Over the past months there have been several stories about how extreme weather events have disrupted normal life in India. The Global Climate Risk Index 2021 had ranked India 7th in the list of most affected countries in terms of exposure and vulnerability to climate risk events.

Climate change being one of the most pressing challenges of the 21st century poses significant risks not only to the environment, human health and food security, but also economic development.

How does Climate Change Affect India’s Macroeconomy?

About:

Ø  Climate change can adversely affect both the supply side (the productive potential) and the demand side (the consumption and investment) of the economy.

Ø  It can also have spillover effects across regions and sectors, as well as cross-border impacts and contagion risks.

Impacts:

Ø  Reduced Agricultural Output: Climate change can severely disrupt crop cycles and cause low agricultural yield due to changes in temperature, precipitation patterns, pest infestation, soil erosion, water scarcity, and extreme weather events such as floods and droughts.

o   Agriculture, with its allied sectors, is the largest source of livelihood in India and contributes significantly to the economy. Low yields can hit the rural economy and push inflation in urban areas as well.

Ø  Disruption of the Fisheries Sector: Rising sea surface temperatures due to climate change can disrupt the distribution and behaviour of fish species.

o   Some species may move to cooler waters or shift their migratory patterns, affecting the availability of fish in certain regions. This can lead to changes in fish catch composition and abundance, impacting the livelihoods of fishermen.

Ø  Increased Health Costs: Climate change can increase the incidence and severity of diseases such as malaria, dengue, cholera, heat stroke, respiratory infections, and mental stress.

o   It can also affect the nutrition and well-being of vulnerable groups such as children, women, elderly, and poor. Health costs can reduce disposable income, lower labour productivity, and increase public expenditure.

o   According to the WHO, between 2030 and 2050, climate change is expected to cause approximately 2,50,000 additional deaths per year, from malnutrition, malaria, diarrhoea and heat stress.

Ø  Damaged Infrastructure: Climate change can damage physical infrastructure such as roads, bridges, railways, ports, airports, power plants, water supply systems, and buildings due to sea level rise, coastal erosion, landslides, storms, floods, and heat waves.

o   Damaged infrastructure can disrupt economic activity, trade, and connectivity and increase maintenance and replacement costs.

o   For instance, India spent USD 3 bn of economic damage caused by floods in the last decade which is 10% of the global economic loss.

Ø  Reduced Industrial Output: Climate change can increase operational costs and reduce profits in the industrial sector due to factors such as new climate-friendly regulations, reduced utilisation of old stock, relocation of production processes and activities due to climate-related losses.

o   India could contribute to 34 million out of 80 million global job losses due to heat stress-associated productivity decline by 2030.

Ø  Energy Crisis: According to the the International Energy Agency (IEA), India’s primary energy demand will double by 2030.

o   Energy and climate share a distinctive relationship such that rising temperatures demand a surge in energy usage to assist the process of mitigating the heat effects.

Ø  Impact on Financial Services: Climate change can put pressure on financial services due to increased credit risk for banks and financial institutions. It can affect borrowers' ability to repay loans due to climate-related events such as floods, hurricanes, or droughts.

o   These events can damage properties, disrupt supply chains, and impact businesses' profitability, potentially leading to loan defaults and credit losses.

o   It can also increase insurance claims and disrupt travel and hospitality services due to reduced demand, cancellations, and safety concerns.

Recently, at a press conference in Hiroshima, Japan, the UN Secretary-General has called for reforms in UNSC (United Nations Security Council) and Bretton Woods Institutions, citing that the current order is outdated, dysfunctional and unfair.

In the face of the economic shocks from the Covid-19 pandemic and the Russia-Ukraine Conflict, the said institutions have failed to fulfil their core function as global safety nets.

What is the Bretton Woods System?

About:

Ø  The Bretton Woods system was a monetary framework created in 1944 by representatives of 44 nations at the Bretton Woods Conference in New Hampshire, USA. It aimed to establish stability and cooperation in international Monetary after World War II.

Ø  The Bretton Woods Agreement created two important organizations—the International Monetary Fund (IMF) and the World Bank.

Ø  While the Bretton Woods System was dissolved in the 1970s, both the IMF and World Bank (Bretton Woods institutions) have remained strong pillars for the exchange of International Currencies.

Need for Reforming Bretton Woods Institutions:

Ø  While these institutions performed well over their first 50 years – they have been struggling in more recent times as problems of rising inequality, financial instability and Protectionism have re-emerged.

Ø  The threat of Climate Change and ecological stress, rising disasters and a more interconnected world with new threats like cyber-security and pandemics require a new International Financial Architecture.

Ø  There has been biases in fund allocation and unregulated Special Drawing Rights (SDRs), the IMF allocated USD 650 billion in SDRs during the pandemic.

Ø  The G7 countries, with a population of 772 million people, received USD 280 billion. The African continent, with 1.3 billion people, received only USD 34 billion.

What is the United Nations Security Council?

About:

Ø  The UN Security Council was established by the UN Charter in 1945 and is one of the 6 principal organs of the United Nations.

Ø  UNSC has 15 members: 5 permanent members (P5) and 10 non-permanent members elected for 2-year terms.

Ø  The P5 are: US, Russia, France, China and the UK.

Ø  India has been a non-permanent member of the Council during 1950-51, 1967-68, 1972-73, 1977-78, l984-85, 1991-92, 2011-12 and for the 8th time, entered the UNSC in 2021 and was on the council for the term 2021-22.

Issues with the UNSC:

Creating Problems for the Developing Countries:

Ø  Developing countries are facing problems in three dimensions: Moral, power-related, and practical.

Ø  A systemic and unjust bias in global economic and financial frameworks in favour of rich countries is generating “great frustration in the developing world”.

Limits the Representation:

Ø  The absence of Africa, as well as countries like India, Germany, Brazil, and South Africa, from the permanent membership of the UN Security Council is seen as a significant drawback.

Ø  It limits the representation of important nations and their perspectives on global issues, hindering effective decision-making on complex and interconnected problems.

Misuse of Veto Power:

Ø  The P5 have anachronistic veto power in the UNSC which has faced criticism for being undemocratic and limiting the Council's ability to make important decisions when any of the P5 disagrees.

Ø  Many argue that such elite decision-making structures are not suitable for the current global security landscape.

What can be done to Address these Issues?

Bretton Woods:

Ø  There is a need to reshape and revitalize three global institutions -the IMF, WBG and the WTO (World Trade Organization) where:

Ø  The IMF will focus on macroeconomic policy and financial stability, with stricter surveillance of advanced economies and their impact on global crises.

Ø  The restructured WBG will prioritize sustainability, shared prosperity, and leveraging private capital effectively. It should work with others to address global challenges and act as a wholesaler of finance.

Ø  A stronger WTO is needed for fair trade, faster dispute resolution, and the ability to respond swiftly to emergencies.

Ø  The system needs more automatic and rule-based financing mechanisms to avoid delays and political influences.

Ø  There needs to be regular calibrated SDR issues, global pollution taxes, and financial transaction taxes.

Ø  A well-structured G-20 could provide overarching guidance to the Bretton Woods system and its interactions with other institutions.

UNSC:

Ø  There is a need to ensure equal representation for all regions, including Africa, along with decentralization of power and authority, which will allow nations from all regions to voice concerns related to peace and democracy in their countries, making decision-making more representative and democratic.

Ø  The focus should be on addressing global issues rather than preserving the privileges of the P5 nations.

Ø  Urgent correction is needed to balance power between the P5 and the rest of the world, ensuring a more democratic and legitimate governance of the UNSC for international peace and security.

Ø  The IGN (Intergovernmental Negotiation) process, which discusses UNSC reform, should be revised and re-energized, avoiding procedural tactics that hinder progress.

Recently, the Chief Justice of India (CJI) has condemned the practice of Forum Shopping after a litigant mentioned the hearing before CJI although he had mentioned the same case a day before another Judge. 

What is the Practice of Forum Shopping?

About:

Ø  Forum shopping refers to the practice of deliberately choosing a specific court for a legal case in the hope of getting a favorable outcome.

Ø  Litigants and lawyers often consider this strategy as part of their litigation plan.

Ø  For example, they might opt for a higher court like the Supreme Court (SC) to gain more attention for their case. However, if someone is clearly trying to manipulate the system or avoid a particular judge, it is seen as unfair.

Ø  Similarly, “Bench Hunting” refers to petitioners managing to get their cases heard by a particular judge or bench to ensure a favourable order.

Advantages:

Ø  It can allow plaintiffs to seek justice and compensation in a court that is more sympathetic to their claims or interests.

Ø  It can encourage competition and innovation among courts and judges to improve their efficiency and quality of service.

Disadvantages:

Ø  Forum shopping has been criticized by judges because it can lead to injustice for the opposing party and create an imbalance in the workload of different courts.

Ø  Judges have cited the overburdening of some courts over others and interfering with judicial process.

Ø  It can undermine the authority and legitimacy of courts and judges by creating perceptions of bias or favoritism.

Ø  It can increase the costs and complexity of litigation by creating conflicts of laws and multiple proceedings.

Discouraging Forum Shopping:

Ø  Even courts in the US and the UK discourage/prohibit forum shopping. In common law countries, the principle of "forum non-conveniens" is used to prevent the practice of Forum Shopping.

Ø  Common Law is a shared British heritage of the U.S., Canada, and the Commonwealth, and these countries have a legal system primarily based on common law principles.

Ø  This principle allows a court to refuse its jurisdiction over a case if another court is more appropriate to hear it. This helps ensure fairness and allocates cases to the right judicial authorities.

How Does Forum Shopping Affect Justice and the Judicial Process?

Ø  It can compromise the principle of natural justice, which requires that every person should have a fair hearing before an impartial tribunal.

Ø  It can violate the principle of comity, which requires that courts should respect and defer to each other’s decisions on matters of common interest.

Ø  It can hamper the principle of finality, which requires that litigation should end at some point and not be prolonged indefinitely.

What is the SC’s View on Forum Shopping?

Ø  Dr. Khair-Un-Nisa and Ors vs. UT of Jammu and Kashmir and Ors 2023:

Ø  The Jammu, Kashmir, and Ladakh High Court imposed costs worth one lakh rupees on the petitioners for indulging in forum shopping by filing multiple petitions before different wings of the court, despite having the same cause of action.

Vijay Kumar Ghai vs. State of W.B. 2022:

Ø  The SC termed forum shopping as a “disreputable practice by the courts” that “has no sanction and paramountcy in law”.

Dhanwantri Institute of Medical Science vs. The State of Rajasthan 2022:

Ø  The Rajasthan High Court upheld an order imposing costs worth 10 lakh rupees on a party for engaging in forum shopping.

Union of India & Ors. vs. Cipla Ltd. 2017:

Ø  The SC laid down a “functional test” to be adopted for Forum Shopping.

Ø  The "functional test" laid down by the Supreme Court was to determine whether a litigant is genuinely seeking justice or engaging in manipulative tactics through forum shopping.

Rosmerta HSRP Ventures Pvt. Ltd. vs. Govt. of NCT of Delhi & Anr 2017:

Ø  The Delhi High Court imposed costs on a private company that it found was indulging in forum hunting in an arbitration matter.

Kamini Jaiswal vs. Union of India 2017:

Ø  The SC said that “unscrupulous elements” are always on the hunt to find a court or forum of their choice but are not permitted to do so by law.

Chetak Construction Ltd. vs. Om Prakash 1988:

The Supreme Court of India' emphasized that litigants should not have the freedom to choose the court for their convenience. The court stated that any attempt at forum shopping should be strongly discouraged.

Recently, the Reserve Bank of India (RBI) witnessed a significant shift in its foreign exchange transactions during the fiscal year 2022-23. After being a net buyer of the US dollar for three consecutive years, the RBI turned into a net seller, selling 25.52 billion USD in the spot market.

The spot exchange is where financial instruments, such as commodities, currencies, and securities, are traded for immediate delivery.

Why and How did the RBI Turn into a Net Seller in FY23?

Stabilisation of the Rupee:

Ø  The RBI maintains that its intervention in the foreign exchange market is aimed at stabilising the rupee's movement.

Ø  The sale or purchase of dollars by the RBI impacts its profit and is reflected in dividend payouts to the government.

Ø  Without the RBI's dollar sales, experts suggest the rupee could have weakened further, potentially reaching 84-85 levels against the dollar.

Depletion of Forex Reserves and Valuation Losses:

The country's foreign exchange reserves decreased from $606.475 billion to $578.449 billion during FY23. This was primarily due to valuation losses resulting from the appreciating US dollar and higher US bond yields.

Selling of Dollar:

Ø  The RBI sold significant amounts of dollars in FY23 to counter the rupee's depreciation resulting from the Ukraine-Russia conflict and the US Federal Reserve's interest rate hikes.

Ø  The rupee depreciated by approximately 8% during FY23, with the RBI's intervention preventing further weakening.

Ø  The rupee declined from around 76 levels on April 1, 2022, to nearly 82 as of March 31, 2023.

Impact:

The RBI's dollar sales in FY23 resulted in significant profits, leading to a higher dividend payout to the government.

The Central Board of the RBI approved a 188% increase in surplus transfer to the government for the accounting year 2022-23.

Ø  FSSAI stated that it will conduct nationwide surveillance of milk and milk products to check for adulteration

Ø  The government is scaling up the annual production of SECL's Gevra coal mine to 70 MT making it the largest

Ø  In a bid to address challenges in the ship design and construction industry, defence PSU Garden Reach Shipbuilders and Engineers Ltd. launched an innovation nurturing scheme that would help generate a large number of ideas

Ø  Central government formed a steering committee to review and monitor Cheetah translocation project

Ø  Government will launch a special commemorative coin of Rs 75 to mark the opening of the new Parliament building

Ø  'Samarth campaign' has been launched by Shri Giriraj Singh to promote digital transactions in 50000 Gram Panchayats under Amrit Mahotsav in Lucknow

Ø  Central government signed an agreement with six states to conduct Digital crop survey

Ø  Three Indian peacekeepers were awarded the Dag Hammarskjold Medal by the United Nations

Ø  Kangra tea of Himachal Pradesh has become the second product after Basmati Rice in the country to get registered with the European Union (EU) as a protected Geographical Indication (GI), paving the way for the sale of the product in European countries

Ø  The Emilia Romagna Grand Prix has been cancelled due to adverse weather in the region

Ø  International Day of Action for Women’s Health is observed annually on May 28

Ø  International Everest Day 2023 is observed on May 29

Ø  International Day of United Nations Peacekeepers is observed every year on May 29

Ø  The Reserve Bank of India (RBI) has imposed a penalty of ₹84.50 lakh on the Central Bank of India (the bank) for non-compliance with certain provisions of norms related to fraud classification and reporting.

Ø  The Reserve Bank of India (RBI) has sanctioned the voluntary Scheme of Amalgamation of Maratha Sahakari Bank with The Cosmos Co-operative Bank.

Ø  Insurance behemoth Life Insurance Corporation of India (LIC) posted a more than 5-fold jump in consolidated net profit to ₹13,191 crore for the fourth quarter ended March 2023.

Ø  India's Finance Ministry has notified a total of 21 nations, investments from which in Indian start-ups will be exempted from Angel Tax.        

Ø  The government capped the amount of interest subvention at Rs 10 crore per IEC (import-export code) holder in one financial year.

Ø  After Chhatrapati Shivaji Maharaj’s statue, the bust of freedom fighter Vinayak Damodar Savarkar also known as Veer Savarkar will be unveiled in the port Luis capital city Mauritius on May 28,2023 Savarkar’s birth anniversary.

Ø  Kangra tea of Himachal Pradesh (HP) has become the second product after Basmati Rice of the country to get registered with the European Union (EU) as a protected Geographical Indication (GI), paving the way for the sale of the product in European countries.

Ø  The government of Rajasthan has made the decision to promote the usage of manufactured sand (M-Sand) as an inexpensive and easy alternative to river sand.

Ø  The National Council of Confederation of Indian Industry (CII) has elected R Dinesh, executive vice-chairman of TVS Supply Chain Solutions, as the president of CII for 2023-24.

Ø  Harsh Jain, co-founder and chief executive officer (CEO) of Dream Sports has been elected as the chairman of the Internet and Mobile Association of India (IAMAI) for the period of next two years.

Ø  The Competition Commission of India (CCI) approves acquisition of additional Series E compulsorily convertible preference shares of Acko Technology & Services Private Limited by Multiples Private Equity Fund III and CPP Investment Board Private Holdings (4) Inc (CPHI-4).

Ø  Iran's defence ministry unveiled the 4th generation of its Khorramshahr ballistic missile, with a range of 2,000 kilometres (1,242 miles) and a capacity to carry warheads weighing over a tonne.

Ø  Microsoft has unveiled a new generative Artificial Intelligence (AI)-driven multilingual chatbot called 'Jugalbandi', designed for farmers and other users living in rural India.

Ø  IT major Infosys Ltd launched a platform called ‘Infosys Topaz’ for generative artificial intelligence (AI).