Daily Current Affairs : 7th October 2023

Daily Current Affairs for UPSC CSE

Topics Covered

1. Monetary Policy Committee (MPC)
2. MGNREGS
3. Comprehensive Nuclear-Test-Ban Treaty (CTBT)
4. Facts for Prelims – Tirukural, Nobel Peace Prize 

1 . Monetary Policy Committee (MPC)

Context: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) after a detailed assessment of the evolving macroeconomic and financial developments and the outlook, decided unanimously to keep the policy repo rate unchanged at 6.50%. 

Key Highlights of the Policy

• Monetary Policy Committee (MPC) of the Reserve Bank of India decided unanimously to keep the policy repo rate unchanged at 6.50% 
• Standing deposit facility (SDF) rate remained at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%. 
• The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth. 
• The MPC observed that the recurring incidence of large and overlapping food price shocks can impart generalisation and persistence to headline inflation. 
• It stated that the domestic demand conditions were likely to benefit from sustained buoyancy in services, consumer and business optimism, government’s continued thrust on capex, healthy balance sheets of banks and corporates, and supply chain normalisation. 
• However, it warned of headwinds from geopolitical tensions and geoeconomic fragmentation, volatility in global financial markets, global economic slowdown, and uneven monsoon, which pose risks to the outlook. 

Monetary Policy Committee 

• RBI Act, 1934 provides for an empowered six-member monetary policy committee (MPC) to be constituted by the Central Government. 
• The first such MPC was constituted in 2016.  
• Memebers:
  • Governor of the RBI; 
  • Deputy Governor of the RBI in charge of Monetary Policy; 
  • one officer of the RBI to be nominated by the Central Board;  
  • Three people to be appointed by the Central Government 
• Governor of the Reserve Bank of India is the ex-officio Chairperson of the committee 
• Members hold office for a period of four years or until further orders, whichever is earlier) 
• It determines the policy repo rate required to achieve the inflation target. 
• The MPC is required to meet at least four times in a year.
  • The quorum for the meeting of the MPC: four members. 
• Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote. 

Objectives of Monetary Policy

• The main objective of the monetary policy is
  • Economic growth
  • Price and exchange rate stability
  • Promotion of saving and investment
  • Managing the foreign exchange markets
  • Interest Rate Stability

Direct and Indirect instruments used for implementing monetary Policy 

• Repo Rate: The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the Liquidity Adjustment Facility (LAF). 
• Reverse Repo Rate: The (fixed) interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF 
• Liquidity Adjustment Facility (LAF): The LAF consists of overnight as well as term repo auctions. Progressively, the Reserve Bank has increased the proportion of liquidity injected under variable rate repo auctions across the range of tenors. The aim of term-repo is to help develop the inter-bank term-money market, which in turn can set market-based benchmarks for pricing of loans and deposits, and hence improve transmission of monetary policy. The RBI also conducts variable interest-rate reverse-repo auctions, as necessitated under market conditions. 
• Marginal Standing Facility (MSF): A facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This provides a safety valve against unanticipated liquidity shocks to the banking system 
• Corridor: The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.  
• Bank Rate: It is the rate at which the Reserve Bank is ready to buy or re discount bills of exchange or other commercial papers. The Bank Rate is published under Section 49 of the Reserve Bank of India Act, 1934. This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes. 
• Cash Reserve Ratio (CRR): The average daily balance that a bank is required to maintain with the Reserve Bank as a share of such per cent of its Net demand and time liabilities (NDTL) that the Reserve Bank may notify from time to time in the Gazette of India. 
• Statutory Liquidity Ratio (SLR): The share of NDTL that a bank is required to maintain in safe and liquid assets, such as unencumbered government securities, cash and gold. Changes in SLR often influence the availability of resources in the banking system for lending to the private sector. 
• Open Market Operations (OMOs): These include both outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively. 
• Market Stabilization Scheme (MSS): This instrument for monetary management was introduced in 2004. Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills. The cash so mobilized is held in a separate government account with the Reserve Bank.

Qualitative tools:

• Unlike quantitative tools which have a direct effect on the entire economy’s money supply, qualitative tools are selective tools that have an effect in the money supply of a specific sector of the economy.
• Margin requirements – The RBI prescribes a certain margin against collateral, which in turn impacts the borrowing habit of customers. When the margin requirements are raised by the RBI, customers will be able to borrow less.
• Moral suasion – By way of persuasion, the RBI convinces banks to keep money in government securities, rather than certain sectors.
• Selective credit control – Controlling credit by not lending to selective industries or speculative businesses.

Policy Stances of RBI 

• Accommodative Stance
  • Accommodative stance means the central bank is telling the market to expect a rate cut anytime 
  • Usually, this policy is adopted when there is slowdown in the economy. 
• Neutral stance
  • Neutral stance doesn’t have any particular meaning. This means anything can happen anytime means the RBI would have the flexibility to either increase or decrease the policy rates 
• Tight and Calibrated Tightening stance
  • Tight – It indicates an impending rate hike 
  • Calibrated Tightening – RBI would either keep the rates constant or increase the rates.

What are the types of monetary policy?

• There are broadly two types of monetary policy, with a large spectrum of variations lying between them. These are:
• Contractionary Monetary Policy: Central banks use contractionary monetary policy to bring inflation under control. They essentially reduce the supply of money in the system, by restricting the volume of money that the banks can lend. The banks charge higher interest on the loans, making them expensive for the borrowers. In turn, fewer businesses and individuals borrow, slowing growth.
• Expansionary Monetary Policy: Central banks use expansionary monetary policy in the pursuit of lower unemployment and avoiding recession. They give the banks more money to lend by increasing the liquidity in the system. Banks lower the interest at which they lend, making loans cheaper. Businesses borrow more to hire workers, buy equipment, and expand their operations. Individuals borrow more to buy houses, cars, appliances, etc.

Flexible Inflation Targeting Framework (FITF)

• The Flexible Inflation Targeting Framework (FITF) was introduced in India post the amendment of the Reserve Bank of India (RBI) Act, 1934 in 2016. In accordance with the RBI Act, the Government of India sets the inflation target every 5 years after consultation with the RBI.
• In this framework, there are chances of not achieving the inflation target fixed for a particular amount of time. This can happen when:
  • The average inflation is greater than the upper tolerance level of the inflation target as predetermined by the Central Government for 3 quarters in a row.
  • The average inflation is less than the lower tolerance level of the target inflation fixed by the Central Government beforehand for 3 consecutive quarters.

2 . MGNREGS

Context: Six months into the financial year, the flagship rural employment programme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), has run out of funds and as per the statistics put out by the Ministry on its website is running a deficit of ₹6,146.93 crore. 

About MGNREGS 

• It is an employment scheme by the Ministry of Rural Development, providing provide at least 100 days of guaranteed wage employment in a financial year to every rural household whose adult members volunteer to do unskilled work. 
• Any Indian citizen above the age of 18 years and residing in a rural area can apply to this scheme.  
• The applicant receives guaranteed employment within 15 days from the date of application. 
• The wage is deposited directly in the Bank Account / Post Office Account of the applicant. Wages are paid within a week, or fifteen days at most.  
• Men and Women are paid equally. MGNREGA covers the entire country with the exception of districts that have a hundred percent urban population. 
• The Ministry of Rural Development (MRD) monitors the implementation of this scheme in association with state governments.
• It is the largest social security scheme in the world.
• The Act stipulates a minimum wage-material ratio of 60:40.

Eligibility

• The applicant must be at least 18 years of age. 
• The applicant must be residing in a Rural Area. 

 Issues with the scheme

• Fund cuts: In the Union Budget 2023, the Centre has cut the allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) by 21.66 per cent for 2023-24, attracting criticism. 
• Delayed Wage Payments: One of the persistent problems with MGNREGA is the delay in wage payments to workers. Workers often have to wait for weeks or months to receive their wages, which can lead to financial distress for rural households. 
• Corruption and Leakages: Instances of corruption and leakages in the implementation of MGNREGA have been reported. Funds intended for wages and materials can sometimes be siphoned off, reducing the program’s effectiveness. 
• Low Wage Rates: The wages provided under MGNREGA are often lower than the minimum wages fixed by state governments, which can discourage workers from participating in the program. 
• Lack of Diversification: MGNREGA projects often focus on traditional activities like digging trenches and building small-scale infrastructure. Diversifying the range of projects could provide more meaningful and sustainable employment opportunities. The scheme has also been criticised by economists like Jagdish Bhagwati and Arvind Panagariya as an “inefficient instrument of shifting income to the poor”.

Significance of MGNREGA despite criticism

• One in four persons lives below the poverty line in rural India. Ever since the launch of this scheme in 2006, it has changed the nature of the rural labour market.
• It gave an opportunity to rural households to earn minimum income by getting job cards under this scheme.
• While the poor have used it to climb out of poverty, the not-so-poor used it as a measure to supplement their income by working during lean agriculture periods.
• Moreover, the scheme is inclusive — with higher participation of women and SC and ST individuals.
  • Today, about one in two jobs created under the scheme is for women and about 40 per cent for SC/ST.
  • For many women, it is a first-time earning opportunity as well as a chance at empowerment.
• The scheme has also indirectly enabled households to get freed from the clutches of local money lenders too.
  • Payments under the scheme today are mostly by way of direct transfer into beneficiary accounts — which in turn forced people to open 10 crore new bank or post office accounts.
  • The newly opened accounts have aided access to bank credit.
• Some studies even point to improved education for children in MGNREGA households.
• MGNREGA also acted as a crucial safety net during the COVID pandemic.
  • In the financial year 2020-21, the number of person days of work provided under the scheme rose drastically to 389 crores, in comparison to the previous year’s figure of just 265 crore.
  • In 2021-22 too, the demand for MGNREGA work remained high, and 363 crore person days of work were generated.

3 . Comprehensive Nuclear-Test-Ban Treaty (CTBT)

Context: Russian lawmakers will consider revoking the ratification of a global nuclear test ban, the Parliament Speaker said on Friday. 

What is the CTBTO and what does it do?

• The Comprehensive Nuclear-Test-Ban Treaty Organization (CTBTO) is an international organization that will be established upon the entry into force of the Comprehensive Nuclear-Test-Ban Treaty. Its seat will be Vienna, Austria.
• The organization will be tasked with verifying the ban on nuclear tests and will operate therefore a worldwide monitoring system and may conduct on site inspections.
• The Preparatory Commission for the CTBTO, and its Provisional Technical Secretariat, were established in 1996 and employs staffs from the CTBT’s Members States.
• The Preparatory Commission is tasked with making preparations for effective implementation of the Treaty, in particular by establishing its verification regime. The main task is establishing and provisionally operating the 337-facility International Monitoring System (IMS), including its International Data Centre (IDC) and Global Communications Infrastructure (GCI). The Commission is tasked also with the development of operational manuals, including a manual to guide conduct of on-site inspections.

What is CTBT

• The Comprehensive Nuclear-Test-Ban Treaty (CTBT) is the Treaty banning all nuclear explosions – everywhere, by everyone.
• The Treaty was negotiated at the Conference on Disarmament in Geneva and adopted by the United Nations General Assembly.
• It opened for signature on 24 September 1996. Since then, the Treaty has reached near-universality. 187 countries have signed the Treaty. 178 countries have ratified the Treaty

How did CTBT come into being? 

• The United States conducted the world’s first successful nuclear weapons test in July 1945. Four years later, the Soviet Union tested their first nuclear weapon. These tests triggered a decades-long arms race between the two superpowers. Between 1945 and 1996, more than 2,000 nuclear tests were carried out — 1,032 of them by the United States and 715 of them by the Soviet Union, according to the UN. Britain carried out 45 tests, France 210 and China 45. 
• The radioactive fallout from those tests drew criticism from around the globe. The international community’s concern about the effects on health and the environment continued to grow. As a result, several attempts to curb the explosive tests were made. 
• The 1963 Limited Nuclear Test-Ban Treaty (LTBT) was one of the first such attempts. It prohibited nuclear testing in the atmosphere, outer space, and underwater, but underground tests were still permitted. 
• To tackle the limitations of LTBT, a comprehensive test ban was discussed during the negotiation of the Nuclear Nonproliferation Treaty in 1968. However, no agreement was reached on the issue. 
• Six years later, the US and Soviet Union agreed to sign the Threshold Test Ban Treaty (TTBT), which established a nuclear “threshold” by banning the two countries from conducting tests that would produce a yield exceeding 150 kilotons (equivalent to 150,000 tons of TNT). A major breakthrough only came after the Cold War ended around 1990 and the disintegration of the Soviet Union. As the geopolitical tensions simmered down, the UN took advantage of the situation and adopted the CTBT, which put a blanket ban on the explosive testing of nuclear weapons, on September 10, 1996, and it opened for signature on September 24, 1996. 

Why is the CTBT so important?

• It curbs the development of new nuclear weapons and the improvement of existing nuclear weapon designs.
• When the Treaty enters into force it provides a legally binding norm against nuclear testing.
• The Treaty also helps prevent human suffering and environmental damages caused by nuclear testing.

How many nuclear tests were conducted and by whom?

• Between 1945 and 1996 when the CTBT was adopted, over 2000 nuclear tests were conducted by the United States (1000+), the Soviet Union (700+), France (200+), the United Kingdom and China (45 each).
• Three countries have carried out nuclear explosions after the 1996: India and Pakistan in 1998, and and North Korea conducted tests in 2006, 2009, 2013, 2016 (twice) and 2017,

Why has the Treaty not entered into force yet?

• The Treaty’s entry into force depends on 44 specific States  that must have signed and ratified the Treaty. These States had nuclear facilities at the time the Treaty was negotiated and adopted.
• As of August 2011, 35 of these States have ratified the Treaty.
• Nine States still need to do so: China, the Democratic People’s Republic of Korea, Egypt, India, Indonesia, Iran, Israel, Pakistan and the United States. 
• India, North Korea and Pakistan have not yet signed the Treaty.
• All 44 States are listed in the Treaty’s Annex 2.

What is the difference between signature and ratification?

• The signature to a treaty indicates that the country accepts the treaty.  It commits not to take any actions that would undermine the treaty’s purposes. A treaty is signed by a senior representative of a country such as the president or the foreign minister.
• The ratification symbolizes the official sanction of a treaty to make it legally binding for the government of a country.  This process involves the treaty’s adoption by the legislature of a country such as the parliament.  It also includes the submission of the so-called instrument of ratification to the treaty’s depository, which for the CTBT is the UN Secretary-General.  Only then is the process of ratification officially concluded. The ratification of a treaty may require the adjustment of a country’s legislation, reflecting its commitments under the treaty.

What is the CTBT verification regime?

• The CTBT verification regime is a unique, comprehensive system, consisting of the International Monitoring System(IMS),  International Data Centre (IDC) and on-site inspections (OSI). It constantly monitors the planet for nuclear explosions and shares its findings with Member States (= the 182 States that have signed the Treaty).

Monitoring stations

The 337 IMS facilities are located all over the globe and use four distinct technologies to look for signs of nuclear explosions: 

• Seismic: to detect shockwaves in the Earth.  The seismic network is comprised of 170 stations.  50 primary stations provide data continuously and 120 auxiliary stations provide data on demand. They register thousands of earthquakes and mine explosions every year. 
• Hydroacoustic: to detect acoustic signals in the oceans. Eleven stations are sufficient to monitor the big oceans as sound travels very efficiently in water.  
• Infrasound: to detect low-frequency sound waves in the air with a network of 60 stations.  
• Radionuclide: to detect radionuclide particles and noble gas. 80 stations provide the “smoking gun” evidence that an explosion was nuclear. Half of these stations are equipped with radionuclide noble gas detection technology.  The radionuclide network is complemented by 16 laboratories for detailed analysis.  

4 . Facts for Prelims

Tirukural

• The Tirukkuṟaḷ or shortly the Kural  is a classic Tamil language text consisting of 1,330 short couplets, or kurals, of seven words each. 
•  The work is traditionally grouped under the Eighteen Lesser Texts series of the late Sangam works, known in Tamil as Patinkeelganaku
• The text is divided into three books with aphoristic teachings on virtue (aram), wealth (porul) and love (inbam), respectively.  
• Considered one of the greatest works ever written on ethics and morality, it is widely acknowledged for its universality and secular nature. 
• Its authorship is traditionally attributed to Valluvar, also known in full as Thiruvalluvar. 

Nobel Peace Prize

• The 2023 Nobel Peace Prize has been awarded to jailed Iranian activist Narges Mohammadi for her fight against the oppression of women in Iran and her fight to promote human rights and freedom for all. 
• Ms. Mohammadi, 51, has kept up her activism despite numerous arrests by Iranian authorities and spending years behind bars. She has remained a leading light for nationwide, women-led protests, sparked by the death last year of a 22-year-old woman in police custody. 
• She is the 19th woman to win the Nobel Peace Prize, and the second Iranian woman, after human rights activist Shirin Ebadi won the award in 2003.