Daily Current Affairs : 21st January 2023

Daily Current Affairs for UPSC CSE

Topics Covered

1. IMF Lending and Financial Assurances
2. Biodegradable Plastics
3. India – Egypt Relationship
4. Caste Based Census

1 . IMF Lending and Financial Assurances

Context: India did not wait for other bilateral creditors but did “what is right” for Sri Lanka’s economic recovery, visiting External Affairs Minister S. Jaishankar said on Friday, following talks with Sri Lankan President Ranil Wickremesinghe in Colombo.  

About the News 

• India sent written financing assurances to the IMF, becoming the first bilateral creditor of the island nation to officially support its crucial debt restructure programme after last year’s economic meltdown.
• The Fund’s provisional $2.9 billion package will be cleared only after Sri Lanka’s official creditors — China, Japan and India — have provided adequate financing assurances. 
• Sri Lanka went virtually bankrupt last year as it grappled with severe foreign exchange shortages to pay either for essential imports or its foreign creditors. Since then, it has grappled with runaway inflation of food and fuel prices. It also suspended repayment of $7 billion in foreign debt due last year. 
• Sri Lanka began debt restructuring talks with its creditors in September last year as warranted by its agreement with the IMF for the USD 2.9 billion facility over four years. 
• It began negotiating with the IMF for a bail-out after having announced its first-ever sovereign debt default in April last year. 
• The IMF facility would enable the island nation to obtain bridging finance from markets and other lending institutions such as the ADB and the World Bank. 

IMF 

• The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., 
• It consists of 190 countries. 
• Mission- “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world” 

What is debt restructuring? 

• Debt restructuring is the process of renegotiating the terms of debt, so the payments of debt are more manageable. This can include extending the repayment period, lowering the interest rate, or reducing the overall balance owed. 

IMF Financing Assurance 

• An IMF policy developed in response to the external debt crisis of the late 1970s and early 1980s to help mobilize financial support from the international banking community for countries experiencing debt-servicing difficulties. Under the policy, the IMF would not make its resources available to a member undertaking an adjustment program until receiving assurances that the financing for the program would be forthcoming. 
• Entering into debt distress is often a painful process, which may threaten macro-economic stability and set back a country’s development for years. Supporting member countries in managing debt risks and resolving debt distress is therefore at the heart of the IMF’s work. 
• An IMF-supported program can support a member in the context of a debt restructuring by providing sound economic policies and new financing, enabling the return to macroeconomic viability. 

What kind of financial assistance does the IMF offer? 

• Unlike development banks, the IMF does not lend for specific projects.  
• Instead, the IMF provides financial support to countries hit by crises to create breathing room as they implement policies that restore economic stability and growth.  
• It also provides precautionary financing to help prevent crises.  
• IMF lending is continuously refined to meet countries’ changing needs. 

Causes of crises 

The causes of crises are varied and complex. They can be domestic, external, or both. 

• Domestic factors include inappropriate fiscal and monetary policies, which can lead to the large current account and fiscal deficits and high public debt levels; an exchange rate fixed at an inappropriate level, which can erode competitiveness and result in the loss of official reserves, and a weak financial system, which can create economic booms and busts. Political instability and weak institutions also can trigger crises. 
• External factors include shocks ranging from natural disasters to large swings in commodity prices. Both are common causes of crises, especially for low-income countries. With globalization, sudden changes in market sentiment can result in capital flow volatility. Even countries with sound fundamentals can be severely affected by economic crises and policies elsewhere. 
• The COVID-19 pandemic was an example of external shock affecting countries across the globe. The IMF responded with unprecedented financial assistance to help countries protect the most vulnerable and set the stage for economic recovery. 

Types of crises  

Crises can take many different forms.  For instance, 

• Balance of payment problems occur when a nation is unable to pay for essential imports or service its external debt. 
• Financial crises stem from illiquid or insolvent financial institutions. 
• Fiscal crises are caused by excessive deficits and debt. 
• Often, countries that come to the IMF face more than one type of crisis as challenges in one sector spread throughout the economy.  
• Crises can slow growth, increase unemployment, lower incomes, and create uncertainty, leading to a deep recession. In an acute crisis, defaults or restructuring of sovereign debt may be unavoidable. 

Sri Lanka debt crisis 

• The Sri Lankan economy has been facing a crisis owing to a serious balance of payments (BoP) problem.  
• Its foreign exchange reserves were depleting rapidly.  
• It was becoming increasingly difficult to import essential consumption goods.  
• The country was unable to repay past debts.   

Objective of the Sri Lanka debt restructuring scheme 

• The objectives of Sri Lanka’s new Fund-supported program are to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential. 
• Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.  
• Financing assurances to restore debt sustainability from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors are crucial before the IMF can provide financial support to Sri Lanka. 

2 . Biodegradable Plastics

Context: Eight months after the Centre banned single-use plastic and paved the way for the use of biodegradable plastic, a lack of coordination among multiple ministries of government has led to the question remaining unanswered. A consequence of this is that several manufacturers, who are now unable to manufacture single-use plastic goods and invested in making biodegradable alternatives, are unable to produce them and stare at an uncertain future. 

Background

• Ministry of Environment, Forest and Climate Change, Government of India, has notified the Plastic Waste Management Amendment Rules, 2021, which prohibits identified single use plastic items which have low utility and high littering potential by 2022.  
• The manufacture, import, stocking, distribution, sale and use of following single-use plastic, including polystyrene and expanded polystyrene, commodities shall be prohibited with effect from the 1st July, 2022:-
  • ear buds with plastic sticks, plastic sticks for balloons, plastic flags, candy sticks, ice-cream sticks, polystyrene [Thermocol] for decoration;
  • plates, cups, glasses, cutlery such as forks, spoons, knives, straw, trays, wrapping or packing films around sweet boxes, invitation cards,  and cigarette packets, plastic or PVC banners less than 100 micron, stirrers.
• In order to stop littering due to light weight plastic carry bags, with effect from 30th September, 2021, the thickness of plastic carry bags has been increased from fifty microns to seventy five microns and to one hundred and twenty microns with effect from the 31st December, 2022. This will also allow reuse of plastic carry due to increase in thickness.
• The biodegradable plastics have to conform to the standard notified by the Bureau of Indian Standards and certified by the Central Pollution Control Board

About the issue

• The BIS has established a provisional protocol of testing biodegradable plastic that says 90% biodegradation should be achieved to pass the test which may take up to two years. A sectional committee there will establish a standard after further reviews,
• As it will take a minimum of two years to check if the plastics can indeed degrade to at least 90%, the Environment Ministry in its notification of July 2022 banning single-use plastic allowed manufacturers to get a ‘provisional certificate’ valid till June 2023 from the Central Pollution Control Board (CPCB) allowing them to make biodegradable plastic goods.
• Such a certificate could be procured if a manufacturer obtained an ‘interim’ test report from the Central Institute of Petroleum Technology (CIPET), or other accredited testing labs.
• Such interim test report to the CPCB for a licence were rejected because they insisted that they would only consider a test that showed 90% degradation as valid. This is unfair as nowhere in the rules does it say that ‘interim’ means 90% [degradation],”

What are biodegradable plastics? 

• Biodegradable plastics are those that can decompose naturally in the environment. The makeup structure of biodegradable plastics makes them easily break down by natural microorganisms, giving a product that is less harmful to the environment. 

How are Biodegradable Plastics Made? 

• Biodegradable plastics are made in a way that they can breakdown or degrade when exposed to the sun’s ultra-violet radiation, enzymes, bacteria, water, or wind abrasion. They are made from renewable raw materials or all-natural plant or animal materials such as orange peels, corn oil, switchgrass, soybeans, micro-organisms, or starch 
• The industrial processing of biodegradable plastics is like the manufacture of ordinary plastic, only that the materials used differ, and for bio-degradable plastics; they are the materials that can easily break down or decompose. They are mainly categorized into two:
  • Bioplastics; are purely made from natural substances such as corn starch. Examples of those made from corn starch. In their manufacturing process, they save energy and emit less carbon as the plants used already have the same amount of carbon. 
  • Biodegradable plastics; made from traditional petrochemicals but designed to break down faster. They have additives that speed up their rate of decay or breakdown in the presence of oxygen and light. 
  • The presence of moisture also accelerates the breakdown process. Mainly, they get a breakdown in the presence of the sun’s UV light with some only breaking down at high industrial-scale temperatures. 
  • The most common examples include polybutyrate adipate terephthalate (PBAT), polybutylene succinate (PBS), polyvinyl alcohol (PVOH/PVA), and polycaprolactone (PCL). 

Advantages of Using Biodegradable Plastics 

• Biodegradable Plastics are easy to Recycle 
• They Consume less energy during their manufacture 
• Biodegradable plastics are a better choice as they are broken down easily and can be absorbed by the soil or converted into compost. 
• Composting bioplastic products can make the soil fertile, thereby enhancing soil fertility.   
• Since fossil fuels are not required in the manufacturing process of such nature-friendly, biodegradable plastic products, carbon dioxide emissions are also curtailed. 
• The use of biodegradable plastic products instead of traditional plastics lessens the amount of greenhouse gas emissions 

Disadvantages of Biodegradable Plastics 

• Need for Costly Equipment for Both Processing and Recycling 
• Risk of Contamination due to confusion differentiating between Bio-degradable and Non-Biodegradable Plastics 
• Biodegradable Plastics may produce Methane in landfills 
• There is a need for more crops and croplands to produce Biodegradable Plastics

3 . India – Egypt Relationship

Context: India and Egypt are likely to seal around half a dozen agreements during the visit of Egyptian President Abdel Fattah El Sisi who is slated to arrive in New Delhi on January 24 ahead of the Republic Day celebrations where he will be the chief guest.

Historical Background

• India and Egypt are two of the world’s ancient civilizations with a history of close contact. Numerous historians have recorded the common heritage of the ancient civilizations of these two countries. Some historians have attempted to conclude that the Dravidians from India laid the foundations of Egyptian civilization.
• Egyptians also believe in the traditional discourse that they originally came from the South, from a land called Punt, which a historian, Dr H.R. Hall, thought referred to some part of India. Adolf Erman (1854-1937), author of the book “Life in ancient Egypt”.
• There is also a clear mention of good relations with Egypt in Emperor Ashoka’s edicts. In Ashoka’s thirteenth rock edict, inscribed in the early decades of the third century B. C, Ashoka mentions his contacts with Ptolemy II Philadelphus of Egypt (285-246 BC). In modern history, the freedom movement of both countries had common threads wherein Mahatma Gandhi and Saad Zaghloul shared similar goals towards gaining independence.

Political relationship

• India and Egypt share close political understanding based on long history of contacts and cooperation in bilateral, regional and global issues.
• The joint announcement of establishment of diplomatic relations at Ambassadorial level was made on 18 August 1947.
• Both countries have cooperated closely in multilateral fora and were the founding members of Non-Aligned Movement.
• India-Egypt relations could not, however, maintain the positive momentum in the coming decades, especially after Anwar Sadat became the President. With Sadat choosing to align with the US and India ideologically aligned with the USSR during the cold war period, the relations remained low-key.
• Ties remained stagnant until a breakthrough in November 2008, when President Hosni Mubarak visited India. Bilateral ties had stalled due to mutual neglect, and it was time to change that. Both sides decided to establish a Strategic and Security Policy Dialogue at the level of foreign ministers
• The year 2022 is of particular significance since it marks the 75th anniversary of diplomatic relations between India and Egypt.

Economic Relationship

• Egypt has traditionally been one of India’s most important trading partners on the African continent. The India-Egypt Bilateral Trade Agreement has been in operation since March 1978 and is based on the Most Favoured Nation clause and the bilateral trade has increased more than five times in last ten years. Bilateral trade has expanded rapidly in 2021-22, amounting to 7.26 billion registering a 75% increase compared to FY 2020-21.
• India’s exports to Egypt during this period amounted to US$ 3.74 billion, registering a 65% increase over the same period in FY 2020-21. At the same time, Egypt’s exports to India reached US$ 3.52 billion registering an 86% increase.
• During this period of 2021-22, the top Indian imports from Egypt were Mineral Oil/Petroleum, Fertilizers, Inorganic Chemicals and Cotton and main items of export to Egypt from India were Buffalo Meat, Iron & Steel, Light Vehicles and Cotton Yarn. According to the Egyptian Central Agency for Public Mobilization and Statistics (CAPMAS), India was 3rd largest export market for Egypt, 6th largest trading partner and 7th largest exporter to Egypt.
• Wheat export from India: Russia-Ukraine conflict has threatened Egypt with a shortage for wheat, 80% of which is imported from Russia and Ukraine. On 14 April 2022, Egyptian Cabinet announced inclusion of India in the list of accredited countries which can supply wheat to Egypt, thus ending a long pending Non-Tariff Barrier. Though the ban on wheat exports in India posed a difficulty in concluding the shipment, an initial shipment of 61,500 metric tons of wheat was cleared by India for Egypt on 17th May 2022. The shipment is expected to reach in early June 2022. A BSM for Indian wheat and corn is also being planned by the Mission.

Defence relations

• Egypt and India enjoy cordial defence relations. There was close cooperation between the Air Forces, with efforts at jointly developing a fighter aircraft in the 1960s. Egypt participated in the Multinational Training Exercise for friendly African countries held at Pune in March 2019.
• The first ever IAF-EAF Joint Tactical Air Exercise, Dessert Warrior, was held from 29-31 October 2021. 5 x Mirage-2000s and 1 tanker (IL-78) participated in the exercise from India. The exercise comprised of advanced manoeuvrings, including air-to-air refuelling.

Cultural Relations

• The Maulana Azad Centre for Indian Culture (MACIC) has been promoting cultural cooperation between the two countries, through regular activities such as Hindi, Urdu and Yoga classes; seminars; film shows; exhibitions and participation in local cultural activities.

Indian Community

• At present, the Indian community in Egypt numbers at around 3200, most of whom are concentrated in Cairo. There are also a small number of families in Alexandria, Port Said and Ismailia. A majority of the Indians are either employed with Indian companies or are professionals with various multinationals.

Importance of Egypt

• Egypt is a pillar of the Arab world and a key regional leader of the African continent. The Suez Canal, connecting the Mediterranean Sea and the Red Sea, offers the shortest sea link between the East and the West. As the largest Arab nation with a population of over 80 million, Egypt has traditionally played a central role in regional politics for decades.
• Egypt plays a pivotal role in managing relations with Iran and Turkey and combating sea piracy across the Red Sea and the Mediterranean. Egypt also possesses one of the largest and most well-equipped armed forces in the region and has the 10th largest army in the world. Egypt’s importance to the area is therefore undeniable. As a result, there is a strong connection between the various developments within Egypt and the region.
• As India seeks to expand its economic and strategic interests in the Gulf region and Africa and further strengthen its ‘Look West’ policy, peace and stability in the area are critical. Egypt forms a key vector in this equation.

Features of the upcoming bilateral Talks

• Republic Day parade is on track to have a contingent of 180 personnel from the Egyptian armed forces this year.
• During the state visit of Mr. El Sisi, a postage stamp will be released, portraying the multifaceted partnership between the two countries over the last 75 years.
• Collaboration on security, counter terrorism and defence-related matters are expected to feature prominently in the bilateral talks during Mr. El Sisi’s visit
• Challenges from unmanned aerial vehicles and cyber threats may also feature in the India-Egypt Joint Working Group on terrorism that will meet after the visit.
• The visit by President El Sisi will provide India an opportunity to showcase its growing strength in the field of green hydrogen. At least three Indian companies have invested several billion dollars in Egypt’s clean hydrogen projects.
• Egypt has reportedly shown interest in several military hardware items that India can offer, including the Akash missile systems. The growing proximity between the two nations was reportedly helped by Egypt’s display of quiet pragmatism on issues that are sensitive to India. 
• Apart from a growing accommodation of each other’s political concerns, there’s also deepening agricultural cooperation between the two sides that has been in focus over the last year when Egypt’s supply of agricultural products was disrupted by the Ukraine crisis.

4 . Caste Based Census

Context: The Supreme Court on Friday refused to entertain various pleas challenging the State Government’s notification to conduct caste-based census in Bihar.

What is the caste census?

• Caste census means inclusion of caste-wise tabulation of population in the Census exercise.
• From 1951 to 2011, every census in India has published the population of Scheduled Castes and Scheduled Tribes, comprising the Dalits and the Adivasis, along with the gamut of data including religions, languages, socio-economic status, etc. It, however, has never counted OBC’s, the lower and intermediate castes which roughly constitute about 52 percent of the country’s population. All castes other than Scheduled Castes and Scheduled Tribes are marked in the general category.

What are the benefits of caste census?

• A modern State cannot but count every category of citizens that it recognises for purposes of any social policy. India’s social equality programmes cannot be a success without the data and a caste census would help fix that. Due to the lack of data, there is no proper estimate for the population of OBCs, groups within the OBCs and more. The Mandal Commission estimated the OBC population at 52 per cent, while some others have pinned the OBC population from 36 to 65 per cent.
• The census would ‘besides resolving the needless mystery about the size of the OBC population, census enumeration would yield a wealth of demographic information (sex ratio, mortality rate, life expectancy), educational data (male and female literacy, ratio of school-going population, number of graduates) and policy relevant information about economic conditions (house-type, assets, occupation) of the OBCs’.
• A caste-based census could go a long way in bringing a measure of objectivity to the debate on reservations. According to the Rohini Commission, which was formed to look into equitable redistribution of the 27 per cent quota for OBCs, noted that there are around 2,633 castes covered under the OBC reservation. However, the Centre’s reservation policy from 1992 doesn’t take into account that there exists within the OBCs, a separate category of Extremely Backward Castes, who are much more marginalised. Its absence also results in inadequate budgetary allocations by governments to OBCs.

Why conducting a caste census is a herculean task?

• If a caste census was to be carried out, one could be sure that the exercise would be gargantuan and taxing. While carrying out the enumeration, officials would have to ask each person which caste they belonged to. However, the 1951 Census marked a complete departure from the traditional recording of race, tribe or caste and the only relevant question on caste or tribe incorporated in the Census Schedule was to enquire if the person enumerated was a member of any ‘Scheduled Caste’, or any ‘Scheduled Tribe’ or any other ‘Backward class’ or if he was an ‘Anglo Indian’.
• In 1961 and 1971 Censuses the information was collected only for each Scheduled Caste and Scheduled Tribe. Today, if the caste census was to be carried out, a few problems would arise. One of them being that the names of some castes are found in both the list of Scheduled Castes and list of OBCs. Also, there may be issues as some people would be spelling their caste differently from others and that would lead to an inaccurate count.
• Another issue with collecting the information is that those who collect the data simply record the answer. The enumerator is not an investigator or verifier. The enumerator has no training or expertise to classify the answer as OBC or otherwise.
• These issues then give rise to the fact that the census questionnaire would have to be modified to add the names of all the castes – not an easy exercise, as many haven’t even been listed. This would lead to a further delay in carrying out the mammoth exercise, which has already been put off by a year due to the coronavirus pandemic.
• A change in the questionnaire would lead to more money being spent – not only to print the new copies, but also to train the enumerator to add the new caste.

What are the perils of knowing caste-wise population?

• Such a count would reveal how the OBC population is well in excess of the 52 percent identified by the Mandal commission, spurring demands for more quotas.
• There are others who state that in the 21st century India should be discussing ‘let’s do away with caste’ rather than further divide India on those lines. They believe that the caste census will create further divisions within the society.
• Additionally, reservations that were implemented for 10 years have continued for 75 years and a caste-based census would only lead to a demand for more.
• The opponents of the exercise sum it up thus — a caste-based Census could halt India in its tracks, hurting its chances of becoming a global superpower.
• The first census in India was held in 1872 by its then colonial rulers — the British — in order to better know the subjects it ruled over. One of the heads under which data was gathered was caste and this practice was continued till 1931 in which the count of Other Backward Classes was shown to be 52 per cent.
• However, in 1941, caste-based data was collected but not published. MWM Yeats, the then Census Commissioner, said a note: “There would have been no all India caste table… The time is past for this enormous and costly table as part of the central undertaking…” This was during World War II.
• Once India gained freedom, however, it curtailed this exercise and from 1951, the only caste-wise data collected was on Dalits and Adivasis, which meant that no caste data had been collected for more than three-fourths of Indians.