UPSC Key—31st October, 2023: Tata Nano Singur controversy, Household debt in India and Two-State Solution

SC rejects Sisodia bail: Evidence on Rs 338 cr excess profit to distributors

Syllabus:

Preliminary Examination: Indian Polity and Governance-Constitution, Political System, Panchayati Raj, Public Policy, Rights Issues, etc.

Mains Examination: 

• General Studies II: Statutory, regulatory and various quasi-judicial bodies.

• General Studies III: Money-laundering and its prevention

Key Points to Ponder:

• What’s the ongoing story- DISMISSING FORMER Delhi Deputy Chief Minister Manish Sisodia’s bail plea, the Supreme Court on Monday said there is “material and evidence” which “tentatively” supports one of the charges under the Prevention of Money Laundering Act (PMLA) — that 14 wholesale liquor distributors earned “excess profit” of Rs 338 crore in about 10 months when the now-scrapped excise policy was in operation.

• Why has the Supreme Court dismissed the bail plea of former Delhi Deputy Chief Minister Manish Sisodia?

• Do You Know-It is on the basis of the increased profits earned by wholesalers because of the now-scrapped Delhi Excise Policy that the Supreme Court denied bail to Delhi’s former Deputy Chief Minister Manish Sisodia.
In denying bail to Sisodia, the apex court Monday said that the one “clear ground” in the Prevention of Money Laundering Act that was “tentatively supported by material and evidence” was the Rs. 338 crore “excess profit” earned by the wholesalers due to changes made in the policy.
Among the big changes in the policy were the exit of the government from the retail side of the business, the increase in the commission to wholesalers and redistribution of liquor shops to ensure better coverage.
Another modification – allegedly made part of the policy at the behest of outsiders who sought to reap benefits from it – was in regards to the creation of the post of Director, Wholesale Operation which the Cabinet note in regards to the policy was modified to include as per Whatsapp chats retrieved from the phone of one of the accused in the case.
According to allegations made by ED, wholesale distributors earned Rs 581 crore fixed fee because the commission (distribution fee) was increased from 5% in the previous policy to 12% in the newly-scrapped policy that is under investigation. This, according to the CBI and Enforcement Directorate’s submissions, Sisodia was “unable to provide any rational explanation for”. One of the other contentions made by the agencies was the reduction of VAT to a “mere 1%”.

• What Enforcement Directorate (ED) said?

• Who is Manish Sisodia?

• The new liquor policy was very much in news-why?

• For Your Information-Proposed in 2020, it came into effect in November 2021. Delhi was divided into 32 zones with each zone having 27 liquor vends. It marked the exit of the government from selling liquor — only private liquor shops would run in the city, and each municipal ward would have 2-3 vends. It aimed to end the liquor mafia and black marketing, increase revenue and improve the consumer experience, and ensure equitable distribution of liquor vends. The government also made the rules flexible for licensees, such as allowing them to offer discounts and set their own prices instead of selling on MRP fixed by the government. Following this, discounts were offered by vendors, which attracted crowds. After protests by the opposition, the excise department withdrew the discounts for some time.

• What provision in the new liquor policy was the point of contention?

• What differences exist between the old liquor policy and the new liquor policy?

• What exactly ED said on Delhi excise policy?

• In recent years, many political cases are handled by the Enforcement Directorate (ED)-Discuss role and function of the Enforcement Directorate

• Enforcement Directorate is a statutory body-True or False?

• Directorate of Enforcement (ED) comes under which Ministry or Organisation?

• The significant increase in ED cases is mainly attributed to the Prevention of Money Laundering Act (PMLA)-Discuss

• For your Information-Formed in 1956, the ED became a prime agency following enactment of the Prevention of Money Laundering Act (PMLA) in 2002, implemented from July 1, 2005.

• What was the recent verdict of the Supreme Court (SC), in the Enforcement Directorate’s (ED) sweeping powers under the PMLA?

• Over the past few years, major amendments in key Acts have given teeth to central agencies-Discuss

• ‘With this investigation, It is quite clear that the central agencies are now the big brothers of investigations, while state and city police forces function in their shadows with limited powers and jurisdictions’-How far you agree with the same?

• Central investigation agencies and politics-connect the dots

Other Important Articles Covering the same topic:

📍Manish Sisodia arrested: What is Delhi’s alleged liquor scam?

📍SC ground for dismissing Sisodia’s plea: ‘Excess profit’ earned by wholesalers

GOVT & POLITICS

‘Might is right’ has no place in free, open maritime order, says Rajnath

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Important International institutions, agencies and fora- their structure, mandate.

Key Points to Ponder:

• What’s the ongoing story-Stressing the need for establishing multi-national collaborative frameworks to effectively tackle common maritime challenges in the Indian Ocean Region, Defence Minister Rajnath Singh Monday said ‘might is right’ has no place in a ‘free, open and rule-based’ maritime order.

• ‘Might is right’ has no place in a ‘free, open and rule-based’ maritime order-Analyse

• “United Nations Convention on the Law of the Sea (UNCLOS) 1982, must be our lodestar”- What are the objectives of UNCLOS 1982?

• What is the purpose of the United Nations Convention on the Law of the Sea?

• United Nations Convention on the Law of the Sea-Know in detail

• Do You Know-A number of regional, multilateral and global legal frameworks exist to govern the activities in the oceans, the most important of which is the United Nations Convention on the Laws of the Sea (UNCLOS), a 1982 agreement that has near-universal acceptance. Among other things, UNCLOS defined the rights and duties of countries in the oceans, the extent of ocean areas over which countries could claim sovereignty, and the legal status of marine resources. It also specified a set of general rules for a range of activities in the oceans including navigation, scientific research, and deep-sea mining.

• What is exclusive economic zones (EEZ)?

• The high seas are the areas within the EEZ of any country-True or False?

• The High Seas Treaty has four main objectives-What are they?

• Some significant problems are not sufficiently addressed by the treaty-What are they?

• Is India a member of UNCLOS?

• Is UNCLOS legally binding?

Other Important Articles Covering the same topic:  

📍GOA MARITIME CONCLAVE (GMC) – 2023 CONCLUDES

EXPRESS NETWORK

Tribunal awards Tata`766 crore in compensation for Singur losses

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Key Points to Ponder:

• What’s the ongoing story-An arbitration tribunal has awarded Tata Motors Ltd Rs 766 crore in compensation — recoverable from the West Bengal government — for its capital investment losses in the stalled Singur manufacturing plant, the company said on Monday.

In an exchange filing, Tata Motors said the three-member tribunal on October 30 ruled unanimously that it is entitled to recover from West Bengal Industrial Development Corporation Ltd (WBIDC) “a sum of Rs 765.78 crore with interest thereon at 11 per cent per annum from September 1, 2016, till actual recovery thereof”.
The Mumbai-based automobile manufacturer has also been allowed to recover Rs 1 crore for the cost of the proceedings from WBIDC.

• What is the Tata Nano Singur controversy?

• For Your Information-In 2006, the Left Front government in West Bengal had announced that Tata Motors would set up a car manufacturing unit to roll out its cheapest car, the Rs 1-lakh Nano. The Buddhadeb Bhattacharya-led government allotted about 1,000 acres of farmland to the company in Singur.
By October 2008, however, the company had scrapped its plans and shifted the plant to Sanand in Gujarat after facing stiff protests from opposition political parties — particularly the Trinamool Congress (TMC) which is now in power — and farmers in the area over land acquisition. By this time, Tata Motors had already put in more than Rs 1,000 crore in Singur.

• Why Tata Nano failed in Singur?

• What were the major reasons for Tata’s decision to start Nano factory at Singur and why was it relocated?

• What arbitration tribunal said in the recent verdict?

• What Supreme Court said in the Tata-Singur controversy?

Other Important Articles Covering the same topic:  

📍Supreme Court verdict on Singur Tata Nano plant: Everything you need to know

THE IDEAS PAGE

To clear the air

Syllabus:

Preliminary Examination: General issues on Environmental ecology, Bio-diversity and Climate Change

Main Examination: General Studies III: Conservation, environmental pollution and degradation, environmental impact assessment.

Key Points to Ponder:

• What’s the ongoing story- A recent report of the Air Quality Life Index (AQLI), published by Michael Greenstone from the Energy Policy Institute of the University of Chicago (EPIC), estimated that Indians were losing 5.3 years of life expectancy on average due to the health effects of air pollution.

• Report of the Air Quality Life Index (AQLI), published by Michael Greenstone-Know the key takeaways

• “The estimate for Delhi was worse, with life lost estimated to be 11.9 years”-Discuss

• Do You Know-Delhi features at the top or near the top of the world’s most polluted cities, with Wuhan and Lahore sometimes relieving us of the dubious distinction of wearing the carbon crown. However, Delhi is not alone among the Indian cities. In a 2022 list of the 50 most polluted cities put out by IQAir, a Swiss air quality information platform, 39 of them are Indian. Rural areas too are not free of pollution, as dust from unpaved roads and smoke from burnt biomass fuels meet fossil fuel emissions of vehicular intrusions from encroaching modernity.
Pollutants that are monitored for air quality include particulate matter less than 10 and 2.5 microns per cubic metre (PM 10 and PM 2.5 respectively), nitrogen dioxide, sulphur dioxide, carbon monoxide, ozone, ammonia and lead. Besides these, benzene and formaldehyde from wildfire emissions can lead to cancer. Cadmium too is an air pollutant, especially from cigarette smoke. “Fine particulate pollution” refers to particles less than 2.5 microns being suspended in the air.

• Why there is growing concern about “ultra-fine particles” that are smaller than 0.1 microns in diameter?

• National air quality standards in India are less rigorous than the WHO’s standards-Why?

• What are the other reasons for Air pollution in Delhi?

• Why Delhi pollution is always in News?

• For Your Information- India’s AQI has six categories: Good, satisfactory, moderately polluted, poor, very poor and severe. An AQI of 0-50 is rated as “good”, while “severe” represents an AQI of 401-500. Delhi is presently rated as “poor” (201-300), with predictions of further worsening when crop burning commences.
Even when Delhi reports a level of 126, it far exceeds national and WHO standards. It must be recognised that health harms from air pollution occur at even lower levels than the national standard, with a continuum of rising risk as pollutant levels increase. Prolonged exposure to air pollution even at AQI levels declared as “satisfactory” will have adverse health effects. We must aim to bring them as close to the WHO standards as possible. Presently, 22 states meet the national standards of AQI, while 15 do not. None meet the pristine WHO standards.
Geographically, the landlocked Indo-Gangetic plain has the highest levels of pollution as it lacks the dispersal that sea breeze brings to coastal areas. The problem is exacerbated during the harsh winter that much of this region experiences, as cold air does not flow easily to disperse pollutants. When agricultural crop residue is burnt during this period or when garbage is burnt by the urban poor to keep warm, a winter of discomfort ensues with very high AQI levels.
Sources of both ambient (outdoor) and household (indoor) air pollution are well recognised. Particulate matter comes from line sources (vehicles), point sources (power plants, factories), area sources (garbage dump sites, sewage treatment plants) and natural sources (forest fires, volcanic eruptions). Diesel fuel emissions, and road and construction dust are important contributors year-round, with stubble burning as a seasonal culprit. Household air pollution comes from the use of biomass fuels and open fire-cooking stoves. The sources of emissions vary across different regions of India and between urban and rural areas. Emission source apportionment and population exposure assessments are important for context-relevant control strategies.

• What are the health harms of exposure to different pollutants?

• Know the Geographical location of Delhi

• Being landlocked makes Delhi’s air pollution worse-How far you agree with this?

• Know the Supreme Courts Judgments on Delhi Air Pollutions

• Know the National Green Tribunal and Various Decisions given by NGT like modification in National Clean Air Programme

• Air Quality Management in NCR Region-Role and Steps Taken so Far

• What is Graded Response Action Plan (GRAP)?

• What are the Steps taken By Central and Delhi Government to Curb Pollution like Car Rationing (Odd-Even Policy)

• Know the best International Practices to Curb Air Pollution in Urban Areas

Other Important Articles Covering the same topic:  

📍Explained: Why does air pollution rise in October every year?

The household debt challenge

Syllabus:

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies II: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key Points to Ponder:

• What’s the ongoing story- Nikhil Gupta Writes: According to the RBI, household debt surged to 5.8 per cent of the GDP in FY23, marking the second-highest annual increase since Independence (the highest growth was at 6.7 per cent of GDP in FY07). Despite intense debate over the drivers of this surge, there is no discussion about the sustainability of such a rise in household debt. Of course, the massive growth in just one year is unlikely to lead to serious problems. The questions, therefore, are “how long can it sustain?” and “what is the threshold of household debt in India?”

• What is the meaning of household debt?

• What are the examples of household debt?

• What is household debt in India?

• Is household debt part of GDP?

• What is the most widely used approaches to assess the sustainability of debt?

• What is debt service ratio (DSR)?

• A lower debt service ratio (DSR) indicates what?

• “India’s household DSR has been consistently increasing over the past two decades and is higher than that of most advanced economies”-What does this indicates?

• For Your Information-A debt service ratio (DSR) measures the proportion of the income used to repay the debt-related obligations. It is calculated as the ratio of interest payments and amortisations to income. A lower DSR indicates better sustainability and a more manageable level of household debt. The Bank of International Settlements (BIS) publishes quarterly data on household DSR for 17 advanced economies, but not on any developing country.
DSR — debt-to-income ratio, residual maturity/tenure, and effective interest rate. The banking system accounts for more than four-fifths of household debt in India, while housing finance companies (HFCs) and other non-banking finance companies (NBFCs) account for approximately 10 per cent each. India’s household DSR can be estimated by using the RBI data on interest rates of banks’ loan portfolios and maturity profiles (and some assumptions for NBFCs/HFCs).
India’s household debt-to-income ratio jumped to 48.1 per cent (assuming 15 per cent income growth) in FY23 from 42.2 per cent in FY19. With an effective interest rate of 10 per cent and a residual maturity of 5.3 years in FY23, the estimates suggest that the DSR of Indian households was approximately 12 per cent in FY23.
India’s household DSR has been consistently increasing over the past two decades and is higher than that of most advanced economies. The DSR of Indian households was about 12 per cent over the past three years as compared to 11.4-11.5 per cent in FY19/ FY20 and about 10 per cent a decade ago.
It is clear that a combination of higher interest rates and shorter debt tenure makes the DSR for Indian households notably higher, even if their debt-to-income ratio is less than 50 per cent. However, there is a positive aspect for India as household borrowing terms have improved over the past decade, with longer maturity periods (from 4.6-4.7 years a decade ago) and falling interest rates (from 12 per cent in FY13 and FY14).
Moreover, Indian household DSR is similar to that of the heavily indebted Nordic countries (where household debt-to-income ratio is three-four times that of India’s) and more than that in China (8.5 per cent), France (6.4 per cent), the UK (8.6 per cent), and the US (7.7 per cent) — all of which have household leverage of more than 100 per cent. The long-term median of household DSR in the 17 advanced economies for which the BIS provides data was 9.2 per cent, and the median DSR for 12 individual nations (out of 17) was less than 12 per cent. In fact, the maximum DSR witnessed in nine of these rich countries has never crossed 12 per cent in any quarter since 1999 (it was 11.6 per cent in the US in 2007).

Other Important Articles Covering the same topic:  

📍Debt-Service Coverage Ratio (DSCR): How to Use and Calculate It

📍India’s debt ratio projected to be 84 per cent of its GDP: IMF

EXPLAINED

Issues in electoral bonds case

Syllabus:

Preliminary Examination: Indian Polity and Governance

Main Examination: General Studies II: Important aspects of governance, transparency and accountability

Key Points to Ponder:

• What’s the ongoing story- A five-judge bench of the Supreme Court led by Chief Justice of India DY Chandrachud is expected to hear a batch of petitions challenging the constitutional validity of the Centre’s electoral bonds scheme on Tuesday.

Notified on January 2, 2018, the scheme introduced instruments through which anyone in the country could donate money to political parties anonymously. This is not the first time the scheme has ended up before the top court since its inception in 2017.

• What are electoral bonds?

• Why were electoral bonds introduced?

• What has the court ruled previously?

• What remains to be decided now?

• Do You Know- On October 16, while presiding over a three-judge bench, CJI Chandrachud referred the case to a five-judge bench comprising him and Justices Sanjeev Khanna, BR Gavai, JB Pardiwala, and Manoj Misra.
Although the petitioners had nudged the court to refer it to a Constitution Bench even earlier, the SC hadn’t shown its inclination to do the same. In fact, on October 10, the CJI-led bench listed the case for final hearing on October 31, without referring it to a larger bench.
In the present case, the top court will be dealing with four petitions, filed by ADR, CPI(M), Congress leader Jaya Thakur, and a PIL by one Spandan Biswal.
Besides challenging the constitutionality of the electoral bonds scheme, the petitioners have asked the court to declare all political parties as public offices to bring them under the ambit of the Right to Information Act and compel political parties to disclose their income and expenditure.

• What has the ECI’s stance been?

• What has the Centre’s stance been?

• Do You Know-Starting with Jaitley’s Budget speech, the government has maintained in its communications with the RBI and ECI, as well as in media statements, that the scheme was introduced to clean up the political funding of elections. It said the scheme would lead to greater transparency, as the transactions would be carried out by individuals and companies that complete the SBI’s KYC formalities, and the parties would have to open a special account with SBI to receive the EBs. The government also maintained that giving donors anonymity was of prime importance. In a letter to then RBI Governor Urjit Patel, then Economic Affairs Secretary Subhash Chandra Garg wrote on October 5, 2017 that the scheme was “an earnest effort to make political funding more accountable and clean”.
Responding to the RBI’s suggestion that the bonds should be issued in demat form and not as bearer bonds (see below) Garg wrote: “It is the considered view of the Government that EBs (electoral bonds) in demat form will take away the key feature of the scheme to provide anonymity of the donors vis-à-vis political parties. The fact that information of this aspect will be with the Bank, would make the scheme a non-starter.” The bonds were eventually implemented as bearer bonds, as the government wanted. The RBI agreed that the scheme had the potential to clean up political funding, but expressed concern with some aspects during consultations with the Finance Ministry. Governor Patel wrote to Jaitley on September 14, 2017: “We are concerned that the issue of EBs as bearer instruments in the matter currently contemplated has the possibility of misuse, more particularly through use of shell companies.” He went on to suggest that the EBs should be sold in digital form (demat), rather than in physical form.
In the face of the RBI’s objections, the government amended the RBI Act to allow other authorities to issue bearer instruments. In a letter to Jaitley on September 27, 2017, Patel pointed out that the issue of currency was a monopoly function of the central authority, and the amendment that diluted the RBI’s power was a “matter of concern”. “Now that the RBI Act has been amended, the government should in the least not authorise any other institution to issue EBs,” he wrote.
However, when the scheme was notified in January 2018, it was SBI that was authorised to issue EBs, not the RBI. In 2017, when the scheme was being finalised, Garg briefed then Chief Election Commissioner A K Joti and then Election Commissioners O P Rawat and Sunil Arora. In a “record note” on the meeting held on September 22, 2017, Garg said Rawat “expressed doubts that the electoral bonds can be misused by shell companies”, to which he replied that the KYC compliance would require giving the source of funds. Rawat has since then publicly called the scheme “opaque”.
According to the record, CEC Joti raised three issues — (i) that the electoral bonds would not be available to individual candidates and new political parties; (ii) that there was an inconsistency between the Income Tax Act and the Representation of the People Act, with cash donations under the former law limited to Rs 2,000 while the latter allows up to Rs 20,000; and (iii) that political parties should be required to give the ECI denomination-wise details of the EBs received by them.
The scheme was eventually opened to any political party registered with the ECI that had received 1% of votes in the previous election. In RTI replies provided so far, SBI has said 25 parties have opened accounts to cash EBs. Parties submit the sum of donations received from all sources, including EBs, to the ECI every year.

Other Important Articles Covering the same topic:  

📍Opaque, undemocratic, corrupt: Oppn argument

📍‘Citizens right to know subject to reasonable restrictions’: Centre to Supreme Court on electoral bonds

PRISONER’S DILEMMA

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Key Points to Ponder:

• What’s the ongoing story- Giving his keynote address at the Goa Maritime Conclave, Defence Minister Rajnath Singh referred to the concept of “Prisoner’s Dilemma” to underscore the need for countries to collaborate with each other instead of working at cross purposes.

“The concept of the Prisoner’s Dilemma, when applied in the domain of international relations, can explain and analyse various situations where countries face strategic decision-making challenges. For example, when two or more countries engage in an arms race, they often do so out of mutual fear and mistrust,” said Singh.
“The challenge is to find solutions that promote cooperation, build trust, and mitigate the risks associated with the Prisoner’s Dilemma situations in international relations,” he added.

• What is Prisoner’s Dilemma?

• Why is it called prisoner’s dilemma?

• Where is prisoner’s dilemma used?

• What should the prisoners do, then?

• For Your Information-Prisoner’s Dilemma refers to one of the most popular “games” in Game Theory, which is itself a branch of science that helps understand how people/entities behave under different circumstances. By simulating a game, Game Theory also shows how to achieve the best outcome.
For instance, it may appear straight-forward that a person or a country must always do what appears to provide them with the best pay-off. However, real life is complex and filled with uncertainty. Moreover, the final outcome depends on the actions of other people/countries as well. To be sure, the final outcome could change if the other party/parties act in conflict.
For instance, as the Defence Minister alluded to, if in a bid to secure one’s borders, a country starts hoarding more and more arms then it may — far from achieving that goal— start an arms race with the other country. Prisoner’s Dilemma is a game that brings out this paradox clearly.
Suppose two people — A and B — are brought in for questioning about a crime. However, the evidence with the police is circumstantial and the best that they can hope to achieve is to put both A and B in jail for a year each. Unless, of course, they get more credible evidence. One way to do this is to get the prisoners to rat out each other.
So the police officer puts both A and B in separate rooms and provides both of them with a simple choice: If one prisoner says the other is involved in the crime, he can go scot-free while the other will be given a 15-year jail term.
Simply put, the prisoner’s dilemma is whether to confess or stay silent.

Other Important Articles Covering the same topic:  

📍What Is the Prisoner’s Dilemma and How Does It Work?

10 years of China’s BRI: taking stock of Xi’s transnational infra project

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Key Points to Ponder:

• What’s the ongoing story-This year marks a decade since China’s ambitious infrastructure funding project, the Belt and Road Initiative (BRI), was first outlined by President Xi Jinping. Spanning from Africa to Asia and seeing investments worth billions of dollars, it has also come under criticism over the years about how sustainable these debts may be.

Gulshan Sachdeva, who is a Professor at the Centre for European Studies and Coordinator of the Jean Monnet Centre of Excellence, at Jawaharlal Nehru University, explains some key aspects of the project and where it stands now.

• What was the idea behind the BRI, and how did its goals evolve over the years?

• Some countries in Africa have praised the project, whereas the likes of India and the United States have accused China of engaging in ‘debt trap diplomacy’ – aiming to own countries’ assets if they are unable to repay the loans. Today, what is its status?

• At the latest BRI forum held in Beijing earlier this month, a reduced number of heads of state was noticed compared to previous meetings. Has there been a cooling off regarding some of the initial enthusiasm?

• What has progress been like on the China-Pakistan Economic Corridor (CPEC) front?

• How does India view the BRI?

• Many in the West have flagged the slowdown in the Chinese economy in recent years. Could this impact BRI projects?

• How India-Middle East-Europe Economic Corridor (IMEC) is different from China’s Belt and Road initiative (BRI)?

• India-Middle East-Europe Economic Corridor (IMEC) and China’s Belt and Road initiative-Compare and contrast

Other Important Articles Covering the same topic:  

📍An Expert Explains | China-Pakistan Economic Corridor: The bumpy road travelled so far

THE WORLD

Mideast must consider a two-state solution after the war: Biden

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Effect of policies and politics of developed and developing countries on India’s interests

Key Points to Ponder:

• What’s the ongoing story-As the 3-week-old Israel-Hamas war enters what Israeli Prime Minister Benjamin Netanyahu says could be a “long and difficult” new stage, President Joe Biden is calling on Israeli and Arab leaders to think hard about their eventual post-war reality.

It’s one, he argues, where finally finding agreement on a long-sought two-state solution to the Israel-Palestinian conflict should be a priority.

• What is a Two-State Solution?

• The two-state solution has been a subject of significant problem and controversy-Know in detail

• What is India’s stand on two-state solution?

• What are alternatives to a two-state solution?

Other Important Articles Covering the same topic:  

📍Explained: How has India’s policy on Israel and Palestine evolved over time?

ECONOMY

West Asia conflict could trigger ‘dual shock’ in commodity markets: World Bank

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Effect of policies and politics of developed and developing countries on India’s interests

Key Points to Ponder:

• What’s the ongoing story-The conflict in West Asia, which comes on top of disruptions caused by the Russian invasion of Ukraine, has resulted in limited impact on commodity prices but could bring “dual shock” to commodity markets as energy market turmoil could intensify food insecurity, the World Bank said in its latest Commodity Markets Outlook.

• Commodity Markets Outlook-What are the key takeaways from the recent report?

• If the Conflict Worsens in West Asia, then what will happen?

• What exactly “dual shock” signifies here?

• For Your Information-The World Bank underlined that if the conflict escalates, policymakers in developing countries will need to take steps to manage a potential increase in headline inflation.
“Given the risk of greater food insecurity, governments should avoid trade restrictions such as export bans on food and fertilisers. Such measures often intensify price volatility and heighten food insecurity. They should also refrain from introducing price controls and price subsidies in response to higher food and oil prices. A better option is to improve social safety nets, diversify food sources, and increase efficiency in food production and trade. In the longer term, all countries can bolster their energy security by accelerating the transition to renewable energy sources—which will mitigate the effects of oil-price shocks,” the report said.
Noting the export ban on non-basmati rice by India, the World Bank said rice prices will remain high in 2024 assuming India maintains export curbs. It also said that even though the demand for fertilisers is recovering, a cut in India’s subsidy for the second half of the season (beginning October) could further impact demand.
Oil prices are expected to average $90 a barrel this quarter before falling to $81 a barrel next year as global economic growth slows, the World Bank said. “Overall commodity prices are projected to fall 4.1% next year. Prices of agricultural commodities are expected to decline next year as supplies rise. Prices of base metals are also projected to drop 5% in 2024. Commodity prices are expected to stabilise in 2025,” the report said. However, the outlook for commodity prices would darken quickly if the conflict were to escalate. Outlining three risk scenarios based on historical experience since the 1970s, the World Bank said in a “small disruption” scenario, the global oil supply would be reduced by 500,000 to 2 million barrels per day—roughly equivalent to the reduction seen during the Libyan civil war in 2011 and the oil price would initially increase to a range of $93-$102 a barrel.
In a “medium disruption” scenario—roughly equivalent to the Iraq war in 2003—the global oil supply would be curtailed by 3 million to 5 million barrels per day, which could drive oil prices to $109-$121 a barrel. In a “large disruption” scenario—comparable to the Arab oil embargo in 1973— the global oil supply would shrink by 6 million to 8 million barrels per day, which could drive prices to $140-$157 a barrel.

Other Important Articles Covering the same topic:  

📍Conflict in Middle East Could Bring ‘Dual Shock’ to Global Commodity Markets

For any queries and feedback, contact priya.shukla@indianexpress.com
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