IAS UPSC Prelims and Mains Exam – 2nd June 2020

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(PRELIMS + MAINS FOCUS)

The Financial Stability and Development Council (FSDC) meeting held

Part of: GS-Prelims and GS-III – Economy

In News:

• Recently, The Financial Stability and Development Council (FSDC) meeting was held through video conferencing. 
• The meeting was chaired by the Indian Finance Minister. 

Key takeaways 

• It was noted that the COVID-19 pandemic poses a serious threat to the stability of the global financial system since its impact and timing of recovery was still uncertain. 
• It highlighted the need for the government and regulators to remain vigilant on financial conditions that could expose systemic vulnerabilities. 
• It also assured that the government and regulators would continue to provide liquidity and capital support to domestic financial institutions.
• Liquidity and solvency positions of non-banking financial companies, housing finance companies and micro-finance institutions were reviewed. 

Important value additions 

The Financial Stability and Development Council (FSDC) 

• It is a non-statutory apex council under the Ministry of Finance. 
• It was constituted by the Executive Order in 2010.
• Its constitution was proposed by the Raghuram Rajan committee (2008) on financial sector reforms. 
• It is chaired by the Finance Minister and its members include:
  • The heads of all Financial Sector Regulators (RBI, SEBI, PFRDA & IRDA)
  • Finance Secretary
  • Secretary of Department of Economic Affairs (DEA) 
  • Secretary of Department of Financial Services (DFS)
  • Chief Economic Adviser
  • Minister of State for the Department of Economic Affairs (DEA)
  • Secretary of Department of Electronics and Information Technology, 
  • Chairperson of the Insolvency and Bankruptcy Board of India (IBBI)
  • Revenue Secretary.
• The Council can invite experts to its meeting if required. 
• Objectives:
  • To strengthen and institutionalize the mechanism for maintaining financial stability
  • Enhancing inter-regulatory coordination
  • Promoting financial sector development
  • Assess the functioning of the large financial conglomerates.

U.S legislation for sanctions on Chinese officials responsible for oppression of Uighur Muslims

Part of: GS-Prelims and GS-II – International Relations

In News:

• Recently, the USA House of Representatives approved legislation which called for sanctions on Chinese officials responsible for oppression of Uighur Muslims. 
• The bill has been sent to the President to veto or sign into law.

Key takeaways 

• It has been reported that several Chinese officials are responsible for repression of Uighurs and other Muslim groups in China’s Xinjiang province. 
• The United Nations estimates that more than a million Muslims have been detained in camps.
• The bill also calls on U.S. companies or individuals operating in the Xinjiang region to take steps to ensure their products do not include parts using forced labor.
• China has, however, maintained denial about mistreatment and has claimed that the camps provide vocational training.

Important value additions 

Uighurs Muslims

• They are a predominantly Muslim minority Turkic ethnic group. 
• Their origins can be traced to Central and East Asia.
• They are considered to be one of the 55 officially recognized ethnic minority communities in China.
• However, China recognises the community only as a regional minority and rejects that they are an indigenous group.
• The largest population of the Uighur ethnic community lives in Xinjiang region of China.
• They also live in Uzbekistan, Kyrgyzstan and Kazakhstan.

Image Credit- The Economist

Government raises MSMEs turnover limit

Part of: GS-Prelims and GS-III – Economy

In News:

• Several decisions were taken up by the Government recently which aimed at helping the MSMEs (Micro, Small and Medium Enterprises). 

Key takeaways 

• The definition of MSMEs has further been revised. 
• Those enterprises with investment upto 50 crore rupees and turnover of upto 250 crore rupees will now be able to avail the benefits of MSME sector. 
• All export turnovers of such enterprises will also remain exempted from the total turnover.
• It will lead to inclusion of many industrial units. 
• Distressed MSME fund of 20,000 crore has also been approved to help the enterprises in distress. 
• This decision will benefit over 2 lakh units in the country.
• Fund of Funds with initial outlay of 50,000 crore rupees will also be created.
• The amount will be infused in the MSME sector through equity route.
• This will provide an opportunity to get listed in stock exchanges. 

PM SVANidhi: Special Micro-Credit Facility Scheme launched

Part of: GS-Prelims and GS-II – Welfare Schemes; GS-III – Economy

In News:

• The Ministry of Housing and Urban Affairs recently launched a Special Micro-Credit Facility Scheme for providing affordable loans to street vendors.
• The scheme is PM SVANidhi – PM Street Vendor’s Atma Nirbhar Nidhi. 

Key takeaways

• The vendors can avail a working capital loan of up to Rs. 10,000. 
• It will be repayable in monthly instalments in the tenure of one year.
• On timely/early repayment of the loan, an interest subsidy at 7% per annum will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer on six monthly basis. 
• There will be no penalty on early repayment of loan.
• Over 50 lakh people, including vendors, hawkers, thelewalas, etc. are likely to benefit from this scheme.
• Street vendors from peri- urban/ rural areas have become beneficiaries of an urban livelihood programme for the first time.
• MFIs/ NBFCs/ SHG Banks have been allowed in a scheme for the urban poor due to their ground level presence for the first time. 

Mudra Shishu loan for small businesses and cottage industries

Part of: GS-Prelims and GS-III – Economy

In News:

• The Central government has announced ‘Mudra Shishu loan’ for small businesses and cottage industries so that shopkeepers do not suffer due to the COVID-19 pandemic.

Key takeaways 

• A 1500 crore interest subvention has been announced. 
• 2% interest rate subvention for a period of 12 months shall be offered by the Government. 
• It shall benefit small borrowers under the Mudra Shishu loans up to ₹50,000.

Important value additions 

Micro Units Development and Refinance Agency (MUDRA) 

• It is a Non-Banking Financial Company which supports development of micro enterprise sector in the country. 
• It provides refinance support to Banks / MFIs for lending to micro units having loan requirement upto 10 lakh. 
• It provides refinance to micro business under the Scheme of Pradhan Mantri MUDRA Yojana.
• MUDRA offers incentives through these interventions:
  • Shishu : covering loans upto  50,000/-
  • Kishor : covering loans above  50,000/- and upto  5 lakh
  • Tarun : covering loans above  5 lakh and upto  10 lakh. 
• Generally, loans upto 10 lakh issued by banks under Micro Small Enterprises are given without collateral. 

(MAINS FOCUS)

INTERNATIONAL/ SECURITY

Topic: General Studies 2:

• Effect of policies and politics of developed and developing countries on India’s interests 
• Regional groupings involving India and/or affecting India’s interests. 

India, China and fortifying the Africa outreach

Context: The COVID-19 effect are particularly devastating in Africa, where economic and public health conditions are extremely vulnerable.

Impact of COVID-19 pandemic on Africa

• Ill-equipped to cope with a public health emergency of such magnitude due to shortages of masks, ventilators, and even basic necessities such as soap and water. 
• Recession: COVID-19 outbreak has sparked off the Sub-Saharan Africa (SSA) region’s first recession in 25 years. 
• Deepens Health Crisis: With high rates of HIV, malaria, diabetes, hypertension and malnourishment prevalent in Africa, COVID-19 pandemic will further deepen the health crisis in the region. 
• Impacts economic model: The steep decline in commodity prices has spelt disaster for the commodity dependent economies of Nigeria, Zambia and Angola.

• Possibility of Increased Public debt: According to the World Bank, the SSA region paid $35.8 billion in total debt service in 2018, 2.1% of regional GDP. This figure is set to increase due to falling revenues & precarious fiscal position of African nations

• Africa’s cycle of chronic external aid dependence continues: Together, African countries have sought a $100 billion rescue package, including a $44 billion waiver of interest payment by the world’s 20 largest economies.

Beijing’s donation diplomacy

• China, being Africa’s largest trading partner (annual trade ~ $208 billion), was quick to signal its intent to help Africa cope with the pandemic.
• China despatched medical protective equipment, testing kits, ventilators, and medical masks to several African countries. 
• The motives for such donations are:
  • To raise Beijing’s profile as a leading provider of humanitarian assistance and “public goods” in the global public health sector.
  • To shift the focus away from talking about the origins of the virus in Wuhan
  • To build goodwill overseas, and establish an image makeover. 
  • To further secure Africa’s support in multilateral fora. In the past Beijing had used African support for securing a win for Chinese candidates as the head of FAO & WHO

Criticism of Beijing’s donation Diplomacy

• Sub-optimal quality of China’s medical supplies
• Ill-treatment of African nationals in Guangzhou city, which grew into full-blown political crisis for Beijing
• On Africa’s part, the problem lies in the deep credibility gap between Africa’s governing class, the people, the media and civil society
• As a result, criticisms levelled against China has hardly surfaced at the elite level

New Delhi and Africa during the Pandemic

• Increased Focus: Africa has been the focus of India’s development assistance and also diplomatic outreach, as evident in plans to open 18 new embassies.
• Similar Conditions: There is a keen interest to understand the developments and best practices in India because the two share similar socioeconomic and developmental challenges. 
• Health Support: India is sending consignments of essential medicines, including hydroxychloroquine (HCQ) and paracetamol, to 25 African countries in addition to doctors and paramedics at a total cost of around ₹600 million ($7.9 million)
• Capacity Building: e-ITEC COVID-19 management strategies training webinars during pandemic were exclusively aimed at training health-care professionals from Africa and SAARC, where best practices were shared by Indian health experts
• Ayurveda:  A few African countries such as Mauritius are pushing for health-care partnerships in traditional medicines and Ayurveda for boosting immunity. 
• Proactive Diaspora:  Country-specific chapters of gurdwaras and temples by Indians in Africa, have fed thousands of families by setting up community kitchens, helplines for seniors and distributing disinfectants and sanitisers.

The Contrasts – India and China

• The Chinese approach to Africa is threefold: 
  • Money, political influence and elite level wealth creation; 
  • Strong state-to-state relations as opposed to people-to-people ties; and 
  • Hard-infrastructure projects and resource extraction.
• India’s approach on the other hand is one that focuses on 
  • Building local capacities 
  • An equal partnership with Africans and not merely with African elites.
  • Soft power with collaborative partnership is resource utilization

Conclusion

As India & China rise in Africa, their two distinct models will come under even greater scrutiny. Both powers might have to adapt their approached to the rising aspirations of the African continent.

Connecting the dots:

• Regional Organisation: African Union, Indian Ocean Commission, SAARC
• Neo-colonialism 

S&T/ INTERNATIONAL/ ECONOMY

Topic: General Studies 2,3:

• Science and Technology- developments and their applications and effects in everyday life. 
• Government policies and interventions for development in various sectors
• Indian Economy and issues relating to planning, mobilization, of resources 

SpaceX Crew Dragon: A new era in space exploration

Context: SpaceX’s Crew Dragon craft has delivered Nasa astronauts to the International Space Station (ISS), marking the first human spaceflight with private collaboration. 

A brief Background

• NASA’s Space Shuttle mission was decommissioned in 2011
• Since then NASA has relied on the Russian space agency Roscosmos for ferrying astronauts to ISS. 
• NASA was no longer interested in performing routine jobs like ferrying people to orbit as it wanted to reserve budgets for increasing R& and space exploration.
• Also, NASA wanted Private players (like SpaceX) to take up this role but it took nearly 9 years to do this

Impact of Crew Dragon’ success

• Reduced Russian Dominance: Over the last nine years, there have been some 40 successful launches of Russian Soyuz spacecraft with US astronauts on board. But, now the Moscow’s monopoly on crew transport has ended.
• Emboldened US: President Donald Trump has pledged that US astronauts will return to the moon in 2024 to stay, and make a launch base for Mars.
• Speeds up Mars Mission: The US has also stated that it would put the first woman on the moon, and the first astronauts on Mars.
• Fire up US- Russia Space Travel competition: Trump’s competitive America-first rhetoric is of Cold War vintage, when winning the space race was a matter of superpower prestige
• Enhances Private Partnership: An era of public-private partnerships in space is beginning, where the sector will also be driven by profits rather than mere National prestige.
• Opens up Space Market: Rapid mass commercial aviation at the edge of space would probably be the most lucrative segment in the future
• National Cooperation: The biggest achievement of the ISS program could be lost: the “invaluable experience of cooperation.” A return to nations going it alone in outer space would be a step backward for international collaboration
• Reduced Cost: The entry of private sector has begun to drive down the cost-per-launch through innovations such as reusable rockets. For a trip to the ISS and back Roscosmos had increased its fees from $21 million to nearly $90 million in 2020

Conclusion

The Crew Dragon has broken a psychological barrier, but aversion to risk would probably keep private capital (especially in post-COVD world) to a secondary or supporting role in space.

Connecting the dots:

• Gaganyan Mission of India
• India needs reforms in Space sector

(TEST YOUR KNOWLEDGE)

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

Note: 

• Correct answers of today’s questions will be provided in next day’s DNA section. Kindly refer to it and update your answers. 
• Comments Up-voted by IASbaba are also the “correct answers”.

Q.1 The Financial Stability and Development Council (FSDC) is chaired by which of the following? 

1. Prime Minister 
2. Finance Minister 
3. Chairman of RBI
4. Financial secretary of Department of Economic Affairs 

Q.2 PM SVANidhi scheme is launched for which of the following? 

1. Street vendors 
2. Small shopkeepers 
3. Cottage industry
4. Silk industry 

Q.3 Consider the following statements regarding Micro Units Development and Refinance Agency (MUDRA): 

1. Loans upto ₹10 lakh are given to micro enterprises under this scheme
2. Loans are collateral free. 

Which of the above is/are correct? 

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

Q.4 Which of the following province of China is mostly inhabited by the Uighur Muslims? 

1. Guizhou
2. Hubei
3. Xinjiang
4. Jiangxi

ANSWERS FOR 1st June 2020 TEST YOUR KNOWLEDGE (TYK)

Must Read

About India’s economic slowdown:

The Hindu

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The Indian Express