News 1: Issues with the FinTech Industry
- Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday flagged concerns related to digital lending including a spate of complaints regarding usurious interest rates, unethical recovery practices and data privacy issues and emphasized the need for the fintech industry to focus on governance, business conduct, regulatory compliance and risk mitigation to ensure that customers were protected even as their needs were served.
Digital lending and privacy:
- RBI mandated digital lending platforms to disclose the names of the banks/ NBFCs upfront on whose behalf they were providing credit.
- The regulatory norms aim to balance customer protection and business conduct on the one hand and support innovation on the other
- Innovations must be responsible, enhances the efficiency and resiliency of the financial system while benefitting the consumers.
- Robust internal product and service assurance frameworks, together with fair and transparent governance, would go a long way to safeguard the interests of customers and ensure long-term sustainability of the fintech entities themselves.
Fintech:
- The term Fintech (Financial Technology) refers to technology-enabled innovation in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services.
- As per EY Fintech Adoption Index, 2017, India ranks 2nd in terms of fintech adoption.
Benefits of Fintech:
- Designing suitable financial products that cater to specific needs of the financially excluded population
- Digital onboarding and boosting the quantum of investments
- Improves the quality of traditional financial institutions by increasing efficiency and productivity
- Ease of convenience and reduced costs is the power of fintech
Risks related to fintech:
- Systemic risks may arise due to unsustainable credit growth, increased interconnectedness, Development of new activities beyond the supervisory framework
- Data confidentiality and customer protection
- Financial risks manifested by lower profitability
- Cross border legal and regulatory issues might affect the performance
News 2: RBI lifts PCA restriction on Central Bank of India
Background:
- The Reserve Bank of India (RBI) has decided to take Central Bank of India out of the Prompt Corrective Action (PCA) restrictions subject to certain conditions and continuous monitoring.
Prompt Corrective Action:
- Prompt Corrective Action or PCA is a framework under which financial institutions with weak financial metrics are put under watch by the RBI.
- It can be applied to both RBI and NBFCs
- The central bank will track three indicators
- Capital To Risk-Weighted Assets Ratio (CRAR) – It is bank’s available capital expressed as a percentage of a bank’s risk-weighted credit exposures.
- Tier I leverage ratio – It is the relationship between a banking organization’s core capital and its total assets.
- Net Non-Performing Assets (NNPAS) Including Non-Performing Investments (NPIS). NPA are loans for which the principal or interest payment remained overdue for a period of over 90 days
News 3: Southwest monsoon begins early withdrawal in Rajasthan
Background:
- September 30 is considered the final day of the season for the entire country; while India has recorded 7% more rainfall than normal, the southern peninsula and central parts have had the bulk of the excess at 29% and 33%, respectively.
- The withdrawal of the monsoon was based on meteorological conditions such as an anti-cyclonic circulation (dry air that is the opposite of a cyclone), the absence of rain in the past five days and the water vapour imagery indicating dry weather conditions over the region.
Retreating monsoon and October Heat:
- During October-November, with the apparent movement of the sun towards the south, the monsoon trough or the low-pressure trough over the northern plains becomes weaker. This is gradually replaced by a high-pressure system.
- The southwest monsoon winds weaken and start withdrawing gradually. By the beginning of October, the monsoon withdraws from the Northern Plains.
- The months of October-November form a period of transition from hot rainy season to dry winter conditions.
- The retreat of the monsoon is marked by clear skies and a rise in temperature.
- While day temperatures are high, nights are cool and pleasant. The land is still moist. Owing to the conditions of high temperature and humidity, the weather becomes rather oppressive during the day. This is commonly known as ‘October heat’.
- In the second half of October, the mercury begins to fall rapidly in northern India.
- The low-pressure conditions, over northwestern India, get transferred to the Bay of Bengal by early November. This shift is associated with the occurrence of cyclonic depressions, which originate over the Andaman Sea.
- These cyclones generally cross the eastern coasts of India cause heavy and widespread rain. These tropical cyclones are often very destructive. The thickly populated deltas of the Godavari, the Krishna, and the Kaveri are frequently struck by cyclones, which cause great damage to life and property. Sometimes, these cyclones arrive at the coasts of Orissa, West Bengal, and Bangladesh. The bulk of the rainfall of the Coromandel Coast is derived from depressions and cyclones.
News 4: China remains formidable challenge, says Navy chief
Background:
- China remains a formidable challenge and has increased its presence not only along India’s land borders, but also in the maritime domain by leveraging anti-piracy operations to normalise its naval presence in the Indian Ocean Region (IOR)
Presence of Chinese Navy:
- The Navy chief noted that China had maintained continuous presence in the IOR since 2008 using anti-piracy operations “as the reason”.
- China now had a base in Djibouti and was also involved in the development of various ports in the IOR, Sri Lanka, Myanmar, Pakistan and many other countries.
News 5: The ‘triple dip’ La Niña, and its likely impact in India
Background:
- La Niña refers to the ENSO phase in which sea-surface temperatures are cooler than normal. Continuance of La Niña into 2023 is not bad news from the Indian standpoint, but it is not the same for other regions.
- The ongoing La Niña phase of the equatorial Pacific Ocean has just been predicted to persist for at least another six months, making it one of the longest ever La Niña episodes in recorded history. It is also only the third episode since 1950 to stretch into a third year.
La Nina and El Nino:
- The periodic warming and cooling of surface waters in the equatorial Pacific Ocean — a phenomenon described as El Niño Southern Oscillations, or ENSO — is known to trigger widespread changes in atmospheric conditions, and has a major influence on global weather patterns, including the Indian monsoon.
- La Niña refers to the ENSO phase in which sea-surface temperatures are cooler than normal. The warmer phase is known as El Niño.
- El Niño and La Niña episodes typically last for about nine months to a year.
- They usually develop in the March-June period and are the strongest during winter (November-January in the northern hemisphere), before weakening or dissipating by March or April of next year.
- The current La Niña episode has already surpassed that in length. Having started in September 2020, it has prevailed for the last 24 months, and looks set to continue for another six months, and has thus been classified as a ‘triple dip’ La Niña.
- El Niño episodes occur more frequently and are usually associated with more impactful weather events. La Niña, on the other hand, has a longer run.
- That is why multi-year La Niña events, those that continue for more than 12 months, are quite common. An El Niño is more likely to be a single-year event.
- Prolonged La Niña events in those instances could be explained by the fact that the amount of accumulated heat in the oceans was higher, and therefore took a longer time to dissipate.
Likely impact:
- In the Indian context, La Niña is associated with good rainfall during the monsoon season. This is the opposite of El Niño which is known to suppress monsoon rainfall. Thus, a continued spell of La Niña could lead to expectation of another year of good, or normal, rainfall during the monsoon.
- But, even though powerful, ENSO condition is only one of the several factors affecting monsoon rainfall in India. There is no one-on-one correlation between the ENSO condition and the amount of rainfall. Also, the influence of ENSO is at a macro level. There are wide variations in rainfall at the local level, which are getting exacerbated by climate change. The continuance of La Niña further into 2023 is not bad news from the Indian standpoint.
- In most parts of the United States, for example, La Niña is associated with very dry winters. In Australia and Indonesia, and generally in the tropical region, La Niña is expected to bring more rainfall.
- The widespread drought in the United States and flooding in eastern Australia this year could have been a result of the prolonged La Niña. The excessive rainfall in Pakistan, which is experiencing its worst flooding disaster, can also be blamed in part on La Niña.
- In its latest bulletin, the World Meteorological Organization (WMO) said the worsening drought in the Horn of Africa and southern United States carried the “hallmarks of La Niña”, as did the “above average rainfall in southeast Asia and Australasia”. It said that the persistence of La Niña was most likely to result in a worsening of the drought in Africa.
Climate change link:
- The occurrences of El Niño or La Niña are not very regular. Sometimes they emerge every two years, at other times there has been a gap of even seven years. Historical records do not go very far in the past.
- As a result, the natural variability of ENSO is not understood very clearly. And when the natural variability itself is not clear, the influence of global warming is difficult to quantify.
- There have been suggestions that climate change is increasing the frequency and intensity of El Niño and La Niña episodes, but the question is not entirely settled.
- A part of the reason is the fact that trade winds play a very important role in triggering ENSO events. And the changes in the strength of trade winds are not easily explained by global warming.
- During La Niña years, the colder surfaces allow the oceans to absorb more heat from the atmosphere. Consequently, the air temperatures tend to go down, producing a cooling effect.
- However, as pointed out by the WMO, this is not enough to reverse or neutralize the impacts of global warming.
News 6: Nutrition rating stars set to appear soon on food pack labels
Background:
- The Food Safety and Standards Authority of India (FSSAI), the country’s apex food regulator, has released draft notification for front-of-pack labelling to discourage consumers from buying packaged food high in sugar, salt, and fat, which will require pre-packaged food to carry a star graphic — ranging for 0 to 5 — next to the brand name.
- Like the star-rating system for energy efficiency of electronic products, the ‘Indian Nutrition Rating (INR)’ will see the unhealthiest food items carry a 0-star rating and the healthiest carry a 5-star rating.
Draft notification:
- As per the draft notification, items will be given scores based on contribution of energy and content of saturated fat, sugar, sodium, fruit and vegetables (FV), nuts, legumes, and millets (NLM), dietary fibre, and protein per 100 gm of solid or 100 ml liquid foods. Solid food with a score of more than 25 will be given 0.5 stars, and those with a score less than – (minus)11 will get 5 stars.
- Although not mandatory, the notification stated that food businesses may add interpretive information next to the star-rating logo, giving details of energy, sugar, saturated fat, and salt content.
- To generate the star-rating logo for the product, food businesses have to submit nutritional profiles of the products concerned on FSSAI’s FoSCoS (Food Safety Compliance System) portal.
- Food such as milk and milk products, whey, butter oil, ghee, vegetable oil and fat, fresh and frozen fruit and vegetables, fresh and frozen meat, egg, fish, flour, and sweeteners will not have to display the star rating.
- Carbonated beverages without any energy or sugar will also not be eligible for declaring the rating, according to the notification.
FSSAI:
- Ministry: Ministry of Health and Family Welfare
- Type: Statutory body established under the Food Safety and Standards Act, 2006
- FSSAI is responsible for protecting and promoting public health through the regulation and supervision of food safety.
Objective:
- Lay down science-based standards for articles on food
- To regulate the manufacture, storage, distribution, import, and sale of food
- To facilitate the safety of food
Powers of FSSAI:
- Framing of regulations to lay down food safety standards
- Laying down guidelines for accreditation of laboratories for food testing
- Providing scientific advice and technical support to the Central Government
- Contributing to the development of international technical standards in food
- Collecting and collating data regarding food consumption, contamination, emerging risks, etc.
- Disseminating information and promoting awareness about food safety and nutrition in India.
The FSS Act took 7 older acts into one umbrella.
- Prevention of Food Adulteration Act, 1954
- Fruit Products Order, 1955
- Meat Food Products Order, 1973
- Vegetable Oil Products (Control) Order, 1947
- Edible Oils Packaging (Regulation) Order 1988
- Solvent Extracted Oil, De- Oiled Meal and Edible Flour (Control) Order, 1967
- Milk and Milk Products Order, 1992
Eat Right India movement:
- FSSAI has embarked on a large-scale effort to transform the country’s food system in order to ensure safe, healthy and sustainable food for all Indians through the ‘Eat Right India’ movement.
- The tagline ‘Sahi Bhojan. Behtar Jeevan’, thus, forms the foundation of this movement.
- Eat Right India adopts a judicious mix of regulatory, capacity building, collaborative and empowerment approaches to ensure that our food is good both for the people and the planet. Further, it builds on the collective action of all stakeholders – the government, food businesses, civil society organizations, experts and professionals, development agencies and citizens at large.
- Eat Right India is aligned to the National Health Policy 2017 with its focus on preventive and promotive healthcare and flagship programmes like Ayushman Bharat, POSHAN Abhiyaan, Anemia Mukt Bharat and Swacch Bharat Mission.
Other important news
Sambar deer
- Conservation status: Vulnerable
- Distribution: Native to Indian subcontinent and southeast asia but has been introduced in Australia, New Zealand and United States
- Decline in population: Populations have declined substantially due to severe hunting, local insurgency, and industrial exploitation of habitat.
- State animal: Sambar is state animal of Odisha
Chital deer:
- Conservation status: Least concern
- Distribution: Native to Indian subcontinent
- Males are larger than females, and antlers are present only on males
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.