DNA (Daily News Analysis) – 16 Sept 2022

UPSC/STATE PSC

The Hindu & Indian Express

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News 1: Financial Stability Development Council

Background:

• Finance Minister Nirmala Sitharaman stressed the need for the government and regulators to monitor financial sector risks and market developments on a continuous basis and take timely actions to mitigate vulnerabilities at a meeting of the Financial Stability and Development Council (FSDC) recently.

Financial Stability Development Council:

• Established: 2010
• Chairman: Union Finance Minister
• Members: Heads of financial sector Regulators (RBI, SEBI, PFRDA, IRDA & FMC) Finance Secretary and/or Secretary, Department of Economic Affairs, Secretary, Department of Financial Services, and Chief Economic Adviser
• FSDC was set up to strengthen and institutionalize the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
• The Council monitors macro prudential supervision of the economy, including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial sector development issues. It also focuses on financial literacy and financial inclusion.

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News 2: Fitch cuts FY23 India growth outlook to 7% on high inflation

Background:

• Fitch Ratings recently cut its forecast for India’s economic growth in 2022-23 to 7%, from 7.8% projected earlier, citing the global slowdown, high inflation and the RBI’s monetary actions to tame it as reasons. 

Credit Rating Agencies:

• Credit rating agency (CRA) is a company that assigns credit ratings, which rate a debtor’s ability to pay back debt by making timely principal and interest payments and the likelihood of default.
• These agencies help lenders and investors determine the potential risk involved in lending money to a particular borrowing entity and gauge the entity’s repayment ability based on its past credit behaviour.
• The global credit rating industry is highly concentrated, with three agencies controlling nearly the entire market: Moody’s, S&P Global, and Fitch Ratings.

In India:

• CRISIL, ICRA, CARE, India Ratings and Research Pvt Ltd, Acuite Ratings & Research, Brickwork Ratings India Pvt. Ltd. and Infomerics Valuation and Rating Pvt. Ltd.
• Credit Rating agencies in India are regulated by Securities Exchange Board of India

Significance of Credit Ratings:

• Assesses creditworthiness of Governments and their securities.
• The primary role is to reduce information asymmetry in credit markets by providing investors an opinion on the ability of an instrument to meet its obligations.
• CRAs encapsulate extensive information relating to the debt instrument and issuer in rating symbols, and also lend some of their reputational capital to the issue.
• Credit rating agencies provide investors with information about whether bond and debt instrument issuers can meet their obligations.
• Agencies also provide information about countries’ sovereign debt.
• Obtaining a good sovereign credit rating is usually essential for developing countries that want access to funding in international bond markets.
• A good sovereign credit rating helps attract foreign direct investment.

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News 3: The Eastern Economic Forum and India’s balancing act

Eastern Economic Forum (EEF):

• The EEF was established in 2015 to encourage foreign investments in the Russia’s Far East (RFE). The EEF displays the economic potential, suitable business conditions and investment opportunities in the region.

Aim of EEF:

• The primary objective of the EEF is to increase the Foreign Direct Investments in the RFE. The region encompasses one-third of Russia’s territory and is rich with natural resources such as fish, oil, natural gas, wood, diamonds and other minerals.
• The region’s riches and resources contribute to five per cent of Russia’s GDP. But despite the abundance and availability of materials, procuring and supplying them is an issue due to the unavailability of personnel.
• The RFE is geographically placed at a strategic location, acting as a gateway into Asia. The Russian government has strategically developed the region with the aim of connecting Russia to the Asian trading routes. Russia is trying to attract the Asian economies in investing and developing the far east.

Major actors and their interests on this forum:

• In 2022, the Forum aimed at connecting the Far East with the Asia Pacific region.
• China: 
  • China is the biggest investor in the region as it sees potential in promoting the Chinese Belt and Road Initiative and the Polar Sea Route in the RFE. China’s investments in the region account for 90% of the total investments.
  •  The Trans-Siberian Railway has further helped Russia and China in advancing trade ties. 
  • The countries share a 4000-kilometer-long border, which enables them to tap into each other’s resources with some infrastructural assistance.
  •  China and Russia have invested in a fund to develop northeastern China and the RFE, through collaborations on connecting the cities of Blagoveshchensk and Heihe via a 1,080 metre bridge, supplying natural gas, and a rail bridge connecting the cities of Nizhneleninskoye and Tongjiang.
• South Korea: 
  • South Korea has invested in shipbuilding projects, manufacturing of electrical equipment, gas-liquefying plants, agricultural production and fisheries.
  •  In 2017, the Export-Import Bank of Korea and the Far East Development Fund announced their intention to inject $2 billion in the RFE in a span of three years.
• Japan: 
  • Japan is another key trading partner in the Far East. In 2017, Japanese investments through 21 projects amounted to $16 billion. Under Shinzo Abe’s leadership, Japan identified eight areas of economic cooperation and pushed private businesses to invest in the development of the RFE.
  • Japan seeks to depend on Russian oil and gas resources after the 2011 meltdown in Fukushima which led the government to pull out of nuclear energy. Japan also sees a market for its agro-technologies which have the potential to flourish in the RFE, given similar climatic conditions. 
  • The trade ties between Japan and Russia are hindered by the Kuril Islands dispute as they are claimed by both countries.
• India: 
  • India seeks to expand its influence in the RFE. During the forum, Prime Minister Narendra Modi expressed the country’s readiness in expanding trade, connectivity and investments in Russia. 
  • India is keen to deepen its cooperation in energy, pharmaceuticals, maritime connectivity, healthcare, tourism, the diamond industry and the Arctic.
  • In 2019, India also offered a $1 billion line of credit to develop infrastructure in the region. Through the EEF, India aims to establish a strong inter-state interaction with Russia. Business representatives of Gujarat and the Republic of Sakha have launched agreements in the diamond and pharmaceuticals industry.

Balancing act between EEF and Indo-Pacific Economic Framework (IPEF):

• The U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) and the EEF are incomparable based on its geographic coverage and the partnership with the host-countries.
• India has vested interests in both the forums and has worked towards balancing its involvement. India has not shied away from investing in the Russia-initiated EEF despite the current international conditions.
• At the same time, India has given its confirmation and acceptance to three of the four pillars in the IPEF. The country understands the benefits of being involved in the development in the RFE but it also perceives the IPEF as a vital platform to strengthen its presence in the Indo-Pacific region.
• The IPEF also presents an ideal opportunity for India to act in the region, without being part of the China-led Regional Comprehensive Economic Partnership or other regional grouping like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
• The IPEF will also play a key role in building resilient supply chains. India’s participation in the forum will help in disengaging from supply chains that are dependent on China and will also make it a part of the global supply chain network.
• Additionally, the IPEF partners will act as new sources of raw material and other essential products, further reducing India’s reliance on China for raw materials.

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News 4: Delay in govt.’s flagship PMAY-G scheme to invite penalty

Background:

• Pulling up the States for the delay in completion of the Narendra Modi government’s flagship rural household scheme — Pradhan Mantri Awas Yojana (Gramin) — the Union Ministry of Rural Development has come up with a set of penalties that the State governments will have to bear for any further delay.
• West Bengal, Chhattisgarh and Odisha, along with Assam, are the leading four States who are far behind their targets.

PMAY – G:

• Ministry: Ministry of Rural Development

• In pursuance to the goal – Housing for all by 2022, the rural housing scheme Indira Awas Yojana has been revamped to Pradhan Mantri Awaas Yojana – Gramin and approved during March 2016.

Objective:

• To provide pucca house to all who are houseless and living in dilapidated houses in rural areas. The overall target is to construct 2.95 crore pucca houses with basic amenities by March, 2024.
• Under the scheme, financial assistance is provided for construction of pucca house to all houseless and households living in dilapidated houses. The scheme would be implemented in rural areas throughout India except Delhi and Chandigarh. The cost of houses would be shared between Centre and States.
• The initial deadline for the scheme was March 2022, which owing to the COVID-19 pandemic was extended by another two years till March 2024.

Funding:

• In plain areas, Centre: State = 60: 40
• In North Eastern states and hill states, Centre: State = 90: 10

Target group:

• Identification of beneficiaries eligible for assistance and their prioritisation to be done using information from Socio Economic and Caste Census (SECC) ensuring total transparency and objectivity.
• The list will be presented to Gram Sabha to identify beneficiaries who have been assisted before or who have become ineligible due to other reasons.
• Awaas+ Survey conducted to identify those otherwise eleigible households who got left out in the SECC of 2011 based permanent wait list of PMAY – G.

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News 5: Saudi Arabia overtakes Russia to be India’s no 2 oil supplier in August

• Saudi Arabia emerged as the 2nd biggest oil supplier to India in August, while Irag is the biggest oil supplier to India.
• India – 3rd biggest oil importer and consumer
• Share of oil from OPEC in India fell down to 59.8% which was lowest in at least 16 years, because India cut imports from Africa.
• India is no. 2 oil buyer of Russia after China

OPEC (Organization of Petroleum Exporting Companies):

• • OPEC is a permanent intergovernmental organization of 13 oil-exporting developing nations that coordinates and unifies the petroleum policies of its Member Countries.
  • Type: Intergovernmental organization
  • Headquarter: Vienna, Austria
  • Members: Algeria, Angola, Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, UAE, Venezuela
  • OPEC was created at the Baghdad Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Its membership is open to any country provided that the country is a substantial exporter and shares the same ideals as that of OPEC organization.

Mission: To coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.

OPEC+:

• OPEC plus countries are those countries which export crude oil and are not a part of OPEC organization.
• Members: Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.

Asian Premium:

•  Asian Premium is the extra charge being collected by OPEC countries from Asian countries when selling oil

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News 6: Ethereum blockchain cuts energy use with ‘Merge’ software fix

Background:

• The ethereum blockchain has undergone a major software upgrade, drastically reducing its energy usage.

Blockchain:

• A blockchain is a distributed database or ledger that is shared among the nodes of a computer network.
• As a database, a blockchain stores information electronically in digital format.
• Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions.
• The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
• Blockchains store data in blocks that are then linked together via cryptography
• Decentralized blockchains are immutable, which means that the data entered is irreversible.
• The use of blockchains has exploded via the creation of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.

Pros and Cons of blockchain:

Pros:

• Improved accuracy by removing human involvement in verification
• Cost reductions by eliminating third-party verification
• Decentralization makes it harder to tamper with
• Transactions are secure, private, and efficient
• Transparent technology
• Provides a banking alternative and a way to secure personal information for citizens of countries with unstable or underdeveloped governments

Cons:

• Significant technology cost associated with mining bitcoin
• Low transactions per second
• History of use in illicit activities, such as on the dark web
• Regulation varies by jurisdiction and remains uncertain
• Data storage limitations

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News 7: Electoral bonds case in Supreme Court

Background:

• The Supreme Court will likely hear pending petitions challenging the Electoral Bond Scheme on September 19. The petitions filed by NGO Association for Democratic Reforms (ADR) figure in the advance cause list of the top court for September 19.
• The top court questioned claims regarding “complete anonymity” of the purchasers of the bonds and said “it is not as though the operations under the Scheme are behind iron curtains incapable of being pierced”.

Electoral bond scheme:

• Electoral bonds are an instrument through which anyone can donate money to political parties. Such bonds, which are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, can be bought from authorized branches of the State Bank of India.
• The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses.
• Name of the donor remains anonymous.

Reason behind introduction of electoral bonds:

• The central idea behind the electoral bonds scheme was to bring about transparency in electoral funding in India.

Criticism:

• The central criticism of the electoral bonds scheme is that it does the exact opposite of what it was meant to do: bring transparency to election funding. Critics argue that the anonymity of electoral bonds is only for the broader public and opposition parties.
• Further, one of the arguments for introducing electoral bonds was to allow common people to easily fund political parties of their choice but more than 90% of the bonds have been of the highest denomination (Rs 1 crore).
• Moreover, before the electoral bonds scheme was announced, there was a cap on how much a company could donate to a political party: 7.5 per cent of the average net profits of a company in the preceding three years. However, the government amended the Companies Act to remove this limit, opening the doors to unlimited funding by corporate India, critics argue.

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News 8: Vembanad lake:

• Type: Freshwater lake
• Location: Kerala
• Vembanad lake is the longest lake in India and largest lake in Kerala.
• The lake has its source in four rivers, Meenachil, Achankovil, Pampa and Manimala
• It is the 2nd largest Ramsar site after Sunderbans.
• Vembanad lake’s conservation is covered under National wetland Conservation Programme and the famous snake boat race is organized on this lake.
• Kuttanad lies on the southern point of Vembanad (Kuttanad Wetland Agriculture System is unique, as it is the only system in India that favours rice cultivation below sea level in the land created by draining delta swamps in brackish waters. It forms the part of Globally Important Agricultural Heritage Systems-GIAHS).

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News 9: Golconda Fort:

• Golconda Fort is located in the western part of Hyderabad city and is about 9 km from the Hussain Sagar Lake. 
• It was originally a mud fort under the reign of Rajah of Warangal. Later it was fortified between the 14th and 17th centuries by the Bahmani Sultans and then the ruling Qutub Shahi dynasty. Golconda was the principal capital of the Qutub Shahi kings.
• Golconda still boasts of mounted cannons, four drawbridges, eight gateways, and majestic halls, magazines, stables etc. The outermost enclosure is called Fateh Darwaza meaning Victory gate, after Aurangzeb’s army marched successfully through this gate.

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