Current Affairs (30th June 2021)

Household financial savings

Context:

• Recently, the Reserve Bank of India (RBI) released its preliminary estimate of household financial savings.
• For lakhs of households in the country, the Covid-19 pandemic has led to a decline in financial assets such as bank deposits, pension money, life insurance funds and currency holdings.
• While the RBI estimated an increase in debt of around 20 crore households, which contribute around 60% of gross savings in the economy, financial savings showed a decline of over 45% from June to December 2020.

The broad takeaways from the estimate:

Financial savings

• When the pandemic first struck, household financial savings initially jumped in the first quarter of 2020-21, but went on to witness sequential moderation in the next two quarters.
• According to the RBI’s preliminary estimate, household financial savings were at 8.2% of GDP in the third quarter, after being at 10.4% of GDP in the second quarter (ended September 2020) and 21% the June quarter.

Household deposits

• While overall bank deposits have been going up, the share of households has been coming down.
• The ratio of household (bank) deposits to GDP declined to 3.0% in the December quarter of 2020-21 from 7.7% in the previous quarter.
• In absolute numbers, household deposits fell from Rs. 3,67,264 crore in September to Rs. 1,73,042 crore in December.
• This suggests that when Covid infections shoot up, deposits of households decline, only to pick up partially when the situation improves and fall again when infections rise again later.

Currency holdings

• Cash holdings were at a high of Rs. 2,06,889 crore in the June quarter of 2020. This declined to Rs. 17,225 crore in September and recovered partially to Rs. 91,456 crore in December, when infections came down.
• After the government announced a stringent lockdown in March last year, currency with the public increased by Rs. 3.07 lakh crore between March and June, from Rs. 22.55 lakh crore to Rs. 25.62 lakh crore. Now, currency with the public is at a record high of Rs. 28.78 lakh crore.
• While currency with the public has been rising, its pace slowed since July, before gathering momentum once again in February 2021.
• Rise in currency holdings indicates that people have started to accumulate cash in anticipation of more stringent lockdown measures, prompting more withdrawals at the ATM.

Life insurance funds

• The insurance industry has undergone a significant transformation since the pandemic struck, with demand for policies rising.
• Life insurers’ new business premium income had declined 27.9% in April and May 2020. However, for the full fiscal 2020-21, premium income recovered and rose by 7.49%.
• However, as infections and deaths increased, funds rose to Rs. 1,23,324 crore in June quarter, Rs. 1,42,422 crore in September quarter and Rs. 1,56,320 crore in December quarter of FY 2021.
• The insurance industry ended the last financial year at 9% growth in life and non-life combined. During the April-May period of the current fiscal, it has grown 17%.

Equity holdings

• Stock markets have progressively improved with the Sensex rising at the beginning of April 2020. After the decline in March and the beginning of April 2020, the markets recovered but households’ investment in equity declined.

Small savings

• Household savings in small saving schemes like post office and National Savings Certificate remained unchanged at Rs 75,879 crore in the three quarters of FY 2021.
• Most of these schemes have a lock-in period, preventing investors from withdrawing from them.

Household debt

• The household debt to GDP ratio, which is based on select financial instruments, has been increasing steadily since end-March 2019.
• It rose sharply to 37.9% at end-December 2020 from 37.1% at end-September 2020. Households’ liabilities to the banking sector contracted by Rs 1,38,472 crore in the June quarter of 2020, but increased to Rs 2,18,216 crore in December.
• The RBI had announced a moratorium on loan repayment last year. “Despite higher borrowings from banks and housing finance companies, the flow in household financial liabilities was marginally lower in the December quarter of 2020-21 following a marked decline in borrowings from non-banking financial companies”.

Vulnerability of seaside structures

Context:

• The partial collapse of the Champlain South Towers condominium in Surfside, Florida, is a reminder of vulnerability of structures near the coast.

About:

• The 40-year-old, oceanfront apartment block was in need of substantial repairs. Among the findings were lack of adequate waterproofing along the entrance driveway and pool deck, and “abundant cracking and spalling of varying degrees in the concrete columns, beams and walls” in the parking lot of the 12-storey building.
• The “marine urban sprawl” plays a major role in rising water levels and land subsidence because of excessive groundwater extraction.
• While the causes behind the “pancake collapse” are yet to be established, construction close to the sea has to take several factors into consideration. In India, any construction along the coast has four fundamental checkpoints.

1.       Soil and foundation

• Along coastal areas, there are sandy strata of considerable depth, and beneath this layer is hard rock or, sometimes, marine clay.
• Usually, buildings are done on a pile foundation in these areas. Concrete piles are driven to rest on a suitable stratum deep into the ground taking into consideration the effect of any compressive layer underneath.
• The life of these underground members can be increased by carefully choosing materials that withstand the hostile saline environment. These could include chemical additives which improve the performance of concrete or sulphate-resistant cement.
• For the hard strata to support the foundation, engineers increase the area of concrete and make sure that steel is non-corrosive.

2.       Material interaction

• In buildings close to the sea, a major concern can be spalling, or saltwater seeping into concrete, causing support beams to rust and weaken over time, and leading to collapse.
• Corrosion too is common in coastal buildings, and erosion can happen depending on the cover of steel.
• Another concern in such areas is carbonation, causing the cement slurry around the structure to lose its protective ability. Once this chemical reaction reaches the reinforcement, corrosion increases rapidly.

3.       Structural audits

• These are a good way to maintain buildings close to large water bodies. In 2019, the Brihanmumbai Municipal Corporation (BMC) had stressed the need for structural audits on buildings 30 years and older.
• While the parameters vary for residential, commercial and industrial buildings, the basic checks included columns, beams, pillars, iron bars and plaster, sewage discharge systems, and water pipelines.
• A non-destructive test is usually recommended by the BMC’s empanelled structural engineer. While implementation remains a challenge, such timely interventions have helped prevent sudden building collapses.

4.       Sea level

• Besides global warming, the sea has its inherent way of getting back. Across the world, be it in Mumbai, along the Kerala coast, Maldives or Dubai, water levels have risen.

Ration card reform

Context:

• Recently, the Supreme Court directed all states and Union Territories to implement the One Nation, One Ration Card (ONORC) system, which allows for inter- and intra-state portability, by July 31.

What is ONORC?

• The ONORC scheme is aimed at enabling migrant workers and their family members to buy subsidised ration from any fair price shop anywhere in the country under the National Food Security Act, 2013.
• While the person can buy foodgrains as per his or her entitlement under the NFSA at the place where he or she is based, members of his or her family can still go to their ration dealer back home.
• To promote this reform in the archaic Public Distribution System (PDS), the government has provided incentives to states.
• The Centre had even set the implementation of ONORC as a precondition for additional borrowing by states during the Covid-19 pandemic last year.
• At least 17 states, which implemented the ONORC reform, were allowed to borrow an additional Rs 37,600 crores in 2020-21.
• To promote this reform in the archaic Public Distribution System (PDS), the government has provided incentives to states. The Centre had even set the implementation of ONORC as a precondition for additional borrowing by states during the Covid-19 pandemic last year.
• At least 17 states, which implemented the ONORC reform, were allowed to borrow an additional Rs 37,600 crores in 2020-21.

What factors led to the launch of ONORC?

• Earlier, NFSA beneficiaries were not able to access their PDS benefits outside the jurisdiction of the specific fair price shop to which they have been assigned.
• The government envisioned the ONORC to give them access to benefits from any fair price shop. Full coverage will be possible after 100% Aadhaar seeding of ration cards has been achieved, and all fair price shops are covered by ePoS devices (there are currently 4.74 lakh devices installed across the country).
• ONORC was launched in August, 2019. Work on ration card portability, however, had begun in April 2018 itself, with the launch of the IM-PDS.
• The idea was to reform the PDS, which has been historically marred by inefficiency and leakages.
• ONORC was initially launched as an inter-state pilot. However, when the Covid-19 pandemic forced thousands of migrant workers to return to their villages last year, a need was felt to expedite the rollout.
• As part of its Covid economic relief package, the government announced the national rollout of ONORC in all states and Union Territories by March 2021.

What has been the coverage so far?

• Till date, 32 states and Union Territories have joined the ONORC, covering about 69 crore NFSA beneficiaries. Four states are yet to join the scheme — Assam, Chhattisgarh, Delhi and West Bengal.
• While inter-state ration card portability is available in 32 states, the number of such transactions is much lower than that of intra-district and inter-district transactions.
• Delhi is yet to start the use of ePoS in fair price shops, which is a prerequisite for the implementation of ONORC.
• In the case of West Bengal, the state government has demanded that the non-NFSA ration card holders — ration cards issued by the state government — should also be covered under the ONORC.