Current Affairs 10 April 2025

Content:

1. RBI cuts repo rate by 0.25%, trims GDP growth forecast
2. India ends transshipment facility for Bangladesh exports, cites congestion
3. Democracy and federalism in the delimitation debate
4. Will aviation disputes be easier to resolve?
5. India better off than others in tariff row: RBI Governor
6. As wildfires scorch the earth, the Arctic biome rejects more carbon

RBI cuts repo rate by 0.25%, trims GDP growth forecast

Context : The Reserve Bank of India, amid global trade tensions and slowing domestic demand, cut the repo rate by 0.25% to 6%. It also revised the GDP growth forecast downward from 6.7% to 6.5%, signaling a shift to a more accommodative policy stance.

Relevance : GS 3(Economy )

Repo Rate Cut:

• Repo rate reduced by 25 basis points (bps) from 6.25% to 6%.
• This marks the second consecutive rate cut of 25 bps by the RBI.
• Decision was unanimous by the Monetary Policy Committee (MPC).

Shift in Policy Stance:

• Stance shifted from “neutral” to “accommodative”.
• Signals RBI’s priority is reviving growth rather than controlling inflation.
• Opens the door for possible future rate cuts.

GDP Growth Forecast Lowered:

• RBI revised India’s GDP growth forecast from 6.7% to 6.5%.
• Reflects concerns about slowing domestic and global economic activity.

Global Trade War Impact:

• Escalation in U.S.-China trade tensions cited as a major concern.
• Higher tariffs are expected to hurt India’s export sector.
• Global slowdown affecting business confidence and investment decisions.

Impact on Borrowers & Depositors:

• Positive for borrowers: Lower interest burden on home, auto, and personal loans.
• Negative for savers: Likely decline in interest income on deposits.

RBI Governor’s Remarks (Sanjay Malhotra):

• Trade war creates uncertainty, affecting investment and spending.
• External slowdown and tariff impacts will dampen India’s growth.
• Current policy aims at stimulating economic activity.

India ends transshipment facility for Bangladesh exports, cites congestion

Context:

• Transshipment facility was initiated by India in 2020 to support Bangladesh’s exports to Nepal, Bhutan, and Myanmar via Indian ports and airports.
• It aimed to facilitate regional connectivity and ease logistical challenges for landlocked neighbors.

Relevance : GS 2(International Relations)

What is Transshipment?

Transfer of cargo at an intermediate port from one vessel/transport mode to another before reaching the final destination.

• Commonly used when direct shipping routes are impractical or uneconomical.
• Essential for landlocked countries (like Nepal and Bhutan) and countries with limited port capacity (like Bangladesh).

Transshipment and Bangladesh

• Bangladesh, with limited deep-sea port infrastructure, depends on transshipment via foreign ports (e.g., Singapore, Colombo) or neighboring countries (especially India).
• Key sectors, like the Readymade Garments (RMG) industry, rely on smooth transit for exports to Nepal, Bhutan, and Myanmar.

India’s Transshipment Facility to Bangladesh (Since 2020)

• India had allowed Bangladesh to use its ports and airports for exporting goods to Nepal, Bhutan, and Myanmar.
• Enhanced regional connectivity, improved logistics, and supported BBIN (Bangladesh-Bhutan-India-Nepal) integration.

Withdrawal of Facility (April 8, 2025):

• India terminated the facility citing significant congestion at its airports and ports.
• Caused logistical delays, higher costs, and backlogs, impacting India’s own exports.

Official Justification:

• MEA clarified the move was due to operational issues, not political motives.
• Exports from Bangladesh to Nepal and Bhutan through Indian territory will continue, but transshipment via Indian facilities will not.

Geopolitical Undercurrents:

• Withdrawal came days after Muhammad Yunus (Bangladesh’s interim govt. adviser) visited Beijing.
• Yunus advocated for enhanced China-Bangladesh trade and greater access for China through Bangladeshi ports to Northeast India.
• India did not confirm a direct link, but timing raises speculation of a strategic signal.

Economic Implications for Bangladesh:

• Readymade garments (RMG) sector, a major export from Bangladesh, may face disruption.
• Exports to landlocked neighbors now face logistical hurdles and increased costs without Indian port access.

Regional Trade Impact:

• May strain Bangladesh’s trade logistics, especially with Nepal, Bhutan, Myanmar.
• Could push Bangladesh to seek alternate routes or develop self-reliant port infrastructure.
• May indirectly boost Chinese influence if Bangladesh diversifies toward China-led corridors.

India’s Strategic Concerns:

• India appears protective of its logistical ecosystem, especially amid rising exports.
• Likely a calibrated balancing act — addressing internal congestion while signaling geopolitical caution regarding China’s growing regional footprint.

Democracy and federalism in the delimitation debate

Context : The delimitation debate involves a conflict between two principles:

• Democracy: “One person, one vote, one value” — equal weight to each citizen’s vote.
  • Federalism: India is a Union of States — States must retain equitable power and identity regardless of population changes.

Relevance : GS 2(Polity , Constitution , Governance)

Legal & Constitutional Framework

• Article 81(2) provides a two-step process for Lok Sabha seat allocation:
  • Step 1: Seats allocated among States based on population (Article 81(2)(a)).
  • Step 2: States divided internally into constituencies with roughly equal population (Article 81(2)(b)).
• Both clauses include “so far as practicable”, allowing for flexibility and political accommodation.

84th and 87th Constitutional Amendments (2001, 2003)

• Apportionment between States frozen based on 1971 Census (to reward population control).
• Delimitation within States done using 2001 Census.
• Delimitation Commission (2002) recommendations implemented in 2008.
• Next inter-State redistribution deferred until after first Census post-2026, per 84th Amendment.

Unequal Vote Values Across States

• Due to freeze and population changes, voter representation per MP has become unequal.
• In 1967: MPs represented ~4.2–5.3 lakh electors across States (more equal).
• In 2024:
  • Kerala MP: 13.9 lakh electors.
  • UP/Bihar MP: 19.3 lakh electors.
  • Rajasthan MP: 21.4 lakh electors.

Vote Value Disparity – Explained

• National median = 1 vote value.
• If MP has double the population of median: vote value = 0.5.
• If MP has half the population: vote value = 2.
• In 2024:
  • Kerala: +30% vote value.
  • Tamil Nadu: +13%, Odisha: +12%, Punjab: +9%.
  • Rajasthan: –16%, UP & Bihar: –7% each.

Impact of Redrawing on State Representation

• If delimitation is done on current population:
  • High-population growth States gain more seats.
  • States with stable populations lose representation.

• Example:
  • Rajasthan could go from 4.6% to 5.5% of LS seats.
  • Kerala could drop from 3.7% to 2.8%.

Analogy: Joint Family and Landholding

• India = joint family; States = constituent families.
• Seats = land parcels allocated by family size.
• Over time, families (States) grew/declined unevenly.
• Thus, per capita share (vote value) has become inequitable, like unequal land division.

Key Takeaways

• Federal democracy requires balancing two values:
  • Individual equality (democracy).
  • Collective equity among States (federalism).
• Upcoming delimitation post-2026 will require delicate political negotiation.
• Raises questions:
  • Should States that controlled population be penalized?
  • Can equal vote value be achieved without federal imbalance?

Will aviation disputes be easier to resolve?

What does the Bill entail?

• Implements the Cape Town Convention and Aircraft Protocol, signed by India in 2008.
• Establishes a legal framework for aircraft leasing and repossession, aligning Indian aviation law with international standards.
• Applies to aircraft, helicopters, engines, and other aviation assets.

Relevance : GS 2(Governance , International Relations)

Key Provisions of the Bill

• Designates DGCA as the Registry Authority for registering and deregistering aircraft.
• Obligates airlines (debtors) to report dues and comply with lease terms.
• Grants lessors the right to repossess aircraft in case of default within 2 calendar months or a shorter agreed period.
• Contains an overriding clause—the Bill takes precedence over any other Indian law in case of conflict.

What is the Cape Town Convention and Protocol?

• A UN-backed international treaty (ICAO, 2001) for protecting creditors’ interests in high-value mobile equipment.
• Standardizes leasing transactions globally, offering legal remedies to lessors in case of default.
• India ratified it in 2008, but implementation lagged due to lack of enabling legislation.

Why was the Bill necessary?

• Past disputes (e.g. GoFirst, SpiceJet, Kingfisher) highlighted inconsistencies between Indian insolvency law and global norms.
• The Insolvency and Bankruptcy Code (IBC) gave protection to airlines (e.g. GoFirst moratorium), preventing lessors from repossessing aircraft.
• Aimed to improve India’s Cape Town Compliance Index score (moved from 50 to 62, target 90).
• Encourages aircraft leasing via GIFT City, Gujarat.

Impact on Leasing Industry

Positive Aspects:

• Brings legal clarity and reduces dispute resolution time.
• May encourage foreign lessors to lease to Indian carriers.
• Expected to lower perceived risk, especially for new or smaller airlines.
• Possibility of lower leasing rates (8-10%) and improved airfare affordability (though contested).

Concerns Raised:

• Taxation regime remains complex, with unpredictable enforcement.
• Lessors face IT notices for operating via SPVs without a permanent establishment in India.
• Government seen as pushing for domestic leasing through GIFT City—viewed by some as coercive.
• Creditworthiness and business fundamentals of airlines, not just legal framework, drive leasing decisions.
• Impact on airfares likely marginal, as pricing is demand-driven.

Conclusion: Will aviation disputes be easier to resolve?

Yes, in terms of legal process and repossession timelines—the Bill is a step forward.
No, if broader ecosystem issues like taxation, compliance burden, and business risks remain unaddressed.

India better off than others in tariff row: RBI Governor

Context: Global Tariff War Impact

• The U.S., under President Trump, has intensified tariff measures, triggering a global trade war.
• These developments have global macroeconomic implications, prompting central banks to reassess growth projections.

Relevance : GS 3(Economy ,Global Trade)

RBI’s Response & Growth Revision

• RBI revised India’s GDP growth projection for FY25 down by 20 basis points, from 6.7% to 6.5%.
• Reason: Global trade and policy uncertainties resulting from the tariff war.

Why India is Less Affected

• Low export exposure to the U.S.: Exports to the U.S. account for only about 2% of India’s GDP.
• Smaller trade surplus: India’s trade surplus with the U.S. is modest compared to countries like China and Germany.
• Diversified trade basket: India has a broader, more balanced trade strategy, reducing overdependence on any single market.
• Comparisons:
  • China: Exports = 19% of GDP
  • Germany: 37%
  • EU average: 30%+
  • Several smaller economies: ~80% of GDP from exports

Inflation Impact: Mixed Outlook

• Tariffs can shrink global demand, which may:
  • Ease imported inflation pressures (disinflationary effect).
  • But overall, inflation impact is uncertain—RBI more concerned about growth than inflation.

Currency Stability & Resilience

• INR outlook stable: RBI not worried about immediate volatility.
• China may devalue the Yuan in response to U.S. tariffs, but:
  • INR will find its own level in the forex market.
  • RBI will intervene if excessive volatility occurs.
• Forex reserves at ~$700 billion, offering strong cushion.
• Sustainable fiscal and current account deficits indicate macroeconomic strength.

Strategic Advantages for India

• Lower dependence on trade makes India more insulated from global trade shocks.
• Scope for domestic demand-driven growth rather than export-led, unlike export-heavy economies.
• India may gain competitiveness in global supply chains as firms seek to diversify away from China.

Conclusion: India’s Position

• India is relatively insulated from the full brunt of the global tariff war.
• Challenges remain, but India’s macro buffers (reserves, deficits) and diversified trade strategy provide stability.
• The real concern is global growth slowdown, not direct tariff shocks.

As wildfires scorch the earth, the Arctic biome rejects more carbon

Context : Global Wildfire Crisis & Carbon Emissions

• Escalation of Wildfires Globally:
  • Severe wildfires in 2025 in California (Eaton & Palisades), Texas, Oklahoma, and Japan caused massive destruction: over 14,000 structures destroyed, thousands evacuated, and dozens of lives lost.
  • The Eaton Fire alone burned over 16,000 hectares; the Japan fire (near Ofunato City) affected nearly 2,900 hectares, the worst in five decades.

Relevance : GS 3(Disaster Management , Environment and Ecology)

• Wildfire Emissions Data:
  • In January 2025 alone, wildfires emitted 800,000 tonnes of carbon, 4x higher than the same period a decade ago (CAMS data).
  • Wildfires’ radiative power (heat emission) exceeded the 2003–2024 average by an order of magnitude — indicating intensifying heat signatures.

Arctic Boreal Zone (ABZ): From Carbon Sink to Carbon Source

• ABZ’s Traditional Role:
  • Comprises tundra, permafrost, wetlands, and boreal forests.
  • Acts as a major carbon sink, historically storing vast carbon in frozen soils and vegetation.

• Transition to Carbon Source:
  • A third of ABZ now emits more carbon than it absorbs.
  • Shift began before 1990, accelerated by wildfires in Eastern Siberia (2003) and Timmins, Canada (2012).

• Study Insights (Nature Climate Change):
  • Analysis from 200 monitoring sites (1990–2020): shows net carbon emission from many Arctic regions.
  • Alaska (44%), Northern Europe (25%), and Siberia (13%) were key carbon-emitting regions.

• Non-Summer Emissions > Summer Uptake:
  • Emissions during non-summer months (Sep–May) now exceed summer (Jun–Aug) carbon absorption.
  • Sign of long-term seasonal imbalances in carbon sequestration.

Feedback Loop: Warming–Wildfire–Carbon Emissions

• Permafrost Thawing:
  • Rising Arctic temperatures accelerate permafrost melt, leading to organic decay and CO₂ release.
  • Changes in plant types, drier soils, and higher topsoil temperatures worsen the release.

• Vicious Cycle:
  • Wildfires release carbon → Carbon worsens global warming → Warming dries land, increases fire risk → More wildfires.
  • Creates a self-reinforcing feedback loop with potential tipping points for climate systems.

India’s Forest Fires & Carbon Emissions

• Fire-Prone States:
  • As per India State of Forest Report (Dec 2024), Uttarakhand, Odisha, and Chhattisgarh topped forest fire incidents.
  • Uttarakhand alone saw 5,315 fires between Nov 2022 and June 2023.

• Hotspot Trends:
  • Fire hotspot counts declining slightly:
    • 2.23 lakh (2021–22) → 2.03 lakh (2023–24).

• Temperature Rise:
  • IIT-KGP & IITM, Pune: Land temperatures rising:
    • 0.1º–0.3ºC/decade (pre-monsoon);
    • 0.2º–0.4ºC/decade (post-monsoon).

• Heatwaves = Fire Risk:
  • Earlier, slower-moving, longer-lasting heatwaves are amplifying fire vulnerability.
  • India emits ~69 million tonnes of CO₂/year from forest fires (Chase India).

Broader Environmental & Policy Implications

• Loss of Carbon Sink Services:
  • ABZ’s shift erodes a key natural buffer against global emissions.
  • Increases dependence on anthropogenic emission cuts and carbon capture technologies.

• Climate Justice Concerns:
  • Countries with minimal historical emissions, like India, face climate risks from emissions elsewhere.
  • Highlights the need for global climate finance, adaptation funds, and early-warning systems.

• Policy Responses Needed:
  • Better forest management, fire prevention, and community-based resilience programs.
  • In Arctic and elsewhere, international cooperation vital to protect shared global commons.