CURRENT AFFAIRS – 19/10/2023

CURRENT AFFAIRS – 19/10/2023

Cabinet clears ₹15,000-crore bonanza for government staff

(General Studies- Paper III, Page 1, the Hindu)

Source : TH

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The Union Cabinet has approved a significant financial boost for government employees and pensioners to coincide with the festive season and upcoming Assembly elections.

• This package includes an increase in dearness allowance (DA) to combat inflation.
• Additionally, non-gazetted railway employees have been granted a Productivity Linked Bonus (PLB).
• This move aims to address the rising cost of living and acknowledge the performance of government employees.

Key Highlights

• The Union Cabinet approved a ₹15,000-crore package for government employees and pensioners.
• This package includes an additional installment of dearness allowance (DA), resulting in a 4% increase in the income of employees and pensioners to offset inflation.
• The extra DA and dearness relief (DR) will be applicable from July 1, 2023, and will bring the total payouts to 46% of the basic pay or pension amounts.
• This move will benefit approximately 48.67 lakh Central government employees and 67.95 lakh pensioners.
• Ad Hoc Bonus for Central Government Employees:
  • In a separate decision, the government had previously announced an ad hoc bonus for some Central government employees for the financial year 2022-23.
  • The exact financial outlay for this bonus was not specified in the report.
• Productivity Linked Bonus for Railway Employees:
  • A Productivity Linked Bonus (PLB) equivalent to 78 days’ wages for the financial year 2022-23 was declared for 11.07 lakh non-gazetted railway employees, amounting to ₹1,968.87 crore.
  • The bonus is not applicable to Railway Protection Force and Railway Protection Special Force personnel.
  • The government commended the excellent performance of the Railways in 2022-23, attributing it to factors such as infrastructure improvement, capital expenditure, operational efficiency, and technology enhancements.

What is dearness allowance (DA)?

• Dearness Allowance (DA) is an additional amount paid to employees by their employer, typically a government or public sector organization, to help them cope with the rising cost of living.
• DA is a component of an employee’s salary or compensation and is usually calculated as a percentage of the basic salary.
• Its primary purpose is to offset the impact of inflation on the purchasing power of employees’ salaries.

What is Productivity Linked Bonus (PLB)?

A Productivity Linked Bonus (PLB) is a type of performance-based incentive or bonus scheme commonly used by governments and organizations to motivate and reward employees, typically those in the public sector, for their productivity and efficiency in the workplace.

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The explosion of digital uncertainty

(General Studies- Paper III)

Source : TH

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Recent advancements in Generative Artificial Intelligence (AI) and the release of a comprehensive AI report by the Government of India have generated considerable interest in the potential opportunities and challenges associated with AI.

• However, a deeper understanding of the implications and risks surrounding digital uncertainty and cognitive warfare is lacking.

Key Highlights

• Unprecedented Digital Uncertainty:
  • There is a rapidly growing, unprecedented level of digital uncertainty that people, governments, and businesses are struggling to comprehend.
  • Society and economies are increasingly reliant on digital infrastructure, which is composed of complex layers of machine intelligence, human-coded software, and hardware components connected through intricate protocols.
  • Most people have a limited understanding of the intricacies of digital infrastructure, which leads to an underestimation of the associated vulnerabilities.
• Cognitive Warfare:
  • Cognitive warfare is a relatively new form of warfare that ranks alongside traditional domains such as maritime, air, and space warfare.
  • It aims to destabilize institutions, particularly governments, and manipulate media by non-state actors using technological tools.
  • This includes altering the cognition of human targets without their awareness.
  • Cognitive warfare can lead to a loss of trust, breaches of confidentiality, governance challenges, and the manipulation of a population’s behavior through psychological techniques.
• AI and Business Vulnerabilities:
  • A growing number of companies, especially in advanced countries, are investing more in intangible assets than physical ones, making them vulnerable to AI-driven risks.
  • Over 50% of the market value of the top 500 companies is based on intangible assets, which exposes them to potential threats.
  • As businesses migrate to the Cloud and utilize sensors to transmit sensitive information, the risks increase exponentially.
• Digital Uncertainty Escalating:
  • Digital uncertainty is rapidly evolving into radical uncertainty, posing significant challenges for governments and businesses.
  • The manipulation of information and the role of AI in transforming information are contributing to a phenomenon referred to as ‘truth decay.’
• The Advent of AGI:
  • As AI advances, there is a growing concern about the impending emergence of Artificial General Intelligence (AGI).
  • AGI represents AI that matches or surpasses human intelligence in various domains, potentially replacing human judgment, intuition, and creativity.
  • The dawn of AGI is seen as a disruptive and dangerous development, with far-reaching implications for nation-states and global communities.
• Social and Economic Impact:
  • The introduction of AGI is predicted to exacerbate social and economic inequalities, leading to potential social anarchy, particularly in technologically advanced cities.
  • AGI’s capacity to flood information channels with fake content and mimic familiar voices raises concerns about a breakdown of trust in information sources.
  • It is expected to have a profound impact on various sectors, leading to job displacement and economic disruptions.
• Geo-Political Consequences:
  • AGI is likely to bring about significant shifts in the global balance of power, similar to the Industrial Revolution’s impact on the 18th century.
  • The concentration of AGI power centers in specific locations could lead to a new form of digital colonialism, characterized by data exploitation.
• Ethical and Regulatory Challenges:
  • The rise of AGI presents ethical and regulatory challenges.
  • Controlling or halting AGI development is a complex task, and unfettered experimentation carries the potential to reshape the world in unpredictable ways.
  • Collaboration between states and the technology sector is suggested as a possible solution, but implementing such cooperation is challenging.
• AI in the Hamas-Israel Conflict:
  • AI was potentially exploited and manipulated in the Hamas-Israel conflict.
  • Israel’s intelligence failure is attributed to over-reliance on AI, which Hamas exploited by distorting information fed into Israeli AI systems.
  • This case underscores the importance of not overly depending on AI and recognizing its limitations.

What is intangible assets?

• Intangible assets are non-physical assets that lack a physical substance but have value to a business or organization.
• These assets are valuable because they can provide future economic benefits, such as generating revenue or reducing costs.
• Intangible assets are considered long-term resources and are typically recorded on a company’s balance sheet.
• Common examples of intangible assets include:
  • Intellectual Property:
    • This category includes patents, trademarks, copyrights, and trade secret
  • Software:
    • The cost of developing or acquiring software for internal use, such as enterprise software or custom applications, is considered an intangible asset.
  • Customer Relationships:
    • Customer lists, contracts, and the relationships a company has with its clients can be considered intangible assets, as they represent future revenue streams.
  • Brand Value:
    • The value associated with a recognizable and trusted brand name is an intangible asset.
  • Franchise Rights:
    • Franchise agreements, which grant the right to operate a business using an established brand and business model, are considered intangible assets.

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India’s Consumer Inflation Eases to 5% in September

(General Studies- Paper III)

Source : TH

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Consumer inflation in India has shown signs of relief, declining to 5% in September.

• This decrease comes after a period of escalating prices that began with a 15-month high inflation rate of 7.44% in July.

Key Highlights

• The 5% inflation rate brings India back into the 2% to 6% tolerance range set by the Reserve Bank of India (RBI).
• The RBI had revised its estimate to an average inflation rate of 6.4% between July and September, which has been matched by the recent figures.
  • However, the RBI’s target remains a 4% inflation rate.
• The RBI anticipates a continued challenge in reaching the 4% target, with expectations of an average inflation rate of 5.6% for this quarter and 5.2% between January and June 2024.
• The International Monetary Fund and World Bank have raised their inflation estimates for India to 5.5% and 5.9%, respectively, which suggests that inflation may remain a concern.
• Factors Affecting Inflation:
  • While food inflation, a major contributor to rising prices in July and August, eased to 6.6% in September, it was largely driven by a sharp drop in vegetable prices.
  • However, inflation accelerated for items like pulses, fruits, eggs, and sugar.
  • Cereals and spices maintained high inflation rates at 11% and 23.1%, respectively.
  • Rural areas experienced higher inflation than urban areas, with challenges stemming from erratic monsoons affecting crop sowing, especially for pulses, and uncertainties regarding the impact of El Niño on the rabi crop.
  • The Wholesale Price Index revealed that pulses prices surged by 17.7% and onions by 55% in September, indicating persistent food price pressures.
  • Wholesale price rise remained just above deflationary territory at -0.26%, but it may not be sustained as global oil and gas prices have increased significantly.
• Uncertainties and Future Trends:
  • Retail fuel prices have been held steady by the government, but producers have been raising prices due to higher global oil and gas prices.
    • This trend could impact retail prices in the near future.
  • Global urea prices, an important import for India, have increased by 20% since March, which will likely affect retail prices soon.
  • Overall, while September’s 5% inflation rate provides some relief, the situation remains uncertain, and there are potential inflationary pressures on the horizon.

About RBI’s inflation targeting levels

• The Reserve Bank of India (RBI) follows a framework of inflation targeting, which is a monetary policy strategy aimed at maintaining price stability within a specified target range.
• The primary objective of this framework is to control inflation and keep it within the target range, while also supporting economic growth and stability.
• Inflation Target:
  • The RBI sets a specific target for the Consumer Price Index (CPI) inflation.
  • The target is a desired level of 4 % inflation that the central bank aims to achieve.
  • In addition to the inflation target, the RBI establishes a tolerance range around the target.
  • The tolerance range around this target is ±2%, meaning that inflation is considered within the target range if it falls between 2% and 6%.
• Policy Response:
  • The RBI uses various monetary policy tools, such as changes in the policy interest rates (like the repo rate or the reverse repo rate), to influence the money supply and, consequently, inflation.
  • When inflation deviates from the target or the tolerance range, the RBI may adjust these policy rates to either stimulate economic activity or cool it down, depending on the inflation trend.

What CPI and WPI?

• Consumer Price Index (CPI)
  • The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
  • It is one of the most widely used indicators for inflation and reflects the cost of living for a typical urban consumer.
  • Market Basket:
    • CPI is based on a fixed basket of goods and services that represents the typical spending patterns of an average urban consumer or household.
    • The items in this basket include food, clothing, housing, transportation, medical care, entertainment, education, and other everyday expenses.
  • Base Year:
    • The CPI is calculated relative to a chosen base year. Currently, the base year is 2011-12.
    • The prices of items in the current year are compared to the prices in the base year.
    • The index is set to 100 in the base year for reference.
  • Calculation:
    • The CPI is calculated using the formula: (Cost of Basket in Current Year / Cost of Basket in Base Year) x 100.
    • This formula yields an index number that represents the change in the cost of the basket over time.
  • The CPI is measured and published by the Central Statistics Office (CSO), which is a part of the Ministry of Statistics and Programme Implementation, Government of India.
• WPI (Wholesale Price Index):
  • The Wholesale Price Index (WPI) is a measure of the changes in the prices of goods at the wholesale level.
  • It is used to track the average price changes of goods sold in bulk before they reach the retail level.
  • The WPI is measured and published by the Office of the Economic Adviser (OEA), which is also part of the Ministry of Commerce and Industry, Government of India.
  • Goods at Wholesale Level:
    • WPI tracks the prices of goods that are typically traded in bulk quantities between manufacturers, wholesalers, and retailers.
    • It includes commodities like raw materials, semi-finished goods, and finished products.
  • Calculation:
    • The WPI is calculated using the weighted average of the price changes for the items in its basket.
    • Each item’s weight is based on its relative importance in the wholesale market.
  • Base Year:
    • Like the CPI, WPI is calculated relative to a chosen base year, with the index set to 100 in the base year.
    • Currently, the base year is 2011-12.
  • Indicator of Inflation at Wholesale Level:
    • The change in the WPI is used to gauge inflation specifically in the wholesale market.
    • An increase in the WPI suggests rising costs for wholesalers, which can impact downstream prices for consumers.

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The BRI at 10, some hits, many misses

(General Studies- Paper II and III)

Source : TH

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The Third Belt and Road Forum for International Cooperation held in Beijing recently has drawn attention to China’s ambitious Belt and Road Initiative (BRI).

Key Highlights

• BRI as China’s Marshall Plan:
  • Some experts liken the BRI to China’s version of the Marshall Plan, with a vision of transitioning China from a regional power with global influence to a global power with comprehensive strength.
  • It is seen as China’s bid to revitalize globalization and address its own economic needs.
  • There is a strategic imperative for China to develop alternative transport and trade routes to safeguard its interests, especially in the face of potential threats to the Strait of Malacca.
• Key Objectives and Significance:
  • The establishment of the Asian Infrastructure Investment Bank (AIIB) with a substantial capital of $100 billion was seen as a means for China to benefit from the BRI.
  • China initially aimed to promote the use of local currency in trade, reducing reliance on the U.S. dollar.
  • The BRI served as a vehicle for Chinese President Xi Jinping to project global influence, with its inclusion in the Communist Party of China’s constitution and the 14th Five-Year Plan.
  • The Chinese government revealed that over 200 BRI cooperation pacts had been signed with more than 150 nations, with total two-way investment reaching $380 billion from 2013 to 2022.
• Global Infrastructure Gap:
  • The World Bank highlights significant global infrastructure deficits, with millions lacking access to electricity, clean water, and broadband.
  • Addressing these deficits would require an annual capital infusion of $1.5 trillion through 2030, a substantial financial challenge.
  • Under China’s Marshall Plan, infrastructure projects including motorways, power plants, ports, railways, and digital infrastructure have been developed.
• Unsavoury Ground Realities:
  • Reports point out various challenges related to ecological damage, displacement of people, disputes over payouts, and labor unrest associated with BRI projects.
  • Case studies from countries like Indonesia, Laos, and Pakistan reveal issues ranging from local employment concerns to revenue distribution imbalances.
  • These challenges have raised questions about the “win-win cooperation” tagline associated with the BRI.
• Global Alternatives:
  • Countermeasures are being explored to counter the BRI. In the U.S., initiatives like the “United States-Japan infrastructure investment alternatives in the Indo-Pacific region” and the ‘Build Back Better World’ (B3W) initiative aim to redirect private capital into infrastructure development.
  • The India-Middle East-Europe Corridor (IMEC) is another alternative, seeking to connect India, West Asia, and Europe through railways, shipping lines, and more.
  • India, in particular, has been vocal about its concerns regarding the China-Pakistan Economic Corridor (CPEC) over issues of sovereignty and unsustainable debt.
• Future of the BRI:
  • As the BRI completes a decade, it faces economic challenges for China amid concerns about debt and unemployment.
  • The future of the BRI will be closely watched to see how it evolves in the face of these challenges.

What is Marshall Plan?

• The Marshall Plan, officially known as the European Recovery Program, was a significant American initiative to aid Western Europe in the aftermath of World War II.
• It was named after George C. Marshall, the United States Secretary of State at the time, who proposed the plan in a speech at Harvard University on June 5, 1947.
• The Marshall Plan was born out of the devastation and economic turmoil that Europe faced after World War II.
• Aid to Europe:
  • The Marshall Plan was a comprehensive aid program that provided financial and material assistance to European nations.
  • It aimed to help Europe recover from the war, rebuild infrastructure, and stabilize its economies.
  • While the primary goal was economic recovery, the Marshall Plan also had political objectives.
  • It aimed to foster political stability in Europe, prevent the spread of communism (especially in the context of the emerging Cold War), and strengthen Western European democracies.
• Impact:
  • The Marshall Plan was highly successful. It played a crucial role in the rapid recovery and reconstruction of Western Europe’s economies.
  • By 1952, Europe’s industrial production had surpassed pre-war levels, and living standards improved.
• Recipients:
  • Sixteen countries in Western Europe participated in the Marshall Plan, including France, the United Kingdom, West Germany, Italy, and others.

About Asian Infrastructure Investment Bank (AIIB)

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that was founded to promote sustainable economic development, infrastructure investment, and regional cooperation in the Asian region.

• The AIIB was officially established on December 25, 2015, with the signing of the Articles of Agreement by 57 founding member countries.
• Members:
  • The AIIB’s membership has grown since its establishment, and it now includes over 100 approved members from around the world.
  • These members include both Asian and non-Asian countries.
  • Notable members include China, India, the United Kingdom, Germany, and many others.
• Headquarters:
  • The AIIB’s headquarters is located in Beijing, China.
• The primary mission of the AIIB is to address the vast infrastructure and development needs in the Asian region.
  • It aims to promote sustainable economic growth, reduce poverty, and enhance regional connectivity by investing in infrastructure and other productive sectors.
• Governance and Voting Rights:
  • It is governed by its Board of Governors, which consists of one governor from each member country.
  • The governors typically represent their respective finance ministries or central banks.
  • Voting rights in the AIIB are determined by the financial contributions (capital subscriptions) of member countries.
  • The more capital a member contributes, the greater its voting power.
  • China, as the largest shareholder, holds the largest voting share.

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Can refer aspects of PMLA verdict to Constitution Bench: Supreme Court

(General Studies- Paper II and III)

Source : TH

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A three-judge Bench, led by Justice Sanjay KishanKaul, has signaled its intention to reevaluate certain aspects of the Prevention of Money Laundering Act (PMLA) following a Supreme Court judgment from July 2022.

• This move comes as a response to a series of petitions challenging the correctness of the July 2022 judgment.

Key Highlights

• Background:
  • The July 2022 judgment, delivered by a different Bench, upheld core amendments to the PMLA.
  • These amendments granted extensive powers to the Enforcement Directorate and shifted the burden of proving innocence from the prosecution to the accused.
  • The judgment was seen as a significant step in combating money laundering.
  • Dissatisfaction with this judgment led to additional writ petitions challenging its impact on personal liberty, legal procedures, and constitutional principles.
• Special Bench Convenes:
  • A Special Bench, led by Justice Kaul, was convened to address the challenges and petitions.
  • Justice Kaul emphasized that the goal was not to engage in a comprehensive review of the previous judgment but to consider if specific issues addressed by the earlier Bench required reconsideration.
  • The Bench would decide whether a referral to a larger Bench was necessary, depending on the issues identified.
• Government’s Position:
  • Solicitor General Tushar Mehta argued that every provision of the PMLA had been extensively debated before the previous Bench.
  • He expressed concern that petitioners were trying to challenge a Coordinate Bench’s judgment through writ petitions while review petitions were still pending.
  • He questioned the legitimacy of citizens sitting in judgment of a Coordinate Bench’s decision.
• Judicial Response:
  • Justice Kaul clarified that cases usually begin with Coordinate Benches, which decide whether to refer them to larger Benches.
  • He noted that the Bench was not constrained by law in considering issues for referral.
  • The court acknowledged the unique position of petitions filed under Article 32 of the Constitution, which challenge a judgment, and indicated it would further consider this point.

About the Prevention of Money Laundering Act (PMLA) 2002

• The PMLA was enacted in response to India’s commitment to combat money laundering, which is often associated with criminal activities such as terrorism, drug trafficking, and corruption.
• It aims to track and prevent the process of converting illicitly obtained funds into legitimate assets.
• The Act, along with the Rules established under it, came into force on July 1, 2005, and it forms the foundation of the legal framework to prevent and address money laundering in the country.
• Objectives:
  • Prevent and control money laundering in India.
  • Confiscate and seize property derived from or involved in money laundering.
  • Provide punishment for the offense of money laundering.
  • Appoint the Adjudicating Authority and Appellate Tribunal to handle matters related to money laundering.
  • Impose obligations on banking companies, financial institutions, and intermediaries to maintain records related to financial transactions.
  • Address any other issues connected with money laundering in India, ensuring comprehensive coverage of related concerns.
• Empowered Authorities:
  • The Act designates specific authorities to enforce its provisions effectively.
  • The Director of the Financial Intelligence Unit-India (FIU-IND) and the Director (Enforcement) are entrusted with exclusive and concurrent powers under relevant sections of the PMLA to implement the provisions of the Act.
• Definition of Money Laundering:
  • The PMLA defines money laundering as any process that conceals or disguises the proceeds of crime or ownership of such property, aids the person involved in the process, or knowingly assists in securing the benefit of such proceeds.
  • It covers a wide range of financial transactions and activities intended to legitimize illicit funds.
• Attachment and Confiscation:
  • The Act allows the ED to attach or confiscate property and assets that are the proceeds of money laundering or are involved in money laundering activities.
• List of Offences under PMLA:
  • Part A Offences:
    • Encompass offenses under various acts including the Indian Penal Code, Narcotics Drugs and Psychotropic Substances Act, Prevention of Corruption Act, Antiquities and Art Treasures Act, Copyright Act, Trademark Act, Wildlife Protection Act, and Information Technology Act.
  • Part B Offences:
    • Include offenses that are categorized as Part A offenses but involve a value of Rs 1 crore or more.
  • Part C Offences:
    • Address trans-border crimes, emphasizing the commitment to combat money laundering across international borders.
  • Common Forms of Money Laundering:
    • Hawala
    • Bulk Cash Smuggling
    • Fictional Loans
    • Cash-Intensive Businesses
    • Round-Tripping
    • Trade-Based Laundering
    • Shell Companies and Trusts
    • Real Estate
    • Gambling
    • Fake Invoicing

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