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DAILY CURRENT AFFAIRS, 29 JANUARY 2024

THE PLACES OF WORSHIP ACT

 

1. Context

Calls to hand over the Gyanvapi mosque to the Hindus have come even after appeals by the Anjuman Intazamia Masjid in the Supreme Court to protect the Places of Worship (Special Provisions) Act of 1991 from becoming a dead letter.

The 1991 Act provides a guarantee for the preservation of the religious character of places of public worship as they existed on August 15, 1947

2. The Places of Worship Act and its Provisions 

The long title describes it as “An Act to prohibit conversion of any place of worship and to provide for the maintenance of the religious character of any place of worship as it existed on the 15th day of August, 1947, and for matters connected therewith or incidental thereto.”
 
Section 3 of the Act bars the conversion, in full or part, of a place of worship of any
religious denomination into a place of worship of a different religious denomination or even a different segment of the same religious denomination.

Section 4(1) declares that the religious character of a place of worship “shall continue to be the same as it existed” on August 15, 1947.
 
Section 4(2) says any suit or legal proceeding with respect to the conversion of the religious character of any place of worship existing on August 15, 1947, pending before any court, shall abate and no fresh suit or legal proceedings shall be instituted.
 
The proviso to this subsection saves suits, appeals and legal proceedings that are pending on the date of commencement of the Act, if they pertain to the conversion of the religious character of a place of worship after the cut-off date.

Section 5 stipulates that the Act shall not apply to the Ramjanmabhoomi-Babri Masjid case, and to any suit, appeal or proceeding relating to it.

At least two petitions challenging the Act are pending before the Supreme Court.
 
The law has been challenged on the ground that it bars judicial review, which is a basic feature of the Constitution, imposes an “arbitrary irrational retrospective cutoff date”, and abridges the right to religion of Hindus, Jains, Buddhists and Sikhs.

3. Reasons for bringing of the act

  • The Act was brought by the  Prime Minister P V Narasimha Rao at a time when the Ram temple movement was at its peak.
  • The Babri Masjid was still standing, but L K Advani’s rath yatra, his arrest in Bihar and the firing on kar sevaks in Uttar Pradesh had raised communal tensions.
Moving the Bill in Parliament, then Home Minister S B Chavan said: “It is considered necessary to adopt these measures in view of the controversies arising from time to time with regard to conversion of places of worship which tend to vitiate the communal atmosphere Adoption of this Bill will effectively prevent any new controversies from arising in respect of conversion of any place of worship…”

4. Supreme Court verdict

  • The constitutional validity of the 1991 Act was not under challenge, nor had it been examined before the Supreme Court Bench that heard the Ramjanmaboomi-Babri Masjid title suit.
  • Even so, the court, while disagreeing with certain conclusions drawn by the Allahabad High Court about the Act, made specific observations in its support.
  • “In providing a guarantee for the preservation of the religious character of places of public worship as they existed on 15 August 1947 and against the conversion of places of public worship, Parliament determined that independence from colonial rule furnishes a constitutional basis for healing the injustices of the past by providing the confidence to every religious community that their places of worship will be preserved and that their character will not be altered,” the court said.

5. Constitutional obligations

  • The law addresses itself to the State as much as to every citizen of the nation.
  • The State, has by enacting the law, enforced a constitutional commitment and operationalised its constitutional obligations to uphold the equality of all religions and secularism which is a part of the basic features of the Constitution.
  • The Places of Worship Act imposes a non-derogable obligation towards enforcing our commitment to secularism under the Indian Constitution.
  • The law is hence a legislative instrument designed to protect the secular features of the Indian polity, which is one of the basic features of the Constitution.
  • The Places of Worship Act is a legislative intervention which preserves non-retrogression as an essential feature of our secular values.
For Prelims & Mains
 
For Prelims: The Places of Worship Act, secularism, Indian Constitution, Ramjanmaboomi-Babri Masjid title suit, 
For Mains:
1. What is the Places of Worship Act and discuss its constitutional obligations (250 words)
 
Source: The Indian Express
 

FOREST RIGHTS ACT

1. Context 

The electoral outcome in nearly three in 10 Lok Sabha constituencies can be influenced by issues surrounding the implementation of the forest rights Act, says an analysis by independent researchers.

The forest rights Act, officially known as the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, enables tribal communities and forest-dwelling citizens to claim legal rights over forest land they have occupied for generations, but in many cases, are denied a say or authority in its management or free access to forest produce

2. The involvement of NCST in the Act

  • The Ministry of Environment, Forests and Climate Change in June 2022 notified the forest (Conservation Rules, 2022, which prescribed the mechanism for the diversion of Forest land for non-forest purposes.
  • These amended rules have omitted a clause (Present in 2014 and 2017 Rules) that explicitly required any proposal to mandatorily have the consent of local tribespeople and Other Traditional Forest Dwellers (OTFDs) of the area, before proceeding for Stage 1 clearance.
  • The FCR, 2022 has allowed applying entities to go for the consent of locals, represented by the Gram Sabha after Stage 1 or even after Stage 2 clearance.
  • According to the FRA, 2006, in case of a dispute over forest land, precedence has to be given to the rights of STs and OTFDs, who live in and off the forest and its resources, over any other party.

3. NCST demands

  • In September 2022, NCST Chairperson Harsh Chouhan shot off a letter to Environment Minister Bhupendra Yadav, highlighting the potential consequences of FCR, 2022, recommending that they be put on hold and the previous Rules, which provided for the consent clause, be strengthened.
  • The ST panel argued that the previous versions of the Rules provided a legal space for ensuring the completion of the processes for recognition and vesting of rights under the FRA in areas where forests are being diverted.
  • The ST Commission noted that it made little sense to take the consent of tribals and forest dwellers after an applicant had got Stage 1 clearance.
By then, the applicant would be invested in the project and would then have the incentive to "pursue the State It said governments or Union Territories" to divert the land at the earliest.
The NCST added that the FCR, 2022 provided for compensatory Afforestation, but nowhere did it prescribe safeguards or a mechanism for compliance with FRA.
 
  • Further, the NCST's Working Group found that FRA compliance was in trouble even under the old rules.
    It said currently, nearly 25, 000-30, 000 hectares of forest land were being diverted every year.
  • It cited a study by the Centre for Environment and Development, ATREE to note: " Out of 128 applications for forest diversion for mining, over 100 had been processed between 2009 and 2018".
  • It added that 74 proposals had Stage 2 approval, 46 had Stage 1 approval (in principle), with just five rejected and four closed for other reasons.
  • None of the rejections was for non-compliance with FRA.
  • The study also found that 14 of these cases (all post-2014) had been cleared with an FRA compliance report, despite, this being far from the "ground reality".

4. About NCST

  • The National Commission for Scheduled Tribes is a constitutional body that was established by the Constitution (89th Amendment) Act, 2003.
  • The Commission is an authority working for the economic development of Scheduled Tribes in India.
This amendment replaced the National Commission for Scheduled Castes and Scheduled Tribes with two distinct commissions which are:
  1. National Commission for Scheduled Castes (NCSC)
  2. National Commission for scheduled Tribes (NCST)
Article 366 (25) of the Constitution, Scheduled Tribes are those communities that are scheduled in by article 342 of the Constitution.
Also, Article 342 of the Constitution says that: The Scheduled Tribes are the tribes or tribal communities or part of or groups within these tribes and tribal communities which have been declared as such by the President through a public notification.

4.1. Composition of NCST

  • The NCST consists of one chairperson, one vice-chairperson and three full-time members.
  • Out of the three members, there should compulsorily be one lady member.
  • Tenure of the members is 3 years.

 4.2. Functions of NCST

  •  It investigates and monitors issues related to safeguarding the provisions for Scheduled Tribes under the Constitution and evaluating the working of those safeguards.
  • NCST will inquire into specific complaints concerned with the deprivation of rights and safeguards of the STs.
  • The commission participates and advises on the planning process for the socio-economic development of the STs and also evaluates the progress of the various developmental activities.
  • The President will be presented with an annual report on the working of those safeguards.
  • Apart from annual reports, other reports also will be submitted to the President as and when necessary.
  • The Commission will also give reports on what measures are to be taken by both the central and various state governments for the effective execution of the measures and safeguards for the protection, development and welfare of the STs.
  • Other functions of NCST are related to the welfare, protection, development and advancement of the STs.

5. Forest Rights Act 

  • The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, commonly known as the Forest Rights Act of India, is often referred to as the Tribal Rights Act or the Tribal Land Act.
  • It was enacted in 2006 and recognises the rights of tribal communities that live in the forest as well as other traditional forest dwellers to the forest resources that were essential to their ability to provide for a variety of needs, including subsistence, habitation and other sociocultural requirements.
  • The forest management policies, including the Acts, Rules and Forest Policies of Participatory Forest Management policies in both colonial and post-colonial India, did not, till the enactment of this Act., recognize the symbiotic relationship of the STs with the forests, reflected in their dependence on the forests as well as in their traditional wisdom regarding conservation of the forests.
The Act encompasses Rights of Self-cultivation and Habitation which are usually regarded as Individual rights; and Community Rights such as Grazing, Fishing and access to Water bodies in the forest, Habitat Rights for PVTGs, Traditional Seasonal Resources access to Nomadic and Pastoral Communities, access to biodiversity, community right to intellectual property and traditional knowledge, recognition of traditional customary rights and right to protect, regenerate or conserve or manage any community forest resource for sustainable use.
 
  • It also provides rights to the allocation of forest land for developmental purposes to fulfil the basic infrastructural needs of the community.
  • In conjunction with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Settlement Act, 2013 FRA protects the tribal population from eviction without rehabilitation and settlement.
  • The Act further enjoins upon the Gram Sabha and rights holders the responsibility of conservation and protection of bio-diversity, wildlife, forests, adjoining catchment areas, water sources and other ecologically sensitive areas as well as to stop any destructive practices affecting these resources or cultural and natural heritage of the tribals.
    The Gram Sabha is also a highly empowered body under the Act, enabling the tribal population to have a decisive say in the determination of local policies and schemes to impact them.
  • Thus the Act empowers the forest dwellers to access and use the forest resources in the manner that they were traditionally accustomed, to protect, conserve and manage forests, protect forest dwellers from unlawful evictions and also provides for basic development facilities for the community of forest dwellers to access facilities of education, health, nutrition, infrastructure etc.

5.1. Objective

  1. To undo the historical injustice that occurred to the forest-dwelling communities
  2. To ensure land tenure, livelihood and food security of the forest-dwelling Scheduled Tribes and other traditional forest dwellers
  3. To Strengthen the conservation regime of the forests by including the responsibilities and authority of Forest Rights holders for sustainable use, conservation of biodiversity and maintenance of ecological balance.

For Prelims & Mains

For Prelims: Forest Rights Act, NCST, NCSC, Forest Conservation Rules 2022, Traditional Forest Dwellers, 
For Mains: 
1.Discuss the powers and functions of the National Commission for Scheduled Tribes in protecting the rights of the Forest-dwellers in India. (250 Words)
 
Source: The Hindu and Ministry of Tribal Affairs
 

MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE ACT (MGNREGA)

1. Context

On January 1 2024, the Rural Development Ministry made Aadhaar-Based Payment Systems (ABPS) mandatory in the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). This is after five deadline extensions by the Union government, disregarding several memorandums by workers to the Ministry to not make ABPS mandatory
 

2. About the National Level Monitoring (NLM) report

  • The National Level Monitoring (NLM) report is a study conducted by the Ministry of Rural Development (MoRD) to assess the implementation of various rural development programs in India.
  • The report is based on field visits and interviews with stakeholders at the grassroots level.
  • The NLM report is an important tool for the government to identify areas where improvement is needed and track rural development programs' progress.
  • The report also provides valuable insights into the challenges faced by rural communities and the impact of government interventions.

The NLM report typically identifies the following areas:

  • The coverage of rural development programs
  • The quality of implementation of rural development programs
  • The impact of rural development programs on the lives of rural people

The NLM report also provides recommendations to the government on improving the implementation of rural development programs and making them more effective.

 

3. The findings of the NLM report

  • In 2017-18, the NLM report found that the quality of construction of 87% of the verified works under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was satisfactory. However, the report also found that only 139 out of 301 districts had seven registers maintained satisfactorily.
  • In 2018-19, the NLM report found that the job cards, an important document that records entitlements received under MGNREGA, were not regularly updated in many districts. The report also found that there were significant delays in payments to workers.
  • In 2019-20, the NLM report found that the Pradhan Mantri Awaas Yojana - Gramin (PMAY-G) program was facing challenges due to a shortage of construction materials and skilled labour. The report also found that there were delays in the processing of applications and the release of funds.
  • The NLM report for 2020-21 found that the coverage of rural development programs had improved significantly in recent years. However, the report also found that there was still a need to improve the quality of implementation of these programs.
  • The NLM report for 2021-22 found that the impact of rural development programs on the lives of rural people had been positive overall. However, the report also found that there were still some disparities in the impact of these programs across different regions and social groups.
 

4. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a social welfare program that guarantees 100 days of unskilled manual wage employment in a financial year to a rural household whose adult members volunteer to do unskilled manual work. The Act was enacted by the Government of India in 2005 and came into force on February 2, 2006.

4.1. Mandate and Goals

  • The mandate of MGNREGA is to provide employment and ensure food security for rural households.
  • The scheme also aims to strengthen natural resource management, create durable assets, improve rural infrastructure, and promote social equity.
  • The goals of MGNREGA are to Reduce rural poverty, Increase employment opportunities, Improve food security, Create durable assets, Improve rural infrastructure and Promote social equity. 

4.2. Core Objectives 

  •  The primary goal of MGNREGA is to provide at least 100 days of guaranteed wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.
  • The program aims to reduce poverty and distress by offering employment opportunities, especially during seasons of agricultural unemployment.
  • MGNREGA encourages the creation of productive and durable assets such as water conservation structures, rural infrastructure, and land development. These assets not only improve rural livelihoods but also contribute to sustainable development.
  • The Act promotes gender equality by ensuring that at least one-third of the beneficiaries are women and that their participation in the workforce is actively encouraged.

4.3. Key Stakeholders 

  • Rural households are the primary beneficiaries and participants in the MGNREGA scheme.
  • Gram Panchayats play a pivotal role in implementing the program at the grassroots level. They are responsible for planning, execution, and monitoring of MGNREGA projects within their jurisdiction.
  • The central government provides the funds and sets the broad guidelines, while the state governments are responsible for the program's effective implementation.
  • The DPC is responsible for the overall coordination and monitoring of MGNREGA activities within a district.
  • Rural labourers, both skilled and unskilled, participate in MGNREGA projects and directly benefit from the program.

4.4. Role of Gram Sabha and Gram Panchayat

  • The Gram Sabha is the village assembly consisting of all registered voters in a village. Its role in MGNREGA includes discussing and approving the annual development plan, ensuring transparency in project selection, and conducting social audits to monitor program implementation.
  • The Gram Panchayat is responsible for planning, approving, executing, and monitoring MGNREGA projects within its jurisdiction. It also maintains records of employment provided, ensures timely wage payments, and conducts social audits. The Panchayat is accountable for the effective utilization of MGNREGA funds.

4.5. Issues with MGNREGA

  •  Delayed wage payments to labourers have been a persistent issue, affecting the livelihoods of beneficiaries.
  •  There have been cases of corruption and leakages in the implementation of MGNREGA projects, leading to suboptimal outcomes.
  • Administrative inefficiencies, complex procedures, and bureaucratic hurdles have hampered program delivery.
  • Some argue that the quality and effectiveness of assets created under MGNREGA projects have been variable and not always aligned with the intended goals.
  • Not all eligible rural households are provided 100 days of guaranteed employment, which can limit the program's impact.
  • Adequate budget allocation to meet the program's demands and inflation-adjusted wages remains a concern.

5. Conclusion

MGNREGA has made a positive impact on the lives of rural people, particularly in terms of employment opportunities and the creation of durable assets. It remains a crucial tool in India's efforts to promote rural development, reduce poverty, and achieve social equity. Addressing the identified issues will be critical in ensuring the continued success and effectiveness of the program in the years to come.

 

For Prelims: MGNREGA, National Level Monitoring (NLM) report, Ministry of Rural Development, rural development, Pradhan Mantri Awaas Yojana - Gramin (PMAY-G), 
For Mains: 
1. Evaluate the importance of the Mahatma Gandhi National Rural Employment Guarantee Act in the context of rural development and food security in India. How does MGNREGA contribute to sustainable development and rural infrastructure improvement? (250 Words)
 
 
 
Previous Year Questions
 
Prelims

1. Among the following who are eligible to benefit from the “Mahatma Gandhi National Rural Employment Guarantee Act”? (UPSC 2011)

(a) Adult members of only the scheduled caste and scheduled tribe households
(b) Adult members of below poverty line (BPL) households
(c) Adult members of households of all backward communities
(d) Adult members of any household

Answer: D

2. The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers which of the following? (UPSC 2012)

  1. Deprivation of education, health, assets and services at household level
  2. Purchasing power parity at national level
  3. Extent of budget deficit and GDP growth rate at national level

Select the correct answer using the codes given below:

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

Answer: A

3. Which of the following grants/grant direct credit assistance to rural households? (UPSC 2013)

  1. Regional Rural Banks
  2. National Bank for Agriculture and Rural Development
  3. Land Development Banks

Select the correct answer using the codes given below:

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

Answer: C

4. How does the National Rural Livelihood Mission seek to improve livelihood options of rural poor? (UPSC 2012)

  1. By setting up a large number of new manufacturing industries and agribusiness centres in rural areas
  2. By strengthening ‘self-help groups’ and providing skill development
  3. By supplying seeds, fertilisers, diesel pump-sets and micro-irrigation equipment free of cost to farmers

Select the correct answer using the codes given below:

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

Answer: B 

5. Under the Pradhan Mantri Awaas Yojana-Gramin (PMAY-G), the ratio of the cost of unit assistance to be shared between the Central and State Governments is: (MP Patwari 2017)

A. 60:40 in plain areas and 90:10 for North Eastern and the Himalayan States
B. 70:30 in plain areas and 80:20 for North Eastern and the Himalayan States
C. 50:50 in plain areas and 70:30 for North Eastern and the Himalayan States
D. 75:25 in Plain areas and 85:15 for North Eastern and the Himalayan States
 
Answer: A
 
Mains
 
1. The basis of providing urban amenities in rural areas (PURA) is rooted in establishing connectivity. Comment (UPSC 2013)
 
Source: indianexpress
 

MARITIME RED SEA ROUTE

1. Context

Car factories have idled in Belgium and Germany. Spring fashion lines are delayed at a popular British department store. A Maryland company that makes hospital supplies does not know when to expect parts from Asia.

Attacks on ships in the Red Sea are delivering another shock to global trade, coming on top of pandemic-related logjams at ports and Russia’s invasion of Ukraine.

2. About the ancient Red Sea trade route

  • For years, it was thought that Roman merchants were the only ones trading with India.
  • However, recent evidence shows that Indian merchants and shipowners were also involved in this trade.
  • The scale of this trade was massive. According to the latest estimates, custom taxes on the Red Sea trade with India, Persia, and Ethiopia may have generated as much as one-third of the income of the Roman exchequer.
  • The principal source for this figure is the Muziris Papyrus, a document that details the purchase of goods from an Indian merchant by an Egyptian financier.
  • The Papyrus gives precise details of one particular cargo sent to the Egyptian port of Berenike from Muziris on the coast of Kerala.
  • The total value of the goods was 131 talents, which is equivalent to the price of 2,400 acres of farmland in Egypt or a premium estate in central Italy.
Image Source: Wikipedia

3. Roman Empire earnings from this trade

  • According to the Muziris Papyrus, the import tax paid on the cargo of almost nine million sesterces was over two million sesterces.
  • Working up from these figures, it is estimated that Indian imports into Egypt were worth probably over a billion sesterces per annum, from which the tax authorities of the Roman Empire were creaming off no less than 270 million.
  • These vast revenues surpassed those of entire subject countries Julius Caesar imposed a tribute of 40 million sesterces after his conquests in Gaul while the vital Rhineland frontier was defended by eight legions at an annual cost of 88 million sesterces.

4. Goods Traded on the Ancient Red Sea Route

4.1. Roman Imports from India

Luxuries: The Roman Empire had a significant appetite for luxury items from India. This included products like malabathrum, a plant whose leaves were used to create perfume, as well as ivory, pearls, and precious gemstones. Notably, Pompeii contained a shop dedicated solely to ivory products, showcasing the demand for such exotic materials.

Wild Animals: There was a demand for "exotic" goods, including live animals like elephants and tigers from India.

Spices: Pepper was India's major export to Rome. Large quantities of pepper have been discovered in excavations at Berenike, often stored in torpedo-shaped pottery jars, each weighing more than 10 kg. By the end of the first century CE, Indian pepper had become readily available, although it remained an expensive treat. Pepper was a common ingredient in Roman cuisine, with approximately 80 per cent of the recipes in the Roman cookbook of Apicius including it.

4.2. Roman Exports to India

  • The flow of goods from Rome to India was more limited. Pliny the Elder noted that gold was a significant export to India, creating a trade imbalance that posed challenges for the Roman economy.
  • However, there are records indicating that Indians developed a taste for Roman wine.
  • Some limited trade also involved items like olive oil and Garum, an ancient Roman fermented fish paste, which could be likened to contemporary condiments like Tabasco or garam masala.

5. Trade on the Route Before the Common Era

  • Evidence of trade along this route dates back to ancient times, including during the time of Meluha, the Indus Valley Civilization (approximately 3300-1300 BCE).
  • However, this early trade appears to have been more localized and coastal, involving smaller quantities of goods.
  • In Roman times, this trade expanded significantly, with large cargo ships directly connecting the Indian subcontinent to the Roman Empire.
  • The Romans played a crucial role in "industrializing" this trade, driven by their economic capacity to purchase the luxury items that India offered.
  • The trade flourished, particularly in the 1st and 2nd centuries CE, after the Romans conquered Egypt, which opened up the route to adventurous Roman merchants.

6. Organization of the Trade and Voyage Duration

  • The trade along the ancient Red Sea route was highly organized. Merchants in Kerala and shippers in Alexandria engaged in formal contracts.
  • Goods were transported in containers, similar to modern shipping practices, where a container would be booked and filled with specific products.
  • There are even references to insurance, highlighting the sophistication of this trade network.
  • Indian traders recognized the monsoon winds, which blew in different directions in winter and summer due to the heating of the Tibetan Plateau.
  • By timing their voyages correctly, they could take advantage of these winds. The journey from India to Egypt, or vice versa, could be completed in about six to eight weeks with the winds behind them.
  • However, travellers had to wait for a few months for the winds to change direction.

7. Roles of Indians in the Red Sea Trade

Interest in Seafaring: Indian dynasties displayed a keen interest in seafaring, evident in ancient artwork like the depictions of large double-masted ships in Ajanta caves. Additionally, ships were common symbols of early Indian coins, such as those from the Satavahanas dynasty.

Prominent Role of Indian Sailors: Indian sailors played a prominent role in the Red Sea trade. Graffiti left by Indian sailors, often Gujaratis from Barigaza (modern-day Bharuch), was discovered in the Hoq caves on Socotra Island, a vital stopover at the Gulf of Aden's mouth. These inscriptions, dating from the second to the fifth century CE, were primarily in the Indian Brahmi script, with names like "Vishnu, son of the merchant Ganja" and "Skandabhuti, the Sea Captain." They also featured images of ships, religious symbols, and prayers to deities like Krishna and Radha.

Ownership of Shipping: While historical records suggest that much of the shipping departing from Egyptian Red Sea ports may have been owned by Alexandrian businessmen, it's plausible that Indian merchants and ship owners also had a significant stake in this trade due to the substantial Indian presence in the maritime activities of the period.

8. Comparison with the Silk Road

Silk Road vs. Red Sea Route: The Red Sea trade route, connecting the Indian subcontinent with the Roman Empire through the Red Sea, differs significantly from the concept of the Silk Road. While the Silk Road has gained popularity in modern times, it was entirely unknown in ancient or medieval times. The term "Silk Road" was coined in the late 19th century by Baron von Richthofen, primarily for a proposed railway route.

Historical Accuracy of Silk Road: There is no ancient record, whether from Chinese or Western sources, that mentions the existence of the Silk Road. Even Marco Polo, often associated with this route, never mentions it. The idea of the Silk Road gained prominence only in the 1980s-90s, largely due to its romantic appeal.

Inaccuracy of Silk Road Focus: The Silk Road concept is mostly inaccurate for the Roman period. Instead, during this time, there is no evidence of direct contact or trade between China and Europe. Chinese silk, for example, likely reached Rome through ports in India, travelling overland through Kushana territory in northern India to reach Gujarat and the mouth of the Indus.

9. Emerging Understanding of Indo-Roman Trade

New Evidence and Underplayed History: The recent emergence of a deeper understanding of Indo-Roman trade is attributed in part to the discovery of new archaeological evidence in places like Muziris in Kerala and Berenike in Egypt. Additionally, India has sometimes underplayed its significance as a centre of trade and ideas in the early classical period.

The Significance of the 1st and 2nd Centuries CE: The 1st and 2nd centuries CE represent an intriguing period when India played a vital role in exporting its ideas and luxury goods to the Roman world. This era witnessed the spread of Buddhism to China and the provision of luxury items to Rome. While scholars like Himanshu Prabha Ray have made valuable contributions to this field, there is a need to make their findings more accessible to a wider audience.

10. The Way Forward

  • The recent revelations about India's central role in this ancient trade route have opened up numerous questions for exploration.
  • For instance, the influence of Buddhist monasticism in India on the development of Christian monasticism in the late Roman period remains a topic of investigation.
  • As more information comes to light, researchers can delve further into the connections and impacts of this extensive East-West trade network, shedding new light on the history of these two interconnected worlds.
 
For Prelims: India-Middle East-Europe Economic Corridor, G20, Roman Empire, Silk Road, ancient Red Sea trade route, Muziris Papyrus,  Indus Valley Civilization, Red Sea, Egypt, Tibetan Plateau, Ajanta caves, Satavahanas dynasty, Gulf of Aden, Buddhism, 
For Mains: 
1. Discuss the significance of the Maritime Red Sea Route in connecting the Indian subcontinent with the Roman Empire. How has recent evidence reshaped our understanding of this trade route compared to the Silk Road? (250 Words)
 
 
Previous Year Questions
 
1. With reference to the “G20 Common Framework”, consider the following statements: (UPSC 2022)
1. It is an initiative endorsed by the G20 together with the Paris Club.
2. It is an initiative to support Low Income Countries with unsustainable debt.
Which of the statements given above is/are correct?
(a) 1 only            (b) 2 only      (c) Both 1 and 2          (d) Neither 1 nor 2
Answer: C
 
2. In which one of the following groups are all the four countries members of G20?
(UPSC 2020) 
A. Argentina, Mexico, South Africa and Turkey
B. Australia, Canada, Malaysia and New Zealand
C. Brazil, Iran, Saudi Arabia and Vietnam
D. Indonesia, Japan, Singapore and South Korea
 
Answer: A
 
3. Read the statements (A) and (R) and choose the correct option. (CTET 2022)
 Assertion (A): The Roman empire carried out trades with South India.
 Reason (R): Roman gold coins have been found in South India.
A. Both (A) and (R) are correct and R is the correct explanation of A.
B. Both (A) and (R) are correct and R is not the correct explanation of A.
C. (A) is true, but (R) is false.
D. (A) is false but (R) is true.
 
Answer: A
 
4. Who was the first emperor of the Roman Empire? (ACC 122 CGAT 2020) 
A. Tiberius     B. Mark Antony        C. William Shakespeare     D. Augustus
 
Answer: D
 
5. Comprehension (SSC CGL Tier 2 2020) 
Directions:
Read the passage and answer the questions that follow.
The Roman Empire covered a vast stretch of territory that included most of Europe as we know it today and a large part of the Fertile Crescent and North Africa. The Roman Empire embraced a wealth of local cultures and languages; that women had a stronger legal position then than they do in many countries today; but also that much of the economy was run on slave labour, denying freedom to substantial numbers of persons. From the fifth century onwards, the empire fell apart in the west but remained intact and exceptionally prosperous in its eastern half. Roman historians have a rich collection of sources to go on, which we can broadly divide into three groups: (a) texts, (b) documents and (c) material remains. Textual sources include letters, speeches, sermons, laws, and histories of the period written by contemporaries. These were usually called ‘Annals’ because the narrative was constructed on a year-by-year basis. Documentary sources include mainly inscriptions and papyri. Inscriptions were usually cut on stone, so a large number survive, in both Greek and Latin. The ‘papyrus’ was a reed-like plant that grew along the banks of the Nile in Egypt and was processed to produce sheets of writing material that was very widely used in everyday life. Thousands of contracts, accounts, letters and official documents survive ‘on papyrus’ and have been published by scholars who are called ‘papyrologists’. Material remains include a very wide assortment of items that mainly archaeologists discover (for example, through excavation and field survey), for example, buildings, monuments and other kinds of structures, pottery, coins, mosaics, even entire landscapes. Each of these sources can only tell us just so much about the past, and combining them can be a fruitful exercise, but how well this is done depends on the historian’s skill! Which of these statements is NOT true?
A. Archaeologists make discoveries through excavations.
B. Inscriptions were carved in Greek and Latin
C. The Roman empire flourished longer in the west.
D. Texts, documents and material remains were the main sources for the historians
 
Answer: C
 
6. In the first century AD, which among the following was not a major item of Indian exports to Rome? (CDS GK  2018) 
A. Pepper        B. Spikenard           C. Tortoiseshell         D. Nutmeg
 
Answer: D
 
7. Pepper was as valued in Roman Empire that as it was called (CTET  2013)
A. Black magic        B. Black charm         C. Black stone       D. Black gold
 
Answer: D
 
8. In the middle of the first century BC, under ________, a high-born military commander, the ‘Roman Empire’ was extended to present-day Britain and Germany. (SSC JE CE 2017)
A. Alexander       B. Julius Caesar        C. Xerxes     D. Caligula
 
Answer: B
 
9. Comprehension
Direction: Read the passage carefully and select the best answer to each question out of the given four alternatives.
The Silk Road was a network of trade routes which connected the East and West, and was central to the economic, cultural, political, and religious interactions between these regions from the 2nd century BCE to the 18th century. The Silk Road primarily refers to the land routes connecting East Asia and Southeast Asia with South Asia, Persia, the Arabian Peninsula, East Africa and Southern Europe. The Silk Road derives its name from the lucrative trade in silk carried out along its length, beginning in the Han dynasty in China. The Silk Road trade played a significant role in the development of the civilizations of China, Korea, Japan, the Indian subcontinent, Iran, Europe, the Horn of Africa and Arabia, opening long-distance political and economic relations between the civilizations. Though silk was the major trade item exported from China, many other goods and ideas were exchanged, including religions (especially Buddhism), syncretic philosophies, sciences, and technologies like paper and gunpowder. So, in addition to economic trade, the Silk Road was a route for cultural trade among the civilizations along its network. Diseases, most notably plague, also spread along the Silk Road. Some remnants of what was probably Chinese silk dating from 1070 BCE have been found in Ancient Egypt. The Great Oasis cities of Central Asia played a crucial role in the effective functioning of the Silk Road trade. The originating source seems sufficiently reliable, but silk degrades very rapidly, so it cannot be verified whether it was cultivated silk (which almost certainly came from China) or a type of wild silk, which might have come from the Mediterranean or Middle East. Archeological sites such as the Berel burial ground in Kazakhstan, confirmed that the nomadic Arimaspians were not only breeding horses for trade but also great craftsmen able to propagate exquisite art pieces along the Silk Road.
 
According to the passage, The Silk Road primarily refers to the land routes connecting to one another. Which routes were not linked by it? (DSSSB Junior Stenographer 2021) 
A. East Asia with Southern Europe
B. East Asia with South Asia
C. South America and South Africa
D. East Asia with Persia
 
Answer: C
 
10. The term “Silk Route” in the ancient period refers to (CTET 2022)
A. the travelling route of traders from China to other countries carrying silk.
B. Sea routes connecting countries in which silk traders sold their products.
C. roads connecting all the countries in which mulberry plants were cultivated.
D. road and sea routes in which silk products were traded.
 
Answer: A
 
11. Who started the ‘Silk-route’ (Marg) for Indians? (UKPSC RO/ARO 2016) 
A. Kanishka      B. Harshwardhan      C. Ashok       D. Fahien
 
Answer: A
 
12. With reference to ancient South India, Korkai, Poompuhar, and Muchiri were well-known as (UPSC 2023)
A. capital cities  B. ports  C. centres of iron-and-steel    D.  making shrines of Jain Tirthankaras
Answer: B
 
13. Two thousand years ago, a trader narrates that he has been to Gaza, Petra and Apologos. Which of the following trade routes has he travelled through? (CTET 2022)
A. Route controlled by Roman emperors
B. Route under the rulers of Persia
C. Route controlled by Kushanas
D. Route under the rulers of China
 
Answer: A
 
14. Red sea is an example of: (UPPSC Civil Service 2017)
A. Volcanic valley B.  Eroded valley      C.  Axial trough      D. U-shaped valley
 
Answer: C
 
15. In which Indian state was the ancient sea port 'Muziris' located? (UP Police SI 2017)
A. Kerala    B. Gujarat      C. Karnataka      D. Tamil Nadu
 
Answer: A
 
16. Regarding the Indus Valley Civilization, consider the following statements: (UPSC 2011)
1. It was predominantly a secular civilization and the religious element, though present, did not dominate the scene.
2. During this period, cotton was used for manufacturing textiles in India.
Which of the statements given above is/are correct?
A. 1 only       B.  2 only           C.  Both 1 and 2         D. Neither 1 nor 2
 
Answer: C
 
Source: The Indian Express
 

EARTHQUAKE

 

1. Context

One year after earthquake, remains of ancient Antioch unrecognisable. The February 6, 2023, disaster killed more than 50,000 people and erased swathes of entire cities across Turkiye’s southeast in the middle of the night.

2. What is an Earthquake?

An earthquake is an intense shaking of the ground caused by movement under the earth’s surface. It happens when two blocks of the earth suddenly slip past one another, according to USGS. This releases stored-up ‘elastic strain’ energy in the form of seismic waves, which spreads through the earth and cause the shaking of the ground.

3. How do exactly Earthquakes Occur?

  • As we know, the earth’s outermost surface, crust, is fragmented into tectonic plates. The edges of the plates are called plate boundaries, which are made up of faults.
    The tectonic plates constantly move at a slow pace, sliding past one another and bumping into each other.
  • As the edges of the plates are quite rough, they get stuck with one another while the rest of the plate keeps moving.
  • Earthquake occurs when the plate has moved far enough and the edges unstick on one of the faults.
  • The location below the earth’s surface where the earthquake starts is called the hypocenter, and the location directly above it on the surface of the earth is called the epicenter.”

4. Earthquake waves

The release of energy during an earthquake generates waves which are called Earthquake Waves. Earthquake waves are basically of two types body waves and surface waves.
Body waves: They are generated due to the release of energy at the focus and move in all directions traveling through the body of the earth. Hence, the name body waves. The body waves interact with the surface rocks and generate a new set of waves called surface waves.
Surface waves: These waves move along the surface. The velocity of waves changes as they travel through materials with different densities. The denser the material, the higher the velocity. Their direction also changes as they reflect or refract when coming across materials with different densities.

There are two types of body waves. They are called P and S-waves.

P-waves or ‘primary waves’ move faster and are the first to arrive at the surface. The P-waves are similar to sound waves. They travel through gaseous, liquid, and solid materials.
P-waves vibrate parallel to the direction of the wave. This exerts pressure on the material in the direction of propagation. As a result, it creates density differences in the material leading to stretching and squeezing of the material.
S-waves or secondary waves arrive at the surface with some time lag. They can travel only through solid materials. This characteristic of the S-waves is quite important. It has helped scientists to understand the structure of the interior of the earth.
The direction of vibrations of S-waves is Perpendicular to the wave direction in the vertical plane. Hence, they create troughs and crests in the material through which they pass. Surface waves are considered to be the most damaging waves.

5. Measuring of Earthquakes

  • The earthquake events are scaled either according to the magnitude or intensity of the shock.
  • The magnitude scale is known as the Richter scale. The magnitude indicates the energy released during the quake. It is expressed in absolute numbers 0-10.
  • The intensity scale is named after Mercalli, an Italian seismologist. The intensity scale indicates the visible damage caused by the event. The range of intensity scale is from 1-12.

6. Turkey and Syria lie in a seismically active region

  • The region where the earthquake struck lies along a well-known seismic fault line called the Anatolia tectonic block that runs through northern, central, and eastern Turkey.
  • It is a seismically active zone-though not as active as, say, the Himalayan region which is one of the most dangerous regions in the world from the perspective of earthquakes.
  • Large earthquakes, of magnitude 5 or higher, have not been very frequent in recent years. According to USGS, only three earthquakes of magnitude 6 or more have happened in the region since 1970. The last major quake in this area came in January 2020.
  • The seismicity in this region is a result of interactions between the African, Eurasian, and Arabian plates. The Arabian plate is known to be pushing northward, which results in a slight westward movement for the Anatolian plate, where Turkey is located.
  • The earthquake happened around the near-vertical fault line on the eastern Anatolian block, close to the Syrian border.

7. Shallow Earthquakes cause much greater damage

  • Earthquakes in Turkey emerged from relatively shallow depths which made them devastating. The first earthquake, of magnitude 7.8, originated 17.9 km below the earth's surface.
  • All the subsequent ones, including one of 7.5 magnitudes, emerged from even closer to the surface.
  • Shallow earthquakes are generally more devastating because they carry greater energy when they emerge on the surface.
  • Deeper earthquakes lose much of their energy by the time they come to the surface. The deeper quakes spread farther though- the seismic waves move conically upwards to the surface even as they lose energy while traveling greater distances and hence cause less damage.

8. Can earthquakes be predicted?

  • An accurate prediction of an earthquake requires some sort of a precursory signal from within the earth that indicates a big quake is on the way.
  • Moreover, the signal must occur only before large earthquakes so that it doesn’t indicate every small movement within the earth’s surface. Currently, there is no equipment to find such precursors, even if they exist.
  • Theoretically, it is possible to offer a lead time of a few seconds between the time of the origin of the earthquake and the time it reaches the Earth’s surface.
  • Seismic waves travel significantly slower than the speed of light between 5 and 13 km
    per second. So if the earthquake is detected as soon as it is triggered, information about it can be related a few seconds ahead of it reaching the ground.
  • Such systems are already in use in some locations to issue alerts about earthquakes. However, these are not predictions. The alerts are issued post-event.
  • Attempts to find reliable predictors of earthquakes have not been fruitful so far. Scientists have been able to map the areas that are earthquake-prone, and are likely to generate earthquakes in the future, but there is no way to predict when.

For Prelims & Mains

For Prelims: Earthquake, Tectonic plates, Hypocenter, Epicenter, Body waves, Surface waves, P-waves or ‘primary waves’, S-waves or secondary waves, Richter scale, and Seismic waves.
For Mains: 1. What is an Earthquake? How do exactly Earthquakes Occur? Discuss the effects of Earthquakes.
 
Source: The Indian Express

END-TO-END ENCRYPTION

 
 
 
 
1. Context 
 
 
Securing information is paramount, and a crucial method for safeguarding it is encryption. End-to-end (E2E) encryption, in particular, revolutionizes the approach of human rights organizations, law enforcement agencies, and technology companies towards accessing individual information. This transformation is significant in their efforts to protect, prosecute, or derive profit from engagements, depending on the context.
 

2. About Encryption
  • At its core, encryption involves the transformation of readable information into an unreadable format based on specific rules.
  • These rules vary, and one example is the Data Encryption Standard (DES), which, with certain configurations, converts the phrase "ice cream" into AdNgzrrtxcpeUzzAdN7dwA== using the key "kite."
  • Altering the key, for instance, to "motorcycle," changes the encrypted text to 8nR+8aZxL89fAwru/+VyXw==.
  • The key serves as data that allows a computer to 'unlock' (decrypt) previously 'locked' (encrypted) text, utilizing the designated set of rules.
  • To illustrate, imagine writing down AdNgzrrtxcpeUzzAdN7dwA== on one piece of paper and "kite" on another, crumpling both, and tossing them across the room to a friend.
  • Suddenly, an unnoticed person in the room swiftly grabs the piece of paper with AdNgzrrtxcpeUzzAdN7dwA== and makes off with it.
  • However, since this individual lacks knowledge of the key ("kite"), the content of the piece of paper remains unknown to them.
  • In the digital realm, this is how encryption serves as a protective measure for securing digital information.

3. What is E2E encryption?

  • E2E encryption, short for End-to-End encryption, pertains to specific points in the journey of information transmission.
  • For instance, consider a chat conversation on a messaging app. When you send a message, it initially travels to a server maintained by the app's company. Following the app's instructions, the server directs the message to your friend. Within this framework, two critical encryption forms come into play: encryption-in-transit and E2E encryption.
  • Encryption-in-transit ensures that before a message is forwarded from the server to you (or vice versa), it undergoes encryption. This method is employed to thwart any attempt by an unauthorized entity to read the message's contents by intercepting the relay.
  • On the other hand, E2E encryption goes a step further. It encrypts the message both during transit (from your phone to the server or vice versa) and when it resides within the server. Decryption only occurs when your friend receives the message.

4. Methods of Information Encryption

Protecting information involves employing various encryption methods, selected based on the desired level of secrecy and security duration. One key distinction lies between symmetric and asymmetric encryption.

Symmetric Encryption

  • In symmetric encryption, the key used for encryption is identical to the one needed for decryption. Notable examples include the Data Encryption Standard (DES) and Triple DES.
  • Triple DES involves splitting the user-provided key into three parts, sequentially encrypting and decrypting the message with each part. This method is suitable when the sender and recipient are the same, as in encrypting a computer's hard drive. The Advanced Encryption Standard (AES) is another symmetric encryption algorithm widely used.

Asymmetric Encryption

  • Asymmetric encryption involves distinct keys for encryption and decryption. If a message is encrypted with one key, it can only be decrypted using a corresponding key in a predetermined manner.
  • Public and private key pairs are utilized. The public key is shared openly, while the private key remains confidential. This method is effective when the sender and recipient are different, ensuring privacy.
  • The effectiveness of asymmetric encryption relies on keeping the private key secret. Advanced implementations involve mathematical problems for key storage, making it computationally challenging to breach. Longer keys enhance security.

Curve25519 Algorithm and Elliptic-Curve Cryptography (ECC):

  • Messaging apps like WhatsApp employ the Curve25519 algorithm to generate public keys for messages. Curve25519 utilizes principles from elliptic-curve cryptography (ECC), grounded in algebraic geometry.
  • ECC offers equivalent security to asymmetric encryption but with shorter key lengths, making it computationally efficient.
 
5. Vulnerabilities in E2E Encryption

While End-to-End (E2E) encryption offers robust privacy assurances, certain vulnerabilities may expose user data or compromise the security of encrypted messages.

Man-in-the-Middle (MITM) Attacks

  • E2E encryption is susceptible to MITM attacks, where an unauthorized party intercepts the communication. Attackers may obtain encryption keys by hacking devices, compromising the correspondence between encryption and decryption keys, or other means.
  • Prevention involves using and comparing fingerprints—unique identifiers for keys. Users can verify key authenticity by comparing fingerprints through a separate channel, minimizing the risk of interception and message tampering.

 Device Hacking and Malware

  • E2E encryption does not safeguard against attacks on individual devices. If an attacker gains access to a sender's or recipient's device, they may exploit vulnerabilities to obtain unencrypted data.
  • Malware can infiltrate devices through various means, including SMS, providing unauthorized access to messages before encryption occurs.

Company-Installed Backdoors

  • Companies implementing E2E encryption may, under legal or other pressures, install backdoors or exceptions to access encrypted messages. This could be mandated by law enforcement or for purposes of data retention and legal compliance.
  • Instances like the Edward Snowden revelation exposed companies, such as Skype, installing backdoors for government agencies to access E2E-encrypted messages.

Complacency and Metadata Surveillance

  • Users may become complacent with E2E encryption, assuming absolute security. However, certain vulnerabilities, such as storing images on devices, can be exploited by attackers who compromise the device.
  • Metadata, information about messages (timing, frequency, recipients, locations, etc.), may still be accessible. While not revealing message content, metadata surveillance can provide insights into user behaviour.
6. The Way Forward
 
E2E encryption is a valuable tool for secure communication, but it's not foolproof. Understanding its strengths, limitations, and potential vulnerabilities empowers you to use it effectively and protect your privacy in the digital world.
 
 
For Prelims: End-to-End Encryption, elliptic-curve cryptography,  Curve25519 algorithm, Advanced Encryption Standard,  Data Encryption Standard
For Mains: 
1. Discuss the ethical and legal implications of using End-to-End Encryption (E2E) in the context of national security and individual privacy. What measures can be taken to balance these competing interests? (250 Words)
2. Imagine you are a policymaker responsible for developing a national framework for E2E encryption. What key factors would you consider, and what principles would guide your approach to ensure a balance between security, privacy, and economic interests? (250 Words)
 
Previous Year Questions
 
1. What is the key size of Data Encryption Standard algorithm in cryptography ? (UPSC ESE 2021)
A. 56 bit       B. 62 bit        C. 168 bit          D. 128 bit
 
2. The Data Encryption Standard (DES) has a function consists of four steps. Which of the following is correct order of these four steps? (UGC NET 2019)
A. an expansion permutation, S-boxes, an XOR operation, a straight permutation
B. an expansion permutation, an XOR operation. S-boxes, a straight permutation
C. a straight permutation, S-boxes, an XOR operation, an expansion permutation
D. a straight permutation, an XOR operation. S-boxes, an expansion permutation
 
Answers: 1-A, 2-B
 
Source: The Hindu

RBI GUIDELINES ON STATE GUARANTEES 

 
 
 
 
 
1. Context 
 

Recently, a working group constituted by the Reserve Bank of India (RBI) made certain recommendations to address issues relating to guarantees extended by State governments. Among other things, the Working Group prescribed a uniform reporting framework for the guarantees extended, besides expanding the definition of what constitutes a ‘guarantee.’
 

2. About 'Guarantee'

A 'guarantee' is defined as a contingent liability of a State, formalized through an accompanying contract. This arrangement serves to safeguard the lender or investor against the potential default risk of the borrower. The guarantor commits to being accountable for the debt, default, or failure of the borrower.

Key Parties Involved:

    • Creditor: The party receiving the guarantee.
    • Principal Debtor: The entity for whom the guarantee is provided, and who may face default.
    • Surety: The entity offering the guarantee, typically State governments in this context.
  • If party A supplies goods or services to party B, and B fails to make the agreed payment, B is in default and liable for the debt. At this point, party C intervenes, pledging to cover B's default. This act constitutes a guarantee.
  • The report from the RBI working group emphasizes that while guarantees may seem harmless during favourable economic conditions, they can pose substantial fiscal risks and burden the State during challenging times. This situation can lead to unforeseen cash outflows and an increase in debt.
  • State governments often authorize and issue guarantees on behalf of various entities such as State-owned enterprises, cooperative institutions, urban local bodies, or other State-owned entities. These guarantees are extended to diverse lenders, including commercial banks and financial institutions.
  • In return for these guarantees, entities are obligated to pay a guarantee fee to the State governments. This dynamic plays a crucial role in the financial landscape, impacting both the guarantor and the entities receiving the guarantees.

3. Definition of 'Guarantee'

The Working Group, constituted by the Reserve Bank of India, proposes a comprehensive redefinition of the term 'guarantee.' According to their recommendations, the term should be expansively interpreted to encompass all instruments, regardless of nomenclature, that impose an obligation on the guarantor (State) to make a payment on behalf of the borrower in the future.

  1. The suggested definition broadens the scope to include any financial instrument or contractual arrangement, irrespective of its specific designation, as long as it entails a commitment from the guarantor to fulfil a payment obligation on behalf of the borrower.
  2. The proposed definition removes distinctions based on conditions, categorizing guarantees as conditional or unconditional, and whether they pertain to financial or performance aspects. This uniform approach is intended to assess fiscal risk without differentiating between the various forms of guarantees.
  3. Central to the definition is the aspect of creating an obligation for the guarantor to make payments on behalf of the borrower at a future date. This emphasizes the forward-looking nature of guarantees, where the guarantor commits to financial responsibility for potential future events.

4. Guidelines on Government Guarantees

The Working Group, established by the Reserve Bank of India, has put forth crucial recommendations regarding the utilization of government guarantees. These guidelines aim to ensure the responsible and prudent use of guarantees to safeguard the financial interests of State governments.

  • The Working Group strongly advises against the use of government guarantees to secure finance through State-owned entities. Such practices, which substitute budgetary resources of the State Government, are discouraged to maintain fiscal discipline.
  • A key recommendation emphasizes that government guarantees should not lead to direct or de facto liability on the State. This precautionary measure is designed to prevent undue financial burdens on the State.
  • The Working Group advocates strict adherence to the Government of India guidelines. These guidelines specify that guarantees should only cover the principal amount and the normal interest component of the underlying loan. This measured approach helps mitigate fiscal risks associated with guarantee commitments.
  • Guarantees are advised not to be extended for external commercial borrowings. Additionally, the Working Group recommends restricting guarantees to not exceed 80% of the project loan. Furthermore, the extension of guarantees to private sector companies or institutions is discouraged.

5. Risk Assessment and Ceilings on Guarantee Issuance

The Working Group has outlined specific measures for determining and managing risks associated with the extension of guarantees by State governments. These recommendations aim to ensure a judicious approach to guarantee issuance and minimize the potential fiscal stress on State governments.

  • States are advised to assign appropriate risk weights to guarantees, indicating the level of risk associated with each. The suggested categorization includes high, medium, or low risk. The assessment should also take into account the historical record of defaults, providing a comprehensive evaluation of the associated risks.
  • The risk determination process must incorporate the past record of defaults. This historical perspective contributes to a more nuanced understanding of the potential risks associated with extending guarantees.
  • The report underscores the desirability of imposing ceilings on the issuance of guarantees. Recognizing that invoking guarantees could lead to significant fiscal stress, the imposition of ceilings serves as a preventive measure.
  • For incremental guarantees issued during a year, the Working Group proposes a ceiling at 5% of Revenue Receipts or 0.5% of GSDP (Gross State Domestic Product), whichever is less. This measure is intended to manage and control the potential fiscal impact of additional guarantees, ensuring responsible fiscal management.
 

6. Enhanced Disclosure Practices for State-Government Backed Credits

The Working Group has proposed measures to improve transparency and data credibility regarding credit extended to State-owned entities backed by State-government guarantees. These recommendations are directed towards enhancing disclosure practices within the banking sector.

  • The apex banking regulator is suggested to consider advising banks and non-banking financial companies (NBFCs) to disclose information related to credit extended to State-owned entities supported by State-government guarantees. This advisory aims to promote transparency in financial reporting.
  • The report highlights that data availability from both the issuer (State government) and the lender can contribute to enhancing the credibility of reported data. By ensuring comprehensive and accurate information, stakeholders can make informed decisions.
  • The Working Group advocates for the creation of a proper database that captures details of all extended guarantees. This centralized repository would serve as a comprehensive source of information, facilitating effective monitoring and management of guarantee-related data.
 
7. The Way Forward
 
With these RBI recommendations, state governments can leverage guarantees responsibly, fostering economic growth while mitigating potential financial burdens. This balanced approach contributes to a more sustainable and transparent financial landscape for both the government and its stakeholders.
 
 
For Prelims: RBI, Working Group, GSDP, NBFC's
For Mains: 
1. Discuss the potential impact of the proposed ceilings on guarantee issuance on infrastructure development and economic growth in States. Suggest alternative measures to manage fiscal risks arising from guarantees. (250 Words)
2.  In the context of federalism, discuss the implications of the proposed expansion of the definition of "guarantee" on the relationship between the central government and state governments. (250 words)
 
Previous Year Questions
 
1. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. An increase in the Nominal Effective Exchange Rate (NEER) indicates the appreciation of the rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct?
A. 1 and 2 only     B. 2 and 3 only       C. 1 and 3 only        D. 1, 2 and 3
Answer: C
 

2. With reference to Indian economy, consider the following statements: (UPSC 2015)

  1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
  2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.

Which of the statements given above is/are correct?

(a) 1 only       (b) 2 only          (c) Both 1 and 2                (d) Neither 1 nor 2

Answers: 1-C, 2-B 

Source: The Hindu

 


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