Daily Prelims Newsletter for upsc 09 Apr 2022

Daily Prelims Newsletter For UPSC
| RaghukulCS

09 Apr 2022-Saturday

Table Of Contents

Table of Contents

The Supreme Court upheld FCRA Amendments.

Why in the news?

The Supreme Court (SC) recently upheld the constitutionality of the Foreign Contribution (Regulation) Amendment Act (FCRA) of 2020.

It ruled that receiving foreign donations is not an absolute right that can be regulated by Parliament.

The Indian government proposed amendments to the Foreign Contribution Regulations Act (FCRA) in 2020, imposing new restrictions on how Non-Governmental Organizations (NGOs), individuals, and other organisations could receive or use funds contributed from abroad.

What are the main points of the judgments?

Intoxicant vs. Medicine Foreign Contributions can be used as a medicine if consumed (used) in moderation and discreetly.

However, the free and uncontrolled flow of foreign contributions can act as an intoxicant, threatening the nation’s sovereignty and integrity.

Imposing Political Ideology: The Supreme Court emphasised that foreign contributions have the potential to influence or impose political ideology.

Thus, FCRA amendments are primarily conceived in the interest of public order, with the goal of preventing the misuse of donations from foreign sources.

Global precedents show that accepting foreign donations is not an absolute or even vested right.

This is because the theory of the possibility of a national polity being influenced by foreign contribution is widely accepted around the world.

Maintaining Legislation:

In this scenario, Parliament had to step in and provide a stringent regime for effectively regulating the inflow and utilisation of foreign contributions.

What is the Foreign Contribution (Regulation) Act of 2010 (FCRA)?

Foreign funding of individuals in India is governed by the Foreign Contribution Regulation Act, which is enforced by the Ministry of Home Affairs.

Individuals may accept foreign contributions without the permission of the MHA.

The monetary limit for accepting such foreign contributions, however, shall be less than Rs. 25,000.

The Act ensures that recipients of foreign contributions follow the stated purpose for which they were received.

Organizations are required to register themselves every five years under the Act.

What changes were made to the Act?

Acceptance of foreign contributions is prohibited: It prohibits public servants from accepting foreign contributions.

It prohibits the transfer of foreign contributions to any other person.

Aadhaar for registration: An Aadhaar number is required as an identification document for all office bearers, directors, or key functionaries of a person receiving foreign contribution.

FCRA account: The foreign contribution must be received only in an account designated by the bank as an FCRA account in such State Bank of India, New Delhi branches.

Other than the foreign contribution, no funds should be received or deposited in this account.

Restriction on the use of unutilized foreign contributions: It allowed the government to limit the use of unutilized foreign contributions.

This may be done if the government believes, based on an investigation, that such person has violated FCRA provisions.

Administrative Cap: Previously, NGOs could use up to 50% of their funds for administrative purposes; the new amendment limits this use to 20%.

What are the Amendments’ Objectives and Issues?

Objectives: Many foreign contribution recipients have not used their funds for the purposes for which they were registered or granted prior permission under the FCRA 2010.

The Union Home Ministry recently suspended the licences of six (NGOs) accused of using foreign contributions for religious conversion.

A situation like this could have harmed the country’s internal security.

It also aims to improve transparency and accountability in the receipt and use of foreign contributions, as well as to assist genuine non-governmental organisations (NGOs) working for the betterment of society.


The Amendments drew criticism from some quarters, who claimed that they would harm civil society organisations.

The government intends to exert control over non-governmental organisations (NGOs) that engage in questionable activities.

Failure to recognise the diversity of NGOs, which includes world-class organisations recognised globally, will crush their competitiveness and creativity.

Way Forward

NGOs aid in the implementation of government schemes at the grassroots level. They fill the voids left by the government’s failure to do its job.

The government must adhere to the ancient Indian ethos of Vasudhaiva Kutumbakam as the framework for its global engagement and refrain from retaliating against NGOs that criticise its work.

RBI Monetary Policy Review

Why in the news?

The Reserve Bank of India (RBI) recently decided to keep the main policy rate – Repo rate – unchanged at 4% for the eleventh time in a row in its latest Monetary Policy review.

It has also maintained its accommodative stance, but has indicated that it will withdraw surplus liquidity gradually and calibratedly in order to contain inflation.

What Importance Does This Monetary Policy Review Have?

Recognizing the Impact of the Russia-Ukraine War: Following the rise in crude oil and commodity prices, as well as the impact of Russia’s invasion of Ukraine, the RBI has reduced its growth forecast for fiscal 2022-23 to 7.2 percent from 7.8 percent previously projected.

The Russia-Ukraine conflict has the potential to stymie economic recovery through rising commodity prices and global spillover channels.

Standing Deposit Facility: The RBI also introduced a new measure, the Standing Deposit Facility — an additional tool for absorbing liquidity — to extract Rs 8.5 lakh crore of excess liquidity from the financial system, which is fueling inflation.

Signaling a Policy Shift: The Monetary Policy Review indicates that the RBI has finally shifted its priorities to combat inflation.

As a result, there is a chance that its key policy rate (Repo Rate) will be raised in the coming months.

Furthermore, the RBI has raised its inflation forecast for 2022-23 from 4.5 percent to 5.7 percent, which is still below the upper band of the RBI’s target of 6 percent.

Using Pre-pandemic Levels: The RBI policy panel took a concrete step by restoring the policy rate corridor under the Liquidity Adjustment Facility (LAF) to its pre-pandemic width of 50 basis points.

This is intended to reduce inflationary pressures.

LAF is a monetary policy tool that allows banks to borrow money from the RBI via repurchase agreements (Repo) or lend funds to the RBI via reverse repo agreements.

What Is a Standing Deposit Facility and What Is Its Role?

The RBI has introduced the Standing Deposit Facility (SDF), an additional tool for absorbing liquidity, at a 3.75 percent interest rate.

It is a new tool for absorbing liquidity in the absence of collateral.

Background: In 2018, the RBI Act’s Section 17 was amended, allowing the RBI to implement the SDF.

The SDF strengthens the operating framework of monetary policy by removing the RBI’s binding collateral constraint.

In addition to its role in liquidity management, the SDF is a financial stability tool.

At this stage, the SDF rate will be 25 basis points lower than the policy rate (Repo rate), and it will apply to overnight deposits.

It would, however, retain the flexibility to absorb longer-term liquidity as needed, with appropriate pricing.

Need: The “extraordinary” liquidity measures implemented in the aftermath of the pandemic, combined with the liquidity injected through various other RBI operations, have resulted in a liquidity overhang in the system of the order of Rs 8.5 lakh crore.

The primary goal of SDF is to reduce excess liquidity in the system and to keep inflation under control.

Implementation: Beginning this year, the RBI will begin a gradual and calibrated withdrawal of this liquidity over a multi-year time frame in a non-disruptive manner.

Various Instruments of Monetary Policy

Repo Rate:

§  The interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).

Reverse Repo Rate:

§  The interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF.

Marginal Standing Facility (MSF):

§  A facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest.

§  This provides a safety valve against unanticipated liquidity shocks to the banking system.


§  The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.

Cash Reserve Ratio (CRR):

§  The average daily balance that a bank is required to maintain with the Reserve Bank as a share of such per cent of its Net demand and time liabilities (NDTL) that the Reserve Bank may notify from time to time in the Gazette of India.

Liquidity Adjustment Facility (LAF):

§  The LAF consists of overnight as well as term repo auctions.

§  The aim of term repo is to help develop the interbank term money market, which in turn can set market based benchmarks for pricing of loans and deposits, and hence improve transmission of monetary policy.

§  The RBI also conducts variable interest rate reverse repo auctions, as necessitated under the market conditions.

Market Stabilisation Scheme (MSS):

§  This instrument for monetary management was introduced in 2004.

§  Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills.

§  The cash so mobilised is held in a separate government account with the RBI.

Bank Rate:

§  It is the rate at which the RBI is ready to buy or rediscount bills of exchange or other commercial papers. The Bank Rate is published under Section 49 of the RBI Act, 1934.

§  This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes.

Statutory Liquidity Ratio (SLR):

§  The share of NDTL that a bank is required to maintain in safe and liquid assets, such as, unencumbered government securities, cash and gold.

§  Changes in SLR often influence the availability of resources in the banking system for lending to the private sector.

Open Market Operations (OMOs):

§  These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively.

Various Policy Stances of RBI


§  An accommodative stance means the central bank is prepared to expand the money supply to boost economic growth.

§  The central bank, during an accommodative policy period, is willing to cut the interest rates. A rate hike is ruled out.

§  The central bank typically adopts an accommodative policy when growth needs policy support and inflation is not the immediate concern.


§  A ‘neutral stance’ suggests that the central bank can either cut rate or increase rate.

§  This stance is typically adopted when the policy priority is equal on both inflation and growth.

§  The guidance indicates that the market can expect a rate action on either way at any point.

Hawkish Stance

§  A hawkish stance indicates that the central bank’s top priority is to keep the inflation low.

§  During such a phase, the central bank is willing to hike interest rates to curb money supply and thus reduce the demand.

§  A hawkish policy also indicates tight monetary policy.

§  When the central bank increases rates or ‘tightens’ the monetary policy, banks too increase their rate of interest on loans to end borrowers which, in turn, curbs demand in the financial system.

Calibrated Tightening:

§  Calibrated tightening means during the current rate cycle, a cut in the repo rate is off the table.

§  However, the rate hike will happen in a calibrated manner.

§  This means the central bank may not go for a rate increase in every policy meeting but the overall policy stance is tilted towards a rate hike.

§  This can happen outside the policy meetings as well if the situation warrants.

1. Q. If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? (2020)

  1.  Cut and optimise the Statutory Liquidity Ratio
  2. Increase the Marginal Standing Facility Rate
  3. Cut the Bank Rate and Repo Rate

Select the correct answer using the code given below:



Forest Fire Management in a Changing Climate

Why in the news?

According to the Council on Energy, Environment, and Water (CEEW) study (Managing Forest Fires in a Changing Climate), the frequency and intensity of forest fires, as well as the number of months in which such fires occur, have increased over the last two decades.

CEEW is an independent, non-partisan think tank that is one of Asia’s leading not-for-profit policy research organisations. Its mission is to conduct research on all issues concerning the use, reuse, and mismanagement of resources.

What exactly are forest fires?

It is defined as any uncontrolled and non-prescribed combustion or burning of plants in a natural setting such as a forest, grassland, brush land, or tundra, which consumes natural fuels and spreads based on environmental conditions (e.g., wind, topography).

Human-caused forest fires can be sparked by land clearing, extreme drought, or, in rare cases, lightning.

In order for a wildfire to burn, three conditions must be met: fuel, oxygen, and a heat source.

What are the results?

Forest fires have increased tenfold in the last two decades, and more than 62 percent of Indian states are vulnerable to high-intensity forest fires.

Andhra Pradesh, Assam, Chhattisgarh, Odisha, and Maharashtra are the states most vulnerable to high-intensity forest fires caused by rapid climate change.

Mizoram has experienced the most forest fires in the last two decades, with more than 95 percent of its districts being forest fire hotspots.

Districts that were previously prone to flooding are now prone to drought due to a “swapping trend” caused by climatic changes.

More than 75% of Indian districts are extreme climate event hotspots, and more than 30% are extreme forest fire hotspots.

More Incidences in the Northeast:

 In recent decades, the majority of the Northeast has seen an increase in the frequency of forest fire incidences.

Despite being a rain-fed region, the NER (North Eastern Region) is seeing an increase in forest fires due to increased dry spells in March and May, as well as a muddled rainfall distribution pattern.

Incidences with a Longer Duration:

Previously, forest fires would occur during the summer months of May and June. Because of climatic changes, it is now in the spring, between March and May.

Previously, forest fires could burn for two to three months, but this has now been extended to nearly six months.

According to a 2019 Forest Survey of India report, 36 percent of India’s forest cover is located in areas prone to forest fires.

What Is the Most Up-to-Date Information on Forest Fires?

According to the Forest Survey of India, 381 forest fires have been reported in India as of March 30th, 2022. With 133 fires, Madhya Pradesh has the highest number.

Significant forest fires were reported in Uttarakhand, Madhya Pradesh, and Rajasthan in March 2022.

The recent fire in Rajasthan’s Sariska Tiger Reserve was also deemed unseasonal, with high temperatures exacerbating the spread of the blaze.

Long-term fires raged in Uttarakhand, Himachal Pradesh (Kullu Valley), and along the Nagaland-Manipur border in January 2021. (Dzukou Valley)

Recent fires have also occurred in Madhya Pradesh’s Bandhavgarh Forest Reserve.

What are CEEW’s recommendations?

Recognize as a Disaster: The forest fires should be classified as “natural disasters” and placed under the jurisdiction of the National Disaster Management Authority.

Furthermore, by designating forest fires as natural disasters, a financial allocation will be made to manage them.

Create an alert system:

A forest fire-only alert system that can provide real-time impact-based alerts is required.

Improve Adaptive Capacity:

Capacity-building initiatives aimed at district administrations and forest-dependent communities have the potential to reduce the magnitude of loss and damage caused by forest fires.

What are the Efforts Being Made to Prevent Forest Fires?

The FSI (Forest Survey of India) has been developing the Forest Fire Alert System since 2004 to monitor forest fires in real time.

The system now uses satellite data from NASA and ISRO in its advanced version, which was launched in January 2019. National Action Plan on Forest Fires (NAPFF) 2018 and Forest Fire Prevention and Management Scheme

Other’s News:

Arctic Council

The Arctic Council, founded in 1996, is a leading high-level intergovernmental forum that addresses issues confronting governments in the region as well as indigenous peoples in the Arctic.

It promotes cooperation, coordination, and interaction on common Arctic issues among Arctic States, Arctic Indigenous peoples, and other Arctic inhabitants.

Members – According to the Ottawa Declaration, the Arctic Council is comprised of eight states.

Canada, Denmark, Finland, Norway, Iceland, Russia, Sweden, and the United States are all members.

Aside from these, six organisations representing Arctic indigenous peoples have been granted the status of permanent participants.

Other countries or groups of countries are referred to as observer states (38).

All decisions are made by consensus among the six members and in consultation with the permanent participants.

Other countries or groups of countries are referred to as observer states (38).

All decisions are made by consensus among the six members and in consultation with the permanent participants.

The Council’s activities are carried out by the six Working Groups.

Action Plan for Arctic Contaminants

Programme for Arctic Monitoring and Assessment

Arctic Flora and Fauna Preservation

Emergency Preparedness and Response Arctic Marine Environment Protection Sustainable Development Group of Work

India currently serves as an observer on the Arctic Council.

The government recently unveiled India’s Arctic policy document.

According to the report, India aspires to have a permanent presence, more research stations, and satellite ground stations in the Arctic region.

Banarasi Pashmina

The premium Pashmina products made by Varanasi’s highly skilled Khadi weavers were launched by the Chairman of the Khadi and Village Industries Commission (KVIC).

Pashmina products are being produced outside of the Himalayan highlands of Leh-Ladakh and Jammu and Kashmir for the first time.

KVIC will sell “Made in Varanasi” Pashmina products through its showrooms, outlets, and online portal.

The process of producing Pashmina in Varanasi begins with the collection of raw Pashmina wool from Ladakh, which is then transported to Delhi for de-hairing, cleaning, and processing.

The processed wool is brought back to Leh in the form of roving, where it is handspun into yarn by women Khadi artisans using modern Charkhas provided by KVIC.

The finished yarn is then sent to Varanasi, where it is woven into final Pashmina products by trained Khadi weavers.

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