- Forex reserves at all-time high
- Assam Rifles: Tussle between MoD and MHA
- Financing economic recovery
- Court’s drift and chinks in the judiciary’s armour
- COVID-19 setting off a bradykinin storm
- 13th Amendment to the Sri Lankan Constitution
Focus: GS-III Indian Economy
- India’s foreign exchange (forex) reserves surged by more than 3.5 billion Dollars to touch a lifetime high despite the current Pandemic Situation.
- Although the Covid Pandemic is likened to one the worst crises that the country has faced, the current situation stands in stark contrast to the one in 1991, when India had to pledge its gold reserves to stave off a major financial crisis.
- While the overall situation on the economic front is gloomy, with India’s Gross Domestic Product (GDP) growth having contracted 23.9 per cent in the April-June quarter, and manufacturing activity and trade at standstill, the stock of forex reserves is one data point that India can cheer about amidst the Covid-19 pandemic.
What are forex reserves?
Forex reserves are external assets in the form of gold, SDRs (special drawing rights of the IMF) and foreign currency assets (capital inflows to the capital markets, FDI and external commercial borrowings) accumulated by India and controlled by the RBI.
Why are forex reserves rising despite the slowdown in the economy?
- The major reason for the rise in forex reserves is the rise in investment in foreign portfolio investors in Indian stocks and foreign direct investments (FDIs).
- Foreign investors have acquired stakes in several Indian companies over the past several months.
- On the other hand, the fall in crude oil prices has brought down the oil import bill, saving precious foreign exchange.
- Similarly, overseas remittances and foreign travels have fallen steeply.
What’s the significance of rising forex reserves?
- The rising forex reserves give comfort to the government and the RBI in managing India’s external and internal financial issues at a time of major contraction in economic growth.
- It serves as a cushion in the event of a crisis on the economic front, and is enough to cover the import bill of the country for a year.
- The rising reserves have also helped the rupee to strengthen against the dollar.
- The foreign exchange reserves to GDP ratio is around 15 per cent.
- Reserves will provide a level of confidence to markets that a country can meet its external obligations, demonstrate the backing of domestic currency by external assets, assist the government in meeting its foreign exchange needs and external debt obligations and maintain a reserve for national disasters or emergencies.
What does the RBI do with the forex reserves at its disposal?
- The Reserve Bank functions as the custodian and manager of forex reserves, and operates within the overall policy framework agreed upon with the government.
- The RBI uses its forex kitty for the orderly movement of the rupee.
- When the RBI mops up dollars, it releases an equal amount in rupees. This excess liquidity is sterilised through the issue of bonds and securities and LAF operations.
Where are India’s forex reserves kept?
- The RBI Act, 1934 provides the overarching legal framework for deployment of reserves in different foreign currency assets and gold within the broad parameters of currencies, instruments, issuers and counterparties.
- As much as 64 per cent of the foreign currency reserves are held in securities like Treasury bills of foreign countries, mainly the US; 28 per cent is deposited in foreign central banks; and 7.4 per cent is deposited in commercial banks abroad, according to RBI data.
- India also held more than 650 tonnes of gold as of March 2020.
Is there a cost involved in maintaining forex reserves?
- The return on India’s forex reserves kept in foreign central banks and commercial banks is negligible — analysts say it could be around 1 per cent, or even less than that, considering the fall in interest rates in the US and Euro zone.
- There was a demand from some quarters that forex reserves should be used for infrastructure development in the country.
- However, the RBI had opposed the plan. Several analysts argue for giving greater weightage to return on forex assets than on liquidity thus reducing net costs if any, of holding reserves.
-Source: Indian Express
Focus: GS-II Governance
Why in news?
- The Delhi High Court has granted 12 weeks to the Union government to decide on whether to scrap or retain the dual control structure for Assam Rifles, which comes under both the Ministry of Home Affairs (MHA) and the Ministry of Defence (MoD).
- Observing that the matter has been pending for almost three years, the court said it appears that an in-principle decision has been taken to keep the central armed police force under the exclusive control of MHA, but the final decision has not yet been taken.
What is Assam Rifles?
- Assam Rifles is one of the six central armed police forces (CAPFs) under the administrative control of Ministry of Home Affairs (MHA).
- The other forces being the Central Reserve Police Force (CRPF), the Border Security Force (BSF), the Indo-Tibetan Border Police (ITBP), the Central Industrial Security Force (CISF) and the Sashastra Seema Bal (SSB).
- It is tasked with the maintenance of law and order in the North East along with the Indian Army and also guards the Indo-Myanmar border in the region.
- Assam Rifles is the oldest paramilitary force raised way back in 1835 in British India with just 750 men.
- Since then it has gone on to fight in two World Wars, the Sino-Indian War of 1962 and used as an anti-insurgency force against militant groups in the North East.
- It remains the most awarded paramilitary force in both pre- and post-independent India.
How is it unique?
- It is the only paramilitary force with a dual control structure. While the administrative control of the force is with the MHA, its operational control is with the Indian Army, which is under the MoD.
- This means that salaries and infrastructure for the force is provided by the MHA, but the deployment, posting, transfer and deputation of the personnel is decided by the Army.
- The force is the only central paramilitary force (CPMF) in real sense as its operational duties and regimentation are on the lines of the Indian Army.
- However, its recruitment, perks, promotion of its personnel and retirement policies are governed according to the rules framed by the MHA for CAPFs.
- This has created two sets of demands from both within the Assam rifles and by MoD and MHA for singular control over the force by one ministry.
Why do both MHA and MoD want full control?
- MHA has argued that all the border guarding forces are under the operational control of the ministry and so Assam Rifles coming under MHA will give border guarding a comprehensive and integrated approach.
- MHA sources also say that Assam Rifles continues to function on the pattern set during the 1960s and the ministry would want to make guarding of the Indo-Myanmar border on the lines of other CAPFs.
- The Army, for its part, has been arguing that there is no need to fix what isn’t broken.
- Sources say the Army is of the opinion that the Assam Rifles has worked well in coordination with the Army and frees up the armed forces from many of its responsibilities to focus on its core strengths.
- It has also argued that Assam Rifles was always a military force and not a police force and has been built like that.
- It has argued that giving the control of the force to MHA or merging it with any other CAPF will confuse the force and jeopardise national security.
-Source: Indian Express
FINANCING ECONOMIC RECOVERY
Focus: GS-III Indian Economy
As the socioeconomic impacts of the pandemic spread across Asia and the Pacific, finance ministries are continuing their efforts to inject trillions of dollars for emergency health responses and fiscal packages.
Financing in three key areas
The United Nations is contributing through a global initiative, Financing for Development in the Era of COVID-19 and Beyond, co-convened by Canada and Jamaica, to articulate a comprehensive financing strategy to safeguard the Sustainable Development Goals.
In the Asia-Pacific region, several countries have already adopted financing plans in three key areas, aiming:
- To address the challenge of diminished fiscal space and debt vulnerability;
- To ensure sustainable recovery, consistent with the ambitions of the Paris Agreement and the 2030 Agenda;
- To harness the potential of regional cooperation in support of financing for development.
The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has recently launched its first-ever Regional Conversation Series on Building Back Better.
Fiscal Space and managing debts
- To improve the fiscal space and manage high levels of debt distress, a growing call for extending the debt moratorium under global initiatives like the Debt Service Suspension initiative is timely.
- Central banks can continue to keep the balance of supporting the economy and maintaining financial stability.
- This further involves enhancing tax reforms and improving debt management capacities, while using limited fiscal space to invest in priority sectors.
- Exploring sustainability-oriented bonds and innovative financing instruments options such as debt swaps for SDG investment should be explored further.
- In addition to economic considerations, the policy paradigm must mainstream affordable, accessible and green infrastructure standards, while promoting social equality and environmental sustainability principles as enshrined in the Paris Agreement.
Way Forward: Regional cooperation
- Regionally coordinated financing policies can restart trade, reorganise supply chains and revitalise sustainable tourism in a safe manner.
- Across Asia and the Pacific, governments must pool financial resources to create regional investment funds.
- Strengthening regional cooperation platforms to ensure that all countries receive an equitable number of doses of the vaccine on short notice to everyone everywhere is particularly essential.
United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)
- The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) is one of the five regional commissions under the jurisdiction of the United Nations Economic and Social Council.
- It was established in order to increase economic activity in Asia and the Far East, as well as to foster economic relations between the region and other areas of the world.
- The Commission is composed of 53 Member States and nine Associate members, mostly from the Asia and Pacific regions.
- In addition to countries in Asia and the Pacific, the Commission’s members include France, the Netherlands, the United Kingdom and the United States.
-Source: The Hindu
COURT’S DRIFT AND CHINKS IN THE JUDICIARY’S ARMOUR
Focus: GS-II Governance
- This past fortnight has seen two significant developments in connection with the Indian judiciary: the first was the decision of the Supreme Court of India in the matter of Prashant Bhushan’s contempt case, and the second was the retirement of Justice Arun Mishra.
- These events, in their own way, magnify the chinks in the armour of the Supreme Court.
A judge in the limelight
- In the judges’ press conference in 2018, the primary grouse was with the “master of the roster” system, and the specific concern that politically sensitive cases (i.e., dealing with the executive) were being allocated to Benches involving Justice Arun Mishra (even if not mentioned by name, his role was clearly insinuated, notably with reference to the judge Loya case).
- Commentators (e.g., Aparna Chandra, Anup Surendranath, V. Venkatesan) have also conducted detailed analyses of Justice Arun Mishra’s decisions, and studies have found that these were predictably in favour of the executive.
- Allegations and suspicions have been voiced from within as well.
- In recent times, many columnists, leading scholars, and legal luminaries have speculated on the marked drift of the Supreme Court away from rights-based court to an executive court.
- Of course, to keep such a court going, a judge who is ever ready to step up to handle politically sensitive matters, and who can be relied upon to issue decisions that are in favour of the executive, is always useful.
Concern Regarding “Master of the roster” system
- The “master of the roster” system was designed for a different era, and indeed, may have worked well in the past even, when we had very tall judges, and judicial independence was rarely doubted.
- Recall that the National Judicial Appointments Commission (NJAC) Act was struck down by the Court on grounds of excessive executive interference in the selection of judges.
- But surely, this judgment is of no use if executive interference is anyway possible in more subtle ways.
- Opaque systems like the “master of the roster” are considered to be against the idea of an independent judiciary by many scholars.
The European example
- What we need now (instead of “master of the roaster”) is legal certainty, and a rules-based mechanism for allocation of cases (e.g., as followed by the European Court of Justice and the European Court of Human Rights, among many other jurisdictions where cases are decided not by full courts but by benches).
- A case allocation system that is neutral and rules-based will prevent bench packing, and demonstrate neutrality, impartiality, and transparency.
- Ensure that Courts are protected from outside interference;
- Improves public confidence in the impartiality and independence of the judiciary;
- Assures litigants of equality and fairness;
- And protect basic rights and freedoms by not compromising on them.
-Source: The Hindu
COVID-19 SETTING OFF A BRADYKININ STORM
Focus: GS-III Science and Technology
Why in news?
A supercomputer’s recent analysis of data on the contents collected earlier from the lungs of patients with the COVID-19 infection has showed that a phenomenon called a ‘bradykinin storm’ might explain how the virus works in the body, including some of the more puzzling extreme events.
What is the bradykinin hypothesis?
- Bradykinin is a compound that is related to pain sensation and lowering blood pressure in the human body.
- According to the researchers, SARS-CoV-2 uses a human enzyme called ACE2 to sneak into the cells of its host and ACE2 lowers blood pressure in the human body and works against another enzyme known as ACE (which has the opposite effect).
- The analyses further found that the virus caused the levels of ACE to fall in the lungs, and consequently pushed up the levels of ACE2.
- As a chain reaction, this increases the levels of the molecule bradykinin in the cells, causing a bradykinin storm.
- Bradykinin causes the blood vessels to expand and become leaky, leading to swelling of the surrounding tissue.
- In addition, the levels of a substance called hyaluronic acid, which can absorb more than 1,000 times its own weight in water to form a hydrogel, increased.
-Source: The Hindu
13TH AMENDMENT TO THE SRI LANKAN CONSTITUTION
Focus: GS-II International Relations
After the Rajapaksas’ win in the 2019 Sri Lankan Presidential Elections, the Sri Lankan government has already drafted and gazetted the 20th Amendment.
Now, the spotlight has fallen on two key legislations in Sri Lanka’s Constitution-
- the 19th Amendment, that was passed in 2015 to curb powers of the Executive President, while strengthening Parliament and independent commissions.
- the 13th Amendment passed in 1987, which mandates a measure of power devolution to the provincial councils established to govern the island’s nine provinces.
The 13th Amendment
- It is an outcome of the Indo-Lanka Accord of July 1987, signed by the then Prime Minister Rajiv Gandhi and President J.R. Jayawardene, in an attempt to resolve Sri Lanka’s ethnic conflict that had aggravated into a full-fledged civil war, between the armed forces and the Liberation Tigers of Tamil Eelam, which led the struggle for Tamils’ self-determination and sought a separate state.
- The 13th Amendment, which led to the creation of Provincial Councils, assured a power sharing arrangement to enable all nine provinces in the country, including Sinhala majority areas, to self-govern.
Why is it contentious?
- The 13th Amendment carries considerable baggage from the country’s civil war years.
- It was opposed vociferously by both Sinhala nationalist parties and the LTTE. The former thought it was too much power to share, while the Tigers deemed it too little.
- Though signed by the powerful President Jayawardene, it was widely perceived as an imposition by a neighbour (India) wielding hegemonic influence.
- Till date, the 13th Amendment represents the only constitutional provision on the settlement of the long-pending Tamil question.
-Source: The Hindu