THE ECONOMIC DEVELOPMENTS
1. EXPLAINED: FED RESERVE RATE HIKE, US RECESSION AND IMPACT ON INDIA
THE CONTEXT: In its continuing bid to cool down raging inflation in the United States — at 9.1% in June, the inflation rate is at a four-decade high — the Federal Reserve or Fed (US’ central bank) decided to raise the Federal Funds Rate target by another 75 basis points. The Fed has steadily pushed up the targeted FFR from zero to almost 2.5% now.
THE EXPLANATION:
What is the Federal Funds Rate (FFR)?
• The FFR is the interest rate at which commercial banks in the US borrow from each other overnight. The US Fed can’t directly specify the FFR but it tries to “target” the rate by controlling the money supply.
• As such, when the Fed wants to raise the prevailing interest rates in the US economy, it reduces the money supply, thus forcing every lender in the economy to charge higher interest rates. The process starts
• with commercial banks charging higher to lend to each other for overnight loans.
Why is the Fed tightening money supply?
This is called monetary tightening, and the Fed (or any other central bank, for that matter) resorts to it when it wants to rein in inflation in the economy. By decreasing the amount of money, as well as raising its price (the interest rate), the Fed hopes to dent the overall demand in the economy. Reduced demand for goods and services is expected to bring down inflation.
What are the risks of monetary tightening?
Aggressive monetary tightening — like the one currently underway in the US — involves large increases in the interest rates in a relatively short period of time, and it runs the risk of creating a recession. This is called a hard-landing of the economy as against a soft landing (which essentially refers to monetary tightening not leading to a recession). The chances of a soft-landing for the US exist but are extremely low.
What is a recession?
The most common definition of recession requires the GDP of a country to contract in two successive quarters. Contracting GDP typically results in job losses, reduced incomes, and reduced consumption.
So, is the US in recession?
A firm answer may be available as early as 6 pm India time, when the US announces the GDP growth data for the second quarter (April, May and June) of 2022. Since the US GDP has already contracted by 1.6% during the first quarter (January, February and March) of 2022, a contraction in the second quarter will imply the US is in recession
However, many observers also contest this rather strict technical definition of recession.
What is the likely impact on India?
• In the latest — July update of the — World Economic Outlook, the IMF has downgraded the growth projections for the US, China and India. “Downgrades for China and the United States, as well as for India, are driving the downward revisions to global growth during 2022–23, which reflect the materialization of downside risks highlighted in the April 2022 World Economic Outlook”.
• A global slowdown is unlikely to have any positives for India apart from some relief in crude oil prices.
• The IMF has knocked off almost a full percentage point each (0.8%, to be precise) off India’s GDP projections for the current year and the next.
• Also, IMF noted that, for India, the revision reflects mainly less favorable external conditions and more rapid policy tightening”.
2. TREND ON FOREIGN DIRECT INVESTMENT (FDI) IN INDIA
THE CONTEXT: Singapore (27.01%) and USA (17.94%) have emerged as top 2 sourcing nations in FDI equity flows into India in FY 2021-22 followed by Mauritius (15.98%), Netherland (7.86%) and Switzerland (7.31%). It may be noted that as per the UNCTAD World Investment Report (WIR) 2022, in its analysis of the global trends in FDI inflows, India has improved one position to 7th rank among the top 20 host economies for 2021.
THE EXPLANATION:
• India is rapidly emerging as a preferred country for foreign investments in the manufacturing sector. FDI Equity inflow in Manufacturing Sectors have increased by 76% in FY 2021-22 (USD 21.34 billion) compared to previous FY 2020-21 (USD 12.09 billion).
• The Government has implemented several transformative reforms under the FDI policy regime across sectors such as insurance, defence, telecom, financial services, pharmaceuticals, retail trading, e-commerce, construction & development, civil aviation, manufacturing etc.
• Despite the ongoing pandemic and global developments, India received the highest annual FDI inflows of USD 84,835 million in FY 21-22 overtaking last year’s FDI by USD 2.87 billion. Earlier, FDI inflows increased from USD 74,391 million in FY 19-20 to USD 81,973 million in FY 20-21.
• Top 5 sectors receiving highest FDI Equity Inflow during FY 2021-22 are Computer Software & Hardware (24.60%), Services Sector (Fin., Banking, Insurance, Non Fin/Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis, Other) (12.13%), Automobile Industry (11.89%), Trading 7.72% and Construction (Infrastructure) Activities (5.52%).
• Top 5 States receiving highest FDI Equity Inflow during FY 2021-22 are Karnataka (37.55%), Maharashtra (26.26%), Delhi (13.93%), Tamil Nadu (5.10%) and Haryana (4.76%)
• Top 5 sectors receiving highest FDI Equity Inflow during FY 2021-22 are Computer Software & Hardware (24.60%), Services Sector (Fin., Banking, Insurance, Non Fin/Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis, Other) (12.13%), Automobile Industry (11.89%), Trading 7.72% and Construction (Infrastructure) Activities (5.52%).
THROUGH AUTOMATIC ROUTE
• In India FDI up to 100% is allowed in non-critical sectors through the automatic route, not requiring security clearance from the Ministry of Home Affairs (MHA). Prior government approval or security clearance from MHA is required for investments in sensitive sectors such as defence, media, telecommunication, satellites, private security agencies, civil aviation and mining, besides any investment from Pakistan and Bangladesh.
• All foreign investments are required to be in compliance with the applicable entry route, sectoral cap, attendant conditions, sectoral laws, Companies Act, 2013 and rules thereunder, pricing guidelines, documentation and reporting requirements.
THE SCIENCE AND TECHNOLOGY
3. NEW RESEARCH: TWO STUDIES REINFORCE COVID-19’S WUHAN MARKET ORIGIN
THE CONTEXT: Recently, two companion papers published in Science magazine indicate that the Covid-19 pandemic “most likely began with at least two separate zoonotic transmissions starting in November 2019”, and that SARS-CoV-2 emerged via the live wildlife trade in China, with the Huanan Seafood Wholesale Market in Wuhan being the likely early epicentre of the pandemic.
THE EXPLANATION:
• The lead authors of both studies are affiliated to American universities — the University of Arizona and the University of California San Diego — and the research has been primarily funded by the United States National Institutes of Health (NIH). One of the papers also received funding from the Centers for Disease Control and Prevention (CDC), the US national public health agency.
• The paper titled ‘The Huanan Seafood Wholesale Market in Wuhan was the early epicentre of the COVID-19 pandemic’ (Worobey et al.), mapped geo locations of 155 of the initial 174 cases, and found that that the clustering in December around the Huanan market contrasts with the pattern of widely dispersed cases across Wuhan by early January through mid-February 2020 — indicating that the cases flowed outward from the market to elsewhere.
• The second paper, ‘The molecular epidemiology of multiple zoonotic origins of SARS-CoV-2’ (Pekar et al.), through simulations of SARS-CoV-2-like epidemics combined with genomic sequence data, concludes that “as with other coronaviruses, SARS-CoV-2’s emergence likely resulted from multiple zoonotic events” (the spread of germs from animals to humans).
Related findings
• The molecular epidemiology paper argues that the paradox of genomic diversity in the early days (before February 2020) is best explained by rejecting a single-introduction origin of the pandemic from one lineage, and instead considering that “at least two separate zoonotic transmissions, in which lineage A and B progenitor viruses were both circulating in non-human mammals prior to their introduction into humans,” occurred.
• The companion paper on the Huanan market epicentre notes that “plausible intermediate wildlife hosts of SARS-CoV-2 progenitor viruses, including red foxes, hog badgers and common raccoon dogs, were sold live at the…market up until at least November of 2019”.
• Through spatial analyses within the market, the research records that “SARS-CoV-2-positive environmental samples, including cages, carts, and freezers, were associated with activities concentrated in the southwest corner of the market” — the same section where live mammals, including raccoon dogs, hog badgers, and red foxes, were being sold immediately prior to the outbreak of the epidemic.
The study took “multiple positive samples” from a stall known to have sold live mammals, and from a water drain close by, suggesting that infected animals were present at the market at the beginning of the outbreak.
Unanswered questions
• The Huanan market paper acknowledges that a crucial question that remains unanswered is the events upstream of the market — that is, prior to the transmission from the market. The exact circumstances at the market too remain obscure, and direct evidence of an intermediate animal infected with SARS-CoV-2 either at the market or at a location connected with the supply chain, remains missing.
• The authors acknowledge that precise latitude and longitude coordinates of all cases were not available, with many such cases missing the date of onset of symptoms as well. Of the 174 Covid-19 cases in Hubei province in December 2019, geolocations of 155 cases could be reliably extracted.
• One of the papers hypothesizes that the possible source of introduction of lineage B was a seafood vendor at the market, even though there is no published genomic data from the sample of this patient. The assumption is based on the fact that an environmental sample from the stall this vendor operated was detected with lineage B.
THE SECURITY AFFAIRS
4.WHAT IS CRYPTOJACKING, THE CYBER ATTACK CARRIED OUT BY CRYPTO MINERS?
THE CONTEXT: According to a report by SonicWall, a US-based cybersecurity firm, ‘Cryptojacking’ attacks on computer systems have gone up by 30% to 66.7 million in the first half of 2022 compared to the first half of last year (2022).
THE EXPLANATION:
The report highlighted While volume increases were widespread, some business sectors were hit harder than others, such as the finance industry, which saw a rise of 269%”.
What is cryptojacking?
Cryptojacking is a cyber attack wherein a computing device is hijacked and controlled by the attacker, and its resources are used to illicitly mine cryptocurrency. In most cases, the malicious programme is installed when the user clicks on an unsafe link, or visits an infected website — and unknowingly provides access to their Internet-connected device.
Why is cryptojacking done?
• Coin mining is a legitimate, competitive process used to release new crypto coins into circulation or to verify new transactions. It involves solving complex computational problems to generate blocks of verified transactions that get added to the blockchain. The reward for the first miner who successfully manages to update the crypto ledger through this route is crypto coins.
• But the race to crack this 64-digit hexadecimal number code needs considerable computing power involving state-of-the-art hardware, and electrical power to keep the systems involved up and running.
• Cryptojackers co-opt devices, servers, and cloud infrastructure, and use their resources for mining. The use of ‘stolen’ or cryptojacked resources slashes the cost involved in mining.
Why have cryptojacking incidents gone up?
• According to the SonicWall’s Cyber Threat Report, the crackdown on ransomware attacks is forcing cybercriminals to look for alternative methods. Cryptojacking involves “lower risk”, and promises “potentially higher payday”.
• “Unlike ransomware, which announces its presence and relies heavily on communication with victims, cryptojacking can succeed without the victim ever being aware of it”.
Why should this be a concern?
• Cryptojacking is hard to detect and the victims of these attacks mostly remain unaware that their systems have been compromised. Some telltale signs are the device slowing down, heating up, or the battery getting drained faster than usual.
• Apart from individuals, businesses too are on the target list of cryptojackers. According to the report, cryptojacking incidents targeting the retail industry rose by 63% year-to-date, while similar attacks on the financial industry skyrocketed 269%.
“The primary impact of cryptojacking is performance-related, though it can also increase costs for the individuals and businesses affected because coin mining uses high levels of electricity and computing power,” says the Interpol.
VALUE ADDITION:
Government initiatives to strengthen Cyber Security in India
• CERT-In (Cyber Emergency Response Team – India) – It was created by Section 70B of the IT Act. It is the national nodal agency to respond against computer security threats as and when required.
• National Cyber Security Coordination Centre (NCCC): The NCCC is mandated to perform real-time threat assessment. Further, they also create situational awareness of potential cyber threats to the country. It was made operational in 2017.
• Information Technology Act (IT) 2000 – It is the primary law for dealing with cyber-crime and digital commerce in India.
The act covers a broad range of offences including child pornography, cyber terrorism etc.
Section 75 of the Act empowers the government to punish people located outside India who is accused of the offence.
THE PRELIMS PERSPECTIVE
5. REVISION SERIES: SAMUDRAYAAN MISSION
• Samudrayaan Mission is aimed to develop a self propelled manned submersible to carry 3 human beings to a water depth of 6000 meters in the ocean with a suite of scientific sensors and tools for deep ocean exploration. It has an endurance of 12 hours of operational period and 96 hours in case of emergency.
• The manned submersible will allow scientific personnel to observe and understand unexplored deep sea areas by direct interventions. Further, it will enhance the capability for deep sea man rated vehicle development.
• The projected timeline is five years for the period 2020-2021 to 2025-2026.
• National Institute of Ocean Technology (NIOT), Chennai, an autonomous institute under MoES, has developed 6000 m depth rated Remotely Operated Vehicle (ROV) and various other underwater instruments such as Autonomous Coring System (ACS), Autonomous Underwater Vehicle (AUV) and Deep Sea Mining System (DSM) for the exploration of deep sea.
VALUE ADDITION:
Deep Ocean Mission:
The Samudrayaan project is a part of the deep-sea ocean mission under MoES approved in 2021.
• It is India’s first unique manned ocean mission that aims to send men into the deep sea in a submersible vehicle for deep-sea ocean exploration and mining of rare minerals.
• Resources such as polymetallic manganese nodules, Gas hydrates, hydrothermal sulfides, and cobalt crusts will be explored which are usually located at a depth between 1000 to 5500 meters.
• The project is undertaken by the National Institute of Ocean Technology (NIOT), under MoES.
• India has been allocated a site of 75,000 sq km in the Central Indian Ocean Basin by the International Sea Bed Authority (ISA) for the exploration of polymetallic nodules from the seabed in a 15-year contract.
• The estimated resource potential of polymetallic nodules is 380 million tonnes through preliminary studies.
• Major components in these nodules are manganese, nickel, copper, and cobalt.
The six components of the mission are-
1. Development of technologies for deep-sea mining and manned submersible.
2. Development of ocean climate change advisory services.
3. Technological innovations for sustainable use of marine bio-resources.
4. Deep ocean survey and exploration
5. Energy production from the ocean and offshore based desalination
6. Advanced marine station for ocean biology.
6. WORLD HEPATITIS DAY 2022
THE CONTEXT: On July 28, World Hepatitis Day is celebrated across the World, annually. The day seeks to raise awareness on the Hepatitis, which cause deaths of around 125 000 people in Africa every year, even though the disease can be cured.
THE EXPLANATION:
Theme of the World Hepatitis Day 2022:
• In year 2022, the World Hepatitis Day is being celebrated under the theme- “Bringing hepatitis care closer to you”.
• This theme is aimed at highlighting the usefulness of bringing hepatitis care closer to primary health care facilities and communities.
• It also seeks to ensure better access to treatment and care.
About Hepatitis:
• It is inflammation of the liver tissue. Some people or animals show no symptoms of hepatitis. On the other hand,
others people develop yellow discoloration of skin and whites of the eyes, vomiting, poor appetite, abdominal pain, tiredness, and diarrhoea. The disease is acute, if it is treated within six months.
• It can be turned chronic, if it lasts more than six months. Acute hepatitis can be treated on its own, while chronic hepatitis causes failure of liver. Chronic hepatitis can lead to liver cirrhosis, liver cancer and liver failure.
Hepatitis case burden in WHO African Region:
• In Africa, over 90 million people are living with hepatitis. It accounts for 26% of total cases worldwide. The disease goes undetected mostly, because of absence of any symptoms. As per WHO, prevalence of Hepatitis B in around S8% of the total populations across 19 countries.
• Hepatitis C is prevalent among 1% population across 18 countries. Transmission of Hepatitis B from mother to child is high.
THE PRELIMS PRACTICE QUESTIONS
QUESTION OF THE DAY
Q. Consider the following statements with respect to Deep Ocean Mission:
1. The Samudrayaan project is a part of the deep-sea ocean mission.
2. It was implemented by the Ministry of Earth Sciences.
Which of the above statements is/are incorrect?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
ANSWER FOR THE PRACTICE QUESTION
ANSWER: D
Explanation:
Deep Ocean Mission:
The Samudrayaan project is a part of the deep-sea ocean mission under MoES approved in 2021.
• It is India’s first unique manned ocean mission that aims to send men into the deep sea in a submersible vehicle for deep-sea ocean exploration and mining of rare minerals.
• Resources such as polymetallic manganese nodules, Gas hydrates, hydrothermal sulfides, and cobalt crusts will be explored which are usually located at a depth between 1000 to 5500 meters.
• The project is undertaken by the National Institute of Ocean Technology (NIOT), under MoES.
