SC Refuses to Entertain Plea on Google-CCI Issue

21, Jan 2023

Why in News?

• The Supreme Court of India has refused to entertain a plea by Google against NCLAT’s order refusing the interim stay on ₹1,337 crore penalty on Google. 

About the News:

• The SC has granted Google 7 days to deposit 10% of the penalty imposed by the Competition Commission of India (CCI). The Indian companies have welcomed the SC’s stance against Google.  

What’s the issue?

• CCI found that Google was dominant in the relevant market for licensable smart TV device operating systems in India. It also said that prima facie mandatory pre-installation of all the Google applications under Television App Distribution Agreement (TADA) amounts to imposition of unfair conditions on the smart TV device manufacturers. This is in contravention of Section 4(2)(a) of the Competition Act.
• So, CCI imposed a penalty on Google for “abusing its dominant position” in markets related to the Android mobile device ecosystem. Google filed an appeal with the NCLAT against the CCI order which was declined by NCLAT.
• Section 4 of the Act pertains to abuse of dominant position.

About Competition Commission Of India:

• The Competition Commission of India (CCI) was established under the Competition Act, 2002 for the administration, implementation and enforcement of the Act, and was duly constituted in March 2009. Chairman and members are appointed by the central government.

Functions of the commission:

• It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
• The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

About the Competition Act:

• The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of Raghavan committee.
• The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

GST revenues rise 15% in December 2022, says Finance Ministry

02, Jan 2023

Why in News?

• India’s Goods and Services Tax (GST) revenues rose to nearly ₹1.5 lakh crore in December 2022, 15% higher than a year ago and 2.5% over November’s collections that had marked a three-month low.

About the News:

• This is the tenth month in a row that GST collections have crossed the ₹1.4 lakh crore mark, with revenues from import of goods rising 8% and revenues from domestic transactions (including import of services) up 18% from the revenues yielded by these sources during December 2021. 
• The gross GST revenue collected during December 2022, which reflect transactions undertaken in November, is ₹1,49,507 crore, of which Central GST (CGST) is ₹26,711 crore, State GST (SGST) is ₹33,357 crore, Integrated GST (IGST) is ₹78,434 crore (including ₹40,263 crore collected on import of goods) and Cess is ₹11,005 crore (including ₹850 crore collected on import of goods), the Finance Ministry said.
•  “The Government has settled ₹36,669 crore to the CGST and ₹31,094 crore to SGST from IGST as regular settlement. The total revenue of Centre and the States after regular settlements in the month of December 2022 is ₹63,380 crore for CGST and ₹64,451 crore for the SGST,” it added.
• On a sequential basis, while there was a 2.5% rise in revenues from November to December 2022, the number of e-way bills generated went up 3.95% to 7.9 crore in December.
• While revenues from domestic transactions rose 18% overall, a dozen States recorded higher growth in tax collections and 13 States reported slower growth rates. 
• Goa, Odisha and Manipur reported a contraction in revenues of 22%, 6% and 5%, respectively, even as Chhatisgarh’s revenues were flat year-on-year. 
• Bihar reported the highest growth in revenues at 36%, followed by Nagaland (30%), the erstwhile State of Jammu and Kashmir (28%), Arunachal Pradesh (27%), with Gujarat and Andhra Pradesh seeing GST inflows rise by 26% each. Tamil Nadu’s revenues rose 25%, followed closely by Rajasthan and West Bengal (24%), Madhya Pradesh (22%) and Maharashtra (20%).
• Among the Union Territories, Ladakh reported a sharp 68% spike in revenues, followed by Dadra Nagar Haveli (37%), Chandigarh (33%) and Puducherry (30%). However, Daman and Diu reported a whopping 86% drop in GST collections, with Lakshadweep and Andaman and Nicobar Islands also recording contractions of 36% and 19%, respectively.
• Abhishek Jain, partner indirect tax, KPMG said the robust GST collections suggest that ₹1.5 lakh crore may be ‘the new normal’ for monthly revenues, as the December’s numbers came in after peak festive sales are over.

What are the reasons for the Rise of the GST?

• The sharp surge has come on the back of anti-evasion measures, “especially action against fake billers”, and a pick-up in economic activity.
• Rate rationalization measures undertaken by the GST Council to correct ‘inverted duty structure’.

• Inverted Tax Structure refers to a situation where the rate of tax, that is GST, on inputs is higher than the rate of tax on output supplies or finished goods.

• Economic recovery and increased domestic consumption.
• The total number of e-way bills generated in February was 6.91 crore, higher than 6.88 crore seen a month ago, despite it being a shorter month, which indicates the “recovery of business activity at faster pace”.

What is Goods and Services Tax?

• GST was introduced through the 101st Constitution Amendment Act, 2016.
• It is one of the biggest indirect tax reforms in the country.
• It was introduced with the slogan of ‘One Nation One Tax’.
• The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax etc.
• It is essentially a consumption tax and is levied at the final consumption point.
• This has helped mitigate the double taxation, cascading effect of taxes, multiplicity of taxes, classification issues etc., and has led to a common national market.
• The GST that a merchant pays to procure goods or services (i.e. on inputs) can be set off later against the tax applicable on supply of final goods and services.
• The set off tax is called input tax credit.
• The GST avoids the cascading effect or tax on tax which increases the tax burden on the end consumer.

Tax Structure under GST:

• Central GST to cover Excise duty, Service tax etc,
• State GST to cover VAT, luxury tax etc.
• Integrated GST (IGST) to cover inter-state trade.
• IGST per se is not a tax but a system to coordinate state and union taxes.
• It has a 4-tier tax structure for all goods and services under the slabs- 5%, 12%, 18% and 28%.

Delhi HC in trademark infringement claim

28, Dec 2022

Why in News?

• The Delhi High Court granted an interim injunction in favour of Hamdard Laboratories in its plea against Sadar Laboratories Private Limited for infringing its registered trademark. 

About the News:

• The Court has restrained the manufacture and sale of sweet beverage concentrate ‘Sharbat Dil Afza’ during the pendency of a lawsuit for alleged trademark infringement by Hamdard Dawakhana which sells ‘Rooh Afza’.

What is a Trademark?

• A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises. Trademarks are protected by Intellectual Property Rights (IPR).
• In India, trademarks are governed by the Trade Marks Act 1999, which was amended in 2010.
• It legally differentiates a product or service from all others of its kind and recognizes the source company’s ownership of the brand.
• Although trademarks do not expire, the owner must make regular use of it in order to receive the protections associated with them.
• It serves as a badge of origin exclusively identifying a particular business as a source of goods or services.
• Trademark infringement is the unauthorised usage of a sign that is identical or deceptively similar to a registered trademark.
• A mark is said to be strong when it is well-known and has acquired a high degree of goodwill.
• The degree of the protection of any trademark changes with the strength of the mark; the stronger the mark, the higher the requirement to protect it.

What is the Court’s Verdict?

• The court said Rooh Afza served as the source identifier for Hamdard for over a century and has acquired immense goodwill and it was essential to ensure that the competitors keep a safe distance from the mark.
• It is not difficult to conceive that a person who looks at the label of ‘DIL AFZA’ may recall the label of ‘ROOH AFZA’ as the word ‘AFZA’ is common and the meaning of the words ‘ROOH’ and ‘DIL’, when translated in English, are commonly used in conjunction.
• Both the products have the “same deep red colour and texture” and “structure of the bottles is not materially different” and thus opined that the “commercial impression of the impugned trademark is deceptively similar to the appellants’ trademark”.

Decriminalisation of offences under GST

21, Dec 2022

Why in News?

• The Finance Minister chaired the 48th GST Council, which recommended decriminalising certain offences under Section 132 of the Central Goods and Services Tax (CGST) Act, 2017

What is the issue?

• The GST law is still in its early stages of development. Hence, it is vital to recognise that imposing penal provisions in an uncertain ecosystem impacts an enterprise’s ability to conduct business.

What is Goods and Services Tax?

• GST was introduced through the 101st Constitution Amendment Act, 2016.
• It is one of the biggest indirect tax reforms in the country.
• It was introduced with the slogan of ‘One Nation One Tax’.
• The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax etc.
• It is essentially a consumption tax and is levied at the final consumption point.
• This has helped mitigate the double taxation, cascading effect of taxes, multiplicity of taxes, classification issues etc., and has led to a common national market.
• The GST that a merchant pays to procure goods or services (i.e. on inputs) can be set off later against the tax applicable on supply of final goods and services.
• The set off tax is called input tax credit.
• The GST avoids the cascading effect or tax on tax which increases the tax burden on the end consumer.

Offences under GST: 

• Despite technology leverage, instances of tax evasion have surged due to culprits remaining undetected.
• The GST law imposes severe penalties and guidelines in order to combat corruption and maintain an efficient tax collection system.

Penalties under GST law:

• The department authorities have the jurisdiction to impose monetary fines and the seizure of goods as penalties for violating statutory provisions.
• Criminal penalties include imprisonment and fines but can be awarded only in a criminal court following a prosecution.
• The amount of tax evaded, the amount of Input Tax Credit (ITC) improperly claimed or used, etc, determines the length of the prison sentence.
• The Act also divides offences into – cognisable and bailable and non-cognisable and bailable. 

Measures recommended at the 48th GST Council meeting:

• Raising the minimum tax amount for commencing a GST prosecution from one to two crore.
• Reducing the compounding amount from 50 to 150% of the tax amount to 25 to 100% of the tax amount.
• Decriminalising certain offences under Section 132 of the CGST Act, 2017, such as preventing an officer from doing his duties, deliberate tampering with material evidence and failure to supply information.
• Other suggestions include refunding unregistered individuals and facilitating e-commerce for small businesses. 

What impact will the aforementioned measures have?

• Prosecution, arrest, and imprisonment in GST cases would occur only in the most exceptional cases.
• Ease of doing business will be made more effective.

GI Status for Kerala’s Five Agricultural Products

19, Dec 2022

Why in News?

• The Geographical Indications Registry at Guindy, Chennai, has received an application from the Tribal Development Council, Andaman & Nicobar Islands, seeking the Geographical Indication (GI) tag for the Nicobari hodi boat which is the first application from the Union Territory seeking a tag for one its products. 

What are the Key Facts about the Latest GIs?

• Attappady Attukombu Avara (Beans):

• It is curved like a goat’s horn as its name indicates.
• Its higher anthocyanin content compared to other dolichos beans imparts violet colour in the stem and fruits.
• Anthocyanin is helpful against cardiovascular diseases along with its antidiabetic properties.
• The higher phenolic content of Attappady Attukombu Avara imparts resistance against pest and diseases, making the crop suitable for organic cultivation.

• Attappady Thuvara (Red Gram):

• It is having seeds with white coat.
• Compared to other red grams, Attappady Thuvara seeds are bigger and have higher seed weight.

• Onattukara Ellu (Sesame):

• Onattukara Ellu and its oil are famous for its unique health benefits.
• Relatively higher antioxidant content in Onattukara Ellu helps in fighting the free radicals, which destroy the body cells.
• Also, the high content of unsaturated fat makes it beneficial for heart patients.

• Kanthalloor-Vattavada Veluthulli (Garlic):

• Compared to the garlic produced in other areas, this garlic contains higher amount of sulphides, flavonoids, proteins and also rich in essential oil.
• It is rich in allicin, which is effective against microbial infections, blood sugar, cancer, etc.

• Kodungalloor Pottuvellari (Snapmelon):

• This snap melon, which is harvested in summer, contains high amount of Vitamin C.
• Compared to other cucurbits, nutrients such as calcium, magnesium, fibre and fat content are also high in Kodungalloor Pottuvellari.

What is GI Tag?

• A GI or Geographical Indication is a name or a sign given to certain products that relate to a specific geographical location or origins like a region, town or country.
• Using Geographical Indications may be regarded as a certification that the particular product is produced as per traditional methods, has certain specific qualities, or has a particular reputation because of its geographical origin.
• Geographical indications are typically used for wine and spirit drinks, foodstuffs, agricultural products, handicrafts, and industrial products.
• GI Tag ensures that none other than those registered as authorized users are allowed to use the popular product name. In order to function as a GI, a sign must identify a product as originating in a given place.

Who accords and regulates Geographical Indications?

• Geographical Indications are covered as a component of intellectual property rights (IPRs) under the Paris Convention for the Protection of Industrial Property. 
• At the International level, GI is governed by the World Trade Organisation’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). 
• In India, Geographical Indications registration is administered by the Geographical Indications of Goods (Registration and Protection) Act, 1999 which came into force with effect from September 2003. 
• The first product in India to be accorded with GI tag was Darjeeling tea in the year 2004-05.

What are the Benefits of GI Tags?

• The Geographical Indication registration confers the following benefits:

• Legal protection to the products
• Prevents unauthorised use of GI tag products by others
• It helps consumers to get quality products of desired traits and is assured of authenticity.
• Promotes the economic prosperity of producers of GI tag goods by enhancing their demand in national and international markets.

What are the Significances of GI Tags?

• A geographical indication right facilitates those who have the right to use the indication to prohibit its usage by a third party whose product does not conform to the applicable standards.
• For example, in the purview in which the Darjeeling geographical indication is protected, producers of Darjeeling tea can omit the term “Darjeeling” for tea not grown in their tea gardens or not produced according to the norms set out in the code of practice for the geographical indication.
• However, a protected GI does not permit the holder to forbid someone from making a product using the same approaches as those set out in the standards for that indication. Protection for a GI tag is usually procured by acquiring a right over the sign that constitutes the indication.

Challenges in GI Tags:

• The special treatment to wines and spirits in TRIPS Agreement appears to be developed country centric.
• Developing countries, including India, seek the same higher level of protection for all GIs as was given under TRIPS for wines and spirits.
• The battle for GI tag between states. False use of geographical indications by unauthorized parties is detrimental to consumers and legitimate producers.
• Cheap Power loom saris are sold as reputed Banarsi handloom saris, harming both the producers and consumers.
• Such unfair business practices result in loss of revenue for the genuine right-holders of the GI and also misleads consumers.
• Protection of GI has, over the years, emerged as one of the most contentious IPR issues.

Way Forward:

• The benefits of GI tag are realised only when these products are effectively marketed and protected against illegal copying.
• Effective marketing and protection require quality assurance, brand creation, post-sale consumer feedback and support, prosecuting unauthorised copiers, etc.
• For internationally recognised products like Darjeeling tea, international protection is of crucial importance.
• Legal protection to GIs also extends to protection of traditional knowledge and traditional cultural expression contained in the products.
• Hence Intellectual Property is a power tool for economic development and wealth creation particularly in the developing world.
• GIs have the potential to be our growth engine. Policy-makers must pay a heed to this and give Indian GI products their true reward.

RBI’s MPC starts deliberations amid expectations of moderate rate hike

06, Dec 2022

Why in News?

• The Reserve Bank of India‘s (RBI’s) rate-setting panel recently started brainstorming for the next round of monetary policy amid expectations of a moderate interest rate hike of 25-35 basis points as inflation has started showing signs of easing and economic growth tapering. 

About the News:

• The RBI has hiked key benchmark lending rate by 50 basis points (bps) thrice since June over and above an off-cycle 40 bps increase in repo in May.
• The current policy repo rate is 5.9%.
• Several other experts too expect the rate hike to be in the range of 25-35 basis points on December 7.
• On September 30, the RBI had hiked the key policy rate (repo) by 50 basis points with an aim to check inflation.
• It was the third successive hike of 50 bps. Before the September hike, the central bank had raised the repo rate by 50 bps each in June and August, and 40 bps in May.

What is Monetary Policy Committee?

• Strong recommendations to set monetary policy committee in India had come from Urjit Patel panel report.
• Monetary Policy Committee is an executive body of 6 members. Of these, three members are from RBI while three other members are nominated by the Central Government.
• Each member has one vote. In case of a tie, the RBI governor has casting vote to break the tie. MPC is required to meet for two days before deciding on rates. Further, it is needed to meet at least four times a year and make public its decisions following each meeting.
• The core mandate of MPC is to fix the benchmark policy interest rate {Repo Rate} to contain inflation within the target level.
• In that context, RBI is mandated to furnish necessary information to the MPC to facilitate its decision. Government also, if wishes to convey its views, can do so in writing to MPC.

Different Terminologies in Banking Sector:

• Loan moratorium period refers to a particular period of a loan tenure during which the borrower does not have repay anything. It can be described as a waiting period before the borrower will have to start paying the equated monthly instalments (EMIs) for his or her loan. It doesn’t mean that he is completely waived off his loans.
• REPO rate (now 5.9%) denotes Re Purchase Option – the rate by which RBI gives loans to other banks. In other words, it is the rate at which banks buy back the securities they keep with the RBI at a later period. Bank gives loan to the public at a higher rate, often 1% higher than REPO rate, at a rate known as Bank Rate. 
• RBI at times borrows from banks at a rate lower than REPO rate, and that rate is known as Reverse REPO rate.
• CRR or Cash Reserve Ratio corresponds to the percentage of cash each bank have to keep as cash reserve with RBI (in their current accounts) corresponding to the deposits they have. For example, say if State Bank of India (SBI) got a total deposit of Rs. 1 crore with them, they need to keep 4.5 % of that as cash reserve with RBI (around 4.5 lakh rupees).

The banks and other financial institutions in India have to keep a fraction of their total net time and demand liabilities in the form of liquid assets such as G-secs, precious metals, approved securities etc. The Ratio of these liquid assets to the total demand and time liabilities is called Statutory Liquidity Ratio (18%).

Essential Commodities Act

06, Dec 2022

Why in News?

• States to set up district-wise price monitoring centres for essential items.

About the Essential Commodities act:

• The Essential Commodities Act, 1955 was enacted to ensure the easy availability of essential commodities to consumers and to protect them from exploitation by unscrupulous traders.
• The Act provides for the regulation and control of production, distribution and pricing of commodities which are declared as essential.
• Essential items under the Act include drugs, fertilisers, pulses and edible oils, and petroleum and petroleum products.
• The Act aim at maintaining/increasing supplies/securing equitable distribution and availability of these commodities at fair prices.
• Centre invokes the ECA Act’s provisions to impose stock limits in case of price/quantity distortions in the market to ensure adequate availability of essential commodities at reasonable prices.
• States are the implementing agencies to implement the EC Act, 1955 and the Prevention of Black marketing & Maintenance of Supplies of Essential Commodities Act, 1980, by exercising powers delegated to them.
• The list of essential commodities is reviewed from time to time with reference to their production and supply and in consultation with concerned Ministries/Departments.
• Currently, the restrictions like licensing requirement, stock limits and movement restrictions have been removed from almost all agricultural commodities.
• Exemptions: Wheat, pulses and edible oils, edible oilseeds and rice are certain exceptions.
• The recent amendment to the Legal Metrology (Packaged Commodities) Rules 2011 is linked to the ECA. The Government can fix the retail price of any packaged commodity that falls under the ECA.

Arguments against ECA:

• An archaic law: Essential Commodities Act has been in existence since 1955, when the economy was very different from what it is today. It was an economy ravaged by famine and food shortages.
• Difference between storage and hoarding: Recently there is evidence of interventions not working. It is because there is a distinction between storage and hoarding.
• As compared to older times, when the economy experiences acute shortages, today many shortage cases are actually that of hoarding.
• Stock limits led to onion price volatility: To control soaring prices of onions over the last few months, centre through ECA imposed stock limits on onions. Instead of decreasing prices, this actually increased price volatility.
• Although the restrictions on both retail and wholesale traders were meant to prevent hoarding and enhance supply in the market, the Survey showed that there was actually an increase in price volatility and a widening wedge between wholesale and retail prices.
• Lower stock limit led traders and wholesalers to immediately offload most of the kharif crop which led to a sharp increase in the volatility.
• Disincentivises storage infrastructure development: With too-frequent stock limits, traders may have no reason to invest in better storage infrastructure in the long run.
• Also, food processing industries need to maintain large stocks to run their operations smoothly. Stock limits curtail their operations. In such a situation, large scale private investments are unlikely to flow into food processing and cold storage facilities.
• Higher prices of medicines: Drug Price Control Order issued under the ECA also distorted the market and actually made medicines less affordable.
• The increase in prices is greater for more expensive formulations than for cheaper ones and for those sold in hospitals rather than retail shops.
• Rent seeking and Low conviction rates: Despite many raids conducted under the ECA in 2019, the conviction rate was abysmally low. The ECA only seems to enable rent-seeking and harassment.

Way Forward:

• Adequate supply: Given that almost all crops are seasonal, ensuring round-the-clock supply requires adequate build-up of stocks during the season.
• Without the ECA the common man would be at the mercy of opportunistic traders and shopkeepers.
• Genuine shortages: There can be genuine shortages triggered by weather-related disruptions in which case prices will move up.
• So, if prices are always monitored, farmers may have no incentive to farm.
• Difficult to differentiate between hording and shortage: It may not always be possible to differentiate between genuine stock build-up and speculative hoarding.

Government forms Panel to look into MGNREGA’s efficacy

28, Nov 2022

Why in News?

• The Central government has constituted a committee to review the implementation of the MGNREGA scheme, especially to assess the programme’s efficacy as a poverty alleviation tool.  

Background:

• The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was enacted in 2005, and the demand-driven scheme promises 100 days of unskilled work per year to every rural household that wishes to participate.
• It was launched as a poverty alleviation instrument for the rural region, providing them with a safety net in the form of guaranteed work and wages. The scheme now has 51 crore active workers enrolled.
• However, it was felt that states like UP and Bihar where there is a higher level of poverty, haven’t been able to utilise the scheme optimally.
• The scheme has also been criticised by economists like Jagdish Bhagwati and Arvind Panagariya as an “inefficient instrument of shifting income to the poor”.

About the committee:

• The Sinha committee (named after former Rural Development secretary Amarjeet Sinha) has now been tasked to study –

• The various factors behind the demand for MGNREGA work,
• The expenditure trends and inter-State variations, and
• The composition of work.

• It will suggest (within 3 months) what changes in focus and governance structures are required to make MGNREGA more effective.

Terms of reference of the committee:

• It will look at the argument that the cost of providing work has also shot up since the scheme first started.
• It will review the reasons and recommend ways to bring in a greater focus on poorer areas.
• It will study if the composition of work taken up presently under the scheme should be changed, i.e., whether it should focus more on community-based assets or individual works.

Criticism of the scheme:

• Lack of tangible asset creation: Bihar, for example, despite its levels of poverty, does not generate assets to make a concrete difference, while Kerala which is economically better has been utilising it for asset creation.
• Allocation of funds is not as per the needs of the states: From the above example, while Bihar needs MGNREGA more, Kerala cannot be denied funds because of the current structure of the programme.

India-Australia Economic Cooperation and Trade Agreement

23, Nov 2022

Why in News?

• Commerce and Industry Minister Piyush Goyal recently said that the trade pact with Australia that was ratified by the Australian Parliament on November 22 will “significantly open up opportunities” for many Indian business sectors.

About the News:

• In February 2022, India and Australia announced that they were going to sign such an agreement.
• The negotiations for India-Australia ECTA were formally re-launched in September 2021 and concluded on a fast-track basis by the end of March 2022.

What is the Economic Cooperation and Trade Agreement?

• It is the first Free Trade Agreement (FTA) that India has signed with a major developed country in over a decade.
• In February, India signed an FTA with the UAE and is currently working on FTAs with Israel, Canada, UK and the European Union.
• The Agreement encompasses cooperation across the entire gamut of bilateral economic and commercial relations between the two friendly countries, and covers areas like:

• Trade in Goods, Rules of Origin.
• Trade in Services.
• Technical Barriers to Trade (TBT).
• Sanitary and Phytosanitary (SPS) measures.
• Dispute Settlement, Movement of Natural Persons.
• Telecom, Customs Procedures.
• Pharmaceutical products, and Cooperation in other Areas.

• ECTA provides for an institutional mechanism to encourage and improve trade between the two countries.
• The ECTA between India and Australia covers almost all the tariff lines dealt in by India and Australia respectively.

• India will benefit from preferential market access provided by Australia on 100% of its tariff lines.
• This includes all the labour-intensive sectors of export interest to India such as Gems and Jewellery, Textiles, leather, footwear, furniture etc.
• On the other hand, India will be offering preferential access to Australia on over 70% of its tariff lines, including lines of export interest to Australia which are primarily raw materials and intermediaries such as coal, mineral ores and wines etc.

• Under the agreement, Indian graduates from STEM (Science, Technology, Engineering and Mathematics) will be granted extended post-study work visas.

• Australia will also set up a programme to grant visas to young Indians looking to pursue working holidays in Australia.

What is the Significance of the Agreement?

• It will provide zero-duty access to 96% of India’s exports to Australia including shipments from key sectors such as engineering goods, gems and jewellery, textiles, apparel and leather.
• It will boost bilateral trade in goods and services to USD 45-50 billion over five years, up from around USD 27 billion, and generate over one million jobs in India, according to a government estimate.
• It will also give about 85% of Australia’s exports zero-duty access to the Indian market, including coal, sheep meat and wool, and lower duty access on Australian wines, almonds, lentils, and certain fruits.

What are Free Trade Agreements?

• It is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
• The concept of free trade is the opposite of trade protectionism or economic isolationism.
• FTAs can be categorised as Preferential Trade Agreement, Comprehensive Economic Cooperation Agreement (CECA), Comprehensive Economic Partnership Agreement (CEPA).

How has been the India- Australia Trade Relation so far?

• India and Australia enjoy excellent bilateral relations that have undergone transformational evolution in recent years, developing along a positive track, into a friendly partnership.
• This is a special partnership characterised by shared values of pluralistic, parliamentary democracies, Commonwealth traditions, expanding economic engagement, long standing people-to-people ties and increasing high level interaction.
• The India-Australia Comprehensive Strategic Partnership initiated during the India-Australia Leaders’ Virtual Summit held in June 2020 is the cornerstone of India-Australia multi-faceted bilateral relations.
• Growing India-Australia economic and commercial relations contribute to the stability and strength of a rapidly diversifying and deepening bilateral relationship between the two countries.
• India and Australia have been each other’s important trading partners.
• Australia is the 17th largest trading partner of India and India is Australia’s 9th largest trading partner.
• India-Australia bilateral trade for both merchandise and services is valued at USD 27.5 billion in 2021.
• India’s merchandise exports to Australia grew 135% between 2019 and 2021. India’s exports consist primarily of a broad-based basket largely of finished products and were USD 6.9 billion in 2021.
• India’s merchandise imports from Australia were USD 15.1 billion in 2021, consisting largely of raw materials, minerals and intermediate goods.
• India and Australia are partners in the trilateral Supply Chain Resilience Initiative (SCRI) arrangement along with Japan which seeks to enhance the resilience of supply chains in the Indo-Pacific Region.
• Further, India and Australia are also members of the QUAD grouping (India, the US, Australia and Japan), also comprising the US, and Japan, to further enhance cooperation and develop partnership across several issues of common concern.

Way Forward:

• Shared values, shared interests, shared geography and shared objectives are the bedrock of deepening India-Australia ties and the cooperation and coordination between the two countries have picked up momentum in recent years.
• Both India and Australia share a vision of a free, open, inclusive and rules-based Indo-Pacific region and cooperative use of the seas by adherence to international law including the United Nations Convention on the Law of the Sea (UNCLOS) and peaceful resolution of disputes rather than through unilateral or coercive actions.
• The India-Australia ECTA will further cement the already deep, close and strategic relations between the two countries and will significantly enhance bilateral trade in goods and services, create new employment opportunities, raise living standards, and improve the general welfare of the peoples of the two countries.

A & N seeks GI Tag for Nicobari hodi Boat

21, Nov 2022

Why in News?

• The Geographical Indications Registry at Guindy, Chennai, has received an application from the Tribal Development Council, Andaman & Nicobar Islands, seeking the Geographical Indication (GI) tag for the Nicobari hodi boat which is the first application from the Union Territory seeking a tag for one its products. 

About the Brass and Bell Metal products:

• The hodi is the Nicobari tribe’s traditional craft. 
• It is an outrigger canoe, very commonly operated in the Nicobar group of islands. 
• The technical skills for building a hodi are based on indigenous knowledge inherited by the Nicobarese from their forefathers. 
• The hodi is built using either locally available trees or from nearby islands, and its design varies slightly from island to island.

What is GI Tag?

• A GI or Geographical Indication is a name or a sign given to certain products that relate to a specific geographical location or origins like a region, town or country.
• Using Geographical Indications may be regarded as a certification that the particular product is produced as per traditional methods, has certain specific qualities, or has a particular reputation because of its geographical origin.
• Geographical indications are typically used for wine and spirit drinks, foodstuffs, agricultural products, handicrafts, and industrial products.
• GI Tag ensures that none other than those registered as authorized users are allowed to use the popular product name. In order to function as a GI, a sign must identify a product as originating in a given place.

Who accords and regulates Geographical Indications?

• Geographical Indications are covered as a component of intellectual property rights (IPRs) under the Paris Convention for the Protection of Industrial Property. 
• At the International level, GI is governed by the World Trade Organisation’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). 
• In India, Geographical Indications registration is administered by the Geographical Indications of Goods (Registration and Protection) Act, 1999 which came into force with effect from September 2003. 
• The first product in India to be accorded with GI tag was Darjeeling tea in the year 2004-05.

What are the Benefits of GI Tags?

• The Geographical Indication registration confers the following benefits:

• Legal protection to the products
• Prevents unauthorised use of GI tag products by others
• It helps consumers to get quality products of desired traits and is assured of authenticity.
• Promotes the economic prosperity of producers of GI tag goods by enhancing their demand in national and international markets.

What are the Significances of GI Tags?

• A geographical indication right facilitates those who have the right to use the indication to prohibit its usage by a third party whose product does not conform to the applicable standards.
• For example, in the purview in which the Darjeeling geographical indication is protected, producers of Darjeeling tea can omit the term “Darjeeling” for tea not grown in their tea gardens or not produced according to the norms set out in the code of practice for the geographical indication.
• However, a protected GI does not permit the holder to forbid someone from making a product using the same approaches as those set out in the standards for that indication. 
• Protection for a GI tag is usually procured by acquiring a right over the sign that constitutes the indication.

Challenges in GI Tags:

• The special treatment to wines and spirits in TRIPS Agreement appears to be developed country centric.
• Developing countries, including India, seek the same higher level of protection for all GIs as was given under TRIPS for wines and spirits.
• The battle for GI tag between states.
• False use of geographical indications by unauthorized parties is detrimental to consumers and legitimate producers. Cheap Power loom saris are sold as reputed Banarsi handloom saris, harming both the producers and consumers.
• Such unfair business practices result in loss of revenue for the genuine right-holders of the GI and also misleads consumers.
• Protection of GI has, over the years, emerged as one of the most contentious IPR issues.

Way Forward:

• The benefits of GI tag are realised only when these products are effectively marketed and protected against illegal copying.
• Effective marketing and protection require quality assurance, brand creation, post-sale consumer feedback and support, prosecuting unauthorised copiers, etc.
• For internationally recognised products like Darjeeling tea, international protection is of crucial importance.
• Legal protection to GIs also extends to protection of traditional knowledge and traditional cultural expression contained in the products.
• Hence Intellectual Property is a power tool for economic development and wealth creation particularly in the developing world.
• GIs have the potential to be our growth engine. Policy-makers must pay a heed to this and give Indian GI products their true reward.

Pradhan Mantri Garib Kalyan Anna Yojana scheme (PMGKAY)

19, Nov 2022

Why in News?

• The extension of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), a scheme to distribute free foodgrains to the poor, for another three months, comes as a surprise for many reasons.

What is PMGKAY?

• The Pradhan Mantri Garib Kalyan Anna Yojana scheme was part of the Centre’s initial COVID-19 relief package, back in March 2020 when the first lockdown was announced.
• It provides for 5 kg of rice or wheat per person per month to be distributed free of cost to the 80 crore beneficiaries of the National Food Security Act.
• This is over and above the 5 kg already provided to ration card holders at a subsidised rate, thus ensuring a doubling of foodgrain availability to poor people at a time when the pandemic and lockdown was decimating livelihoods.
• The scheme was initially meant to run from April to June 2020, but was then extended for another five months from July to November.
• In these first two phases, 320 lakh tonnes of grain were allotted and about 95% distributed to beneficiaries.
• Initially, one kg of pulses was also provided under the scheme, which was later restricted to chana dal only, and then discontinued in later phases.
• After the onset of the second wave of the pandemic, PMGKAY was rolled out for two months again, in May-June 2021, and was then further extended for another five months, from July to November.
• Another 278 lakh tonnes of grain were allotted for these two phases, and distribution is still ongoing.

Were all poor people covered under the scheme?

• The scheme only provided grain for those families who held ration cards.
• During the first lockdown, the plight of migrant workers who held cards registered in their home villages but were stranded without food or employment in the cities where they worked, came to the limelight.
• A number of other poor families did not possess ration cards at all for a variety of reasons, including the state quotas on the number of ration cards.
• In May and June 2020, the Centre allocated 8 lakh tonnes of foodgrain to be distributed by States under the Atma Nirbhar Bharat scheme for stranded migrants and others without ration cards, although only 40% had been distributed even by August. The scheme was not revived during the second lockdown.
• The 80 crore cap on NFSA beneficiaries and state ration card quotas are based on 2011 census data.
• Given the projected increase in population since then, economists have estimated that 10 crore eligible people are being excluded from the NFSA’s safety net.
• In its June 2021 judgement in a suo moto case on the plight of migrant workers, the Supreme Court directed that the Centre and State should continue providing foodgrains to migrants whether or not they had ration cards.

What are the arguments for and against extension of PMGKAY?

• As the economy is also reviving and the OMSS [or Open Market Sale Scheme] is also exceptionally good, there is no proposal from the department for extension.
• It was previously noted that States are free to buy rice and wheat under OMSS, and distribute it to migrants and other vulnerable communities.
• The Right to Food Campaign, pointing to the SC judgement and noting that the pandemic still exists, unemployment remains at record levels and there is widespread hunger among vulnerable communities.
• ThWhy in News?
  • The extension of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), a scheme to distribute free foodgrains to the poor, for another three months, comes as a surprise for many reasons.

  What is PMGKAY?

  • The Pradhan Mantri Garib Kalyan Anna Yojana scheme was part of the Centre’s initial COVID-19 relief package, back in March 2020 when the first lockdown was announced.
  • It provides for 5 kg of rice or wheat per person per month to be distributed free of cost to the 80 crore beneficiaries of the National Food Security Act.
  • This is over and above the 5 kg already provided to ration card holders at a subsidised rate, thus ensuring a doubling of foodgrain availability to poor people at a time when the pandemic and lockdown was decimating livelihoods.
  • The scheme was initially meant to run from April to June 2020, but was then extended for another five months from July to November.
  • In these first two phases, 320 lakh tonnes of grain were allotted and about 95% distributed to beneficiaries.
  • Initially, one kg of pulses was also provided under the scheme, which was later restricted to chana dal only, and then discontinued in later phases.
  • After the onset of the second wave of the pandemic, PMGKAY was rolled out for two months again, in May-June 2021, and was then further extended for another five months, from July to November.
  • Another 278 lakh tonnes of grain were allotted for these two phases, and distribution is still ongoing.

  Were all poor people covered under the scheme?

  • The scheme only provided grain for those families who held ration cards.
  • During the first lockdown, the plight of migrant workers who held cards registered in their home villages but were stranded without food or employment in the cities where they worked, came to the limelight.
  • A number of other poor families did not possess ration cards at all for a variety of reasons, including the state quotas on the number of ration cards.
  • In May and June 2020, the Centre allocated 8 lakh tonnes of foodgrain to be distributed by States under the Atma Nirbhar Bharat scheme for stranded migrants and others without ration cards, although only 40% had been distributed even by August. The scheme was not revived during the second lockdown.
  • The 80 crore cap on NFSA beneficiaries and state ration card quotas are based on 2011 census data.
  • Given the projected increase in population since then, economists have estimated that 10 crore eligible people are being excluded from the NFSA’s safety net.
  • In its June 2021 judgement in a suo moto case on the plight of migrant workers, the Supreme Court directed that the Centre and State should continue providing foodgrains to migrants whether or not they had ration cards.

  What are the arguments for and against extension of PMGKAY?

  • As the economy is also reviving and the OMSS [or Open Market Sale Scheme] is also exceptionally good, there is no proposal from the department for extension.
  • It was previously noted that States are free to buy rice and wheat under OMSS, and distribute it to migrants and other vulnerable communities.
  • The Right to Food Campaign, pointing to the SC judgement and noting that the pandemic still exists, unemployment remains at record levels and there is widespread hunger among vulnerable communities.
  • They argued that the government should not only extend PMGKAY for another six months, but also universalise the public distribution system itself, so that anyone in need would receive food support regardless of whether they possessed a ration card or not.
  • They also suggested that pulses and cooking oils be added to the monthly entitlements, given the recent rise in prices of these commodities.

  ey argued that the government should not only extend PMGKAY for another six months, but also universalise the public distribution system itself, so that anyone in need would receive food support regardless of whether they possessed a ration card or not.

• They also suggested that pulses and cooking oils be added to the monthly entitlements, given the recent rise in prices of these commodities.

Eklavya Model Residential Schools

16, Nov 2022

Why in News?

• The government is pushing to set up 740 Eklavya Model Residential Schools (EMRS) for Scheduled Tribe (ST) students.

What are EMRS?

• EMRS is a scheme for making model residential schools for STs across India.

• It started in the year 1997-98.
• Its nodal ministry is Ministry of Tribal Affairs.
• The aim of the scheme to build schools at par with the Jawahar Navodaya Vidyalayas and Kendriya Vidyalayas with focus on special state-of-the-art facilities for preserving local art and culture besides providing training in sports and skill development.
• The EMR School follows the CBSE curriculum.

• In 2018-19, revamping of the EMRS scheme was approved by the Cabinet.

• Since the new guidelines have been put into place, the Ministry of Tribal Affairs sanctioned 332 of the targeted 452 schools till 2021-22.
• As of November 2022, a total of 688 schools have been sanctioned, of which 392 are functional.
• Of the 688, 230 have completed construction and 234 are under construction, with 32 schools still stuck due to land acquisition issues.

What were the Old Guidelines?

• Although the Union government had sanctioned a certain number of preliminary EMRS, the States and Union Territories were responsible for seeking sanction of new schools as and when they needed it.
• The funds for these schools were to come from the grants under Article 275(1) and the guidelines mandated that unless States finished constructing the schools sanctioned by the Centre, they would not be entitled to funds for new ones.
• Apart from the infrastructural requirements of 20-acre plots for each EMRS, the guidelines did not have any criteria of where the EMRS could be set up, leaving it to the discretion of State governments.

What are the New Guidelines?

• The new guidelines in 2018-19 gave the Union government more power to sanction schools and manage them.
• A National Education Society for Tribal Students (NESTS) was set up and entrusted with the management of the State Education Society for Tribal Students (SESTS), which would run the EMRS on the ground.
• The new guidelines set a target of setting up an EMRS in every tribal sub-district and introduced a “population criteria” for setting them up.
• One EMRS will be set-up per sub-district that has at least a 20,000-odd Scheduled Tribe (ST) population, which must be 50% of the total population in that area.
• The minimum land requirement for setting up an EMRS was reduced from 20 acres to 15 acres.

What are the Challenges?

• Requirement of 15-acre Area: 

• As per the Standing Committee Report, requirement of 15-acre area is making the identification and acquisition of land troublesome, especially in hilly areas, leftwing extremism-affected areas and the northeast.

• Population Criteria: 

• The Standing Committee noted that the population criteria is depriving a scattered tribal population of the benefit of EMRS. Sometimes, when the population criteria are fulfilled, 15-acre plots are not available.

• Shortage of Teachers: 

• Despite the setting up of the NESTS, there was a shortage of teachers.
• Though the new guidelines allowed NESTS to suggest measures for teacher recruitment, they never made them mandatory for the States to follow.
• This led to non-uniformity in the quality of teachers, not enough recruitment in reserved positions, and a large number of schools recruiting teachers contractually, in a bid to save on salary expenses.
• As of July 2022, all functional EMRS had a teaching strength of just under 4,000 against the 11,340 recommended by NESTS.

Way Forward:

• Guidelines regarding area of land and population criteria should be relaxed so that the less dense tribal populations can also reap the benefit of EMRS scheme.
• More control of school management should be given to NESTS to overcome the shortage of teachers.
• Also, mandatory guidelines about teacher recruitment must be issued for the States.

Declining Consumer Demand and Reluctant Investors

09, Nov 2022

Why in News?

• In September, Finance Minister Nirmala Sitharaman was anguished that industry was holding back from investing in manufacturing despite a significant cut in corporate tax rates in 2019.

Analyzing the corporate Investment since the pandemic:

• Less investment is not the result of losses: The slowdown in corporate investment did not happen because companies were making losses.
• More profit but less investments by corporates: In fact, private companies, boosted by considerable tax cuts, made windfall profits. A State Bank of India analysis shows that tax cuts contributed 19% to the top line of companies during the pandemic. But this did not result in increased investments.
• Dividends to shareholders: Before the pandemic, instead of investing in themselves, companies chose to reward shareholders with higher dividends.
• Investment in equity and debt instead of Infrastructure: During the pandemic, they did not use the profits for paying out dividends; they retained a big chunk of the profits. However, instead of investing in buildings, plants and machinery, they invested in equity shares and debt instruments.
• Corporate cited the slowdown in demand as reason for less investment: So, both before and after the outbreak, they shied away from capital investments. The hesitancy to invest can be explained by a slowdown in the demand side of the economy.
• Corporates didn’t invest in long term returns sectors: Consumer demand started to decline the year before the pandemic and worsened after the COVID19 outbreak. This forced companies to use the increased profits to decrease their debts, pay dividends and invest in financial instruments instead of increasing productivity by making capital investments.

What is the current consumer’s demand situation?

• Average Consumer sentiment index: Private companies invest when they are able to estimate profits, and that comes from demand. The Centre for Monitoring Indian Economy’s (CMIE) consumer sentiment index is still below pre-pandemic levels but is far higher than what was seen 12-18 months ago.
• Buoyant Aggregate demand: RBI’s Monetary policy report dated September 30 says, Data for Q2 (ended Sept) indicate that aggregate demand remained buoyant, supported by the ongoing recovery in private consumption and investment demand. It shows that seasonally adjusted capacity utilization rose to 74.3% in Q1 the highest in the last three years.
• High household savings: Along with household savings intentions remaining high, might hold the key to the investment cycle kicking in.

Statistic on demand and investment:

• New investment projects: The new investment projects announced as a % of GDP, since FY18, the share has remained below the 5% mark, compared to over 9% between FY05 and FY22.
• Collection of corporate tax decreased: Corporate tax and income tax collected in India as a % of GDP after the cut in 2019, the share of corporate tax declined dramatically, while the share of income tax gradually increased.
• Double burden on tax payers: The shift in tax burden from the corporates to the people came at a time of job losses and reduced income levels. This pushed more people into poverty.
• Corporate profit increased after tax cut: Profit after tax earned by non-financial private companies in ₹ trillion after the tax cut, the profits of these companies rose to ₹4-5 trillion in the last two financial years from ₹1-2 trillion in many of the previous periods.
• Increase and decrease in dividend to shareholders: Dividends paid by non-financial private companies as a share of profits earned after tax, Payouts to shareholders surged in FY20, the year before the pandemic, but reduced in the following years.
• Profit retention increased: Retained profits as a % of profit after tax surged to 63% in FY22 the highest in a decade (limited companies were analyzed in FY22, so data are provisional).
• Profits are invested in equities: In FY21, the debt-to-equity ratio came down to 0.86 the lowest in at least three decades. In FY22 (provisional data), it came down further to 0.71.
• Year on year decline in capital investment: Year on year change in the investments of non-financial private companies in fixed assets such as buildings, plants, machinery, transport and infrastructure have declined in recent years. But the year on year change in investments in financial instruments such as equity, debt and mutual funds have surged.

Conclusion:

• Corporates are holding their pockets in hope of demand rise in future. However, this affects the post-pandemic recovery of economy. IMF and RBI was right to revise their growth forecast this year. Unequal recovery of economy have certainly affected the income levels of middle class. Government has taken a lot of step on supply side (corporate side and banking reform) but no intervention in revival of demand.

The Protection of Children from Sexual Offences (POCSO) Act

09, Nov 2022

Why in News?

• The POCSO Act brings tribals in the Nilgiris into conflict with the law, as youth under the age of 18 in relationships within or outside marriage are subject to the Act’s stringent provisions.

About the News:

• The POCSO Act brings tribals in the Nilgiris into conflict with the law, as youth under the age of 18 in relationships within or outside marriage are subject to the Act’s stringent provisions.

About the Protection of Children from Sexual Offences (POCSO) Act:

• The Union Ministry of Women and Child Development led the introduction of the POCSO Act in 2012.
• The Act was designed to protect children from sexual assault, sexual harassment and pornography offences, as well as to provide for the establishment of Special Courts for the trial of such offences.
• The Act was amended in 2019 for enhancing the punishments for specific offences in order to deter abusers and ensure a dignified childhood.

Salient features:

• A gender-neutral law: The POCSO Act establishes a gender-neutral tone for the legal framework available to child sexual abuse victims by defining a child as “any person” under the age of 18.
• Not reporting abuse is an offence: Any person (except children) in charge of an institution who fails to report the commission of a sexual offence relating to a subordinate is liable to be punished.
• No time limit for reporting abuse: A victim can report an offence at any time, even a number of years after the abuse has been committed.
• Maintaining confidentiality of the victim’s identity: The Act prohibits disclosure of the victim’s identity in any form of media, except when permitted by the special courts established under the act.

New obligations under the POCSO Rules 2020:

• Any institution housing children or coming in regular contact is required to conduct a periodic police verification and background check of every employee.
• Such an institution must impart regular training to sensitise its employees on child safety and protection.
• The institution has to adopt a child protection policy based on the principle of zero tolerance for violence against children.

POCSO Act’s performance in comparison to global standards:

• A 2019 Economist Intelligence Unit report ranked India’s legal system for safeguarding children from sexual abuse and exploitation as the best of the countries surveyed.
• On this metric, India outranked the United Kingdom, Sweden and Australia.

Concerns:

• Despite the existence of such comprehensive child sexual abuse law, the scale of such abuse is staggering.

• According to a recent survey, one in every two children is a victim of sexual abuse in India.
• Furthermore, in the vast majority of cases, the perpetrators are known to the victim, causing the victim to be hesitant to approach authorities for redress.
• Incidents of child abuse have also risen exponentially since the Covid-19 pandemic, with the emergence of new forms of cybercrime.

• The general level of awareness or knowledge on the part of minor girls and boys of the POCSO Act remains severely inadequate in the country.

• Child marriage is common among certain tribal groups in the country, resulting in the criminalisation of 17-18 years old youths due to a lack of knowledge of the POCSO Act.

Way ahead: 

• Recently, the Karnataka HC has directed the State Education Department to set up a mechanism for educating students, at least from Class IX onwards about the act and its provisions.

Pradhan Mantri Jan-Aushadhi Yojana

09, Mar 2022

Why in News?

• Janaushadhi Diwas week has been observed from 1^st March to 7^th March 2022.

About the News:

• Theme of 4^th Janaushadhi Diwas: “Jan Aushadhi-Jan Upyogi”
• Pharmaceuticals & Medical Devices Bureau of India (PMBI) is the implementing agency of Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP).
• All the districts of the country have been covered under the scheme.
• Effective IT-enabled logistics and supply-chain systems for ensuring real-time distribution of medicines at all outlets have also been introduced.
• Product basket of PMBJP presently comprises 1,451 drugs and 240 surgical instruments.

What is National Health Authority (NHA)?

• National Health Authority (NHA) is the apex body responsible for implementing India’s flagship public health insurance/assurance scheme called “Ayushman Bharat Pradhan Mantri Jan Arogya Yojana”.
• It has been entrusted with the role of designing strategy, building technological infrastructure and implementation of “National Digital Health Mission” to create a National Digital Health Eco-system.
• National Health Authority is the successor of the National Health Agency, which was functioning as a registered society since 23rd May, 2018.
• Pursuant to Cabinet decision for full functional autonomy, National Health Agency was reconstituted as the National Health Authority on 2nd January 2019, under Gazette Notification.
• NHA is governed by a Governing Board chaired by the Union Minister for Health and Family Welfare headed by a Chief Executive Officer (CEO), an officer of the rank of Secretary to the Government of India, who manages its affairs. The CEO is the Ex-Office Member Secretary of the Governing Board.
• To implement the scheme at the State level, State Health Agencies (SHAs) in the form of a society/trust have been set up by respective States. SHAs have full operational autonomy over the implementation of the scheme in the State including extending the coverage to non SECC beneficiaries.
• NHA is leading the implementation for national Digital Health Mission NDHM in coordination with different ministries/departments of the Government of India, State Governments, and private sector/civil society organizations.

About Universal Health Coverage:

• The scheme will ensure Universal Health Coverage and focus on providing financial risk protection and ensuring quality and affordable essential health services to all individuals and communities.
• Universal Health Coverage (UHC) includes the full spectrum of essential, quality health services, from health promotion to prevention, treatment, rehabilitation, and palliative care.
• UHC enables everyone to access the services, protecting people from the financial consequences of paying for health services out of their own pockets and reducing the risk that people will be pushed to poverty.

What is Ayushman Bharat PMJAY Yojana?

• The PMJAY, world’s largest health insurance/assurance scheme fully financed by the government, provides a cover of Rs. 5,00,000 per family per year for secondary and tertiary care hospitalisation across public and private empanelled hospitals in India.
• Pre-hospitalisation and Post-hospitalisation expenses such as diagnostics and medicines are also included in the scheme.
• Coverage: Over 10.74 crore poor and vulnerable entitled families (approximately 50 crore beneficiaries) are eligible for these benefits.
• Provides Cashless Access to health care services for the beneficiary at the point of service.

What is its Significance?

• Helps reduce catastrophic expenditure for hospitalizations, which pushes 6 crore people into poverty each year.
• Helps mitigate the financial risk arising out of catastrophic health episodes.

Eligibility Criteria’s:

• No Restrictions on family size, age or gender.
• All pre–existing conditions are covered from day one.
• Covers up to 3 days of pre-hospitalization and 15 days post-hospitalization expenses such as diagnostics and medicines.
• Benefits of the scheme are portable across the country.
• Services include approximately 1,393 procedures covering all the costs related to treatment, including but not limited to drugs, supplies, diagnostic services, physician’s fees, room charges, surgeon charges, OT and ICU charges etc.
• Public hospitals are reimbursed for the healthcare services at par with the private hospitals.

Challenges and Concerns:

• Medical audits have also revealed that private hospitals are more likely to indulge in fraud and abuse than public hospitals and more likely to discharge patients early post-surgery to cut Costs.
• Ensuring the Accountability of Private Hospitals to provide efficient and high-quality care is a pre-eminent challenge for scheme Implementation.
• There is huge State-wise variation in the share of Empanelled private hospitals from less than 25% in most of the north-eastern and hill States to 80% in Maharashtra.
• Private hospitals have fewer beds than public hospitals and are more likely to be empanelled for surgical packages and super-specialties.

GST Revenues Cross 1.3 Lakh Crore in Feb

09, Mar 2022

Why in News?

• The Gross Goods and Services Tax (GST) Revenue in February was 26% higher than the pre-pandemic levels at ₹1,33,026 crore.

What is GST?

• GST is an Indirect tax that has replaced many Indirect Taxes in India such as excise duty, VAT, services tax, etc.
• The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1^st July 2017. It is a single domestic indirect tax law for the entire country.
• It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
• Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

What are the Components of GST?

• There are three taxes applicable under this system:
• CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
• SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
• IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

Advantages Of GST:

• GST has mainly removed the cascading effect on the sale of goods and services.
• Removal of the cascading effect has impacted the cost of goods.
• Since the GST regime eliminates the tax on tax, the cost of goods decreases.
• Also, GST is mainly technologically driven.
• All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

Issues with GST:

• High operational cost
• GST has given rise to complexity for many business owners across the nation.
• GST has received criticism for being called a ‘Disability Tax’ as it now taxes articles such as braille paper, wheelchairs, hearing aid etc.
• Petrol is not under GST, which goes against the ideals of the Unification of Commodities.
• Take a look at the share of GST in Government Earnings for the previous fiscal:

Amazon- Future Deal

06, Mar 2022

Why in News?

• The Amazon-Future Group Dispute over a ₹24, 731–crore merger deal with Reliance took an unexpected turn in the Supreme Court when the U.S.-based e-commerce giant proposed talks to possibly end the quarrel.

About the News:

• The SC Bench adjourned the case to March 15, giving Future time to take a call on the Amazon’s proposal.
• The apex court did not pass any orders on Amazon’s plea for ‘withholding’ proceedings in the company law tribunal and the Delhi High Court in connection with the dispute.

What’s the Issue?

• Future Group and Reliance Industries Limited had signed a Rs 24,713-crore deal in August 2020 for Future Retail to sell its retail, wholesale, logistics and warehousing units to Reliance Retail and Fashionstyle.
• Amazon is Future Group’s Indian partner.
• Amazon says Future violated a partnership contract with the asset sale to its rival and wants to scuttle it, while the indebted Indian group says it would collapse if the transaction fails.

Why did Amazon Approach SIAC?

• The parties in a deal usually sign a contractual agreement which specifies about:
• The arbitral institution administering the arbitration.
• The applicable rules.
• The seat of arbitration.
• In this case Amazon and Future Group have under their agreement agreed to refer their disputes to SIAC, with Singapore presumably being the contractual choice for the seat/place of arbitration.

How is the Dispute taken up at the SIAC? What is the Procedure to be followed?

• Once a dispute is referred to arbitration, the process of appointment of the arbitral tribunal takes place.
• Composition: Typically, in case of a three member tribunal, both the parties appoint one member each to the tribunal, while the third member is jointly appointed by the two nominees or, if they fail to agree, by SIAC.

Appointment of an Emergency Arbitrator:

• Appointment of the arbitral tribunal usually takes time.
• Therefore, under the rules of SIAC, parties can move SIAC to appoint an emergency arbitrator to get urgent interim relief, even as the process of appointment of the main Arbitral Tribunal is Underway.

What Happens when the Parties don’t comply with the Order Voluntarily?

• Currently under Indian law, there is no express mechanism for enforcement of the orders of the Emergency Arbitrator.
• But, the parties voluntarily comply with the Emergency Award.
• However, if the parties don’t comply with the order voluntarily, then the party which has won the emergency award, in this case Amazon, can move the High Court in India under Section 9 of the Arbitration & Conciliation Act, 1996, to get similar reliefs as granted by the Emergency Arbitrator.

Why has Singapore become the Hub of International Arbitration?

• Foreign investors investing in India typically want to avoid the rigmarole of the Indian courts.
• Foreign investors feel that Singapore is neutral ground for dispute resolution.
• Singapore itself over time has built a stellar reputation as jurisdiction driven by rule of law with international standards and high integrity. This gives comfort to investors that the arbitration process will be quick, fair and just”.
• According to the 2019 annual report of SIAC, India was the top user of its arbitration seat with 485 cases being referred to SIAC, followed by Philippines at 122, China at 76 and the United States at 65.

Does India has any International Arbitration centre?

• India now has its own international arbitration centre in Mumbai.

About Singapore International Arbitration Centre (SIAC):

It is a not-for-profit international arbitration organisation based in Singapore, which administers arbitrations under its own rules of arbitration and the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.

Time to Rationalize Fuel Taxes

16, Feb 2022

Why in News?

• The disconnect between retail and wholesale inflation suggests that the two measures are driven by distinct and Unrelated Shocks.

The Disconnect between retain Inflation and Wholesale Inflation:

• In the months between April 2020 and November 2020, retail inflation remained above 6%, while average wholesale inflation was -0.20%.
• During the financial crisis (2008-2009) wholesale inflation came down significantly as commodity prices crashed after a boom, but retail inflation kept rising.
• Correlation: This disconnect is reflected in the Contemporaneous correlation between these two measures of inflation, which we find to be very low (0.04), and not significant.
• Understanding the reasons for the Disconnect
• We cannot rule out feedback from wholesale inflation to retail inflation.
• To better explore this, it helps to understand the driving forces behind retail and wholesale inflation.
• Driving factors for CPI: Retail inflation is closely linked to food and beverage prices, partly because of their higher weightage in the consumer price index (CPI).
• The dominance of supply shocks: High retail inflation in 2020 was primarily due to the rising prices of food and beverages.
• The surge was likely led by the usual supply shocks—rainfall, agricultural productivity, or Covid-19-induced supply shocks.
• This suggests two important features of Indian retail inflation: it is predominantly led by supply shocks (food inflation shock) and it is transitory in nature.
• Driving factor for WPI: High wholesale inflation in recent months was mainly due to rising prices in fuel and power and manufacturing, which together comprise around 77% of the wholesale price index (WPI).
• Rising fuel and energy prices in India were a result of the recent increase in global oil prices.

Takeaways:

• High wholesale inflation should not warrant any immediate policy responses as the two inflation measures seem to reflect Different Things.
• Overall, the high correlation between world energy inflation and India’s wholesale inflation (0.88) Indicates that India’s wholesale inflation is predominantly driven by world Commodity Prices.
• On the other hand, the low correlation between India’s retail inflation and world energy Inflation (-0.13, and not significant), suggests that India’s retail inflation is primarily driven by domestic food prices.
• Higher wholesale inflation implies a higher profit margin for producers, which acts as an incentive for Investment.
• There are, in fact, some early signs of a revival in investment in recent quarters, and policy must be careful not to Derail this.

Policy Options:

• Given the pass-through of wholesale inflation into retail inflation, if the ongoing commodity boom persists, then the fuel and power component of the WPI is likely to raise retail inflation directly.
• At that point, there would be some urgency to increase the interest rate, which may be premature and could dampen the revival of growth prospects.
• To avoid the interest rate response, the best option going forward would be to rationalise fuel taxes, to reduce the pass-through of global commodity prices into wholesale prices and ultimately into retail inflation.

The Myth of the Trickle-Down

16, Feb 2022

Why in News?

• There is fear that the way the money will be used by the Centre will disempower the states further, just when they must do most of the heavy lifting on Public Welfare.

Wealth Creation and Trickle-Down:

• Failure of trickle-down: Evidence from around the world is that the economic policy paradigm, of first increasing the overall size of the pie by reducing taxes at the top and then “redistributing” the wealth, has not delivered benefits to people.
• Gandhiji had declared that he was not against wealth creators. He lauded wealth creation.
• However, it must not be at the cost of workers and welfare.
• Wealth creators must be trustees of the wealth they create, not its exclusive owners.
• The demand-side problem of the Indian Economy
• The Indian economy is suffering from a chronic “demand-side” problem that is becoming worse with Misguided Economic Policies.
• Young people who have been getting educated in larger numbers than before, even learning vocational skills, cannot find jobs.
• If people don’t earn, demand will not increase, and investments in businesses will not be attractive.
• Moreover, frustrated youth are tinderboxes for social unrest.

Financial Globalization and its Impact on India:

• Around the world, there is reaction to the Financial Globalisation of the last 30 years.
• In his book, Davos Man, Peter Goodman Explains how the wealthiest people have influenced economic policies in democratic countries from the 1990s to make themselves wealthier.
• Thomas Piketty has documented how wealth inequalities have increased alarmingly.
• Wealth has accumulated at the top, with regressive tax policies along with deregulation.
• Government expenditure on social reforms has been crimped.

Way Forward:

• The Global Economy must move on from hyper-financial, deregulated capitalism, which has given Easy Money too much Freedom.
• They must move out from their Ideological Ruts.
• Invest in Human Capital: That until the economy grows there will be no resources to invest in Human Development — whereas China invested in human development before its Economic take-off.
• Protection to Industrial Sector: That an unprepared industrial sector will thrive in Global Free Trade — whereas the UK and US (and Japan and China too), grew their industrial sectors behind walls of protection, and then demanded that the rest open their markets to the might of their Enterprises.
• Inclusive Growth: Political divisions by religion and caste are tearing India’s social fabric again. The Indian economy must grow inclusively to repair it.

Conclusion:

• Indian Policymakers must urgently discover India’s own, Contextually appropriate model of Development and shed Defunct Economic Theories.

Improvements in Agri-credit System can Revive Agriculture

15, Feb 2022

Why in News?

• The Budget Speech as well as the Economic Survey 2021-22 Recommended that priority should be given to crop Diversification and allied sectors including horticulture, organic Farming, Dairying and Fishing to increase farmers income.

Focus on Increasing the Institutional Credit:

• The Government has increased the agricultural credit target to Rs 18 lakh crore for 2022-23 from Rs 16.5 lakh crore for the current fiscal, with an allocated subsidy of Rs 20,870 crore.
• To enable small farmers to shift from wheat and paddy or improve their income through allied sectors, they must have access to institutional credit at reasonable rates of interest.
• Decreased quality and impact on agriculture: While the volume of credit has grown over the decades, its quality and impact on agriculture has deteriorated.
• Over the years, the growth rate in the agriculture sector has been falling.
• Agricultural credit has become less efficient in delivering growth.
• Small and marginal farmers left out
• Low penetration: In the last 10 years, agriculture credit increased by 350 per cent, but it has not reached even 15 per cent of the 12.56 crore small and marginal farmers.
• Agricultural households with the lowest landholding (up to two hectares) get only about 15 per cent of the subsidised loan from institutional sources.
• As per the Situation Assessment Survey of Agricultural Households by NSSO, the share of institutional loans increases with an increase in land possessed.
• The bulk of subsidised agri-credit is grabbed by a handful of big farmers and agri-business companies.A loose definition of agri-credit has led to the leakage of loans at subsidised rates to large agri-firms.
• One of the main reasons for this diversion is that subsidised credit disbursed at 4 per cent to 7 per cent rate interest is being refinanced to small farmers and in the open market at interest rates up to 24 per cent.

Way Forward:

• Institutional Development: The flow of agricultural credit has not been uniform across states.
• Institutional Development across states is a priority area for equitable flow of subsidised credit.
• Close coordination between State and NABARD: State governments should work in close coordination with the banking system for the promotion of more Joint Liability Groups (JLGs) as per NABARD guidelines to ensure that formal credit reaches financially-excluded farmers.
• States should monitor credit flow: State governments should regularly monitor credit flow.
• Low Interest Rate: Four, the rate of interest for long-term loans should be kept at 4 per cent.
• List of farm related activities: A comprehensive list of all farm-related activities should be prepared by the banks in consultation with NABARD, agriculture experts, farmers and administration.
• Simplify eligibility criteria: Eligibility conditions/criteria for providing agriculture loans should be further simplified and liberalised.
• The repayment schedule should be according to the farmers’ capacity.

Conclusion:

• Credit is critical for achieving higher farm output. Institutional credit will help Delink Farmers from non-institutional sources, where they are compelled to Borrow at Usurious rates of Interest.

Supreme Court examines allegations of rampant misuse of PMLA

15, Feb 2022

Why in News?

• The Supreme Court is looking into allegations of the metamorphosis of the Prevention of Money Laundering Act (PMLA), brought to sniff out drug money, into a potent weapon to raid rivals and Deny Rights.

Prevention of Money Laundering Act (PMLA):

• PMLA, 2002 is an Act of the Parliament of India enacted by the NDA government to prevent money-laundering and to provide for confiscation of property derived from money-laundering.
• It was enacted in response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering.
• PMLA and the Rules notified there under came into force with effect from July 1, 2005.
• The act was amended in the year 2005, 2009 and 2012.

Objectives of PMLA:

• The PMLA seeks to combat money laundering in India and has three main objectives:
• To prevent and control money laundering.
• To confiscate and seize the property obtained from the laundered money; and
• To deal with any other issue connected with money laundering in India.

Key Definitions:

• Payment System: A system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them. It includes the systems enabling credit card, debit card, smart card, money transfer or similar operations.
• Money-laundering: Whosoever directly or indirectly attempts to indulge or assist other person or actually involved in any activity connected with the proceeds of crime and projecting it as untainted property.
• Attachment: Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.
• Proceeds of crime: Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.

Salient Features:

• Punishment and Jail term: The Act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years. The maximum punishment may extend to 10 years instead of 7 years.
• Powers of attachment of tainted property: The Director or officer above the rank of Deputy Director with the authority of the Director, can provisionally attach property believed to be “proceeds of crime”.
• Adjudicating Authority: It is the authority appointed by the central government which decides whether any of the property attached or seized is involved in money laundering.
• Presumption in inter-connected transactions: Where money laundering involves two or more inter-connected transactions. It is presumed that the remaining transactions form part of such inter-connected transactions.
• Burden of proof: A person, who is accused of having committed the offence of money laundering, has to prove that alleged proceeds of crime are in fact lawful property.
• Appellate Tribunal: It is given the power to hear appeals against the orders of the Adjudicating Authority and any other authority under the Act. Its orders are not final and can be challenged.
• Establishment of Special Court: To ensure speedy trial.

Issues with PMLA:

• Misuse of Central Agencies: PMLA is being pulled into the investigation of even ordinary crimes by the Enforcement Directorate.
• Seizing of Assets: Assets of genuine victims have been attached. The ED could just walk into anybody’s house.
• Politically Motivated Raids: In all this, the fundamental purpose of PMLA to investigate the conversion of “illegitimate money into legitimate money” was lost.
• Opacity of charges: Petitioners pointed out that even the Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
• Vagueness over Evidences: The accused is called upon to make statements which are treated as admissible in evidence.
• Harassment: The ED begins to summon accused persons and seeks details of all their Financial Transactions and of their family members.
• Against individual liberty: The initiation of an investigation by the ED has consequences which have the potential of curtailing the liberty of an individual.

Way Ahead:

• It is unlikely that corruption can be substantially reduced without modifying the way Government Agencies operate.
• The fight against Corruption is intimately linked with the reform of the Investigations.
• Therefore the adjudicating authorities must work in cooperation and ensure the Highest standards of Transparency and Fairness.

Capital Gains Tax

14, Feb 2022

Why in News?

• The capital gains tax structure in India is complicated, and it is time for a relook since the union budget has provisions for 30% tax on cryptocurrency.

What is Capital Gains Tax?

• Capital gains tax is levied on the profits made on investments.
• It covers real estate, gold, stocks, mutual funds, and various other financial and non- financial assets.
• Types
• It is divided into long-term capital gains tax (LTCG) and short-term capital gains tax (STCG) depending on how long you have held the investment in question.
• Unlike income tax, the percentage of tax does not change on the basis of your overall tax slab.
• The LTCG tax, excluding surcharge, on equity is the same for gains of ₹10 lakh or ₹10 crore.
• There is also a separate set of deductions that apply to LTCG, which do not apply to Ordinary Income.

Why is it so Complicated?

• Capital gains tax is complicated for a few primary reasons.
• First, the rate changes from asset to asset. LTCG tax on stocks and equity mutual funds is 10% but on debt mutual funds is 20% with indexation.
• Second, holding period changes from asset to asset. The holding period for LTCG tax is two years in real estate, one year for stocks, and three years for debt mutual funds and gold.
• Third, exemptions available against it come with their own complex conditions. For instance, buying a house after selling one can get you an exemption, but the new house must be bought in two years or built in three years of the sale.

Is cryptocurrency taxed as capital gains?

• The 2022 budget has proposed a 30% tax on cryptocurrency, which is higher than capital Gains Tax in many Cases.
• Besides, under Capital Gains Tax, Investors can adjust profits and losses on different investments against each other or against profits/losses in the future.
• However, this cannot be done with Cryptocurrency.

What Distortions does it Create?

• As capital gains tax is the same regardless of your overall income it can compound Inequality.
• For instance, a person with a salary of ₹40 lakh will pay 30% tax on it but just 10% LTCG tax on gains from stock trading.
• A person with a salary of ₹5 lakh will pay a 5% tax on it but the same 10% LTCG tax on stock trading.
• Second, the smaller one-year qualifying period for LTCG in stocks compared to three years in debt mutual funds may encourage short-term trading in equity.

What can be Done to fix these Anomalies?

• The government can bring about uniformity in rates and holding periods for various assets to ensure that the tax for one asset is not more attractive than another.
• A uniform and long holding period to qualify for LTCG can also discourage short-term trading and speculative  behavior  in assets  such as  stocks.
• The exemptions for LTCG such as reinvestment in another house property or capital gains bonds can also be made simpler, with fewer conditions.
• Small Investors can also be given relief by reducing rates of capital gains.

Ratings Agency

12, Feb 2022

Why in News?

• Finance Secretary has accused rating agencies of “Double Standards” when assessing Emerging Markets and Developing Economies.

What is the News?

• Fitch, a rating agency, has termed India as the most indebted emerging market.
• It claimed that the latest budget did not provide clarity on fiscal consolidation plans.

What is a Rating Agency?

• Rating agencies assess the creditworthiness or potential of an equity, debt or country.
• Their reports are read by investors to make an informed decision on whether or not to invest in a particular country or companies in that geography.
• They assess if a country, equity or debt is financially stable and whether it at a low/high default risk.
• In simpler terms, these reports help investors gauge if they would get a return on their Investment.

What do they do?

• The agencies periodically re-evaluate Previously assigned ratings after new developments Geopolitical Events or a significant Economic Announcement by the concerned entity.
• Their reports are sold and published in Financial and Daily Newspapers.

What Grading Pattern do they follow?

• The three prominent ratings agencies, viz., Standard & Poor’s, Moody’s and Fitch subscribe to largely similar grading patterns.
• Standard & Poor’s accord their highest grade, that is, AAA, to countries, equity or debt with the Exceedingly high capacity to meet their financial commitments.
• Its grading slab includes letters A, B and C with an addition a single or double letter denoting a higher grade.
• Moody’s separates ratings into short and long-term definitions. Its longer-term grading ranges from Aaa to C, with Aaa being the highest.
• Fitch, too, rates from AAA to D, with D being the lowest. It follows the same succession scheme as Moody’s and Fitch.

Criticism of Rating Agencies

• Popular ratings agencies publicly reveal their methodology, which is based on macroeconomic data publicly made available by a country, to lend credibility to their inferences.
• However, credit rating agencies were subjected to severe criticism for allegedly spurring the financial crisis in the United States, which began in 2017.
• The agencies underestimated the credit risk associated with structured credit products and failed to adjust their ratings quickly enough to deteriorating market conditions.
• They were charged for methodological errors and conflict of interest on multiple counts.

Do countries Pay Attention to Ratings Agencies?

• Lowered rating of a country can potentially cause panic selling or offloading of investment by a foreign investor.
• In 2013, the European Union opted for regulating the agencies.
• Over reliance on credit ratings may reduce incentives for investor to develop their own capacity for credit risk assessment.
• Ratings Agencies in the EU are now permitted to issue ratings for a country only thrice a year, and after close of trade in the entire Union.

RBI extends Liquidity Window for Healthcare

11, Feb 2022

Why in News?

• The Reserve Bank of India (RBI) recently proposed to extend the term-liquidity facility of ₹50,000 crore offered to emergency health services by three months till June 30.

About the News:

• Last year in May, RBI had announced an on-tap liquidity window of ₹50,000 crore, at the repo rate with tenors of up to three years, to boost provision of immediate liquidity for ramping up COVID-19-related healthcare infrastructure and services in the country.
• Banks were incentivised for quick delivery of credit under the scheme through extension of priority-sector classification to such lending up to March 31, 2022.
• “In view of the response to the scheme, it is now proposed to extend this window up to June 30, 2022 from March 31, 2022 as announced earlier,” the RBI said in a statement on development and regulatory policies on Thursday.
• Under the scheme, banks were expected to create a COVID-19 loan book.

What is the Significance?

• Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufacturers, importers and suppliers of vaccines and priority medical devices, hospitals and dispensaries, pathology labs, manufactures and suppliers of oxygen and ventilators, importers of vaccines and Covid-related drugs, logistics firms and also patients for treatment.Banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector classification to such lending.
• These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier. “Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI.

Step up agri-spending, boost farm incomes

10, Feb 2022

Why in News?

• While the overall budgetary allocation towards the agricultural sector has marginally increased by 4.4% in the Union Budget 2022-23, the rate of increase is lower than the current inflation rate of 5.5%-6%.

India’s low spending in Agriculture:

• The Food and Agriculture Organization (FAO) of the United Nations (UN) report for 2001 to 2019 shows that, globally, India is among the top 10 countries in terms of government spending in agriculture, constituting a share of around 7.3% of its total government expenditure.
• However, India lags behind several low-income countries such as Malawi (18%), Mali (12.4%), Bhutan (12%), Nepal (8%), as well as upper middle-income countries such as Guyana (10.3%) and China (9.6%).
• Low Budgetary Allocation:
• 1.  Low allocation for important schemes
• A closer look at the budgetary allocation towards the agricultural sector shows that there has been a drastic slashing of funds toward important schemes such as crop insurance and minimum support price (MSP).
• Even with an overall increase in budgetary outlays, the allocation towards Market Intervention Scheme and Price Support Scheme (MIS-PSS) was only ₹1,500 crore.
• This is 62% less than the previous allocation of ₹3,959.61 crore in revised estimates (RE) of FY 2021-22.
• Similarly, the Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) was allocated just ₹1 crore for the year as against an expenditure of ₹400 crore in 2021-22.
• Both schemes are pertinent to ensure MSP-based procurement operations in the country, especially for pulses and oil seeds.
• 2.  Low capital investment
• Capital investment in the agricultural sector is more crucial than price support programmes.
• However, there has not been any considerable and commensurate increase in the allocation towards capital investment, especially for promotion of rural infrastructure and marketing facilities.
• The allocation of funds towards schemes such as Pradhan Mantri Kisan Samman Nidhi (PM KISAN), Pradhan Mantri Kisan Maandhan Yojana, though desirable, will not result in long run asset generation.

Agriculture Orientation Index (AOI):

• It measures the ratio between government spending towards the agricultural sector and the sector’s contribution to GDP.
• AOI was developed as part of the Goal 2 (Zero Hunger) of the 2030 Agenda for Sustainable Development in 2015.
• What low AOI indicates: India’s index is one of the lowest, reflecting that the spending towards the agricultural sector is not commensurate with the sector’s contribution towards GDP.
• India holds only the 38th rank in the world.
• Although the AOI has shown an improvement since the mid-2000s, as part of the general revival that took place in several middle-income countries, India’s AOI is one of the lowest in Asia and among several other middle-income and upper-income countries.
• Low crop yield in India:
• The enormous spending on the agricultural sector by East Asian countries is also reflected in their higher crop yield.
• For example, the total cereal yield in India is only around 3,282 kilograms per hectare compared to 4,225 kg per hectare in Asia.
• In China, even with an average landholding size of 0.6 hectares, which is much lower than India’s average landholding size, the performance of the sector in terms of crop yield is much higher than India.

Way Forward:

• The focus on development of irrigation facilities, urban Infrastructure and development of national highways must be complemented with an emphasis on the Development of rural infrastructure and rural transportation facilities, along with an increase in the number of markets, as suggested by the National Commission on Farmers.

Green Bonds to have Long Tenure, says Centre

07, Feb 2022

Why in News?

• Asserting that the issuance of sovereign green bonds is part of the government’s overall borrowing programme, Economic Affairs Secretary Ajay Seth has said these rupee-denominated papers will have long tenure to suit the Requirement of Green Infrastructure Projects.

About the News:

• Finance Minister Nirmala Sitharaman in her Budget speech announced that the government proposes to issue sovereign green bonds to mobilise resources for green infrastructure.
• The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy which is a part of the overall borrowing for the Next Financial Year.

What is a Green Bond?

• A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects.
• These bonds are typically asset-linked and backed by the issuing entity’s balance sheet, so they usually carry the same credit rating as their issuers’ other debt obligations.​
• Green bonds may come with tax incentives to enhance their attractiveness to investors.
• The World Bank is a major issuer of green bonds. It has issued 164 such bonds since 2008, worth a combined $14.4 billion. In 2020, the total issuance of green bonds was worth almost $270 billion, according to the Climate Bond Initiative.

How Does a Green Bond Work?

• Green bonds work just like any other corporate or Government Bond.
• Borrowers issue these securities in order to secure financing for projects that will have a positive environmental impact, such as ecosystem restoration or reducing pollution.
• Investors who purchase these bonds can expect to make as the bond matures.
• In addition, there are often Tax Benefits for Investing in Green Bonds.

Green Bonds Vs Blue Bonds:

• Blue bonds are sustainability bonds to finance projects that protect the ocean and related ecosystems.
• This can include projects to support sustainable Fisheries, protection of coral reefs and other Fragile Ecosystems, or reducing Pollution and Acidification.
• All blue bonds are green bonds, but not all Green Bonds are blue bonds.

Green Bonds Vs Climate Bonds:

• “Green bonds” and “climate bonds” are sometimes used interchangeably, but some authorities use the latter term specifically for projects focusing on reducing carbon Emissions or Alleviating the effects of Climate Change.

Forex Reserves

03, Feb 2022

Why in News?

• According to recent data from Reserve bank of India (RBI), India’s Foreign Exchange (Forex) reserves posted a decline of USD 678 million during the week ended 21st January 2022 to reach USD 634.287 billion.

About the News:

• The slip in the reserves was on account of a drop in the Foreign Currency Assets (FCA), a vital component of the overall reserves. FCA declined by USD 1.155 billion to USD 569.582 billion in the reporting week.
• Gold reserves saw an increase of USD 567 million to USD 40.337 billion in the reported week.
• The Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) fell USD 68 million to USD 19.152 billion.

About Foreign Exchange Reserves:

• Foreign exchange reserves are assets held on reserve by a central bank in foreign currencies, which can include bonds, treasury bills and other government securities.
• It needs to be noted that most foreign exchange reserves are held in US dollars.
• India’s Forex Reserve include:
• Foreign Currency Assets
• Gold reserves
• Special Drawing Rights
• Reserve position with the International Monetary Fund (IMF).

Objectives of Holding Forex Reserves:

• Supporting and maintaining confidence in the policies for monetary and exchange rate management.
• Provides the capacity to intervene in support of the national or Union Currency.
• Limits external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed.

Significance of Rising Forex Reserves:

• Comfortable Position for the Government: The rising forex reserves give comfort to the government and the RBI in managing India’s external and internal financial issues.
• Managing Crisis: It serves as a cushion in the event of a Balance of Payment (BoP) crisis on the economic front.
• Rupee Appreciation: The rising reserves have also helped the rupee to strengthen against the dollar.
• Confidence in Market: Reserves will provide a level of confidence to markets and investors that a country can meet its external obligations.

Foreign Currency Assets:

• FCAs are assets that are valued based on a currency other than the country’s own currency.
• FCA is the largest component of the forex reserve. It is expressed in dollar terms.
• The FCAs include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

About Special Drawing Rights:

• The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
• The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
• The value of the SDR is calculated from a weighted basket of major currencies, including the US dollar, the euro, Japanese yen, Chinese yuan, and British pound.
• The interest rate on SDRs or (SDRi) is the interest paid to members on their SDR holdings.
• Recently, the IMF has made an allocation of SDR 12.57 billion (equivalent to around USD 17.86 billion) to India. Now, the total SDR holdings of India stand at SDR 13.66 billion.

Reserve Position in the International Monetary Fund:

• A reserve tranche position implies a portion of the required quota of currency each member country must provide to the IMF that can be utilized for its own purposes.
• The Reserve Tranche is basically an emergency account that IMF members can access at any time without Agreeing to conditions or paying a Service Fee.

Budget Session of Parliament

03, Feb 2022

Why in News?

• The Budget Session of Parliament has begun and is scheduled to conclude on April 8.

What is Budget?

• Annual Financial Statement is a documents presented to the Parliament in every financial year as a part of the Budget Process under Article 112 of the constitution of India.
• This document comprises the receipts and expenditures of the government of current year, previous year and budget year in three separate parts viz. Consolidated Fund of India, Contingency Fund of India and Public Account of India. The government has to present a statement of receipts and expenditure for each of these funds.
• Capital receipt Comprises of loans raised by the Government, borrowing from the Reserve Bank of India and loans taken from foreign Governments/institutions.
• It also Embraces recoveries of loans advanced by the Government and sale proceeds of Government assets, including those realized from divestment of Government equity in PSUs.

Difference between Annual Financial Statement and Budget:

• The term budget is used for several documents together including the Annual Financial Statement. The other documents in budget include Demands for Grants (DG); Appropriation Bill; Finance Bill; Memorandum Explaining the Provisions in the Finance Bill; Macro-Economic Framework Statement; Fiscal Policy Strategy Statement; Medium Term Fiscal Policy Statement; Medium Term Expenditure Framework Statement etc.
• However, Annual Financial Statement distinguishes the expenditure on revenue account from the expenditure on other accounts, as is mandated in the Constitution of India.
• The Revenue and the Capital sections together, therefore make the Union Budget and that is why, Annual Financial Statements is essentially the Budget of the Government.

Budget Pre Independence:

• Budget was introduced on 7 April 1860 by the East India Company to the British Crown. It was presented by a Scottish Economist and politician James Wilson.
• For the first 30 years, the Budget didn’t have the word infrastructure. It was introduced in the Budget in the 1900s.

Budget Post Independence:

• First Union Budget of Independent India: It was introduced on 26 November 1947. It was present by the first Finance Minister R.K. Shanmukham Chetty. However, it was a review of the Indian economy and no new taxes were proposed. It is to be noted that almost 46% of the Budget or Rs. 92.74 crores were allocated for defence services department.
• Printing of Budget: The Budget was leaked in 1950, following which the government shifted the printing of budget from Rashtrapati Bhawan to a press at Minto Road. In 1980, it was shifted to a government press in North Block.
• Introduction of Hindi: Till 1955, the Budget was presented only in the English language. However, from 1955-56, the Budget documents are printed both in English and Hindi.
• First Prime Minister to present the Union Budget: Former Prime Minister Jawaharlal Nehru was the first PM to present the Union Budget for the FY 1958-1959. The Union Budget is usually presented by the Finance Minister. Other than Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi were the only Prime Ministers to have presented the Budget in their respective administration.
• First Woman to present the Union Budget: Former Prime Minister Indira Gandhi was the first woman to present the Union Budget for the FY 1970-71. On 5 July 2019, Finance Minister Nirmala Sitharaman became the first full-time woman Finance Minister on India.
• Maximum Union Budgets by a Minister: Former Finance Minister Moraji Desai presented the Union Budget a record 10 times, followed by former FM P. Chidambaram (9), former FM Pranab Mukherjee (8), former FM Yashwant Sinha (8), and former FM Manmohan Singh (6)
• Black Budget: For the FY 1973-74, the Budget was presented by the then Finance Minister Yashwantrao B. Chavan and is called as ‘Black Budget’ due to high budget deficit of Rs 550 crores– the maximum until that time. The Budget followed the Indo-Pak war of 1971 and failed the monsoon season.
• The Epochal Budget: The Budget presented by the then Finance Minister Manmohan Singh for the FY 1991-92 is known as ‘The Epochal Budget’– a budget that changed India forever as it marked the economic liberalisation of the nation.
• Dream Budget: The Budget presented by the then Finance Minister P. Chidambaram for the FY 1997-98 is known as ‘Dream Budget’ as it proposed to lower the tax slabs of personal and corporate taxes.
• The Millennium Budget: The Budget presented by the then Finance Minister Yashwant Sinha for the FY 2000-01 is known as ‘The Millennium Budget’– revolutionised India’s IT sector.
• Change in time: In the year 2001, Finance Minister Yashwant Sinha changed the time for the presentation of Union Budget from 5 p.m. to 11 a.m. on the last working day of February.
• Merging of Budgets and Change in date: In the year 2017, the Rail Budget was merged with the Union Budget. Also, since the said year, the Budget has been presented on 1 February following the changes introduced by the then Finance Minister Arun Jaitley.
• Gift Tax: Former Prime Minister Jawaharlal Nehru introduced the Gift Tax in the FY 1958-1959 Budget to make tax evasion more difficult.
• Goods and Services Tax: On 28 February 2006, Goods and Services Tax was introduced by the then Finance Minister P. Chidambaram in the Budget.
• Longest Budget speech: Former Finance Minister Arun Jaitley holds the record for delivering the longest Budget speech in 2014– 2.5 hours.
• Bahi Khata instead of a briefcase: In the year 2019, Finance Minister Nirmala Sitharaman replaced the standard Budget briefcase with the traditional ‘Bahi Khata’ with the National Emblem.
• Paperless Budget: For the first time in Independent India’s history, the Budget for the FY 2021-22 wass paperless.

Budgeting Process in India:

• The procedure for presentation of the Budget in and its passing by Lok Sabha is as laid down in articles 112—117 of the Constitution of India, Rules 204—221 and 331-E of the Rules of Procedure and Conduct of Business in Lok Sabha and Direction 19-B of Directions by the Speaker.
• The Budget goes through six stages:
• Presentation of Budget.
• General discussion.
• Scrutiny by Departmental Committees.
• Voting on Demands for Grants.
• Passing of Appropriation Bill.
• Passing of Finance Bill.

Presentation:

• The Budget is presented to Lok Sabha on such day as the President may direct.
• Immediately after the presentation of the Budget, the following three statements under the Fiscal Responsibility and Budget Management Act, 2003 are also laid on the Table of Lok Sabha:
• The Medium-Term Fiscal Policy Statement;
• The Fiscal Policy Strategy Statement; and
• The Macro Economic Framework Statement.

Demand for MGNREGA work softens

01, Feb 2022

Why in News?

• The Department of Economic Affairs recently said in its annual Economic Survey, that the demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme has dropped from the peak of the first lockdown, but is still higher than pre-COVID levels.

About the News:

• However, it cautioned against drawing conclusions about the movement of migrant labour on the basis of MGNREGA employment, noting that the highest demand for work under the scheme was seen in States which are usually the destination of migrant workers, rather than source States.
• Advocates for rural workers argued that the drop in demand is also due to funding constraints, and urged a significant increase in allocations for the scheme in Union budget.
• According to the Survey’s analysis, though demand for work stabilised after the second COVID wave with a maximum of 4.59 crore persons in June 2021, aggregate MGNREGA employment is still higher than pre-pandemic levels of 2019, after accounting for the Seasonality of demand.

What is the Issue Now?

• In 2021-22, additional funding was not available until late in the year when many States had already run out of money, forcing an artificial suppression in demand on the ground.
• For the upcoming 2022-23 financial year, activists have asked for a budget allocation of Rs. 2.6 lakh crore, which would cover the guaranteed 100 days of work for all active job card holders.
• But anything less than Rs. 1.4 lakh crore, which is the amount spent in 2020-21 plus inflation, will be a clear Suppression of Demand by the Government.

Why this Imbalance?

• Intuitively, one may expect that higher MGNREGS demand may be directly related to the movement of migrant labour i.e. source States would be more impacted.
• Nevertheless, State-level analysis shows that for many migrant source States like West Bengal, Madhya Pradesh, Odisha, Bihar, the MGNREGS employment in most months of 2021 has been lower than the corresponding levels in 2020.
• According to the Survey, demand has been higher for migrant recipient States like Punjab, Maharashtra, Karnataka and Tamil Nadu.
• Karnataka, Tamil Nadu and Rajasthan have a record of administrative sensitivity and efficiency with regard to MGNREGA implementation even pre-COVID.
• These States also see high levels of short–term migration within their own borders.

About MGNREGA: 

• The scheme was introduced in 2005 as a social measure that guarantees “the right to work”.
• The key tenet of this social measure and labour law is that the local government will have to legally provide at least 100 days of wage employment in rural India to enhance their quality of life.

Key Objectives:

• Generation of paid rural employment of not less than 100 days for each worker who volunteers for unskilled labour.
• Proactively ensuring social inclusion by strengthening the livelihood base of rural poor.
• Creation of durable assets in rural areas such as wells, ponds, roads and canals.
• Reduce urban migration from rural areas.
• Create rural infrastructure by using untapped rural labour.

What are the Eligibility Criteria for receiving the benefits under MGNREGA scheme?

• Must be Citizen of India to seek MGNREGA benefits.
• Job seeker has completed 18 years of age at the time of application.
• The applicant must be part of a local household (i.e. application must be made with local Gram Panchayat).
• Applicants must volunteer for Unskilled Labour.

Implementation of the scheme:

• Within 15 days of submitting the application or from the day work is demanded, wage employment will be provided to the applicant.
• Right to get unemployment allowance in case employment is not provided within fifteen days of submitting the application or from the date when work is sought.
• Social Audit of MGNREGA works is mandatory, which lends to accountability and transparency.
• The Gram Sabha is the principal forum for wage seekers to raise their voices and make demands.
• It is the Gram Sabha and the Gram Panchayat which approves the shelf of works under MGNREGA and fix their priority.

GI Tag Sought for Kumbakonam Vetrilai, Thovalai Manikka Malai

17, Jan 2022

Why in News?

• Geographical Indications Registry in Chennai has received applications seeking GI tag for Two Famous products from Tamil Nadu — Kumbakonam Vetrilai and Thovalai Manikka Malai.

About the News:

• The application for Kumbakonam Vetrilai was filed by the Tamil Nadu Agricultural University, Coimbatore while the application for Thovalai Manikka Malai was given by the Thovalai Manikkamaalai Kaivinai Kalaingargal Nalasangam, Kanniyakumari.

About the Kumbakonam Betel Leaves:

• The Kumbakonam betel leaves were heart shaped and grown in the Cauvery delta region by small and marginal farmers. It is particularly grown in Ayyampettai, Rajagiri, Pandaravadai and Swamimalai in Thanjavur district.

• On an average, about 60-80 lakh betel leaves were harvested annually from a one-hectare plot. A betel leaf cultivator spends ₹10,000 to ₹50,000 to grow these leaves on a one-acre land.
• Harvested leaves are washed, cleaned, and graded according to their size and quality. They were traditionally packed in bamboo baskets but now there are several options such as Plantain Leaves and Cloth Bags.

About the Thovalai Manikka Malai:

• Thovalai Manikka Malai is a special type of garland that is made only in Thovalai, a small village in Kanniyakumari. The flowers used in this particular garland are positioned in a way that when folded they look like a gem.

• The flowers are generally arranged in five rows, but at times for other decorations, 20 rows are used. The height ranges from one foot to 24 feet and above.
• Chamba fibre, nochi leaves, oleander and rose flowers are the key materials used for making this garland. Thovalai is famous for its abundance of flowers and most of flowers are procured locally.

What is GI Tag?

• A GI or Geographical Indication is a name or a sign given to certain products that relate to a specific geographical location or origins like a region, town or country.
• Using Geographical Indications may be regarded as a certification that the particular product is produced as per Traditional Methods, has certain specific qualities, or has a particular reputation because of its geographical origin.
• Geographical indications are typically used for wine and spirit drinks, foodstuffs, agricultural products, handicrafts, and industrial products.
• GI Tag ensures that none other than those registered as authorized users are allowed to use the popular product name. In order to function as a GI, a sign must identify a product as originating in a given place.

Who Accords and Regulates Geographical Indications?

• Geographical Indications are covered as a component of intellectual property rights (IPRs) under the Paris Convention for the Protection of Industrial Property.
• At the International level, GI is governed by the World Trade Organisation’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
• In India, Geographical Indications registration is administered by the Geographical Indications of Goods (Registration and Protection) Act, 1999 which came into force with effect from September 2003.
• The first product in India to be accorded with GI tag was Darjeeling tea in the year 2004-05.

What are the Benefits of GI Tags?

• The Geographical Indication registration confers the following benefits:
• Legal protection to the products
• Prevents unauthorised use of GI tag products by others
• It helps consumers to get quality products of desired traits and is assured of Authenticity.
• Promotes the economic prosperity of producers of GI tag goods by enhancing their demand in national and International Markets.

What are the Significances of GI Tags?

• A geographical indication right facilitates those who have the right to use the indication to prohibit its usage by a third party whose product does not conform to the applicable standards.
• For example, in the purview in which the Darjeeling geographical indication is protected, Producers of Darjeeling tea can omit the term “Darjeeling” for tea not grown in their tea Gardens or not produced according to the norms set out in the code of practice for the Geographical Indication.
• However, a protected GI does not permit the holder to forbid someone from making a product using the same approaches as those set out in the standards for that indication. Protection for a GI tag is usually procured by acquiring a right over the sign that constitutes the Indication.

Challenges in GI Tags:

• The special treatment to wines and spirits in TRIPS Agreement appears to be developed Country Centric.
• Developing countries, including India, seek the same higher level of protection for all GIs as was given under TRIPS for wines and spirits.
• The battle for GI tag between states.
• False use of geographical indications by unauthorized parties is detrimental to consumers and Legitimate Producers.
• Cheap Power loom saris are sold as reputed Banarsi handloom saris, harming both the producers and consumers.
• Such unfair business practices result in loss of revenue for the genuine right-holders of the GI and also misleads consumers.
• Protection of GI has, over the years, emerged as one of the most contentious IPR issues.

Way Forward:

• The benefits of GI tag are realised only when these products are effectively marketed and protected against illegal copying.
• Effective marketing and protection require quality assurance, brand creation, post-sale consumer feedback and support, prosecuting Unauthorised Copiers, etc.
• For internationally recognised products like Darjeeling tea, international protection is of Crucial Importance.
• Legal protection to GIs also extends to protection of traditional knowledge and traditional Cultural Expression contained in the products.
• Hence Intellectual Property is a power tool for economic development and wealth creation particularly in the Developing World.
• GIs have the potential to be our growth engine. Policy-makers must pay a heed to this and give Indian GI products their true Reward.

Airtel Payments Bank is now a Scheduled Bank

08, Jan 2022

Why in News?

• The Reserve Bank of India (RBI) has announced the inclusion of Airtel Payments Bank Ltd. in the Second Schedule to the Reserve Bank of India Act, 1934.

Implications:

• With this, the bank can now pitch for Government-issued Requests for Proposals (RFP) and Primary Auctions and undertake both Central and State Government business.

What is a Schedule Bank?

• Scheduled Banks in India refer to those banks which have been included in the Second Schedule of Reserve Bank of India Act, 1934.
• Every Scheduled bank enjoys two types of principal facilities: It becomes eligible for debts/loans at the bank rate from the RBI; and, it automatically acquires the membership of Clearing House.

About Airtel Payments Bank:

• It is among the fastest-growing digital banks in the country, with a base of 115 million users.
• It offers a suite of digital solutions through the Airtel Thanks app and a retail network of over 500,000 Neighbourhood Banking Points.
• The bank Turned Profitable in the Quarter ended September 2021.

What is Payment’s bank?

• Payment banks were established to promote financial inclusion by offering; ‘modest savings accounts and payments/remittance services to migratory labour workforce, low-income households, small enterprises, other unorganised sector entities, and other users.’
• These banks can accept a restricted deposit, which is now capped at Rs 200,000 per person but could be raised in the future.
• These banks are unable to provide loans or credit cards. Banks of this type can handle both current and savings accounts.
• Payments banks can provide ATM and debit cards, as well as online and mobile banking.

Extending the GST Compensation

07, Jan 2022

Why in News?

• Finance Ministers of several States have demanded that the GST compensation scheme be Extended beyond June 2022.

What’s the Issue?

• The adoption of GST was made possible by States ceding almost all their powers to impose local-level indirect taxes and Agreeing to let the prevailing multiplicity of imposts be Subsumed into the GST.
• This was agreed on the condition that revenue shortfalls arising from the transition to the new indirect taxes regime would be made good from a pooled GST Compensation Fund for a period of five Years that is set to end in June 2022.

Need for Extension:

• Citing the impact of the COVID-19 pandemic on the overall economy and more specifically States’ revenues, the States including Tamil Nadu, Kerala, West Bengal, Rajasthan and Chhattisgarh stressed that while their revenues had been adversely impacted by the introduction of GST, the hit from the pandemic had pushed back any possible rebound in revenue especially at a time when they had been forced to spend substantially more to address the public health emergency and its socio-economic fallout on their residents.

What is the GST Compensation?

• The Constitution (One Hundred and First Amendment) Act, 2016, was the law which created the mechanism for levying a common nationwide Goods and Services Tax (GST).
• While States would receive the SGST (State GST) component of the GST, and a share of the IGST (integrated GST), it was agreed that revenue shortfalls arising from the transition to the new indirect taxes regime would be made good from a pooled GST Compensation Fund for a period of five years that is currently set to end in June 2022.

How is the GST Compensation Fund funded?

• This corpus is funded through a Compensation cess that is levied on so-called ‘demerit’ Goods.
• The items are pan masala, Cigarettes and tobacco products, aerated water, caffeinated Beverages, Coal and certain Passenger motor vehicles.

Computation of the Shortfall:

• The computation of the shortfall is done annually by projecting a revenue assumption based on 14% compounded growth from the base year’s (2015-2016) revenue and calculating the difference between that figure and the actual GST collections in that year.

Can the deadline be Extended? If so, how?

• The deadline for GST compensation was set in the original legislation and so in order to extend it, the GST Council must first recommend it and the Union government must then move an amendment to the GST law allowing for a new date beyond the June 2022 deadline at which the GST compensation scheme will come to a close.

GI tag sought for Arunachal Pradesh Apatani textile product

31, Dec 2021

Why in News?

• An application seeking Geographical Indication (GI) tag for the Arunachal Pradesh Apatani textile product has been filed by a firm, Zeet Zeero Producer Company Ltd.

About the Apatani Weave:

• The Apatani weave comes from the Apatani tribe living at Ziro, the headquarters of Lower Subansiri district.
• The woven fabric of this tribe is known for its geometric and zigzag patterns and for its Angular Designs.
• The tribe predominantly weaves shawls known as jig-jiro, and jilan or jackets called supuntarii.
• The people use leaves and plant resources for organic dyeing of the cotton yarns in their traditional ways. And only women folk are engaged in weaving.

What is GI Tag?

• A GI or Geographical Indication is a name or a sign given to certain products that relate to a specific geographical location or origins like a region, town or country.
• Using Geographical Indications may be regarded as a certification that the particular product is produced as per traditional methods, has certain specific qualities, or has a particular reputation because of its Geographical Origin.
• Geographical indications are typically used for wine and spirit drinks, foodstuffs, agricultural Products, Handicrafts, and Industrial Products.
• GI Tag ensures that none other than those registered as authorized users are allowed to use the popular product name. In order to function as a GI, a sign must identify a product as originating in a given Place.

Who Accords and regulates Geographical Indications?

• Geographical Indications are covered as a component of intellectual property rights (IPRs) under the Paris Convention for the Protection of Industrial Property.
• At the International level, GI is governed by the World Trade Organisation’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
• In India, Geographical Indications registration is administered by the Geographical Indications of Goods (Registration and Protection) Act, 1999 which came into force with effect from September 2003.
• The first product in India to be accorded with GI tag was Darjeeling tea in the year 2004-05.

What are the Benefits of GI Tags?

• The Geographical Indication registration confers the following benefits:
• Legal protection to the products
• Prevents unauthorised use of GI tag products by others
• It helps consumers to get quality products of desired traits and is assured of authenticity.
• Promotes the economic prosperity of producers of GI tag goods by enhancing their demand in national and international markets.

What are the Significances of GI Tags?

• A geographical indication right facilitates those who have the right to use the indication to prohibit its usage by a third party whose product does not conform to the applicable standards.
• For example, in the purview in which the Darjeeling geographical indication is protected, producers of Darjeeling tea can omit the term “Darjeeling” for tea not grown in their tea Gardens or not produced according to the norms set out in the code of practice for the Geographical Indication.
• However, a protected GI does not permit the holder to forbid someone from making a product using the same approaches as those set out in the standards for that indication. Protection for a GI tag is usually procured by acquiring a right over the sign that Constitutes the indication.

Challenges in GI Tags:

• The special treatment to wines and spirits in TRIPS Agreement appears to be developed country centric.
• Developing countries, including India, seek the same higher level of protection for all GIs as was given under TRIPS for wines and spirits.
• The battle for GI tag between states.
• False use of geographical indications by unauthorized parties is detrimental to consumers and legitimate producers.
• Cheap Power loom saris are sold as reputed Banarsi handloom saris, harming both the producers and consumers.
• Such unfair business practices result in loss of revenue for the genuine right-holders of the GI and also misleads consumers.
• Protection of GI has, over the years, emerged as one of the most contentious IPR issues.

Way Forward:

• The benefits of GI tag are realised only when these products are effectively marketed and protected against illegal copying.
• Effective marketing and protection require quality assurance, brand creation, post-sale consumer feedback and support, prosecuting unauthorised copiers, etc.
• For internationally recognised products like Darjeeling tea, international protection is of crucial importance.
• Legal protection to GIs also extends to protection of traditional knowledge and traditional cultural expression contained in the products.
• Hence Intellectual Property is a power tool for economic development and wealth creation particularly in the developing world.
• GIs have the potential to be our growth engine. Policy-makers must pay a heed to this and give Indian GI products their true reward.

PLI scheme for Textile Sector

31, Dec 2021

Why in News?

• The Ministry of Textiles has recently said that it will accept applications from January 1 for the Production Linked Scheme for Textiles announced in September this year.

About the News:

• The Union government in September approved production-linked incentive (PLI) for the textile sector with a budgetary outlay of ₹10,683 crore.
• The scheme is for man-made fibre (MMF) apparel, MMF fabrics and 10 segments/products of technical textiles.
• According to an official statement, the incentive structure for the textile sector is designed to Encourage investment in fresh capacities in MMF apparel, MMF fabrics, and 10 segments or products of technical textiles.
• The Scheme Envisages two types of investment with different set of incentive structure. In type one, any person, (which includes firm/company) willing to invest minimum ₹300 crore in Plant, Machinery, and civil works (excluding land and administrative building cost) to produce the notified products will be able to participate in the scheme. In the second type, anyone willing to invest minimum ₹100 crore will be eligible to participate.
• The government has already launched a National Technical Textiles Mission to promote research and development in that sector.

What is its Significance?

• The scheme is expected to attract fresh investment of more than ₹19,000 crore and cumulative turnover of over ₹3 lakh crore will be achieved under this scheme. It will create additional 7.5 lakh jobs in the sector.
• Further, priority will be given for investment in aspirational districts, tier-three, tier-four towns and Rural Areas.
• The scheme will benefit States such as Gujarat, U.P., Maharashtra, Tamil Nadu, Punjab, Andhra Pradesh, Telangana, and Odisha.

About the Textile Sector in India:

• Textiles & Garments industry is labour intensive sector that employs 45 mn people in India and is Second only to the agriculture sector in terms of employment.
• India’s textiles sector is one of the oldest industries in the Indian economy, and is a storehouse and carrier of traditional skills, heritage and culture.
• It can be divided into two segments-
• The unorganised sector is small scale and uses traditional tools and methods. It consists of handloom, handicrafts and sericulture (production of silk).
• The Organised sector uses modern machinery and techniques and consists of the spinning, apparel and Garments Segment.

Significance of the Textiles Sector:

• It contributes 2.3% to Indian Gross Domestic Product, 7% of Industrial Output, 12% to the export earnings of India and employs more than 21% of total employment.
• India is the 6th largest producer of Technical Textiles with 6% Global Share, largest producer of cotton & jute in the world.
• Technical textiles are functional fabrics that have applications across various industries including automobiles, civil engineering and construction, agriculture, healthcare, industrial safety, personal protection etc.
• India is also the second largest producer of silk in the world and 95% of the world’s hand woven fabric comes from India.

About the PLI Scheme:

• The scheme aims to make India a global hub for manufacturing telecom equipment.
• Its eligibility criteria include achievement of a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods.
• The incentive structure ranges between 4% and 7% for different categories and years. Financial year 2019-20 will be treated as the base year for computation of cumulative incremental sales of manufactured goods net of taxes.
• Minimum investment threshold for MSMEs has been kept at Rs 10 crore and for others at Rs 100 Crore.
• Once qualified, the investor will be Incentivised up to 20 times of minimum investment threshold enabling them to utilise their Unused Capacity.

Why is the Production Linked Scheme Needed?

• According to experts, the idea of PLI is important as the government cannot continue making investments in these capital intensive sectors as they need longer times for start giving the Returns.
• Instead, what it can do is to invite global companies with adequate capital to set up capacities in India.
• The kind of ramping up of manufacturing that we need requires across the board Initiatives, but the government can’t spread itself too thin.
• Electronics and pharmaceuticals themselves are large sectors, so, at this point, if the Government can focus on labour intensive sectors like garments and leather, it would be Really helpful.

Anti-Dumping Duty on Five Chinese Goods

29, Dec 2021

Why in News?

• India has imposed anti-dumping duty on five Chinese products, including certain Aluminium Goods and some Chemicals, for Five Years to guard local manufacturers from cheap imports from the Neighbouring Country.

About the News:

• According to Separate Notifications of the Central Board of Indirect Taxes and Customs (CBIC), the duties have been imposed on certain flat rolled products of aluminium; sodium hydrosulphite (used in dye industry); silicone sealant (used in manufacturing of solar photovoltaic modules, and thermal power applications); hydrofluorocarbon (HFC) component R-32; and Hydrofluorocarbon blends (both have uses in refrigeration industry).
• These duties were imposed following recommendations of the Commerce Ministry’s investigation arm, the Directorate General of Trade Remedies (DGTR).
• The DGTR, in separate probes, has concluded that these products have been exported at a price below normal value in Indian markets, which has resulted in Dumping and has suffered material injury due to the dumping.
• India’s exports to China during the April-September 2021 period were worth $12.26 billion while imports aggregated at $42.33 billion, leaving a trade deficit of $30.07 billion.

What is Dumping?

• In international trade practise, dumping happens when a country or a firm exports an item at a price lower than the price of that product in its domestic market.
• Dumping impacts the price of that product in the importing country, hitting margins and profits of local Manufacturing Firms.

What is Anti-Dumping Duty?

• Anti-dumping duty is imposed to rectify the situation arising out of the dumping of goods and its Trade Distortive Effect.
• According to Global Trade norms, including the World Trade Organization (WTO) regime, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to Domestic Manufacturers.
• The duty is aimed at ensuring fair trading practices and creating a level-playing field for domestic producers vis-a-vis foreign producers and exporters.
• While the DGTR recommends the duty to be levied, the Finance Ministry imposes it.

How is it Different from CVD?

• Anti-dumping duty is different from countervailing duty. The latter is imposed in order to counter the negative impact of import subsidies to protect domestic producers.
• Countervailing Duties (CVDs) are tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country.
• CVDs are meant to level the playing field between domestic producers of a product and foreign producers of the same product who can afford to sell it at a lower price because of the subsidy they receive from their Government.

Amazon- Future deal

28, Dec 2021

Why in News?

• The Competition Commission of India (CCI) has frozen its approval given in November 2019 to Amazon’s investment in a Future Group unit on the grounds that the U.S. e-commerce company had suppressed the scope and full details of its investment while seeking Regulatory Approval.

What are its Implications?

• The CCI decision further roils the legal landscape as Amazon seeks to block the Future Group’s 2020 decision to sell its retail assets to Reliance Industries.

What’s the Issue?

• Future Group and Reliance Industries Limited had signed a Rs 24,713-crore deal in August 2020 for Future Retail to sell its retail, wholesale, logistics and warehousing units to Reliance Retail and Fashionstyle.
• Amazon is Future Group’s Indian partner.
• Amazon says Future violated a partnership contract with the asset sale to its rival and wants to scuttle it, while the indebted Indian group says it would collapse if the Transaction Fails.

Why did Amazon Approach SIAC?

• The parties in a deal usually sign a contractual agreement which specifies about:
• The arbitral institution administering the arbitration.
• The applicable rules.
• The seat of arbitration.
• In this case Amazon and Future Group have under their agreement agreed to refer their disputes to SIAC, with Singapore presumably being the contractual choice for the seat/place of arbitration.

How is the dispute taken up at the SIAC? What is the procedure to be followed?

• Once a dispute is referred to arbitration, the process of Appointment of the arbitral tribunal takes place.
• Composition: Typically, in case of a three member Tribunal, both the parties appoint one member each to the tribunal, while the third member is jointly appointed by the two nominees or, if they fail to agree, by SIAC.

Appointment of an Emergency Arbitrator:

• Appointment of the arbitral tribunal Usually takes time.
• Therefore, under the rules of SIAC, parties can move SIAC to appoint an emergency arbitrator to get urgent Interim relief, even as the process of appointment of the main Arbitral Tribunal is Underway.

What happens when the Parties don’t comply with the Order Voluntarily?

• Currently under Indian law, there is no express mechanism for enforcement of the orders of the Emergency Arbitrator.
• But, the Parties Voluntarily comply with the Emergency Award.
• However, if the parties don’t comply with the order voluntarily, then the party which has won the emergency award, in this case Amazon, can move the High Court in India under Section 9 of the Arbitration & Conciliation Act, 1996, to get similar reliefs as granted by the Emergency Arbitrator.

Why has Singapore become the hub of International Arbitration?

• Foreign investors investing in India typically want to avoid the rigmarole of the Indian courts.
• Foreign investors feel that Singapore is neutral ground for dispute resolution.
• Singapore itself over time has built a stellar reputation as jurisdiction driven by rule of law with international standards and high integrity. This gives comfort to investors that the arbitration process will be quick, fair and just”.
• According to the 2019 annual report of SIAC, India was the top user of its arbitration seat with 485 cases being referred to SIAC, followed by Philippines at 122, China at 76 and the United States at 65.

Does India have any International Arbitration Centre?

• India now has its own international arbitration centre in Mumbai.

About Singapore International Arbitration Centre (SIAC):

• It is a not-for-profit international arbitration organisation based in Singapore, which administers arbitrations under its own rules of arbitration and the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.

RBI introduces Prompt Corrective Action Framework for NBFCs

28, Dec 2021

Why in News?

• The Reserve Bank of India (RBI) has introduced the prompt corrective action (PCA) Framework for non-banking Financial Companies (NBFCs).

About the News:

• The PCA framework for NBFCs will come into effect on October 1,2022 on the basis of their Financial Position on or after March 31.

What is PCA Framework?

• The objective of the framework is to enable supervisory intervention at the appropriate time and require the supervised entity to initiate and implement remedial measures in a timely manner, to restore its Financial Health.

Applicability:

• The framework will be applicable to all deposit-taking non-banking financial companies (NBFCs), all non-deposit taking NBFCs in the middle, upper and top layers including investment and credit companies, core investment companies, infrastructure debt funds, infrastructure finance companies and microfinance institutions.
• However, it has excluded NBFCs not accepting/not intending to accept public funds, primary dealers and Housing Finance companies along with government-owned ones.

Indicators based on which PCA will be Invoked for NBFC:

• The central bank will track three indicators — capital to risk-weighted assets ratio (CRAR), Tier I ratio and net non-performing assets (NNPAs) including non-performing investments (NPIs).
• In the case of core investment companies (CICs), the RBI will track adjusted net worth/aggregate risk-weighted assets, leverage ratio and NNPAs, including NPIs.
• A breach in any of the three risk thresholds under the above-mentioned indicators could result in invocation of PCA.

Need for:

• The PCA Framework for NBFCs has been brought after four big finance firms — IL&FS, DHFL, SREI and Reliance Capital — which collected public funds through fixed deposits and non-convertible debentures collapsed in the last three years despite the tight monitoring in the financial sector. They collectively owe over Rs 1 lakh crore to investors.

What will happen once the PCA is invoked for an NBFC?

• Based on the risk threshold, the RBI may prescribe mandatory corrective actions such as restriction on dividend distribution/remittance of profits, requiring promoters /shareholders to infuse equity and reducing leverage.
• The RBI can also restrict the issuance of guarantees or take other contingent liabilities on behalf of group companies (only for CICs).
• Further, the central bank may also restrict branch expansion, impose curbs on capital expenditure other than for technological up-gradation within board-approved limits and restrict/ directly reduce variable operating costs.

Cabinet Nod to Extend Irrigation Scheme for Another Five Years

28, Dec 2021

Why in News?

The Cabinet has recently given its approval to extend its umbrella scheme for irrigation, water supply, ground water and watershed development projects for another five years.

About the News:

• According to Jal Shakti Ministry, less than half of identified irrigation projects have been completed since the scheme began in 2015.
• The extension of the Pradhan Mantri Krishi Sinchayee Yojana till 2026 will cost ₹93,068 crore, benefit 22 lakh farmers and fund dams critical for water supply to Delhi and five other States in the upper Yamuna basin.
• In 2015-16, 99 projects were identified which were completed more than 50% but had been pending for years. Of the 99 projects, 46 have been completed. The rest of the projects will be completed by 2024-25.
• Har Khet Ko Pani, another component of the PMKSY, focuses on expanding physical access on farms and increasing the cultivable area under assured irrigation through surface water projects and by restoring water bodies. This is targeted to bring another 4.5 lakh hectares under irrigation by 2026.
• The Cabinet has now expanded inclusion criteria for water body rejuvenation projects, including both urban and rural water bodies, and enhancing Central assistance from 25% to 60%.

About Pradhan Mantri Krishi Sinchayee Yojana (PMKSY):

• Launched in 2015, PMKSY is a centrally sponsored scheme to provide assured irrigation to cultivated areas, reduce wastage of water and improve water-use efficiency.
• It not only focuses on creating sources for assured irrigation but also aims to create protective irrigation by harnessing rainwater at the micro-level through “Jal Sanchay’’ and “Jal Sinchan”.
• The scheme has been formulated by amalgamating other existing schemes like Accelerated Irrigation Benefit Programme (AIBP), Integrated Watershed Management Programme (IWMP), and On Farm Water Management (OFWM).
• Ministries of Agriculture, Water Resources, and Rural Development are the implementing agencies of the scheme.
• PMKSY is being implemented in an area development approach, adopting decentralized state-level planning and projectized execution, allowing the states to draw their irrigation development plans based on district/block plans with a horizon of 5 to 7 years. States can take up projects based on the District/State Irrigation Plan.
• All the States and Union Territories including the North-Eastern States are covered under the program
• The motto of the Scheme is ‘Har Khet Ko Pani’.
• The funding pattern of the Scheme is 60:40 center-state share in the case of States, for the Himalayan and North-Eastern states, the center-state cost-share is 90:10, and for the Union Territories, 100% of the cost is borne by the Central Government.

Focus areas of the Scheme:

• PMKSY will strategize by focussing on end-to-end solutions in the irrigation supply chain, viz. water sources, distribution network, efficient farm level applications, extension services on new technologies & information, etc. The major focus areas include,
• Creation of new water sources; repair, restoration, and renovation of defunct water sources; construction of water harvesting structures, secondary & micro storage, groundwater development, enhancing potentials of traditional water bodies at the village level.Developing/augmenting distribution network where irrigation sources (both assured and protective) are available or Created.
• Promotion of scientific moisture conservation and runoff control measures to improve Groundwater Recharge.
• Promoting efficient water conveyance and field application devices within the farm viz, underground piping system, drip & sprinklers, pivots, rain-guns, and other application devices, etc.
• Encouraging community irrigation through registered user groups/farmer producers’ organizations/NGOs.
• Farmer-oriented activities like capacity building, training and exposure visits, demonstrations, farm schools, skill development in efficient water and crop management practices (crop alignment) including large scale awareness through mass media campaigns, exhibitions, field days, and extension activities through short animation films, etc.
• More focus on irrigation development will be given to deficient states in terms of irrigation coverage.

Components of the Scheme:

• Accelerated Irrigation Benefit Programme (AIBP) focuses on faster completion of ongoing major and medium irrigation projects including national Projects.
• PMKSY (Har Khet ko Pani) focuses on the creation of new water sources through minor Irrigation (both surface and groundwater), repair, restoration, and renovation of water bodies; strengthening carrying capacity of traditional water sources, construction of rainwater harvesting structures; command area development, strengthening and creation of distribution network from source to farm, groundwater development in water-abundant areas, improvement in the water management and distribution system, diversion of water from water-abundant to water-deficient areas and creation and rejuvenation of traditional water storage systems.
• PMKSY (Per Drop More Crop) focuses on maximizing water use efficiency at the farm level through program management, promotion of efficient water conveyance, precision water application devices, and water-lifting devices. Construction of micro-irrigation structures, secondary storage structures, conducting extension activities for the promotion of scientific moisture conservation and agroeconomic measures, capacity building, training, and awareness campaign, and information technology interventions are other measures to promote water use efficiency.
• PMKSY (Watershed Development) focuses on effective management of runoff water and improved soil & moisture conservation activities, construction of water harvesting structures, and convergence with MGNREGS for the creation of a water-source to full potential in identified backward rainfed blocks including renovation of traditional water bodies.

Implementation Framework

• PMKSY follows a “decentralized” three-tiered institutional structure with High-Level Empowered Committee (HLEC) at the Central level, State Level Sanctioning Committee (SLSC) at the State level, and District Level Implementation Committee (DLIC) at the district level besides dynamic involvement of other stakeholders.
• At the national level, National Steering Committee (NSC) and National Executive Committee (NEC) are the key committees that oversee the implementation of programs, allocate resources, undertake monitoring and performance assessment, etc.
• At the State level, the State Department of Agriculture is the nodal department for implementation of the program.
• At the district level, the District Level Implementation Committee (DLIC) oversees the implementation of PMKSY.

WORLD BANK APPROVES $ 1 BILLION FOR INDIA TO FIGHT AGAINST COVID-19

16, May 2020

Why in News?

• The Government of India is getting $1 billion loan from the World Bank to support its COVID-19 relief measures and financial assistance for the poorest and most vulnerable communities.

About the News:

• The money will be used for reforms in social security net, making it more integrated, portable and focussed on the urban poor.
• The new support will be funded in two phases. An allocation of $750 million — more than ₹5,600 crore —will be made immediately to help fund the Pradhan Mantri Garib Kalyan Yojana, which the Centre announced in March to scale up cash transfers and free food grain distribution to vulnerable communities, pensioners and poor workers, and provide insurance support to health workers.
• The second phase will provide $250 million — almost ₹1,900 crore —post July, which will fund additional cash and in-kind benefits based on local needs through the State governments and portable social protection delivery systems.
• The COVID-19 pandemic has also put the spotlight on some of the gaps in the existing social protection systems.
• This programme will support the Government of India’s efforts towards a more consolidated delivery platform – accessible to both rural and urban populations across state boundaries.

About Pradhan Mantri Garib Kalyan Yojana:

• The Pradhan Mantri Garib Kalyan Yojana was launched in the year 2016 by PM Narendra Modi along with the other provisions of Taxation Laws (Second Amendment) Act, 2016.
• This scheme was valid from December 16, 2016 to March 31, 2017 and provided an opportunity to declare the unaccounted wealth and black money in a confidential manner and avoid prosecution after paying a fine of 50% on the undisclosed income.
• An additional 25% of the undisclosed income is invested in the scheme which can be refunded after four years, without any interest.
• Due to the outbreak of COVID-19 in India, the Finance Minister announced a ₹7 lakh crore Gareeb Kalyan package to mitigate the loss faced by the poor due to the coronavirus lockdown.

What are its Recent Updates?

• To provide an insurance cover of Rs 50 lakhs per health worker affected by COVID-19.
• To provide free resources of 5 kg wheat or rice and 1 kg of preferred pulses for 80 crore poor people for the next three months under the PM Garib Kalyan Ann Yojana.
• 20 crore Women Jan Dhan account holders will be provided Rs 500 per month for next three months.
• There will be an increase in MGNREGA wage to Rs 202 per day to benefit 13.62 crore families.
• The Central Government has given orders to State Governments to use the Building and Construction Workers Welfare Fund to provide relief to Construction Workers.

What are its Implications?

• The loan would help India move from more than 460 fragmented social protection schemes to an integrated system, which would be faster, more flexible and also acknowledge the diversity of needs across states.
• Geographic portability would be introduced to ensure that social protection benefits could be accessed from anywhere in the country, providing relief to inter-State migrant workers.
• There would also be a shift from the current rural focus of social protection schemes to include the needs of the urban poor as well.
• The platform draws on the country’s existing architecture of safety nets – the PDS, the digital and banking infrastructure, and Aadhaar – while positioning the overall social protection system for the needs of a 21st century India.Importantly, such a system will need to leverage India’s federalism enabling and supporting the States to respond quickly and effectively in their context

ECONOMIC STIMULUS PACKAGE – III

16, May 2020

Why in News?

• In the third tranche of the COVID-19 economic package, the government announced a slew of measures for agriculture sector, including a ₹63 lakh crore outlay.

About the News:

• It also amended the stringent Essential Commodities Act to remove cereals, edible oil, oilseeds, pulses, onions and potato from its purview.
• The package would focus on infrastructure and building capacities in the agriculture and allied activities.

• The interest subvention will unlock ₹5,000 crore additional liquidity, benefitting 2 crore farmers.
• This also included ₹7 lakh crore package comprising free food grain and cash to poor for three months announced in March, and ₹5.6 lakh crore stimulus provided through various monetary policy measures by the Reserve Bank of India (RBI).
• Of the remaining, the government has made two tranches of announcements with a cumulative package of ₹1 lakh crore, comprising largely of credit lines to smaller firms, concessional credit to farmers and support to shadow banking and electricity distributors.

Regulating Essential Commodities:

• The government will amend the six-and-a-half-decade old Essential Commodities Act to deregulate food items, including cereals, edible oil, oilseeds, pulses, onion and potato.
• The amendment, besides deregulating production and sale of food products, will provide for no stock limit to be imposed on any produce.
• A stock limit will be imposed only under very exceptional circumstances like national calamities, famine with a surge in prices.
• Also, no stock limit shall apply to processors or value chain participants.

Other Important Announcements:

• ₹15,000 crore Animal Husbandry Infrastructure Development Fund will be set up to support investment in dairy processing, value addition and cattle feed infrastructure.
• To ensure 100 per cent vaccination of all livestock against foot and mouth disease (FMD) ₹13,343 crore will be provided, she said.
• As much as ₹10,000 crore will be provided for fishermen through Pradhan Mantri Matsya Sampada Yojana (PMMSY).

• For promoting herbal cultivation, ₹4,000 crore National Medicinal Plants Fund will be started to help 10 lakh hectares to be covered under herbal cultivation.
• Also, Operation Greens will be extended from tomato, onion and potato to all fruit and vegetables by providing 50 per cent subsidy on transportation and storage of these commodities.
• For beekeepers, a ₹500-crore scheme was announced for infrastructure development and post-harvest facilities.

ECONOMIC STIMULUS-II PACKAGE

16, May 2020

Context:

• The Union Finance Minister has recently announced the short term and long-term measures for supporting the poor, including migrants, farmers, tiny businesses and street vendors as part of the second tranche of Atmanirbhar Bharat Abhiyan.

About Free Food Grains:

• The allocation of additional food grain to all the States/UTs (5 kg per migrant labourer and 1 kg chana per family per month) for two months (May and June, 2020) free of cost. It is an extension of the Pradhan Mantri Gharib Kalyan Yojana.
• The Migrant labourers not covered under National Food Security Act (NFSA), 2013 or without a ration card in the State/UT in which they are stranded at present.
• The entire outlay of ₹3500 crores will be borne by the Government of India.

About One Nation One Ration Card:

• It is part of Technology Driven System Reforms and will enable migrant workers and their family members to access PDS benefits from any Fair Price Shop in the country.
• Around 67 crore beneficiaries covering 83% of Public Distribution System (PDS) population will be covered by National portability of Ration cards by August, 2020 and 100% National portability will be achieved by March, 2021.It will ensure that the people in transit, especially migrant workers can also get the PDS benefit across the country.

About Scheme for Affordable Rental Housing Complexes:

• It will be launched soon and under this, the Central Government will provide ease of living at affordable rent for Migrant Workers and Urban Poor.
• It will be converted into Affordable Rental Housing Complexes (ARHC) of government funded houses in the cities under PPP mode (Public Private Partnerships) through Concessionaires.

About Credit Linked Subsidy Scheme:

• This Scheme for Middle Income Group (MIG, annual income between ₹6 and ₹18 lakhs) will be extended up to March 2021. It comes under the Pradhan Mantri Awas Yojana (Urban).
• It will benefit 2.5 lakhs middle income families during 2020-21 and will lead to investment of over ₹70,000 crores in housing sector.
• It will create a significant number of jobs by giving a boost to the Housing sector and will stimulate demand for steel, cement, transport and other construction materials.

Credit Boost for Kisan Credit Card Scheme:

• It is a special drive to provide concessional credit to Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) beneficiaries through Kisan Credit Cards.
• It will inject additional liquidity of ₹2 lakh crore in the farm sector.
• The 2.5 crore farmers will be covered and fisherman and animal husbandry farmers will also be included in this drive.

Shishu MUDRA loanees and their Interest Subvention:

• The Government will provide Interest subvention of 2% for prompt payees for a period of 12 months to MUDRA Shishu loanees, who have loans below ₹50,000.
• The current, MUDRA Shishu loans is around ₹62 Lakh crore. This will provide relief of about ₹1,500 crore to Shishu MUDRA loanees.

Street Vendors and Credit Facility:

• It will be launched to facilitate easy access to credit to Street vendors and enable them to restart their businesses.
• It is expected that 50 lakh street vendors will be benefited under this scheme and credit of ₹5,000 crores would be provided.
• The Bank credit facilities for initial working capital up to ₹10,000 for each enterprise will be extended.

About Employment using CAMPA Funds:

• Around ₹6,000 crore of funds under Compensatory Afforestation Management & Planning Authority (CAMPA) will be used.
• It will be utilised in afforestation and plantation works, artificial regeneration, forest management, soil & moisture conservation works, forest protection, forest and wildlife related infrastructure development, wildlife protection and management etc.
• The Government will grant immediate approval to these plans which will create job opportunities in urban, semi-urban and rural areas and also for Tribals.

Additional Emergency Working Capital:

• The NABARD will extend additional re-finance support of ₹30,000 crore for meeting crop loan requirements of Rural Cooperative Banks (RCBs) and Regional Rural Banks (RRBs).
• It is over and above ₹90,000 crore that will be provided by NABARD to this sector in the normal course.
• It will benefit around 3 crore farmers, mostly small and marginal and will meet their post-harvest Rabi and current Kharif requirements.

Demerits:

• The Economists feel, that this intervention was too little, too late, and that the free food grains provision should have been universalised to deal with widespread distress.
• They have asked the government for a one-time cash transfer to vulnerable sections like migrant labourers.
• Around 50 crore people in the country without ration cards, of which 10 crores are legally entitled to PDS grain under NFSA.
• There are many people who were managing in normal times, vegetable vendors, gig economy workers, auto rickshaw drivers, who are in dire straits now. PDS needed to be extended to all these people at this time.
• There were no steps taken to extend MGNREGA employment guarantee to at least 200 days. It aims to provide at least 100 days of wage employment.

MEASURES TO STRENGTHEN AGRICULTURE SECTOR IN INDIA

16, May 2020

Why in News?

• Union Finance Minister announced the 3rd Tranche of measures to strengthen Infrastructure Logistics, Capacity Building, Governance and Administrative Reforms for Agriculture, Fisheries and Food Processing Sectors.

Highlights:

• The recent package is a part of the Special economic and comprehensive package of Rs 20 lakh crore – equivalent to 10% of India’s GDP, announced recently amid COVID-19 pandemic.
• Aatmanirbhar Bharat or Self-Reliant India Movement having five pillars – Economy, Infrastructure, System, Vibrant Demography and Demand, is what this special economic and comprehensive package called.
• Two significant Agriculture-related measures were also announced as part of 2nd tranche to support farmers –
• Additional Emergency Working Capital facility through NABARD to enable RRBs and Cooperative Banks extending farm loans for Rabi post-harvest and Kharif expenses and
• Credit boost to the farm sector by covering 2.5 crore PM-KISAN beneficiaries under Kisan Credit Card Scheme.

Measures Announced:

• Out of these 11 measures, 8 measures are for improving agricultural infrastructure and 3 measures are for administrative and governance reforms, including removing restrictions on sale and stock limits of farm produce. Measures are
• Rs 1 lakh crore Agri Infrastructure Fund for farm-gate infrastructure for farmers:
• Impetus for development of farm-gate & aggregation point, affordable and financially viable Post Harvest Management infrastructure. The fund will be created immediately.
• Rs 10,000 crore scheme for Formalisation of Micro Food Enterprises (MFE):
• A Scheme promoting the government’s vision: ‘Vocal for Local with Global outreach’ will be launched to help 2 lakh MFEs who need technical upgradation to attain FSSAI food standards, build brands and marketing.
• The focus will be on women and SC/ST owned units and those in Aspirational districts and a Cluster based approach (e.g. Mango in UP, Tomato in Karnataka, Chilli in Andhra Pradesh, Orange in Maharashtra etc.) will be followed.

Pradhan Mantri Matsya Sampada Yojana (PMMSY):

• The Government will launch the PMMSY for integrated, sustainable, inclusive development of marine and inland fisheries.  The focus will be on Islands, Himalayan States, North-east and Aspirational Districts.
• Rs 11,000 crore for activities in Marine, Inland fisheries and Aquaculture and Rs. 9000 crore for Infrastructure – Fishing Harbours, Cold chain, Markets etc shall be provided.
• Impact: This will lead to Additional Fish Production of 70 lakh tonnes over 5 years, Employment to over 55 lakh persons and double the exports to Rs 1,00,000 crore.

National Animal Disease Control Programme:

• National Animal Disease Control Programme for Foot and Mouth Disease (FMD) and Brucellosis launched with total outlay of Rs. 13,343 crore to ensure 100% vaccination of cattle, buffalo, sheep, goat and pig population for Foot and Mouth Disease (FMD) and for brucellosis.

DIRECT SEEDING OF RICE (DSR)

14, May 2020

Why in News?

• Recently, the farmers are now being encouraged to adopt Direct Seeding of Rice (DSR) in place of Conventional Transplanting due to the Shortage of Labourers.

About Conventional Transplanting:

• The farmers prepare nurseries where the paddy seeds are first sown and raised into young Plants.
• These seedlings are then uprooted and replanted 25-35 days later in the main field.
• It is transplanted on fields that are “puddled” or tilled in standing water using tractor-drawn disc harrows.

Direct Seeding of Rice (DSR):

• There is no nursery preparation or transplantation. The seeds are instead directly drilled into the field by a tractor-powered machine.
• Conventionally the water act as a herbicide for paddy but in DSR, water is replaced by real chemical herbicides. Farmers have to only level their land and give one pre-sowing irrigation or rauni.
• Once the field has good soil moisture, they need to do two rounds of ploughing and planking (smoothening of soil surface), which is followed by the sowing of the seeds and spraying of herbicides.

Advantages of DSR:

• The most important one is water savings. The first irrigation (apart from the pre-sowing rauni) under DSR is necessary only 21 days after sowing.
• It is unlike in transplanted paddy, where watering has to be done practically daily to ensure submerged/flooded conditions in the first three weeks.
• It saves more number of working labours, which about three labourers are required to transplant one acre of paddy at almost Rs 2,400 Per Acre.
• Here, the cost of herbicides under DSR will not exceed Rs 2,000 per acre.

Disadvantages of DSR:

• The main issue is the Availability of Herbicides.
• The seed requirement for DSR is also higher, at 8-10 kg/acre, compared to 4-5 kg in Transplanting.
• The laser land levelling, which costs Rs 1,000/acre, is compulsory in DSR. This is not so in Transplanting.
• Here, the yields are as good as from normal transplanting, but one need to sow by the first fortnight of June. The plants have to come out properly before the Monsoon Rains Arrive.
• In Transplanting there is no such problem, where the saplings have already been raised in the Nursery.

GUJARAT AMENDS APMC ACT

14, May 2020

Why in News?

• Following the Centre’s directive to States to amend their Agricultural Produce Markets (APMC) Acts, the Gujarat government has promulgated an Ordinance expanding the purview of the Act to include livestock under agricultural produce and to provide better market access to farmers.

What is APMC?

• It is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government.
• The Ministry of Agriculture formulated a model law on agricultural marketing, State Agricultural Produce Marketing (Development and Regulation) Act, 2003 and requested the state governments to suitably amend their respective APMC Acts.
• Union Budgets of 2014-15 and 2015-16 had suggested the creation of a National Agricultural Market (NAM) following which e-NAM was launched on April 2016 as a pan-India electronic trade portal to link APMCs across the States.

What are its objectives?

• Ensure transparency in pricing systems and transactions taking place in the market area.
• Provide market-led extension services to farmers.
• Ensure payment for agricultural produce sold by farmers on the same day.
• Promote agricultural processing including activities for value addition in agricultural produce.
• Setup and promote public private partnership in the management of agricultural markets, etc.

Changes Made and Their Implications:

• As per the amendment, the new Act is termed Gujarat Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 1963.
• The Act paves the way for establishment of a livestock market.
• Also, it seeks to have involvement of local authorities, including Panchayati raj institutions that own and operate rural periodical markets such as haats within their area.
• Changed Structure of the market committee of a market yard. It is deemed to be of national importance with increased membership from farmers.
• A single licence will be applicable to the whole of the State for the traders to be granted or renewed by the Director. The existing trader licences granted by the market committees shall be converted into State wide single trader licence by the Director.
• Now, even private entities can set up their own market committees or sub-market yards that can compete and offer the best possible remuneration to farmers for their produce.
• The ordinance also restricts the jurisdiction of the market committees to the physical boundaries of their respective marketing yards. They can levy cess only on those transactions, happening within the boundary walls of their marketing yard.

Significance of these Changes:

• The changes help develop these markets to efficiently function as marketing platform nearest to the farm gate.
• They also ensure that the spirit of competition is encouraged and the principle of ‘farmer first’ is kept in mind.
• Also, the act removes the conventional involvement of middlemen by allowing farmers to sell their crops in a free market. This is a progressive step towards a more robust farm economy.

Concerns from APMC:

• APMCs have not welcomed the decision because it ends their monopoly and allows private players to enter.
• The ordinance will also affect revenues because no cess will be collected on transactions outside the physical boundaries of marketing yards.
• For example, last year, of the ₹5 crore earned as market fees, ₹1.5 crore came from transactions that were conducted outside the marketing yard. With the new ordinance in place, this revenue will be lost.

ECONOMIC PACKAGE TO MAKE INDIA SELF-RELIANT

14, May 2020

Why in News?

• Union Finance Minister announced a ₹20-lakh-crore economic stimulus package to deal with the COVID-19 pandemic.

Highlights:

• This is the first tranche of the Atmanirbhar Bharat Abhiyan announced by Prime Minister Narendra Modi recently as a ₹20 lakh crore economic package.
• That package includes the ongoing Pradhan Mantri Garib Kalyan Yojana, meant to support the poorest and most vulnerable communities during the pandemic, as well as several measures taken by the Reserve Bank of India to improve liquidity.
• More tranches are expected in the next few days.

Pradhan Mantri Garib Kalyan Package (1):

• 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against Coronavirus which includes –
• Insurance cover to Health Worker
• 5 kg wheat or rice per person for next 3 months to poor people
• 20 crore women Jan Dhan account holders get Rs 500 per month for next 3 months;
• Gas cylinders, free of cost, provided to 8 crore poor families for the next 3 months;
• Increase in MNREGA wage to Rs 202 a day from Rs 182 to benefit 13.62 crore families;
• Ex-gratia of Rs 1,000 to 3 crore poor senior citizens, poor widows and poor Divyang.

Pradhan Mantri Garib Kalyan Package (2):

• Front-loaded Rs 2,000 paid to farmers under existing PM-KISAN to benefit 8.7 crore farmers; Building and Construction Workers Welfare Fund allowed to be used to provide relief to workers;
• Five crore workers registered under Employee Provident Fund (EPF) to get non-refundable advance of 75% of the amount or three months of the wages, whichever is lower, from their accounts;
• Limit of collateral free lending to be increased from Rs 10 to Rs 20 lakhs for Women Self Help Groups supporting 6.85 crore households;
• District Mineral Fund (DMF) to be used for supplementing and augmenting facilities of medical testing, screening etc.

Measures taken by Reserve Bank of India:

• Reduction of Cash Reserve Ratio (CRR) has resulted in liquidity enhancement of ₹1,37,000 crores Targeted Long Term Repo Operations (TLTROs) of ₹1,00,050 crore for fresh deployment in investment grade corporate bonds, commercial paper, and non-convertible debentures.
• Increased the banks’ limit for borrowing overnight under the marginal standing facility (MSF). Announced special refinance facilities to NABARD, SIDBI and the NHB for a total amount of ₹50,000 crore at the policy repo rate.
• Moratorium of three months on payment of instalments and payment of Interest on Working Capital Facilities in respect of all Term Loans.
• For loans by NBFCs to the commercial real estate sector, additional time of one year has been given for extension of the date for commencement for commercial operations (DCCO).

Other Measures:

• On the request of the Government of India, RBI raised the Ways and Means advance limits of States by 60% and enhanced the Overdraft duration limits;
• Issued all the pending income-tax refunds up to ₹5 lakh, immediately benefiting around 14 lakh taxpayers;
• Implemented “Special Refund and Drawback Disposal Drive” for all pending refund and drawback claims;
• Sanctioned Rs 15,000 crores for Emergency Health Response Package.

Dissecting the Current Economic Package:

• For Salaried Workers and Taxpayers:
• Some relief was provided in the form of an extended deadline for income tax returns for financial year 2019-20, with the due date now pushed to November 30, 2020.
• The rates of tax deduction at source (TDS) and tax collection at source (TCS) have been cut by 25% for the next year.
• While statutory provident fund (PF) payments have been reduced from 12% to 10% for both employers and employees for the next three months.
• MSMEs Get Attention:
• A major chunk (₹3 lakh crore) of this package is for collateral free loan schemes for businesses, especially micro, small and medium enterprises (MSMEs).
• The ₹3 lakh crore emergency credit line will ensure that 45 lakh units will have access to working capital to resume business activity and safeguard jobs.
• For two lakh MSMEs which are stressed or considered non-performing assets, the Centre will facilitate provision of ₹20,000 crore as subordinate debt.
• A ₹50,000 crore equity infusion is also planned, through an MSME fund of funds with a corpus of ₹10,000 crore.
• In a bid to fulfil the Prime Minister’s vision of a self-reliant or “Atmanirbhar” India, global tenders will not be allowed for government procurement up to ₹200 crore.
• Other interventions for MSMEs: e-market linkage and Fintech will be used to enhance transaction-based lending using the data generated by the e-marketplace.
• The definition of an MSME is being expanded to allow for higher investment limits and the introduction of turnover-based criteria.
• Non-banking finance companies (NBFCs):
• NBFCs/HFCs/MFIs are finding it difficult to raise money in debt markets.
• Government will launch a Rs 30,000 crore Special Liquidity Scheme;
• Under this scheme investment will be made in both primary and secondary market transactions in investment grade debt paper of NBFCs/HFCs/MFIs;
• Will supplement RBI/Government measures to augment liquidity;
• Securities will be fully guaranteed by GoI.
• This will provide liquidity support for NBFCs/HFC/MFIs and mutual funds and create confidence in the market.
• Power Distribution Companies:
• Revenues of Power Distribution Companies (DISCOMs) have plummeted. Unprecedented cash flow problem accentuated by demand reduction.
• PFC/REC to infuse liquidity of Rs 90,000 cr to DISCOMs against receivables.
• Loans to be given against State guarantees for the exclusive purpose of discharging liabilities of Discoms to Gencos.
• Linkage to specific activities/reforms: Digital payments facility by Discoms for consumers, liquidation of outstanding dues of State Governments, Plan to reduce financial and operational losses.
• Central Public Sector Generation Companies shall give rebate to Discoms which shall be passed on to the final consumers (industries).
• Relief to Contractors:
• Extension of up to 6 months (without costs to contractor) to be provided by all Central Agencies (like Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc)
• Covers construction/ works and goods and services contracts.
• Covers obligations like completion of work, intermediate milestones etc. and extension of Concession period in PPP contracts.
• Government agencies to partially release bank guarantees, to the extent contracts are partially completed, to ease cash flows
• The Real Estate Industry:
• Adverse impact due to COVID and projects stand the risk of defaulting on RERA timelines. Time lines need to be extended.
• Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the following effect:
• Treat COVID-19 as an event of ‘Force Majeure’ under RERA.
• Extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25th March, 2020 without individual applications.
• Issue fresh ‘Project Registration Certificates’ automatically with revised timelines.
• Extend timelines for various statutory compliances under RERA concurrently.
• These measures will de-stress real estate developers and ensure completion of projects so that homebuyers are able to get delivery of their booked houses with New Timelines.

KAILASH MANSAROVAR LINK ROAD

12, May 2020

Why in News?

• Recently, Nepal has strongly objected to the newly inaugurated link road which connects Pithoragarh, Uttarkhand to Lipulekh pass, China border significantly reducing the time of Kailash Mansarovar Yatra.

Highlights:

• Nepal claims the territory at the Lipulekh pass around 400 sq km area east of Kali river in the tri-junction of Nepal, Tibet and India, through which the road passes as its own.
• It referred to the 2014 agreement between Prime Ministers of both countries, for Foreign Secretaries to work out the “outstanding boundary issues” on Kalapani where Lipulekh lies and Susta bordering Bihar.
• The unilateral decision to build a road there, is a breach of the 2014 agreement.
• Nepal has the maps during the 1816 Sugauli treaty and other complementing treaties that followed, fixing that Limpiadhura, Kalapani and Lipulekh were shown east of Kali river and part of Nepal.
• These arrangements were made following Nepal’s war with the British due to which Nepal had to cede a large part of territory which currently forms the present Uttarakhand.
• Nepal seeks to question China and India because both had signed an agreement in May 2015 to develop Lipulekh as a commercial passage without consulting Nepal which majorly affected the triangulation of the countries.

About India’s Stand:

• According to the External Affairs minister, the road going through Pithoragarh lies Completely within the Territory of India.
• It is the pre-existing route used by the pilgrims of the Kailash Mansarovar Yatra which has been made pliable for the ease and convenience of Pilgrims, Locals and Traders, under the Present Project.
• India held that the boundary delineation exercise with Nepal is in process and it is committed to resolving outstanding boundary issues through Diplomatic Dialogue.

Other Issues between Indian and Nepal:

• Nepal protested against the publication of Indian maps that included the Kalapani area.
• India rejected Nepal’s contention, asserting that the map accurately depicts the sovereign territory of India.
• Both nations are in the process of scheduling foreign secretary-level talks, which will be held once dates are finalised after the two governments have successfully dealt with the challenge of Covid-19.

About Kali River:

• It is also known as Sharda river or Kali Ganga in Uttarakhand.
• It joins Ghagra river in Uttar Pradesh, which is a tributary of Ganga.
• Its river projects are Tanakpur hydro-electric project, Chameliya hydro-electric project, Sharda Barrage.

About Lipulekh Pass:

• It is also known as Lipu-Lekh Pass/Qiangla or Tri-Corner is a high altitude mountain pass situated in the western Himalayas with a height of 5,334 metre or 17,500 feet.
• It is an International mountain pass between India, China and Nepal.

HELICOPTER MONEY

09, May 2020

Why in News?

• Telangana Chief Minister has recently suggested that the helicopter money can help states to come out of the economic chaos created by Covid-19 pandemic.

What is meant by Helicopter money?

• It is an unconventional monetary policy tool, which involves printing large sums of money and distributing it to the public, to stimulate the economy during a recession (decline in general economic activity) or when interest rates fall to zero.
• Under such a policy, a central bank “directly increases the money supply and, via the government, distribute the new cash to the population with the aim of boosting demand and inflation”.
• The term was coined by American economist Milton Friedman. It basically denotes a helicopter dropping money from the sky.

Difference between Helicopter Money and Quantitative Easing:

• Helicopter money should not be confused with quantitative easing, because both aim to boost consumer spending and increase inflation.
• In case of helicopter money, currency is distributed to the public and there is no repayment liability.
• Whereas in case of quantitative easing, it involves the use of printed money by central banks to buy government bonds. Here the government has to pay back for the assets that the central bank buys.

Pros of Helicopter Money:

• It boosts spending and Economic Growth more Effectively than quantitative easing because it increases aggregate demand – the demand for goods and services – immediately.
• It does not rely on increased borrowing to fuel the economy, which means that it doesn’t create more debt.

Cons of Helicopter Money:

• It may lead to over-inflation.
• It may devalue the currency in the foreign exchange market.
• It does not involve repayment liability, therefore many people argue that it’s not a feasible solution to revive the economy.

SBI TO EXTEND LOAN MORATORIUM TO NBFCS

07, May 2020

Why in News?

• The State Bank of India (SBI) has decided to extend loan moratorium to NBFCs that could give a huge relief to the entities facing a Cash Crunch.

What is Loan Moratorium?

• It refers to a particular period of a loan tenure during which the borrower does not have to repay anything.
• It can be described as a waiting period before the borrower will have to start paying the equated monthly instalments (EMIs) for his or her loan.
• It doesn’t mean that he is completely waived off his Loans.

Why this Move?

• At end March, following the nationwide lockdown, the RBI had allowed banks to extend three-month repayment moratorium to their term loan customers without classifying them as non-performing assets.
• While the banks had extended the facility to the retail borrowers, they were reluctant to extend the same to the NBFCs, including housing finance companies and micro-finance institutions.
• Bank funding is a key source of liquidity for the NBFCs. As a result, NBFCs that had extended the benefit to their customers but were not granted one from the banks were facing a severe liquidity crunch.
• Rating agency Crisil had said that the NBFCs rated by the agency would face a ₹75 lakh-crore debt obligation maturing by June end.
• Similarly, micro-finance institutions had informed the RBI during a recent meeting that they had to repay a debt of ₹18,500 crore in the next three months.
• With SBI now deciding to offer the moratorium, NBFCs expect other commercial banks also to follow suit.

What is Non-Banking Financial Company (NBFC)?

• A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature.
• NBFC does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
• A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in instalments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

What are the Differences between banks & NBFCs?

• NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
• NBFC cannot Accept Demand Deposits;
• NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
• Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of Banks.

PRADHAN MANTRI BHARTIYA JANAUSHADHI PARIYOJANA (PMBJP)

07, May 2020

Why in News?

• Pradhan Mantri Bhartiya Janaushadhi Kendras (PMBJKs) are accepting orders on WhatsApp and e-mail and delivering on patient’s doorsteps to facilitate medicine procurement During Lockdown.

About PMBJP:

• ‘Pradhan Mantri Bhartiya Janaushadhi Pariyojana’ is a campaign launched by the Department of Pharmaceuticals, Govt. Of India, to provide quality medicines at affordable prices to the masses through special Kendra’s known as Pradhan Mantri Bhartiya Jan Aushadhi Kendra.
• Bureau of Pharma PSUs of India (BPPI) is the implementing agency of PMBJP. BPPI (Bureau of Pharma Public Sector Undertakings of India) has been established under the Department of Pharmaceuticals, Govt. of India, with the support of all the CPSUs.

What are the Salient Features of the scheme?

• Ensure access to quality medicines.
• Extend coverage of quality generic medicines so as to reduce the out of pocket expenditure on medicines and thereby redefine the unit cost of treatment per person.
• Create awareness about generic medicines through education and publicity so that quality is not synonymous with only high price.
• A public programme involving Government, PSUs, Private Sector, NGO, Societies, Co-operative Bodies and other Institutions.
• Create demand for generic medicines by improving access to better healthcare through low treatment cost and easy availability wherever needed in all therapeutic categories.

What is a Generic Medicine?

• There is no definition of generic or branded medicines under the Drugs & Cosmetics Act, 1940 and Rules, 1945 made thereunder. However, generic medicines are generally those which contain same amount of same active ingredient(s) in same dosage form and are intended to be administered by the same route of administration as that of branded medicine.
• The price of an unbranded generic version of a medicine is generally lower than the price of a corresponding branded medicine because in case of generic version, the pharmaceutical company does not have to spend money on promotion of its brand.

How are they Regulated in India?

• Drugs manufactured in the country, irrespective of whether they are generic or branded, are required to comply with the same standards as prescribed in the Drugs and Cosmetics Act, 1940 and Rules, 1945 made thereunder for their quality.

Outreach of Generic Medicines:

• With developments like more and more doctors prescribing generic medicines and opening of over 5050 Janaushadhi stores across 652 districts, awareness and availability of high quality affordable generic medicines has increased in the country.
• About 10-15 lakh people benefit from Janaushadhi medicines per day and the market share of generic medicines has grown over three fold from 2% to 7%in last 3 years.
• The Janaushadhi medicines have played a big role in bringing down the out of pocket expenditure of patients suffering from life threatening diseases in India.
• The PMBJP scheme has led to total savings of approximately Rs.1000 crores for common citizens, as these medicines are cheaper by 50% to 90% of average market price.
• The PMBJP is also providing a good source of self-employment with self-sustainable and regular earnings.

CO-OPERATIVE BANKS UNDER SARFAESI ACT

06, May 2020

Why in News?

• The Supreme Court held that Co-operative banks established under a State law and multi-State level co-operative societies come within the ambit of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act of 2002.

Issues Involved:

• The Judgment Came in view of Several Conflicting decisions by high courts on the issues of
• Whether the Co-operative banks can be called  as “Banks (financial Institutions)” under the Banking Regulation Act of 1949
• Whether the Parliament has legislative competence to regulate financial assets of cooperative banks formed under state law.
• The argument was that under Lists I and II of the 7th Schedule, the Constitution provides for distinct fields of legislative entries for the state legislature and Parliament and once there is already a valid law made by the state referring to its own field, there should not be a parallel parliamentary law on the same topic.

Verdict of the Supreme Court:

• The court has upheld the central government’s notification which brought co-operative societies within the purview of the Sarfaesi Act.
• The Supreme court said Co-operative banks come within the definition of “Banks” under the Banking Regulation Act, 1949 for the purposes of the Sarfaesi Act. The recovery procedure under the Sarfaesi Act is also applicable to co-operative banks and there is no clash with the Banking Regulation Act, 1949.
• The court also ruled that the Parliament has legislative competence to provide procedures for recovery of loans under the Sarfaesi Act with respect to cooperative banks.
• The court was of the opinion that recovery of dues would be an essential function of any financial institution and co-operative banks cannot carry on any activity without compliance of provisions of the banking Act and any other legislation applicable to such banks and the RBI Act.

About Sarfaesi Act:

• Banks utilize Sarfaesi Act as an effective tool for bad loans (Non Performing Asset) recovery.
• The Sarfaesi Act is effective only against secured loans where banks can enforce the underlying security.
• Major feature of Sarfaesi is that it promotes the setting up of asset reconstruction companies (ARCs) and asset securitization companies (SCs) to deal with NPAs accumulated with the banks and financial institutions.
• Following are the main objectives of the Sarfaesi Act.
• Provides the legal framework for securitization activities in India.
• It gives the procedures for the transfer of NPAs to asset reconstruction companies for the reconstruction of the assets.
• Enforces the security interest without Court’s intervention.
• Gives powers to banks and financial institutions to take over the immovable property that is pledged to enforce the recovery of debt.

LIQUOR REVENUE FOR STATES

06, May 2020

Why in News?

• Recently, the central government eased restrictions in the third phase of the nationwide lockdown and allowed the sale of liquor.

About the News:

• The Delhi government announced a 70% hike as ‘Special Corona Fee’ in the price of liquor across categories. This shows the importance of liquor to the economy of the states.
• Liquor contributes a considerable amount to the exchequers of all states and Union Territories (UTs) except Gujarat and Bihar, both of which have enforced prohibition.
• Andhra Pradesh announced prohibition in 2019, however, sale of the liquor has been allowed with “prohibition tax”.
• States levy excise duty on manufacture and sale of liquor.
• States also charge special fees on imported foreign liquor, transport fee, and label & brand registration charges.
• A few states like Uttar Pradesh, have imposed a ‘special duty on liquor’ to collect funds for special purposes, such as maintenance of stray cattle.

RBI’s report on State Finance:

• The Reserve Bank of India published the report ‘State Finances: A Study of Budgets of 2019-20’ in September 2019.
• It shows that state excise duty on alcohol accounts for around 10-15% of Own Tax Revenue of a majority of states.
• In fact, state excise duties on liquor is the second or third largest contributor to the category State’s Own Tax revenue; Goods and Services Tax-GST is the largest.
• This is the reason states have always wanted liquor kept out of the purview of GST.
• According to the report, in 2019-20, state GST had the highest share, 43.5%, in states’ Own Tax Revenue, followed by Sale Tax at 23.5% (mainly on petroleum products which are out of GST), state excise at 12.5%, and taxes on property and capital transactions at 11.3%.

About State Excise:

• Excise duty on production of few items including that on liquor and other alcohol-based items is imposed and collected by state governments and is called ‘State Excise’ duty.
• Excise duty is basically a production tax. It is imposed on manufactured items in India that are meant for domestic consumption.Revenue receipts from state excise come mainly from commodities such as Country Spirits; Liquor; Foreign Liquors and Spirits; Medicinal and Toilet Preparations containing Alcohol, Opium etc; Opium, Hemp and other Drugs; Sales to Canteen Stores Depots. Apart from these, a substantial amount comes from licences, fine and confiscation of alcohol products.

What are the Sources of Revenue for States?

Tax Revenue:

• State’s Own Tax Revenue:
• Taxes on Income (agricultural income tax and taxes on professions, trades, callings and employment)
• Taxes on Property and Capital Transactions (land revenue, stamps and registration fees, urban immovable property tax)
• Taxes on Commodities and Services (sales tax, state sales tax/VAT, central sales tax, surcharge on sales tax, receipts of turnover tax, other receipts, state excise, taxes on vehicles, taxes on goods and passengers, taxes and duties on electricity, entertainment tax, state GST, and “other taxes and duties”)

Share in Central Taxes:

• Article 280 of the Indian Constitution requires the composition of the Finance Commission in every five years so that the states can get a reasonable part in the tax revenue of the Union Government.

Non-Tax Revenue:

• These are collected by the governments for providing/facilitating any goods and service.
• It is compulsory to pay a part of the income earned/generated and amount of goods and services consumed as tax. However, non-tax revenue becomes payable only when services offered by the government are availed.

Other Components:

• Interest:It comprises interest of loans given to states and union territories for reasons like non-plan schemes and planned schemes with a maturity period of 20 years and also interest on loans advanced to Public Sector Enterprises (PSEs), Port Trusts and other statutory bodies etc.
• Dividends and profits, Petroleum license, Power supply fees, Fees for Communication Services, Broadcasting fees, Road, Bridges usage fees, Examination fees etc.

DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION (DICGC)

06, May 2020

Why in News?

• RBI has asked the Registrar of Co-operative Societies, Maharashtra to start the process of winding up operations of CKP Co-operative bank and appoint a liquidator.

What’s the Issue?

• Recently, the Reserve Bank of India (RBI) recently cancelled the licence of Mumbai-based CKP Co-operative Bank for the Following Reasons:
• Financial position of the bank was highly adverse and unsustainable.
• The bank is not in a position to pay its present and future depositors.
• The bank failed to meet the regulatory requirement of maintaining a minimum capital adequacy ratio of 9% and reserves.

What is Capital to Risk Weighted Assets Ratio (CRAR)?

• The CRAR, also known as the Capital Adequacy Ratio (CAR), is the ratio of a bank’s capital to its risk. It is a measure of the amount of a bank’s core capital expressed as a percentage of its risk-weighted asset.
• It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
• The Basel III norms stipulated a capital to risk weighted assets of 8%.
• However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CRAR of 9%.

What is Deposit Insurance? How is it Regulated in India?

• Deposit insurance is providing insurance protection to the depositor’s money by receiving a premium.
• The government has set up Deposit Insurance and Credit Guarantee Corporation (DICGC) under RBI to protect depositors if a Bank Fails.
• DICGC charges 10 paise per ₹100 of deposits held by a bank. The premium paid by the insured banks to the Corporation is paid by the banks and is not to be passed on to depositors.

• DICGC last revised the deposit insurance cover to ₹5 lakh in Feb, 2020, raising it from ₹1 lakh since 1993.

What is the Procedure for Depositors to Claim the Money from a Failed Bank?

• The DICGC does not deal directly with depositors.
• The RBI (or the Registrar), on directing that a bank be liquidated, appoints an official liquidator to oversee the winding up process.
• Under the DICGC Act, the liquidator is supposed to hand over a list of all the insured depositors (with their dues) to the DICGC within three months of taking charge.
• The DICGC is supposed to pay these dues within two months of receiving this list.

Who are Insured by the DICGC?

• The corporation covers all commercial and co-operative banks, except in Meghalaya, Chandigarh, Lakshadweep and Dadra and Nagar Haveli.
• Besides, only primary cooperative societies are not insured by the DICGC.

Which type of depositors is not included under the DICGC?

• Deposits of Foreign Governments.
• Deposits of Central/State Governments.
• Inter-bank Deposits.
• Deposits of the State Land Development Banks with the state Co-operative Bank.
• Any amount due on account of Any Deposit received outside India.
• Any amount specifically Exempted by the DICGC with Previous Approval of RBI.

INSURANCE CLAIMS AMID COVID-19 OUTBREAK

05, May 2020

Why in News?

• Companies that suffered business interruption losses due to the Covid-19 outbreak and lockdown are likely to bat for the “loss of profit” clause in their insurance contracts.
• Many companies had taken insurance policies to cover loss arising due to certain unforeseen circumstances but the question has risen whether Covid-19 outbreak is covered by such policies.
• The net result is that they may not get any insurance claim from the insurance companies under the Standard Fire and Special Perils Policy, commonly known as property policy.

Types of Insurances:

• Corporations usually Take Two Types of insurance policies -Material damage policy and Business Interruption Policy.
• Material damage policy is triggered if there is loss of property due to fire or flood or machine breakdown.
• Business interruption, on the other hand, only comes into force if loss of profit has happened due to the clauses mentioned under the material damages policy.

Provisions of the “Property Policy”:

• If the insured plant or office is shut down due to any damage or fire, the company is eligible for claims.
• Also the Policy specifies if the building insured or containing the insured property becomes unoccupied and so remains for a period of more than 30 days (not applicable for dwellings), the insurance claims may not be applicable.
• For claim, before the occurrence of any loss or damage to the property, the continuation of the coverage needs to be ensured.

Relaxation from Policy Lapse:

• The insurers have given relief to corporates, which shut their units for more than a month. Their policies will be allowed to be operational despite the clause that “if a unit is shut for 30 days continuously – the policy cover will lapse”.
• The above relief is applicable for the “unoccupied properties” for more than one month till May 3 under the property policy.
• It means companies can claim insurance if the property is damaged due to fire or any other loss even if the factory or unit is not operational during the period till May 3.

Force Majeure, or “Act of God” Clause:

• Most insurers will also use the Force Majeure, or “Act of God” clause but again there is no concrete conclusion or clause stating that loss of profit due to Covid-19 is Force Majeure.
• Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties occurs. It prevents one or both parties from fulfilling their obligations under the contract.

MANUFACTURING HITS RECORD LOW

05, May 2020

Why in News?

• According to a recent IHS Markit India monthly survey, Manufacturing Purchasing Managers’ Index (PMI) fell to 27.4 in April, 2020 from 51.8 in March, 2020.
• The Index (PMI) is compiled by IHS Markit for more than 40 economies worldwide. IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.

Highlights of the Report:

• The PMI slipped into contraction mode, after remaining in the growth territory for 32 consecutive months.
• In PMI’s language, a reading above 50 means expansion, while a score below that denotes contraction.
• According to the 12-month outlook for production the demand will rebound once the Covid-19 threat is diminished and lockdown restrictions are eased.
• The deteriorating demand conditions has led the manufacturers to drastically cut back staff numbers.Export orders have also witnessed a sharp decline.
• There was also evidence of supply-side disruption due to the lockdown.

Reasons Behind the Fall:

• India’s manufacturing sector activity has witnessed contraction in the month of April, 2020 due to national lockdown restrictions.
• The new business orders have collapsed at a record pace severely hampering the demand.
• This is the sharpest deterioration in business conditions across the manufacturing sector since data collection began over 15 years ago.

About Purchasing Managers’ Index:

• Purchasing Managers’ Index (PMI) is an indicator of business activity – both in the manufacturing and services sectors. It is calculated separately for the manufacturing and services sectors and then a composite index is also constructed.
• The PMI summarizes whether market conditions as viewed by purchasing managers are expanding, neutral, or contracting.
• The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
• The PMI is a number from 0 to 100.
• PMI above 50 represents an expansion when compared to the previous month;
• PMI under 50 represents a contraction, and
• A reading at 50 indicates no change.
• The PMI is usually released at the start of every month. It is, therefore, considered a good leading indicator of economic activity.
• It is different from the Index of Industrial Production (IIP), which also gauges the level of activity in the economy.

FOREIGN PORTFOLIO INVESTORS (FPIS)

05, May 2020

Why in News?

• Recently, the Foreign Portfolio Investors (FPIs) have significantly reduced the pace of outflows from the equity and debt market in April, 2020, according to the data from Central Depository Services Limited (CDSL).

Highlights:

• The Foreign Portfolio Investers sold a net of Rs 6,883 crore from the equities market and net holdings worth Rs 12,551 crore from the debt market in April.
• Equity market: Its shares are issued and traded, either through exchanges or over-the-counter markets (i.e directly). It is also known as the stock market.
• Debt market: It is the market where debt instruments are traded. Debt instruments are instruments that require a fixed payment to the holder, usually with interest. E.g. bonds (government or corporate) and mortgages.
• However, they invested a net of Rs 4,032 crore in debt Voluntary Retention Route (VRR) scheme.
• VRR scheme allows FPIs to participate in Repo Transactions and also invest in Exchange Traded Funds that Invest in Debt Instruments.
• The success on developing medicine and vaccines will lead to a V-shaped recovery in the Economy and Markets.

About Voluntary Retention Route (VRR) Scheme:

• It is aimed at attracting long-term and stable FPI investments into debt markets.
• Its Investment route will be free of the regulatory norms applicable to FPI investments in debt markets, provided investors maintain a minimum share of their investments for a fixed period.
• It has a minimum retention period of three years and investors need to maintain a minimum of 75% of their investments in India
• FPIs registered with Securities and Exchange Board of India (SEBI) are eligible to voluntarily invest through the route in government and corporate bonds.

About V-Shaped Recovery:

• It is characterized by a sharp economic decline followed by a quick and sustained recovery.
• The recession of 1953 is an example of a V-shaped recovery.
• It is different from an L-shaped recovery, in which the economy stays in a slump for a prolonged period of time.

About Foreign Portfolio Investment:

• It consists of securities and other financial assets passively held by foreign investors.
• It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market.
• It is part of a country’s capital account and is shown on its Balance of Payments (BOP).
• The BOP measures the amount of money flowing from one country to other countries over one monetary year.
• Its investor does not actively manage the investments through FPIs, he does not have control over the securities or the business. The investor’s goal is to create a quick return on his money.
• It is more liquid and less risky than Foreign Direct Investment (FDI).

About Foreign Direct Investment (FDI):

• It is an investment made by a firm or individual in one country into business interests located in another country.
• It lets an investor purchase a direct business interest in a foreign country.
• It is often referred to as “hot money” because of its tendency to flee at the first signs of trouble in an Economy.
• Bout FPI and FDI are important sources of funding for most economies. Foreign capital can be used to develop infrastructure, set up manufacturing facilities and service hubs, and invest in other productive assets such as machinery and equipment, which contributes to economic growth and stimulates employment.

DECLINE IN FPI OUTFLOWS

04, May 2020

Why in News?

• As per the recent data published by Central Depository Services Limited (CDSL), the Foreign Portfolio Investors (FPIs) have significantly reduced the pace of outflows from the equity and debt market in April 2020, after a record net outflow in the month of March 2020.

Highlights of the Report:

• FPIs sold a net of Rs 6,883 crore from the equities market and net holdings worth Rs 12,551 crore from the debt market in April..
• However, they invested a net of Rs 4,032 crore in debt Voluntary Retention Route (VRR) scheme.
• VRR scheme allows FPIs to participate in repo transactions and also invest in exchange traded funds that invest in debt instruments.
• Outflows have continued due to uncertainty surrounding economic conditions caused by Covid-19 lockdown and investors are cautious. However, the pessimism also continues to grip the markets.
• So far, India has been able to contain the Covid-19 pandemic from spreading aggressively. The measures announced by the government and the Reserve Bank of India (RBI) periodically to revitalize the sagging economy have also resonated well with investors.
• With selective relaxation in the lockdown and gradual opening up of economic activity in the country, foreign investors will be closely watching the developments on this front.
• A success on developing medicine and vaccines will lead to a V-shaped recovery in the economy and markets.

Voluntary Retention Route (VRR) Scheme:

• The VRR scheme is aimed at attracting long-term and stable FPI investments into debt markets.Investments through the route will be free of the regulatory norms applicable to FPI investments in debt markets, provided investors maintain a minimum share of their investments for a fixed period.
• VRR Scheme has a minimum retention period of three years and investors need to maintain a minimum of 75% of their investments in India.

• FPIs registered with Securities and Exchange Board of India (SEBI) are eligible to voluntarily invest through the route in government and corporate bonds.

What is meant by Foreign Portfolio Investment?

• Foreign portfolio investment (FPI) consists of securities and other financial assets passively held by foreign investors. It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market.
• Foreign portfolio investment is part of a country’s capital account and is shown on its Balance of Payments (BOP).
• The BOP measures the amount of money flowing from one country to other countries over one monetary year.
• The investor does not actively manage the investments through FPIs, he does not have control over the securities or the business.
• The investor’s goal is to create a quick return on his money.
• FPI is more liquid and less risky than Foreign Direct Investment (FDI).
• A Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. FDI lets an investor purchase a direct business interest in a foreign country.
• FPI is often referred to as “hot money” because of its tendency to flee at the first signs of trouble in an economy.
• FPI and FDI are both important sources of funding for most Economies. Foreign capital can be used to develop infrastructure, set up manufacturing facilities and service hubs, and invest in other Productive assets such as Machinery and Equipment, which contributes to Economic Growth and Stimulates Employment.

FOREIGN EXCHANGE RESERVES

04, May 2020

Why in News?

• Recently, India’s Foreign Exchange (Forex) reserves declined by $113 million to $479.45 billion in the week to 24 April, 2020 due to a Fall in Foreign Currency Assets.

Highlights:

• The foreign currency assets (FCAs) decreased by $321 million to $441.56 billion. The Gold reserves rose by $221 million to $32.901 billion.
• The country’s reserve position with the IMF also was down by $8 million to $3.57 billion. The special drawing rights with the International Monetary Fund (IMF) fell by $6 million to $1.42 billion.
• Earlier, the reserve had touched a life-time high of $487.23 billion in the week ended by 6 March, 2020. During 2019-20, the country’s foreign exchange reserves rose by almost $62 billion.

About Foreign Exchange Reserves:

• It is an asset, which is held on reserve by a central bank in foreign currencies, which can include bonds, treasury bills and other government securities.
• It needs to be noted that most foreign exchange reserves are held in U.S. dollars. These assets serve many purposes but are most significantly held to ensure that the central bank has backup funds if the national currency rapidly devalues or becomes altogether insolvent.
• India’s Forex Reserve includes Foreign Currency Assets, Gold reserves, Special Drawing Rights and Reserve position with the International Monetary Fund (IMF).

 About Reserve Position in the International Monetary Fund:

• A reserve tranche position implies a portion of the required quota of currency each member country must provide to the International Monetary Fund (IMF) that can be utilized for its own purposes.
• It is basically an emergency account that IMF members can access at any time without Agreeing to Conditions or Paying a Service Fee.

About Foreign Currency Assets (FCA):

• These are assets that are valued based on a currency other than the country’s own currency.
• It is the largest component of the forex reserve, which is expressed in dollar terms.
• It includes the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

About Special Drawing Rights (SDR):

• It is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
• It is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
• Its value is calculated from a weighted basket of major currencies, including the U.S. dollar, the euro, Japanese yen, Chinese yuan, and British pound. The Interest rate on SDRs or (SDRi) is the interest paid to members on their SDR Holdings.

KASHMIR SAFFRON GETS GI TAG

02, May 2020

Why in News?

• Kashmir saffron, which is cultivated and harvested in the Karewa (highlands) of Jammu and Kashmir, has been given the Geographical Indication (GI) tag by the Geographical Indications Registry.

About Kashmir Saffron:

• Kashmir saffron is a very precious and costly product renowned globally as a spice.
• It rejuvenates health and is used in cosmetics and for medicinal purposes. It has been associated with traditional Kashmiri cuisine and represents the rich cultural heritage of the region.
• The unique characteristics of Kashmir saffron are its longer and thicker stigmas, natural deep-red colour, high aroma, bitter flavour, chemical-free processing, and high quantity of crocin (colouring strength), safranal (flavour) and picrocrocin (bitterness).
• Iran is the largest producer of saffron and India is a close competitor. With the GI tag, Kashmir saffron would gain more prominence in the export market.
• It is the only saffron in the world grown at an altitude of 1,600 m to 1,800 m AMSL (above mean sea level), which adds to its uniqueness and differentiates it from other saffron varieties available the world over.

What is GI Tag?

• A GI or Geographical Indication is a name or a sign given to certain products that relate to a specific geographical location or origins like a region, town or country.
• Using Geographical Indications may be regarded as a certification that the particular product is produced as per traditional methods, has certain specific qualities, or has a particular reputation because of its geographical origin.
• Geographical indications are typically used for wine and spirit drinks, foodstuffs, agricultural products, handicrafts, and industrial products.
• GI Tag ensures that none other than those registered as authorized users are allowed to use the popular product name. In order to function as a GI, a sign must identify a product as originating in a given place.

Who accords and regulates Geographical Indications?

• Geographical Indications are covered as a component of intellectual property rights (IPRs) under the Paris Convention for the Protection of Industrial Property.
• At the International level, GI is governed by the World Trade Organisation’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
• In India, Geographical Indications registration is administered by the Geographical Indications of Goods (Registration and Protection) Act, 1999 which came into force with effect from September 2003.
• The first product in India to be accorded with GI tag was Darjeeling tea in the year 2004-05.

What are the Benefits of GI Tags?

• The Geographical Indication registration confers the following benefits:
• Legal protection to the products
• Prevents un-authorised use of GI tag products by others
• It helps Consumers to get quality products of desired traits and is assured of authenticity.
• Promotes the economic prosperity of producers of GI tag goods by enhancing their demand in national and international markets.

What are the Significances of GI Tags?

• A geographical indication right facilitates those who have the right to use the indication to prohibit its usage by a third party whose product does not conform to the applicable standards.
• For example, in the purview in which the Darjeeling geographical indication is protected, producers of Darjeeling tea can omit the term “Darjeeling” for tea not grown in their tea gardens or not produced according to the norms set out in the code of practice for the geographical indication.
• However, a protected GI does not permit the holder to forbid someone from making a product using the same approaches as those set out in the standards for that indication. Protection for a GI tag is usually procured by acquiring a right over the sign that constitutes the Indication.

Challenges in GI Tags:

• The special treatment to wines and spirits in TRIPS Agreement appears to be developed country centric.
• Developing countries, including India, seek the same higher level of protection for all GIs as was given under TRIPS for wines and spirits.
• The battle for GI tag between states.
• False use of geographical indications by unauthorized parties is detrimental to consumers and legitimate producers.
• Cheap Power loom saris are sold as reputed Banarsi handloom saris, harming both the producers and consumers.
• Such unfair business practices result in loss of revenue for the genuine right-holders of the GI and also misleads consumers.
• Protection of GI has, over the years, emerged as one of the most contentious IPR issues.

Way Forward:

• The benefits of GI tag are realised only when these products are effectively marketed and protected against illegal copying.
• Effective marketing and protection require quality assurance, brand creation, post-sale consumer feedback and support, prosecuting unauthorised copiers, etc.
• For internationally Recognised products like Darjeeling tea, International Protection is of crucial importance.
• Legal protection to GIs also extends to protection of Traditional Knowledge and Traditional cultural expression contained in the products.
• Hence Intellectual Property is a Power Tool for economic development and wealth creation particularly in the Developing World.
• GIs have the potential to be our growth engine. Policy-makers must pay a heed to this and give Indian GI Products their True Reward.

FINAL REPORT ON NATIONAL INFRASTRUCTURE PIPELINE

30, Apr 2020

Why in News?

• The task force headed by Atanu Chakraborty on National Infrastructure Pipeline (NIP) submitted its final report to the Finance Minister recently.
• The summary report for, National Infrastructure Pipeline (NIP), 2020-25 was released by the finance minister in the month of December,2019.

Highlights of the Report:

• The final report has revised up NIP from earlier Rs 100 lakh crore in light of additional data provided by central ministries/state governments since the release of summary NIP report.
• The taskforce has forecast an investment need of ₹111 lakh crore over the next five years (2020-2025) to build infrastructure projects and drive economic growth.
• Bulk Share: Energy, roads, railways and urban projects are estimated to account for the bulk of projects (around 70%).

Various Measures Suggested by the Report:

• Aggressive Push towards Asset Sales
• Monetisation of Infrastructure Assets
• Setting up of Development Finance Institutions
• Strengthening the Municipal Bond MARKET

Various Committees need to be set up (Recommended in the Report):

• The task force has also recommended set up of three committees:
• Timely Execution: Panel to monitor NIP progress and eliminate delays.
• Follow Up: Steering committee in each infrastructure ministry for following up implementation
• Raising Financial Resources: Committee in the Department of Economic Affairs for raising financial resources for the NIP.

About National Infrastructure Pipeline:

• The task force was set up after the Prime Minister, in his Independence Day speech of 2019, promised to roll out an infrastructure push worth ₹100 trillion over five years to make India a $5 trillion economy.
• NIP will enable a forward outlook on infrastructure projects which will create jobs, improve ease of living, and provide equitable access to infrastructure for all, thereby making growth more inclusive.
• NIP includes economic and Social Infrastructure Projects.
• It also includes both greenfield and Brownfield Projects.
• It will help in stepping-up annual infrastructure investment to achieve the Gross Domestic Product (GDP) of $5 trillion by 2024-25.
• The Centre and states are expected to have almost equal share in implementing NIP, while the private sector contribution is expected to be around 21%.
• Out of the total expected capital expenditure of Rs 111 lakh crore
• Projects worth Rs 44 lakh crore (40 % of NIP) are under implementation.
• Projects worth Rs 33 lakh crore (30 % of NIP) are at conceptual stage.
• Projects worth Rs 22 lakh crore (20 % of NIP) are under development.

PM LAUNCHES SWAMITVA YOJANA ON PANCHAYATI RAJ DIWAS

27, Apr 2020

Why in News?

• On Panchayati Raj Diwas (April 24^th), the Prime Minister of India launched ‘Swamitva Yojana’ or Ownership Scheme to map residential land ownership in the Rural Sector using Modern Technology like the use of drones.

About Swamitva Yojana:

• The scheme is piloted by the Panchayati Raj ministry that aims to revolutionise property record maintenance in India.
• The residential land in villages will be measured using drones to create a non-disputable record.
• Property card for every property in the village will be prepared by states using accurate measurements delivered by drone-mapping. These cards will be given to property owners and will be Recognised by the Land Revenue Records Department.

What would be the Benefits of the Scheme?

• The delivery of property rights through an official document will enable villagers to access bank finance using their property as collateral.
• The property records for a village will also be maintained at the Panchayat level, allowing for the collection of associated taxes from the owners. The money generated from these local taxes will be used to build rural infrastructure and facilities.
• Freeing the residential properties including land of title disputes and the creation of an official record is likely to result in appreciation in the market value of the properties.
• The accurate property records can be used for facilitating tax collection, new building and structure plan, issuing of permits and for thwarting attempts at Property Grabbing.

What is the Significance of the Scheme?

• The need for this Yojana was felt since several villagers in the rural areas don’t have papers proving ownership of their land.
• In most states, survey and measurement of the populated areas in the villages has not been done for the purpose of attestation/verification of properties.
• The new scheme is likely to become a tool for empowerment and entitlement, reducing social strife on account of discord over properties.

About Panchayati Raj:

• After the Constitution came into force, Article 40 made a mention of Panchayat and Article 246 empowered the state legislature to legislate with respect to any subject relating to local self-government.
• Panchayati Raj Institution (PRI) was constitutionalized through the 73rd Constitutional Amendment Act, 1992 to build democracy at the grass roots level and was entrusted with the task of rural development in the country.
• PRI is a system of rural local self-government in India. Local Self Government is the management of local affairs by such local bodies who have been elected by the local people.

About the 73^rd constitutional Amendment:

• The 73^rdConstitutional Amendment added Part IX titled “The Panchayats” to the Constitution.
• Basic unit of democratic system-Gram Sabhas (villages) comprising all the adult members registered as voters.
• Three-tier system of panchayats at village, intermediate block/taluk/mandal and district levels except in States with population is below 20 lakhs (Article 243B).
• Seats at all levels to be filled by direct elections Article 243C (2).
• Reservation of Seats:
• Seats reserved for Scheduled Castes (SCs) and Scheduled Tribes (STs) and the chairpersons of the Panchayats at all levels also shall be reserved for SCs and STs in proportion to their population.
• One-third of the total number of seats to be reserved for women.
• One-third offices of chairpersons at all levels reserved for women (Article 243D).
• Uniform Five Year Term and elections to constitute new bodies to be completed before the expiry of the term.
• In the event of dissolution, elections compulsorily within six months (Article 243E).
• Independent Election Commission in each State for superintendence, direction and control of the electoral rolls (Article 243K).
• Panchayats have been authorised to prepare plans for economic development and social justice in respect of subjects illustrated in Eleventh Schedule (Article 243G).
• Source of Revenue (Article 243H):State legislature may authorise the Panchayats with
• Budgetary allocation from State Revenue.
• Share of revenue of certain taxes.
• Collection and retention of the revenue it raises.
• Establish a Finance Commission in each State to determine the principles on the basis of which adequate financial resources would be ensured for panchayats and municipalities (Article 243I).
• The following areas have been exempted from the operation of the Act because of the socio-cultural and administrative considerations:
• Scheduled areas listed under the Schedule V in the states of Andhra Pradesh, Bihar, Gujarat, Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa and Rajasthan.
• The states of Nagaland, Meghalaya and Mizoram.
• The hill areas of the district of Darjeeling in the state of West Bengal for which Darjeeling Gorkha Hill Council exists.
• However, an Act called the Provisions of Panchayats (Extension to the Scheduled Areas) Act, 1996 passed by the Government of India for the mentioned scheduled areas.

OPERATION TWIST

27, Apr 2020

Why in News?

• The Reserve bank of India has decided to bring back its bond swapping programmed billed as India’s Operation Twist with an aim to help monetary transmission. The RBI said that it will conduct purchase and sale of government securities under open market operations (OMO) for Rs10,000 crore each on 27 April.

Operation Twist:

• Operation Twist is the name given to a US Federal Reserve monetary policy operation, which involves the purchase and sale of Government Securities to boost the economy by bringing down long-term Interest Rates.
• Operation Twist normally leads to lower longer-term yields, which will help boost the economy by making loans less expensive, while saving becomes less desirable because it doesn’t pay as much Interest.

Functioning of Operation Twist by RBI:

• This operation involves buying and selling government securities simultaneously in order to bring down long-term interest rates and bolster short-term rates.
• There is an inverse relationship between the bond prices and their yields. As the central bank buys long-term securities (bonds), their demand rise which in turn pushes up their prices.
• However, the bond yield comes down with an increase in prices. Yield is the return an investor gets on his (bond) holding/investment.
• The interest rate in an economy is determined by yield. Thus, lower long-term interest rates mean people can avail long-term loans (such as buying houses, cars or financing projects) at lower rates.
• This also results in a dip in the expected returns from long-term savings which tilts the balance from saving towards spending. Hence, cheaper retail loans can help encourage consumption spending which is the largest GDP component in the Economy.

COMMODITY MARKETS OUTLOOK

25, Apr 2020

Why in News:

• Recently, the World Bank’s has released Commodity Markets Outlook.

About Commodity Markets Outlook

• It provides market analysis for major commodity groups – energy, metals, agriculture, precious metals, and fertilizers.
• The Report Forecasts Prices for 46 Key Commodities, Including Oil.

Highlights

• Energy and metals commodities:They are the most affected by the sudden stop to economic activity and the serious global slowdown that is anticipated. Commodities associated with transportation, including oil, have experienced the steepest declines.
• Agricultural prices: They are likely to stay broadly stable in 2020 because of relatively stable demand and all-time high levels of staple production and stock.  However, supply chain disruptions and government steps to restrict exports or stockpile commodities raise concerns that food security may be at risk in places.
• Gold prices:They were up 6.9% in the last quarter (January- March,2020) – its sixth consecutive quarterly rise.  The strong investor demand propped gold up despite weak jewelry demand in India and China.
• Oil Prices:These are expected to average at $35 per barrel in 2020. The decline in crude oil prices has been exacerbated by uncertainty around production agreements among the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers.
• Importers and Exporters:They are likely to see some long-term shifts in their markets due to the pandemic. These include Increasing transport costs due to enhanced border checks and thus impact on supply chains and substituting for imports with domestic goods.
• The Changing consumer behaviour, such as, people may choose to work remotely, travel less, and this could impact permanent drops in demand for oil, favourably impacting the accounts for oil importers.
• This leads to reduction in emissions of the harmful gases caused by the restrictions may also increase public pressure for greener transport and lowered fossil fuel use.

World Bank:

• The Bretton Woods Conference held in 1944, created the International Bank for Reconstruction and Development (IBRD) along with the International Monetary Fund (IMF).
• The IBRD later became the World Bank.
• The World Bank Group is a unique global partnership of five institutions working for sustainable solutions that reduce poverty and build shared prosperity in developing countries.
• It has 189 Member Countries.

Few Important Reports Released by the World Bank are:

• Ease of Doing Business
• Human Capital Index and
• World Development Report

The Development Institutions of the World Bank are:

• International Bank for Reconstruction and Development (IBRD)
• International Development Association (IDA)
• International Finance Corporation (IFC)
• Multilateral Guarantee Agency (MIGA)
• International Centre for the Settlement of Investment Disputes (ICSID)

PAYMENT OF MGNREGS IN FOODGRAINS

24, Apr 2020

Why in News?

• Chhattisgarh Chief Minister Bhupesh Baghel in a letter to Union Rural Development Minister Narendra Singh Tomar has asked the Centre to allow payment of the MGNREGA wages in the form of Foodgrains.

What is the reason for Chhattisgarh’s demand?

• The Chief Minister proposed that handing the workers foodgrains directly is better due to the lockdown and the continuing scare of the COVID-19.
• “Once we credit the MGNREGA wages, the worker will have to go to the banks to withdraw the money. This would not only be a bother but also could jeopardise social distancing norms.”
• Chhattisgarh does not have many bank branches and faces the problem of Internet connectivity in Naxal-affected areas. “Due to this, there are often problems like link failure and workers have to contact the branch many times to withdraw the amount,” he wrote in his letter.

What is the Concern?

• There are many concerns about making payments through foodgrains like at what rate the grains would be charged. Will the government make the payments based on the PDS or the FCI rates.
• The other concern is that the pay-outs during the pandemic should not exhaust the 100-day entitlement.
• These payments via food grains should not eat into the 100-day entitlement per family. Because they will need employment even after this pandemic subsides.
• If accessibility to banks is a problem, then the government must make timely cash payments in a public place.

About MGNREGA:

• The scheme was introduced as a social measure that guarantees “the right to work”.
• The key tenet of this social measure and labour law is that the local government will have to legally provide at least 100 days of wage employment in rural India to enhance their quality of life.

Key Objectives of the Scheme:

• Generation of paid rural employment of not less than 100 days for each worker who volunteers for unskilled labour.
• Proactively ensuring social inclusion by strengthening livelihood base of rural poor.
• Creation of durable assets in rural areas such as wells, ponds, roads and canals.
• Reduce urban migration from rural areas.
• Create rural infrastructure by using untapped rural labour.

Eligibility criteria for receiving the benefits under MGNREGA scheme:

• Must be Citizen of India to seek NREGA benefits.
• Job seeker has completed 18 years of age at the time of application.
• The applicant must be part of a local household (i.e. application must be made with local Gram Panchayat).
• Applicant must volunteer for unskilled labour.

What are the other Key Facts Related to the Scheme?

• The Ministry of Rural Development (MRD), Government of India is monitoring the entire implementation of this scheme in association with state governments.
• Individual beneficiary oriented works can be taken up on the cards of Scheduled Castes and Scheduled Tribes, small or marginal farmers or beneficiaries of land reforms or beneficiaries under the Indira Awaas Yojana of the Government of India.
• Within 15 days of submitting the application or from the day work is demanded, wage employment will be provided to the applicant.
• Right to get unemployment allowance in case employment is not provided within fifteen days of submitting the application or from the date when work is sought.
• Social Audit of MGNREGA works is mandatory, which lends to accountability and transparency.
• The Gram Sabha is the principal forum for wage seekers to raise their voices and make demands.
• It is the Gram Sabha and the Gram Panchayat which approves the shelf of works under MGNREGA and fixes their priority.

What is the Role of Gram Sabha?

• It determines the order of priority of works in the meetings of the Gram Sabha keeping in view potential of the local area, its needs, and local resources.
• Monitor the execution of works within the GP.

What are the Roles of Gram Panchayat?

• Receiving applications for registration
• Verifying registration applications
• Registering households
• Issuing Job Cards (JCs)
• Receiving applications for work
• Issuing dated receipts for these applications for work
• Allotting work within fifteen days of submitting the application or from the date when work is sought in the case of an advance application.
• Identification and planning of works, developing shelf of projects including determination of the order of their priority.

What are the Responsibilities of State Government in MGNREGA?

• Frame Rules on matters pertaining to State responsibilities under Section 32 of the Act and to Develop and notify the Rural Employment Guarantee Scheme for the State.
• Set up the State Employment Guarantee Council (SEGC).
• Set up a State level MGNREGA implementation agency/ mission with adequate number of high calibre professionals.
• Set up a State level MGNREGA social audit agency/directorate with adequate number of people with knowledge on MGNREGA processes and demonstrated commitment to social audit.
• Establish and operate a State Employment Guarantee Fund (SEGF).

OIL PRICE FELL BELOW ZERO

23, Apr 2020

Context:

• Recently, the oil prices of West Texas Intermediate (WTI) fell to minus $40.32 a barrel in interlay trade in New York (the USA). It has the best quality of crude oil in the world.
• It is the lowest crude oil price ever recorded below the zero mark while the previous lowest was recorded immediately after World War II (WWII).

Oil Pricing Around the World:

• The Organization of the Petroleum Exporting Countries (OPEC) used to work as a cartel and fix prices in a favourable band. It is led by Saudi Arabia, which is the largest exporter of crude oil in the world (single-handedly exporting 10% of the global demand).
• It could bring down prices by increasing oil production and raise prices by cutting production.The global oil pricing mainly depends upon the partnership between the global oil exporters instead of well-functioning competition.
• Cutting oil production is a difficult decision, because restarting it is immensely costly and complicated. If a country cuts production, it risks losing market share if other countries do not follow the suit.

Causes for the Oil Price Fall:

• The Crude oil prices were already falling before the global lockdown due to the higher supply and lower demand.
• The price was close to $60 a barrel at the start of 2020 and, by March-end, they were closer to $20 a barrel. The Problems arose when Saudi Arabia and Russia disagreed over the production cuts, required to keep prices stable.
• Likewise, Saudi Arabia led oil-exporting countries started undercutting each other on price while producing the same quantities of oil.
• The global spread of Covid-19 made it even worse as it sharply reduced the economic activity and the oil-demand, which made the Oil-exporting countries to cut production by 10 million barrels a day (the highest production cuts) and yet the demand for oil was reducing even further.
• The supply demand mismatch resulted in exhausted storage capacities. The oil prices started falling steeply because the May contracts for WTI were due to expire on 21st April, 2020 which posed huge challenges for both the oil producers and the consumers (contractors/buyers).

• The Producers started selling the oil at unbelievably low prices because shutting production would have been costlier to restart when compared to the marginal loss on May sales.The Consumers were facing the problem of storage. There is no space to store the oil even if they decided to buy and take the delivery.
• Accepting the oil delivery, paying for the transportation and storage would have been costlier than the hit on contract price.
• For both the holders of the delivery contract and the oil producers, it was less costly to pay $40 a barrel and get rid of the oil instead of storing it (consumers/buyers) or stopping production (producers). So this led to the negative WTI oil contract prices.

Impact of Oil pricing in India:

• It does not have any direct impact on India because Indian crude oil basket does not comprise WTI and it only has Brent and oil from some of the Gulf countries.
• But, the weakness in WTI reflects on the falling prices of Indian basket as well because oil is traded globally and has indirect impacts.
• The fall of oil pricing will benefit India in two ways:

1. 1.If the government passes on the lower prices to consumers, then individual consumption will be boosted whenever the economic recovery starts in India.
2. 2.If both, central and the state, governments decide to levy higher taxes on oil, it can boost Government Revenues.

Way Ahead:

• It was the WTI price for May in the US markets that went so low. Crude oil prices at other places fell but not too much. The prices for June and the coming months are pegged between $20 and $35 a barrel.The Investment budgets of exploration and production companies are expected to drop because of the low shale oil prices.
• Normally, this should force oil exporting countries to cut back production and negate the excess supply, restoring balance in the oil markets but the possibility of recent events from happening again cannot be ruled out.Eventually, it would be the demand-supply mismatch (adjusted for how much can be stored away) that will decide the fate of oil prices.

INDIAN TRADE CURBS AGAINST WTO PRINCIPLES, SAYS CHINA

21, Apr 2020

Why in News?

• China has recently stated that India’s recently adopted policy to curb opportunistic takeovers of domestic companies goes against the principles of the World Trade Organisation (WTO).

What is the Issue?

• The Government has amended certain sections of the FDI policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.
• While India shares a land border with Pakistan, Bangladesh, Myanmar, Nepal, Bhutan, China and Afghanistan, the move appears directed mostly at China.

What were the Changes Introduced?

• All FDI proposals from countries sharing border with India will be under the government approval route.
• The so-called automatic route, under which the central bank simply had to be informed after money was invested, has been blocked in such cases.
• Companies whose beneficial ownership also lies in such countries will have to undergo government scrutiny for any change in Foreign Holding.

How was the FDI Policy for Neighbours so far?

• A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited.
• However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route.
• Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

What Would be the Impact?

• The amended policy makes every type of investment by Chinese investors subject to government approval. Such a blanket application could create unintended problems.
• It does not distinguish between Greenfield and Brownfield investments. It may pose obstacles to Greenfield investments where Chinese investors bring fresh capital to establish new factories and generate employment in India.
  • Greenfield investments include building new production facilities in a foreign country. It refers to investment in a manufacturing, office, or other physical company-related structure or group of structures in an area where no previous facilities exist.
  • Brownfield investments are those used for purchasing or leasing existing production facilities to launch a new production activity.
• The new policy does not distinguish between the different types of investors, such as industry players, financial institutions, or venture capital funds. The restrictions on Venture capital funds may impact the prospects of many start-ups in the Indian market.

Why Chinese investment in India is Targeted?

• China’s footprint in the Indian business space has been expanding rapidly, especially since 2014.
• The Chinese investment in India in 2014 stood at $1.6 billion. This involved mostly investment from Chinese state-owned players in the infrastructure space in India.
• By 2017, the total investment had increased five-fold to at least $8 billion accompanied by a marked shift from a state-driven to market-driven approach.
• Total current and planned Chinese investment in India has crossed $26 billion in March 2020.

What is China’s Point on WTO Trade Violation?

• The additional barriers set by Indian side for investors from specific countries violate WTO’s principle of non-discrimination, and go against the general trend of liberalisation and facilitation of trade and investment.
• India also do not conform to the consensus of the G20 leaders and Trade Ministers to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.

WAYS AND MEANS ADVANCES

20, Apr 2020

Why in News?

• The Reserve Bank of India (RBI) has announced a 60% increase in the Ways and Means Advances (WMA) limit of state governments over and above the level as on March 31.

What is the Significance of this Move?

• It was done with a view to enabling them “to undertake COVID-19 containment and mitigation efforts” and “to better plan their market borrowings”.
• The increased limit comes at a time when government expenditure is expected to rise as it battles the fallout of a spreading Coronavirus.
• The availability of these funds will give government some room to undertake short term expenditure over and above its long term market borrowings.

What are Ways and Means Advances?

• The WMA scheme for the Central Government was introduced on April 1, 1997, after putting an end to the four-decade old system of adhoc (temporary) Treasury Bills to finance the Central Government deficit.
• They are temporary loan facilities provided by RBI to the government to enable it to meet temporary mismatches between revenue and expenditure.
• The government makes an interest payment to the central bank when it borrows money.
• The rate of interest is the same as the repo rate, while the tenure is three months.
• The limits for WMA are mutually decided by the RBI and the Government of India.
• They aren’t a source of finance per se. Section 17(5) of the RBI Act, 1934 authorises the central bank to lend to the Centre and state governments subject to their being repayable “not later than three months from the date of the making of the advance”.

What if the Government needs Extra Money for Extra Time?

• When the WMA limit is crossed the government takes recourse to overdrafts, which are not allowed beyond 10 consecutive working days.
• The interest rate on overdrafts would be 2 percent more than the repo rate.

Types of WMA:

• There are two types of Ways and Means Advances — normal and special.
  • Special WMA or Special Drawing Facility is provided against the collateral of the government securities held by the state. After the state has exhausted the limit of SDF, it gets normal WMA. The interest rate for SDF is one percentage point less than the repo rate.
  • The number of loans under normal WMA is based on a three-year average of actual revenue and capital expenditure of the state.

What are the existing WMA limits and Overdraft Conditions?

• For the Centre, the WMA limit during the first half of 2020-21 (April-September) has been fixed at Rs 120,000 crore. This is 60% higher than the Rs 75,000 crore limits for the same period of 2019-20. The limit for the second half of the last fiscal (October-March) was Rs 35,000 crore.
• For the states, the aggregate WMA limit was Rs 32,225 crore till March 31, 2020. On April 1, the RBI announced a 30% hike in this limit, which has now been enhanced to 60%, taking it to Rs 51,560 crore. The higher limit will be valid till September 30.
• The central bank, on April 7, also extended the period for which a state can be in overdraft from 14 to 21 consecutive working days, and from 36 to 50 working days during a quarter.

SPECIAL DRAWING RIGHTS (SDR)

20, Apr 2020

Why in News?

• India is not supporting a general allocation of new Special Drawing Rights (SDR) by the International Monetary Fund (IMF) because it feels it might not be effective in easing COVID-19-driven financial pressures.

What is a Special Drawing Right (SDR)?

• The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
• The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
• So far SDR 204.2 billion (equivalent to about US$281 billion) have been allocated to members, including SDR 182.6 billion allocated in 2009 in the wake of the global financial crisis.

What is the Reason Behind India’s Stand?

• The new SDR allocation was supposed to provide all 189 members with new foreign exchange reserves with no conditions.
• Such a major liquidity injection could produce potentially costly side-effects if countries used the funds for “extraneous” purposes.

What is the role of the SDR?

• The SDR was created as a supplementary international reserve asset in the context of the Bretton Woods fixed exchange rate system.
• The SDR serves as the unit of account of the IMF and some other international organizations.
• The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members.
• SDRs can be exchanged for these currencies.

Do SDRs are Reviewed Periodically?

• Yes, the SDR basket is reviewed every five years or earlier if warranted, to ensure that the basket reflects the relative importance of currencies in the world’s trading and financial systems.
• The reviews cover the key elements of the SDR method of valuation, including criteria and indicators used in selecting SDR basket currencies and the initial currency weights used in determining the amounts (number of units) of each currency in the SDR basket.

NBFC’S GETS 50,000 CRORE BOOSTER

18, Apr 2020

Why in News?

• The Reserve Bank of India (RBI) has announced a host of measures to provide liquidity support to non-banking financial companies (NBFCs), apart from giving them certain benefits for loans extended to the commercial Real Estate Sector.

What Measures did RBI took?

• Banks have to invest the funds availed under targeted long-term repo operation (TLTRO), in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs. Small and mid-sized NBFCs and micro-finance institutions (MFIs) should receive at least 50% of these funds.
• Banks can avail Rs. 50,000 crore through the targeted long-term repo operation. The first auction of TLTRO for Rs. 25,000 crore will be conducted on April 23.
• The RBI has also decided to provide special refinance facility of Rs. 50,000 crore to NABARD, SIDBI and NHB to enable them to meet sectoral credit needs.
• The regulator has also allowed non-banking institutions to extend the date for commencement for commercial operations (DCCO) by an additional one year, without treating the same as restructuring, if the project is delayed due to reasons beyond the control of the promoter.

What are the NBFC’s?

• A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature.
• NBFC does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
• A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

How they are Differed from other Commercial Banks?

• NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:

1. 1.NBFC cannot Accept Demand Deposits;
2. 2.NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
3. 3.Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of Banks.

SOVEREIGN GOLD BONDS

18, Apr 2020

Why in News?

• Recently, Reserve Bank of India (RBI) has decided to issue Sovereign Gold Bonds (SGBs) in six instalments, from April 2020 to September 2020.

About Sovereign Gold Bonds:

• They are government securities denominated in grams of gold. They are substitutes for holding physical gold.
• Its objective is to reduce the demand for physical gold and shift a part of the domestic savings (used for the purchase of gold) into financial savings.
• The Investors have to pay the issue price in cash and the bonds will be redeemed (bought back by the issuer) in cash on maturity. Issue price is the price at which bonds are offered for sale when they first become available to the public.
• The investor gets a fixed rate of interest on the investment amount throughout the tenure of the fund.
• The government will pay an interest at the rate of 2.5% per annum. The interest is payable semi-annually.
• It has a tenure of eight years, with exit options are available from the fifth year.
• It will be restricted for sale to resident individuals, Hindu Undivided Families (HUFs), Trusts, Universities and Charitable Institutions.
• Its minimum Permissible Investment Unit is 1 Gram of Gold.

How to Buy this Bonds?

• It can be bought through designated scheduled commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited, and designated post offices.
• We can also buy these bonds through National Stock Exchange of India Limited and Bombay Stock Exchange(BSE) Limited.

Advantages of the Gold Bond:

• It is advisable to invest in gold for portfolio diversification.
• It is considered one of the better ways of investing in gold as along with capital appreciation an investor gets a fixed rate of interest.
• It is tax efficient as no capital gains is charged in case of redemption on maturity.
• It a good way to ensure an investment that does not need physical storage of Gold.

Disadvantages of the Gold Bonds

• In long term investment unlike physical gold which can be sold immediately.
• It is listed on exchange but the trading volumes are not high, therefore it will be difficult to exit before Maturity.

IMF PROJECTS 1.9% GROWTH FOR INDIA IN 2020

16, Apr 2020

Why in News?

• The COVID-19 pandemic is expected to cause a -3% change in global output in 2020, much worse than the 2008-09 financial crises, as per the International Monetary Fund’s (IMF) World Economic Outlook (WEO).

Highlight:

• A rare disaster, a coronavirus pandemic, has resulted in a tragically large number of Human Lives being lost.
• As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown.
• The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.

World Economic Outlook (WEO), April 2020:

• India’s growth is expected to dip to 1.9% in 2020 and rebound to 7.4% in 2021.
• Assuming that the pandemic fades in the second half of 2020, the world economy is projected to grow at 5.8% in 2020 as economic activity normalizes, aided by policy.
• If the pandemic does not recede in the second half of 2020, global GDP would fall an additional 3% in 2020 and if the pandemic continues into 2021, global GDP may fall by an additional 8% relative to the baseline scenario.
• The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars, greater than the economies of Japan and Germany, combined.

Emerging Asia:

• Emerging Asia is projected to be the only region that grows in 2020, at a rate of 1.0%.
• Apart from India’s modest 1.9% in 2020, Indonesia is expected to grow at 0.5%, while others in the region experience contractions.

Factors of Economic Impact of the Disease:

• The economic impact of the disease depends on a number of factors and their unpredictable interaction, including the pandemic’s pathway, the intensity and effectiveness of containment efforts, supply chain disruptions, spending pattern changes, behavioural changes (for example around people visiting shopping malls and public transport use), significant tightening of global financial market conditions and so forth.

Way Forward:

• The IMF called on policymakers to make targeted fiscal, monetary and financial sector interventions to support impacted households and businesses.
• Fiscal measures should be two-fold, cushioning the impact on the most-exposed households and businesses, and reducing firm closures, i.e., preserving economic relationships.
• Fiscal support will need scaling up, if activity does not pick up sufficiently once restrictions are lifted or if economic activity stoppages are persistent.
• Monetary stimulus by large central banks and liquidity facilities to reduce systemic stress would be required to limit the shock, positioning the economy for a better recovery.
• Further Strong multilateral cooperation is essential to overcome the effects of the pandemic, including to help financially constrained countries facing twin health and funding shocks, and for channelling aid to countries with weak healthcare systems.

HELICOPTER MONEY

15, Apr 2020

Why in News?

Telangana Chief Minister K. Chandrashekar Rao has suggested RBI to adopt the concept of Helicopter Money to help state governments tide over the current crisis and kick-start economic activity in India.

What is Helicopter Money?

• This is an unconventional monetary policy tool aimed at bringing a flagging economy back on track.
• It involves printing large sums of money and distributing it to the public. American economist Milton Friedman coined this term.

Why it is Called So?

• It basically denotes a helicopter dropping money from the sky. Friedman used the term to signify “unexpectedly dumping money onto a struggling economy with the intention to shock it out of a deep slump.”
• Under such a policy, a central bank “directly increase the money supply and, via the government, distribute the new cash to the population with the aim of boosting demand and inflation.”

Why is Helicopter Money Needed Now?

• With the coronavirus-hit economy falling deeper and deeper into a chasm with each passing day, Telangana chief minister KC Rao has said helicopter money can help states comes out of this crisis.
• He asked for the release of 5% funds from GDP by way of quantitative easing (QE).

Is Helicopter Money the Same as Quantitative Easing?

• Quantitative easing also involves the use of printed money by central banks to buy government bonds. But not everyone views the money used in QE as helicopter money.
• It sure means printing money to monetise government deficits, but the government has to pay back for the assets that the central bank buys. It’s not the same as bond-buying by central banks “in which bank-owned assets are swapped for new central bank reserves.”

How will Helicopter Money Help Indian Economy?

• Simply put, Helicopter Money means extension of non-repayable money transfer from the central bank to the state and central governments, to infuse liquidity in the system.
• The policy aims at putting more money into the pockets of people to nudge them to spend more money and in turn pick-up economic activity in the country.
• The direct impact of Helicopter Money is rise in disposable incomes of the people, increase in money supply with an intention to boost demand and inflation in the economy.

RETAIL INFLATION

15, Apr 2020

Why in News?

• Recently, The Consumer Price Index (CPI) data has been released by the National Statistical Office (NSO), the retail inflation in March 2020 dropped to 5.91% due to decrease in demand and lowered food prices.

Highlights:

• Its rate was based on 66% of the usual price quotations as the nationwide lockdown to counter Covid-19 pandemic had led to suspension of fieldwork for price collection after March 19,2020.
• The inflation rate in March 2020 remained within the Reserve Bank of India’s (RBI’s) medium-term target of 4±2% for Consumer Price Index (CPI) inflation, which is due to suppressed demand, especially for non-essential items, as the lockdown was imposed towards the end of March,2020.
• The inflation rose to 6.59% from 6.36% in Fuel and Light segment February 2020. The Food inflation moderated to 8.76% from 10.81% in March 2020.The inflation of various items like vegetables, spices, pulses continue to be in double digits.
• Pressure is expected due to the shortages witnessed in different centres with mandi arrivals being affected due to lockdown.
• The inflation is expected to be brought down by low energy prices and subdued economic activity. However, the food price inflation of 8.7% will tend to increase.
• It is expected that the Reserve Bank of India (RBI) undertakes further repo rate cuts. Repo Rate is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds.
• When RBI increases the repo rate, this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in Arresting Inflation.
• The RBI reduces the repo rate in the event of a fall in inflationary pressures. Ideally, a low repo rate should translate into low-cost loans for general masses.

Inflation:

• It refers to the rise in the prices of most goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc.
• It measures the average price change in a basket of commodities and services over time.
• It is indicative of the decrease in the purchasing power of a unit of a country’s currency. This could ultimately lead to a deceleration in economic growth.
• It is measured by the Ministry of Statistics and Programme Implementation.
• It is primarily measured by two main indices — WPI (Wholesale Price Index) and CPI (Consumer Price Index) which measure wholesale and retail-level price changes.
• The CPI has five sub-groups including food and beverages, fuel and light, housing and clothing, bedding and footwear.

About the National Statistical Office:

• It is the central statistical agency of the Government mandated under the Statistical Services Act 1980under the Ministry of Statistics and Programme Implementation.
• It is responsible for the development of arrangements for providing statistical information services to meet the needs of the Government and other users for information on which to base policy, planning, monitoring and management decisions.
• Its services include collecting, compiling and disseminating official statistical information.
• All business operations in NSO are done in compliance with international standards, procedures and best practices.

COVID-19: GLOBAL MARKETS AND ECONOMY

15, Apr 2020

Context:

• The COVID-19 pandemic has caused an unprecedented human and health crisis. The measures necessary to contain the virus have triggered an economic downturn. The latest Global Financial Stability Report shows that the financial system has already felt a dramatic impact, and a further intensification of the crisis could affect global financial stability.
• Volatility has spiked –
• The uncertainty about the economic impact of the pandemic, had increased the volatility in the market.
• With the spike in volatility, market liquidity has deteriorated significantly.
• The First Line of Defense –
• To preserve the stability of the global financial system and support the global economy, central banks across the globe have been the first line of defense.
• 1. First,they have significantly eased monetary policy by cutting policy rates.
• 2. Second,central banks have provided additional liquidity to the financial system, including through open market operations.
• 3. Third,a number of central banks have agreed to enhance the provision of U.S. dollar liquidity through swap line arrangements.
• 4. And finally, central banks have reactivated programs used during the global financial crisis, including to purchase riskier assets such as corporate bonds.
• By effectively stepping in as “buyers of last resort” in these markets and helping contain upward pressures on the cost of credit, central banks are ensuring that households and firms continue to have access to credit at an Affordable Price.
• The Vulnerability of Emerging Markets –
• As so often happens at times of financial distress, emerging markets risk bearing the heaviest burden.
• In fact, emerging markets have experienced the sharpest portfolio flow reversal on record (FPIs cashing out all they can) posing stark challenges to more vulnerable countries.
• The Spiralling Effect –
• Tougher & lasting containment measures = further tightening of global financial conditions = more severe and prolonged downturn.
• Such a tightening may, in turn, expose financial vulnerabilities that have built in recent years in the environment of extremely low interest rates. This would further exacerbate the COVID-19 shock.
• As firms become distressed and default rates climb higher, credit markets may come to a sudden stop.
• Looking Ahead –
• Central banks will remain crucial to safeguarding the stability of global financial markets and maintaining the flow of credit to the economy.
• But this crisis is not simply about liquidity.
• It is primarily about solvency—at a time when large segments of the global economy have come to a complete stop.
• As a result, both monetary and fiscal policy have a vital role to Play.
• The Troubled Path of India –
• The immediate economic and market impacts of the coronavirus have been on India’s financial markets as well as the rupee, which hit a new low.
• For firms laden with dollar-denominated debts, a continuous weakening of the rupee is likely to intensify their struggles to repay their obligations.
• Beyond the financial shocks, India has to urgently find a way to cushion the demand-side shocks induced by ongoing containment measures.
• Although the recent drop in oil prices offers some reprieve, it is inevitable that India will have to undertake more aggressive counter-cyclical fiscal measures at some stage to buffer against acute negative shocks arising from the spread of Covid-19.
• Together, monetary, fiscal, and financial policies should aim to cushion the impact of the COVID-19 shock and to ensure a steady, sustainable recovery once the pandemic is under control. Close, continuous international coordination will be essential to support vulnerable countries, to restore market confidence, and to contain Financial Stability Risks.

DEVELOPING COUNTRY STATUS IN WTO

14, Apr 2020

Why in News?

• US president has asked for changing the WTO rules for changing the developing country status of China.

China – a developing country or Developed Country?

• China became a WTO member in 2001. By 2011, China became the second-largest economy in GDP terms, the first largest merchandise exporter, the fourth largest commercial services exporter and the first destination for inward FDI among developing countries.
• So if China is forced to take on the duties of a developed country and forego the benefits of a developing country, the West could soon ask other developing countries that are ahead of China (at least in per capita terms) to do the same.

Who are the developing countries in the WTO?

• There are no WTO definitions of “developed”and “developing”
• Members announce for themselves whether they are “developed” or “developing” countries.
• However, other members can challenge the decision of a member to make use of provisions available to developing countries.

What are the advantages of “Developing Country” status?

• Developing country status in the WTO brings certain rights.
• Developing country status ensures special and differential treatment (S&DT)or provisions which allow them more time to implement agreements and commitments, include measures to increase trading opportunities, safeguard their trade interests, and support to build capacity to handle disputes and implement technical standards.

WTO Norms for Recognition of Developed, Developing and LDCs:

• Under the WTO system, generally, countries are designated as developed, developing, and least developed countries (LDCs).
• The uneven level of development between developed and developing countries in the WTO is a well-recognised fact.
• Article XVIII of the General Agreement on Tariffs and Trade (GATT) recognises that attaining the objectives of this agreement would require facilitating the progressive development of those countries that can only support low levels of development and are at the early stages of development.
• Accordingly, countries self-designate themselves as ‘developing country’ to take advantage of provisions like Article XVIII of GATT and other special and differential treatment (S&DT) provisions in the WTO agreements.
• These provisions are aimed at increasing trade opportunities for developing countries, ensuring longer transitional periods to comply with WTO obligations, and affording technical assistance to countries, among other things.

What are “Special and Differential Treatment” Provisions?

• Longer time periods for implementing Agreements and commitments,
• Measures to increase trading opportunities for developing countries,
• Provisions requiring all WTO members to safeguard the trade interests of developing countries,
• Support to help developing countries build the capacity to carry out WTO work, handle disputes, and implement technical standards, and
• Provisions related to least-developed country (LDC) Members.
• The concept of non-reciprocal preferential treatment for developing countries that when developed countries grant trade concessions to developing countries, they should not expect the developing countries to make matching offers in return.

Demands by Developed Countries:

• For some time now, developed countries, mainly the US, have been asking the WTO to end the benefits being given to developing countries.
• Nearly two-thirds of the members of the World Trade Organization (WTO) have been able to avail themselves of special treatment and to take on weaker commitments under the WTO framework by designating themselves as Developing Countries.

CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE

14, Apr 2020

Why in News?

• The Ministry of Commerce and Industry has clarified that the contributions to the Chief Minister’s Relief Fund or the State relief fund will not qualify as Corporate Social Responsibility (CSR) expenditure, while any donation to the PM CARES Fund will.

What are the Key Points?

• The Chief Minister’s Relief Fund or State Relief Fund for COVID-19 is not included in Schedule VII of the Companies Act, 2013, and therefore any contribution to such funds shall not qualify as admissible CSR expenditure.
• Schedule VII of the Companies Act, 2013 provides the list of activities that can be included in CSR.
• Some political parties criticised this saying it is discriminatory and goes against the constitutional principle of federalism.
• However, donations to the State Disaster ManagementAuthority to combat COVID-19 can be counted as admissible CSR expenditure.

What is Corporate Social Responsibility?

• The term “Corporate Social Responsibility” in general can be referred to as a corporate initiative to assess and take responsibility for the company’s effects on the environment and impact on social welfare.In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013. India is the first country in the world to mandate CSR spending along with a framework to identify potential CSR activities.
• The CSR provisions within the Act is applicable to companies with an annual turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a net profit of Rs. 5 crore and more.
• The Act requires companies to set up a CSR committee which shall recommend a Corporate Social Responsibility Policy to the Board of Directors and also monitor the same from time to time.

• The Act encourages companies to spend 2% of their average net profit in the previous three years on CSR activities.
• The indicative activities, which can be undertaken by a company under CSR, have been specified under Schedule VII of the Act. The activities include:
• Eradicating extreme hunger and poverty,
• Promotion of education, gender equality and empowering women,
• Combating Human Immunodeficiency Virus, Acquired Immune Deficiency Syndrome and other diseases,
• Ensuring environmental sustainability;
• Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women etc.

Strategic importance of Social Responsibility:

• A healthy business can only succeed in a healthy society. Thus, it is in the best interest of a company to produce only goods and services which strengthen the health of society
• If the company wants to succeed in the long term it needs to have the acceptance—or licence to operate—from social actors affected by the company’s’ operations.

PRADHAN MANTRI JAN AROGYA (PM-JAY)

14, Apr 2020

Context:

• Recently, the National Health Authority has launched an express empanelment process called Hospital Empanelment Module (HEM) Lite to bring a large number of private hospitals under Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY).

Highlights:

• With the launch of express empanelment process, patients suffering from serious illnesses, such as cancer, cardiac issues and diabetes that require continuous treatment, will be able to continue getting inpatient services without the fear of contracting the Covid -19 infection.
• Hospitals can empanel themselves for a temporary period of 3 months through a simpler, user friendly online system available on the scheme’s website pmjay.gov.in.
• Using the HEM Lite process, the system has been built in a way to ensure that the rest of the process of approvals by concerned authorities is expeditious.
• The hospitals have the choice whether to provide regular treatment for serious illnesses such as cancer and cardiac illnesses under the scheme or convert themselves into covid-19 only hospitals providing dedicated testing and treatment to covid-19 patients.
• The government recently decided to bring testing and treatment of covid-19 under AB PM-JAY scheme.

About Pradhan Mantri Jan Arogya (PM-JAY):

• It offers a sum insured of Rs.5 lakhs per family for secondary care (which doesn’t involve a super specialist) as well as tertiary care (which does).
• It is an entitlement-based scheme that targets the beneficiaries as identified by latest Socio-Economic Caste Census (SECC) data. Once identified by the database, the beneficiary is considered insured and can walk into any empanelled hospital.
• The insurance cost is shared by the centre and the state mostly in the ratio of 60:40.

• Empanelled hospitals agree to the packaged rates under PM-JAY—there are about 1,400 packaged rates for various medical procedures under the scheme.
• It also has prescribed a daily limit for medical management.

Significance of PM_JAY:

• It will be cashless and largely paperless. The poor and vulnerable stand to benefit from the scheme.
• It will be an enabler of quality, affordability and accountability in the health system.
• Ayushman Bharat is expected to advance India’s pursuit of universal health coverage (UHC).
• This will ensure all people can access quality health services when and where they need them,without suffering financial hardship, which is also one of the WHO South-East Asia Region’s Flagship
• From the day PMJAY was launched, almost half of all eligible families are now covered for hospital
• Another impact of the PMJAY will be rationalisation of the cost of care in the private sector.The scheme will create lakhs of jobs for professionals and non-professionals — especially women.

About State Health Agency (SHA)

• It is the apex body of the State Government responsible for the implementation of AB PM-JAY in the State.It will sign an MoU with express empanelled hospital for three months only. It can continue with the empanelment on mutual agreement between hospital and SHA after this period, but only after the detailed empanelment process is followed i.e. hospital has filled the entire form and District Implementation Unit (DIU) and SHA have verified the details, etc.
• These packaged rates also mention the number of average days of hospitalization for a medical procedure and supporting documents that are needed.
• These rates are flexible, but once fixed hospitals can’t change it and under no circumstances can they charge the beneficiary.
• The National Health Agency has been constituted as an autonomous entity under the Society Registration Act, 1860 for effective implementation of PM-JAY in alliance with state governments.

Way Forward:

• There is a Need for real-time monitoring of implementation. This will allow problems to be detected early on, thereby enhancing accountability, as well as facilitating course corrections where necessary.
• Money must be spent wisely. The investment in frontline services is cost-effective.  This must be backed up by effective and affordable hospital care. Special attention is needed to build confidence in and demand for the country’s primary care services.

INDUSTRIAL BODIES CLAIMS FOR A RELIEF PACKAGE

10, Apr 2020

Why in News?

• The National Real Estate Development Council (NAREDCO) and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) have sought 200 billion dollars from the government as a relief package to minimise the economic impact of COVID-19.
• The relief package demanded is around 10% of the nation’s Gross Domestic Product (GDP).

Demands of the Industrial Bodies:

• They have also called for a partial lifting of the lockdown on construction sites to reduce job losses.
• NAREDCO also called for suspending all cases under the National Company Law Tribunal (NCLT) for the next six months amid economic slowdown.
• The real estate sector accounts for 7% of the GDP and employs 11% of the country’s population.

About NAREDCO:

• NAREDCO is hailed as the apex national body for the real estate industry.
• National Real Estate Development Council (NAREDCO) was established as an autonomous self-regulatory body in 1998. It comes under the aegis of the Ministry of Housing and Urban Affairs, Govt. of India.

About ASSOCHAM:

• The Associated Chambers of Commerce and Industry of India is one of the highest trade associations in India. It was established in 1920.

CORONA BONDS

08, Apr 2020

Context:

• Corona bonds is recently seen in news, which could be a possible resolution to alleviate Eurozone financial struggles amid the coronavirus crisis.

About Corona Bonds:

• It would be a collective debt amongst EU member states, with the aim of providing financial relief to Eurozone countries battered by the coronavirus.
• It would also be mutualised and supplied by the European Investment Bank, with the debt taken collectively by all member states of the European Union.
• The idea of corona bonds has received reinforcement from nine EU countries, all keen to reach a financial solution as soon as possible. Not all countries in the European Union (EU) are in favour of this idea.
• The resistance has come most notably from the ‘Frugal Four’. The Frugal Four consists of Germany, The Netherlands, Finland, Austria
• These countries are of the opinion that finance is an individual nation’s responsibility. They believe that each EU member state should keep their finances in order.

Significance:

• It would allow European countries to gain essential financial support.
• Their States could receive economic aid without expanding their national debt.
• If all the EU member states support this idea, then this would likely strengthen confidence amongst Europe.

Way Forward:

• Its disadvantage is that it would not necessarily enhance debt sustainability.
• Its concept would only aid future debt forgiveness, distinguishing between coronavirus related debt and legacy debt.
• The implementation of a common bond amongst EU member states could also potentially take a lot of time. The delay is not ideal for countries who require access to funds immediately.

IHS MARKIT INDIA SERVICES BUSINESS ACTIVITY INDEX

07, Apr 2020

Why in News?

• The IHS Markit India Services Business Activity Index (i.e Service Purchasing Managers’ Index (PMI)) has registered a fall in the month of March.

Key Points:

• The Index registered 49.3 in March, down from February’s 85-month high of 57.5.
• In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction. The fall implies contraction in India’s services sector activity during March basically due to COVID-19.
• The COVID-19 pandemic has reduced demand, particularly in overseas markets. Nationwide store closures and prohibition to leave the house weighed heavily on the services economy.

Composite PMI Output Index:

• The Composite PMI Output Index that maps both the manufacturing and services sector also fell to 50.6 in March, down 7 points from February’s 57.6.
• This signals a sharp slowdown in private sector output growth and brought an abrupt end to the recent strong upward-moving Expansion Trend.

What is Purchasing Managers’ Index:

• The Index is compiled by IHS Markit for more than 40 economies worldwide.
• IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.
• PMI is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
• It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.
• The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and Investors.

RBI PLANS FOR AN FRAUD OVERSIGHT WING

06, Apr 2020

Why in News?

• The Reserve Bank of India (RBI) is in the process of putting together an exclusive wing for banking fraud oversight.

About “Fraud Oversight Wing”:

• This wing will have teams for meta-data processing and analysis, artificial intelligence analysis units, as well as proactive risk assessment cells.
• The banking fraud oversight wing may comprise up to 600 officers along with experts from the private sector. The RBI plans to hire industry veterans to lead the teams.
• Experts from the private sector working in all these domains will be brought in to train the new members in the fraud oversight wing. These training sessions will be repeated every year in the initial years.
• These new teams will also be given training in the latest technologies, so that they can also prevent another Yes Bank kind of event.

Need of such an Institution:

• The RBI had been mulling ways to proactively detect such frauds after various Bank loan fiascos.

1. 1.Punjab National Bank Fraud. The bank fraud was of the tune of Rs 11,450 crore involving diamond merchant Nirav Modi.
2. 2.Yes Bank Case: Even though there were representatives of RBI on the Yes Bank board, it was found to be difficult for them to flag the risk, as they had never done a credit risk assessment task in their career so far.

Earlier Attempts of RBI:

• The banking regulator in 2019 had moved to create a separate cadre of its own employees who would work in regulation and oversight sections.
• However, the working conditions were very strict and anyone opting for that cadre would not be allowed to leave for three years. To overcome this problem, the RBI sought to create a fraud oversight wing.

THE SPECTRE OF A POST-COVID-19 WORLD

04, Apr 2020

Context:

• In many parts of the world, borders are closed, airports, hotels and businesses shut, and school cancelled. These unprecedented measures are tearing at the social fabric of some societies and disrupting many economies, resulting in mass job losses and raising the spectre of widespread hunger.

Digital Factor:

• The physical analog world is being decimated, with traditional analog businesses including hotels, restaurants and airplanes in crisis.
• The digital world, however, is thriving. We are surviving through this pandemic because of technology like smartphones.
• In the post-pandemic world, technology will be as ubiquitous as it is now, if not more, and tech companies will become even more powerful and dominant.
• Use of surveillance –
• It is a useful weapon to fight the virus – for instance, countries like Israel are using smartphones to figure out who’s been where in order to track clusters of the virus.
• The technocratic authoritarian model in Beijing and East Asia, such as in Singapore and to some extent South Korea are dealing more effectively with the virus.
• But at the same time, such moves threaten to undermine individual freedom and privacy.
• The sophistication of such technologies may determine our socio-political rights in the future.

Social Change:

• Changes in people:
• COVID-19 can have lasting effects on people’s values.
• It changes the habits of the people– they work and travel in a different way, their daily routines and the very rhythm of their lives change, including when they eat and how they communicate with their families
• Religion – one of the biggest sources of culture for the human being will undergo changes, the epistemology of society – will never again be the same.

• Police States:
• COVID-19 will fast-forward the fourth industrial revolution and digitalization of all services, including public services. .
• Digital technology makes it possible to create subtle police states as citizens might voluntarily offer private data in hope the state can provide security.
• International cooperation:
• On the international level, there will be less cooperation.
• The trend of nationalism and self-reliance will continue, especially as the fear of the “external” and “foreign” can be exploited by populists.
• Fragile healthcare and weak Economy:
• Most states are challenged in their resilience economically, socially and in terms of public health.
• The public health crisis compounds existing domestic economic crises amid a global economic depression following the end of the COVID-19 crisis.
• This might overthrow those regimes whose legitimacy is undermined by inability to manage the crisis.

Prognosis for India

• India was estimated to be among the 15 most affected economies by the COVID-19 epidemic
• An early estimate by the Asian Development Bank, soon after the epidemic was declared, was that it would cost the Indian economy $29.9 billion.
• A recent industry estimate pegs the cost of the lockdown at around $120 billion or 4% of India’s GDP.
• The Confederation of Indian Industry (CII) had at one point warned that India would require up to six months even after the entire course of the COVID-19 epidemic is over to restore normalcy and business continuity.
• To compensate for this loss, massive inflows of government funds would be needed.
• India, like any other developing country, might find it difficult to find adequate resources for this purpose. Hence, it would be wise to start thinking of what next, if at least to try and handle a situation created by the most serious pandemic in Recent Centuries.

INDIA’S DEFENCE EXPORT -IMPORT

03, Apr 2020

Why in News?

• Based on the latest estimates released by the Stockholm International Peace Research Institute (SIPRI) in the period between 2009-13 and 2014-18, Indian defence imports fell even as Exports Increased.

Highlights:

• Indeed, the period between 2012 and 2019 saw Indian defence exports experiencing a considerable jump sourced from Indian public and private sector enterprises.
• In the last two fiscal years, 2017-18 and 2018-19, exports have witnessed a surge from 7,500 crore to 11,000 crore, representing a 40% increase in exports. Small naval crafts account for the bulk of India’s major defence exports. However, export of ammunition and arms remain low.
• As a percentage of total Indian trade, defence-related exports for the fiscal years 2017-18 and 2018-19 were 0.8 and 0.73%, respectively.
• Russia’s arms export to India fell 42?tween 2014-18 and 2009-2013. In the same period, India’s arms imports decreased 24%.
• Although India is still the second-largest arms importer in the world over the last five years, with Pakistan ranking at 11th.
• Broadly, Two Factors appear to be driving this shift.
• The first is the ‘Make in India’ initiative, as part of which a number of components from Indian private and public sector enterprises have been prioritised by the government.
• The second set of factors is extraneous to India in the form of delays in supplying equipment by vendors and the outright cancellation of contracts by the Indian government or at least a diminution of existing contracts.

Role of Make in India and DPP:

• Under the ‘Make in India’ initiative, the Defence Procurement Procedure (DPP) lays out the terms, regulations and requirements for defence acquisitions as well as the measures necessary for building India’s defence industry.
• It created a new procurement category in the revised DPP of 2016 dubbed ‘Buy Indian Indigenously Designed, Developed and Manufactured’ (IDDM).
• The ‘Make’ procedure has undergone simplification “earmarking projects not exceeding ten crores” that are government funded and 3 crore for Micro, Small and Medium Enterprises (MSMEs) that are industry funded.
• In addition, the government has also introduced provisions in the DPP that encourages technology transfers.
• Further Government dispensed with the erstwhile No Objection Certificate (NOC) under the DPP restricting exports of aerospace products, several dual-use items and did away with two-thirds of all products under these heads.

Public Sector Support:

• According to government of India data for the financial year 2018-19, the three armed services for their combined capital and revenue expenditures sourced 54% of their defence equipment from Indian industry which in turn helped decrease imports and augment exports.
• Among arms producers, India has four companies among the top 100 biggest arms producers of the world.
• Hindustan Aeronautics Limited (HAL)
• Indian ordnance factories
• Bharat Electronics Limited (BEL)
• Bharat Dynamics Limited (BDL)
• It is estimated, according to SIPRI, their combined sales were $7.5 billion in 2017, representing a 6.1% jump from 2016.

Impact on Exports-Imports owing to Cancellation and Delays:

• Indian defence acquisitions have also fallen due to the cancellation of big-ticket items.
• Take for instance the India-Russia joint venture for the development of the advanced

Su- 57 stealth Fifth Generation Fighter Aircraft (FGFA).

• India cancelled involvement in 2018 due to rising dissatisfaction in delays with the project as well as the absence of capabilities that would befit a fifth generation fighter jet.
• In 2015, the government also reduced the size of the original acquisition of 126 Rafale Medium Multi-Role Combat Aircraft (MMRCA) from Dassault to 36 aircraft, which is also responsible for significantly driving down the import bill.
• The delays in the supplies of T-90 battle tanks, and Su-30 combat aircraft from Russia and submarines from France, in 2009-13 and 2014-18, also depressed imports.

Bottlenecks in the Defence Sector:

• Governments, including the incumbent, have tended to privilege Defence Public Sector Units (DPSUs) over the private sector, despite ‘Make in India’.
• This model is highly skewed, undermining the growth of private players and diminishes the strength of research and development, thereby impairing development of the sector.

Stockholm International Peace Research Institute:

• SIPRI is an independent international institute dedicated to research into conflict, armaments, arms control and disarmament.
• Established in 1966, SIPRI provides data, analysis and recommendations, based on open sources, to policymakers, researchers, media and the interested public.
• Based in Stockholm, SIPRI is regularly ranked among the most respected think tanks worldwide.

ELECTRONIC MANUFACTURING SCHEME

03, Apr 2020

Why in News:

• The government has recently notified three Electronic Manufacturing Scheme involving total incentives of around Rs 48,000 crore for Electronics Manufacturing.

About:

• The Three Schemes are
• The Production Linked Incentive Scheme (PLI) for large scale electronics manufacturing.
• The scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).
• The modified Electronics Manufacturing Clusters (EMC 2.0) Scheme.
• They are expected to attract Rs 1 lakh crore investment in the sector, Boost local electronics manufacturing and generate manufacturing revenue potential of Rs 10 lakh crore by 2025 and create 20 lakh direct and indirect jobs by 2025.

About Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing:

• It proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including electronic components and semiconductor packaging.
• It will get an incentive of 4 to 6% to electronic manufacturing companies on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies over a period of next 5 years.
• It shall only be applicable for target segments namely mobile phones and specified electronic components.
• The production of mobile phones in the country has surged eight-times in the last four years.

About the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors:

• It is notified for manufacturing of electronics components and semiconductors has a budget outlay of Rs 3,285 crore spread over a period of eight years.
• Under the scheme, a financial incentive of 25% of capital expenditure has been approved by the Union Cabinet for the manufacturing of goods that constitute the supply chain of an electronic product.
• It is estimated by the government that the push for manufacturing of electronics components and electronic chips will create around 6 lakh direct and Indirect Jobs.

About Modified Electronics Manufacturing Clusters 2.0 Scheme:

• It has a total incentive outlay of Rs 3,762.25 crore spread over a period of 8 years with an objective to create 10 lakh direct and indirect jobs under the scheme.
• It will provide financial assistance up to 50% of the project cost subject to a ceiling of Rs 70 crore per 100 acres of land for setting up of Electronics Manufacturing Cluster projects.
• Under the scheme, the Electronic manufacturing clusters to be set up will be spread in an area of 200 acres across India and 100 acres in North East part of the country.

BATTLE TO SET OIL PRICES

03, Apr 2020

Context:

• The global economy, grappling with the COVID-19 pandemic, is now facing an energy war, with crude oil prices crashing in the international market. Crude oil prices crashed, as the Organisation of the Petroleum Exporting Countries (OPEC) and its alliance partners failed to reach any consensus on cutting back production to levels that would enable prices to Remain Stable.

COVID-19 and its Impact on Oil market:

• There has been a spectacular fall of around 30% in crude oil prices.
• The International Energy Agency (IEA) has scaled down global demand for oil, a move not taken by the energy watchdog since 2009.
• Demand for oil had already weakened owing to the global economic slowdown, and this weakening has become more pronounced due to the COVID-19 pandemic, which has hit China’s economy and reduced consumption by the world’s largest importer.

US – Russia: Capturing the Market:

• The U.S., as the largest oil producer today, has stayed away from the OPEC-plus arrangement, hoping that production cuts by OPEC-plus countries will help it increase its market share.
• Russia refused any production cuts, unleashing an energy war with Saudi Arabia.
• Russia’s decision to reject any production cuts is driven directly by its strategy of denying market share to American shale oil producers.

American Shale:

• The American producers rely on higher prices in the range of $50-$60 to remain profitable because of higher production costs.
• At $31 per barrel, not more than five American shale oil producers can remain profitable at current prices.
• President Donald Trump has scrambled to put together a rescue package for the shale oil companies.

Sanctions on Rosneft:

• Russia also remains resentful of sanctions imposed on Rosneft, which is building the gas pipeline project Nord Stream 2 across the Baltic Sea, carrying Siberian gas to Germany, a major consumer.
• This pipeline was delayed due to opposition from Denmark’s environmental activists and could not be completed before the U.S. sanctions kicked in.
• Moscow has accused Washington of using geopolitical tools for Commercial Reasons.

Saudi Arabia and Russia:

• Both Saudi Arabia and Russia depend heavily on oil revenues — upwards of 80% of export revenues accrue from crude oil.
• Both are also fighting to retain market share.
• It has been reported that Saudi Arabia has agreed to supply crude oil at lower rates to refiners in India and China, two primary customers, but refused to supply to other refiners in Asia.
• This will impact on India’s oil procurement from the U.S.
• Can Russia and Saudi Arabia sustain the energy war for long? –
• Saudi Arabia’s production cost is the cheapest in the world and it can ramp up production to around 12 million barrels a day.
• By offering discounts, it can undercut other producers, including Russia. Domestic considerations also matter.

Benefit to Importing Countries:

• Lower crude oil prices are not necessarily bad news for oil importing countries like India, which is the world’s third-largest importer of crude oil and the fourth largest importer of LNG.
• Impact on the global economy: The global economy, already impacted by President Donald Trump’s trade war with China and other countries, including India, and the COVID-19 pandemic, may find lower energy costs helpful in overall growth.

Benefits for India:

• From a high of $147 per barrel in 2008, crude oil prices have fallen to around $24 per barrel and may even go further southwards.
• India, with 80% of its energy requirements met by imports from the international market, stands to save ₹10,700 crores for every $1 drop in prices.
• While this may help manage the current account deficit, fiscal deficit and inflation.
• If the cost of fuel at the pump is passed on to consumers, it will have a multiplier effect.
• Lower cost will reduce transportation costs and boost demand.
• The consumer, however, may not benefit much since the government may choose to use this financial windfall for other purposes, like bailing out banks which have been hollowed out by NPAs to leading Indian companies.

COVID-19: MEASURES BY RBI

02, Apr 2020

Context:

• The Reserve Bank of India (RBI) has announced measures to fight economic disruptions caused by COVID19, including extension of the realisation period of export proceeds and allowing States to Borrow More.

Realisation Period of Export Proceeds:

• Presently, the value of the goods or software exports made by exporters is required to be realised fully and repatriated to the country within nine months from the date of exports.
• In view of the disruption caused by the pandemic, the time period for realisation and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export.
• The measure will enable exporters to realise their receipts, especially from COVID19 affected countries, within the extended period.
• This will also provide greater flexibility to exporters  to negotiate future export  contracts with buyers abroad.

Ways and means limit for the states:

• The RBI has formed an advisory committee to review the ways and means limit for State governments and union territories.
• Till the panel submits its report, the RBI has increased the ways and means advances limit by 30% for States and union territories.
• This would enable State governments to tide over the situation arising from the outbreak of the COVID19 pandemic.
• The revised limits will come into force with effect from April 1, 2020 and will be valid till September 30, 2020.

‘Ways and Means Advances’:

• It is a temporary facility to meet revenue mismatches – mismatches in receipts and payments of the government.Under this scheme, a government can avail itself of immediate cash from the RBI.

Counter Cyclical Capital Buffers (CCyB):

• The central bank has also deferred the implementation of counter cyclical capital buffers (CCyB) for banks.
• Based on the review and empirical analysis of CCyB indicators, RBI has decided that it is not necessary to activate CCyB for a period of one year or earlier, as may be necessary.

CCyB:

• Counter Cyclical Capital buffer is the capital to be kept by a bank to meet business cycle related risks.
• It is aimed to protect the banking sector against losses from changes in economic conditions.
• Banks may face difficulties in phases like recession when the loan amount doesn’t return. To meet such situations, banks should have their own additional capital.
• This is an important theme of the Basel III norms.

WAYS AND MEANS ADVANCE SCHEME

02, Apr 2020

Why in News?

• The Government has recently hiked Ways and Means Advance (WMA) limit with the Reserve Bank of India (RBI) by 60%.

Highlights:

• The government has announced a Rs 1.7 lakh crore package (Pradhan Mantri Garib Kalyan Yojana) to provide income support, free food and other facilities to the poor to help them during the 21-day national lockdown.
• The fundraising resources are not only from the market, but also from institutions such as the RBI.
• The 2020-21 budget has pegged the Centre’s net market borrowing, including government securities, treasury bills and post office life insurance fund.
• In FY21, the Centre also plans to issue the Debt Exchange Traded Fund comprising government securities to widen the base of investors.
• This will enable retail investors, who otherwise find it difficult to buy government bonds directly, take an exposure in this risk free instrument.

About Ways and means Advance scheme:

• It was introduced in 1997 to meet mismatches in the receipts and payments of the government.
• The government can avail of immediate cash from the RBI, if required. But it has to return the amount within 90 days. Interest is charged at the existing repo rate.
• If exceeds 90 days, it would be treated as an overdraft (the interest rate on overdrafts is 2 percentage points more than the repo rate).
• Its limits are decided by the government and RBI mutually and revised periodically. A higher limit provides the government flexibility to raise funds from RBI without borrowing them from the market.
• There are two types of Ways and Means Advances, Special WMA and Normal WMA
• Special WMA or Special Drawing Facility is provided against the collateral of the government securities held by the state. After the state has exhausted the limit of SDF, it gets normal WMA. The interest rate for SDF is one percentage point less than the repo rate.
• The loans Normal WMA is based on a three-year average of actual revenue and capital expenditure of the state.

About Exchange Traded Fund:

• It is a basket of securities that trade on an exchange, just like a stock.
• It reflects the composition of an Index, like BSE Sensex. Its trading value is based on the Net Asset Value (NAV) of the underlying stocks (such as shares) that it represents.
• It shares prices fluctuate all day as it is bought and sold. This is different from mutual funds that only trade once a day after the market closes.
• It can own hundreds or thousands of stocks across various industries, or it could be isolated to one particular industry or sector.

RBI INTRODUCES “FULLY ACCESSIBLE ROUTE (FAR)”

01, Apr 2020

Why in News?

• In the Union Budget, it has been announced that certain specified categories of government securities would be opened fully for non-resident investors without any restrictions.
• As a follow up of the announcement, the Reserve Bank of India (RBI) has introduced a separate channel called “Fully Accessible Route (FAR)” to enable non-residents to invest in specified Government of India dated securities.
• ‘Specified securities’ shall mean Government Securities as periodically notified by the Reserve Bank for investment under the FAR route.

Key Points:

• FPI consists of securities and other financial assets passively held by foreign investors.
• The RBI has said that all new issuances of Government securities (G-secs) of 5-year, 10-year, and 30-year tenors will be eligible for investment as specified securities.
• Non Resident investors can invest in specified government securities without being subject to any investment ceilings.
• This scheme shall operate along with the two existing routes: The Medium Term Framework (MTF) for Foreign Portfolio Investment (FPI) in Central Government Securities (G-secs) and State Government Securities (SDLs), which was introduced in October 2015.
• The Voluntary Retention Route (VRR) encourages Foreign Portfolio Investors to undertake long-term investments in Indian debt markets.

Benefits of the Scheme:

• This would facilitate inflow of stable foreign investment in government bonds.
• This would facilitate inclusion in global bond indices.
• Being part of the global bond indices would help Indian G-secs attract large funds from major global investors, including Pension Funds.
• This will ease the access of non-residents to Indian Government Securities Markets.

What is meant by Government Security (G-Sec)

• A G-Sec is a tradable instrument issued by the Central Government or the State Governments.
• It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year- presently issued in three tenors, namely, 91 day, 182 day and 364 day) or long term (usually called Government bonds or dated securities with original maturity of one year or more).
• In India, the Central Government issues both treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).

COMPANIES FRESH START SCHEME, 2020

01, Apr 2020

Why in News?

• Ministry of Corporate Affairs introduces the “Companies Fresh Start Scheme, 2020” and revised the “LLP Settlement Scheme, 2020” to provide relief to law abiding companies and Limited Liability Partnerships (LLPs) in the wake of COVID 19.

What do these Schemes Entail?

• These schemes incentivise compliance and reduce compliance burden during the unprecedented public health situation caused by COVID-19.
• The schemes provide a one-time waiver of additional filing fees for delayed filings by the companies or LLPs with the Registrar of Companies during the currency of the Schemes, i.e. during the period starting from 1stApril, 2020 and ending on 30th September, 2020.
• They also significantly reduce the related financial burden on them, especially for those with long standing defaults, thereby giving them an opportunity to make a “fresh start”.
• Both the Schemes also contain provision for giving immunity from penal proceedings, including against imposition of penalties for late submissions.
• They also provide additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed.

What is a LLP?

• A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations.
• In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.

Salient features of an LLP:

• An LLP is a body corporate and legal entity separate from its partners. It has perpetual Succession.

• Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners.
• Every Limited Liability Partnership shall use the words “Limited Liability Partnership” or its acronym “LLP” as the last words of its Name.

 Composition:

• Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India and all the partners shall be the agent of the Limited Liability Partnership but not of other partners.

 Need for and significance LLP:

• LLP format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
• This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular.
• Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals.

KERALA SOUGHT RELAXATION OF FRBM RULES

31, Mar 2020

Why in News?

• To help fund the emergency relief package, Kerala proposes to borrow ₹12,500 crore from the market and has urged the Centre to provide Kerala with flexibility under the Fiscal Responsibility and Budget Management (FRBM) Act.

What is the FRBM Act?

• The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establish financial discipline to Reduce Fiscal Deficit.

What are the objectives of the FRBM Act?

• The FRBM Act aims to introduce transparency in India’s fiscal management systems.
• The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India.
• The Act was enacted to introduce more equitable distribution of India’s debt over the years.

How does a relaxation of the FRBM Work?

• The law does contain what is commonly referred to as an ‘escape clause’.
• Under Section 4(2) of the Act, the Centre can exceed the annual fiscal deficit target citing grounds that include national security, war, national calamity, collapse of agriculture, structural reforms and decline in real output growth of a quarter by at least three percentage points below the average of the previous four quarters.

Key Features of the FRBM Act:

• The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament Annually:
• Medium Term Fiscal Policy Statement.
• Macroeconomic Framework Statement.
• Fiscal Policy Strategy Statement.
• The FRBM Act proposed that revenue deficit, fiscal deficit, tax revenue and the total outstanding liabilities be projected as a percentage of gross domestic product (GDP) in the medium-term fiscal policy statement.

What are the Amendments Made?

• The Act has been amended several times.
• In 2013, the government introduced a change and introduced the concept of effective revenue deficit. This implies that effective revenue deficit would be equal to revenue deficit minus grants to states for the creation of capital assets.
• In 2016, a committee under N K Singhwas set up to suggest changes to the Act. According to the government, the targets set under FRBM Act previously were too rigid.

What are the various recommendations made by N.K. Singh Committee?

• Targets:The committee suggested using debt as the primary target for fiscal policy and that the target must be achieved by 2023.
• Fiscal Council:The committee proposed to create an autonomous Fiscal Council with a chairperson and two members appointed by the Centre (not employees of the government at the time of appointment).
• Deviations:The committee suggested that the grounds for the government to deviate from the FRBM Act targets should be clearly specified
• Borrowings:According to the suggestions of the committee, the government must not borrow from the RBI, except when:
• The Centre has to meet a temporary shortfall in Receipts.
• RBI subscribes to government securities to Finance Any Deviations.
• RBI purchases government securities from the Secondary Market.

COAL CAPACITY PIPELINE DECLINES IN INDIA

30, Mar 2020

Why in News?

• The latest report ‘Boom and Bust 2020:Tracking the Global Coal Plant Pipeline’ which is the fifth annual survey of the coal plant pipeline has been released recently. The report highlights that the capacity of coal power plants in the pre-construction phase fell by half from 2018 to 2019 in the country.
• Jointly released by the Centre for Research on Energy and Clean Air (CREA), Greenpeace International, the Sierra Club and Global Energy Monitor.

Highlights:

• The capacity of coal power plants which was 60.2GW in 2018, saw a sharp fall to 29.3GWlast year.
• In India, capacity under construction and in pre-construction phase declined 80% from311.1GW in 2015 to 66GW in 2019, with only 2.8GW newly proposed in 2019
• The findings state that the biggest growth in construction took place in South Asia in 2019, with India starting construction of 8.8GW of new coal power capacity.

• Along with this, 8.1GW coal- based capacity was commissioned in the country last year.
• The new construction includes four coal plants-Adani Godda, Patratu and Udangudi having 1.6GW each and Yadadri with 4GW.
• All the 8.8GW of new construction received substantial financing from the Power Finance Corporation or the Rural Electrification Corporation, both of which fall under the jurisdiction of the Ministry of Power and are set to merge this year.
• The report indicated that the private sector is exiting coal plant development in the country, the public sector is stepping in and footing the bill.

Concerns:

• The shrinking coal pipeline in India, forced by huge over-capacity, subdued demand for electricity, falling utilization factor, falling prices of renewable energy, drying investments, and increasing public resistance due to pollution gives hope for a future with reduced fossil footprint for the country.
• But, at the same time new capacity is being added to the grid, new projects are given clearances and infusion of public money into new projects by the government stresses on the environmental and economic crisis faced by the country.
• A strict policy against building or clearing new coal-based plants with rapid retirement of older units is urgently required.

LOCKDOWN AND THE AGRI SECTOR

30, Mar 2020

Context:

• COVID-19 and the 21-day lockdown to contain it, has brought all the sectors of the economy to a standstill. During such lockdowns, it is relatively easy to shut factories, IT parks, hotels, malls and multiplexes. But the agriculture and animal husbandry will continue to produce and also they must.
• The Great Bengal Famine of 1943, as Amartya Sen famously documented, wasn’t brought about by a decline in food availability. Instead, it was a result of people not having access to food due to a collapse of “exchange entitlements”.

Lockdown and the Agriculture Supply Chain:

• The Food Corporation of India’s current wheat and rice stocks are over 3.5 times the required normative buffer reserve.
• Farmers are also set to harvest a bumper crop of wheat, chana, mustard, onion and other rabi season produce.
• What India is at present facing is not a “supply”, but a “supply chain” problem.

1. Inter-state movement restrictions and arbitrary actions by local authorities to enforce the lockdown had hit the supply chain.
2. This includes closing down of produce collection centres and warehouses of organised retailers, which has broken the links in the chain connecting farmers to consumers.
3. This in turn has opened up arbitrage opportunities for unscrupulous speculators and middlemen.

• It is the government’s responsibility to ensure that farmers are able to keep their animals alive and market the crop that has been, or will be, harvested during the lockdown period.

• There is an urgent need to ensure that those keeping supply chains of essential items running are protected against COVID-19 lockdown.

Problems in the Supply Chain:

• Many essential services were kept out of the purview of the lockdown. Food, feed and agricultural inputs have been specifically notified as essential services.
• But there are several implementational hurdles due to the vague specifications in the Government Notifications.
• There are also reports of conflict between the police and citizens, including people involved in the transportation and delivery of food as well as inputs to farms.
• Thelabour shortage has become a problem in the labour intensive dairy and poultry sectors. There were also issues of hoarding, done by the middlemen expecting shortages to increase their profits.

Way Forward:

• The government needs an immediate action plan to manage the agriculture and livestock sectors in the interest of both producers and consumers.
• Ensure free movement of farm produce, livestock feed and veterinary medicines.
• The Centre must issue a single notification relating to food items in a standard format and uniform language so that all ambiguities are removed.
• This needs to be finalised after consultations with the stakeholders.
• The Essential Services Maintenance Act (ESMA) be invoked for the delivery of all essential services relating to food to prevent disruption of supplies.
• The government must start planning now to prevent post-lockdown chaos, especially profiteering in the event of shortages.
• Place all food items, agri-inputs, packaging material and transport services under ESMA for a six-month period to prevent profiteering.
• Suspend APMC (agricultural produce market committee) laws for the next six months.
• As traders with APMC licence are bound to act as cartels during rush hour, which will hurt both farmers and consumers.
• Even in the Bengal Famine, the maintenance of essential food supplies to Calcutta was accorded very high priority by the authorities; the three million who died then were mostly the rural masses or those who did not survive after trekking from the districts to the city. That lesson from history should not be forgotten. This is the moment to free movement and trade in all agricultural produce and prevent the unfortunate.

RBI CUTS RATES, ALLOWS LOAN MORATORIUM

28, Mar 2020

Why in News?

• To ease impact of lockdown, RBI reduced the repo and reverse repo rates and the EMIs deferred for three months.

About the News:

• The Reserve Bank of India (RBI) has opened up the liquidity floodgates for banks even as it reduced the key interest rate sharply by 75 bps and allowed equated monthly instalments (EMIs) to be deferred by three months in a move to fight the economic impact of the countrywide lockdown to check the spread of novel coronavirus.
  
• The repo rate was reduced to by 75 bps 4.4% while the reverse repo rate was cut by 90 bps point to 4%.
• The higher reduction in the reverse repo rate was aimed at prompting banks to lend more rather than keeping their excess liquidity with the RBI.
• Apart from cutting the repo rate, RBI has also reduced the cash reserve ratio of banks which released ₹37 lakh crore liquidity. This, along with other measures, will see an infusion of ₹3.74 lakh crore into the banking system.
• RBI has also allowed banks to defer payment of EMIs on home, car, personal loans as well as credit card dues for three months. Since non-payment will not lead to non-performing asset classification by banks, there will be no impact on credit score of the borrowers.
• The following decisions were taken after the meeting of the Monetary Policy Committee headed by the RBI Governor.

What is Monetary Policy Committee?

• Strong recommendations to set monetary policy committee in India had come from Urjit Patel panel report.
• Monetary Policy Committee is an executive body of 6 members. Of these, three members are from RBI while three other members are nominated by the Central Government.
• Each member has one vote. In case of a tie, the RBI governor has casting vote to break the tie. MPC is required to meet for two days before deciding on rates. Further, it is needed to meet at least four times a year and make public its decisions following each meeting.
• The core mandate of MPC is to fix the benchmark policy interest rate {Repo Rate} to contain inflation within the target level.
• In that context, RBI is mandated to furnish necessary information to the MPC to facilitate its decision. Government also, if wishes to convey its views, can do so in writing to MPC.

Different Terminologies in Banking Sector:

• Loan moratorium period refers to a particular period of a loan tenure during which the borrower does not have repay anything. It can be described as a waiting period before the borrower will have to start paying the equated monthly instalments (EMIs) for his or her loan. It doesn’t mean that he is completely waived off his loans.
• REPO rate (now 4.4%) denotes Re Purchase Option – the rate by which RBI gives loans to other banks. In other words, it is the rate at which banks buy back the securities they keep with the RBI at a later period.
• Bank gives loan to the public at a higher rate, often 1% higher than REPO rate, at a rate known as Bank Rate.
• RBI at times borrows from banks at a rate lower than REPO rate, and that rate is known as Reverse REPO rate (now 4%).
• CRR or Cash Reserve Ratio corresponds to the percentage of cash each bank have to keep as cash reserve with RBI (in their current accounts) corresponding to the deposits they have. For example, say if State Bank of India (SBI) got a total deposit of Rs. 1 crore with them, they need to keep 4 % of that as cash reserve with RBI (around 4 lakh rupees).
• The banks and other financial institutions in India have to keep a fraction of their total net time and demand liabilities in the form of liquid assets such as G-secs, precious metals, approved securities etc. The Ratio of these liquid assets to the total demand and time liabilities is called Statutory Liquidity Ratio(18.25%).

INDIAN RED CROSS SOCIETY AND COVID-19

28, Mar 2020

Context:

• Recently, President Ramnath Kovind exhorted the collective strength of the society and urged Governors, LGs and Administrators to mobilise volunteers of Indian Red Cross society, voluntary and religious organisations to contain the menace of COVID 19 at the Earliest.

COVID-19 and Indian Red Cross Society:

• The President of India stressed the role of the Red Cross, civil society/voluntary organisations in complementing the efforts of the Union and State governments to contain the spread of the Novel Coronavirus, especially with the lockdown and other challenges emerging from the evolving situation.
• In general, the Indian Red Cross’s programmes are grouped into four Main Core Areas:
• Promoting humanitarian principles and values;
• Disaster response;
• Disaster preparedness; and
• Health and Care in the Community.
• Indian Red Cross Society is currently, used to create awareness among the masses on COVID-19 and educate them about social distancing
• In Karnataka, around 8000 Indian Red Cross volunteers are involved in the awareness creation activities.
• Also, the Red Cross has been helping to supply food packets in Chandigarh to the people in need.
• The health care expertise of Indian Red Cross Society is used to make efficient delivery of such services to the society.
• Red Cross Ambulance services are used widely by the District authorities to support other measures.

Indian Red Cross Society:

• The Indian Red Cross is a voluntary humanitarian organization providing relief in times of disasters/emergencies and promotes health & care of the vulnerable people and communities.
• It is a leading member of the largest independent humanitarian organization in the world, the International Red Cross & Red Crescent Movement.
• Indian Red Cross Society (IRCS) was established in 1920 under the Indian Red Cross Society Act and incorporated under Parliament Act XV of 1920. The act was last amended in 1992 and rules were formed in 1994.
• The President of India serves as the President and Union Health Minister serves as the Chairman of the Society.
• The Vice Chairman is elected by the members of the Managing Body.
• The National Managing Body consists of 18 members.
• The Chairman and 6 members are nominated by the President. The remaining 12 are elected by the state and union territory branches through an electoral college.
• The IRCS adopted RED CROSS as its emblem.

History of Red Cross and Red Crescent Movement:

• Jean Henry Dunant, a young Swiss businessman, was deeply influenced by the condition of the wounded soldiers he witnessed in the battlefield during the Franco – Austrian war(1859).
• During the war, he arranged relief services with the help of the local community.
• In his book ‘Memory of Solferino’, he suggested that a neutral organization be established to aid the wounded soldiers in times of war.
• An international conference was convened in Geneva to consider the suggestions of Henry Dunant and thus the Red Cross Movement was established by Geneva Convention of 1864.
• The name and the emblem of the movement are derived from the reversal of the Swiss national flag, to honor the country in which the Red Cross was found.
• In the Russo-Turkish war the Ottoman empire used a Red Crescent in place of the Red Cross. Egypt too opted for the Red Crescent while Persia chose a Red Lion on a white background. These symbols were written and accepted into the 1929 Geneva Conventions.
• During the General Assembly and the council of Delegates in November 2005 at Geneva, Red Crystal was adopted as another emblem for the Red Cross Red Crescent movement.

RBI REGULATION FOR PAYMENT AGGREGATORS AND PAYMENT GATEWAYS

27, Mar 2020

Why in News?

• The Reserve Bank of India recently released guidelines for regulating payment aggregators and Payment Gateways.

About Payment Aggregators and Payment Gateways:

• Payment Aggregators facilitate e-commerce sites and merchants in accepting payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own. Example: Billdesk.
• Payment Gateways are entities that provide technology infrastructure to route and facilitate processing of an online payment transaction without any involvement in handling of funds. PGs in India mainly include banks.
• A Payment Gateway allows the merchants to deal in a specific payment option put on the portal, whereas a Payment Aggregator allows one to have multitudes of options for payment. Thus, a Payment Aggregator covers a payment gateway in its ambit.

What are the various Guidelines?

Authorisation

• Non-bank PAs will require authorisation from the RBI under the Payment and Settlement Systems Act, 2007 (PSSA). A PA should be a company incorporated in India under the Companies Act, 1956 / 2013.
• Banks provide PA services as part of their normal banking relationship and do not therefore require a separate authorisation from RBI.
• E-commerce marketplaces (e.g. flipkart, Paytm) providing PA services should separate PA services from the marketplace business and they should apply for authorisation on or before 30^th June, 2021.
• PGs will be considered as ‘Technology Providers’ or ‘Outsourcing Partners’ of banks or non-banks, as the case may be.

Capital Requirement:

• Existing PAs have to achieve a net worth of ₹15 crore by 31st March, 2021 and a net worth of ₹25 crore on or before 31st March, 2023. The net worth of ₹25 crore has to be maintained at all times thereafter.
• New PAs should have a minimum net worth of ₹15 crore at the time of application for authorisation and have to attain a net worth of ₹25 crore by the end of the third financial year of the grant of authorisation. The net worth of ₹25 crore has to be maintained at all times thereafter.

Disclosure Requirements:

• PAs need to disclose comprehensive information regarding merchant policies, customer grievances, privacy policy and other terms and conditions on the website and / or their mobile application.
• They need to undertake background and antecedent checks of the merchants to ensure that such merchants do not have any malafide intention of duping customers, and do not sell fake / counterfeit / prohibited products.

MSP FOR MINOR FOREST PRODUCE

27, Mar 2020

Why in News?

• According to experts, the Union government’s ‘mechanism for marketing of minor forest produce (MFP) through minimum support price (MSP) and development of value chain for MFP’ scheme can offer respite to forest-dependent labourers in the wake of novel coronavirus (COVID-19) outbreak.

About the Scheme:

• The Union Cabinet, in 2013, approved a Centrally Sponsored Scheme for marketing of non-nationalized / non monopolized Minor Forest Produce (MFP) and development of a value chain for MFP through Minimum Support Price (MSP).
• This was a measure towards social safety for MFP gatherers, who are primarily members of the Scheduled Tribes (STs) most of them in Left Wing Extremism (LWE) areas.
• The scheme had Rs. 967.28 crore as Central Government share and Rs. 249.50 crore as the States share for the current Plan period.

Key Features of the Scheme:

• Ensure that the tribal population gets a remunerative price for the produce they collect from the forest and provide alternative employment avenues to them.
• Establish a system to ensure fair monetary returns for forest dweller’s efforts in collection, primary processing, storage, packaging, transportation etc., while ensuring sustainability of the resource base.
• Get them a share of revenue from the sales proceeds with costs deducted.

Coverage of the Scheme:

• Earlier, the scheme was extended only to Scheduled Areas in eight states and fixed MSPs for 12 MFPs. Later expanded to all states and UTs.
• Total number of MFPs covered under the list includes 49.
  • Implementation: The responsibility of purchasing MFP on MSP will be with State designated agencies.
  • To ascertain market price, services of market correspondents would be availed by the designated agencies particularly for major markets trading in MFP.
  • The scheme supports primary value addition as well as provides for supply chain infrastructure like cold storage, warehouses etc.
  • The Ministry of Tribal Affairs will be the nodal Ministry for implementation and monitoring of the scheme. The Minimum Support Price would be determined by the Ministry with technical help of

What are the Significances of the Scheme?

• The Minor Forest Produce (MFP), also known as Non-Timber Forest Produce (NTFP), is a major source of livelihood and provides essential food, nutrition, medicinal needs and cash income to a large number of STs who live in and around forests. An estimated 100 million forest dwellers depend on the Minor Forest Produce for food, shelter, medicines, cash income, etc.
• However, MFP production is highly dispersed spatially because of the poor accessibility of these areas and competitive market not having evolved. Consequently, MFP gatherers who are mostly poor are unable to bargain for fair prices. This package of intervention can help in organizing unstructured MFP markets.

DOUBLE TROUBLE FOR THE AUTO SECTOR

25, Mar 2020

Context:

• The auto sector, which has been grappling with multiple challenges over the past year, is headed for tougher times due to the COVID-19 outbreak. Automakers and suppliers, struggling with muted demand, have shut production facilities both in India and overseas.

COVID-19 effect on Automobile Sector:

On the Demand Side:

• The duration and the extent of COVID-19 will determine the income loss of the consumers, and thus will have a bearing on the retail buying sentiment.
• The sector has shed over 37 per cent over the past month due to subdued demand.
• The virus threat have reduced the demand in the market
• The sector’s transition from BS-IV to BS-VI, has increased its cost.

On the supply side:

• The planned transition from BS-IV to BS-VI is not happening as smoothly as planned.
• The two-wheeler segment has been the worst-hit
• Given the curfew-like conditions, the BS-IV inventory cannot be sold to the consumers before the deadline of March, 2020.
• Auto makers are not expected to restart production till authorities relax the lockdown measures.

On the Workers:

• The government has instructed the industries to pay remuneration to the employees, during the times of COVID-19 lockdown.
• However, the MSME sector which employs a large section of the population, supplying goods and services to the automobile sector will be affected largely.
• Unorganized workers indirectly linked to the automobile sector will be affected due to the lockdown and the resultant Job Losses.

Future prospects for the Auto Sector:

• Two-wheelers and truck makers will be the worst hit from the sharp rise in costs due to new BS-VI norms.
• This COVID-19 may further weaken the sector due to weak consumer sentiment and low industrial production, rising uncertainty and slowdown in exports – leading to reduced transit of goods.
• Falling capacity utilisation, partial absorption of the BS-VI price hike, and impairment of the leftover BS-IV inventory are expected to affect the sector for yet another year.
• However, the sharp fall in raw material costs, on account of the global demand crash, is a positive sign for the future of the sector.

Way Forward:

• The rural automobile market, which is still under-utilized, shall be used as a growth focus to revive the sector.
• Proper relief to the workers shall help in sustaining the skilled workforce of the sector.
• In case of early withdrawal of the outbreak, a stimulus package to boost overall consumption, shall increase the demand.
• Government should come forward to extend the date for BS-VI implementation.
• A scrappage policy to replace the pre-BS-IV vehicles can boost the market and help revive the growth of the sector.

INSURANCE COVER FOR A PANDEMIC

23, Mar 2020

Context:

• In case if a person gets infected by COVID-19, he/she must have a comprehensive health insurance plan to cover Hospitalisation expenses.

How to secure our Health?

• While pandemics such as COVID-19 are not new to the world, it is important to stay protected in every manner possible.
• While we may take all required precautionary measures such as maintaining social distancing to stay protected, what is more important here is to understand how we can secure your health.
• If you are still confused as to whether your health insurance policy will cover hospitalisation expenses incurred due to COVID-19, it is important for you to know that any claim for COVID-19 will be payable by your insurer if you are hospitalised for at least 24 hours.
• As per a circular from the Insurance Regulatory and Development Authority of India (IRDAI) to all health insurers regarding the guidelines all claims will be processed as per regular norms and will be covered as any other illness.

24-hour hospitalisation – Is it Mandatory?

• However, it is mandatory for the policyholder to stay hospitalised for a minimum of 24 hours.
• IRDAI has even made it clear that the entire cost of admissible medical expenses during the course of treatment, including the treatment during quarantine period, shall be settled in accordance with the regular health insurance policy.
• Also, the infection caused due to COVID-19 does not fall under the pre-existing disease category and hence, the claims will be covered for the illness from day one.
• Every basic health insurance plan will compensate the policyholder for expenses incurred on pre-hospitalisation, post-hospitalisation, in-patient treatment, OPD and ambulance expenses, should one seek treatment for COVID-19.

About the Fixed Benefit Plan:

• While the above features are for an indemnity-based health plan, those looking for a fixed benefit health plan that compensates them for loss of income due to hospitalisation following COVID-19 can invest in the fixed benefit health plan offered by Digit Insurance.
• Offered under the IRDAI’s regulatory sandbox framework, Health Care Plus plan is available for a sum insured of between ₹25,000 and ₹2 lakh.
• The premiums start at ₹299 at the lower end, while the maximum sum insured entails a premium of ₹2,027 plus GST.
• As to the pay-out process, in case a policyholder tests positive for COVID-19, the insurer will pay out the entire sum insured. If quarantine is advised in a government or a military hospital, the insurer will pay 50% of the sum insured.
• Retired people may consider it for additional benefits even if they have a standalone plan since they are more vulnerable to the virus. Those suffering from symptoms of cold or respiratory diseases will not be able to purchase this plan.

About IRDAI:

• Insurance Regulatory and Development Authority of India or the IRDAI is the apex body responsible for regulating and developing the insurance industry in India.
• It is an autonomous body established by an act of Parliament known as the Insurance Regulatory and Development Authority Act, 1999.
• IRDAI is headquartered in Hyderabad in Telangana. Prior to 2001, it was headquartered in New Delhi.
• The organization fought for an increase in the FDI limit in the insurance sector to 49% from the previous 26%. The FDI cap was hiked to 49% in July of 2014.
• Its Functions include:
• Its primary purpose is to protect the rights of the policyholders in India.
• It gives the registration certificate to insurance companies in the country.
• It also engages in the renewal, modification, cancellation, etc. of this registration.
• It also creates regulations to protect policyholders’ interests in India.

INDIA BECOMES 3RD LARGEST PRODUCER OF ELECTRICITY

21, Mar 2020

Why in News?

• As per the Key World Energy Statistics 2019 published by the International Energy Agency, India has been ranked as the 3^rdlargest producer of electricity in the world.

Highlights of the Report:

• With a generation of 1,497 Terawatt-hour (TWh), India is the third largest producer and the third largest consumer of electricity in the world after the US and China.
• India was 106th in terms of per capita consumption in 2017.
• Although power generation has grown more than 100-fold since independence, growth in demand has been even higher due to accelerating economic activity.

Government Interventions in the Electricity Sector:

• The Ujwal Discom Assurance Yojana:UDAY was launched by the Ministry of Power to help turn around the poor financial situation of state discoms. It also envisages development of renewable energy sector and availability of 24*7 Power For All at an affordable price.
• Saubhagya Scheme: It was launched by the Government of India with the aim of providing electricity access to over 40 million families in the country.
• Unnat Jyoti by Affordable LEDs for All (UJALA): It aims to promote efficient lighting, enhance awareness on using efficient equipment which reduce electricity bills and help preserve the environment. The project is spearheaded by the Energy Efficiency Services Limited.

About Key World Energy Statistics:

• KWES is published by the International Energy Agency.
• It is part of the IEA’s annual edition of the world’s most comprehensive series of energy databases and data services, which include World Energy Statistics and Balances and the full range of Fuel Information Data Services.

GLOBAL UNEMPLOYMENT AMIDST COVID-19

20, Mar 2020

Why in News?

• The International Labour Organization (ILO) has recently said that the COVID-19 pandemic will drastically increase global unemployment, leaving up to 25 million more people out of work and slashing incomes.

About ILO:

• It is the only tripartite U.N. agency. It brings together governments, employers and workers of 187 member States, to set labour standards, develop policies and devise programmes promoting decent work for all women and men.
• It was established in 1919 by the Treaty of Versailles as an affiliated agency of the League of Nations and also became the first affiliated specialized agency of the United Nations in 1946.
• Headquarters:Geneva, Switzerland.
• India is a founding member of the ILO and it has been a permanent member of the ILO Governing Body since 1922.
• The organization has played a key role in
• Ensuring labour rights during the Great Depression
• Decolonization process
• The creation of Solidarnosc( trade union) in Poland
• The victory over apartheid in South Africa

What are its Key Findings?

• The International Labour Organization (ILO) has warned that the economic and labour crisis sparked by the coronavirus will have far-reaching impacts on labour market outcomes.
• The ILO said that by comparison, the global financial crisis of 2008-09 increased global unemployment by 22 million.
• A study based on the report suggests that the world should prepare to see a significant rise in unemployment and underemployment in the wake of the pandemic.
• In the best-case scenario, 5.3 million more people will be pushed into unemployment.
• In the worst case scenario, 24.7 million more will become jobless, on top of the 188 million registered as unemployed in 2019.
• Underemployment is also expected to increase on a large scale, as the economic consequences of the virus outbreak translate into reductions in working hours and wages.
• Self-employment in developing countries usually serves to cushion the impact of economic shifts but this time due to the severe restrictions on the movement of people and goods, it might not help.
• Reductions in access to work will also mean large income losses for workers.
• The study estimates the income loss between $860 billion and $3.4 trillion by the end of 2020, which will translate into falls in consumption of goods and services, in turn affecting the prospects for businesses and economies.
• The number of people who live in poverty despite holding one or more jobs will also increase significantly.
• The strain on incomes resulting from the decline in economic activity will devastate workers close to or below the poverty line.
• Some groups will be disproportionately impacted by the jobs crisis, including youth, older workers, women and migrants which will only increase the already Prevailing Inequality.

What are its Suggestions?

• The ILO has called for urgent, large-scale and coordinated measures to protect workers in the workplace and stimulate the economy, employment and job support through social protections, paid leave and other subsidies.
• It is suggested to tackle this pandemic in the same way the global financial crisis of 2008 was tackled, by presenting a united front to address the consequences.

INDIA NOT OBLIGATED TO IMPLEMENT WTO’S DISPUTE PANEL RECOMMENDATIONS

20, Mar 2020

Why in News?

• As per the reply of Commerce and Industry Minister in Lok Sabha, India is under no obligation to implement the recommendations of the WTO’s dispute panel on its export promotion schemes.

What is the Issue?

• A dispute settlement panel of World Trade Organization (WTO) in its report issued to members on 31 October 2019 has ruled that India’s export-related schemes (including SEZ scheme) are in the nature of prohibited subsidies under the Agreement on Subsidies and Countervailing Measures and are inconsistent with WTO norms.
• The panel had given a time-frame of 180 days for withdrawal of Special Economic Zone (SEZ) scheme.
• India had appealed at the WTO’s appellate body against this ruling.
• But due to non-functioning of appellate body (of the WTO’s dispute settle mechanism), the appeal has been kept in suspension.
• Till the appeal is disposed of, India is under no obligation to implement the recommendations of panel.

WTO’s Dispute Settlement Mechanism:

• The Appellate Body of the World Trade Organization set up in 1995, is a standing body of 7 persons that hears appeals from reports issued by panels in disputes brought on by WTO members.
• A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO.
• By joining the WTO, member countries have agreed that if they believe fellow members are in violation of trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally.

Current Scenario:

• The dispute settlement mechanism requires at least three members to function.
• The United States has blocked the appointments of new members and the reappointments of members who had completed their four-year tenures, the membership of the body has decreased to three persons (instead of the required seven).
• The US believes the WTO is biased against it, and has criticized it for being unfair.
• In 2019, several developing countries met in India to discuss ways to prevent the WTO’s dispute resolution system from collapsing all together.
• India is involved in 15 trade disputes, mostly against the US, at the WTO at Present.

RBI TO INFUSE RS. 10,000 CRORE VIA OMO

19, Mar 2020

Why in News?

• The Reserve Bank of India (RBI) has decided to infuse ₹10,000 crore liquidity in the banking system by buying government securities through open market operations (OMO).

What is Open Market Operations?

• Open Market Operations (OMO) is one of the quantitative (to regulate or control the total volume of money) monetary policy tools which is employed by the central bank of a country to control the money supply in the economy.
• OMOs are conducted by the RBI by way of sale or purchase of government securities (g-secs) to adjust money supply conditions.
• The central bank sells g-secs to remove liquidity from the system and buys back g-secs to infuse liquidity into the system.
• These operations are often conducted on a day-to-day basis in a manner that balances inflation while helping banks continue to lend.
• RBI carries out the OMO through commercial banks and does not directly deal with the public.
• The RBI uses OMO along with other monetary policy tools such as repo rate, cash reserve ratio and statutory liquidity ratio to adjust the quantum and price of money in the system.

How it would be done?

• RBI will conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for ₹10,000 crore each.
• It will purchase the longer-term maturities (i.e. government bonds maturing in 2029), and simultaneously sell the shorter duration ones (i.e. short-term bonds maturing in 2020).
• The eligible participants can bid or submit offers in electronic format on RBI’s Core Banking Solution (E-Kuber).

 Why such a Decision Taken now?

• With the heightening of COVID-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in the hardening of yields and widening of spreads.
• To ensure that all market segments remain liquid and stable, and function normally, the Reserve Bank of India (RBI) has decided to infuse ₹10,000 crore liquidity in the banking system by buying government securities through open market operations.

What are its Benefits?

• This simultaneous purchase and sale will bring down interest on long term loans which can lead to increase in economic spending.
• OMOs are primarily done to maintain ample liquidity in the system, which reflects that the RBI is keen that banks should transmit lower rates to borrowers.
• The action of Operation Twist by the RBI is encouraging for the market. This step may become a driving factor for long-term economic activity and the addition of new investment stock.

1. 1.‘Operation Twist’ is when the central bank uses the proceeds from the sale of short-term securities to buy long-term government debt papers, leading to easing of interest rates on the long term papers.
2. 2.Operation Twist first appeared in 1961 as a way to strengthen the U.S. dollar and stimulate cash flow into the economy.
3. 3.In June 2012, Operation Twist was so effective that the yield on the 10-year U.S. Treasury dropped to a 200-year low.

RBI GUIDELINES TO REGULATE PAYMENT AGGREGATORS AND GATEWAYS

18, Mar 2020

Why in News?

• The Reserve Bank of India has recently released guidelines for regulating activities of Payment Aggregators and Payment Gateways functioning in India.

What is meant by Payment Aggregators and Payment Gateways?

• Payment Aggregators (PA) facilitates e-commerce sites and merchants in accepting payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.
• Payment Gateways (PG) are entities that provide technology infrastructure to route and facilitate processing of an online payment transaction without any involvement in handling of funds. PGs in India mainly include banks.

Difference between PA and PG:

• A Payment Gateway allows the merchants to deal in a specific payment option put on the portal, whereas a Payment Aggregator allows one to have multitudes of options for payment. Thus, a Payment Aggregator covers a payment gateway in its ambit.

Key Guidelines given by RBI:

1. Mandatory Authorisation:

• A PA should be a company incorporated in India under the Companies Act, 1956 / 2013.
• Non-bank PAs will require authorisation from the RBI under the Payment and Settlement Systems Act, 2007 (PSSA).
• Banks provide PA services as part of their normal banking relationship and do not therefore require a separate authorisation from RBI.
• E-commerce marketplaces (e.g. flipkart, Paytm) providing PA services should separate PA services from the marketplace business and they should apply for authorisation on or before 30th June, 2021.
• PGs will be considered as ‘technology providers’ or ‘outsourcing partners’ of banks or non-banks, as the case may be.

2. Disclosure Requirements:

• As need to disclose comprehensive information regarding merchant policies, customer grievances, privacy policy and other terms and conditions on the website and / or their mobile application.
• They need to undertake background and antecedent checks of the merchants to ensure that such merchants do not have any malafide intention of duping customers, and do not sell fake / counterfeit / prohibited products.

3. Capital Requirement:

• Existing PAs have to achieve a net worth of ₹15 crore by 31st March, 2021 and a net worth of ₹25 crore on or before 31st March, 2023. The net worth of ₹25 crore has to be maintained at all times thereafter.
• New PAs should have a minimum net worth of ₹15 crore at the time of application for authorisation and have to attain a net worth of ₹25 crore by the end of the third financial year of the grant of authorisation. The net worth of ₹25 crore has to be maintained at all times thereafter.

SHORTFALL – DEFENCE FUND

17, Mar 2020

Why in News?

• Parliamentary Standing Committee on Defence has recently shown concern at the widening gap between projections and allocations in the defence budget.

Key Findings of the Committee

• It noted that since 2015-16, none of the three Services (Army, Navy and Air Force) has been given the matching allocation as per the projection. There is a considerable shortage in the allocation in the Capital Head, which is 35% less than the projection.
• It noted that the committedliabilities constitute a significant part of the Capital Head and inadequate allocation would definitely lead to ‘default situation’ on contractual obligations. They are payments anticipated during a financial year for contracts concluded in previous years.
• It opines that such a situation is not conducive for preparation of the country to modern-day warfare, where possession of capital intensive modern machines is a prerequisite for tilting the result of the war in favour and also to have a credible deterrence.
• Both the Navy and the Indian Air Force (IAF) have a situation where their committed liabilities are more than their share of the capital allocation in the Budget.
• To offset this, the Services have been forced to defer payment of committed liabilities of the Defence Public Sector Undertakings (DPSU) among other measures.

The shortfall in Defence Expenditure will Affect:

• Operational readiness of Andaman and Nicobar Command (ANC).
• Maintenance of SIGINT (Signal Intelligence) equipment.
• Administration of training institutes and operational units.
• Operationalisation of three tri-service organizations i.e. Defence Space Agency (DSA), Defence Cyber Agency (DCYA) and Armed Forces Special Operations Division (AFSOD).

Recommendations of the Committee:

• It has recommended a dedicated fund for committed liabilities and procurements before the shortfall impacts modernisation, invariably from next Budget onwards (2021-22)

UNNAT BHARAT ABHIYAN

17, Mar 2020

Why in News?

• Ministry for Human Resource Development (MHRD)  has submitted the information related to the Unnat Bharat Abhiyan (UBA) recently.

Unnat Bharat Abhiyan (UBA):

• It is a flagship program of the Ministry for Human Resource Development (MHRD).
• It aims to link the Higher Education Institutions with a set of at least (5) village, so that these institutions can contribute to the economic and social betterment of these village communities using their knowledge base.

Objectives of the Scheme:

• To engage the faculty and students of Higher Educational Institutions (HEIs) in identifying development issues in rural areas and finding sustainable solutions for the same.
• Identify & select existing innovative technologies, enable customisation of technologies, or devise implementation methods for innovative solutions, as required by the people.
• To allow HEIs to contribute to devising systems for smooth implementation of various Government programmes.

About Unnat Bharat Abhiyan 2.0:

• It is the upgraded version of Unnat Bharat Abhiyan 1.0 launched in the year 2018.
• The scheme used to be extended to all educational institutes. But under Unnat Bharat Abhiyan 2.0 participating institutes are selected based on the fulfilment of certain criteria.
• The technological interventions under the UBA cover different subjects broadly categorized like in the area of sustainable agriculture; water resource management; artisans, industries and livelihood; basic amenities (Infrastructure & Services) and Rural Energy System.

AIR INDIA SALE: 100% FDI BY NRIS

14, Mar 2020

Context:

• Recently, the cabinet approved 100 percent Foreign Direct Investment (FDI) in Air India by foreign entities/NRIs under the automatic route. Earlier, the FDI limit permitted for NRIs was 49 per cent. This is considered to be a major development in the run-up to the Air India sale process, expected to be completed by this year.

Air India:

• It was founded as Tata Airlines (division of Tata Sons Ltd) in 1932 by J R D Tata
• In 1946, it became a Public Ltd Company with the name of Air India
• The government nationalized the carrier in 1953 and passed Air Corporations Act 1953, which provided the monopoly rights to Air India and its associates.
• This act was repealed after a standing committee headed by Pramod Mahajan recommended for it in 1993 and since 1994 the private sector players are allowed to participate in the aviation business
• In 2007 the decision to merge Air India with Indian Airlines to form NACIL (National Aviation Company of India Ltd) was taken.
• The merger is based on the recommendations of Justice Dharmadhikari committee report.
• The objective was to ensure lower administrative costs and other services.
• AI and Indian Airlines had been running profitably till 2005–06.
• It is commented that the merger of Air India with Indian Airlines has created woes due to lack of effective leadership and erroneous government policies.

Reasons for the failure of Air India:

Decision Making:

• Decision making is not quick enough due to the red tapism at different stages and there were various constraints on the operations.

The Rising Fuel Costs:

• The rising fuel costs have led to higher cost of operations which have eaten up the profit margins

Competition:

• The AI has been competing with private sector airlines which are more efficient in terms of ticket pricing, decision making, choosing the right routes, providing value-added services, etc.

AI and Indian Airlines Merger:

• The ill-timed merger was the biggest reason as it led to huge losses

Overstaffing:

• The number of staff/workers is very high compared to industry standards

Failure Gaining Momentum:

• Air India’s precarious financial situation was first made public in June 2009.
• But the government, instead of tackling the core problem of the lack of a strategic and operational direction within the airline, decided to focus on a financial package.
• The bailout package of over Rs.30,000 crore, which is being infused over an eight-year span ending 2021, has not helped Air India evolve into a robust carrier.
• In 2017, NITI Aayog recommended disinvestment but the government, in its wisdom, decided to not only retain 24% equity, it also wanted the acquirer to absorb a major chunk of the non-aircraft related debt.

Present Situation:

• The government has put Air India for disinvestment.
• It is driven by the Centre’s anxiety to get rid of the airline. Thus, it can spare itself of the responsibility of further infusion of funds.
• The reality is that the airline’s survival depends on several factors, most notably
• induction of a professional management with an effective leadership,
• a sound financial package that does not come with political interference in its day-to-day operations,
• trade unions allowing reasonable changes in work conditions and pay packages.
• After a failed attempt at Air India divestment in 2018, the government in January 2020 invited bids again for privatising the airline.
• Learning its lesson from the 2018 failure, the preliminary information memorandum states that 100% stake will be offloaded, unlike 76% offered in the previous attempt.
• However, the new owners would be required to continue to use the “Air India” brand name. The government has also retained a provision that substantial ownership and effective control of the airline must remain with an Indian entity.

Why are There No Buyers?

• The airline’s poor financial situation is what makes it largely unappealing.
• The airline had a debt burden of around ₹48,781 crore as of March 2017, which poses a huge financial risk to a buyer.
• Though the government has offered to transfer some of the debt to a special purpose entity, a buyer will still have to assume responsibility for debt of around Rs.30,000 crore after acquisition – still a significant burden for many.
• Apart from the huge debt burden, Air India has also been losing money for over a decade, with accumulated losses
• A major reason behind its huge losses is the cost of paying interest on its massive debt.
• Some analysts believe that Air India may not be worth anything to its buyers as they are unlikely to obtain any free cash flow after paying money to lenders.
• In fact, they may have to pay money from their own pockets if they assume personal liability for the debt.

100% FDI by NRIs:

• The FDI (foreign direct investment) policy would be amended to allow NRIs who are Indian nationals to own up to 100% of Air India “under automatic route”.
• Besides Air India, the government is also offloading its 100% stake in its low-cost subsidiary, Air India Express (AIXL), and 50% of AISATS, which provides cargo and ground handling services at major Indian airports.
• Apart from reducing the debt of the loss-making airline, the government has made a number of changes in the eligibility criteria for prospective bidders.
• Government had made changes so that the buyer would have to take over debt and liabilities worth Rs 32,986 crore, against around Rs 85,000 crore earlier.
• This means that the prospective buyer would now have to take over only 39% of the total debt and liabilities, unlike 61% in the 2018 bid document.
• The disinvestment of Air India would not just add to the government’s non-tax revenue next fiscal but also stop persistent loss to exchequer. The government has set an ambitious disinvestment target of Rs 2.1 lakh crore for FY21, against a revised Rs 65,000 crore for this fiscal. This part of disinvestment is highly necessary for the government to plug in the fiscal deficit amidst the chaos of slumping economy and a gloomy future in trade due to the Corona outbreak.

RAJYA SABHA NOD FOR VIVAD SE VISHWAS BILL

14, Mar 2020

Why in News?

• Recently, the Parliament has passed an amendment to the ‘Direct Tax Vivad se Vishwas Bill, 2020’ in order to widen its scope to cover litigation pending in various Debt Recovery Tribunals (DRTs).

About the Amendment:

• The amendment also includes certain search and seizure cases where the recovery is up to Rs. 5 crore.
• Therefore, the Bill in current form allows taxpayers to settle cases pending before the Commissioner (Appeals), Income Tax Appellate Tribunals (ITATs), Debt Recovery Tribunals (DRTs), High Courts and the Supreme Court.
• The Direct Tax Vivad se Vishwas Bill, 2020 is similar to the ‘Sabka Vishwas Scheme’, which was brought in to reduce litigation in indirect taxes in the year 2019. It resulted in settling over 1, 89,000 cases.
  • Under the Sabka Vishwas Scheme, the government expected to raise around 39,500 crore. However, after the closure of the amnesty window in January 2020 application in relation to taxes worth Rs. 90,000 crore were received. This shows the success of the scheme.

What are its Key Features?

• Objective: The Bill provides a mechanism for resolution of pending tax disputes related to direct taxes (Income Tax and Corporate Tax)in simple and speedy manner.
• Reduce Litigation: According to the Finance Ministry, at present there are 4.83 lakh pending direct tax cases worth Rs.9 lakh crore in the courts. Through this scheme, the government wants to recover this money in a swift and simple way
• Addressing Revenue Shortfall: The government is witnessing a big shortfall in revenues, especially tax revenues, hence, increasing revenues in one of the priorities of the Government.
  • Direct Tax collections have been lower than their budget targets due to the overall economic slowdown and a cut in the corporate tax rate in September, 2019.
• Mechanism: In case of payment of tax, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest, penalty and prosecution provided he/she pays by March 31, 2020.
  • But, if the tax arrears relate to disputed interest or penalty only, then 25% of disputed penalty or interest will have to be paid.
  • Those who avail this scheme after March 31, 2020 will have to pay some additional 10% amount. However, the scheme will remain open till June 30, 2020.
• Immunity to Appellant: Once a dispute is resolved, the designated authority cannot levy interest or penalty in relation to that dispute.
  • Further, no appellate forum can make a decision in relation to the matter of dispute once it is resolved.
• Revival of Disputes: However, if an appellant provides false information or violates the Income Tax Act, 1961, then case of dispute can be revived.

Other Issues Related to the Bill:

• Few MP’s also raised concern about the Hindi name of the bill, which claimed to be a violation of Article 348.
• Article 348 talks about the Language to be used in the Supreme Court and in the High Courts and for Acts, Bills, etc.
  • Notwithstanding anything in the foregoing provisions of this Part, until Parliament by law otherwise provides
  • all proceedings in the Supreme Court and in every High Court,
  • the authoritative texts
  • of all Bills to be introduced or amendments thereto to be moved in either House of Parliament or in the House or either House of the Legislature of a State,
  • of all Acts passed by Parliament or the Legislature of a State and of all Ordinances promulgated by the President or the Governor of a State, and
  • of all orders, rules, regulations and bye laws issued under this Constitution or under any law made by Parliament or the Legislature of a State, shall be in the English language.

MASKS, SANITISERS NOW ESSENTIAL COMMODITIES

14, Mar 2020

Why in News?

• The Centre recently brought masks and hand sanitisers under the Essential Commodities Act, 1955 (EC Act) in the wake of COVID-19 outbreak.

About the Essential Commodities Act:

• The Essential Commodities Act, 1955was enacted to ensure the easy availability of essential commodities to consumers and to protect them from exploitation by unscrupulous traders.
• The Act provides for the regulation and control of production, distribution and pricing of commodities which are declared as essential.
• Essential items under the Act include drugs, fertilisers, pulses and edible oils, and petroleum and petroleum products.
• The Act aim at maintaining/increasing supplies/securing equitable distribution and availability of these commodities at fair prices.
• Centre invokes the ECA Act’s provisions to impose stock limits in case of price/quantity distortions in the market to ensure adequate availability of essential commodities at reasonable prices.
• States are the implementing agenciesto implement the EC Act, 1955 and the Prevention of Black marketing & Maintenance of Supplies of Essential Commodities Act, 1980, by exercising powers delegated to them.
• The list of essential commodities is reviewed from time to timewith reference to their production and supply and in consultation with concerned Ministries/Departments.
• Currently, the restrictions like licensing requirement, stock limits and movement restrictions have been removed from almost all agricultural commodities.
• Exemptions:Wheat, pulses and edible oils, edible oilseeds and rice are certain exceptions.
• The recent amendment to the Legal Metrology (Packaged Commodities) Rules 2011 is linked to the ECA. The Government can fix the retail price of any packaged commodity that falls under the ECA.

What Masks and Sanitisers under ESA?

• Taking note of the fact that masks (2ply and 3ply surgical masks and N95 masks) and hand sanitisers are not easily available and vendors are charging exorbitant prices for them, the government declared these items as essential commodities till June 30 under the EC Act.

What are its Impact?

• Under this Act, the States and Union Territories can ask manufacturers to enhance their production capacity so that these products are widely available to consumers.
• Under the Act, an offender may be punished with an imprisonment up to seven years.
• The Consumer Affairs Ministry has also invoked the Prevention of Black marketing and Maintenance of Supplies of Essential Commodities Act, 1980 which would carry out action against those involved in overpricing and black marketing of the products.

Arguments against ECA:

• An archaic law:Essential Commodities Act has been in existence since 1955, when the economy was very different from what it is today. It was an economy ravaged by famine and food shortages.
• Difference between storage and hoarding:Recently there is evidence of interventions not working. It is because there is a distinction between storage and hoarding.
• As compared to older times, when the economy experiences acute shortages, today many shortage cases are actually that of hoarding.
• Stock limits led to onion price volatility:To control soaring prices of onions over the last few months, centre through ECA imposed stock limits on onions. Instead of decreasing prices, this actually increased price volatility.
• Although the restrictions on both retail and wholesale traders were meant to prevent hoarding and enhance supply in the market, the Survey showed that there was actually an increase in price volatility and a widening wedge between wholesale and retail prices.
• Lower stock limit led traders and wholesalers to immediately offload most of the kharif crop which led to a sharp increase in the volatility.
• Disincentivises storage infrastructure development:With too-frequent stock limits, traders may have no reason to invest in better storage infrastructure in the long run.
• Also, food processing industries need to maintain large stocks to run their operations smoothly. Stock limits curtail their operations. In such a situation, large scale private investments are unlikely to flow into food processing and cold storage facilities.
• Higher prices of medicines:Drug Price Control Order issued under the ECA also distorted the market and actually made medicines less affordable.
• The increase in prices is greater for more expensive formulations than for cheaper ones and for those sold in hospitals rather than retail shops.
• Rent seeking and Low conviction rates:Despite many raids conducted under the ECA in 2019, the conviction rate was abysmally low. The ECA only seems to enable rent-seeking and harassment.

Way Forward:

• Adequate supply:Given that almost all crops are seasonal, ensuring round-the-clock supply requires adequate build-up of stocks during the season.
• Without the ECA the common man would be at the mercy of opportunistic traders and shopkeepers.
• Genuine shortages:There can be genuine shortages triggered by weather-related disruptions in which case prices will move up.
• So, if prices are always monitored, farmers may have no incentive to farm.
• Difficult to differentiate between hording and shortage:It may not always be possible to differentiate between genuine stock build-up and speculative hoarding.

AT-1 BONDS

14, Mar 2020

Why in News?

• Recently, the Reserve Bank of India (RBI) has made a proposal to write-down Additional Tier-1 (AT-1) bonds as part of the SBI-led restructuring package for Yes Bank.

What are AT-1 Bonds?

• AT-1 bonds are a type of unsecured, perpetual bonds that banks issue to shore up their core capital base to meet the Basel-III norms.
• AT-1 bonds are like any other bonds issued by banks and companies, but pay a slightly higher rate of interest compared to other bonds.

There are Two Routes through which these bonds can be Acquired:

• Initial private placement offers of AT-1 bonds by banks seeking to raise money.
• Secondary market buys of already-traded AT-1 bonds.

Key points about AT-1 Bonds:

• These bonds are also listed and traded on the exchanges. So, if an AT-1 bondholder needs money, he can sell it in the secondary market.
• Investors cannot return these bonds to the issuing bank and get the money. i.e there is no put optionavailable to its holders.
• However, the issuing banks have the option to recall AT-1 bonds issued by them (termed call options that allow banks to redeem them after 5 or 10 years).
• Banks issuing AT-1 bonds can skip interest payouts for a particular year or even reduce the bonds’ face value.
• AT-1 bonds are regulated by RBI. If the RBI feels that a bank needs a rescue, it can simply ask the bank to write off its outstanding AT-1 bonds without consulting its investors.

Basel-III Norms:

• It is an international regulatory accord that introduced a set of reforms designed to improve the regulation, supervision and risk management within the banking sector, post 2008 financial crisis.
• Under the Basel-III norms, banks were asked to maintain a certain minimum level of capital and not lend all the money they receive from deposits.

RBI’s Regulations over Banks:

• In a situation where a bank faces severe losses leading to erosion of regulatory capital, the RBI can decide if the bank has reached a situation wherein it is no longer viable.
• The RBI can then activate a Point of Non-Viability Trigger (PONV) and assume executive powers of the bank.
• By doing so, the RBI can do whatever is required to get the bank on track, including superseding the existing management, forcing the bank to raise additional capital and so on.
• However, activating PONV is followed by a write down of the AT-1 bonds, as determined by the RBI through the Banking Regulation Act, 1949.

IBC (AMENDMENT) BILL, 2020

13, Mar 2020

Context:

• Recently, the Indian parliament passed amendments to the insolvency law that will help safeguard successful bidders of insolvent companies from the risk of criminal proceedings for offences committed by the previous promoters. The bill seeks to remove bottlenecks and streamline the corporate insolvency resolution process. The latest changes pertain to various sections of the IBC as well as theintroduction of a new section.

About the Insolvency and Bankruptcy Code, 2016:

• The code is a comprehensive law, which covers all individuals, companies, Limited Liability Partnerships (LLPs) and partnership firms.
• It provides for a time-bound process to resolve insolvency.
• When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency.
• The Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency.
• The Code creates various institutions to facilitate resolution of insolvency. These are as follows:
• Insolvency Professionals:
  • A specialised cadre of licensed professionals who would administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.
• Insolvency Professional Agencies:
  • The insolvency professionals must be registered with insolvency professional agencies.
  • The agencies conduct examinations to certify the insolvency professionals and enforce a code of conduct for their performance.
• Information Utilities:
  • Creditors will report financial information of the debt owed to them by the debtor. Such information will include records of debt, liabilities and defaults.
• Adjudicating authorities:
  • The proceedings of the resolution process will be adjudicated by the National Companies Law Tribunal (NCLT), for companies; and the Debt Recovery Tribunal (DRT), for individuals.
  • The duties of the authorities will include approval to initiate the resolution process, appoint the insolvency professional, and approve the final decision of creditors.
• Insolvency and Bankruptcy Board:
  • The Board regulates the insolvency professionals, insolvency professional agencies and information utilities set up under the Code.
  • The Board consists of representatives of Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law.

IBC (Amendment) Bill, 2020:

• Insolvency commencement date
  • The Bill clarifies that the insolvency commencement date is the date of admission of an application for initiating corporate insolvency resolution process (CIRP).
  • Presently under the Code, the insolvency resolution process commences when the Insolvency Resolution Professional (IRP) is appointed by the adjudicating authority.
• Threshold for initiating resolution process
  • The Bill also specifies the minimum threshold for certain classes of financial creditors for initiating insolvency resolution process.
  • The Code allows the creditors to initiate an insolvency resolution process, if the amount of default by the debtor is at least one lakh rupees.
  • The Bill adds an additional requirement for certain classes of financial creditors for filing application. These classes include real estate allottees and security or deposit holders represented by a trustee or agent.
• Corporate debtors entitled to make application
  • The Bill further clarifies that a corporate debtor should not be prevented from filing an application for initiation of corporate insolvency resolution process against other Corporate Debtors.
• Liabilities for Prior Offences
  • The bill provides safeguard for the successful bidders of insolvent companies from the risk of criminal proceedings for offences committed by the previous promoters.
  • Further, the Bill provides immunity to the company from attachment, seizure, retention, or confiscation of their property in relation to such offences.
• Licenses and permits not to be terminated due to Insolvency
  • The Bill also amends the Code the effect that a licence, permit, registration, quota, concession, clearances or a similar grant or right will now not be terminated or suspended during the Moratorium period.
  • This provision will be applicable as long as the debtor does not default in the payment of current dues arising for the use or continuation of such licenses or permits.
• IBC and its Shortcomings:
  • The insolvency and bankruptcy law has resulted in recovery of just 10 percent of defaulted loans in case of companies other than the seven big cases referred for resolution.
  • Of the 970 cases referred to IBC, 780 have been liquidated, indicating a mortality rate of 80 percent.
  • Experts opine that only 43 percent of the loans has been recovered, implying that banks took a haircut of 57 percent on their loans
  • There is also a concern over the MSMEs that will be compelled to supply goods to debt-ridden companies, under examination by the Resolution Professional.
• Though the bill is equipped to remove bottlenecks and streamline the corporate insolvency resolution process, it needs furthermore scrutiny to iron out the shortcomings and make the resolution process much more efficient and creditor friendly..

WOMEN IN WORKFORCE

11, Mar 2020

Context:

• According to a statement by the non- government organisation Azad Foundation – women workforce in the country fell to 18 per cent in 2019 from 37 per cent in 2006, The World Economic Forum’s Global Gender Gap Report this year ranks India at 149th position out of 153 countries on economic participation and opportunity.

Observations by the Azad Foundation:

• According to the Foundation, the Global Gender Gap Report estimates that raising women’s participation in the labour force can increase India’s GDP significantly.
• The declining women’s labour force participation, gender pay gap, high rates of informal work with lack of social security are seen as impediments to the goal of gender equality and empowerment of women in India. Over the last few years more women have taken up Science, Technology, Engineering and Mathematics courses and are aspiring to enter the workforce. However dropout rates among women is also high, particularly around marriage, maternity and motherhood.

Safeguards for Women:

• The principle of gender equality has been put forward in the Indian Constitution through its Preamble, Fundamental Rights, Fundamental Duties and Directive Principles.
• The Constitution not only grants equality to women, but also empowers the State to adopt measures of positive discrimination in favour of women.
• From the Fifth Five Year Plan (1974-78) onwards has been a marked shift in the approach to women’s issues from welfare to development.
• The National Commission for Women was set up by an Act of Parliament in 1990 to safeguard the rights and legal entitlements of women.
• The 73^rdand 74^th Amendments (1993) to the Constitution of India have provided for reservation of seats in the local bodies of Panchayats and Municipalities for women, laying a strong foundation for their participation in decision making at the local levels.
• India has also ratified various international conventions and human rights instruments committing to secure equal rights for women.
• Key among them is the ratification of the Convention on Elimination of All Forms of Discrimination against Women (CEDAW) in 1993.
• The Government of India attempted to gender sensitise the Budget initially through the Women’s Component Plan (by state governments also) and then more intensively with Gender Responsive Budgeting institutionalized through the Gender Budget Statement published every year since 2005 ‐2006 with the Union Budget (in some states as well).
• The women’s movement and a wide-spread network of non-Government Organisations which have strong grass-roots presence.
• The Indian government is running many schemes for women’s empowerment such as the Pradhan Mantri Ujjwala Yojana, Beti Bachao Beti Padhao, Mahila E-haat Scheme, Sukanya Samriddhi Yojana, Sakhi Yojana, Ladli Yojana, Digital Laado and the Swachh Bharat Mission.
• Maternity Benefits Act – Maternity benefits are generous for a small minority of Indian women employed in the formal sector and covered under the Maternity Benefit Act.
• NFSA – Under the National Food Security Act, 2013, all pregnant women (except those already receiving similar benefits under other laws) are entitled to maternity benefits of ₹6,000 per child.
• Maternity benefits scheme – a maternity benefit scheme was rolled out in 2017: the Pradhan Mantri Matru Vandana Yojana (PMMVY).

Challenges in Bringing Gender Equality

• For millions of years, except in few matriarchal societies, the man has always been considered the head of the family.
• Even among the educated, there are deep rooted biases that prevent people from admitting that the man is no longer the provider-in-chief.
• A study at the University of Chicago found that marriages in which the woman earned more were less likely in the first place and more likely to end in divorce.
• It also found that women who out-earned their husbands were more likely to seek jobs beneath their potential and do significantly more housework and child care than their husbands to make their husbands feel less threatened.
• The norms in our families act as a huge deterrent to achieving gender parity.
• Annual Crime in India Report 2018 by NCRB
• According to the report, 3,78,277 cases of crime against women were reported in the country, up from 3,59,849 in 2017.
• Uttar Pradesh topped the list with 59,445 cases, followed by Maharashtra (35,497) and West Bengal (30,394).
• The conviction rate in rape-related cases stood at 27.2% even though the rate of filing chargesheets was 85.3% in such cases.
• Cruelty by husband or his relatives (31.9%) followed by assault on women with intent to outrage her modesty (27.6%) constituted the major share of crimes against women.

Sociology behind the Gender-Divide in Workplace:

• Research shows that when men and women apply for jobs — be in the labour market, or in places where high level qualifications are demanded, men candidates engage in self-promotion, and are boastful while equally qualified women are more ‘modest’ and ‘undersell’ themselves.
• Even in groups and situations where men and women are present as colleagues, the views of women are either ignored or listened to less seriously than those of men.
• As a result, women tend to underestimate their ability relative to men, especially in public settings, and negotiate less successfully.
• Dual role played by women as a part of the workforce and as a caretaker of the family, makes it difficult for her to align in the same position as that of men.

Why Female Labour Force Participation Matters Beyond Social Cause?

• Ignoring India’s declining female labour force participation at a time of economic distress is a mistake.
• Women in workforce improve overall efficiency and the country’s economy
• In India, where young women’s education is now at par with men’s, ignoring that half of the population isn’t participating equally in the economy means we are missing out on many things, like-
• Innovation
• Enterpreneurship
• Productivity gains.
• Large potential to increase in GDP
• A report by McKinsey Global Institute suggests that if women participated in the Indian economy at the level men do, annual GDP could be increased by 60 per cent above its projected GDP by 2025.
• The same analysis also suggested that India’s potential GDP gains through achieving

MICRO-IRRIGATION HIT BY LACK OF FUNDS

11, Mar 2020

Why in News?

• The prevailing economic slowdown appears to have affected the implementation of the projects to provide drip and sprinkler implements to farmers in state of Telangana.

Highlights:

• For providing the drip and sprinkler implements to the targeted extent of land, an amount of Rs 669 crore is required, including RS 270 crore contribution of the Centre and about Rs 400 crore share of the State.

Micro-irrigation:

• Drip irrigation is a type of micro-irrigation system that has the potential to save water and nutrients by allowing water to drip slowly to the roots of plants, either from above the soil surface or buried below the surface.
• The goal is to place water directly into the root zone and minimize evaporation. Drip irrigation systems distribute water through a network of valves, pipes, tubing, and emitters.
• Depending on how well designed, installed, maintained, and operated it is, a drip irrigation system can be more efficient than other types of irrigation systems, such as surface irrigation or sprinkler irrigation.

Advantages:

• Fertilizer and nutrient loss is minimized due to a localized application and reduced leaching.
• Water application efficiency is high if managed correctly. Field leveling is not necessary.
• Fields with irregular shapes are easily accommodated. Recycled non-potable water can be safely used.
• Moisture within the root zone can be maintained at field capacity. Soil erosion is lessened.
• Weed growth is lessened. Water distribution is highly uniform, controlled by the output of each nozzle.

• Labour cost is less than other irrigation methods.

Disadvantages:

• Initial cost can be more than overhead systems.
• The sun can affect the tubes used for drip irrigation, shortening their lifespan.
• If the water is not properly filtered and the equipment not properly maintained, it can result in clogging or bio clogging.
• Drip tape causes extra clean-up costs after harvest. Users need to plan for drip tape winding, disposal, recycling or reuse.
• In lighter soils subsurface drip may be unable to wet the soil surface for germination. Requires careful consideration of the installation depth.
• The PVC pipes often suffer from rodent damage, requiring replacement of the entire tube and increasing expenses.

#SHEINSPIRESUS

10, Mar 2020

Context:

• Prime Minister of India on 8th March 2020 marked International Women’s Day by handing over control of his social media accounts to seven women achievers. It is claimed to be an unique initiative and it is expected to inspire many women from various echelons of the society who are contributing to its development in their own ways.

International Women’s Day 2020:

• International Women’s Day (March 8) is a global day celebrating the social, economic, cultural and political achievements of women.
• The day also marks a call to action for accelerating gender parity.
• The 2020 theme for International Women’s Day (8 March) is, “I am Generation Equality: Realizing Women’s Rights”.

History:

• The early years of the 20th century saw rapid industrialisation in many countries and the working conditions of most of the women employed in factories and on the production lines gave cause for considerable concern.
• In 1910 a second International Conference of Working Women was held in Copenhagen. A woman named Clara Zetkin (Leader of the ‘Women’s Office’ for the Social Democratic Party in Germany) tabled the idea of an International Women’s Day.
• She proposed that every year in every country there should be a celebration on the same day – a Women’s Day – to press for their demands.
• The conference of over 100 women from 17 countries, representing unions, socialist parties, working women’s clubs – and including the first three women elected to the Finnish parliament – greeted Zetkin’s suggestion with unanimous approval and thus International Women’s Day was the result.
• International Women’s Day was celebrated for the first time by the United Nations in 1975.
• Then in December 1977, the General Assembly adopted a resolution proclaiming a United Nations Day for Women’s Rights and International Peace to be observed on any day of the year by Member States, in accordance with their historical and national traditions.
• 2011 saw the 100 year centenary of International Women’s Day – with the first IWD event held exactly 100 years ago in 1911 in Austria, Denmark, Germany and Switzerland.

The Super Seven:

• PM Narendra Modi’s social media accounts were handled by seven women from different fields on International Women’s Day. A look at the achievements of these women:
• Arifa Jaan:
• Kashmir-based Arifa Jaan is passionate about reviving Namda, the traditional craft of the region
• Sneha Mohandoss:
• Inspired by her mother, Chennai-based Sneha Mohandoss started an  initiative called Foodbank India, aimed at eradicating hunger through food donation campaigns.
• Kalavati Devi:
• A mason from Kanpur, Uttar Pradesh, she collected funds from the public and built toilets for better hygiene in her locality.
• Kalpana Ramesh:
• The Hyderabad-based architect is focused on water conservation projects, especially rainwater harvesting, and spreads awareness on the responsible use of water
• Malvika lyer:
• An award winning disability rights activist, social worker and model
• She lost both arms in a bomb blast at Bikaner when she was 13
• Vjaya Pawar:
• She promotes handicrafts from the Banjara Community of rural Maharashtra
• Veena Devi:
• An organic farmer from Munger, Bihar, she has been cultivating mushrooms at some since 2013, setting an example in self-Sufficiency. She gained recognition for cultivating 1 kg mushrooms under her bed
• Namda Traditional Art:
• Namda is a local term used for traditional felted wool floor coverings, made out of a coarse variety of wool.
• Namda comes from the root word Namata (Sanskrit for woollen stuff).
• Namda making is practised as a craft in several cultures, especially in the countries throughout Asia, viz. Iran, Afghanistan and India.
• Srinagar in Kashmir and Tonk in Rajasthan are the two major namda making centres in India.
• In India, it is known to have come from Iran and was actively promoted in the state under the patronage of the Mughal monarchs and the Rajput royals.
• Rich hues and exquisite designing are the characteristics of the handcrafted Namda.
• Unique themes and floral patterns provide the themes for these masterpieces and flowers and leaves, buds and fruits are the essence of the designs.

STATUS OF GOVERNMENT SCHOOLS IN INDIA

10, Mar 2020

Why in News?

• The Parliamentary Standing Committee on Human Resource Development (HRD) recently submitted its report on the 2020-2021 demand for grants for school education to the Rajya Sabha and has made various observations on state of government schools in India.

What are the Key Findings?

• Almost half the government schools in the country do not have electricity or playgrounds.
• The budgetary allocations saw a 27% cut from proposals made by the School Education Department, despite proposals for 82,570 crore, only Rs. 59,845 crore was allocated.
• There is slow progress in building classrooms, labs and libraries to strengthen government higher secondary schools.
• Overall, for the core Samagra Shiksha Scheme, the department had only spent 71% of revised estimates by December 31, 2019.
• India is also dealing with a scenario of significant teacher vacancies, which are to the tune of almost 60-70 per cent in some states.

About Samagra Shiksha Abhiyan:

• Samagra Shiksha is an integrated scheme for school education extending from pre-school to class XII to ensure inclusive and equitable quality education at all levels of school education.
• It subsumes the three Schemes of Sarva Shiksha Abhiyan (SSA), Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and Teacher Education (TE).
• The scheme treats school education holistically as a continuum from Pre-school to Class 12.
• The main emphasis of the Scheme is on improving the quality of school education by focussing on the two T’s – Teacher and Technology.

What are its Key Recommendations?

• Core schemes should get additional funds at the revised estimates stage.
• HRD Ministry should collaborate with the Mahatma Gandhi National Rural Employment Guarantee Scheme to construct boundary walls.
• It should also work with the Ministry of New and Renewable Energy to provide solar and other energy sources so that schools have access to power.

What is the Concern?

• The learning crisis is evident in the fact that almost half of the children in grade 5 in rural India cannot solve a simple two-digit subtraction problem, while 67 per cent of children in grade 8 in public schools score less than 50 per cent in competency-based assessments in mathematics.

Need of an Hour:

• The Delhi Model of Education:
• For too long, there have been two kinds of education models in the country: one for the classes and another for the masses. The AAP government in Delhi sought to bridge this gap.
• Its approach stems from the belief that quality education is a necessity, not a luxury. Hence, it built a model which essentially has five major components and is supported by nearly 25% of the State Budget.
• Key components of the model:

1. Transformation of school infrastructure.

2. Training of teachers and principals.

3. Engaging with the community by reconstituting school management committees (SMC).

4. Curricular reforms in teaching learning.

5. No fee increase in private schools.

MADRAS HC DISMISSES M. P’S PLEA ON GI TAG FOR BASMATI RICE

10, Mar 2020

Why in News?

• The Madras High Court has set aside the State of Madhya Pradesh and the Madhya Shetra Basmati Growers Association plea to restrict the production of Basmati rice to certain regions in the Indo-Gangetic plain.

About Basmati Rice:

• It is one of the best known varieties of rice all across the globe.
• It is a long grain rice which has its origin from India and some parts of Pakistan.
• It has a unique position in the rice world due to its price, fragrance, grain morphology as well as quality.
• Basmati rice has a unique fragrance and flavour caused due to the presence of a chemical called 2-acetyl-1-pyrroline.
• This chemical is found in basmati rice at about 90 parts per million (ppm) which is 12 times more than non-basmati rice varieties.
• Basmati rice needs specific climatic conditions to grow which is why it is cultivated in selected regions of India.
• It is cultivated in the states of Himachal Pradesh, Punjab, Haryana, Delhi, Uttarakhand, Madhya Pradesh, Jammu and Kashmir and western Uttar Pradesh (Indo Gangetic Plains).

Production of Basmati Rice in India:

• India is the largest producer of Basmati rice with about 70 per cent share in global production.
• Basmati rice constitutes one of India’s significant exports both in terms of soft power and hard money.
• India is leading exporter of Basmati rice in the global market.
• During 2016-17, India exported 40, 00,471.56 MT of Basmati Rice.
• Major Export Destinations in 2016-17 included Saudi Arabia, Iran, United Arab Emirates, Iraq and Kuwait.
• According to a report, the Indian Basmati rice industry is on the verge of clocking its highest ever export of around 30,000 crore rupees in the financial year 2019.
• India has always been involved in protecting the name Basmati as a geographic indicator. In other words, Basmati is a term that should be restricted to the product from its geographic location.

About the Issue:

• Agricultural and Processed Food Products Export Development Authority (APEDA) had initiated steps to protect and get GI recognition for Basmati cultivated in the IGP.
• It had applied for registration of GI basmati rice in its favour in May 2010.
• APEDA was established by the Government of India under the Agricultural and Processed Food Products Export Development Authority Act, passed by the Parliament in December, 1985.
• It is a statutory body under the Ministry of Commerce and Industry and is the apex organization engaged in work related to the development of export of agricultural products and processed food from India.
• It is responsible for putting in place a system for administration of GI and authentication of the product in India and abroad.

About Geographical Indication (GI):

• Geographical Indication is an insignia on products having a unique geographical origin and evolution over centuries with regards to its special quality or reputation attributes.
• It is a mark of authenticity and ensures that registered authorised users (or at least those residing inside the geographic territory) are allowed to use the popular product name.
• GI registration confers:(i) Legal protection to the products (ii) Prevents unauthorised use of a GI tags by others (iii) Helps consumers to get quality products of desired traits (iv) Promotes economic prosperity of producers of GI tag goods by enhancing their demand in national and international markets.
• Legal Authorities:At international level, GI is governed by World Trade Organisation’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
• In India, GI registration is governed by the Geographical Indications of goods (Registration and Protection) Act, 1999. Darjeeling tea was the first product in India accorded with GI tag.
• Presently, there are total 218 GI tag products from India. Some of them are Mysore Silk, Mysore Pak, Thanjavaur Veena, etc.

YES BANK CRISIS

07, Mar 2020

Context:

• Recently, the Reserve Bank of India (RBI) on March 5 imposed a moratorium on the private sector lender Yes Bank, limiting withdrawal of deposits to Rs 50,000. The RBI has also superseded the institution’s board of directors and had imposed a 30-day moratorium.RBI has appointed Prashant Kumar, former CFO of State Bank of India as its administrator.

What’s a Moratorium?

• It means the bank’s normal operations including lending and deposit mobilization are restricted.
• Under Section 45 of the Banking Regulation Act 1949, the one-month moratorium imposed on Yes Bank came into effect from March 5 and will be on till April, 6.
• During this period, deposit withdrawals are capped, while the bank cannot give fresh loans or renew existing loans besides others

Why did Yes Bank Collapse?

• Deteriorating Financial Position
• The bank was making losses and inadequate profits for consecutive quarters
• The bank was unable to raise capital to address potential loan losses and resultant downgrades
• In FY’19 alone, it reported a divergence of Rs 3,277 crore in bad loans and Rs 978 crore in NPA provisions.
• Governance Issues:
• The bank has also experienced serious governance issues and practices.
• In 2018, the RBI refused to give Yes Bank’s boss Rana Kapoor an extension as chief executive and managing director due to his highly irregular credit management practices.
• Failure in Raising Capital
• There was no concrete proposal from investors to put the kind of money that the bank required to survive and grow.
• In August 2019, it raised Rs 1,930.46 crore through qualified institutional placement (QIP), but this only scratched the surface of what it needed.
• Outflow of Liquidity
• The bank was facing regular outflow of liquidity due to withdrawal of deposits from customers.

The safety of the Depositors:

• Although the government has limited withdrawals from Yes bank accounts to a maximum of Rs 50,000 per month, the deposits with Yes Bank are insured for up to Rs 5 lakh by the DICGC.
• Budget 2020 proposed to increase insurance coverage of deposits with scheduled banks from Rs 1 lakh to Rs 5 lakh by Deposit Insurance and Credit Guarantee Corporation (DICGC).

Deposit Insurance and Credit Guarantee Corporation (DICGC):

• DICGC came into existence in 1978 after the merger of Deposit Insurance Corporation (DIC) and Credit Guarantee Corporation of India Ltd. (CGCI) after passing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 by the Parliament.
• It serves as a deposit insurance and credit guarantee for banks in India.
• It is a fully owned subsidiary of and is governed by the Reserve Bank of India.
• What DICGC does?
• DICGC charges 10 paise per ₹ 100 of deposits held by a bank. The premium paid by the insured banks to the Corporation is paid by the banks and is not to be passed on to depositors.
• DICGC last revised the deposit insurance cover to ₹ 1 lakh on May 1, 1993, raising it from ₹ 30,000 since 1980. The protection cover of deposits in Indian banks through insurance is among the lowest in the world.
• The Damodaran Committee on ‘Customer Services in Banks’ (2011) had recommended a five-time increase in the cap to ₹5 lakh due to rising income levels and increasing size of individual bank deposits.
• Budget 2020 proposed to increase insurance coverage of deposits with scheduled banks from Rs 1 lakh to Rs 5 lakh.
• What kind of deposits are covered
• DICGC covers all deposits such as savings, fixed, current, recurring and so on except for the following deposits:

1.Deposits of foreign governments;

2.Deposits of Central/State Governments;

3.Inter-bank deposits;

4.Deposits of the State Land Development Banks with the State co-operative bank;

5.Any amount due on account of and deposit received outside India

6.Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India

DISABILITY PENSION

07, Mar 2020

Why in News?

• Recently, the government has withdrawn a circular, that had directed banks to deduct income tax on pension and disability benefits provided to disabled retired military personnel.

About Categories of Disabled Veterans:

• They are classified under three categories: battle casualties (war wounded), battle casualties and disabilities due to service conditions.
• The military personnel who have been disabled due to wounds or injuries suffered by them in operations with the enemy or terrorists/ insurgents or suchlike operations are battle casualties (war wounded), while personnel who have been declared battle casualties but have not suffered injuries due to physical wounds are classified under battle casualties.
• The third category pertains to personnel who have been disabled due to conditions of service, wherein some of the disabilities akin to lifestyle diseases are also included.

Benefits are based on the Percentage of Disability:

• Less than 20% disability is not entitled to any benefits.
• Those with disability from 21% to 50% are categorised as 50% disabled,
• Those with 51% to 75% disability are classified as 75% disabled, and
• Those with 76% or more disability are classified as 100% disabled.
• The Amount of disability pension is based on two categories

The first rate is for battle casualties (war wounded) and battle casualties:

• For 21% to 50% disability, 30% of the last pay drawn is given as disability pension;
• for 51% to 75% disability, 45% of the last pay; and
• for 76% of more disability, 60% of last pay drawn on retirement is given as disability pension.

The second rate applies to personnel with disabilities due to service conditions:

• For 21% to 50% disability, 15% of the last pay drawn is the disability pension;
• for 51% to 75% disability, 22.5% of the last pay; and for 76% of more disability,
• 30% of the last pay drawn on retirement is given as disability pension.

Are These Disability Pensions Tax-Free?

• The entire pension and disability element of pension in all the categories is exempt from payment of income tax.
• But the Central Board of Direct Taxes (CBDT) notified that tax exemption on disability pension would be available only to personnel who had been invalidated from service and not to personnel who had retired otherwise.
• This has been challenged in the Supreme Court which, in an order dated August, 2019, directed all parties to maintain ‘status quo’ on the matter.

About Central Board of Direct Taxes (CBDT):

• It is a statutory body established as per the Central Board of Revenue Act, 1963.
• It is India’s official financial action task force unit.
• It is administered by the Department of Revenue under the Ministry of Finance.

About CBDT Structure:

• The Central Board of Direct Taxes consists of a Chairman and six members that deal with the following:

1.Income Tax

2.Revenue

3.Legislation and Computerisation

4.Audit and Judicial

5.Investigation

6.Personnel and Vigilance

• The Members of the CBDT are selected from the Indian Revenue Service (IRS). The members constitute the top management of the Income Tax Department.

Functions of CBDT:

• It deals with matters related to levying and collecting Direct Taxes.
• Formulation of various policies.
• Supervision of the entire Income Tax Department
• Suggests legislative changes in Direct Tax Enactments
• Suggests changes in tax rates
• Proposes changes in the taxation structure in line with the Government policies.

Current Controversy:

• The Principal Controller of Defence Accounts, Allahabad issued a circular on February 20, for “necessary action” on the June 2019 CBDT notification to deduct income tax from pensions of disabled soldiers.
• The State Bank of India then started debiting tax at source for the entire financial year 2019-20 from the February pension of retired military personnel who were receiving disability pension. This led to several pensioners receiving as little as Rs 1000 in their accounts.

THE ECONOMIC IMPACT OF CORONAVIRUS

05, Mar 2020

Why in News?

• The outbreak of Corona virus in China and its spread to neighbouring countries has been having a devastating impact on the various sectors of the economy at both global and national level.
• Thus the impact of this spread on various sectors has been discussed here.

Global Scenario:

1. Slowdown in Global Growth: The world’s economy could grow at its slowest rate since 2009 this year due to the corona virus outbreak, according to OECD. The OECD has forecast growth of just 2.4% in 2020, down from 2.9% in November 2019.

2. Travel Industry: The number of cases diagnosed is increasing around the world every day. Thus, many countries have introduced travel restrictions to try to contain the virus’s spread, impacting the travel industry massively.

3. Fall in Customer Demand: Some people are choosing to avoid activities that might expose them to the risk of infection, such as going out shopping. Restaurants, car dealerships and shops have all reported a fall in customer demand.

4. Beneficiaries: Consumer goods giant Reckitt Benckiser, for example, has seen a boost in sales for its Dettol and Lysol products. The disinfectant is seen as providing protection against the spread of the disease, although its effectiveness has not yet been scientifically proven.

Impact on Indian Economy:

1. GDP Growth Rate:

• OECD has slashed India’s growth forecast for 2020-21 by 110 basis points to 5.1%, warning that the impact of the Covid-19 outbreak on business confidence, financial markets and the travel sector, including disruption to supply chains, could shave 50 bps off global growth in 2020.

2. Automobile Industry:

• China is one of the leading suppliers of auto components in India, accounting for 27% of the total imports.
• The corona virus is expected to have an impact on the Indian automotive industry and therefore also on the automobile component and forging industries, which had already reduced their production rate due to the market conditions and on account of the impending change over to BS-VI emission norms from BS-IV from April 2020.

3. Impact on Pharmaceuticals Sector:

• Given the pharmaceutical industry’s deep linkages to China, the supply chain of raw materials of drugs has taken a hit.
• The production facilities in Himachal Pradesh — largest pharma hub of Asia — have warned of suspension.
• India is heavily import-dependent for APIs from China. India’s API imports stand at around $3.5 billion per year, and around 70%, or $2.5 billion, come from China.

4. Currency

• The month of March is typically good for the Indian currency as remittances, from both overseas citizens and companies, tend to boost the exchange rate.
• In the past decade, the rupee has appreciated seven times against the dollar in March. But March 2020 could be hard on the exchange rate and the rupee’s sharp drop to 73.25 per dollar on 3rd March, 2020 is evidence of this. One of the reasons is an increase in the number of reported cases of coronavirus in India.

Response at Global level:

• Vaccines are being developed.
• The COVID-19 outbreak was declared a Public Health Emergency of International Concern by the WHO.
• According to recommendations by the World Health Organization, the diagnosis of COVID-19 must be confirmed by the Real Time- Polymerase Chain Reaction (PCRT-PCR) or gene sequencing for respiratory or blood specimens, as the key indicator for hospitalisation.
• $15 million dollars has been released from the UN’s Central Emergency Fund to help fund global efforts to contain the spread of the COVID-19 corona virus, particularly vulnerable countries with weak health care systems.

Response at National Level:

• The Indian health minister advised people to approach the government helpline numbers regarding the doubts related to symptoms of the deadly disease. The situation is being monitored at the highest level.
• The government has already introduced travel restrictions and suspended visas from affected countries.
• A detailed containment plan has been shared with states. States have been asked to identify possible isolation areas in hospitals that can accommodate larger numbers.
• PCR Test: If PCR test is positive, the sample is sent to the National Institute of Virology in Pune, which is the only government laboratory currently doing genome sequencing, for final confirmation.

ROAD SAFETY IN INDIA

04, Mar 2020

Context:

• The 3^rdGlobal Ministerial Conference on Road Safety “Achieving Global Goals 2030” was held February this year, where the conference aimed to chart future strategic directions for global road safety, and define ways to accelerate action on proven strategies.

Road safety in India:

Data on “Road Accidents in India 2018”:

• As per the ‘Road Accidents in India, 2018’ Report, Road accidents in the country have increased marginally by 0.46 % during 2018 compared to 2017.
• The fatalities during the same period have also risen by about 2.37% and 1,51,471 persons were killed in 2018 as against 1,47,913 in 2017.
• Road accident injuries have however shown a decrease of 0.33% in 2018 as compared to 2017.
• As per the report, 62 pedestrians die daily on Indian roads.
• Till 2014, it was 32, a rise of 84% in just four years (2014 to 2018).
• West Bengal tops the list of pedestrian related fatalities with 2618 deaths in 2018.

Significance of Road Safety:

• Road transport is the dominant mode of transport in India, in terms of traffic share and in terms of contribution to the national economy.
• To meet the demand for road transport, the number of vehicles and the length of road network have increased over the years.
• A negative externality of expansion in road network, motorization and urbanization in the country is the increase in road accidents and road crash fatalities.
• Road traffic injuries are one of the leading causes of death, disabilities and hospitalization in the country imposing huge socio-economic costs.

Impact of lack of Road Safety:

• Road accident injuries are the leading causes of deaths and disabilities.
• The age profile of road accidents victims in year 2016 reveals that the productive age group of 18 to 35 years accounts for the high share of 46.3 percent and the age group of 18-45 accounted for a share of 68.6% in the total road accident fatalities.
• India loses 3% of its GDP due to road accidents, most of which are preventable.

Causes of Road Accident:

• Many road accidents are the result of faulty road-design especially a single-lane one with a sharp curve.
• Infrastructural deficits: Pathetic conditions of roads and vehicles, poor visibility and poor road design and engineering – including quality of material and construction.
• Negligence and risks: Over speeding, driving under the influence of alcohol or drugs, tiredness or riding without a helmet, driving without seatbelts.
• Distraction while driving like talking over mobile phones while driving has become a major cause of road accidents.
• Overloading to save cost of transportation.
• Weak Vehicle Safety Standards in India: In 2014, crash tests carried out by the Global New Car Assessment Programme (NCAP) revealed that some of India’s top-selling car models have failed the UN’s frontal impact crash test.
• Lack of awareness among people regarding the importance of safety features like airbags, Anti-lock Braking system etc. Moreover, Vehicle manufacturers do not provide them as standard fitment but only in higher class vehicles reducing their reach.

Steps taken by the Government:

• In 2015 the Indian government announced the application of new regulations consistent with the UN standards for front and side impact and also pedestrian protection.
• For new car models, the use of front and side crash tests came into force from October 2017 and will apply to all new cars from October 2019.
• The pedestrian protection regulation for new models came into force from October 2018 and will apply to all new cars from October 2020.
• In addition, new cars are required to have airbags fitted as standard and to have a speed warning device above 80 km/h.
• KS Radhakrishnan panel on Road Safety
  • Supreme Court had set up the three-member KS Radhakrishnan panel on road safety in April 2014.The main recommendation of the committee was
  • Ban on the sale of alcohol on highways (both state and national) to restrain drunk driving.
  • The states were directed to implement laws on wearing helmets.
  • Audit of road safety to be implemented by states to ensure the safety standards in the design, construction, and maintenance of roads.
  • The committee stressed the importance of creating awareness among people on road safety rules.
• 3 Year Action Agenda NITI Aayog also highlighted need for Road Safety and set the following Agenda:
  • Create Road Safety Boards to reduce accidents. Use data to monitor accidents. We can do this by using data to monitor accidents in real time and use this input to direct efforts towards correction on specific points.
  • Standardize reporting of accidents and enhance preparedness through better logistics.
  • Provisions to ensure that whenever an emergency situation occurs, the victims are rushed to a nearby medical centre within 10 minutes of the accident.
  • Create supporting infrastructure and economic models to support better safety and efficiency.
• India signed the Brasilia declaration and committed to reduction in fatalities.

Brasilia Declaration on Road Safety:

• The declaration was signed at the Second Global High-Level conference on Road Safety held in Brazil.
• Through the Brasilia Declaration Countries plan to achieve the Sustainable Development Goal 3.6: By 2020, halve the number of global deaths and injuries from road traffic accidents.
• United Nations has also declared 2010-2020 as the decade of action for Road Safety.

The Plight of the Pedestrians:

• Despite a weak legal framework, the rights of pedestrians to have encroachment free footpaths and streets and maintenance of the same is still a dream.
• In the  landmark Olga Tellis v. Bombay Municipal Corporation casein 1985, the Supreme Court talked extensively (and for the first time) on the rights of pedestrians.
• The same was held true in the recent judgment of Omprakash Gupta and others v. Mumbai Municipal Corporation (2018) by the Mumbai High Court.
• In 2017, Navdeep Asija, a renowned road safety expert, filed a petition in the Punjab and Haryana High Court for the enforcement of ‘right to walk’.
• The petition was based on Article 21 of the Constitution – right to life – arguing that the right to walk was a substantial part of right to life. But the court has not ruled on the petition so far.
• In 2005, the Manmohan Singh government constituted an expert committee under the chairmanship of S Sundar, which studied road safety management pan India.The main recommendation were
• The setting up of an apex body, the “National Road Safety and Traffic Board” having regulatory and advisory powers under the National Road Safety and Traffic Management Act.
• It also suggested the Board be vested with power to issue directives and undertake road safety audits.
• But no action has been taken on the Sundar committee recommendations so far

The Motor Vehicles (Amendment) Act, 2019:

• The Motor Vehicles Act, 1988 is the principal instrument through which road transport is regulated in the country.
• The same has been amended first time in a comprehensive way after thirty years in 2019.
• Road Safety Provisions and Penalties:
• It facilitates electronic monitoring of vehicles for enforcing traffic rules.
• Provision of a refresher training course to obtain the DL after its suspension or revocation for certain offences like over speeding, drunken driving etc.
• Penalties have been introduced for new offences and enhanced for existing offences.
• For offences committed by Juveniles:
• penalty of Rs. 25000 and imprisonment up to 3 years for the owner/guardian.
• Digital intermediaries and aggregators (Ola and Uber) will follow guidelines prescribed by the Centre.
• Constitution of National Road Safety Board to render advice on Road Safety and Traffic Management.
• Citizen facilitation, Transparency and Reduction in Corruption:
• All forms, fees and documents under the Act can be submitted online to avoid human intervention.
• Dealer point registration – for registration of new motor vehicles, the onus to apply for registration has been shifted to dealers and the requirement to produce vehicles before authority has been removed.
• Formulation of National Registers for DLs and registrations to bring transparency.
• Automated testing.
• The validity periods for DLs have been extended.
• DLs can be renewed anytime between 1 year before its expiry till 1 year after its expiry to facilitate citizen away from home, visiting abroad, chronic patients etc.
• Employment Facilitation:
• The requirement of minimum educational qualification for license to drive transport vehicles has been removed.
• Scheme for setting up driving schools with the Central assistance.
• Increased accountability of manufacturers of Motor Vehicles
• Centre can order recall of motor vehicles for any defect.
• Insurance and Compensation
• Constitution of Motor Vehicle Accident Fund.
• compensation for hit and run cases.
• Cashless treatment of road accident victims during golden hour.
• Drivers and Co-driver/helper have been included as third parties, for the purpose of insurance.
• Behavioral Changes:
• Increasing the motorcycle helmet, seat-belt usage and increasing child restraint use.
• Awareness regarding the influence of alcohol on driving.
• Post Crash response and Effective Trauma Care:
• Simple and affordable post-crash care interventions can save lives. Effective care for the injured requires timely care at the scene, prompt transport to appropriate emergency and surgical care at the hospital, and early access to rehabilitation services.
• Safe Roads:
• Safety consideration during the planning, design, and operation of roads, can contribute to reducing road traffic deaths and injuries.
• Vehicular Safety Standards:
• Vehicle safety features such as electronic stability control, effective Car Crash Standards and advanced braking should be made mandatory.
• Awareness and Publicity:
• Mass media and social media should be used effectively for spreading awareness about road safety.
• Training and Capacity Building:
• Training courses and training workshops shall be organized for building capacity in road safety audits and road safety engineering.

PUSHING THE WRONG ENERGY BUTTONS

04, Mar 2020

Context:

• In the backdrop of the recent visit of the US President to India, the joint statement highlighted the setting of up of 6 nuclear reactors at Kovvada, AP by Westinghouse.
• This article flags some of the issues with respect to the deal setting up nuclear reactors.

Background:

• In March 2019, India and USA agreed to set up the long-pending 6 nuclear reactors in Kovvada, Andhra Pradesh.
• Under the agreement, the US Company Westinghouse Electric will sell 6 AP-1000 nuclear reactors to India.
• AP-1000 reactors are light water reactors where fuel used is U-235. Ordinary water acts as both coolant and moderator.
• The Westinghouse electric will supply the nuclear reactor technology and NPCIL will be responsible for construction and operation of the plant.

Problems Associated with these Projects:

1. High Cost

• Electricity from American reactors would be more expensive than competing sources of energy.
• According to estimates the first year tariff for electricity from nuclear reactors is about Rs. 25 per unit. In comparison the wind and solar energy costs have declined by around 70% to 90% in the last 10 years and are estimated to be around Rs.3/unit.

2. Safety and Civil Liability

• Given the experience of Chernobyl and Fukushima nuclear reactors are prone to serious accidents.
• In this context the operator of the reactor would be responsible for compensation and not the supplier. This is true after India ratified the Convention of Supplementary Compensation for Nuclear Damage in 2015.

3. Past Experiences

• The past experience of setting up imported reactors such as Tarapur reactors in Maharashtra and Kudankulam reactors in Tamil Nadu has been poor as they have faced repeated shut downs.
• For instanceTarapur reactors and Kudankulam reactors produced just 32% and 38%, respectively, of their capacity in 2018-19.

India’s Civil Nuclear Cooperation – In Brief

• In the aftermath of 1998 Pokhran Test India faced a nuclear isolation across the world.
• This changed after the 2005 Indo-US Civil Nuclear Agreement.
• In addition India also signed an agreement with IAEA in 2009 to place its civil nuclear facilities under IAEA safeguards. (IAEA Additional Protocols)
• This paved the way for US companies to engage in nuclear commerce with India.
• However despite the Indo-US nuclear deal, the nuclear liability regime in India was seen as hurdle for foreign companies to invest in India’s nuclear sector.
• The major hurdle for companies to do nuclear commerce with India was the Civil Liability for Nuclear Damage Act, 2010 (CLINDA) which held the suppliers of nuclear power projects liable in case of nuclear accidents.

Ratification of CSC:

• This was solved in 2016 when India ratified the Convention of Supplementary Compensation.
• This marked India’s willingness to accede to international nuclear liability regime which holds the operator liable to pay up for damage in case of nuclear accidents. (However it provides for operator to have the right to recourse with the supplier in the contract)
• Besides India has also launched an insurance pool with a liability cap of ₹ 1,500 crore to cover the suppliers’ risk of potential liability.
• As a result of this, foreign companies have showed interest in nuclear commerce with India.
• Accordingly India has signed civil nuclear agreements with 14 countries including USA, France, Russia, Canada, Argentina, Australia, Sri Lanka, the UK, Japan, Vietnam, Bangladesh, Kazakhstan, South Korea and Czech Republic.

CORONAVIRUS: IMPACT ON TRADE

03, Mar 2020

Context:

• Recently, the OECD in its Interim Economic Outlook, has warned that the coronavirus presents “greatest danger” to the world economy since the times of the financial crisis. Businesses are dealing with lost revenue and disrupted supply chains due to China’s factory shutdowns, lockdown in dozens of cities and other countries extending travel restrictions.

Impact on Trade and Commerce:

• With many companies and countries depending on the health of China’s economy, here are a few ways the outbreak is sending ripples around the world.
• Predicted slump
• China is the world’s second-largest economy and leading trading nation, so economic fallout from coronavirus also threatens global growth.
• Experts predicted China’s economic growth to slump to 4.5% in the first quarter of 2020, down from 6% in the previous quarter – the slowest pace since the financial crisis.
• However, the economists were optimistic China’s economy would recover quickly if the virus could be contained.
• Falling oil demand
• China is the world’s biggest oil importer.
• With coronavirus hitting manufacturing and travel, the International Energy Agency (IEA) has predicted the first drop in global oil demand in a decade.
• Disruption to Commerce
• The shortage of products and parts from China is affecting companies around the world.
• Apple’s manufacturing partner in China, Foxconn, is facing a production delay. Some carmakers including Nissan and Hyundai temporarily closed factories outside China because they couldn’t get parts.
• The pharmaceutical industry is also bracing for disruption to global production.
• Many trade shows and sporting events in China, Asia and across the world have been cancelled or postponed.
• Travel and Tourism
• The travel and tourism industries were hit early on by economic disruption from the outbreak.
• Global airline revenues are expected to fall by $4-5 billion in the first quarter of 2020 as a result of flight cancellations, according to a report from the UN’s International Civil Aviation Organization (ICAO).
• ICAO also forecasts that Japan could lose $1.29 billion of tourism revenue in the first quarter due to the drop in Chinese travellers while Thailand could lose $1.15 billion.

Impact on India

• India’s reliance on China is spread across almost all the sectors.
• Indian pharma industry is dependent on Chinese imports to make medicines — the APIs (active pharma ingredients) come from China.
• The $30 billion domestic smartphone market, the world’s second largest now, will see major disruptions as it is heavily dependent on imports.
• Solar power parks are dependent on Chinese imports. More than 80% of solar cells and modules used in India are imported from China-based manufacturers.
• Apart from these, sectors such as toys, furniture, computers, cars and white goods are dependent on China.
• A supply crunch in smartphones, TVs and electronics will impact ecommerce sales dearly.
• These items comprise about half of the gross merchandise value of $31 billion ecommerce sales.

A hidden opportunity for India:

• The dependence on China has decreased, though only slightly, over the last five years.
• From importing finished products, India is now assembling products and developing the ecosystem here as well.
• Investments from Chinese companies are helping boost the local ecosystem by expanding their manufacturing facilities in India.
• India shall also accrue benefits from the lower oil prices, which  have fallen as the virus attack brought down demand across the world.
• Through this, longer-term benefits can accrue to us if India can take advantage of supply chain disruption as many suppliers will try to shift their manufacturing base from China to the rest of the world.
• The Indian exporters of electronics, pharmaceuticals, speciality chemicals and automobile segments depend on China for raw material and are facing supply constraints, but there are several areas where there are increased opportunities for domestic traders.
• The coronavirus can be used as a catalyst in driving India’s course correction towards a global export pathway or towards self-subsistence. Through this India can improve its global presence and as an additional benefit can generate employment opportunities to its citizens, where India’s unemployment rate is at 45 year low.

TECHNICAL TEXTILES MISSION

29, Feb 2020

Why in News?

• The Cabinet Committee on Economic Affairs (CCEA) has approved the setting up of a National Technical Textiles Mission at a total outlay of ₹1,480 Crore.

Technical Textiles Mission:

• Objective: To position India as a global leader in technical textiles and increase the use of technical textiles in the domestic market.
• Implementation: For 4 years from 2020-2021.

Components of the National Technical Textiles Mission:

Component -l (Research, Innovation and Development):

• Will focus on research and development at both, fibre level and application-based in geo, agro, medical, sports and mobile textiles and development of bio-degradable technical textiles.
• Research activities will also focus on development of indigenous machinery and process equipment.
• Will have an outlay of ₹1,000 crores.

Component -II (Promotion and Market Development):

• Will be for promotion and development of market for technical textiles.
• Will aim at average growth rate of 15-20% per annum taking the level of domestic market size to 40-50 Billion USD by the year 2024.

Component – III (Export Promotion):

• Will focus on export promotion so that technical textile exports from the country reach from the ₹14,000 crore now to ₹20,000 crores by 2021-2022.
• Ensure 10% average growth every year till the Mission ends.
• An export promotion council for technical textiles will be set up.

Component- IV (Education, Training, Skill Development):

• Will promote technical education at higher engineering and technology levels related to technical textiles and its application areas.

Significance of the Mission:

• The Mission will focus on usage of technical textiles in various flagship missions, including strategic sectors. The use of technical textiles in agriculture, aquaculture, dairy, poultry, etc. JalJivan Mission; Swachch Bharat Mission; Ayushman Bharat will bring an overall improvement in cost economy, water and soil conservation, better agricultural productivity and higher income to farmers per acre of land holding in addition to promotion of manufacturing and exports activities in India.
• The use of geo-textiles in highways, railways and ports will result in robust infrastructure, reduced maintenance cost and higher life cycle of the infrastructure assets.
• Promotion of innovation amongst young engineer will be taken up by the Mission; along with creation of incubation centres and promotion of ‘start-up’ and Ventures’.
• The research output will be reposited with a ‘Trust’ with the Government for easy and assessable proliferation of the knowledge.

• A sub-component of the research will focus on development of bio degradable technical textiles materials, particularly for agro-textiles, geo-textiles and medical textiles.
• It will also develop suitable equipment for environmentally sustainable disposal of used technical textiles, with emphasis on safe disposal of medical and hygiene wastes.
• There is another important sub-component in the research activity aiming at development of indigenous machineries and process equipment for technical textiles, in order to promote ‘Make In India’ and enable competitiveness of the industry by way of reduced capital costs.

Current scenario of Indian Textiles segment:

• Indian technical textiles segment is estimated at $16 billion which is approximately 6% of the $250 billion global technical textiles market.
• The penetration level of technical textiles in India varies between 5% and 10% against the level of 30% to 70% in developed countries.
• Indian textile industry is the 2nd largest manufacturer and exporter in the world, after China.
• The share of textile and clothing in India’s total exports stands at a significant 13 % (2017-18).
• The textile industry contributes to 7% of industry output in value terms, 2% of India’s GDP and to 15% of the country’s export earnings.

What are Technical Textiles?

• Technical textiles are textiles materials manufactured primarily for technical performance and functional properties rather than aesthetic characteristics.
• Technical Textiles products are divided into 12 broad categories (Agrotech, Buildtech, Clothtech, Geotech, Hometech, Indutech, Mobiltech, Meditech, Protech, Sportstech, Oekotech, Packtech) depending upon their application areas.

DAIRY SECTOR IN INDIA

29, Feb 2020

Context:

• The Cabinet Committee on Economic Affairs, has given its approval for upward revision of interest subvention to 2.5% per annum  under the scheme Dairy Processing and Infrastructure Development Fund with the revised outlay of Rs 11,184 Cr.

Key Facts – Dairy Sector in Budget 2020-21:

• The government aims to “facilitate” doubling of India’s annual milk processing capacity from 53.5 million tonnes (mt) to 108 mt by 2025.
• Building a seamless national cold supply chain for perishables, inclusive of milk, meat and fish, by setting up of  a “Kisan Rail” – through PPP arrangements.
• There shall be refrigerated coaches in Express and Freight trains as well.
• Eliminating Foot and Mouth disease, brucellosis in cattle and also peste des petits ruminants (PPR) in sheep and goats by 2025.
• Increasing the coverage of artificial insemination from the present 30% to 70%.
• NREGA would be dovetailed to develop fodder farms.
• The Budget Estimates for the Department of Animal Husbandry and Dairying stands at 3,289 in the Budget 2020-21.
• Recently, the Ministry of Science and Technology has launched the “Scientific Utilization through Research Augmentation-Prime Products from Indigenous Cows” (SUTRA-PIC India).

• It is one of the research programmes into indigenous cattle announced during the 2019-20 Union Budget, which aims to develop products as well as improve the genetic quality of indigenous cattle breeds.

Dairy Sector in India:

• Over the span of three decades, India has transformed from a country of acute milk shortage to the world’s leading milk producer, with estimated production of milk in 2018-19 at 187 million tonnes.
• Milk production in India has been growing at over 4% annually and its share in milk production in the world has also been increased.

• This phenomenal success is attributed to the programme ‘Operation Flood’ (1970–1996) and its intense focus on dairy development activities.
• Now, India is the leading producer and consumer of dairy products globally with sustained growth over the years.
• The dairy industry and milk hold equal importance to farmers and consumers.

Major Programmes:

• Department of Animal Husbandry And Dairying, Government of India has been supplementing the efforts of State Governments by implementing following dairy development schemes for creation/ strengthening of infrastructure for production of quality milk, procurement, processing and marketing of milk and milk products across the country:

1. 1.National Programme for Dairy Development (NPDD)
2. 2.Dairy Entrepreneurship Development Scheme (DEDS)
3. 3.National Dairy Plan-I (NDP-I)
4. 4.Dairy Processing and Infrastructure Development Fund (DIDF)
5. 5.Supporting Dairy Cooperatives and Farmer Producer Organizations engaged in dairy activities (SDCFPO)

Challenges Faced by the Indian Dairy Sector:

• Milk is a source of liquidity for the farmers. It provides them with ready cash whereas crops fetch them cash only 2-3 times a year. The Indian dairy sector is different from other dairy producing countries as emphasis is placed on both cattle and buffalo milk.
• Indian dairy sector faces the following challenges:
• Productivity of Indian dairy animals is lower compared to other countries.
• Lack of scientific livestock feeding practice.
• Inadequacy and unavailability of livestock healthcare.
• Improper milk marketing facilities and uncertain price of milk for producers.
• Lack of infrastructure for milk collection, transportation, processing.
• Lack of veterinary and extension services.
• Milk losses due to lack of cold chain facilities.
• Lack of milk production standards and clean milk production practices.

Suggestions by NITI Aayog’s ‘Strategy for New India @ 75’

• Breed indigenous cattle with exotic breeds:
• Breeding of indigenous cattle with exotic breeds needs to be encouraged to arrest the issue of inbreeding.
• This will enable greater gene coverage, reduced diseases and greater resilience to climate change.
• Promote and develop Bull Mother Farms:
• Employing multiple ovulation and embryo transfer technologies, these farms can significantly enhance milk productivity through the supply of cattle with enhanced milk potential to farmers.
• Village Level Procurement Systems:
• Installing of bulk milk chillers and facilities for high value conversion of milk are needed to promote dairy in states.
• The private sector should be incentivized to create a value chain for HVCs and dairy products at the village level.

The Way Forward:

• Milk is highly perishable, therefore value addition such as processing, packaging, and conversion to long life products such as sterilized milks (UHT) is more a necessity than a luxury.
• India needs to achieve a balance between free trade and import restriction.
• Bring down the cost of production to the farmers and improve the quality and quantity of milk. This can help farmers stabilise their milk prices.
• Expand domestic demand for higher milk consumption through concerted campaigns, especially in the 115 aspirational districts where malnutrition is high.
• Indian dairy industry needs to be mechanised and modernised to achieve sustainability in the export competitive environment.
• Apart from that, the focus should also be on increasing the yields so that India can be a major player in milk and milk products’ exports.
• After the fulfilment of supplies, extra milk and milk powder can be subsidised and distributed to BPL farmers and families.
• Dairy is mainly a women-led industry so strengthening it would mean more opportunities for women and more avenues for their growth and development.

EASE 3.0 FOR TECH-ENABLED BANKING

28, Feb 2020

Why in News?

• Finance Minister Nirmala Sitharaman has recently launched Ease 3.0 for tech-enabled to change the customer’s experience at the Public Sector Banks (PSBs).

About:

• Ease (Enhanced Access and Service Excellence) 3.0 reform agenda aims at providing smart, tech-enabled public sector banking for aspiring India.
• New features that customers of public sector banks may experience under EASE 3.0 reforms agenda include facilities like:
  • Palm Banking for “End-to-end digital delivery of financial service”.
  • “Banking on Go” via EASE banking outlets at frequently visited spots like malls, stations, complexes, and campuses.
• PSB Reforms EASE Agenda is a common reform agenda for PSBs aimed at institutionalizing clean and smart banking.
• It was launched in January 2018, and the subsequent edition of the program ― EASE 2.0 built on the foundation laid in EASE 1.0 and furthered the progress on reforms.
• In EASE 2.0, the government had proposed pushing liquidity in the public sector banks, reconstituting the management committee and possible mergers among the ideal partners in the Indian banking sector.

Why EASE 3.0 was Launched?

• The Ministry has the idea of establishing paperless and digitally-enabled banking at places where people visit the most.
• The government aims to focus on digitalization in the Public Sector Banks (PSBs) among themes that include responsible banking, PSBs as Udyami Mitra, customer responsiveness, credit take-off, and deep financial inclusions.

INVESTMENT IN RESEARCH AND DEVELOPMENT (R&D)

24, Feb 2020

Why in News?

• In an effort to stimulate investment in research and development (R&D), the Department of Science and Technology is mooting a fund that will match the contributions made by private companies in R&D.

About:

• The idea is to pool funds from a group of companies willing to invest in fundamental research, such as quantum computers or artificial intelligence, and whatever is invested government will match that.
• The scheme will be coordinated through the department’s Science and Engineering Research Board, which funds a variety of basic science projects in several universities.

• Public sector institutions form the lion’s share of India’s investment in R&D. In 2004-2005, private sector accounted for 28% of India’s research spend and in 2016-17 this increased to 40%. In most advanced economies, private R&D accounts for the bulk of investment in R&D.
• It is well below that in major nations such as the U.S. (2.8), China (2.1), Israel (4.3) and Korea (4.2), according to a 2019 report by the Economic Advisory Council to the Prime Minister.

What is the Concern?

• As a lower middle-income country, it is not surprising that India’s spending on R&D lags upper-middle income and high-income countries such as China, Israel, and the U.S.
• However, it currently under spends even relative to its income level.
• In fact, in 2015, there was a sizeable decline in R&D spending even as GDP per capita continued to Rise.

ONE IN THREE PAYMENTS FOR MATERNITY BENEFIT SCHEME CREDITED TO WRONG ACCOUNT

24, Feb 2020

Why in News?

• The progress report on Poshan Abhiyan released by Niti Aayog recently has flagged the failure of Aadhaar-based payments under Pradhan Mantri Matru Vandana Yojana.

Issues Highlighted by the Report:

1. Faulty Payment System

• Only 66% of pregnant and lactating mothers under PMMVY are getting the benefits from Aadhaar-based payment system.
• Out of that, about 28% of total Aadhaar-based DBT towards Pradhan Mantri Matru Vandana Yojana was credited to a Wrong Bank Account.

2. Delay in Payment:

• According to the report a huge number of beneficiaries had not received the Cash Incentive since 2 years.
• This was as a result of red tapism that has been so vividly entrenched across data entry operators at taluk-level offices who has to update the data.

3. Cumbersome Application

• Besides it is said that the application form required to be filled up for availing the benefits under the scheme is too long and cumbersome (32 pages).

About Poshan Abhiyaan:

• POSHAN Abhiyaan (National Nutrition Mission) was launched by the government in 2018.
• The Abhiyaan targets to reduce stunting, undernutrition, anemia and low birth weight by 2%, 2%, 3% and 2% per annum respectively.
• Mission 25:The target of the mission is to bring down stunting among children in the age group 0-6 years from 38.4% to 25% by 2022.

• POSHAN Abhiyaan aims to ensure service delivery and interventions by use of technology, behavioural change through convergence and lays-down specific targets to be achieved across different monitoring parameters.
• Under the Abhiyaan, Swasth Bharat Preraks will be deployed one in each district for coordinating with district officials and enabling fast and efficient execution of the Abhiyaan across the country. Swasth Bharat Preraks would function as catalyst for fast tracking the implementation of the Abhiyaan.

About Pradhan Mantri Matru Vandana Yojana:

• Pradhan Mantri Matru Vandana Yojana (PMMVY) is a maternity benefit programme being implemented in all districts of the country from 2017.
• It is a centrally sponsored scheme being executed by the Ministry of Women and Child Development.
• Direct Benefit Transfer Scheme: Cash benefits are provided to pregnant women in their bank account directly to meet enhanced nutritional needs and partially compensate for wage loss.

Target Beneficiaries:

• All Pregnant Women and Lactating Mothers (PW&LM), excluding those who are in regular employment with the Central Government or the State Governments or PSUs or those who are in receipt of similar benefits under any law for the time being in force.
• All eligible Pregnant Women and Lactating Mothers who have their pregnancy for the first child in the family.

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