Daily Current Affairs for 28th June 2021

GS PAPER III NEWS

Bengaluru Suburban Rail Project

Why in News

The dream project of Karnataka Government of connecting Bengaluru with its suburbs via a rail-based rapid-transit system is now going to fulfil through Bengaluru Suburban Rail Project.

Key Points

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• The dream to connect Bengaluru with its suburbs via a rail-based rapid-transit system which has been seen by the Karnataka governments since 1983, is now going to takes ground.
• The much-anticipated project seems to be taking shape with the state government announcing that work on it will start in 3 months.
• The project is expected to be completed by 2026 at an estimated cost of Rs 15,767 crore, has often been dubbed as “India’s most integrated rail project”.

Bengaluru Suburban Rail Project (BSRP)

• The Bengaluru Suburban Rail Project (BSRP) was first proposed in 1983 and has since then been one of the dreams of many Karnataka governments.
• The project was first proposed by an expert team from the then Southern Railway, but now Bengaluru falls under the purview of South Western Railway.
• It was estimated to be run across 58 kilometres. The proposal then was submitted as part of Karnataka’s first Transportation Survey commissioned by the then Chief Minister R Gundu Rao.
• The project aims to link Bengaluru to its satellite townships, suburbs, and surrounding rural areas by a rail-based rapid-transit system.
• With air-conditioned and metro-like trains expected to run across the network, BSRP will also provide a faster, safer and more comfortable mode of travel to hundreds and thousands of rural and urban commuters.

In-charge of the project

• The Rail Infrastructure Development Company, Karnataka, (K-RIDE) is a joint venture of the government of Karnataka and the Union Ministry of Railways.
• They are the in charge of conceptualising and implementing the rail project.
• It is estimated to be completed by 2026 at a cost of Rs 15,767 crore.

Areas under the project

• The project will span across a rail network of 148.17 kilometres. With 57 stations planned across four corridors, the system is expected to connect the Karnataka capital to its outskirts in six directions:
• Kengeri (Mysuru side),
• Chikkabanavara (Tumakuru),
• Rajanukunte (Doddaballapura),
• Devanahalli (Kolar side),
• Whitefield (Bangarapet side), and
• Heelalige.

All about four Corridors

• All four corridors have been named after common regional flowers found in and around Bengaluru:
• Sampige (Champa),
• Mallige (Chameli),
• Parijata (Prajakta), and
• Kanaka (Priyardarsha). Interestingly, the first letters of these varieties can be put together as “Samparka”, which in Kannada means connectivity.
• Corridor-1 or “Sampige” connects KSR Bengaluru City (Majestic) to Devanahalli with 15 stations in between and runs across 41.40 kilometres.
• Corridor-2 or “Mallige” will connect areas between Baiyappanahalli Terminal and Chikkabanavara. Running across 25 kilometres it consists of 14 stations.
• Corridor-3 or “Parijata” will be 35.52-kilometres long with 19 stations between Kengeri and Whitefield.
• Corridor-4 or “Kanaka” will have another 19 stations connecting the remaining 46.24-kilometre-long rail route.

Objectives of the project

• BSRP is planned to ensure connectivity, convenience, cost-effective commute, convergence, commercial stimulus, and a mode of sustainable mobility.
• It is also expected that the fares would be cost-effective as a substantial share among expenses chalked out for the project is being raised through innovative project financing and land monetisation.
• Further, the suburban rail network in Bengaluru is planned to integrate multiple modes of transport.
• More than 60 per cent of its stations, passengers will be able to interchange with other modes of transport like Indian Railways and the local Metro network.
• The BSRP project will turn out to be a sustainable mobility solution ending Bengaluru’s traffic woes to a large extent and reduce the city’s carbon footprint.
• The stations into integrated commercial hubs to promote “Make in India” initiative. Each such facility will be called a “Smart Station Hub”.

GS PAPER – III

Economy of India

Why in News

As June month draws to a close, the Indian economy is completing the first quarter of the current financial year: April, May and June.

Key Points

• The end of any quarter typically throws up a lot of economic analysis. Last week, the Reserve Bank of India released its June bulletin, which provided the RBI’s assessment of how the Indian economy is placed.
• The more instructive analysis was carried out by the National Council of Applied Economic Research (or NCAER) as it released its Quarterly Economic Review.
• The NCAER distinguished itself in finding innovative ways to map the state of the Indian economy during the pandemic.

Current challenges in Economy

• Two years’ worth of GDP growth has been lost:
• In 2019-20, India’s GDP was Rs 146 trillion. In other words, India had produced goods and services worth Rs 146 trillion that year.
• Then, in 2020-21, it fell to Rs 135 trillion. That’s the fall of minus 7.3%.
• In 2021-22, the GDP is expected to grow back to Rs 146 trillion after registering a growth of 8.3%. This would mean that, in terms of overall economic production, India would have lost two full years of growth.
• For instance, if there was no Covid disruption and India grew by even 6% in both these years, the total GDP would have reached the level of Rs 164 trillion, that is Rs 18 trillion more than where India is likely to end up now.
• Both retail and wholesale inflation are trending up:
• At a time when economic growth has taken a hit and recovery is muted due to the second Covid wave, India is also facing ever-increasing prices.
• The retail inflation is the rate at which prices increase for retail consumers.
• This inflation rate stayed above the RBI’s comfort zone (2% to 6%) between November 2019 and November 2020. But, after a brief period of martial relief, it has again crossed the 6%-mark in May 2021.
• The core inflation is calculated by taking away the price rise in fuel and food items. The fact that even this inflation rate has remained consistently close to RBI’s upper limit, shows that it is not just a matter of petrol and diesel prices being very high or vegetables and fruit prices rising too fast. The common Indian is witnessing a fast rise in prices across the board.
• For a long time, the wholesale prices were not increasing too fast. But starting from January onwards, that trend, too, has worsened. In May, WPI inflation was nearly 13%. In other words, wholesale prices were rising at the rate of 13%.
• Poor credit offtake in the commercial sector:
• The biggest engine of GDP in the Indian economy is the expenditure that Indians undertake in their private capacity. It accounts for more than 55% of all GDP in a year.
• The first Covid wave made that trend worse with people either losing jobs or salaries being reduced. The second Covid wave has compounded the problem further because now everyone is bothered about the high health expenses.
• In the absence of consumer spending, the country’s businessmen — both big and small — are holding back new investments and refusing to seek new loans.

Future Threats

• The slow pace of vaccination and a possible third Covid wave:
• By now it is clear that there is no economic recovery unless India gets a significant majority of its population vaccinated.
• If the pace of vaccination continues to lag, there is the possibility of a third wave, which may bring with it another round of disruption.
• It is also very important to understand that even the possibility of a third wave is quite dangerous for economic recovery. It increases uncertainty further worsens the trends of consumers holding back consumption and businesses holding back new investments.
• Monetary policy hitting a barrier:
• Between fiscal and monetary policy, most of the heavy lifting towards achieving economic revival has been done by the RBI.
• As mentioned earlier, the government has not been expanding its fiscal policy by as much as many expected it to.
• Indeed, it was largely left for the RBI to pump in loads of cheap money in the form of new loans in a bid to jump-start the economy.
• The RBI will have to do whatever it takes to keep inflation within bounds. Typically, this would require the RBI to raise interest rates.
• The long-term adverse effects of short-term shocks:
• Starting from a 2020–21 baseline which is 7.3 per cent lower than in 2019– 20, GDP has to grow well above the recent pre-pandemic trend rate (5.8 per cent) for India to catch up with its pre-pandemic growth path.
• This will require deep and wide-ranging structural reforms in the financial sector, power & foreign trade.

Way Forward

• Reforms in cooperation with the states are urgent in health, education, labour and land, which are all primarily state subjects.

GS PAPER – III

New Bad bank in India

Why in News

A bad bank in India that’s expected to launch in June may help to reduce one of the world’s worst bad-loan piles.

Key Points

• According to a BloombergQuint report, the new institution, which is set to start operations by the end of June, is likely to handle stressed debt worth 2 trillion rupees ($27 billion) over time. That would be about a quarter of the nation’s non-performing debt load.
• By housing bad loans of many lenders under one roof, the entity should help speed up decision-making and improve bargaining power when resolving these assets.
• But for India to overcome its struggles with bad debt and stabilize the financial system of Asia’s third-largest economy, more fundamental problems with insolvency laws introduced in 2016 need to be addressed.
• The proposed bad bank is useful as a one-time clean-up exercise of the bad loans that are pending resolution for years now.
• According to the, data compiled by Insolvency and Bankruptcy Board of India less than one in 10 companies admitted in the insolvency courts is getting resolved while a third are facing liquidation.
• The recoveries for financiers from the resolved cases have also dropped to 39% of dues as of March from 46% a year earlier. And if the top nine cases by recovery are excluded, lenders received just 24% of dues, according to Macquarie Capital.
• For now, Indian banks will be happy to finally kick away some of the stressed loans to the proposed entity. The sector’s bad-loan ratio is set to almost double to 13.5% of total advances by the end of September.
• Stressed loans have taken far too much management time across the industry in the past couple of years.

Bad Banks

• A bad bank is a corporate structure that isolates illiquid and high-risk assets held by a bank/financial institution or a group of banks/financial institutions.
• It can help banks clear off their balance sheets by transferring bad loans and focus on core business and lending activities.
• The first bad bank was created by US-based Mellon Bank in 1988 to hold its “toxic assets”.

Reason for introducing Bad Banks

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• Bad banks have been institutionalised and considered a success in several countries including the US, Sweden, Finland, Belgium, and Indonesia.
• Another reason for the revival of the bad bank idea in India is the steep discount on stressed loans for Asset Reconstruction Companies (ARC). The IBA has proposed that the bad bank should purchase stressed assets at book value, net of minimum regulatory provisions, which would circumvent the valuation process and due diligence. Therefore, it is possible that the bad bank may purchase stressed assets at the price desired by banks.
• Another issue, which may arise, is selling stressed assets to potential buyers and resolving the underlying crisis in the system. In the current situation, when economic conditions are deteriorating and the Insolvency and Bankruptcy Code (IBC) is suspended, finding potential buyers for distressed assets can be a significant challenge.

Bad Loans

• A Non-Performing Asset (NPA) or ‘bad loan’ is one that has not been repaid within the stipulated time, or where the scheduled payments are in arrears.
• Monetary watchdog Reserve Bank of India (RBI), while laying down in detail the various circumstances when a loan will be deemed an NPA, broadly defines non-performance thus: “An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.

Need of Bad Bank in India

• Economic Recovery:
• With the pandemic hitting the banking sector, the RBI fears a spike in bad loans in the wake of a six-month moratorium it has announced to tackle the economic slowdown.
• Government Support:
• Professionally-run bad banks, funded by the private lenders and supported by the government, can be an effective mechanism to deal with Non-Performing Assets (NPA).
• The presence of the government is seen as a means to speed up the clean-up process.
• Rising NPAs:
• Financial Stability Report (FSR): The RBI noted in its recent FSR that the gross NPAs of the banking sector are expected to shoot up to 13.5% of advances by September 2021, 7.5% in September 2020.
• K V Kamath Committee: Noted that corporate sector debt worth Rs 15.52 lakh crore has come under stress after Covid-19 hit India, while another Rs 22.20 lakh crore was already under stress before the pandemic. The committee noted that companies in sectors such as retail trade, wholesale trade, roads and textiles are facing stress.
• Sectors that have been under stress pre-Covid include Non-Banking Financial Company (NBFC), power, steel, real estate and construction.
• International Precedents: Many other countries had set up institutional mechanisms to deal with a problem of stress in the financial system.

GS PAPER – III

Draft National Space Transportation Policy-2020

Why in News

India has decided to allow private companies to establish and operate rocket launch sites within and outside the country, subject to prior authorisation from the government.

Draft National Space Transportation Policy-2020

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• The launch could be from own or leased launch site and also from mobile platforms (land, sea or air) as per the Draft National Space Transportation Policy-2020 brought out by the Department of Space.
• The Draft National Space Transportation Policy-2020 is comprehensive covering all aspects of rocket launching, launchpads, re-entry of a space object and others.
• The city based Agnikul Cosmos is developing a small rocket to launch small satellites into orbit. Skyroot Aerospace is another small rocket maker.
• As per the draft policy, IN-SPACe authorisation requires the financial guarantee or insurance cover by the proposer as part of its ownership towards fulfilment of nation’s liability as per international agreements.
• The draft policy categorically states that IN-SPACe or the Union of India shall not have any liability related to launches performed outside of the territory of India.
• According to the draft policy, the authorisation process shall ensure that the sharing of Government owned launch facilities shall not pose any constraint to the timely implementation of approved space programmes for societal development or safeguarding national sovereignty.
• According to the Department of Space, it is essential to ensure that the independent launch activities undertaken by Indian entities are in accordance with relevant treaties and other international agreements due to the impact of such activities on public safety, domestic and global transport and in-orbit satellites. Therefore, an authorisation mechanism needs to be in place to ensure compliance to the relevant regulations and safety requirements.
• The draft policy is comprehensive. Covers all aspects of space transportation such as launching, launchpads, re-entry and more. It makes it clear that this is a single window system.
• The draft policy goes into specifics on what is required under each category for approval. This is very helpful as work can get started on how to meet these.
• The draft policy states, globally, the participation of private agencies in providing launch services has increased and some of these agencies have become significant players in the commercial market for launch services.
• India is also witnessing the emergence of a “New Space” wherein the private players in the space sector aim to tap the commercial potential of small satellite launch services by developing small satellite launchers for the global market.

Indian National Space Promotion & Authorization Centre (IN-SPACe)

• Any rocket launch from Indian or overseas territory can be carried out only with authorisation from Indian National Space Promotion & Authorization Centre (IN-SPACe), an independent body constituted by the Government of India, under the Department of Space (DOS).
• The compliance and approvals of the administration controlling the territory from where the Launch is performed shall be ensured by the proposer and the proof of compliance/approvals shall be enclosed with the application for authorisation.
• The IN-SPACe shall authorise the launch by the Indian Entity after verifying the clearances accorded by the Ministry of External Affairs or any other Ministry, if applicable and also the approvals obtained by the Entity from the administration/agencies controlling the territory from where the launch is planned.

GS PAPER – III

New Generation Agni P Ballistic Missile

Why in News

Defence Research and Development Organisation (DRDO) successfully flight tested a New Generation Nuclear Capable Ballistic Missile Agni P from Dr APJ Abdul Kalam island off the coast of Odisha, Balasore.

Key Points

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• Various telemetry and radar stations positioned along the eastern coast tracked and monitored the missile.
• The missile followed text book trajectory, meeting all mission objectives with high level of accuracy.

Agni P

• Agni P is a new generation advanced variant of Agni class of missiles. It is a canisterised missile with range capability between 1,000 and 2,000 km.
• The new nuclear-capable Agni P is fully made up of composite material and it was a textbook launch.
• The new ballistic missile, which has a range capability between 1,000 and 2,000 kilometres, weighs half of Agni III and has new kinds of propulsion and new guidance.
• It also comes with the technologies found in the 4000-kilometre range Agni-IV and 5000-kilometre range Agni-V. The new Agni P can be used to target enemy warships in the Indo-Pacific.
• Agni I, India’s first intermediate-range ballistic missile, was successfully test-fired for the first time in May 1989. It was inducted into service in 2004 and has range capability between 700 and 900 kilometres.

Agni Missile

• The Agni missile is a family of medium to intercontinental range ballistic missiles developed by India, named after one of the five elements of nature.
• Agni missiles are long range, nuclear weapons capable surface to surface ballistic missile.
• The first missile of the series, Agni-I was developed under the Integrated Guided Missile Development Program (IGMDP) and tested in 1989. After its success, Agni missile program was separated from the IGMDP upon realizing its strategic importance.
• It was designated as a special program in India’s defence budget and provided adequate funds for subsequent development.
• Before Agni-P, six series of Agni were launched and this one is the 7^th of its series.