DAILY CURRENT AFFAIRS ANALYSIS

07 JULY 2022

. No.	Topic Name	Prelims/Mains
1.	About the Forex Reserves in India	Prelims & Mains
2.	Details of the Sub Categorization of OBCs	Prelims & Mains
3.	About the Minimum Support Prices	Prelims Specific Topic
4.	Details of the Donbas region of Ukraine	Prelims Specific Topic

 

1 – About the Forex Reserves in India: 

GS III

Topic – Indian Economy

• Context:
• In order to stem the rupee’s depreciation and boost foreign exchange reserves, the Reserve Bank of India (RBI) on Wednesday announced a variety of measures, including a relaxation in foreign investment in debt, external commercial borrowings, and Non-Resident Indian (NRI) deposits.
• About foreign exchange reserves:
• A central bank may hold assets in foreign currencies as reserves, such as bonds, treasury bills, and other government securities.
• It should be emphasised that the majority of foreign exchange reserves are held in US dollars.
• India has the following in its foreign exchange reserves:
• Special Drawing Rights at the International Monetary Fund (IMF).
• Gold
• Foreign Currency
• Objectives for Maintaining Foreign Exchange Reserves
• fostering and maintaining confidence in monetary and exchange rate management strategies.
• enables one to take action to protect the national or union currency.
• reduces external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is constrained.
• The significance of increasing foreign reserves:
• Government in a comfortable position: Thanks to India’s expanding foreign exchange reserves, the government and the RBI are more at ease addressing the country’s internal and external financial issues.
• Crisis management serves as a safety net in the event of a balance-of-payments (BoP) crisis in the economy.
• The rupee has appreciated versus the dollar as a result of increasing reserves.
• Market Confidence: Reserves will provide some reassurance to markets and investors that a government can uphold its international commitments.
• Foreign currency assets:
• FCAs are assets that are valued using a different currency than the country’s primary currency.
• The majority of the FX reserve is made up by the FCA. It is expressed in terms of money.
• The FCAs account for the effects of increases or decreases in the value of non-US currencies held in foreign exchange reserves, such as the euro, pound, and yen.
• About the SDR Mechanism:
• The IMF created the SDR in 1969 as an additional form of international reserve asset to go along with the official reserves of its member countries.
• The SDR is not a method of exchange or an IMF claim. It may instead be a claim against the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
• The value of the SDR is based on a weighted basket of significant currencies, including the US dollar, the euro, the Japanese yen, the Chinese yuan, and the British pound.
• The SDR interest rate, or SDR rate, is the interest paid to members on their holdings of SDRs (SDRi).
• India recently received funding from the IMF totaling SDR 12.57 billion, or approximately USD 17.86 billion. India now holds 13.66 billion SDR, which is the value of its holdings.
• The reserves are held by the IMF in the following ways:
• The amount of money that each member state must give the IMF but may keep for its own use is referred to as a reserve tranche position.
• Essentially, the reserve tranche functions as an emergency account that IMF members are allowed to utilise whenever they wish, without any limits or service fees.

Source – The Hindu

2 – Details of the Sub Categorization of OBCs:

GS II

Topic – Government Policies and Interventions

• Context:
• The Union Cabinet on Wednesday granted the Justice Rohini Commission its thirteenth extension, giving it until January 31, 2023, to submit its findings.
• It has the following benefit:
• The “Commission” will be able to provide a comprehensive report on the topic of sub-categorizing OBCs after speaking with several stakeholders thanks to the anticipated extension of tenure and expansion of its mandate.
• About:
• The Central List’s Other Backward Classes (OBCs) Sub-categorization was the focus of the Commission’s inquiry.
• The extension is in effect from July 31, 2021, through January 31, 2022, for an extra six months.
• Background:
• In October 2017, the Rohini Commission was constituted.
• Objective:
• to look at how Other Backward Classes (OBCs) are divided and how to fairly distribute their advantages among them
• Justification for extension: The Supreme Court turned down the federal government’s plea for a rehearing of its May 5th decision, which stated that the 102nd Amendment to the Constitution takes away the states’ power to define the Socially and Economically Backward Classes (SEBC) in the region.
• Regarding the 102nd Amendment to the Indian Constitution:
• The National Commission for Backward Classes is given legal stature as a result.
• Additionally, it included Article 338B, which deals with the composition, duties, and powers of the commission, as well as Article 342A, which gives the President the right to designate a class as SEBC and gives Parliament the authority to amend the central SEBC list.
• OBC subcategorization details:
• The federal government provides a 27 percent reservation for OBCs in both employment and education.
• The Supreme Court’s participation: In September of last year, the Supreme Court’s Constitution Bench reopened the legal debate over the sub-categorization of Scheduled Castes and Scheduled Tribes for reservations.
• Only rich communities are permitted to make reservations: Out of the more than 2,600 OBCs included on the Central List, the contention is that just a few rich groups have gotten a sizable share of the 27 percent quota.
• Why was the Rohini Commission created?
• On October 2, 2017, the Rohini Commission was constituted to look into the sub-categorization of OBCs.
• It initially had 12 weeks to finish the report, but numerous extensions have since been issued; the most recent was until November 11.
• The other member of the Commission is Jitendra Bajaj, director of the Centre for Policy Studies.
• Before the Rohini Commission was created, the Center granted constitutional standing to the National Commission for Backward Classes (NCBC).
• Working Objective of the Rohini Commission:
• To determine the degree of disparity between the castes or groups that make up the large category of OBCs and the classes that are on the Central List in the allocation of quota benefits;
• To locate the suitable castes, communities, sub-castes, or synonyms in the Central List of OBCs and place them in the proper sub-categories; and to design the mechanism, criteria, norms, and parameters for sub-categorisation within such OBCs using a scientific approach.
• Should check each entry in the Central List of OBCs for repetitions, ambiguities, contradictions, and transcribing or spelling errors, and advise that they be eliminated.
• Findings so far:
• The OBC admissions to central higher education institutions over the previous three years, including universities, IITs, NITs, IIMs, and AIIMS, were also examined by the Commission in 2018.
• In total, 1.3 lakh government positions filled under the OBC quota over the previous five years were also looked at.
• Only 25% of all OBC subcastes received 97% of all jobs and educational seats; ten OBC communities received 24.5% of these jobs and seats; 983 OBC communities, or 37% of the total, have no representation in jobs and educational institutions; and 994 OBC subcastes have a combined representation of just 2.68 percent in recruitment and admissions.
• This study only includes 42 central government ministries and divisions.
• Because OBC candidates were marked as “NFS” for a lot of positions that were intended for OBCs, there weren’t as many applicants as there should have been (None Found Suitable).

Source – The Hindu

3 – About the Minimum Support Prices:

GS III

Topic – Indian Agriculture related issues

• Context
• Member of the NITI Aayog Ramesh Chand stressed the importance of continuing the minimum support price (MSP) programme for crops, stating that if procurement is not an option, it is vital to debate and discuss what should be the “means” to deliver the promised returns to farmers.
• About:
• The rate at which the government buys crops from farmers is known as the MSP, and it is calculated as being at least 1.5 times the farmers’ production expenses.
• Any crop the government determines to be profitable for farmers and hence deserving of “assistance” has a “minimum price” (MSP) established for it.
• MSP-covered crops include:
• Along with MSPs for 22 obligatory crops, the Commission for Agricultural Costs & Prices (CACP) also suggests the fair and remunerative price (FRP) for sugarcane.
• CACP is the name of a division within the Ministry of Agriculture and Farmers Welfare.
• The list of necessary crops consists of 14 crops for the kharif season, 6 crops for the rabi season, and 2 more commercial crops.
• Additionally, the MSPs for de-husked coconut and toria are established using the MSPs for copra and rapeseed/mustard, respectively.
• How is the MSP determined:
• The CACP considers a number of factors, including the cost of cultivation, before determining the MSP for a commodity.
• The dynamics of supply and demand for the commodity, price trends on both the domestic and global markets, parity with respect to other crops, consumer effects (inflation), environmental effects (soil and water consumption), and trade agreements between the agricultural and non-agricultural sectors are all taken into account.
• The Cabinet Committee on Economic Affairs (CCEA) of the Union government makes the ultimate decision on the MSP level and other recommendations made by CACP.
• Why is MSP necessary?
• Due to the twin droughts of 2014 and 2015, farmers have been forced to deal with declining commodity prices since 2014.
• The rural economy was hurt by the simultaneous shocks of demonetization and the implementation of the GST, especially the non-farm sector but also agriculture.
• Due to the epidemic, the decline in the economy after 2016–17, and other issues, the majority of farmers still live in insecure situations.
• Cost increases for fuel, energy, and fertilisers have only gotten worse.
• What Issues Concern India’s MSP Regime?
• Even though 23 crops’ MSPs have been officially announced, only two—rice and wheat—are actually purchased because they are distributed by the NFSA (National Food Security Act). The rest is mostly incidental and unimportant.
• Ineffectively Implemented: According to a 2015 evaluation by the Shanta Kumar Committee, farmers could only collect 6% of the MSP. This immediately means that 94% of farmers in the country do not profit from the MSP.
• More of a Purchase Price The current MSP policy has no impact on domestic market prices. It serves as a procurement price rather than an MSP because its primary function is to satisfy NFSA requirements.
• Results in Paddy and Wheat Farming’s dominant industry Farmers are prevented from producing other crops and horticulture goods because of the overproduction of rice and wheat brought on by the unbalanced MSP system, which may increase farmers’ revenue.
• Smaller farmers may find it challenging to get in touch with the middlemen, commission agents, and APMC officials who are necessary for the MSP-based procurement system.
• How to Proceed Ahead:
• True MSPs demand that the government step in if market prices fall below a predetermined level, usually when there is an excess of production and supply or when external factors have caused a price collapse.
• MSP can also be a motivating price for many of the products that are desirable for nutritional security, such as coarse cereals, as well as for pulses and edible oils for which India is dependent on imports.
• Spending more money on nutrient-dense foods like fruits and vegetables, together with fisheries and animal husbandry, is the way to wisdom.
• The best way to invest is to give companies financial incentives to build valuable value chains based on cluster strategies.
• A transitional plan for agricultural pricing must be developed by the government, in which some agricultural pricing should be supported by the government and some should be decided by the market.
• One method to accomplish this would be to create a shortfall payment plan modelled after the Bhavantar Bhugtan Yojana (BBY) of Madhya Pradesh.

Source – The Hindu

4 – Details of the Donbas region of Ukraine:

Prelims Specific Topic

• Donetsk and Luhansk in eastern Ukraine share a border with Russia.
• Within these two nations are the Donetsk People’s Republic (DPR) and the Luhansk People’s Republic (LPR), two separatist territories ruled by Russians and separatists with Russian support.
• The entire region, including Donetsk, Luhansk, and each of their respective rebel territories, is usually referred to as “Donbas.”
• Russian is spoken by the majority of people in Donbas, which is close to and borders Russia.
• The area is industrialised and renowned for its coal resources.
• Russia has acknowledged Donetsk and Luhansk as distinct entities.

Source – The Hindu