Current Affairs 25 May 2023

CONTENTS

1. RBI Becomes Net Seller of USD in FY23
2. Bretton Woods and UNSC
3. Forum Shopping
4. Power to promulgate, repromulgate ordinances
5. Sengol
6. INS Mormugao

 RBI Becomes Net Seller of USD in FY23

Context:

In the fiscal year 2022-23, the Reserve Bank of India (RBI) experienced a notable change in its foreign exchange dealings. After acting as a net purchaser of the US dollar for three consecutive years, the RBI transitioned into a net seller, with a sale of 25.52 billion USD in the spot market.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. How did the RBI Turn into a Net Seller in FY23?
2. Other Measures to Curb Depreciation of Rupee

How did the RBI Turn into a Net Seller in FY23?

The Reserve Bank of India (RBI) shifted to becoming a net seller of foreign exchange in FY23 due to several factors and considerations:

• Stabilizing the Rupee: The RBI’s primary objective is to maintain stability in the movement of the Indian rupee. By intervening in the foreign exchange market, the RBI aims to prevent excessive volatility and sharp depreciation of the rupee.
• Impact on Profit and Dividend Payouts: The sale or purchase of dollars by the RBI affects its profit. The profits generated from these transactions are reflected in dividend payouts to the Indian government.
• Preventing Rupee Weakness: Experts believe that without the RBI’s dollar sales, the rupee could have further weakened, potentially reaching levels as low as 84-85 against the US dollar.
• Decrease in Foreign Exchange Reserves: During FY23, the country’s foreign exchange reserves declined from $606.475 billion to $578.449 billion. This decrease was primarily due to valuation losses resulting from the appreciation of the US dollar and higher US bond yields.
• Countering Global Developments: The RBI sold significant amounts of dollars in FY23 to counter the depreciation of the rupee caused by the Ukraine-Russia conflict and the interest rate hikes implemented by the US Federal Reserve.
• Rupee Depreciation: The rupee experienced a depreciation of approximately 8% during FY23. The RBI’s intervention helped prevent further weakening of the currency.
• Rupee Movement: From April 1, 2022, to March 31, 2023, the rupee declined from around 76 levels to nearly 82 against the US dollar.
• Profit and Dividend Payouts: The RBI’s dollar sales in FY23 resulted in significant profits, leading to a higher dividend payout to the Indian government. The Central Board of the RBI approved a 188% increase in surplus transfer to the government for the accounting year 2022-23.

Other Measures to Curb Depreciation of Rupee

To curb the depreciation of the rupee, several measures can be considered:

• Increase Capital Flows: Encouraging foreign investments and attracting Non-resident Indian (NRI) deposits can help increase capital inflows into the country, boosting the availability of foreign currency.
• Monitor and Intervene in Foreign Exchange Markets: The central bank can actively monitor and intervene in the foreign exchange markets to reduce excessive volatility and smooth out fluctuations in the rupee’s value.
• Selective Use of Foreign Exchange Reserves: Foreign exchange reserves can be utilized selectively to counter excessive depreciation, ensuring stability in the currency’s value.
• Foster Favorable Business Environment and Policies: Creating a favorable business environment and implementing policies that support economic growth and exports can help strengthen the overall economy and reduce pressure on the rupee.
• Strengthen Monetary Policy Frameworks: Robust monetary policy frameworks that effectively manage inflation and maintain stability can contribute to curbing the depreciation of the rupee.
• Enhanced Coordination: Collaborating with other relevant government agencies to implement comprehensive strategies for managing currency depreciation can lead to more coordinated and effective interventions.
• Promote Trade in Rupees: Encouraging trade transactions to be conducted in rupees and promoting the use of the domestic currency for pricing India’s trade can reduce dependence on foreign currencies and mitigate depreciation risks.
• Continuous Monitoring and Assessment: Regular monitoring and assessment of the impact of policy measures on the rupee’s depreciation is crucial. Adjustments can be made as necessary to ensure the effectiveness of the measures implemented.

-Source: Indian Express

Bretton Woods and UNSC

Context:

During a press conference in Hiroshima, Japan, the United Nations Secretary-General recently advocated for reforms in the United Nations Security Council (UNSC) and the Bretton Woods Institutions. The Secretary-General highlighted that the existing order of these institutions is outdated, dysfunctional, and unfair.

• He emphasized that they have been unable to effectively serve their fundamental purpose as global safety nets in the wake of economic shocks resulting from the Covid-19 pandemic and the Russia-Ukraine Conflict.

Relevance:

GS II: International Relations

Dimensions of the Article:

1. Bretton Woods System
2. United Nations Security Council
3. Issues with the United Nations Security Council (UNSC)
4. Addressing the Issues

Bretton Woods System:

• The Bretton Woods system was established in 1944 to promote stability and cooperation in international monetary affairs after World War II.
• It led to the creation of two significant organizations, the International Monetary Fund (IMF) and the World Bank.
• Although the Bretton Woods System ended in the 1970s, the IMF and World Bank (Bretton Woods institutions) continue to play essential roles in global currency exchange.

The Need for Reforming Bretton Woods Institutions:

• Recent Challenges: While the IMF and World Bank have performed well in their initial years, they have faced difficulties in more recent times due to issues like increasing inequality, financial instability, and protectionism.
• Addressing New Global Challenges: The threats posed by climate change, ecological stress, rising disasters, and an interconnected world with emerging concerns like cyber-security and pandemics require a new international financial architecture.
• Biases and Allocation Issues: There have been concerns about biases in fund allocation, as well as the lack of regulation regarding Special Drawing Rights (SDRs).
  • For example, during the pandemic, the IMF allocated $650 billion in SDRs, with G7 countries (population: 772 million) receiving $280 billion, while the African continent (population: 1.3 billion) received only $34 billion.

United Nations Security Council

• The Security Council is one of the six main organs of the United Nations.
• The Permanent Residence of UNSC in the UN Headquarters New York City, USA.
• Its primary responsibility is the maintenance of international peace and security.
• While other organs of the United Nations make recommendations to member states, only the Security Council has the power to make decisions that member states are then obligated to implement under the Charter- Hence, it is the only body of the UN with the authority to issue binding resolutions to member states.
• Resolutions of the Security Council are typically enforced by UN peacekeepers, military forces voluntarily provided by member states and funded independently of the main UN budget.

Membership

• It has 15 Members (5 as Permanent Members and 10 as Non- Permanent Members), and each Member has one vote.
• The Five permanent members are: China, France, Russian Federation, the United Kingdom, and the United States. Each of the Permanent Members has Veto Power over every decision of UNSC.
• The Ten non-permanent members are Elected for two-year terms by the General Assembly.
• Each year, the General Assembly elects five non-permanent members (out of ten in total) for a two-year term. The ten non-permanent seats are distributed on a regional basis.
• As per the rules of procedure, a retiring member is not eligible for immediate re-election and the election is held by secret ballot and there are no nominations.
• The presidency of the Council rotates monthly, going alphabetically among member states.

Functions and Powers of UNSC

Under the United Nations Charter, the functions and powers of the Security Council are:

• to maintain international peace and security in accordance with the principles and purposes of the United Nations;
• to investigate any dispute or situation which might lead to international friction;
• to recommend methods of adjusting such disputes or the terms of settlement;
• to formulate plans for the establishment of a system to regulate armaments;
• to determine the existence of a threat to the peace or act of aggression and to recommend what action should be taken;
• to call on Members to apply economic sanctions and other measures not involving the use of force to prevent or stop aggression;
• to take military action against an aggressor;
• to recommend the admission of new Members;
• to exercise the trusteeship functions of the United Nations in “strategic areas”;
• to recommend to the General Assembly the appointment of the Secretary-General and, together with the Assembly, to elect the Judges of the International Court of Justice.

Issues with the United Nations Security Council (UNSC):

• Challenges for Developing Countries: Developing countries are confronted with problems in moral, power-related, and practical dimensions within the UNSC.
• Unjust Bias in Global Frameworks: The global economic and financial frameworks exhibit a systemic and unfair bias in favor of wealthy nations. This generates significant frustration among developing nations.
• Lack of Representation: The absence of Africa, as well as countries like India, Germany, Brazil, and South Africa, from the permanent membership of the UNSC is considered a major drawback. This limitation hampers the representation of important nations and their perspectives on global issues, thereby impeding effective decision-making on complex and interconnected problems.
• Criticism of Veto Power: The five permanent members of the UNSC (P5) possess veto power, which has been criticized as anachronistic and undemocratic. The veto power restricts the Council’s ability to make crucial decisions when any of the P5 disagrees.
• Incompatibility with Current Security Landscape: Many argue that such elite decision-making structures are unsuitable for the current global security landscape and call for reforms to address these shortcomings.

Addressing the Issues:

Bretton Woods:

• Reshape and Revitalize Institutions: The IMF, World Bank Group (WBG), and World Trade Organization (WTO) should undergo reforms to enhance their effectiveness.
• IMF: Focus on macroeconomic policy and financial stability, with stricter surveillance of advanced economies and their impact on global crises.
• WBG: Prioritize sustainability, shared prosperity, and effective leveraging of private capital. Collaborate with others to address global challenges and serve as a wholesaler of finance.
• WTO: Strengthen its role in promoting fair trade, faster dispute resolution, and the ability to respond swiftly to emergencies.
• Automatic and Rule-based Financing: Implement more automatic and rule-based financing mechanisms to avoid delays and minimize political influences.
• Calibrated Measures: Introduce regular SDR issues, global pollution taxes, and financial transaction taxes to address financial and environmental challenges.
• Enhanced G-20: Develop a well-structured G-20 framework that provides comprehensive guidance to the Bretton Woods system and its interactions with other institutions.

UNSC:

• Equal Representation: Ensure equal representation for all regions, including Africa, in the UNSC. Decentralize power and authority to allow nations from all regions to voice concerns related to peace and democracy in their countries.
• Focus on Global Issues: Shift the focus of the UNSC towards addressing global issues rather than preserving the privileges of the P5 nations.
• Balance of Power: Make urgent corrections to balance power between the P5 and the rest of the world, aiming for a more democratic and legitimate governance structure for international peace and security.
• Reform the IGN Process: Revise and re-energize the Intergovernmental Negotiation (IGN) process, which discusses UNSC reform, while avoiding procedural tactics that hinder progress.

-Source: The Hindu

Forum Shopping

Context:

Recently, to a litigant appearing before him, the Chief Justice of India (CJI) DY Chandrachud said that he will not permit forum shopping.

Relevance:

GS II: Polity and Governance

Dimensions of the Article:

1. About Forum Shopping
2. Criticism of Forum Shopping
3. Supreme Court’s View on Forum Shopping

About Forum Shopping:

• Forum shopping refers to the deliberate attempt by litigants or lawyers to move their case to a specific judge or court where they believe they will receive a more favorable judgment.
• Webster’s dictionary defines forum shopping as the practice of selecting a court from among those that have jurisdiction to determine the case, based on the likelihood of obtaining the most favorable outcome.

Consideration in Litigation Strategy:

• Lawyers consider the choice of forum as part of their litigation strategy.
• They assess which court or judge is more likely to rule in their favor.
• Factors such as the judge’s expertise, the court’s track record, and the potential impact of the forum on the case are taken into account.

Example:

• For strategic reasons, litigants may choose to directly approach the Supreme Court through a public interest litigation case instead of filing it in the relevant High Court.
• This decision is based on the expectation that the issue will receive more attention and visibility in the Supreme Court

Criticism of Forum Shopping:

• Circumventing the Process: Forum shopping is seen as an obvious attempt to bypass the usual legal process or to avoid a particular judge, which undermines the integrity of the legal system.
• Injustice to the Other Party: Judges have expressed concerns about the unfairness caused to the opposing party when a case is deliberately moved to a particular forum, as it may disadvantage them and disrupt the balance of justice.
• Overburdening Courts: Forum shopping can lead to an imbalance in caseloads among different courts, with some courts becoming overwhelmed while others are underutilized. This puts strain on the judicial system and hampers the efficient dispensation of justice.
• Interference with Judicial Process: By selectively choosing a forum, litigants interfere with the natural progression of cases and the orderly functioning of the judicial process, which can lead to delays and inefficiencies.
• Criticism by US and UK Courts: The practice of forum shopping has drawn criticism even in countries like the United States and the United Kingdom. Courts in these jurisdictions have voiced their disapproval and have sought to discourage or prohibit such practices.
• Example of Patent Suits in the US: In the US, forum shopping in patent cases has been highlighted as a concern. A significant number of patent suits are reported to be concentrated in a specific Federal Court in East Texas, raising questions about the fairness and legitimacy of the chosen forum.

Supreme Court’s View on Forum Shopping:

• Definition Not Exclusive: The concept of forum shopping has not been specifically defined in any Indian statute.
• Chetak Construction Ltd. vs. Om Prakash (1988): In this case, the Supreme Court stated that a litigant cannot be allowed the choice of forum and emphasized that every attempt at forum shopping should be strongly discouraged.
• Vijay Kumar Ghai vs. State of W.B. (March 2022): The Supreme Court referred to forum shopping as a disreputable practice by the courts and stated that it has no legal sanction or paramountcy. The court expressed its disapproval of the practice and highlighted an instance where a respondent filed multiple complaints in different courts, indicating a malicious intent to harass the petitioners and extract monetary gains.
• Union of India & Ors. vs. Cipla Ltd. (2017): The Supreme Court established a “functional test” to identify forum shopping. The court examines whether there is functional similarity in the proceedings between different courts and whether there is any subterfuge or manipulative behavior on the part of the litigant.

-Source: Indian Express

Power to Promulgate, Repromulgate Ordinances

Context:

The central government recently promulgated an Ordinance to undo a unanimous verdict of a 5-judge Constitution Bench of the Supreme Court.

• The SC verdict gave the Delhi government control over the transfer and posting of officials in the National Capital Territory (NCT), except with regard to public order, police, and land.

Relevance

GS II: Polity and Governance

Dimensions of the Article:

1. Power to Promulgate Ordinance
2. Repromulgation of Ordinance
3. SC Verdicts on Promulgation/Repromulgation of Ordinances
4. Regarding the ordinance related to power over services in the National Capital Territory (NCT)

Power to Promulgate Ordinance:

Article 123 of the Indian Constitution:

• Empowers the President to promulgate Ordinances during Parliament recess.

Article 213 of the Indian Constitution

• It deals with the broadly analogous powers of the Governor to promulgate an Ordinance when the state legislature is not in session.

Conditions for Promulgation:

• President can promulgate Ordinances if both Houses of Parliament are not in session.
• President must be satisfied that immediate action is necessary due to existing circumstances.

Government’s Role:

• President acts on advice of Council of Ministers (Article 74).
• Government decides to bring the Ordinance.

Force and Effect of Ordinance:

• An Ordinance holds the same force and effect as an Act of Parliament.
• Government must bring the Ordinance before Parliament for ratification.

Lapsing of Ordinance:

• If government fails to bring the Ordinance before Parliament, it lapses after 6 weeks from Parliament’s reassembly.
• Ordinance may also lapse earlier if the President withdraws it or if both Houses pass resolutions disapproving it.
• Rejection implies the government has lost majority.

Repromulgation of Ordinance:

• The power to promulgate ordinances is provided for addressing urgent requirements since lawmaking is a legislative function.
• To prevent an ordinance from lapsing (which occurs after 6 weeks from the reassembly of both Houses of Parliament), it needs to be converted into an Act through parliamentary ratification within that timeframe.
• Repromulgation of an ordinance, however, extends its life and allows the executive branch to retain legislative power.

SC Verdicts on Promulgation/Repromulgation of Ordinances:

RC Cooper Case (1970):

• In this case, it was held that if an ordinance is promulgated without an immediate requirement and solely to bypass debate and discussion in the legislature, the President’s decision to promulgate the ordinance can be challenged.

D C Wadhwa v. State of Bihar (1986):

• The court ruled that it would be considered a colorable exercise of power if the government ignores the legislature and repromulgates an ordinance repeatedly, while continuing to regulate the rights and freedoms of citizens through executive-made ordinances.

Krishna Kumar Singh v. State of Bihar (2017):

• In this case, a 7-judge bench of the court reiterated that legislation should normally be carried out by the legislature.
• The power of the Governor to issue an ordinance is considered an emergency power.
• Repeated repromulgations of an ordinance without bringing it to the legislature would be seen as usurping the function of the legislature and would be deemed unconstitutional.

Regarding the ordinance related to power over services in the National Capital Territory (NCT):

• The ordinance conferred power over services to the Lieutenant Governor of Delhi, who is appointed by the central government.
• It established a National Capital Civil Service Authority, consisting of the Chief Minister and two senior IAS officials.
• The authority would make decisions based on the majority of votes from the members present and voting.
• This setup created a situation where the elected Chief Minister’s views could potentially be overruled by the authority.

-Source: Indian Express

Sengol

Context:

A historical sceptre from Tamil Nadu ‘Sengol’ will be installed at the new Parliament building to be inaugurated by by Prime Minister Narendra Modi on May 28.

Relevance:

GS I: History, Facts for Prelims

About Sengol:

Origin:

• The term “Sengol” was first used on August 14, 1947, by Prime Minister Jawaharlal Nehru during the transfer of power from the British.
• It was initially kept in a museum in Allahabad.
• The word “Sengol” is derived from the Tamil word “Semmai,” which means “righteousness.”
• It is a civilizational practice from the Chola kingdom, which was one of the prominent kingdoms in the Indian subcontinent for centuries.

Symbolic:

• In Tamil tradition, a high priest presents a sceptre, known as “Sengol,” to a newly crowned king as a symbolic gesture of power transition.
• The recipient of the “Sengol” is expected to rule with justice and impartiality.
• C. Rajagopalachari, the last Governor General of India, proposed that this tradition observed by the Chola dynasty could serve as a significant symbol of India’s freedom from British rule.

Features:

• The “Sengol” was crafted by the renowned jeweler Vummidi Bangaru Chetty from Madras (Chennai).
• This impressive sceptre measures five feet in length.
• It features a “nandi” bull at the top, symbolizing the concept of justice.

-Source: The Hindu

INS Mormugao

Context:

The Indian Navy successfully carried out an engagement of a sea-skimming supersonic target using its latest indigenous guided missile destroyer INS Mormugao.

Relevance:

GS III: Science and Technology

Dimensions of the Article:

1. About INS Mormugao
2. Features

About INS Mormugao:

• INS Mormugao is an indigenous guided missile destroyer belonging to the Indian Navy.
• It is named after the historic port city of Mormugao in Goa, located on the west coast of India. It coincidentally undertook its first sea sortie on December 19, 2021, coinciding with Goa’s celebration of 60 years of liberation from Portuguese rule.

Features:

• The ship measures 163 meters in length and 17 meters in breadth.
• It has a displacement of 7,400 tonnes.
• Propulsion is provided by four powerful Gas Turbines, configured in a Combined Gas and Gas (COGAG) arrangement.
• The ship is capable of achieving speeds in excess of 30 knots.
• It incorporates enhanced stealth features, resulting in a reduced Radar Cross Section (RCS).
• A modern Surveillance Radar is installed, providing target data to the ship’s gunnery weapon systems.
• The vessel is equipped with sophisticated weapons and sensors, including surface-to-surface and surface-to-air missiles.
• Anti-submarine warfare capabilities are provided by indigenous rocket launchers, torpedo launchers, and ASW (Anti-Submarine Warfare) helicopters.
• It is designed to operate under nuclear, biological, and chemical (NBC) warfare conditions.

-Source: The Hindu