Current Affairs 18th Sep 2024 for UPSC Prelims Exam

Windfall Tax

Context: Recently the Union government has slashed windfall tax on domestically produced crude oil to ‘Zerol’ per tonne with effect from September 18.

About Windfall Tax

• It refers to higher tax levied by the government on specific industries when the industry experiences unexpected and above-average profits.
• These could be due to various global and geopolitical events which are outside the control of the industry.
• Windfall refers to a dramatic and unanticipated increase in profits. On the other hand, Tax implies an imposition levied on this dramatic income growth.
• In India it is Imposed as a Special Additional Excise Duty (SAED) on crude oil production and exports of diesel, petrol and aviation turbine fuel (ATF).

Green Climate Fund

Context: Recently the Green Climate Fund (GCF) chief started a mission to help vulnerable nations that have not received a penny from the world’s largest dedicated source of climate finance. It has identified 19 such climate-vulnerable nations.

About Green Climate Fund (GCF)

• It is the world’s largest fund dedicated to helping developing countries fight climate change.
• Established: In 2010 by the United Nations Framework Convention on Climate Change (UNFCCC).
• Secretariat: Songdo, South Korea.
• Goals of GCF:
  • It helps developing countries to limit/reduce their greenhouse gas emissions.
  • It helps vulnerable societies adapt to the impacts of climate change.
  • To support a paradigm shift in the global response to climate change.

Climate Finance Action Fund (CFAF)

Context: Azerbaijan, which is going to host the 29th Conference of Parties (COP) of the United Nations Framework Convention on Climate Change has announced a new fund called the ‘Climate Finance Action Fund’.

About Climate Finance Action Fund (CFAF)

• Secretariat: Baku, Azerbaijan.
• Funding:
  • Voluntary contributions from fossil-fuel-producing countries and companies.
  • Fossil-fuel producing countries and companies will have the option to make annual contributions, either as a fixed sum or based on production volumes.
• Usage of Funds:The funds will be divided equally:
  • 50% – climate projects in developing countries.
  • 50% – To support developing nations in implementing national climate action plans.
• Conditions for becoming Operational:
  • When it reaches a minimum corpus of $1 billion.
  • At least 10 countries must commit to being shareholders for the fund to start.
• Rapid Response Funding Facility (2R2F): 20% of the revenues generated from investments will be deposited in 2R2F to provide highly concessional and grant-based support.

Impact of Fed Rate Cut

Context: The much-anticipated two-day meeting of the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve, started on September 17. It is expected to conclude with an announcement of a rate cut—the first by the central bank since March 2020.

Impacts of U.S. Federal Reserve’s Interest Rate Cuts on Global Markets

• Global Growth Prospects: A rate cut could indicate a commitment to supporting growth in the U.S. economy, potentially offering a positive outlook for global markets amidst concerns like China’s slowdown.
• Strengthens Global Investment: Lower U.S. interest rates make U.S. assets less attractive, leading to increased investment in emerging markets.
• Bond Markets: The anticipated Fed rate cut is expected to benefit the global bond market. Bond Yields will fall in the USA due to increased interest rates.
• Weakens U.S. Dollar: Rate cuts often lead to a depreciation of the U.S. dollar, impacting global trade balances and exchange rates.
• Impacts Commodity Prices: A weaker U.S. dollar can lead to higher prices for commodities like oil and gold, as they are generally priced in dollars.

Impact on India

• Positive Carry Trade:
  • When the Fed cuts its policy rates, the difference between the interest rates of the US and the other country could widen.
  • This makes countries such as India more attractive for the currency carry trade. The lower the rate in the US, the higher the arbitrage opportunity.
• Capital Inflows: A lower US rate could boost foreign investment into India, strengthening the currency and equity markets.
• Trade and Growth: Enhanced US economic growth could improve demand for Indian exports, supporting the country’s growth trajectory.

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