IAS UPSC Prelims and Mains Exam – 5th October 2019

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(PRELIMS + MAINS FOCUS)

Fourth bi-monthly monetary policy statement, 2019-20

Part of: GS Prelims and GS-III- Economy

In News

•  Monetary Policy Committee (MPC) has decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.15 % from 5.40 % 
• Consequently, the reverse repo rate under the LAF stands reduced to 4.90 %, and the marginal standing facility (MSF) rate and the Bank Rate to 5.40 %.
• It also revised its growth forecast for the current financial sharply, from 6.9% projected in the August policy, to 6.1%. Growth forecast for the first quarter of the next financial year was also trimmed to 7.2% from 7.4%.

About MPC

• MPC is a six-member committee constituted by the Central Government (Section 45ZB of the amended RBI Act, 1934).

• Of these, three members are from RBI while three other members are nominated by the Central Government.

• The MPC determines the policy interest rate required to achieve the inflation target
• Before establishment of Monetary Policy Committee, the final decision on interest rates etc. would come from RBI Governor’s desk.
• The quorum for the meeting of the MPC is four members. Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.

India’s first e-waste clinic will come up in Bhopal

Part of: GS Prelims and Mains GS-III –Environment Conservation

In News

• The Bhopal Municipal Corporation (BMC) and the Central Pollution Control Board (CPCB) have joined hands to set up the country’s first e-waste clinic in Bhopalthat would enable segregation, processing and disposal of waste from both household and commercial units.
• The clinic is being conceived in compliance with the Solid Waste Management Rules, 2016
• Electronic waste will be collected door-to-door or could be deposited directly at the clinic in exchange for a fee. The CPCB will provide technical support at the unit

Do You Know?

• It is estimated that 50 million tonne of e-waste will be generated globally in 2018. Half of this is personal devices such as computers, screens, smartphones, tablets.
• India is ranked 5th in the world among top e-waste producing countries-USA, China, Japan and Germany.The volume of e-waste is growing at an estimated 21 per cent annually.
• The concept of Extended Producer Responsibility (EPR)- under 2016 E-waste (Management) Rules – mandated producers of electrical and electronic equipment to register and specified targets to collect back e-waste generated and to ensure that it is channelised to authorized recyclers

ELECTRIC VEHICLE (EV) CHARGING GUIDELINES

Part of: GS Prelims and GS Mains III – Infrastructure

In News

• Union Minister for Power has approved amendments in Electric Vehicle Charging Guidelines and Specifications.
• At least one Charging Station to be available in a grid of 3 Km x 3 Km in the cities and one Charging Station at every 25 Km on both sides of highways/roads.
• All Mega Cities & expressways connected to these Mega Cities to be taken up for coverage in first phase, other big cities to be taken up in second phase.
• For inter-city travel, Fast Charging Station to be installed at every 100 Kms.
• Bureau of Energy Efficiency (BEE), a statutory body under Ministry of Power has been nominated as the Central Nodal Agency to facilitate installation of Charging Infrastructure.

MICROFINANCE

Part of: GS Prelims and GS Mains II –Economy

In News

• RBI has decided to raise the lending limit per borrower from ₹1 lakh to ₹1.25 lakh to enable more borrowers to avail loans from microfinance institutions (MFI)
• RBI has also proposed to increase the household income limit for borrowers of NBFC-MFIs from the current level of ₹ 1.00 lakh for rural areas to ₹ 1.25 lakh and from present level of ₹ 1.60 lakh for urban/semi urban areas to ₹ 2.00 lakh.
• RBI said the decision was taken after taking into consideration the important role played by MFIs in delivering credit to those at the bottom of the economic pyramid and enable them to play their assigned role in a growing economy.
• Microfinance institutions (MFIs) are financial companies that provide small loans to people who do not have any access to banking facilities

Miscellaneous

ChangthangPrahar (assault)

• It is an all arms integratedexercise in a “super high altitude” area near Chushul in eastern Ladakh, featuring tanks, artillery guns, drones, helicopters and troops, as well as para-drops.
• The exercise encompassed employment of mechanised forces with force multipliers integrating high technology platforms
• Changthang is a plateau in western and northern Tibet that extends into SoutheasternLadakh
• Another major combat exercise called “Him Vijay” will be held by the Army in Arunachal PradeshduringOctober second week, which will see the force testing its new integrated battle groups in mountain warfare in conjunction with the IAF

(MAINS FOCUS)

INDIA’S FOREIGN RELATION

TOPIC: General Studies 2:

• India and its neighbourhood- relations.
• Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

India-China informal summit

Context:

• Prime Minister Narendra Modi and Chinese President Xi Jinping   two-day India-China informal summit
• The second informal summit between leaders of India and China is scheduled to take place in the coastal town of Mamallapuram, south of Chennai.(first was wuhan) 
• The summit would take place in the wake of the recent India-US bonhomie and growing China-Pakistan partnership.

Why Mamallapuram?

• Mamallapuram, or Mahabalipuram in Chennai, Tamil Nadu. 
• An ancient historic town and one of two major port cities by the 7th century within the Pallava kingdom (Pallavas also had trade relations with the Chinese.)
• Now UNESCO world heritage site and  one of the most visited towns in South India
• Renowned for its architecture, widely admired across the world.
• Wuhan was picked by President Xi Jinping as the venue last year to demonstrate China’s economic resilience and might.
•  Mamallapuram is symbolic of India’s ‘soft power’.

Img : https://cdn.kastatic.org/ka-perseus-images/75a502c2daddead167bd72b120b004c9d47801ed.jpg

Did you know:

• Mamallapuram and the Pallava dynasty are also historically relevant, for the earliest recorded security pact between China and India (in the early 8th century) involved a Pallava king (Rajasimhan, or Narasimha Varma II), from whom the Chinese sought help to counter Tibet, which had by then emerged as a strong power posing a threat to China.

Issue of concern:

• Doklam and the disputed border between the two countries remains an issue of concern.
• China and India continue to compete and have a contradictory outlook on many strategic and civilisation issues. Like Asian security, regional stability and the role of the U.S. in the region
• The recent announcement by India of an “all arms integrated” exercise ‘codenamed Changthang Prahar (assault)’ in a “super high altitude” area near Chushul in eastern Ladakh, featuring tanks, artillery guns, drones, helicopters and troops, as well as para-drops, is almost certain to be read suspiciously by China.
• The reopening of the Advance Landing Ground at Vijoynagar in Arunachal Pradesh for the use of military aircraft 

• A  proposed major combat exercise, in Arunachal Pradesh, in which the new Integrated Battle Groups will be seen in operation 

Wuhan summit:

• The first Informal Summit between Prime Minister Narendra Modi and China’s President Xi Jinping was held in Wuhan in 2018
•  The purpose of meeting was to exchange views on overarching issues of bilateral and global importance and to elaborate their respective visions and priorities for national development in context of current and future international situation.
• Since the Wuhan Summit, little has changed as far as India-China relations are concerned.
• Political situation in Afghanistan deteriorates, China, along with countries like Pakistan, remains more intent than ever on ensuring that India has no role to play there.

Aftermath 

• Relations between China and the U.S. have sharply deteriorated. 
• Majority of nations in the West have cooled off towards China.
• strengthening of India-Russia ties.
•  New triangular relationship of Russia, India and Japan.
• China’s Belt and Road Initiative (BRI) has also come under increasing attack.

Challenges in China:

• China’s domestic scene is  marked by heightened anxiety

• The economy is far more fragile than in early 2018, as exemplified by the jitters emanating from China’s equity and currency markets

• The decline in growth rates.
• Internal security concerns such as unrest in Tibet, inroads made by radical extremist groups in Xinjiang 

• Turn of events in Hong Kong 

• The relentless attack by the U.S. and President Trump on China’s economic practices has aggravated this mood of pessimism.

China’s concern:

• India’s relations with the U.S. have attained a new high. 

• Relations with Russia have acquired a fresh dimension, incorporating economics alongside a longstanding military relationship.

• India’s relations with Japan have greatly strengthened. 

• The Quadrilateral (the U.S., India, Japan and Australia) has gained a new lease of life.

Way forward:

• India, needs to proceed with utmost caution

•  India must ensure that it does not provoke China to the point where it would be inclined to indulge in ‘adventurism’.

• China’s efforts are more than likely to be directed towards ‘disruption’, primarily concentrating on disrupting the strategic alliances that India has forged, or strengthened, recently.

Conclusion:

• With preparations and proper handling, the forthcoming meet could, on the other hand, provide India’s leaders with a realistic estimate as to where India-China relations are headed.

Connecting the dots:

• Informal summits have their use as trust-building exercises. Elucidate 

RBI

TOPIC: General Studies 3:

• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

The Reserve Bank of India (RBI) cut the repo rate

Context:

• The Reserve Bank of India (RBI) cut the repo rate or key lending rate by 25 basis points while maintaining an accommodative stance. 
• The reverse repo rate was reduced to 4.9%.
• This is the fifth consecutive rate cut by the apex bank this year, aggregating to 135 bps.
• The Monetary Policy Committee (MPC) also cuts GDP growth forecast for the current fiscal year 2019-20 to 6.1% from 6.9% earlier.

Highlights of MPC:

• A repo rate cut allows banks to reduce interest rates for consumers and lowers equal monthly instalments on home loans, car loans and personal loans.
• Central banks around the world are loosening monetary policy to offset a global slowdown made worse by U.S.-China trade tensions
• RBI will take a fresh look at cooperative bank regulations and take it up with the government
• The RBI has allowed domestic banks to freely offer foreign exchange (forex) prices to NRIs
• The continuing slowdown warrants intensified efforts to restore the growth momentum.
• On the crisis in the Punjab & Maharashtra Cooperative Bank (PMC), the RBI governor said one incident cannot be and should not be used to generalise the health of the co-operative banking sector.
• PCA(Prompt Corrective Action) is an opportunity for the bank to correct itself.
• Appealed members of the public and all depositors that our banking system remains sound and stable, there is no reason for unnecessary panic.

• RBI has decided to create a separate category of NBFC, viz., Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI).

• It acknowledged “the negative output gap has widened further”

Negative output gap:

• A negative output gap indicates surplus capacity in the economy. A widening of this gap means the industry is unable to use much of its capacity due to poor demand.

What is Prompt Corrective Action?

• To ensure that banks don’t go bust, RBI has put in place some trigger points to assess, monitor, control and take corrective actions on banks which are weak and troubled. 

• The process or mechanism under which such actions are taken is known as Prompt Corrective Action, or PCA.

Present scenario:

• Inflation is well within the target giving space to the RBI to focus on growth

• Crude oil prices are back in the comfort zone, retreating from the spike in mid-September, and food prices are projected to remain soft on the back of a good monsoon.

Crux:

• If the projection of 6.1% for 2019-20 is to be met, the economy has to grow by about 7% in the second half which does not look very likely.

• The problem is that the central bank can only facilitate lower rates and push banks to lend. It cannot force borrowers to borrow and this is evident from the soft trends in credit offtake in the last few months.

Way forward:

• Recent measures announced by the government are likely to help strengthen private consumption and spur private investment activity, the continuing slowdown warrants intensified efforts to restore the growth momentum

Connecting the dots:

Its commentary on the state of the economy and its outlook too has qualitatively changed — from being “optimistic” in April to expressing “concerns” in August and calling for “intensified efforts to restore the growth momentum” in October. Substantiate

(TEST YOUR KNOWLEDGE)

Model questions: (You can now post your answers in comment section)

Note: 

• Featured Comments and comments Up-voted by IASbaba are the “correct answers”.
• IASbaba App users – Team IASbaba will provide correct answers in comment section. Kindly refer to it and update your answers.

Q.1) Changthang Prahar often seen in news is related to which of the following area?

1. India-China joint military exercise
2. India-Mongolia joint army exercise
3. India’s integrated military exercise in Eastern Ladakh
4. None of the above

Q.2) Consider the following statements Monetary Policy Committee (MPC)

1. The MPC determines the policy interest rate required to achieve the inflation target
2. It consists of 5 members out of which three are from RBI and the remaining two are nominated by the Central Government

Which of the statement(s) given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Q.3) Consider the following statements

1. India is ranked first in the world with respect to e-waste generation.
2. India’s first e-waste clinic will come up in Bangalore to deal with recycling of e-waste

Which of the statement(s) given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

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