11 Jan 2021: UPSC Exam Comprehensive News Analysis

11 Jan 2021 CNA:- Download PDF Here

TABLE OF CONTENTS

A. GS 1 Related
B. GS 2 Related
POLITY AND GOVERNANCE
1. Organisers of cockfights warned of penal action
INTERNATIONAL RELATIONS
1. U.S. removes restrictions on diplomatic contact with Taiwan
2. Gyawali to discuss border dispute
3. Qataris head to Saudi Arabia after reopening of border
C. GS 3 Related
ECONOMY
1. Arunachal harbours a vanadium source
2. Q3 private investment in manufacturing jumps 102%
D. GS 4 Related
E. Editorials
INFRASTRUCTURE
1. The front seat in electric mobility
ECONOMY
1. Planning an exit out of the easy money regime
HEALTH
1. Felled by fire
F. Prelims Facts
1. Gangasagar Festival
G. Tidbits
1. Two flight surgeons to train in Russia
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions

Category: INTERNATIONAL RELATIONS

1. U.S. removes restrictions on diplomatic contact with Taiwan

Context:

Secretary of State Mike Pompeo announced that the State Department is voiding longstanding restrictions on how U.S. diplomats and others have contact with their counterparts in Taiwan.

Concerns:

• The latest move is expected to upset China.
• China’s state media lashed out at the Secretary of State for seeking to maliciously inflict a long-lasting scar on China-U.S. ties.

Details:

• The Trump administration has sought to strengthen bilateral relations with Taiwan.
• It announced that UN Ambassador Kelly Craft would go to Taiwan.
• Taiwan Foreign Minister welcomed the move.
• In August 2020, Health and Human Services Secretary Alex Azar became the first Cabinet member to visit Taiwan since 2014.

2. Gyawali to discuss border dispute

Context:

Addressing an extraordinary session of the Upper House of Parliament, Nepal’s Prime Minister Mr. Oli said Foreign Minister Pradeep Kumar Gyawali would visit India on January 14 to discuss the dispute related to the border and several other issues.

• The announcement has put an end to speculation about a breakthrough visit to help revive the relationship which was hit by the Kalapani territorial dispute.

Background:

• India and Nepal had disagreements over a road to Lipulekh, leading to Nepal amending its constitution.
• The dispute erupted after India published a new political map in November 2019 following which Nepal introduced a map that claimed the Kalapani-Lipulekh-Limpiyadhura region of Pithoragarh.

This topic has been covered in 24^th May 2020 Comprehensive News Analysis.

Details:

• Nepal’s Prime Minister has asserted that Nepal wants equality-based friendship with India and take it to a new height.
• He maintained that dissolution of the Lower House, Pratinidhi Sabha, was necessary and that the government under his leadership would seek a fresh political mandate to ensure stability.

This topic has been covered in 21^st December 2020 Comprehensive News Analysis.

3. Qataris head to Saudi Arabia after reopening of border

Context:

Gulf leaders signed a “solidarity and stability” deal after leaders of Saudi Arabia and Qatar publicly embraced, bringing Qatar back into the regional fold after a three-year-long rift.

This topic has been covered in 6^th January 2021 Comprehensive News Analysis.

Background:

• Saudi Arabia shut its side of Qatar’s only land border in June 2017 as part of a package of sanctions it said was a response to Doha’s backing of radical Islamist groups and closeness to Iran.
• Qatar always denied the charges.
• Recently, Saudi Arabia, along with the United Arab Emirates, Bahrain and Egypt, all of which had also imposed embargoes on travel and trade, agreed to lift the restrictions at a Gulf Cooperation Council summit in the kingdom.

Details:

• Qataris celebrated crossing their border with Saudi Arabia, calling the Kingdom “our second country”.
• Qatar Airways and Saudi Airlines said that they would soon begin resuming flights between their countries.

2. Q3 private investment in manufacturing jumps 102%

Context:

India has witnessed a continued rise in private investments in the third quarter (Q3) of 2020-21, led by a 102% surge in manufacturing investments.

Details:

• This has, in turn, helped India register a 10.3% increase in fresh project spending in Q3 over the previous quarter.
• This suggests a reversal from recent years’ trend of government capital expenditure propping up the economy while the private sector remained reluctant to invest due to flat consumer demand and weak balance sheets.
• However, new project investment intentions from the government declined by 7.21% in terms of project expenditure and 19.32% in terms of projects, compared to the previous quarter.
  • New capital expenditure proposals from the government collapsed between October and December 2020, owing to funding constraints to the States.

Note:

Maharashtra received the highest investment projects in Q3, followed by Andhra Pradesh, Gujarat and Tamil Nadu.

Category: ECONOMY

1. Planning an exit out of the easy money regime

Context:

• The RBI’s abilities to balance the inflation-growth equation would be tested with the Indian economy recovering and the need to ease the expansionary monetary policy.

Details:

• The COVID-19 pandemic and the ensuing lockdown has crippled economies world over, with India being no exception.
• The Reserve Bank of India (RBI) resorted to an expansionary monetary policy to make way for credit creation and dispersal.
• As a part of such a policy, the RBI slashed policy interest rates aggressively, creating conditions of a market with high liquidity availability and instituted a slew of measures for targeted assistance to especially distressed sectors.

Must be a deliberative process

• The economy has appeared to have been on a recovery mode, with better second-quarter performance than the first quarter and also the second quarter seeing an expansion in the manufacturing output.
• There has been optimism expressed by several economists who have talked of a ‘V-shaped recovery’ and have predicted an improved performance in the rest of the fiscal year.
• The RBI must be devising a strategy for a gradual easing of the expansionary policy. The role of a central bank comes under the microscope when a country is undergoing a tough financial crisis.
• Crisis management is one of the responsibilities of RBI, like most central banks across the world. In this scenario, RBI’s expansionary policy to resuscitate the economy that’s struggling post the pandemic, cannot be seen as a strategy without a due-date.
• Reversing a crisis-induced expansionary policy has to be a deliberative process, care has to be given to ensure that its timing and sequencing are not disruptive. The lessons from the global financial crisis have taught us that any knee-jerk reaction on the exit-path can undo a lot of hard work done until then.

So what are the challenges that the RBI will confront on the way out?

• The biggest challenge that the RBI will have to deal with is balancing inflation and growth aspirations.
• The inflation-growth policy dilemma is not a novel issue haunting the RBI. This is an issue that is prevalent even when the macroeconomic situation is benign; the pandemic has just accentuated the dilemma.
• The Monetary Policy Committee (MPC) review suggested that the inflation remained above the RBI’s target band for the past several months, and according to the RBI’s own estimates, is expected to remain above the band for the next several months.
• But the RBI chose not to alter the policy rate out of concerns for growth and financial stability.
• The MPC expects inflation to climb down on its own in the near future as supply chains, disrupted by the lockdown, get back on track and the bumper winter crop comes into the market.

Inflation and revival

• The expansionary monetary policy without enhancing the supply capabilities will pave way for inflation.
• Inflation could be on an upward journey owing to several factors even though there could be some apparent softening purely because of base effects.
• Several economists fear that persistent inflation will spill over food items.
• Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors. This measure of inflation excludes these items because their prices are much more volatile.
• Core inflation could firm up because of rising input prices. ‘Excessive margins’, among the factors cited by the MPC as one of the causes of high inflation, may not disappear if firms, regaining pricing power amid demand recovery, raise prices to mend their balance sheets.
• The much talked about economic recovery is still fragile in nature, and the recovery hasn’t been uniform, with large industries finding their foothold while small and medium enterprises and the entire informal sector being some way away from recovery.
• The improved performance should not be read too much into, as some of the firms are resorting to laying off workers to trim the wage bill.

Plight of savers

• RBI can ill-afford to forget the plight of savers, who are being shortchanged by low-interest rates at a time of high inflation.
• All these concerns taken together make a complex cocktail of dilemmas for the RBI as it seeks to normalise the policy rates.
• A second and related challenge will be to withdraw the ‘excess’ liquidity in good time.
• Banks are routinely depositing trillions of rupees with the RBI every day, evidencing that all the money that the central bank unleashed into the system is not doing much good anymore.
• For sure, there was a clear purpose behind the RBI joining the global central bank bandwagon of ‘dash for cash’ to inspire confidence in the economy when confidence was at a very low ebb.
• Every financial crisis can be traced back to mispricing of risk, and mispricing of risk is what results when there is too much liquidity sloshing around the system for too long. It will drive investors into dodgy ventures and threaten financial stability.

Market reactions

• The RBI aims to protect financial stability by normalising liquidity, any move to do that will have to deal with possible market tantrums.
• The policy of ‘quantitative easing’ was famously followed by the US Federal Reserve in the aftermath of the sub-prime crisis.
  • Quantitative easing (QE) is a monetary policy whereby a central bank purchases at scale government bonds or other financial assets in order to inject money into the economy to expand economic activity.
• Post the announcement of gradual tapering of the ‘Quantitative easing’, it set off a wave of panic and uncertainty.
• RBI will have to manage its communication as carefully as it does the liquidity withdrawal.

Financial stability

• The current account surplus this year together with massive capital flows has meant an excess of dollars in the system putting upward pressure on the rupee which is already overvalued in real terms.
• The RBI has absorbed the excess US Dollars to the tune of $90 billion from the economy.
• The mopping-up operation in this fiscal year has been with an aim to prevent the appreciation of exchange rate and to maintain the competitiveness of the rupee, which is very crucial for Indian exports to remain competitive in the global market.
• The RBI also cannot be overzealous in absorbing the excess dollars as that may further lead to excess in rupee availability, leading to a spike in liquidity and consequently the inflation.
• Thus RBI’s actions of intervening in the forex market are not without limitations. Managing the impossible trinity will be a tricky challenge for RBI going forward.

Conclusion

• The RBI is confronted with a classic case of ‘the impossible trinity’ of keeping doors open for capital flows while simultaneously maintaining a stable exchange rate and restraining inflation. Maintaining a policy balance across all three conflicting objectives can be tricky.

Category: HEALTH

1. Felled by fire

Context:

• A fire that killed 10 babies in a hospital in Bhandara, Maharashtra, was likely caused by an explosion in one of the several radiant warmers in the Sick Newborn Care Unit (SNCU).

Details:

• The fire incident has brought in much-needed focus and attention to safety norms in medical facilities.
• The incident is a shocking reminder of the infrastructural inadequacies in the Indian healthcare ecosystem.

Incident

• Some of the victims, a few just days old, had been brought to the hospital for better care from smaller health facilities.
• The response of the staff has come under the scanner, reports have highlighted their incapabilities in dealing with the incident, reflecting poor training standards.
• There are reports of poorly trained staff failing to respond adequately.
• The incident is not a one-off incident, several incidents have occurred in government and private hospitals, a reflection of safety protocols.
• There were devastating fires in COVID-19 facilities in Vijayawada and Ahmedabad, with several casualties, last year.
• It was blamed on poor oversight by fire authorities or faulty electrical repairs.

The response

• The Maharashtra government has initiated a probe into the Bhandara fire and also ordered a fire audit of hospitals, but this will not effectively address the inadequacies.
• Hospital fires are a distinct entity, and research indicates that there are specific factors that trigger them off and aggravate their impact.
• Intensive Care Units, neonatal ICUs and operating rooms are often the sites of fires, implicating the presence of a high concentration of oxygen in a confined space.
• The Journal of Clinical Anesthesia conducted a review of Indian hospital fires and identified higher oxygen availability in intensive care facilities as the likely primary cause, with motors and electrical units in the room providing the ignition, and plastics fuelling it.
• It is thus important for the audits to take into consideration all these factors and evaluate them, only then the audits can be said to be reliable, if not they’ll remain mere paperwork.
• Oxygen monitors for hospital rooms, to ensure that the ambient level is within safe norms set at a maximum of 23.5% by the U.S. National Fire Protection Association could prevent an accident. Locating electrical equipment for air-conditioners with sparking potential away from oxygen saturated areas may also reduce the risk.

Conclusion:

• The health sector is expanding, thus it is essential that all the upcoming infrastructure adheres to rigorous safety standards.
• The regulatory standards must be up to international standards and the regulatory authorities must not compromise on safety. Only when a regulatory mechanism is robust, a strict safety protocol will be adhered to in full.
• The Centre should also create a public platform for insights gained from inquiries into hospital fires to be shared. Hospitals should mandatorily hold regular safety and evacuation drills which are key to saving lives when disaster strikes.

Q1. Which of the following are the member states of Gulf Co-operation Council?

Q2. Gangasagar Festival is organised in which Indian state?

Q3. Consider the following statements with respect to Vanadium:

Q4. Consider the following statements with respect to the Animal Welfare Board 
of India:

11 Jan 2021 CNA:- Download PDF Here