28 September 2022

DAILY CURRENT AFFAIRS ANALYSIS

1 – NAVIC Scheme: GS II – Government Policies and Interventions

Context:

• According to two industry sources and government documents viewed by Reuters, India is pressuring tech giants to make smartphones compatible with its in-house navigation system within months, which is alarming companies like Samsung, Xiaomi, and Apple who fear increased costs and disruptions as the move requires hardware changes.

Future Applications:

• navigation in the land, air, and sea;
• disaster preparedness;
• fleet management and vehicle tracking, particularly for the mining and transportation industries;
• compatibility with mobile devices;
• precise time (as in power grids and ATMs);
• geodetic data collection and mapping.

About NAVIC:

• The Indian Space Research Organization created the Indian Regional Navigation Satellite System (IRNSS) known as Navigation in Indian Constellation (NavIC) (ISRO).
• Eight satellites make up the IRNSS, with three in geostationary orbit and five in geosynchronous orbit.
• The primary goal is to deliver accurate position, navigation, and timing services over India and its surrounding area.
• Similar to the well-known and widely used U.S. Global Positioning System (GPS), it operates over the Indian subcontinent within a 1,500 km radius.
• The Third Generation Partnership Project (3GPP), a multinational organisation for coordinating mobile phone standards, has certified it.

Source The Hindu

2 – New Foreign Trade Policy of India: GS III – Indian Economy

Context:

• The Foreign Trade Strategy 2015–20 was extended by the government on Monday by a further six months, until March 2023, rather than being replaced by a new policy by September 30 as originally planned, citing appeals from industry organisations.

What Does a Foreign Trade Policy Mean?

• The Foreign Trade Development and Regulation Act of 1992 makes the Government of India’s Foreign Trade Policy a legally binding instrument.
• The FTP has served as the compass for all stakeholders since the 1991 economic reforms, when it was reviewed and informed every five years.
• A foreign trade policy’s main goal is to promote trade by lowering transaction and transit times and costs.
• A FTP lays down the rules for international commerce and discloses the government’s position on a number of concurrent but significant policy factors, such as technology flow and intangibles, among others.

Why is it Vital to Have a New Foreign Trade Policy?

• Clarifying India’s Position at the Global Level: It is crucial to make clear India’s position and alignment with flagship programmes like the “Local for Global” and PLI (Production Linked Incentive) schemes, the WTO’s decision to reject India’s export incentive programmes, a long overdue review of the Special Economic Zone (SEZ) scheme, shifting geographic profiles of India’s export basket, and FTA implications.
• A WTO dispute panel had ruled in 2019 that India’s WTO commitment was broken by the export incentives provided under the FTP.
• Impact on Export-Oriented Enterprises: Some export-oriented businesses have been negatively impacted by some ad hoc, incongruous, and inconsistent amendments to the 2015 FTP. This is another justification for revising the FTP.
• Through the direct issuance of duty-credit coupons in proportion to exports, the 2015 FTP encouraged exports. The government did, however, cap the maximum export incentives at Rs. 20 million for commodities in 2020 and at Rs. 20 million for services in 2021.
• Additionally, the adjustments to service incentives were retroactively announced in September 2021 to take effect in April 2019.
• Reduced Spending and Incentives: The RoDTEP plan incentive, worth Rs.12,454 crore, superseded the yearly export incentives known as the Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS), both of which were worth Rs. 51,012 crore.
• To benefit a few sectors, the remaining Rs. 38,558 crore was transferred into PLI.
• Infrastructural setbacks: Due to inadequately upgraded export infrastructure such as ports, warehouses, and supply chains, the average turnaround time for ships in India is about three days while the world average is 24 hours. Earlier, there was a 3% export incentive on agriculture implements like tractors, which has been reduced to 0.7%.
• MSMEs are in crisis: MSMEs are essential to accomplishing the challenging export goals, contributing around 29% to the GDP and 40% to global commerce. However, MSMEs’ bottom lines are being negatively impacted by the rise in input and gasoline prices.
• The MSMEs are finding it challenging to fully capitalise on the global growth in demand due to the rising costs of raw materials like steel and plastics, as well as a lack of shipping containers and labour.

What modifications to the New FTP would be possible?

• Fixing the MSMEs’ Crisis An incentive of 3-7% of net foreign exchange revenues is offered under the SEIS to Indian service exporters of designated services.
• With the new FTP, an adjustment to the minimum cap on the amount of net foreign exchange earnings that can be claimed under the scheme and quicker GST refunds to global services are both important.
• In order to expand the proportion of exporting MSMEs and boost MSME exports by 50% in 2022–2023, the government must also assist MSMEs in utilising the export potential in current tariff lines and give policy support.
• More Exporter Incentives: If the incentives given to retail and wholesale merchants under the purview of the MSME category are extended to them as well, the new FTP might be advantageous to exporters.
• The new FTP needs to make it possible for exporters to use technology in the area of international trade. This will help MSMEs compete with their counterparts around the world.
• Infra Upgrade: Exporters will stay competitive in a cutthroat market with the aid of an effective and broad infrastructure network, including warehouses, ports, special economic zones (SEZs), quality testing labs, certification centres, etc.
• To keep up with technologically advanced nations like China, India must spend in improving its export infrastructure.
• It also has to implement contemporary business practises, which can be done through digitising export procedures. This will reduce costs and save time.
• GST Export Advantages: The GST export advantage is now beyond the scope of FTP, which has led to the denial of export benefits to specific exporter classes.
• To close the gap between the two policies, it is therefore urgently necessary. Furthermore, it is crucial that GST refunds are distributed smoothly and without interruption from administrative processes.
• WTO Compliant Programs The FTP should be built around this. In order to ensure that all nations compete on an equal footing, the WTO works to discourage governments from significantly subsidising exporters.
• The Indian government has already taken major steps to abolish subsidy-led initiatives since it is well aware of the necessity to adhere to WTO standards.
• To increase exports and guarantee that Indian exports are competitive in the international market, more work must be done fundamentally.
• Other Measures: In order to develop a deliberate and directed policy stance that directs both the Center and private enterprises for the country’s economic success, policymakers must quickly broaden their area of consideration to include all stakeholders.
• These factors should also take into account the current paradigm, such as the compelling need to replace fuel imports, exploiting improvised logistics, and igniting entrepreneurial zeal.
• The new FTP shall work gradually to resolve export restrictions, evaluate the regulatory and operational framework to lower transit costs, and build a low-cost operating environment through developed logistics and utilities infrastructure. This is because the pandemic has had a severe economic impact.

Source The Hindu

3 – RTI Act: GS II – Government Policies and Interventions

Context:

• A few days prior to the Chief Justice’s comments, Justice D.Y. Chandrachud had also spoken in open court regarding the launch of a Right to Information (RTI) portal.

The RTI Act of 2005:

• The guidelines for exercising citizens’ right to information are outlined in this act.
• The previous Freedom of Information Act of 2002 was replaced by it.
• This law was passed to strengthen the fundamental freedom of speech guarantee in the Indian Constitution. RTI is an implied fundamental right because it is included in the Right to Freedom of Expression under Article 19 of the Indian Constitution.

Key Requirements under the RTI Act:

• Each public authority is required to disclose information suo motu under Section 4 of the RTI Act.
• Exemptions from the RTI Act’s requirement to provide information are mentioned in Section 8 (1).
• If a greater public interest is served, Section 8 (2) allows for the revelation of information exempt under the Official Secrets Act of 1923.

The origins of the law:

• The Supreme Court was responsible for sowing the RTI Act’s seeds.
• The citizens of our nation have a right to know about every public action and all that their public officials conduct in a public way.
• Their right to information, which stems from the idea of free speech.
• Before the RTI Act was ratified as national legislation and put into effect in 2005, 12 states had passed their own transparency laws in response to widespread calls for such a law.
• The Supreme Court argued that “Voters’ right to know antecedents, including criminal past, of his candidate vying for MP or MLA election is considerably more essential and basic for survival of democracy” prior to the RTI Act.

Recently occurring events:

• For the first time since 2005, the Center revised the RTI Act.
• The amendments approved by the legislature provide the national government the authority to establish regulations that will determine the conditions of employment, pay, and tenure for all commissioners in the nation.
• After Article 370 was read down, the J&K RTI Act was repealed.
• RTI access to the Chief Justice of India’s office is necessary, but only if it is robust.
• Information access on issues of public interest is essential to the notion of “government by the people.”
• The free exchange of information regarding governmental issues promotes accountability in government and opens the door for discussion of public policy.
• It establishes the prerequisites for “open governance,” which is the basis of democracy.

Views from the Supreme Court:

• Sharad Arvind Bobde, the incumbent Chief Justice of India, recently demanded the creation of a “filter” to prevent “abuse” of the Right to Information (RTI) Act.
• The Supreme Court has occasionally emphasised the value of transparency under RTI while also criticising its abuse at other times over the years.

Source The Hindu

4 – Inflation: GS III – Indian Economy

Context:

• Last year, India’s kharif crop suffered from La Nia, an uncommon cooling of the central and eastern equatorial Pacific Ocean waters that brought copious rain just before or during harvest. From September to January, the nation saw five straight months of above-average rainfall, which damaged a variety of crops including ready-to-pick foods like soyabeans, cotton, pulses, tomatoes, and onions. La Nia’s protracted influence hasn’t been ruled out this time either, with the majority of international weather agencies forecasting the current event to last at least through December. That would make this particular occurrence, which started in September 2020 and lasted three winters, one of the longest ones ever. One can only hope that the “triple drip” La Nia is nearing the end and that this year won’t end up like last year, given the gradual retreat of the southwest monsoon and the recent strong rains over Northwest India.

What are the causes of India’s recent rise in inflation?

• India’s inflation is more complex than simply a “cost-push” phenomenon. Liquidity availability has been a key element.
• An estimated 8.5 lakh crore worth of liquidity was overextended, according to the April Monetary Policy statement.
• Over a certain threshold, inflation itself can impede growth. Savings interest rates that are negative in real terms do not promote growth. Liquidity regulation along with a corresponding increase in the interest rate on deposits and loans are absolutely necessary if we want to control inflation.
• Due to the disruption in the global supply chain brought on by the Russia-Ukraine conflict, prices for basic metals, mineral oils, and other commodities have increased significantly, contributing to the high rate of inflation in March 2022.
• However, the cost of important foods like “oils and fats,” “vegetables,” and “protein-rich goods like meat and fish” increased, which is primarily why retail inflation increased.
• According to CPI data, the geopolitical turmoil brought on by the Russia-Ukraine war drove up the price of edible oil, causing inflation in “oils and fats” to rise to 18.79% in March.
• Sunflower oil is widely exported from Ukraine. Vegetable inflation accelerated to 11.64% in March, while the rate of price growth for “meat and fish” was 9.63 percent compared to February 2022.
• One of the main causes of the high increase in inflation in India is the sharp rise in commodity prices globally. Inflation is rising as a result of the rising import costs for some essential products.

What effect does India’s higher inflation have?

• Repo Rate: It is anticipated that the banking system’s interest rates would increase. The Equated Monthly Installments (EMIs) for loans for a home, a car, and other personal and business loans are probably going to increase.
• Also expected to climb are deposit rates, mostly fixed term rates.
• The Repo rate increase may have an influence on demand and consumption.
• CRR: The increase in CRR will drain the banking system of Rs 87,000 crore. As a result, banks’ lendable resources will decline.
• Additionally, it implies that the cost of funds would increase and that banks’ net interest margins may suffer.
• The difference between interest revenue received by a bank or other financial institution and interest paid to its lenders (such as depositors) in relation to the value of those institutions’ interest-bearing assets is known as net interest margin (NIM).

What Obstacles Face the Fight Against Rising Inflation?

• In the current scenario, it is argued that inflation will decrease if the government absorbs some of the increase in petroleum costs. For the straightforward reason that one section of the population shouldn’t be subjected to an unreasonable burden, there may be a rationale for lowering the levies on petroleum products. The cost of food must be taken into account as well.
• But to imagine that it is a magic wand via which inflation may be averted is erroneous. The overall deficit will increase if government spending does not increase to make up for the additional burden brought on by revenue loss.
• There will be an increase in the borrowing programme, and more liquidity support would be needed.
• Interest rates cannot be dictated by central banks. The right steps must be done to reduce liquidity if you want an interest rate increase to last. The increase in CRR will have that effect. Open market operations will have to drain liquidity in the absence of a rise in CRR.
• “Liquidity conditions need to be regulated in line with the policy action and attitude to guarantee their full and efficient transmission to the rest of the economy,” the governor of the RBI said in a statement.

What steps may be taken to stop inflation?

• Fuel duty reduction: According to experts, additional duty reductions will be at least Rs 5 per litre.
• It may reduce inflation by 15-20 basis points.
• It has direct and indirect effects on power, and a 1% increase in oil prices (in the Indian basket) might increase the WPI by 8 basis points.
• If hoarding occurs, the food supply will be curtailed.
• Relax import restrictions on oil seeds and pulses.
• More duty reductions are necessary for imports of food oils. However, it was cut from 19.25 percent to 13.75 percent.
• Prepare to use buffer stock if inflation affects grain prices by keeping it on hand.
• CPI can climb by 48 bps for every 1% increase in WPI primary food costs.

Additional measures:

• Demand faster growth because a 10% increase in industrial output can reduce retail inflation by 40 basis points.
• Eliminate supply constraints.
• Increase your ability to generate revenue to ease the strain on low-income households.

Source The Indian Express