Extend Brexit transition, says IMF

GS Paper III

Topic: International relations

Mains: Transition period of Brexit

What’s the News?

Britain should ask for an extension to its post-Brexit transition period to ease uncertainty at a time when the world economy is being hammered by the COVID-19 pandemic, the head of the International Monetary Fund said.

Background:

  • Negotiations with the EU officially started in June 2017, aiming to complete the withdrawal agreement by October 2018. However, that didn’t happen.
  • Boris Johnson sought to replace parts of the agreement and vowed to leave the EU by the new deadline.
  • The Withdrawal Agreement was ratified by the UK Parliament on 23 January 2020, and by the European Parliament on 29 January, ensuring the UK leaves the EU on 31 January.

Transition period:

  • However, the UK is still negotiating the future trade relationship with the EU. Britain is now going through a transition period where negotiations are open. The transition period will end on 31 December 2020.
  • During the transition, the UK still remains subject to EU law and remains part of the EU customs union and single market, but is no longer part of the EU’s political institutions.

Implications:

  • The UK faces having to wait longer and pay more to acquire a coronavirus vaccine because it has left the EU.
  • Brexit means the UK will probably have to join other non-EU countries in a queue to acquire the vaccine after EU member states have had it, and on less-favourable terms.
  • Not just emergencies and the UK can expect slower and more limited access to medicines, especially those for rare conditions or those used to treat children, where the market is small.

India, U.K and European Union:

  • The UK is the third-largest source of foreign direct investment in India and India’s largest G20 investor.
  • India is the third-largest source of FDI to the UK in terms of numbers of projects. India invests more in the UK than in the rest of Europe combined, emerging as the UK’s third-largest FDI investor.
  • The key sectors attracting Indian investment include healthcare, agritech, food, and drink.

Its impact on India:

  • Brexit will have a negative impact on the $108 billion Indian IT sector in the short term.
  • Many Indian companies are listed on the London Stock Exchange and many have European headquarters in London. Brexit will take away this advantage.
  • Due to fall in the value of Pound sterling, Indian exports to the UK will suffer. Cheaper rupee will make Indian exports, including IT and ITeS, competitive. Indian import companies operating in the UK may also report a loss. Also, note that India is exporting more than what it is importing from Britain.
  • As investors look around the world for safe havens in these turbulent times, India stands out both in terms of stability and of growth.
  • Brexit might give a boost to trade ties between India and the UK.
  • Britain will now be free to discuss a bilateral trade pact with India.
  • Due to the fall in the value of Pound sterling, those who import from the UK will gain. Indian export companies operating in the UK may also gain.
  • More Indian tourists can afford to visit Britain in the coming days as the currency value has fallen.
  • More Indian students can afford to study in Britain (for higher education) as the fees may seem cheaper.
  • Britain will need a steady inflow of talented labour, and India fits the bill perfectly due to its English-speaking population.

Record foodgrain target of 298.3 million tonnes set

GS Paper III

Topic: Indian economy

Prelims: kharif and rabi crops

What’s the News?

On the back of a normal monsoon forecast, the Agriculture Ministry is targeting a record foodgrain production of 298.3 million tonnes for 2020-21, higher than the 291.95 million tonnes estimated for 2019-20.

Focus:

  • According to a presentation made by Agriculture Commissioner at a National Conference on Agriculture-Kharif 2020 Campaign, both rice and wheat production targets are minimally higher than the previous year.
  • However, the focus is on driving the growth in pulses, coarse cereals and oilseeds.

The India Meteorological Department forecast for the monsoon:

  • It predicted normal rainfall, with a chance of above normal rain in August and September.
  • The main kharif season crop is rice, and the Agriculture Ministry is targeting a harvest, slightly higher than the last kharif season harvest.
  • However, it has lowered its rice production target for the next rabi season. This means that the total rice production target for 2020-21, barely higher than the previous year’s target.
  • Wheat production is also expected to remain steady, in comparison to the previous year’s estimate of 106.21 million tonnes.
  • The Agriculture Ministry hopes to ramp up production of coarse cereals this year, but admits that the challenge is how to create demand for nutricereals or millets.
  • With regard to pulses, the target is 25.3 million tonnes compared to the previous season’s estimates of 23 million tonnes, with the entire increase projected to come from the kharif season.

Oilseeds major priority:

  • Oilseeds are a major priority, especially due to the disruption in edible oil imports caused by the COVID-19 pandemic.
  • The Ministry has also created an action plan for oil palm plantation, given the disruptions in imports.
  • It hopes to cover 31,500 hectares with about 45 lakh seedlings this year, with the bulk of the plantation in Andhra Pradesh and Telangana.

Challenge:

  • One challenge could be a shortfall in supply of soyabean seeds to the tune of 3.2 lakh quintals, due to unseasonal rains at the time of harvesting the seed crop.
  • With respect to coarse cereals,the challenge is how to create demand for nutricereals or millets.

Conclusion:

  • Due to the travel restrictions imposed by the COVID-19 pandemic, the Agriculture Ministry’s annual meeting to review the ongoing rabi or winter season harvest and layout prospects for the coming kharif or summer cropping season is being held via videoconferencing.
  • It is briefing on the measures taken to ensure a smooth and safe rabi harvest in the midst of the lockdown which is hoped to be helpful for the sector.

Gadchiroli count zero, but fears uptick in Maoist violence

GS Paper III

Topic: Security issues in India- Naxalism

Mains: Corona and naxalism relations

What’s the News?

With a population of 12 lakh, Gadchiroli has had no COVID cases so far, but for the district that has always lived in the shadow of Maoist violence, the lockdown to check the spread of the virus hangs heavy.

Corona and naxalism:

  • In Gadchiroli, the lockdown has coincided with the harvesting season of tendu leaves and bamboo.
  • It is also the time of the year when both trading activities and Naxalite movement increase. This is the time they can extort money from local villagers and contractors.
  • The lockdown seems to have impacted Maoists too. A group of extremists is reported to be stranded in the forests of erstwhile composite Adilabad district, not able to return to their neighbouring Maharashtra thanks to the increased vigil on the inter-state borders owing to containment operations for COVID-19.

Challenges:

  • With the district sharing its borders with four districts of Chhattisgarh and three each of Telangana and Maharashtra, quarantining those coming from other districts has been a challenge.
  • In recent days, Maoists have even put up hoardings outside villages, warning the district administration against entering.

Steps taken:

  • To tackle these challenges, a network of one talathi (a revenue official) for every 10 villages has been set up to alert the administration if any of the villagers face problems due to the lockdown or because of Maoist presence.
  • With many of the villages having no cellular network, the nearest spot where signals are strong are identified to ensure distress situations are notified within an hour.
  • The market caters to around 40,000 people who live in 120 tribal hamlets in the heavily forested terrain of Abujhmad, a known Naxal stronghold. The shutting down of this weekly event has led to a spike in vegetable prices and left tribals with no takers for the rice they produce.

Conclusion:

While the local administration is conducting awareness drives and medical surveys to tackle COVID-19, they are hobbled by the Maoist presence in the region so the Awareness and precaution are the best way out.


Ways and Means Advances: what is it, and how far will relaxation of limit help?

GS Paper III

Topic: Indian Economy

Mains: Ways and Means Advances

What’s the News?

The Reserve Bank of India (RBI), on  17th April 18, 2020, announced a 60% increase in the Ways and Means Advances (WMA) limit of state governments over and above the level as on March 31, with a view to enabling them “to undertake COVID-19 containment and mitigation efforts” and “to better plan their market borrowings”.

Ways and Means Advances (WMA):

  • It is a facility for both the Centre and states to borrow from the RBI. These borrowings are meant purely to help them to tide over temporary mismatches in cash flows of their receipts and expenditures.
  • In that sense, they aren’t a source of finance per se. Section 17(5) of the RBI Act, 1934 authorises the central bank to lend to the Centre and state governments subject to their being repayable “not later than three months from the date of the making of the advance’’.

How much does RBI charge:

  • The interest rate on WMA is the RBI’s repo rate, which is basically the rate at which it lends short-term money to banks. That rate is currently 4.4%.
  • The governments are, however, allowed to draw amounts in excess of their WMA limits. The interest on such overdraft is 2 percentage points above the repo rate, which now works out to 6.4%.
  • Further, no state can run an overdraft with the RBI for more than a certain period.

Existing WMA limits and overdraft conditions:

  • For the Centre, the WMA limit during the first half of 2020-21 (April-September) has been fixed at Rs 120,000 crore. This is 60% higher than the Rs 75,000 crore limit for the same period of 2019-20. The limit for the second half of the last fiscal (October-March) was Rs 35,000 crore.
  • For the states, the aggregate WMA limit was Rs 32,225 crore till March 31, 2020. On April 1, the RBI announced a 30% hike in this limit, which has now been enhanced to 60%, taking it to Rs 51,560 crore. The central bank, on April 7, also extended the period for which a state can be in overdraft from 14 to 21 consecutive working days, and from 36 to 50 working days during a quarter.

Reasons behind the relaxation:

  • Government finances are in a mess today. The lockdown has resulted in revenues drying up, and it is the states that are actually feeling the heat.
  • With economic activity at a near standstill, there is hardly any money coming in from GST, petroleum products, liquor, motor vehicles, stamp duty or registration fee.
  • At the same time, the states are also incurring the bulk of the on-the-ground expenditures for combating the novel coronavirus.
  • These extend not only to purchases of testing kits, personal protective equipment and ventilators or deployment of healthcare and police personnel, but even to providing food, shelter and other relief measures to those worst hit by the lockdown.
  • In a scenario where their expenses are real, mounting and cannot be deferred, even as revenues are collapsing and uncertain, the states are facing an unprecedented cash crunch.
  • Most of them have resorted to slashing expenditures of other departments in order to meet COVID-19 exigencies, with some even deferring or cutting salaries of employees.
  • But all these measures haven’t really addressed the underlying problem of liquidity and cash flow mismatches.

Conclusion:

  • The WMA window, as already pointed out, is intended only to tide over temporary mismatches in cash flow of receipts and payments. Given the likelihood of total government borrowings crossing Rs 20 lakh crore –a WMA limit of Rs 120,000 crore for the Centre and Rs 51,560 crore for states may prove grossly insufficient.
  • At some point, the Centre, at least, might have to invoke Fiscal Responsibility and Budget Management Act, 2003.
  • Apart from monetisation of deficits – which is what this provision effectively entails – the RBI may, in the coming day, also have to undertake increased secondary market purchases and sales of Central as well as state government securities.

Why the Coronavirus Seems to Hit Men Harder Than Women

GS Paper III

Topic: Science and technology

Mains: Reasons behind men being more susceptible to infections than women

What’s the News?

In China, men are dying at higher rates following infection with the coronavirus. There may be several explanations, scientists say.

Background:

  • The coronavirus that originated in China has spread fear and anxiety around the world. But while the novel virus has largely spared one vulnerable group — children — it appears to pose a particular threat to middle-aged and older adults, particularly men.
  • Although men and women have been infected in roughly equal numbers, researchers found, the death rate among men was 2.8 percent, compared with 1.7 percent among women.
  • Some 32 percent of men infected with Middle East Respiratory Syndrome died, compared with 25.8 percent of women. Young adult men also died at higher rates than female peers during the influenza epidemic of 1918.

Factors responsible:

A number of factors may be working against men in the current epidemic, scientists say, including some that are biological, and some that are rooted in lifestyle-

Biological:

  • When it comes to mounting an immune response against infections, men are the weaker sex.
  • Women also produce stronger immune responses after vaccinations, and have enhanced memory immune responses, which protect adults from pathogens they were exposed to as children.

A stew of biological factors may be responsible, including the female sex hormone estrogen, which appears to play a role in immunity, and the fact that women carry two X chromosomes, which contain immune-related genes. Men, of course, carry only one.

Different behaviour or lifestyle:

  • Health behaviors that differ by sex in some societies may also play a role in disparate responses to infections.
  • China has the largest population of smokers in the world — 316 million people — accounting for nearly one-third of the world’s smokers and 40 percent of tobacco consumption worldwide.
  • But just over 2 percent of Chinese women smoke, compared with more than half of all men.