What’s in today’s article?

• Why in news?
• What is Monetary Policy Committee (MPC)?
• News Summary: RBI monetary policy update
• What are the Key rates after the recent announcements made by MPC?
• Other highlights of the MPC announcements
• Why is the RBI in pause mode on raising interest rates?

 

Why in news?

• The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged.
• This is for the second time since the RBI started hiking Repo rate in May 2022 to check inflation.

 

What is Monetary Policy Committee (MPC)?

• The Committee

• Under Section 45ZB of the amended RBI Act, 1934, the central government is empowered to constitute a six-member Monetary Policy Committee (MPC).
• MPC will determine the policy interest rate required to achieve the inflation target. The first such MPC was constituted in September 2016.

• Members of MPC

• As per the amended RBI act, the MPC shall consist of 
  • the RBI Governor as its ex officio chairperson, 
  • the Deputy Governor in charge of monetary policy, 
  • an officer of the Bank to be nominated by the Central Board, and 
  • three persons to be appointed by the central government. 

• Functions of MPC
  • Setting Policy Interest Rates: The primary function of the MPC is to determine the policy interest rates, specifically the repo rate.
  • Inflation Targeting: The current inflation target set by the government is a Consumer Price Index (CPI) inflation target of 4% with a tolerance band of +/- 2%.
  • Economic Analysis and Forecasting: The MPC conducts thorough analysis and forecasting of various economic indicators, including inflation, GDP growth, employment, fiscal conditions, and global economic developments.
  • Decision-Making: The MPC meets at least four times a year to review the monetary policy stance.

 

News Summary: RBI monetary policy update

What are the Key rates after the recent announcements made by MPC?

• Repo Rate - The repo rate now stands at 6.50 per cent.
  • Repo rate is the rate at which the Reserve Bank of India lends money to commercial banks in the event of any shortfall of funds.
• The standing deposit facility (SDF) - This rate stands at 6.25%.
  • The SDF is a liquidity window through which the RBI will give banks an option to park excess liquidity with it. 
  • It is different from the reverse repo facility in that it does not require banks to provide collateral while parking funds.
  • The idea of an SDF was first mooted in the Urjit Patel Monetary Policy Committee report in 2014.
  • It later received the government’s nod following an amendment to the RBI Act in 2018, vide the Finance Bill.
• The marginal standing facility (MSF) rate – It stands at 6.75%.
  • MSF is a window for banks to borrow from the central bank in an emergency situation when inter-bank liquidity dries up completely.
• The Bank Rate - It is now 6.75%.
  • Bank rate is the rate charged by the central bank for lending funds to commercial banks.
  • There is a slight difference between Bank Rate and Repo Rate. In Repo Rate, RBI lends money to the banks against securities for the short term only.

 

Other highlights of the MPC announcements

• Retained the policy stance as withdrawal of accommodation
  • The MPC decided to remain focused on withdrawal of accommodation.
    • An accommodative stance means the central bank is prepared to expand the money supply to boost economic growth. 
    • Withdrawal of accommodation means reducing the money supply in the system which will rein in inflation further.
  • This is to ensure that inflation progressively aligns with the target, while supporting growth.
• Inflation outlook
  • The headline inflation trajectory was likely to be shaped by food price dynamics.
  • Milk prices, on the other hand, are likely to remain under pressure due to supply shortfalls and high fodder costs.
  • Crude oil prices have eased but the outlook remains uncertain.
  • Taking into account these factors and assuming a normal monsoon, CPI inflation has been projected at 5.1% for 2023-24.
• Growth forecast
  • Higher rabi crop production in 2022-23, the expected normal monsoon, and the sustained buoyancy in services should support private consumption and overall economic activity in the current year.
  • The government’s thrust on capital expenditure, moderation in commodity prices and robust credit growth are expected to nurture investment activity. 
  • Weak external demand, geoeconomic fragmentation, and protracted geopolitical tensions, however, pose risks to the outlook.
  • Taking all these factors into consideration, real GDP growth for 2023-24 has been projected at 6.5%.

 

Why is the RBI in pause mode on raising interest rates?

• Retail inflation within comfort zone of RBI
  • Retail inflation declined to an 18-month low of 4.7 per cent in April, remaining under the RBI’s comfort zone of 2-6 per cent for two consecutive months.
• Expansion of GDP
  • India’s gross domestic product (GDP) expanded at 6.1 per cent January-March 2023 quarter, in turn pushing up the growth estimate for the full year (2022-23) to 7.2 per cent.

 

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Q1) What is the marginal standing facility (MSF)?

The Marginal Standing Facility (MSF) is a monetary policy tool used by central banks, particularly in countries that follow a corridor system of interest rates. It is a facility that allows banks to borrow funds from the central bank on an overnight basis against eligible securities at a rate slightly higher than the prevailing policy rate. The MSF serves as a secondary window for banks to borrow money from the central bank when they are unable to obtain funds from other sources or facing a liquidity shortage. The interest rate charged on MSF loans is usually higher than the repo rate or the main policy rate set by the central bank.

 

Q2) What is inflation?

Inflation refers to the general increase in prices of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money. In other words, it means that the value of money declines, and as a result, individuals need more money to buy the same quantity of goods and services. Inflation is typically measured using an inflation rate, which indicates the percentage change in the average price level of a basket of goods and services over a specific period, often on an annual basis. It is usually calculated using various price indices, such as the Consumer Price Index (CPI) or the Producer Price Index (PPI).

 

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Source: RBI monetary policy update: keeps repo rate unchanged, retains FY24 GDP growth forecast at 6.5% | RBI | Indian Express

What’s in today’s article?

• Why in news?
• What is the Khalistan movement?
• When did the movement start and why?
• News Summary: Celebration of Indira Gandhi's killing in Canada
• What really happened at Canada event?
• India's response

 

Why in news?

• A massive controversy has erupted over a social media video of a parade float depicting late prime minister Indira Gandhi's assassination in Canada.
  • In 1984, Indira Gandhi was assassinated by her two Sikh bodyguards, months after the military operation called the Operation Bluestar.
• The parade was allegedly organised by pro-Khalistani supporters on June 4, days before the 39th anniversary of ‘Operation Bluestar’ (celebrated on June 6).

 

What is the Khalistan movement?

• About
  • The Khalistan movement is a fight for a separate, sovereign Sikh state in present day Punjab (both India and Pakistan). 
  • The movement was crushed in India following Operation Blue Star (1984) and Operation Black Thunder (1986 and 1988).
    • Operation Blue Star began on June 1, 1984 to flush out militants from the Golden Temple and neutralise Bhindranwale.
  • However, it continues to evoke sympathy and support among sections of the Sikh population, especially in the Sikh diaspora in countries such as Canada, the UK, and Australia.
• Khalistan and Canada
  • As per the 2021 Canadian census, Sikhs account for 2.1 per cent of Canada’s population, and are the country’s fastest growing religious group. 
    • After India, Canada is home to the largest population of Sikhs in the world.
  • In 2002, Toronto-based Punjabi-language weekly Sanjh Savera greeted Indira’s death anniversary with a cover illustration of her murder. 
    • The magazine received government advertisements, and is now a prominent daily in Canada.
  • Last year in Brampton - home to Canada’s largest Sikh population - a pro-Khalistan organisation known as Sikhs for Justice (SFJ) held a so-called referendum on Khalistan.

 

When did the movement start and why?

• Origin lies in India’s independence and subsequent Partition along religious lines
  • The Punjab province, which was divided between India and Pakistan, saw some of the worst communal violence and generated millions of refugees.
  • Lahore, the capital of Maharaja Ranjit Singh’s great Sikh Empire, went to Pakistan, as did holy Sikh sites including Nankana Sahib, the birthplace of Guru Nanak, the founder of Sikhism. 
  • While most Sikhs found themselves in India, they were a small minority in the country, making up around 2 per cent of the population.
• Struggle for greater autonomy & States Reorganisation Commission
  • The political struggle for greater autonomy began around the time of Independence, with the Punjabi Suba Movement for the creation of a Punjabi-speaking state. 
  • The States Reorganisation Commission, in its 1955 report, rejected this demand, but in 1966, after years of protest, the state of Punjab was reorganised to reflect the Punjabi Suba demand.
  • The erstwhile Punjab state was trifurcated into the Hindi-speaking, Hindu-majority states of Himachal Pradesh and Haryana, and the Punjabi-speaking, Sikh-majority Punjab.
• Anandpur Sahib Resolution
  • In 1973, leaders of the Akali Dal met at the sacred town of Anandpur Sahib, the birthplace of the Khalsa.
  • They released a list of demands that would guide the political path of the Akali Dal.
  • Among other things, the Anandpur Sahib Resolution demanded autonomy for the state of Punjab, identified regions that would be part of a separate state, and sought the right to frame its own internal constitution.
  • The Akali Dal was trying to cash in on the growing demand for an autonomous state which had emerged alongside the Punjabi Suba movement.
    • This demand had gone global by 1971 — when an advertisement appeared on The New York Times proclaiming the birth of Khalistan.
• Rise of Jarnail Singh Bhindranwale
  • Many in Punjab sought to go beyond just a demand for greater autonomy. One such man was Jarnail Singh Bhindranwale.
  • Bhindranwale was a charismatic preacher who soon positioned himself as the authentic voice of the Sikhs.
  • He found a captive audience in the state’s youth, especially those in the lower rungs of the social ladder, and massed a massive following.
  • By 1982, he took up residence inside the Golden Temple, directing demonstrations and clashes with the police.
  • The movement was geared towards the demands first articulated in the Anandpur Sahib Resolution.
  • However, amidst growing religious polarisation, sectarian violence, and Bhindranwale’s own harsh rhetoric against Hindus, the then government declared the movement tantamount to secession.
• The aftermath of Operation Blue Star
  • This operation gravely wounded the Sikh community around the world. It also galvanised the demand for Khalistan.
  • Punjab saw the worst violence, becoming the hub of a long drawn-out insurgency that lasted till 1995.

 

News Summary: Celebration of Indira Gandhi's killing in Canada

What really happened at Canada event?

• A tableau in the 5 km-long parade seemed to celebrate the assassination of former Prime Minister Indira Gandhi.
  • A female figure was shown in a blood-stained white saree, with the hands up, as turbaned men pointed guns at her. 
• A poster behind the scene read Revenge for the attack on Darbar Sahib.

 

India's response

• The Indian high commission in Ottawa sent a note expressing displeasure to Global Affairs Canada, the Canadian foreign ministry.
  • One cannot exceed freedom of expression like this, glorifying the assassination of the leader of a democratic nation.
• India warned Canada that giving space to separatists, extremists was not good for bilateral ties.

 

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Q1) What is Operation Blue Star?

Operation Blue Star refers to a military operation conducted by the Indian government in June 1984 to remove Sikh militants who had taken shelter in the Golden Temple complex in Amritsar, Punjab, India. The operation was a response to the escalating violence and separatist activities led by Jarnail Singh Bhindranwale, who sought to establish an independent Sikh state called Khalistan. The Golden Temple, also known as Harmandir Sahib, is the holiest shrine for Sikhs and holds immense religious significance. The militants had fortified themselves inside the temple complex, using it as a base to launch attacks and store weapons.

 

Q2) What is the geographical location of Canada?

Canada is located in North America, specifically in the northern part of the continent. It spans a vast area, stretching from the Atlantic Ocean in the east to the Pacific Ocean in the west. Canada shares land borders with the United States to the south and maritime boundaries with France (overseas territories) and Denmark (Greenland) to the east. It is the second-largest country in the world by land area, covering approximately 9.98 million square kilometers (3.85 million square miles).

 

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Source: Jaishankar slams Canada over ‘celebration’ of Indira Gandhi’s assassination: ‘requirements of vote bank politics’ | Hindustan Times | Times of India | India Today

What’s in today’s article?

• Why in News?
• What do you mean by Monsoon?
• What is Meant by the “Onset of the Monsoon”?
• Conditions Determining the Onset of Monsoon
• Implications of Delay in/Early Onset of the Monsoon

 

Why in News?

• The southwest monsoon hit the Kerala coast on June 8 (May 29 in 2022). The normal date of the onset of the monsoon over the Kerala coast is June 1.
• However, monsoon is expected to remain weak for at least one more week, thanks to the development of cyclone Biparjoy in the Arabian Sea.

 

What do you mean by Monsoon?

• A monsoon is a seasonal reversing wind accompanied by corresponding changes in precipitation and associated with annual latitudinal oscillation of the Intertropical Convergence Zone (ITCZ).
  • ITCZ is the region that circles the Earth and where the trade winds of the Northern and Southern Hemispheres converge - creating a broad trough of low pressure.
  • Seasonal shifts (between equator and tropic of cancer) in the location of the ITCZ with the apparent movement of the sun results in the wet and dry seasons of the tropics.
• Usually, the term monsoon is used to refer to the rainy phase of a seasonally changing pattern.
• On the Indian subcontinent, as the rain bearing winds come from the southwest direction, it is known as the southwest monsoon.

 

What is Meant by the “Onset of the Monsoon”?

• The onset of the monsoon over Kerala signals the beginning of the four-month (June-September) southwest monsoon season, during which India gets more than 70% of its annual rainfall.
  • The monsoon covers the entire country by July 15.
• Contrary to what is sometimes assumed, the onset does not mean the first rain of the season.
• For example, the Andaman and Nicobar Islands usually start receiving monsoon rainfall between May 15 and May 20, and it starts raining along the Kerala coast in the last week of May.
• However, ‘onset’ is a technical expression with a specific definition and the IMD does not officially declare onset until certain prescribed conditions are met.

●      

 

Conditions Determining the Onset of Monsoon:

• According to the IMD, the onset of the monsoon happens when there is a significant transition in the large-scale atmospheric and ocean circulations in the Indo-Pacific region.
• The IMD essentially looks at the consistency of rainfall over a defined geography, the intensity of the rainfall, and the wind speed.
• Rainfall: The onset is declared if at least 60% of 14 designated meteorological stations in Kerala and Lakshadweep record at least 2.5 mm of rain for two consecutive days at any time after May 10.
• Wind field: The depth of westerlies should be up to 600 hectopascal (1 hPa is equal to 1 millibar of pressure) in the area that is bound by the equator to 10ºN latitude (passes through Kochi), and from longitude 55ºE to 80ºE.
• Heat: The measure of the energy emitted to space by the Earth’s surface, oceans, and atmosphere should be below 200 watts per sq m (wm2) in the area between the 5ºN and 10ºN latitudes, and 70ºE and 75ºE longitudes.

 

Implications of Delay in/Early Onset of the Monsoon:

• Neither an early nor a late onset of the monsoon is unusual.
• A delay in the onset over Kerala does not automatically mean delays in the arrival of the monsoon over other parts of the country.
  • The northward progression of the monsoon is not uniform - it depends on local factors, including the creation of low-pressure areas.
  • Therefore, despite a late onset over Kerala, other parts of the country may start getting monsoon rain on time.
• A delay or an early arrival has no bearing on the quality or amount of rainfall, or its regional distribution across the country.

 

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Q1) What is the Northeast monsoon?

NE monsoon is the name of the monsoon winds, which blow from the northeast to the southwest. During their movement, these winds pick up moisture from the Bay of Bengal and dump it mainly over the southern states of TN and Andhra Pradesh during October and December.

 

Q2) What are tropical cyclones?

A tropical cyclone is a rapid rotating storm originating over tropical oceans from where it draws the energy to develop. It has a low-pressure centre and clouds spiraling towards the eyewall surrounding the "eye", the central part of the system where the weather is normally calm and free of clouds.

 

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Source: IMD declares monsoon arrival, but to remain weak for at least a week | IE

What’s in today’s article?

• Why in News?
• What Is a Primary Agricultural Credit Society (PACS)?
• Why Are PACS Attractive?
• News Summary
• About Pradhan Mantri Kisan Samriddhi Kendras (PMKSK)

 

Why in News?

• Ministry of Cooperation issued a statement that Primary Agricultural Credit Societies (PACS) can also be employed as drone entrepreneurs for spraying fertilisers and pesticides.

 

What Is a Primary Agricultural Credit Society (PACS)?

• PACS are village level cooperative credit societies that serve as the last link in a three-tier cooperative credit structure headed by the State Cooperative Banks (SCB) at the state level.
  • Credit from the SCBs is transferred to the District Central Cooperative Banks (DCCBs), that operate at the district level.
  • The DCCBs work with PACS, which deal directly with farmers.
• Since these are cooperative bodies, individual farmers are members of the PACS, and office-bearers are elected from within them. A village can have multiple PACS.
• PACSs provide short-term, and medium-term agricultural loans to the farmers for the various agricultural and farming activities.
• The first PACS was formed in 1904.

·   Currently, there are more than 1,00,000 PACS in the country with a huge member base of more than 13 crore farmers. However, only 63,000 of them are functional.

 

Why Are PACS Attractive?

• The attraction of the PACS lies in the last mile connectivity they offer.
• For farmers, timely access to capital is necessary at the start of their agricultural activities.
• PACS have the capacity to extend credit with minimal paperwork within a short time.
  • With other scheduled commercial banks, farmers have often complained of tedious paperwork and red tape.
• For farmers, PACS provide strength in numbers, as most of the paperwork is taken care of by the office-bearer of the PACS.
• In the case of scheduled commercial banks, farmers have to individually meet the requirement and often have to take the help of agents to get their loans sanctioned.
• Major Drawback of PACS –
  • Since PACS are cooperative bodies, however, political compulsions often trump financial discipline, and the recovery of loans is hit.
  • Chairpersons of PACS participate in electing the office-bearers of DCCBs.
• Political affiliations are important here as well.

 

News Summary

• Ministry of Cooperation issued a statement that Primary Agricultural Credit Societies (PACS) can also be employed as drone entrepreneurs for spraying fertilisers and pesticides.
• The statement also said that the PACS which are not currently functioning as Pradhan Mantri Kisan Samridhi Kendras will be brought under their ambit.

 

About Pradhan Mantri Kisan Samriddhi Kendras (PMKSK)

• The Central government launched 600 Pradhan Mantri Kisan Samriddhi Kendras in 2022.
• These Kendras are one-stop solutions to farmers in the form of crop advisories, soil- and seed-testing facilities, retailing seeds and pesticides, and even custom hiring of agricultural equipment and machines.
• PMKSK functions under the Ministry of Chemicals & Fertilizers.

 

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Q1) What is the role of NABARD (National Bank for Agriculture and Rural Development)?

NABARD is a Development Bank with a mandate for providing and regulating credit for the development of agriculture, small-scale industries, cottage and village industries, handicrafts and other allied economic activities in rural areas to promote prosperity of rural areas.

 

Q2) What is meant by Kisan Credit Card?

The Kisan Credit Card scheme is a Government of India scheme which provides farmers with timely access to credit. The Kisan Credit Card (KCC) scheme was launched in 1998 with the aim of providing short-term formal credit to farmers and was created by NABARD.

 

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Source: Govt to utilise PACS as ‘drone entrepreneurs’ for spraying fertilisers