10 JUNE 2023

Topic 1: Sagar Samriddhi

Context: Government launched ‘SAGAR SAMRIDDHI’ recently.

Key details:

• It is an online dredging monitoring system.
• Aim:
  • To accelerate ‘Waste to Wealth’ initiative of the government.
• Who developed it?
  • This system has been developed by National Technology Centre for Ports, Waterways and Coasts (NTCPWC) the technological arm of Ministry of Ports,Shipping and Waterways.
• Key features:
  • The new technology brings in marked improvement against the old system of Draft & Loading Monitor (DLM) system.
  • The system will bring in synergy among multiple input reports.
  • The ‘Sagar Samriddhi’ monitoring system will allow:
    • Daily and monthly progress Visualisation,
    • Dredger performance and downtime monitoring,
    • easy location track data with snapshot of loading, unloading and idle time .
• Significance:
  • The annual maintenance dredging at Major Ports and Waterways is around 100 million cubic meters, for which about Rs.1000 crores are spent each year by the Ports and IWAI.
  • Now with implementation of the Dredging guidelines and by using the Sagar Samriddhi, online dredging monitoring system, the dredging cost will be greatly reduced along with bringing in more transparency and efficiency in the overall system.

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Topic 2: First Loss Default Guarantee

Context: The Reserve Bank of India (RBI) has allowed default loss guarantee (DLG), a safety-net arrangement among banks, non-banking finance companies, and lending service providers (LSPs, popularly known as fintech players) in the digital lending space.

What is an FLDG arrangement?

• DLG is also known as First Loss Default Guarantee (FLDG).
• FLDG is an arrangement whereby a third party such as a financial technology (fintech) player (LSP) compensates lenders if the borrower defaults.
• Significance:
  • The LSP provides certain credit enhancement features such as first loss guarantee up to a pre-decided percentage of loans generated by it.
  • From the perspective of the fintechs, offering FLDG acts as a demonstration of its underwriting skills.
  • From the perspective of the lender, it ensures the platform’s skin in the business.
  • Credit risk is borne by the LSP without having to maintain any regulatory capital.
  • The loan portfolio backed by FLDG is akin to the off-balance sheet portfolio of the LSP wherein the nominal loans sit in the books of the lender without having to partake in any lending process.
  • This will facilitate entry of small and medium fintechs into the digital lending space in partnerships with banks or NBFCs

What does an LSP do?

• Lending service providers are new-age players who use technology platforms in the lending space.
• They are agents of a bank or NBFC who carry out one or more of a lender’s functions (in part or full) in:
  • customer acquisition,
  • underwriting support
  • pricing support,
  • disbursement,
  • servicing,
  • monitoring,
  • recovery of specific loan or loan portfolio
• The LSP-providing DLG must be incorporated as a company under the Companies Act, 2013.
• The RBI has allowed banks to accept DLG in digital lending only if the guarantee is in the form of a cash deposit, or fixed deposits in a bank with a lien in favour of the regulated entities, or a bank guarantee in favour of the regulated entities.
• Banks and NBFCs should ensure that the total amount of DLG cover on any outstanding portfolio does not exceed 5% of the amount of that loan portfolio.

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Topic 3: The politics and economics of MSP

Context: Recently, the Union government announced the MSPs (minimum support prices) for 17 crops in this year’s Kharif season.

Key details:

• MSPs play a very significant role not just for India’s farmers and the farm economy but also for India’s consumers and the kind of food prices they face.
• That is why MSP announcements are keenly watched and often deeply politicised.
• The MSP announcements could prove of critical political significance, apart from their economic impact.

What are MSPs?

• MSPs are “support prices” announced by the government (and sometimes state governments add a bonus amount to them).
• The intended aim in announcing them is to provide a safety net for farmers.
• Need and significance of MSP:
  • Given the acute lack of warehousing and cold storage in India, a farmer has little bargaining power in the market.
  • If the market prices are below the farmer’s cost of production they and their families can be ruined.
  • Widespread distress of this kind tends to have broader ramifications as well.
    • For example, if one particular crop, say cotton, led to the ruin of many farmers, then farmers will avoid growing cotton next season.
    • This, in turn, will reduce supply and push up prices.
  • By announcing MSPs, the government makes a promise that it will buy (called procurement) from farmers at the announced prices.
  • Since MSPs are calculated in such a manner that covers the basic costs of cultivation, the hope is that MSPs will save farmers from ruin.
  • The other big purpose of MSPs is to serve as a tool in the hands of the policymakers to tweak the production pattern.
    • If the government wants to incentivise the production of pulses, as against paddy (rice), then it can give a relatively higher hike in MSP of pulses than the MSPs for paddy.

Does the government actually buy all crops at MSPs?

• While the government announces MSPs for a whole host of crops both in the Rabi (winter) and the Kharif (summer) season, it procures only a few of those crops and that too from only a few states.
• Only few Kharif crops benefit from government procurement.
  • While around 45% of the paddy produced is procured at MSP, it is about 25% in case of cotton and only 1-3% in case of pulses.
• The procurement is concentrated in only a few states:
  • Punjab, Haryana, western Uttar Pradesh, Chhattisgarh, and Telangana for paddy
  • Telangana and Maharashtra for cotton
  • Maharashtra and Karnataka for pulses

Economic and political aspects of MSP announcements

• Political aspects:
  • India’s farm economy doesn’t really fully adhere to market principles.
    • Partly that’s because national food security is a strategic concern.
  • If large a population is involved in farming as it is in India, then it is unlikely that farming will prove to be remunerative.
  • But government intervention makes everything political.
  • Closer to elections, it is natural for governments to announce high MSPs to win over the farmer vote.
• Economic aspects:
  • The economic aspect of MSPs is not limited to farmers alone.
  • While a sharp rise in MSPs (or higher MSPs over a sustained period) does alleviate farm distress, it can also lead to a spike in food inflation.
  • The trade-off between the interests of the farmer, on the one hand, and consumers, on the other, makes deciding MSPs so difficult.
  • The political dimension just adds to the complications.

How does the recent hike compare with the rate of food inflation and the rise in cost of production?

• The prices of cereals went up by almost 14% in this year.
• The MSP hike is modest.
• The Citi Research note finds that cost of cultivation went up by 6.8% and from that perspective, a 7% hike in MSPs is enough to ensure that farm economy does not lose out to the non-farm economy.

Impact of hikes on inflation and monetary policy

• It is unlikely that this hike per se would spike inflation.
• Food inflation may still spike if the normal monsoon is affected by El Nino.

Impact on Government’s finances

• Higher MSPs and more procurement as well as the storage and disbursal of subsidised foodgrains are all expenditures that weigh down government’s financial health.
• This MSP increase will not materially alter the government’s food subsidy budgeting.

Likely impact on rural India

• Latest GDP data showed that personal consumption growth, the biggest contributor to India’s GDP, was growing at around 2.5% over the past two quarters.
• This is starkly lower than India’s overall GDP growth rate of 7.2%.
• The rural economy is lagging behind urban India.
• The consumption growth trends in the GDP have been weak with drivers of rural consumption remaining uneven.
• The 7% MSP increase might just be enough to cover the increase in cost of production but does not signal a populist boost to rural consumption.

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Topic 4: Amarnath Yatra

Context: Union Home Minister reviewed the security arrangements for the Amarnath Yatra held every year in Jammu and Kashmir.

About Amarnath Yatra:

• The annual Amarnath Yatra to the cave shrine of Lord Shiva high up in the Himalayas is among the country’s most revered pilgrimages.
• However, there is no official record of when the Yatra formally began.
• The cave is situated 3,888 metres above sea level, and can be reached only on foot or by pony.
• Legends behind it’s origin:
  • According to a legend, when Lord Shiva decided to tell Parvati the secret of his immortality (Amar Katha), he chose the Amarnath cave deep in the Himalayas in South Kashmir.
  • According to lore, the cave was discovered by a Muslim shepherd named Buta Malik in 1850.
    • The family of Buta Malik remained the traditional custodian of the shrine, along with Hindu priests from the Dashnami Akhara and Purohit Sabha Mattan.
    • This unique ensemble of faiths turned Amarnath into a symbol of Kashmir’s centuries-old communal harmony and composite culture.
• In 2000 the Shri Amarnathji Shrine Board was formed with the Governor at its head, and Malik’s family and the Hindu organisations were evicted.
• This streamlined the Yatra, but also did away with one of its most unique features.
• The ice lingam, representing Lord Shiva, is formed by a trickle of water from a cleft in the roof of the cave.
• The water freezes as it drips, forming, over time, a tall, smooth ice stalagmite.
• The Shiva lingam gets its full shape in May every year, after which it begins to melt.
• On the left of the Shiva lingam are two smaller ice stalagmites, representing Parvati and Lord Ganesh.

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Topic 5: Tech can change agri landscape

Context: In India, technology is rapidly reshaping agriculture, creating investment opportunities, lifting up rural areas, feeding the world, and transforming India into a farming powerhouse.

Significance of Agricultural sector for India:

• After independence, agriculture was the driver of the economy, contributing more than half of the nation’s GDP.
• India is still one of the world’s largest and most diversified food producers, the source of more than 20% of India’s income.
• However, there are significant problems holding back the nation’s untapped potential.
• If solved, a flourishing agriculture industry could both boost the economy and significantly improve farmers’ livelihoods and incomes.
• By 2030, agriculture could contribute around Rs 4,92,000 crore to India’s GDP, an increase of 50% over its contribution in 2020.

Role of Agritechnology:

• The key to expanding India’s transformation into a farming powerhouse is agricultural technology, which lags behind developed farming nations.
• Problems of farmers:
  • half lack basic farming equipment
  • three of every four farms are at risk of crop damage from pests and weather
  • 50% of India’s farmers lack access to traditional financing sources and marketing networks
  • those who can get informal credit often pay inflated interest rates of 10 to 25% above market rates.
• Use of Agritechnology:
  • Solutions have begun to be more farmer-centric.
  • Each part of the value chain that is digitising, be it finances, inputs, or others, is directly targeting the farmer.
  • Between 2014 and 2023, more than 2000 agritech companies were set up in India, fuelled by:
    • increased farmer awareness,
    • rising internet penetration, and
    • the need for greater efficiency in the agriculture sector.
  • Farming supplies providers are using technology to create direct-to-farmer (D2F) sales channels that bypass middlemen and retailers.
  • Banks and non-banks are using technology to better understand the farmer, provide targeted products, and reduce loan risks.
    • For example, SBI developed the YONO Krishi app to meet farmers’ finance, input, and advisory needs.
  • Companies that sell farm equipment have also started providing mechanisation as a service to farmers.
  • Firms that operate in the procurement, processing, and sale of agricultural products have started backward integration of their supply chains and creating market linkages.
  • The E-Choupal network has expanded direct-from-farm procurement over the past few years.

Way forward:

• The agri-technology ecosystem has the potential to propel Indian farmers’ incomes to grow by 25 to 35% and add more than Rs 98,380 crore into the Indian economy, through:
  • reduction of input costs,
  • enhanced productivity
  • price realisation,
  • cheaper credit, and
  • alternative incomes.
• The government should undertake policy steps and foster technology and innovation in the following agricultural sectors:
  • Easier digital reach through farmer collectivisation;
  • Development of the agristack;
  • Digital soil-health cards;
  • Digitally enabled direct benefit transfer;
  • E-NAM;
  • Digital infrastructure;
  • Linking credit with marketing;
  • Investors expectations.
• Digital technologies could enhance production at every step, from high-quality inputs to world-class agricultural outputs.
• This could help create sustainable growth for farmers, boost economic fortunes in rural areas, and benefit the entire economy. 

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Topic 6: Akhand Bharat

Context: The newly-built Parliament building has a mural that shows the map of ancient India.

Key details:

• The mural depicts an undivided India (Akhand Bharat) whose geographical area includes present-day Afghanistan, Pakistan, Maldives, Sri Lanka, Myanmar, Bangladesh, and India.
• Three of India’s neighbours, Pakistan, Nepal, and Bangladesh, have objected to the mural.
• The Government of India has clarified that the map is of the ancient Ashokan Empire.
• The accompanying Ashokan rock edict is from Maski in Raichur, and the sculpture of Ashoka from Sannati in Kalburgi, both in Karnataka.

The Maski edict:

• Maski is a town and an archaeological site in Karnataka.
• It lies on the bank of the Maski river which is a tributary of the Tungabhadra.
• The site came into prominence with the discovery of a minor rock edict of Emperor Ashoka by C. Beadon in 1915.
• It was the first edict of Emperor Ashoka that contained the name Ashoka in it instead of the earlier edicts that referred him as Devanampiye piyadasi.
• Many edicts found earlier in the Indian sub-continent in the name of Devanampiye piyadasi, all belonged to Emperor Ashoka.
• The edict is etched on a rock-face of Durgada–gudda, one of the gneissic outcrops that are present in the site.

The Sannati sculpture of Ashoka:

• Sannati, a small village on the banks of the river Bhima in Kalaburagi, Karnataka.
• It came into prominence after the collapse of the roof of the Kali temple in Chandralamba temple complex in 1986.
• The collapse revealed the historically valuable Ashokan edicts written in Prakrit language and Brahmi script at the foundations of the temple
• It led to the discovery of the magnificent Maha Stupa at Kanaganahalli, which had been referred to as Adholoka Maha-Chaitya (The Great Stupa of the Netherworlds) in the inscriptions.
• More importantly, a sculpture-portrait of Ashoka seated on his throne with his queens was also discovered.
  • The discovery of the first inscribed portrait of Emperor Ashoka, named Raya Ashoka, was discovered in the stupa.
  • It has also shed light on his forays into South India.
  • While Ashoka’s empire extended deep into the south, there is still no definitive proof of Ashoka’s sojourn here.

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Topic 7: RBI plans to bring RuPay on par with global card rivals

Context: Recently, the Reserve Bank of India (RBI) has initiated steps to gradually bring the homegrown RuPay card on par with global card networks such as Visa and Mastercard.

Key Details:

• RBI has recently decided to let RuPay issue foreign currency cards. This option was so far available only to rival card networks.
• The central bank’s move is seen as an attempt to internationalize the RuPay.
• The RBI has allowed issuance of RuPay prepaid forex cards by banks in India for use at ATMs, point of sale (PoS) machines and online merchants overseas.
• In June 2022, RBI approved the use of RuPay credit cards on UPI (unified payments interface), a facility its rivals don’t have access to so far.
• The issuance of forex cards would not only increase the acceptance of RuPay overseas but also allow corporates and individuals to use these cards during travel abroad.

• The decision to internationalize the issuance and acceptance of RuPay, coupled with the permission for banks to issue RuPay prepaid forex cards, will position RuPay alongside leading global payment networks like Mastercard and Visa.
• RBI’s decision creates new opportunities for RuPay in the global market, strengthening its position as a preferred payment option for a wider range of users.
• The RuPay has been able to establish itself as a credible alternative to Visa and Mastercard and allowing it to issue forex cards would give the product more impetus.
• RBI’s decision is significant in terms of cross-border transactions and the introduction of RuPay Prepaid Forex cards, payment options for Indians travelling abroad have further expanded.