27th June, 2018-IAS Current Affairs
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‘Financial Stability Report’ (GS3: Indian Economy)
Issue: The gross non-performing asset ratio of scheduled commercial banks could rise up to 12.2 percent by March 2019 from 11.6 percent in March 2018, the Reserve Bank of India said in its Financial Stability Report.
Other observations made in the report
- In the worst case scenario, the bad loan ratio could rise up to 13.3 percent by the end of the current financial year, according to the report.
- The increase in bad loans is estimated to be the highest for public sector banks. In the base case, the banking regulator expects the gross NPA ratio for state-owned banks to rise to 16.3 percent by March 2019 from 15.6 percent in March 2018
- In the baseline scenario, the capital adequacy ratio of six PSU banks under RBI’s prompt corrective action framework may be below the minimum regulatory level of 9 percent by March 2019.
- The industry segment, which covers large, medium and small corporate loans, reported a gross NPA ratio of 22.8 percent in March 2018, as compared with 19.4 percent in September 2017.
What is Prompt Corrective Action (PCA)?
- Banks under PCA face restrictions on distributing dividends, remitting profits and even on accepting certain kinds of deposits. Besides, there are restrictions on the expansion of branch network, and lenders need to maintain higher provisions, along with caps on management compensation and directors’ fees.
‘Uranium Contamination’ (GS3: Environmental Pollution)
Issue: A study, published in Environmental Science and Technology Letters, has found over 30 micrograms per litre (mcg/l) of the heavy metal in parts of northwestern, southern and southeastern India
- Drinking such water can damage one’s kidneys, and the World Health Organization prescribes 30 mcg/l as an upper limit
- The residents of the regions surveyed were using the contaminated wells as their main source of drinking water.
- As the Bureau of Indian Standards does not specify a norm for uranium level, water is not tested regularly for it. This is despite the fact that evidence of uranium contamination has accumulated from across India over the last decade. A 2015 Bangalore study, for example, found uranium levels of over 2000 mcg/l in the southern part of the city. Other studies found levels of over 500 mcg/l in Andhra Pradesh and Telangana
How Uranium is believed to cause pollution?
- The Environmental Science paper identified two types of terrains with heavy contamination. In Rajasthan and other northwestern regions, uranium occurs mostly in alluvial aquifers; while in southern regions such as Telangana, crystalline rocks such as granite seem to be the source. When groundwater is over-extracted from such soils, the researchers suggest, the uranium is exposed to air, triggering its release.
‘Reserve Bank of India’ (GS3: Indian Economy)
Issue: The Reserve Bank of India has observed that the 7.7% GDP growth in the last quarter indicates the “economy is well on the recovery track” on the back of a sharp pick-up in gross fixed capital formation, but warned gathering headwinds including fiscal and current account challenges posed risks to the economic momentum.
Other observations made by the RBI
- The widening current account deficit — the shortfall widened in 2017-18 on the back of a wider trade deficit — was also a challenge as it impacted exporters’ cost-effective access to U.S. dollar credit. , it was critical to ensure that public sector banks had continued access to global money markets as they contributed about 45% of the export credit.
- Externally, tightening liquidity conditions in developed markets were impacting emerging market currencies, bonds and capital flows.
What is Gross fixed capital formation?
- Capital formation is a term used to describe the net capital accumulation during an accounting period for a particular country, and the term refers to additions of capital stock, such as equipment, tools, transportation assets and electricity. Countries need capital goods to replace the current assets that are used to produce goods and services, and if a country cannot replace capital goods, production declines. Generally, the higher the capital formation of an economy, the faster an economy can grow its aggregate income.
- Producing more goods and services can lead to an increase in national income levels. In order to add capital stock, a country needs to generate savings and investments from household savings, or based on government policy. Countries with a high rate of household savings can accumulate funds to produce capital goods faster, and a government that runs a surplus can invest the surplus in capital stock.
- The World Bank also tracks gross capital formation, which it defines as outlays on additions to fixed assets, plus the net change in inventories. Fixed assets include plant, machinery, equipment and buildings, while inventory includes works in process, which are partially completed goods that remain in production.
‘Reforms in Public Sector bank’ (GS3: Indian Economy)
Issue: The Centre’s initiative to reform public sector banks, begun in 2015 with the Indradhanush programme, appears to have lost steam, Reserve Bank of India’s (RBI) deputy governor Viral Acharya said.
- According to the RBI, if governance reforms are undertaken promptly it would not only improve the financial performance of the banking sector but also help reduce operational risks.
Mission Indhradhanush for Banks
It is a seven-point public sector banks’ revival plan.
Government implemented the much discussed split in Chairman and MD/CEO post to improve the governance standard in the public sector banking space.
The GOI announced first two tranches of capital infusion into 13 public sector banks to the tune of Rs200.1bn, which is part of an already announced comprehensive Rs700bn capitalisation plan over four years until 2019.
- De-stressing banks:
Government will continue to work towards solving problems of sectors, which are contributing major stress to the banking sector at this point of time.
Government has issued a circular that it will not interfere in the functioning of public sector banks and encouraged them to take decisions independently, keeping the commercial interest of the organization in mind.
- Framework of Accountability:
New standardized “Key Performance Indicators” for measuring performance of public sector banks in place of earlier Statement of Intent has been set up.
- Governance Reforms:
Government has indicated that it will continue to pursue the governance reform and to discuss the same,
- Establishment of Bank Board Bureau
‘Belize’s reef’ (GS3: Conservation of Environment)
Issue: The Mesoamerican Reef, an underwater wonder world whose survival was considered to be at risk for years, may now be removed from UNESCO’s list of threatened World Heritage Sites, thanks to bold steps to save it by activists and the Belizean government.
About Belize’s reef
- The Belize Barrier Reef is a series of coral reefs straddling the coast of Belize, roughly 300 meters (980 ft) offshore in the north and 40 kilometers (25 mi) in the south within the country limits. The Belize Barrier Reef is a 300-kilometer (190 mi) long section of the 900-kilometer (560 mi) Mesoamerican Barrier Reef System, which is continuous from Cancún on the north-eastern tip of the Yucatán Peninsula through the Riviera Maya and up to Honduras, making it the third largest coral reef system in the world after the Great Barrier Reef in Australia and the New Caledonian barrier reef in New Caledonia. It is Belize’s top tourist destination, popular for scuba diving and snorkeling and attracting almost half of its 260,000 visitors. It is also vital to the country’s fishing industry.
About World Heritage Sites
- The United Nations Educational, Scientific and Cultural Organization (UNESCO) seek to encourage the identification, protection and preservation of cultural and natural heritage around the world considered to be of outstanding value to humanity. This is embodied in an international treaty called the Convention concerning the Protection of the World Cultural and Natural Heritage adopted by UNESCO in 1972.
UNESCO’s World Heritage mission is to
- Encourage countries to sign the World Heritage Convention and to ensure the protection of their natural and cultural heritage;
- Encourage States Parties to the Convention to nominate sites within their national territory for inclusion on the World Heritage List;
- Encourage States Parties to establish management plans and set up reporting systems on the state of conservation of their World Heritage sites;
- Help States Parties safeguard World Heritage properties by providing technical assistance and professional training;
- Provide emergency assistance for World Heritage sites in immediate danger;
- Support States Parties’ public awareness-building activities for World Heritage conservation;
- Encourage participation of the local population in the preservation of their cultural and natural heritage;
- Encourage international cooperation in the conservation of our world’s cultural and natural heritage.
‘Nuclear energy’ (GS3: Science)
Issue: India’s space program wants to go where no nation has gone before -– to the south side of the moon. And once it gets there, it will study the potential for mining a source of waste-free nuclear energy that could be worth trillions of dollars.
About the mission
- The nation’s equivalent of NASA will launch a rover in October to explore virgin territory on the lunar surface and analyze crust samples for signs of water and helium-3. That isotope is limited on Earth yet so abundant on the moon that it theoretically could meet global energy demands for 250 years if harnessed.
- The rover landing is one step in an envisioned series for ISRO that includes putting a space station in orbit and, potentially, an Indian crew on the moon. The government has yet to set a timeframe.
- The upcoming launch of Chandrayaan-2 includes an orbiter, lander and a rectangular rover. The six-wheeled vehicle, powered by solar energy, will collect information for at least 14 days and cover an area with a 400-meter radius.
- The rover will send images to the lander, and the lander will transmit those back to ISRO for analysis.
- A primary objective, though, is to search for deposits of helium-3. Solar winds have bombarded the moon with immense quantities of helium-3 because it’s not protected by a magnetic field like Earth is.
- It is thought that this isotope could provide safer nuclear energy in a fusion reactor, since it is not radioactive and would not produce dangerous waste products
Challenges involved include:
- To be sure, there are numerous obstacles to overcome before the material can be used – including the logistics of collection and delivery back to Earth and building fusion power plants to convert the material into energy.
- It won’t be easy to mine the moon.
‘Oxytocin’ (GS3: Science)
Issue: The Ministry of Health and Family Welfare has restricted the manufacture of Oxytocin formulations for domestic use to public sector only from 1st July 2018. It has also banned the import of Oxytocin and its formulations.
What is Oxytocin?
- Oxytocin is a peptide hormone and neuro-peptide. Oxytocin is normally produced by the paraventricular nucleus of the hypothalamus and released by the posterior pituitary. It plays a role in social bonding, sexual reproduction in both sexes, and during and after childbirth. Oxytocin is released into the bloodstream as a hormone in response to stretching of the cervix and uterus during labor and with stimulation of the nipples from breastfeeding. This helps with birth, bonding with the baby, and milk production. Oxytocin was discovered by Henry Dale in 1906. Its molecular structure was determined in 1952. Oxytocin is also used as a medication to facilitate childbirth.
- Oxytocin ban is to stop its misuse in the livestock industry, where activists say it causes hormonal imbalances and shortens the lives of milch animals.
‘Unicorn Start-up’ (G3: Globalization)
Issue: Swiggy raised $210 million at a valuation of $1.3 billion, marking an important milestone for what has been a remarkable journey of an Indian Start-up
- Flipkart, which is widely regarded as India’s most successful startup, took a little over six years to enter the billion-dollar club. Swiggy, which was launched in the Bengaluru neighbourhood of Koramangala by Sriharsha Majety, Nandan Reddy and Rahul Jaimini, breached the same mark in less than four years, becoming the fastest startup to become a unicorn.
What is a unicorn start-up?
- A unicorn is a privately held startup company valued at over $1 billion. The term was coined in 2013 by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures
- A decacorn is a word used for those companies over $10 billion, while hectocorn is the appropriate term for such a company valued over $100 billion.
‘Digital India’ (GS3: Infrastructure)
Issue: The internet may have transformed the Indian economy in many ways over the past couple of decades, but India continues to lag behind peer countries when it comes to internet penetration, shows the recently published findings of a global survey of over 40,000 adults conducted in 2017 by Pew Research Centre.
Observations made in the report
- Only one in four Indian adults either owns a smartphone or uses the internet occasionally, something that the report considers to be a measure of internet penetration.
- India scrapes the bottom of a list of 39 large economies considered in the survey, which include both developed and emerging markets.
- India also ranked among the very lowest, just above Tanzania, in terms of the percentage of adults owning a smartphone. Smartphones refer to mobile phones, which can access the internet and apps.
- As the Pew report points out, in relatively poorer countries such as India, “mobile phones can be extremely important tools—whether (in) helping people gain access to financial services or providing the much-needed assistance with health and agricultural needs”.
Note: The above points could be utilized in mains question on Digital India. From prelims perspective, it does not carry much significance