Daily Prelims Notes 9 April 2022

Daily Prelims Notes

9 April 2022

Table Of Contents

1. Recombinant Virus
2. SC upholds new restrictions on receiving foreign funds
3. 10 States get nod to borrow ₹28,204 crore
4. Fortified Rice
5. Surge in Marine Product Exports
6. Deregulation of GM crops
7. SpaceX’s launch of three visitors to ISS
8. Liquidity Adjustment Corridor:
9. SLR under the Held to Maturity (HTM) category
10. Trends in the tax revenue
11. WHO Contingency Fund for Emergency

1. Recombinant Virus

Subject: Science

Section: Biotech

Context: The recombination of novel coronavirus lineages is unlikely to be a greater threat to public health than mutations

How are variants created?

• SARS-CoV-2, the virus that causes COVID-19, is an RNA virus which evolves by accumulating genetic errors in its genome. These errors are produced when the virus infects a person and makes copies of itself inside the host’s cells.
• These errors (otherwise called mutations) are therefore a by-product of replication of SARS-CoV-2 inside the cell and may be carried forward as the virus continues to infect people. When viruses having a specific set of errors or mutations infect a number of people, this forms a cluster of infections descending from a common parental virus genome and is known as a lineage or a variant of the virus.

What is Mutation?

• A mutation means a change in the genetic sequence of the virus.
• In the case of SARS-CoV-2, which is an Ribonucleic acid (RNA) virus, a mutation means a change in the sequence in which its molecules are arranged.
  • RNA is an important biological macromolecule that is present in all biological cells, Principally involved in the synthesis of proteins, carrying the messenger instructions from Deoxyribonucleic Acid (DNA), which is an organic chemical that contains genetic information and instructions for protein synthesis. It is found in most cells of every organism.
• A mutation in an RNA virus often happens when the virus makes a mistake while it is making copies of itself.
• Mutations are a natural phenomenon when viruses replicate.
• Generally, RNA viruses have a higher rate of mutations compared with DNA viruses.
• However, unlike other RNA viruses, coronaviruses have fewer mutations. This is because coronaviruses have a genetic “proofreading mechanism” that corrects some of the errors made during replication.

What is a recombinant variant?

• Recombination occurs when, in extremely rare situations, two different lineages of the virus co-infect the same cell in the host and exchange fragments of their individual genomes which generate a descendent variant having mutations that occurred in both the original lineages of the virus.
• Recombination of lineages happens in a variety of other viruses, including those that cause influenza, as well as other coronaviruses.
• Such recombination events occur typically in situations where two or more lineages of SARS-CoV-2 may be co-circulating in a certain region during the same time period. This co-circulation of lineages provides an opportunity for recombination to occur between these two lineages of SARS-CoV-2.

Are recombinant variants more deadly?

• Although recombination has been detected in SARS-CoV-2, it has not yet impacted public health in a unique way. There is little evidence to suggest that recombinant lineages have a varied clinical outcome compared to the currently dominant Omicron variant, although preliminary data from the U.K. health security agency suggests a transmission advantage over the Omicron variant.
• It is certain at this point in time that more data will be needed to ascertain the impact of these lineages on the epidemiology of COVID-19.
• When there is multiple lineages circulating, the danger is that the viruses could combine one dangerous phenotype with another dangerous phenotype into a single virus that has two dangerous phenotypes

2. SC upholds new restrictions on receiving foreign funds

Subject: Polity

Section: Acts

Context: The Supreme Court upheld amendments introducing restrictions in the Foreign Contribution Regulation Act (FCRA) while holding that no one has a fundamental or absolute right to receive foreign contributions.

Observation of Court:

• No one can be heard to claim a vested right to accept foreign donations, much less an absolute right.
• Philosophically, foreign contribution (donation) is akin to gratifying intoxicant replete with medicinal properties and may work like a nectar. However, it serves as a medicine so long as it is consumed (utilised) moderately and discreetly, for serving the larger cause of humanity.
• The presence/inflow of foreign contribution in the country ought to be at the minimum level, if not completely eschewed. The influence may manifest in different ways, including in destabilising the social order within the country.
  • Unbridled inflow may destabilise sovereignty of the nation
• Unregulated inflow of foreign donations would only indicate that the government was incapable of looking after its own affairs and needs of its citizens
• The amendments do not prohibit inflow of foreign contributions, but are a regulatory measure to permit acceptance by registered persons or persons having prior permission to do so with condition that they must themselves utilise the entire contribution
• The court held that the restrictions in the amendments were “reasonable” and “founded on intelligible criteria”. It fixed accountability on the recipients, increased the efficacy of “continual supervision” over foreign contributions, did not discriminate and served the purpose of the FCRA 2010.
• Mere plea of inconvenience is not enough to attract constitutional inhibition. There is intrinsic evidence to indicate that the change effected by the amendments is to serve the legitimate government purpose and has a rational nexus to the object of the principal Act of 2010

Foreign Contribution (Regulation) Amendment, 2020:

• It seeks to prohibit ‘public servants’ from receiving any foreign funding.
• It proposes to reduce the use of foreign funds to meet administrative costs by NGOs from the existing 50 per cent to 20 per cent.
• It seeks to “prohibit any transfer of foreign contribution to any association/person”.
• It proposes to make Aadhaar cards a mandatory identification document for all office-bearers, directors and other key functionaries of NGOs or associations eligible to receive foreign donations.
• Another amendment mandates that every person (or association) granted a certificate or prior permission to receive overseas funds must open an FCRA bank account in a designated branch of the SBI in New Delhi.
• It seeks to allow for the central government to hold a summary inquiry to direct bodies with FCRA approval to “not utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution”.

Foreign Contribution (Regulation) Act (FCRA), 2010:

• Under the Act, organisations require to register themselves every five years.
• As per the amended FCRA rules, all NGOs registered or granted prior permission under FCRA are now required to upload details of foreign contributions received and utilized by them every three months on their website or the FCRA website.
• NGOs now need to file their annual returns online, with the hard copy version dispensed with.

3. 10 States get nod to borrow ₹28,204 crore

Subject: Polity

Section: Federalism

Context: Move based on 15th Finance Commission recommendations following power sector reforms by States

Background:

• Finance Ministry, based on the recommendations of the 15th Finance Commission, had decided to grant the additional borrowing space of up to 0.5 per cent of the Gross State Domestic Product (GSDP) to the States every year for four years from FY22 to FY25 based on reforms undertaken by them in the power sector.
• This was announced by the Finance Minister in the Budget speech for FY22. The Power Ministry is the nodal agency for assessment of the performance of States and determining their eligibility for granting additional borrowing permission.
• To avail of the additional borrowing, the States have to undertake a set of mandatory reforms and also meet stipulated performance benchmarks.
  • The reforms include assuming responsibility for losses of Discoms, transparent reporting of power sector finances, including payment of subsidies as well as the recording of liabilities of governments to Discoms.
  • It also includes timely rendition of the financial and energy accounts, and its timely audit.
• States who could not complete the reform process in FY22 may also avail of the benefit for FY23 if they carry out the reforms in the current financial year.

Borrowing by States

https://optimizeias.com/article-293/

4. Fortified Rice

Subject: Economy

Section: PDS

Context: The Union Cabinet approved a scheme to distribute fortified rice under government programmes like NFSA, ICDS, PM POSHAN and others.

Background:

• In last year’s Independence Day speech, PM had announced the fortification of rice distributed under various government schemes, including the public distribution system (PDS) and midday meals in schools, by 2024.
• FCI and state agencies have already procured 88.65 LMT (lakh tonnes) of fortified rice for supply and distribution.
• But, around 35 million tonne (mt) of fortified rice is required for supply grain to beneficiaries of NFSA, ICDS, PM POSHAN and other schemes annually with an estimated cost of Rs 2,700 crore.
• In the first phase which ended in March 2022, fortified rice was supplied to beneficiaries of ICDS and PM POSHAN beneficiaries across eleven states — Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu, Chhattisgarh, Uttar Pradesh, Odisha, Telangana, Madhya Pradesh, Uttarakhand and Jharkhand.
• In the second phase of implementation, along with the beneficiaries under ICDS and PM POSHAN, fortified rice will be provided under NFSA and other welfare schemes to 291 aspirational and high burden districts assessed in terms of stunting by March 2023.
• The decision on providing fortified rice comes after the government decided to extend the free ration scheme — Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) — by six months to September-end 2022.

Concept:

• Need for fortified rice: To combat anaemia and Malnutrition among women, lactating mothers and children. Also, Rice is one of India’s staple foods, consumed by about two-thirds of the population (Per capita rice consumption in India is 6.8 kg per month). Therefore, fortifying rice with micronutrients is an option to supplement the diet of the poor.
• India’s capacity for fortification: Last year, nearly 2,700 rice mills had installed blending units for production of fortified rice, and India’s blending capacity stood at 13.67 lakh tonnes in 14 key states. FRK production had increased rapidly from 7,250 tonnes to 60,000 tonnes within 2 years.

Technologies involved in Rice Fortification:

• Various technologies are available to add micronutrients to regular rice, such as coating, dusting, and extrusion.
• Extrusion involves the production of fortified rice kernels (FRKs) from a mixture using an ‘extruder’ machine. It is considered to be the best technology for India. FRKs have a shelf life of at least 12 months.
• The fortified rice kernels are blended with regular rice to produce fortified rice.
• As per guidelines issued by the Ministry of Consumer Affairs, Food and Public Distribution, the shape and size of the fortified rice kernel should “resemble the normal milled rice as closely as possible”. According to the guidelines, the length and breadth of the grain should be 5 mm and 2.2 mm

Standards for Fortification:

• 10 g of FRK must be blended with 1 kg of regular rice.

Cooking Procedure:

• No special effort needed. The rice needs to be cleaned and washed in the normal way before cooking. After cooking, fortified rice retains the same physical properties and micronutrient levels as it had before cooked.

Way to distinguish between fortified rice and regular rice:

• Fortified rice will be packed in jute bags with the logo (‘+F’) and the line “Fortified with Iron, Folic Acid, and Vitamin B12”.

To know more about Rice fortification, refer: https://optimizeias.com/rice-fortification-2/

5. Surge in Marine Product Exports

Subject: Economy

Section: Growth and Development

Context: India’s marine products exports reached a record high of $7.74 billion during 2021-22, achieving the 99% of the $7.809-billion target fixed by the Commerce Ministry for 2021-22.

Concept:

• The US, China and Japan are the top three favourite destinations for Indian marine exports. Exports contributed to these three countries account 63 per cent of exports in dollar terms.
• The top 10 countries were the US (past 11 years), China (past 3 years), Japan (past 3 years), Vietnam, Thailand, Spain, Canada, Italy, UAE and Belgium. Among them, the top five countries contributed 70 per cent of exports and the top 10 countries contributed 82 per cent of total marine exports in dollar value.
• The export target fixed for these top 3 countries are usually achieved at higher value than the pre-fixed one.
• According to MPEDA (Marine Products Exports Development Authority), Russia-Ukraine conflict hit seafood shipments to CIS countries in the last quarter. Otherwise, the export figure could have crossed the target fixed by the Ministry.
• Besides, the pent-up demand from various countries is also a contributing factor for India to perform well in the global market. South-East Asian nations are the main source for these countries to procure seafood. But the rising Covid cases had restricted exports and affected production. This has facilitated these countries to source seafood from India.
• Major items of Export: Frozen Shrimp emerged as a principal item of export in the seafood basket both in quantity and foreign earnings followed by Frozen Fish, Frozen Cuttle fish, others and Frozen Squid etc.

MPEDA:

• The Marine Products Export Development Authority (MPEDA) is a statutory body which was set up under Section (4) of MPEDA Act, 1972. It functions under the Department of Commerce.
• It is responsible for development of the marine products industry with special reference to exports.
• It is headed by a Chairman. It has its headquarters at Kochi and has a number of Regional and Sub- Regional Offices.

To know about steps taken by govt, refer: https://optimizeias.com/shaphari-scheme/

6. Deregulation of GM crops

Subject: Economy

Section: Agriculture

Context: Anil Ghanwat, President of Swatantra Bharat Party and a member of the Supreme Court-appointed Committee on Farm Laws demanded the government must deregulate all GM Crops and varieties that have been approved in other developed countries.

In News:

• As many States are reluctant in giving consent for field trials of GM crops, the government must deregulate Bt brinjal and GM mustard, which have been already approved by the GEAC as well as the herbicide tolerant varieties of cotton and other crops.
• The decision will make India self-sufficient in oilseeds and pulses which are being imported.
• Moreover, permitting the adoption of this technology in India will give freedom to farmers to sow the seed they prefer and the technology they wish to adopt.

GM Crops:

• In conventional plant breeding, species of same genus are crossed to provide the offspring with the desired traits of both parents.
• Genetic engineering aims to transcend the genus barrier by introducing an alien gene in the seeds to get the desired effects.
• The alien gene could be from a plant, an animal or even a soil bacterium.
• Bt cotton is the only GM crop allowed for commercial cultivation in India. It has two alien genes from the soil bacterium Bacillus thuringiensis (Bt) that allows the crop to develop a protein toxic to the common pest pink bollworm.
• HtBt, on the other, cotton is derived with the insertion of an additional gene, from another soil bacterium, which allows the plant to resist the common herbicide glyphosate.

Legal Provision:

• Use of the unapproved GM variant can attract a jail term of 5 years and fine of Rs 1 lakh under the Environmental Protection Act ,1989.

GEAC:

• The Genetic Engineering Appraisal Committee (GEAC) functions under the Ministry of Environment, Forest and Climate Change (MoEF&CC).
• It is responsible for appraisal of activities involving large scale use of hazardous microorganisms and recombinants in research and industrial production from the environmental angle.
• The committee is also responsible for appraisal of proposals relating to release of genetically engineered (GE) organisms and products into the environment including experimental field trials.
• GEAC is chaired by the Special Secretary/Additional Secretary of MoEF&CC and co-chaired by a representative from the Department of Biotechnology (DBT). Presently, it has 24 members and meets every month to review the applications in the areas indicated above.

To know about GM Food Crop Regulation, refer: https://optimizeias.com/gm-food-crops-regulation/

7. SpaceX’s launch of three visitors to ISS

Subject: Science and Technology

Section: Space Technology

Context: SpaceX launched three rich businessmen and their astronaut escort to the International Space Station for more than a week’s stay, as NASA joins Russia in hosting guests at the world’s most expensive tourist destination.

Background:

• Russia has been hosting tourists at the space station – and before that the Mir station – for decades. Just last autumn, a Russian movie crew flew up, followed by a Japanese fashion tycoon and his assistant.
• NASA is finally getting into the act, after years of opposing space station visitors.

Concept:

• It’s SpaceX’s second private charter flight to the orbiting lab after two years of carrying astronauts there for NASA.
• The first private charter of Elon Musk’s SpaceX, took a billionaire and his guests on a three-day orbit ride last year.
• The private Axiom Space company arranged this visit with NASA for its three paying customers. So, this may be considered as Axiom’s first private flight to the space station.
• The three visitors will be an American, Canadian and Israeli who run investment, real estate and other companies. They’re paying $55 million apiece for the rocket ride and accommodations, all meals included.
• The visitors’ tickets include access to all but the Russian portion of the space station – they’ll need permission from the three cosmonauts on board. Three Americans and a German also live up there.
• Other Explorations include:
  • Jeff Bezos’ rocket company Blue Origin is taking customers on 10-minute rides to the edge of space, while Virgin Galactic expects to start flying customers on its rocket ship later this year.
  • Axiom is targeting next year for its second private flight to the space station. More customer trips will follow, with Axiom adding its own rooms to the orbiting complex beginning in 2024. After about five years, the company plans to detach its compartments to form a self-sustaining station – one of several commercial outposts intended to replace the space station once it’s retired and NASA shifts to the moon.
  • NASA’s new moon rocket, which is awaiting completion of a dress rehearsal for a summertime test flight.

8. Liquidity Adjustment Corridor:

Subject: Economy

Section: Monetary Policy

Context:

The Reserve Bank of India (RBI) has introduced a non-collateralized Standing Deposit Facility (SDF) to absorb surplus liquidity from the banking system at a higher interest rate.

RBI will now use SDF at 3.75% as the floor rate for Liquidity Adjustment Facility (LAF) corridor instead of Fixed Reverse Repo Rate at 3.35%

What?

SDF is a Reverse Repo Facility at a higher rate and without collaterals from RBI.

Under SDF banks will be able to park their surplus money (lend to the RBI) but at a higher rate than reverse repo rate.

Why?

SDF rate of 3.75 per cent will be the new floor rate for the Liquidity Adjustment Facility (LAF) corridor, replacing the fixed rate reverse repo.

So far, RBI used three policy rates under the LAF corridor to manage its monetary policy operations:

• repo rate- at which it lends to banks,
• reverse repo rate- at which it drains excess liquidity from banks,
• marginal standing facility-rate at which RBI supplies liquidity on overnight basis (above the repo rate). It acted as the ceiling rate under the LAF corridor.

Introduction of the SDF thus acts as the floor rate under the LAF corridor as being above the fixed reverse repo rate.

This has resulted in normalisation of the LAF corridor to pre-pandemic level of 50 basis points, with SDF being 25 basis points below the repo rate and the marginal standing facility (MSF) 25 basis points above the repo rate. And it can be seen as the first concrete step for both policy and liquidity normalisation. significant change in the design of LAF itself.

Changes in details:

The policy repo (4%) and reverse repo rates (3.35%), both of which are collateralised overnight rates, used to be the upper and lower bounds respectively of the LAF corridor till now.

These will be replaced by two standing facility rates — MSF or Marginal Standing Facility (4.25 per cent) and SDF or Standing Deposit Facility (3.75 per cent) as being lower than Repo Rate and above Reverse Repo Rate respectively.

Advantages:

• Remove constraints on liquidity absorption mechanism– Since RBI can get money without parting Gsec as the collateral to the lenders as done under reverse repo facility.
• Benefits to Banks through arbitrage– the market repo rate was around 3.40 per cent and, with SDF at 3.75, banks with excess SLR (Statutory Liquidity Ratio) can borrow through market repo/TREPS at lower rates, and the amounts so borrowed can be parked with the RBI at higher SDF which would not attract capital charge, for engaging in arbitrage in preference to making loans which attract capital charge.

9. SLR under the Held to Maturity (HTM) category

Subject: Economy

Section: Monetary Policy

Context:

The Reserve Bank of India (RBI) has enhanced the limit for banks to park Statutory Liquidity Ratio (SLR) securities such as Government Securities (G-Secs) in the Held to Maturity (HTM) category from 22 to 23% of NDTL or Net Demand and Time Liabilities, in the backdrop of the huge ₹14.31-lakh crore government borrowing programme in FY23.

Impact?

• Reduce the cost of borrowing– allowing banks to buy G-Secs aggregating up to ₹1.70-lakh crore without worrying about investment depreciation provision in the current rising yield scenario. Thus, reduce the bond supply relative to demand causing the bond price to rise and its yield to fall.
• Reduce liquidity and inflation -banks buy Gsec in exchange pating liquidity held on their part to the Government.

Concept:

The entire investment portfolio of the banks (including SLR securities and non-SLR securities) are classified under three categories viz.

•  ‘Held to Maturity’,
• ‘Available for Sale’ and
• ‘Held for Trading’.

Held-to-maturity securities are debt security investments which the holder has the intention and ability to hold until a specific date of maturity. The investments classified under HTM need not be marked to market and will be carried at acquisition cost, as subsequent changes in market value are ignored because the return is predetermined that the increase in HTM

Thus, raising the limit by 1 per cent could create an additional headroom of ₹1.6-1.7-lakh crore for banks to hold the government securities, without marking them to market in a rising bond yield scenario and thereby preventing any loss.

10. Trends in the tax revenue

Subject: Economy

Section: Fiscal Policy

Context:

Gross tax collections grew to Rs 27.07 lakh crore in FY22, a 33.5% rise over last fiscal’s mop-up. The improved revenue buoyancy also reflected in tax-to-GDP ratio rising to over two-decade high of 11.7%

Details:

• India’s gross tax revenues surged 34% in 2021-22 to exceed ₹27 lakh crore against the Budget estimate of ₹22.17 lakh crore
• Corporation tax collections rose by 56.1% and personal income tax grew about 43%, taking overall direct tax growth to 49%
• The Customs duty collections went up by 48%,excise duty collections have contracted 0.2% and the Central GST has grown by almost 30% taking the overall indirect taxes growth by 20%
• The tax-to-GDP ratio at 11.7%, from 10.3% in the previous year and is the highest since at least 1999.
• Direct taxes are 6.1% of GDP, and indirect taxes are 5.6%
• Tax buoyancy ratio is ‘very healthy’ at 1.9 with 2.8 for direct taxes and 1.1 for in- direct taxes in 2021-22.
•  The ratio of direct to indirect taxes recovered from 0.9 in 2020-21 to 1.1 in 2021-22.
• The aggregate devolution to States has overshot the RE by about ₹95,000 crore.

Long term trends:

Long term fiscal indicators(% of GDP and growth rate)

Concept:

Tax buoyancy explains this relationship between the changes in the government’s tax revenue growth and the changes in GDP.  It refers to the responsiveness of tax revenue growth to changes in GDP. When a tax is buoyant, its revenue increases without increasing the tax rate.

A tax is considered buoyant if it is above 1. The tax buoyancy came in at about 2, which means the rate of growth in tax collection was around twice as fast as nominal GDP growth.

Determining factors:

• the size of the tax base
• the friendliness of the tax administration
• the reasonableness and simplicity of the tax rates
• lesser the tax rebates and reductions

The tax-to-GDP ratio is the ratio of the tax revenue of a country compared to the country’s gross domestic product (GDP). This ratio is used as a measure of how well the government controls a country’s economic resources. Tax-to-GDP ratio is calculated by dividing the tax revenue of a specific time period by the GDP.

Receipts

A tax-to-GDP ratio of 15% or higher ensures economic growth and, thus, poverty reduction in the long-term, according to the World Bank

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 capital 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.

Gross vs Net tax revenue-From the point of view of budgeting

•  Gross tax revenue means the sum of total direct taxes of union and total indirect taxes of unions.
•  Net tax revenue is Gross Tax Revenue minus Revenue shared between states.

11. WHO Contingency Fund for Emergency

Subject: IR

Section: International organization

Context: The World Health Organization has called for sustained and safe access for the delivery of humanitarian assistance even as the Russian invasion of Ukraine continues.

Further, $3.5 million from WHO’s Contingency Fund for Emergencies (CFE) has been provided to purchase and deliver urgent medical supplies.

What?

The CFE was established in 2015 by a resolution of the World Health Assembly, the decision making body of WHO. It was created as an internal financing mechanism to save time, resources and lives by enabling WHO to respond rapidly to disease outbreaks and health emergencies, often in 24 hours or less.

The CFE has helped transform WHO into a first responder in health crises, enabling it to fulfill its vision to protect people in emergencies and keep the world safe. The CFE relies entirely on the generous support of WHO Member State governments and other contributors who recognize WHO’s critical role in crisis response and understand that, in an emergency, every hour counts.

Mechanism :

The CFE operates within the WHO Emergency Response Framework, which guides the Organization’s response to health emergencies.

• When an event such as an outbreak is confirmed and presents a serious threat, the CFE can allocate US$ 50 000 immediately to finance a risk assessment. 
• If an event requires a higher level of operational response, the event undergoes grading, an internal activation procedure that triggers WHO emergency procedures and activities for the management of the response.
• For graded events, whether new or an escalation of an existing emergency, there is no limit to the amount that can be requested from the CFE.
• Up to US$ 500 000 can be fast-tracked in as little as 24 hours, with higher amounts requiring approval of the Executive Director, WHO Health Emergencies Programme.
• For graded events, WHO’s Incident Management System (IMS) and emergency standard operating procedures are activated. The IMS guides WHO’s operational response, identifying critical roles and responsibilities, including financial management with highest level of financial monitoring and accountability from all three levels of the Organization.

CFE funds are typically used within the first three months of a response and may be extended if needs persist. Allocations from the CFE should be reimbursed to the extent possible. All unspent funds are returned to the CFE.