Weekly Current Affairs (8th to 14th October 2022) - 1 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Nobel Prize in Literature 2022

Context: The 2022 Nobel Prize in Literature has been awarded to French author “Annie Ernaux”for“the courage and clinical acuity with which she uncovers the roots, estrangements and collective restraints of personal memory”.

• In 2021, the award was given to novelist Abdulrazak Gurnah “for his uncompromising and compassionate penetration of the effects of colonialism and the fate of the refugee in the gulf between cultures and continents”.
• The Nobel Prizes in Physics, Chemistry and Medicine for 2022 have already been awarded.

Who is Annie Ernaux?

About:

• Annie was born in 1940 and brought up in the small town of Yvetot in Normandy (France).
• She went on to study at the universities of Rouen and then Bordeaux from where she qualified as a schoolteacher and gained a higher degree in modern literature.

Career & Work:

• Her exemplary literary career started with the publication of her first book, Cleaned Out, in 1974.
• Her other major work includes “A Women’s Story”, “Happening”, “A Girl’s Story”, “Getting Lost”.

Themes of her work:

• Her books talk about the body and sexuality, intimate relationships, social inequality and the experience of changing class through education, time and memory, and the overarching question of how to write these life experiences.
• Her books have explored how shame is built into the female consciousness, and how women censor and judge themselves even in personal spaces such as a diary.

Awards & Recognition:

• Her works overall have received the French language prize and the Marguerite Yourcenar prize.
• In 2014 she was awarded an honorary doctorate by the University of Cergy-Pontoise.
• Her work “The Years” was shortlisted for the Man Booker International prize.

Nobel Prize in Physics 2022

Context: The Nobel Prize in Physics for 2022 was awarded to John F. Clauser, Alain Aspect and Anton Zeilinger for their work in quantum mechanics by the Royal Swedish Academy of Sciences.

• In 2021, the Nobel Prize in Physics was awarded to Syukuro Manabe and Klaus Hasselmann (jointly) for their research on climate models and to Giorgio Parisi for his work on the interplay of disorder and fluctuations in physical systems.
• The Nobel Prize for 2022 in Physiology or Medicine was awarded to Svante Pääbo for his research in the field of genomes of extinct hominins and human evolution.

What is Quantum Mechanics and Quantum Entanglement?

• Mechanics is the branch of physics that deals with the movement and interaction of various bodies. Mechanics has two parts - classical and quantum.
  • Classical or Newtonian mechanics is the mathematical study of the motion of macroscopic objects and the forces that affect them.
  • Quantum mechanics is a subfield of physics that describes the behavior of particles — atoms, electrons, photons and almost everything in the molecular and sub molecular realm.
  • One important difference in the behaviour of quantum systems, when compared to classical rigid bodies, is the concept of entanglement.
• Quantum entanglement is a phenomenon by which a pair of subatomic particles are allowed to exist in a shared state where they have complementary properties, such that by measuring the properties of one particle, one can automatically know the properties of the other particle.
• This is true regardless of how far apart the two particles are transported.
• Quantum entanglement was first elucidated by Erwin Schrödinger in 1935, leading to his well-known cat paradox.

What is Bell Inequality?

• In the 1960s, John Stewart Bell developed the mathematical inequality - Bell Inequality which states that if there are hidden variables, the correlation between the results of a large number of measurements will never exceed a certain value.
  • Quantum mechanics predicts that a certain type of experiment will violate Bell’s inequality, thus resulting in a stronger correlation than would otherwise be possible.

What is the Experiment?

• The laureates have been awarded for their experiments with entangled photons (quantum entanglement), establishing the violation of Bell inequalities, and pioneering quantum information science.
• John F. Clauser developed John Bell’s ideas, leading to a practical experiment which supported quantum mechanics by clearly violating a Bell inequality implying that quantum mechanics cannot be replaced by a theory that uses hidden variables.
• Alain Aspect developed the setup, using it in a way that closed an important loophole.
  • He was able to switch the measurement settings after an entangled pair had left its source, so the setting that existed when they were emitted could not affect the result (as some loopholes remained after John Clauser’s experiment).
• Anton Zeilinger was chosen for his innovative use of entanglement and Bell pairs both in research and application such as quantum cryptography.
  • His research group demonstrated a phenomenon called quantum teleportation, which makes it possible to move a quantum state from one particle to the one at a distance.

How is the Experiment Significant?

• The development of experimental tools has laid the foundation for a new era of technology based on quantum information.
• It will help in utilising the special properties of individual particle systems to construct quantum computers, improve measurements, build quantum networks, establish secure quantum encrypted communication (quantum cryptography) and precise timekeeping as is done in atomic clocks.

Joint Comprehensive Plan of Action (JCPOA)

Context: Recently, the US imposed sanctions against a Mumbai based petrochemical company, Tibalaji Petrochem Pvt Ltd. as it was accused of selling Iranian petroleum products.

• It is the first Indian entity to face the US designation under unilateral sanctions passed in 2018-19, after the US walked out of the Joint Comprehensive Plan of Action (JCPOA).

What was the Joint Comprehensive Plan of Action (JCPOA)?

• The deal is also known as 2015 Iran Nuclear Deal.
• The JCPOA was the result of prolonged negotiations from 2013 and 2015 between Iran and P5+1 (China, France, Russia, the United Kingdom, the United States + Germany).
• Under the deal, Iran agreed to significantly cut its stores of centrifuges, enriched uranium and heavy-water, all key components for nuclear weapons.
• Iran also agreed to implement a protocol that would allow inspectors from the International Atomic Energy Agency (IAEA) to access its nuclear sites to ensure Iran would not be able to develop nuclear weapons in secret.
• While the West agreed to lift sanctions related to Iran’s nuclear proliferation, other sanctions addressing alleged abuses of human rights and Iran’s ballistic missile programme remained in place.
• The US committed to lifting sanctions on oil exports, but continued to restrict financial transactions, which have deterred international trade with Iran.
• Nonetheless, Iran’s economy, after suffering years of recessions, currency depreciation, and inflation, stabilized significantly after the deal took effect, and its exports skyrocketed.
• After US abandoned the deal in 2018 and reinstated banking and oil sanctions, Iran ramped up its nuclear programme in earnest, returning to approximately 97% of its pre-2015 nuclear capabilities.
  

What Happened After the US Pulled Out of the Deal?

• In April 2020, the US announced its intention to snap back sanctions. However, the other partners objected to the move, stating that since the US was no longer part of the deal, it could not unilaterally reimpose sanctions.
• Initially following the withdrawal, several countries continued to import Iranian oil under waivers granted by the Trump administration. A year later, the US ended the waivers to much international criticism and, by doing so, significantly curbed Iran’s oil exports.
• The other powers, in an attempt to keep the deal alive, launched a barter system known as Instrument in Support of Trade Excahanges (INSTEX) to facilitate transactions with Iran outside the US banking system. However, INSTEX only covered food and medicine, which were already exempt from US sanctions.
• In January 2020, after the US assassinated the top Iranian general Qasem Soleimani, Iran announced that it would no longer limit its uranium enrichment.
• In September 2022, Iran and International Atomic Energy Agency officials held a round of talks to discuss the possibility of Iran’s agreement to reallow inspectors back to Iran for oversight over reactors.
  • The U.S. and Iran have also exchanged their stands indirectly via the European Union for a “final draft” on rejoining the JCPOA.

What is the significance of JCPOA for India?

• Enhance Regional Connectivity:
  • Removing sanctions may revive India’s interest in the Chabahar port, Bandar Abbas port, and other plans for regional connectivity.
  • This would further help India to neutralize the Chinese presence in Gwadar port, Pakistan.
  • Apart from Chabahar, India’s interest in the International North-South Transit Corridor (INSTC), which runs through Iran, and will improve connectivity with five Central Asian republics, may also get a boost.
• Energy Security:
  • Due to the pressure linked to the US Countering America’s Adversaries Through Sanctions Act (CAATSA), India has to bring down oil imports to zero.
  • Restoration of ties between the US and Iran will help India to procure cheap Iranian oil and aid in energy security.

Sustainable Finance

Context: A Committee on Sustainable Finance, constituted by International Financial Services Centres Authority (IFSCA) submitted its report on Sustainable Finance suggesting development of the carbon market among others.

What is Sustainable Finance?

• Sustainable finance is defined as investment decisions that take into account the environmental, social, and governance (ESG) factors of an economic activity or project.
  • Environmental factors include mitigation of the climate crisis or use of sustainable resources.
  • Social factors include human and animal rights, as well as consumer protection and diverse hiring practices.
  • Governance factors refer to the management, employee relations, and compensation practices of both public and private organizations.

What are the Recommendations of the Committee?

• Developing a voluntary carbon market, framework for transition bonds, enabling de-risking mechanisms, promoting regulatory sandbox for green fintech and facilitating the creation of a global climate alliance among others.
• Setting up of a dedicated MSME (Micro, Small and Medium Enterprises) platform for sustainable lending.
• Facilitating the use of innovative instruments such as catastrophe bonds, municipal bonds, green securitisation, blended finance among others.
• Enabling aggregation facilities, impact funds, green equity etc. in IFSC.
• IFSCA has to play a vital role in capacity building which lays the foundation for greening the financial system.

What is IFSCA?

Establishment:

• The IFSCA was established in 2020 under the International Financial Services Centres Authority Act, 2019.
• It is headquartered at GIFT (Gujarat International. Finance Tec-City) City, Gandhinagar in Gujarat.

Role:

• The IFSCA is a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre (IFSC) in India.
• At present, the GIFT IFSC is the maiden international financial services centre in India.
• Prior to the establishment of IFSCA, the domestic financial regulators, namely, RBI, SEBI, Insurance Regulatory and Development Authority of India (IRDAI), and the Pension Fund Regulatory and Development Authority (PFRDA) regulated the business in IFSC.

Members:

• The International Financial Services Centres Authority consists of nine members, appointed by the central government.
• They include the chairperson of the authority, a member each from the RBI, SEBI, the IRDAI, and the PFRDA, and two members from the Ministry of Finance. In addition, two other members are appointed on the recommendation of a Selection Committee.

Term:

• All members of the IFSCA have a term of three years, subject to reappointment.

What are the Carbon Markets?

• Carbon markets allow for buying and selling of carbon emissions with the objective of reducing global emissions.
• Carbon markets existed under the Kyoto Protocol, which is being replaced by the Paris Agreement in 2020.
• Carbon Markets can potentially deliver emissions reductions over and above what countries are doing on their own.
  • For example, technology upgradation and emission reduction of a brick kiln in India can be achieved in two ways:
    (i) A developed country which is unable to meet its reduction target can provide money or technology to the brick kiln in India, and thus claim the reduction of emission as its own.
    (ii) Alternatively, the kiln can make the investment, and then offer on sale the emission reduction, called carbon credits. Another party, struggling to meet its own targets, can buy these credits and show these as their own.

What are the Related Indian Government Initiatives?

• Perform Achieve and Trade (PAT) Scheme: The government has undertaken the PAT scheme, targeting carbon emission reduction in 13 energy intensive sectors.
• Encouraging Foreign Capital: The Government has permitted Foreign Direct Investment (FDI) up to 100 percent under the automatic route in the renewable energy sector.
• Encouraging Renewable energy:
  • The Government has waived inter-state Transmission System (ISTS) charges for inter-State sale of solar and wind power for projects.
  • Making provisions for Renewable Purchase Obligation (RPO) and setting up Renewable Energy parks
• India’s Nationally Determined Contribution: Under the Paris Agreement which was adopted by signatory countries in 2015, India had submitted Nationally Determined Contribution (NDC) with quantified targets
  • To reduce the emissions intensity of its Gross Domestic Product (GDP) by 33-35% till 2030 from the levels at 2005,
  • To achieve about 40% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030,
  • To create an additional carbon sink of 2.5-3 billion tonnes of carbon dioxide equivalent through additional forest and tree cover by 2030.

Proposed Digital Rupee

Context: The Reserve Bank of India (RBI) will soon commence limited pilot launches of e-rupee (e`), or Central Bank Digital Currency (CBDC) or digital rupee, for specific use cases.

• It has hinted at two broad categories for the use of e-rupee — retail and wholesale — for various transactions.

What is e-rupee?

• Definition: RBI defines the CBDC as the digital form of currency notes issued by a central bank. It is a sovereign or entirely independent currency issued by the central bank (in this case, RBI), in accordance with the country’s monetary policy.
• Legal Tender: Once officially issued, CBDC will be considered as a medium of payment and legal tender by all three parties - citizens, government bodies, and enterprises. Being government-recognised, it can be freely converted to any commercial bank’s money or notes.
  • RBI is not in favour of e-rupee with interest. Because people might withdraw money from banks and convert it to digital rupee - causing banks to fail.
• Difference with Cryptocurrencies: The underlying technology of cryptocurrency (distributed ledger) can underpin parts of the digital rupee system, but the RBI has not decided on this, yet. However, cryptocurrencies like bitcoin or ethereum are ‘private’ in nature. Digital rupee on the other hand, will be issued and controlled by the RBI.
• Global Scenario: As of July 2022, 105 countries were exploring CBDC. Ten countries have launched CBDC, the first of which was the Bahamian Sand Dollar in 2020 and the latest was Jamaica’s JAM-DEX.

What is RBI's Plan for CBDC?

• Types of CBDC: On the basis of usage and the functions performed by the digital rupee and considering the different levels of accessibility, CBDC can be demarcated into two broad categories — general purpose (retail) (CBDC-R) and wholesale (CBDC-W).
  • Retail CBDC is an electronic version of cash primarily meant for retail transactions. It will be used by all — private sector, non-financial consumers and businesses. However, the RBI has not explained how e-rupee can be used in merchant transactions in the retail trade.
  • Wholesale CBDC is designed for restricted access to select financial institutions. It has the potential to transform the settlement systems for financial transactions undertaken by banks into government securities (G-Sec) segment, inter-bank market and capital market more efficiently and securely in terms of operational costs, use of collateral and liquidity management.
• Structure: A token based CBDC would be a bearer instrument like banknotes, the person receiving a token will verify that his ownership of the token is genuine. A token-based CBDC is viewed as a preferred mode for CBDC-R as it would be closer to physical cash.
  • An account-based system would require maintenance of records of balances and transactions of all holders of the CBDC and indicate the ownership of the monetary balances. In this case, an intermediary will verify the identity of an account holder. This system can be considered for CBDC-W.
• Available in online and offline mode: The offline functionality as an option will allow CBDC to be transacted without the internet and thus enable access in regions with poor or no internet connectivity.
  • However, the RBI feels in the offline mode, the risk of ‘double-spending’ will exist because it will be technically possible to use a CBDC unit more than once without updating the common ledger of CBDC.
• Model for Issuance: In the direct model, the central bank will be responsible for managing all aspects of the digital rupee system such as issuance, account-keeping and transaction verification.
  • An indirect model would be one where the central bank and other intermediaries (banks and any other service providers), each play their respective role. The central bank will issue CBDC to consumers indirectly through intermediaries and any claim by consumers will be managed by the intermediary.

What are the advantages of e-rupee?

• Reduction in operational costs involved in physical cash management, fostering financial inclusion, bringing resilience, efficiency and innovation in the payments system.
• Provide the public with uses that any private virtual currencies can provide, without the associated risks.

What are the issues related to CBDC in India?

• Cyber Security: CBDC ecosystems may be at a similar risk of cyber-attacks that the current payment systems are exposed to.
• Privacy issue: The CBDC is expected to generate huge sets of data in real time. Privacy of the Data, concerns related to its anonymity and its effective use will be a challenge.
• Digital divide and financial illiteracy: The NFHS-5 also provides data segregation based on the rural-urban divide. Only 48.7% of rural males and 24.6% of the rural females have ever used the internet. So, CBDC may wide gender-based hurdle in financial inclusion along with digital divide.

Way Forward

• Technical clarity must be ensured to decide on the underlying technologies that can be trusted to be safe and stable.
• To make CBDC a successful initiative and movement, RBI must address the demand side infrastructure and knowledge gap to increase its acceptance in rural areas for wide base.
• The RBI must proceed cautiously, remaining mindful of the various issues, the design considerations and the implications surrounding the introduction of the digital currency.

Nobel Prize in Economic Sciences 2022

Context: The Royal Swedish Academy of Sciences has decided to award the 2022 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig “for research on banks and financial crises.”

• The 2021 Nobel Prize in Economic Sciences was awarded in one half to Canadian-born David Card (labor economics) and the other half jointly to Israeli-American Joshua D Angrist and Dutch-American Guido W Imbens (analysis of causal relationships).
• Other 2022 Nobel Prizes for Literature, Chemistry, Physics, Medicine and Peace have already been announced.

Note

• Unlike the other prizes, the economics award wasn't established in Alfred Nobel's will of 1895 but by the Swedish central bank in his memory. The first winner was selected in 1969.

What Contribution have these Laureates made in the Banking System?

Ben S. Bernanke:

• Ben Bernanke analysed the Great Depression of the 1930s, the worst economic crisis in modern history.
• Through statistical analysis, Bernanke demonstrated how failing banks played a decisive role in the global depression of the 1930s.
• He showed how bank runs were a decisive factor in the crisis becoming so deep and prolonged.
• It also helped in understanding the importance of well-functioning bank regulation.
• Bernanke was the head of the US central bank, the Federal Reserve, when the 2008 crisis hit, and was able to “put knowledge from research into policy”.

Douglas W. Diamond and Philip H. Dybvig:

• Both Diamond and Dybvig worked together to develop theoretical models explaining why banks exist, how their role in society makes them vulnerable to rumors about their impending collapse, and how society can lessen this vulnerability. These insights form the foundation of modern bank regulation.
• They presented a solution to bank vulnerability, in the form of deposit insurance from the government. When depositors know that the state has guaranteed their money, they no longer need to rush to the bank as soon as rumors start about a bank run.
• Diamond also showed how banks perform a societally important function. As intermediaries between savers and borrowers, banks are better suited to assessing borrowers’ creditworthiness and ensuring that loans are used for good investments.