11 January, 2021 - Daily Current Affairs Analysis & MCQs - The Daily News Simplified from The Hindu

  • Self-Assessment Test
  • Qatar-Saudi Deal (International relations)
  • Lithium Deposits Global And India - (Economy)
  • Vanadium Deposits- (Economy)
  • RBI Monetary Policy Dilemma (Economy)
  • Question for the day (Economy)

Prelims Quiz

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    UPSC Current Affairs: Qataris head to Saudi Arabia after reopening of border | Page 13

    UPSC Syllabus: Mains – GS Paper II – International Relations

    Sub Theme: Qatar - Middle east crisis | Gulf Cooperation council | India and the middle east crisis | UPSC

    Qatar - Middle east crisis 

    • Saudi led coalition of four Arab countries (United Arab Emirates, Bahrain and Egypt) had recently announced the restoration of ties with Qatar.
    • In 2017, Saudi Arabia led an Arab transport blockade against Qatar, in order to punish Doha for its ties with radical Islamist groups.
    • The bigger motivation probably was to pressure Qatar into reducing diplomatic and economic relations with Iran, Saudi Arabia’s great rival in the region.
    • Coalition countries put 13 demands as conditions to resume relations, including shutting news organisations such as Al Jazeera, closing a Turkish military base in the country, and downgrading ties with Tehran. 

    Gulf Cooperation council

    The Gulf Cooperation Council (GCC) was established by an agreement concluded on 25 May 1981 in Riyadh, Saudi Arabia among Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE in view of their special relations, geographic proximity, similar political systems based on Islamic beliefs, joint destiny and common objectives. 

    About Qatar

    • Qatar has gone from being one of the poorest Gulf states to one of the wealthiest.
    • This has mainly been because of the presence of large gas reserves which have contributed significantly in helping it to become an influential player in the region’s politics.
    • Qatar shares a huge gas field with Iran (South Pars/North Dome Gas-Condensate field), which is an incentive for it to retain good relations with the Shiite regime in Tehran.
    • This is a strong irritant for Sunni Saudi Arabia, which seeks to control the geopolitics of the Middle East.

    Breakthrough in the crisis

    • US under Donald trump had initially called Qatar a "Funder of terror".
    • However due to the mediation of Kuwait which is also a member of GCC, US made a U-turn in its policy towards Qatar.
    • It was due to this mediation that finally the crisis has come to an end.

    India and the middle east crisis -

    • Initially India had called the crisis as an internal matter of the GCC.
    • India has welcomed the reconciliation and rapprochement between countries in the region.
    • Recently India's External affairs minister visited Qatar.
    • West Asia especially GCC countries are pivotal to India’s energy security and Diaspora welfare.
       
    • The GCC states are home to about eight million Indian expatriates, with a majority based in Saudi Arabia and the UAE.
    • Accordingly India has prioritised its relations with the West Asian countries through its Look West policy.
    • Qatar is the per capita richest country and is the largest supplier of gas to India
    • Seven lakh Indians live and work in Qatar and many of them send big amounts of remittances back to India.
    • Qatar recently introduced labour reforms which have been adopted for the welfare of the workers.
    • These measures which include the settlement of labour issues; safe movement and the institutionalisation of rights of workers have been welcomed by India.
    • The Gulf country is also the host of the intra-Afghan talks and Taliban delegation with Afghanistan.

     

    UPSC Current Affairs: The front seat in electric mobility | Page 07

    UPSC Syllabus: Mains – GS Paper III + GS Paper I – Indian Economy + Physical Geography

    Sub Theme: Electric Vehicles | Lithium triangle | Lithium resources in India | UPSC

    Why a transition to Electric Vehicles?

    • It is important for India because such vehicles are sustainable and profitable in the long term.
    • They will reduce dependence on crude oil will save the government money, reduce carbon emissions, and build domestic energy independence.
    • They are economically and environmentally viable option.
    • India’s transition to electric vehicles will allow us to fine-tune our infrastructure.
    • This will also influence India’s foreign policy as our energy security dependence will shift from West Asia to Latin America.
    • India imported 228.6 MT of crude oil worth $120 billion in 2018–19, which made it the third-largest oil importer in the world in terms of value.

    Government's policy

    • Under the ‘Faster Adoption and Manufacturing of Hybrid and Electric Vehicles’ (FAME) Scheme, the government has allocated $1.3 billion in incentives for electric buses, three-wheelers and four-wheelers to be used for commercial purposes till 2022, and earmarked another $135 million for charging stations.
    • A proposal for a $4.6 billion subsidy for battery makers has also been proposed by the NITI Aayog. 
    • Further India has the vision to have 30% electric vehicles plying the roads by 2030.

    Lithium Ion Batteries

    • In order to achieve its goals of electric vehicles development of lithium - ion batteries is crucial.
    • To boost the local manufacturing of such batteries India will have to import Lithium.
    • At present, India’s lithium-ion battery demand is fulfilled by imports from China, Vietnam, and Hong Kong. In the last two years, India has had a growing appetite for lithium-ion batteries, and so, lithium imports have tripled from $384 mn to $1.2 bn. 

    Lithium triangle

    • Latin America’s famous lithium triangle that encompasses lithium deposits under the salt flats of northwest Argentina, northern Chile, and southwest Bolivia holds about 80% of the explored lithium of the world.
    • In Latin America, most of the production comes from Argentina, Chile, and Bolivia.

    India's efforts for exploration –
    In 2019, India’s National Aluminium Company (NALCO), Hindustan Copper Limited (HCL) and Mineral Exploration Corporation Ltd (MECL) formally signed a joint venture agreement to form Khanij Bidesh India Limited (KABIL) to scout for strategic mineral assets like lithium and cobalt abroad for commercial use and for supplying to meet the domestic requirement for battery manufacturers.

    Domestic Exploration

    • Preliminary surveys by the Atomic Minerals Directorate for Exploration and Research (AMD), an arm of the Department of Atomic Energy,  have shown the presence of 1,600 tonnes of lithium resources in the igneous rocks of the Marlagalla-Allapatna region of Karnataka’s Mandya district.
    • There is some potential for recovering lithium from the brines of Sambhar and Pachpadra in Rajasthan, and Rann of Kachchh in Gujarat.
    • The major mica belts in Rajasthan, Bihar, and Andhra Pradesh, and the pegmatite belts in Odisha and Chhattisgarh apart from Karnataka, are the other potential geological domains.

     

    UPSC Current Affairs: Arunachal harbours a vanadium source | Page 10

    UPSC Syllabus: Mains – GS Paper I –  Physical Geography |Distribution of key natural resources across the world

    Sub Theme:  Mineral distribution| UPSC

    Vanadium Deposits - Arunachal Pradesh

    • Vanadium is a high-value metal used in strengthening steel and titanium
    • India is a significant consumer of vanadium, but is not a primary producer of the strategic metal.
    • It is recovered as a by-product from the slag collected from the processing of vanadiferous magnetite ores (iron ore)
    • India consumed 4% of about 84,000 tonnes of vanadium produced across the globe in 2017.
    • China, which produces 57% of the world’s vanadium, consumed 44% of the metal.
    • Concentrations of vanadium have been identified in the Paleoproterozoic carbonaceous phyllite rocks in the Depo and Tamang areas of Papum Pare district in Arunachal Pradesh.
    • This was the first report of a primary deposit of vanadium in India.

     

    UPSC Current Affairs:Planning an exit out of the easy money regime | Page 06

    UPSC Syllabus: Mains – GS Paper III –  Indian Economy

    Sub Theme: Dilemma of Inflation Vs Economic Growth | Dilemma of Exchange rate Management Vs Inflation |UPSC

    Context:

    The twin shocks of Demand and Supply caused due to CoVID-19 has led to unprecedented contraction in India's GDP. The GDP growth rate in the first quarter of the Financial year 2020-21 was around -24%. In response, the RBI had adopted the expansionary monetary policy to reduce the policy rates and kickstart investment and consumption expenditure. On account of this, the Indian Economy is showing signs of economy recovery. 

    In this regard, this article discusses some challenges before the RBI in the formulation of Monetary policy in future.

    Challenges before the RBI

    Dilemma of Inflation Vs Economic Growth:

    Presently, the rate of Inflation in the Indian Economy is above the targeted range of 6%. The CPI rate of Inflation in the month of November 2020 was around 6.9%. In order to bring the inflation under control, the RBI would be required to increase the policy rates. However, if the RBI increases the policy rates, it would lead to increase in the rate of interest on the loans and thus hamper the revival of Indian Economy.

    On the other hand, if the RBI continues to maintain lower rates of interest, this would lead to increase in the money supply in the long-run and thus increase the CPI rate of inflation even further.

    Thus, clearly, the RBI is in a fix.

    Dilemma of Financial Stability Vs Economic Growth: As part of expansionary monetary policy, the RBI has injected huge amount of money to revive the Investment and consumption expenditure. However, poor investor and consumer investment due to economic slowdown has led to decrease in credit creation. Apart from that, the Banks are apprehensive in giving loans due to the fear of possible increase in the NPAs. Instead of giving loans, the Banks are parking their surplus liquidity with the RBI under the Reverse Repo route.

    The author has highlighted that surplus liquidity in the economy may prompt the investors to invest in poorly rated companies. For example, the investors may invest in poorly rated corporate Bonds or shares, which in the long run could threaten the financial stability. Hence, if the liquidity in the economy continues to be higher, it may have an adverse impact on Financial stability.

    However, if the RBI starts to suck out excess liquidity from the economy, it could lead to increase in the rate of interest on loans and thus hamper the economic revival.

    Dilemma of Exchange rate Management Vs Inflation: The ultra-low Interest rates in the developed economies has led to surge in foreign inflows in the form of FPI and FDI into India. This in turn was leading to large scale appreciation in the Indian Rupee and hence affected our export competitiveness. Thus, the RBI has been intervening in the forex market to buy dollars, check large scale Rupee Appreciation and build up Forex Reserves.

    However, the purchase of dollars accompanied by equivalent injection of Rupees has been leading to increase in the Rupee supply in the Indian Economy. In the long run, this could further aggravate the CPI rate of Inflation and have an adverse impact on macro-economic stability.

    So, on one hand the RBI needs to attract foreign inflows and maintain stable exchange rate. But on the other hand, if it does so, this could lead to incre

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