04 Feb 2024: UPSC Exam Comprehensive News Analysis

04 February 2024 CNA
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A. GS 1 Related

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C. GS 3 Related

Category: ECONOMY

1. Why is fiscal consolidation so important?

Syllabus: Economic Development in India and Macroeconomics

Prelims: Fiscal deficit

Mains: Importance of fiscal consolidation

Context​: Fiscal consolidation is a crucial aspect of economic management, ensuring a balance between government revenue and expenditure. The recent Union Budget presented by Finance Minister Nirmala Sitharaman outlines ambitious targets for fiscal deficit reduction, prompting a closer examination of the associated challenges and implications.

Issues with Fiscal Deficit Estimate

• Surprising Projections: Analysts were surprised by the Finance Minister’s announcement to reduce the fiscal deficit to 5.1% of GDP in 2024-25, with a further reduction to below 4.5% by 2025-26. Projections were lower than expected, with revised estimates for 2023-24 lowering the fiscal deficit projection to 5.8% of GDP.

Significance of Fiscal Consolidation

• Fiscal Deficit Definition: Fiscal deficit signifies the shortfall when a government’s expenditure surpasses its revenue. It necessitates borrowing or asset selling to bridge the gap. Governments typically focus on controlling fiscal deficit to maintain economic stability.

How Government Funds its Expenditure

• Revenue Sources: Taxes, primarily, constitute the major revenue source for governments. In 2024-25, tax receipts are estimated at ₹26.02 lakh crore, contributing to the total revenue of ₹30.8 lakh crore. In contrast, the estimated expenditure for the Union government is ₹47.66 lakh crore.

Fiscal Deficit vs. National Debt

• Distinction: Fiscal deficit should not be confused with national debt. Fiscal deficit is the yearly shortfall, while national debt is the cumulative amount owed by the government over time. The fiscal deficit is expressed as a percentage of GDP, reflecting the government’s ability to repay lenders.

Borrowing from the Market

• Borrowing Mechanism: To fund fiscal deficits, governments primarily borrow from the bond market, with the Centre expected to borrow ₹14.13 lakh crore in 2024-25. Central banks, like the Reserve Bank of India (RBI), also play a significant role, indirectly lending to the government through open market operations.

Significance of Fiscal Deficit

• Impact on Borrowing Costs: The rate at which a government borrows becomes critical as its financial health deteriorates. Governments may face higher interest rates as demand for bonds decreases, leading to increased borrowing costs.
• Role of Monetary Policy: Central bank lending rates, affected by monetary policy, influence government borrowing costs. Rising rates post-pandemic could make borrowing more expensive, contributing to the Centre’s emphasis on fiscal deficit reduction.

Why Fiscal Deficit Matters

• Inflationary Impact: Persistent high fiscal deficits can lead to inflation as fresh money issued by central banks funds deficits. The fiscal deficit, having reached 9.17% of GDP during the pandemic, is projected to drop to 5.8%, indicating a positive trend.
• Market Perception and Debt Management: A lower fiscal deficit enhances the government’s image of fiscal discipline, potentially improving bond ratings. It also helps manage public debt more effectively, preventing an excessive increase that could surpass 100% of GDP.
• International Bond Market Access: Lower fiscal deficits may facilitate easier access to the international bond market, allowing the government to sell bonds overseas and access credit at more favourable rates.

Challenges and Future Projections

• Ambitious Targets: The Centre aims to reduce the fiscal deficit to 5.1% of GDP in 2024-25 despite plans for increased capital expenditure. Revenue generation through tax collections, projected to rise by 11.5%, forms a significant part of the strategy.
• Potential Risks: The ambitious fiscal deficit target, seen as optimistic by many, poses risks. The accuracy of projections remains uncertain, and attempts to achieve the target through increased tax rates could impact economic growth negatively.

Nut Graf: Fiscal consolidation is pivotal for economic stability, and the Union Budget’s emphasis on reducing the fiscal deficit presents both opportunities and challenges. Striking a balance between revenue generation, expenditure management, and economic growth will be crucial for achieving the ambitious targets set by the government.

D. GS 4 Related

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2. Dusted Apollo sighted for first time in Himachal’s Chamba

Context: The sighting of the rare Dusted Apollo butterfly (Parnassius stenosemus) in Himachal Pradesh’s Chamba district has brought joy to butterfly enthusiasts and highlighted the rich biodiversity of the region. This significant discovery, made during a trek to Manimahesh Lake, underscores the crucial role of forest guards in environmental conservation.

Discovery of Dusted Apollo

Image source: The Hindu

• First Sighting: The Dusted Apollo butterfly, a rare high-altitude species, was sighted and photographed for the first time in Himachal Pradesh by Gajinder Verma and Abinash Thakur, forest guards of Chamba Forest Circle, during a trek to Manimahesh Lake in September 2023.
• Distribution Range: The Dusted Apollo’s distribution range extends from Ladakh to west Nepal, flying at altitudes between 3,500 to 4,800 meters in the inner Himalayas. The species was originally discovered in 1890.
• Identification Challenges: The Dusted Apollo closely resembles the Ladakh Banded Apollo, but distinctive features, such as the complete discal band on the upper forewing and narrower dark marginal band on the hind wings, allowed for its confirmation through scientific examinations.

Significance of the Discovery

• Flourishing Diversity: The discovery is indicative of the flourishing diversity of Apollo butterflies in the region. The sighting of another rare species, the Regal Apollo, further emphasizes the ecological richness of the Manimahesh area.
• Conservation Concerns: Apollo butterflies, including the Dusted Apollo, are commercially important and fetch high prices in the poaching industry. With five of the eleven Apollo species declared as Scheduled species, the declining trend in butterfly numbers raises conservation concerns.
• Importance of Conservation: Lovish Garlani, a butterfly expert, emphasizes the urgent need for the conservation and protection of these endangered species. The declining trend necessitates community awareness about poaching and the establishment of butterfly parks and conservation reserves in the state.

Proposed Solutions

• Community Awareness: Educating local communities about the importance of butterfly conservation and the detrimental impact of poaching is crucial. Engaging communities as stewards of biodiversity can contribute significantly to the protection of rare butterfly species.
• Establishment of Conservation Reserves: Prioritizing the creation of butterfly parks and conservation reserves by the government can provide safe habitats for endangered butterfly species. These reserves can also serve as educational and research centres, fostering a sense of responsibility towards environmental conservation.

3. Reducing ammonia emissions through fertilizer management

Context: Ammonia emissions from agriculture, particularly associated with staple crops like rice, wheat, and maize, contribute significantly to environmental pollution and pose challenges for sustainable farming. A recent study, utilizing machine learning, has provided detailed estimates of ammonia emissions from these crops. The research highlights the potential for a substantial reduction in atmospheric ammonia emissions through effective fertilizer management.

Ammonia Emissions and Environmental Impact

• Environmental Significance: Atmospheric ammonia is a major environmental pollutant with wide-ranging impacts on ecosystems and human health.
• Crop-Related Emissions: A significant portion (51-60%) of anthropogenic ammonia emissions is linked to crop cultivation, with rice, wheat, and maize being the main contributors.

Challenges in Quantifying Emissions

• Challenging Quantification: Accurately quantifying ammonia emission reductions at a detailed, cropland-specific level poses challenges due to factors such as nitrogen inputs, local emission factors, and varying agricultural practices.

Machine Learning-Based Approach

• Innovative Methodology: Researchers, led by Yi Zheng from the Southern University of Science and Technology, employed machine learning to model ammonia emissions from global rice, wheat, and maize agriculture. The model incorporated diverse variables like climate, soil characteristics, crop types, irrigation, tillage, and fertilization practices.
• Dataset Development: A comprehensive dataset comprising over 2,700 observations from a systematic review of published literature informed the machine learning model.

Estimates and Optimized Strategy

• Global Ammonia Emission Estimate: The researchers estimated global ammonia emissions at 4.3 teragrams (4.3 billion kilograms) in 2018.
• Potential Reduction: The machine learning model suggested that spatially optimizing fertilizer management could lead to a significant 38% reduction in ammonia emissions from rice, wheat, and maize crops.
• Optimized Strategy Details: The proposed strategy involves placing enhanced-efficiency fertilizers deeper into the soil using conventional tillage practices during the growing season.
• Contribution by Crops: The study found that rice crops could contribute 47% to the total reduction potential, while maize and wheat could contribute 27% and 26%, respectively.
• Future Scenario without Management
• Projection without Strategies: Without effective management, the study projects a potential increase in ammonia emissions between 4.6% to 15.8% by 2100, depending on future greenhouse gas emissions levels.

Significance and Solutions

• Environmental Impact Mitigation: The research highlights the significance of targeted fertilizer management in mitigating ammonia emissions, thereby reducing the environmental impact associated with staple crop cultivation.
• Policy Implications: The findings underscore the importance of integrating optimized fertilizer management strategies into agricultural policies to promote sustainable farming practices.

4. India-made typhoid vaccine efficacy lasts for 4 years: study

Context: A recent study has revealed that the conjugated typhoid vaccine, Typbar, developed by Bharat Biotech in Hyderabad, exhibits a lasting efficacy of at least four years, according to a phase-3 trial conducted in Malawi, Africa. The research, focusing on children aged nine months to 12 years, emphasizes the vaccine’s potential to reduce typhoid cases and deaths globally.

Trial Details and Vaccine Efficacy

• Phase-3 Trial: The trial involved healthy children aged nine months to 12 years, randomly assigned to receive either Bharat Biotech’s conjugate typhoid vaccine (Typbar) or a control meningococcal vaccine (MenA).
• Duration of Follow-up: The study, with a median follow-up of 4.3 years, showcased that the vaccine’s efficacy remained robust over an extended period.
• Age-Specific Efficacy: The efficacy of the vaccine was found to be 70.6% in children aged nine months to two years, rising to over 79% in children above two years. Notably, children aged two to four years exhibited a higher efficacy of 79.6%, while those aged five to 12 years had an efficacy of 79.3%.

Long-Term Protection and Follow-up Results

• Durability of Protection: The study underscores the importance of durability of protection, particularly in children younger than two years. The incidence of typhoid fever in the control group remained similar across age bands.
• Increased Cases Prevented: The longer follow-up of at least 48 months revealed an increased number of cases prevented by the original single-dose vaccine intervention.
• Cumulative Vaccine Efficacy: The cumulative vaccine efficacy was estimated at 83.4% after one year, remaining consistently high at 77.1% after four years, demonstrating little decline over time.

Cost-Effectiveness and Global Impact

• Absolute Risk Reduction: The study indicates an absolute risk reduction of 6.1 typhoid infections per 1,000 vaccinated children, translating to a number needed to vaccinate 163 to prevent one case of typhoid fever.
• Estimated Cumulative Efficacy: The estimated cumulative efficacy remained substantial, ranging from 80.7% after two years to 78.3% after 4.61 years, supporting the vaccine’s cost-effectiveness.
• Typhoid Cases Worldwide and Vaccine Options
• Global Typhoid Scenario: In 2019, there were approximately 9.24 million typhoid cases and 110,000 deaths globally, with a significant burden in Southeast Asia and Africa.
• Existing Conjugated Typhoid Vaccines: Currently, two conjugated typhoid vaccines are available — Typbar TCV by Bharat Biotech and Biological E’s Vi-CRM197. Both vaccines have received WHO prequalification.

Concerns and Future Studies

• Typhoid Rebound Concerns: The study suggests the possibility of typhoid rebound in children aged 5-15 years due to waning protection by a single vaccine dose, highlighting the need for longer-duration efficacy studies.
• Booster Dose Study: An ongoing immunogenicity study is evaluating the efficacy of a booster dose administered nearly five years after the initial dose, specifically in the youngest children enrolled in the trial.

G. Tidbits

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Q1. With reference to Tiger Reserves in India, consider the following statements:

Q2. With reference to Dusted Apollo, consider the following statements:

Q3. With reference to India’s Culture, what is Kalaripayattu?

Q4. Under MNREGA the Social Audit Committee is selected by

Q5. With reference to educational institutions during colonial rule in India, 
consider the following pairs: