Daily Current Affairs for 09th August 2022

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Pradhan Mantri Adi Adarsh Gram Yojna

GS Paper 1: Social Empowerment
Important for
Prelims exam: Provision of Pradhan Mantri Adi Adarsh Gram Yojna
Mains exam: Efforts to empower schedule tribes
Why in news
The Ministry of Tribal Affairs is implementing ‘Pradhan Mantri Adi Adarsh Gram Yojna’ to achieve integrated socio-economic development of tribal population.

About Pradhan Mantri Adi Adarsh Gram Yojna

• Government has modified the earlier scheme of ‘Special Central Assistance to Tribal Sub-Scheme (SCA to TSS) with nomenclature ‘Pradhan Mantri Adi Adarsh Gram Yojna (PMAAGY)’, for implementation during 2021-22 to 2025-26.
• It aims at mitigating gaps and providing basic infrastructure in villages with significant tribal population in convergence with funds available under different schemes in Central Scheduled Tribe Component.
• It is envisaged to cover 36,428 villages having at least 50% ST population and 500 STs across States / UTs with notified STs during the period.

Funding under the Scheme

• For every new village selected, the Scheme provides for a total of Rs. 21 lakh of which Rs.20.00 lakh is for the ‘Gap-filling’ component and Rs.1.00 lakh is meant for ‘administrative expenses’ in the ratio of 1:1:1:2 at the Centre, State, District and Village level respectively.

Vision of an ‘Adarsh Gram’

• The Scheme provides for An ‘Adarsh Gram’ is one wherein people have access to various basic services so that the minimum needs of all the sections of the society are fully met and disparities are reduced to a minimum.
• These villages would have all such infrastructure and its residents will have access to all such basic services that are necessary for a dignified living, creating thereby an environment in which everyone is enabled to utilise her/his potential to the fullest.

Objectives of the Scheme

The objective of this Scheme is to ensure integrated development of the selected villages with more than 50% SC population so that, inter alia, there is:
• Adequate Infrastructure: All requisite infrastructure necessary for the socio-economic development needs are to be provided under the Scheme.
• Improvement in Socio-Economic Indicators: The identified socio-economic indicators, known as Monitorable Indicators, are to be improved so that the disparity between SC and non-SC population is eliminated and the level of indicators is raised to at least that of the National average.
o More specifically, all BPL SC families should have food and livelihood security, all SC children should complete education at least up to the secondary level, all factors leading to maternal and infant mortality are addressed and incidence of malnutrition, especially amongst children and women, is eliminated.

Constitutional provision

• Article 46: Article 46 of Part IV (“Directive Principles of State Policy”) of the Constitution enjoins upon the State to promote with special care the educational and economic interests of the weaker sections of the people, in particular, of the Scheduled Castes and the Scheduled Tribes.
• Article 38(2): Article 38 (2) in the same Part also enjoins upon the State to minimise inequities in income, and to endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations.

New START treaty
GS Paper 2: Bilateral Groupings
Important for
Prelims exam: New START treaty
Mains exam: Provision of treaty and consequences of suspension

Why in news

Russia has “temporarily” suspended on-site inspections of its strategic nuclear weapons, under an arms control treaty known as New START.

Reason behind this move

• The Russian foreign ministry said the US was seeking advantages and had deprived Russia of the right to carry out inspections on US territory. As US and its allies had imposed travel restrictions on Russian officials in light of ongoing Russia-Ukraine conflict.
About New START treaty
• The Treaty between the United States of America and the Russian Federation on Measures for the Further Reduction and Limitation of Strategic Offensive Arms, also known as the New START Treaty.
• The New START Treaty entered into force on February 5, 2011.
• The United States and the Russian Federation have agreed to extend the treaty through February 4, 2026.

Strategic Offensive Limits

Under the treaty, the United States and the Russian Federation had seven years to meet the treaty’s central limits on strategic offensive arms (by February 5, 2018) and are then obligated to maintain those limits for as long as the treaty remains in force.
Aggregate limits:
Both the United States and the Russian Federation met the central limits of the New START Treaty by February 5, 2018, and have stayed at or below them ever since. Those limits are:
• 700 deployed intercontinental ballistic missiles (ICBMs), deployed submarine-launched ballistic missiles (SLBMs), and deployed heavy bombers equipped for nuclear armaments;
• 1,550 nuclear warheads on deployed ICBMs, deployed SLBMs, and deployed heavy bombers equipped for nuclear armaments (each such heavy bomber is counted as one warhead toward this limit);
• 800 deployed and non-deployed ICBM launchers, SLBM launchers, and heavy bombers equipped for nuclear armaments.

New START Replaced START I Treaty

• New START has replaced the 1991 START I treaty, which expired in December 2009, and superseded the 2002 Strategic Offensive Reductions Treaty (SORT), which terminated when New START entered into force.
• The START Framework of 1991 (at the end of the Cold War) limited both sides to 1,600 strategic delivery vehicles and 6,000 warheads.

Impact on global security

• A collapse of New START poses a serious threat to the nuclear non-proliferation regime, which is predicated on the commitment from the two nuclear superpowers to continue reducing their nuclear arsenals.
• An increasingly multipolar nuclear world amid growing geopolitical tensions and the decline of global and regional collective security institutions represent the most significant threats to the global security situation in the coming decades.
• A collapse of the treaty will raise geopolitical risks not only in US-Russia relations, but also in the transatlantic and global contexts.
• Any threat to the non-proliferation regime could push countries such as Turkey or Saudi Arabia towards developing nuclear capabilities, thus raising the threat of unilateral sanctions and a deteriorating investment climate.

West Seti hydropower project

GS Paper 2: India and its neighbourhood, Relations between India and neighbouring countries
Important for
Prelims exam: West seti project
Mains exam: India-nepal relation
Why in news
Nepal approves India’s hydropower board to study, develop the West Seti project.

About West Seti Hydropower Project

• The West Seti project, whose revised installed capacity stands at 1,200 megawatts(The projects include 750MW West seti Hydropower Project and 450MW seti River (3R-6), a joint storage project) and which has been talked about for the last six decades, suddenly gained momentum just before indian Prime Minister’s visit to Lumbini.
• The West Seti Hydroelectric Project in Nepal’s Far-Western Development Region (FWDR) is a storage scheme designed to

generate and export large quantities of electrical energy to India.
• The Project will generate electrical energy throughout the year, storing excess wet season river flows in the reservoir, and using this water to generate energy during peak demand periods in the dry season.
• The NHPC Limited, an Indian government hydropower board under the Ministry of Power, has submitted a proposal to develop the West Seti Hydropower Project.
• The project has been on the drawing board since the early 1980s. The project also attracted some geopolitical fissures in the last two and a half decades since the nepal government issued the developing licence to a French company and then to a renowned Chinese company.

Significance: India-Nepal Power Relations

• Nepal is rich in power sources with around 6,000 rivers and an estimated potential for 83,000 MW.
• India has formally approached Nepal on many occasions, seeking preferential rights over Nepali waters.
• India is viewed as a feasible power market for Nepal.
• India has undertaken to harness or expressed intent to harness major rivers in the north.
Issues in project execution
• There has been some uncertainty in Nepal over India’s inability to deliver projects on time.
• An ambitious Mahakali treaty was signed back in 1996, to produce 6,480 MW, but India has still not been able to come out with the Detailed project Report.
• The Upper Karnali project, for which the multinational GMR signed the contract, has made no headway for years.
• Major reasons for stalling of these projects was a lack of consensus over power purchase agreement with India.
• Also, seismic sensitivity of the Himalayan Region is the prime consideration.
What has helped build faith recently?
• India has been successful in executing the 900-MW Arun Three Project in eastern Nepal’s Sankhuwa Sabha.
• After a standoff between Nepal and India led to the economic blockade of 2015, equations changed after Deuba took over last July, replacing Oli.

Benefits for Nepal

• Nepal has a massive power shortfall as it generates only around 900 MW against an installed capacity of nearly 2,000 MW.
• Although it is currently selling 364 MW power to India, it has over the years imported from India.
Hurdles from Nepal’s internal crisis
• Nepal’s Constitution has a provision under which any treaty or agreement with another country on natural resources will require Parliament’s ratification by at least a two-thirds majority.
• That will also mean homework will be required before any hydro project is signed and given for execution.
Way forward
• Until India agrees to value Nepal’s water and the existing focus on power is not reviewed, mutual distrust may continue.
• India must start executing its projects timely.

Cantillon effect
GS Paper 3: Monetary policy
Important for
Prelims exam: Cantillon effect

What is Cantillon effect

• The Cantillon effect refers to the idea that changes in the money supply in an economy causes redistribution of purchasing power among people, disturbs the relative prices of goods and services, and leads to the misallocation of scarce resources.
• The Cantillon effect is named after the 18th century French economist Richard Cantillon who published his ideas in the 1755 book Essay on the Nature of Trade in General.
How money supply affects the economy
• It is generally accepted by economists today that an increase in the overall money supply in an economy causes a proportionate rise in the prices of goods and services over the long run.
• This is in line with the quantity theory of money, according to which the total amount of money in an economy plays a crucial role in determining the general price level.
o So, if the money supply in an economy doubles this should lead to a rough doubling of prices across the economy.
o In other words, money has largely been considered to be “neutral,” in the sense that changes in its supply have no real effect on the economy.
• Cantillon, however, noted that when money supply is expanded, the fresh money does not get evenly distributed across the economy all at once as assumed by most economists.
o The fresh money is rather injected into particular sections of the economy first and thus people in these sections of the economy are enriched when compared to people in the rest of the economy.
o In other words, when the money supply is expanded, the purchasing power of people who first receive the freshly created money is enhanced at the cost of the rest of society.
o When the first recipients of freshly created money spend their money on certain goods and services, the prices of these goods and services begin to rise before the prices of other goods and services.
 This is because the freshly created money takes time to percolate through the wider economy and cause the prices of all goods and services to rise proportionately.
o Thus, there is a disturbance in relative prices of goods as fresh money is injected into the economy and, contrary to what economists have traditionally assumed, this can lead to real effects on the economy.

RBI surveys

GS Paper 3: Macroeconomics, Growth and Development
Important for
Prelims exam: Surveys
Mains exam: Survey data and implication
Why in news
The RBI expects India’s GDP to grow by 7.2% in 2022-23. But to understand how the different components of the economy are doing, the RBI routinely conducts surveys. Recently RBI released seven such surveys.
About these survey

1. Consumer Confidence Survey (CCS)

• The CCS asks over 6,000 people across 19 cities about their current perceptions and one-year ahead expectations on the general economic situation, employment scenario, overall price situation and own income and spending.
• Based on the responses, the RBI comes up with two indices: the Current Situation Index (CSI) and the Future Expectations Index(FEI). An index below the 100 mark implies people are pessimistic and a value higher than 100 conveys optimism.
• The CSI has been recovering but, despite the improvement, it is still in the negative territory. The FEI is in the positive territory, but even now it stays below the pre-pandemic levels.
• Inshort, consumer confidence is improving but there is still some way to go for people to recover from the Covid shock.

2. Inflation Expectations Survey (IE)

• This survey tracks people’s expectations of inflation. The biggest worry during phases of rapid inflation is that if inflation is not controlled quickly, it can lead to people getting into the habit of expecting high inflation; that, in turn, alters people’s economic behaviour.
• Often central bankers can be found saying they want to prevent people’s inflation expectations from becoming “unanchored”.
o This survey provides an answer to whether that is happening in India or not.
o The survey found that households’ inflation perception for the current period has moderated by 80 bps to 9.3% in the latest survey round.
o Their three months and one-year ahead median inflation expectations also declined by 50 bps and 60 bps, respectively, from the May 2022 round of the survey.
o In short, even though inflation is high at present, people expect it to come down soon

3. OBICUS Survey

• OBICUS stands for “Order Books, Inventories and Capacity Utilisation Survey”.
• This survey covered 765 manufacturing companies to provide a snapshot of demand conditions in India’s manufacturing sector from January to March 2022.
• The key variable here is Capacity Utilisation (CU).
o A low level of CU implies that manufacturing firms can meet the existing demand without needing to boost production. That, in turn, has negative implications for job creation and the chances for private sector investments in the economy.
• Here again, the news is heartening. The CU is well above the pre-pandemic level suggesting India’s aggregate demand is recovering steadily.

4. Industrial Outlook Survey (IOS)

• This survey tries to track the sentiments of the businessmen and businesswomen.
• The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q1(April, May and June) and their expectations for Q2(July August and September) in 2022-23.
• Data suggest that businesses were optimistic (above the 100 level) in Q1 although not as much as they were in the recent past. But, they do expect things to improve as the months roll by.
• This tallies with the steadily improving capacity utilisation from the OBICUS.
• In short, unlike consumer confidence, business sentiments are already in the optimistic terrain, and are expected to improve further.

5. Services and Infrastructure Outlook Survey (SIOS)

• This survey does a qualitative assessment of how over 750 Indian companies in the services and infrastructure sectors view the current situation (Q1) and the future prospects (Q2).
• The questions are on parameters relating to demand conditions, price situations and other business conditions.
• The survey found that the companies in the services space are far more optimistic than companies in the infrastructure sector.
• But the key take away from this survey is that the net responses, that is, the difference between the percentage of respondents reporting optimism and those reporting pessimism, is positive for both sectors.

6. Bank Lending Survey (BLS)

• This survey captures the mood, qualitative assessment and expectations, of major scheduled commercial banks (SCBS) on credit parameters (viz, loan demand and terms & conditions of loans) for major economic sectors.
• The BLS found that the bankers assessment of loan demand in Q1 of 2022-23 remained positive for all major sectors though the sentiments were somewhat toned down from the level reported in the previous quarter.
• Sentiments on overall loan demand in the second, third and fourth quarters also remained upbeat.
• In short, while banks remain upbeat, they are not as optimistic as they were just a couple of quarters ago.

7. Survey of Professional Forecasters (SPF)

• There is a survey of 42 professional forecasters (outside the RBI) on key macro-economic indicators such as GDP growth rate and inflation rate in the current year and the next financial year.
• India’s real GDP is expected to grow by 7.1% in 2022-23, projections revised down by 10 basis points from the last survey round, and it is expected to grow by 6.3% in 2023- 24.
• In short, there is considerable unanimity among observers that India’s GDP will grow at around 7% in the current year.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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