Oct 3rd 2024 Current Affairs

Index:

1. Surplus Rains to Reduce Food Inflation and Boost Demand

Key Points:

Southwest Monsoon Impact: Healthy Southwest monsoon has boosted reservoir levels in most regions (except the North) and positively impacted both Kharif and Rabi crops.
Surplus Rainfall: As of September 30, the monsoon yielded an 8% surplus over the long-term average.
Reservoir Levels: Stood at 87% of capacity by September 26, aiding in a favorable outlook for Rabi crops.

Regional Disparities:

Northern Region: Reservoir levels in the northern region are at 68% of capacity compared to 86% last year.

Crop-Specific Trends:

Implications:

Food Inflation: Likely to ease in H2 FY25 due to surplus rains and increased sowing of Kharif crops.
Demand Rebound: Rural demand is expected to improve in the second half of FY25.
Farm Sector Growth: Increased sowing and diversification of crops are expected to enhance the farm sector’s Gross Value Addition (GVA) and alleviate inflationary pressures.
Monsoon Benefits: Above-normal rainfall has helped not only in sowing but also in crop diversification, leading to improved food security and economic outlook.

2. India's Saudi Oil Imports Jump as Riyadh Seeks to Regain Market Share from Russia

CONTEXT: Crude Oil Imports Recovery: India’s crude oil imports rebounded in September 2024, especially from Saudi Arabia, following the completion of maintenance at several Indian refineries.

Saudi Arabia’s Strategy:
- Price Cuts: Saudi Arabia reduced its crude oil prices to regain its lost market share in India, which had previously shifted significantly to Russia.
- Increase in Imports: Saudi crude oil imports jumped by 8% month-on-month to 0.73 million barrels per day (bpd), the highest since March.
- Saudi imports had hit a low of 42 million bpd in June, reflecting its loss in India’s market due to higher prices.

Russia’s Dominance:
- India’s top oil supplier continues to be Russia, with 88 million bpd imports, marking a 6.4% rise over August 2024.
- Russia’s market share in India accounts for 2% of the country’s total crude imports, which amounted to 4.68 million bpd overall in September.

Refining Sector in India:
- Indian refineries were undergoing peak maintenance in August, leading to a dip in demand for crude oil. As refinery units resume operation, oil imports are expected to further rise in October to meet festival season fuel demand.

Market Dynamics:
- The competition between Russia, Iraq, and Saudi Arabia for the Indian market has intensified post the Russia-Ukraine war.
- India’s heavy reliance on discounted Russian oil continues, with many refineries locking in long-term deals at attractive rates.

Implications:

Strategic Shift: Saudi Arabia’s aggressive pricing is aimed at countering the influence of Russian oil in India’s market.
Competitive Pressure: This situation could push other suppliers, such as Russia and Iraq, to offer more competitive pricing to retain their market share in India.

3. India's Worry: Long Trade Routes, High Shipping Rates, and Corridor Risks

Red Sea Shipping Route Crisis:
- The conflict in West Asia has led to severe disruptions in trade, particularly impacting the Red Sea shipping route.
- Indian exporters have faced a 9% drop in exports in August due to rising shipping costs and the Red Sea route crisis.
- Petroleum product exports from India fell 38%, with the total value dropping to $5.95 billion in August, down from $9.54 billion the previous year.

High Shipping Costs:
- The conflict and disruptions have caused a significant increase in shipping costs, negatively affecting profit margins, especially for low-end engineering products, textiles, garments, and other labor-intensive goods.
- This increase in transport costs has also led Indian traders to push the government to develop a global shipping line to mitigate costs.

Trade Impact on India:
- The Suez Canal is a critical route for India, facilitating trade with Europe, the US, Africa, and West Asia, which accounted for over $400 billion of India’s trade in FY23.
- India’s exports to the Gulf Cooperation Council (GCC) countries rose 8% between January and July 2024. Similarly, India’s exports to Iran grew by 15.2% during the same period.

Longer Trade Routes:
- The Suez Canal experienced a 50% year-on-year decline in trade volume in the first two months of 2024.
- Vessels have been forced to take the longer route via the Cape of Good Hope, leading to a 15-20% increase in shipping costs.
- The situation is worsened by Hezbollah’s ties with the Houthis in Yemen, as this raises risks for ships transiting the Red Sea.

Economic Corridor Risks:

The conflict could jeopardize progress on the India-Middle East-Europe Economic Corridor (IMEC), which was announced at the G20 summit in New Delhi. This corridor connects India to Europe via the Gulf, but instability in the region poses risks to its future development.

4. Special Status Demand by Ladakh

Context: Activist Sonam Wangchuk was detained after leading a group of protesters demanding Sixth Schedule inclusion for Ladakh to grant greater autonomy to the region.

Similar demands for autonomy have been raised in Himachal Pradesh and Manipur.

What is Asymmetrical Federalism?

The Indian Constitution offers asymmetrical federalism, where some regions enjoy special provisions. This includes:
- Fifth and Sixth Schedules.
- Article 370, previously for Jammu and Kashmir.
- Article 371, offering special provisions for various states (Maharashtra, Gujarat, Andhra Pradesh, etc.).

History of Fifth and Sixth Schedules:

British Colonial Policies:
- British policy of “isolation” led to the creation of excluded and partially excluded areas under the Government of India Act, 1935.
- Tribes in these regions experienced significant restrictions, especially regarding forest access and traditional livelihoods.

Scheduled Areas:
- Fifth Schedule: Applicable to tribal areas under the President’s notification.
- Sixth Schedule: Specific to tribal areas in the Northeast (Assam, Meghalaya, Tripura, Mizoram) with autonomous district councils (ADCs), granting legislative and administrative powers.

Ladakh’s Demand:

Ladakh is seeking to be included under the Sixth Schedule to safeguard tribal rights and provide the region more autonomy.
The region is not classified as a “scheduled area”, which has led to concerns about its future governance and development.

Current Provisions in Fifth and Sixth Schedules:

Fifth Schedule:
- Deals with scheduled areas under the President’s discretion.
- Provides protection for tribal land and governance through Tribal Advisory Councils (TACs).

Sixth Schedule:
- Grants autonomous district councils (ADCs) the power to govern and legislate on certain areas like land, forests, and public health.
- ADCs have powers to manage resources and administer civil matters related to inheritance, marriage, etc.

There is a Governor’s oversight, ensuring laws align with the Constitution.

Challenges and Future Needs:

Activists argue for more inclusion of tribes under the Fifth and Sixth Schedules for better protection of their rights.
Proposals are being discussed in Parliament to notify Ladakh and other states as scheduled areas, integrating them with the development policies under the Scheduled Tribes (ST) framework.
Anomalies: The status of tribes outside the Northeastern region is debated, as they do not receive the same constitutional protections under the Sixth Schedule.

5. India's Policy on Trade and the US Dollar

CONTEXT: External Affairs Minister (EAM) S. Jaishankar clarified that India is not targeting the US dollar as part of its economic policy. Instead, the country is looking for “workarounds” to facilitate trade, especially with partners like Russia and sanctioned countries.

International Trade in Domestic Currencies:
- India is increasingly engaging in trade using its domestic currency with several partners, such as Russia, as a way to circumvent challenges imposed by the use of the US dollar.
- Jaishankar noted that India is not moving away from the US dollar, but alternative settlements and transactions are being explored.

Impact of US Sanctions:
- US sanctions, particularly on Iran and Russia, have impacted trade, complicating India’s economic interactions.
- For instance, India’s oil imports from Russia have seen sharp reactions from the West, despite Russia becoming one of India’s top suppliers of oil.

Multipolar World and Currencies:
- Jaishankar emphasized that the “multipolar world” will eventually be reflected in currencies and economic dealings.
- The use of non-dollar currencies like the rupee, ruble, and yuan in bilateral trade is growing, especially between Russia and China.

Rupee Settlement Mechanism:
- India’s Reserve Bank has introduced the rupee settlement mechanism for international trade, which gained momentum in 2022 as part of efforts to move away from dollar dependence.
US Dollar’s Global Influence:
- The International Monetary Fund (IMF) has observed a gradual decline in the US dollar’s share of global foreign exchange reserves over the past two decades. However, this decline has not been accompanied by a significant increase in the share of the other major currencies (euro, yen, pound).

Broader Economic Context:

India’s shift towards using domestic currencies for trade is also influenced by the US sanctions regime, especially the exclusion of Russia from the SWIFT payment system following the Ukraine invasion.
Bangladesh and Sri Lanka faced significant challenges recently due to their dependence on the US dollar for imports of essential commodities.

The IMF notes that while the role of the US dollar in reserves has diminished, currencies like the Australian dollar, Canadian dollar, and Chinese renminbi have seen a rise in use for international transactions.

6. How India's Temples are Run: Demand to Free Temples from Government Control

Key Points:

Controversy: The issue of freeing temples from government control has resurfaced following petitions concerning the adulteration of ghee in the laddu prasadam at Tirupati.
Organizational Campaigns:
- The Vishwa Hindu Parishad (VHP) has launched a nationwide campaign.
- Andhra Pradesh Deputy CM Pawan Kalyan announced a board to investigate temple issues.

Management of Religious Places:

Religious Places Under Government Control:
- Hindu temples in various states are primarily controlled by the state governments through Endowments and Charitable Trusts.
- Other religions like Muslims, Sikhs, Jains, Buddhists are generally allowed to run their places of worship without state interference.
- States like Tamil Nadu, Karnataka, Kerala, and others have enacted laws giving the government powers to manage temple administration, property, and finances.

Historical Background:

Temple Control Origins:
- Evidence of temple construction dates back to 321-185 BCE, when temples played a central role in both spiritual and economic life, often supported by agriculture and local resources.
- The British institutionalized control of temples by enacting laws in the 19th century. The government began taking over temple management, especially in Madras (now Tamil Nadu), Bombay (now Mumbai), and other presidencies.

Post-Independence Developments:
- In 1951, the HR&CE Act was passed, giving governments power over temples in many states.
- However, government control has often been criticized for interfering in religious and secular activities, such as using temple funds for non-religious purposes.

Demand for Freeing Temples:

RSS Campaign:
- The demand to free temples from government control was first raised by the Rashtriya Swayamsevak Sangh (RSS) in 1959.
- Prominent leaders like Swami Dayananda Saraswati and organizations like the Akhil Bharatiya Sant Samiti have also supported this movement, arguing that government control affects autonomy and religious practices.

Recent Developments:
- Several BJP governments, such as in Uttarakhand (2019) and Madhya Pradesh (2023), have enacted or rolled back laws related to temple management.
- In 2022, a petition in the Supreme Court called for temples to be freed from government control, arguing that non-Hindu religious places are free from such interference.

Legal Position:

Supreme Court Judgments:
- The Supreme Court has upheld that states can regulate secular aspects of religious places under Article 25(2), which gives the government power to manage public religious institutions.
- However, the Court also noted that states cannot interfere with purely religious functions.

Current Scenario:

Political and Social Debate:
- The demand to free temples from government control has become part of a wider political debate, with BJP and allied organizations often raising the issue during elections.

Critics argue that temple funds should not be diverted for secular projects, and that temple management should be decentralized to local communities or religious bodies.