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Current Affairs – 3 August 2021

Current Affairs (3rd August 2021)

Gilgit-Baltistan

Context:

  • Pakistan’s Law and Justice Ministry has finalised draft legislation to incorporate Gilgit-Baltistan, the region known before 2009 as Northern Areas, as a province of the country.
  • New Delhi has not responded yet and it has asserted that Gilgit-Baltistan is an integral part of India “by virtue of the legal, complete and irrevocable accession of Jammu & Kashmir to the Union of India in 1947”.
  • The area’s strategic importance for India has increased considering the China-Pakistan Economic Corridor agreement, under which Beijing is investing hugely to develop the area as part of its Belt and Road Initiative, and the concerns of a two-front war after the standoff in Eastern Ladakh last year.

History of the region

  • Gilgit was part of the princely state of Jammu & Kashmir, but was ruled directly by the British, who had taken it on lease from Hari Singh, the Hindu ruler of the Muslim-majority state.
  • When Hari Singh acceded to India on October 26, 1947, the Gilgit Scouts rose in rebellion, led by their British commander Major William Alexander Brown.
  • The Gilgit Scouts also moved to take over Baltistan, which was then part of Ladakh, and captured Skardu, Kargil and Dras. In battles thereafter, Indian forces retook Kargil and Dras in August 1948.
  • Before that, on November 1, 1947, a political outfit called the Revolutionary Council of Gilgit-Baltistan had proclaimed the independent state of Gilgit-Baltistan.
  • On November 15, it declared it was acceding to Pakistan, which accepted the accession only to the extent of full administrative control, choosing to govern it directly under the Frontier Crimes Regulation, a law devised by the British to keep control of the restive tribal areas of the northwest.
  • Following the India-Pakistan ceasefire of January 1, 1949, Pakistan in April that year entered into an agreement with the “provisional government” of “Azad Jammu & Kashmir” — parts that had been occupied by Pakistani troops and irregulars — to take over its defence and foreign affairs. Under this agreement, the “AJK” government also ceded administration of Gilgit-Baltistan to Pakistan.

Beyond the provinces

  • In 1974, Pakistan adopted its first full-fledged civilian Constitution, which lists four provinces — Punjab, Sindh, Balochistan and Khyber Pakthunkhwa.
  • Pakistan-Occupied Kashmir (PoK) and Gilgit-Baltistan were not incorporated as provinces. One reason ascribed to this is that Pakistan did not want to undermine its international case that the resolution of the Kashmir issue had to be in accordance with UN resolutions that called for a plebiscite.
  • In 1975, PoK got its own Constitution, making it an ostensibly self-governed autonomous territory.
  • This Constitution had no jurisdiction over the Northern Areas, which continued to be administered directly by Islamabad (the Frontier Crimes Regulation was discontinued in 1997 but repealed only in 2018).
  • In reality, PoK too remained under the control of Pakistani federal administration and the security establishment, through the Kashmir Council.
  • The main difference was that while the people of PoK had rights and freedoms guaranteed by their own Constitution, which mirrors the Pakistan Constitution, the people of the minority Shia-dominated Northern Areas did not have any political representation.
  • Although they were considered Pakistani, including for citizenship and passports, they were outside the ambit of constitutional protections available to those in the four provinces and PoK.

First changes:

  • It was only in the first decade of the new century that Pakistan began considering changes to its administrative arrangements in the Northern Areas due to the new post-9/11 dynamics of the region and the increasing Chinese involvement in strategic development ventures.
  • Gilgit-Baltistan was vital to those projects, given that it provides the only land access between the two countries.
  • In 2009, Pakistan brought in the Gilgit-Baltistan (Empowerment and Self-Governance) Order, 2009, replacing the Northern Areas Legislative Council (NALC) with the Legislative Assembly, and the Northern Areas were given back the name of Gilgit-Baltistan.
  • The NALC was an elected body but had no more than an advisory role to the Minister for Kashmir Affairs and Northern Areas, who ruled from Islamabad.

Provincial status:

  • On November 1, 2020, observed in Gilgit-Baltistan as “Independence Day”, Pakistan announced that his government would give the region “provisional provincial status”.
  • In March this year, the newly elected Assembly passed a unanimous resolution demanding an amendment to the Constitution to make Gilgit-Baltistan a provisional province of Pakistan, “without prejudice to the Kashmir dispute”.

 

India’s growth forecast

Context:

  • On August 6, the Monetary Policy Committee of the Reserve Bank of India will unveil its latest monetary policy review.
    • Typically, these reviews happen once every two months — although there have been times (as it happened in March 2020) when the RBI has decided to react outside this set cycle; it did so to counter the adverse impacts of the Covid-19 pandemic.

About:

  • In each meeting, there are two key questions that the RBI evaluates:
    • One, what is the outlook on economic (GDP) growth and,
    • Two, what is the outlook on retail inflation.
  • There is one very important difference between these two concerns though. The RBI is legally mandated to keep the inflation rate between 2% and 6% but there is no such requirement when it comes to GDP growth.

How to boost economic growth by RBI:

  • Boosting economic growth translates to reducing the interest rate that RBI charges to lend money to India’s commercial banks; this rate is called the repo rate. 
  • By doing so, it tries to make it easier for all economic agents (especially businesses) to seek new loans and boost economic activity.
  • When inflation is too high, the RBI typically increases the interest rate, thus incentivising consumers to keep their money in their bank accounts (instead of spending it) while also making it costlier for businesses to take out new loans. If the retail inflation is too low, it suggests weak economic activity and one would expect the RBI to lower interest rates to boost GDP.

Concerns:

  • The odd thing with the RBI policy lately is that India’s GDP growth has been stalling even as the inflation rate has spiked. 
  • The RBI cannot boost growth as well as curb inflation at the same time. If it chooses to boost growth when inflation is also high, it runs the risk of further fuelling inflation. About inflation, the key thing to remember is that it hits the poor the hardest.
  • As against the expectations at the start of the financial year, the GDP growth in the first quarter of this financial year (April, May, and June) has been underwhelming.

How IMF cutting India’s growth forecast will impact RBI’s monetary policy:

  • IMF’s World Economic Outlook update, at least from an Indian perspective, was that between its April report and the July one, the IMF cut India’s GDP growth forecast for 2021-22 (or FY22) by as much as three percentage points.
    • In April, IMF expected India’s real GDP to grow by 12.5% this year; in July, it revised that forecast to just 9.5%.
    • The hit to India’s GDP is the biggest among the large economies.
  • The IMF points to two broad sets of reasons why it dialled down India’s GDP growth forecast.
    • The first is the inadequate levels of vaccination, which points out how emerging economies such as India have only 11% of their population fully vaccinated — far behind the 40% mark for advanced economies such as the US and UK.
    • The second key factor is the kind of policy support that the Indian economy has received. Governments in most advanced economies have unveiled measures to support their economies longer.
  • But there is yet another aspect to policy support. It is the nature of policy support.
    • The “Above the line” measures refer to those fiscal decisions that boost economic activity by either increasing government expenditures (such as expanding MGNREGA or subsidised food programmes or health facilities etc.) or reducing government revenues (by providing a tax cut or any such relief to consumers and businesses etc.).
    • The “Below the line” measures refer to those policy decisions where instead of a direct immediate outgo from its coffers, the government (including the RBI) provides more loans and credit guarantees.
    • The Indian government has favoured the “below the line” measures instead of the “above the line” measures.
    • This is contrary to the suggestion of many economists who argue that the Indian economy is in dire need of increased direct spending by the government. That’s because in a wide-ranging downturn all other economic agents in the economy have run out of reasons to spend: Individuals have lost incomes and jobs, and firms have lost business.

Conclusion

  • It is true that retail inflation, which is the primary target of RBI, is expected to stay outside or almost outside RBI’s comfort zone in 2021-22.
  • CARE Ratings expects retail inflation to be 6% and wholesale inflation to be 10% this year. Still, RBI is unlikely to raise interest rates on August 6 because India’s economic recovery continues to be quite iffy.

 

Ashwagandha

Context:

  • The Ministry of Ayush has collaborated with the U.K.’s London School of Hygiene and Tropical Medicine (LSHTM) to conduct a study on ‘Ashwagandha’ for promoting recovery from COVID-19.

About:

  • Ashwagandha’ (Withaniasomnifera) is commonly known as ‘Indian winter cherry’.
  • It is a traditional Indian herb that boosts energy, reduces stress and makes the immune system stronger.
  • All India Institute of Ayurveda (AIIA), an autonomous body under the Ministry of Ayush, and the LSHTM recently signed a MoU to conduct clinical trials of ‘Ashwagandha’ on 2,000 participants in three U.K. cities — Leicester, Birmingham and London (Southall and Wembley).
  • While there have been several studies on ‘Ashwagandha’ to understand its benefits in various ailments, this is the first time the Ministry of Ayush has collaborated with a foreign institution to investigate its efficacy on COVID-19 patients”.