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Monthly DNA

11 Jul, 2022

24 Min Read


GS-II : International Relations Sri Lanka


Gotabaya Rajapaksa has agreed to step down as the President of the island nation, following a huge protest by the people.

His regime is facing crises has four interconnected dimensions: economic, governance, social, and legitimacy.

People are living through harrowing economic collapse, with accessing essentials such as fuel, food, and medicine becoming an everyday battle.

Poor Decisions By The President Rajapaksa

  • He began his tenure as President in November 2019 by promising a future of stability, security, development, and prosperity for the people of Sri Lanka.
  • He concentrated a great deal of financial and administrative power into his hand by re-establishing the Presidential Executive as the Central Institution of state power, thus Sri Lanka was brought back to executive presidential through the 20th amendment.
  • Continuous failures and confusion in policy making and implementation are the heart of an ongoing governance crisis.
  • Militarization of public administration, the decision to ban chemical and fertilizers input in all spheres of agriculture, mishandling of Sri Lanka’s chronic foreign exchange crisis and
  • Government’s failure to regulate the rising prices of essential commodities. All of these made the Sri Lankan citizens pay heavy prices for the poor decision-making of the government.

Why is Sri Lanka suffering from a crisis?

the Sri Lankan government declared officially that the country was hit by the worst economic crisis in January 2021, it is facing an unprecedented crisis due to economic mismanagement, corruption, and an agricultural crisis.

  • The policy miscalculations such as imposing tax cuts which took a heavy toll on government revenues, and cut in taxes led to budget deficits soaring from 55 in 2020 to 15% in 2022. Even the bad monetary policies led to an increase in inflation (17.5% in 2022) which has triggered unrest and protest among the citizens.
  • Due to the Balance of Payment crisis, Sri Lanka is not able to import goods like paper sugar medicines petrol, and even food.
  • the economic crisis is accompanied by a severe food shortage, the increase in food prices was caused by a depreciation in the currency which forced the government to impose an economic emergency and gave the authority the following powers:

1: right to seize food stock designated as a staple food

2: help set the price of staple food

3: help in rationing food

Factors that triggered an economic crisis

  • Covid 19 pandemic put the tourism industry on hold which led to a dip in the forex reserve ($7.5 billion in 2019 to $2.8 billion in 2021) as the tourism industry accounted for 10% of Sri Lanka’s GDP.
  • A depreciated currency, high dependence on imports, and hoarding led to a steep rise in food prices in Sri Lanka.
  • Russia Ukrainian conflict also is a factor that is affecting the already precarious economic condition of Sri Lanka tourism relies on tourists from Russia and Ukraine.
  • Russia is also the second biggest market to Sri Lanka when it comes to tea exports.
  • Due to the move toward 100% organic farming the farming industry collapsed which was based on the tea industry, even organic farming is expensive and the yield is far less in comparison.
  • In November 2021 Sri Lanka was forced to abandon its policy to become the world’s first organic nation, leading to continuous food prices rise.

How have these crises affected Indo-Sri Lankan relations?

The current crisis has given a new dimension to the Indian- Sri Lanka relationship.

  • Sri Lanka has taken both China and India’s help in this crisis but India has proven more reliable than China.
  • India has taken the advantage of this opportunity to improve its economic presence in the country which is a counterbalance to the increasing Chinese presence in the Indian ocean.
  • The crisis has allowed India to enhance its geopolitical interest by increasing its presence in strategically important places in Sri Lanka.
  • The relief extended by India from the beginning of 2022 totals over USD 1.4 billion - a USD400 currency swap, a USD500 loan deferment, and a USD 500 line of credit to fuel imports.

Way forward

  • There is a need for ambitious fiscal consolidation based on high-quality revenue measuring, raising income tax and VAT rates, and minimizing exemptions.
  • Government should also join hands with the Tamil political leadership to create a roadmap for the economic development of the war-affected northern and eastern provinces

Source: The Hindu


GS-II : Governance IT act


Twitter moved the Karnataka high court seeking to set aside multiple orders of the central government as well as to change their directions to identify specific violative content and then impose a blanket ban on an individual account.

Current issue

  • Ministry of Electronics and Information Technology issued an order to take down certain posts from Twitter under section 69A of the IT Act as the company has failed to comply with the directions on multiple occasions.
  • As per the Twitter transparency report for January to June 2021, India accounted for 11%of the overall legal requests received globally by the micro-blogging platform for moderating access to certain content.
  • Twitter submitted a list of 80 accounts and tweet that it had blocked based on a request from the government in 2021 and it also claims that the basis on which multiple accounts and posts have been flagged by the Ministry are either overbroad and arbitrary or disproportionate.
  • Supreme court ruling in The Superintendent, Central Prison Fatehgarh vs Ram Manohar Lohia (1960) has held restrictions made in the public interest must possess a reasonable connection to the objective being achieved.
  • Some of the content flagged by the Ministry may pertain to official accounts of political parties, blocking which could be violative of the right to free speech according to Twitter.

What is Section 69A of the IT Act?

  • Section 69A of the IT Act empowers the government to restrict access to any content in the interest of sovereignty and integrity of the country, security of the state, friendly relations with foreign states, or public order. All directions to restrict information or content in circulation must be recorded in the writing.
  • Social media intermediaries failing to comply with the regulations are liable to be monetarily penalized along with an imprisonment term which may extend up to seven-year.
  • Section 69A enables the centre to ask any agency of the government, or any intermediary, to block access to the public of any information generated, transmitted, received, or stored on any computer resource
  • The intermediaries include network service, internet service, provider, telecom service provider, network service providers, search engines, online payment sites, online auctions sites, online marketplace, cyber cafés, etc.
  • In the past government used section 69A of the IT Act to block 59 Chinese apps like Tik Tok, UC Browser, Cam Scanner, etc. after the clash between Indian and Chinese troops in Ladakh.
  • While Section 69 A of the IT Act, provides power to the government, the procedure to do such restrictions is listed in the Information Technology (Procedure and Safeguard for Blocking of Access of Information by Public) Rules, 2019.

Other related law

  • Information technology (IT) Act 2000: it covers all ‘intermediaries’ who play a role in the use of computer resources and electronic records.
  • Section 66 of IT Act: in the Shreya Singhal vs Union of India case the supreme court has struck down section 66 of the IT Act under which posting offensive comments online was a crime punishable by a court.
  • Section 95 and 96 of CRPC: section 95 talks about the power to declare certain publications forfeited and to issue search warrants for the same while section 96 allows for an application to the High Court to set aside the declaration of forfeiture.
  • In the Anuradha Bhasin vs Union of India case the Supreme Court had said that when access to the internet is restricted, reason must be given and it also stated that government-imposed restrictions on the freedom of expression and assembly, fair reason must be made available to the public and affected parties can challenge in a court of law in case of arbitrary use.

Thus, the rules impacting the fundamental rights must be equipped with proper accountability with proper parliamentary or judicial oversight to check the misuse of the section by the government.

Source: The Hindu


GS-III : Economic Issues Forex


Recently, there has been a fall in the rupee’s exchange rate (nearing 80 to a US Dollar), as well as a fall in the forex reserves. The relationship between the forex reserve and rupee exchange rate is:

  • Exchange rate: It is the price of one currency in terms of another currency.
  • Exchange rates can be either fixed or it can be floating.
  • Fixed exchange rates are decided by the central banks of a country.
  • Floating exchange rates are determined by the mechanism of market demand and supply.

Rupee’s exchange rate:

  • In the beginning, for every rupee demanded in the market, there is a demand for a US dollar. The exchange rate between the two currencies would be one.
  • But if over the period more dollars are demanded than the rupee, then the dollar would appreciate against the rupee.
  • If this trend continues for a longer period, then the rupee will keep becoming weaker and weaker and its exchange rate will keep falling.


  • Indian imports will become expensive as the rupee buys less and less of products sold in dollars. (India is heavily dependent upon the import of oil, nearly 85% is imported.)
  • Not just oil but electronic items, such as mobile phones, some cars, and appliances, are likely to get expensive.

[The basket of Indian imports includes crude oil, coal, plastic material, chemicals, electronic goods, vegetable oil, fertilizer, machinery, gold, pearls, precious and semi-precious stones, and iron and steel]

  • Education and travel in foreign countries will become expensive.
  • Remittances: Non-Resident Indians (NRIs) who send money back home will end up sending more in the rupee value.
  • In the case of fertilizer, the government subsidy bill is estimated to rise to Rs 2.5 lakh crore in this fiscal against Rs 1.62 lakh crore in the previous year due to the high prices of fertilizers in the global markets coupled with the rupee depreciation.
  • Rise in import bills will also increase inflation in the country. Prices of imported intermediate goods will go up and that will push the manufacturing cost of businesses, who would pass that cost on to the consumers, which would push the price of goods.
  • Indian exports to the US will increase, as the rupee’s depreciation makes India’s products cheaper and it will be more affordable to US customers.
  • However, India’s current account deficit is expected to deteriorate in the current fiscal on account of costlier imports and poor merchandise exports.

Relationship between Forex Reserves & Exchange Rate:

  • The rupee’s exchange rate will be changed based on the relative demand for the rupee among foreigners and the demand for the dollars among Indians.
  • In case such relative demand fluctuates wildly, then, predictably, the rupee’s exchange rate too will fluctuate wildly.
  • Sharp and repeated fluctuations will, however, destroy many firms.

When the RBI buys the dollars, they become India’s forex reserve.

This exchange reduces the presence of dollars and increases the presence of the rupee in the forex market, thus holding back the rupee from becoming stronger against the dollar.

One of the key reasons why RBI intervenes in the forex market is to smoothen the volatility of the exchange rate.

Source: The Indian Express

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