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UPSC CURRENT AFFAIRS – 24 May 2024

InstaLinks :  Insta Links help you think beyond the issue but relevant to the issue from UPSC prelims and Mains exam point of view. These linkages provided in this ‘hint’ format help you frame possible questions in your mind that might arise(or an examiner might imagine) from each current event. InstaLinks also connect every issue to their static or theoretical background. This helps you study a topic holistically and add new dimensions to every current event to help you think analytically.

Table of Contents:

GS Paper 3:

  1. Economic Capital Framework (ECF) of RBI and its implications

 

GS Paper 4:

  1. From Kautilya to Immanuel Kant: Lessons for a World at War

 

Facts for Prelims (FFP)

  1. 2024 International Booker Prize
  2. Turbulence
  3. Graphite
  4. Shallow Aquifer Management (SAM)
  5. International Solar Alliance
  6. BIMSTEC
  7. Avian Influenza
  8. Census to estimate blue sheep and Himalayan ibex

 


 

Economic Capital Framework (ECF) of RBI and its implications

GS Paper 3

 Syllabus: Indian Economy

 

Source: TH

 

Context: The Reserve Bank of India (RBI) approved a record transfer of ₹2,10,874 crore to the Union government for 2023-24, more than double the ₹87,416 crore transferred last year. The RBI also increased the Contingent Risk Buffer (CRB) to 6.50% from 6%. This surplus is based on the Economic Capital Framework (ECF) adopted in 2019.

 

What is Economic capital?

Economic capital is the amount of capital that a firm (in this case RBI), usually in financial services, needs to ensure that it stays solvent given its risk profile. It includes both realized and unrealized reserves.

Economic Capital Framework Objective: The framework aims to balance the RBI’s autonomy with the Government’s development goals.

 

Reserve Bank of India’s Sources of Income:

Source of IncomeInterest from Government Securities

Open Market Operations (OMOs)

Foreign Exchange Operations

Interest on Loans and Advances

Income from LAF

ExpenditureOperating Expenses

Interest Paid on Deposits and Borrowings

Currency Issue Expenses

Provisioning for Contingencies and Reserves

SurplusNet income is derived from the total income (sources of income) minus total expenditure (expenses).

Reserve funds and contingency provisions for financial stability and emergencies.

 

About Economic Capital Framework (ECF)

The ECF provides a method for determining risk provisions and profit distribution under Section 47 of the RBI Act, 1934, requiring the central bank to pay profits to the government after provisions for debts, asset depreciation, and staff contributions. It was recommended by the Expert Committee (headed by Bimal Jalan) to Review the Extant Economic Capital Framework of the RBI.

 

The Bimal Jalan-led panel recommended:

  1. The total economic capitalshould be maintained between 20.8% to 25.4% of the RBI’s balance sheet.
  2. Risk Capital Frameworks: Assess the adequacy of RBI reserves.
  3. Contingency Risk Buffer (CRB): Maintain within 5.5%-6.5% of the RBI’s balance sheet.
    1. The CRB is the country’s savings for a financial stability crisis, which has been consciously maintained with the RBI in view of its role as Lender of Last Resort.
  4. Review Frequency: Review ECF every five years, or sooner if risks change significantly.
  5. Accounting Year Alignment: Sync RBI’s fiscal year (April-March) with the government’s from 2020-21 for better policy cohesiveness.
  6. Interim Dividend: Remove the interim payout structure, restricting it to extraordinary circumstances.

 

All recommendations were accepted by the RBI.

Reasons for Higher Dividend Transfers to the Government:

  1. Increased RBI Revenue: Boosted by variable repo rate (VRR) auctions for bank funding amid tight liquidity.
  2. Revaluation Gains: Higher revaluation gains on forex reserves.
  3. Interest Rates: Increased interest rates on domestic and foreign securities.
  4. Foreign Exchange Sales: Higher gross sales of foreign exchange.
  5. Rupee Depreciation: Surplus transfer aided by the rupee’s depreciation against the dollar.

 

Implications of Surplus Transfer:

  1. Fiscal Relief: Eases government fiscal management and boosts capex expenditure
  2. Revenue Compensation: Helps offset lower tax buoyancy and other revenue gaps.
  3. Budget Support: Provides a buffer to meet budget targets.
  4. Offsetting Losses: Mitigates potential losses from lower disinvestment, telecom payouts, or tax revenues.
  5. Fiscal Management: Enhances the government’s ability to manage fiscal deficits.

 

Reasons Against RBI Surplus Transfer to Government:

  1. Autonomy: Preserves RBI’s independence from government influence.
  2. Financial Stability: Ensures sufficient reserves for managing financial crises.
  3. Risk Buffer: Maintains a contingency risk buffer for unforeseen economic shocks.
  4. Monetary Policy: Supports effective monetary policy implementation without fiscal pressure.
  5. Long-term Stability: Prioritizes long-term economic stability over short-term fiscal gains.

 

Conclusion:

Transferring the RBI surplus to the government provides immediate fiscal relief and supports budgetary goals, but maintaining sufficient reserves is crucial for the RBI’s autonomy and long-term financial stability. A balanced approach is essential for sustainable economic health.

 

Insta links:

RBI Panel on Economic Capital Framework 

 

Prelims Link:

Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017)

  1. It decides the RBI’s benchmark interest rates.
  2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
  3. It functions under the chairmanship of the Union Finance Minister.

 

Select the correct answer using the code given below:

(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 2 and 3 only

 

 

Ans: A

 

 

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? (UPSC 2020)

  1. Cut and optimize the Statutory Liquidity Ratio
  2. Increase the Marginal Standing Facility Rate
  3. Cut the Bank Rate and Repo Rate

 

Select the correct answer using the code given below:

(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3

 

Ans: B

From Kautilya to Immanuel Kant: Lessons for a World at War

GS Paper 4

 Syllabus: Philospher and lessons from them

 

Source: IE

 

Context:  Kant’s rationality and ethics remain relevant in today’s world, fraught with geopolitical interests and fake news.

 

Who was Immanuel Kant?

Immanuel Kant (1724-1804) was a German philosopher from Königsberg, Prussia. He is best known for his works in epistemology, ethics, and metaphysics, particularly the “Critique of Pure Reason.” Kant’s philosophy emphasized reason, rationality, and autonomy, and he argued for perpetual peace, open trade, and the idea of a world citizen. His ideas continue to influence contemporary thought in various fields, including ethics, politics, and international relations.

 

Key IdeasDescription
Rejection of Imperialism and ColonialismKant opposed imperialism, colonialism, and slavery, advocating for the autonomy of nations and individuals.
Support for Open Trade and ImmigrationHe believed in the benefits of open trade and supported the right to refuge and free movement of people.
Concept of a World CitizenKant introduced the idea of a “world citizen” who could travel freely across borders, promoting global unity.
Emphasis on Reason, Rationality, and MoralityKant stressed that political actions should be guided by reason, rationality, and ethical principles.

 

Relevant to his ideas in today’s world:

  1. Crisis in Multilateral Order: Kant’s ideas are being reassessed due to dysfunctionality in the multilateral order, as seen with the UN’s struggles.
  2. Global Citizenship: His concept of a “world citizen” resonates in today’s globalized world, advocating for free movement and open trade.
  3. Ethics and Rationality: Kant’s emphasis on reason, rationality, and morality remains crucial in addressing issues like terrorism and aggression by nations.
  4. Global Non-Self-Governing Territories: Kant’s rejection of imperialism and colonialism is relevant as 17 territories still seek self-government, reflecting ongoing colonial legacies.
  5. Modern Challenges: Kant’s vision of “perpetual peace” contrasts with today’s realities of global terrorism, multinational corporations, and AI-driven warfare.

 

India’s perspective emphasizes its ancient strategic culture, which draws wisdom from texts like the Ramayana, Mahabharata, Arthashastra, and Tirukkural, assessing statecraft through the lens of ethics. During its G20 Presidency, India promoted the motto “One Earth, One Family, One Future,” inspired by Vasudhaiva Kutumbakam, reflecting its commitment to global unity. Rooted in its cultural heritage, India values serving humanity. It aims to blend Kant’s ideas with its own ancient teachings, offering a new moral compass for international relations.

2024 International Booker Prize

Facts for Prelims (FFP)

 

Source: TH

 Context:  Jenny Erpenbeck’s novel “Kairos” wins the 2024 International Booker Prize, depicting a complex love story amidst East Germany’s final years.

Set against the backdrop of the Berlin Wall’s fall, it explores personal and national transformations.

 

About the International Booker Prize (formerly known as the Man Booker International Prize):

It is awarded annually to recognize the finest translated work of fiction worldwide. Established in 2005, it encourages reading diverse fiction and has impacted reading habits in the UK. Eligible works must be long-form fiction originally written in any language but translated into English. The £50,000 prize is equally split between the author and translator, with shortlisted candidates receiving £2,500 each.

Turbulence

Facts for Prelims (FFP)

 

Source: BS

 Context: A recent Singapore Airlines flight encountered severe mid-air turbulence, a type called Clear-air turbulence, caused by wind shear.

 

What is Wind shear? 

It is the change in wind speed or direction over a distance, occurring horizontally or vertically at various altitudes. It’s commonly associated with weather phenomena like jet streams, mountain waves, or thunderstorms.

 

What is Turbulence?

Turbulence is the irregular motion of air that can occur during flight. It manifests as sudden, unpredictable changes in airflow, causing the aircraft to experience shaking or bouncing movements.

 

Turbulence occurs in aircraft due to various factors, including:

  1. Atmospheric Conditions: Turbulence can be caused by disturbances in the atmosphere, such as wind shear, jet streams, thermal convection, or mountain waves.
  2. Weather Systems: Thunderstorms, frontal boundaries, and other weather systems can create turbulent conditions as aircraft encounter changes in air pressure, temperature, and moisture.
  3. Terrain Effects: Near mountains or large land masses, aircraft may experience turbulence caused by the interaction of air masses with terrain features.
  4. Wake Turbulence: Aircraft generate wake turbulence, or vortices, as they move through the air. Following aircraft can encounter these vortices, leading to turbulence.
  5. Clear-Air Turbulence: This type of turbulence occurs in clear air and is often associated with changes in wind speed and direction at high altitudes, such as jet streams. 

 

Graphite

Facts for Prelims (FFP)

 

Source: PTI

 Context: India is discussing with Sri Lanka to acquire graphite mines, aiming to meet the rising demand for graphite, crucial for battery anodes, especially lithium-ion batteries.

 

  • China is the world’s largest producer of natural graphite, accounting for two-thirds of global supply.
  • While Mozambique, Madagascar, and Brazil are significant non-Chinese producers, China also refines over 90% of the world’s graphite for use in EV battery anodes.
  • It is among 30 critical minerals declared by India.

 

About Graphite:

Graphite is a naturally occurring crystalline form of carbon. It’s made up of stacked layers of graphene. Graphite is the most stable form of carbon under standard conditions. 

Graphite is a mineral that’s found in metamorphic and igneous rocks. It’s extremely soft, cleaves with very light pressure, and has a very low specific gravity. 

Graphite is a good conductor of electricity and heat. It’s also lighter than diamond, smooth and slippery to the touch.

Graphite, a key component in electric vehicle (EV) batteries, has seen a surge in demand due to the growth of the EV industry. The battery end-use market for graphite has grown by 250% globally since 2018

Shallow Aquifer Management (SAM)

Facts for Prelims (FFP)

 

Source: TH

 Context: Telangana is implementing Shallow Aquifer Management (SAM) pilot models in Habsiguda and Sainikpuri to address groundwater depletion and flooding.

 

What is an Aquifer?

An aquifer is an underground layer of permeable rock, soil, or sand that holds water and allows it to flow freely. It acts as a natural reservoir, storing groundwater that can be accessed through wells for various purposes like drinking water supply, irrigation, and industrial use.

 

What is SAM?

SAM is a sustainable urban water management technique under the AMRUT scheme. It drills shallow borewells to pump out water, recharging aquifers during rainfall and raising water tables.

International Solar Alliance

Facts for Prelims (FFP)

 

Source: TOI

 Context: Spain has become the 99th member of the International Solar Alliance (ISA). Spain handed over the ISA Instrument of Ratification during a meeting between Spain’s Ambassador to India

 

Previous News about ISA:

BIMSTEC

Facts for Prelims (FFP)

 

Source: TH

 Context:  The BIMSTEC Charter, which came into force on May 20, 2024, grants the organization a ‘legal personality,’ enabling it to welcome new members and observers.

This milestone allows BIMSTEC to engage in structured diplomatic dialogue with other countries and groupings. The charter reaffirms India’s dedication to fostering a prosperous, peaceful, and sustainable neighbourhood, emphasizing shared history, culture, and mutual respect among member states.

What is Legal Personality?

Legal personality refers to the recognition of an entity, such as an organization or corporation, as having rights and obligations similar to those of a natural person.

 

Avian Influenza

Facts for Prelims (FFP)

 

Source: TOI

 Context: Australia’s first human case of bird flu has been confirmed in a child who contracted the H5N1 virus while in India. The child returned from India in March and fell ill with the flu virus.

 

Although avian influenza rarely infects humans, it can cause severe illness and has a high mortality rate.

 

About Avian influenza: 

It is commonly known as bird flu, is a highly contagious viral infection that primarily affects birds, including wild and domestic poultry. The H5N1 strain, first identified in 1996, has a mortality rate of about 60% in humans. Symptoms range from mild flu-like symptoms to severe respiratory issues and neurological problems. In India, outbreaks of avian influenza have occurred since 2006, with millions of birds culled to control its spread. India’s strategy involves detecting and culling infected birds. Antiviral treatments are available for human cases.

 

Global efforts to combat avian influenza include the Global Influenza Surveillance and Response System (GISRS), a WHO-led initiative that monitors circulating virus strains and advises on treatment and control measures. Additionally, the World Organisation for Animal Health (WOAH) collaborates internationally to enhance animal health. In India, the National Action Plan for Prevention, Control, and Containment of Avian Influenza outlines steps to manage outbreaks. India’s self-declaration of freedom from Highly Pathogenic Avian Influenza (HPAI) in certain poultry compartments was approved by WOAH in 2023.

 

Census to estimate blue sheep and Himalayan ibex

Facts for Prelims (FFP)

 

Source: DTE

 Context: The census to estimate blue sheep and Himalayan ibex populations has begun in Himachal Pradesh’s Lahaul & Spiti district. Wildlife authorities are using the double observer survey technique to conduct the survey in the challenging terrain

 

About Blue Sheep:

The Bharal, or blue sheep, is a Himalayan caprine species with the scientific name Pseudois nayaur, the sole member of its genus. Found in the high Himalayas, it inhabits regions across India, Bhutan, China, Myanmar, Nepal, and Pakistan. Bharal are medium-sized, with males slightly larger than females, and sport a slate grey coat with white underparts and black markings. Their distinctive horns curve upwards and then backwards. Bharal are diurnal and active throughout the day, grazing and resting on mountain slopes. They are classified as Least Concern on the IUCN Red List and are protected under the Wildlife Protection Act of 1972 in India.

 

About  Himalayan Ibex:

The Himalayan ibex, a subspecies of the Siberian ibex, is native to the Himalayan region spanning India, Pakistan, Tibet, and Nepal. Scientifically known as Capra sibirica hemalayanus, it thrives in high-altitude areas between 3,000 and 5,800 meters. In India, it’s primarily found in Jammu and Kashmir, Himachal Pradesh, and Uttarakhand. These sturdy wild goats weigh about 90 kg, stand 40 inches tall, and sport large curved horns with notches. Their coat ranges from light brown to reddish-brown, with a woolly texture in winter. Typically found in small herds, they can reach speeds of up to 50 km/h. The Himalayan ibex is classified as Near Threatened on the IUCN Red List.

 

Daily Current Affairs + PIB Summary (24 May 2024)

 


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