News 1: Rupee slides to new low of 80.79 on Fed rate increase, stance
Background:
- The Indian rupee on Thursday weakened sharply against the dollar to a new record low in the wake of the U.S. Federal Reserve increasing interest rates by 75 basis points and signaling more such steep increases in the future.
- The rupee depreciated by 83 paise to close at 80.79, suffering its biggest single day fall since February 24, when Russia invaded Ukraine.
Reason behind the fall:
- Due to rise in dollar index, rupee and other major currencies will come under pressure
- Depreciating rupee is unattractive to foreign portfolio investors
Steps that can be taken to arrest the slide:
- Curbs on imports of non-essential goods
- Reduction in thresholds on aggregate overseas investments by resident Indians
- Mandates for exporters to quicken their remittances
- Asking importers to sell dollars directly to oil marketing companies
- Easing norms for foreign portfolio investment in debt market
- Increasing the external commercial borrowing limits under automatic route
- Temporarily abolishing interest-rate caps for banks to attract deposits from non-resident Indians.
News 2: Telecom bill moots licensing of OTT apps, dues waiver
Background:
- The government has released the draft of ‘The Indian Telecommunication Act, 2022’ wherein it has proposed several significant changes, including provisions for waiving off dues for financially stressed operators, bringing over-the-top (OTT) platforms (such as WhatsApp, Zoom, Netflix) within the ambit of telecom services that require a license to operate, and provisions for message interception in case of public emergency.
- The Bill, released late on Wednesday inviting comments from stakeholders, seeks to replace the existing framework comprising the Indian Telegraph Act, 1885, the Wireless Telegraphy Act, 1933, and the Telegraph Wires (Unlawful Possession) Act, 1950, that govern the sector.
The Indian Telecommunication bill:
- The explanatory note said the Bill aims to consolidate and amend laws governing provision, development, expansion and operation of telecom networks and infrastructure, and spectrum assignment.
- The Bill proposes a framework to address defaults in payment by a licencee, whereby under “extraordinary circumstances”, the government may allow for deferred payment, conversion of a part or all of it into shares in the licencee or even write-offs.
- The Bill also simplifies the framework for mergers, demergers and acquisitions, for which the entities would need to comply with norms under the Companies Act, 2013, and only need to inform the telecom department.
- Noting that telecom users wish to know who was calling them, the Centre said it had included provisions related to identity to help prevent cyberfrauds using telecom services.
- The draft Bill had provided clarity on two critical aspects: insolvency proceedings for stressed telecom companies and bringing OTT platforms and Internet Service Providers (ISPs) under the umbrella of the Ministry of Telecommunications.
News 3: Central govt. signs ₹1,700-cr. deal for BrahMos missiles
Background:
- The Defence Ministry on Thursday signed a ₹1,700-crore contract with BrahMos Aerospace Pvt Ltd for 35 combat and three practice BrahMos supersonic surface-to-surface cruise missiles for two P-15B class of stealth guided missile destroyers of the Indian Navy.
BrahMos missiles:
- BrahMos is a joint venture between the DRDO and Russia’s NPO Mashinostroyeniya and the missile derives its name from Brahmaputra and Moskva rivers.
- Flight range of missile: 290 km with supersonic speed all through the flight
- BrahMos is a two-stage missile with solid propellant booster engine as its first stage and liquid ramjet in second stage which takes the missile closer to 3 Mach speed in cruise phase.
- It operates on Fire and Forget principle, adopts varieties of flights on its way to the target and due to its large kinetic power n impact has increased its destructive power. It can carry a conventional warhead weighing between 200 – 300 kgs.
News 4: NCC and UNEP sign MoU on tackling plastic pollution
Background:
- The National Cadet Corps (NCC) and United Nations Environment Programme (UNEP) in New Delhi on Thursday signed a Memorandum of Understanding (MoU) to tackle the issue of plastic pollution and achieve the universal goal of clean water bodies through Puneet Sagar Abhiyan and ‘Tide Turners Plastic Challenge programme’.
- The aim is to synergise and collate efforts towards engaging youth for promoting clean water bodies.
UNEP:
- Established: 1972
- Headquarter: Nairobi, Kenya
- Members: 193
- United Nations Environment Programme (UNEP) has been the global authority that sets the environmental agenda, promotes the coherent implementation of the environmental dimension of sustainable development within the United Nations system and serves as an authoritative advocate for the global environment.
- Objective:
- UNEP works on delivering transformational change for people and nature by drilling down on the root causes of the three planetary crises of climate change, nature and biodiversity loss, and pollution and waste.
- UNEP employs seven interlinked subprogrammes for action: Climate Action, Chemicals and Pollutions Action, Nature Action, Science Policy, Environmental Governance, Finance and Economic Transformations and Digital Transformations.
- Through its campaigns, particularly World Environment Day, UNEP raises awareness and advocates for effective environmental action.
UNEP hosts the secretariats of several multilateral environmental agreements and research bodies, including
- The Convention on Biological Diversity (CBD),
- The Minamata Convention on Mercury,
- The Convention on Migratory Species and The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
In 1988, the World Meteorological Organization and UNEP established the Intergovernmental Panel on Climate Change (IPCC).
UNEP is also one of several Implementing Agencies for the Global Environment Facility (GEF) and the Multilateral Fund for the Implementation of the Montreal Protocol
News 5: What US Fed’s latest rate hike means, and what to expect in the future
Background:
- “My colleagues and I are strongly committed to bringing inflation back down to our 2% goal. We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses,” a sombre US Federal Reserve chair Jerome Powell.
- Powell also signalled a further intensification of the American central bank’s fight against runaway inflation in the coming months.
Relation between Inflation and interest rate hikes:
- Interest rate hikes are the primary monetary policy tool used by central banks to tackle sporadic spurts in inflation.
- When interest rates go up in an economy, it becomes more expensive to borrow; so households are less inclined to buy goods and services, and businesses have a disincentive to borrow funds to expand, buy equipment or invest in new projects.
- A subsequent lowering of demand for goods and services ends up depressing wages and other costs, in turn, bringing runaway inflation under control.
- Even though the linkages of monetary policy to inflation and employment are not direct or immediate, monetary policy is a key factor in tackling runaway prices.
Impact across markets:
- The Fed’s primary tool of monetary policy is the federal funds rate, changes in which influence other interest rates — which in turn influence borrowing costs for households and businesses, as well as broader financial conditions.
- Theoretically, a signal to hike policy rates in the US should be a negative for emerging market economies, especially from a debt market perspective.
- Emerging economies such as India tend to have higher inflation and, therefore, higher interest rates than in developed countries. As a result, investors, including Foreign Portfolio Investors, tend to borrow in the US at lower interest rates in dollar terms and invest that money in the bonds of countries such as India in rupee terms to earn a higher rate of interest.
- When the Fed raises its policy rates, the difference between the interest rates of the two countries narrows, thus making countries such as India less attractive for the currency carry trade.
- A high-rate signal by the Fed would also mean a lower impetus to growth in the US, which could be yet negative news for global growth, especially when China is reeling under the impact of a real estate crisis and a lockdown-induced downturn.
- Higher returns in the US debt markets could also trigger a churn in emerging market equities, tempering foreign investor enthusiasm. There is also a potential impact on currency markets, stemming from outflows of funds.
Other important news
5G:
- 5G is the 5th generation mobile network. It is a new global wireless standard after 1G, 2G, 3G, and 4G networks.
- 5G enables a new kind of network that is designed to connect virtually everyone and everything together including machines, objects, and devices.
- 5G wireless technology is meant to deliver higher multi-Gbps peak data speeds, ultra low latency, more reliability, massive network capacity, increased availability, and a more uniform user experience to more users.
- Higher performance and improved efficiency empower new user experiences and connects new industries.
- While earlier generations of cellular technology (such as 4G LTE) focused on ensuring connectivity, 5G takes connectivity to the next level by delivering connected experiences from the cloud to clients. 5G networks are virtualized and software-driven, and they exploit cloud technologies.
- The 5G network will also simplify mobility, with seamless open roaming capabilities between cellular and Wi-Fi access. Mobile users can stay connected as they move between outdoor wireless connections and wireless networks inside buildings without user intervention or the need for users to reauthenticate.
- 5G technology should improve connectivity in underserved rural areas and in cities where demand can outstrip today’s capacity with 4G technology.
- New 5G networks will also have a dense, distributed-access architecture and move data processing closer to the edge and the users to enable faster data processing.
Evolution from 1G to 5G:
- The 1G era was defined by briefcase-sized phones and short conversations between a relatively small number of professional people.
- In the lead up to 2G, the demand for mobile services grew and never slowed down.
- Phones that could fit in your pocket, SMS and mobile internet access were hallmarks of the 3G world.
- Thanks to 4G, we have smartphones, app stores and YouTube.
- Now, 5G is completely reshaping both our professional and personal lives by enabling new use cases like connective vehicles, Augmented Reality and enhanced video and gaming.
