Relevance IN - Prelims (about WMA - objective + benefits + Mains GS III Economic development - steps taken by the government and RBI + factual data to substantiate answer writing)
What's the News

• The Reserve Bank of India (RBI), announced a 60% increase in the Ways and Means Advances (WMA) limit of state governments over and above the level as on March 31, with a view to enabling them "to undertake COVID-19 containment and mitigation efforts" and "to better plan their market borrowings".

• Ways and Means Advances is a facility for both the Centre and states to borrow from the RBI. These borrowings are meant purely to help them to tide over temporary mismatches in cash flows of their receipts and expenditures. In that sense, they aren't a source of finance per se.
• Section 17(5) of the RBI Act, 1934 authorises the central bank to lend to the Centre and state governments subject to their being repayable "not later than three months from the date of the making of the advance".
• The interest rate on WMA is the RBI's repo rate, which is basically the rate at which it lends short-term money to banks. That rate is currently 4.4%.
• The governments are, however, allowed to draw amounts in excess of their WMA limits. The interest on such overdraft is 2 percentage points above the repo rate, which now works out to 6.4%.

• For the Centre, the WMA limit during the first half of 2020-21 (April-September) has been fixed at Rs 120,000 crore. This is 60% higher than the Rs 75,000 crore limit for the same period of 2019-20. The limit for the second half of the last fiscal (October-March) was Rs 35,000 crore.
• For the states, the aggregate WMA limit was Rs 32,225 crore till March 31, 2020. On April 1, the RBI announced a 30% hike in this limit, which has now been enhanced to 60%, taking it to Rs 51,560 crore. The higher limit will be valid till September 30.

• Owing to the Corona virus pandemic, the government is facing severe financial crunch.
• The lockdown has resulted in revenues drying up, and it is the states that are actually feeling the heat.
• With economic activity at a near standstill, there is hardly any money coming in from GST, petroleum products, liquor, motor vehicles, stamp duty or registration fee.
• At the same time, the states are also incurring the bulk of the on-the-ground expenditures for combating the novel coronavirus.
• Most of them have resorted to slashing expenditures of other departments in order to meet

• The financial position of states was precarious even before the lockdown. The gross fiscal deficit of 22 states, as per latest available data, rose from 2.4% of their GSDP (gross state domestic product) in 2018-19 to 2.9% in 2019-20, with the corresponding revenue deficit ratio also climbing from 0.1% to 0.7%.
• Moreover, gross government market borrowings shot up from Rs 10,49,323 crore (Centre: Rs 571,000 crore, States: Rs 478,323 crore) in 2018-19 to Rs 13,44,521 crore (Centre: Rs 710,000 crore, States: Rs 634,521 crore) in 2019-20.
• The lack of clarity on how much the states (and even the Centre) would eventually need to borrow is reflected in bond yields. Since March 9, the weighted average yields (interest) at auctions of 10-year state government securities have risen from 6.86% to 7.57%.

• Bond Yield is the profit an investor earns on a bond investment. Bond yield is inversely related to the bond price. If the demand for bond decreases (which is happening in the present situation due to uncertainty of coronavirus), It's selling price will also decrease, thereby increasing the bond yield.

• Given the likelihood of total government borrowings crossing Rs 20 lakh crore - a conservative underestimate - a WMA limit of Rs 120,000 crore for the Centre and Rs 51,560 crore for states may prove grossly insufficient.
• At some point, the Centre, at least, might have to invoke Section 5(3) of its Fiscal Responsibility and Budget Management Act, 2003. That overriding provision in the Act - which otherwise bars the RBI from lending to the government, except for meeting temporary cash flow mismatches - allows the central bank to "subscribe to the primary issues of Central Government securities" under very specified grounds. Those cover, among other things, "act of war" and "national calamity".
• Apart from monetisation of deficits - which is what this provision effectively entails - the RBI may, in the coming day, also have to undertake increased secondary market purchases and sales of Central as well as state government securities.

Relevance IN - Prelims ( about Ruhdaar)
What's the NEWS

• A team of engineering students from IIT Bombay, NIT Srinagar and Islamic University of Science & Technology (IUST), Awantipora, Pulwama, Jammu and Kashmir is a group of creative individuals who have come forward to solve the problem of ventilator requirement. The team has come up with a low-cost ventilator using locally available materials.

Know! more about it

• The team has been able to design a low-cost ventilator using locally available materials.
• Ruhdaar provides necessary functionalities which can provide adequate breathing support necessary to save the life of a critically ill COVID-19 patient.

Health
Immunity passports

Relevance IN - Prelims (about immunity passports)
What's the NEWS

• The World Health Organization has warned against issuing "immunity passports" to people who have recovered from Covid-19, as there is no evidence that they will be protected from a second infection.

Know! more about it

• The idea of issuing some form of certificates to people who have been sick with the virus - on the assumption they would be immune to reinfection - has been gaining ground in many places, including the UK, as authorities cast around for ways out of socially and economically devastating lockdowns.
• The WHO warned that "there is currently no evidence that people who have recovered from Covid-19 and have antibodies are protected from a second infection.
• Instead, the certificates could pose a health risk by providing unjustified assurances of protection to individuals and their communities.
• People who assume that they are immune to a second infection because they have received a positive test result may ignore public health advice. The use of such certificates may therefore increase the risks of continued transmission.
• Chile is so far the only country to launch an official immunity passport scheme. Elsewhere there have been concerns that schemes will be unreliable and impractical if only a small portion of the population has been infected.

Economy
Banking declared as public utility service for six months
Relevance IN - Prelims (about public utility service + about IBA + about Industrial dispute act + Mains (GS III Economic development)
What's the NEWS

• The government has declared banking industry as a public utility service for six months till October 21 under the provisions of the Industrial Disputes Act.

Know! the salient features of coming under public utility service

• Bringing banking services under the provisions of this Act means that the banking sector would not see any strikes by employees or officers during the operation of the law starting from April 21.
• The Department of Financial Services said the labour and employment ministry through a notification has declared "banking industry as a public utility service" for six months with effect from April 21.
• All public sector banks, old generation private sector banks like HDFC Bank, ICICI Bank, Axis Bank and Federal Bank are members of IBA.
• Some of the oldest foreign banks -- HSBC, StanChart and Citibank -- are also part of it. All of them come under wage settlements and other employee issues that are taken up by IBA.
• New generation private sector lenders like Kotak Bank, IndusInd Bank and Yes Bank are outside the purview of IBA norms.

The Industrial Disputes Act

• The Industrial Disputes Act, 1947 regulates Indian labour law so far as that concerns trade unions as well as Individual workman employed in any Industry within the territory of Indian mainland.
• The laws apply only to the organised sector.
• The objective of the Industrial Disputes Act is to secure industrial peace and harmony by providing mechanism and procedure for the investigation and settlement of industrial disputes by conciliation, arbitration and adjudication which is provided under the statute.

Indian Banks' Association (IBA)

• Indian Banks' Association (IBA), formed on 26 September 1946 as a representative body of management of banking in India operating in India - an association of Indian banks and financial institutions based in Mumbai.
• With an initial membership representing 22 banks in India in 1946, IBA currently represents 237 banking companies operating in India.
• IBA was formed for development, coordination and strengthening of Indian banking, and assist the member banks in various ways including implementation of new systems and adoption of standards among the members.

Public utility Service

• A public utility is a business that furnishes an everyday necessity to the public at large. Public utilities provide water,electricity, natural gas, telephone service, and other essentials.

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