TOP 5 TAKKAR NEWS OF THE DAY (29th JUNE 2023)

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1. CURRENT ACCOUNT DEFICIT

TAG: GS 3: ECONOMY

THE CONTEXT: Experts believe the country’s current account deficit is likely to moderate in the current fiscal. External balances will benefit from lower commodity prices as well as a sharp pick up in portfolio flows in the April-June 2023 quarter. Current account deficit moderates to 0.2% of GDP in March quarter.

EXPLANATION:

• The country’s current account deficit (CAD) is which measures the difference between exports and imports of goods and services – narrowed to 0.2 per cent of gross domestic product (GDP) in the fourth quarter of fiscal 2022-2023, from 2 per cent in the preceding quarter.
• However, as compared to 1.2 per cent in FY2022, CAD widened to 2 per cent of GDP in Y2023, according to recent data released by the Reserve Bank of India (RBI).

What is the Current Account Deficit or CAD?

• The current account deficit or CAD is a key indicator of a country’s external sector. When the value of the goods and services that a country imports exceeds the value of the products it exports, it is known as the current account deficit.

• Together with the fiscal deficit, which is the amount of money that the government has to borrow in any year to fill the gap between its expenditures and revenues, the two make up the ‘twin deficits’ that are considered the enemies of the stock market and investors.
• If the current account – the country’s trade and transactions with other countries – shows a surplus, that indicates money is flowing into the country, boosting the foreign exchange reserves and the value of the rupee against the dollar. These are factors that will have ramifications on the economy and the stock markets, as well as on returns on investments by people.

Why CAD shrink?

• Remittances, which are the second largest major source of external financing after service export, also contributed to narrowing the CAD.
• During the quarter, private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $28.6 billion, up 20.8 per cent from their level a year ago.
• Terms of trade relief from a correction in commodity prices, strong service trade and resilient remittances helped to narrow CAD in Q4 FY23 compared to the quarter before.
• In the quarter, net foreign direct investment (FDI) was $6.4 billion. Net foreign portfolio investment (FPI) recorded an outflow of $1.7 billion in Q4 FY23, compared with an outflow of $15.2 billion in the year-ago quarter.

What does a lower CAD reflect?

• The current account deficit is essentially the difference between investment and savings. If a country runs a current account deficit, then it needs foreign savings to finance that gap.
• When the current account deficit is lower, less money is needed to finance the gap. It is also treated as a sign of the resilience of the economy.

2. FAILTURE OF CHANDRAYAAN-2

TAG: GS 3: SCIENCE AND TECHNOLOGY

THE CONTEXT: Almost four years after its first unsuccessful attempt to make a spacecraft land on the Moon, Isro will launch its third moon mission, Chandrayaan-3 (Ch-3), on July 12, with the primary objective of executing a precise landing on the celestial body. In 2019, the lander and rover of the Chandrayaan-2 mission malfunctioned in the final moments and crash-landed, getting destroyed in the process.

EXPLANATION:

• Launched on July 22, 2019, the Chandrayaan-2 mission’s Vikram lunar lander crashed on the Moon during the early hours of September 6.
• Despite the setback, the mission wasn’t a complete failure as its Orbiter part kept on working normally.
• Chandrayaan-2 mission’s Vikram lunar lander crashed on the Moon during the early hours of September 6. Its debris was later found by NASA around three months later. Despite the setback, the mission wasn’t a complete failure as its Orbiter part kept on working normally and gathered a wealth of new information that added to our knowledge about the Moon and its environment.

What was the Chandrayaan-2 mission?

• Chandrayaan-2 was to demonstrate the ability to soft-land a lander and rover on the unexplored south pole of the Moon, it also had other goals.
• The mission was “designed to expand the lunar scientific knowledge through a detailed study of topography, seismography, mineral identification and distribution, surface chemical composition, thermo-physical characteristics of topsoil and composition of the tenuous lunar atmosphere, leading to a new understanding of the origin and evolution of the Moon.
• In 2021, the space agency revealed that the mission’s Orbiter had produced a handsome amount of data about the Moon. This helped in building upon existing knowledge of the celestial body in terms of its surface, sub-surface and exosphere.
• A key outcome from Chandrayaan-2 was the exploration of the permanently shadowed regions as well as craters and boulders underneath the regolith, the loose deposit comprising the top surface extending up to 3-4m in depth.

What was missed because of the crash landing?

• The most obvious miss was the opportunity to demonstrate the technology to make a soft landing in outer space.
• The lander Vikram and rover Pragyaan were carrying instruments to carry out observations on the surface. These were supposed to pick up additional information about the terrain, composition and mineralogy. With the support of the Orbiter, Vikram and Pragyaan would have provided two diverse sets of data that could have helped prepare a more composite picture of the Moon.

3. INDIAN OCEAN DIPOLE

TAG: GS 1: GEOGRAPHY

THE CONTEXT: With the El Nino phenomenon almost certain to affect the Indian monsoon this year, high hopes are pinned on the development of a positive Indian Ocean Dipole (IOD) and its ability to counterbalance the El Nino effect.

EXPLANATION:

• The Indian Ocean Dipole (IOD) is an ocean-atmosphere interaction very similar to the El Nino fluctuations in the Pacific Ocean, in the Indian Ocean.
• It is also a much weaker system than El Nino, and thus has relatively limited impacts.
• But a positive IOD does have the potential to offset the impacts of El Nino to a small measure in neighbouring areas, and it has, at least once in the past (1997), delivered admirably on this potential.
• While the El Nino is already firmly established in the Pacific Ocean this year, the IOD is still in the neutral phase. “The Indian Ocean Dipole is currently neutral. All international climate models surveyed by the Bureau suggest a positive IOD event may develop in the coming months.

 Indian Ocean Dipole:

• Also known as the Indian Nino, the Indian Ocean Dipole (IOD) is defined as the difference in sea surface temperature between the western pole of the Arabian Sea (western Indian Ocean) and an eastern pole south of Indonesia, which has an impact on the climate of Australia and other nations in the Indian Ocean Basin.
• Experts state that the IOD is similar to the El Nino phenomenon but that it plays out in the relatively smaller area of the Indian Ocean between the Indonesian and Malaysian coastline in the east and the African coastline near Somalia in the west. It primarily sees one side of the ocean, along the equator, getting warmer than the other.
• The IOD is said to be positive when the western side of the Indian Ocean, near the Somalia coast, becomes warmer than the eastern Indian Ocean. It’s said to be negative when the western Indian Ocean is cooler.
• A positive IOD event is often seen developing at times of an El Nino, while a negative IOD is sometimes associated with La Nina.
• Many studies suggest that IOD events are actually induced by El Nino Southern Oscillation (ENSO). However, there is evidence to show that IOD events can have an independent existence.

What impact will IOD have?

• During a positive IOD event, the western Indian Ocean experiences higher-than-normal rainfall, while the eastern Indian Ocean experiences drier-than-normal conditions.
• This can lead to increased rainfall over India and can offset the effects of El Nino, which usually brings drier-than-normal conditions to India.
• In 2019, it was a positive Indian Ocean Dipole that had caused floods in East Africa, with the Horn of Africa seeing up to 300 per cent above average rainfall between October and mid-November.
• Similarly, the devastating bushfires in Australia in 2020 was owing to an extreme Indian Ocean Dipole.

What is El Nino?

• El Nino is a weather phenomenon that occurs when ocean temperatures in the central and eastern Pacific Ocean rise above normal. The warming causes changes in atmospheric patterns, leading to a weakening of the monsoon circulation over the Indian subcontinent. As a result, the Indian monsoon tends to be weaker and less reliable during El Nino years.
• Weather experts note that over the past seven decades, the El Nino weather pattern occurred has 15 times and of these nine monsoon seasons have experienced deficient rainfall. In the last four El Nino years, India has constantly faced drought conditions and a severe decrease in rainfall.

4. LABOUR FORCE PARTICIPATION RATE (LFPR)

TAG:  GS 3: ECONOMY

THE CONTEXT:  According to the latest data available from the Centre for Monitoring Indian Economy (CMIE), India’s labour force participation rate (LFPR) fell to 39.5% in the last financial year (2022-23) that ended in March. This is the lowest LFPR reading since 2016-17. The LFPR for men stood at a seven-year low of 66% while that of women was pegged at a mere 8.8%.

EXPLANATION:

• The LFPR is the share of the working-age population aged 15 years and above that is employed or unemployed, willing and looking for employment.
• In other words, of all the Indians aged 15 years and above, only 39.5% are even asking for a job. Among men, this proportion was 66% and among women, just 8.8%.

Why LFPR matters?        

• In India’s case, the unemployment rate is an inadequate measure because India’s LFPR (or the proportion asking for a job) has not only been lower than the global average but also falling.
• A low and falling LFPR is never a good sign for a developing economy because it shows that, despite low levels of income, its workers are opting out of the jobs market.
• LFPR has been falling in a secular manner since 2016-17 and has hit its lowest in 2022-23. It is noteworthy that the fall has happened despite the fast growth rate of the economy.
• India’s female LFPR has fallen to just 8.8% in FY23. In other words, more than 90% of all working-age women in India don’t even look for a job.

Global laggard:

• CMIE admits that its measure of assessing LFPR are more stringent than others. For instance, the International Labour Organization (ILO) pegged India’s LFPR at 49% for 2022 distinctly higher than CMIE’s 40% for 2022.
• However, even by ILO’s standards, India’s LFPR lagged far behind other countries. According to CMIE, India’s LPR is woefully low when compared to some Latin American and Asian economies that boast far higher labour participation rates as estimated by the same ILO model.

Key takeaways:

• Regardless of the rate of GDP growth, the decline in LFPR is unabated.
• Dta shows that the bulk of the decline happened before the Covid pandemic. This was the time when the economy was decelerating sharply. The GDP in 2019-20 grew by less than 4%.
• India’s workforce is becoming increasingly male-dominated, thanks to India’s starkly low female LFPR.
• CMIE data shows that in 2016-17, females comprised only 15.3 per cent of the labour force in India. This fell to 12 per cent in 2019-20 and fell further to a mere 10.3 per cent in 2022-23.

5. DIFFERENTIAL TIME-BASED POWER TARIFFS

TAG:  PRELIMS PERSPECTIVE

THE CONTEXT: The Centre has signalled a move towards rolling out differential time-based electricity tariffs, which would entail discounted prices during an eight-hour period during daytime and premium or surge pricing during the peak power consumption hours. The Union Power Ministry announced amendments to the Electricity (Rights of Consumers) Rules, 2020, and the changes included the introduction of time-of-day (ToD) tariff provisions.

EXPLANATION:

• Broadly, time-based power tariff structures can be static predetermined tariffs based on time blocks or dynamic determined on a real-time basis in accordance with the actual demand conditions.
• There are some other variants as well, but those are combinations of static and dynamic pricing models. As per the notification issued by the Centre, ToD tariffs in India will be static, which means they will be decided in advance for different blocks of the day.

Time-of-day tariff norms :

• Under the ToD tariff system, the power tariff during “solar hours” the duration of eight hours a day as specified by the respective State Electricity Regulatory Commission (SERC) of the day shall be at least 20 per cent lower than the normal tariff.
• On the other hand, tariffs during peak hours will be at least 20 per cent higher than the normal tariff for commercial and industrial consumers, and at least 10 per higher for other consumers.
• ToD tariff would be applicable for Commercial and Industrial consumers having Maximum demand of 10 KW and above, from 1st April, 2024 and for all other consumers except agricultural consumers, latest from 1st April, 2025.
• Time of Day tariff shall be made effective immediately after installation of smart meters, for the consumers with smart meters. Smart meters are a prerequisite for ToD tariff systems.
• The amended rules prohibit the duration of peak power consumption hours to exceed the duration of the solar hours, which would be eight hours.
• As per the government, most SERCs have already implemented ToD tariffs for large commercial and industrial categories of consumers, and with the installation of smart meters, ToD metering at the domestic consumer level will also be introduced.
• Also, power distribution companies will be required to display on their websites the tariffs for each category of consumers, and in case of a change in rates, consumers will have to be notified at least a month in advance.

Potential benefits of ToD power tariffs:

• The TOD tariffs, which are separate tariffs for peak hours, solar hours, and normal hours, send price signals to consumers to manage their load according to the tariff.
• Since solar power is cheaper, the tariff during the solar hours will be less, so the consumer benefits.
• During the non-solar hours, mostly thermal, hydel, and gas-based power is consumed, which is relatively costlier than solar power.
• Hence, tariffs during non-solar hours will be relatively higher, reflecting the higher cost of electricity. As for peak power consumption hours, the government hopes to discourage consumers from placing excessive load on the grid with higher-than-normal tariffs.
• If the load on the grid during peak consumption hours goes down, the requirement for additional investments in grid infrastructure for maintenance and upgradation also declines over the medium to long term.
• The government also expects the ToD tariff structure to lead to better integration of renewable energy sources with the country’s electricity grid, which will hopefully expedite India’s energy transition.
• The ToD tariff will improve the management of renewable generation fluctuations, incentivize demand increase during the periods of high RE generation hours and thereby increase grid integration of larger quantities of renewable power.

Grid management tool:

• In India, which is the world’s third largest producer of renewable energy, nearly 40 per cent of installed electricity capacity comes from non-fossil fuel sources.
• This green push has resulted in a sharp 24 per cent reduction in the emission intensity of GDP between 2005 and 2016, but it has also thrown up challenges of a grid being increasingly powered by renewables.
• Even as the Lithium-ion storage battery option for grid application is now being ruled out as unviable, at least for now, an emerging policy push in the direction of solar and wind-based generation cannot continue to be pushed down to struggling electricity distribution companies or discoms.
• The renewables challenge is compounded by the fact that SECI (Solar Energy Corporation of India Ltd) — the state-owned company conducting solar auctions — has locked a number of contracts involving green developers in rigid PPAs (power purchase agreements) with no scope for innovation, according to sectoral experts.
• Energy storage is needed alongside green energy sources to primarily balance out the variability in a renewable generation – electricity is generated only when the sun shines or when the wind blows. This is not always in sync with the demand cycle. Storage can help tide over this shortcoming associated with renewables.
• For procurers such as state-owned discoms, renewables are not always a viable option precisely due to these vagaries in the generation trends, which means they still have to depend on thermal or nuclear generation for meeting base load demand. Renewables bundled with a viable storage option help overcome this problem.
• There are two alternatives being considered by the government now: hydrogen and hybrid generation models blended with off-stream pumped storage. In 2023, as the hidden challengesof the RE (Renewable Energy) transition are likely to manifest more concretely, the government is making a renewed push on both technologies. A policy for stepping up green hydrogen production and tapping into its potential as a fuel has just been cleared by the cabinet.
• The Union Ministry of Power has also wrapped up a survey of all pumped hydro sites and hydro PSUs have been given a target of taking up pumped hydro schemes. The Ministry of Power has also written to the Union Coal Ministry to consider the option of opencast mines as potential sites for pumped hydro in the future.

Constraints in integrating RE generation:

• The main challenge is the non-availability of natural gas to run gas turbines to complement the growing RE capacity in the generation mix.
• India’s vast fleet of coal-based power plants of 200 MW series is more than 25 years old, runs on old technology and does not promise robust reliability.
• The country’s current installed generation capacity is around 410 GW (1 gigawatt is 1,000 megawatts) while the maximum demand is around 229 GW. Of the installed capacity, the total electric power installed capacity from non-fossil fuel-based energy resources was 179 GW, which is over 40 per cent of the total electric power installed capacity, primarily solar and wind.
• To compensate for the intermittency, pumped-storage hydroelectric plants where it stores energy in the form of the gravitational potential energy of water that is generally pumped from a lower elevation reservoir to a higher elevation reservoir when renewable power is available, which is then released to move a turbine to generate electricity when renewable generation is not available – is being seen as the most viable alternative.