Daily Current Affairs MCQ / UPSC / IAS / 29-07-19

Table of Contents

MCQ 1

IPS officer V. K. Johri has been appointed as New Director General of

CBI
SSB
BSF
CRPF

The Appointments Committee of the Cabinet (ACC) headed by Prime Minister Narendra Modi has appointed IPS officer VK Johri as new Director General (DG) of, Border Security Force (BSF), country’s largest border guarding force.
About VK Johri: He is a 1984-batch Indian Police Service (IPS) officer of Madhya Pradesh cadre. Currently he is serving as Special Secretary in external intelligence agency Research and Analysis Wing (RAW), under Cabinet Secretariat. He will take over charge of BSF from incumbent Rajni Kanti Mishra, who retires on 31 August.
However, as per the order issued by ACC he has been appointed as an Officer on Special Duty (OSD) in Union home ministry with immediate effect and will attain superannuation in September 2020.
About Border Security Force (BSF), It is one of 7 Central Armed Police Forces (CAPF) of India.
It was raised in wake of 1965 War on 1 December 1965.
It is country’s largest border guarding force with a present strength of about 2.5 lakh personnel. Being a primary border defence organisation of India, it is tasked to secure two of India’s most important and sensitive fronts with Pakistan and Bangladesh.
Two other border guarding forces in country are- Indo-Tibetan Border Police (ITBP) for China Sashastra Seema Bal (SSB) for Nepal and Bhutan)

MCQ 2

Sovereign debt is debt issued by a central government, usually in the form of securities, to finance various development initiatives within a country. 2. countries with unstable economies and political systems are choosing for this financing method.

Choose correct

(A) Only 1

(B) Only 2

(D) None

What is Sovereign Debt?

Sovereign debt is a central government’s debt. It is debt issued by the national government in a foreign currency in order to finance the issuing country’s growth and development. The stability of the issuing government can be provided by the country’s sovereign credit ratings which help investors weigh risks when assessing sovereign debt investments.
Sovereign debt is also called government debt, public debt, and national debt.
Understanding Sovereign Debt
Sovereign debt can either be internal debt or external debt. If categorized as internal debt, it is debt owed to lenders who are within the country. If categorized as external debt, it is debt owed to lenders in foreign areas. Another way of classifying sovereign debt is by the duration until the repayment of the debt is due. Debt classified as short-term debt typically lasts for less than a year, while debt classified as long-term debt typically lasts for more than ten years.
How Sovereign Debt Works
Sovereign debt is usually created by borrowing government bonds and bills and issuing securities. Countries that are less creditworthy compared to others directly borrow from world organizations like The World Bank and other international financial institutions. An unfavorable change in exchange rates and an overly optimistic valuation of the payback from the projects financed by the debt can make it difficult for countries to repay sovereign debt. The only recourse for the lender, who cannot seize the government’s assets, is to renegotiate the terms of the loan. Governments assess the risks involved in taking sovereign debts since countries that default on sovereign debts will have difficulty obtaining loans in the future.
KEY TAKEAWAYS
Sovereign debt is debt issued by a central government, usually in the form of securities, to finance various development initiatives within a country.
The most important risk in sovereign debt is the risk of default by the issuing country. For this reason, countries with stable economies and political systems are considered to be less of a default risk in comparison to countries with a history of instability.
Measurement and assigned ratings for sovereign debt can vary between agencies.
Risks Involved in Sovereign Debt
Although sovereign debt will always involve default risk, lending money to a national government in the country’s own currency is referred to as a risk-free investment because, with limits, the debt can be repaid by the borrowing government through raising taxes, reducing spending, or simply printing more money. Aside from issuing sovereign debt, governments can finance their projects by creating money. By doing so, governments are able to remove the need to pay for interest. However, this method only reduces government interest costs and can lead to hyperinflation. Thus, governments still need to fund their projects through the aid of other governments.

MCQ 3

1. A sovereign bond is a debt security issued by a national government. Sovereign bonds can be denominated in a foreign currency only

India has never resorted to large scale foreign currency borrowing even during the time of the 1991 balance of payments crisis

Choose correct

(A) Only 1

(B) Only 2

(D) None

A Sovereign bond is a debt security issued by a national government. Sovereign bonds can be denominated in a foreign currency or the government’s domestic currency; the ability to issue bonds denominated in domestic currency tends to be a luxury that most governments do not enjoy — the less stable of a currency denomination, the higher the risk the bondholder’s faces.
The government of a country with an unstable economy tends to denominate its bonds in the currency of a country with a stable economy. Because of default risk, sovereign bonds tend to be offered at a discount.
The default risk of a sovereign bond is assessed by international debt markets and represented by the yield the bond offers. Bondholders demand higher yields from riskier bonds. To illustrate, as of May 24, 2016, 10-year government bonds issued by the Canadian government offer a yield of 1.34%, while 10-year government bonds issued by the Brazilian government offer a yield of 12.84%. This spread of 1150 basis points accounts for the financial position of both governments and is indicative of the favorable credibility enjoyed by the Canadian government.
Sovereign Bonds Denominated in Foreign Currencies
As of 2014, the most recent year such data is available, debt denominated in the five most significant global currencies, the U.S. dollar, the British pound, the euro, the Swiss franc, and the Japanese yen, accounted for 97% of all debt issuance, but these countries issued only 83% of this debt. The reality is less-developed countries have difficulty issuing sovereign bonds denominated in their currency, and thus have to assume debt denominated in a foreign currency.
This is due to several reasons. First, investors consider poorer countries to be ruled by lesstransparent governments that are more susceptible to corruption, increasing the likelihood of loans and government investments being funneled into unproductive areas. Second, poorer countries tend to suffer from instability, leading to higher rates of inflation, which eats into the real rates of return received by investors.
Therefore, less-developed countries are forced to borrow in foreign currencies, further threatening their economic situation by exposing them to currency fluctuations that can make their borrowing costs more expensive. For example, say the Indonesian government issues bonds denominated in yen to raise capital. If the interest rate it agrees to borrow is 5%, but throughout the bonds’ maturity, the Indonesian rupiah depreciates by 10% in relation to the yen. Then, the real interest rate the Indonesian government has to pay in the form of principal and interest payments is 15%, assuming its business operations are conducted in rupiah.
After Finance Minister Nirmala Sitharaman proposed that the Indian government would borrow some of its funds in overseas markets in foreign currencies, there is a lot of buzz on sovereign bonds. It has been a fiercely-debated issue with a lot of highly economists. Even former Reserve Bank of India governors and deputy governors, mostly arguing against such an issuance. To top it all, now, there are news reports suggesting that Finance Secretary Subhash Chandra Garg was transferred to the power ministry because the government was unhappy with his handling of the sovereign bond issue. Here’s a FAQ on sovereign bonds.
These are government debt securities issued in overseas markets in foreign currency denominations such as dollars, euros and yen. Currently, the government of India only issues bonds in the domestic market in rupees to finance the deficit between its expenses and revenues.

Why is it a big deal?

India has never resorted to large scale foreign currency borrowing even during the time of the 1991 balance of payments crisis. Thus, a sovereign bond issue now will represent a major shift in policy now.
What’s the need for a policy shift now?
The huge amount of government borrowing has put pressure on local interest rates and the availability of funds for the private sector. This is called the crowding out effect. For fiscal year 2019-20, the government plans to borrow at least Rs 7 trillion from the Indian markets. It is believed that shifting some of this borrowing abroad will relieve the pressure on local interest rates.
Secondly, as the finance minister pointed out, India’s external sovereign debt to GDP ratio at 5 percent is among the lowest in the world. Thus, there is room to borrow more.
Are there other benefits as well?
Well, there are a host of other possible benefits if India floats a formal sovereign bond in foreign currency.
One, rates for foreign currency borrowing in overseas market is cheaper. (There is a caveat here, we will come to it later).
Second, if Indian government bonds are included in foreign bond indices, it will make it more attractive. It will also set a benchmark for corporate foreign bond yields and also help attract more foreign investment.
Three, this could make the Indian government more disciplined in reining in the fiscal deficit. Foreign borrowers are quick to exhibit their displeasure if things go awry (this option is not here locally since banks are mandated by law to invest a portion of their deposits in government bonds).
Four, some commentators have pointed out that when sovereign bonds actually start trading, this will establish the credit risk premium for India. (Credit risk premium refers to the additional yield demanded by investors for investing in an emerging market like India compared to a mature market like the US). This could force credit rating agencies to improve India’s ratings once a baseline has been established. They point to Philippines and Indonesia where this has actually happened, to bolster this argument.
Sovereign bonds sound good. Let’s float them already?
There are lots of negatives too. Why do you think India has never gone for these instruments in a significant way?
The big problem is, of course, that the foreign currency risk (which an investor bears since if the bond is in rupees) will not be shifted to the government – it borrows in dollars now. That means, if the rupee depreciates sharply, the government ends up paying more. This could lead to even more market turmoil, points out former RBI governor Raghuram Rajan.
Secondly, India is still vulnerable to global economic risks because of the twin deficit problem. The fiscal deficit is high. While India does have a glide path to reduce the fiscal deficit, most governments have had a tough time in sticking to this goal and have resorted to fudging numbers. Indeed, the gross public sector borrowing – if one includes the centre, states and government-owned enterprises – is close to 8.5 percent of GDP. The current account deficit is also high and could even go up further in case of an economic revival through increasing investment demand. (If investments exceed savings, it has to be financed by foreign borrowings). These are big risk factors.
Thirdly, as some commentators have pointed out, on a currency-hedged basis, it is one percent more expensive than local currency debt.
Fourthly, once the tap is opened, there is a real risk that governments might get addicted to this form of funding. As former RBI governor YV Reddy has argued, unless a limited liability company, government debt is held in perpetuity. There is no write-off of government debt when times are bad. Moreover, all governments are liable to pay off debts incurred by their predecessors notwithstanding whether they were democracies or despotic regimes.
Moreover, if the idea is to get a global benchmark for corporate debt, an issue by a quasi-sovereign entity like SBI would be good enough, it is argued.

MCQ 4

Mussoorie Resolution 2019 was the outcome of Conclave of Himalayan States
It was 3 rd such conclave of such type held in himachal Pradesh for the 1 st time.

Choose correct

(A) Only 1

(B) Only 2

(D) None

Uttarakhand holds 1st Himalayan conclave

Conclave of Himalayan States was held on at Mussoorie in Uttarakhand to discuss priorities of Indian Himalayan Region (IHR) in 15th Finance Commission (XV FC).
The conclave was initiated by government of Uttarakhand with Integrated Mountain Initiative (IMI) as its knowledge partner.
The chief guest of conclave was Union Finance Minister Nirmala Sitharaman. Key Highlights of Conclave Participants: The conclave saw participation of representatives from 11 hill states namely, Arunachal Pradesh, Assam Himachal Pradesh, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand.
Conclave’s Agenda: As most of country’s rivers originate in Himalayas therefore Himalayan states play most significant role in prime minister’s water conservation initiative thus need is to work towards water conservation, with focus on conserving glaciers, rivers, lakes and water bodies besides reviving water resources which have dried up over years. Various other issues related to development of Himalayan States were also discussed in conclave.
Green Bonus: 11 States belonging to Himalayan Region sought Green Bonus from Centre considering their contributions to environmental conservation and to compensate the Himalayan states for their disadvantages. Separate Ministry: Concerned states also asked Centre to set up a dedicated Ministry for region, to deal with problems endemic to them.
It is for 1st time that states belonging to Himalayan Region have come on a single platform to take a unanimous stand on issue of green bonus and separate ministry for dealing with problems unique to them.
Deliberation on development challenges and potential of IHR and concluded with adoption of Mussoorie Resolution 2019.

MCQ 5

Sudarsan Pattnaik is related to

Politics
Shooting
Sprint race
None

Sudarsan Pattnaik is an Indian sand artist from Odisha. He was awarded the Padma Shri by Government of India in 2014
Renowned Indian sand artist and Padma Awardee Sudarsan Pattnaik has won People’s Choice Award at a prestigious sand sculpting festival in United States (US).
He was among top 15 sand artists selected from all over world to participate in 2019 Revere Beach International Sand Sculpting Festival in Boston.
He wowed American public with his sculpture that highlighted message of combating plastic pollution in oceans. Key Highlights Sudarsan Pattnaik was sole representative from India as well as Asia. He bagged the ‘People’s Choice Award’ for his sand art on plastic pollution with message ‘Stop Plastic Pollution, Save Our Ocean’. Through his sand sculpture he wanted to highlight that human activity is destroying oceans as well as humans are also getting impacted by polluted waterways as they consume food from sea/rivers. Artists from Belgium and Canada also won at prestigious championship. Revere Beach International Sand Sculpting Festival It is one of the largest sand sculpting festivals in world and sees participation from leading sand sculptors from around the world. It is hosted by non-profit organisation Revere Beach Partnership. The Sand festival is now in its 16th year. The 2019 edition of festival ran from 26-28 July and was attended by close to a million people.

MCQ 6

Global Tiger Day is celebrated across the world on

13 July
29 July
28 July
30 July

Every year 29 July is celebrated across the world as Global Tiger Day to create awareness about tiger conservation and protection of natural habitat of tigers. Why 29 July? This is because 29 July act as a reminder of agreement signed by countries at Saint Petersburg Tiger Summit in Russia in 2010, to raise awareness about decline of global tiger population. Signatories declared an agreement that governments of tiger-populated countries would double animal’s population by 2022.
Global Tiger Day 2019 On occasion of Global Tiger Day 2019 Prime Minister Narendra Modi will release results of 4th cycle of All India Tiger Estimation (AITE) in New Delhi. The Tiger Estimation exercise is believed to be world’s largest wildlife survey effort in terms of- coverage, quantum of camera trapping and intensity of sampling. In India All India Tiger Estimation is conducts in every 4 years. Government of India and National Tiger Conservation Authority (NTCA) has also carried out an economic valuation of tigers in mitigating adverse impact of climate change.
Tiger Conservation in India : Tigers are one of world’s most iconic species. Tigers are an ‘Umbrella Species’ as their conservation also conserves many other species in same area. Thus with initiative of conserving India’s national animal, Project Tiger was launched in 1973.
Due to planned efforts under Project Tiger, at present India has distinction of having maximum number of tigers in world. The 2014 country level tiger assessment had shown a 30% increase of tigers i.e. from 1706 in 2010, tiger population has increased to 2226 in 2014. However, despite conservation efforts since 1970s, wild tiger populations showed a rapid decline therefore in 2010, during St. Petersburg Declaration, tiger range countries had resolved to double tiger numbers by 2022.
Significance: Observing World Tiger Day is significant because according to World Wildlife Fund (WWF), currently there are only around 3,900 wild tigers in world and as per reports, since the beginning of 20th century around 95% of global tiger population has been lost to various activities like poaching, etc.

MCQ 7

CITY Country