K-shaped economic recovery
(GS-III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment)
The prospects of a K-shaped recovery from COVID are increasing both in India and across the world.
What is a K-shaped recovery?
A K-shaped recovery happens when different sections of an economy recover at starkly different rates.
Households at the top of the pyramid are likely to have seen their in- comes largely protected, and savings rates forced up during the lockdown, increasing ‘fuel in the tank’ to drive future consumption.
Meanwhile, households at the bottom are likely to have witnessed permanent hits to jobs and incomes.
What are the macro implications of a K-shaped recovery?
Upper-income households have benefitted from higher savings for two quarters.
Households at the bottom have experienced a permanent loss of income in the forms of jobs and wage cuts; this will be a recurring drag on demand, if the labour market does not heal faster.
To the extent that COVID has triggered an effective income transfer from the poor to the rich, this will be demand-impeding because the poor have a higher marginal propensity to consume (i.e. they tend to spend (instead of saving) a much higher proportion of their income.
If COVID-19 reduces competition or increases the inequality of incomes and opportunities, it could impinge on trend growth in developing economies by hurting productivity and tightening political economy constraints.
Policy will, therefore, need to look beyond the next few quarters and anticipate the state of the macro economy post the sugar rush.
(GS-III: Awareness in space)
Researchers say that the Earth might soon get Saturn-like rings made entirely out of space junk, but they could be cleaned up using magnets.
What’s the issue?
With more countries venturing into space with every passing decade, the problem is simply ballooning out of control and recent events, like the anti-satellite weapons test by Russia, are only exacerbating the problem.
The debris is now adding to the space junk problem and posing a major risk to the International Space Station (ISS) and the satellites in geostationary orbit.
The debris also poses a potential threat to the lives of the US, Russian, and Chinese astronauts and cosmonauts currently in space.
What is Space Debris?
Space debris poses a global threat to the continued use of space-based technologies that support critical functions like communication, transport, weather and climate monitoring, remote sensing.
Predicting collision probability from these space objects is crucial from the national security perspective as well as for the protection of public and private space assets of Indian origin.
Amount of space debris in space:
The real amount of space debris is said to be between 500,000 and one million pieces as current sensor technology cannot detect smaller objects. They all travel at speeds of up to 17,500 mph (28,162 kmph) fast enough for a relatively small piece of orbital debris to damage a satellite or a spacecraft.
Significance of the Project:
Outcome of this project will directly support the Indian space sector, valued at $7 billion (Rs 51,334 crore) by providing an operationally flexible, scalable, transparent and indigenous collision probability solution.
To safeguard its space assets from space debris, Isro had set up a dedicated Space Situational Awareness (SSA) Control Centre named “Netra” in Bengaluru last December.
Netra’s key objective is to monitor, track and protect the national space assets and function as a hub of all SSA activities.
Only the US, Russia and Europe have similar facilities in place to track space objects and share collision warnings.
Telangana’s first UNESCO World Heritage Site
(GS-I: Art and architecture)
Telangana’s Ramappa Temple is receiving massive focus after it received UNESCO tag recently.
About the Temple:
Situated in Telangana’s Warangal, the temple stands on a six-feet high star-shaped platform with walls, pillars and ceilings adorned with intricate carvings that attest to the unique skill of the Kakatiyan sculptors.
The temple is named after its architect, Ramappa.
Constructed in 1213 AD during the reign of the Kakatiya Empire by Recharla Rudra, a general of Kakatiya king Ganapati Deva.
The temple’s presiding deity is Ramalingeswara Swamy.
About kakatiya dynasty-Key facts:
The 12th and the 13th centuries saw the emergence of the Kakatiyas.
They were at first the feudatories of the Western Chalukyas of Kalyana, ruling over a small territory near Warangal.
The dynasty saw powerful leaders like Ganapathi Deva and Rudramadevi.
Prataparudra I, also known as Kakatiya Rudradeva, was the son of the Kakatiya leader Prola II. It was under his rule that the Kakatiyas declared sovereignty. He ruled the kingdom till 1195 A.D.
It was under the rule of Prataparudra I that usage of Telugu language in inscriptions began.
Before the establishment of Orugallu/Warangal as the capital, Hanamakonda was the first capital of the Kakatiyas.
The great Italian traveller Marco Polo visited the Kakatiya Kingdom sometime during Rudramadevi’s tenure as the ruler of the Kakatiya Dynasty and made note of her administrative style; admiring her extensively.
Art and architecture:
The iconic Kakatiya Thoranam was built by Rudramadevi’s father in the 12th Century. This ornate arch is said to have many similarities with the gateways at the Sanchi Stupa and is also the emblem of Telangana.
The scenic Pakhal lake in Warangal was built by Ganapathi Deva.
The 1000 pillar temple in Warangal was built during the Kakatiya Rule and is another example to the exquisite Kakatiya Architecture.
The Koh-i-Noor Diamond, which is now among the jewels set in the British Crown, was mined and first owned by the Kakatiya Dynasty.
Under the Kakatiya rule, the caste system was not rigid and in fact, it was not given much significance socially. Anyone could take up any profession and people were not bound to an occupation by birth.
The Kakatiya rule finally came to an end in 1323 A.D. when Warangal was conquered by the Ghiyasuddin Tughlaq, the then Sultan of Delhi.
Corporates to set up banks- Issues related
(GS-III: Inclusive growth and issues arising from it)
The Reserve Bank of India (RBI) has kept in abeyance a recommendation by an internal panel to give banking licences to large business groups, while allowing promoters to own up to 26% in private banks.
What has happened?
The IWG was constituted to “review extant ownership guidelines and corporate structure for Indian private sector banks” and submitted its report last week.
One key recommendation of the group was related to allowing large corporate/industrial houses to be promoters of private banks.
What’s the issue now?
Former RBI Governor Raghuram Rajan and former RBI Deputy Governor Viral Acharya have criticised the suggestion by the IWG, describing it a “bombshell”.
They observed, it would be ‘penny wise pound foolish’ to replace the poor governance under the present structure of these (public sector/government-owned) banks with a highly conflicted structure of ownership by industrial houses.
Why is the recommendation to allow large corporates to float their own banks being criticised?
Historically, RBI has been of the view that the ideal ownership status of banks should promote a balance between efficiency, equity and financial stability.
A greater play of private banks is not without its risks. The global financial crisis of 2008 was a case in point.
A predominantly government-owned banking system tends to be more financially stable because of the trust in government as an institution.
More specifically, here in this case, the main concern in allowing large corporates to open their own banks is a basic conflict of interest, or more technically, “connected lending”.
What is connected lending?
A situation where the promoter of a bank is also a borrower and, as such, it is possible for a promoter to channel the depositors’ money into their own ventures.
Connected lending has been happening for a long time and the RBI has been always behind the curve in spotting it.
The recent episodes in ICICI Bank, Yes Bank, DHFL etc. were all examples of connected lending.
The so-called ever-greening of loans (where one loan after another is extended to enable the borrower to pay back the previous one) is often the starting point of such lending.