07-February-2025-Daily-Current-Affairs

IMPACT OF BUDGET 2025’S TAX CUTS ON THE MIDDLE CLASS AND ECONOMY

TOPIC: (GS3) ECONOMY: THE HINDU

The Union Budget 2025 has introduced significant personal income tax (PIT) cuts, putting ₹1 lakh crore back into the hands of India’s urban middle class. This move is expected to drive consumption, boost demand, and encourage private investment, ultimately accelerating economic growth.

Key Highlights of the Tax Cuts

• The government has reduced PIT to increase disposable income among the middle class.
• Around ₹1 lakh crore has been redirected to taxpayers, primarily benefiting urban middle-class households.
• This aims to stimulate consumption, enhance demand for goods and services, and boost economic growth.

Understanding the Consumption Multiplier

• Concept: The consumption multiplier measures how additional income circulates in the economy, generating multiple rounds of spending.
• Formula: The multiplier is calculated as 1/(1-MPC), where MPC (Marginal Propensity to Consume) is the fraction of income spent, and MPS (Marginal Propensity to Save) is the fraction saved.

Economic Impact of the Tax Cuts

• ₹1 lakh crore in tax savings could lead to ₹5 lakh crore in additional spending.
• Major spending areas include electronics, home appliances, education, and healthcare.
• India’s current real consumption is ₹104 lakh crore, and GDP stands at ₹185 lakh crore.
• The increase in consumption would result in 8% consumption growth and 2.7% GDP growth.
• With a conservative multiplier estimate (3.3), GDP growth is expected to rise by 8%.

Factors Influencing the Multiplier Effect

Positive Factors:

• Strong Consumer Confidence: The middle class is likely to spend rather than save.
• Limited Leakage to Imports: Most spending will be on locally produced goods.
• Encouragement for Private Investment: Rising demand may push firms to expand.

Limiting Factors:

• Savings for Future Uncertainty: Some individuals might save in anticipation of higher future taxes.
• Higher Interest Rates: Government borrowing to offset tax revenue loss may raise borrowing costs.
• Inflationary Pressures: If supply cannot meet demand, prices may rise instead of output.

Effect on Private Investment

• Higher middle-class spending will create demand for goods, encouraging firms to invest in new projects.
• This could lead to more job creation, further increasing disposable income and economic activity.
• Unlike traditional tax cuts, this move is targeted at a key segment that drives domestic demand.

Monetary and Fiscal Policy Considerations

• The Reserve Bank of India (RBI) should adopt an easy monetary policy to support private investment.
• With the fiscal deficit controlled at 4.4% of GDP, inflation risks remain minimal.
• While tax cuts provide a short-term consumption boost, public investment in infrastructure ensures long-term productivity and growth.
• The government is likely to continue balancing tax relief with infrastructure development.

Conclusion

Budget 2025’s tax cuts will act as a short-term economic stimulus, boosting consumption and private investment. While this policy enhances immediate demand, it should be complemented by long-term investments in infrastructure to sustain economic growth.

Practice Question:

1. Consider the following statements regarding the Union Budget 2024-25:

1. The Union Budget is presented under Article 112 of the Indian Constitution.
2. The budget includes both the Revenue Budget and the Capital Budget.
3. The Finance Bill is presented separately from the Union Budget and does not contain tax proposals.

Which of the statements given above is/are correct?

1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2, and 3

Answer: A

Explanation:

• Article 112 of the Constitution of India mandates the presentation of the Union Budget, also known as the Annual Financial Statement.
• The budget consists of the Revenue Budget (which includes revenue receipts and expenditures) and the Capital Budget (which includes capital receipts and expenditures).
• The Finance Bill, which is a part of the budget, contains tax proposals and is introduced along with the Union Budget.

APPOINTMENT OF AD-HOC JUDGES TO HIGH COURTS

TOPIC: (GS2) INDIAN POLITY: THE HINDU

To tackle the increasing backlog of criminal cases, the Supreme Court recently allowed High Courts to appoint retired judges on an ad-hoc basis. This move aims to speed up judicial processes while ensuring fair trials.

Supreme Court’s Order on Ad-hoc Appointments

• On January 30, 2024, the Supreme Court permitted High Courts to appoint retired judges as ad-hoc judges.
• These judges will handle only criminal appeals and must work alongside sitting judges.
• A three-judge Bench led by Chief Justice of India (CJI) Sanjiv Khanna, with Justices B.R. Gavai and Surya Kant, modified an earlier rule set in the Lok Prahari vs Union of India (2021) case.
• The new order removed the restriction that allowed such appointments only in High Courts with over 20% judicial vacancies.

Legal Basis for Ad-hoc Judges

• Article 224-A of the Indian Constitution, introduced through the Fifteenth Amendment Act, 1963, provides for the appointment of retired judges in High Courts.
• Such appointments require:
  • Consent of the retired judge.
  • Approval from the President of India.
• These judges enjoy the same powers and privileges as sitting judges and receive allowances as per presidential orders.
• The 1998 Memorandum of Procedure (MoP) outlines the detailed appointment process.

Circumstances for Appointing Ad-hoc Judges

• The Lok Prahari judgment identified specific conditions where such appointments could be made, citing previous recommendations from the Law Commission (1979, 1988, and 2003).
• The Supreme Court had earlier expressed concerns that Article 224-A could be misused to delay regular judicial appointments.

Ad-hoc judges were only to be appointed when:

• More than 20% of judicial positions in a High Court remained vacant.
• Cases in a specific category had been pending for over five years.
• More than 10% of total cases in a High Court were unresolved for over five years.
• The case disposal rate was lower than the rate at which new cases were being filed.

• Chief Justices of High Courts were advised to create a panel of retired and soon-to-retire judges to facilitate appointments.

Supreme Court’s Latest Order

• The new ruling aimed at reducing judicial delays, given that as of January 25, 2024, there were 62 lakh pending cases across all High Courts.
  • 18.2 lakh criminal cases
  • 44 lakh civil cases
• The Supreme Court removed the 20% vacancy rule and allowed High Courts to appoint ad-hoc judges even if vacancies were below this threshold.

Additional guidelines:

• Ad-hoc judges will only hear criminal appeals.
• The number of ad-hoc judges in a High Court cannot exceed 10% of its sanctioned strength.
• This means a High Court may have only 2 to 5 ad-hoc judges at a time.

Past Instances of Ad-hoc Appointments

• Ad-hoc appointments have been rare in India, with only three recorded cases:

• Justice Suraj Bhan (1972) – Appointed to the Madhya Pradesh High Court to handle election petitions.
• Justice P. Venugopal (1982) – Appointed to the Madras High Court.
• Justice O.P. Srivastava (2007) – Appointed to the Allahabad High Court for the Ayodhya title dispute case.

Significance of the Decision

• Helps clear case backlog – By appointing additional judges, courts can resolve cases faster.
• Improves judicial efficiency – More judges mean quicker hearings and reduced delays.
• Temporary but effective solution – Addresses the shortage of judges without making permanent appointments.
• Maintains quality of judgments – Retired judges bring experience, ensuring fair and competent decisions.

Challenges and Concerns

• Not a permanent fix – The government needs to fill regular judicial vacancies rather than relying on ad-hoc appointments.
• Risk of over-reliance – High Courts might use ad-hoc appointments as an alternative to making permanent recommendations.
• Limited scope – Ad-hoc judges can only hear criminal appeals, leaving civil case backlogs unresolved.
• Potential conflicts – Retired judges might not be up-to-date with recent legal developments, affecting case outcomes.

Conclusion

The Supreme Court’s decision marks a crucial step in addressing judicial delays by allowing High Courts to appoint ad-hoc judges. While this provides immediate relief for pending criminal cases, long-term solutions, such as increasing regular judicial appointments, remain essential.

Practice Question:

1. With reference to the appointment of ad hoc judges in the Supreme Court of India, consider the following statements:

1. Ad hoc judges can be appointed under Article 127 of the Indian Constitution.
2. The Chief Justice of India can appoint an ad hoc judge with the approval of the President when there is a lack of quorum in the Supreme Court.
3. Ad hoc judges enjoy the same powers and privileges as permanent judges of the Supreme Court.

Which of the statements given above is/are correct?

1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2, and 3

Answer: D

Explanation:

• Article 127 of the Indian Constitution provides for the appointment of ad hoc judges in the Supreme Court.
• The Chief Justice of India, with the approval of the President, can appoint a High Court judge as an ad hoc judge when there is a lack of quorum in the Supreme Court.
• Ad hoc judges have the same powers, privileges, and jurisdiction as permanent judges while they serve in the Supreme Court.

RBI’S REPO RATE CUT: IMPACT ON ECONOMY AND BORROWERS

TOPIC: (GS3) ECONOMY: THE HINDU

The Reserve Bank of India (RBI) recently reduced the repo rate by 25 basis points (bps) to 6.25%, marking the first rate cut in nearly five years. This move aims to encourage economic growth by making loans cheaper and boosting spending and investment.

Reasons for the Repo Rate Cut

• The RBI cut the repo rate to support economic growth and improve credit availability.
• Inflation remains within the RBI’s target, allowing flexibility in monetary policy.
• Lower rates can encourage borrowing, increase liquidity, and boost consumption and investment.
• The global trend of accommodative monetary policies influenced this decision.

Impact on Borrowers and Lending Rates

• Reduced Loan EMIs: Home and vehicle loan equated monthly instalments (EMIs) will decrease as banks lower their lending rates.
• Lower External Benchmark Lending Rates (EBLR): Lending rates linked to the repo rate will fall, reducing borrowing costs.
• Marginal Cost of Fund-Based Lending Rate (MCLR) Effect: Banks may also lower their MCLR, further reducing loan interest rates.
• Better Credit Availability: More affordable credit can help businesses expand and individuals invest in housing, education, or businesses.

Impact on Economy

• Encouraging Investments: Businesses may increase spending on expansion and infrastructure due to cheaper loans.
• Boosting Consumption: Lower borrowing costs encourage individuals to spend more on big-ticket items like cars and homes.
• Potential Growth in GDP: Increased credit flow can boost economic activity and create job opportunities.

Concerns and Challenges

• Risk of Higher Inflation: Increased money supply and lower interest rates could push prices upward.
• Lower Savings Returns: Depositors may earn less interest on their savings accounts and fixed deposits.
• Uncertain Long-Term Impact: The sustainability of economic growth depends on multiple factors, including global economic conditions and fiscal policies.

Economic Outlook

• The RBI projects GDP growth at 6.7% for 2025-26, slightly higher than its previous estimate of 6.6%.
• Retail inflation is expected to remain at 4.2%, with further moderation due to falling vegetable and edible oil prices.
• The economy faces challenges such as currency depreciation and global uncertainties, which may impact inflation trends.

Conclusion

The RBI’s decision to cut the repo rate aims to stimulate economic activity by making loans more affordable. While this move can encourage spending and investment, its long-term impact depends on inflation control and global economic stability.

Practice Question:

1. With reference to the Repo Rate and Reverse Repo Rate, consider the following statements:

1. Repo rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks.
2. Reverse repo rate is the rate at which commercial banks borrow from the RBI.
3. An increase in the repo rate makes borrowing costlier for banks, which can lead to a reduction in liquidity in the economy.
4. A decrease in the reverse repo rate encourages banks to park more funds with the RBI, reducing money circulation in the market.

Which of the statements given above is/are correct?

1. 1 and 3 only
2. 2 and 4 only
3. 1, 2, and 3 only
4. 1, 3, and 4 only

Answer: A

Explanation:

• The repo rate (repurchase rate) is the rate at which the RBI lends money to commercial banks for short-term needs.
• Reverse repo rate is the rate at which the RBI borrows money from commercial banks, not the other way around.
• An increase in the repo rate makes borrowing more expensive for banks, leading to reduced liquidity in the economy.
• A decrease in the reverse repo rate discourages banks from parking their funds with the RBI, thereby increasing money circulation in the economy.

UGC GUIDELINES AND FEDERALISM CONCERNS

TOPIC: (GS2) INDIAN POLITY: THE HINDU

The new UGC draft guidelines propose significant changes in the appointment process of Vice-Chancellors (V-Cs) in state universities, increasing the role of governors. These changes have sparked debates on federalism, states’ autonomy in higher education, and the potential for excessive centralization.

Key Provisions of the Draft UGC Regulations, 2025

• The Search-and-Selection Committee for appointing V-Cs will be constituted by the Chancellor (mostly the Governor).
• The Committee will have three members—one each from the Chancellor/Visitor, the UGC chairman, and the university’s governing body.
• The Chancellor will have sole discretion in making the final appointment.
• The requirement for prior teaching or research experience for V-Cs has been removed, raising concerns about political influence.

Impact on Federalism and State Autonomy

• The regulations diminish the role of state governments in higher education governance.
• Education was originally under the State List but was moved to the Concurrent List in 1976, enabling greater central control.
• Some states, like Gujarat (2013), have successfully reduced the Governor’s powers as Chancellor, while others, such as Kerala and Tamil Nadu, face opposition.

Historical Context and Legal Challenges

• The Governor’s role in education dates back to British rule (Wood’s Despatch, 1854).
• Supreme Court rulings have favored UGC regulations over state laws, creating conflicts over governance rights.
• Justice Sarkaria Commission (1983) and the Centre-State Relations Commission (2010) criticized Governors’ discretionary powers in education.

Concerns Over Contractual Employment and Privatization

• The draft guidelines propose contractual hiring for teaching positions, removing the 10% cap on such appointments.
• Up to 10% of faculty positions can now be filled by professionals from industries, increasing corporate influence.
• This move aligns with policies like lateral entry in civil services and Agniveers in defense, potentially reducing job security in academia.

State Governments’ Response

• Kerala and Tamil Nadu have passed resolutions opposing the new UGC guidelines.
• More states may follow, fearing loss of control over higher education policies.

Conclusion

The draft UGC regulations are seen as a move towards centralizing education governance, undermining federal principles. If implemented, they could significantly alter the balance of power between the Centre and states in shaping the higher education sector.

MARINE HEATWAVES AND CLIMATE CRISIS

TOPIC: (GS3) ENVIRONMENT: INDIAN EXPRESS

Marine heatwaves (MHWs) are extreme climate events where sea surface temperatures rise significantly above normal levels for a prolonged period. Due to climate change, these heatwaves have become more frequent, intense, and longer-lasting, affecting marine ecosystems worldwide.

What are Marine Heatwaves?

• MHWs occur when sea surface temperatures rise 3-4°C above average for at least five days.
• They can persist for weeks, months, or even years and affect both coastal and deep-sea regions.
• A study in Nature (2018) found that MHWs have doubled between 1982 and 2016.
• The International Union for Conservation of Nature (IUCN) stated that MHWs have increased by 50% over the last decade and are becoming more severe.

Why are Marine Heatwaves Intensifying?

• Climate Change: Rising global temperatures have led to more heat being absorbed by the ocean.
• Increased Sea Surface Temperature (SST): The global average SST has risen by 0.9°C since 1850. Over the past four decades, SST has increased by 0.6°C.
• Western Australia’s Example: September 2024: Average Sea temperature anomaly at 1.2°C. January 2025: Temperatures exceeded 2°C on multiple occasions.
• If global warming reaches 1.5°C, MHWs could become 16 times more frequent.
• If warming reaches 2.0°C, MHWs could occur 23 times more frequently.

Impact of Marine Heatwaves

• Marine Life Loss: MHWs in Western Australia (2010-11) led to mass fish deaths and disrupted marine ecosystems. Recent MHWs (2024-25) have caused the death of over 30,000 fish in Western Australia.
• Destruction of Kelp Forests: Kelp forests thrive in cooler waters and provide food and shelter for marine species. Heatwaves kill kelp forests, leading to ecosystem collapse.
• Coral Bleaching: Coral bleaching occurs when corals lose their symbiotic algae due to heat stress. The Great Barrier Reef experienced its seventh mass bleaching event in 2024.
• Disruption of Marine Food Chains: Many marine animals depend on coral reefs and kelp forests for survival. The loss of these habitats can threaten biodiversity and disrupt fishing industries.

Conclusion

Marine heatwaves are becoming more frequent, intense, and prolonged due to climate change. Their impact on marine ecosystems, fisheries, and biodiversity is severe, making it crucial to take immediate climate action to reduce global warming.

SHOULD INDIA BUILD A SOVEREIGN FOUNDATIONAL AI MODEL?

TOPIC: (GS3) SCIENCE AND TECHNOLOGY: THE HINDU

India is debating whether to invest in a sovereign foundational AI model, balancing the need for technological self-reliance with financial constraints. While some experts highlight the importance of sovereignty and innovation, others question the feasibility given India’s resource limitations.

Need for a Sovereign AI Model

• Technological Independence: Developing an indigenous AI model can reduce reliance on foreign technology and safeguard against geopolitical risks such as trade restrictions.
• National Security: AI models are crucial for cybersecurity, defense, and governance, making it essential for India to have control over its own systems.
• Economic and Strategic Value: AI can boost India’s digital economy and create opportunities in AI-driven applications tailored to local needs.

Challenges in Developing a Foundational Model

• High Costs: Training a competitive AI model requires billions of dollars, making it a resource-intensive venture.
• Infrastructure Constraints: India lacks domestic semiconductor manufacturing capabilities, making it dependent on foreign chipmakers.
• Market Limitations: The Indian AI market is relatively small compared to global tech hubs, potentially limiting the returns on investment.

Alternative Approaches

• Leveraging Open-Source Models: Instead of building a new model, India can modify and build upon existing open-source AI frameworks like DeepSeek.
• Investment in AI Applications: Focusing on AI-driven software and applications rather than foundational models can be a more cost-effective strategy.
• Government and Private Sector Collaboration: Encouraging partnerships between academia, startups, and large corporations can drive AI innovation.

Role of Government Initiatives

• IndiaAI Mission: The IT Ministry has announced initiatives to provide subsidized GPU access to startups and researchers, reducing computational costs.
• Regulatory Framework: Establishing policies for ethical AI development can encourage responsible AI innovation.
• Focused AI Research: Supporting projects that cater to India’s linguistic and cultural diversity, such as Indic language AI models, can yield high-impact results.

Conclusion

While building a sovereign AI model can enhance India’s technological autonomy, the high costs and infrastructure challenges make it a complex endeavour. A balanced approach that leverages open-source AI, focuses on applications, and promotes collaborative research may be a more practical strategy for India’s AI aspirations.

EXPANSION OF E-NAM PLATFORM TO BOOST AGRICULTURAL TRADE

TOPIC: (GS3) ECONOMY: THE HINDU

The Government of India has expanded the e-NAM (National Agricultural Market) platform by adding 10 new commodities, increasing the total count to 231.

Key Highlights:

Expansion of e-NAM Coverage

• The Department of Agriculture and Farmers’ Welfare decided to extend e-NAM’s scope to cover more agricultural commodities.
• This move addresses farmers’ and traders’ demand for broader trading options.
• The Directorate of Marketing and Inspection (DMI) formulated trading parameters for 10 additional commodities after stakeholder consultations.

Newly Added Commodities

• Miscellaneous Products: Dried Tulsi Leaves, Besan (Chickpea Flour), Wheat Flour, Chana Sattu, and Water Chestnut Flour.
• Spices: Asafoetida and Dried Fenugreek Leaves.
• Vegetables: Water Chestnut and Baby Corn.
• Fruits: Dragon Fruit.

Impact of the Expansion

• Strengthens digital agricultural trading and improves market access.
• Helps farmers secure better prices by ensuring quality standards.
• Encourages value addition and formalized trade, particularly benefiting Farmer Producer Organizations (FPOs).
• Supports the government’s goal of modernizing agriculture through transparency and efficiency.

This initiative aligns with India’s ongoing efforts to create a fair and efficient agricultural market.

IMPACT OF CLIMATE CHANGE ON CULTURAL HERITAGE SITES

TOPIC: (GS3) ENVIRONMENT: THE HINDU

Climate change poses a serious threat to cultural heritage sites due to extreme weather, pollution, and natural disasters. India has taken several steps to monitor and protect historical monuments through scientific methods and disaster management strategies.

Measures Taken to Protect Heritage Sites

Regular Monitoring and Climate-Resilient Solutions

• The Archaeological Survey of India (ASI) conducts periodic scientific treatments and conservation efforts.
• Efforts include strengthening structures and preserving materials to minimize climate damage.

Use of Technology for Monitoring

• Automated Weather Stations (AWS) installed by ASI and ISRO track wind speed, rainfall, temperature, and atmospheric pressure.
• Air Pollution Laboratories at Taj Mahal and Bibi ka Maqbara monitor air pollutants affecting monuments.

Disaster Management Planning

• ASI collaborates with NDMA and UNESCO to develop strategies for heritage site protection.
• National Disaster Management Guidelines help in risk assessment, emergency response, and post-disaster recovery.

Conclusion

India is implementing advanced monitoring and conservation measures to safeguard cultural heritage sites from climate change.