Current Affair

Back
DAILY CURRENT AFFAIRS, 30 APRIl 2024

DEEPFAKES

1. Context

Four Telangana Congress office-bearers also summoned by Delhi Police along with the CM

Cases filed in Delhi, Assam, Maharashtra over video with Home Minister’s comments on quota

Assam CM, State police say one arrested in connection with the controversial video

2. What are Deepfakes

  • Deepfake is a type of synthetic media in which a person in an already-existing video or image is replaced with another person. It manipulates the audio/video, which has the propensity to the device, using machine learning and artificial intelligence.
  • Due to the ease with which bogus news, celebrity pornographic content, etc. get shared online, it has drawn attention.
  • It makes a fake version of original or real audio-visual content by superimposing a new audio or image over an existing media file.
  • In September 2019, the AI company Deeptrance discovered 15,000 deep fakes videos online-nearly tripling in just nine months. A starting 96% of them were pornographic, and 99% of them matched the faces of famous women to porn actors.
  • Deepfakes can be used to damage reputation, fabricate evidence, defraud the public, and undermine trust in democratic institutions.
  • All this can be achieved with fewer resources, with scale and speed, and even microtargeted to galvanize support.
3. How did Deepfakes Work?
  • Deepfake content is created by using two competing AI algorithms- one is called the generator and the other is called the discriminator.
  • The discriminator is tasked with determining if the fake multimedia content produced by the generator is real and manufactured.
  • A generative adversarial network is created when the generator and discriminator work together (GAN). Every time the discriminator correctly recognizes the content as being fake, it gives the generator important insights into how to make the next deep fakes better.
  • The first step in establishing a GAN is to identify the desired output and create a training dataset for the generator.
  • Video clips can be supplied to the discriminator after the generator starts producing output at a level that is acceptable.
4. Who are the Victims?
  • The first case of malicious use of deep fake was detected in pornography. According to sensity.ai, 96% of deepfakes are pornographic videos, with over 135 million views on pornographic websites alone. Deepfake pornography exclusively targets women.
  • Pornographic deepfakes can threaten, intimidate, and inflict psychological harm. It reduces women to sexual objects causing emotional distress, and in some cases, leading to financial loss and collateral consequences like job loss.
  • Deepfake could act as a powerful tool by a malicious nation-state to undermine public safety and create uncertainty and chaos in the target country. Deepfake can undermine trust in institutions and diplomacy.
5. Challenges with Deepfake
  • Deepfake causes financial fraud, which poses problems for the entire financial system.
  • In the era of the threat of fake news, it also poses a threat to the security of cyber systems and the validity of online registration.
  • Deepfakes in phishing efforts would make it more challenging for people to recognize a hoax.
  • In any nation, deep fakes can be used to sabotage democratic procedures like elections.
  • The potential for harm to people, organizations, and societies is enormous since it can be used to generate phony pornographic videos and make politicians appear to say things they did not.
  • Any genuine evidence of a crime can be easily discounted as false because the public is so distrustful due to the prevalence of deep fakes.
  • Fake movies are likely to become more popular outside the world of celebrities as new technology enables unskilled people to create deep fakes with just a few images. This will feed the growth of revenge porn.
  • The use of fake identities and impostor frauds in cybercrime is rising.

6. What is the Solution?

  • Media literacy efforts must be enhanced to cultivate a discerning public. Media literacy for consumers is the most effective tool to combat disinformation and deep fakes.
  • We also need meaningful regulations with a collaborative discussion with the technology industry, Civil society, and policymakers to develop legislative solutions to disincentivize the creation and distribution of malicious deepfakes.
  • Social media platforms are taking cognizance of the deepfake issue, and almost all of them have some policy or acceptable terms of use for deepfakes.
  • We also need easy-to-use and accessible technology solutions to detect deepfakes, authenticate media, and amplify authoritative sources.

For Prelims & Mains

For Prelims: Artificial Intelligence (AI), Deepfake Technology,  and AI algorithms.
For Mains: 1. What are deepfakes and explain the challenges with deep-fake technology in the present technological world.
 
Source: The Hindu
 

DIRECTORATE OF ENFORCEMENT (ED)

1. Context

The Enforcement Directorate (ED) has maintained in the Supreme Court that former Tamil Nadu Minister V. Senthilbalaji played a “central and pivotal role” in a “job racket scam” during 2014-15.

2. About the Directorate of Enforcement 

The Directorate of Enforcement (ED) is a law enforcement agency in India that operates under the Department of Revenue, Ministry of Finance. It is responsible for enforcing economic laws and fighting financial crimes in the country. The primary objective of the Directorate of Enforcement is to enforce the provisions of two major laws:

  • Foreign Exchange Management Act (FEMA): This law deals with foreign exchange and foreign trade in India. The ED ensures compliance with FEMA regulations and investigates violations related to foreign exchange transactions.

  • Prevention of Money Laundering Act (PMLA): The ED is also responsible for implementing the provisions of the PMLA, which focuses on preventing money laundering and combating the financing of terrorism. It investigates cases related to money laundering and takes appropriate action against those involved.

The Directorate of Enforcement plays a crucial role in maintaining the economic stability of the country by addressing financial offenses and ensuring compliance with relevant laws. It conducts investigations, searches, and seizures, and has the authority to attach and confiscate properties acquired through illegal means

3. Establishment and History

  • The Directorate of Enforcement was established on 1st May 1956, as the "Enforcement Unit" within the Department of Economic Affairs.
  • Its primary focus was on preventing and detecting violations of the Foreign Exchange Regulation Act (FERA) of 1947.
  • Over the years, the agency's role expanded, and in 1999, the Enforcement Directorate was established as a separate entity under the Ministry of Finance.
  • The enactment of the Prevention of Money Laundering Act (PMLA) in 2002 further broadened its jurisdiction, giving it the power to investigate cases related to money laundering.
  • Since its establishment, the ED has played a crucial role in combating economic offences and ensuring compliance with economic laws in India.
  • It has been involved in several high-profile cases, including those related to financial scams, money laundering by influential individuals, and cross-border financial crimes.
  • The ED collaborates with various domestic and international agencies, including financial intelligence units, law enforcement agencies, and Interpol, to gather information, share intelligence, and effectively coordinate efforts to combat economic offences.

4. Functions and Roles of ED

4.1. Enforcing Economic Laws

  • The primary function of the ED is to enforce two key economic laws in India: the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).
  • It ensures compliance with these laws and investigates money laundering, foreign exchange violations, and economic fraud cases.

4.2. Money Laundering Investigations

  • The ED investigates cases involving money laundering, which is the process of concealing the origins of illegally obtained money to make it appear legitimate.
  • It identifies and seizes properties and assets derived from illicit activities and prevents their further use.

4.3. Foreign Exchange Violations

  •  The ED is responsible for investigating cases related to violations of foreign exchange laws and regulations.
  • It monitors and controls foreign exchange transactions to maintain the stability of the Indian rupee and prevent illegal activities such as smuggling and illegal money transfers.

4.4 Financial Frauds

  • The ED also investigates and takes action against financial frauds, including bank frauds, Ponzi schemes, and other fraudulent activities affecting the Indian financial system.
  • It works closely with other law enforcement agencies, such as the Central Bureau of Investigation (CBI), to tackle complex financial crimes.

5.  Challenges

5.1. The complexity of economic crimes.

  • Economic crimes are often complex and involve a variety of financial transactions.
  • This can make it difficult for the ED to trace the proceeds of crime and to build a case against the perpetrators.

5.2. The difficulty of tracing the proceeds of crime

  • The proceeds of crime are often hidden in complex financial structures, making it difficult for the ED to track them down.
  • The ED also faces challenges in obtaining information from foreign jurisdictions, where the proceeds of crime may have been transferred.

5.3. The lack of international cooperation

  • Economic crime is often transnational, making it difficult for the ED to cooperate with foreign law enforcement agencies.
  • This is due to differences in legal systems, as well as political and economic considerations.

5.4. Political interference

  • The ED has been accused of being used as a political tool by the ruling party to target its opponents and critics.
  • This has raised questions about the independence and impartiality of the ED.

5.5. Lack of transparency

  • The ED has been criticized for its lack of transparency.
  • The agency does not publish its annual reports, and it is difficult to obtain information about its investigations.
  • This has made it difficult for the public to hold the ED accountable.

5.6. Human rights violations

  •  The ED has been accused of violating the human rights of those it investigates.
  • The agency has been accused of using coercive tactics, such as prolonged detention and interrogation, to extract confessions from suspects.

5.7. The limited resources

  • The ED is a relatively small agency with limited resources.
  • This can make it difficult for the ED to investigate complex economic crimes and prosecute the perpetrators.

6. Conclusion

  • The Directorate of Enforcement in India plays a crucial role in enforcing economic laws, preventing money laundering, and combating financial crimes.
  • With its specialized expertise, investigative capabilities, and coordination with domestic and international partners, the ED contributes to the integrity of the financial system, national security, and the country's overall socio-economic development.
For Prelims: Directorate of Enforcement, Financial Action Task Force, Prevention of Money Laundering Act (PMLA), the Foreign Exchange Management Act (FEMA), Supreme Court, Foreign Exchange Regulation Act (FERA) of 1947, Central Bureau of Investigation, 
For Mains: 
1. Discuss the establishment and evolution of the Directorate of Enforcement in India. Explain its key functions and roles in combating economic offences. (250 Words)
 
 

Previous Year Questions

1. Which one of the following is not correct in respect of Directorate of Enforcement ? (CDS  2021)
A. It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance.
B. It enforces the Foreign Exchange Management Act, 1999.
C. It enforces the Prevention of Money Laundering Act, 2002.
D. It enforces the Prohibition of Benami Property Transaction Act, 1988.
 
Answer: D
 
2. The Prevention of Money Laundering Act, 2002 become effective since which one of the following dates? (UKPSC RO/ARO 2012)
 
A. July 2002          B. August 2003        C. July 2004         D. July 2005
 
Answer: D
 
3. FEMA (Foreign Exchange Management Act) was finally implemented in the year (UPPSC  2013)
A. 1991         B. 1997         C. 2000             D. 2007
 
Answer: C
 
4. The Foreign Exchange Regulation Act was replaced by the ______ in India. (SSC Steno 2020) 
A. Foreign Exchange Currency Act
B. Foreign Exchange Finances Act
C. Foreign Exchange Funds Act
D. Foreign Exchange Management Act
 
Answer: D
 
5. "Central Bureau of Intelligence and Investigation" is listed in the __________ list given in the Seventh Schedule of the Constitution of India. (SSC CGL 2017) 
A. Union             B. State             C. Global          D. Concurrent
 
Answer: A
 
Source: The Indian Express
 

UNCLASSED FORESTS

 
 
 
1. Context
 
 
Recently, Following a directive from the Supreme Court, the Ministry of Environment, Forests, and Climate Change (MoEFCC) published the State Expert Committee (SEC) reports on its website in April. This action came in response to a public interest litigation questioning the legality of the Forest (Conservation) Act Amendment (FCAA) 2023. One of the primary issues raised in the petition was the uncertainty surrounding the identification of unclassed forests, a task assigned to the SEC reports.

2. Unclassed Forests

 

  • Unclassed forests, also known as deemed forests, are areas of land that possess forest-like characteristics but have not been officially classified or notified as protected forest areas.
  • These forests may vary in terms of ownership, ranging from government entities such as forest departments or revenue departments to community-owned or privately-owned lands.
  • Despite their ecological significance, unclassed forests often lack legal protection, leaving them vulnerable to exploitation and degradation.
  • The identification and conservation of unclassed forests have become increasingly important in environmental and conservation efforts.
  • Policies and regulations, such as the Forest (Conservation) Act and various state-specific forest policies, aim to address the protection and sustainable management of these forests.
  • However, challenges such as incomplete data, lack of verification, and inadequate regulatory oversight pose obstacles to effectively safeguarding unclassed forests and ensuring their long-term ecological integrity.
 

3. Forest (Conservation) Act Amendment (FCAA) 2023

 

The Forest (Conservation) Act Amendment (FCAA) 2023 brings significant changes to the legal protection of unclassed forests, as established by the landmark T.N. Godavarman Thirumalpad (1996) case. Under this amendment, unclassed forests, also known as deemed forests, face the risk of losing their protection, potentially leading to their diversion for non-forest purposes. The amendment mandates the preparation of State Expert Committee (SEC) reports to identify these forests, which fall outside of notified forest areas.

Key Provisions of the FCAA

  • The FCAA broadens the scope of the Forest (Conservation) Act, 1980, to include all categories of forests, regardless of ownership or notification status. This encompasses forests defined by their dictionary meaning, along with unclassed forests.
  • With the FCAA in effect, any diversion of unclassed forests for non-forest purposes necessitates approval from the Central government. This measure aims to regulate and oversee the utilization of unclassed forests, ensuring their conservation and sustainable management.
  • Unclassed forests may be owned by various entities, including government bodies such as forests, revenue departments, and railways, as well as communities and private individuals. Despite their ownership diversity, unclassed forests share the characteristic of not being officially notified as protected forest areas.

 

4. Identification Status of Unclassed Forests

 

The identification of unclassed forests, mandated by the Forest (Conservation) Act Amendment (FCAA) 2023, has been a subject of uncertainty and scrutiny since the landmark T.N. Godavarman Thirumalpad judgment in 1996. Recent developments shed light on the efforts and challenges surrounding this crucial task.

Challenges in Identification Process

  • Despite assertions by the Ministry of Environment, Forests and Climate Change (MoEFCC) to a Joint Parliamentary Committee that State Expert Committees (SECs) had identified unclassed forests, the actual status remained ambiguous. An RTI application revealed that the MoEFCC did not possess the required reports, casting doubt on the progress of identification.
  • Seven States and Union Territories, including Goa, Haryana, Jammu & Kashmir, Ladakh, Lakshadweep, Tamil Nadu, and West Bengal, reportedly did not establish SECs. This lack of institutional framework hindered the identification process in these regions.
  • Many States cited the short duration provided by the Supreme Court and the voluminous nature of the task as reasons for their inability to conduct physical surveys and demarcate unclassed forest lands within the stipulated time frame.

Developments in Identification Efforts

  • The MoEFCC has recently uploaded SEC reports on its website, offering transparency regarding the progress of identification efforts across states.
  • However, the uploaded reports paint a concerning picture, as many states have not provided verifiable data on the identification, status, and location of unclassed forests. Only 17 out of 23 states have submitted reports aligned with the directives of the Court.

 

5. Analysis and Concerns of SEC Reports

 

The State Expert Committee (SEC) reports, aimed at identifying unclassed forests as per the Forest (Conservation) Act Amendment (FCAA) 2023, reveal several critical insights and challenges

Reported Findings

  • Only nine States have provided information on the extent of unclassed forests, while most states and Union Territories (UTs) have focused on detailing various types of forest areas under government ownership.
  • The majority of States and UTs have not specified the geographic locations of forests in their reports. Any geographical information provided pertains mainly to reserve or protected forests, which is redundant as it is already available with Forest Departments.
  • SEC reports question the accuracy of forest area assessments by the Forest Survey of India. For instance, Gujarat's SEC report indicates unclassed forests covering 192.24 sq. km, contrasting sharply with the Forest Survey's estimate of 4,577 sq. km (1995-1999). Such discrepancies raise concerns about the reliability of forest area data.

Challenges and Implications

  • The treatment of SEC reports without on-ground verification raises concerns about the potential destruction of forests that should have been identified, demarcated, and protected nearly three decades ago. The absence of baseline data from 1996-1997 further complicates efforts to assess the extent of forest loss over time.
  • Instances such as Kerala's SEC report omitting ecologically fragile areas like the Pallivasal unreserve in Munnar highlight the risk of overlooking critical habitats, potentially exacerbating environmental vulnerabilities, as witnessed during events like the devastating 2018 floods.

6. Potential Effects of Forest (Conservation) Act Amendment (FCAA)

 

The enactment of the Forest (Conservation) Act Amendment (FCAA) is likely to have significant repercussions on India's forests and ecological landscape.

  • The potential loss of unclassed forests, as highlighted by the SEC reports, is a matter of concern across all States. This loss could lead to adverse ecological consequences, including habitat destruction, loss of biodiversity, and disruption of ecosystem services.
  • The hurried compilation of SEC reports using incomplete and unverified data suggests a lack of thoroughness in the identification process. This raises questions about the reliability and accuracy of the information presented to the Supreme Court.
  • The failure to fully implement the directives of the T.N. Godavarman Thirumalpad judgment represents a missed opportunity to align with the Indian Forest Policy's goals of achieving specific forest cover targets. This failure undermines the conservation and sustainable management of India's forest resources.
  • The promulgation of the FCAA without adequate examination of the SEC reports reflects a lack of diligence on the part of the Ministry of Environment, Forests, and Climate Change (MoEFCC). This oversight could have serious implications for India's ecosystems and ecological security.

Call for Accountability and Remedial Action

  • Those responsible for the oversight and implementation of forest conservation measures, including the preparation of SEC reports, need to be held accountable for any shortcomings or negligence in fulfilling their obligations.
  • The national government must take prompt and decisive action to address the deficiencies in the identification, retrieval, and protection of forest areas, as mandated by the 1996 Supreme Court judgment. This may involve revisiting the identification process, enhancing data collection methods, and strengthening conservation efforts to safeguard India's forests for future generations.
7. The Way Forward
 
 
By implementing the recommendations, India can move towards a more comprehensive and effective approach to managing unclassed forests. This will require collaboration between government agencies, local communities, and civil society organizations. Protecting these vital ecosystems is essential for safeguarding India's biodiversity, ecological security, and the well-being of future generations.
 
 
For Prelims: Ministry of Environment, Forests, and Climate Change, Forest (Conservation) Act Amendment (FCAA), State Expert Committee,  Forest (Conservation) Act, 1980
For Mains: 
1. The Forest (Conservation) Act Amendment (FCAA) 2023 has raised concerns about the potential weakening of protection for unclassed forests. Discuss the potential ecological and legal consequences of the FCAA, and suggest measures to ensure the sustainable management of these forests. (250 words)
2. “Forests are the lungs of our planet.” Discuss the importance of unclassed forests for India's ecological security and suggest a multi-pronged approach for their sustainable management. (250 words)
 
Previous Year Questions
 
1. Which of the following statements about tropical rainforests are correct? (UPSC CAPF 2021)
1. The soils of tropical rainforests are quite infertile.
2. The vegetation is evergreen, enabling photosynthesis to take place year around.
3. They have been described as 'deserts covered by trees'.
4. They are the most productive land-based ecosystem.
Select the correct answer using the code given below.
A. 2 and 4 only             B. 1, 3, and 4 only        C. 1, 2, and 3 only           D. 1, 2, 3 and 4
 
2. "If rainforests and tropical forests are the lungs of the Earth, then surely wetlands function as its kidneys." Which one of the following functions of wetlands best reflects the above statement? (UPSC 2022)
A. The water cycle in wetlands involves surface runoff, subsoil percolation, and evaporation.
B. Algae form the nutrient base upon which fish, crustaceans, molluscs, birds, reptiles, and mammals thrive.
C. Wetlands play a vital role in maintaining sedimentation balance and soil stabilization.
D. Aquatic plants absorb heavy metals and excess nutrients.
 
3. If the tropical rainforest is removed, it does not regenerate quickly as compared to the tropical deciduous forest. This is because (UPSC 2011)
A. The soil of rain forest is deficient in nutrients.
B. propagules of the trees in the rainforest have poor viability.
C. The rainforest species are slow-growing.
D. exotic species invades the fertile soil of rain forest.
 
4. Consider the following States:
1. Arunachal Pradesh
2. Himachal Pradesh
3. Mizoram
In which of the above States do 'Tropical Wet Evergreen Forests' occur? (UPSC 2015)
A. 1 only       B. 2 and 3 only           C. 1 and 3 only          D. 1, 2 and 3
 
 
5. The Ministry of Environment, Forest and Climate Change recently published the draft Environment Impact Assessment (EIA) Notification, in 2020. Which of the following statements is correct about EIA? (Punjab Civil Service 2020)
1. It predicts the effect of a proposed industrial/infrastructural project on the environment.
2. It prevents the proposed activity/project from being approved without proper oversight or taking adverse consequences into account.
3. It compares various alternatives for a project and seeks to identify the one which represents the best combination of economic and environmental costs and benefits.
4. As per the new notification, Coal and non-Coal mineral prospecting and solar photovoltaic projects do not need prior environmental clearance.
Select the correct answer using the code given below:
A. Only 1 and 2  B. Only 2, 3 and 4      C. Only 1, 2 and 3      D. Only 1, 2 and 4
 
6. With reference to the Bombay Natural History Society (BNHS), consider the following statements: (UPSC 2014)
1. It is an autonomous organization under the Ministry of Environment and Forests.
2. It strives to conserve nature through action-based research, education, and public awareness.
3. It organizes and conducts nature trails and camps for the general public.
Which of the statements given above is/are correct?
A. 1 and 3 only          B. 2 only            C. 2 and 3 only              D. 1, 2 and 3
 
7. Consider the following statements: (UPSC 2019)
1. As per law, the Compensatory Afforestation Fund Management and Planning Authority exists at both National and State levels.
2. People's participation is mandatory in the compensatory afforestation programmes carried out under the Compensatory Afforestation Fund Act, 2016.
Which of the statements given above is/are correct? 
A. 1 only          B. 2 only             C. Both 1 and 2                D. Neither 1 nor 2
 
8. Consider the following States: (UPSC 2019)
1. Chhattisgarh
2. Madhya Pradesh
3. Maharashtra
4. Odisha
With reference to the State mentioned above, in terms of the percentage of forest cover to the total area of the State, which one of the following is the correct ascending order?
A. 2-3-1-4        B. 2-3-4-1         C. 3-2-4-1                D. 3-2-1-4

9. At the national level, which ministry is the nodal agency to ensure effective implementation of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006? (UPSC 2021)

(a) Ministry of Environment, Forest and Climate Change
(b) Ministry of Panchayati Raj
(c) Ministry of Rural Development
(d) Ministry of Tribal Affairs

10. A particular State in India has the following characteristics: (UPSC 2012)

1. It is located on the same latitude which passes through northern Rajasthan.
2. It has over 80% of its area under forest cover.
3. Over 12% of forest cover constitutes the Protected Area Network in this State.

Which one among the following States has all the above characteristics?

(a) Arunachal Pradesh          (b) Assam       (c) Himachal Pradesh        (d) Uttarakhand

11. Consider the following statements: (UPSC 2019)
1. As per recent amendment to the Indian Forest Act, 1927, forest dwellers have the right to fell the bamboos grown on forest areas.
2. As per the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, bamboo is a minor forest produce.
3. The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 allows ownership of minor forest produce to forest dwellers.
Which of the statement given above is/are correct?
A. 1 and 2 only         B. 2 and 3 only         C. 3 only             D. 1, 2 and 3
 
12. The Indian Forest Act 1927 was enacted after repealing which of the following Indian forest acts? (SSC CGL 2021)
A. Indian Forest Act, 1922
B. Indian Forest Act, 1878
C. Indian Forest Act, 1865
D. Indian Forest Act, 1882
 
13. In which year Forest Conservation Act was passed? (UPTET 2019)
A.  1986     B. 1990           C. 1980         D. 1988
 
Answer: 1-D, 2-D, 3-A, 4-C, 5-D, 6-C, 7-A, 8-C, 9-D, 10-A, 11-B, 12-B, 13-C

Mains

1. What are the consequences of Illegal mining? Discuss the Ministry of Environment and Forests’ concept of GO AND NO GO zones for coal mining sector. (UPSC 2013)
2. Examine the status of forest resources of India and its resultant impact on climate change. (UPSC 2020)
Source: The Hindu

PARADOX OF THRIFT 

 
 
1. Context 
 
 
The recent discussions in India have centred around the decline in household savings, a topic of significant concern. This decline is primarily attributed to a substantial decrease in net financial savings, resulting in the household net financial savings to GDP ratio reaching its lowest point in four decades. Despite a slight recovery in physical savings, the notable reduction in household net financial savings during 2022-23 has contributed to an overall downturn in household savings.
 

2. About the Paradox of Thrift

 

  • The paradox of thrift, also known as the paradox of savings, posits that an increase in individual savings rates may lead to a decrease, rather than an increase, in overall savings within an economy.
  • This contradicts the conventional notion that higher savings rates at the individual level automatically translate into higher overall savings at the macroeconomic level.
  • While saving is generally considered beneficial for individual households, it is argued that excessive saving can have adverse effects on the broader economy.
  • This concept is a key component of under-consumption theories of the business cycle, which suggest that economic downturns can be attributed to insufficient consumption and excessive saving.
  • In such scenarios, high levels of saving can result in reduced consumer spending, leading to decreased demand for goods and services, lower production levels, and ultimately, economic stagnation or recession.
  • Therefore, while saving is prudent at the household level, an overemphasis on saving across the economy can have unintended negative consequences on economic growth and stability.

3. Origins of the Theory
 

The concept of the paradox of thrift, popularized by British economist John Maynard Keynes in his seminal work "The General Theory of Employment, Interest, and Money" published in 1936, had earlier discussions by economists William T. Foster and Waddill Catchings in their works "Business without a Buyer" and "The Dilemma of Thrift."

Keynesian Perspective

  • Keynesian economists argue that higher savings rates can have detrimental effects on the broader economy and advocate for boosting consumer spending as a means to foster economic growth.
  • They posit that savings are typically invested by capitalists to sell their output as final goods and services to consumers.
  • Consequently, if consumers fail to spend sufficiently on the goods and services brought to market by capitalists, it can result in losses for capitalists and discourage further investment.

Impact on Savings and Investment

  • According to Keynesian economists, an increase in individual savings can lead to a decrease in overall savings and investment due to reduced spending on final goods and services.
  • They emphasize that fluctuations in consumer spending are a primary driver of the business cycle.
  • As a solution, they recommend various government interventions during economic downturns, including increasing government spending to inject more money into consumers' hands.

Keynesian Economic Policy

  • In the Keynesian framework, the main challenge for fiscal and monetary authorities is to stimulate sufficient consumer spending on final goods and services to justify the costs incurred by capitalists in their production.
  • This perspective underscores the importance of government action to manage aggregate demand and stabilize the economy during periods of economic instability.

 

4. Criticisms of the Paradox of Thrift

 

Savings and Investment Dynamics

  • Critics contend that saving more is not detrimental to the economy and refute the notion that a decrease in consumer spending leads to a corresponding decline in investment.
  • They argue that reduced consumer spending leads to an increase in savings, which in turn fuels investment.
  • Any money not spent on consumer goods is diverted towards savings, which subsequently gets invested.

Impact on Aggregate Demand

  • Critics challenge the idea that a decrease in consumer spending results in reduced investment due to a lack of consumer demand for final goods and services.
  • They argue that lower consumer spending prompts capitalists to redirect savings towards investments in factors of production.
  • This offsets the decline in consumer demand, maintaining aggregate demand in the economy.

Capital Allocation

  • Critics assert that a drop in consumer spending prompts capitalists to allocate savings towards longer-term business projects, which were previously considered unviable.
  • As consumers save more, capitalists invest in projects that cater to future consumer demand.
  • This reallocation of savings enables the economy to pursue projects with higher long-term returns, contributing to economic growth.

Time Preference

  • Critics emphasize the role of consumer preferences in shaping investment decisions. They argue that as consumers prioritize future consumption over immediate consumption, capitalists adjust investment strategies accordingly.
  • This realignment allows for the expansion of economic output over time, driven by investments in projects that cater to future consumer needs.
 
5. The Way Forward
 
Addressing the decline in household savings requires a multi-pronged approach that tackles the root causes, encourages balanced saving and consumption behaviours, and fosters financial literacy and inclusion. By prioritizing economic stability, promoting responsible public finances, and implementing targeted policies, India can navigate the complexities of the paradox of thrift and unlock its full economic potential.
 
 
For Prelims: Paradox of thrift financial savings, GDP 
For Mains: 
1. The recent decline in household savings in India has sparked discussions about the paradox of thrift. Explain the concept of the paradox of thrift and critically evaluate its relevance in the Indian context. (250 words)
2. "India's economic future hinges on striking a balance between encouraging savings and stimulating consumption." Discuss this statement in the context of the paradox of thrift and suggest a long-term economic plan for India that addresses both aspects. (250 words)
 
 
 
Previous Year Questions
 
1. Who coined the concept of "Paradox of Thrift"?  (UPSC CAPF 2019)
A. Adam Smith          B.  Alfred Marshall   C. John Maynard Keynes   D. Paul A. Samuelson 
 
2. The phenomenon wherein which the individuals try to save more during recession which ultimately leads to a fall in aggregate demand and thereby a fall in economic growth is known as _________. (MP HSTET Varg 1 2019)
A. Ricardian equivalence      B. Arbitrage      C.  Pigou effect          D. Paradox of thrift
 
3. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. A share of the household financial savings goes towards government borrowings.
2. Dated securities issued at market-related rates in auctions form a large component of internal debt.
Which of the above statements is/are correct?
A. 1 only      B.  2 only         C.  Both 1 and 2          D.  Neither 1 nor 2
 
4. What is the purpose of setting up of Small Finance Banks (SFBs) in India? (UPSC 2017)
1. To supply credit to small business units
2. To supply credit to small and marginal farmers
3. To encourage young entrepreneurs to set up business particularly in rural areas.
Select the correct answer using the code given below:
A. 1 and 2 only      B.  2 and 3 only          C.  1 and 3 only        D. 1, 2 and 3
 
5. With reference to Indian economy, consider the following statements: (UPSC CSE, 2015)
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
(a) 1 only   (b) 2 only    (c) Both 1 and 2      (d) Neither 1 nor 2
 
6. A decrease in tax to GDP ratio of a country indicates which of the following? (UPSC CSE, 2015)
1. Slowing economic growth rate
2. Less equitable distribution of national income
Select the correct answer using the code given below:
(a) 1 only        (b) 2 only           (c) Both 1 and 2          (d) Neither 1 nor 2
 
Answers: 1-C, 2-D, 3-C, 4-A, 5-B, 6-A
 
Mains

1. Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC  2020)
2. Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC 2021)
Source: The Hindu

PLASTIC WASTE

 
 
1. Context
Plastic waste is everywhere, from the peak of Mount Everest to the floor of the Pacific Ocean, inside the bodies of animals and birds, and in human blood and breast milk. 
 
2. What is Plastic Waste?
 
  • Plastic waste refers to any discarded or abandoned plastic material that is no longer useful or needed. It encompasses a wide range of items made from plastic, including packaging materials, bottles, containers, wrappers, bags, utensils, and various other disposable products.
  • Plastic waste can be generated at various stages of production, distribution, consumption, and disposal.
  • Plastic waste poses significant environmental challenges due to its durability, persistence, and widespread use.
  • Unlike organic materials, plastic takes a long time to decompose naturally, leading to accumulation in landfills, water bodies, and ecosystems. Improper disposal of plastic waste can result in pollution, habitat destruction, harm to wildlife, and negative impacts on human health.
  • Efforts to address plastic waste include recycling, waste reduction strategies, alternative materials development, and policy interventions such as plastic bans or taxes. Recycling plastic waste can help mitigate its environmental impact by diverting it from landfills and reducing the demand for virgin plastic production.
  • However, challenges such as low recycling rates, limited infrastructure, and contamination issues need to be addressed to improve the effectiveness of plastic waste management efforts
3. What are the different types of plastic waste?
 

Plastic waste can be categorized into various types based on their chemical composition, characteristics, and intended use.

Some of the common types of plastic waste include:

  • Polyethylene Terephthalate (PET or PETE): PET is commonly used in the production of beverage bottles, food packaging, and synthetic fibers. It is lightweight, transparent, and has good barrier properties against moisture and gases.

  • High-Density Polyethylene (HDPE): HDPE is a versatile plastic used in the manufacturing of bottles for milk, detergent, shampoo, and other household products, as well as plastic bags, pipes, and containers. It is known for its high strength, resistance to chemicals, and durability.

  • Polyvinyl Chloride (PVC): PVC is used in a wide range of applications, including construction materials (pipes, window frames), packaging, electrical insulation, and medical devices. It is characterized by its rigidity, durability, and resistance to abrasion and weathering.

  • Low-Density Polyethylene (LDPE): LDPE is commonly used in flexible packaging materials such as plastic bags, shrink wraps, and films. It is also used in the production of squeeze bottles, tubing, and wire insulation. LDPE is known for its flexibility, toughness, and moisture resistance.

  • Polypropylene (PP): PP is used in various applications, including packaging (bottle caps, food containers), textiles, automotive parts, and medical devices. It is valued for its high melting point, chemical resistance, and lightweight properties.

  • Polystyrene (PS): PS is used in the production of disposable food containers, packaging materials, insulation, and disposable cutlery. It can exist in both rigid (e.g., foam cups, packaging) and expandable (e.g., foam packaging) forms.

  • Other Plastics: This category includes plastics that do not fall into the above categories, such as polycarbonate (PC), acrylic (PMMA), and polyethylene terephthalate glycol-modified (PETG). These plastics are used in various applications, including automotive parts, electronics, and consumer goods

4. Plastic and Climate 
  • Since the 1950s, there has been a significant surge in global plastic production. Starting from a mere 2 million tonnes in 1950, it has escalated to over 450 million tonnes by 2019. Projections indicate a doubling of this production by 2050 and a tripling by 2060 if measures are not taken to curb it.
  • As per a study released in 2023 by The Lancet, approximately 400 million tonnes of plastic waste is generated annually, with expectations of a 62% increase between 2024 and 2050.
  • A considerable portion of this plastic waste finds its way into the environment, particularly into rivers and oceans, where it undergoes fragmentation into smaller particles known as microplastics or nanoplastics. These particles contain over 16,000 chemicals capable of causing harm to ecosystems and organisms, including humans.
  • Furthermore, plastic production and disposal contribute to climate change. According to a report from the OECD, plastics were responsible for emitting 1.8 billion tonnes of greenhouse gases (GHGs) in 2019, accounting for 3.4% of global emissions.
  • While the details of the treaty are yet to be finalized, experts suggest that it may extend beyond merely imposing caps on plastic production in UN member states. The treaty could potentially outline guidelines on how wealthier nations can assist poorer ones in meeting their plastic reduction targets.
  • However, negotiations for the treaty have been highly contentious thus far. Since the inaugural round of talks in Uruguay in November 2022, oil-producing nations such as Saudi Arabia, Russia, and Iran have opposed plastic production caps and have employed various delay tactics, such as procedural disputes, to disrupt constructive dialogues
5. Why is a global plastics treaty needed?
 
A global plastics treaty is needed for several compelling reasons:
 
  • Plastic pollution has become a global environmental crisis. Plastic waste contaminates land, water bodies, and ecosystems, leading to habitat destruction, wildlife entanglement, and ingestion. A treaty can provide a framework for coordinated international action to address plastic pollution and protect the environment
  • Plastic pollution not only harms the environment but also poses risks to human health. Microplastics, tiny plastic particles resulting from the breakdown of larger plastic items, have been found in food, water, and even the air we breathe.
  • These particles can contain toxic chemicals and pollutants, which may pose health risks when ingested or inhaled. A treaty can help regulate plastic production and disposal to safeguard public health
  • The production and disposal of plastics contribute to greenhouse gas emissions and climate change. Plastic manufacturing processes release carbon dioxide and other greenhouse gases into the atmosphere, while plastic waste in landfills emits methane, a potent greenhouse gas.
  • By addressing plastic production, consumption, and disposal, a global treaty can help mitigate climate change and promote sustainable development
  • Plastic pollution knows no borders and can travel long distances through ocean currents and atmospheric transport.
  • Efforts to address plastic pollution must therefore be coordinated at the international level to effectively combat this global problem. A global plastics treaty can facilitate cooperation among countries to implement measures for waste management, pollution prevention, and plastic reduction
  • Plastics are made from non-renewable fossil fuels, such as oil and natural gas. As global demand for plastics continues to rise, there is growing concern about the depletion of finite resources and the environmental impact of extractive industries.
  • A treaty can promote resource conservation and the transition to more sustainable alternatives through measures such as recycling, reuse, and the promotion of biodegradable materials
6. What is the Paris Agreement?
 

The Paris Agreement is an international treaty adopted in December 2015 at the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) held in Paris, France. It represents a landmark global effort to address climate change by committing countries to undertake actions to limit global warming and its impacts.

Key features of the Paris Agreement include:

 

  • Mitigation Goals: The agreement sets a long-term goal to limit the increase in global average temperature to well below 2 degrees Celsius (°C) above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5°C. Countries are required to submit nationally determined contributions (NDCs) outlining their efforts to reduce greenhouse gas emissions and adapt to climate change.

  • Nationally Determined Contributions (NDCs): Each country determines its own contribution to the global effort to combat climate change based on its national circumstances, capabilities, and priorities. NDCs may include targets for reducing emissions, increasing renewable energy use, enhancing carbon sinks, and implementing adaptation measures.

  • Transparency and Accountability: The Paris Agreement includes provisions for transparency and accountability to ensure that countries are fulfilling their commitments. Countries are required to regularly report on their emissions and progress in implementing their NDCs, and to participate in a global stocktake every five years to assess collective progress towards the agreement's goals.

  • Adaptation and Support for Developing Countries: The agreement recognizes the importance of adaptation to the impacts of climate change, particularly for vulnerable countries and communities. It calls for increased support for adaptation efforts, including financial assistance, technology transfer, and capacity-building, especially for developing countries.

  • Finance and Technology Transfer: The Paris Agreement emphasizes the importance of providing financial resources and technology transfer to support developing countries in their climate action efforts. Developed countries are expected to contribute financial resources to help developing countries transition to low-carbon and climate-resilient development pathways.

 
 
 
For Prelims: Current events of national and international importance, General issues on the Environment
For Mains:  GS-II, GS-III, Environment, environmental pollution and degradation, Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
 
Previous Year Questions

1.In India, ‘extend producer responsibility’ was introduced as an important feature in which of the following? (UPSC CSE 2019)

(a) The Bio-medical Waste (Management and Handling) Rules, 1998

(b) The Recycled Plastic (Manufacturing and Usage) Rules, 1999

(c) The e-Waste (Management and Handling) Rules, 2011

(d) The Food Safety and Standard Regulations, 2011

Answer (c)

The concept of "extended producer responsibility" (EPR) was introduced as an important feature in the (c) The e-Waste (Management and Handling) Rules, 2011 in India. These rules were established to address the growing concern of electronic waste (e-waste) management and handling in the country

Source: Indianexpress

CURRENCY DEPRECIATION

 
 
1. Context
Between April-end 2014 and now – roughly the time the Narendra Modi government has been in office – the rupee has depreciated by 27.6% against the US dollar, from Rs 60.34 to Rs 83.38.
 
2. What is Currency depreciation?
 

Currency depreciation refers to the decrease in the value of a country's currency in relation to other currencies in the foreign exchange market. It means that the purchasing power of the currency decreases compared to other currencies, leading to higher prices for imported goods and services.

Currency depreciation can occur due to various factors, including:

  • Supply and demand: If the demand for a currency decreases relative to its supply in the foreign exchange market, its value may depreciate. Factors such as changes in trade balances, capital flows, and interest rates can influence supply and demand dynamics.

  • Inflation differentials: If a country experiences higher inflation rates compared to its trading partners, its currency may depreciate as the purchasing power of the currency decreases relative to other currencies.

  • Economic performance: Weak economic indicators, such as low growth rates, high unemployment, or large fiscal deficits, can lead to a loss of confidence in a country's currency, causing it to depreciate.

  • Political instability: Political uncertainty or instability in a country can undermine investor confidence and lead to capital outflows, putting pressure on the currency to depreciate.

  • Speculative activities: Speculators may engage in trading activities that anticipate currency depreciation, exacerbating downward pressure on the currency's value

3. What do you understand by Rupee depreciation?
 

Rupee depreciation refers specifically to the decline in the value of the Indian rupee (INR) in relation to other major currencies, such as the US dollar (USD), euro (EUR), or British pound (GBP), in the foreign exchange market. It signifies that the purchasing power of the Indian rupee decreases relative to other currencies, resulting in higher prices for imported goods and services.

Rupee depreciation can occur due to a variety of factors, including:

  • Trade imbalances: Persistent trade deficits, where imports exceed exports, can put downward pressure on the rupee as more foreign currency is required to pay for imports.

  • Capital outflows: If foreign investors sell Indian assets or withdraw investments from the country, it can lead to a decrease in demand for the rupee, causing its value to depreciate.

  • Interest rate differentials: Higher interest rates in other countries can attract foreign investors away from Indian assets, leading to a decrease in demand for the rupee and its depreciation.

  • Inflation differentials: Higher inflation rates in India compared to other countries can erode the purchasing power of the rupee, leading to depreciation.

  • Global economic factors: Events such as changes in global oil prices, geopolitical tensions, or shifts in investor sentiment towards emerging markets can also impact the value of the rupee

4. Appreciation vs Depreciation of Currency-Compare and Contrast
 
Subject Appreciation of Currency Depreciation of Currency
Definition Increase in the value of a currency relative to other currencies. Decrease in the value of a currency relative to other currencies.
Effect on Imports Imports become cheaper. Imports become more expensive.
Effect on Exports Exports become more expensive for foreign buyers. Exports become cheaper for foreign buyers.
Trade Balance May lead to a trade deficit as exports become less competitive. May lead to a trade surplus as exports become more competitive.
Inflation May contribute to deflationary pressures as imported goods become cheaper. May contribute to inflationary pressures as imported goods become more expensive.
Interest Rates May lead to lower interest rates as a stronger currency reduces inflationary pressures. May lead to higher interest rates as a weaker currency increases inflationary pressures.
Foreign Investment May discourage foreign investment as returns become less attractive. May encourage foreign investment as returns become more attractive.
Domestic Production May discourage domestic production as exports become less competitive. May encourage domestic production as imports become more expensive.
External Debt Burden May increase the cost of servicing external debt denominated in foreign currencies. May decrease the cost of servicing external debt denominated in foreign currencies.
Purchasing Power Increases the purchasing power of domestic consumers and businesses. Decreases the purchasing power of domestic consumers and businesses.
Government Policy Response Central banks may intervene to prevent excessive appreciation through measures such as foreign exchange interventions. Central banks may intervene to stabilize the currency or support exports through measures such as interest rate adjustments or currency interventions.
 
5. What is the difference between depreciation and devaluation?
 
Subject Depreciation Devaluation
Definition Decrease in the value of a currency in the foreign exchange market due to market forces. Deliberate and official decrease in the value of a country's currency by the government or central bank.
Cause Market forces such as changes in supply and demand, economic conditions, or investor sentiment. Implemented by the government or central bank to address economic challenges or achieve specific objectives.
Effect Affects the exchange rate of a currency relative to other currencies, making imports more expensive and exports more competitive. Affects the exchange rate of a currency in the foreign exchange market, making imports more expensive and exports more competitive.
Economic Implications Can influence trade balances, inflation, interest rates, and economic growth. Can influence trade balances, inflation, interest rates, and economic growth.
Policy Response Central banks may intervene to stabilize the currency or address excessive depreciation through measures such as foreign exchange interventions or monetary policy adjustments. Deliberate policy action undertaken by the government or central bank, which may involve announcing changes in the official exchange rate, adjusting monetary policy measures, or implementing structural reforms.
 
6.Way Forward
 
Between April-end 2014 and now – roughly the time the Narendra Modi government has been in office – the rupee has depreciated by 27.6% against the US dollar, from Rs 60.34 to Rs 83.38. That’s marginally higher than the 26.5% from April-end 2004 to April-end 2014: The rupee fell from 44.37 to 60.34 to the dollar during that period when the previous Congress-led United Progressive Alliance (UPA) was in power
 
 
For Prelims: Current events of national and international importance.
For Mains: GS-III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
 
Previous Year Questions

1.Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of the Indian rupee? (UPSC CSE 2019)

(a) Curbing imports of non-essential goods and promoting exports

(b) Encouraging Indian borrowers to issue rupee-denominated Masala Bonds

(c) Easing conditions relating to external commercial borrowing

(d) Following an expansionary monetary policy

Answer (d)

The option that is not the most likely measure the Government/RBI takes to stop the slide of the Indian rupee is:

(d) Following an expansionary monetary policy

An expansionary monetary policy involves increasing the money supply and lowering interest rates to stimulate economic growth. While this policy may indirectly influence the value of the rupee, it is not typically used as a direct measure to stop the slide of the currency. In fact, an expansionary monetary policy may potentially contribute to further depreciation of the rupee if it leads to capital outflows or inflationary pressures.

The other options, (a), (b), and (c), are more directly related to measures that the Government/RBI may take to address currency depreciation, such as curbing imports, promoting exports, encouraging rupee-denominated bonds, and easing conditions for external commercial borrowing

 
Source: Indianexpress

Share to Social