Current Affairs Compilations for UPSC IAS Prelims 2022

Mains Oriented Articles

GS Paper 1

• Who should own the world’s lithium?

GS Paper 2

GS Paper 3

• Coordinating in the battlefield
• At the root of India’s manufacturing challenge
• India stands to gain from the trading of carbon credits
• Concentration concerns – Sebi’s proposal will make FPIs more transparent

Prelims Oriented Articles (Factly)

Mains Oriented Articles

GS Paper 1

Who should own the world’s lithium?

News– Significant reserves of lithium have been found in Jammu and Kashmir.

What is the status of India’s lithium industry?

India’s electric-vehicle market was valued at $383.5 million in 2021. It is expected to expand to $152.21 billion in 2030.

India imported 450 million units of lithium batteries valued at $929.26 million in 2019-2020.

The ongoing global transition to low-carbon economies, the rapid expansion of AI, and 5G networks will greatly reshape global and regional geopolitics. The access to and control over rare minerals will play a crucial role in these changes.

Who should own these minerals?

In July 2013, Supreme Court of India ruled that the owner of the land has rights to everything beneath down to the centre of the earth.

The Supreme Court also recalled that the Union government could ban private actors from mining sensitive minerals. It is already the case with uranium under the Atomic Energy Act 1962.

Yet, large areas of land, including forests, hills, mountains, and revenue wasteland are publicly owned.

How do other countries manage lithium reserves?

In Chile, the government has designated lithium as a strategic resource. Its development has been made the exclusive prerogative of the state. The state has issued only 2 licenses to produce lithium in the country.

In April 2023, Chile’s president announced a new “National Lithium Strategy”. The new strategy calls for public-private partnerships for future lithium projects.

It will allow the state to regulate the environmental impact of lithium-mining, distribute the revenue from lithium production fairly among local communities, and promote domestic research into lithium-based green technologies.

Bolivia’s new constitution gave the state the control and direction over the exploration, exploitation, industrialisation, transport, and commercialisation of natural resources.

It has nationalised lithium and adopted a hard line against private and foreign participation.

This is believed to be one of the factors for the country’s failure to produce any lithium at a commercial scale. Bolivia’s current president seeks to change that.

The President wants to join hands with other Latin American countries to design a ‘lithium policy’ that would benefit all their economies.

Mexico’s president has also nationalised lithium in February this year.

In general, the countries in Latin and South America are thinking through ways and means to pursue a multi-pronged strategy.

The actions of these governments are also a response to the mobilisation of Indigenous Peoples in the region who want to hold corporations and governments accountable.

What is the way forward for India?

The appropriate development of the lithium sector will require a very high level of effectiveness on the part of the Indian state. It is necessary to meet its multiple goals of social wellbeing, environmental safety, and national energy security.

Much of India’s mineral wealth is mined from regions with very high levels of poverty, environmental degradation, and lax regulation.

GS Paper 2

Why India and China are stronger as partners

News- The article explains the potential of bilateral relationship between India and China.

What are the growth prospects of the Indian and Chinese economy?

India has become the fifth-largest economy in the world. The UNCTAD ‘World Investment Report 2022’ shows that in 2021, India ranked seventh among the top 20 recipients of foreign direct investment.

India’s digital economy is growing rapidly with more than 82,000 start-ups and 107 unicorn companies.

The Chinese economy is rebounding with the first-quarter GDP growing by 4.5% year-on-year.

Employment and prices remained stable. Many international organisations and investment institutions have revised their forecasts upwards for China’s economic growth this year.

What is the potential of a bilateral relationship between India and China?

China and India are the most populous developing countries and the top two developing economies in the world. The two countries account for more than 35% of the world’s total population and more than 20% of the world’s total economic output.

China and India have a decisive impact on human development. The strong economic growth of the two countries has a vital role to play in the global economic recovery.

China and India have also made important contributions to world poverty alleviation. Over the past more than 40 years, the Chinese government has lifted more than 800 million people out of poverty.

From fiscal year 2006 to 2021, a total of 410 million people in India have been lifted out of poverty.

According to the forecast of the International Monetary Fund, the contribution of China and India to world economic growth this year will be over 50.3 per cent.

What is the way forward for India and China bilateral partnership?

Emerging economies like China and India have become important engines for the recovery of global economic growth.

There is a need to develop a strategic and long-term perspective for bilateral relations. Both countries should pursue a new path of living in harmony, peaceful development.

On Bihar’s prohibition policy: A costly ban

News: Bihar government amended the stern Bihar Prohibition and Excise (Amendment) Act, which banned liquor in Bihar.

The amendment is moved to relax the rules for release of vehicles impounded for transporting liquor.

Vehicle owners were abandoning their vehicles, captured for transporting liquor, rather than paying hefty fines to retrieve them. It resulted in over 50,000 four-wheelers being parked in 800 police stations across Bihar.

The recent amendment allows the release of impounded vehicles upon payment of 10% of their insurance cover, as opposed to the earlier requirement of 50%.

What are the other changes introduced to the Bihar Liquor Law?

Now first-time drinkers will not be imprisoned. They can pay fine of Rs 2,000 to Rs 5,000 and walk free.

The government has removed community fines, reduced the term of imprisonment for drinking from 10 years to five.

Ex gratia payment in hooch deaths was restored to Rs 4 lakh compensation to the next of kin of victims.

What are the reasons behind relaxation?

It shows that Bihar’s liquor policy has not been successful.

Bihar’s liquor ban has led to a spike in illicit trade, hooch deaths, and arrests.

The majority of those arrested and imprisoned are from marginalized groups, including Other Backward Castes, Extremely Backward Castes, and Dalits.

How To Be A Pal – on India Nepal Relations

News: Nepal PM Prachanda visited India for the first time, during his present tenure.

During Prachanda’s visit, several agreements were signed, including a transit treaty, bilateral digital payments, and a long-term understanding on power trade, which are positive steps.

However, India needs to consider the changing dynamics of their relations and transform its approach towards Nepal.

What are the changing dynamics that need to be considered in India Nepal Relations?

Changing equation: Over time, the dynamics of the India-China-Nepal equation have undergone significant changes, with strained India-China ties and Chinese incursions.

Strategic battleground: Nepal is becoming a battleground for the US and China. US has entered in the Nepal’s political discourse by around the $500 million US grant. On the other hand, China is pushing for faster implementation of Belt and Road Initiative (BRI).

Awareness of power rivalry: The ongoing Ukraine conflict has made Nepal cautious about not becoming a bone of contention between major powers.

Therefore, Nepal will naturally try to maintain close relations with both India and China.

What should be India’s approach towards Nepal?

Soft approach: The unresolved bilateral border issue should be addressed through diplomatic discussions rather than exacerbating tensions. For example, 2015 blockade reversed the goodwill generated by India, before that.

Economic cooperation: India should expedite pending projects in Nepal and follow a needs-based development model.

GS Paper 3

Coordinating in the battlefield

News– Speaking at an annual gathering of the Confederation of Indian Industry (CII) in New Delhi last week, Defence Minister Rajnath Singh asked defence forces to innovate in futuristic technologies “to transform India from a follower to a leader”.

How has the nature of warfare changed in recent times?

Azerbaijan’s rout of Armenia in 2020 and Russia’s failure to subdue Ukraine signal a major change in interstate warfare.

In the battlefield of today, survival faces a different set of challenges. Systems like the Switchblade, Kamikaze drone, are used by Ukrainians against the Russians.

Switchblade flies to its target and crashes into it. It detonates itself in a suicidal manner.

Kamikaze drone attacks force adversaries to change their patterns of operations. It reduces the effectiveness of the field force.

What are the challenges faced by India from the defence capabilities of China?

China is a key player in autonomous weapons. The PLA has been developing unmanned systems since 2013. It has incorporated them into their theatre planning.

China has a sophisticated understanding of India’s cyber vulnerabilities. The PLA is believed to have mapped the strategic vulnerabilities in our critical infrastructure.

These systems include hardware that is full of Chinese components. They maintain complete control over it even after it has been installed in Indian servers.

What is the way forward for Indian defence forces to tackle the Chinese challenge?

There is a need to rethink the hardware realm. Swift decisions are needed.

Banning Chinese hardware such as 5G networks would serve little purpose. There is a need to replace the major systems and networks.

India needs creativity. Our acquisitions processes are focused on buying military hardware, rather than creating new capabilities.

The synergistic integration of the shortened BrahMos cruise missile into the Sukhoi-30MKI fighter has been successful. This has given the BrahMos a deep strike capability cheaply and with available Indian technology.

The Indian Air Force’s requirement of 42 combat aircraft squadrons includes many MiG-21 squadrons, especially for air defense. But the induction of force multipliers and platforms that perform the same job is overlooked.

For example, S-400 surface-to-air missiles and airborne warning and control systems (AWACS) have enormously boosted our air-defence capability. Yet, the IAF’s stated requirement remains 42 fighter squadrons.

The Indian Navy has not revised its requirement of 200 warships, stated in its Maritime Capability Perspective Plan. But, its capability as a fighting force is more potent today than ever  before.

It has a heavily armed fleet. The navy is planning for six more conventional submarines and six nuclear-propelled submarines (SSNs) for the deep waters of the Bay of Bengal. There is ample scope to reduce the surface fleet.

There is inadequate discussion of the Indian Army’s manpower policies. These include beefing up our defences against China by three new mountain divisions into Eastern Ladakh and two new mountain divisions in Arunachal Pradesh in 2007-09.

Indian army is planning for the conversion of India’s plains strike corps into a mountain strike  corps. This involves shifting two infantry and one armoured division from the Pakistan frontier and re-tasking, re-training, and re-equipping them for offensive operations on the China border.

Some key projects of three services have not achieved much progress. Since 2009, work has not progressed much on the Future Infantry Combat Vehicle.

The Advanced Towed Artillery Gun System  is high in priority. The Tactical Communications System is also being neglected.

For all these weapons, the military must obtain strike platforms and fighting tools to serve an operational plan.

India’s military can no longer afford to create a patchwork of small and relatively inconsequential systems, purchased from here and there.

At the root of India’s manufacturing challenge

News– The article explains the steps taken by successive governments for manufacturing sector and the reason behind weak performance of manufacturing sector despite government initiatives

What are various steps taken by governments in India for the manufacturing sector and their impacts?

The economic reforms of 1991 had almost exclusively focused on manufacturing. But the reforms did not lead to an increase in the share of manufacturing in the economy.

There has been a qualitative change after 1991. The range and quality of products manufactured in India have undergone an impressive increase.

In 2014, the manufacturing sector was given a push through the ‘Make in India initiative’. There was emphasis on foreign direct investment. The Production-Linked Incentive scheme was launched recently.

The tax rate had been lowered substantially in 2019.  Government is pushing public investment. In the last Union Budget, capital expenditure was raised by 18.5%.

But, the record of these schemes has not been impressive. In 2022-23, manufacturing growth is 1.3%. The persistence of low rates of growth despite policy initiatives in manufacturing points to structural issues with the sector in India.

Why is demand side weakness a major factor behind lack of growth in the manufacturing sector?

There is a need to look at the demand side. This is largely independent of the supply side.

Household demand for manufactures follows the satisfaction of its demand for the necessities of life like food, housing, health and education. For a substantial section of India’s households, food occupies a large share. This impacts the growth of demand for manufactures.

The relationship between per capita income and the share of food in household expenditure is strongly negative globally. Countries such as the United States and Singapore, have a low share of food.

The share of food is the largest in India, among major economies and its GDP per capita the lowest. Industry leaders have no control over the demand side of the equation.

What can India learn from East Asian countries?

Exports can sidestep a narrow domestic market. East Asian countries were able to grow their manufacturing base despite the low scale of domestic markets. It requires that manufacturers are globally competitive.

Infrastructure and skill level of the workforce are important contributors to manufacturing growth of East Asian economies. These determine the cost of production and the type of products that a country can produce.

Indian exporters face a competitive disadvantage related to higher turnaround time for ships in India’s ports. Inexpensive power, space and industrial waste disposal services all matter.

Why neglect of education in India is impacting the manufacturing sector in India?

India has fallen most behind the countries that are the manufacturing successes of the world in the education field.

The ranking of countries by the Programme for International Student Assessment reveals this directly. In a group of about 75 countries, India barely manages not to be the last.

Pratham findings point to the very low reading ability and numeracy of Indian children in their early years.

There are issues related to employability of Indian graduates. The skilled workers, ranging from carpenters to plumbers and mechanics have been neglected in economic policy-making in India.

There is no formal assessment available of the state of the vocational training institutes in India. The Planning Commission data shows that only about 5% of Indian youth have had any kind of technical training. The figure for South Korea was over 85%.

India stands to gain from the trading of carbon credits

News: The article explains measures taken by India to combat climate change and benefit and challenges associated with carbon credit market.

What are the measures taken by India to tackle climate change?

Click Here to Read

India, despite having 17% of the global population, has the lowest per capita emissions among major economies, accounting only 5% of the global total emissions.

However, projections indicate that India’s emissions would increase. Therefore, India has called on the developed nationals to fulfill their promise of climate financing.

Further, the government is also taking measures to establish a carbon credit market to achieve the Nationally Determined Contributions (NDC) goals.

Read More: Carbon Markets: Benefits and Challenges – Explained

How can the carbon credit market benefit India?

Extra carbon credits may be sold globally, allowing other countries to receive significant amounts of carbon credits from India.

This can generate revenue to finance climate change mitigation projects and help in transitioning to a low-carbon economy.

What are the challenges with the carbon credit market?

Competition: In 2021, the global carbon credits market experienced a significant growth of 164%. It is projected to surpass $100 billion by 2030. This growth has implications for India’s domestic carbon market, as increased competition for carbon credits may result in higher prices within the country.

However, due to the international cooperation promoted by the Paris Agreement, this is unlikely to happen.

Instead, the establishment of a global carbon market could potentially create a more balanced playing field, which could be advantageous for developing countries like India.

Edge for Developed Nation: Developed nations hold an advantage due to their technical and financial capabilities, allowing them to generate and sell carbon credits at a lower cost.

Hence, a standardized system within a global carbon market is needed to address this imbalance.

Lack of Centralized Regulatory Body: Currently, trading carbon credits between countries involves complex bilateral agreements, additional reporting requirements, and country authorizations.

Therefore, a centralized registry and regulatory body is needed that would facilitate smoother international trading for India, reducing administrative burdens.

What more steps can be taken by India to achieve transition to a low-carbon economy?

a)) achieve the target of building 175GW of installed renewable energy capacity by 2022 and 450GW by 2030, b) India would need to increase its total installed solar power capacity to over 5,600GW to attain net-zero by 2070, c) the use of coal, particularly in power generation, would have to decrease by 99% by 2060, d) consumption of crude oil across different sectors would need to reach its peak by 2050 and then significantly decrease by 90% between 2050 and 2070, e) the industrial sector could potentially meet 19% of its total energy requirements through the use of green hydrogen.

What can be the way ahead?

India can position itself as a key player in the global carbon market and achieve its climate goals while promoting sustainable development by following the 5 Es formula.

5 Es formula—Enhancing carbon reduction efforts, Establishing robust monitoring and reporting systems, Encouraging international cooperation, Exploring technology and Innovation, and Empowering local stakeholders.

Concentration concerns – Sebi’s proposal will make FPIs more transparent

News: The Securities and Exchange Board of India (Sebi) has published a consultation paper that proposes new additional disclosure requirements for foreign portfolio investors (FPIs).

What is the current requirement for additional disclosures for FPIs?

Currently, Sebi proposes that high-risk FPIs holding more than 50 percent of assets under management (AUM) in a single corporate group would be required to comply with requirements for additional disclosures, if such concentration exceeds a temporary window of 10 days.

Such FPIs would have to provide the granular data of all entities with any ownership, economic interest, or control rights.

However, this requirement is qualified by exempting newly registered FPIs for the first six months and FPIs that are currently undergoing the winding-up process.

What are the new additional disclosure requirements for FPIs proposed by Sebi?

The new additional disclosure requirements primarily focus on identifying the true beneficial owners of shares held by concentrated FPIs.

The aim is to prevent potential evasion of minimum public shareholding (MPS) regulations and misuse of the FPI route to bypass Press Note 3 (PN3) guidelines.

The paper is likely a response to the Hindenburg Research incident, where a US-based short seller accused the Adani Group of using FPIs as proxies to hold shares in listed companies, exceeding the maximum promoter shareholding limit of 75%.

What is PN3 guidelines and why has Sebi come up with new additional disclosure requirements?

The PN3 mandates that entities of nations sharing land borders with India, or where the beneficial owner of an investment in India is situated, or is a citizen of any such country, can invest only via the government route.

Sebi is concerned that entities of these nations may use FPIs as a means to hide their ownership of Indian shares.

The consultation paper also highlights that some FPIs concentrate a significant portion of their equity portfolio in a single company or a group of companies.

Such concentrated investments raise suspicions that promoters or other investors acting together may exploit the FPI route to evade regulations. This could increase the risk of price manipulation.

What can be done to prevent evasion?

In order to investigate if concentrated holdings exist, it will be necessary to compile a list of FPIs with such patterns along with obtaining detailed information about the ownership, economic interest, and control of these FPIs.

Existing legislation, such as the Prevention of Money Laundering Act, 2002, and the Prevention of Money Laundering (Maintenance of Records Rules), 2005, provides a framework for identifying beneficial owners.

However, in practice, it is challenging to apply these regulations due to the complex ownership structures often employed by such entities.

Prelims Oriented Articles (Factly)

Formation water: The green panacea to restore the wastewater disposed during crude oil excavation and processing

Source: The post is based on the article “The green panacea to restore the wastewater disposed during crude oil excavation and processing” published in the PIB on 1st June 2023

What is the News?

A recent study found that a mixture consisting of plant-based biomaterial, biosurfactant, and NPK fertilizer can help in efficient restoration of formation water.

What is formation water?

Formation water is disposed in huge volumes during crude oil excavation and processing.

Composition of formation water: It consists of oily components, brine solutions, and solvents that are used during various phases in the oil industry.

How formation water impacts the environment?

It is usually drained off and reaches the rivers and streams, ultimately deteriorating the water quality and threatening the existing aquatic life.

The larger animals’ consumption of fish and plants collected from such contaminated sites can transfer and even magnify the associated risks.

Thus, the formation water needs to be treated before it is released to the environment.

What scientists have discovered to treat formation water?

Scientists of the Institute of Advanced Study in Science and Technology (IASST) have worked towards developing a green approach for the treatment of formation water.

They formulated a mixture consisting of plant-based biomaterial, biosurfactant, which are secondary metabolites of microbes, and NPK fertilizer, to efficiently restore the formation water.

This “wonder mixture” can help prevent pollution of the environment from formation water and render it reusable for maintaining the green revolution. This can help enhance crop production to meet the ever-growing food demand.

India, Nepal sign pacts on energy, transport

Source: The post is based on the article “India, Nepal sign pacts on energy, transport” published in The Hindu on 2nd June 2023

What is the News?

The Nepalese Prime Minister is on a four-day visit to India.

What are the key discussions and agreements signed on India-Nepal relations during the visit?

Move forward in bilateral relations: India would take forward the 2022 India-Nepal vision document for cooperation in the power sector that sets an ambitious goal in India-Nepal power trade and transmission.

Power Trade Agreement: A long-term Power Trade Agreement has been signed between India and Nepal. Under this agreement, both nations have set a target of importing 10,000 MW of electricity from Nepal in the coming years.

Focus on energy cooperation: A new pipeline will be constructed from Siliguri to Jhapa in eastern Nepal.

Other key agreements signed: These include a) An MoU for the development of Phukot Karnali Hydroelectric Project, b) A Project Development Agreement for the Lower Arun Hydroelectric Project, c) The revised Treaty of Transit under which Nepal will get to access to India’s inland waterways. This is described as “once in a generation” pact by Nepal, and d) Agreement for the export of Nepal’s hydropower to Bangladesh through Indian territory.

Other key developments: a) Inaugurated integrated checkposts (ICPs) at Nepalgunj in Nepal and Rupaidiha on the Indian side, b) Inaugurated a cargo train from Bathnaha in India to Nepal Customs Yard. The rail link was built with an Indian grant.

Both nations also agreed to achieve tangible and time-bound progress on the Pancheshwar multipurpose project.

India-Russia joint venture on Vande Bharat trains hits hurdle

Source: The post is based on the article “India-Russia joint venture on Vande Bharat trains hits hurdle” published in The Hindu on 2nd June 2023

What is the News?

The joint venture (JV) between Russian transportation giant Transmashholding (TMH) and Indian public sector undertaking (PSU) Rail Vikas Nigam Ltd. (RVNL) to manufacture 120 Vande Bharat Express train sets has run into problems.

What are the Vande Bharat trains?

About India-Russia joint venture on Vande Bharat trains

The Indian Railways awarded the JV deal to the TMH-RVNL consortium after it emerged as the lowest bidder. The JV requires TMH and RVNL to manufacture 120 Vande Bharat train sets, each costing nearly ₹120 crore.

By June 2025, the TMH-RVNL consortium has to be ready with the first two prototype Vande Bharat trains for testing and trials. After the prototypes are approved, every year, 12 to 18 trains will be manufactured in a tapered fashion.

The consortium will also run maintenance services on the trains for 35 years. The railways are spending $1.8 billion for the train sets and another $2.5 billion for their maintenance.

What are the problems faced by India-Russia joint venture on Vande Bharat trains?

The issue with shareholding: RVNL had requested majority shareholding from TMH. But the TMH has not agreed to this and has also not deposited the bank guarantee of nearly ₹200 crores required for the project to get started.

Import of spares: Not all parts of the much-touted ‘Make in India’ Vande Bharat train sets are manufactured indigenously. Many of these parts have to be imported from Western European and American manufacturers.

The ongoing sanctions imposed on Russia following the Russia-Ukraine war have affected the supply of spare parts from Western European and American manufacturers.

Sedition law can be retained but with safeguards: Law Commission

Source: The post is based on the article “Sedition law can be retained but with safeguards: Law Commission” published in The Hindu on 2nd June 2023

What is the News?

The 22nd Law Commission has said that the sedition needs to be retained, but certain amendments could be made for greater clarity regarding its usage.

What is Sedition?

The Law Commission received a reference from the Home Ministry through a letter addressed to the Department of Legal Affairs in the Law Ministry for a study of the usage of the provision of Section 124A and suggest amendments.

What are the Law Commission’s recommendations on Sedition?

Existing laws do not cover all offences under Section 124A: The existence of laws such as the Unlawful Activities (Prevention) Act (UAPA) and the National Security Act (NSA) does not by implication cover all elements of the offence envisaged under Section 124A of the IPC.

Scrapping Section 124A brings harm to the accused: In the absence of a provision like Section 124A of IPC, any expression that incites violence against the government would invariably be tried under special laws and counter-terror legislation. These laws contain much more stringent provisions to deal with the accused.

Colonial origin is not a cause to scrap provisions: Many are of the view that sedition law is a colonial legacy, hence scrapped.

But the entire framework of the Indian legal system, police force and the idea of an All-India Civil Service are also a colonial legacy. So, the mere fact that a particular legal provision is colonial in its origin does not ipso facto validate the case for its repeal.

Misuse is not the reason to scrap: There are a plethora of examples of various laws being misused by ill-intentioned individuals. However, any alleged misuse can be reined in by laying down procedural safeguards.

Lay down procedural guidelines: The Centre should issue model guidelines to curb any misuse of provisions in Section 124A. It is imperative to lay down certain procedural guidelines for curbing any misuse of Section 124A of IPC by law enforcement authorities.

BRICS FM meeting in South Africa: What’s on the agenda?

Source: The post is based on the article “BRICS FM meeting in South Africa: What’s on the agenda?” published in the Indian Express on 2nd June 2023

What is the News?

External Affairs Minister is in Cape Town, South Africa, to attend a meeting of the foreign ministers of BRICS.

What is BRICS?

What are the key highlights of the BRICS foreign ministers’ meeting agenda?

The foreign ministers’ meeting will finalise the agenda for the 15th BRICS summit scheduled to be held in South Africa.

Note: The theme of BRICS 2023 is: “BRICS and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development, and Inclusive Multilateralism”.

Two key items on the agenda are a) a plan to expand the membership of BRICS, and b) a common currency.

What is the significance of the expansion of BRICS members?

As many as 19 countries are said to be in the queue to join BRICS. Many of the countries are frequently mentioned to become the BRICS member. These are from Latin America, Africa, West Asia, Central Asia, South Asia; and South-East Asia. It is not clear which countries might be admitted. The list includes big oil producers Saudi, Iran, the UAE, Nigeria, and Venezuela.

The expansion of BRICS membership has numerous benefits such as a) Any expansion can be seen as strengthening the group’s heft as a spokesperson of the developing world, b) Admitting some key countries in the list could lay claim to representing more than half the world’s population, c) There is considerable anti-US sentiment in the world, and all these countries are looking for a grouping where they can use that sentiment to gather together. This will allow the “voices of the marginalised to actually be heard”, and d) The expansion will facilitate the solidarity of the Global South.

Note: Adding more members might sideline India’s role in the group.

What are the challenges in creating a common BRICS currency?

The idea of a common currency was proposed by Russia’s President at the Beijing BRICS summit last year. The leaders decided to set up a committee to study its viability.

The common BRICS currency might not work as a) The BRICS members have different economic and political systems and are located on different continents, b) Setting up a common central bank of member countries is challenging, and c) In a situation of low growth of member countries the common currency might not work.

RBI governor cautions against evergreening of loans: Are banks, corporates still window-dressing loans?

Source: The post is based on the article “RBI governor cautions against evergreening of loans: Are banks, corporates still window-dressing loans?” published in the Indian Express on 1st June 2023

What is the News?

Recently, the Reserve Bank of India (RBI) Governor raised red flags over banks adopting innovative methods for the evergreening of loans.

What is the evergreening of loans?

Evergreening loans is a practice of extending new or additional loans to a borrower who is unable to repay the existing loans. It is a form of zombie lending thereby banks concealing the true status of the non-performing assets (NPAs) or bad loans.

Banks delay the recognition of losses due to loan defaults and engage in evergreening. This is purely misgovernance. Some banks have even extended such loans to wilful defaulters to keep them out of the defaulters’ books.

What are the approaches used by banks for evergreening loans?

These include a) bringing two lenders together to evergreen each other’s loans by sale and buyback of loans or debt instrument, b) good borrowers being persuaded to enter into structured deals with a stressed borrower to conceal the stress, c) use of internal or office accounts to adjust borrower’s repayment obligations, and d) renewal of loans or disbursement of new/additional loans to the stressed borrower or related entities closer to the repayment date of the earlier loans.

What does the evergreening of loans mean?

Evergreening loans can create a false impression of the asset quality and profitability of banks and delay the recognition and resolution of stressed assets.

Evergreeening loans can also undermine credit discipline and moral hazard among borrowers, and erode the trust and confidence of depositors, investors and regulators.

What is the difference between Loans written off and evergreening of loans?

Loan write-offs are a process of removing bad loans from the books of banks after making adequate provisions for them. Loans written off by the banks are removed from the NPA books and reflect banks true financial position.

Evergreening of loans, on the other hand, is a practice of extending new or additional loans.

How to stop the evergreening of loans?

The RBI has come across cases where one method of evergreening, after being pointed out by the regulator, was replaced by another method.

The P J Nayak Committee or the Committee to Review Governance of Boards of Banks in India highlighted significant evergreening in banks and suggested a) levying penalties through cancellations of unvested stock options, b) claw-back of monetary bonuses on officers concerned and c) All whole-time directors, and the Chairman of the audit committee should be asked to step down from the board.

MeitY launches pilot project on Electronics Repair Services Outsourcing (ERSO)

Source: The post is based on the article “MeitY launches pilot project on Electronics Repair Services Outsourcing (ERSO)” published in the PIB on 31st May 2023

What is the News?

The Government has launched the Electronics Repair Services Outsourcing (ERSO) Pilot initiative.

What is Electronics Repair Services Outsourcing (ERSO) initiative?

Need: Over the next 5 years, India’s ERSO industry is likely to fetch India up to $20 billion in revenue and also generate millions of jobs.

Aim:

-To validate certain transformational policy and process changes to make India the Repair Capital of the World.

-To assess the feasibility and potential of capturing 20% of the global repair service market within five years.

Nodal Ministry: Ministry of Electronics & IT.

Location of the pilot project: The pilot is being held in Bengaluru and will be run for three months.

Other details of ERSO:

-India’s e-waste policy will be modified to enable repair companies to domestically recycle 5% of imported goods by weight on a trial basis.

-The repaired goods will not be permitted to be sold in the domestic market.

-New provisions will be made to allow their exportation to regions other than their country of origin.

What are the significances of the ERSO initiative?

-The project has been identified as a game-changer for India and make India a world leader in a hitherto untapped domain.

-The ERSO initiative will be a game-changer for Global environmental sustainability and reiterates India’s commitment to the environment and our planet.

-The initiative will enable extension of device life globally by providing cheap and reliable repair of ICT products for the globe.