REPO RATE
1. Context
The Reserve Bank of India slashed the repo rate by 25 basis points to 6% on Wednesday, with its Monetary Policy Committee (MPC) voting unanimously to reduce the policy rate in a bid to support growth and bring down the interest burden on home, auto, and other loan borrowers. However, this will also reduce the interest earned on savings by depositors
2. About the Repo rate
- The repo rate, short for repurchase rate, is the rate at which the central bank of a country (such as the Reserve Bank of India in India) lends money to commercial banks for a short-term period, typically overnight. It is one of the key tools used by central banks to control monetary policy and regulate the economy.
- When the central bank wants to stimulate economic growth, it may lower the repo rate. This makes it cheaper for commercial banks to borrow money, which in turn encourages them to lend more to businesses and consumers, stimulating spending and investment. Conversely, when the central bank wants to control inflation or cool down an overheated economy, it may raise the repo rate. This makes borrowing more expensive, which can help reduce spending and inflationary pressures.
- The repo rate also influences other interest rates in the economy, such as lending rates for consumers and businesses, as well as rates on savings and deposits. Therefore, changes in the repo rate have wide-ranging implications for the overall economy.
- The repo rate in India is 6.50%. This rate has been unchanged since February 8, 2023, after a series of hikes throughout 2022 to combat inflation.
3. What is the Cash Reserve Ratio (CRR) Rate?
- The Cash Reserve Ratio (CRR) is the portion of a bank's deposits that it is required to maintain as reserves with the central bank, such as the Reserve Bank of India (RBI) in India. It is expressed as a percentage of a bank's total deposits.
- The CRR rate is set by the central bank as part of its monetary policy tools to regulate the money supply in the economy. By adjusting the CRR rate, the central bank can influence the amount of money available for lending by commercial banks.
- When the CRR rate is increased, banks are required to hold a higher proportion of their deposits as reserves with the central bank, which reduces the amount of money available for lending. Conversely, when the CRR rate is decreased, banks have more funds available for lending, which can stimulate borrowing and economic activity.
- The primary objective of adjusting the CRR rate is to control inflation, manage liquidity in the banking system, and ensure the stability of the financial system.
4. How this move will impact the overall Economy?
Changes in repo rate and CRR affect various aspects of the economy, including:
- When the central bank increases the CRR rate, banks are required to hold a larger portion of their deposits as reserves, reducing the amount of money available for lending. This can lead to a decrease in liquidity in the banking system, making it more difficult for businesses and individuals to access credit. Conversely, a decrease in the CRR rate can increase liquidity in the banking system, making credit more readily available.
- Changes in the CRR rate can also influence interest rates in the economy. When the CRR rate is increased, banks may raise their lending rates to compensate for the higher cost of holding reserves. This can lead to higher borrowing costs for businesses and consumers, potentially dampening investment and spending. Conversely, a decrease in the CRR rate can lead to lower lending rates, stimulating borrowing and economic activity.
- The CRR rate is one of the tools used by the central bank to control inflation. By adjusting the amount of money available for lending, changes in the CRR rate can impact aggregate demand in the economy. A decrease in the CRR rate can stimulate borrowing and spending, potentially leading to increased demand and inflationary pressures. Conversely, an increase in the CRR rate can reduce borrowing and spending, helping to control inflation.
- Changes in the CRR rate can have implications for overall economic growth. Higher CRR rates can reduce the availability of credit, which may slow down investment and consumption spending, leading to lower economic growth. Conversely, lower CRR rates can stimulate borrowing and spending, potentially boosting economic activity.
5. About the Monetary Policy Framework
A monetary policy framework is the overall structure and set of guidelines that a central bank like the Reserve Bank of India (RBI) uses to achieve its economic objectives. It defines the tools, targets, and communication strategies employed to manage the money supply and influence interest rates, ultimately affecting inflation and economic growth.
Objectives
- Maintaining low and stable inflation is typically the primary objective.
- Balancing price stability with promoting economic growth is crucial.
- Ensuring a stable and efficient financial system is also important.
Instruments
- Repo rate influences the cost of borrowing for banks and indirectly impacts interest rates in the economy.
- CRR affects the amount of money banks have available for lending, influencing the money supply.
- Open market operations The central bank can buy or sell government securities to inject or drain money from the economy.
Targets
- This framework sets a specific inflation target and uses monetary policy tools to achieve it. India currently follows a flexible inflation-targeting framework.
- This framework aims to maintain a stable exchange rate, but India does not currently follow this approach.
Communication
- The central bank clearly communicates its policy decisions and rationale to the public and market participants to ensure transparency and manage expectations.
Benefits of a clear framework
- It helps the public understand how the central bank makes monetary policy decisions.
- It holds the central bank accountable for achieving its objectives.
- It allows businesses and individuals to make informed economic decisions based on expected monetary policy actions.
India's Monetary Policy Framework
- India currently follows a flexible inflation targeting framework, with a target of 4% inflation ± 2%.
- The RBI uses a variety of instruments, including the repo rate and CRR, to achieve this target.
- The RBI regularly communicates its policy decisions and rationale through press releases, speeches, and its website.
6. The Way Forward
The RBI's decision to maintain the repo rate highlights its cautious approach to balancing inflation control with economic growth. Analyzing the potential implications within the context of broader monetary policy objectives can help us understand the impact on various economic actors and sectors.
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For Prelims: Repo rate, RBI, Inflation, Monetary Policy Committee, Cash Reserve Ratio For Mains: 1. Examine the impact of the RBI's repo rate decision on various sectors of the Indian economy, such as agriculture, manufacturing, and small and medium enterprises. How can the government mitigate the negative consequences on vulnerable sections of the population? (250 Words)
2. In a globalized world where economic policies are interconnected, how can India collaborate with other countries to address macroeconomic challenges such as inflation and exchange rate volatility? (250 Words)
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Previous Year Questions 1. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
2. Concerning the Indian economy, consider the following: (UPSC 2015)
Which of the above is/are component(s) of Monetary Policy? (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4
3. An increase in Bank Rate generally indicates: (UPSC 2013) (a) Market rate of interest is likely to fall.
(b) Central bank is no longer making loans to commercial banks.
(c) Central bank is following an easy money policy.
(d) Central bank is following a tight money policy.
4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 1. It decides the RBI's benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.
Select the correct answer using the code given below: A. 1 only B. 1 and 2 only C. 3 only D. 2 and 3 only
5. If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? (UPSC 2020) (1) Cut and optimize the Statutory Liquidity Ratio
(2) Increase the Marginal Standing Facility Rate
(3) Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below: A. 1 and 2 only B. 2 only C. 1 and 3 only D. 1, 2 and 3
6. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)
A. Controlling the inflation in India is the responsibility of the Government of India only
B. The Reserve Bank of India has no role in controlling the inflation
C. Decreased money circulation helps in controlling the inflation
D. Increased money circulation helps in controlling the inflation
7. Consider the following statements: (UPSC 2020)
1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct?
A. 1 and 2 only B. 2 only C. 3 only D. 1, 2 and 3
Answers: 1-C, -C, 3-D, 4-A, 5-B, 6-C, 7-A
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Source: The Indian Express
WILDFIRES
1. Context
Multiple states in the U.S. were recently in the grip of tornadoes, wildfires, and dust storms. The fires that scorched parts of Texas and Oklahoma burnt through almost 300 homes, reliving the horrors a similar blaze inflicted on Los Angeles in January this year
2. About Wildfires
- Wildfires, also referred to as bushfires, vegetation fires, or forest fires, epitomize the uncontrolled and non-prescribed combustion of plants within natural environments like forests, grasslands, brushlands, or tundras.
- These fires, ignited by various factors, consume natural fuels and propagate based on prevailing environmental conditions such as wind patterns and terrain features.
- Three pivotal elements must converge for a wildfire to thrive: Fuel, Oxygen, and a Heat source.
2.1. Origins and Causes
Natural Causes: Many wildfires stem from natural triggers, with lightning strikes being a prominent initiator. These lightning-induced fires often ignite trees, yet the subsequent rainfall tends to douse the flames, minimizing damage. Elevated atmospheric temperatures and aridity, characterized by low humidity levels, create propitious conditions for fire ignition and spread.
Man-made Causes: Human activities constitute a significant driver of forest fires. Fires ignite when a fire source be it an exposed flame, a discarded cigarette or bidi, an electric spark, or any ignition source interacts with inflammable materials. Such anthropogenic incidents can swiftly transform into destructive conflagrations.
2.2. Classification
Surface Fires: wildfires can primarily manifest as surface fires, advancing across the forest floor's surface layer, encompassing senescent leaves, twigs, and parched grass. The propagating flames embrace the surface litter, leading to a rapid spread.
Underground Fires: Underground fires, are characterized by low intensity, smoulder within the organic matter beneath the surface and the forest floor's litter. Often concealed, these fires extend several meters below the ground, challenging detection and control efforts. These covert fires, lingering for months, inflict substantial harm to vegetative cover.
Ground Fires: Ground fires, infiltrating the sub-surface organic fuels, transcend boundaries, involving duff layers beneath forest stands, Arctic tundra, taiga, and organic soils of swamps or bogs. The distinction between underground and ground fires isn't clear-cut, as smouldering underground fires can metamorphose into ground fires. These fires ravage the herbaceous growth on the forest floor alongside decaying organic layers, potentially annihilating vegetation. Ground fires simmer below the surface via smouldering combustion, frequently sparked by surface fires.
Image Source: CNN
2.3. Impact
Wildfires can have a significant impact on ecosystems. They can destroy vegetation, kill wildlife, and pollute the air and water. However, they can also have some positive effects, such as clearing out deadwood and creating new growth opportunities.
2.3.1. Negative impacts of wildfires
Loss of vegetation: Wildfires can destroy large areas of vegetation, which can have a cascading effect on the entire ecosystem. For example, the loss of trees can lead to erosion, which can pollute waterways and damage downstream ecosystems.
Death of wildlife: Wildfires can kill animals directly through burns or smoke inhalation. They can also indirectly kill animals by destroying their food sources or habitat.
Air and water pollution: wildfires can release harmful pollutants into the air and water. These pollutants can cause respiratory problems in humans and animals, and they can also contaminate drinking water.
2.3.2. Positive Impacts of Wildfires
Clearing out deadwood: wildfires can clear out deadwood, which can help to prevent the spread of larger fires in the future. Deadwood is also a fire hazard, as it can dry out and catch fire easily.
Creating new growth opportunities: wildfires can create new growth opportunities for plants and animals. For example, some plants need fire to germinate their seeds. Fire can also remove competition from older plants, allowing younger plants to grow.
Reducing the risk of pests and diseases: wildfires can help to reduce the risk of pests and diseases by killing off infested trees. This can help to protect healthy trees and prevent the spread of pests and diseases to other areas.
3. The Historical Significance of Maui and Lahaina
- Maui is a popular tourist destination known for its beautiful beaches and lush rainforests.
- Lahaina was the capital of the Hawaiian kingdom from 1820 to 1845.
- The town is home to many historical landmarks, including the Waiola Church, which was built in 1832.
- The fires have caused extensive damage to Lahaina, including the destruction of many historic buildings.
4. Reasons for the Fires in Hawaii Been So Devastating
The fires have been so devastating due to a combination of factors, including:
Dry weather: The island of Maui has been in a drought for several months, which has created ideal conditions for wildfires to spread.
Strong winds: Hurricane Dora passed south of the islands this week, which created strong winds that fanned the flames.
Invasive plant species: Invasive plant species, such as fireweed, have spread rapidly across the island, making it easier for fires to start and spread.
Climate change: Climate change is making the Earth's climate warmer and drier, which is creating more favourable conditions for wildfires to occur.
5. Measures that can be taken to prevent wildfires
Create firebreaks: Firebreaks are strips of land that have been cleared of vegetation and are used to stop the spread of fire. They can be created by clearing trees, shrubs, and other vegetation, or by plowing the land.
Educate the public about fire safety: People should be educated about fire safety in forests, including how to prevent fires and how to stay safe if a fire occurs.
Use fire permits: In many areas, it is required to obtain a fire permit before lighting a fire in the forest. This helps to ensure that fires are only lit in safe areas and that they are properly extinguished.
Monitor weather conditions: Forest officials should monitor weather conditions and issue warnings when there is a high risk of fire. This allows people to take steps to protect themselves and their property.
Maintain fire equipment: Fire equipment, such as fire trucks and water hoses, should be maintained in working order so that they can be used to fight fires quickly and effectively.
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For Prelims: Wildfires, Hawaii, USA, climate change, soil degradation, vegetation,
For Mains:
1. Explain the causes and factors that contribute to the severity of wildfires. Discuss the positive and negative impacts of wildfires on ecosystems. (250 Words)
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Previous Year Questions
1. Comprehension (SSC CHSL 2020)
Direction: In the following passage some words have been deleted. Fill in the blanks with the help of the alternatives given. Select the most appropriate option for each blank. Forest fire always (1) ______ by one of two reasons-naturally caused or human-caused. Natural fire is generally (2) ______ by lightning, with a very small percentage (3) ______ by spontaneous combustion of dry fuel such as sawdust and leaves. (4) ______, human-caused fire can happen (5) ______ any number of reasons.
Select the most appropriate option for blank No. 1.
A. takes up B. happens C. causes D. creates
Answer: B
2. Match List - I with List - II and select the correct answer from the codes given below the lists: (UPSC CAPF 2015)
List - I (Volcano type) List – II (Location)
A. Shield Volcano 1. Indonesia
B. Composite Volcano 2. India
C. Caldera 3. Hawaii
D. Flood Basalt Provinces 4. Phillippines
1. A-2, B-4, C-1, D-3
2. A-2, B-1, C-4, D-3
3. A-3, B-1, C-4, D-2
4. A-3, B-4, C-1, D-2
Answer: 4
3. Recently, the USA decided to support India's membership in multilateral export control regimes called the "Australia Group" and the "Wassenaar Arrangement". What is the difference between them? (UPSC 2011)
1. The Australia Group is an informal arrangement which aims to allow exporting countries to minimize the risk of assisting chemical and biological weapons proliferation, whereas the Wassenaar Arrangement is a formal group under the OECD holding identical objectives.
2. The Australia Group comprises predominantly of Asian, African and North American countries, whereas the member countries of Wassenaar Arrangement are predominantly from the European Union and American continents.
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: D
4. In India, the problem of soil erosion is associated with which of the following? (UPSC 2014)
1. Terrace cultivation
2. Deforestation
3. Tropical climate
Select the correct answer using the code given below.
A. 1 and 2 only B. 2 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
5. The vegetation of savannah consists of grassland with scattered small trees, but extensive areas have no trees. The forest development in such areas is generally kept in check by one or more or a combination of some conditions. Which of the following are such conditions? (UPSC 2021)
1. Burrowing animals and termites
2. Fire
3. Grazing herbivores
4. Seasonal rainfall
5. Soil properties
Select the correct answer using the code given below.
A. 1 and 2 B. 4 and 5 C, 2, 3 and 4 D. 1, 3 and 5
Answer: C
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Source: The Indian Express
TARIFFS
1. Context
The White House Tuesday announced that a sweeping 104 per cent tariff imports from China has gone into effect, deepening the economic standoff between Washington and Beijing
2. What is a Tariff?
- Most countries are limited by their natural resources and ability to produce certain goods and services.
- They trade with other countries to get what their population needs and demands. However, trade isn't always conducted in an amenable manner between trading partners.
- Policies, geopolitics, competition, and many other factors can make trading partners unhappy. One of the ways governments deal with trading partners they disagree with is through tariffs.
- A tariff is a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages.
3. Key Take Aways
- Governments impose tariffs to raise revenue, protect domestic industries, or exert political leverage over another country.
- Tariffs often result in unwanted side effects, such as higher consumer prices.
- Tariffs have a long and contentious history, and the debate over whether they represent good or bad policy still rages.
4. History of Tariffs
4.1 Pre Modern Europe
- In pre-modern Europe, a nation's wealth was believed to consist of fixed, tangible assets, such as gold, silver, land, and other physical resources.
- Trade was seen as a Zero-sum game that resulted in either a clear net loss or a clear net gain of wealth.
- If a country imported more than it exported, a resource, mainly gold, would flow abroad, thereby draining its wealth. Cross-border trade was viewed with suspicion, and countries preferred to acquire colonies with which they could establish exclusive trading relationships rather than trading with each other.
- This system, known as mercantilism, relied heavily on tariffs and even outright bans on trade. The colonizing country, which saw itself as competing with other colonizers, would import raw materials from its colonies, which were generally barred from selling their raw materials elsewhere.
- The colonizing country would convert the materials into manufactured wares, which it would sell back to the colonies. High tariffs and other barriers were implemented to ensure that colonies only purchased manufactured goods from their home countries.
4.2 Late 19th and early 20th Centuries
- Relatively free trade enjoyed a heyday in the late 19th and early 20th centuries when the idea took hold that international commerce had made large-scale wars between nations so expensive and counterproductive that they were obsolete.
- World War I proved that idea wrong, and nationalist approaches to trade, including high tariffs, dominated until the end of World War II.
- From that point on, free trade enjoyed a 50-year resurgence, culminating in the creation in 1995 of the World Trade Organisation (WTO), which acts as an international forum for settling disputes and laying down ground rules.
- Free trade agreements, such as the North American Free Trade Agreement (NAFTA) now known as the United States-Mexico-Canada Agreement (USMCA) and the European Union (EU), also proliferated.
4.3 In the 21st Century
- Skepticism of this model sometimes labeled neoliberalism by critics who tie it to 19th-century liberal arguments in favor of free trade grew, however, and Britain in 2016 voted to leave the European Union.
- That same year Donald Trump won the U.S. presidential election on a platform that included a call for tariffs on Chinese and Mexican imports, which he implemented when he took office.
- Critics of tariff-free multilateral trade deals, who come from both ends of the political spectrum, argue that they erode national sovereignty and encourage a race to the bottom regarding wages, worker protections, and product quality and standards.
- Meanwhile, the defenders of such deals counter that tariffs lead to trade wars, hurt consumers, and hamper innovation.
5. Understanding Tariffs
- Tariffs are used to restrict imports. Simply put, they increase the price of goods and services purchased from another country, making them less attractive to domestic consumers.
- A key point to understand is that a tariff affects the exporting country because consumers in the country that imposed the tariff might shy away from imports due to the price increase. However, if the consumer still chooses the imported product, then the tariff has essentially raised the cost to the consumer in another country.
There are two types of tariffs:
- A specific tariff is levied as a fixed fee based on the type of item, such as a $500 tariff on a car.
- An ad-valorem tariff is levied based on the item's value, such as 5% of an import's value.
6. Why Government Imposes Tariffs?
Governments may impose tariffs for several reasons
6.1 Raise Revenues
Tariffs can be used to raise revenues for governments. This kind of tariff is called a revenue tariff and is not designed to restrict imports. For instance, in 2018 and 2019, President Donald Trump and his administration imposed tariffs on many items to rebalance the trade deficit. In the fiscal year 2019, customs duties received were $18 billion. In FY 2020, duties received were $21 billion.
6.2 Protect Domestic Industries
Governments can use tariffs to benefit particular industries, often doing so to protect companies and jobs. For example, in May 2022, President Joe Biden proposed a 25% ad valorem tariff on steel articles from all countries except Canada, Mexico, and the United Kingdom (the U.K. has a quota of an aggregate of 500,000 metric tons it can trade with the U.S.). This proclamation reopens the trade of specific items with the U.K. while taking measures to protect domestic U.S. steel manufacturing and production jobs.
6.3 Protect Domestic Consumers
By making foreign-produced goods more expensive, tariffs can make domestically-produced alternatives seem more attractive. Some products made in countries with fewer regulations can harm consumers, such as a product coated in lead-based paint. Tariffs can make these products so expensive that consumers won't buy them.
6.4 Protect National Interests
Tariffs can also be used as an extension of foreign policy as their imposition on a trading partner's main exports may be used to exert economic leverage. For example, when Russia invaded Ukraine, much of the world protested by boycotting Russian goods or imposing sanctions. In April 2022, President Joe Biden suspended normal trade with Russia. In June, he raised the tariff on Russian imports not prohibited by the April suspension to 35%.
7. Advantages of Tariffs
- Produce revenues: As discussed, tariffs provide a government a chance to bring in more money. This can relieve some of the tax burdens felt by a county's citizens and help the government to reduce deficits.
- Open negotiations: Tariffs can be used by countries to open negotiations for trade or other issues. Each side can use tariffs to help them create economic policies and talk with trade partners.
- Support a nation's goals: One of the most popular uses for tariffs is to use them to ensure domestic products receive preference within a country to support businesses and the economy.
- Make a market predictable: Tariffs can help stabilize a market and make prices predictable.
8. Disadvantages of Tariffs
- Create issues between governments: Many nations use tariffs to punish or discourage actions they disapprove of. Unfortunately, doing this can create tensions between two countries and lead to more problems.
- Initiate trade wars: A typical response for a country with tariffs imposed on it is to respond similarly, creating a trade war in which neither country benefits from the other.
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For Prelims: Tariffs, Zero-sum game, Cross-border trade, World Trade Organisation (WTO), North American Free Trade Agreement (NAFTA), United States-Mexico-Canada Agreement (USMCA), and the European Union (EU). For Mains: 1. What is a Tariff and explain why government imposes tariffs. Discuss the advantages and disadvantages associated with Tariffs. (250 Words). |
Source: Investopedia
DELIMITATION EXERCISE
1. Context
In a nation plagued by many controversies, many of them avoidable, a serious problem that threatens to create a rift between the Northern and Southern states is the delimitation issue.
2. About delimitation
- Delimitation refers to the process of determining the number of seats and defining the boundaries of electoral constituencies for the Lok Sabha and Legislative Assemblies.
- It also involves allocating seats specifically reserved for Scheduled Castes (SC) and Scheduled Tribes (ST) within these legislative bodies.
- As outlined in Articles 82 and 170 of the Constitution, the allocation of seats in the Lok Sabha and State Legislative Assemblies, as well as the demarcation of constituencies, is subject to adjustment following each Census.
- This delimitation process is overseen by a Delimitation Commission established by an act of Parliament.
- Such redistricting exercises have historically occurred following the 1951, 1961, and 1971 Censuses.
3. Constitutional Requirements and Current Status
- The constitutional requirement for democratic governance stipulates that the government should be elected by the people, with the principle of 'one citizen-one vote-one value' being paramount.
- Historically, the number of seats in the Lok Sabha was determined based on population figures from the 1951, 1961, and 1971 Censuses, resulting in an average population per seat of 7.3 lahks, 8.4 lahks, and 10.1 lahks respectively.
- However, since the 1971 Census, the number of seats has been frozen to incentivize population control measures, ensuring that states with higher population growth do not gain disproportionately higher representation.
- This freeze was initially implemented through the 42nd Amendment Act until the year 2000 and extended by the 84th Amendment Act until 2026.
- Consequently, seat allocation is based on the population figures from the 1971 Census, with adjustments slated to occur following the first Census after 2026.
- Ordinarily, the delimitation process, including determining the number of seats, defining territorial constituency boundaries, and allocating reserved seats for Scheduled Castes (SC) and Scheduled Tribes (ST), would align with the Census of 2031, being the first Census post-2026.
- However, with the postponement of the 2021 Census and the approach of the year 2026, discussions are underway regarding the impending delimitation exercise.
5. International Practices in Seat Allocation
- In the United States, the number of seats in the House of Representatives, akin to India's Lok Sabha, has remained fixed at 435 since 1913. Despite the population increase from 9.4 crore in 1911 to an estimated 33.4 crore in 2023, the method of equal proportion is utilized to redistribute seats among states following each Census. This method aims to maintain fairness, ensuring that no significant gain or loss occurs for any state. For instance, after the 2020 Census, 37 states saw no change in their number of seats, while Texas gained two seats, five states gained one seat each, and seven states lost one seat each.
- In the European Union Parliament, comprised of 720 members, seat allocation among its 27 member countries follows the principle of degressive proportionality. This principle entails that the ratio of population to the number of seats increases as population size increases. For example, Denmark, with a population of around 60 lahks, has 15 seats (with an average population of 4 lahks per member), while Germany, with a population of 8.3 crores, has 96 seats (with an average population of 8.6 lahks per member).
6. Proposed Ideal Solution
- The dilemma between democratic and federal principles in delimitation can be effectively addressed by striking a balance that acknowledges the significance of both. A harmonious solution can be achieved by giving equal weight to democratic representation and federal structure.
- The number of Members of Parliament (MPs) in the Lok Sabha could be capped at the current level of 543 seats. This ensures continuity in representation from various states, thereby upholding the federal principle. MPs primarily legislate on matters listed in the Union List, such as Defense, External Affairs, Railways, Telecommunication, and Taxation, and hold the Central government accountable.
- To meet democratic representational requirements, the number of Members of the Legislative Assembly (MLAs) in each state can be increased in alignment with the current population. This adjustment can be made without altering the number of seats in the Rajya Sabha, thereby addressing the need for fair representation at the state level.
- Crucially, to strengthen democracy at the grassroots level, empowering local bodies like panchayats and municipalities is imperative. These entities engage directly with citizens on a daily basis and play a vital role in governance. Significant devolution of powers and finances to these bodies is essential to enhance democracy at the grassroots level, ensuring effective citizen participation in decision-making processes.
7. The Way Forward
Finding a balanced approach to delimitation that considers democratic representation, federal stability, and local governance empowerment is crucial for India's future. This proposed solution offers a starting point for discussion and debate to ensure a fair and effective delimitation process that strengthens the nation's democracy.
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For Prelims: Delimitation, Census, Covid-19 Pandemic, Article 82, Article 170 For Mains: 1. Critically analyze the potential conflict between the principle of "one citizen-one vote" and the freezing of Lok Sabha seats based on the 1971 Census in the context of delimitation. Discuss how this can impact federalism and representation in India. (250 Words)
2. How can the delimitation exercise be conducted in a manner that fosters national integration and strengthens the federal structure of India? (250 Words)
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Previous Year Questions
1. With reference to the Delimitation Commission, consider the following statements: (UPSC 2012)
1. The orders of the Delimitation Commission cannot be challenged in a Court of Law.
2. When the orders of the Delimitation Commission are laid before the Lok Sabha or State Legislative Assembly, they cannot effect any modifications in the orders.
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
2. Barak Valley in Assam is famous for which among the following? (MSTET 2019)
A. Bamboo Industry
B. Petroleum Production
C. Cottage Industries
D. Tea Cultivation
3. Which one of the following is an important crop of the Barak Valley? (Karnataka Civil Police Constable 2019)
A. Sugarcane B. Jute C. Tea D. Cotton
4. Consider the following statements: (UPSC 2021)
1. In India, there is no law restricting the candidates from contesting in one Lok Sabha election from three constituencies.
2. In 1991 Lok Sabha Election, Shri Devi Lal contested from three Lok Sabha constituencies. 3. As per the- existing rules, if a candidate contests in one Lok Sabha election from many constituencies, his/her party should bear the cost of bye-elections to the constituencies vacated by him/her in the event of him/her winning in all the constituencies.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. 1 and 3 D. 2 and 3
5. The provisions in Fifth Schedule and Sixth Schedule in the Constitution of India are made in order to (UPSC 2015)
A. protect the interests of the Scheduled Tribes
B. determine the boundaries between States
C. determine the powers, authority and responsibilities of Panchayats
D. protect the interests of all the border States
Answers: 1-C, 2-D, 3-B, 4-B, 5-A
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Source: The Hindu
NATIONAL CLEAN AIR PROGRAM (NCAP)
1. Context
Delhi recorded the highest PM 10 (particulate matter smaller than 10 micrometers) levels among the 130 cities covered under the Centre’s flagship National Clean Air Programme in the financial year 2024-25, a new analysis by non-profit Centre for Research on Energy and Clean Air (CREA) revealed. The national capital was followed by Byrnihat in Assam and Patna in Bihar.
2. Abour National Clean Air Programme (NCAP)
The National Clean Air Programme (NCAP) was initiated by the Indian government to address the alarming levels of atmospheric pollution, particularly the concentration of Particulate Matter (PM). Under NCAP, cities in India exceeding annual PM levels are required to develop and execute Clean Air Action Plans (CAAPs) annually. To support this initiative, the Ministry of Environment, Forest, and Climate Change has allocated ₹10,422.73 crore.
Challenges in NCAP Implementation
Despite the proactive submission of CAAPs by most cities, the implementation of NCAP has faced inconsistencies. According to the Ministry, only 60% of the allocated funds have been utilized on average, with 27% of cities spending less than 30% of their designated budgets. Notably, cities like Visakhapatnam and Bengaluru have spent minimal percentages of their NCAP funds, hindering progress.
Barriers to Implementation
- Delays in implementation primarily stem from bureaucratic hurdles and a lack of standard operating procedures.
- Approval delays from competent authorities, such as technical specifications for tendering processes and procurement of necessary equipment like mechanical sweepers and electric buses, have been significant impediments.
- Additionally, the absence of well-defined timelines and time-consuming tasks further exacerbate delays.
- Overcoming these challenges requires a systematic approach integrating Emissions Inventory (EI), Air Quality (AQ) modelling, and Source Apportionment (SA).
- Recent findings questioning the efficacy of outdoor smog towers have also fueled doubts among decision-makers, necessitating a comprehensive reevaluation of proposed mitigation measures.
3. Role of Scientific Tools in Pollution Management
Scientific tools play a crucial role in addressing air pollution challenges, particularly in identifying and understanding its origins.
- EI studies provide valuable insights into local pollution sources and their contributions, enabling experts to forecast future emissions and shape targeted pollution control strategies.
- Despite their usefulness, EI studies have limitations, especially in assessing the impact of transboundary pollution sources, such as stubble burning outside Delhi, on local air quality.
- SA studies offer detailed analyses of contributions from various pollution sources, including distant ones.
- However, they lack predictive capabilities and require substantial resources for chemical analysis.
- Additionally, SA studies struggle to differentiate between pollution origins with similar chemical signatures, such as emissions from diesel trucks nearby versus those further away.
- AQ modelling bridges gaps left by EI and SA studies by informing our understanding of pollution dispersion, including from distant sources.
- By simulating the movement of pollutants in the atmosphere, AQ modelling enhances our ability to assess and mitigate air pollution's impacts.
4. Utilization of Scientific Data in Air Pollution Management
- Cities ideally utilize Emissions Inventory (EI) and Source Apportionment (SA) data to identify air pollutants and devise targeted mitigation measures for each polluting activity.
- However, according to the Portal for Regulation of Air Pollution in Non-Attainment Cities, only 37% of cities have completed EI and SA studies, leaving 63% without a clear understanding of their air pollution sources.
- This lack of data raises concerns about the effectiveness of Clean Air Action Plans (CAAPs), as cities may not accurately gauge the emission reduction potential of proposed measures.
- To address this, cities must establish proper yearly targets based on their potential and infrastructure capabilities.
Challenges and Considerations
- The reliance of the National Clean Air Programme (NCAP) on concentration data, which measures population exposure to pollution, adds complexity.
- Pollution from high-emitting industries and sources beyond city limits, transported into urban areas by wind, complicates urban air quality management.
- Additionally, many existing control measures primarily target primary PM emissions, overlooking their secondary precursors.
- There's a need for a shift towards comprehensive strategies addressing both primary and secondary pollutants.
- Furthermore, while NCAP aims to establish infrastructure for air quality forecasting, only a few cities like Delhi, Pune, Mumbai, and Ahmedabad have implemented decision-support systems.
- Implementing such systems across cities is crucial for timely and effective pollution management.
5. Key Factors for NCAP Success
The success of the National Clean Air Programme (NCAP) relies on several critical elements beyond just data and models.
- Efficient implementation on the ground is paramount. To achieve this, implementation agencies must streamline bureaucratic processes by adopting shared, standardized technical evaluations. This will expedite the execution of NCAP initiatives and ensure timely action on pollution reduction measures.
- Given that NCAP funding is tied to cities' performance in reducing annual average PM concentrations, proactive budgeting and meticulous time management are essential. Initial plans should encompass thorough assessments of technical feasibility, budget requirements, and timeframes to facilitate successful execution.
- NCAP's vision for cleaner air in India necessitates a multifaceted approach. Success requires integrating rigorous scientific studies, strategic allocation of funds, and prompt, efficient implementation of mitigation measures.
6. The Way Forward
The successful implementation of the NCAP requires concerted efforts to address challenges, utilize scientific data effectively, and adopt a comprehensive approach towards pollution management. By addressing these key factors, India can make significant progress towards achieving cleaner air for its citizens.
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For Prelims: National Clean Air Programme, Air Pollution, Particulate Matter, Clean Air Action Plans For Mains:
1. What are the challenges and opportunities presented by the National Clean Air Programme (NCAP) for improving air quality in Indian cities? Discuss the measures required to overcome implementation hurdles and ensure the effective management of air pollution. (250 Words)
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Previous Year Questions
1. In the cities of our country, which among the following atmospheric gases are normally considered in calculating the value of Air Quality Index? (UPSC 2016)
Select the correct answer using the code given below: A. 1, 2 and 3 only B. 2, 3 and 4 only C. 1, 4 and 5 only D. 1, 2, 3, 4 and 5 2. Which of the following are the reasons/factors for exposure to benzene pollution? (UPSC 2020)
Select the correct answer using the code given below: A. 1, 2 and 3 only B. 2 and 4 only C. 1, 3 and 4 only D. 1, 2, 3, 4 and 5
3. What is the ‘Greenhouse Gas Protocol’? (UPSC 2016) (a) It is an international accounting tool for government and business leaders to understand, quantify and manage greenhouse gas emissions
(b) It is an initiative of the United Nations to offer financial incentives to developing countries to reduce greenhouse gas emissions and to adopt eco-friendly technologies.
(c) It is an inter-governmental agreement ratified by all the member countries of the United Nations to reduce greenhouse gas emissions to specified levels by the year 2022
(d) It is one of the multilateral REDD+ initiatives hosted by the World Bank
4. Photochemical smog is a resultant of the reaction among (UPSC 2013) (a) NO2, O3 and peroxyacetyl nitrate in the presence of sunlight
(b) CO, O2 and peroxyacetyl nitrate in the presence of sunlight
(c) CO, CO2 and NO2 at low temperature
(d) high concentration of NO2 O3 and CO in the evening
5. Acid rain is caused by the pollution of the environment (UPSC 2013, 2022) (a) Carbon Dioxide and Nitrogen
(b) Carbon Monoxide and Carbon Dioxide
(c) Ozone and Carbon Dioxide
(d) Nitrous Oxide and Sulphur Dioxide
6. Biological Oxygen Demand (BOD) is a standard criterion for (UPSC 2017) (a) Measuring oxygen level in blood
(b) Computing oxygen levels in forest ecosystems
(c) Pollution assay in aquatic ecosystem
(d) Assessing oxygen levels in high-altitude regions
7. The Ministry of Environment, Forest and Climate Change recently published the draft Environment Impact Assessment (EIA) Notification, in 2020. Which of the following statements is correct about EIA? (Punjab Civil Service 2020)
1. It predicts the effect of a proposed industrial/infrastructural project on the environment.
2. It prevents the proposed activity/project from being approved without proper oversight or taking adverse consequences into account.
3. It compares various alternatives for a project and seeks to identify the one which represents the best combination of economic and environmental costs and benefits.
4. As per the new notification, Coal and non-Coal mineral prospecting and solar photovoltaic projects do not need prior environmental clearance.
Select the correct answer using the code given below:
A. Only 1 and 2
B. Only 2, 3 and 4
C. Only 1, 2 and 3
D. Only 1, 2 and 4
8. Headquarters of the World Meteorological Organization is located in (NDA 2017)
A. Washington B. Geneva C. Moscow D. London
9. With reference to the 'Global Climate Change Alliance', which of the following statements is/are correct? (UPSC 2017)
1. It is an initiative of the European Union.
2. It provides technical and financial support to targeted developing countries to integrate climate change into their development policies and budgets.
3. It is coordinated by World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD)
Select the correct answer using the code given below:
A. 1 and 2 only B. 3 only C. 2 and 3 only D. 1, 2 and 3
10. The IPCC is the United Nations body for assessing the science related to climate change. IPCC stands for: (RRB NTPC CBT 2 2022)
A. Intergovernmental Provision on Climate Change
B. International Panel on Climate Change
C. International Provision on Climate Change
D. Intergovernmental Panel on Climate Change
11. Comprehension (SSC CHSL 2020)
Direction: In the following passage some words have been deleted. Fill in the blanks with the help of the alternatives given. Select the most appropriate option for each blank.
Forest fire always (1) ______ by one of two reasons-naturally caused or human-caused. Natural fire is generally (2) ______ by lightning, with a very small percentage (3) ______ by spontaneous combustion of dry fuel such as sawdust and leaves. (4) ______, human-caused fire can happen (5) ______ any number of reasons.
Select the most appropriate option for blank No. 1.
A. takes up B. happens C. causes D. creates
12. Which of the following statements best describes the term 'Social Cost of Carbon'? It is a measure, in monetary value, of the (UPSC 2020)
A. long-term damage done by a tonne of CO2 emission in a given year.
B. requirement of fossil fuels for a country to provide goods and services to its citizens, based on the burning of those fuels.
C. efforts put in by a climate refugee to adapt to live in a new place.
D. contribution of an individual person to the carbon footprint on the planet Earth.
13. The increasing amount of carbon dioxide in the air is slowly raising the temperature of the atmosphere, because it absorbs (UPSC 2012)
A. the water vapour of the air and retains its heat
B. the ultraviolet part of the solar radiation
C. all the solar radiations
D. the infrared part of the solar radiation
14. As per the World Health Organisation (WHO) recommendation of a balanced diet, to avoid unhealthy weight gain, total fat should NOT exceed _______ of total energy intake. (UPSSSC Mandi Inspector 2019)
A. 20% B. 30% C. 10% D. 40%
15. What is the role of ultraviolet (UV) radiation in the water purification systems? (UPSC 2012)
1. It inactivates/kills the harmful microorganisms in water.
2. It removes all the undesirable odours from the water.
3. It quickens the sedimentation of solid particles, removes turbidity and improves the clarity of water.
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
16. Which of the following ultraviolet rays is more dangerous? (UPTET 2017)
A. UV-A B. UV-B C. UV-C D. None of the above
17. Consider the following statements: (UPSC 2019)
1. Agricultural soils release nitrogen oxides into environment.
2. Cattle release ammonia into environment.
3. Poultry industry releases reactive nitrogen compounds into environment.
Which of the statements given above is/are correct?
A. 1 and 3 only B. 2 and 3 only C. 2 only D. 1, 2 and 3
18. Which of the following is a VOC? (MP Vyapam 2022)
A. Toulene B. Water C. Carbon dioxide D. Carbon monoxide
19. Volatile Organic Compounds (VOCs) are of great concern because (UGC NET Environmental Science 2020)
A. Once such compounds are in the vapour state, they are difficult to control in the environment.
B. Most of them are ozone-depleting substances
C. They contribute to a general increase in reactive hydrocarbons in the atmosphere.
D. They are less soluble in water.
Answers: 1-B, 2-A, 3-A, 4-A, 5-D, 6-C, 7-D, 8-B, 9-A, 10-D, 11-B, 12-A, 13-D, 14-B, 15-A, 16-C, 17-D, 18-A, 19-C
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Source: The Hindu
MICRO SMALL MEDIUM ENTERPRISES (MSME)
1. Context
The Union government’s decision to revise the classification criteria for micro, small, and medium enterprises (MSMEs), effective April 1, has created unease among some representative bodies, who argue the revision will have an “adverse impact” on micro and small firms.
2. Definition of 'MSME'
Micro, Small, and Medium Enterprises (MSMEs) are businesses that are characterized by their relatively small size in terms of employees, assets, and revenue. These enterprises play a crucial role in economies around the world, contributing to employment generation, economic growth, and innovation. The definitions of MSMEs can vary from country to country, but there are general guidelines provided by international organizations like the World Bank and the United Nations.
The definition of MSME varies from country to country. In India, an MSME is defined as a business with:
- Micro enterprise: Up to 10 employees and an investment of up to INR 1 crore (approximately USD 130,000)
- Small enterprise: Up to 50 employees and an investment of up to INR 10 crore (approximately USD 1.3 million)
- Medium enterprise: Up to 200 employees and an investment of up to INR 50 crore (approximately USD 6.5 million)
3. Importance of MSME's
The importance of MSMEs in an economy includes:
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Employment Generation: MSMEs are significant contributors to employment, especially in economies with limited opportunities for large-scale industrial employment.
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Local Economic Development: MSMEs often operate at a local level, contributing to the development of local communities and economies.
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Innovation and Entrepreneurship: Many innovative ideas and entrepreneurial ventures start as MSMEs. They have the flexibility to adapt quickly to changing market demands and experiment with new business models.
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Diversity and Resilience: A diverse ecosystem of MSMEs can contribute to a more resilient economy by reducing dependence on a few large corporations.
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Contributions to GDP: The combined contributions of MSMEs to a country's Gross Domestic Product (GDP) can be significant, even if individual businesses are relatively small.
4. New Criteria for MSME's
The new criteria for the classification of micro, small and medium enterprises (MSMEs) in India was notified by the Ministry of Micro, Small and Medium Enterprises (MSME) on June 1, 2020. The new criteria are based on the investment in plant and machinery or equipment and the annual turnover of the enterprise.
The following are the new criteria for the classification of MSMEs:
- Micro enterprise: An enterprise with:
- Investment in plant and machinery or equipment not more than Rs.1 crore (approximately USD 130,000)
- Annual turnover not more than Rs. 5 crore (approximately USD 650,000)
- Small enterprise: An enterprise with:
- Investment in plant and machinery or equipment not more than Rs.10 crore (approximately USD 1.3 million)
- Annual turnover not more than Rs. 50 crore (approximately USD 6.5 million)
- Medium enterprise: An enterprise with:
- Investment in plant and machinery or equipment not more than Rs.50 crore (approximately USD 6.5 million)
- Annual turnover not more than Rs. 250 crore (approximately USD 3.25 million)
5. Challenges faced by MSME's
Micro, small, and medium enterprises (MSMEs) play a vital role in the Indian economy, accounting for over 90% of all enterprises and employing over 40% of the workforce. However, MSMEs face a number of challenges, including:
- Access to finance: MSMEs often find it difficult to obtain loans from banks and other financial institutions due to their lack of collateral and track record. This can make it difficult for them to expand their businesses or invest in new technologies.
- Lack of skills: MSMEs often lack the skills and knowledge needed to compete in the global market. This can make it difficult for them to develop new products and services, or to adopt new technologies.
- Competition from large businesses: MSMEs often face competition from large businesses, which have more resources and economies of scale. This can make it difficult for MSMEs to compete on price or quality.
- Bureaucracy: MSMEs often face a number of bureaucratic hurdles, such as obtaining licenses and permits. This can be time-consuming and costly, and can discourage entrepreneurs from starting or expanding their businesses.
- Infrastructure constraints: MSMEs often face infrastructure constraints, such as poor roads and electricity supply. This can make it difficult for them to transport their goods and services, or to operate their businesses efficiently.
- Unstable government policies: MSMEs are often affected by unstable government policies, such as changes in tax rates or import duties. This can make it difficult for them to plan for the future and make investment decisions.
6. Government Schmes for MSME's
Here are some of the prominent schemes and programs for MSMEs by the Union Government of India:
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Micro Units Development and Refinance Agency (MUDRA) Yojana:
- MUDRA Yojana aims to provide financial support to small and micro enterprises by offering loans through various financial institutions. It consists of three categories: Shishu, Kishor, and Tarun, based on the loan amount.
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Pradhan Mantri Mudra Yojana (PMMY):
- PMMY is a scheme to provide financial assistance for the establishment, expansion, and modernization of MSMEs. It offers loans without collateral security up to a certain limit.
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Credit Linked Capital Subsidy Scheme (CLCSS):
- CLCSS provides capital subsidy to MSMEs for technology upgradation, modernization, and replacement of their plant and machinery to improve competitiveness.
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Zero Defect Zero Effect (ZED) Certification Scheme:
- ZED certification encourages MSMEs to adopt best practices and quality standards to enhance product quality while minimizing environmental impact.
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Make in India Initiative:
- The Make in India campaign encourages domestic and foreign companies to manufacture products in India, fostering the growth of the manufacturing sector and MSMEs.
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Stand Up India Scheme:
- This scheme aims to promote entrepreneurship among women and Scheduled Caste/Scheduled Tribe communities by providing loans for starting new enterprises.
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Technology Upgradation Support for MSMEs (TEQUP):
- TEQUP focuses on supporting MSMEs in adopting modern technology and upgrading their production processes to improve quality and competitiveness.
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National Manufacturing Competitiveness Programme (NMCP):
- NMCP includes various components such as Lean Manufacturing Competitiveness Scheme, Design Clinic Scheme, and more, aimed at enhancing the competitiveness of the manufacturing sector, including MSMEs.
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Entrepreneurial and Managerial Development of SMEs (EMD-SME):
- EMD-SME focuses on providing training, capacity-building, and skill development to entrepreneurs and managers of MSMEs.
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Skill India Initiative:
- While not exclusively for MSMEs, the Skill India program aims to provide skill training to individuals, including those in the MSME sector, to improve employability and entrepreneurship.
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Export Promotion Capital Goods (EPCG) Scheme:
- The EPCG scheme allows MSMEs to import capital goods for the purpose of upgrading technology and enhancing export competitiveness with certain duty benefits.
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Udyog Aadhaar Registration:
- The Udyog Aadhaar registration process simplifies the process of registering and obtaining various benefits for MSMEs, such as easier access to credit and government schemes.
7. Way forward
Addressing these challenges often requires a combination of government support, industry initiatives, access to finance, skill development programs, technology adoption, networking opportunities, and tailored solutions that take into account the unique needs of MSMEs.
Previous year Questions1. Consider the following statements with reference to India: (UPSC 2023)
1. According to the 'Micro, Small and Medium Enterprises Development (MSMED) Act, 2006', the 'medium enterprises' are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.
2. All bank loans to the Micro, Small, and Medium Enterprises qualify under the priority sector.
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: B
2. Which of the following can aid in furthering the Government's objective of inclusive growth? (UPSC 2011)
1. Promoting Self-Help Groups
2. Promoting Micro, Small and Medium Enterprises
3. Implementing the Right to Education Act
Select the correct answer using the codes given below:
A. 1 only
B. 1 and 2 only
C. 2 and 3 only
D. 1, 2 and 3
Answer: D
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Source: The Hindu
