Exam View: Dealing in rupees; Why billions of rupees are lying unused; Learnings.

Context: Russia has accumulated billions of rupees in accounts in Indian banks and to use this money the rupees need to be transferred to another currency. There are on-going talks between Russia and India on halting the settling of trade in rupees.

Decoding the editorial: Dealing in rupees

• After Russia invaded Ukraine in February 2022, the US had imposed sanctions on it.
• A large part of international trade is carried out in US dollars, hence, with sanctions, it became difficult for Russia to do so.
• At that point, India reportedly began exploring a mechanism by which Indian importers could pay for Russian imports in rupees, which would help India get around the American sanctions on Russia.
• Rupee payments would also help Indian importers save money by not having to convert rupees into dollars for payments.
• This plan involved Russian banks opening vostro accounts with Indian banks. Indian importers could make rupee payments into these accounts, which could then be used by Russia to buy stuff from India.

Why are billions of rupees lying unused?

• In 2022-23, Russia was India’s fourth largest import partner, with a total of $46.5 billion worth of goods imports.
  • Petroleum and petroleum products worth $34.3 billion were imported.
  • Coal and fertilisers were the other major imports.
• That same year, Russia was India’s 36th largest export destination with total exports of $3.2 billion.

• When Russia attacked Ukraine, it drove up global commodity prices. In the case of oil, India got a better deal from Russia than other countries.
• So, Russia ran a $43.3 billion trade surplus, meaning that India had much more to buy from Russia than vice versa. Hence, billions of rupees are lying unused in Indian banks.
• If there were no sanctions and the trade would have been carried out in dollars:
  • Those dollars could be used to pay for buying stuff from other countries, since a good chunk of global exports are priced in dollars.
  • The dollars could be converted quickly into another currency like the euro and be used to pay for stuff.
  • The dollars could be invested in dollar assets like US Treasury bonds to earn a rate of return.
• Other countries are unlikely to accept Indian rupees from Russia for payment of purchases.
  • In 2021, total global exports (goods and services) stood at $27.9 trillion, whereas India’s exports stood at $679.7 billion, or 2.4% of global exports.
  • Hence, there is very little that other countries can buy from India.
• Russia wants to be paid in Chinese yuan or other currencies.
  • Paying in any other currency too will have issues around how much money can be converted without impacting the exchange rate.
  • The rupee accounts for just 1.6% of global foreign exchange transactions.

Learnings:

• India needs to export more, so that other countries can use rupees to buy stuff from India.
• The structure of the global economy is such that it’s very difficult to carry out any significant amount of international trade without invoicing in dollars.
  • History shows us that different currencies have enjoyed a similar privilege of being a premier international currency at different points of time.
  • Before the US dollar, the British pound, the Dutch Guilder and the Spanish dollar had an exorbitant privilege.
• The presence of a premier international currency allows countries to run trade surpluses and deficits with each other, and at an aggregate level as well.
  • In a world without a premier international currency, countries like China in the past two decades (or Japan, South Korea, etc, earlier), would have never been able to run trade surpluses by exporting more than they import, pulling millions out of poverty in the process.

Source:

https://www.livemint.com/opinion/columns/russias-trade-surplus-with-india-why-billions-of-rupees-are-lying-unused-in-indian-banks-amid-us-sanctions-11683654791517.html

In News: Both agricultural exports from and imports into India have scaled new highs in the fiscal year 2022-23, however, India’s farm trade surplus was lower as compared to the previous year.

Indian Agricultural Metrics:

• In 2022-23, total farm exports and imports accounted for $53.15 billion and $35.69 billion respectively surpassing their previous year’s records of $50.24 billion and $32.42 billion. This resulted in a marginal decline in agricultural trade surplus from $17.82 billion to $17.46 billion.
• Historical data shows that exports sharply fell from $43.25 billion to $32.81 billion between 2013-14 and 2015-16 due to declining global food prices. The UN-FAO Food Price Index (FPI) crashed from an average of 119.1 points in 2013-14 to 90 points in 2015-16.
• FPI is a weighted average of world prices of a basket of food commodities over a base period value i.e. 100 in 2014-16. It recovered to 139.5 points in 2022-23, thus making Indian commodities competitive, soaring its export to $53.15 billion in 2022-23.

India’s Major Agricultural Exports:

• Marine products: It has grown steadily from $5.02 billion in 2013-14 to $8.08 billion in 2022-23.

• Rice: Rice exports has grown and has been driven by non-basmati rice with the value of premium-priced basmati shipments actually declining.
  • Basmati rice is exported mainly to the Persian Gulf countries, US and UK. But Non-basmati shipments are more diversified, with destinations like Bangladesh, China, Sri Lanka, Malaysia, Vietnam, UAE and Iraq and Africa
  • It’s non-basmati that has made India the biggest rice exporter, ahead of Thailand.
• Sugar: Sugar exports have risen recently from a mere $810.90 million in 2017-18 to $1.97 billion in 2019-20 to $5.77 billion in 2022-23.
  • Indian mills have built markets for both raw sugar (among refineries in Bangladesh, Indonesia, Malaysia, Saudi Arabia and Iraq) and regular plantation whites (in African countries, Afghanistan, Sri Lanka and China).
  • The country has emerged as the world’s No. 2 exporter after Brazil.
• Spices exports jumped from $2.5 billion in 2013-14 to almost $4 billion in 2020-21 led by chilli, mint products, cumin, turmeric, ginger, coriander, fennel and other seed spices.
• Exports of raw cotton, guar-gum, and oil meals have declined from their historical high of 2011-12.

India’s Agricultural Import Profile:

• Vegetable oils: Its imports have doubled in terms of value from $9.67 billion to $20.84 billion between 2019-20 and 2022-23 roughly meeting 60% of India’s vegetable oil requirements.
• Pulses: Import dependence on pulses have declined to 10% with the value of imports also coming down from $4.24 billion in 2016-17 to $1.94 billion in 2022-23.
• Imports of spices, cashew, and cotton: Import of commodities where India has traditionally been a net exporter has shown a rising trend. Spice imports going up reflect reduced price competitiveness vis-à-vis Vietnam Guatemala in pepper.

Risks to Agricultural Exports:

• International prices: Fluctuations in FPI reading impact exports by making the commodities less competitive in the global market.
• Domestic food inflation: Fear of domestic food inflation has resulted in a ban on exports of commodities like wheat, broken rice, sugar etc.
• Monsoons: Failure of monsoon could also lead to the diversion of export items for local consumption.

Government Initiatives to Promote Agricultural Exports and Reduce Imports:

• National Mission on Edible Oil-Oil Palm (NMEO-OP) for raising areas under palm cultivation and reducing vegetable oil imports.
• Agriculture Export Policy 2018 to diversify our export basket, and destinations and boost high-value and value-added agricultural exports.
• District as Export Hub Initiative where products including agricultural products with export potential have been identified in all 733 districts across the country.
• Transport and Marketing Assistance for Specified Agriculture Products
• Product-specific Export Promotion Forums (EPF) for eight high-potential agri-products.

Source:

https://indianexpress.com/article/explained/explained-economics/india-farm-exports-drivers-risks-explained-8596742/

In News: Recently, Food Safety and Standards Authority of India (FSSAI) flagged 32 fresh cases of misleading ads and claims by food business operators.

About

The FSSAI has found that certain companies marketing nutraceutical products, refined oils, pulses, flours, millet products, and ghee are making unverified assertions about their products. These assertions have the potential to deceive consumers since they lack scientific validation. The FSSAI has brought these instances to the notice of the licensing authorities, who will issue notifications to the companies to retract or amend their misleading claims.

Regulations for tackling misleading ads and claims

• There are varied regulations to combat misleading advertisements and claims, some are broad, while others are product specific.
  • For example, FSSAI uses the Food Safety and Standards (Advertisements & Claims) Regulations, 2018 which specifically deal with food (and related products) while Central Consumer Protection Authority (CCPA)’s regulations cover goods, products and services.
• Programme and Advertising Codes prescribed under the Cable Television Network Rules, 1994 stipulate that advertisements must not draw inferences that it has “some special or miraculous or supernatural property or quality, which is difficult of being proved.”
• Product claims suggesting suitability for prevention, alleviation, treatment or cure of a disease, disorder or particular psychological condition is prohibited unless specifically permitted under the regulations of the Food Safety and Standard Act, 2006.
• Consumer Welfare Fund was set up under the Central Goods and Services Tax (CGST) Act, 2017 to promote and protect the welfare of the consumers. Creation of Consumer Law Chairs/ Centres of Excellence in Institutions/Universities of repute to foster research and training on consumer related issues. Projects for spreading consumer literacy and awareness.
• Central Consumer Protection Council aims to safeguard consumer interests by monitoring and enforcing consumer protection laws, facilitating consumer education, and providing consumer redressal mechanisms. In addition, the council also promotes consumer-friendly policies and initiatives.
• Consumer Protection Rules, 2021 stipulate the pecuniary jurisdiction of each tier of consumer commission. The rules revised pecuniary jurisdiction for entertaining consumer complaints.
• Consumer Protection (E-Commerce) Rules, 2020 rules are mandatory and are not advisory. Sellers cannot refuse to take back goods or withdraw services or refuse refunds, if such goods or services are defective, deficient, delivered late, or if they do not meet the description on the platform.
• FSSAI seeks that the advertisements and claims be “truthful, unambiguous, meaningful, not misleading and help consumers to comprehend the information provided”. Claims must be scientifically substantiated by validated methods of characterising or quantifying the ingredient or substance that is the basis for the claim.

https://www.thehindu.com/news/national/explained-misleading-food-ads-and-regulations-to-curtail-them/article66815388.ece

In News: Germany and the United Arab Emirates host the Petesberg Climate Dialogue 2023 to discuss the way forward towards COP28.

About Petersberg Climate Dialogue 2023:

• The Petersberg Dialogue on Climate Change has emphasised on "cleaning-up our economies" and driving decarbonization in every sector to achieve a 5-degree global warming pathway.
• It has also called for an Acceleration Agenda where all countries fast-forward their Net Zero deadlines and phase out coal by 2030 in OECD countries and by 2040 in others.
• It also held discussions around a potential global target for renewables at the next climate conference, with a focus on expanding wind and solar energy.
• The conference called for tripling renewable energy capacity by 2030 and doubling by 2040, but remains silent on the phaseout of fossil fuels.
• Developed countries on track to deliver the promised $100 billion per year for climate finance, but it is far less than the estimated need of $1 trillion per year by 2030 for emerging markets alone.
• The dialogue also called for an urgent need for global financial systems transformation to unlock crucial climate finance for the most vulnerable countries.
• It declared 2023 as the year for the Global Stocktake which would focus on climate change impacts, actions, and responses in relation to the developmental priorities of developing countries, including poverty eradication.

https://www.downtoearth.org.in/news/world/some-key-takeaways-from-the-petersberg-climate-dialogue-89116

In News: Experts stresses the need to have a drug recall law to regulate bad drugs from the market in India

About Drug Recall:

• A drug recall refers to the process of removing a pharmaceutical product from the market due to safety concerns, quality issues, or regulatory violations.
• It can be initiated by pharmaceutical companies, regulatory authorities, or health agencies as a mechanism used to protect public health, ensure the safety and efficacy of drugs.
• Major reasons for drug recalls include contamination, incorrect labeling, manufacturing defects, presence of impurities, ineffective or substandard formulation, adverse effects, and non-compliance with regulatory standards.
• Recalls can be broadly classified into different categories based on the level of risk associated with the recalled product, such as Class I (highest risk), Class II, and Class III (lowest risk).
• The recall process involves retrieving the affected products from the market, halting their distribution, and disposing of or correcting the recalled drugs.
• These recalls are needed to minimize harm to patients, restore confidence in the pharmaceutical industry, and improve drug safety
• The effectiveness of a drug recall relies on cooperation and coordination between pharmaceutical companies, regulatory authorities, healthcare providers, and the public.
• At present, India does not have a specific law for drug recalls, however, the Central Drugs Standard Control Organization (CDSCO) and state drug regulatory authorities have provisions for market withdrawal of drugs in certain situations.
• However, many countries around the world have policies and regulations already in place for drug recalls including USA, European Union, Canada, Australia and United Kingdom etc.

In News: Goa sees a spate of forest fires in the month of March

About Goa Forest Fires:

• Forest fires, also known as wildfires or bushfires, refer to uncontrolled fires that spread rapidly across forested areas causing threat to ecosystems, wildlife, and human lives.
• The factors such as lightning strikes, stubble burning often ignites dry vegetation initiating a fire while the decomposition processes generate heat, leading to ignition under certain conditions.
• The connection between weather and fires in Goa is due to deficient rainfall, high temperatures, low humidity, and dry leaves on hilltops, which are fanned and spread by high winds.
• Goa's forest cover is classified as "less fire-prone" according to the India State of Forest Report (ISFR) 2021 which lists the Forest fire season from November to June.
• States including Andhra Pradesh, Odisha, Maharashtra, Chhattisgarh, and Uttarakhand are prone to forest fires with Mizoram having the highest incidence with nearly 95% of its districts being hotspots.
• More than 36% of India's forest cover is prone to frequent fires while approximately 66% of the forest area in India is extremely to very highly fire-prone.

https://indianexpress.com/article/explained/explained-climate/goa-forest-fires-in-march-2023-explained-8596719/

Why in news? Recently, the Union Minister of Ports, Shipping & Waterways and Ayush, visited the construction site of India’s first International Multi-Modal Logistics Park in Jogighopa, Assam, to review the progress made so far.

About:

• The park is being developed under the ambitious Bharatmala Pariyojana of the Government.
  • Bharatmala Pariyojana is an umbrella program for the highways sector that focuses on optimizing efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps.
• This park is being made by National Highways & Infrastructure Development Corporation Limited (NHIDCL).
• The park will be connected to road, rail, air, and waterways.
• It is being developed in 317-acre land along the Brahmaputra.
• Project is likely to unlock huge potential for the region along with neighboring countries like Bhutan and Bangladesh.

MMLP:

• A MMLP is a transportation hub that combines different modes of transport in one location to enable efficient movement of goods.
• They are designed to handle a large volume of goods, with facilities for warehousing, distribution, and value-added services such as packaging and labeling.
• These logistics parks are typically located near major transportation nodes, such as ports, airports, and highways.

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1922047

Why in news? Recently, Defence Minister inaugurated the nation’s first Indian Air Force Heritage Centre in Chandigarh.

About:

• The Indian Air Force Heritage Centre is a joint project between the Union Territory administration and the Indian Air Force (IAF).
• Although the UT administration will maintain the centre, the IAF has provided the weapons and equipment.
• This is the first heritage centre of the IAF.
• The heritage centre highlights the IAF’s role in various wars, including in 1965 and 1971 and the Kargil War, and the Balakot air strike through murals and memorabilia.
• It houses five vintage aircraft and will provide visitors with cockpit exposure and an experience with flight simulators.
• It also houses the first IAF-made patent aircraft Air Force ‘Kanpur-1 Vintage Prototype Aircraft’, a single-engine indigenous flying machine.
• The centre also showcases augmented reality, holograms, virtual reality, and electro-mechanical enclosures, interactive kiosks highlighting various facets of the IAF.
• The centre also has a special segment which has been dedicated to women officers in the IAF for their contribution to the service of the nation.

https://indianexpress.com/article/india/country-first-air-force-heritage-centre-inaugurated-8597721/

Why in news? Recently, Indian Railways, Ministry of Railways and Ministry of Housing and Urban Affairs (MoHUA) has inked a MoU with Japan International Cooperation Agency (JICA) to develop four stations of Maharashtra-Ahmedabad rail corridor (Project SMART).

About:

• The Project-SMART aims to enhance accessibility and convenience of commuters and other stakeholders as well as to promote economic activities in the vicinity of station areas.
• The project would facilitate the institutional capacity of state governments, Municipal Corporations and Urban Development Authorities to plan, develop and manage surrounding areas of Mumbai – Ahmedabad High Speed Railway (MAHSR) stations.
• The MoU has been signed for four high speed rail stations. These are: (a) Sabarmati, (b) Surat, (c) Virar, and (d) Thane.
  • The high-speed rail corridor has a total of 12 stations.
  • Surat, Virar and Thane are green field stations.
  • Gujarat’s Sabarmati station is a Brownfield development.
• The move aims to ‘Transfer of Technology’ of the Japanese HSR track system.
  • This is commonly used in the Japanese Shinkansen High-Speed Rail.

https://www.financialexpress.com/business/railways-strongindian-railways-mohua-ink-mou-with-jica-to-develop-four-stations-of-maharashtra-ahmedabad-rail-corridor-details-here-strong-3079553/

Why in news? India's coal imports increased by 30 per cent to 162.46 million tonnes in the 2022-23 financial year against 124.99 MT in the year-ago period.

About:

• India is among the top five coal-producing countries in the world.
• However, some parts of its coal requirement are met through imports as the country is also among the major consumers of the dry fuel.
• India is heavily dependent on imports when it comes to coking coal, a key raw material used in steel making.

Key points:

• The import of coking coal rose 5.44 per cent to 54.46 MT over 51.65 MT in FY22.
• Along with other varieties of coal like anthracite, pulverised coal injection (PCI coal), met coke and pet coke, the total imports in FY23 were at 249.06 MT, up from 200.71 MT FY22, a rise of over 24 per cent.

https://m.economictimes.com/industry/indl-goods/svs/metals-mining/india-coal-imports-surge-to-162-mt-in-fy23-inbound-coking-coal-shipment-grows-to-54-mt/articleshow/100068704.cms

Why in news? Recently, more than 170 people have died due to heavy rains and flooding in Democratic Republic of Congo.

About:

• The Democratic Republic of Congo (DRC) is a country located in Central Africa.
• Political Boundaries
  • It is the second largest country of Africa after Algeria.
  • It is bounded to the north by the Central African Republic and South Sudan; to the east by Uganda, Rwanda, Burundi, and Tanzania; to the southeast by Zambia; and to the southwest by
• Geographical Features
  • Most of the country is composed of the central Congo basin, a vast rolling plain.
  • North-south Western Rift Valley, the western arm of the East African Rift System, forms the country’s eastern border.
  • Highest Mountain: Mt.Stanley of Ruwenzori Range.
  • Important Rivers: Congo (crosses the equator twice), M’pozo River.
  • Important Lakes: Lakes Albert, Edward, Kivu, Tanganyika, and Mweru.

https://www.theguardian.com/world/2023/may/09/confirmed-dead-flooding-drc-democratic-republic-congo

Why in news? Recently, ozone was identified as a prominent air pollutant in Delhi.  

About:

• Ozone (composed of three atoms of oxygen) occurs both in the Earth's upper atmosphere (stratosphere or good ozone) and at ground level (troposphere).
• Ground-level ozone is a type of pollutant that is produced when two primary pollutants, nitrogen oxides (NOX) and volatile organic compounds, react in sunlight and stagnant air.
• It is referred to as a “secondary” pollutant because it is not directly emitted, but rather formed through chemical reactions between these primary pollutants.
• NOX is released by combustion of fossil fuels from vehicles and industries. Ozone can also be transported long distances by wind.
• Exposure to excessive ozone can cause breathing problems, trigger asthma, reduce lung function, etc.

https://indianexpress.com/article/cities/delhi/why-ozone-prominent-pollutant-over-past-two-days-in-delhi-8595685/