Prelims Booster

29th April – Prelims Booster

Mutual funds

RBI has announced a special window of Rs 50,000 crore for mutual funds in view of the redemption pressure that the fund houses are facing.

What are ‘mutual funds’?

A mutual fund collects money from investors and invests the money, on their behalf, in securities (debt, equity or both). It charges a small fee for managing the money. Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI).

Details –

  • Under the scheme, the RBI will conduct repo operation of 90 day tenor at the fixed rate repo.
  • Funds availed under this facility will be used by banks exclusively for meeting the liquidity requirements of mutual funds by extending loans, and for undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers, debentures and certificates of deposit held by the funds.

How will it work?

The RBI window allows MFS to access liquidity through two routes. Banks can borrow funds from the statutory liquidity facility for them from the RBI and lend to MFS against their collateral debt securities, or buy commercial papers or corporate debentures from the MFS.

Why liquidity injection?

  • The move comes after Franklin Templeton Mutual Fund last week decided to wind up six debt funds that have combined assets under management of nearly ₹26,000 crore on account of illiquid and low-rated instruments in its portfolio.
  • These mutual Funds had 65% of the portfolio investment in bonds that are AA rated or below These lower rated bonds offer higher return but also carry a higher risk. During the times of crisis, these type of bonds are least sought after, meaning their depreciation is quicker. As a result, the fund managers will not be able to service the interest & principal payment to the investors. To protect the interest of the investors, the RBI had to intervene with liquidity injection.

SIPRI Report

The global military expenditure rose to $1917 billion in 2019 with India and China emerging among the top three spenders, according to a report by a Swedish think tank, Stockholm International Peace Research Institute (SIPRI).

Details –

  • In 2019, the top five largest spenders — U.S. ($732 bn), China, India, Russia ($65.1 bn) and Saudi Arabia ($61.9 bn) — accounted for 62% of the global expenditure. The annual report ‘Trends in World Military Expenditure, 2019’ said.
  • The $71.1 billion spent by India on defence in 2019 was 2.4% of its Gross Domestic Product (GDP). India was at the fourth position in 2018 with Saudi Arabia at the third.
  • India’s expenditure in 2019 was 6.8% more than that in 2018, the report says the country’s military expenditure has risen significantly over the past few decades. “It grew by 259% over the 30-year period of 1990– 2019, and by 37% over the decade of 2010–19. However, its military burden fell from 2.7% of GDP in 2010 to 2.4% in 2019.”

About SIPRI –

  • Stockholm International Peace Research Institute (SIPRI) is an independent international institute dedicated to research into conflict, armaments, arms control and disarmament.
  • Established in 1966, SIPRI provides data, analysis and recommendations, based on open sources, to policymakers, researchers, media and the interested public.
  • SIPRI was established on the basis of a decision by the Swedish Parliament and receives a substantial part of its funding in the form of an annual grant from the Swedish Government.
  • It releases the annual report ‘Trends in World Military Expenditure’.

Armenian Genocide

The Armenian Genocide is often called the first genocide of the twentieth century. It refers to the systematic annihilation of Armenians living in the Ottoman Empire between 1915 and 1917. According to estimates, approximately 1.5 million Armenians died during the genocide, either in massacres and in killings, or from ill treatment, abuse and starvation. The Armenian diaspora marks April 24 as Armenian Genocide Remembrance Day. This year marks 105 years since the beginning of the genocide, something Turkey has consistently denied.

Why did the Armenian Genocide occur?

  • The Armenian Genocide occurred during the First World War, and in many ways a direct result of the developments during the war. Although Armenians had always faced harassment and persecution in Asia Minor, this heightened around 1908. During the Ottoman rule, minorities like the Armenians were subjected to discriminatory treatment. For instance, they were forced to pay higher taxes. Despite this, they were an educated and wealthy community, characteristics that drew resentment from others.
  • The Armenians in the Ottoman empire were Christians by faith and the Ottoman Caliphate feared that the Armenians would bear allegiance to neighbouring countries, Russia for instance, with similar religious affiliations than the Ottoman empire, especially during a war.
  • A result of this continued hostility and suspicion towards Armenians was the first state-sanctioned pogroms called the Hamidian Massacres between 1894–1896. These violent massacres were implemented to crush protests against discrimination that was being perpetrated against minorities in the Ottoman Caliphate.
  • In many ways, the Hamidian Massacres that resulted in the death of thousands of people, were a prelude to the Armenian Genocide. The reigning monarch, Abdul Hamid II was never held accountable for the massacres although researchers believe that the violence was perpetrated with his approval.

What happened during World War I?

  • After the First World War broke out in November 1914, the Ottoman Turks participated in the war, siding with Germany and the Austro-Hungarian empire. The Ottoman Turks believed the Armenians would side with Russia in the war and aggressively engaged in propaganda against them. For many in the Ottoman Turkish army, their fears were confirmed when Armenians in the fringes of the Caucasus began organising volunteer battalions to fight for Russia against the Ottoman Turks. This resulted in the Ottoman Turks engaging in a mass-removal campaign of Armenians from the border areas along the Eastern Front.
  • On April 24, 1915, Ottoman Turkish government officials arrested and executed thousands of Armenian intellectuals. It was the start of the Armenian Genocide. Armenian families, including small children, were forced to walk for days without food, water and shelter in the deserts of Syria and Arabia. The Armenians were subjected to other indignities, having to walk naked under the sun, many dropping dead on the journey. Women and girls were subjected to widespread sexual violence and abuse and were also trafficked into sexual slavery.
  • Several Armenian objects and monuments of religious and cultural value and heritage were destroyed during the genocide, including churches and cemetaries. The genocide lasted till 1923.

Response in Turkey –

  • Following years of criticism for genocide denials, in 2007, Recep Tayyip Erdoğan, then Turkish Prime Minister, called for an alternative term to be used for the Armenian Genocide— 1915 Olayları, the ‘Events of 1915’. In Turkey, intellectuals and authors who have openly written about the Armenian Genocide have faced harassment, violence, arrest and have even been killed in retaliation.
  • In the past, whenever a country has officially extended recognition to the Armenian Genocide, Turkey has threatened those governments with economic and diplomatic consequences. India does not officially recognise the Armenian Genocide.

Daily MCQs

1. Which of the following statement(s) is/are correct about the mutual funds? 1. They collect money from investors and invests the money, on their behalf, in securities and charge a small fee for managing the money. 2. They are regulated in India by the Reserve Bank of India.

Correct! Wrong!

A mutual fund collects money from investors and invests the money, on their behalf, in securities (debt, equity or both). It charges a small fee for managing the money. Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI).

2. Which of the following statement(s) is/are correct? 1. India is amongst the top five military spenders in the world. 2. India’s military expenditure has grown more than 2.5 times between 1990-2019.

Correct! Wrong!

In 2019, the top five largest spenders — U.S. ($732 bn), China, India, Russia ($65.1 bn) and Saudi Arabia ($61.9 bn) — accounted for 62% of the global expenditure. The annual report ‘Trends in World Military Expenditure, 2019’ (by SIPRI) has said. The $71.1 billion spent by India on defence in 2019 was 2.4% of its Gross Domestic Product (GDP). India was at the fourth position in 2018 with Saudi Arabia at the third. India’s expenditure in 2019 was 6.8% more than that in 2018, the report says the country’s military expenditure has risen significantly over the past few decades. “It grew by 259% over the 30-year period of 1990– 2019, and by 37% over the decade of 2010–19. However, its military burden fell from 2.7% of GDP in 2010 to 2.4% in 2019.”

3. SIPRI is a think-tank based in -

Correct! Wrong!

Stockholm International Peace Research Institute (SIPRI) is an independent international institute dedicated to research into conflict, armaments, arms control and disarmament. Established in 1966, SIPRI provides data, analysis and recommendations, based on open sources, to policymakers, researchers, media and the interested public. SIPRI was established on the basis of a decision by the Swedish Parliament and receives a substantial part of its funding in the form of an annual grant from the Swedish Government. It releases the annual report ‘Trends in World Military Expenditure’.

4. Which of the following statement(s) is/are correct about the ‘Armenian Genocide of 1915’? 1. It refers to the systematic annihilation of Armenians living in the Ottoman Empire between 1915 and 1917. 2. Armenians living in the Ottoman Empire were Shia Muslims and the Ottoman Caliphate feared that they had links with Iran during the World War I. 3. India has recently granted official recognition to the Armenian Genocide of 1915.

Correct! Wrong!

The Armenian Genocide is often called the first genocide of the twentieth century. It refers to the systematic annihilation of Armenians living in the Ottoman Empire between 1915 and 1917. The Armenians in the Ottoman empire were Christians by faith and the Ottoman Caliphate feared that the Armenians would bear allegiance to neighbouring countries, Russia for instance, with similar religious affiliations than the Ottoman empire, especially during a war. In the past, whenever a country has officially extended recognition to the Armenian Genocide, Turkey has threatened those governments with economic and diplomatic consequences. India does not officially recognise the Armenian Genocide.

5. Spanish Flu (1918) was caused by the -

Correct! Wrong!

Spanish flu was caused by an H1N1 influenza virus (swine flu) in the year 1918.

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