Weekly Current Affairs (1st to 7th September 2023) Part - 2 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Aditya-L1 Mission

Context: Recently, the Indian Space Research Organisation (ISRO) has accomplished the launch of Aditya-L1, its inaugural Solar Mission.

• The launch was conducted using the PSLV-C57 rocket. The PSLV's fourth stage was fired twice, a first in ISRO's history, to precisely insert the spacecraft into its elliptical orbit.

What is Aditya-L1 Mission?

About:

• Aditya-L1 is the first space based observatory class Indian solar mission to study the Sun from a substantial distance of 1.5 million kilometers. It will take approximately 125 days to reach the L1 point.
• Aditya-L1 is also ISRO’s second astronomy observatory-class mission after AstroSat (2015).
• The mission's journey is notably shorter than India's previous Mars orbiter mission, Mangalyaan.
• The spacecraft is planned to be placed in a halo orbit around the Lagrangian point 1 (L1) of the Sun-Earth system.

Payloads:

Objective:

• The mission aims to provide valuable insights into the solar corona, photosphere, chromosphere, and solar wind.
• The primary objective of Aditya-L1 is to gain a deeper understanding of the Sun's behavior, including its radiation, heat, particle flow, and magnetic fields, and how they impact Earth.

What are Lagrange Points?

About:

• Lagrange points are special positions in space where the gravitational forces of two large orbiting bodies, such as the Sun and the Earth, balance each other out.
• This means that a small object, such as a spacecraft, can stay at these points without using much fuel to maintain its orbit.
• There are five Lagrange Points, each with distinct characteristics. These points enable a small mass to orbit in a stable pattern amid two larger masses.

Lagrange Points in the Sun-Earth System:

• L1: L1 is considered the most significant of the Lagrange points for solar observations. A satellite placed in the halo orbit around the L1 has the major advantage of continuously viewing the Sun without any occultation/ eclipses.
• It is currently home to the Solar and Heliospheric Observatory Satellite (SOHO).
• L2: Positioned directly 'behind' Earth as viewed from the Sun, L2 is excellent for observing the larger Universe without Earth's shadow interference.
• The James Webb Space Telescope orbits the Sun near L2.
• L3: Positioned behind the Sun, opposite Earth, and just beyond Earth's orbit, it offers potential observations of the far side of the Sun.
• L4 and L5: Objects at L4 and L5 maintain stable positions, forming an equilateral triangle with the two larger bodies.
• They are often used for space observatories, such as those studying asteroids.

Note: L1, L2, and L3 points are unstable, meaning that a small perturbation can cause an object to drift away from them. Therefore, satellites orbiting these points need regular course corrections to maintain their positions

What is the Significance of Exploring the Sun?

• Understanding Our Solar System: The Sun is the center of our solar system, and its characteristics greatly influence the behavior of all other celestial bodies. Studying the Sun enhances our understanding of the dynamics of our solar neighborhood.
• Space Weather Prediction: Solar activities, such as solar flares and coronal mass ejections, can impact Earth's space environment.
• Understanding these phenomena is crucial for predicting and mitigating potential disruptions to communication systems, navigation, and power grids.
• Advancing Solar Physics: Exploring the Sun's complex behavior, including its magnetic fields, heating mechanisms, and plasma dynamics, contributes to advances in fundamental physics and astrophysics.
• Enhancing Energy Research: The Sun is a natural fusion reactor. Insights gained from studying its core and nuclear reactions can inform our pursuit of clean and sustainable fusion energy on Earth.
• Improving Satellite Operations: Solar radiation and solar wind affect the functioning of satellites and spacecraft. Understanding these solar interactions allows for better spacecraft design and operation.

Role of UPI in Shaping Foreign Policy

Context: India's digital strength has reached new heights with the United Payments Interface (UPI) surpassing 10 billion transactions, signifying not only domestic success but also its vital role in foreign policy.

• Transactions on UPI have grown by over 50% year-on-year. UPI crossed 1 billion monthly transactions for the first time in October 2019.

How does UPI Contribute to India’s Foreign Policy?

Digital Diplomacy:

• India aims to assume a leadership role in the Global South by pioneering digital governance.
• India's digital public infrastructure (DPI) push is a differentiator from China's focus on physical infrastructure development in developing countries.

International Expansion:

• Since June 2023, India has signed agreements with countries like Armenia, Sierra Leone, Suriname, Antigua & Barbuda and Papua New Guinea to share India Stack.
• Similarly, UPI has also been taken to international markets such as France, UAE, Singapore and Sri Lanka, with countries like Japan, Mauritius, and Saudi Arabia having shown an interest in adopting the payment system.

Global Digital Public Infrastructure Repository (GDPIR):

• India plans to establish the GDPIR to share DPI practices globally.
• The GDPIR aims to facilitate the exchange of tools and resources related to DPI among G20 members and beyond.

Economic Diplomacy:

• UPI's success attracts foreign investments and partnerships, contributing to India's economic diplomacy efforts and strengthening bilateral relations.

What is India Stack?

• India Stack is a set of APIs (Application programming interfaces) that allows governments, businesses, startups, and developers to utilize a unique digital Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery.
• India Stack is a government-led initiative that focuses on building a robust digital infrastructure to enable various digital services across different sectors.
• The components of this collection are owned and maintained by different agencies.
• INDIA STACK aims to streamline and enhance identity verification, data exchange, and digital payment processes to make them more accessible and efficient for citizens.
• It includes digital public goods, which are digital resources and tools made available to the public to support various digital services and initiatives.
• The India Stack comprises three key layers: identity, payments, and data management.

Identity Layer (Aadhaar):

• Aadhaar serves as the cornerstone of India Stack, offering digital identity products.
• It is issued by the Unique Identification Authority of India (UIDAI) under the Ministry of Electronics and Information Technology.
• Aadhaar is considered a proof of residence and not a proof of citizenship, and it does not grant any rights to domicile in India.

Payments Layer (UPI):

• UPI forms the second layer, ensuring interoperability among money custodians, payment rails, and front-end payment applications.
• Managed by the National Payments Corporation of India (NPCI), UPI is licensed to third-party private entities like PhonePe, Google Pay, and Paytm.

Data Governance Layer:

• Digital Locker is built on Data Empowerment and Protection Architecture(DEPA) ; it incorporates a consent management system, enabling the secure sharing of information for better financial, health, and telecom-related products and services.
• It consists of a set of digital identity products centered around Aadhaar. It can be used to remotely authenticate via two-factor or biometric authentication, receive digitally signed records such as driver’s licenses, educational diplomas, and insurance policies, and sign documents or messages using a government-backed digital signature service.
• Aside from UPI, a number of digital solutions that the Indian government has rolled out in the last few years, including CoWin, DigiLocker, Aarogya Setu, and Government e-Marketplace (GeM), all utilize the three fundamental layers of the Indian Stack.
• The vision of India Stack is not limited to one country (India); it can be applied to any nation, be it a developed one or an emerging one.

New Method to Determine Hubble Constant

Context: Recently, some researchers from India and the US have proposed a novel method to determine the Hubble constant and the Rate of Expansion of the Universe.

Note: About 13.8 billion years ago, a really small, really dense, and really hot spot lying beyond spacetime began to expand. Its expansion and cooling – in an event that scientists have called the Big Bang – produced the universe as we know it. The universe continued to expand, at first really rapidly before slowing down to a great degree. Then, about five or six billion years ago, dark energy – an unknown and largely uncharacterised form of energy – accelerated its expansion again.

What is Hubble Constant?

About:

• In 1929, Edwin Hubble formulated Hubble's law, providing the first mathematical description of the universe's expansion.
• The precise rate of this expansion, termed the Hubble constant, remains a contentious issue in cosmology.

Measurement:

Two details are required to calculate the value of the Hubble constant:

• The distance between the observer and astronomical objects,
• The velocity at which these objects are moving away from the observer as a result of the expansion of the universe.

So far, scientists have used three methods to get these details:

• They compare the observed brightness of a stellar explosion, called a supernova, with its expected brightness to figure how far away it could be. Then they measure how much the wavelength of the light from the star has been stretched by the expansion of the universe – i.e. the redshift – to figure how much it’s moving away.
  • They use changes to the Cosmic Microwave Background (CMB) – radiation leftover from the Big Bang event – to estimate the Hubble constant.
• The CMB is a faint, nearly uniform glow of microwave radiation that fills the observable universe. It is often referred to as the "afterglow" of the Big Bang.
• They use gravitational waves, ripples in spacetime produced when massive astronomical objects – like neutron stars or black holes – collide with each other. Detectors that observe gravitational waves record the data in the form of curves.
• Using the shape of these curves, astronomers can calculate the amount of energy that the collision released. Comparing this with the amount of energy the waves had when they reached earth allows researchers to estimate the distance between these objects and earth.

Discrepancy in Measurement:

• Measurements from the first method have reported a Hubble constant about two units higher than the one derived by the second method; the third method hasn’t yet matured enough to provide a precise measurement.
• The discrepancy could be due to a mistake in the methods used – or it could indicate that the Hubble constant is itself evolving with time.
• This possibility arises because the three methods estimate the Hubble constant today based on information from different stages of the universe.
• The CMB way is based on a much younger universe while the other two are based on an older universe (i.e. closer to the one today).

What is the New Approach for Estimation of Hubble Constant?

• Researchers proposed analyzing a collection of lensed gravitational waves and their time delays to derive information about the universe's rate of expansion.
• Gravitational lensing is a phenomenon in which the gravitational field of a massive object, such as a galaxy or a cluster of galaxies, bends and distorts the light from objects located behind it.
• This method offers an independent estimation of the Hubble constant and could help determine other cosmological parameters such as matter density.
• Experts in the field find the study fascinating and see it as a significant cosmological application of gravitational waves.

Indian Economy and Impossible Trinity

Context: The Reserve Bank of India(RBI) and Indian investors are facing a challenge in overcoming the "impossible trinity".

What is the Impossible Trinity?

About:

• The impossible trinity, or the trilemma, refers to the idea that an economy cannot pursue independent monetary policy, maintain a fixed exchange rate, and allow the free flow of capital across its borders all at the same time.
• In a fixed exchange rate regime, the domestic currency is tied to another foreign currency such as the U.S. dollar, Euro, the Pound Sterling or a basket of currencies.
• An able policymaker can, at best, achieve two of these three objectives at any given time.
• The idea was proposed independently by Canadian economist Robert Mundell and British economist Marcus Fleming in the early 1960s.
• The Impossible Trinity is a fundamental concept in international economics and monetary policy.
• It describes the inherent challenges countries face when trying to simultaneously achieve three specific policy objectives related to their exchange rate and capital flows.

Challenges Involved:

• When a country prioritizes free capital flow and a fixed exchange rate, it loses control over its monetary policy, making it susceptible to external economic pressures.
• If a country chooses to maintain a fixed exchange rate and independent monetary policy, it must impose capital controls to limit the flow of funds across its borders.
• Opting for independent monetary policy and free capital flow requires accepting exchange rate fluctuations, potentially leading to volatility.

Examples of the Impossible Trinity in Action:

• Various countries have faced the challenges of the Impossible Trinity, with some notable examples being the Asian Financial Crisis in 1997 and the European Exchange Rate Mechanism crisis in 1992.
• These crises were partly attributed to the inability of affected countries to maintain fixed exchange rates, independent monetary policies, and free capital flows simultaneously.

How is India Struggling with the Impossible Trinity?

Strategies and Actions to Address the Impossible Trinity:

Managing Interest Rates:

• The RBI has been cautious in raising interest rates compared to the US Federal Reserve.
• The reluctance to raise rates is driven by the fear of causing a recession, especially with the upcoming elections in 2024.
• A lower interest rate arbitrage signifies a flight of capital back to the US (the world’s reserve currency) and an impending depreciation of the Indian rupee.

Composition of Foreign Exchange Reserves:

• India's foreign exchange reserves primarily consist of 'hot money' (from Foreign Institutional Investors (FIIs) investing in domestic debt or equity markets to cash in on arbitrage opportunities) and corporate borrowing (for example, Adani Green Energy, Vedanta, etc.), not money earned from trade.
• Relying on reserves not earned through trade poses challenges for maintaining currency stability.

Implementing Capital Controls:

• India has implemented various measures to control capital flows, but their effectiveness remains uncertain.

Policy Measures to Control Capital Outflows:

Import Bans and Licensing Policies:

• India imposed import bans, particularly on electronic goods, as a quick response to limit capital outflows.
• These bans were later transformed into license-based import policies due to domestic manufacturing limitations.
• However, these measures may inadvertently contribute to supply-pull inflation rather than preventing capital outflows.

Tax Changes:

• India has also increased tax rates on outbound remittances from 5% to 20% as a means to restrict capital outflows.
• The effectiveness of this tax increase in managing the 'Impossible Trinity' is under scrutiny.

Influence of China on India's Economic Situation:

• China's deflation and rate cuts aim to stimulate economic growth. The Chinese consumer price index fell by 0.3% in July year-on-year. Additionally, the INR has appreciated by 4% against the Chinese yuan.
• A stronger Indian rupee can lead to increased imports from China, affecting India's trade balance and currency dynamics.
• The depreciating Chinese yuan can make India's exports less competitive in global markets.

Foreign Institutional Investors (FIIs) and Indian Debt:

• FIIs are selling holdings of Indian debt securities and seeking more profitable investments abroad, increasing the demand for foreign currency and weakening the Indian rupee in the foreign exchange market.

What are the Implications of the Impossible Trinity for Indian Investors?

Shielding Against Rupee Depreciation:

• Investing in sectors like IT and Pharma that primarily earn in dollars can shield against rupee depreciation.
• As the rupee weakens, these companies may experience increased competitiveness and offer attractive returns.

Diversifying Investments Abroad:

• Investors must acknowledge the challenges posed by the 'Impossible Trinity' and adapt accordingly.
• Investing in international assets becomes crucial for protecting investments in a complex economic environment.

Way Forward

• India should focus on effectively implementing capital control measures. These measures should strike a balance between maintaining a stable currency and encouraging foreign investment.
• The country should actively diversify its foreign exchange reserves and aim to earn money through trade rather than relying heavily on 'hot money' from foreign investors.
• Additionally, attracting foreign direct investment (FDI) can contribute to currency stability and strengthen the rupee.
• The RBI should adopt a balanced approach to interest rates, considering inflation control and attracting foreign investment. Gradual interest rate adjustments can help achieve this balance.

One-Hour Trade Settlement

Context: Recently, the Securities and Exchange Board of India (SEBI) has announced that it is aiming to launch One-Hour Settlement of trades by March 2024 in order to enhance the efficiency of trade settlement processes.

• The SEBI will launch Application Supported by Blocked Amount (ASBA)-like facility for trading in the Secondary Market by January 2024.

What is Application Supported by Blocked Amount (ASBA)?

• ASBA is a mechanism introduced by the SEBI to facilitate the application and allotment process for Initial Public Offerings (IPOs), rights issues, and other securities offerings.
• ASBA is designed to make the application process more efficient and investor-friendly by allowing investors to apply for shares without transferring the entire application amount upfront.
• It entails that the amount to be paid for subscribing the shares does not get debited from the investor’s account until the shares have been allotted by the company.

What is the Trade Settlement?

About:

• Trade settlement is a critical process in the financial markets that involves the transfer of funds and securities between parties involved in a trade.
• It ensures that the buyer receives the purchased securities, and the seller receives the agreed-upon funds.
• In the context of securities trading, this settlement process finalizes the transaction.

T+1 Settlement Cycle:

• In January 2023, India adopted the T+1 settlement cycle, where T represents the trade date.
• This means that trade-related settlements occur within one business day or 24 hours of the actual transaction.
• India became the second country, after China, to implement the T+1 settlement cycle in top-listed securities.
• This transition brought several advantages, including increased operational efficiency, faster fund transfers, prompt share delivery, and improved convenience for participants in the stock market.

What is SEBI’s New Plan for Real Time Trade Settlement?

One-Hour Trade Settlement:

• Under this scheme, when an investor sells a share, the money from the sale will be credited to their account within one hour, and the buyer will receive the purchased shares in their demat account within the same time frame.
• This represents a significant reduction in settlement time compared to the existing T+1 cycle.

Instantaneous Trade Settlement:

• SEBI acknowledges that achieving instantaneous settlement is a more intricate task, requiring additional technology development.
• Therefore, they plan to focus on implementing one-hour trade settlement first and then proceed towards instantaneous settlement.
• The timeframe for launching instantaneous settlement is projected to be by the end of 2024.

What are the Benefits of One-Hour Trade Settlement?

• Faster Transactions: Investors will experience significantly reduced settlement times, enabling quicker access to funds and securities.
• Enhanced Liquidity: Quicker settlement can lead to improved market liquidity as funds become available for reinvestment sooner.
• Risk Reduction: Reducing the settlement time can mitigate counterparty and market risk, enhancing overall market stability.
• Investor Convenience: Investors will appreciate the swifter access to their funds and securities, making the market more user-friendly.