Daily Current Affairs : 11th September 2020

Daily Current Affairs for UPSC CSE

Topics Covered

  1. Direct Deficit Monetization
  2. Cellulose Acetate
  3. India- Japan Logistics Agreement
  4. Dy. Speaker of Loksabha & Dy Chairman of Rajya sabha
  5. Facts for Prelims

1 . Direct Deficit Monetization

Context: The government and Reserve Bank of India (RBI) will be reviewing the plan for monetising its deficit as a last resort as India is experiencing revenue shortfalls in the wake of COVID-19 pandemic.

About the news

  • India’s economy, hardest hit by the COVID-19 pandemic is facing revenue shortfalls. Hence the government and Reserve Bank of India (RBI) are discussing the possibility of monetising the deficit.
  • The RBI is also planning to ease liquidity through open market operations to keep yields in check while helping the government to raise borrowing

About Deficit Monetization

  • The monetization of deficits involves the financing of extra expenses with money, instead of debt to be repaid at some future dates.

Methods of Deficit Montisation

  • Printing Money : Government prints its own money and finances its expenses. In practice, the same happens as the deficit is financed with newly created money issued by the central bank and transferred to the state treasury without future repayment obligations: the money issued by the central bank is either credited to the account of treasury or treasury is allowed an overdraft facility. Debt would obviously originate if treasury were to borrow the money from the central bank; yet, this would not constitute true monetization of the deficits, but simply a temporary support to treasury cash needs.
  • Open Market Operations : Deficits are monetized as the government issues bonds in the primary market and the central bank purchases an equivalent amount of government bonds from the secondary market. However for this modality to replicate the same effects of the first, the central bank must commit to the following actions: i) hold the purchased bonds in perpetuity, ii) roll over all the purchased bonds that reach maturity, and iii) return to government the interests earned on the purchased bonds

Indian Scenario

  • Direct monetization of deficit refers to a scenario where a central bank prints currency to the tune of accommodating massive deficit spending by the government. RBI does so by purchasing government securities directly in the primary market.
  • Monetisation of deficit was in practice in India till 1997, whereby the central bank automatically monetised government deficit through the issuance of ad-hoc treasury bills.
  • Such a monetization process used to be automatic only until 1997, when it was later decided to end this practice by entrusting RBI to conduct such OMOs (Open Market Operations) only in the secondary market.
    • The implied understanding also was that the RBI would use the OMO route not so much to support government borrowing but as a liquidity instrument to manage the balance between the policy objectives of supporting growth, checking inflation and preserving financial stability.
  • With the enactment of FRBM Act, 2003, RBI was completely barred from subscribing to the primary issuances of the government from April 1,2006. However, an escape clause in the 2017 amendment of the FRBM (Fiscal Responsibility and Budget Management Act) act permits such direct monetisation under special circumstances.
    • It can be evoked on the grounds that there just aren’t enough savings in the economy to finance government borrowing of such a large size. Bond yields would spike so high that financial stability will be threatened. The RBI must therefore step in and finance the government directly to prevent this from happening.

Monetized Deficit

  • Monetized deficit also known as the ‘net reserve bank credit to the government’, it is that part of the government deficit which is financed solely by borrowing from the RBI.
  • Since borrowings from the RBI can be both short-term and long-term, therefore, monetized deficit is the sum of the net issuance of short-term treasury bills, dated securities (that is, long-term borrowing from the RBI) and rupee coins held exclusively by the RBI, net of Government’s deposits with the RBI.

Difference between Monetized deficit and Traditional Budget deficit

  • Traditional Budget deficit includes 91-day treasury bills held by both, the RBI and non-RBI entities whereas Monetized deficit includes 91-day Treasury Bills held only by the RBI.
  • Traditional Budget deficit includes only short-term sources of finance whereas Monetized deficit includes long-term securities also.

Arguments against Deficit Monetization

  • Monetisation exercise leads to an increase in total money supply in the system, and hence inflation, as RBI creates fresh money to purchase the bonds.
  • Unlike the US dollar, Indian rupee is not considered a safe haven. Even when the US Federal Reserve prints more currency, there is still global demand for the US dollar. However, the same will not be the case for the rupee. Thus, when there is excess supply of the currency, it could lead to a fall in rupee value, leading to an outflow of foreign investment. A rupee depreciation would not be beneficial for the exports sector either.
  • Direct monetization could weaken the macro fundamentals of the country, risking a downgrade by the credit rating agencies, which can in turn bring about more cost to the economy

Arguments for Deficit Monetization

  • Modern Monetary Theory (MMT) argues that a fixation with government deficits is misguided and that in the absence of rising inflation and real resource constraints, the government should just print money, if necessary, to revive the economy. 
  • Argument of expansion of money supply which may lead to inflation are not correct in a situation where aggregate demand has fallen sharply and there is an increase in unemployment. In such a situation, monetisation of the deficit is more likely to raise actual output closer to potential output without any great increase in inflation.
  • The impact on money supply is the same whether the central bank acquires government bonds in the secondary market or directly from the Treasury. 

2 . Cellulose Acetate

Context: The National Green Tribunal has passed an order directing the Central Pollution Control Board (CPCB) to lay down guidelines for disposal of cigarette and bidi butts within the next three months.

Details of NGT’s order

  • The NGT has directed Central Pollution Control Board (CPCB) to lay down guidelines for disposal of cigarette and bidi butts within the next three months.
  • The order by NGT has come while hearing a plea moved by NGO ‘Doctors for You’ and is also based  on a report filed by the Central Pollution Control Board (CPCB).
  • The report by CPCB is based on a study conducted by the Indian Institute of Toxicology Research (IITR) which has analyzed the concentration of various parameters which it says are lower than the prescribed limits and will not be toxic to humans and environment.

Details of the report

  • The report by IITR has given an analysis of the safety and toxicity of the cigarette and beedi butts.
  • An analysis of the concentration of various parameters were done which show that concentrations detected are not toxic to human and environment.
  • The toxicity date is not available for cellulose acetate which is a major component (95%) of the cigarette and beedi butts along with the wrapping paper and rayon.
  • The degradation studies of cellulose acetate show that it persists for a longer duration.
  • Recycling of cellulose acetate after recovery from cigarette butts can be one of the immediate solution to the problem until the degradation and safety data are generated.
  • The study added that natural environmental conditions and laboratory stimulating conditions would be required to conclude the safety or toxicity of cigarette butts to further correlate with human and environmental health risk assessment.

Cellulose Acetate

  • Cellulose acetate is a synthetic compound derived from the acetylation of the plant substance cellulose.
  • Cellulose acetate is used as a film base in photography, as a component in some coatings, and as a frame material for eyeglasses; it is also used as a synthetic fiber in the manufacture of cigarette filters and playing cards. In photographic film, cellulose acetate replaced nitrate film in the 1950s, being far less flammable and cheaper to produce.
  • Cellulose acetate is spun into textile fibres known variously as acetate rayon, acetate, or triacetate.
  • It can also be molded into solid plastic parts such as tool handles or cast into film for photography or food wrapping, though its use in these applications has diminished.

3 . India – Japan logistics agreement

Context: Recently, India and Japan signed a logistics agreement called as Acquisition and Cross-Servicing Agreement (ACSA).

About Logistics Agreement

  • Logistics agreements are administrative arrangements which help to facilitate the replenishment of fuel, rations, spares (where required), and berthing and maintenance for the other nations’ warships, military aircraft and troops during routine port calls, joint exercises and training carried out in each other’s countries as well as during humanitarian assistance and disaster relief .
  • These agreements simplify the bookkeeping during such events and ensure that the forces of the visiting countries are benefitted by using the host nation’s existing logistics network, which additionally reduces overall costs and saves on time.
  • Japan becomes the sixth country with which India has such an arrangement, adding to the United States, France, Singapore, South Korea, and Australia.

Detail of the agreement with Japan

  • Acquisition and Cross-Servicing Agreement would allow the militaries of the two countries to exchange supplies and services on a reciprocal basis during exercises in which both participate, U.N. and humanitarian assistance operations, as well as visits to each other’s ports.
  • The agreement provides for creation of an enabling framework for closer cooperation and interoperability, besides allowing militaries of the two countries to use each other’s bases and facilities for repair and replenishment of supplies, the official said.
  • It will remain in force for 10 years and will be automatically extended for periods of 10 years unless one of the parties decides to end it.

Significance of the agreement

  • The agreement will promote closer cooperation between the militaries of the two countries, and enable them to actively contribute to international peace and security.
  • The pact will enhance the interoperability between the armed forces, resulting in further expansion of bilateral defence engagement under the Indo-Japan special strategic and global partnership.
  • The agreement will help both India and Japan to coordinate on medical requirements, supplies, maintenance, airlifting and communication.
  • The agreement is mainly aimed at greater maritime cooperation and can dramatically upgrade India-Japan naval exercises as the participants are expected to share maritime facilities for mutual benefit.

4 . Dy. Speaker of Loksabha & Dy Chairman of Rajya sabha

Context: Deputy Speaker’s position has been vacant for the past 15 months and efforts are being made to fill the same.

About Deputy Speaker

  • Article 93 of the Constitution provides for the election of both the Speaker and the Deputy Speaker.
  • The Deputy Speaker of the Lok Sabha is the vice-presiding officer of the Lok Sabha, the lower house of the Parliament of India.


  • They act as the presiding officer in case of leave or absence caused by death or illness of the Speaker of the Lok Sabha.


  • They hold office until either they cease to be a member of the Lok Sabha or they resign.
  • They can be removed from office by a resolution passed in the Lok Sabha by an effective majority of its members.
  • It is by convention that position of Deputy Speaker is offered to opposition party in India.


  • According to the tradition the position of the Deputy Lok Sabha Speaker is given to the principal Opposition party in the Lok Sabha. But this trend began with the non-Congress government of Morarji Desai offering the position of the Deputy Lok Sabha Speaker to the Opposition Congress party in 1977. Before that, the Congress held both positions.
  • However, the Indira Gandhi government in 1980 on her come back and the Rajiv Gandhi government in 1984 did not offer the position to opposition parties. They offered the Deputy Lok Sabha Speaker’s position to their allies the DMK and the AIADMK respectively.
  • The trend was restored in 1989 by the VP Singh government and was followed by successive governments including those under PV Narasimha Rao, Vajpayee and Manmohan Singh.
  • In 2014, the Narendra Modi government did a Congress to the Congress party by not offering the position of the largest opposition party. The Modi government offered the position to the next biggest party, the AIADMK

Election Rules

  • According to the Rules of Procedure and Conduct of Business in Lok Sabha, “The election of a Deputy Speaker shall be held on such date as the Speaker may fix.”
  • But as per tradition Speaker needs the nod of the government for announcing such an election. Once this is notified, one or more motions can be moved by members for election of a nominee as the Deputy Speaker of the Lok Sabha.
  • No member can move a motion for his or her own election. If a properly moved motion is accepted by the simple majority of the house, the MP becomes the Deputy Speaker of the Lok Sabha.

Deputy Chairman of Rajya Sabha

Context: The Congress parliamentary strategy group has decided to work with the Opposition parties to field a joint candidate for the election of Rajya Sabha deputy chairman’s post.

Deputy Chairman of Rajya Sabha

  • The Deputy Chairman is a constitutional position created under Article 89 of the Constitution, which specifies that Rajya Sabha shall choose one of its MPs to be the Deputy Chairman as often as the position becomes vacant.
  • The Deputy Chairman is elected by the Rajya Sabha itself from amongst its members.

Roles and Functions

  • The Deputy Chairman performs the duties of the Chairman’s office when it is vacant or when the Vice-President acts as President or discharges the functions of the President.
  • He also acts as the Chairman when the latter is absent from the sitting of the House.
  • In both the cases, he has all the powers of the Chairman
  • The Deputy Chairman is not subordinate to the Chairman. He is directly responsible to the Rajya Sabha.

Procedure for vacating the office

  • If he resigns by writing to the chairman
  • If he is removed by a resolution passed by a majority of all the members of the Rajya Sabha. Such a resolution can be moved only after giving 14 days’ advance notice.
  • If he ceases to be a member of the Rajya Sabha


  • Any Rajya Sabha MP can submit a motion proposing the name of a colleague for this constitutional position.
  • The motion has to be seconded by another MP.
  • Additionally, the member moving the motion has to submit a declaration signed by the MP whose name s/he is proposing stating that the MP is willing to serve as the Deputy Chairperson if elected.
  • Each MP is allowed to move or second only one motion.
  • Then the majority of the House decides who gets elected as the Deputy Chairperson.
  • However, if the political parties arrive at a consensus candidate, then that MP will be unanimously elected as the Deputy Chair.

5 . Facts for Prelims

National School of Drama

  • Actor and former BJP MP, Paresh Rawal has been appointed as the Chairperson of the National School of Drama Society.
  • He has been appointed for a four-year term.
  • The National School of Drama is one of the foremost theatre training institutions in the world and the only one of its kind in India.
  • It was set up by the Sangeet Natak Akademi as one of its constituent units in 1959.
  • In 1975, it became an independent entity and was registered as an autonomous organization under the Societies Registration Act XXI of 1860, fully financed by the Ministry of Culture, Government of India.

e-gopala app

  • e-GOPALA app will provide information “related to cattle care, from productivity to its health and diet”. The app will enable cattle owners to buy and sell animals

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