The Uttarakhand Assembly passed the Uniform Civil Code on Wednesday, despite the Opposition’s demand that the Bill be handed over to the House’s select committee first.

Terming it a “historic moment”, Chief Minister Pushkar Singh Dhami said the Assembly had become the first legislature in Independent India to pass a Bill that imposes common rules for all communities — except Scheduled Tribes — on marriage, divorce, inheritances, and live-in relationships

2. The objective of a Uniform Civil Code (UCC) in India

• A Uniform Civil Code (UCC) aims to establish a consistent set of laws to replace the diverse personal laws associated with different religions. These laws pertain to crucial aspects like marriage, divorce, adoption, and inheritance. The constitutional basis for the UCC is found in Article 44, which directs the state to "endeavour to secure for the citizens a uniform civil code throughout the territory of India." This provision falls under the Directive Principles of State Policy, playing a significant role in governance, even though it is not legally enforceable.
• The inclusion of the UCC provision sparked intense debates during the deliberations of India's Constituent Assembly. There was a profound discussion on whether it should be considered a fundamental right or a directive principle. Opponents raised concerns that implementing a UCC might compromise the rights of religious minorities and erode India's cultural diversity. Some argued that it could conflict with the freedom of religion guaranteed under Article 19 (now Article 25) of the draft Constitution.
• While some, like Member K.M. Munshi, advocated for the UCC, emphasizing its potential to promote gender equality and eliminate discriminatory practices against women, others, like Member Naziruddin Ahmad, expressed reservations. Ahmad highlighted the need for community consent for implementing such a uniform set of laws.
• Dr. B.R. Ambedkar, taking a more ambivalent stance, expressed the desirability of a UCC but recommended that it be "purely voluntary" in its initial stages. He argued that since the provision was recommendatory and not mandatory, it should not be imposed on all citizens.
• The matter was ultimately settled with a 5:4 majority vote, led by the sub-committee on fundamental rights headed by Sardar Vallabhbhai Patel. The decision was that the establishment of a UCC should not be categorized as a fundamental right.

3. Development of Uttarakhand's Uniform Civil Code (UCC)

• In June 2022, the Uttarakhand government established an expert committee led by former Supreme Court judge Justice Ranjana Prakash Desai to explore avenues for implementing a Uniform Civil Code (UCC). This initiative to implement a UCC in the state if re-elected. Despite the Chief Minister's announcement in June of that year that a draft UCC was prepared, the committee faced delays in submitting its report. The original deadline in November 2022 was extended multiple times.
• Right from the outset, the proposal encountered opposition from rival political parties, with Congress representatives in the state claiming that the UCC initiative was merely a political strategy to influence voters in the lead-up to the general elections. The tribal community, constituting 2.9% of the population, had not given consent to the UCC. Additionally, the Van Gujjar tribe, a Muslim nomadic group with around 60,000 members, expressed concerns about the proposed law.
• The controversies surrounding community consent and political motivations added complexity to the discussions surrounding the proposed implementation of the UCC in the state.

4. Anticipated Changes in Uttarakhand's Uniform Civil Code (UCC)

• The forthcoming draft of the Uniform Civil Code (UCC) in Uttarakhand is poised to bring about significant changes, primarily focusing on gender equality within legal frameworks. Notable provisions include equal treatment of men and women, particularly in matters related to inheritance. The UCC is expected to eliminate practices associated with marriage and divorce, such as polygamy, iddat (mandatory waiting period for women after the dissolution of a Muslim marriage), and triple talaq. Furthermore, the proposed Code is likely to ensure an equal property share for Muslim women, surpassing the current 25% share stipulated by Muslim personal law.
• Despite these amendments, the minimum age for marriage is anticipated to remain unchanged, with 18 years for women and 21 years for men. The UCC is set to encompass a range of issues, including divorce, marriage registrations, adoption, and provisions for the social security of ageing parents. Additionally, the committee has recommended the mandatory registration of live-in relationships.
• In clarifying the intentions behind the UCC, the proposed changes are not geared towards appeasing any specific community but rather aim to empower all sections of society. The implementation of the UCC would not impact reservations, marital rights, customs, or any other class-specific considerations. The emphasis is on fostering equality and empowerment across diverse segments of the population.

5. Supreme Court's Stance on Uniform Civil Code (UCC) and Related Petitions

Over the years, the Supreme Court has engaged in discussions on the Uniform Civil Code (UCC) through various judgments. However, it has consistently refrained from issuing directives to the government, emphasizing that law-making falls exclusively within the domain of Parliament. In the 1985 Shah Bano Begum case, the Court expressed regret over Article 44 remaining a "dead letter" and urged its implementation. This sentiment was echoed in subsequent cases like Sarla Mudgal versus Union of India (1995) and John Vallamattom versus Union of India (2003).

Petitions for Uniformity in Laws

Between 2021 and 2022, six petitions were filed in the Supreme Court seeking uniformity in divorce, maintenance, and alimony laws, asserting that existing laws discriminated against women and thereby violated constitutional provisions under Article 14 (right to equality) and Article 15 (right against discrimination based on religion and gender). In March of the previous year, a Bench led by Chief Justice of India (CJI) D.Y. Chandrachud dismissed these petitions, emphasizing that such matters are within the exclusive legislative purview of Parliament.

Dismissal of Petition Challenging Uttarakhand's UCC Committee

In January of the same year, the Supreme Court dismissed a petition challenging the Uttarakhand government's establishment of an expert committee on the UCC. The Court highlighted that Article 162 permits the exercise of executive powers, stating, "Article 162 of the Constitution indicates that the executive power of a State extends to matters concerning which the Legislature of the State has power to make laws." The order emphasized that the constitution of such a committee, as per Entry 5 of the Concurrent List, dealing with "marriage and divorce; infants and minors; adoption; wills, intestacy, and succession," could not be challenged as ultra vires.

6. Law Commission's Perspective on the Uniform Civil Code (UCC)

• In 2016, the government sought the Law Commission of India's guidance on formulating a Uniform Civil Code (UCC) due to the diverse personal laws existing in the country. In response, the 21st Law Commission, led by former Supreme Court judge Justice Balbir Singh Chauhan, submitted a 185-page consultation paper in August 2018 titled "Reforms of family law." The paper concluded that, at that stage, the formulation of a UCC was deemed "neither necessary nor desirable." It emphasized that a unified nation did not inherently require "uniformity" and that secularism should not contradict the diverse cultural and religious practices prevailing in the country. While rejecting the immediate need for a UCC, the commission recommended amendments to eliminate discriminatory practices and stereotypes present in the existing personal laws.
• On June 14 of the following year, the 22nd Law Commission, led by Justice (Retd) Rituraj Awasthi, issued a notification seeking input from various stakeholders, including the public and religious organizations, on the UCC. Notably, Justice Awasthi, during his tenure as Chief Justice of the Karnataka High Court, had ruled in favour of the Karnataka government's order prohibiting the wearing of hijab in educational institutions.
• The Law Commission's transition from deeming a UCC as unnecessary in 2018 to actively seeking public opinion in 2022 signifies a shift in perspective. While the 2018 report emphasized the importance of maintaining cultural and religious diversity, the subsequent move to engage stakeholders suggests a willingness to reconsider and evaluate the need for a UCC, taking into account diverse viewpoints and societal changes.

7. Future Developments in the Uniform Civil Code (UCC) Landscape

• Following Uttarakhand's lead, Madhya Pradesh and Gujarat have also established committees to kickstart the formulation of a Uniform Civil Code (UCC). This push for a UCC was included in the BJP's election manifesto for the Karnataka Assembly polls, although the Congress eventually secured a significant victory in that election.
• The question of whether the central government will propose a UCC on a pan-India level remains a topic of debate. The central government will likely proceed cautiously, observing the outcomes of the initiatives undertaken by individual states. The awaited report from the 22nd Law Commission is anticipated to carry persuasive weight in shaping the discourse.
• The renewed momentum towards a UCC may also be influenced by a pending query before the Supreme Court concerning the "scope and ambit of the right to freedom of religion under Article 25 of the Constitution." This question originated in the Sabarimala case and was framed by a Constitution Bench for reference to a larger bench. Despite three years passing, there has been no substantial progress on this matter.
• The evolving landscape of UCC initiatives in various states, coupled with the legal and political considerations at the national level, indicates a complex and dynamic situation. The outcome of these state-level efforts, coupled with the pending Supreme Court query, will likely influence the trajectory of discussions on the UCC at both the state and national levels. The UCC debate continues to be shaped by legal, political, and societal dynamics, with potentially far-reaching implications for India's legal framework and cultural diversity.

PREVENTION OF MONEY LAUNDERING ACT (PMLA)

1. Context

Recently, The Supreme Court bench hearing petitions challenging the 2022 ruling upholding the Prevention of Money Laundering Act (PMLA) and the powers of the ED under it said that its mandate was not to decide the merits of the matter but only to see if it needs a relook by a larger bench.

 

2. Money laundering

• Money laundering is the illegal process of making large amounts of money.
• This money is generated by criminal activity but may appear to come from a legitimate source.
• Criminal activities include drug trafficking, terrorist funding, illegal arms sales, smuggling, prostitution rings, insider trading, bribery and computer fraud schemes that produce large profits.

2.1. Different stages in money laundering

Generally, money laundering is a three-stage process:

1. Placement: The crime money is injected into the formal financial system.
2. Layering: Money injected into the system is layered and spread over various transactions and book-keeping tricks to hide the source of origin.
3. Integration: Laundered money is withdrawn from the legitimate account to be used for criminal purposes. Now, Money enters the financial system in such a way that the original association with the crime is disassociated.  The money now can be used by the offender as legitimate money.

All three sources may not be involved in money laundering. Some stages could be combined or repeated many times.

2.2. Impact of Money Laundering on Economic Development

Money laundering can have a significant impact on economic development by:

• When money laundering occurs, it can undermine public confidence in banks and other financial institutions. This can lead to increased risk aversion and a decline in investment, which can hamper economic growth.
• Money laundering can distort economic activity by directing funds away from legitimate businesses and into criminal enterprises. This can lead to inefficient allocation of resources and slower economic growth.
• Money laundering can facilitate corruption by providing a means to conceal the proceeds of corrupt activities. This can weaken governance and undermine the rule of law, further hindering economic development.
• Money laundering can also lead to a loss of tax revenue, as criminals seek to evade taxes on their illicit gains. This can deprive governments of much-needed funds for essential services, such as education and healthcare.
• Money laundering is often used to finance organized crime groups, which can lead to an increase in violence and instability.
• Money laundering can also be used to finance terrorist activities, posing a serious threat to international security.
• Money laundering can also have a direct impact on individuals and businesses, who may lose money or be victims of fraud as a result of this crime.

3. Prevention of Money-Laundering Act, 2002 (PMLA)

The Prevention of Money-Laundering Act, 2002 (PMLA) is a comprehensive legislation enacted by the Indian Parliament to combat money laundering and other financial crimes. It aims to prevent the use of proceeds of crime, particularly those derived from drug trafficking, organized crime and corruption, from being laundered and utilized to finance further criminal activities or to gain legitimacy.

3.1. Key Features of the PMLA

• The PMLA prohibits the process of money laundering, defined as the act of concealing or disguising the proceeds of crime.
• The PMLA empowers the Enforcement Directorate (ED), the designated agency for investigating money laundering cases, to attach and seize property derived from or involved in money laundering.
• The PMLA provides for the confiscation of property that is involved in money laundering, even if it is not in the possession of the accused person.
• The PMLA grants the ED extensive powers to conduct searches, make arrests, and detain individuals suspected of money laundering.
• The PMLA facilitates international cooperation in combating money laundering through mutual legal assistance treaties and other mechanisms.

3.2. Significance of the PMLA

The PMLA has played a crucial role in strengthening India's anti-money laundering framework and enhancing its global standing in combating financial crimes. It has enabled the investigation and prosecution of numerous money laundering cases, leading to the recovery of substantial illicit funds.

3.3. Challenges in Implementing the PMLA

Despite its significance, the implementation of the PMLA has faced certain challenges, including:

• The PMLA and other laws, such as the Narcotics Drugs and Psychotropic Substances Act, have overlapping jurisdictions, which can lead to confusion and delays in investigations.
• There have been concerns about the lack of adequate safeguards against arbitrary actions and misuse of power under the PMLA.
• The ED faces resource constraints in terms of manpower and infrastructure, which can hamper its ability to effectively investigate and prosecute money laundering cases.

 

4. About the Directorate of Enforcement 

 

The Directorate of Enforcement (ED) is an agency in India that primarily deals with the enforcement of economic laws and regulations to combat money laundering, foreign exchange violations, and financial fraud.

The ED is part of the Department of Revenue under the Ministry of Finance, Government of India.

The Directorate of Enforcement was established on 1st May 1956, as the "Enforcement Unit" within the Department of Economic Affairs.

Its primary focus was on preventing and detecting violations of the Foreign Exchange Regulation Act (FERA) of 1947.

Over the years, the agency's role expanded, and in 1999, the Enforcement Directorate was established as a separate entity under the Ministry of Finance.

The enactment of the Prevention of Money Laundering Act (PMLA) in 2002 further broadened its jurisdiction, giving it the power to investigate cases related to money laundering.

Since its establishment, the ED has played a crucial role in combating economic offences and ensuring compliance with economic laws in India.

It has been involved in several high-profile cases, including those related to financial scams, money laundering by influential individuals, and cross-border financial crimes.

The ED collaborates with various domestic and international agencies, including financial intelligence units, law enforcement agencies, and Interpol, to gather information, share intelligence, and effectively coordinate efforts to combat economic offences.

4.1. Functions and Roles of ED

Enforcing Economic Laws: The primary function of the ED is to enforce two key economic laws in India: the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA). It ensures compliance with these laws and investigates money laundering, foreign exchange violations, and economic fraud cases.

• Money Laundering Investigations: The ED investigates cases involving money laundering, which is the process of concealing the origins of illegally obtained money to make it appear legitimate. It identifies and seizes properties and assets derived from illicit activities and prevents their further use.
• Foreign Exchange Violations: The ED is responsible for investigating cases related to violations of foreign exchange laws and regulations. It monitors and controls foreign exchange transactions to maintain the stability of the Indian rupee and prevent illegal activities such as smuggling and illegal money transfers.
• Financial Frauds: The ED also investigates and takes action against financial frauds, including bank frauds, Ponzi schemes, and other fraudulent activities affecting the Indian financial system. It works closely with other law enforcement agencies, such as the Central Bureau of Investigation (CBI), to tackle complex financial crimes.

 

For Prelims: Prevention of Money Laundering Act, ED, CBI, Foreign Exchange Management Act,  For Mains:  1. Critically evaluate the Prevention of Money Laundering Act, 2002 (PMLA) in its effectiveness in combating money laundering in India. (250 Words)

 

 

Previous Year Questions   1. Which one of the following is not correct in respect of Directorate of Enforcement? (CDS  2021) A. It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance. B. It enforces the Foreign Exchange Management Act, 1999. C. It enforces the Prevention of Money Laundering Act, 2002. D. It enforces the Prohibition of Benami Property Transaction Act, 1988.   2. The Prevention of Money Laundering Act, 2002 become effective since which one of the following dates? (UKPSC RO/ARO 2012)   A. July 2002          B. August 2003        C. July 2004         D. July 2005   3. FEMA (Foreign Exchange Management Act) was finally implemented in the year (UPPSC  2013) A. 1991         B. 1997         C. 2000             D. 2007   4. The Foreign Exchange Regulation Act was replaced by the ______ in India. (SSC Steno 2020)  A. Foreign Exchange Currency Act B. Foreign Exchange Finances Act C. Foreign Exchange Funds Act D. Foreign Exchange Management Act   5. "Central Bureau of Intelligence and Investigation" is listed in the __________ list given in the Seventh Schedule of the Constitution of India. (SSC CGL 2017)  A. Union             B. State             C. Global          D. Concurrent   Answers: 1-D, 2-D, 3-C, 4-D, 5-A

 

Source: The Indian Express

 

FISCAL CONSOLIDATION

 

 

 

1. Context

 

The interim Budget or ‘vote on account’ for 2024-25 was presented on February 1, 2024. In keeping with the best traditions, Finance Minister Nirmala Sitharaman announced that she was not proposing to make any changes in the tax rates either for direct taxes or indirect taxes. Nevertheless, a few things stand out in the Budget. First, there is a continued emphasis on increasing capital expenditures of the Union government and second, there is a continued emphasis on fiscal correction and consolidation

 

 

2. About fiscal deficit

• A fiscal deficit signifies the disparity between a government's revenue and its expenditure. When a government's spending surpasses its income, it is compelled to resort to borrowing or selling assets to cover the deficit. Taxes constitute the primary revenue source for any government.
• In the fiscal year 2024-25, the government anticipates tax receipts amounting to ₹26.02 lakh crore, contributing to a total projected revenue of ₹30.8 lakh crore. In contrast, the Union government's expected expenditure is estimated at ₹47.66 lakh crore.
• A fiscal surplus occurs when a government's revenue exceeds its expenditure. However, such surpluses are uncommon in contemporary governance. Most governments prioritize maintaining control over the fiscal deficit rather than aiming for a surplus or budgetary balance.
•  It is crucial to differentiate between fiscal deficit and national debt. The national debt represents the cumulative amount owed by a government to its lenders at a specific point in time. This debt accrues over years of running fiscal deficits and resorting to borrowing to bridge the financial gaps.
• Fiscal deficit is typically expressed as a percentage of a country's Gross Domestic Product (GDP). This representation aims to gauge the government's ability to repay its lenders. A higher fiscal deficit, relative to GDP, suggests a potentially challenging scenario for lenders to be repaid. Larger economies may sustain higher fiscal deficits in absolute monetary terms.

 

3. Funding the Fiscal Deficit

• To bridge its fiscal deficit, the government primarily turns to the bond market, where lenders compete to finance the deficit by purchasing government-issued bonds. In the fiscal year 2024-25, the Centre anticipates borrowing a gross sum of ₹14.13 lakh crore from the market, a figure slightly below the earlier projection. The government aims to fund its expenditures through increased Goods and Services Tax (GST) collections in the same period, contrary to economists' expectations of a higher borrowing target.
• Central banks, such as the Reserve Bank of India (RBI), play a significant role in the credit market. While not always directly purchasing government bonds, central banks may acquire them in the secondary market from private lenders who initially bought the bonds. Through 'open market operations,' the RBI creates fresh money, potentially impacting the money supply and contributing to rising prices in the broader economy over time.
• Government bonds are generally considered risk-free, as the government has the ability, in extreme scenarios, to seek assistance from the central bank. This support enables the government to create fresh currency for repaying lenders. Consequently, governments usually find it relatively easy to borrow from the market. However, the challenge lies in the interest rate at which the money is borrowed. Worsening government finances can lead to decreased demand for government bonds, prompting the government to offer higher interest rates to lenders, resulting in elevated borrowing costs.
• Monetary policy plays a pivotal role in determining government borrowing costs. Sharp rises in central bank lending rates, observed post-pandemic, increase the expense for governments to borrow money. This aspect contributes to the government's motivation to curb its fiscal deficit.

 

4. Significance of Fiscal Deficit

• The fiscal deficit holds significant importance for various reasons, one being its direct correlation with inflation. A persistently high fiscal deficit can lead to increased inflation, as the government resorts to using freshly issued money by the central bank to cover the deficit. Notably, the fiscal deficit peaked at 9.17% of GDP during the pandemic but has since shown improvement, projected to decline to 5.8% currently.
• The level of the fiscal deficit communicates the government's commitment to fiscal discipline to the market. A lower fiscal deficit can enhance the ratings assigned to the government's bonds, signaling prudent financial management. When the government relies more on tax revenues and borrows less, it instills confidence in lenders, thereby reducing the government's borrowing costs.
• A high fiscal deficit can impede the government's ability to manage its overall public debt effectively. Concerns have been raised, with the International Monetary Fund (IMF) cautioning that India's public debt might surpass 100% of GDP in the medium term, despite differing opinions from the Centre. Managing public debt becomes crucial, especially as the government expresses interest in tapping into the international bond market. A lower fiscal deficit can facilitate the government's bond sales overseas, providing access to more affordable credit.

 

5. Fiscal Challenges in 2024-25

• The Centre outlines ambitious plans to reduce its fiscal deficit to 5.1% of GDP in the fiscal year 2024-25, despite intentions to boost capital expenditure and allocate funds for various programs. Achieving this goal hinges largely on augmenting revenue through increased tax collections. The government anticipates an 11.5% growth in tax collections for the mentioned period.
• To align with fiscal targets, the Centre envisions trimming expenditure in specific areas. A notable adjustment includes a reduction in the fertilizer subsidy, from ₹1.88 lakh crore in 2023-24 to ₹1.64 lakh crore in 2024-25. Similarly, the projected expenditure on food subsidy is slated to decrease from ₹2.12 lakh crore to ₹2.05 lakh crore during the same period.
• While the government aims to balance the budget primarily through elevating tax rates to bolster collections, this approach raises concerns about potential repercussions on economic growth. Heightened taxes can act as a dampener on economic activity. Striking a delicate equilibrium between fiscal discipline and sustaining economic momentum becomes imperative.
• The feasibility of meeting the ambitious fiscal deficit target remains uncertain. Projections are susceptible to inaccuracies, and the government's ability to achieve its fiscal goals may face challenges. Relying solely on raising tax rates poses risks to economic growth, emphasizing the need for a comprehensive and dynamic approach to fiscal management.

 

6. The Way Forward

 

India's fiscal consolidation journey in 2024-25 will require careful planning, flexibility, and a commitment to long-term economic well-being. By adopting a balanced and forward-thinking approach, the government can navigate this crucial year and lay the foundation for a sustainable fiscal future.

 

 

For Prelims: Fiscal Consolidation, RBI, International Monetary Fund (IMF), GDP, Monetary Policy For Mains:  1. Critically evaluate the effectiveness of the Fiscal Responsibility and Budget Management (FRBM) Act in achieving its objectives in the context of India's current fiscal situation. Suggest any necessary modifications or reforms to make the Act more efficient. (250 Words) 2. What are the implications of rising public debt on India's economic stability and long-term growth prospects? Analyze the risks associated with high debt levels and suggest strategies for effective debt management. (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   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   3. Consider the following statements: (UPSC 2018) 1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments. 2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments. 3. As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter. Which of the statements given above is/are correct? A. 1 only        B. 2 and 3 only       C. 1 and 3 only          D. 1, 2 and 3     4. Recently, which one of the following currencies has been proposed to be added to the basket of IMF’s SDR? (UPSC 2016) A. Rouble B. Rand C. Indian Rupee D. Renminbi     5. Rapid Financing Instruments" and "Rapid Credit Facility" are related to the provisions of lending by which one of the following? (UPSC 2022) A. Asian Development Bank B. International Monetary Fund C. United Nations Environment Programme D. Finance Initiative World Bank     6. With reference to Indian economy, consider the following statements: (UPSC CSE, 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   7. A decrease in tax to GDP ratio of a country indicates which of the following? (UPSC CSE, 2015) 1. Slowing economic growth rate 2. Less equitable distribution of national income Select the correct answer using the code given below: (a) 1 only        (b) 2 only            (c) Both 1 and 2            (d) Neither 1 nor 2   Answers: 1-C, 2-B, 3-C, 4-D, 5-B, 6-B, 7-A   Mains 1. Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC 2020) 2. Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC 2021)

Source: The Hindu

 

RETAIL INFLATION

 

1. Context

Easing food prices may help cool India’s consumer price inflation (CPI) in January from the four-month high of 5.7% recorded in December, price trends for food plates and essential commodities for the last month indicate.

2. What is Inflation?

• It is the rise in prices of goods and services within a particular economy wherein consumers' purchasing power decreases, and the value of the cash holdings erodes.
• In India, the Ministry of Statistics and Programme Implementation (MoSPI) measures inflation.
• Some causes that lead to inflation are demand increases, reduction in supply, demand-supply gap, excess circulation of money, increase in input costs, devaluation of the currency, and rise in wages, among others.

3. Retail Inflation

Consumers often directly buy from retailers. So, the inflation experienced at retail reflects the actual price rise in the country. It also shows the cost of living better. In India, the index that reflects the inflation rate at the retail level is known as Consumer Price Index (CPI). Unlike WPI, CPI includes both goods and services. CPI is used to calculate the Dearness Allowance (DA) for government employees.

4. How Inflation is measured?

• In India, inflation is primarily measured by two main indices- WPI (Wholesale Price Index) and CPI (Consumer Price Index), Which measures Wholesale and retail-level price changes, respectively.
• The CPI calculates the difference in the price of commodities and services such as food, medical care, education, electronics, etc, which Indian consumers buy for use.
• On the other hand, the goods or services sold by businesses to smaller businesses for selling further are captured by the WPI.
• Both WPI (Wholesale Price Index) and CPI (Consumer Price Index) are used to measure inflation in India. 

5. What is the Inflation Target?

• Under Section 45ZA, in consultation with the RBI Act, the Central Government determines the inflation target in terms of the Consumer Price Index (CPI), once in five years and notifies it in the Official Gazette.
• Accordingly, on August 5, 2016, the Central Government notified in the Official Gazette 4 percent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016, to March 31, 2021, with the upper tolerance limit of 6 percent and the lower tolerance limit of 2 percent.
• On March 31, 2021, the Central Government retained the inflation target and the tolerance band for the next 5-year period-April 1, 2021 to March 31, 2026.
• Section 45ZB of the RBI Act provides for the constitution of a six-member Monetary Policy Committee (MPC) to determine the policy rate required to achieve the inflation target.

6. Monetary Policy Committee (MPC)

• The MPC is a statutory and institutionalized framework under the RBI Act, of 1934, for maintaining price stability, keeping in mind the objective of growth. It was created in 2016.
• It was created to bring transparency and accountability in deciding monetary policy.
• MPC determines the policy interest rate required to achieve the inflation target.
• The committee comprises six members and Governor RBI acts as an ex-officio chairman. Three members are from RBI and three are selected by the government. The inflation target is to be set once every five years. It is set by the Government of India, in consultation with the Reserve Bank of India.
• The current inflation target is pegged at 4% with -2/+2 tolerance till March 31, 2021.

7. What Caused the drop in Inflation?

• Retail Inflation or price gains based on the Consumer Price Index, slowed to 6.77 % last month, from September's 7.41%, aided by an appreciable deceleration in food price inflation.
• The year-on-year inflation based on the Consumer Food Price Index eased by almost 160 basis points in October, to 7.01%, from the preceding month's 8.60%, helped by a 'decline in prices of vegetables, fruits, pulses and oils, and fats', the Government said.
• With the food and beverages sub-index representing almost 46% of the CPI's weight, the slowdown in food price gains understandably steered overall inflation lower even as price gains in three other essential categories, namely clothing, and footwear, housing, and health remained either little changed from September or quickened.
• Inflation at the Wholesale Prices Level also continued to decelerate, with the headline reading easing into single digits for the first time in 19 months. A favorable base effect along with a distinct cooling in international prices of commodities including crude oil and steel amid gathering uncertainty in advanced economies was largely instrumental in tempering wholesale price gains.

8. Recent Measures by the Government

To soften the prices of edible oils and pulses, tariffs on imported items have been rationalized from time to time. The stock limits on edible oils are also maintained, to avoid hoarding.

The Government has taken trade-related measures on wheat and rice to keep domestic supplies steady and curb the rise in prices.

The impact of these measures is expected to be felt more significantly in the coming months.

For Prelims & Mains

For Prelims: Consumer Price Index (CPI), Wholesale Price Index (WPI), Monetary Policy Committee (MPC), Inflation, and RBI. For Mains: 1. Government needs to remain watchful while fighting against Inflation.Comment?

 

Source: The Hindu

 

 

CAR T CELL THERAPY

 

 

1. Context

Months after India’s drug regulator approved the commercial use of CAR-T cell therapy, a pioneering treatment that genetically reprogrammes a patient’s immune system to fight cancer, Gupta, a Delhi-based gastroenterologist, became one of the first patients to access the therapy by paying Rs 42 lakh — a treatment that costs approximately Rs 3-4 crore abroad

 

2. (CAR) T Cell Therapy

 

• Chimeric Antigen Receptor (CAR) T-cell therapy is a revolutionary form of immunotherapy used to treat certain types of cancer, primarily blood cancers like leukaemia and lymphoma. This innovative approach harnesses the power of a patient's own immune system to target and destroy cancer cells
• CAR T-cell therapy has shown remarkable success in treating certain blood cancers, particularly in cases where other treatments have failed. However, it is not without potential side effects, including cytokine release syndrome (CRS) and neurologic toxicity, which can be severe in some cases
• Two well-known CAR T-cell therapies that have received approval from regulatory agencies like the U.S. Food and Drug Administration (FDA) are Kymriah (tisagenlecleucel) and Yescarta (axicabtagene ciloleucel), used to treat certain types of leukemia and lymphoma. Research and development in this field are ongoing, with efforts to expand the application of CAR T-cell therapy to other types of cancers and improve its safety and effectiveness

3. How does it work?

• A patient's own T-cells (a type of immune cell) are collected from their blood through a process called leukapheresis
• The collected T-cells are then genetically engineered in a laboratory to express a chimeric antigen receptor (CAR) on their surface. This CAR is designed to specifically recognize a particular protein or antigen found on the surface of cancer cells. This engineering process enables the T-cells to target cancer cells more effectively
• The expanded CAR T-cells are infused back into the patient's body through an intravenous (IV) infusion
• Once in the patient's body, these CAR T-cells seek out and bind to cancer cells that express the target antigen. This binding activates the T-cells, leading to the destruction of the cancer cells

4. Conclusion

In comparison to other CAR T-cell therapies, the safety profile of CRS and the absence of neurotoxicity indicates a significant improvement, the company vouched. Dr Jain, an associate professor at Tata Memorial Centre, said in a press release, “NexCAR19 has shown an excellent balance of efficacy and low toxicity, which is a significant advantage in clinical management (post-infusion) of the patients in our resource-constrained settings.”

 

Source: DownToEarth

 

LIQUIFIED NATURAL GAS (LNG)

 

 

1. Context

Petronet LNG and QatarEnergy on Tuesday inked the deal to extend the supply of 7.5 million tonnes per annum (mtpa) of liquefied natural gas (LNG) from the latter for another 20 years beyond 2028, when the current long-term contract is set to expire

 

2. What is liquid natural gas (LNG)?

Liquefied Natural Gas (LNG) is a natural gas that has been cooled to extremely low temperatures to convert it from a gaseous state into a liquid state. This process makes natural gas more compact and transportable, facilitating its storage and transportation over long distances

2.1. Key Aspects of LNG

Natural Gas Composition: Natural gas is primarily composed of methane, but it can also contain small amounts of other hydrocarbons like ethane, propane, and butane, as well as impurities like sulfur compounds.

Liquefaction Process: LNG is created through a process known as liquefaction. In this process, natural gas is cooled to temperatures around -162 degrees Celsius (-260 degrees Fahrenheit). This extreme cooling causes the gas to change from a gaseous form into a dense, stable liquid.

Reduced Volume: The liquefaction process reduces the volume of natural gas to approximately 1/600th of its volume in its gaseous state. This reduction in volume makes it more practical and cost-effective to store and transport natural gas over long distances, whether by ship, truck, or pipeline.

Storage and Transportation: LNG is stored and transported in specially designed cryogenic tanks and ships. These tanks and ships are insulated to maintain the extremely low temperatures required to keep LNG in its liquid state. LNG carriers are designed to handle the safe transport of LNG from production facilities to import terminals around the world.

3. Uses of liquified natural gas (LNG)

•  LNG can be used to generate electricity. It is often used in natural gas power plants to produce electricity, especially in regions with limited access to other energy sources.
•  LNG can be regasified and used for heating purposes in homes, businesses, and industrial facilities
• LNG is used as a fuel source in various industrial and commercial applications, including in the manufacturing, chemical, and transportation sectors.
• Some ships and vessels, especially in the maritime industry, use LNG as a cleaner and more environmentally friendly alternative to traditional marine fuels
• LNG is considered a relatively cleaner fuel source compared to coal and oil because it produces fewer emissions of greenhouse gases, sulfur dioxide, and other pollutants when burned. This has made it a popular choice for reducing emissions in power generation and transportation
•  LNG is traded globally, with significant producers including countries like Qatar, the United States, Australia, and Russia. It is transported across oceans to meet the energy needs of various regions and countries

4. India, Qatar, and LNG

• India’s total imports from Qatar in FY2022-23 were valued at $16.81 billion, of which LNG imports alone were worth $8.32 billion, or 49.5%, an analysis of official trade data shows
• India’s other major imports from Qatar are also fossil fuel-linked commodities and products, such as liquefied petroleum gas (LPG), plastics, and other petrochemicals.
•  India’s exports to Qatar were valued at just $1.97 billion in FY2022-23. The major exports include cereals, copper articles, iron and steel articles, vegetables, fruits, spices, and processed food products
• India imported a total 19.85 million tonnes of LNG in FY23, of which 10.74 million tonnes, or 54%, came from Qatar, the trade data show.
• This means that apart from the 8.5 million tonnes of LNG that Qatar supplied as part of the Petronet LNG term contract, nearly 2.25 million tonnes of additional gas was purchased from Qatar on spot basis last year.
• While Indian LNG importers — predominantly the public sector oil and gas companies — continue to make efforts to diversify sourcing, it could be years before the high reliance on Qatar can be reduced to a meaningful extent

5. Global LNG Market

• The global LNG market is a seller’s market after Russia’s invasion of Ukraine and the sanctions that have disrupted Russian natural gas supplies to Europe. After the war broke out, prices, particularly of LNG spot cargoes, surged globally
• Compared with term contracts (such as the one Petronet has with Qatar), the spot LNG market is prone to higher price volatility.
• In a supply glut, spot prices tend to fall more steeply than term contracts, as pricing in the latter is based on an agreed formula between the buyer and the seller. And when supplies are tight, spot prices tend to rise much more than term contract rates
• The war has put Qatar, the world’s largest exporter of LNG, in a unique position of strength. According to industry experts, the extreme price volatility of the past couple of years in global LNG markets has established that term contracts, and not spot purchases, are the more viable option to secure supplies at a reasonable and stable price
• This has pushed LNG importers all over the world, including India, to scout for long-term contracts with major suppliers, of whom Qatar is the foremost. Over the past few weeks, Doha has announced 27-year LNG supply deals with French, Dutch, and Italian energy majors. In the preceding months, it had signed long-term contracts to supply LNG to China and Germany

6. Way forward

Analysts and industry experts predict that the global LNG market is likely to turn into a buyer’s market over the next few years due to a surge in new LNG export projects coming onstream. This scenario, however, is still a few years away. And even then, a large chunk of this new LNG export capacity is expected to come onstream in Qatar itself.

 

Source: indianexpress

 

NORTHERN IRELAND

 

 

 

 

1. Context 

 

Recently, Michelle O’Neill, a pro-Irish unity politician representing Sinn Féin, achieved a historic milestone by becoming Northern Ireland's first Nationalist First Minister. This significant development followed the reentry of the Democratic Unionist Party (DUP), the leading pro-U.K. party, into the government, effectively breaking a two-year-long political impasse in Northern Ireland.

 

 

2. Factors Leading to the Political Deadlock in Northern Ireland

 

Northern Ireland operates under a power-sharing agreement known as consociationalism, established by the Good Friday Agreement of 1998. This system advocates for equal power-sharing among sectarian groups, namely the Nationalists (Republicans) and the Unionists (Loyalists).

 

Political Dynamics and Electoral Results

In the 2022 elections, Sinn Féin, the largest Nationalist party, secured a 29% vote share, while the Democratic Unionist Party (DUP), representing Unionists, attained the second position with a 21.3% vote share. Per the agreement, the First Minister must be from the party with the largest vote share, while the Deputy First Minister must be from the second-largest party, with one position occupied by a Unionist and the other by a Nationalist.

 

Brexit and the Northern Ireland Protocol

 

The DUP's departure from Stormont, Northern Ireland’s Parliament, stemmed from objections to new border controls between Britain and the island of Ireland following Brexit. With Northern Ireland being the sole province sharing a land border with an EU country (the Republic of Ireland), the Northern Ireland Protocol was established. This protocol shifted the trade border to Irish ports, effectively creating a sea border.

 

The DUP objected to the Northern Ireland Protocol, viewing it as contrary to the principles of the Good Friday Agreement, which ensured free movement of goods and people across borders. In protest, they withdrew from the government, leading to a political deadlock.

 

The Windsor Framework

To address concerns, the UK and the EU developed the Windsor Framework, under which goods arriving in Northern Ireland are categorized upon entry. Goods destined for Northern Ireland undergo minimal checks ("green lane"), while those intended for the Republic of Ireland (EU territory) undergo compliance checks ("red lane"). With assurances regarding Northern Ireland's status in the UK's internal market, the DUP agreed to return to government, effectively ending the deadlock.

 

3. Formation of Northern Ireland

Northern Ireland's origins trace back to centuries of conflict and colonial rule, culminating in its establishment as a distinct region within the United Kingdom.

Early Settlement and Religious Conflict

Northern Ireland was historically part of the Ulster province, situated to the north of present-day Ireland. Tensions between Protestants and Catholics in the region date back to the 17th century, exacerbated by King James I's policy of encouraging Protestant migration to Ulster from England and Scotland. These tensions reflected broader religious conflicts engulfing Europe during this period.

Colonial Rule and Resistance

Under English rule, Ireland faced increasing resistance, particularly following the devastating Potato Famine of 1845, which exacerbated sectarian and religious divisions. The desire for independence intensified, leading to the Easter Rising of 1916, where Irish Republicans, notably the Irish Republican Army (IRA), rebelled against British colonial rule amidst the backdrop of World War I.

Establishment of Northern Ireland

Following a protracted struggle, the Anglo-Irish Treaty of 1921 granted Ireland independence from England but resulted in the partition of the island. Given the Protestant majority in Ulster, six of Ireland's 32 counties remained part of the United Kingdom, forming Northern Ireland. This division reflected the religious and sectarian demographics of the region, with Northern Ireland predominantly Protestant and the rest of Ireland predominantly Catholic.

Legacy and The Troubles

The partition of Ireland laid the groundwork for decades of conflict, notably the 30-year civil war known as "The Troubles" (1968-1998), characterized by violence and strife between Republicans (predominantly Catholic) and Unionists (predominantly Protestant). The Troubles claimed thousands of lives and entrenched divisions within Northern Ireland's society.

4. What factors led to the Good Friday agreement

Northern Ireland's journey to peace was marked by decades of turmoil, discrimination, and violent conflict, leading to the eventual signing of the Good Friday Agreement in 1998.

Escalation of Conflict

Following years of discrimination and sectarian violence, the late 1960s saw protests against the Northern Ireland government escalate into armed conflict between Irish Republicans and Unionist paramilitary groups. The deployment of the British Army to maintain peace was marred by allegations of collusion with Unionists. The violence culminated in the tragic event of Bloody Sunday in 1972, further fueling tensions and spreading conflict to mainland Britain and Ireland.

Political Engagement and International Mediation

Amidst the ongoing violence, Sinn Féin, the political wing of the IRA, began actively participating in Northern Ireland's political landscape during the 1980s. Concurrently, peace talks mediated by the United States gained momentum. By the 1990s, growing public fatigue with violence spurred both parties to negotiate a ceasefire and engage in peace talks.

Negotiations and Challenges

Peace negotiations faced significant hurdles, particularly regarding the decommissioning of arms. While the UK advocated for disarmament, both the IRA and Unionist groups resisted complete disarmament. Negotiations adopted a "twin approach," aiming for simultaneous progress towards peace and decommissioning.

On April 10, 1998, amidst intense negotiations and international mediation, the Good Friday Agreement was signed in Belfast. This landmark accord brought an end to the 30-year civil war in Northern Ireland. The agreement addressed key issues such as power-sharing, human rights, and the decommissioning of weapons, laying the foundation for peace and reconciliation in the region.

5. About the Good Friday Agreement

The Good Friday Agreement stands as a distinctive peace accord, addressing key demands from both Republican and Unionist factions while aiming to foster reconciliation in Northern Ireland.

Core Components

• Shared Governance: Central to the agreement is the principle of power-sharing, ensuring that the Northern Ireland government is formed by representatives of both Republicans and Unionists, with equal participation in governance.
• Reunification Referendum: The agreement allows for the possibility of Northern Ireland's reunification with Ireland through a referendum, granting citizens the right to determine their political future.
• Dual Nationality: Individuals in Northern Ireland are afforded the opportunity to claim Irish, British, or both nationalities, reflecting the diverse identities within the region.
• Border Abolishment: The agreement aimed to dismantle border checks between Northern Ireland and Ireland, promoting the free movement of people throughout the UK and Ireland.

Implementation Challenges

Despite the agreement's provisions, tensions from the conflict persist in Northern Ireland. The power-sharing mechanism has encountered obstacles, leading to the suspension of the Assembly on multiple occasions:

• 2000: The Assembly was suspended.
• 2001: Another suspension occurred.
• 2002-2007: Unionist withdrawal from the executive led to further instability.
• 2017-2020: Stormont faced another collapse.

Recent Challenges

In February 2022, the government once again collapsed as Unionists withdrew over disagreements regarding border controls between the UK and Northern Ireland, underscoring ongoing tensions and the fragile nature of the peace process.

6. Future Uncertainties

 

• The appointment of Michelle O’Neill as Northern Ireland's first Nationalist First Minister marks a significant shift in the region's political dynamics, with implications for the potential reunification with Ireland. Despite O’Neill's optimistic outlook, the road to reunification faces hurdles.
• Ms O’Neill's assertion of being in a "decade of opportunity" hints at the possibility of a reunification referendum within the next ten years. This sentiment reflects the growing aspirations among Nationalists for Northern Ireland to join Ireland.
• However, the UK government, in a published paper, expressed scepticism about the feasibility of a united Ireland, citing recent polling data. This stance suggests that the UK does not see a realistic prospect of a reunification referendum leading to Northern Ireland's incorporation into Ireland.
• Similarly, Irish Prime Minister Leo Varadkar, while supportive of the idea of a united Ireland in principle, emphasized that the question of reunification is not an immediate priority. This cautious approach indicates that the Irish government is not actively pursuing reunification at present.

 

7.  The Way Forward

Northern Ireland stands at a crossroads, with opportunities for progress alongside persistent challenges. Navigating the complexities of power-sharing, Brexit-related tensions, and the aspiration for reunification requires sustained dialogue, compromise, and a commitment to the principles of peace and reconciliation embodied by the Good Friday Agreement.

 

For Prelims: Good Friday Agreement, Windsor Framework, Northern Ireland, UK, Brexit, Scotland   For Mains:  1. Analyze the impact of Brexit on the Northern Ireland Protocol and its role in the recent political crisis. How does it create a balance between maintaining peace and respecting the interests of both sides? (250 Words) 2. "The future of Northern Ireland hangs in the balance between historical divisions and the possibilities for peace and reconciliation. Discuss the key challenges and opportunities. (250 Words)

 

Previous Year Questions 1. The term ‘Brexit’ is associated with which one of the following? (Kerala SET 2016) A. Illegal immigration to Britain B. European Union C. Rio Olympics D. Information Technology 2. Which among the following is also known as Scotland of India? (UPSSSC PET 2022) A. Coorg         B. Srinagar          C. Mussoorie ​          D. Darjeeling Answers: 1-B, 2- A

Source: The Hindu