals from lower courts that the Supreme Court has yet to admit.

Special Leave Petitions (SLPs):

SLPs are discretionary appeals where the SC needs to decide whether to grant leave (permission to appeal) to the petitioners. SC has to grant “leave” for them to be heard.
It is provided for under Article 136 of the Constitution of India.
These cases often involve quick decisions regarding admission or rejection. Dismissal of these cases means an immediate reduction in pendency.
Once a case is admitted, it becomes a “regular hearing matter” that requires detailed hearings before the court.
The court has been hearing these cases for three days of the workweek (Tuesdays, Wednesdays, and Thursdays), and has kept only Mondays and Fridays for fresh cases.
In effect, the SC is limiting the listing of cases in which a detailed hearing is required.

Statistics:

According to the book Court on Trial: A Data-Driven Account of the Supreme Court of India, the SC accepts only 14% of SLPs that are filed.
Appeals, the bulk of which are SLPs, comprise approximately 92.4% of the court’s docket, and a typical hearing on whether to admit an SLP lasts for just 1 minute and 33 seconds on average, says the book.
But once a case is taken up for full hearing by the court, it takes more than four years on average before the judgment is passed, with many cases taking “twice as long or longer”.

SC Registry:

The administrative machine of the court is known as the “Registry”.
The SC Registry has two wings, the administration and the judicial. Each of these wings is divided into various divisions, with their own administrative responsibilities such as case listing, technology, issues related to the court and buildings, human resources, etc.
Each division is headed by a Registrar, and the Registry as a whole is led by the Secretary General, who is the highest administrative officer in the Supreme Court, and reports to the CJI.

Process of Case Filing and Listing:

Lawyers authorized as Advocate-on-Record (AoRs) file cases on behalf of clients. Cases are submitted through the filing counter or the SC’s e-Filing portal.
After submission, the case is checked by a “dealing assistant” for defects such as incorrect party information or missing signatures. Defective petitions must be corrected within 90 days.
Once the case is defect-free, it is registered and assigned a diary number.
After registration, the case is sent to the listing department, which schedules the case for hearing.
If the case is not dismissed immediately, the SC issues notice to the other party for their response. The case is then heard as an “after notice miscellaneous matter.”
If the case is admitted, it moves forward for a full hearing. If dismissed, the case is closed.

6. Korea ruling party head wants to cancel powers of President

Sub : IR

Sec: Places in news

Context:

South Korea’s ruling party chief expressed support for suspending President Yoon Suk Yeol’s constitutional powers following his controversial declaration of martial law earlier this week. The decision was overturned by Parliament within hours.

Call for impeachment:

Opposition parties are pushing for a parliamentary vote to impeach Yoon, calling his actions unconstitutional and illegal.
They need support from some members of the ruling People Power Party (PPP) to secure the necessary two-thirds majority for impeachment.

Impeachment process:

To impeach President Yoon, opposition parties need 200 votes in the National Assembly.
If the impeachment motion passes, President Yoon would be suspended from office until the Constitutional Court makes a final decision on his removal.
During this period, Prime Minister Han Duck-soo would assume the responsibilities of the presidency.

Martial Law:

Martial law is the imposition of military control over normal civilian functions of government, typically in response to emergencies or perceived threats to national security.
Under martial law, the military assumes control over key government functions, often replacing civilian law enforcement and judicial systems.
Civil rights and freedoms may be suspended, and the military may have the authority to arrest individuals, enforce curfews, and control public gatherings.

Martial Law in India:

India does not have an explicit provision for martial law like South Korea.
However, it is implicit in Article 34 under which martial law can be declared in any area within the territory of India.
This provision in Article 34 empowers the Parliament to indemnify any government servant or any other person for any act done by him in connection with the maintenance or restoration of order in any area where martial law was in force.

7. Karnataka relaxes rules to give minority tag to institutions

Sub : Polity

Sec: Constitution

Context:

The Karnataka government took a significant decision to scrap the requirement of a minimum number of students from a particular minority community for higher educational institutions to be designated as minority institutions.
Previously, to retain the “minority institution” status, such institutions had to ensure that 50% of their students belonged to the minority community.

Implications of the Decision:

The removal of the 50% student quota criterion would increase the number of non-minority students in institutions run by religious minorities, including Christians, Jains, Sikhs, and Parsis.
Many institutions run by religious minorities found it difficult to admit 50% students from their respective communities. This relaxation aims to alleviate that pressure, ensuring the sustainability of such institutions while maintaining their minority status.

Minority Commission Recommendation:

The decision to scrap the student quota criterion was taken in accordance with the National Minority Commission’s recommendation. The Commission had suggested that the requirement was too stringent and impractical for several institutions.

Article 30:

Article 30 of the Indian Constitution guarantees the rights of minorities to establish and administer educational institutions.
All minorities, whether based on religion or language, shall have the right to establish and administer educational institutions of their choice.
State cannot discriminate against any educational institution on the grounds that it is managed by a minority community.

8. Silicosis in India’s Mining Sector

Sub : Sci

Sec: Health

Why in News

The National Green Tribunal (NGT) directed the Central Pollution Control Board (CPCB) to draft new guidelines for granting permissions for silica mining and washing plants.

What is Silicosis?

A preventable but incurable occupational lung disease caused by inhaling fine silica dust.
Classified as a pneumoconiosis, which is a group of lung diseases caused by inhalation of dust.

Causes

Prolonged exposure to respirable silica dust.
Mining, stone crushing, construction, sandblasting, and ceramic work.
Poor ventilation, lack of protective equipment, and unregulated working conditions.

Impacts

Chronic cough, breathlessness, fatigue, and increased susceptibility to tuberculosis.
Loss of livelihood due to inability to work and healthcare expenses.
Reduced quality of life and premature mortality.

India Context:

High occurrence among workers in Rajasthan, Madhya Pradesh, Gujarat, and Jharkhand due to extensive mining activities.
Tribal populations and informal sector workers with limited access to healthcare.
Mines Act, 1952, and Factories Act, 1948, mandate safety measures.
The National Human Rights Commission (NHRC) has emphasized addressing silicosis as a public health crisis.

Rajasthan became the first state to establish a silicosis policy (2019). Compensation and welfare schemes for affected workers in various states.

Silicosis is listed as a priority disease by the International Labour Organization (ILO).

Occupational Safety, Health, and Working Conditions Code, 2020:

Employers must notify authorities about workers developing silicosis or other occupational diseases.
Non-compliance may attract penalties under the Code.
Free annual health checkups are mandated for workers in hazardous occupations like mining.
Employers are obligated to maintain a health surveillance system to detect occupational diseases early.
Qualified medical practitioners are required to report confirmed silicosis cases to the Chief Inspector-cum-Facilitator.
The aim is to ensure timely diagnosis and state intervention.
Emphasis on safe working conditions, including dust control systems and provision of personal protective equipment (PPE).
Regular inspection by authorities to ensure adherence to prescribed safety norms.
Affected workers are entitled to compensation under the Employees’ Compensation Act, 1923.

About Silica:

Silica, or silicon dioxide (SiO₂), is a naturally occurring mineral composed of silicon and oxygen.
Found abundantly in quartz, sand, and various rocks.

Forms of Silica:

Crystalline: Found in quartz, widely used in industries like mining, construction, and manufacturing.
Amorphous: Less hazardous, found in diatoms and some clays.

Uses:

Key ingredient in glass, ceramics, concrete, and electronics.
Utilized in sandblasting, water filtration, and the production of silicon chips.

9. RBI’s Mule Hunter

Sub: Eco

Sec: Monetary Policy

Why in News

The Reserve Bank of India (RBI) has launched Mule Hunter, an Artificial Intelligence (AI) and Machine Learning (ML)-powered system aimed at tackling digital frauds involving mule bank accounts.

Mule Hunter:

To identify and mitigate fraudulent activities associated with mule accounts.
Leverages AI and ML algorithms to detect fraud patterns.

Developer: Created by the Reserve Bank Innovation Hub (RBIH), Bengaluru.
Operation: Utilizes databases from all banks and payment system operators for comprehensive fraud detection.
Infrastructure-level setup with real-time fraud detection capabilities.

Supports all banks and payment systems, creating a centralized approach to fraud management.
Enables expeditious resolution of mule account cases, reducing operational delays.

Mule account:

A mule account is a bank account or financial account used to transfer illegally acquired money on behalf of others.
Purpose: These accounts are used to move money from one place to another, often across borders, to obscure the source of funds and make them appear legitimate.
How it works: The account holder (the “mule”) allows their account to be used for receiving and transferring money. They typically keep a small percentage of the transferred funds as payment.
The bulk of the money is then forwarded to another account as directed by the criminals.
Types of mules:
- Unwitting mules: People tricked into believing they’re doing legitimate work.
- Witting mules: Those who knowingly participate in the scheme.

10. World’s Oldest Wild Bird Lays Egg at 74

Sub : Env

Sec : Species in news

Why in News

Wisdom, the world’s oldest known wild bird, a Laysan albatross, has laid an egg at the age of 74 in the Midway Atoll National Wildlife Refuge, part of the Hawaiian Archipelago. This significant event highlights the resilience and longevity of these seabirds, sparking global interest in wildlife conservation.

About Wisdom:

Species: Laysan albatross (Phoebastria immutabilis).
Approximately 74 years, first banded as an adult in 1956.
Possibly her 60th egg laid, after a four-year hiatus.

Breeding Site: Midway Atoll National Wildlife Refuge, a critical habitat for millions of seabirds.

About Laysan Albatross:

Scientific Name: Phoebastria immutabilis.
Found primarily in the North Pacific, especially around Midway Atoll and Laysan Island.
Wingspan ranges from 6 to 7 feet, allowing long-distance flights using dynamic soaring.
The species is known for longevity.
Feeds on squid, fish eggs, and crustaceans, but often ingests plastic mistakenly.
Lays one egg per season with an incubation period of 62-66 days.
Pairs form lifelong bonds.
Can travel over 4,000 miles and spend up to five years at sea before nesting.
Special features: Employs dynamic soaring to conserve energy during long flights.
Elaborate courtship displays include synchronized movements like bill touching and head bobbing.

About Hawaiian Archipelago:

Situated in the central Pacific Ocean, spanning approximately 2,400 km.
Comprises 137 islands, with eight major islands, including Hawaii (Big Island), Maui, Oahu, and Kauai.
Formed by volcanic activity due to the Pacific Plate moving over a stationary hotspot.
Features Mauna Loa, the world’s largest active volcano, and Mauna Kea, the tallest mountain when measured from base to summit.
Known for shield volcanoes with fluid lava flows.
Home to endemic species due to isolation, such as the Hawaiian monk seal and the Nene (Hawaiian goose).
Rich biodiversity includes coral reefs and unique terrestrial ecosystems.
Tropical climate with microclimatic variations influenced by trade winds and altitude.
Recognized globally for traditional practices like hula dance and luaus.
Honolulu on Oahu serves as the economic and administrative centre.
Hosts Pearl Harbor, a significant U.S. naval base with historical importance during World War II.
Plays a pivotal role in U.S. military and strategic operations in the Pacific.

11. No Plans for De-Dollarization: RBI Governor Das Clarifies India’s Trade Strategy

Subject: Economy

Section: External Sector

Clarification on De-Dollarisation
- RBI Governor Shaktikanta Das confirmed that India has no plans for de-dollarisation, addressing concerns sparked by U.S. President-elect Donald Trump’s threat to impose 100% tariffs on BRICS nations considering a common currency.
- De-dollarisation is not on India’s agenda. Efforts are solely aimed at de-risking trade, not undermining the dollar’s role in global trade.
BRICS Currency Proposal
- A common BRICS currency was an idea proposed by one member of the bloc.
- No decision has been taken due to challenges such as the geographical dispersion of BRICS countries, which is unlike the Eurozone’s geographic continuity.
Local Currency Trade Agreements
- India has entered agreements with some countries for local currency-denominated trade to reduce trade risks.
- This move is intended to minimize exposure to currency fluctuations and ensure smoother bilateral trade.
Rationale Against De-Dollarisation
- Over-dependence on a single currency can be problematic during its appreciation or depreciation.
- However, India’s goal is trade resilience, not replacing the dollar in global transactions.
Global Trade Concerns and Potential Tariff Wars
- Trump’s hypothetical 100% tariffs could lead to retaliatory measures like currency devaluations by China.
- The broader trade environment would shape India’s response, as multiple global events could unfold in such a scenario.
Rupee Stability and Forex Reserves
- India’s forex reserves are robust, ensuring the ability to deal with spillovers from global economic uncertainties.
- As of now, there is no immediate concern regarding the rupee’s stability.
Interest Rate Ceiling on Deposits
- There is no plan to increase the interest rate ceiling on FCNR (B) deposits as a buffer.

What is De-Dollarisation?

De-dollarisation refers to reducing dependence on the US dollar for international trade and as a reserve currency.

Key Aspects of De-Dollarisation:

Reduced Dollar Usage in Trade:
- Bilateral/multilateral agreements to settle transactions in local currencies.
Diversification of Reserves:
- Central banks include alternative assets like the euro, yuan, yen, or gold in reserves.
Alternative Payment Systems:
- Mechanisms like China’s CIPS or regional initiatives by BRICS bypass SWIFT.
Economic Sovereignty:
- Aims to reduce dependence on the US financial system, insulating nations from sanctions or dollar volatility.