Daily Current Affairs : 20th August

Daily Current Affairs for UPSC CSE

1. Tardigrade
2. Sulphur dioxide
3. Bond yield & Inversion
4. Direct Tax Code Panel
5. Facts for Prelims : Ansupa

1 . Tardigrade

Context : On April 11, the Israeli spacecraft Beresheet attempted to land on the Moon, but crashed on the surface. It was carrying a number of items — including thousands of specimens of a living organism called tardigrade.

About Tardigrade

• The tardigrade, also known as water bear, is among the toughest and most resilient creatures on Earth.
• The tardigrade can only be seen under a microscope. Half a millimetre long, it is essentially a water-dweller but also inhabits land and, a 2008 study found, can survive in the cold vacuum of outer space.
• The tardigrade derives its name from the fact that it looks like an eight-legged bear, with a mouth that can project out like a tongue. Its body has four segments supported by four pairs of clawed legs.
• A tardigrade typically eats fluids, using its claws and mouth to tear open plant and animal cells, so that it can suck nutrients out of them.
• It is also known to feast on bacteria and, in some cases, to kill and eat other tardigrades. Although they are famed for their resilience, they are destructible too. Should a human being swallow a tardigrade with her food, her stomach acid will cause the flesh of the tardigrade to disintegrate.
• In 2017, another study found that if all other life were to be wiped out by a cataclysmic event a large asteroid impact, a supernova or a gamma-ray bursts — the tardigrade would be the likeliest to survive.
• The tardigrade can endure extreme hot and cold temperature levels. Although the tardigrades on the spacecraft were dehydrated, the organism is known to “come back to life” on rehydration. In fact, they themselves expel water from their bodies and set off a mechanism to protect their cells, and can still revive if placed in water later. However, there is no evidence of liquid water on the Moon, although there is ice.
• Without liquid water, it is possible that the tardigrades will remain in their current state, unless future astronauts find them and revive them in water.

2 . Sulphur dioxide

Context : A new report by Greenpeace India shows the country is the largest emitter of sulphur dioxide in the world, with more than 15% of all the anthropogenic sulphur dioxide hotspots detected by the NASA OMI (Ozone Monitoring Instrument) satellite. Almost all of these emissions in India are because of coal-burning, the report says.

About Sulphur Dioxide Emission in India

• The vast majority of coal-based power plants in India lack flue-gas desulphurisation technology to reduce air pollution.
• The Singrauli, Neyveli, Talcher, Jharsuguda, Korba, Kutch, Chennai, Ramagundam, Chandrapur and Koradi thermal power plants or clusters are the major emission hotspots in India
• In a first step to combat pollution levels, the Ministry of Environment, Forest and Climate Change introduced, for the first time, sulphur dioxide emission limits for coal-fired power plants in December 2015. But the deadline for the installation of flue-gas desulphurisation (FGD) in power plants has been extended from 2017 to 2022.

Overall Sulphur Dioxide emission in the world

• The report also includes NASA data on the largest point sources of sulphur dioxide. The largest sulphur dioxide emission hotspots have been found in Russia, South Africa, Iran, Saudi Arabia, India, Mexico, United Arab Emirates, Turkey and Serbia.
• Air pollutant emissions from power plants and other industries continue to increase in India, Saudi Arabia and Iran. In Russia, South Africa, Mexico and Turkey, emissions are currently not increasing — however, there is not a lot of progress in tackling them either.
• Of the world’s major emitters, China and the United States have been able to reduce emissions rapidly. They have achieved this feat by switching to clean energy sources; China, in particular, has achieved success by dramatically improving emission standards and enforcement for sulphur dioxide control.

Coal plants causing air pollution emergency

• Environment experts called for strict action on coal power plants. They said these plants should not be given a free hand to continue polluting and causing a health emergency situation in the country.

Health Hazards

• SO2 emissions are a significant contributor to air pollution. Its direct exposure and exposure to particulate matter PM2.5 (fine particulate matter) produced when SO2 reacts with other air pollutants to form sulphate particles both affect human health.

NASA – AURA Spacecraft 

• Aura is part of the Earth Science Projects Division, a program dedicated to monitoring the complex interactions that affect the globe using NASA satellites and data systems.
• Aura is a joint mission between NASA, the Netherlands, Finland, and the U.K
• Aura is a multi-national NASA scientific research satellite in orbit around the Earth, studying the Earth’s ozone layer, air quality and climate.
• Aura flies in a sun-synchronous orbit, in formation with 6 other satellites, collectively known as the A Train
• Instruments
  • High Resolution Dynamics Limb Sounder — measures infrareradiation from ozone, water vapor, CFC,, methane and nitrogen compounds
  •  Microwave Limb Sounder — measures emissions from ozone, chlorine and other trace gases, and clarifies the role of water vapor in global warming. 
  •  Ozone Monitoring Instrument — uses ultraviolet and visible radiation to produce daily high-resolution maps.
  •  Tropospheric Emission Spectrometer — measures tropospheric ozone in infrared wavelengths, also carbon monoxide, methane and nitrogen oxides. 

3 . Bond yield & Inversion

Context : As talk of a recession gets louder globally, bond yields are being keenly watched. A government bond yield curve most accurately reflects what investors think about current and future economic growth prospects.

What are bonds?

• A bond is an instrument to borrow money.
• A bond could be floated/issued by a country’s government or by a company to raise funds.
• Since government bonds (referred to as G-secs in India, Treasury in the US, and Gilts in the UK) come with the sovereign’s guarantee, they are considered one of the safest investments.
• As a result, they also give the lowest returns on investment (or yield). Investments in corporate bonds tend to be riskier because the chances of failure (and, therefore, the chances of the company not repaying the loan) are higher.

What are bonds yields?

• Simply put, the yield of a bond is the effective rate of return that it earns. But the rate of return is not fixed — it changes with the price of the bond. But to understand that, one must first understand how bonds are structured. Every bond has a face value and a coupon payment. There is also the price of the bond, which may or may not be equal to the face value of the bond
• Suppose the face value of a 10-year G-sec is Rs 100, and its coupon payment is Rs 5. Buyers of this bond will give the government Rs 100 (the face value); in return, the government will pay them Rs 5 (the coupon payment) every year for the next 10 years, and will pay back their Rs 100 at the end of the tenure. In this case, the bond’s yield, or effective rate of interest, is 5%. The yield is the investor’s reward for parting with Rs 100 today, but for staying without it for 10 years. .

Why and how do yields go up and down?

• Imagine a situation in which there is just one bond, and two buyers (or people willing to lend to the government). In such a scenario, the selling price of the bond may go from Rs 100 to Rs 105 or Rs 110 because of competitive bidding by the two buyers. Importantly, even if the bond is sold at Rs 110, the coupon payment of Rs 5 will not change. Thus, as the price of the bond increases from Rs 100 to Rs 110, the yield falls to 4.5%.
• Similarly, if the interest rate in the broader economy is different from the initial coupon payment promised by a bond, market forces quickly ensure that the yield aligns itself with the economy’s interest rate. In that sense, G-sec yields are in close sync with the prevailing interest rate in an economy.
• With reference to the above example, if the prevailing interest rate is 4% and the government announces a bond with a yield of 5% (that is, a face value of Rs 100 and a coupon of Rs 5) then a lot of people will rush to buy such a bond to earn a higher interest rate.
• This increased demand will start pushing up bond prices, even as the yields fall. This will carry on until the time the bond price reaches Rs 125 — at that point, a Rs-5 coupon payment would be equivalent to a yield of 4%, the same as in the rest of the economy.
• This process of bringing yields in line with the prevailing interest rate in the economy works in the reverse manner when interest rates are higher than the initially promised yields.

What is happening to US govt bond yields at present? What does it signify?

• The global economy has been slowing down for the better part of the last two years. Some of the biggest economies are either growing at a slower rate (such as the US and China) or actually contracting (such as Germany).
• As a result, US Treasury bond yields fell sharply as there was confirmation of slowdown in Germany and China.
• Reason: investors, both inside the US and outside, figured that if growth prospects are plummeting, it makes little sense to invest in stocks or even riskier assets. It made more sense rather, to invest in something that was both safe and liquid (that is, something that can be converted in to cash quickly). US Treasury bonds are the safest bet in this regard. So, many investors lined up to buy US Treasury bonds, which led to their prices going up, and their yields falling sharply.
• The fall in the yields of 10-year government bonds showed that the bond investors expected the demand for money in the future to fall. That is why future interest rates are likely to be lower. A lower demand for money in the future, in turn, will happen only when growth falters further. So government bond yields falling typically suggests that economic participants “expect” growth to slow down in the future.

And what is a yield curve, and what does it signify?

• A yield curve is a graphical representation of yields for bonds (with an equal credit rating) over different time horizons. Typically, the term is used for government bonds — which come with the same sovereign guarantee.
• If bond investors expect the US economy to grow normally, then they would expect to be rewarded more (that is, get more yield) when they lend for a longer period. This gives rise to a normal — upward sloping — yield curve
• The steepness of this yield curve is determined by how fast an economy is expected to grow. The faster it is expected to grow the more the yield for longer tenures. When the economy is expected to grow only marginally, the yield curve is “flat”.

What then is yield inversion, and what does it mean?

• Yield inversion happens when the yield on a longer tenure bond becomes less than the yield for a shorter tenure bond. This, too, happened last week when the 10-year Treasury yield fell below the 2-year Treasury yield.
• A yield inversion typically portends a recession. An inverted yield curve shows that investors expect the future growth to fall sharply; in other words, the demand for money would be much lower than what it is today and hence the yields are also lower.

How good is yield inversion at predicting a recession?

• Although US Commerce Secretary Wilbur Ross was quoted as saying Monday that “eventually there’ll be a recession but this inversion is not as reliable, in my view, as people think”, yet US data show historically that barring one episode in the mid-1960s, a yield inversion has always been followed by a recession.

4 . Direct Tax Code Panel

Context : The ‘Task Force for drafting a New Direct Tax Legislation’ submitted its report and a draft of the new proposed version of the Income-tax law to Finance Minister Nirmala Sitharaman 

Background

• The Task Force, headed by former CBDT Member (Legislation) Arbind Modi, was constituted in November 2017 in order to review the Income-tax Act and to draft a new Direct Tax Law. Then, in November 2018, the Finance Ministry appointed Akhilesh Ranjan, Member (Legislation), CBDT, as convenor of the task force after the retirement of the earlier convenor Modi.
• The report of the Task Force is yet to be made public.

Recommendations

• A rejig of personal income tax slabs, roadmap of corporate tax rate cut to 25 per cent for companies, suggestions to reduce compliance burden by simplification of procedures, and litigation management are some of the key recommendations which are learnt to have been outlined by the panel in its report.
• In the four slabs of personal income tax currently, the panel is learnt to have suggested a rejig in rates between 5 per cent to 20 per cent. As of now, for taxpayers below 60 years of age, there’s nil tax on income up to Rs 2.5 lakh, 5 per cent tax rate for income between Rs 2.5-5 lakh, 20 per cent tax rate for income between Rs 5-10 lakh and 30 per cent for income above Rs 10 lakh.
• Some tweaks have also been suggested for dividend distribution tax and minimum alternate tax.

5 . Facts for Prelims

Ansupa

• Ansupa is Odisha’s largest freshwater lake
• Ansupa is famous for its sweet water fish, especially labeo bata locally known as pohala.