August 1st 2024 Current Affairs

1. Core Sector Growth Slowdown

1. Core Sector Growth Slowdown

Core Industries: Definition- Eight key sectors representing a significant portion of industrial production:

Coal
Crude oil
Natural gas
Refinery products
Fertilizers
Steel
Cement
Electricity

Importance: Serve as a leading indicator of overall industrial performance.

June 2024 Core Sector Performance: Overall Growth: Slowed to 4%, lowest in 20 months.

Sectoral Trends:

Coal: Strongest growth (14.8%), highest in 8 months.
Electricity: Growth slowed to 7.7%, lowest in 4 months.
Steel: Growth declined to 2.7%, lowest in 27 months.
Cement: Recovered to 1.9% growth after two months of contraction.
Natural Gas: Growth slowed to 3.3%, lowest in 13 months.
Refinery Products: Contracted by 1.5% for the first time in 5 months.
Crude Oil: Contraction deepened to 2.6%.
Fertilizers: Recovered after 5 months of contraction, grew by 2.4%.

Reasons for Slowdown

Decline in public capex: Due to general elections.
Slowdown in construction activity: Impacting steel and cement demand.
Monsoon impact: Reduced electricity demand.

Implications

Industrial Growth: Indicates potential slowdown in overall industrial production (IIP) in June.
Economic Growth: Could impact overall GDP growth for the quarter.
Policy Response: Government may need to consider measures to stimulate growth in affected sectors.

IIP Index

Index of Industrial Production (IIP): A composite index measuring short-term changes in the volume of production of industrial products.
Importance: Key indicator of industrial performance and overall economic health.
Relationship to Core Sector: Core industries account for a significant portion of IIP, making it a leading indicator for the overall index.
The Central Statistical Organisation (CSO) is responsible for the compilation and publication of the Index of Industrial Production (IIP)

2. India-China Relations and LAC

Line of Actual Control (LAC)

Definition: A de-facto border between India and China, not officially defined or agreed upon by both countries.
Disputed Areas: Aksai Chin (claimed by India, controlled by China) and Arunachal Pradesh (claimed by China, controlled by India).
Current Situation: Persistent tensions and standoffs along the LAC, especially in the Galwan Valley and other areas.
Significance: A strategically important border, with implications for both countries’ territorial integrity and national security.

India-China Relations: A Historical Overview

Early Years: Panchsheel principles (1954): Five principles of peaceful coexistence signed by Nehru and Zhou Enlai.

Border disputes emerged in the late 1950s.

1962 War: A brief but decisive war with China inflicting heavy losses on India.
Post-War Period: A period of detente and gradual improvement in relations.
Economic Engagement: Growing economic ties in the 1990s and 2000s.
Recent Tensions: Escalating border disputes since 2020, leading to military standoffs and casualties.

India-China Relations: Current Challenges

Border Disputes: The unresolved LAC issue remains a major point of contention.
Strategic Competition: Increasing geopolitical rivalry between the two countries in the Indo-Pacific region.
Trade Imbalance: A significant trade deficit in favor of China.
Infrastructure Development: China’s infrastructure building activities near the LAC are seen as a challenge by India.

Way Forward

Diplomacy: Continued diplomatic engagement to manage tensions and find a peaceful resolution.
Military Preparedness: Strengthening India’s military capabilities to deter aggression.
Economic Diversification: Reducing dependence on China for trade and investment.
Strategic Partnerships: Building stronger relationships with other countries to counterbalance China’s influence.
Mechanisms for Dialogue: Both countries have established mechanisms like the Working Mechanism for Consultation and Coordination (WMCC) to address border issues.
Confidence Building Measures (CBMs): Implementation of CBMs can help reduce tensions and build trust.

3. State Government Debt

Key Points

State Government Debt

Increasing Market Borrowings:

· Shift from reliance on central loans to market-based financing.

· Surge in market borrowings in recent years.

· Stock of SGS has grown significantly.

Debt Redemption:

· Large amounts of SGS are maturing in the coming years, especially in states like Uttar Pradesh, Tamil Nadu, Maharashtra, Karnataka, and Gujarat.

· This will necessitate substantial fresh borrowing.

Debt Tenor:

· States are increasingly opting for longer-term debt to manage rollover risk and benefit from lower interest rates.

· However, some states still prefer shorter-term debt.

Rollover Risk

Definition: The risk of being unable to refinance maturing debt.

Factors Affecting Rollover Risk:

· Amount of debt maturing.

· Average maturity of the debt portfolio.

· Market conditions.

Mitigation Strategies:

· Issuing longer-term debt.

· Diversifying funding sources.

· Building debt service reserves.

Central Government Loans

GST Compensation Loans:

· Raised by the central government and lent to states.

· To be repaid through GST compensation cess.

· Significant amount of these loans will mature in the next few years.

Interest-Free Capex Loans:

· Introduced during the pandemic.

· Amount allocated has increased significantly.

· Impacts state resource availability and market borrowing.

Implications

1. Fiscal Sustainability: Rising debt levels and rollover risks pose challenges to state fiscal sustainability.

2. Credit Rating: High debt levels can negatively impact state credit ratings, increasing borrowing costs.

3. Development Expenditure: Excessive debt servicing may limit funds available for essential public services.

4. Economic Growth: High debt levels can hinder economic growth.

Policy Recommendations

· Debt Management: States should adopt prudent debt management strategies, including debt ceilings, debt-to-GDP ratios, and expenditure control.

· Revenue Mobilization: Increasing own tax revenues can reduce reliance on borrowing.

· Public Financial Management: Strengthening financial management systems to improve expenditure efficiency.

· Central Government Support: Continued support through interest-free loans and other mechanisms can help states manage their debt burden.

4. Kerala landslide And Chaliyar River

Context: Disaster Management (GS Paper 3)

Climate change: Increasing frequency and intensity of extreme weather events, including heavy rainfall and landslides.

Landslides in Kerala:

Recurring issue, exacerbated by climate change.
High vulnerability due to geographical factors (Western Ghats, hilly terrain).
Loss of life and property, impact on local communities.

Human-induced factors:

Deforestation and denudation of flora.
Unsustainable land use practices (quarrying, construction, monocropping).
Lack of early warning systems and disaster preparedness.

Recommendations:

Restore denuded flora.
Rehabilitate vulnerable populations.
Decline engineering projects in ecologically sensitive areas.
Establish expert committees for project feasibility.
Balance development with environmental concerns.
Increased water flow and sediment load due to heavy rains and deforestation.

Chaliyar River (Geography)

The Chaliyar River, also known as the Beypore River, is the fourth longest river in Kerala, stretching over 169 kilometers. Here are some key geographical details:

Source and Course

Originates at an altitude of around 2 km.

· Origin: The river originates from the Elambaleri Hills in the Western Ghats, located in the Wayanad district of Kerala.

Flows through steep terrain, carrying high volume of water and sediment.

· Flow: It flows through the districts of Wayanad, Malappuram, and Kozhikode2. The river passes through several towns and villages, including Nilambur, Areekode, Mavoor, and Feroke.

· Mouth: The Chaliyar empties into the Arabian Sea at Beypore, near Kozhikode.

Tributaries

· Left Tributaries: Iruvazhinjipuzha, Cherupuzha, Engappuzha1.

· Right Tributaries: Cherupuzha

5. Small Modular Reactors (SMRs)

Context: The government is planning to team up with private sector to study test small modular reactor

Definition: Smaller, modular versions of conventional nuclear reactors, typically ranging from 10 to 300 MWe.

Advantages:

Safer due to inherent design features.
More commercially feasible due to lower capital costs and smaller operational footprint.
Can be deployed in remote locations.
Potential for faster construction and deployment.

Challenges:

Proliferation risk due to frequent refuelling and plutonium production.
Higher capital costs for safe guardable designs.
Uncertain market conditions and grid stability.
Need for mass production of components to reduce costs.

Nuclear Power in India

Importance: Crucial for energy security and reducing carbon emissions.

Current Scenario: India has a mix of conventional nuclear reactors with varying capacities.

Department of Atomic Energy (DAE): Responsible for nuclear power generation and research.
Challenges: High capital costs, long construction timelines, and public perception issues.

Government Initiatives:

Collaboration with private sector for SMR development.
Focus on indigenous technology development.
Plans to increase nuclear power capacity.

Comparison of SMRs and Conventional Reactors

Feature	Small Modular Reactors (SMRs)	Conventional Reactors
Size	Smaller	Larger
Cost	Lower capital cost	Higher capital cost
Construction time	Faster	Slower
Flexibility	Can be deployed in various locations	Typically large, centralized plants
Proliferation risk	Higher due to frequent refuelling	Lower
Safety	Designed for inherent safety	Multiple safety systems