RBI Hikes Key Interest Rate By 35 BPS
Signalling a further rise in lending and deposit rates, the Monetary Policy Committee (MPC) of the Reserve Bank of India on Wednesday (December 7) hiked the key policy rate, the repo rate or the rate at which the RBI lends funds to banks, by 35 basis points to 6.25 per cent in a bid to rein in retail inflation.
- The MPC also lowered its growth forecast to 6.8 per cent from 7 per cent for the current financial year amid concerns over the “bleak” global economic outlook, and retained its retail inflation forecast at 6.7 per cent.
GS III- Indian Economy
Dimensions of the Article:
- Instruments of Monetary Policy
- Why did the Monetary Committee raise the rate?
- What will be the impact?
- What does the Repo rate hike mean?
- About Monetary Policy Committee (MPC)
Instruments of Monetary Policy
There are several direct and indirect instruments that are used for implementing monetary policy.
- Repo Rate: The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
- Reverse Repo Rate: The (fixed) interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF.
- Liquidity Adjustment Facility (LAF): The LAF consists of overnight as well as term repo auctions. Progressively, the Reserve Bank has increased the proportion of liquidity injected under fine-tuning variable rate repo auctions of range of tenors. The aim of term repo is to help develop the inter-bank term money market, which in turn can set market based benchmarks for pricing of loans and deposits, and hence improve transmission of monetary policy. The Reserve Bank also conducts variable interest rate reverse repo auctions, as necessitated under the market conditions.
- Marginal Standing Facility (MSF): A facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This provides a safety valve against unanticipated liquidity shocks to the banking system.
- Corridor: The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.
- Bank Rate: It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers. The Bank Rate is published under Section 49 of the Reserve Bank of India Act, 1934. This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes.
- Cash Reserve Ratio (CRR): The average daily balance that a bank is required to maintain with the Reserve Bank as a share of such per cent of its Net demand and time liabilities (NDTL) that the Reserve Bank may notify from time to time in the Gazette of India.
- Statutory Liquidity Ratio (SLR): The share of NDTL that a bank is required to maintain in safe and liquid assets, such as, unencumbered government securities, cash and gold. Changes in SLR often influence the availability of resources in the banking system for lending to the private sector.
- Open Market Operations (OMOs): These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively.
- Market Stabilisation Scheme (MSS): This instrument for monetary management was introduced in 2004. Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills. The cash so mobilised is held in a separate government account with the Reserve Bank.
Why did the Monetary Committee raise the rate?
- The RBI has hiked the policy rate in a bid to bring down inflation from the current level.
- Inflation in October eased to 6.77 per cent, a three-month low, but it remains well above the RBI’s comfort level of 4 per cent.
- But the worry for the central bank is the rise in core inflation — the non-food, non oil part of inflation — that edged up again after moderating over the summer.
- Also households’ inflation expectations remain high as food price inflation continues to remain elevated.
- Weakness in the rupee against the US dollar is adding to inflationary concerns at the RBI given that a third of the CPI basket consists of import.
What will be the impact?
- Equated monthly instalments (EMIs) on home, vehicle and other personal and corporate loans are likely to go up.
- Deposit rates are also set to rise after the Repo rate hike that came after nearly four years.
- By hiking the Repo rate and CRR, the RBI is aiming to keep inflation – which is already close to 7 per cent — at its desired level, and control and monitor money flow into the banking system at a time when the global economy is facing turbulent times.
What does the Repo rate hike mean?
- The hike in Repo rate – the key policy rate of RBI or the rate at which it lends to banks – means the cost of funds for banks will go up.
- This will prompt banks and NBFCs to raise the lending and deposit rates in the coming days.
- However, analysts say that consumption and demand can be impacted by the Repo rate hike.
- The RBI last hiked the Repo rate by 25 bps to 6.50 per cent in August 2018.
About Monetary Policy Committee (MPC)
- The Monetary Policy Committee (MPC) is the body of the RBI, headed by the Governor, responsible for taking the important monetary policy decisions about setting the repo rate.
- Repo rate is ‘the policy instrument’ in monetary policy that helps to realize the set inflation target by the RBI (at present 4%).
Membership of the MPC
- The Monetary Policy Committee (MPC) is formed under the RBI with six members.
- Three of the members are from the RBI while the other three members are appointed by the government.
- Members from the RBI are the Governor who is the chairman of the MPC, a Deputy Governor and one officer of the RBI.
- The government members are appointed by the Centre on the recommendations of a search-cum-selection committee which is to be headed by the Cabinet Secretary.
Objectives of the MPC
Monetary Policy was implemented with an initiative to provide reasonable price stability, high employment, and a faster economic growth rate.
The major four objectives of the Monetary Policy are mentioned below:
- To stabilize the business cycle.
- To provide reasonable price stability.
- To provide faster economic growth.
- Exchange Rate Stability.
-Source: The Hindu, Indian Express
Recently, it has been reported that a cyclone may impact the Tamil Nadu and Puducherry coasts from 8th December 2022 onwards.
GS-I: Geography (Physical geography – Climatology, Important Geophysical phenomena), GS-III: Disaster Management
Dimensions of the Article:
- What is Cyclone Mandous?
- What are Tropical Cyclones?
- Conditions for cyclone formation:
- How are Tropical Cyclones Formed?
- Why tropical cyclones don’t form in the eastern tropical oceans?
- Names of Tropical Cyclones
- Structure of the tropical cyclone
- Landfall, what happens when a Cyclone reaches land from the ocean?
- Cyclone Management in India
What is Cyclone Mandous?
- Mandous is a slow-moving cyclone that often absorbs a lot of moisture, carries a humongous amount of rainfall and gains strength in the form of wind speeds.
- The name has been suggested by the United Arab Emirates.
- India Meteorological Department’s (IMD) predicted that the storm system may move in the west and northwestward directions and intensify into a depression by the evening of December 6.
- It may subsequently strengthen further into a cyclone over southwest Bay of Bengal and move towards the Tamil Nadu and Puducherry coasts by the morning of December 8.
What are Tropical Cyclones?
- The Tropical Cyclones are violent storms that originate over oceans in tropical areas and move over to coastal areas bringing about large-scale destruction caused by violent winds, very heavy rainfall and storm surges.
- These are low pressure weather systems in which winds equal or exceed speeds of 62kmph.
- Winds circulate around in anti-clockwise direction in the Northern Hemisphere and in clockwise direction in the Southern Hemisphere.
- “Tropical” refers to the geographical origin of these systems, which form almost exclusively over tropical seas.
- “Cyclone” refers to their winds moving in a circle, whirling round their central clear eye, with their winds blowing counter clockwise in the Northern Hemisphere and clockwise in the Southern Hemisphere.
- The opposite direction of circulation is due to the Coriolis effect.
Tropical Cyclones in India
- Tropical cyclones striking India generally originate in the eastern side of India.
- Bay of Bengal is more prone to cyclone than Arabian Sea because it gets high sea surface temperature, low vertical shear winds and has enough moisture in middle layers of its atmosphere.
- The frequency of cyclones in this region is bi-modal, i.e., Cyclones occur in the months of May–June and October–November.
Conditions for cyclone formation:
- A warm sea surface (temperature in excess of 26o –27o C) and associated warming extending up to a depth of 60m with abundant water vapour.
- High relative humidity in the atmosphere up to a height of about 5,000 metres.
- Atmospheric instability that encourages the formation of cumulus clouds.
- Low vertical wind between the lower and higher levels of the atmosphere that do not allow the heat generated and released by the clouds to get transported from the area.
- The presence of cyclonic vorticity (rate of rotation of air) that initiates and favours rotation of the air cyclonically.
- Location over the ocean, at least 4–5 o latitude away from the equator.
How are Tropical Cyclones Formed?
- Tropical cyclones typically form over large bodies of relatively warm water. Warm water > Evaporation > Rising up of air > Low Pressure area.
- They derive their energy through the evaporation of water from the ocean surface, which ultimately re-condenses into clouds and rain when moist air rises and cools to saturation.
- Water takes up heat from the atmosphere to change into vapour.
- When water vapour changes back to liquid form as raindrops, this heat is released to the atmosphere.
- The heat released to the atmosphere warms the air around.
- The air tends to rise and causes a drop in the pressure.
- More air rushes to the centre of the storm.
- This cycle is repeated.
Why tropical cyclones don’t form in the eastern tropical oceans?
- The depth of warm water (26-27°C) should extend for 60-70 m from surface of the ocean/sea, so that deep convection currents within the water do not churn and mix the cooler water below with the warmer water near the surface.
- The above condition occurs only in western tropical oceans because of warm ocean currents (easterly trade winds pushes ocean waters towards west) that flow from east towards west forming a thick layer of water with temperatures greater than 27°C. This supplies enough moisture to the storm.
- The cold currents lower the surface temperatures of the eastern parts of the tropical oceans making them unfit for the breeding of cyclonic storms.
- ONE EXCEPTION: During strong El Nino years, strong hurricanes occur in the eastern Pacific. This is due to the accumulation of warm waters in the eastern Pacific due to weak Walker Cell.
Names of Tropical Cyclones
Depending on its location and strength, a tropical cyclone is referred to by different names:
- Cyclones in the Indian Ocean
- Hurricanes in the Atlantic
- Typhoons in the Western Pacific and the South China Sea
- Willy-willies in Western Australia
Structure of the tropical cyclone
Tropical cyclones are compact, circular storms, generally some 320 km (200 miles) in diameter, whose winds swirl around a central region of low atmospheric pressure. The winds are driven by this low-pressure core and by the rotation of Earth, which deflects the path of the wind through a phenomenon known as the Coriolis force. As a result, tropical cyclones rotate in a counter clockwise (or cyclonic) direction in the Northern Hemisphere and in a clockwise (or anticyclonic) direction in the Southern Hemisphere.
- The Eye: A characteristic feature of tropical cyclones is the eye, a central region of clear skies, warm temperatures, and low atmospheric pressure. Typically, atmospheric pressure at the surface of Earth is about 1,000 millibars.
- The Eyewall: The most dangerous and destructive part of a tropical cyclone is the eyewall. Here winds are strongest, rainfall is heaviest, and deep convective clouds rise from close to Earth’s surface to a height of 15,000 metres.
- Rainbands: These bands, commonly called rainbands, spiral into the centre of the storm. In some cases the rainbands are stationary relative to the centre of the moving storm, and in other cases they seem to rotate around the centre.
Landfall, what happens when a Cyclone reaches land from the ocean?
- Tropical cyclones dissipate when they can no longer extract sufficient energy from warm ocean water.
- A storm that moves over land will abruptly lose its fuel source and quickly lose intensity.
- A tropical cyclone can contribute to its own demise by stirring up deeper, cooler ocean waters. tropical cyclone can contribute to its own demise by stirring up deeper, cooler ocean waters.
Cyclone Management in India
India is highly vulnerable to natural disasters especially cyclones, earthquakes, floods, landslides, and drought. Natural disasters cause a loss of 2% of GDP every year in India. According to the Home ministry, 8% of total area in India is prone to cyclones. India has a coastline of 7,516 km, of which 5,700 km are prone to cyclones of various degrees.
- Loss due to cyclones: Loss of lives, livelihood opportunities, damage to public and private property and severe damage to infrastructure are the resultant consequences, which can disrupt the process of development
- Indian Meteorological Department (IMD) is the nodal agency for early warning of cyclones and floods.
- Natural Disaster Management Authority is mandated to deal with the disaster management in India. It has prepared National Guidelines on Management of Cyclone.
- National Cyclone Risk Mitigation Project (NCRMP) was launched by Home ministry to upgrade the forecasting, tracking and warning about cyclones in states.
- National Disaster Response Force (NDRF) has done a commendable performance in rescuing and managing relief work.
- National Disaster Response Reserve (NDRR)– a fund of 250 crores operated by NDRF for maintaining inventory for an emergency situation.
- In 2016, a blueprint of National Disaster Management Plan was unveiled to tackle disaster. It provides a framework to deal with prevention, mitigation, response and recovery during a disaster. According to the plan, Ministry of earth science will be responsible for disaster management of cyclone. By this plan, India joined the list of countries which follow the Sendai Framework for Disaster Risk Reduction 2015-2030.
- Due to increased awareness and tracking of Cyclone, the death toll has been reduced substantially. For example, Very severe cyclone Hudhud and Phailin claimed lives of around 138 and 45 people respectively, which might have been more. It was reduced due to the early warning and relocation of the population from the cyclone-hit areas. Very severe cyclone Ockhi claimed many lives of people in Tamil Nadu and Kerala. This was due to the unprecedented change in the direction of the cyclone.
- But the destruction of infrastructure due to cyclonic hit is not been reduced which leads to increase in poverty due to the economic weakening of the affected population.
-Source: Indian Express
The State of Punjab has furthered the cause of right to life and personal liberty of prisoners by allowing conjugal visits for inmates. It is expected that this initiative will lead to strengthening of matrimonial bonds and also ensure good conduct of prisoners.
GS II: Polity and Governance
Dimensions of the Article:
- What are conjugal rights?
- What are the judicial views?
- Punjab model
What are conjugal rights?
- Conjugal rights are rights created by marriage, that is, the right of the husband or the wife to the company of their spouse.
- In the context of prisons, however, conjugal visits refer to the concept of allowing a prisoner to spend some time in privacy with his spouse within the precincts of a jail.
- It is often argued that conjugal visits can have positive impacts in the form of psychological health benefits for prisoners, preservation of marital ties and, reduction in the rates of homosexuality and sexual aggression within prisons.
It is also argued that conjugal visits are a fundamental right of the spouses of the prisoners:
- Prisoner rights are internationally recognised through the United Nations Standard Minimum Rules for the Treatment of Prisoners, the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights etc.
- Through such instruments, prisoners are guaranteed the right to life and inherent dignity.
- The right to maintain family relations including conjugal visits are included in these treaties.
- Most prison Acts and Rules across the country accept the importance of maintenance of continuity in family and social relations.
What are the judicial views?
Sunil Batra vs Delhi Administration (1979, SC)
- Justice observed that “visit to prisoners by family and friends are solace in isolation: and only a dehumanised system can derive vicarious delight in depriving prison inmates of this humane amenity.”
- On the specific question of conjugal rights of prisoners, however, High Courts have differed in their rulings.
Jasvir Singh vs State of Punjab,
- A couple convicted of murder and on death row made a petition to the court to enforce their right to procreate.
- The primary question before the law was whether the right to conjugality and procreation is a part of the right to life.
- The High Court held that this right to conjugality is available to prisoners under Article 21, subject to restrictions.
Meharaj vs State (2022)
- Madras HC while considering the question of whether conjugal rights form part of the right to life and personal liberty guaranteed by Article 21, observed that there have to be differential standards in enforcement of Article 21 for law abiders and law violators.
- The Court observed that even though conjugal visits could not be held as a fundamental right, the prisoner would still be eligible to avail leave for conjugal visits if there are ‘extraordinary reasons’ such as ‘infertility treatments.’
- The State guidelines clarify that conjugal visits are a matter of privilege rather than a right.
- It has been notified that the average time for conjugal visits shall be two hours, allowed once every two months.
- The visiting spouse will have to furnish a proof of marriage and medical certificates declaring that he or she is free from HIV or any other sexually transmitted disease, COVID-19 or any other infectious disease.
- Moreover, such a facility will not be extended to high risk prisoners, terrorists, child abuse and sexual offenders, death row convicts, prisoners who suffer from HIV etc.
-Source: The Hindu
Scheduled Castes Quota Benefits for Dalit Converts
The Supreme Court said it would examine the question whether the court should wait for the report of the Justice K.G. Balakrishnan Commission or go ahead and hear a series of petitions seeking Scheduled Castes quota benefits for Dalit converts to other religions, primarily Christianity.
GS II: Government Policies and Interventions
Dimensions of the Article:
- Who all are included in the Constitution Order of 1950?
- Why don’t Dalits who convert to Christianity and Islam get quota benefits?
- Does this religion-based bar apply to converted STs and OBCs as well?
- What efforts have been made to include Muslims and Christians of Dalit origin among SCs?
Who all are included in the Constitution Order of 1950?
- When enacted, the Constitution (Scheduled Castes) Order of 1950, initially provided for recognising only Hindus as SCs, to address the social disability arising out of the practice of untouchability.
- The Order was amended in 1956 to include Dalits who had converted to Sikhism and once more in 1990 to include Dalits who had converted to Buddhism.
- Both amendments were aided by the reports of the Kaka Kalelkar Commission in 1955 and the High Powered Panel (HPP) on Minorities, Scheduled Castes and Scheduled Tribes in 1983 respectively.
- On the other hand, the Union government in 2019 rejected the possibility of including Dalit Christians as members of SCs, rooting the exclusion on an Imperial Order of 1936 of the then colonial government, which had first classified a list of the Depressed Classes and specifically excluded “Indian Christians” from it.
Why don’t Dalits who convert to Christianity and Islam get quota benefits?
- The original rationale behind giving reservation to Scheduled Castes was that these sections had suffered from the social evil of untouchability, which was practised among Hindus.
- Under Article 341 of the Constitution, the President may “specify the castes, races or tribes or parts of or groups within castes, races or tribes which shall…be deemed to be Scheduled Castes”.
- The first order under this provision was issued in 1950, and covered only Hindus.
- Following demands from the Sikh community, an order was issued in 1956, including Sikhs of Dalit origin among the beneficiaries of the SC quota.
- In 1990, the government acceded to a similar demand from Buddhists of Dalit origin, and the order was revised to state: “No person who professes a religion different from the Hindu, the Sikh or the Buddhist religion shall be deemed to be a member of Scheduled Caste.”
Does this religion-based bar apply to converted STs and OBCs as well?
- It does not. The Department of Personnel and Training (DoPT) website states, “The rights of a person belonging to a Scheduled Tribe are independent of his/her religious faith.”
- Following the implementation of the Mandal Commission report, several Christian and Muslim communities have found place in the Central and state lists of OBCs.
What efforts have been made to include Muslims and Christians of Dalit origin among SCs?
- After 1990, a number of Private Member’s Bills were brought in Parliament for this purpose.
- In 1996, a government Bill called The Constitution (Scheduled Castes) Orders (Amendment) Bill was drafted, but in view of a divergence of opinions, the Bill was not introduced in Parliament.
Then government headed by PM Manmohan Singh set up two important panels:
- Ranganath Misra Commission: The National Commission for Religious and Linguistic Minorities, popularly known as the Ranganath Misra Commission, in October 2004 and
- Sachar Committee: A seven-member high-level committee headed by former Chief Justice of Delhi High Court Rajinder Sachar to study the social, economic, and educational condition of Muslims in March 2005.
What did they recommend?
- The Sachar Committee Report observed that the social and economic situation of Dalit Muslims and Dalit Christians did not improve after conversion.
- The Ranganath Misra Commission, which submitted its report in May 2007, recommended that SC status should be completely de-linked from religion and Scheduled Castes should be made fully religion-neutral like Scheduled Tribes.
- Reception to these recommendations
- The report was tabled in Parliament in 2009, but its recommendation was not accepted in view of inadequate field data and corroboration with the actual situation on the ground.
- Few studies, commissioned by the National Commission for Minorities, was also not considered reliable due to insufficient data.
-Source: Indian Express
Recently, the Prime Minister paid homage to Dr. Babasaheb Ambedkar on Mahaparinirvan Diwas and recalled his exemplary service to our nation.
GS II- History
Dimensions of the Article:
- What is Mahaparinirvan Diwas?
- About B R Ambedkar
What is Mahaparinirvan Diwas?
- Parinirvana, regarded as one of the major principles as well as goals of Buddhism, is a Sanskrit term which means release or freedom after death.
- As per the Buddhist text Mahaparinibbana Sutta, the death of Lord Buddha at the age of 80 is considered as the original Mahaparinirvan.
- 6th December is observed to commemorate the unfathomable contribution to society given by Dr. Bhimrao Ambedkar and his achievements.
- Owing to Ambedkar’s status as a Buddhist leader, his death anniversary is referred to as Mahaparinirvan Diwas.
About B R Ambedkar
- He was born into a caste that was considered untouchable, he faced many injustices and discrimination in society.
- He was born in Mhow in the Central Provinces (modern-day Madhya Pradesh) to a Marathi family with roots in Ambadawe town of Ratnagiri, Maharashtra.
- He Popularly known as Baba Saheb Ji.
- He was the Chairman of the Drafting Committee of the Constituent Assembly and is called the ‘Father of the Indian Constitution’.
- He was a jurist and an economist.
- He was a brilliant student and had doctoral degrees in economics from Columbia University and the London School of Economics.
- The Ambedkar Ji was against the caste-based discriminations in society and advocated the Dalits to organize and demand their rights.
- He promoted the education of Dalits and made representations to the government in various capacities in this regard.
- He was part of the Bombay Presidency Committee that worked with the Simon Commission in 1925.
- He established the Bahishkrit Hitakarini Sabha to promote education and socio-economic improvements among the Dalits.
- He started magazines like Mooknayak, Equality Janta and Bahishkrit Bharat.
- In 1927, he launched active agitation against untouchability.
- He organised and agitated for the right of Dalits to enter temples and to draw water from public water resources.
- He condemned Hindu scriptures that he thought propagated caste discrimination.
- He advocated separate electorates for the ‘Depressed Classes’, the term with which Dalits were called at that time.
- He was in disagreement with Mahatma Gandhi at that time since Gandhi was against any sort of reservation in the electorates.
- When the British government announced the ‘Communal Award’ in 1932, Gandhi went on a fast in Yerwada Jail.
- An agreement was signed between Gandhi and Ambedkar in the jail whereby it was agreed to give reserved seats to the depressed classes within the general electorate, this was called the Poona Pact
- He advocated a free economy with a stable Rupee.
- He also mooted birth control for economic development.
- He also emphasized equal rights for women.
- The Ambedkar Ji founded the Independent Labour Party (later transformed into the Scheduled Castes Federation) in 1936 and contested in 1937 from Bombay to the Central Legislative Assembly.
- He also contested from Bombay (north-central) after independence in the country’s first general elections. but he lost both times.
- He also worked as Minister of Labour in the Viceroy’s Executive Council. After independence, Ambedkar became the first Law Minister in 1947 under the Congress-led government. Later he resigned due to differences with Jawaharlal Nehru on the Hindu Code Bill.
- He was appointed to the Rajya Sabha in 1952 and remained a member till his death.
Shift to Buddhism
- A few months before he died, he converted to Buddhism in a public ceremony in Nagpur and with him lakhs of Dalits converted to Buddhism.
- His death anniversary is observed as Mahaparinirvan Din.
He authored several books and essays, some of them are as follows;-
- The Annihilation of Caste, Pakistan or the Partition of India,
- The Buddha and his Dhamma,
- The Evolution of Provincial Finance in British India,
- Administration and Finance of the East India Company, etc.
-Source: Indian Express