Daily Current Affairs & General Studies For UPSC: June 9

Credit Rating And Fundamentals

The decision of the rating agency, Moody’s, to downgrade India from Baa2 to Baa3 should come as a rude awakening. The present rating is just one notch above the ‘junk’ category.

  • The rationale given by Moody’s should not be ignored.
  • The downgrade, Moody’s says, has not factored in the economic impact of the pandemic. It has to do with India’s fundamentals before the onset of the pandemic

Impact of Downgrading to Junk Status

If India is downgraded to junk status, foreign institutional investors, or FIIs, will flee in droves. The stock and bond markets will take a severe beating. The rupee will depreciate hugely and the central bank will have its hands full trying to stave off a foreign exchange crisis.

Source: Who’s afraid of monetisation of the deficit? (The Hindu)

Credit Rating: Know The Basics

Credit Rating: A credit rating evaluates the creditworthiness of a borrower. Corporations and governments issue bonds to borrow money.

What does it mean in respect of bonds?: When you buy a bond, you are lending your money to someone—the government or a private company entity who promises to repay within a specified tenure. Credit ratings represent the ability of the bond issuer to repay. A higher rating implies the bond issuer has a lower likelihood of defaulting on payments.

Credit Rating Agencies: Moody’s, Standard and Poor’s (S&P) and Fitch Ratings are among the ones which operate worldwide. In India, commercial credit rating agencies include CRISIL, CARE and ICRA among others.

Junk Bond: Bonds that have higher credit rating are also known as investment-grade bonds. Bonds with very low credit rating are known as junk bonds because of a stronger likelihood of default.

Role of Local Government in Tackling Pandemics

The novel coronavirus pandemic has brought home the critical role of local governments and decentralised responses.

  • In terms of information, monitoring and immediate action, local governments are at an advantage, and eminently, to meet any disaster such as COVID-19.
  • COVID-19 has raised home four major challenges: economic, health, welfare/livelihood and resource mobilisation. These challenges have to be addressed by all tiers of government in the federal polity, jointly and severally.
  • There is yet no clarity in the assignment of functions, functionaries and financial responsibilities to local governments. Functional mapping and responsibilities continue to be ambiguous in many States.
  • Property tax collection with appropriate exemptions should be a compulsory levy and preferably must cover land.
  • In States such as Uttar Pradesh, Bihar and Jharkhand, local tax collection at the panchayat level is next to nil.
  • The suspension of MPLADS by the Union government for two years is a welcome measure.

Source: The critical role of decentralised responses (The Hindu)

Commercial Space Flight

For the United States to send American astronauts to space from American soil after a gap of nine years is a milestone in itself.

The flight is a joint venture between NASA and Elon Musk’s SpaceX.

NASA has partially outsourced its work of innovating, testing and building new technology to market players such as SpaceX. It has made clear its desire to invite more such innovative space companies to participate. India under Prime Minister Modi has also opened up the space sector including ISRO facilities to private players. The emergence of successful partnerships here will likely depend on how well they stand up against the American example of allowing for failure. 

Source: Selling Space (Hindu Editorial)

Other Players in The Commercial Space Tourism

  • Boeing’s CST-100 Starliner crew capsule is under development which plans to do what SpaceX has just achieved.
  • Another player in the space tourism industry is Virgin Galactic owned by Richard Branson. The company has already managed to fly its test passenger in February.
  • Jeff Bezos is another entrepreneur keen on space tourism and he has already made huge investments for this not so distant dream. With his Blue Origin venture, Jeff wants to pioneer private travel to space at lower costs along with increased reliability.
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