Table of Contents
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).
Facts |
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UPSC PYQ |
Q. The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of: (2020)
(a)Â Â Â Â Crude oil (b)Â Â Bullion (c)Â Â Â Rare earth elements (d)Â Â Uranium Answer: A |
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.
UPSC PYQ |
Q. Which of the following statements regarding ‘Green Climate Fund’ is/are correct? (2015)
Select the correct answer using the code given below. (a)Â Â Â 1 only (b)Â Â 2 only (c)Â Â Â Both 1 and 2 (d)Â Â Neither 1 nor 2 Answer: A |
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.