Daily Current Affairs - Civil Services - 05-07-2021

Useful compilation of Civil Services oriented - Daily Current Affairs - Civil Services - 05-07-2021

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• SECTION 1 - TEN NEWS HEADLINES

1. Indian Economy - Financial Stability Report July 2021 by RBI - The RBI released its Financial Stability Report in July 2021, which is a bi-annual report that reflects risks to financial stability and the resilience of financial system. Key learnings were - (i) The gross non-performing assets (GNPAs) ratio of banks may rise from 7.48% in March 2021 to 9.8% by March 2022; (ii) MSMEs face huge stress in meeting their payment obligations (At the end of March 2021, 15.9% of loans of less than Rs. 25 crore to the MSEME Sector had turned bad), (iii) Capital to risk weighted assets ratio (CRAR) of Scheduled commercial Banks (SCBs) increased to 16.0 3% in March 2021 (it's the ratio of a Bank’s capital in relation to its risk weighted Assets and current liabilities), (iv) Provision coverage ratio stood at 68.86% in March 2021 (a high PCR ratio means most asset quality issues have been taken care of and the bank is not vulnerable), (v) Demand for consumer credit across banks and non banking financial companies (NBFCs) has decreased amidst the second wave of Covid-19.  Banks remain relatively unaffected by distractions caused due to the pandemic and are well protected by regulatory, monetary and fiscal Policies.
2. Environment and Ecology - LEAF Coalition announced - The LEAF (Lowering Emissions by Accelerating Forest Finance) Coalition was announced at the Leaders Summit on Climate, 2021. It will be the largest ever public-private effort to protect tropical forests and intends to mobilize at least USD 1 billion in financing to countries committed to protecting their tropical forests. It is a collective of the governments of the USA, UK and Norway. A country willing to participate would need to fulfil certain predetermined conditions laid down by the Coalition. The results-based financing model will be used in LEAF. The goal of net zero emissions cannot be reached without bold leadership from the private sector. Tropical forests are massive carbon sinks and by investing in their protection will help in achieving Nationally Determined Contributions (NDCs). It is a step towards achieving the aims and objectives of the Reducing Emissions from Deforestation and Forest Degradation (REDD+) mechanism.
3. Environment and Ecology - Historic heat wave in Canada continues due to Heat Dome - In July, the Pacific Northwest and some parts of Canada recorded temperatures around 47 degrees, causing a “historic” heat wave. This was a result of a phenomenon referred to as a “heat dome”. A heat dome is an area of high pressure that parks over a region like a lid on a pot, trapping heat, and begins when there is a strong change in ocean temperatures. The western Pacific ocean’s temperatures have increased in the past few decades and are relatively more than the temperature in the eastern Pacific. The gradient causes more warm air, heated by the ocean surface, to rise over the ocean surface (Convection). As prevailing winds move the hot air east, the northern shifts of the jet stream trap the air and move it toward land, where it sinks, resulting in heat waves. This strong change in ocean temperature from the west to the east causes heat dome (HD). HD also prevents clouds from forming, causing more Sun’s radiation to reach the Earth’s surface. They are more likely to form during La Niña years like 2021, when waters are cool in the eastern Pacific and warm in the western Pacific.
4. Governance and Institution - Digital India Abhiyan gaining strength - Launched in 2015, it is a flagship programme of the Ministry of Electronics & IT (MietY) with a vision to transform India into a digitally empowered society and knowledge economy. It is transformational in nature and would ensure that Government services are available to citizens electronically. This is centred on three key vision areas: (i) Digital Infrastructure as a Core Utility to Every Citizen, (ii) Governance & Services on Demand, (iii) Digital Empowerment of Citizens. The overall scope of this programme is to prepare India for a knowledge future, on being transformative that is to realize IT (Indian Talent) + IT (Information Technology) = IT (India Tomorrow). The programme weaves together a large number of ideas and thoughts into a single, comprehensive vision, so that each of them is seen as part of a larger goal. Issues on internet access for crores of school-children, however, remain unresolved.
5. Polity and Constitution - Uttarakhand gets a new Chief Minister - Pushkar Singh Dhami took oath as Chief Minister of Uttarakhand, replacing Tirath Singh Rawat whose term as Uttarakhand Chief Minister lasted just 114 days and was riddled with controversies over his remarks as well as reversal of decisions taken by his predecessor Trivendra Singh Rawat (who had resigned in March 2021 after leading the state government for four years). Days after the swearing-in, the Tirath cabinet suspended Trivendra’s decision to declare the state summer capital of Gairsain as the third administrative division in the state after Garhwal and Kumaon. In a meeting of the Vishwa Hindu Parishad (VHP) and saints in Haridwar Kumbh in April, Tirath had announced a review of the Uttarakhand Char Dham Devasthanam Board that was constituted by Trivendra on January 15 last year. Then came the second wave of Covid and the controversy surrounding the Kumbh Mela crowds.
6. Social Issues - Nirbhaya fund - More than four years after a MoU was signed between the Indian Railways and RailTel for the installation of surveillance cameras at 983 stations across the country, the project envisaged under the “Nirbhaya Fund” to enhance safety of women passengers has derailed. This scheme was for implementation of initiatives to enhance safety and security for women in India, and was established by the Union Finance Ministry. It is a non-lapsable corpus fund, and have various schemes under it - (i) One Stop Centre Scheme (Sakhi Centres): It is being implemented across the country since 1st April 2015. It aims at establishing Centres to facilitate women affected by violence. It provides First aid, Medical aid, Police assistance, Legal aid and counselling support; (ii) Women Helpline (181): The Department of Telecommunication has allocated the number 181 to all States/UTs for Women Helpline. This helpline number will link the One Stop Centres being established by the Ministry of Women & Child Development; (iii) Mahila Police Volunteers (MPVs): These will act as a link between police and community and help women in distress. Haryana launched the scheme in 2016, thereby becoming the first state to launch it.
7. Social Issues - Draft Trafficking in Persons (Prevention, Care and Rehabilitation) Bill, 2021 - The Ministry of Women and Child Welfare invited suggestions and comments for its draft "Trafficking in Persons (Prevention, Care and Rehabilitation) Bill, 2021" which was released. The law, once enacted, will extend to all citizens inside as well as outside India and a foreign national or a stateless person who has his or her residence in India at the time of commission of offence under this Act. The scope of the Bill vis a vis offenders will also include defence personnel and government servants, doctors and paramedical staff or anyone in a position of authority. Exploitation has been defined to include, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation including pornography, any act of physical exploitation, forced labour or services, slavery or practices similar to slavery, servitude or forced removal of organs, illegal clinical drug trials or illegal bio-medical research. The Bill also extends beyond the protection of women and children as victims to now include transgenders as well as any person who may be a victim of trafficking. It also does away with the provision that a victim necessarily needs to be transported from one place to another to be defined as a victim.
8. World Politics - Indo-Italian ties - After the late October 2018 India-Italy Summit in New Delhi, the visit of Indian External Affairs Minister Dr. S. Jaishankar to Matera in Italy, to attend the meeting of the foreign and development ministers of G-20 group, has raised the banner of bilateral relations. Italy is the eighth largest economy in the world, and a member of the 27 nation European Union, the influential G-20, and the powerful G-7, besides NATO and OECD. It has chosen India among the five priority countries, for strengthening all-round relations. Besides economy and trade, the two countries have also decided to strengthen defence cooperation by increased defence exchanges through greater two-way collaboration and technology cooperation, co-development, and co-production. Both countries have already set up a joint defence committee to promote this. In fact, the November 2020 virtual Summit between PMs Narendra Modi and Giuseppe Conte resulted in a Joint Declaration and Plan of Action to prioritize areas of cooperation and strategic goals for the five-year period till 2025. Being the fifth largest trade partner in the EU, India is home to more than 600 Italian companies. Italy also hosts over 1,80,000 overseas Indians.
9. Environment and Ecology - Heat Pumps - There is concern about ACs not being environmentally friendly, so as an alternative, some cities in the US are considering using heat pumps thought to be more eco-friendly. The US Department of Energy notes that for climates with moderate heating and cooling needs, heat pumps offer an energy-efficient alternative to furnaces and air-conditioners. It says that much like a refrigerator, heat pumps use electricity to move heat from a cool space to a wam space. This makes the cool place cooler and the warm place warmer. Therefore, a heat pump does not create any heat or cool air, but it merely shifts air. For instance, if a heat pump is being used inside a room to make it cool, it will absorb the heat in the room and will release it outdoors with the help of an outdoor compressor. In heating mode, the heat pump will absorb heat from outside and release it indoors. There are mainly two types of heat pumps depending on the type of medium they extract heat from. One type extracts heat from the ground and the other from air.
10. Indian Economy - Bold project by KVIC - A unique scientific exercise for reducing desertification and providing livelihood and multi-disciplinary rural industry support has been initiated by Khadi and Village Industries Commission (KVIC). The project named “Bamboo Oasis on Lands in Drought” (BOLD) is the first of its kind exercise in India which was launched from the tribal village Nichla Mandwa in Udaipur, Rajasthan. 5000 saplings of special bamboo species – Bambusa Tulda and Bambusa Polymorpha specially brought from Assam – have been planted over 25 bigha (16 acres approx) of vacant arid Gram Panchayat land. Project BOLD seeks to create bamboo-based green patches in arid and semi-arid land zones, and aims for reducing land degradation and preventing desertification. It is part of KVIC’s “Khadi Bamboo Festival” to celebrate 75 years of independence “Azadi ka Amrit Mahotsav”. KVIC is set to replicate the Project at Village Dholera in Ahmedabad district in Gujarat and Leh-Ladakh region by August.

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• SECTION 2 - DAILY CURRENT AFFAIRS

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• 1. ECONOMY (Prelims, GS Paper 3, Essay paper)

RBI's FSR - Financial Stability Report - July 2021

• The story: The Reserve Bank of India has released its July '21 version of the Financial Stability Report (FSR), where it looks at questions like do Indian banks (both public and private) have enough capital to run their operations, or are the levels of bad loans (or non-performing assets) within manageable limits or are different sectors of the economy able to get credit (or new loans) for economic activity such as starting a new business or buying a new house or car?
• Macro perspective: The RBI in its FSR has put together data and information allowing it to assess the state of the domestic economy, especially in a fast-changing global economy. It also assesses the macro-financial risks, which refer to risks originating from the financial system but affecting the wider economy and risks to the financial system that originate in the wider economy.

1. Example - If a high percentage of loans extended by banks in the past turn “bad” (not being repaid) perhaps because of a lockdown or fall in demand for certain goods and services, then such banks will be unable to extend new loans to the wider economy because of reducing profitability; so a bad loans problem turns into a growth issue for entire Indian economy.
2. The RBI tries to explain how a shock in one part of the financial system affects another part; so how would Banks' poor position affect companies that finance housing loans.

• Stress testing: As part of the FSR, the RBI conducts “stress tests” to find what may happen to the health of the banking system if the broader economy worsens. It tries to assess how factors outside India — crude oil prices or interest rates in other countries — may affect the domestic economy.
• Systemic Risk Surveys (SRS): Each FSR also contains the results of the 'Systemic Risk Surveys'. In 2020, as India was battling the first Covid wave, the RBI was worried about bad loans shooting through the roof. According to the FSR in June 2020, depending on the level of stress in the economy, Gross NPAs could rise from 8.5% (of gross loans and advances) at the end of March 2020 to a two-decade high of as much 14.7% by March 2021.

1. By June 2021, the FSR found that the actual level of bad loans as of March 2021 was just 7.5%. But it says that “macro-stress tests” for credit risk show that the GNPA ratio of Scheduled Commercial Banks (SCBs) “may rise from 7.48 per cent in March 2021 to 9.80 per cent by March 2022 under the baseline scenario and to 11.22 per cent under a severe stress scenario”.
2. So while the relief provided by the RBI in 2020 — cheap credit, moratoriums and facilities to restructure existing loans — has limited the number of firms that defaulted on loan repayments, things could yet get worse, especially for the small firms (or MSMEs).
3. It depends on factors like the evolution of the virus (and its impact on the economy) as well as the decision of central banks the world over to raise interest rates (to manage rising inflation) and wind up their cheap money policy.
4. As Governor Shaktikanta Das says: a clear picture of NPAs will emerge only when the regulatory relief provided by the RBI is taken away.

• RBI's trouble: The FSR explains the problem: “Historical experience shows that credit losses remain elevated for several years after recessions end. Indeed, in EMEs [Emerging Market Economies], non-performing assets typically peak six to eight quarters after the onset of a severe recession. Eventually, support measures will be phased out. The longer that blanket support is continued, the higher the risk that it props up persistently unprofitable firms (‘zombies’), with adverse consequences for future economic growth”. So, providing excess regulatory relief might just help firms that don't deserve to get it because they are inefficient, and helping out inefficient firms is a burden on the taxpayers of the country.
• Do it too quickly and ... : If support measures are phased out before firms’ cash flows recover, the banks will have to increase provisions and might tighten lending standards to preserve capital which can undermine recovery. Banks need sufficient buffers to absorb losses along the entire path to full recovery. Beyond the NPAs, the latest FSR provides some key pointers to the state of the economy.
• Learnings from credit growth data:  The rate of credit growth in commercial banks shows that - (i) at less than 6%, the overall rate of credit growth is poor, and the low growth rate in wholesale credit (loans worth Rs 5 crore or more) is visible (growth rate for retail loans (loans to individuals including housing loans, loans for the purchase of durables, auto loans, credit cards and educational loans) are doing better, (ii) the sharp fall in credit growth happened much before the Covid pandemic hit India, suggesting that recovery in credit growth may take longer than usual.
• SRS: The FSR published results of the latest round (April 2021) of the Systemic Risk Survey (SRS), that try to capture the perceptions of experts on the major risks faced by the Indian financial system. The risks are classified into five categories - global, macroeconomic, financial market, institutional and general. The overall risk perception is “medium”, but several factors have elicited more negative response (than the Jan FSR) perhaps as surveys were in April. A large percentage of respondents expected employment, productivity, and wages to decline, even as they expected prices to rise.
• Summary: Not everyone or every sector will recover at the same pace. Experts expect a K-shaped recovery from the second Covid wave. It is noteworthy that only 8% expected a “V-shaped” recovery.

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• 2. ENVIRONMENT AND ECOLOGY (Prelims, GS Paper 3, Essay paper)

North American heatwave 2021 - Rossby waves

• The story: Average daily highs for June in places like Lytton are around 16.4°C (61.5°F) but on June 28th the village reported a high of 47.9°C (118.2°F), beating its record from the previous day of 46.6°C which was 1.6°C hotter than any temperature recorded anywhere in Canada, ever. It was also the highest temperature ever recorded at a latitude above 50° North. Canada’s west coast and much of America’s Pacific north-west were baking in a heatwave.
• Understanding it technically: The heatwave was caused by a phenomenon called “heat dome”, in which an area of high pressure in the atmosphere stops the air beneath it escaping. Heatwaves occur when there is high air pressure at ground level. The high pressure is a result of air sinking through the atmosphere. As the air descends, the pressure increases, compressing the air and heating it up, just like in a bike pump. Sinking air has a big warming effect: the temperature increases by 1 degree for every 100 meters the air is pushed downwards.

1. High-pressure systems are an intrinsic part of an atmospheric Rossby wave, and they travel along with the wave. Heatwaves occur when the high-pressure systems stop moving and affect a particular region for a considerable time.
2. When this happens, the warming of the air by sinking alone can be further intensified by the ground heating the air – which is especially powerful if the ground was already dry. In the northwestern US and western Canada, heatwaves are compounded by the warming produced by air sinking after it crosses the Rocky Mountains.

• Rains in Japan: Aroung 26th June 2021, it rained over the western Pacific Ocean near Japan. It kicked off the North American heatwave by two events

1. It disturbed the atmosphere to set off an undulation in the jet stream – a river of very strong winds in the upper atmosphere – that atmospheric scientists call a Rossby wave (or a planetary wave). Then the wave was guided eastwards by the jet stream towards North America.
2. The wave amplified, until it broke just like an ocean wave does when it approaches the shore. When the wave broke it created a region of high pressure that remained stationary over the North American northwest for many days.
3. This is where the rain event's importance was seen - the locked region of high pressure air set off one of the most extraordinary heatwaves we have ever seen, smashing temperature records in the Pacific Northwest of the United States and in Western Canada as far north as the Arctic.

• Rossby waves: A high-pressure system is usually part of a specific type of wave in the atmosphere – a Rossby wave. These are very common, and form when air is displaced north or south by mountains, other weather systems or large areas of rain. Rossby waves are the main drivers of weather outside the tropics, including the changeable weather in the southern half of Australia. Occasionally, the waves grow so large that they overturn on themselves and break. The breaking of the waves is intimately involved in making them stationary.

1. The seeds for the Rossby waves that trigger heatwaves are located several thousands of kilometres to the west of their location (as they were for the June-July heatwave). So for northwestern America, that’s the western Pacific. Australian heatwaves are typically triggered by events in the Atlantic to the west of Africa.
2. Another important feature of heatwaves is that they are often accompanied by high rainfall closer to the Equator. When southeast Australia experiences heatwaves, northern Australia often experiences rain. These rain events are not just side effects, but they actively enhance and prolong heatwaves.
3. Higher anthropogenic carbon dioxide in the atmosphere is increasing Earth’s average surface temperature, but while this average warming is the background for heatwaves, the extremely high temperatures are produced by the movements of the atmosphere in the instant cases.
4. A major cause for heat domes in North America was a sharp difference in temperature between the east and west of the Pacific over the preceding winter.  The water movements creating such gradients may be changing because of global warming, but the link isn’t clear. But it is clear that warmer climate overall (average global temperatures having risen by at least 1°C from pre-industrial levels) make the temperature spikes experienced in heatwaves that much more unbearable. [as per America’s National Oceanic and Atmospheric Administration NOAA]

• Climate and weather studies: Big questions remain - How will events that seed Rossby waves change? How will the jet streams change? Will more waves get big enough to break? Will high-pressure systems stay in one place for longer? Will the associated rainfall become more intense, and how might that affect the heatwaves themselves? Some of the key processes involved are too detailed to be explicitly included in current large-scale climate models, which agree that global warming will change the position and strength of the jet streams. But the models disagree about what will happen to Rossby waves. New computer models of the world’s climate are needed, that explicitly include some of the fine detail (about a km in size) of weather.

Greenhouse-gas emissions are set to rise fast in 2021

• The story: In 2020, as countries locked down amid spiralling Covid-19 infections and deaths, some environmentalists saw a silver lining to the pandemic: a decline in the world’s use of fossil fuels, and hence, greenhouse-gas emissions. Indeed, global energy-related carbon emissions fell by 5.8% in 2020, or nearly 2 gigatonnes of carbon dioxide, due to reduced demand for oil, coal and gas. But since cumulative emissions in the atmosphere would rise and not fall even with an annual reduction in net emissions, the only ray of hope is eventually it may be the beginning of the end of fossil fuels.
• IEA report on fossil fuels: In the latest Global Energy Review, the International Energy Agency (IEA) predicted that energy-related carbon-dioxide emissions will rise by 1.5 gigatonnes to 33 gigatonnes in 2021, an increase of almost 5%. In absolute terms this would be the largest increase since 2010 when, after the global financial crisis of 2007-09, governments poured cash into carbon-intensive projects in an effort to pull their economies out of recession.
• Coal it is: Most of the increase in emissions predicted for 2021 will be driven by a dramatic rebound in the burning of coal, particularly in China. The IEA thinks global demand for coal will approach the peak of 2014. It also expects global demand for natural gas to exceed the level of 2019. Demand for both fuels will be pushed up by higher consumption once vaccination roll-outs cause societies to open back up. Oil will also rebound, though at a slower rate because of the sluggish recovery of aviation. All told, emissions will be slightly lower in 2021 than before the pandemic, but are likely to quickly exceed 2019 levels once lingering coronavirus restrictions—such as limits on international travel—are lifted.
• RE rising: The IEA expects renewable-energy generation to rise, too. In 2021 renewable sources will account for 30% of global electricity, its largest ever share. Wind and solar power is on track for its largest rise in history. But even these achievements will be eclipsed by the increased use of fossil fuels to meet global energy demand, which is expected to grow by 4.6%.
• Summary: If such predictions are borne out, 2020 will have been little more than a temporary dip in the world’s emissions, not a turning-point. Not enough is being done to protect the environment as the world emerges from the pandemic. The economic recovery from the Covid crisis is currently anything but sustainable for the planet's climate. Unless governments around the world move rapidly to start cutting emissions, we are likely to face an even worse situation in 2022.

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• 3. FOREIGN AFFAIRS (Prelims, GS Paper 3, Essay paper)

Chinese find a new way to resist the State - "Tangping"

• The story: Young people in China have set off a nascent counterculture movement that involves lying down and doing as little as possible. Many young Chinese are openly accepting they enjoy doing nothing! Some are quitting factory jobs, and biking around doing odd jobs, using up their savings. They call this new lifestyle “lying flat.”
• Lying flat: A blogger titled a post “Lying Flat Is Justice,” attaching a photo of himself lying on his bed in a dark room with the curtains drawn. Before long, the post was being celebrated by Chinese millennials as an anti-consumerist manifesto. “Lying flat” went viral and has since become a broader statement about Chinese society.
• Revolt through refusal: A generation ago, the route to success in China was to work hard, get married and have children. The country’s authoritarianism was seen as a fair trade-off as millions were lifted out of poverty. But with employees working longer hours and housing prices rising faster than incomes, many young Chinese fear they will be the first generation not to do better than their parents. So, they are now defying the country’s long-held prosperity narrative by refusing to participate in it.
• Xi Jinping's censors: The blog post was removed by censors, who saw it as an affront to Beijing’s economic ambitions. Mentions of “lying flat” — tangping in Mandarin — are restricted on the Chinese internet. The government has launched an official counternarrative - encouraging young people to work hard for the sake of the country’s future.
• Meaning of Tangping: To "lie flat" means to forgo marriage, not have children, stay unemployed and eschew material wants such as a house or a car. It is the opposite of what China’s leaders have asked of their people. Another young fellow thinks of the act as “silent resistance.” Some are dropping out of university in as they finally realise they disliked what their parents chose for them. Many more hate the office jobs that give no time for relaxation.
• We hate 996: Many youngsters now think they should work hard for what they love, but not “996” — 9 a.m. to 9 p.m., six days a week — as many employers in China expect. Such people, to make ends meet, minimize spendings. They have no long-term plans at all. While plenty of Chinese millennials continue to adhere to the country’s traditional work ethic, “lying flat” reflects both a nascent counterculture movement and a backlash against China’s hypercompetitive work environment.
• Turning point: This "tangping" culture may be a turning point for China, since young people feel a kind of pressure that they cannot explain and they feel that promises were broken; many realize that material betterment is no longer the single most important source of meaning in life.
• Communists are scared: The ruling Communist Party, wary of any form of social instability, has targeted the “lying flat” idea as a threat to stability in China. Censors are deleting tangping groups, from popular internet forums. In May 2021, China’s internet regulator ordered online platforms to “strictly restrict” new posts on tangping. E-commerce platforms have been ordered to stop selling clothes, phone cases and other merchandise branded with “tangping.”
• The state news media has called tangping “shameful,” and warned against “lying flat before getting rich.”
• Summary: Many youngster now say those people who say lying down is shameful are shameless. Many now want to live minimally and “think and express freely.” Many say that since only running forward is allowed, but not lying down, so they resist. 

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• 4. GOVERNMENT SCHEMES (Prelims, GS Paper 2, Essay paper)

India's OECD tax deal

• The story: India has agreed in principle to bring only top 100 digital companies like Google, Facebook, and Netflix into the global taxation pact. But it will mean India having to withdraw the contentious 2 per cent equalisation levy on e-commerce operators by 2023.
• What changes: Since the equalisation levy has a much lower annual revenue threshold of Rs 2 crore only (Euro 0.2 million), it is quite low as against Euro 20 billion agreed by 130 countries at the Organization for Economic Cooperation and Development (OECD).

1. India, along with other developing countries, was pitching for at least Euro 1 billion threshold to cover at least 5,000 global entities.
2. India collected Rs 2,057 crore from the equalisation levy in 2020-21, an 85 per cent growth over Rs 1,136 crore in the previous fiscal.
3. So the OECD deal being worked out will not give the same amount of revenue.

• BEPS deal: The OECD Base Erosion and Profit Shifting deal is intended to ensure that multinational digital entities pay more taxes in countries where they have customers or users than from where they operate. It is also aimed at ensuring that countries give up on unilateral measures to tax digital entities through means like digital services tax or equalisation levy.
• Indian case: Large tech firms are already being regulated under the Indian regulation and by 2023 they may need a physical set up to ensure compliance. The equalisation levy or EL was introduced at the rate of 6 per cent in 2016 for digital advertising services, which led to a Rs 200 crore collection. The scope was widened in April 2020 to impose a 2 per cent tax on non-resident e-commerce players. The scope was further expanded in the Budget 2021-22 by way of clarifications.

1. The EL has been a bone of contention between India and the United States, with the latter deciding to impose additional tariffs on a slew of Indian imports, including basmati rice, sea food, jewellery, bamboo, semi-precious stones and pearls, among others.
2. The tariffs were suspended for six months with an expectation of a multilateral solution to the issue of digital taxation. With tariff proposals of up to 25 per cent ad valorem on aggregate level of trade, it aims to mop up around $55 million. This is as much as what India will collect from US companies through the 2 per cent levy.
3. In May 2021, India notified a revenue threshold of Rs 2 crore and a limit of three lakh users for non-resident technology firms to pay tax in India under new or revised bilateral tax pacts. This is as part of the significant economic presence (SEP) principle.
4. The SEP, introduced in the Finance Bill 2018-19, widened the scope of ‘business connection’ to include provision of download of data or software.

• Summary: Under the agreed outline of the OECD multilateral solution, a portion of profits of companies with Euro 20 billion revenues and a profit margin above 10 per cent would be taxed in jurisdictions where they have sales. Between 20 per cent and 30 per cent of profits above a 10 per cent margin may be taxed. India will press for taxing 30 per cent profits. India and other developing countries were fighting to include companies with at least Euro 1 billion in revenues as against the final proposal of Euro 20 billion revenues and a profit margin above 10 per cent.

Water dispute between Andhra Pradesh and Telangana

• The story: Andhra Pradesh complained to the Krishna River Management Board (KRMB) about the drawing of water from the Srisailam project by Telangana for power generation. The KRMB, in its recent orders, had asked Telangana to stop power generation, but defiance of orders by Telangana Government has raised some serious questions.
• The dispute: Telangana and Andhra Pradesh share stretches of the Krishna and the Godavari and own their tributaries, and both have proposed several new projects without getting clearance from the river boards, the Central Water Commission and the Apex Council, as mandated by the Andhra Pradesh Reorganisation Act, 2014.

1. The Andhra Pradesh Reorganisation Act, 2014 mandates the constitution of an Apex Council by the Central Government for the supervision of the functioning of the Godavari River Management Board and Krishna River Management Board.
2. The Apex Council comprises the Union Water Resources Minister and the Chief Ministers of Telangana and Andhra Pradesh.
3. The AP government’s proposal to increase the utilisation of the Krishna water from a section of the river above the Srisailam Reservoir led to the Telangana government filing a complaint against Andhra Pradesh.
4. The Srisailam reservoir is constructed across the Krishna River in Andhra Pradesh, in the Nallamala hills.
5. The Andhra Pradesh government retaliated with its own complaints saying that Palamuru-Rangareddy, Dindi Lift Irrigation Schemes on the Krishna river and Kaleshwaram, Tupakulagudem schemes and a few barrages proposed across the Godavari are all new projects.

• Inter-State river water disputes: The Article 262 of the Constitution provides for the adjudication of inter-state water disputes. The Parliament may by law provide for the adjudication of any dispute or complaint with respect to the use, distribution and control of waters of any inter-state river and river valley. Parliament may also provide that neither the Supreme Court nor any other court is to exercise jurisdiction in respect of any such dispute or complaint.
• Two laws: The Parliament has enacted the two laws, the River Boards Act (1956) and the Inter-State Water Disputes Act (1956).

1. The River Boards Act provides for the establishment of river boards by the Central government for the regulation and development of inter-state river and river valleys. A River Board is established on the request of state governments concerned to advise them.
2. The Inter-State Water Disputes Act empowers the Central government to set up an ad hoc tribunal for the adjudication of a dispute between two or more states in relation to the waters of an inter-state river or river valley. The decision of the tribunal is final and binding on the parties to the dispute. Neither the Supreme Court nor any other court is to have jurisdiction in respect of any water dispute which may be referred to such a tribunal under this Act.

• Godavari and Krishna rivers: The Godavari rises from Trimbakeshwar near Nasik in Maharashtra and flows for a length of about 1465 km before outfalling into the Bay of Bengal. Its basin extends over states of Maharashtra, Telangana, Andhra Pradesh, Chhattisgarh and Odisha in addition to smaller parts in Madhya Pradesh, Karnataka and Union territory of Puducherry. The Krishna originates near Mahabaleshwar (Satara) in Maharashtra. It is the second biggest river in peninsular India after the Godavari River. It runs from four states Maharashtra (303 km), North Karnataka (480 km) and the rest of its 1300 km journey in Telangana and Andhra Pradesh before it empties into the Bay of Bengal. Tributaries of Godavari include Pravara, Purna, Manjra, Penganga, Wardha, Wainganga, Pranhita (combined flow of Wainganga, Penganga, Wardha), Indravati, Maner and the Sabri. Tributaries of Krishna include Tungabhadra, Mallaprabha, Koyna, Bhima, Ghataprabha, Yerla, Warna, Dindi, Musi and Dudhganga.

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• 5. POLITY AND CONSTITUTION (Prelims, GS Paper 2, GS Paper 3)

Polity updates - 05th July

• Animal rights: Stating that animals have a right to be treated with compassion, respect and dignity, the Delhi High Court asked the Animal Welfare Board of India to designate areas in consultation with Resident Welfare Associations, where dogs can be fed in the national capital. The court said that it is the moral responsibility of every citizen to protect animals. The court also directed the board to ensure that every RWA in Delhi constitutes an Animal Welfare Committee.
• Students with a disconnect: In the academic year that began and ended with schools closed due to Covid-19, only 22% of schools in India had Internet facilities, according to data released by the Education Ministry. Among government schools, less than 12% had access to the net in 2019-20, while less than 30% had functional computer facilities. In Assam (13%), Madhya Pradesh (13%), Bihar (14%), West Bengal (14%), Tripura (15%) and Uttar Pradesh (18%), less than one in five schools had working computers. Government schools are way on the wrong side of the digital divide, with less than 5% of UP’s having the facility. Just three states — Kerala (88%), Delhi (86%) and Gujarat (71%) — have Internet in more than half their schools.
• States' power to add new communities to OBC lists: The Supreme Court has dismissed the Union government’s review plea against its verdict on the power of state governments to add new communities to the list of ‘backward classes’ entitled to reservation. A five-judge bench headed by Justice Ashok Bhushan said, “We have gone through the review petition filed against the judgment dated May 5, in Writ Petition. The grounds taken do not fall within the limited ground on which review petition can be considered.” The issue at hand is Maharashtra’s decision to provide reservation for Marathas, invalidated by the court, on the grounds that the 102nd amendment to the Constitution, introduced by Narendra Modi in 2018, had taken away this power from the states. The Modi government argued that this was not the case but must now live with the reality that its poor drafting is to blame for the undoing of Maratha reservation – an initiative the erstwhile BJP-led government of Devendra Fadnavis had taken in 2018.
• Tushar Mehta in a controversy: Solicitor General Tushar Mehta was in the eye of a storm following reports that BJP leader Suvendu Adhikari – a defector from the Trinamool Congress (TMC) – might have met him. Any meeting would be highly inappropriate given that Mehta represents the CBI, which is probing cases where Adhikari’s name has also figured. Mehta issued a statement acknowledging that Adhikari came to his office but said he was given a cup of tea and sent off without a meeting. But the very fact that Adhikari – now the BJP’s top man in Bengal – tried to meet Mehta gave opponents the ammunition to strike.
• Army finds better situation at LoC now: Nearly four months after India and Pakistan agreed to “strictly observe all agreements on ceasefire” along the Line of Control (LoC) in Kashmir, Army Chief General MM Naravane has confirmed there had been a marked change since the ceasefire agreement ― there had been no infiltration from across the LoC and all the parameters of violence in Kashmir had dropped. On China, the Army chief said the developments along our northern borders during the past year are a stark reminder that in order to preserve our territorial integrity, the armed forces must continually prepare and adapt to the exigencies of modern wars. He also said that there was an environment of trust between the two sides due to talks at military and diplomatic level.
• Demands from Leh and Kargil: When Jammu and Kashmir was bifurcated into two Union Territories on August 5, 2019, Ladakh was seen welcoming the reorganisation. But various demands and concerns have been raised from its two districts, Leh and Kargil, over the last two years. (i) Kargil - Of Ladakh’s two districts, the August 2019 changes were immediately opposed by the people of Kargil. The people of Kargil see themselves as a minority in Buddhist majority Ladakh. So, the leaders of the majority Shia population in Kargil demanded that the district should remain part of J&K. They also demanded that special status be restored, to safeguard the rights of Kargil people over their land and employment opportunities. (ii) Leh believed that it was being marginalised in the larger state of J&K, so a UT for Ladakh had been a long-standing demand in Buddhist majority Leh. But what Leh leaders did not bargain for was the complete loss of legislative powers. Earlier, Leh and Kargil each sent four representatives to the J&K legislature. After the changes, they were down to one legislator - their sole MP, and with all powers vested in the UT bureaucracy. Unlike the UT of J&K, Ladakh was a UT without an assembly. So, the Ladakh districts fear that alienation of land, loss of identity, culture, language, and change in demography would follow their political disempowerment. Leh and Kargil have separate Autonomous Hill Development Councils (AHDCs), set up under the Ladakh Autonomous Hill Development Councils Act, 1997. However, the AHDCs have no legislative powers.

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• 6. SCIENCE AND TECHNOLOGY (Prelims, GS Paper 3)

Genome testing rush in Covid battle

• The story: A key aspect of Covid-19 battle has been the constant effort to decode the viral genomes, as it evolves over time. That is boosting direct-to-consumer (DTC) genome sequencing services.
• DTC genomics: This is when a lab provides sequencing services directly to the consumer, without the intervention of a doctor. The benefits are known: a genome test can look into your genes, check for anomalies and make predictions on predisposition to certain diseases.

1. The science is simple - Scientists look for ‘single nucleotide polymorphisms’ (SNP) in the non-coding genes.
2. The SNP is a variation in the position of a single nucleotide in a DNA sequence — say, in place of a nucleotide Adenine you have the nucleotide Cytosine.
3. SNPs themselves do not cause disorders, they just red-flag them because some SNPs are associated with certain diseases.
4. If certain SNPs are known to be associated with a trait, then scientists may examine stretches of DNA near these SNPs in an attempt to identify the gene or genes responsible for the trait.

• Advice following the test: So a genome testing can lead to expert advice on what you should or should not eat, whether you would be a good athlete or a musician, which drugs work best for you if you acquire a disease, to which part of the world you trace your ancestry, and so on. DTC was not very popular because it was costly. A full genome profile could cost up to Rs.1 lakh.

1. In January 2020, US company Precise.ly announced a partnership with the Narayana Health hospital network for delivering next-generation sequencing and “ personalised and preventive healthcare”
2. The pandemic pushed this trend further, as people became more health-conscious, potentially leading them to use new and advanced techniques like consumer genomics.
3. Companies that were earlier providing genomic sequencing for areas like pharmacogenomics (to determine which drug works best against, say, cancer), are now seeing demand for personalised tests.

• Changing times: Emerging technologies that are making consumer genomics more affordable. Today it is possible to sequence long strands of DNA; earlier, one would have to 200 or 300 pieces of it and assemble them to get the full view. With more people using these services, the database becomes more robust and the algorithm can provide the information needed even with a smaller sample. With more Indian data, the predictions will be more precise. Today, the use of global data, available free or for a fee, could throw up imperfect predictions due to ethnic differences.
• Genomepatri: Falling costs naturally lead to cheaper services. So Mapmygenome’s ‘Genomepatri’ services gives “15 reports which help you discover genetic strengths and vulnerabilities that affect your body’s immune system and risk of disease (it costs Rs.7,500 today). Medical and wellness
• Personalised genomics: Under ‘personalised genomics’, there is a distinction between ‘medical’ (like cancer prevention and pharmacogenomics) and ‘wellness’ (nutrition and lifestyle) services. But the demand for one feeds the other. In the case of disease prevention, the falling cost of consumer genomics could mean lower health bills over time. For diseases such as diabetes, heart and cancer, identification of the gene associations can help develop precision medicine. But genome testing should be cross-validated by other medical tests, because “genetic risk does not always mean disease incidence”.
• Privacy issues: Labs sitting on heaps of data might lead to privacy issues. Experts say that while existing laws cover these privacy issues, a separate regulation for consumer genomics is desirable. Genome data is the property of the individual, but can be used with consent.

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• 7. SOCIAL ISSUES (Prelims, GS Paper 2)

US State Department's "Trafficking in Persons" Report

• The story: According to the "Trafficking in Persons" report 2021, by the US State Department, the Covid-19 pandemic has resulted in an increase in vulnerability to human trafficking and interrupted existing anti-traffic efforts.
• Details: Human trafficking is a form of modern-day slavery involving the illegal transport of individuals by force or deception for the purpose of labour, sexual exploitation, or activities in which others benefit financially.

1. While India did not meet the minimum standards to eliminate trafficking, the government was making significant efforts, although these were inadequate, especially when it came to bonded labour.
2. Chinese government engaged in widespread forced labour, including through the continued mass arbitrary detention of more than one million Uyghurs, ethnic Kazakhs, ethnic Kyrgyz, and other Muslims.

• Reasons for increased trafficking: The concurrence of the increased number of individuals at risk, traffickers’ ability to capitalise on competing crises, and the diversion of resources to pandemic response efforts has resulted in an ideal environment for human trafficking to flourish and evolve.
• Categorisation of countries: The categorisation is based not on the magnitude of a country’s trafficking problem but on efforts to meet minimum standards for the elimination of human trafficking. The countries are designated on the three-tier system:

1. Tier 1 countries are those countries whose governments fully comply with the Trafficking Victims Protection Act (TVPA - US’s law on human trafficking) minimum standards. USA, UK, Australia, Bahrain and South Korea are some of the countries in tier 1.
2. Tier 2 countries are those countries whose governments do not fully comply with TVPA's minimum standards but are making significant efforts to bring themselves into compliance with those standards. Tier 2 watchlist countries are those where the absolute number of victims of severe forms of trafficking is significant or is significantly increasing. India is placed in Tier 2 category.
3. Tier 3 countries whose governments do not fully comply with the minimum standards and are not making significant efforts to do so. Afghanistan, Burma, China, Cuba, Eritrea, North Korea, Iran, Russia, South Sudan, Syria and Turkmenistan are under this tier.
4. There are also a few "Special Cases" such as Yemen, where the civil conflict and humanitarian crisis make gaining information difficult.

• Indian laws: Article 23 and 24 of the Constitution of India are most relevant here.

1. Article 23 prohibits human trafficking and begar (forced labour without payment).
2. Article 24 forbids employment of children below the age of 14 years in dangerous jobs like factories and mines.
3. Indian Penal Code (IPC) sections 370 and 370A of IPC provide for comprehensive measures to counter the menace of human trafficking including trafficking of children for exploitation in any form including physical exploitation or any form of sexual exploitation, slavery, servitude, or the forced removal of organs.
4. Sections 372 and 373 dealing with selling and buying of girls for the purpose of prostitution.
5. The Immoral Traffic (Prevention) Act, 1956 (ITPA) is the premier legislation for prevention of trafficking for commercial sexual exploitation.

• UN Convention: India ratified the United Nations Convention on Transnational Organised Crime (UNCTOC) in 2011, which has a Protocol to Prevent, Suppress and Punish Trafficking in Persons, especially Women and Children. India has also ratified the SAARC Convention on Preventing and Combating Trafficking in Women and Children for Prostitution.
• Summary: There is a clear need to step up technical assistance and strengthen cooperation, to support all countries to protect victims and bring criminals to justice. The capacity building of the Police along with that of the NGOs is necessary to tackle the menace of human trafficking. The Justice Verma Committee, 2012 had recommended a census of the missing children, and government needs to take some preventive steps, such as educating children on the crime of trafficking by including the same in their school curriculum.

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• 8. MISCELLANEOUS (Prelims, GS Paper 1, GS Paper 2)

No excess water to Pakistan under Indus Water Treaty

• The story: As per Jal Shakti Minister Gajendra Singh Shekhawat, India is working on its rights to stop excess water flowing to Pakistan under Indus Waters Treaty of 1960 to irrigate its own lands.
• History: India and Pakistan had signed the Indus Waters Treaty in 1960 after nine years of negotiations. The World Bank was also a signatory. Under the treaty, all waters of three eastern rivers viz., Ravi, Sutlej and Beas were allocated to India to use exclusively. The waters of Western rivers viz., Indus, Jhelum, and Chenab were allocated to Pakistan. But India was given exception to use waters of western rivers for specified domestic, non-consumptive and agricultural use. India has also been given right to generate hydroelectricity under run of the river projects on Western Rivers. It is subject to specific criteria for design and unrestricted operation.
• Indus river system:  It comprises the rivers Indus, Jhelum, Chenab, Ravi, Beas and Sutlej. This basin is mainly shared by India and Pakistan. China and Afghanistan are also having a small share. The Indus is a transboundary river in Asia and a trans-Himalayan River of South & East Asia, which flows for a distance of 3,180 km after rising in Western Tibet. It flows northwest through Ladakh and Gilgit-Baltistan regions of Kashmir and bends sharply towards left after Nanga Parbat massif. It flows through Pakistan before draining into Arabian Sea near Karachi.

India's share in world market capitalisation up

• The story: The months since March 2020 have been good for Indian stock markets, and now India accounts for 2.60% of world market capitalisation (in June 2021).
• Points to note: India raised its share in world market capitalisation as compared with long-term average of 2.45%. In May 2020, India’s share had dropped to 2.05% when first wave of coronavirus had affected the global equity markets. However, since then, equity share has been rising. India’s market-capitalisation increased to 66% in one year to $3.02 trillion in June 2021. It outpaced the 44% growth in global market-capitalisation. India has been outperforming global growth in market-capitalisation for five years annually at the rate of 14.7%, against 13.25%. Indian equities have delivered a return of 49% in past one year. No one is sure if the trend would continue.
• Market capitalisation:  This is called 'market cap' also and is the market value of outstanding shares of a publicly traded company. It is equal to share price multiplied by number of shares outstanding. It can be used as an indicator of public opinion of net worth of company as outstanding stock is bought and sold in public markets. It also acts as a determining factor in some forms of stock valuation.
• Country market cap: For any country, the leading stock market's aggregate market cap (for all major listed companies) will become the national market capitalisation.

Pushkar Singh Dhami: 11th Chief Minister of Uttarakhand

• The story: The leader of Bharatiya Janata Party (BJP), Pushkar Singh Dhami, took oath as eleventh chief minister of Uttarakhand. He was sworn in as Chief Minister a day after getting elected as leader of BJP’s legislature party.
• Pushkar Singh Dhami: Aged 45, he is a lawmaker from Khatima assembly constituency, and has become the youngest chief minister of Uttarakhand, succeeding MP Tirath Singh Rawat. He never had held any ministerial position before being elevated as chief minister. Dhami was unanimous choice of all 56 members of BJP’s legislature party.
• Tirath Singh Rawat's departure: He resigned due to uncertainty over by-polls he was required to win in order to continue as chief minister. As per rules, he had six months from his swearing in to be elected as member of legislative assembly to continue his term as Chief Minister. But the Election Commission of India (ECI) has option of not conducting bypolls if term of assembly is expiring in less than a year. Under this scenario, Rawat became ineligible to stay in office.
• Next assembly elections: Uttarakhand is likely to see polls in early 2022, while last elections were in 2017, in which BJP won 56 of state’s 70 assembly constituencies. BJP leader Trivendra Singh Rawat took oath as the chief minister of State then.

Srinagar bans UAVs

• The story: Srinagar district authorities have banned storage, sale, possession, use and transport of drones and similar kinds of unmanned aerial vehicles (UAVs) within their territorial jurisdiction.
• Details: The order asks authorities to secure aerial space near vital installations and highly populated areas. It is imperative to discontinue use of drones in all social and cultural gatherings. The order was issued under Section 144 of CrPC, and reads, “decentralized airspace access needs to be regulated in the backdrop of episodes of misuse of drones, which are posing a threat to security infrastructure.
• Action points: Directorate General of Civil Aviation (DGCA) has also provided draft guidelines to regulate the use of drones with respect to weight classification, height or altitude restrictions, generation of Unique Identification Number, speed restriction etc. Persons with drone cameras or similar kind of unmanned aerial vehicles (UAV) in their possession are required to ground it in local police station with proper receipt. Government departments using drones to map, conduct surveys and surveillance in agricultural, environment conservation and disaster mitigation sector are required to inform local Police station before undertaking any such activity in public interest.
• Why: This order was passed in the backdrop of a drone attack on Jammu Air Force Station on June 27, 2021, using drones. This drone attack is being seen as a display of capability and an attempt to put pressure on fragile ceasefire which is being maintained along the Line of Control (LoC) since February 2021. It also aimed at disrupting political process in Kashmir.

9.1 Today's best editorials to read

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• SECTION 3 - MCQs (Multiple Choice Questions)

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