01 Sep 2020: UPSC Exam Comprehensive News Analysis

1 Sep 2020 CNA:- Download PDF Here

TABLE OF CONTENTS

A. GS 1 Related
ART AND CULTURE
1. Rare Renati Chola era inscription unearthed
B. GS 2 Related
POLITY AND GOVERNANCE
1. SC imposes ₹1 fine on Bhushan for contempt
C. GS 3 Related
INTERNAL SECURITY
1. Naga groups seek accord review
ECONOMY
1. RBI moves to ease liquidity further
2. GDP falls 23.9% in first quarter
D. GS 4 Related
E. Editorials
ECONOMY
1. GST reform needs a new grand bargain
ENVIRONMENT AND ECOLOGY
1. The environment is a national issue
F. Prelims Facts
G. Tidbits
1. Fiscal deficit overshoots FY budget target
2. ‘Most firms availing moratorium were struggling before COVID-19’
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions

Category: ECONOMY

1. RBI moves to ease liquidity further

Context:

The Reserve Bank of India (RBI) has announced measures to ease liquidity pressures amid rising yields on government securities and concerns of higher government borrowing.

Details:

In order to ensure orderly market conditions and congenial financial conditions, RBI has announced more measures.

Special Open Market Operations:

  • It has said that it would conduct additional, special open market operations (OMOs) as part of its efforts.
    • The OMOs via auctions involving the simultaneous purchase and sale of government securities for an aggregate amount of ₹20,000 crore in two tranches of ₹10,000 crore each, will be conducted.

Statutory liquidity ratio securities:

  • The RBI also allowed banks to hold fresh acquisitions of statutory liquidity ratio securities acquired from September 1, 2020 under Held-To-Maturity up to an overall limit of 22% of net demand and time liabilities up to March 31, 2021.
  • This will be reviewed thereafter.

Term Repo Operations:

  • RBI said it will conduct term repo operations for an aggregate amount of ₹1 lakh crore at floating rates (i.e., at the prevailing repo rate).
  • This is to relieve pressures on the market on account of advance tax outflows.

2. GDP falls 23.9% in first quarter

Context:

According to data released by the National Statistical Office, the Gross Domestic Product (GDP) of India has shrunk by a record 23.9% in the April to June 2020 quarter in comparison to the same period in 2019.

Details:

  • The contraction reflects the severe impact of the COVID-19 lockdown, as well as the slowdown trend of the economy even pre-COVID-19.
    • Agriculture was the only sector which recorded a modest growth of 3.4% in year-on-year terms.
    • All other sectors saw a contraction, with the steepest fall of 50% in construction, and the trade, hotels, transport and communication services category shrinking 47%.
    • On the expenditure side, private consumption fell 26.7%, while investments, as reflected by gross fixed capital formation plunged 47%, and exports contracted almost 20%.
    • Government final consumption expenditure grew 16.4%.

Concerns:

  • A member of the Advisory Council to the 15th Finance Commission opined that the Indian economy is in a deeply vicious cycle, where demand is contracting so heavily, while the capacity to neutralise this contraction has also contracted equally because of the tax revenue contraction.
  • Economists expect this to contribute to a contraction in annual GDP in 2020-21.
  • The last contraction of the economy occurred in 1979-80, when GDP shrank 5.2%.
  • There have been four other instances of minor contraction between 1965-68, and 1972-73.
  • However, it is opined that 2020-21 could see the worst contraction in the history of independent India.
  • Economists opine that the government needs to step up its own expenditure suggesting that the government can borrow from the market or the RBI (Reserve Bank of India).

Note:

  • NSO said that the contraction is estimated based on limited indicators pertaining to the formal sector. Data collection was hampered due to the lockdown.

2. ‘Most firms availing moratorium were struggling before COVID-19’

What’s in News?

Crisil Ratings said that three out of four entities that availed of loan moratorium were rated in the sub-investment grade, and that most of them were grappling with a slowing economy before the pandemic began.

  • Only one out of four companies that availed of the moratorium is rated in the investment grade (rated CRISIL BBB- or higher).

Read more on Credit Rating Agencies in India.

H. UPSC Prelims Practice Questions

Q1. Consider the following statements with respect to “contempt of court”:
  1. Provisions in the Constitution of India empower both the Supreme Court and the High Court to punish people for their respective contempt.
  2. The Constitution includes contempt of court as a reasonable restriction to the freedom of speech and expression under Article 19.
  3. Willful disobedience of a court order or judgment or willful breach of an undertaking given to a court amounts to criminal contempt.

Which of the given statement/s is/are correct?

  1. 1 and 2 only
  2. 1 only
  3. 2 and 3 only
  4. 1, 2 and 3
CHECK ANSWERS:-

Answer: a

Explanation:

  • Articles 129 and 215 of the Constitution of India empower the Supreme Court and High Court respectively to punish people for their respective contempt.
  • Article 19(1)(a) of the Constitution gives the right to freedom of speech and expression to all citizens. However, the Constitution includes contempt of court as a reasonable restriction to the freedom of speech and expression under Article 19.
  • Civil contempt of court most often happens when someone fails to adhere to an order from the court, with resulting injury to a private party’s rights. It can be willful disobedience of a court order or judgment or willful breach of an undertaking given to a court.
  • Criminal contempt of court is written or spoken words or any act that scandalises the court or lowers its authority or prejudices or interferes with the due course of a judicial proceeding or interferes/obstructs the administration of justice.
Q2. Which of the following are quantitative methods of credit control by RBI?
  1. Bank Rate
  2. Credit Rationing
  3. Open Market Operations
  4. Variable Cash Reserve Ratio

Choose the correct option:

  1. 1, 2 and 3 only
  2. 1, 2, 3 and 4
  3. 1, 3 and 4 only
  4. 3 and 4 only
CHECK ANSWERS:-

Answer: c

Explanation:

  • Bank rate, Open Market Operations, Statutory Cash Reserve Requirement, Statutory Liquidity Ratio, Variable Cash Reserve Ratio are the instruments of quantitative credit control.
  • Credit Rationing, Moral Suasion, Regulating Marginal Requirements on Security Loans, Direct Action, etc. are the instruments of qualitative/selective credit control.
Q3. Consider the following statements with respect to the River Wainganga:
  1. It originates in the Mahadeo Hills in Madhya Pradesh.
  2. Gosikhurd irrigation project is being constructed on the Wainganga River.
  3. It is a tributary of River Ganga.

Which of the given statement/s is/are incorrect?

  1. 2 only
  2. 1 and 2 only
  3. 3 only
  4. None of the above
CHECK ANSWERS:-

Answer: c

Explanation:

  • River Wainganga rises in the Mahadeo Hills in the Seoni District of Madhya Pradesh.
  • It is a tributary of River Godavari.
  • Gosikhurd Irrigation Project is one of the major irrigation projects in the Godavari basin being constructed on the river Wainganga.
Q4. Rezang La is a mountain pass in:
  1. Sikkim
  2. Ladakh
  3. Himachal Pradesh
  4. Uttarakhand
CHECK ANSWERS:-

Answer: b

Explanation:

Rezang La is a mountain pass in the union territory of Ladakh.

I. UPSC Mains Practice Questions

  1. The current design and implementation of the GST system have failed to deliver on the promise of enhanced economic growth and tax buoyancy. Analyze. Also, suggest suitable changes in the GST system to attain these goals. (15 marks, 250 words)(GS Paper 3/Economy)
  2. In the light of India’s poor performance in the Environment Performance Index, 2020, discuss the major concerns with respect to environmental conservation efforts in India. (10 marks, 150 words)(GS paper 3/Environment and Ecology)

Read the previous CNA here.

1 Sep 2020 CNA:- Download PDF Here

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