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Important Current Affairs for CLAT-10th August 2023

China’s Economy Slips into Deflation: Implications and Countermeasures

Deflation, the inverse of inflation, signifies a persistent decline in the general price levels of goods and services within an economy. The recent occurrence of deflation in China, the world’s second-largest economy, has triggered concerns about its economic prospects and the need for robust policy responses from Beijing.

Understanding Deflation

Deflation can be succinctly described as a continuous reduction in overall price levels across an economy. This situation contrasts with inflation, where prices increase over time. In China’s case, both the consumer price index (CPI) and producer price index (PPI) reported declines in July.

  1. Consumer Price Index (CPI) Decline: China’s CPI dipped by 0.3 percent year-on-year in July, marking its first decrease since February 2021.

  2. Producer Price Index (PPI) Decline: The PPI experienced its tenth consecutive monthly decline, falling by 4.4 percent, surpassing the predicted 4.1 percent decrease.

These statistics underscore the mounting economic challenges confronting China.

Causes of Deflation in China

Deflation can stem from multiple factors, such as reduced consumer demand, an oversupply of goods, technological innovations that lower production costs, or stringent monetary policies by central banks. In China’s context, the primary drivers of deflation are diminished consumer demand and an economic slowdown.

  1. Reduced Consumer Demand: When consumers anticipate further price drops, they tend to delay purchases. This leads to decreased demand for goods and services.

  2. Economic Slowdown: China’s economic deceleration has contributed to the decline in consumer spending, amplifying deflationary pressures.

Implications of Deflation

While falling prices may initially seem advantageous to consumers, deflation can yield detrimental effects on the economy, mirroring China’s predicament.

  1. Negative Demand Cycle: Deflation can initiate a damaging cycle. Anticipated price decreases prompt consumers to postpone purchases, leading to reduced demand, lower production, decreased business revenues, potential layoffs, and a subsequent decline in consumer spending.

  2. Economic Contraction: The cyclical reduction in economic activity can intensify, causing a downward spiral marked by economic contraction, job losses, and financial instability.

  3. Real Burden of Debt: Deflation elevates the actual burden of debt. As prices fall, the relative value of debt remains constant or increases, straining the capacity of individuals, businesses, and governments to manage their debt obligations.

Countermeasures and Central Bank Intervention

In a bid to maintain economic stability, central banks usually target a consistent level of inflation. Moderate inflation fosters spending, investment, and growth. When deflationary pressures emerge, central banks adopt measures to counteract these effects.

  1. Interest Rate Reduction: Central banks may lower interest rates to encourage borrowing and spending, thereby mitigating the decline in demand.

  2. Money Supply Increase: Augmenting the money supply injects liquidity into the economy, stimulating spending and preventing a deflationary spiral.

  3. Monetary Tools Deployment: Central banks deploy a variety of monetary tools, such as quantitative easing, to promote lending and economic activity.

India imposes anti-dumping duty on optical fibre imports from China, Korea and Indonesia

Based on the recommendations of the Directorate General of Trade Remedies (DGTR), the revenue department has imposed an anti-dumping duty on Dispersion Unshifted Single-Mode Optical Fiber (SMOF) imports from China, South Korea and Indonesia.

As reported by the Directorate General of Trade Remedies (DGTR), the domestic optical fiber industry has experienced detrimental consequences due to the surge of inexpensive and substandard imports from these nations. In response to these challenges, the Finance Ministry has introduced anti-dumping duties on specific optical fiber imports originating from these countries, aiming to address the adverse impacts on the domestic industry resulting from the influx of such dumped imports.

Significant SMOF Consumption Driven by Telecom Rollout, Connectivity, and Defense Applications

  • Single-Mode Optical Fiber (SMOF) finds substantial utilization in the deployment of 3G/4G/5G networks by telecommunications companies, linking gram panchayats, and strengthening defense infrastructure.

  • Its applications span the production of various optical fiber cables, encompassing unit-tube and multi-tube stranded variants, tight buffer cables, both armored and unarmored cables, ribbon cables, as well as dry core cables.

  • SMOF’s primary use lies in high-capacity data transmission, long-distance communication, and facilitating access networks.

  • Consequently, it sees widespread implementation in long-haul communications, metropolitan area networks (MANs), cable television (CATV) systems, optical access networks, and is adaptable for shorter-distance network configurations.

Ensuring Fair Trade through Anti-Dumping Measures

  • Anti-dumping actions are implemented to uphold equitable trade practices and establish a balanced competitive environment for the domestic industry. Their purpose is not to hinder imports or unjustly inflate product costs.

  • Nations initiate anti-dumping investigations to assess whether their local industries have been adversely affected by a sudden influx of imports priced below their production costs. In response, they impose duties in accordance with the global framework set by the World Trade Organization (WTO).

About Optical fibers

  • Optical fibers are employed for the transmission of data through light pulses.

  • These fibers are grouped together to create optical fiber cables, which facilitate the transfer of digital data signals as light over distances spanning hundreds of miles.

  • This method achieves greater throughput rates compared to what can be attained using electrical communication cables.

Pakistan’s Parliament Dissolved: Setting the Stage for National Election Amidst Crisis

In a significant political development, Pakistan’s President took the step of dissolving the country’s parliament as per the recommendation of Prime Minister Shehbaz Sharif. The lower house of the Parliament’s five-year term is due to end on August 12. This move comes at a critical juncture as Pakistan grapples with both political and economic challenges.

Pre-Election Scenario

The decision to dissolve the parliament was executed just three days prior to the culmination of the current parliamentary term. As part of the process, a caretaker administration will be established, jointly chosen by Prime Minister Shehbaz Sharif and a representative from the outgoing parliament’s opposition leadership.

This caretaker setup is designed to facilitate the holding of fresh elections within a span of 90 days. Sharif, addressing the parliament, announced his intention to advise the president to dissolve the body, setting this sequence of events in motion. Furthermore, discussions between Sharif and the opposition leader are slated to commence shortly, with a focus on selecting a caretaker prime minister from candidates proposed by both sides.

Potential Delay and Implications

However, it’s important to note that the actual electoral process might encounter a delay of several months. This pause is attributed to the election commission’s undertaking of constituency redrawing, based on the results of a recent census. Analysts have cautioned that any such postponement might incite public discontent and exacerbate uncertainty in the nation, particularly considering Pakistan’s nuclear capabilities.

Context of Previous Election and Political Dynamics

The most recent general election in July 2018 culminated in a victory for the party led by Imran Khan, the former cricketer-turned-politician. Khan assumed the role of prime minister shortly thereafter, marking his debut in the position. Khan’s tenure, however, was punctuated by political turmoil, including his removal via a no-confidence vote the following year.

This sequence of events raised concerns about the country’s stability. Subsequently, Khan encountered legal troubles, leading to his conviction, imprisonment, and disqualification from participating in elections for a five-year period.

Allegations and Challenges

Khan, throughout his political journey, accused the influential military establishment, which has historically wielded power in Pakistan, of orchestrating his removal from office. The military vehemently denied these allegations, underscoring the complexities and tensions within Pakistan’s political landscape.

Sharif’s Challenges and Economic Crisis

Stepping into Khan’s shoes, Prime Minister Shehbaz Sharif inherited an array of challenges, particularly an entrenched economic crisis characterized by soaring inflation and the need for extensive reforms to secure funding from the International Monetary Fund (IMF).

Credibility of Elections and Leadership Transition

While this impending election has been set in motion, the sidelining of Imran Khan, a prominent and popular leader as per polls, raises questions about the credibility of the electoral process. His absence from the political stage could potentially cast a shadow over the perceived fairness of the upcoming elections.

Over 5.25 crore subscribers enrolled in Atal Pension Yojana

The Atal Pension Yojana (APY) scheme has reached a remarkable milestone as it completes eight years of successful implementation, gathering an impressive enrollment of over 5.25 crore subscribers.

Atal Pension Yojana (APY): Vision and Purpose

Launched in the year 2015, the APY was devised as a potent tool to ensure old age income security for every Indian citizen, with a special focus on those who toil in the unorganized sector. Its design aimed to cast a protective net of financial stability, allowing individuals to embrace their golden years without the imminent presence of financial uncertainty.

Atal Pension Yojana (APY): A Nationwide Impact

  • Expanding its reach across the entire nation, the APY has seamlessly became an integral part of the Indian society.

  • Enrollments have shown a consistent upward trajectory since its inception, signifying the resonance of its objectives among the populace.

  • Notably, in the fiscal year 2022-23, new enrollments surged by an impressive 20% compared to the previous year. This growth echoes the trend observed in FY 2021-22, which witnessed a robust 25% increase over FY 2020-21.

Atal Pension Yojana (APY): Fruitful Returns

  • The APY has generated an impressive investment return of 8.92%, a testament to its ability to yield consistent results.

  • The cumulative assets under management within the APY framework have now surpassed a noteworthy Rs. 28,434 crore, further solidifying its position as a cornerstone of fiscal responsibility.

Atal Pension Yojana (APY): Accessible and Inclusive

  • Open to every Indian citizen aged between 18 and 40 years, not subject to income taxation, and equipped with a savings bank account, the APY welcomes individuals from diverse walks of life.

  • In return for their commitment, subscribers are guaranteed a lifelong minimum pension, ranging from Rs. 1000 to Rs. 5000 per month upon crossing the threshold of 60 years, a tangible reward for their foresight.

Pension Fund Regulatory and Development Authority (PFRDA): Nurturing a Pensioned Society

  • The Pension Fund Regulatory and Development Authority (PFRDA) remains committed to evolve the country into a society with a strong pension framework.

  • As the APY embarks on its remarkable eight-year journey, it strengthens the determination to introduce an era characterized by financial security and respect for the elderly within India’s populace.

About The Pension Fund Regulatory and Development Authority (PFRDA)

  • The Pension Fund Regulatory and Development Authority (PFRDA) functions as the central body entrusted with the comprehensive supervision and regulation of pension systems in India.

  • Established in 2003 under the jurisdiction of the Ministry of Finance, its inception was part of the establishment of the Indian National Pension Scheme.

Public sector banks and major private banks collected over ₹35,000 cr in charges

As per a Finance Ministry report, both state-owned banks and leading private banks have garnered more than ₹21,000 crore in fees primarily from account holders failing to maintain the minimum balance.

Charges amounting to over ₹35,000 crore have been amassed since 2018 due to reasons such as non-compliance with minimum balance requirements, additional ATM transactions, and SMS services.

Breakdown of Charges

  • The report highlighted that a significant portion of the collected charges, totaling over ₹21,000 crore, resulted from customers failing to maintain the minimum balance required in their accounts.

  • Furthermore, a substantial sum of ₹8,000 crore was accrued from transactions conducted through ATMs beyond the stipulated number of free transactions.

  • Another noteworthy contributor to the collected charges is SMS services, generating over ₹6,000 crore. Banks charge customers for sending SMS alerts, and the Reserve Bank of India (RBI) has advised banks to ensure that such charges are reasonable and based on actual usage.

Monthly Average Balance and ATM Transaction Charges

This monthly average balance (MAB) or average monthly balance (AMB) varies across different locations, ranging from ₹3,000 to ₹10,000 in metros, ₹2,000 to ₹5,000 in urban areas, and ₹500 to ₹1,000 in rural regions. Failure to meet this balance criterion leads to penalties, which can range from ₹400 to ₹500, depending on the bank.

The charges for each subsequent ATM transaction are capped at ₹21 per transaction, as of January 1, 2022. This policy aims to encourage prudent ATM usage while minimizing undue financial strain on customers. Customers are typically entitled to five free transactions per month at their own bank ATMs, along with a fixed number of free transactions from other bank ATMs.

RBI’s Role and Regulations

The RBI plays a pivotal role in overseeing and regulating these banking charges. RBI circular permits banks to establish penal charges for non-maintenance of minimum balance in savings accounts, as long as these charges align with the banks’ board-approved policies.

The RBI emphasizes that these charges should be reasonable and in line with the average cost of providing services. Moreover, the central bank has urged financial institutions to ensure fairness and equity in the fees associated with sending SMS alerts to customers.

Australia to be testing ground for US missiles

Australia’s involvement in the AUKUS (Australia, United Kingdom, United States) pact has gained attention due to its potential role as a testing ground for advanced hypersonic and long-range precision weapons. The agreement, initially focused on supplying Australia with nuclear-powered submarines, has evolved to address the growing influence of China in the Asia-Pacific region. U.S. Secretary of the Army Christine Wormuth highlighted Australia’s unique contributions and the collaborative nature of the pact.

Australia’s Non-Monetary Contribution

While Australia’s involvement in AUKUS includes the exchange of advanced defense technologies, Secretary Wormuth emphasized that its contribution doesn’t solely revolve around financial commitments. Australia’s strategic geographical attributes, including vast distances and sparsely populated land, make it an ideal testing ground for cutting-edge weaponry.

AUKUS Pact and China’s Influence

The AUKUS pact, signed in late 2021, serves as a strategic response to counter China’s increasing dominance in the Asia-Pacific region. By enhancing Australia’s defense capabilities, the pact aims to create a deterrent against potential aggression from China, a stance that has been criticized by Beijing but strongly supported by the pact’s member nations.

Evolution of AUKUS Focus

Initially centered on the acquisition of nuclear-powered submarines, the AUKUS pact has broadened its scope to include advanced technologies such as long-range precision firing, artificial intelligence, and hypersonic weapons. The pact’s evolution reflects the partners’ commitment to staying at the forefront of defense innovation and adapting to emerging threats.

Australia’s Potential as a Proving Ground

Secretary Wormuth highlighted Australia’s potential as a proving ground for advanced weapons. With extensive territory and limited population, Australia provides an advantageous environment for testing various weapon systems, particularly hypersonic technologies and long-range precision missiles.

Challenges of Testing in the United States

The United States faces challenges in testing advanced weapons due to limited open spaces for conducting experiments. Secretary Wormuth noted that Australia’s ample landmass offers a more feasible testing environment compared to the densely populated regions in the U.S.

Cooperative Nature of AUKUS

Despite criticism that the AUKUS pact might lead to domination by the United States, Secretary Wormuth emphasized the cooperative nature of the partnership. She indicated that Australia and the United Kingdom are committed to actively participating in the pact’s objectives and ensuring their national security interests are met.

Motivations Behind Australia’s Participation

Australia’s engagement in the AUKUS pact stems from its recognition of the security challenges in the region. Senior Australian officials view the pact as a strategic move aligned with their national interests, aiming to address diverse challenges within the theater, including potential conflicts involving Russia, North Korea, and China.

Shifting U.S. Defense Strategy

Historically, the U.S. aimed to be capable of fighting two major wars simultaneously. However, evolving budget constraints, public sentiment, and the rising capabilities of Russia and China have led to a shift in this doctrine. The United States now focuses on strengthening defense alliances and using its nuclear arsenal to deter aggression, acknowledging the impracticality of simultaneously engaging in multiple major conflicts.

Cabinet approves Rs 1.39 lakh cr for connecting 6.4 lakh villages with broadband

The Union Cabinet has approved the final phase of the last-mile optical fiber-based broadband connectivity plan, covering 6.4 lakh villages across India under the BharatNet project. This initiative is supported by a budget of Rs 1.39 lakh crore.

Through this enhancement, the Department of Telecommunications (DoT) seeks to accelerate the endeavor of linking all 6.4 lakh villages within the upcoming two and a half years. The ongoing progress has seen nearly 1.94 lakh villages already integrated into the BharatNet project.

BBNL’s Collaborative Endeavor

  • Bharat Broadband Network Limited (BBNL), a subsidiary of the state-controlled BSNL, will collaborate with village-level entrepreneurs (VLEs) to offer the final leg of connectivity.

  • BBNL will provide customer premise equipment and additional fibre required for connecting homes while local entrepreneurs have been tasked with maintaining the network.

Empowering Employment and Expansion

Beyond its financial implications, this initiative bears the potential to generate a substantial employment opportunity, envisaging a staggering 250,000 jobs. This visionary project crystallized its form subsequent to a meticulously executed pilot program across four districts, achieving an impressive expansion to encompass 60,000 villages across the nation within a mere year.

About Bharat Broadband Network Limited (BBNL)

  • BharatNet, recognized as Bharat Broadband Network Limited (BBNL) is a public sector undertaking established under the Department of Telecommunications, a division under the Ministry of Communications within the Indian Government.

  • The primary aim of BharatNet is to establish, oversee, and manage the National Optical Fibre Network, thereby delivering broadband connectivity to all 250,000 gram panchayats across the nation.

  • Encompassing around 625,000 villages, BBNL’s initiative bolsters the fundamental structure of India’s countrywide broadband internet, aligning with the mission of achieving Digital India.

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