External Benchmark System

External Benchmark System

This article deals with ‘External Benchmark System .’ This is part of our series on ‘Economics’ which is important pillar of GS-3 syllabus . For more articles , you can click here

Issue

When RBI decreases Repo Rate, Banks don’t decrease their interest rates proportionately.

Incomplete Transmission of Rate Cut by Banks

Why banks don’t transmit Repo Rate cuts to borrowers?

a. Banks don’t depend on RBI

  • In India(& all developing countries ) ,RBI is not the main source of money to banks . Common people are main supplier(mainly because people don’t have much option to invest money in alternate investment facilities eg mutual funds etc )

b. Small saving schemes  rate not reduced

  • Transmission is limited by high small savings rates. Banks worry that if they cut their deposit rates, customers will flee to small savings instruments. 

c. High Statutory Liquidity Ratio

  • Large money has to be kept idle as SLR which banks cant lend
  • This reduces their ability to pass the benefit to consumers .

d. Banks increasing their Spread

  • Due to losses incurred to banks as a result of high NPAs & lowering of Credit Demand , Banks are increasing their Spread  in order to maintain their profits in absolute term.
  • This has reduced the capacity of banks to decrease Lending Rates.

To deal with inadequate transfer of Repo Rate cuts by banks to borrowers , RBI Came up with MCLR and External Benchmark  Rate System 

How Banks decide their Interest Rate

Timeline

How Banks decide their Interest Rate
1969 Government began nationalization of private banks, and ‘administered interest rates’ on them.  
1991 M.Narsimhan suggested deregulation: Government should not dictate / administer individual banks’ interest rates & RBI should only give methodology to banks.  
2003 RBI introduced Benchmark Prime Lending Rate  (BPLR).  
2010 RBI introduced BASE Rate + Spread system; update frequency was on individual banks’ discretion.  
2016-17 RBI introduced Marginal Cost of Funds based Lending Rate  (MCLR) +Spread system.
2019RBI introduced External Benchmark Rate System.

Marginal Cost of Funds based Lending Rate  (MCLR)

  • Banks to calculate lending rate on monthly basis.
  • Lending Rate to be calculated using CRR Cost, Operating Cost, Marginal cost of funds (calculated using Repo Rate) (don’t need to go into detail. Just remember, MCLR has Repo Rate as component)

Lending Rate = MCLR + Spread (to be decided by banks)

Benefits?

  • Better transmission of Monetary Policy
  • Transparency & accountability to borrowers.

RBI’s Janak Raj internal study group(2017) showed MCLR did not yield all benefits . Banks keep on increasing ‘Spread’ based on their discretion .

So new method  was introduced

External Benchmark System

  • Applicable from April 2019 (on recommendations of Dr. Janak Raj Committee)
  • NEW loans to be linked with External Benchmark  system.

In this system

  • Bank will be asked to choose any benchmark like
    • Repo rate   or
    • 91-day T-bill yield  or
    • 182-day T-bill yield   or
    • any other benchmarks by Financial Benchmarks India Pvt. Ltd.
  • It has to be updated atleast every 3 months.
  • Lending Rate of Bank will be External Benchmark + Spread (eg if Bank choose Repo Rate as External Benchmark, then Interest Rate will be Repo Rate + Spread)

Benefits?

  • Better transmission of Monetary Policy
  • Better transparency and accountability

Monetary Policy

Last Updated: Feb 2023

Monetary Policy

This article deals with ‘Monetary Policy .’ This is part of our series on ‘Economics’, which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


Demand – Supply Theory

Suppose, at a particular time, equilibrium is reached for the price of any product, say wheat.

Demand - Supply Theory

Now, the government decides to print a lot of Currency and distribute it to the public as an election gimmick to win elections. Will this practice end poverty in India? The answer is negative because although the money supply has increased, the number of goods in the economy hasn’t increased in the same proportion. It will lead to inflation as too much money is chasing a few goods. The wheat that was sold at Rs 100 will now sell at Rs 1000 (hypothetical amounts).

Demand - Supply Theory (Part 2)

If we want to cope with this situation, there are two ways 

  1. Either increase the supply of wheat (can be done by the government by asking FCI to overflow the market with wheat) or 
  2. Reduce the supply of money (can be done by RBI via Monetary Policy) 
Demand - Supply Theory (part 3)

What can RBI do to control inflation or deflation?

Combat Inflation   Combat Deflation
Reduce consumption by making the loans expensive. Encourage consumption by making loans cheaper.
For this, RBI should decrease the money supply. For this, RBI should increase the money supply.
RBI should follow
TIGHT MONEY POLICY
DEAR MONEY POLICY
HAWKISH MONEY POLICY
RBI should follow
EASY MONEY POLICY
CHEAP MONEY POLICY
DOVISH MONEY POLICY

Combating Inflation

Combating Inflation using Monetary Policy

Combating Deflation

Combating Inflation using Monetary Policy

What is Monetary Policy?

In any economy, there are the following actors 

Monetary Policy
  • The Central Bank of the nation formulates monetary policy to control the money supply in the economy.
  • Objectives of monetary policy can be (depending on the economy)
    1. Control inflation 
    2. Accelerating the growth of the economy
    3. Exchange rate stabilization
    4. Balance savings & investments
    5. Generating employment 

Monetary policy can be

1. Expansionary

  • Expansionary Monetary Policy increases the total money supply in an economy.
  • E.g. 
    • In 2008, all countries, including India, used this to beat the recession.
    • During the Covid crisis, all the countries, including India, used this to spur the demand in the economies.
  • Traditionally Expansionary Monetary Policy is used to combat unemployment in a recession by lowering the interest rate.

2. Contractionary

  • Contractionary Monetary Policy decreases the total money supply in the economy.
  • E.g. 
    • 2010 onwards, India & many other countries used it.
    • Post Covid Crisis, almost all the countries, including India, used it to remove excess liquidity from the economy. 
  • Traditionally Contractionary Monetary Policy is used to combat inflation in the economy.

When is the Monetary policy announced in India?

1. Till 1988-89

It was announced twice a year according  to agricultural cycles

Slack season policy April -September
Busy season policy October -March

2. After 1989

  • Since the economy became more dynamic, RBI reserved its right to alter it from time to time, depending upon the state of the economy.
  • Additionally, the share of credit toward industry has increased, which was earlier dominated by agriculture. So aligning the Monetary Policy with agriculture doesn’t make sense. 
  • The major policy was announced in April & reviews took place every quarter. But within a quarter at any time, RBI could make any major change in policy depending upon the need.

3. Now

  • Changes can be made at any time when RBI feels but announced necessarily after two months.

Tools used by RBI for Monetary Policy

RBI implements it using two tools

a. Quantitative /Indirect/General Tools

  • Reserve Ratios (CRR, SLR)
  • OMO (Open Market Operation)
  • Rates (Repo, Reverse Repo, Bank Rate, Standing Deposit Facility, Marginal Standing Facility etc.)

b. Qualitative /Selective/Direct Tools

  • Margin / Loan-to-Value Ratio
  • Consumer Credit Control
  • Rationing
  • Moral suasion
  • Direct Action

We will discuss all this in detail.


Quantitative tools

Quantitative Tools of Monetary Policy

Side Topic: Net Demand & Time Liabilities (NDTL)

Before proceeding further, we will look into the concept of Net Demand & Time Liabilities(NDTL)

Net Demand & Time Liabilities(NDTL)
Current or Saving Account
Fixed Deposit Account
Demand Liabilities Time Liabilities
Demand liabilities are those liabilities on the banks which depositors can demand at any time. Time Liabilities are those which mature after some time. If withdrawn before that, then some penalty is charged.  
Demand Liabilities are more liquid as the depositor can easily convert them into cash without penalty. Relatively less liquid as a person will have to pay the penalty if withdrawn before the maturity.
Consist of money deposited in Current Account & Saving Account   Consist of money deposited in 
1. Fixed deposits
2. Recurring Deposits
3. Cash Certificate
4. Staff security deposit 
Banks pay less interest on demand liabilities. Banks pay more interest on demand liabilities. (= people tend to place money here because of more interest)  

The sum of both Demand & Time Liabilities is known as Net Demand & Time Liabilities.


1. Reserve Ratios

1.1 Cash Reserve Ratio (CRR)

  • CRR is the percentage of public deposits (Net Demand and Time Liabilities (NDTL)) that banks have to keep with the RBI in cash at any point in time. Usually, RBI doesn’t give any interest in this.
  • CRR provisions apply to Scheduled Banks, Non-Scheduled Banks & Cooperative Banks.
  • RBI get these powers to impose CRR from RBI Act. 
  • Present Rate (Feb 2023): 4.5% of Net Demand and Time Liabilities

1.2 Statutory Liquidity Ratio (SLR)

  • SLR is the percentage of NDTL that banks must maintain with themselves in the form of specified liquid assets (like cash, gold & government securities, or RBI-approved securities) at any point in time. 
  • It is mandated under RBI Act.
  • SLR applies to all Scheduled Banks, Non-Scheduled Banks, Cooperative Banks and NBFC deposit-taking. RBI can prescribe different levels for each.
  • Although not used as Monetary Policy Tool, but if decreased, a large amount of capital is infused into the economy.  
  • Present Rate (Feb 2023): 18% of Net Demand and Time Liabilities 

Trends of CRR and SLR

Note: Previously, CRR & SLR were very high (53% combined). As a result, banks had significantly less money to lend. It impacted the Indian Economy because the rate of loans was high, and businesses were not expanding. It was one of (the many) reasons for the 1990 Balance of Payment Crisis. Narasimhan Committee & other experts recommended reducing this. As a result, it was gradually reduced.

CRR Trends

CRR Trends

The  RBI’s move to hike the  CRR by 50 bps resulted in a withdrawal of primary liquidity to the tune of ₹87,000 crore from the banking system.

SLR Trends

SLR Trends

Use of CRR and SLR

CRR and SLR can be used to fight Inflation and Deflation

  Inflation Fight Deflation Fight
Method Tight | Dear Policy Easy | Cheap Policy
CRR, SLR Increase Decrease

They also act as security in case of bank runs.


Side Topic: What are G-Secs?

  • Concepts like Repo, Reverse Repo and Open Market Operations involve the concept of G-Secs (or Government Securities). Hence, we will first deal with the concept of G-Secs.
  • When the Government wants extra money to fund its projects, it asks RBI to arrange it (as RBI is the Government’s Debt Manager). The Government gives the required cash to the Government and prints equivalent Government Securities (G-Secs). 
  • Government Security (G-Sec) is a tradeable instrument issued by RBI on behalf of the Central Government or the State Governments. It acknowledges the Government’s debt obligation. It promises that Government will pay interest of x% to the holder for y years and pay principal at the end of tenure. 
G-Secs
  • Now RBI can use these G-Secs for various operations. E.g. to absorb the excess liquidity from the market etc. 
  • In India, the Central Government can issue Treasury Bills (or T-Bills) and Dated Securities, while State Governments can only issue Dated Securities to raise funds. 


Types of G-Secs

1. T- Bills

  • T-bills are the short-term debt instruments issued by the Union Government. Presently, they are issued in three tenors, i.e., 91-day, 182-day and 364-days. 
  • They are zero-coupon securities, i.e. Government pays no interest. Instead, they are sold at a discount on face value and redeemed at face value.

2. Dated G-Secs

  • Dated G-Secs have a fixed interest rate on the face value and a tenor ranging from 5 to 40 years.

2. Policy Rates/ Liquidity Adjustment Facility (LAF)

  • Under LAF, Central Bank tends to reduce short-term liquidity fluctuations (money supply) in the economy through Repo and Reverse Repo transactions.  
  • The official policy rate in India is REPO RATE (i.e. RBI announces Repo Rate only).
  • Repo & Reverse Repo operations can only be done in Mumbai & through securities as approved by RBI.

2.1 Repo Rate

  • Repo Rate is a short form for Repurchase Rate.
  • In this, Bank borrows immediate funds from the RBI for the short term (up to 14 days) with Government Securities as collateral and simultaneously agrees to repurchase the same Securities after a specified time at a specified price. For example, when a bank borrows, it will give its securities worth, say, ₹ 100 crores, & agree to repurchase it back at a rate of ₹ 104 crores ( if the repo rate is 4).
Repo Rate
  • The amount that can be borrowed under this facility is: From 5 crores to unlimited. 
  • All Banks, Central & State Governments and Non-Banking Financial Institutions are eligible for Repo Operations.  
  • But during the whole operation, the Bank has to maintain its SLR, i.e. Collateral securities can’t be from the SLR quota. 
  • Present Repo Rate is 6.50% (Feb 2023)

Recent Trends

  • RBI was reducing the rates during the Covid pandemic to spur economic activity. RBI has kept the Repo Rate at 4% to increase the demand in the market.
  • But Easy Money policy led to excessive liquidity in the economy. Additionally, Russia-Ukraine War increased the price of commodities, especially oil and food grains. Hence, RBI changed its stance and started to increase the Repo Rate to remove excess liquidity from the economy. 
Trends in Repo Rate

2.2 Marginal Standing Facility (MSF)

  • Marginal Standing Facility was introduced in 2010. 
  • Suppose the Bank is in dire need of cash but doesn’t have spare securities. Under such conditions, the Bank can borrow overnight under MSF without any collateral. But they will have to pay 0.25% higher than Repo Rate (say as punishment)

MSF= Repo + 0.25%

(Presently (as of Feb 2023) = 6.75%)

Marginal Standing Facility (MSF)
  • Only Scheduled Commercial Banks can avail this facility within a range of a minimum of 1 crore & Maximum of 1% of Net Time and Demand Liabilities.  
  • It helps to solve short-term crunch. 
  • It is also necessary because Repo operations are limited to a specific period during the day.

2.3 Reverse Repo Rate

In this, RBI takes money from banks & gives them securities (opposite of the Repo Rate)  (explained in the Infographic below)

Reverse Repo Rate
  • RBI pledges securities in the form of G-Secs. 
  • All clients eligible in the Repo rate are eligible here as well. 
  • The current Reverse Repo is 3.35%.

2.4 Standing Deposit Facility (SDF)

Timeline

  • 2013: Urjit Patel Committee on Monetary policy proposed a standing deposit facility (SDF)
  • 2018: The government included Standing Deposit Facility as a Monetary Policy Tool 
  • 2022: RBI’s Monetary Policy Committee introduced Standing Deposit Facility as Monetary Policy Tool 

About SDF

  • Under SDF, RBI can absorb the excess liquidity from banks without the necessity of collateral in the form of government securities.
Standing Deposit Facility (SDF)
  • It is helpful in situations when RBI has to absorb excessive liquidity in situations such as demonetisation. 
  • SDF is the direct opposite of MSF. SDF is used for liquidity absorption, while MSF is used for liquidity injection.

SDF = Repo – 0.25%

(Presently (as of Feb 2023) = 6.25%)


Policy Corridor/ Liquidity Adjustment Facility (LAF) Corridor

  • Policy corridor is the difference between Marginal Standing Facility (Repo + 0.25%) and Standing Deposit Facility (Repo-0.25%)
  • The formula has changed recently,
    • Before April 2022: Policy Corridor = total width between MSF <—> REPO <—> Reverse
    • After April 2022: Policy Corridor = Total width between MSF <—> REPO <—> SDF  
  • Hence, SDF has replaced the Reverse Repo Rate as the floor of the Policy corridor.
Reverse Repo 
(z Repo -0.25%) 
MSF 
(z Repo + 0.55%) 
civilspedia.com 
Corridor Width is 0.90%

2.4 Bank Rate

  • Bank Rate is the interest rate at which the central bank lends for the long term to commercial banks.  
  • No collateral is required under these operations. 
  • Presently: 6.75% (Feb 2023) (although Bank Rate = MSF, but both are declared separately)
Bank Rate

Although RBI doesn’t use this tool to control the money supply, if it does, the same theory applies here as well.

Inflation Fight Increase Bank Rate
Deflation Fight Decrease Bank Rate
  • It is not the primary tool to control the money supply these days but acts as a penal rate charged to banks for shortfalls in meeting their reserve requirements. How is it done? 
  • If a bank is not maintaining its SLR or CRR, it is fined a penalty on whatever amount is less than the amount to be maintained. Rate Charged is determined as:-
    • First time: Bank rate +3% 
    • Second Time: Bank Rate +5% and so on


3. Open Market Operations (OMO)

  • In Open Market Operations (OMO), the Central Bank (RBI) buys and sells Government Securities to influence the money supply in the economy.
  • It is different from Repo and Reverse Repo Rates because there is no promise by either party to repurchase it back. RBI will pay the interest rate to the holder of the security, but there is no repurchasing agreement.

How does the government use this to control the money supply?

  • Case 1: When there are inflation trends in the market, RBI issue these securities. Banks buy these securities & the money supply decreases.
How to fight Inflation
  • Case 2: When the government wants to increase the money supply, it starts buying these securities at a high price.
How to fight Deflation

Why do banks go for OMO, although there are no compulsions on this?

  • A lot of money keeps on lying idle with banks. Banks don’t earn any interest on that. Hence, investing those in govt securities & earn ~8% interest on them is a better option. 

Dollar-Rupee swap

  • To manage liquidity in the market, RBI has developed a new tool. It was started in 2019. 
  • Under this, RBI purchases dollars from banks in exchange for rupees.
    • Increasing liquidity = Buy $ from Banks and give them ₹
    • Decreasing liquidity = Give $ to Banks and take ₹ from them
Dollar-Rupee swap

For example: In March 2022, RBI conducted a swap of $5 billion by infusing dollars and sucking rupees equivalent to $5 billion from the Indian economy.


Incomplete Transmission of Rate Cut by Banks

Monetary policy transmission refers to how changes in the RBI’s policy rates  (such as  Repo) lead to commensurate changes in the rates of  Interest of the  Banks.

Issue

Earlier, when RBI decreased Repo Rate, Banks didn’t reduce their interest rates proportionately.

Incomplete Transmission of Rate Cut by Banks

Why don’t banks transmit Repo Rate cuts to borrowers?

1. Banks don’t depend on RBI

  • In India (& all developing countries), RBI is not the primary source of money for banks. Ordinary people are the main supplier(mainly because people don’t have many options to invest money in alternate investment facilities, e.g. mutual funds etc.) 

2. Small saving schemes  rate not reduced

  • High small savings rates also limit transmission as banks worry that if they cut their deposit rates, customers will flee to small savings instruments such as PPF, NSC etc.

3. High Statutory Liquidity Ratio

  • Significant money must be kept idle as SLR, which banks can’t lend. It reduces their ability to pass the benefit to consumers.

4. Banks increasing their Spread

  • Due to losses incurred by banks due to high NPAs, banks increased their Spread to maintain their profits in absolute terms. 

5. Higher NPAs

  • Indian banks face the issue of huge NPAs, which reduces banks’ profitability.

To deal with the inadequate transfer of Repo Rate cuts by banks to borrowers, RBI Came up with MCLR and External Benchmark  Rate System. 


External Benchmark System

How Banks decide their Interest Rate: Timeline

External Benchmark System
1969 The government began nationalising private banks and ‘administered interest rates‘ on them.
1991 M.Narsimhan suggested deregulation: Government should not dictate/administer individual banks’ interest rates & RBI should only give a methodology to banks.
2003 RBI introduced Benchmark Prime Lending Rate (BPLR).
2010 RBI introduced the BASE Rate + Spread system; update frequency was at individual banks’ discretion. 
2016-17 RBI introduced the Marginal Cost of Funds based Lending Rate (MCLR) +Spread system
Banks to calculate the lending rate on a monthly basis. 
Lending Rate to be calculated using of CRR Cost, Operating Cost, and Marginal cost of funds (calculated using Repo Rate) (don’t need to go into detail. Just remember, MCLR has Repo Rate as a component in it).

Benefits?
Better transmission of Monetary Policy.
Transparency & accountability to borrowers.

RBI’s Janak Raj internal study group (2017) showed MCLR did not yield all benefits. So banks keep on increasing  Spread based on their discretion.  

Hence, a new method was introduced.

External Benchmark System

  • Applicable from April 2019 (on recommendations of Dr Janak Raj Committee).
  • All New Loans are to be linked with the External Benchmark system. 

In this system

  • Banks have been asked to choose any of the following 4 benchmarks like 
    • Repo rate  or 
    • 91-day T-bill yield  or 
    • 182-day T-bill yield  or 
    • Any other benchmarks by Financial Benchmarks India Pvt. Ltd.
  • It has to be updated at least every 3 months. 
  • The Lending Rate of the Bank will be External Benchmark + Spread (e.g. if Bank choose Repo Rate as External Benchmark, then Interest Rate will be Repo Rate + Spread)

Benefits?

  • Better transmission of Monetary Policy.
  • Better transparency and accountability.

Qualitative / Selective / General tools

These measures are used to regulate the money supply in specific sectors (i.e. these are sector-specific measures).

1. Marginal Requirements/LTV (Loan to Value)

  • If Spice Airlines wants to borrow money from SBI and pledges ₹100 crore collateral but RBI prescribe a margin (Loan to Value ratio) of, say, 65%, then SBI can give only a 65 crore loan.
  • It is obligatory for SBI to obey the directives of RBI in this context (unlike the base rate) 
  • Hence, it is a Selective direct tool.

2. Consumer Credit Regulation

  • In this, RBI can make various regulations on credit.
  •  E.g
    • Increase down payment from 10% to 30% (it will force some people to delay buying vehicles financed through bank loans).
    • Decrease the least EMI for the automobile sector, say, from ₹ 5,000 to 3,000.

3. Selective Credit Control

  • In this, RBI can instruct banks not to extend loans to a particular sector (Negative / Restrictive Tools) or give a minimum %age to a particular sector (positive).
  • These are Qualitative and Direct Tools.
Selective Credit Control

Negative  Restrictions

3.1 Ceiling to big loans

  • It was operational from 1965 to 1989.
  • Under this, all Commercial Banks had to obtain prior approval from RBI before giving loans greater than ₹ 1 crore to a single borrower.

3.2 Ceiling on Non-Food Loans

  • It started in 1973.
  • To boost Green Revolution
  • So that more loans go towards the agriculture sector

These tools were used before LPG Reforms, but they weren’t effective because these can be easily flouted using loopholes.

Positive Restrictions

3.3 Priority Sector Lending/Rationing 

  • Rationing is the main feature of the communist economy. E.g. in the Soviet Union, they used to make provisions like giving a particular amount of loan to a specific sector. PSL is a form of Rationing. 
  • PSL means giving a specific minimum amount of loans to some Priority Sectors. In India, 40% of loans are given to Priority Sectors. 
  • Government can increase the supply of money to that sector by increasing its limit. 

4. Moral Suasion

  • Moral Suasion is “persuasion” without applying punitive measures. RBI governor tries this tactic via conferences, informal meetings, letters, seminars, convocations, panel discussions, and memorial lectures. 
  • Eg 
    • Please reduce giving automobile loans instead; invest your money in government securities.
    • I have reduced the repo rate; now, you also decrease your base rate.
  • It is not obligatory on the part of the Bank to follow orders, but generally, they do follow. 

5. Direct Action

  • RBI can take direct action against any bank for going against the rules. RBI gets this power under the Banking Regulation Act, RBI Act, Foreign Exchange Management Act, Prevention of Money Laundering Act etc.
  • E.g., if Bank is not maintaining CRR or SLR, RBI can scrap its license.
Direct Action by RBI


Money Supply

Money Supply

This article deals with ‘Money Supply .’ This is part of our series on ‘Economics’ which is an important pillar of the GS-2 syllabus. For more articles, you can click here.


Introduction

It is the total stock of all types of money (currency and deposits) held by the public at any time. The term public includes all economic entities other than the government and banking system.


Factors affecting Money Supply

Season For example, during November & April, crops are harvested, and industries also buy their raw material leading to more money in the hands of a farmer. Hence, the Money supply will increase. 
Trade cycle Boom: Money supply increases.
Depression: Money supply falls.
Fiscal policy Money supply decreases with higher taxation and the sale of G-sec and vice-versa.
People’s choice If people deposit more of their income in banks (instead of storing it in their lockers), the bank can expand loans. The money supply rises in such cases. 
Monetary policy If RBI follows a dear money policy = the money supply decreases.
If RBI follows a cheap money policy = the money supply increases.

Why should we measure the money supply?

  • The job of RBI is to control inflation through qualitative & quantitative tools (i.e. Repo Rate, Cash Reserve Ratio etc.) 
  • But for this, RBI must first know how much money supply is in the system. Only then RBI can make a policy to control the money supply.

Types of Money

M0 (Reserve Money or High Powered Money)

  • It is the total stock of currency held by the public and banks.
  • Mo is the base for creating a Broad Money supply (M3) 
  • Mo is the sum of the following things
    • Currency held by the Public and Banks
    • Bankers’ deposits with RBI plus

Basically, it is the Total Currency Printed by RBI. RBI prints money equivalent to bonds or G Secs it gets from Government. 


M1 (Narrow Money)

  • M1 includes
    • Currency with public
    • Demand deposit in all banks (i.e. Deposit in the current account and savings account)
  • Basically, it denotes a situation when a person has money; he can do two things to maintain liquidity. He can keep that money in its hard form or deposit it in the bank in a Current or Savings Account (not a Fixed Account). 


M2 (Narrow Money )

  • M2= M1 + Demand Deposits in Post Office
  • M2 includes
    1. Currency and Coins with public
    2. Demand deposit in all banks 
    3. Demand Deposits in Post Office 

M3 (Broad Money or Money Aggregate)

  • M3 = M1 + Time deposits with Commercial Banks  
  • M3 includes 
    1. Currency and Coins with public
    2. Demand deposit in all banks 
    3. Time deposits with banks 
  • M3 is most commonly used to measure money and is regarded as the primary indicator of money supply in the economy. 
  • M3 is the Net Demand and Time Liabilities (NDTL).

M4 (Broad Money)

  • M4 = M3 + total Post office Deposits
  • M4 includes
    1. Currency and Coins with public
    2. Demand deposit in banks
    3. Time deposits with banks
    4. Demand deposit in post-offices
    5. Time deposits with post-offices

Ranking of Liquidity

Liquidity is the ease with which an asset can be converted into cash.

Name Liquidity Liquidity Rank
M1 highest 1
M2 less than M1 2
M3 less than M2 3
M4 lowest liquidity 4

Liquidity Ranking : M1 > M2 > M3 > M4


Money Multiplier

Before looking into the concept of Money Multiplier, we will look at the concept of the velocity of Money Circulation.


Side Topic: Velocity of Money Circulation

The average number of times money passes from one person to another during a given period.

Velocity of Money Circulation

Factors affecting Velocity of Money Circulation

  • Low financial inclusion means less velocity because banking penetration is low. People tend to save more on physical assets. Hence, money doesn’t change hands much.
  • Poor people immediately use their money. Hence, cash in the hands of the poor has a higher velocity.
  • Booming period = higher velocity.
  • If more people use EMI loans for purchases, the velocity is high.

Money Multiplier – 1st Approach 

  • The Money Multiplier is the Ratio of Broad Money & Reserve money, i.e. M3 / Mo

M3 = Mo X Money Multiplier

  • Its value depends on the credit creation capacity of banks, which depends on the following
    1. Banking habits of the public
    2. Monetary Policy
  • In India, Money Multiplier generally revolves around 5. So, for example, in Dec 2021, India’s Money Multiplier was 5.3. 

Money Multiplier – 2nd Approach 

Money Multiplier is 1/R  (R= Cash Reserve Ratio)

Explanation of the above formula?

Consider a situation in which a Person deposited ₹ 100 hard currency in the bank. Let’s assume that Cash Reserve Ratio (CRR) fixed by RBI is 10%. First Bank will keep aside ₹10 & give ₹90 as a loan to some person. Then the person who got the loan again paid another person through the bank by depositing money in the person’s bank account. This bank will keep ₹9 (10% of 90) aside and give 81 as a loan to some other person. And the game keeps on going like this. So, ₹ 100 printed by the RBI generated a value of ₹ 1000 (i.e. 100 X (1/10%)) if the CRR was 10% and money was used through the banking system up to its full potential.

Money Supply

Note: Presently, Money Multiplier is around 5. But considering the 4.5% Cash Reserve Ratio, it should be 22.22. 


Reason for low Money Multiplier than theory  

  1. Since Financial Inclusion is low, there might be a case that either banks have money, but people are not available to take loans, or people cannot keep their money in banks. 
  2. Along with that, Banks aren’t always willing to give loans. 
  3. Significant cash in India is stored as Black Money and is never stored in Banking System.

Reformist Movements

Reformist Movements

This article deals with ‘Reformist Movements – UPSC.’ This is part of our series on ‘Modern History’ which is important pillar of GS-1 syllabus . For more articles , you can click here

Introduction

  • Main reason why Britain emerged as powerful nation was it accepted modern civilization first among all nations . But in India , intentionally they followed the policy to stall the change in society . Changes did occur & Indian society did try to change but not due to British policies but due to efforts by some progressive Indians
  • These efforts happened first in Bengal  because it came under British control first . First lot of Indians who studied in Western English knowledge were also created  in Bengal at the end of 18th Century. New intellectual stirrings created reformed mentality . They didn’t reject Indian tradition but sought to change certain unreasonable aspects of Hindu society which didn’t conform to their rationalist ideas. Later , British officials also joined the race &  this provided legitimacy to the reform agenda of the Utilitarian reformers like Bentinck .
  • But problem was , this mentality was confined to a small circle of English Educated elite.  Series of reforms followed but they remained on paper . They faced problem because they never attempted to develop modern social consciousness from below . They should have followed ‘bottom up approach’ instead of ‘top down approach’ .  Reform forced from above remained ineffective .
  • Untouchability  as an issue of social reform had to wait until the beginning of the twentieth cen­tury and the arrival of Mahatma Gandhi in Indian  public life  after World War One .
  • Lacking in a broad social base, the reformers of the early nineteenth century thus exhibited an intrinsic faith in the benevolent nature of colonial rule and relied more on legislation  for imposing reform  from above. There was very little or no attempt to create a reformist social conscious­ness at the grass-roots level, where religious revivalism later found a  fertile ground.

The reform movement broadly fell under two categories

Reformist Movement Eg : Brahmo Samaj, Prarthana Samaj & Aligarh Movement
– Relied on reason & conscience. They wanted to purge outdated elements from the religion which didn’t pass on the scale of  reason .
Revivalist Movement Eg : Arya Samaj, Ramakrishna Mission & Deoband Movement
– Relied upon traditions & wanted to go back to their self made golden past
Reformist Movements

Side Topic : Why Britishers tried to reform Indian Society in 19th Century? 

There were various reasons for this

  • Several ideological influences in Britain, such as Evangelicalism, Utilitarianism and free trade thinking.
  • For renewal of Charter of company
  • Pro socio-religious reform thrust in contemporary England => because Progressive Whig Party came into power back in Britain. 
  • Role of Christian missionaries was also noticeable.

But the Company’s government was still tentative about interfering for fear of adverse Indian reaction unless a section of the Indian society was prepared to support reform. Such a group was soon to emerge through the introduction of English education

Status of Woman  & Civilizational Critique

Status of Woman  & Civilizational Critique
  • Status of woman became the main focus of the reforming activities of colonial state as well as educated Indians
  • At that time, way in which  civilisations were ranked , position of woman was one of the important criteria & here Indians were increasingly under attack by western observers from missionaries to civilians . Indian civilisation was  despised because it assigned such a low status to women .
  • Hence, Indian Intelligentsia responded to this civilisation critique by advocating & supporting reforms to improve status of woman in Indian society.
  • But such reforms remained very restricted to only few women belonging to high class because women remained  recipient of male patronage & never became involved in these reformist projects as conscious subjects of their own history .

Upper Class Women vs Peasant Women

  • Peasant woman were better compared to Upper caste woman during that time
  • They didn’t practice Purdah System , Right to Remarry was there  & Sati was also not that widespread among Peasant class unlike Higher caste

Reformist Movements

We have seen the reasons why Social Reform movements were started in India. Now we will look in detail into one strand of these movements known as Reformist Movements .

Features of reformist social  movements

a. Confined only to narrow social group

  • Reformist spirit appealed only to a small elite group who were primarily the economic & cultural beneficiaries of the colonial  rule .
In Bengal – Small number of western educated elite known as Bhadralok
– Socially they were mostly Hindus &  although caste wasn’t a major criteria for membership, they were mostly higher caste  Brahmin, Kayastha & Baidya   
Western India – Members of Prarthna Samaj were mainly English educated Chitpavan & Saraswat Brahmins along with Merchants from Gujarat
  • Indeed the high caste  character of the early 19th century explains to a large extent the relative silence on caste question & untouchability which had to wait till Gandhi

b. Faith in benevolent nature of colonial rule

  • They had great faith in the benevolent nature of colonial rule & infact existence of these classes depended on Colonial rule .
  • Because of faith , they relied more on legislation for imposing reform from the above

c. Colonial Character of the reforms

  • Dominant colonial assumption was religion was the basis for Indian society &  this religion was encoded in the scriptures . Social evils were thought to be result of the distortion of scriptures by self seeking people , in this case the cunning Brahmins who had the monopoly over this textual knowledge .
  • Civilising mission of the colonial state thus seen to lie in giving back the natives the truth of their own little read & even less understood shastras .
  • Whole debate over Sati was grounded in scriptures & its abolition was not based on fact that it is  morally & ethically wrong but when government was convinced that custom was not enjoyed by the scriptures .
  • As the colonial rulers gave supreme importance to scriptures, the Indian reformers too, as well as their detractors, referred to ancient religious texts to argue their respective cases. The brutality or the irrationality of the custom, or the plight of women, whom the reform was intended for, were lesser concerns in a debate

Note : The intellectuals did not however attacked the social system as a whole; their attack centred only on the perversions and distortions that had crept into it. They did not advocate a sharp rupture in the existing social structure of the country. They did not stand for structural transformation; changes were sought within the framework of the very structure. They were advocates of reform and not revolution.

Social problems and Reformist efforts to reform them

Social Reforms in India Modern History

a. Female Infanticide

  • It was most common in Western & Northern India .
  • There landowning high caste families , practising hypergamy found it difficult to find suitable grooms for their daughters or pay high demands of dowry . Hence, they killed their female offsprings at birth .
  • British authorities tried to persuade them & after 1830 sought to coerce them to desist from practice but  no tangible effect was observed. 
  • In  1870,  Female Infanticide Act was passed . But even after that, condition didn’t change because abject neglect of female children resulted in high mortality .

b. Sati Abolition

Sati Abolition
  • Sati Abolition was the greatest achievement of Lord Bentinck .
  • Sati is self immolation of wife on funeral pyre of dead husband. 
  • According to social reformers , it has always been there much the exception rather than a rule in Hindu life & during Mughal period, it was practiced in Rajputs & Kingdom of Vijayanagara . But during British period, it revived on much larger scale & experienced highest rate of development.

Reasons for practice of Sati

  • Earlier it was practiced by Upper Caste Hindus but during British rule, it started in peasant families of lower & intermediate  caste who achieved social mobility & then sought to legitimize their new status by imitating their caste superiors.
  • Greed of the relatives –   Child marriage was widespread at that time & many a times bride who has not even lived with groom was forced to perform Sati in order to get property of that man.
  • Sati was widespread in areas where Dayabhaga school of personal Hindu law was applicable  . Areas where ] Mitakshara school was applicable, it was less prevalent because Mitakshara school gives lesser rights to wife to inherit property

Campaign against it

  • First started by Christian Missionaries
  • But very strong campaign under Raja Rammohan Roy gave real momentum
  • Finally  in 1829 , Governor General Bentinck prohibited Sati by Govt Regulation Act XVII. Pressure was also put by the Court of Directors because they wanted to present credible image of Company’s rule in India in the British Parliament before renewal of Charter pending in 1833.

Although it reduced very much after that but the idea & myth of Sati persisted in popular culture & was continually reaffirmed through epics, ballads & folktales . Case of surfaced even in 1987 ( Roop Kanwar Case of village Deorala in Rajasthan).

c. Widow Remarriage

  • Main protagonist was Ishwarchandra Vidyasagar . But he too, like Raja Rammohan Roy looked to colonial state for piece of legislation for this .
  • In 1856 , Hindu Remarriage Act was passed but this couldn’t make the practice socially acceptable . Along with that, Act was intrinsically conservative in nature because on remarriage , widow disinherited her deceased husband’s property .
  • Movement ended with its unavoidable death . Vidyasagar failed to see widows remarried because this needed social consent which could not be generated by piece of legislation .  Practise of Widow Remarriage  remained rare & exceptional among the educated class & within few years taboo universalised & penetrated to lower castes.

Western India

  • 1860s : Movement to promote widow remarriage spread among educated class & debate  became sharp between reformers & detractors.
  • 1866 : Vishnushastri Pandit started a Society for Encouragement of Widow Remarriage while opponents started rival organisation .
  • Movement ended in whimper . By end of century only 38 such marriages happened & in that cases too couples were subjected to enormous social pressure & ostracism .

Madras Presidency

  • In Telegu speaking areas , movement was started by Veersalingum Pantulu . In 1878 , Society for Social Reforms was founded by him for this.
  • 1881 : first widow remarriage officiated by him in 1881 in face of stiff opposition but till 1891 , support increased & he formed Widow Remarriage Association with patronage of prominent citizens .

North India : Haryana

  • Here practice of widow remarriage was already there& new act provided  such marriage with legitimacy & further social acceptance

d. Child Marriage

  • Vidyasagar continued his campaign against Polygamy & later Child Marriage .
  • In 1860 , finally he was able to secure an Age Of Consent Act, 1860 that fixed age of consent for consummation of marriage at 10 years which was raised to 12 years in 1891.
  • But census showed that it continued to be practiced widely among all castes. 

e. Thugee

  • Various  peripatetic groups were stereotyped into the colonial construct called Thugs who were believed to have been members of a fraternity traditionally involved in robbery & ritual killings in the name of religion
  • Campaign against thugee was initiated in 1830s  by Lord Bentinck
  • Thugee Act (XXX) , 1836 was passed & Thugee Dept. was created for prosecuting gangs seen as perpetrating a crime in the name of religion but it’s elimination proved to be a difficult task. 
  • In 1839 , Sir William Sleeman as head of Department claimed that thugee had been exterminated but in reality he begun to realise difficulty in doing this and it was just a face-saving measure.

f. Slavery

  • Laws were even more ineffective against less organised social customs that remained part of everyday life from centuries .  Slavery  was such an example .
  • Slavery was abolished in Britain in 1820 & in India too Charter of 1833 instructed government to abolish slavery & Parliamentary pressure continued till it was abolished .
  • But problem was, they tried to see slavery in India through lens of their British idea of Slavery but in India where agrarian relations were complex & marked by numerous structures of labour dependencies it was almost impossible to stop it
  • Process was failure in India

Bengal Renaissance

  • Renaissance literally means ‘rebirth’. It refers to the revival of Graeco-Roman (classical) learning in 15th-16th century after long winter of dark ages. In Indian context , intellectual revolution that took place in the nineteenth century in the fields of philosophy, literature, science, politics and social reforms is often known as Indian Renaissance. An important part of this Renaissance was reforming Hinduism from within on the basis of Post Enlightenment Rationalism.
  • Very much like the Italian Renaissance, it was not a mass movement; but instead restricted to the upper classes. 
  • Response of the educated Indian elite to civilisational critique was to reform  Hinduism from within,  in  the boundary  of post enlightenment rationalism . Such phenomenon is known as Bengal Renaissance
  • Movement was started in Bengal by Raja Rammohan Roy who is often described as Father of Modern India .
Bengal Renaissance

Raja Rammohan Roy (1772-1833)

Raja Rammohan Roy

Personal life 

  • He was Hindu Brahmin and was born  in Hooghly ,Bengal
  • He fought against the stagnant society .
  • He was one of those upper caste gentry whose power & position had been enhanced by Permanent Settlement & other opportunities opened by the Colonial rule.
  • He studied Persian and Arabic at  a Madrasah in Patna . He was proficient in Arabic, Persian, Sanskrit & European languages like English, French, Latin , Greek & Hebrew
  • At a time when Bengali youth under the influence of western learning was drifting towards Christianity, Roy proved to be the champion of Hinduism . Although, he defended Hinduism against the hostile criticism of the missionaries , he sought to purge Hinduism of the abuses that had crept into it.
  • Then he studied Vedantic monism & after his migration to Calcutta in 1815, he  was exposed to the Christian Unitarianism . Such intellectual influences motivated him to contest the missionary claim of superiority of Christians . His  answer to this was to reform Hinduism using  reason by going back to its purest form as enshrined in Vedanta texts
  • Raja Rammohan Roy accepted the concept of ‘One God’ as propounded by Upanishads . For him God was shapeless , invisible & omnipresent but the guiding shape of the universe . He declared his opposition to idol worship & was of view that worship to be performed through prayers & meditation & readings from Upanishads . He translated Upanishads into Bangla to demonstrate that ancient Hindu scriptures themselves propagated monotheism
  • He published his first  philosophical work, Tuhfat-ul-Muwahhiddin in 1805 in which he analysed the major religions of the world wrt ‘reason’ and ‘social comfort’. He denied that religion was merely a matter of faith outside reason and attempted to expose the  myth of miracles associated with it.
  • Later, he started English Hindu college at Calcutta in 1816
  • He was great exponent of the Bengali language .
  • He also started Persian newspaper  MIRAT UL AKHBAR ( mirror of news)  and Bengali newspaper Samvad Kaumudi.
  • He was given the title of Raja by Mughal Emperor Akbar II ,  who sent him to England in 1831 as Ambassador of the king to ensure that Bentinck’s Regulation of banning the practice of Sati is not overturned and also to overturn the  decision to make Mughals Princes & taking royal titles from them
  • He died there at Stapleton ,Bristol in 1833 (due to Meningitis)

Social ideas

  • Worked for the emancipation of the women
  • Sati System was abolished on account of his efforts . Government passed Anti Sati legislation in 1829 declaring sati as a criminal offence
  • He condemned polygamy, early marriage and opposed the subjugation of women and their inferior status in society. He related their problems to the root cause of absence of property  rights. To him, female education was another effective method to free Indian Society from social stagnation
  • To propagate his message against Sati he started a Bengali newspaper SAMVAD KAUMUDI (moon of intelligence )
  • Worked against the rigidity of the Caste System

Education

  • He favoured maximum age of Civil services to be 22 years
  • Favoured Jury system
  • Founded Hindu College(1817)  along with David Hare , Radhakant Deb, Maharaja Tejchandra Ray of Burdwan , Prasan Kumar Tagore , Babu Budhinath Mukherjee & Justice Sir Edward Hyde ( Hindu College  later became Presidency College( in 1855) &  Presidency University  (in 2010)
  • He supported Macaulay in favouring English language
  • In 1825 , he started Vedanta College which offered both Indian &  western knowledge
  • He also compiled Bengali Grammar

Political views

  • He raised not only social issues but political and economic issues too
  • He stood for 
    1. Indianisation of services
    2. Trial by jury
    3. Separation of Powers between the executive and the judiciary
    4. Freedom of the Press
    5. Judicial equality between Indians and Europeans
    6. Criticised the Zamindari System for its oppressive practices
  • He was progenitor of nationalist consciousness, and ideology in India. His every effort of social and religious reform was aimed at nation-building.
  • In particular, he attacked the rigidities of the caste system which, according to him, had been the source of disunity among Indians. He held that the monstrous caste system created inequality and division among the people on the one hand, and ‘deprived them of patriotic feeling‘ on the other.
  • Rammohan was an internationalist, libertarian and democrat in his orientation. He took active interest in international affairs and wanted amity among nations. His concern for the cause of liberty, democracy and nationalism led him to cancel all his social engagements when he came to know of the failure of the Revolution in Naples in 1821. By giving a public dinner, he celebrated the success of the Revolution in Spanish America in 1823.

Newspaper and Books

Roy started following newspapers and pamphlets

  • Sambad Kaumudi – Bengali Newspaper
  • Mirat ul Akhbar –  Persian Newspaper
  • Pamphlet –  An Exposition of Revenue & Judicial System in India (urged government that administration & judiciary should be separated among other things ) 

Along with that , he wrote following books

  • Gift to Monotheists (1809)
  • Percepts of Jesus (1820)
  • Tuhfat-ul-Muwahhiddin in 1805
  • Mahanirvana Tantra (1797)

Religious ideas

  • Propagated MONOTHEISM   and Vedantic Monism.
  • He opposed the idol worship

Organisations

a. Atmiya Sabha – Calcutta

  • Started in 1815
  • It was a philosophical discussion circle
  • Discussed monotheism in Hindu Vedantism
  • It was also attended by Dwarkanath Tagore (Grandfather of Rabindranath)
  • Opposed worship of idols
  • Against rigidity of caste & meaning less religious rituals
  • He blamed the Brahman priests for perpetuating religious evils by keeping people ignorant about the true teachings of the  scriptures.

b. Brahmo Samaj

  • Started as Brahmo Sabha in 1828 (later became Brahmo Samaj)
  • Founded by Dwarkanath & Raja Rammohan Roy
  • Main Theme – rid Hinduism of its evils & preach monotheism 
  • Purpose was  to purify Hinduism of all evils which had crept into it
  • Opposed idolatry
  • It vehemently opposed Sati System.

Brahmo Samaj

Started at Calcutta
Year 1828
By Raja Ram Mohan Roy   & Dwarkanath Tahore
Brahmo Samaj

Works done by Brahmo Samaj

  • It propagated Monotheism (discarded the faith in divine Avataras) .
  • It was against  idolatry and idol worship
  • It attacked Casteism & Untouchability
  • Any scripture could enjoy the status of ultimate authority transcending reason & conscience .
  • It took no definite stand on the Doctrine of Karma & Transmigration of soul & left it to the individual Brahmos to believe either way.
  • Worked for respectable position of the women in the society and for this
    1. Condemned Sati
    2. Favoured abolition of Purdah System
    3. Discouraged Child Marriages & Polygamy
    4. Crusaded for widow remarriage etc
  • After Roy’s death in 1833, the leadership of the Brahmo movement was taken over by Debendranath Tagore who provided the movement with a better organisational structure and ideological consistency
  • But the movement was actually taken out of the limited elite circles of Calcutta literati into the district towns of east Bengal by Bijoy Krishna Goswami and Keshub Chandra Sen in the 1860s.
    1. Goswami bridged the gap between Brahmoism and the popular religious tradition of Vaishnavism
    2. Sen’s specific focus was to reach larger numbers of non-Westernised Bengalis in the eastern Gangetic plains and to take the movement outside Bengal to other provinces of India

Schisms & other Developments

First schism in the Samaj in 1866

Brahmo Samaj for India Led by more radical Keshav Chandra Sen, Anandamohan Bose & Shiv Narayan Shastri .
Reverted away from the Hindu components and accepted the teachings of all religions
Adi Brahmo samaj Under Debendranath Tagore (Father of Rabindranath) 
Remained in a more inclusive and Hindu sphere of influence

Basically, as Meredith Borthwick has shown, it was a schism between Keshav’s followers, for whom social progress and reform were more important than anything else, and the followers of Debendranath, who preferred to maintain their identification with Hindu society.This rift was, as it became clear soon, more about an identity crisis than about any fundamental difference of ideology: while some of the Brahmos wanted to define themselves as separate from the Hindus, others began to seek a position within the great tradition of Hinduism.

Second Schism in 1878

  • A band of Keshub Chandra Sen followers left him
  • On account of
    1. Marriage of Sen’s minor daughter to Prince of Cooch Bihar
    2. Also because he became devout follower of Ramakrishna and tried to bridge Brahmanism and Brahmo Samaj.
  • They Started  Sadharan Brahmo Samaj and worked mainly for the social work & female education and famine relief . Consisted of Anand Mohan Bose & SN Shastri
  • Thus Brahmo samaj also contributed prominent nationalists who later formed the backbone of the moderate phase of congress

In 1881, Sen formed his Naba Bidhan (New Dispensation) and started moving towards a new universalist religion. But by this time , successive ideological rifts and organisational divisions had weakened the Brahmo movement, confining it to a small elite group.

Limitations

  • Limited to urban areas only
  • Lot of internal rivalries

Achievements of Brahmo Samaj

  • Abolition of Sati : Pressure was  put by the samajis & as a result Anti Sati legislation was passed  by Lord William Bentinck in 1829
  • Worked for
    1. Abolition of the caste system and dowry system
    2. Emancipation of the women
    3. Improving educational system
  • Brahmo Samaj ultimately failed and emerged as sectarian religious order after continuous schisms but nevertheless , its achievements were huge
    1. Rabindranath Tagore  admitted the failure of Samaj but also recognised the very important role played by Samaj of providing a shock to static Indian society and made it to think on rationalist lines.
    2. According to Bipin Chandra Pal , main impact of Samaj  was on Political Culture . It was from Brahma Samaj that idea of free thinking individual emerged who would be able to absorb democratic & western ideals.

Henry Vivian Derozio & Young Bengal Movement

  • Derozio (Anglo-Indian Teacher at Hindu College) started Young Bengal Movement
  • At age of 17, he started Young Bengal Movement.
  • He was much more modern than Raja Ram Mohan Roy.
  • He was a free thinker and a rationalist, helped promoting  a radical & critical outlook among his students who questioned authority, loved liberty and worshipped truth.
  • Most radical at that time & was inspired by French Revolution
  • First nationalist poet of Modern India
  • Derozians, the followers of Derozio, were staunch rationalists; they measured everything on the yardstick of reason. He organised debates where ideas and social norms were freely debated. In 1828, he motivated them to form a literary and debating club called the Academic Association.
  • In  1838, they formed ‘Society for the Acquisition of General Knowledge‘, where they discussed various aspects of Western science, and stood for a number of social reforms, such as the prohibition of caste taboos, child marriage,  polygamy etc.
  • Young Bengal followed classical economics, and was composed of free traders who took inspiration from Jeremy Bentham, Adam Smith, and David Ricardo.
  • They were passionate advocates of women’s rights and demanded education for them.
  • He  was dismissed from the Hindu College in 1831 because of his radical views, and shortly afterwards he died of Cholera at the young age of 22.
  • Derozians carried forward Rammohan’s tradition of educating the people in social, economic and political questions through newspapers, pamphlets and public associations. They carried on public agitation on public questions such as the revision of the Company’s Charter, the Freedom of the Press, better treatment for Indian labour in British colonies abroad, Trial by Jury, Protection of the Ryots from oppressive Zamindars, and Employment of Indians in the higher grades of government services

Why they didn’t succeed?

  • Social conditions were not yet ripe for their ideas to flourish. The common people , who were not acquainted  with those ideologies, considered those young as arrogant. 
  • Their total faith in the British and in English education, their rationalism and scientism derived from the west, set them apart from the masses of Indians and they never succeeded in organising any social movement in support of their proposed reforms.

Book by Derozio (GK for prelims)

To India – My Native Land In this , he wrote about pain given by British  rule

Debendranath Tagore

  • He was son of Dwarkanath Tagore , father of Rabindra Nath Tagore and a close friend of Raja Ram Mohan Roy .
  • In 1839 , he started Tattvabodhini Sabha to disseminate the knowledge of the Upanishads
  • Tattvabodhini Patrika was the principal organ of the Sabha to propagate the ideas .
  • After death of Raja Rammohan Roy, he became the main organiser of Brahmo Samaj.
  • In 1850 , he wrote  book called Brahmo Dharma where he
    • Emphasised on monotheism
    • Supported rationality and reject scriptural infallibility
    • Rejected Caste distinctions and idolatry
  • Inspired his sons into reform movement ,most famous being Rabindranath Tagore
  • He was part of Landholders Society and played important role in formation of British India Association

IC Vidyasagar

Ishwarachandra Vidyasagar

Introduction

  • His original name was Ishwarachandra Bandopadhyay.
  • He was born on 26 September 1820 in the Paschim Midnapore District of West Bengal to impoverished Brahmin parents.
  • During the period from 1829 to 1841, Ishwar Chandra studied Vedanta, Vyakaran, Literature, Rhetorics, Smriti and Ethics in Sanskrit College. And in 1839 the title ‘Vidyasagar’ was conferred on him for his unusual talent.
  • In 1841, at the age of twenty one years, Ishwar Chandra joined the Fort William College as a head of the Sanskrit department. In 1851 , Vidyasagar became a professor and later on the Principal of the Sanskrit College

Works toward Education

  • He firmly believed that the regeneration of India was possible only through education.
  • His work was aimed at extending the benefits of learning to common people. He stressed upon instruction through vernacular language.
  • He also opened the doors of the colleges and other educational institutions to lower caste students, which was earlier reserved only for the Brahmins. For his immense generosity and kind-heartedness, people started addressing him as “Daya Sagar” (ocean of kindness).
  • Having spent his early life in village Ishwar Chandra could realize the sorrowful condition of the womenfolk. He rightly believed that the emancipation of women was not possible as long as they remained ignorant. Ishwar Chandra, therefore, took upon himself the task of promoting the cause of female education.

Pioneer in the women upliftment

  • Started girls schools in Bombay and Calcutta
  • Encouraged women to study in the colleges
  • He also collaborated with Drinkwater Bethune in establishing the Hindu Female School (at present known as Bethune School and College) in 1849.
  • Took initiative in pushing the Widow Remarriage Act ,1856
  • Instrumental in passing the Special Marriages Act of 1872.
  • Wrote book for women emancipation titled BAHUVIVAH

Social Reforms

  • He initiated the concept of widow remarriage and raised concern for the abolition of child-marriage and polygamy. He demonstrated that the system of polygamy  was not sanctioned by the ancient Hindu Shastras.
  • He took the initiative in proposing and pushing The Hindu Widow Remarriage Act XV of 1856 in India during Governor-Generalship Lord Canning.

Bengali Connoisseur

  • He brought a revolution in the education system of Bengal. In his book, “Barno-Porichoy” (Introduction to the letter), Vidyasagar refined the Bengali language and made it accessible to the common strata of the society.
  • Vidyasagar invented Bengali prose through translation as well as own writings. 

Social Reform Movements in western India

Main reform movements in western India were as follows :-

Reform Movements in Western India

Paramhans Mandali / Samaj

  • It was started in 1849
  • By Dadoba Pandurang . Other important leader was  (Lokhitwadi) Gopal Hari Deshmukh
  • It was first socio religious movement of Maharashtra
  • Paramhansa Sabha’s principal objective was the demolition of all caste distinctions. Each new recruit to the Sabha had to undergo initiation ceremony, and take the pledge that he would not observe any caste distinctions. He had to eat a slice of bread baked by a Christian and drink water at the hands of a Muslim.
  • The Sabha was, however, a secret society; its meetings were conducted in the strictest secrecy for fear of facing the wrath of the orthodox. The challenge to the caste system and other social evils thus remained limited to the participation of its few members only.

Prarthana Samaj

  • Paramhans Mandali’s transformation into Prarthana Samaj was the direct consequence of two visits of KC Sen to Bombay in 1864 & 1867
  • It was founded by Atmaram  Pandurang in 1867 inspired from the Brahmo Samaj & the main spirit behind formation was MG Ranade who was ably assisted by KT. Telang & Bhandarka
  • All leading members were Western educated Maratha Chitpavan Brahmins .
  • It’s ideology was almost similar to Brahmo Samaj
    • Preached Monotheism
    • Denounced idolatry & priestly domination
    • Denounced caste distinctions
    • Favoured Widow Remarriage & raising age of marriage for both males & females . 
  • Later they connected themselves with Maharshtrian Bhakti Tradition .
  • Prarthana Samaj maintained distinction from Brahmo Movement of Bengal & the most notable distinction was they were moderate & more accommodative. They didn’t signal a sharp break & this gradualist approach made it more acceptable
  • It’s branches were opened in Surat, Ahmedabad , Poona & reached even in South India where leader was Veerasalingum Pantulu
  • It faced crisis in 1875 when  Swami Dayanand visited Gujarat & Maharashtra & offered possibilities of a more radical & self assertive religious program .  A group of Samaj members under SP Kelkar broke & felt attracted to Arya Samaji ideology of Dayanand .

Side Topic : MG Ranade

  • He was co-founder of Prarthana Samaj
  • He was a product of the Elphinstone College, Bombay & was Judge of the Bombay High Court during 1891- 1901.
  • He held that the caste distinction was the main blot on Indian social system. 
  • Under his guidance the Paramhans Sabha was reorganised in 1867 under the name Prarthana Samaj. 
  • He was the founding member of Indian National Congress , member of Bombay Legislative Council and founding member of Indian Social Conference (1887)
  • He was the editor of the Anglo Marathi paper – Induprakash

Jyotirao Phule and Satyashodak Samaj

  • He was from Satara , Maharashtra
  • In 1873, Phule established the Satyashodhak Samaj, an organization for challenging Brahmanic supremacy.
  • He promoted  women education along with his wife Savitribai Jyotirao Phule  by opening women schools.
  • He also worked for widow remarriage and to prevent female infanticide, he opened homes for newborn infants.
  • He wrote book titled  GULAMGIRI

Ideology of Satyashodak Samaj

  • It was against  untouchability & caste system  
  • It opposed idolatry and  Brahmin’s role as intermediary between person and god 
  • Promotion of rational thinking
  • It also rejected Vedic supremacy

Servants of India Society

  • Started by Gopal Krishna Gokhale in 1905
  • Aims
    • Create a band of dedicated workers for nation building
    • Carry out activities for the upliftment of Indians 

Sri Narayan Guru & SNDP Yogam

Sri Narayan Guru and SNDP
  • Sri Narayan Guru was social reformer born in 1854 in Kerala into Ezhava family
  • He championed
    • bhakti for spiritual freedom
    • social equality
    • rejected casteism
    • Rejected divisiveness based on caste, religion etc
  • He was a pioneer reformer who rejected the caste system and stressed on the equality of man. He gave the universal message, “One caste, one religion, one God”
  • He was influenced by Vedanta.
  • He supported Temple entry  movements.
  • Sri Narayana Guru  condemned animal sacrifice
  • He urged the Ezhavas to leave the toddy tapping profession and even to stop drinking liquor.
  • Dr. Palpu, a devotee of Guru established the Sree Narayana Dharma Paripalana Yogam (SNDP Yogam) in 1903 to further Narayana Guru’s message

Money

Money

This article deals with ‘Money.’ This is part of our series on ‘Economics’, which is an important pillar of the GS-2 syllabus. For more articles, you can click here.


Barter System

People have been trading with each other even before the advent of money, coin, cash, currency, rupee, dollar, euro or Yuan. They exchanged goods and services with each other through the barter system. E.g., 

  • 1 kg rice for 200 grams of tomatoes
  • 1 kg tomatoes for 50 gm almonds and so on

Problems with Barter System

  • It can happen only with a Double-Coincidence of wants.
  • Search Cost / Cost of Transaction is high. 
  • Don’t favour Division of Labour / Specialization: Due to the above problems, all persons will try to become Jack of all trades but master none. 
  • Don’t favour Industrialization: Industrialists will have to find a large supply line with every person having a double coincidence of demands.  
  • Don’t favour concentration of wealth: Since all the wealth is perishable. E.g., one can’t store tomatoes for an extended period.
  • The problem of Divisibility of Value: In Barter System, you cannot always divide the value to buy whatever you want. 
  • Not always Fungible: In Fungible items, division & mutual substitution is possible, e.g. Gold bars, Currency Notes & Coins. But barter goods are not always fungible. E.g., if a diamond is cut into smaller pieces, the summation of all the smaller parts will not equal one bigger diamond. Hence, diamond isn’t fungible.

Fungibility of Money
Non-Fungibility of Money

Benefits of the Barter System

  • Barter System promotes Joint Family 
  • Food Inflation will be lower in Barter Economy compared to Money Economy.

Money

  • Money is anything that is generally accepted as a means of payment.
  • The money System was invented to answer the above limitations of the Barter System. 
  • Money serves the following functions 
Functions of Money

a. Primary Functions

Measure of Value Money serves as a measure of value. E.g., 
Labour’s value in Money System is Wage 
Land’s value in Money System is Rent  
Medium of Exchange It is the medium of exchange because it has generalized purchasing power. 
E.g., a person earns money from his labour, and that money is used to buy food.

b. Secondary Functions

Due to the above Primary Functions, it can be used for various Secondary Functions as well

Store of Value The value of labour paid in the form of money can be stored for later use 
E.g., A person can store the value of his labour, i.e. wage, for later use.
Transfer of Value The value paid in the form of money can also be transferred to another place.
E.g., A person earning in Bangalore can transfer it to his Parents in Punjab.
Deferred Payment It serves as a standard for the settlement of future monetary obligations. We can make deferred payments like paying in advance (like Paying Rent of Dish TV at once) or Paying later (e.g. taking the car on loan).
It is possible because we can measure the Time value of Money using an Interest Rate.

Benefits of the Money Economy

  • Due to money’s primary and derivative functions, it can be used for social empowerment, dalit entrepreneurship etc. Labour and Service of each kind can be paid, which wasn’t possible in Barter Economy. 
  • It also helps in the Redistribution of National Income (via a taxation system).

Evolution of Money

Evolution of Money

1. Commodity Money

  • It is the first stage in the Evolution of Money. 
  • In this, a particular commodity is used to measure the value.
  • E.g., Cocoa Beans (used by Aztecs), Cowry Shells (in India), Cigarettes (in Jails) etc.
  • Note: Commodity Money has Intrinsic Value too

Different Examples of Commodity Money 

Examples of Commodity Money

2. Metallic Money

Traders and Kings used to stamp their marks on the coins to ensure that the metal was of uniform quantity and quality.


Benefits

  • It has intrinsic value.
  • It is non-perishable
  • It is divisible & fungible.
  • Even foreign trade is possible

Full-Bodied Coin vs Token Coin

1. Full-Bodied Coin

  • It is the money whose intrinsic value is equal to or greater than face value.
  • It is also known as good money.
  • E.g., One Rupee Coin of British India (shown below) had a face value of 1 ₹, but if somebody melted the silver and sold that in the market, it was greater than 1 ₹.

2. Token Coin

  • It is money whose intrinsic value is lower than its face value. 
  • It is also known as Bad Money.
  • E.g., Present 1 ₹ Coin. 
FUll Bodies Coin vs Token Coin

Issues with Full Bodied coin

  • Full-Bodied coins result in various problems. People start to melt metal from the coin and use it for other things. (The same thing was seen in the recent past in Indian Coinage too. Indian ₹5 coins were sent to Bangladesh, where the cost of metal was more than the face value of the coin. People used to melt the coin and make blades out of that. Cupro-Nickel coins were introduced to tackle such activities.)
  • Apart from that, to adjust to inflation, the government keeps on reducing the metal content in the coins to keep the intrinsic value of the coin lesser than its face value. 

Note: It should be noted that melting coins for other purposes is a punishable offence. 


3. Paper Currency

  • The genesis of paper currency can be traced back to Hundis, where traders used to pay using metal at one place and take Hundi to avoid any theft while carrying metal during an extensive voyage. Later, the State started to do the same work and introduced Paper Currency. 
  • It is called Fiduciary Money, i.e. although the paper has no intrinsic value, it is circulated because of trust in issuing authority. 

Types of Fiduciary Money

1. Non-Legal Tender

  • It is not issued by the government 
  • E.g., Bill of Exchange, Cheque, Bank Draft, Postal Orders etc.
  • It is also called Optional Money because its acceptance is optional.

2. Legal Tender/Fiat Money

  • It is issued by the government and acts as money on the fiat or order of the national government.
  • It can be classified as Coin and Currency. 
  • Its acceptance is not optional within the boundary of the country. It can’t be denied for settlement of any monetary obligation.

Types of Legal Tenders

1. Limited Legal Tender (Coin)

  • It can be used to settle a limited amount of debt.
  • According to the Coinage Act of 2011 
    1. Using 50 paisa Coins, a maximum debt of ₹10 can be settled.
    2. Using ₹1 coin or above, a maximum debt of ₹1,000 can be settled. 
    3. All coins below 50 paise are not legal tenders (since 2011).

2. Unlimited Legal Tender (Currency)

  • It can be used to settle the unlimited debt binding by the government’s command. 
  • Every bank note is legal tender in India.

Who Issues what?

Government

  • The government issues all coins. Government can issue any amount of coin (even 1,000 ₹ coins).
  • The government issues ₹ 1 Note with the sign of the Finance Secretary on it. 

RBI

  • Under RBI Act, all Notes except ₹1 can be issued by RBI with the sign of the RBI Governor.

How Fiat Money is issued?

a . Earlier Times

  • Gold Standard System: Earlier, Bank Notes were backed by an equivalent amount of gold. Notes amounting to the equal reserve of gold were issued. E.g., 
    • 1 US dollar was issued against 22-grain gold 
    • 1 British Pound was issued against 113-grain gold
Gold Standard System
  • If this note was taken to Central Bank, it paid an equivalent amount of gold in return.  
  • But later, due to various problems like printing more cash during wars, the cold war and depressions, this system was discarded. 

b. Indian System

Earlier, the following system was used

1935 to 56

  • RBI used to maintain 40% gold to the value of currency issued. 

1956 to 95

  • India abandoned the old system and moved to the ‘Minimum Foreign Reserve System.’
  • Under this, RBI was required to maintain a total reserve of at least Rs. 200 crores, with at least Rs.115 crore in the form of gold and the rest in the form of Foreign Securities. 

1995 to Present

  • India is following the ‘ Managed Paper Currency Standard‘.
  • Under this system, the Government of India can print any amount of money under the backing of gold, foreign securities and Government of India-backed Securities. 
  • Hence, if the government wants to print more money (than gold and foreign currency), the government will issue securities (G-Secs) to RBI, and RBI, in return, will print equivalent money with the backing of those securities.
 Managed Paper Currency Standard

What does it mean?

Managed Paper Currency Standard

It means that if any person with any bank note issued by RBI goes to RBI to exchange that note, RBI is bound to give him other notes and Token coins of equal face value. 


Demonetisation

  • Demonetisation is the wholesale withdrawal of currency from circulation. 
  • Although every banknote is “legal tender”, but on the RBI Board’s recommendation, the Government of India can notify that Specific Bank Notes (SBN) are no longer legal tender (i.e. Demonetized).
  • On 8th Nov 2016, ₹500 & ₹1000 notes were demonetised. 
  • Specified Bank Notes (Cessation of Liabilities) Act 2017: The government passed this Act to give legislative backing to Demonetisation. RBI was not required to honour the promise written on old banknotes. 

4. Bank Money

  • The backend of Bank Money is Fiat Money as well.
Bank Money

Examples of Bank Money

  • Cheques
  • Demand Draft: Can’t be dishonoured because the amount is prepaid. 
  • Overdraft: When a person’s bank account has an insufficient balance, he is still allowed to draw more money than is available in his bank (as a loan). 
  • Debit and Credit Cards
  • Net Banking System
  • Unified Payment Interface (UPI) System

Advantages of Bank Money

  • Easy to transfer over a long distance.
  • The exact amount can be transferred
  • Hard to counterfeit
  • Can freeze if stolen
  • Leave behind a digital trail
  • Legally recognized for high-value payment

Types of Accounts

1. Saving Account

  • These are opened by households.
  • There are some restrictions on transactions.
  • Banks offer low interest on these accounts.
  • It has demand and time liability.

2. Current Account

  • These are opened by business entities (firms or businessmen).
  • There are no restrictions on transactions.
  • Banks offer no interest on these accounts.
  • It has demand liability.

3. Fixed Deposit Account and Recurring Deposit Account

  • Anyone can open this account (but generally, these are opened by households because they are the savers in the economy).
  • There are some restrictions as banks are not liable to pay back until the end of the period for which money was deposited in the bank.
  • Banks offer a relatively high-interest rate on these deposits (6 to 10%). 
  • It has time liability. 

Digital Currency

Central Bank Digital Currency (CBDC)

Budget 2022 announced that RBI would issue a digital rupee using blockchain technology. It will be a digital form of India’s fiat currency.

Central Bank Digital Currency (CBDC)

CBDC will be a legal tender in India. The definition of banknote under the RBI Act 1934 is also amended to broaden the banknote. “Banknote” now means a bank note issued by the bank either in physical or digital form. It will allow the introduction of CBDC from the RBI.


Issuing digital currency has many benefits, such as 

  1. Cheaper: Significant cost is incurred on printing money in India (more than ₹4900 crores in 2020-21).  
  2. Efficient management of currency
  3. It will break the monopoly of crypto-currencies, which are not backed by any sovereign authority.
  4. It will give impetus to the development of the fintech sector.

But there are issues as well.

  1. Encroaches privacy as every transaction will be known to the government
  2. It goes against the traditional banking system.
  3. It makes the financial sector vulnerable to cyber attacks

Karst Topography

Karst Topography

This article deals with ‘Karst Topography.’ This is part of our series on ‘Geography’ which is an important pillar of the GS-1 syllabus. For more articles, you can click here.

Introduction

  • Limestone is a sedimentary rock of organic origin. Chemically it is  Calcium Carbonate (but where Magnesium is also present, it is known as Dolomite).
  • Limestone is soluble in rainwater with Carbon dioxide (weak acid.)
  • A region with a large stretch of limestone, therefore, posses a very distinct topography termed Karst (name derived from Karst District of Yugoslavia where such topography is particularly well developed)

There is the absence of surface drainage as most of the surface water goes underground and form underground channels. When this water meets non-porous rocks, it re-emerges onto the surface as a spring or resurgence.


Location

  • Karst region is in Dinarik Alps in Yugoslavia.
  • Such topography is also found in regions of the Himalayas, Rockies, Andes, Atlas, Shan Plateau, Belo Horizonte etc.
  • In India, this is found in Chirapoonji, Jammu-Kashmir, Himachal Pradesh, Panch Marhi (M.P.), Bastar (Chattisgarh and Coastal areas near Vishakhapatnam.


Landforms

Karst Topography

Erosional Landforms

1 . Lapies

  • Lapies are the irregular grooves and ridges formed when most of the surfaces of limestone are removed by the solution process.

2. Swallow Hole /Sink Holes

  • A sinkhole is an opening more or less circular at the top and funnel-shaped towards the bottom. 
  • On the surface of limestone, there are numerous small depressions carved out by solution at a point of weakness.  Holes size grow through continuous solvent action to form Sink Hole.
Sink Holes

3. Limestone Gorge

  • When the roof of an underground tunnel collapses, a  limestone gorge is formed.
Limestone Gorge

4. Karst Window/ Karst fenster

  • It is a spring that emerges from underground, discharge its water and then abruptly disappears underground through a nearby sinkhole.

5. Doline

  • Due to high chemical activity on swallow holes, their size and depth increases. Its diameter may extend up to some kilometres and its depth may run up to 100 meters.
  • It can be cylindrical, conical, bowl or dish-shaped.
  • The name doline comes from Dolina, the Slovenian word meaning valley.

6. Uvala

  • Series of smaller sinkholes coalesce into a compound sinkhole is called uvala.

7. Polze

  • Polje is an elongated basin having a flat floor and steep walls.
  • It is formed by the coalescence of several sinkholes. The basins often cover 250 square km and may expose “disappearing streams.”

8. Cave

  • In areas where there are alternating beds of rocks (shales, sandstones, quartzites) with limestones or dolomites in between or in areas where limestones are dense, massive and occurring as thick beds, cave formation is prominent.
  • Water percolates down through the cracks and joints and moves horizontally along bedding planes. It is along these bedding planes that the limestone dissolves to form wide gaps called caves.

9. Tunnel

  • Caves having openings at both ends are called tunnels.

Depositional landforms

  • Where subterranean streams descend  to underground passages, the region may be honeycombed with caves
  • The most important features in limestone caves are Stalactites, Stalagmites and Pillars.

1 . Stalactites

  • Formed on roof of caves .
  • As rainwater seeps through the limestone, the water dissolves Calcium Carbonate in it. When from roof, water drips down, it leaves behind Calcium Carbonate (CaCO3) forming Stalactite .
  • They are thinner, long and pointed.
Stalactite

2. Stalagmite

  • They are formed on the floor.
  • All the dripping water has to land somewhere . When a drop finally hits cave floor , it deposits even more Calcite there in unassumed mound .
  • They are shorter, fatter and more round.
Stalagmite

3. Cave Pillars

  • Over a long time, stalactites hanging from roof is eventually joined to Stalagmite growing from floor to form pillar.
Cave Pillars

Fluvial Landforms

Fluvial Landforms

This article deals with ‘Fluvial Landforms.’ This is part of our series on ‘Geography’ which is important pillar of GS-1 syllabus . For more articles , you can click here

Introduction

  • When rain falls , part of it sinks into ground , some of it is evaporated back into the atmosphere & rest runs off as rivulets , streams and tributaries of rivers . This running water is potent agent of erosion  .
  • The river performs three types of work. They are erosion, transportation and deposition.

Materials transported/carried by river

When a river flows , it carries eroded material in four forms

  • Solution – Material dissolved in water.
  • Suspension – Sand, Silt & mud  carried in suspended form.
  • Saltation: Some of the fragments of the rocks move along the bed of a stream by bouncing continuously.
  • Traction Load – This includes coarser materials such as pebbles , stones & boulders which are rolled along river bed .

Rivers carry great amount of material => Eg : Mississippi river removes 2 million tons to Gulf of Mexico daily .

River Erosion 

In rivers, erosion  comprise of following  processes :-

  • Corrasion / Abrasion : Mechanical grinding by river’s traction load against banks & beds of river . 
    • Lateral Corrasion : sideways erosion which widens  V-Shaped valley.
    • Vertical Corrasion : downward action which deepens the river channel.
  • Corrosion or Solution : chemical  action of water on soluble or partly soluble rocks. Eg Calcium Carbonate in limestone is  dissolved & removed in solution .
  • Attrition : This is wear and tear of transported material themselves when they  collide against one another. 
  • Hydraulic Action :  This refers to mechanical action of water. Eg when water splashes against river banks , surges into cracks & disintegrate the rocks .

River deposition

  • When the velocity of the stream decreases, the stream deposits sand, silt and other fragments
  • When a river moves in a gentle slope, its speed reduces and river begins to deposit its load.
  • The river starts depositing larger materials first and smaller and finer materials are carried further down to the mouth of the river.

Course of a River

Course of River

Upper or Mountain Course /Youthful Stage

In this stage

  • Predominant Work = Erosion
  • Predominant action = vertical corrasion.

Landforms formed in this stage

1. Valleys

1.1 V-Shaped Valley

  • In upper course, vertical corrasion is at work . Downward cutting takes place so rapidly that lateral corrasion can’t keep pace. After some time, the loosened material slowly creeps downward and takes shape of V.
  • The valley thus developed is deep , narrow & distinctively V-Shaped.

1.2 Gorges / I-shaped Valley

  • In some cases,  rocks are very resistant and hence afterward loosening don’t take place (because of resistant rock). The  valley formed is so narrow & sides are so steep that gorges are formed .
  • Eg : Indus Gorge in Kashmir .
Gorge

1. 3 Canyons

  • Canyons are extended form of gorges.
  • In arid regions, where there is little to widen the valley sides and river cuts deep into the valley floors , precipitous valleys called Canyons are formed.
  • Eg Grand Canyon of Colorado river in Arizona state of USA .
Grand Canyon

2. Falls

2.1 Rapids

  • These can form in any part of river course but are more numerous in mountain course.
  • They are formed when there are different layers of hard rock and soft rocks . Due to unequal resistance of hard & soft rocks , there is unequal erosion of both set of rocks . The hard rocks will make river to jump and fall down 
Rapids

2.2 Cataract

  • Falls similar to rapids but of greater dimensions are referred to as Cataracts.
  • There are 5 along the Nile that interrupt the smooth navigation.

2.3 Waterfalls

  • When rivers plunge down in a sudden fall of some height , they are known as waterfalls. Their force usually wears out a plunge pool beneath .
  • They can be formed in various ways
    • When a bar of resistant rock lies transversely across a river valley . Eg Niagara Falls in US
    • At fault line across river. Eg Victoria falls on River Zambezi
    • When river plunges down the edge of a plateau like River Congo .

3. Entrenched /Incised Meanders

  • These are formed when downcutting process is slow & river cause lateral erosion leading to asymmetric valley formation .
  • Note : These are different from meanders which occur due to both erosion and deposition. In this, only erosion  takes place. 
Incised Meanders

Middle or Valley Course /Mature Stage

In Middle Course,

  • In Middle Course, Erosion  , Transportation and deposition is done by the river .
  • But amount of erosion is very lower than Youthful stage and in that too, Lateral Corrasion tends to replace vertical corrasion.
  • The volume of the water increases with the confluence of many tributaries & this increases the river’s load.
  • Predominant work of the river =  predominantly transportation with some deposition (main deposition happen in Oldage Stage).

Landforms formed in Middle Stage

1 . Alluvial Fans

  • Alluvial fans  are formed when streams flowing from higher levels break into foot slope plains of low gradient. Normally very coarse load is carried by streams flowing over mountain slopes. This load becomes too heavy for the streams to be carried over gentler  gradients and gets dumped and spread as a broad low to high cone shaped deposit called alluvial fan.
  • Examples : Alluvial fans are found in Kosi river when it enters Bihar just after exiting Himalayas
Alluvial Fans

2. Alluvial Cone

  • As the velocity of river decreases, its transportation capacity also decreases. Due to this decline deposition starts in Foot Hills. This deposition forms Alluvial Cones.
  • It is same as alluvial fan but slope is more (between 10 to 50 degree)

3. Flood Plains

  • Rivers in their course carry large quantities of sediments . During annual or sporadic floods, these materials are spread over the low lying adjacent areas.
  • A layer of sediment is thus deposited during each flood , gradually building up a fertile flood plain.
Flood Plains

4. Levees

  • With the continuous deposition of soil on the banks by the river, the level of banks rises and they look like natural dams known as levees . 
  • During flooding as the water spills over the bank, the velocity of the water comes down and large sized and high specific gravity materials get dumped in the immediate vicinity of the bank as ridges. They are high nearer the banks and slope gently away from the river
Levee

Lower or Plain Course /Old Age stage

In Lower/Oldage Course,

  • River moving downstream across a broad and level plain is heavy with debris brought down from the upper course . Hence, work of the river is mainly deposition, building up its bed & forming extensive flood plains.
  • Vertical corrasion has almost ceased though some lateral corrasion still goes on to erode its bank (like in Meanders).

Landforms formed in Later Stage

1 . Meanders

  • A meander is a winding curve or bend in a river.
  • Meanders are the result of both erosional and depositional processes.(explained in diagram below)
  • The irregularities of the ground , force the river to swing in loops.  Once the channel begins to flow in sinusoidal path , the amplitude & concavity of loop increases rapidly due to dense erosion occurring at the outside and deposition occurring inside .
  • Note : Meanders can be found in Middle as well as Later Stage
Meanders

2. Ox-bow Lakes

  • An oxbow lake is U-shaped body of water that forms when a wide meander from the main stream of river is cut off creating free standing body of water.
  • It has different nomenclature at different places – Billabong in Australia, Rasacas in Texas etc
  • Both meanders and ox bow lakes are formed both in middle and lower course. Ox Bow is more commonly found in lower course .
Oxbow Lake

3. Braided Streams

  • A braided stream is one which does not flow in a single definite channel but rather a network of everchanging, branching and reuniting channels.
  • Thread-like streams of water rejoin and subdivide repeatedly to give a typical braided pattern

4. Delta

  • When a river reaches the sea , the fine material it has not yet dropped are deposited at its mouth , forming a fan shaped alluvial area known as Delta .
  • This alluvial tract is , infact , a seaward extension of the flood plain.
  • Delta extend sideways and seaward at an amazing rate . The River Po extends its delta by over 40 feet a year
  • (GK) Ganges Brahmaputra delta is the largest delta in the world.

Deltas differ in their size , shape , growth & importance. A number of factors such as the rate of sedimentation , the depth of the river  & sea bed and character of  tides , currents & waves greatly influence formation of Delta.

Different type of Deltas

a. Bird’s foot Delta

  • Deposited alluvial material divides the river into smaller distributaries. Several distributaries look like the foot of a bird.
  • Example : Mississippi is example.
Bird Foot Delta

b. Arcuate shaped Delta

  • Delta  look fan shaped with numerous distributaries
  • Examples are Amazon, Ganga & Mekong.
Arcuate Delta

c. Estuarine Delta

  • When river has their deltas submerged in coastal waters (mainly due to submerged coast like India’s western coast) or don’t have much deposition to form delta.
  • Most of India’s west flowing rivers originating in Western Ghats.
Estuarine Delta

d. Cuspate Delta

  • Have tooth like projection at their mouth.
  • Example : Ebro of Spain.
Cuspate Delta

Conditions favourable for formation of deltas are

  • Active vertical & lateral erosion in upper course to provide  sediments to be eventually deposited as Deltas.
  • The sea adjoining the delta should be shallow or else the load will disappear in the deep waters.
  • The coast should be sheltered, preferably tideless.
  • There should be no large lakes in the river course to filter off the sediments.
  • There should be no strong current running at right angle to the river mouth.

Importance of Deltas

a. Ecological importance

  • Deltas absorb runoff from both floods (from rivers) and storms (from lakes or the ocean), filter water and thus reduces the impact of pollution flowing from upstream.
  • Deltas are also important wetland habitats. They support extremely diverse and specialized flora and fauna and are areas of dense forests.  

b. Economic importance

  • Deltas are important places for trade and commerce, and major ports.
  • Deltas due to rich accumulation of silt are fertile agricultural areas. World’s largest delta is the Ganges–Brahmaputra delta in India and Bangladesh,  is densely populated supporting livelihood of millions. Fish, other seafood, and crops such as rice and tea are leading agricultural products of the delta.
  • Deltas possess well sorted sand and gravel which is quarried.
  • Due to their diversity they are centres of tourism and recreation.

Threat to Deltas

  • Diversion of water for irrigation and creation of dams reduce sedimentation, which can cause delta to erode away.
  • Climate change and rising sea level – rising sea level flood deltas bringing in saline water and threatening wetland ecosystem. For example nearly 31 square miles of Sundarbans have vanished entirely due to sea level rise.
  • Use  of water upstream can greatly increase salinity levels as less fresh water flows to meet salty ocean water. 

While nearly all deltas have been impacted to some degree by humans, the Nile Delta and Colorado River Delta are some of the most extreme examples of ecological devastation

Weathering and Mass Movements

Weathering and Mass Movements

This article deals with ‘Weathering and Mass Movements.’ This is part of our series on ‘Geography’ which is important pillar of GS-1 syllabus . For more articles , you can click here

Weathering

  • Weathering is the action of elements of weather  over earth materials  to reduce them to fragmental state.
  • Very little or no motion take place in them & process is in-situ.
  • There are three major groups of weathering processes :
    1. Chemical
    2. Physical or mechanical
    3. Biological  weathering processes.
Weathering

1. Chemical Weathering

a. Solution

  • When something is dissolved in water  , it is called solution.

b. Hydration

  • Hydration is the chemical addition of water. Minerals take up water and expand
  • Calcium sulphate takes in water and turns to gypsum, which is more unstable  

c. Oxidation & Reduction

  • Oxidation means a combination of a mineral with oxygen to form oxides or hydroxides.  Eg : Oxidation of  iron to form rust
  • When oxidised minerals are placed in an environment where oxygen is absent, reduction takes place. Such conditions exist usually below the water table, in areas of stagnant water and waterlogged ground. 

d. Carbonation

  • Carbonation leads to dissolution of Carbon Dioxide into water to form Carbonic Acids which will dissolve calcium and magnesium compounds

2. Physical Weathering

Physical Weathering is the disintegration of rock mainly induced by elements of weather and natural forces.

Physical weathering can be further divided into following categories :-

  • Gravitational forces such as overburden pressure, load and shearing stress.
  • Expansion forces due to temperature changes => Rocks expand during day and contract during night in arid and semi-arid regions=> the rocks  crack and eventually splits up.
  • Exfoliation : Rocks generally heat or cool more on the surface layers. The alternate changes in temperature could cause their outer layers to peel off from the main mass of the rock in concentric layers just as the skin of an onion.
  • Frost wedging : when water freezes, it expands. As water expands between the rock wedges expand, it puts great pressure on rocks resulting in weathering.
  • Water  pressures controlled by wetting and drying

3. Biological Weathering

Weathering due to growth or movement of organisms.

  • Burrowing &wedging by organisms like earthworms, termites, rodents etc. => exposing  new surfaces to chemical attack  
  • Human beings by disturbing vegetation, ploughing and cultivating soils=> this creates  new contacts 
  • Plant roots exert great pressure breaking rocks apart.

Importance of Weathering

Ecological Importance

  • Weathering is the initial stage in the formation of soil. It breaks down the initial rock mass into smaller fragments thus preparing the rock material for the formation of soil.
  • Trees are able to ‘mine’ essential nutrients such as calcium through their association with symbiotic mycorrhizae through small pores in the mineral soil, which is possible only due to weathering.
  • Erosion, with the aid of weathering, helps in mass wasting and reduction of relief. This leads to modifications in various landforms.

Economic Importance

  • It leads to the formation of various natural resources such as clay used in making bricks.
  • Placer deposits are formed due to weathering . These placer deposits are source of rare earth metals, thorium etc
  • It weakens the rocks, thus facilitating the mining and quarrying activities

Hence, we can say that although weathering is a disintegrating process yet it plays an integral role in sustaining life on earth.

Mass Movement

  • These movements transfer the mass of rock debris down the slopes under the direct influence of gravity ( happens only under influence of gravity & no other geomorphic agent is involved)
  • Weathering is not a prerequisite for mass movement although it aids mass movements. Mass movements are very active over weathered slopes .

Mass Movement can be grouped under two classes

1 . Slow Movement

  • Creep : Occur on moderately steep, soil covered slopes.  Movement of materials is extremely slow and imperceptible except through extended observation.
  • Solifluction : Slow downslope movement of soil mass  saturated  with water.  Quite common in moist temperate areas

2. Rapid Movement

Mostly prevalent in humid climatic regions with gentle to steep slopes.

  • Earthflow : Movement of water-saturated earth materials down hillsides. Arcuate scarps at  heads & accumulation bulge at the toe are observed in this.
  • Mudflow : Mudflow is a liquid mass of soil, rock debris and water that moves quickly down a well defined channel. Mudflow  originating on a volcanic slope is called a lahar.
  • Debris avalanche  : characteristic of humid regions with steep slopes. These are rapidly  churning mass of rock debris, soil, water, and air that moves down steep slopes. The trapped air may increase the speed of an avalanche by acting as a cushion between the debris and the underlying surface. They are much faster and deadlier than Earthflow & Mudflow
  • Rock falls : Rock falls occur when pieces of rock break from a cliff. It may result due to Frost wedging . Accumulation  of rock debris at the base of a steep slope is called talus.
  • Landslides : Landslides occur when a large piece of rock breaks off and slides down hill. It can be initiated by heavy rainfall or earthquake.
  • Slump : Great mass of bed rock moves downward by rotational slip from a high cliff
Mass Movement

Question – Why more Landslides & Debris Avalanches occur in Himalayas compared to Western Ghats?

  • There are many reasons for this. 
    • One, the Himalayas are tectonically active. 
    • They are mostly made up of unconsolidated and semi-consolidated deposits
    • The slopes are very steep.

Question : Compared to the Himalayas, the Nilgiris bordering Tamilnadu, Karnataka, Kerala and the Western Ghats along the west coast are relatively tectonically stable and are mostly made up of very hard rocks; but, still, debris avalanches and landslides occur although not as frequently as in  the Himalayas, in these hills.  Why? 

  • Many slopes are steeper with almost vertical cliffs and escarpments in the Western Ghats and Nilgiris.
  • Mechanical  weathering due to temperature changes and ranges is pronounced. 
  • They receive heavy amounts of rainfall over short periods. So, there is almost direct rock fall quite frequently in these places along with landslides and debris avalanches.

Rocks and Minerals

Rocks and Minerals

This article deals with ‘Rocks and Minerals.’ This is part of our series on ‘Geography’ which is important pillar of GS-1 syllabus . For more articles , you can click here

Minerals

  • Naturally occurring organic and inorganic substance, having an orderly atomic structure and a definite chemical composition and physical properties.
  • Composed of two or more elements. But, sometimes single element minerals like sulphur, silver, gold, graphite etc. are found
  • Magma is the source of almost all minerals.

Types of Minerals

a. Metallic Minerals

These minerals contain metals and can be sub-divided into

Precious Metals gold, silver, platinum
Ferrous Metals iron and other metals often mixed with iron to form various kinds of steel.
Non-Ferrous Metals include metals like copper, lead, zinc, tin, aluminium etc.

b. Non-Metallic Minerals

  • These minerals do not contain metal content.
  • Sulphur, phosphates and nitrates are examples of non-metallic minerals.
  • Cement is a mixture of non-metallic minerals.

Rocks

  • A rock is an aggregate of one or more minerals.
  • Rocks do not have definite composition of mineral constituents.
  • Petrology is the science of rocks.
  • The age of the rock is determined based on Carbon-14 dating.

Type of rocks

a. Igneous Rocks

  • Igneous rocks (Ignis in Latin means ‘Fire’) are formed when magma cools and solidifies.
  • They  are known as primary rocks
  • Igneous rocks are classified based on texture. 
    1. If cooled slowly at great depths : Large grains  
    2. Sudden cooling (at the surface) :  small grains.
    3. Intermediate  cooling : intermediate size of grains .
  • Granite, gabbro, pegmatite, basalt, volcanic breccia and tuff are some of the examples of igneous rocks.

b. Sedimentary Rocks

  • Formed by lithification of sediments
  • They are also known as detrital rocks
  • Examples : sandstoneshale, loess , chalk, coal , limestone etc

c. Metamorphic Rocks

  • Metamorphic rocks are formed when already consolidated rocks undergo reorganization in structure due to excessive pressure (through the process called Metamorphism)
  • Eg : Gneiss, syenite, slate, schist, marble, quartzite, anthracite, diamond  etc.

Igneous  and metamorphic rocks together account for 95 percent of the earth while rest 5% are sedimentary rocks.

Rock Cycle

Rocks do not remain in their original form for long but may undergo transformation.  Rock cycle is a continuous process through which old rocks are transformed into new ones.

Rock Cycle

Volcanoes

Volcanoes

This article deals with ‘Volcanoes.’ This is part of our series on ‘Geography’ which is important pillar of GS-1 syllabus . For more articles , you can click here

What are volcanoes?

A volcano is an opening in the earth’s crust through which magma, gases and ash are released to the earth’s surface.

Related terminology

Magma The molten rock material found in the interior of the earth is called magma.
Lava When magma reaches the earth’s surface, it is known as lava.
Vent Vent is an opening or mouth of a volcano.
Fumaroles Fumaroles are the gushing fumes (fume = smoke) through the gap in the vicinity of volcano.
Fumaroles are often in the neighbourhood of volcanoes.
Crater Crater is a saucer shaped depression in the mouth of a volcano.
Caldera When the crater is widened, it is called as Caldera
Volcanic Ash Volcanic ash consists of fragments of pulverized rock, minerals and volcanic glass, created during volcanic eruptions.
Volcanoes

Causes of Volcanism

  • Weak Zones in the Earth Crust: The parts of the earth where two tectonic plates collide against or drift apart from each other are considered very weak. Volcanoes may erupt in such zones, for example, African and Eurasian plates.
  • Magma Saturated with Gases : The magma, in the interior of the earth, is often found saturated with gases like carbon dioxide, and hydrogen sulphide. These gases together with water vapour make the magma highly explosive. Magma is forced out as lava on the surface of the earth due to the pressure exerted by these gases.

Basaltic Eruption vs Andesitic Eruption

Basaltic Eruption Andesitic Eruption
Occur at mid oceanic ridge & Hotspot volcanism Occur at Volcanic Island arcs & volcanic mountains
Basalt is highly fluid & mobile Andesite is less fluid & less mobile
Spread across easily Solidifies at short distance
Quite eruption Explosive eruption
Form plateaus and island groups. Forms volcanic peaks

Types of Volcanoes

1 . Classification on basis of form developed

Volcanoes are classified on the basis of nature of eruption and the form developed at the surface.

a . Shield Volcanoes

  • These are made up of basalt, a type of lava that is very fluid when erupted. Since Basalt is very fluid , it make these volcanoes less steep.
  • Eg : Hawaiian volcanoes are the most famous examples.
  • They become explosive if water gets into the vent; otherwise, they are characterised by low-explosivity.
Shield Volcano

b. Composite Volcanoes

  • Composite volcanoes are  cone-shaped volcanoes composed of different layers of lava, ash and rock debris.
  • Magma which erupt in this case is Andesitic in nature . Hence, eruption is violent and explosive. Along with that, Andesitic lava is less fluid making the Composite volcanoes very steep.
  • Along with lava, large quantities of pyroclastic material also comes out.
  • Examples include Mt Stromboli , Mt Vesuvius, Mt St Helens, Mt Fuji etc.
Composite Volcanoes

c. Caldera

  • These are the most explosive of the earth’s volcanoes.
  • They are usually so explosive that when they erupt they tend to collapse on themselves .The collapsed depressions are called calderas.
Caldera

d. Flood Basalt Provinces

  • These volcanoes out-pour highly fluid lava that flows for long distances. 
  • There can be a series of flows with some flows attaining thickness of more than 50 m. 
  • Deccan Traps from India,  covering most of the Maharashtra plateau, are a  flood basalt province. 

e. Mid Oceanic Ridge Volcanoes

  • These volcanoes occur in the oceanic areas at points where Oceanic – Oceanic tectonic plates diverges. 
  • There is a system of mid-ocean ridges more than 70,000 km long that stretches through all the ocean basins.
  • The central portion of this ridge experiences frequent but peaceful eruptions.
Mid Oceanic Ridge

2. Classification on Basis of Periodicity of eruption

a. Active Volcanoes

  • Volcanoes which erupt frequently.
  • Generally, their vent remains open.
  • Examples : Mount Etna of Italy, Cotopaxi in Ecuador (highest volcano) and many others situated in Pacific ring of fire .

b. Dormant Volcanoes

  • These volcanoes may not have erupted in the recent past but there is a possibility of eruption at any time.
  • Examples : Mt. Vesuvius of Italy , Mt. Fujiyama of Japan and Mt Kilimanjaro in Tanzania.

c. Extinct Volcanoes

  • These volcanoes have exhausted their energy and have  not erupted during the known geological period.
  • Their Crater is generally filled with water making it a lake.
  • Examples : Popa in Myanmar and Mt. Kenya in eastern Africa

Recent Volcanic Activities

Barren Island Barren Island is in Andaman .
It again became active in 2017
Earlier, it became active in  1991 and 1995.  
Anak Krakatau   It is in Indonesia
Latest eruption happened in April 2020
Note : greatest volcanic explosion known to humans is  Mt. Krakatau in August 1883.  
Vulcan de Fuego Volcanic eruption happened in June 2018
Here , Cocos plate is subducting under Caribbean plate.
It lies in the Pacific Ring of Fire in Guatemala    
Kilauea Volcano Kilauea Volcano is situated in Hawaii .
It erupted in May 2018  
Mount Agung and Mount Sinabung – They are in Bali
– Eruption happen due to Oceanic -Oceanic Convergence of Indo-Australia and Sunda Plates
– Volcanic eruptions happened in whole of 2018

Distribution of Volcanism

a. Ring of Fire

  • Pacific Ring of Fire is the Circum-Pacific region that has the greatest concentration of active volcanoes. Two-third of world’s volcanoes lie here.
  • Volcanoes are found here due to Oceanic -Oceanic & Oceanic-Continental Plate convergence .
Oceanic – Oceanic Convergence Results in formation of Volcanic Island Arcs.
Oceanic -Continental  Convergence. Volcanoes are formed

b. Mid Atlantic Region

  • Formed due to Oceanic -Oceanic plate divergence .
  • Basaltic Eruptions  happens here which  are peaceful in nature .
  • Mid Oceanic Ridge Volcanoes are found here.
Mid Oceanic Ridge

c. Great Rift Valley

  • In Africa some volcanoes are found along the East African Rift Valley. 
  • Kilimanjaro and Mt. Kenya are extinct volcanoes. The only active volcano in West Africa is Mt. Cameroon.
Great Rift Valley

d. Mediterranean Volcanism

  • Volcanoes of the Mediterranean region are mainly associated with the Alpine folds.
  • Examples : Mt. Vesuvius,  Mt. Stromboli (known as the Light House of the Mediterranean Sea

e. Hotspot  Volcanoes

  • These have to do with plate tectonics .
  • In these volcanoes, magma from  the deep mantle come outside directly through plume  .
  • Lava is of Basaltic nature => Shield Volcanoes are formed in this activity which are not explosive.
  • Their location remains fixed but plates on them can move leading to formation of island arcs or plateau depending upon conditions .
In Oceans Island Arc
On Continents Volcanic Plateau 
  • Eg Hawaii, Reunion Island , Kurile, Aleutian island , Iceland , Yellowstone (US Continental)

Lava / Volcanic Plateaus

  • When Lava  is basaltic (like in case of hotspots) , it can  flow easily . It will keep on forming layer above layer.
  • When this process goes on for large amount of time ,Lava Plateau is created .
  • Eg: Deccan Plateau was formed in this way when Indian plate passed over Reunion Island hotspot during the cretaceous period.
Location of Volcanic Plateaus

Side Topic : Formation of Deccan Plateau

  • During Cretaceous Period , Indian Plate was moving northward and passed over Reunion islands (near Madagascar island in Indian Ocean)
  • Hotspot  volcanism was active over there which resulted in outpour of highly basaltic lava at that point . As the plate movement was extremely slow, India remained over the Reunion hotspot for a considerable long time which led to Basaltic deposits in Deccan area  . Hence , Deccan Basaltic Plateau formed.
  • 16-17 percent of India is under Deccan traps.

Intrusive Volcanic Landforms

We have studied about various landforms made by the volcanoes on the surface of earth. But volcanoes make large number of landforms inside the earth’s crust. These are called Intrusive Volcanic Landforms.

Intrusive Volcanic landforms are formed when magma  fails to come out and solidifies under the Earth’s crust . Some of the landforms formed are as follows :-

a. Batholiths

  • Batholiths are large rock domes formed due to cooling and solidification of hot magma inside the earth.
  • They appear on the surface only after the denudational processes remove the overlying materials
  • They are granitic in origin.

b. Laccoliths

  • Laccoliths are formed when magma solidifies in cracks of sediments and take concave shape/ dome like shape
  • Karnataka plateau is spotted with dome hills of granite rocks. These are exposed Laccoliths .

c. Phacoliths

  • Phacoliths are formed when magma is filled in anticlines and synclines of folded mountains.

d. Sills

  • Sills are parallelly solidified lava layers in  sedimentary rocks in the interiors of Earth.

e. Dykes

  • Longitudinally solidified magma in rocks is known as dyke.

Importance of Volcanic Activity

  • Volcanism creates new landforms (all the landforms we have seen above)
  • Volcanic rocks yield very fertile soil upon weathering and decomposition. For example black soil of Deccan Plateau in India is made for volcanic rocks and it is best suited to grow cotton .
  • Source of Diamonds :  Eg – Kimberlite rock of South Africa, the source of diamonds, is the pipe of an ancient volcano.
  • Geothermal Energy : In the vicinity of active volcanoes, waters in the depth are heated from contact with hot magma giving rise to springs and geysers. The Puga valley in Ladakh region and Manikaran (Himachal Pradesh) are promising spots in India for the generation of geothermal electricity.
  • Volcanism has also helped in the formation of atmosphere in the past. (How? – explained below)

Importance of Volcanic Activity in atmosphere formation in the past

  • Degassing : Volcanic activity released essential gasses such as water vapor, carbon dioxide, methane, ammonia and very little free oxygen from the interior of the earth through a process called degassing.  
  • Volcanic eruptions injected ash and sulphur-rich aerosol clouds into the atmosphere which shaded sunlight and reduced the amount of solar radiation reaching the Earth’s surface thus cooling the planet. As the earth cooled, water vapor condensed to form rain dissolving carbon dioxide and other gases.

Side Topic : Impact of Volcanic eruptions on Climate Change

  • Volcanic eruptions pour sulfur dioxide and other particles into the stratosphere. Gases react with water to form aerosols that linger in the stratosphere, reflecting sunlight and heat from the sun and thus lowering temperatures in the troposphere
  • Intense volcanism has significantly increased the amount of carbon dioxide in the atmosphere and causes global warming. Volcanic eruptions produce more than 100 million tons CO2 each year.   For Example: The 1980 eruption of Mount St. Helena vented approximately 10 million tons of CO2 into the atmosphere in only 9 hours. 
  • Dark lava flow absorbs more of the solar energy (low albedo) , so a large enough lava flow could warm a local region. 

—> Volcanoes can have both a cooling and warming effect on climate. However, in the long term frequent volcanic eruptions will have a net effect of cooling the earth and counter global warming.