Temporary prohibition on loan instalments, postponement of interest payments and restructuring initiatives taken by RBI during Covid-19 pandemic have prevented a big spike in NPAs till now.
Bank credit growth has slowed significantly in 2020 despite the RBI’s efforts to infuse liquidity into the banking system.
Frauds reported by banks of Rs.1,00,000 and above value have more than doubled (28% increase) in FY 2019-20.
The public sector banks accounted for most of these frauds (80%).
The rural demand fared better than urban areas due to the increased pace of kharif sowing.
In Hospitality, hotels and restaurants, airlines and tourism sectors, employment losses are more severe than in other areas.
Inflation may remain high in the second quarter of 2020-21.
Currency notes of ₹2,000 denomination were not printed in 2019-20 and the circulation of these notes have declined over the year.
Compared to the previous year, there was an increase in counterfeit notes detected in the denominations of ₹10, ₹50, ₹200 and ₹500.
Counterfeit notes detected in the denominations of ₹20, ₹100 and ₹ 2,000 declined.
Suggestions Made by RBI:
Targeted public investment along with asset monetisation and privatisation of major ports.
Apex authorities to drive structural reforms and speedier implementation of infra projects.
Recapitalisation of public sector banks,.
Deep-seated and wide-ranging reforms to regain losses.
The RBI will conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for an aggregate amount of ₹20,000 crore in two tranches.
It involves purchasing government securities of longer maturities and selling equal amount of securities of shorter maturities.
Important value additions
Open market operations
It is the sale and purchase of government securities and treasury bills by RBI.
Objective: To regulate the money supply in the economy.
When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market.
It sells government securities to suck out liquidity from the system.
Under OMO, RBI does not directly deal with the public.
Part of: GS-Prelims and GS-III – Economy; Employment
In News:
According to the United Nations, the global tourism industry has lost $320 billion in exports in the last five months and more than 120 million jobs are at risk.
Key takeaways
Export revenues from tourism could fall by $910 billion to $1.2 trillion in 2020.
It could reduce global GDP by 1.5% to 2.8%.
Jobs in associated sectors, including food service, that provide employment for 144 million workers worldwide are also at risk.
Tourism is the third-largest export sector of the global economy, behind fuels and chemicals.
It is an emergency situation particularly for many small island developing states and African countries.
Part of: GS-Prelims and GS-I – Ancient History; Architecture
In News:
A nine-member expert committee has been constituted to conduct a detailed study on the present state of the renowned Edakkal caves on the Ambukuthi hills in Wayanad district, Kerala.
The neolithic petroglyphs on the cave walls need to be protected from illegal constructions, mining, and urbanisation.
The Edakkal caves are believed to be camping shelters of the Neolithic community.
Part of: GS-Prelims and GS-II – Policies and Interventions; Education & GS-I – Society (Tribes)
In News:
Namath Basai is a unique programme being carried out in Attappady, Kerala.
Under it, tribal children are taught in their mother tongue.
Key takeaways
The programme is being implemented by the Samagra Shiksha Kerala (SSK).
SSK is a programme for the school education sector (pre-school to class 12).
Aim: To improve school effectiveness.
It offers pre-recorded classes through a YouTube channel.
It is available in three tribal languages of the Irula, Muduka and Kurumba tribes.
It is being introduced in tribal belts of Wayanad and Idukki as well.
Classes are offered in the Oorali, Mutuvan and Paniya languages in Idukki.
Important value additions
Kurumba Tribe
Popularly known as: Mala Pulayans, Hill Pulayans and Pamba Pulayans.
Traditional occupation : Foraging and shifting cultivation.
Art of body tattooing.
Skilled in manufacture of baskets and mats
Religion: Animism (belief in spirituality of objects, places, and creatures) and Totemism (Worship of any species of plants or animals thought to possess supernatural powers)
Irula or Irular Tribe
Occupation: Agriculturists
Grow Paddy, Ragi, dhal, plantains, chillies and turmeric
Religion: Majority worship Vishnu (Rangaswami and Siva). Some worship the tiger and practice animism.
Mudugars or Muduka tribe
Have social divisions at kal (clan) level.
Traditional Occupation: Food gatherers and hunters.
Part of: GS-Prelims and GS-II – International Relations & GS-III – Science and Technology; Artificial Intelligence
In News:
BRICS 5G innovation base has been proposed by China.
Objective: To take forward 5G and Artificial Intelligence (AI) cooperation BRICS countries (Brazil, Russia, India, China and South Africa).
Key takeaways
Due to ongoing tensions between India and China, India is reluctant to join the programme while other countries are willing to allow China’s participation in their 5G networks.
India has made clear that a return to normalcy cannot be possible while tensions along the Line of Actual Control remain unresolved.
Context: Today, outer space no longer captures our mind space in the way cyberspace does.
Did COVID-19 impact the planned Space activities?
Several space events planned well in advance proceeded even amidst the COVID-19 pandemic, some of which are:
The launch of missions to Mars by China and the U.S. and UAE’s Mars orbiter mission
The first astronaut trip to orbit on a commercial enterprise built by Space X
The completion of the Chinese ‘BeiDou’ satellite navigation system
The U.S. Space Command
Russia conducted a “non-destructive test of a space-based anti-satellite weapon”
How has Space Industry evolved over the years?
Technology has brought down the Cost: The price tag for reaching low Earth orbit has declined by a factor of 20 in a decade. NASA’s space shuttle cost about $54,500 per kg; now, SpaceX’s Falcon 9 advertises a cost of $2,720 per kg.
Increased Market: According to a Bank of America Report, the $350 billion space market today will touch $2.7 trillion by 2050. In a decade, 80,000 such satellites could be in space compared to less than 3,000 at present
Increased Participation by Private Players leading to fast paced innovation
Starlink, the constellation being constructed by SpaceX to provide global Internet access, plans more than 10,000 mass-produced small satellites in low Earth orbit.
Amazon’s Project Kuiper received U.S. Federal Communications Commission approvals for more than 3,000 micro-satellites.
These missions hope to transcend the digital divide and provide everyone, everywhere access to services such as distance education and telemedicine.
Companies such as Planet, Spire Global and Iceye are using orbital vantage points to collect and analyse data to deliver fresh insights in weather forecasting, global logistics, crop harvesting and disaster response.
What are the challenges to fulfilling the potential of space?
Multilateral framework for Space governance is becoming outdated for present context
The Outer Space Treaty of 1967 enshrines the idea that space should be “the province of all mankind” and “not subject to national appropriation by claims of sovereignty”.
The Rescue Agreement, Space Liability Convention, and the Space Registration Convention expanded provisions of the Outer Space Treaty.
Gaps in the Space laws include
The Moon Treaty of 1979 was not ratified by major space-faring nations.
Space law does not have a dispute settlement mechanism
Space law is silent on collisions and debris
They offer insufficient guidance on interference with others’ space assets.
The legal framework of Space laws is state-centric, placing responsibility on states alone
However, non-state entities are now in the fray for commercial space exploration and utilisation.
Some states like US are providing frameworks for resource recovery through private enterprises based on the notion that this is not expressly forbidden for non-state actors.
Some scholars and governments view this as skirting the principle of national non-appropriation, violating the spirit if not the letter of the existing space law.
The lack of alignment of domestic and international normative frameworks risks a damaging free-for-all competition for celestial resources involving actors outside the space framework.
Space Arms race and Growing Militarisation
States are investing in military space systems for communications, navigation, and reconnaissance purposes, so as to ensure operability of a range of capabilities.
Reliance of militaries on satellite systems means that space assets become potential targets. So investment in technologies that can disrupt or destroy space-based capabilities is under way.
The space arms race is difficult to curb, especially since almost all space technologies have military applications
Way Ahead
Space legislation is needed for enabling coherence across technical, legal, commercial, diplomatic and defence goals.
India’s space vision also needs to address global governance, regulatory and arms control issues.
Connecting the dots:
IN-SPACe (Indian National Space Promotion and Authorisation Centre)
India’s future space plans – Landing on the Moon; solar observatory; crewed orbital spaceflight mission; and installation of a modular space station in 2030.
AGRICULTURE / GOVERNANCE/ ECONOMY
Topic: General Studies 2:
Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Issues related to direct and indirect farm subsidies and minimum support prices
The removal of restrictions under the Essential Commodities Act (ECA) should help attract private investment in agriculture
The two new ordinances are expected to enable inter-State trade and promote contract farming, thereby providing a large number of options to farmers
However, there are several difficulties that need to be addressed before the full benefits of these policies are realised. Some of these are
‘Time-inconsistency’ problem, or in simple terms, the policy credibility problem.
This situation arises when a decision maker’s preferences change over time in such a way that the preferences are inconsistent at different points in time.
This is relevant in present context because the policy signals are not very clear in the last few years as relates to agricultural marketing, as we will see below.
How has agri-marketing policy changed over years?
In 2016, the electronic national agricultural market (e-NAM) waslaunched
The e-NAM was intended to be a market-based mechanism for efficient price discovery by the farmers.
In the first phase, 585 markets across 16 States and 2 Union Territories were covered.
States needed to amend their respective Agricultural Produce Market Committee (APMC) Acts to put in place three prerequisites for the success of this programme —
a single licence across the State;
a single-point levy of the market fee;
electronic auctioning in all the markets.
Reason for failure of e-Nam: Several States could not or did not carry out these amendments and the e-NAM proved to be far less effective than desired.
In September 2018, government launched PM-AASHA
Since e-NAM did not yield expected results, the government reverted back to public price support measures through PM-AASHA
The main objective of this programme was to provide an assured price to farmers that ensured a return of at least 50% more than the cost of cultivation.
The programme was confined to pulses and oilseeds to limit the fiscal costs, although many other crops, which did not receive the benefits of the MSP-procurement system, also needed this coverage.
Public procurement, deficiency payments and private procurement were the main planks of this programme
Reason for uninspiring performance of PM-AASHA
Only public procurement was carried out in a meaningful way.
Deficiency payments were only implemented on a pilot basis in Madhya Pradesh
Private procurement was not initiated, even on a pilot basis, in any State.
Budgetary allocation was meagre: only ₹500 crore have been earmarked in 2020-2021.
In 2019, PM-KISAN Yojana
The uninspiring performance of PM-AASHA necessitated a more radical and direct approach which evolved in PM-KISAN scheme
This programme involved a fixed payment of ₹6,000 per annum to each farm household with a budgetary outlay of ₹75,000 crore.
This programme has worked reasonably well so far with many States topping up the amount at their end.
Conclusion/ Way Ahead
The frequent flip-flops in farm policy — from a market-based e-NAM to a public funded PM-AASHA and now back to market-based measures — needs to be avoided as it does not inspire much confidence in the minds of private investor
Coordination between the Central & State governments, and also among various States becomes crucial for the success of any policy reforms
Absence or failure of credit and insurancemarkets may lead a farmer to depend upon the local input dealer or the middleman to meet his/her farming needs. This, in turn, may tie him to these intermediaries and constrain his choice of output markets.
Restrictions on land leasing in many States leads to inefficient scale of production. Reforms in the output market alone are not sufficient and must be supplemented and complemented with liberalisation of the lease market
Connecting the dots:
Contract Farming
Organic Farming
(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 Consider the following statements regarding Open Market Operations:
It includes purchase of government securities and treasury bills only.
It is an operation taken up by commercial banks independently.
The objective of the operation is to regulate the money supply in the economy.
Which of the above are correct?
3 Only
2 and 3
1 and 2
1, 2 and 3
Q.2 Where is Edakkal Caves situated?
Cardamom Hills
Palni Hills
Nilgiri mountains
Ambukuthi Hills
Q.3 Consider the following statements regarding Namath Basai:
The program is being implemented by the Samagra Shiksha Kerala.
Under the program the tribal children are taught in their mother tongue.
The languages belong to Irula, Muduka and Kurumba tribes.
Which of the above are correct?
1 and 3
2 and 3
1 and 2
1, 2 and 3
ANSWERS FOR 26th August 2020 TEST YOUR KNOWLEDGE (TYK)
