Weekly Current Affairs (8th to 14th May 2023) Part - 1 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Curtailing Misleading Food Ads

Context: Recently, the Food Safety and Standards Authority of India (FSSAI) has flagged misleading claims from the Food Business Operators (FBOs) and found them to be in contravention of the Food Safety and Standards (Advertisements & Claims) Regulations, 2018.

• In 2022, the Central Consumer Protection Authority (CCPA) had issued Guidelines to Prevent False or Misleading Advertisements.

What are the Concerns?

• The FSSAI has discovered that some companies selling nutraceutical products, refined oils, pulses, flours, millet products, and ghee have been making false claims about their products. These claims have not been scientifically proven and could mislead consumers.
  • The FSSAI has referred these cases to the licensing authorities, who will issue notices to the companies to withdraw or modify their misleading claims.
  • Failure to comply may result in penalties, suspension or cancellation of their licenses, as making false claims or advertisements is a punishable offense under Section-53 of the Food Safety and Standards (FSS) Act, 2006.
• The concerns related to misleading food advertisements mainly revolve around false or unsubstantiated claims made about a product's nutrition, benefits, and ingredient mix.
• This problem is widespread across different food categories, and there have been a significant number of violative food advertisements.
• Additionally, non-disclosure by food influencers is also a major concern. Misleading advertisements can lead to consumer confusion and potential harm to their health if they make incorrect food choices based on false claims.

What are the Initiatives for Consumer Protection and tackling Misleading Ads?

• Food Safety and Standards (Advertisements & Claims) Regulations, 2018: It specifically deals with food (and related products) while Central Consumer Protection Authority (CCPA)’s regulations cover goods, products and services.
• Cable Television Network Rules, 1994: It stipulates that advertisements must not draw inferences that it has “some special or miraculous or supernatural property or quality, which is difficult to prove.
• FSS Act 2006: Product claims suggesting suitability for prevention, alleviation, treatment or cure of a disease, disorder or particular psychological condition is prohibited unless specifically permitted under the regulations of the FSS Act, 2006.
• Consumer Welfare Fund: It was set up under the Central Goods and Services Tax (CGST) Act, 2017 to promote and protect the welfare of the consumers.
  • Few Examples: Creation of Consumer Law Chairs/ Centres of Excellence in Institutions/Universities of repute to foster research and training on consumer related issues. Projects for spreading consumer literacy and awareness.
• Central Consumer Protection Council: It aims to safeguard consumer interests by monitoring and enforcing consumer protection laws, facilitating consumer education, and providing consumer redressal mechanisms. In addition, the council also promotes consumer-friendly policies and initiatives.
• Consumer Protection Rules, 2021: The rules stipulate the pecuniary jurisdiction of each tier of consumer commission. The rules revised pecuniary jurisdiction for entertaining consumer complaints.
• Consumer Protection (E-Commerce) Rules, 2020: The rules are mandatory and are not advisory. Sellers cannot refuse to take back goods or withdraw services or refuse refunds, if such goods or services are defective, deficient, delivered late, or if they do not meet the description on the platform.

What are the Tags Given to Packaged Food?

Natural:

• A food product can be referred to as ‘natural’ if it is a single food derived from a recognised natural source and has nothing added to it.
• It should only have been processed to render it suitable for human consumption. The packaging too must be done sans chemicals and preservatives.
• Composite foods, a mixture of plant and processed constituents, cannot be called ‘natural’, instead, they can say ‘made from natural ingredients’.

Fresh:

• The term "fresh" can only be used for food products that have been washed, peeled, chilled, trimmed, or cut without any other processing that alters their basic characteristics.
• If food is processed in any way to extend its shelf life, it cannot be labeled as "fresh."
• Food irradiation is a controlled process that uses radiant energy to achieve effects like sprouting, delay in ripening, and killing of insects/pests, parasites, and microorganisms.
• If a product is frozen soon after being harvested or prepared, it may be labeled as "freshly frozen," "fresh frozen," or "frozen from fresh."
• However, if it contains additives or has undergone any other supply chain process, it cannot be labeled as "fresh."

Pure:

• Pure is to be used for single-ingredient foods to which nothing has been added and which are devoid of all avoidable contamination, while unavoidable contaminants are within prescribed controls.
• Compound foods cannot be described as ‘pure’ but can be referred to as ‘made with pure ingredients’ if they meet the mentioned criteria.

Original:

• Original is used to describe food products made to a formulation, with a traceable origin that has remained unchanged over time.
• They do not contain replacements for any major ingredients. It may similarly be used to describe a unique process which has remained essentially unchanged over time, although the product may be mass-produced.

Nutritional Claims:

• Nutritional claims in food advertisements can be about the specific contents of a product or comparisons with another food item. If a claim states that a food contains the same amount of a nutrient as another food, it must provide equivalent nutritional value as the reference food.
• Nutritional claims may either be about the specific contents of a product or comparisons with some other foodstuff.

Way Forward

• Companies need to provide technical and clinical evidence to support their claims. Advertisements should also be modified in a way that consumers can interpret them correctly.
• FSSAI and the state food authorities should conduct surveys of food business activity under their jurisdiction to ensure a comprehensive and reliable database of FBOs and ensure better enforcement and administration of the FSS Act.
• There is a need to Increase limits of compensation and fine in cases of injury or death and provide adequate infrastructure such as food testing laboratories.

Arab League

Context: Recently, the Arab League has re-admitted Syria into the organization, after a suspension over a decade.

Why has Syria Readmitted to the Arab League?

Suspension:

• Syria was suspended from the Arab League in 2011 after it violently cracked down on anti-government protests.
• The Arab League accused Syria of not complying with a peace plan that called for a withdrawal of military forces, the release of political prisoners, and the start of a dialogue with opposition groups.
• Despite attempts at peace negotiations and ceasefire agreements, the violence continued, leading to Syria's suspension.
• This had economic and diplomatic consequences for Syria.

Readmission:

• The move signifies softness in relations between Syria and other Arab governments and is seen as the start of a gradual process to resolve the crisis in Syria.
• The Crisis in Syria has resulted in the displacement of roughly half of the pre-war population of 21 million and the deaths of over 300,000 civilians.
• A committee involving Egypt, Saudi Arabia, Lebanon, Jordan, and Iraq will be established to help Syria achieve these goals.
• But the decision does not mean a resumption of relationships between Arab states and Syria as it is up to each country to decide this individually.
• It calls for a resolution of the crisis resulting from Syria's civil war, including the flight of refugees to neighboring countries and drug smuggling across the region.

What is the Arab League?

About:

• Arab League, also called League of Arab States (LAS), is an intergovernmental pan-Arab organisation of all Arab states in the Middle East and North Africa.
• It was formed in Cairo, Egypt on 22nd March 1945, following the adoption of the Alexandria Protocol in 1944.

Members:

• Currently, there are 22 Arab countries: Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the United Arab Emirates, and Yemen.

Objective:

• It aims to strengthen and coordinate the political, cultural, economic, and social programs of its members and to mediate disputes among them or between them and third parties.
• The signing on 13th April 1950, of an agreement on joint defense and economic cooperation also committed the signatories to coordination of military defense measures.

Concerns:

• The Arab League has been criticized for its inability to effectively address the issues it was created to handle. Many question the relevance of the institution, with its slogan of “one Arab nation with an eternal mission” being seen as outdated.
• This has led to instances where important events, like the annual leaders' summit, have been postponed or canceled.
• The League has also been criticized for its lack of effectiveness in enforcing decisions and resolving conflicts among its members. It has been accused of disunity, poor governance, and being more representative of autocratic regimes than of the Arab people.

What is the Significance of the Middle East/North Africa (MENA) for India?

Middle East:

• India has enjoyed centuries of good relations with countries like Iran, while smaller gas-rich nation Qatar is one of India’s closest allies in the region.
• India shares good relations with most of the countries in the Gulf.
• The two most important reasons for the relationship are Oil and gas, and trade.
• Two additional reasons are the huge number of Indians who work in the Gulf countries, and the Remittance they send back home.

North Africa:

• North African nations like Morocco and Algeria are important as they serve as gateways to other parts of Africa, which is relevant for India, given its desire to penetrate Francophone Africa (French Speaking African Nations).
• North Africa is significant for India because of its potential as a source of clean energy. The region has abundant solar and wind resources, which can be harnessed to generate electricity.
• India has set ambitious renewable energy targets, and North Africa could provide an opportunity for India to meet its renewable energy goals.
• North Africa is also strategically located, making it an important region for trade and commerce.
• The Suez Canal puts North Africa at the crossroads of global trade. With more than 22000 ship transits in 2022, the canal is one of the world's most important maritime routes.

US Fed Rate Hike

Context: After raising interest rates aggressively to tame inflation, the US Federal Reserve has once again raised its benchmark overnight interest rate by a quarter of a percentage point to the 5.00%-5.25% range.

• Overnight rates are the rates at which banks lend funds to each other at the end of the day in the overnight market.
• In many countries, the overnight rate is the interest rate the central bank sets to target monetary policy (Repo Rate in India).

What could be the Possible Impact of this Hike on India?

• The economists have expected that the latest Fed hike may not have a material impact on India as the RBI has paused hikes and there is weakness in the crude oil prices as well.
• Domestic markets are likely to remain resilient and if there is volatility, it would have a limited impact on the economy.
• It is also expected that the strength of the rupee and the continued buying by foreign institutional investors (FIIs) will strengthen the market.
• FIIs have already started investing in India, with inflows in April 2023 rising to Rs 13,545 crore and Rs 8,243 crore in May so far.
• Moreover, this hike is being viewed as last one for this year,2023 and the Fed will start cutting rates from the second half of 2023.
• If the Fed opts for a cut later in the year, capital inflows are expected to pick up.
• If the Fed starts cutting rates from July 2023, markets are expected to rise sharply.
• Why do Central Banks resort to a Rate Hike?
• The central bank may increase interest rates to control inflation.
• This is being done to reduce the amount of money available for borrowing, which can help to cool down the economy and prevent prices from rising too quickly.
• With higher borrowing costs, people and companies may be less willing to borrow, which can slow down economic activity and growth.
• Businesses may take fewer loans, hire fewer people, and reduce production in response to the increased costs of borrowing.

What are the Impacts of US Fed Rate Hike on Indian Economy?

• Capital Flows: A US Fed rate hike can lead to a rise in interest rates in the US, which can attract capital flows from other countries. This can lead to a reduction in foreign investment in India, which can affect economic growth.
• Depreciation of rupee: It can also lead to a depreciation of rupee, which can have an impact on India's trade balance and current account deficit.
  • Depreciation of Indian rupee may result in costlier imports such as crude oil and other goods. This may bring the imported inflation in Indian Economy.
• Domestic Borrowing Costs: It can lead to an increase in borrowing costs in India, as investors may choose to invest in US securities instead of Indian securities. This can lead to a reduction in domestic investment and higher borrowing costs for businesses and individuals.
• Stock Market: It can also impact the stock market in India. Higher US interest rates can lead to a reduction in demand for risky assets such as equities, which can lead to a decline in stock prices in India.
• External Debt: India’s external debt is mostly denominated in US Dollars, a US Fed rate hike can increase the cost of servicing that debt, as the value of the rupee may fall against the dollar. This can lead to an increase in India's external debt burden and a negative impact on the economy.
• Banks: The banking industry gets benefited by the interest rates rise, as banks re-price their loan portfolio much quicker than their deposit rates, which helps them to increase their net interest margin.

What Options are Available with India to Counter Fed Hikes?

• Adjusting Domestic Interest Rates: The RBI, could raise interest rates in response to the Fed hikes to attract foreign investors to invest in Indian markets, which would increase demand for Indian currency and help maintain its value. However, this could also slow down domestic economic growth.
• Diversifying Reserves: India could diversify its foreign exchange reserves to reduce its dependence on the U.S. dollar and mitigate the impact of Fed rate hikes. For instance, India could increase its holdings of other major currencies such as the Euro, Yen, and Chinese Yuan.
• Enhancing Trade Relations with Other Countries: India could focus on expanding trade ties with other countries to boost its economic growth and reduce the impact of the Fed rate hikes. This could include exploring new export markets, attracting foreign investment, and increasing bilateral trade agreements.
• Encouraging Domestic Consumption: If the Fed rate hikes lead to a slowdown in the Indian economy, the government could boost domestic consumption through measures such as tax cuts, subsidies, or public works programs to stimulate economic activity.
• Reduce Dependence on Crude Oil: One of the major effects of a stronger US dollar is the increase in crude oil prices, which in turn contributes to the overall rise in commodity prices. To address this, it is important to promote the use of alternative sources of energy such as renewable energy and ethanol.

Advisory Committee Suggests Ban on Diesel 4-Wheelers

Context: Recently, the Energy Transition Advisory Committee formed by Union Ministry of Petroleum and Natural Gas has recommended that India should ban diesel-powered 4-wheeler vehicles by 2027 and switch to electric and gas-fuelled vehicles in cities with more than a million people and polluted towns to reduce emissions.

• The Committee, headed by former petroleum secretary Tarun Kapoor, also suggested phasing out motorcycles, scooters, and three-wheelers with internal combustion engines by 2035.

What are the Recommendations of the Committee?

Move Towards Renewable Energy:

• India is one of the largest emitters of greenhouse gases globally, and to achieve its net-zero goal for 2070, it wants to produce 40% of its electricity from renewables.
  • In line with this, the panel report suggests that no city buses should be added that are not electric by 2030, with diesel buses for city transport not to be added from 2024 onwards.
• It called to partially shift to electric and partially to ethanol-blended petrol with almost 50% share in each category.

Incentives to Boost EV Use:

• To boost electric vehicle (EV) use in the country, the report calls for the targeted extension of incentives under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles scheme (FAME).

Transition to Gas-Powered Trucks and Railways:

• The panels also recommended that new registrations of only electric-powered city delivery vehicles should be allowed from 2024, with higher use of railways and gas-powered trucks for the movement of cargo.
• The railway network is anticipated to be fully electric in two to three years. The panel recommended that long-distance buses in India be powered by electricity in the long term, with gas used as a transition fuel for 10-15 years.

Increase in Share of Gas in its Energy Mix:

• India aims to raise the share of gas in its energy mix to 15% by 2030 from the current 6.2%.
• To achieve this goal, the panel suggests building underground gas storage equivalent to two months' demand.
• The panel also recommends the use of depleted oil and gas fields, salt caverns, and aquifers for building gas storage with the participation of foreign gas-producing companies.

What about Diesel Consumption in India?

Consumption Trends:

• Diesel currently accounts for about 40% of India’s petroleum products consumption with 80% of that being used in the transport sector.
• Petrol and diesel demand in India is expected to peak in 2040 and decline post that due to electrification of vehicles.

Reasons for High Preference of Diesel:

• The higher fuel economy of diesel engines over petrol powertrains is one factor. This stems from the greater energy content per litre of diesel, and the inherent efficiency of the diesel engine.
• Diesel engines do not use high-voltage spark ignition (spark plugs), and thus use less fuel per kilometre, as they have higher compression ratios, making it the fuel of choice for heavy vehicles.
• Also, diesel engines offer more torque (rotational or turning force) and are less likely to stall as they are controlled by a mechanical or electronic governor, thereby proving to be better for haulage.

Impact of Diesel-Powered Vehicle:

• Air Pollution: Diesel engines emit higher levels of particulate matter and nitrogen oxides, which contribute to air pollution and can have negative health impacts on humans and wildlife.
• Greenhouse Gas Emissions: While diesel engines are more fuel-efficient, they also emit higher levels of carbon dioxide, which contributes to climate change.
• Noise Pollution: Diesel engines are typically louder than gasoline engines, which can contribute to noise pollution and negatively impact quality of life in urban areas.
• Environmental Damage: Diesel spills can cause significant environmental damage, especially if they occur near water sources or sensitive ecosystems.

Why is Implementing a Diesel Ban for Commercial Vehicles Challenging?

Practicality and Implementation:

• Uncertainty about the practicality of the proposed ban vis-a-vis medium and heavy commercial vehicles.
• It may result in disruption in the transport of goods and public transportation services.

Dominance of Diesel in Transport Segment:

• High dependency on diesel for long-haul transportation and city bus services.
• Diesel sales account for around 87% in the transport sector; trucks and buses contribute to approximately 68% of diesel fuel sales.

Conversion Challenges:

• Transitioning diesel trucks to compressed natural gas (CNG) poses limitations.
• CNG usage is primarily suited for shorter distances and has lower tonnage carrying capacity.

Compliance with Current Emission Norms:

• Automakers argue that diesel vehicles comply with existing emission norms.
• Significant investments made by car manufacturers to transition diesel fleets to BS-VI emission norms; diesel ban might imply that all the time, money and efforts were in vain.

What are India’s Initiatives for a Renewable Energy based Transport Sector?

FAME Scheme:

• Provides fiscal incentives for EV manufacturing and adoption.
• Aims to achieve 30% EV penetration by 2030.
• Supports deployment of charging technologies and stations in urban centers.

National Mission on Transformative Mobility and Battery Storage:

• Aims to improve air quality, reduce oil import dependence, and enhance uptake of renewable energy and storage solutions.
• Drives strategies for transformative mobility and phased manufacturing programs for EVs, EV components and batteries.

Customs Duty Exemption for Lithium-ion Cell Batteries:

• The government has exempted the import of lithium-ion cell batteries from customs duties to bring down their cost and scale up their production in India.

National Green Hydrogen Mission:

• This mission aims to develop green hydrogen as a clean and affordable energy source for various sectors such as industry, transport, and power.
• It envisages setting up of green hydrogen production plants, storage and distribution infrastructure, and end-use applications.

Ethanol blending

• It involves mixing ethanol with petrol to reduce reliance on fossil fuels and decrease greenhouse gas emissions.
• The level of ethanol blending in petrol in India has reached 9.99%. The target for 20% ethanol blending in petrol (also called E20) has been advanced to 2025 from 2030.

Incentives under PLI Scheme:

• It has been rolled out for various industries including the automobile and auto-component industry.
• Around Rs.18,000 crore was approved for development of advanced cell chemistry battery storage manufacturing.
• These incentives further aim to encourage indigenous development of Electric Vehicles (EVs) so as to bring down their upfront cost.

SATAT Scheme:

• Sustainable Alternative Towards Affordable Transportation (SATAT) initiative aims to promote Compressed Bio-Gas (CBG) as an alternative, green transport fuel.

RBI's Gold Reserves

Context: As per RBI’s Half Yearly Report on Management of Foreign Exchange Reserves: October 2022 - March 2023, its gold reserves touched 794.64 metric tonnes in FY 22-23, an increase of nearly 5% over FY 21-22(760.42 metric tonnes)

• Gold reserves along with foreign currency assets, special drawing rights and reserve tranche position in the International Monetary Fund make up India’s forex reserves.

How Much Gold has RBI Bought?

Total Reserves:

• As per RBI, 437.22 tonnes of gold are held overseas are held with the Bank of England and the Bank of International Settlements (BIS), and 301.10 tonnes of gold is held domestically.
• As on March 31, 2023, the country’s total forex reserves stood at $578.449 billion, and gold reserves were pegged at $45.2 billion.
• In value terms (USD), the share of gold in the total forex Eserves increased to about 7.81% at the end of March 2023.

Recent Purchase:

• The RBI bought 34.22 tonnes of gold in FY 23 (65.11 tonnes of gold in fiscal 2022).
• Between FY 2019 – FY 2021, RBI’s gold reserves were 228.41 tonnes.
• According to the World Gold Council's regional CEO (India), the RBI is among the top five central banks that are buying gold.

Which Other Banks are Buying Gold?

• According to the World Gold Council (WGC), gold is being bought mainly by central banks of emerging market economies.
• The WGC report said that in 2022, the People’s Bank of China reported the first increase in its gold reserves since September 2019.
• China has been historically a large buyer of gold.
• During 2022, the central banks from the Middle East, including Egypt, Qatar, Iraq, the UAE, and Oman significantly boosted their gold reserves.
• By the end of 2022, the Central Bank of Uzbekistan became a net purchaser of gold, with its gold reserves rising by 34 tonnes.
• In January-March 2023, the Monetary Authority of Singapore was the largest single buyer of gold after it added 69 tonnes to its gold reserves

Why is RBI Hoarding the Gold?

Counter Strategy against Negative Interest Rate:

• When the RBI has foreign currency (USD) in its reserves then it invests these dollars to purchase US Govt. bonds on which it earns interest.
• The real interest, however, on these bonds has turned negative due to the rise in inflation in the US.
• The real interest rate is the rate of interest an investor, saver or lender receives (or expects to receive) after allowing for inflation (real interest = nominal interest minus inflation rate).
• At the time of such inflation, the demand for gold has increased and RBI being its holder can earn a good return even in stressed economic situations.
• Good Hedge in Geopolitical Uncertainty: Due to the uncertainties arising amid the Russia-Ukraine war and US’ conflicts with China, there has been a decline in the acceptance of Dollar by some of the prominent global supplier of Goods like Russia and China.
• If RBI holds dollars and it depreciates/weakens with respect to other currencies, then it's a loss for RBI.
• However, due to the intrinsic value of gold and its limited supply, gold is able to retain its value much longer than other forms of currency.
• Diversify Forex Reserves: Gold is a safer, more secure and more liquid asset and it performs better during times of crisis, and as a long-term store of value.
• Gold has an international price which is transparent, and it can be traded anytime.

How is Gold Significant in the Economy?

• Gold as a Reserve Currency: For most of the 20th century, gold served as the world's reserve currency. The US used the gold standard until 1971 where it was required to have equivalent reserves of gold to back up the paper money.
  • Due to the volatility of the US dollar and other currencies, some economists advocate returning to the gold standard since it has been discontinued.
• Intrinsic Value: Due to its inherent value and limited supply, inflationary periods see an increase in demand for gold. Gold is able to keep its value much longer than other forms of currency because it cannot be diluted.
• Gold to Boost Value of Currency: The value of a nation's currency starts depreciating when its imports exceed its exports. A country that is a net exporter, on the other hand, will see an increase in the value of its currency.
  • As this raises the value of the country's total exports, a nation that exports gold or has access to gold reserves will see an increase in the strength of its currency when gold prices rise.
• Gold as a Substitute to G-Sec: The central bank of a country can use Gold as a medium to sterilize the market from the influence of foreign currency (in case of FDI) or use as a medium for open market operations (OMO).
  • In both of these operations Gold can be used in place of G-Sec.

Note

• The Reserve Bank of India Act, 1934 provides the overarching legal framework for deployment of reserves in different foreign currency assets and gold within the broad parameters of currencies, instruments, issuers and counterparties.