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16-APRIL-2022
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The Hindu News Analysis –16th April 2022 – Shankar IAS Academy
S. Page Number*
News Articles
No. C B D H T

1 Sri Lanka stares at bankruptcy or redemption (Editorial) 8 10 6 6 -

2 ‘Sri Lanka will not ignore poor while seeking IMF assistance’ 1,10 1,12 1,8 1,8 -

3 China reduces reserve norms for banks as economy slows 14 16 12 12 -

4 India gets S-400 training equipment 11 13 9 9 -

5 Bihar seeks UNESCO’s tag for ‘Cyclopean wall’ 12 14 10 10 -

6 Prelims Practice Questions

@ end of the video
7 Mains Practice Question
*C – Chennai; B – Bengaluru; D – Delhi; H – Hyderabad; T – Thiruvananthapuram

Pg: 8 - C;
Pg: 10 - B;
Pg: 6 - D, H.
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Part A—Preliminary Examination

Paper I - (200 marks)
 Current events of national and international importance.
Part B—Main Examination
PAPER-III
General Studies‐ II: Governance, Constitution, Polity, Social Justice and International relations.
 Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
 Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.
 Important International institutions, agencies and fora- their structure, mandate.
PAPER-IV
General Studies‐ III: Technology, Economic Development, Bio diversity, Environment,
Security and Disaster Management.
• Indian Economy and issues relating to planning, mobilization, of resources, growth, development and
employment.

Consequences of the Sovereign default  Insight into the level of risk associated
investing in the debt of the country.
• Sovereign default - nation has failed to repay
its external debt.  Good rating - essential for developing
countries to access funding in international
1. Ruins Sri Lanka’s unblemished record of not
bond markets.
defaulting.
3. Difficult to access international funding -
2. Downgrades credit ratings of Sri Lankan
makes international lenders reluctant.
govt.
• Lending may be possible with a restructuring
• Credit ratings - quantified assessment of a
agreement.
borrower’s creditworthiness.
 Sovereign debt restructuring - exchange of
 Sovereign credit ratings apply to national
outstanding sovereign debt instruments for
govt.
new debt instruments or cash.
 To investors understand the level of risk
 2 elements - debt rescheduling and debt
while buying a financial instrument.
reduction.
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4. Fresh borrowing - further increase sovereign

debt.

5. No funding - leads to bankruptcy.

• Unsustainable debt - debt
International Monetary Fund (IMF) finance restructuring + finance.

• Country in economic distress approaches IMF • Sri Lanka:

for financing.
 Negotiating a support package.
 To avoid restructuring and the associated
• Includes structural reform package -
economic, social, and political disruption.
economic policy framework - a pre-
• IMF makes a judgment whether debt burden is condition.
sustainable - determines the availability and
appropriate scale of financing.

Structural reforms proposed

• Market-determined and flexible exchange
• Neoliberal policies - free-market capitalism, rate.
deregulation, and reduction in government
 Depreciation results in expensive
spending.
imported goods and services.
• Revenue-based fiscal consolidation - through
 Reduces consumers' purchasing power.
increasing tax rates and energy pricing reforms.
• Targeted social safety nets - not flexible
 Affects consumers.
enough to increase coverage or benefits as
• Near-term monetary policy tightening towards needed.
inflation targeting.
• Reforming state-owned enterprises -
 Higher interest rate privatising.

 Increase in the cost of borrowing.  Makes public services unaffordable.

 Reduction in consumer spending and investment.  Escalate protests in Sri Lanka - affects
the tourism sector.
 Lower economic growth.
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Conclusion

• Imposition of a wealth tax on the

rich sections of Sri Lanka.

Pg: 11 - C; Pg: 13 - B; Pg: 9 - D, H.

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International Monetary Fund (IMF)

• Origin - Bretton Woods conference 1944

• Came into operation on 27th December 1945

• Members - 190 countries

• Hq - Washington DC

Objectives

• Stability of the international monetary system.

• Reducing global poverty.

• Encouraging international trade.

• To promote economic growth.

Functions of IMF

• Oversee the economies of member

countries

• Lending to countries with balance of

payments issues

• Help the member countries to modernize

their economies
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Pg: 14 - C;
Pg: 16 - B;
Pg: 12 - D, H.

Cash Reserve Ratio (CRR)

• Quantitative monetary policy.

• Maintained by
• CRR must be maintained as a percentage of
 Scheduled bank, small finance bank and
NDTL.
payments bank.
• Net Demand and Time Liabilities.
• Points to remember
 Demand liabilities - savings bank deposits,
 Maintained in cash.
current account deposits, Demand Drafts
(DDs) and other unclaimed deposits.  Maintained with RBI.

 Time liabilities - fixed deposits, cash  RBI will not pay any interest.
certificates, cumulative and recurring
• Cooperative banks and local area banks must
deposits.
maintain CRR with themselves.
• CRR - 4 %
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Statutory Liquidity Ratio (SLR)

• Maintained by
• Banks must invest in liquid asset.
 Scheduled commercial banks (including
• SLR is maintained as a percentage of NDTL. Regional Rural Banks)

• SLR can be maintained in  Local area banks

 Cash  Small Finance Banks

 Gold  Payments Bank

 Government approved securities.  Primary co-operative bank

• For maintaining banks earn returns.  State co-operative bank

• Banks maintain SLR with themselves.  District central co-operative bank

• SLR - 18%

Pg: 1,10 - C;
Pg: 1,12 - B;
Pg: 1,8 - D, H.
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S-400 System

• Air defense System.

• Surface to Air missile.

• Missile ranges - 40 km, 120 km, 250 km and

400 km.

• Altitude - 30 km.

• Can engage multiple targets.

• Can track and neutralize aircraft, missiles and

Unmanned Aerial Vehicles (UAV).

• Fire and forget capability.

• Highly flexible and easy to integrate.

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CAATSA

• Countering America ’s Adversaries Through

Sanctions Act.

• To prevent revenue from flowing to the

Russian Government.

• US Government classified the purchase of

the S-400 system as a “significant

transaction”.

• To escape sanctions India and Russia using

Rupee-Ruble route.

Pg: 12 - C; Pg: 14 - B; Pg: 10 - D, H.

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Cyclopean wall, Rajgir

• Situated in Rajgir, Bihar.

• One of important pre-Mauryan

stone structures.

• Built before 3rd century BC.

• Reason - to fortify the ancient

city of Rajgir from invaders.

• Ancient city of Rajagriha or Rajgir:

 Capital city of King Bimbisara and Ajatshatru.

 powerful rulers of Magadha empire.

 contemporaries of the Buddha.

• Features

 Massive undressed stones fitted together.

 14 inches wide and 40 km long.

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 Cyclopean masonry.
Rajgir Wall
 Megalithic architecture.

 Masonry made with massive irregular blocks.

 Constructed without mortar.

 Fortifications - large stones reduced the

number of joints and reduced the walls’
potential weakness.

 Found in Italy and Greece etc.

 Bastions were built at intervals to strengthen the wall.

 Pali texts - 32 large gates and 64 smaller ones to

enter the city.

 Ruined with time.

 Considerable part exists along the Ratnagiri hill.

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Practice Question – Prelims

Q1. Consider the following statements
about the ancient city of Rajagriha.
1. It was the capital of Magadha empire.
2. A Cyclopean wall fortified the city.
3. It is equally revered by the Buddhists
and the Jains.
Which of the above statements is/are
correct?
a) 1 only
b) 1 and 2 only
c) 3 only
d) 1, 2 and 3
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Practice Question – Prelims

Q2. Consider the following statements about
Liquidity Adjustment Facility (LAF)?
1. It is a tool used by RBI to control short
term money supply
2. 1998 Narasimhan committee
recommended the creation of LAF
3. Components of LAF are Repo and Reverse
Repo
Which of the above statements is/are correct
?
a) 1 and 3 only
b) 2 and 3 only
c) 3 only
d) All of the above

Practice Question – Prelims

Q3. Which of the following given pairs are correctly matched
Range Defense System
1. Long Range interception a) Indian Ballistic Missile Defense Programme.
2. Intermediate Interception b) Akash Air Defense System and Similar Systems
3. Short Range interception c) MANPADS and Anti- Aircraft Guns
4. Very Short-range interception d) S-400 Triumph

a) 1 only
b) 1 and 2 only
c) 1, 2 and 3 only
d) All of the above
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Practice Question – Prelims

Q. Consider the following reports
1. World Economic Outlook
2. Global Financial Stability Report
3. World investment report
4. Ease of doing business report
Which of the following report/reports is/are
published by IMF?
a) 1 and 2 only
b) 2 and 3 only
c) 3 and 4 only
d) All of the above

Practice Question – Mains

Prelims Practice Questions – Answers GS – III
Q1. Option (d) – 1,2 and 3
Q. Discuss the consequences of Sovereign
Q2. Option (d) – All the above Default and the measures to mitigate its
Q3. Option (a) – 1 only impact.
(150 words, 10 marks)
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