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DIRECT TAX VIVAD SE VISHWAS BILL, 2020

Why in News?

  • The Union Cabinet has recently approved 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).

Key provisions of the Bill:

Mechanism:

  • 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.
  • 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.
  • Under the proposed Vivad Se Vishwas scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he 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 amount.
  • However, the scheme will remain open only till June 30, 2020. Those who avail this scheme after March 31, 2020 will have to pay some additional amount.
  • The scheme also applies to all case appeals that are pending at any level.
  • The recent amendment also includes certain search and seizure cases where the recovery is up to ₹5 crore.

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.

Significance of the Bill:

1. 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.

2. 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 recent cut in the corporate tax rate.

Similar Schemes:

  • 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.
  • {“Vivad se Vishwas Scheme” will be for the direct tax related disputes whereas “Sabka Vishwas” is for Indirect Tax Related Disputes.}

TELECOS ASKED TO PAY AGR DUES IMMEDIATELY

Why in News?

  • The Supreme Court has recently ordered the MDs and directors of few major telecoms to pay their AGR dues immediately.

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.
  • Spectrum usage charges is the charge that is required to be paid by the licensees providing mobile access services, as a percentage of their Adjusted Gross Revenue (AGR).
  • The spectrum slabs/rates for the same are notified by the Government from time to time.

How AGR is Calculated?

  • The definition of AGR has been under litigation for 14 years.
  • While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.
  • Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.

Why are Issues with Telecoms on Paying Huge Amount?

  • Telecom companies now owe the government not just the shortfall in AGR for the past 14 years but also an interest on that amount along with penalty and interest on the penalty.
  • While the exact amount telcos will need to shell out is not clear, as in a government affidavit filed in the top court, the DoT had calculated the outstanding licence fee to be over ₹92,000 cror
  • However, the actual pay-out can go up to ₹4 lakh crore as the government is likely to also raise a demand for shortfall in SUC along with interest and penalty.
  • Of the total amount, it is estimated that the actual dues is about 25%, while the remaining amount is interest and penalties.

What are the Concerns?

  • The telecom industry is reeling under a debt of over ₹4 lakh crore and has been seeking a relief package from the government.
  • Even the government has on various occasions admitted that the sector is indeed undergoing stress and needs support.
  • Giving a ray of hope to the telecom companies, the government recently announced setting up of a Committee of Secretaries to examine the financial stress in the sector, and recommend measures to mitigate it.

Way Forward:

  • To enhance the growth of the telecom sector, improve the quality of service, and generate resources for the Telecom Service Providers (TSPs), a new infrastructural policy is the need of the hour.
  • The government needs to provide an enabling environment for telecom operators. In order to achieve that, a long-term vision plan must be made accordingly.
  • Enhanced accessibility of the broadband services will enable the digital empowerment of India; hence adequate steps must be taken by the government to strengthen the overall telecom sector.

USTR TAKES INDIA OFF DEVELOPING COUNTRY LIST

Why in News?

  • India has been recently removed from the Developing country list by the United States Trade Representative.

About USTR:

  • To harmonise U.S. law with the World Trade Organization’s (WTO)Subsidies and Countervailing Measures (SCM) Agreement, the USTR had, in 1998, come up with lists of countries classified as per their level of development.
  • These lists were used to determine whether they were potentially subject to U.S. countervailing duties.
  • As per the USTR notice, the 1998 rule is now “obsolete”.

What is the Issue?

  • The U.S. government has changed an administrative rule making it easier for it to impose countervailing duties (CVDs) on goods from India and certain other countries.
  • The Office of the United States Trade Representative (USTR) has published a notice, amending lists of developing and least-developed countries that are eligible for preferential treatment with respect to CVD investigations.

What are its Impacts?

  • Countries not given special consideration have lower levels of protection against a CVD investigation.
  • A CVD investigation must be terminated if the offending subsidy is de minimis (too small to warrant concern) or if import volumes are negligible.
  • The de minimis thresholds and import volume allowance are more relaxed for developing and least-developed countries.
  • The de minimis standard is usually a subsidy of 1% or less ad valorem and 2 percent for special cases.

What is the Eligibility for de Minimis?

  • The USTR used the following criteria to determine whether a country was eligible for the 2% de minimis standard:
    • Per capita Gross National Income or GNI
    • share of world trade
    • Other factors such as Organisation for Economic Co-operation and Development (OECD) membership or application for membership, EU membership, and Group of Twenty (G20) membership.

Is there any other trade related agreements by US?

  • India has been already removed from the Generalised system of preferences (GSP) by USTR.
  • It is a preferential arrangement in the sense that it allows concessional low/zero tariff imports from developing countries to developed countries (also known as preference receiving countries or beneficiary countries).
  • It involves reduced/zero tariffs of eligible products exported by beneficiary countries to the markets of GSP providing countries.
  • The US has a strong GSP regime for developing countries since its launch in 1976, by the Trade Act of 1974.
  • The GSP program has effective dates which are specified in relevant legislation, thereby requiring periodical reauthorization in order to remain in effect.

Why India has been removed from the list of Developing Country?

  • India was taken off the list because — like Argentina, Brazil, Indonesia and South Africa — it is part of the G20.
  • “Given the global economic significance of the G20, and the collective economic weight of its membership (which accounts for large shares of global economic output and trade), G20 membership indicates that a country is developed”.

BLUE REVOLUTION

Why in News?

  • Realizing the immense scope for the development of fisheries and aquaculture, the Government of India has restructured the Central Plan Schemes under an umbrella of the Blue Revolution.

Highlights:

  • The major components of the CSS on Blue Revolution scheme are as under:
    • Development of Inland Fisheries and Aquaculture
    • Development of Marine Fisheries, Infrastructure and Post-harvest Operations
    • National Scheme for Welfare of Fishermen.
    • Monitoring, Control and Surveillance and other need-based Interventions (MCS).
    • Institutional Arrangement for Fisheries Sector
    • Strengthening of Database & Geographical Information System of the Fisheries Sector (SoDGIS).
    • National Fisheries Development Board and its activities (NFDB).

Outcomes:

  • The Blue Revolution in India along with the Fish Farmers Development Agency (FFDA) brought an improvement in the aquaculture and fisheries sector with the introduction of new techniques of rearing, marketing, exporting and fish breeding.
  • Some of the major outcomes of the Blue Revolution in India are mentioned below:
    • Currently, the Indian Fisheries Sector reached a production of 4.7 million tonnes of fish from a limit of 60,000 tonnes including 1.6 million tonnes of fish from freshwater aquaculture.
    • India is recorded to achieve an average annual growth of 14.8% as compared to the global average percentage of 7.5 in the production of fish and fish products.
    • The fishery has become India’s largest agricultural export over the last five years with a growth rate of 6% – 10%.
    • India has become the world’s second-largest producer of fish with exports worth more than 47,000 crore rupees.
    • The Fisheries and aquaculture production contributes 1% and 5% to India’s GDP and Agricultural GDP respectively.

OIL SEEDS PRODUCTION

Why in News?

  • Country needs 25 million tonnes of edible oils to meet its requirement at current consumption level of 19 kg per person per year.
  • Out of the total requirement, 10.50 million tonnes are produced domestically from primary (Soybean, Rapeseed & Mustard, Groundnut, Sunflower, Safflower & Niger) and secondary sources (Oil palm, Coconut, Rice Bran, Cotton seeds & Tree Borne Oilseeds) and remaining 60%, is met through import. The oilseed production of the country has been growing impressively.
  • Despite this, there exists a gap between the demand and supply of oilseeds, which has necessitated sizeable quantities of imports.

Challenges:

  • The major challenges in oilseed production is largely rain-fed conditions (70% area), high seed cost (Groundnut and Soybean), small holding with limited resources, low seed replacement rate and low productivity.

Govt. Intervention:

  • To increase domestic availability and reduce import dependency, a National Mission on Edible Oils (NMEO) is proposed for next five years (2020-21 to 2024-25).
  • NMEO covering three Sub-Missions to increase production of oilseeds and edible oils from
    • Primary Sources (Annual Crops, Plantation Crops and Edible TBOs)
    • Secondary Sources (Rice bran oil and Cotton seed oil)
    • Consumer Awareness for maintaining edible oil consumption constant at 19.00 kg per person per annum.
  • The proposed mission will aim to increase production from 30.88 to 47.80 million tonnes of oilseeds which will produce 7.00 to 11.00 million tonnes of edible oils from Primary Sources by 2024-25.Similarly, edible oils from secondary sources will be doubled from 3.50 to 7.00 million tonnes.

Action Points to Increase Production:

  • The following action point will be initiated for increasing production and productivity of oilseeds and promotion of Secondary Sources of Edible oils:
    • Increasing seed replacement rate and varietal replacement rate
    • Promotion of oilseed in rice fallow/ potato areas
    • Promotion of oilseeds through intercropping
    • Extending oilseed cultivation in non-traditional area
    • Targeting 100 low productivity districts
    • Crop diversification in different reasons
    • Promotion of community-based oil Extraction Unit
    • Value addition and promotion of Export
    • Promotion of rice bran and cotton seed oil
    • Consumer awareness for judicious consumption of oils for good health
    • The above strategies will deliberate the following output by the end of 2024-25:
    • Oilseed production will be increased from 30.88 to 47.80 million tonnes
    • Productivity will be increase from 1263 to 1587 kg per ha
    • Reduction in import dependence from 60% to 45%
    • Edible oil production will be 18.00 Million Tonne from 10.50 Million Tonnes.

PROTECTED SPECIAL AGRICULTURE ZONE

Why in News?

  • Chief Minister of Tamil Nadu recently announced that the Cauvery delta regionwould be declared as Protected Special Agriculture Zone.

What is a Protected Agriculture Zone?

  • Declaring as the Protected Special Agriculture Zone ensures that particular region will not be granted permission for any new projects like those related to hydrocarbons.
  • Only Agro based Industries would be given permission to be built.

What are the regions declared as Protected Zones?

  • To guard the delta areas and end farmers’ ordeals, the special protection will be bestowed on Cauvery Delta districtssuch as Thanjavur, Tiruvarur, Nagappattinam, Pudukottai, Cuddalore, Ariyalur, Karur and Tiruchirappalli districts.

Why such protection is essential?

  • The Cauvery Delta Region is an important agricultural region in Tamil Naduand farmers continue to do agriculture, despite climate changes.
  • It is just and reasonable that projects like hydrocarbon exploration have raised concerns among farmers and other agriculture-based labourers.
  • Since the delta region is close to the sea, there is a need to safeguard the region.

What would be the benefits of this declaration?

  • The benefits that have accrued for farmers are manifold.
  • Drilling for extraction of oil and gas in these regions that hampers agriculture and posing much environmental impact or health hazards will be stopped immediately.
  • Whatever the project introduced by the centre, it cannot be implemented without the NOC from that state.

THE AIRCRAFT (AMENDMENT) BILL, 2020

Context:

  • Recently, the Union Government introduced a bill in the Lok Sabha to amend the Aircraft Act, 1934. This Act pertains to control of the manufacture, possession, use, operation, sale, import and export of aircraft.

Key facts:

  • According to the proposed amendment, the fine amount for violations will be hiked from Rs 10 lakh to up to Rs 1 crore.
  • The bill also provides for keeping “aircraft belonging to any armed forces of the Union, other than naval, from military or air force outside the purview” of the Aircraft Act, 1934.
  • The bill proposes that, the government would also have the power to issue directions to review, if necessary in public interest, any order passed by Directorate General of Civil Aviation (DGCA), Bureau of Civil Aviation Security (BCAS) and Aircraft Accidents Investigation Bureau, as per the bill’s Statement of Objects and Reasons.
  • The proposed amendments would fulfil the safety requirements of the International Civil Aviation Organisation (ICAO).
  • Other proposals include empowering BCAS or any authorised officer to issue directions, having designated officers for adjudging penalties and introducing a provision for compounding of offences.

Why the New Amendment?

  • Spike in the number of air safety violations or breaches in the Recent Past:
    • Recently, Airbus A320neo planes fitted with Pratt and Whitney engines, could have had catastrophic consequences as many such aircraft have faced mid-air glitches.
    • DGCA had asked IndiGo and Go Air, who still use this version of the aircraft, to install modified engines or replace the entire fleet of such planes
    • There have also been many reports of planes facing other technical snags and could ultimately result in creating a sense of fear among passengers.
  • Creating an Enabling Environment:
    • The bill seeks to empower the central government to constitute DGCA, BCAS and AAIB under the Act as well as specify their responsibilities.
    • It would also bring regulations of all areas of air navigation services under the Act.
    • This bill would enable the three regulatory bodies in the civil aviation sector in India, namely DGCA, BCAS and AAIB to become more effective.
  • Adopting the International Standards:
    • The bill has provisions for securing the safety of aircraft operations in India and carrying out civil aviation operations as per standards, procedures and practices laid down by ICAO.
    • As per the statement of ICAO audits, conducted in 2012 and 2015, have indicated a need to amend the Act to give proper recognition to the regulators under the Act.
    • The amendments would fulfil the requirements of ICAO.

Indian Civil Aviation Sector:

  • Indian civil aviation sector has a high growth potential and at present, scheduled domestic carriers together have nearly 680 planes.
  • The Economic Survey 2019-20, pointed out that, to continue with the high growth trajectory, the government has been providing a congenial environment so that the Indian carriers double their fleet from about 680 aircraft at the close of November 2019 to over 1,200 by FY 2023-24.
  • ICAO had carried out the Universal Safety Oversight Audit Programme for India in November 2017 and in February 2018. The audit result showed that the country’s score declined to 57.44% from 65.82% earlier, placing India below Pakistan and Nepal.
  • An ICAO team had visited India in November 2018 as well, and assessed the action taken on issues related to three areas that were audited by the ICAO in November 2015. Those pertained to aerodromes and ground aids, air navigation services (ANS) and aircraft accident and incident investigation.
  • Currently, India’s score is lower than the world average of 65% on the ICAO’s board.

SOIL HEALTH CARD SCHEME

Why in News?

  • In the second phase of the scheme’s implementation, 11.69 crore Soil Health Cards were distributed to farmers in Two Years.

Soil Health Card Scheme:

  • The scheme was launched in 2014 with a view to addressing the decline of soil nutrients.
  • The scheme has helped farmers to understand the soil health parameters and improve its productivity by judicious application of soil nutrients.
  • Under this scheme, farmers can know the major and minor nutrients available in their soils which will ensure judicious use of fertiliser application and reduce the cost of inputs and improve soil fertility.
  • A Soil Health Card is used to assess the current status of soil health and, when used over time, to determine changes in soil health that are affected by land management.
  • It displays soil health indicators and associated descriptive terms. The indicators are typically based on farmers’ practical experience and knowledge of local natural resources.
  • The card lists soil health indicators that can be assessed without the aid of technical or laboratory equipment.
  • A study conducted by the National Productivity Council (NPC) says the application of Soil Health Card recommendations has led to a decline of 8-10% in the use of chemical fertilizers and also raised productivity by 5-6%.
  • A pilot project “Development of Model Villages” is being implemented under which the sampling and testing of cultivable soil are being encouraged in partnership with the farmers.
  • Under the project, a Model Village has been selected for aggregation of soil samples and analysis of each agricultural holding.
  • The scheme provides for the analysis of soil composition by the State Governments once in every two years so that remedial steps can be taken to improve soil nutrients.
  • Farmers can track their soil samples and also obtain their Soil Health Card report.
  • The scheme also aids in creating employment for Rural Youth.
  • Under the scheme, village youth and farmers up to 40 years of age are eligible to set up Soil Health Laboratories and undertake testing.
  • A laboratory costs up to Rs Five Lakhs, 75% of which can be funded by the Central and State Governments.
  • The same provisions apply to Self Help Groups, Farmers’ Cooperative Societies, Farmers Groups and Agricultural Producing Organisations.

PURIFIED TEREPHTHALIC ACID (PTA)-ABOLISHED

Context:

  • Recently, the government has abolished anti-dumping duty on a chemical called Purified Terephthalic Acid (PTA).
  • It was also being mentioned by the Finance Minister in her Budget speech.

About Purified Terephthalic Acid (PTA):

  • It is important for those who are in the manufacturing sector of man-made fabrics or their component – makes up for around 70-80% of a polyester product.
  • It is a crucial raw material used to manufacture polyester coatings resins for use in the formulation of general metal, appliance, automotive, industrial maintenance, and coil coatings.
  • What is Dumping?  It is said to occur when the goods are exported by a country to another country at a price lower than the price it normally charges in its own home market. This is an unfair trade practice which can have a distortive effect on international trade.
  • What is Anti-dumping? It is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect.
  • Anti-dumping duty is used as an instrument of fair competition which is permitted by the World Trade Organisation (WTO).

Reason for the Controversy:

  • The domestic companies facing with limited domestic suppliers of PTA because of their costlier product less attractive for their domestic and international buyers.
  • An increase in imports of the products they had been producing, as there was no safeguard against imports of cheaper versions of these downstream polyester-based products.
  • The abolition of Anti-Dumping Duty on PTA has come after persistent demand from the manufacturing and Textile Industry.
  • Other raw materials: Mono Ethylene Glycol (MEG), another raw material used in the manufacturing of polyester, is currently the subject of another anti-dumping duty investigation initiated by DGTR recently.

Directorate General of Trade Remedies:

  • The anti-dumping duty on PTA was imposed after domestic manufacturers approached the Directorate General of Trade Remedies (DGTR).
  • It is the apex national authority under the Ministry of Commerce and Industry.
  • It administers all trade remedial measures including anti-dumping, countervailing duties and safeguard measures.
  • It provides trade defence support to the domestic industry and exporters in dealing with increasing instances of trade remedy investigations instituted against them by other countries.

Budget 2020-21 – Social Sector and Infrastructure

Why in News?

  • The Union Budget 2020-21 has been presented in the parliament recently. The key provisions related to the Social Sector and infrastructure sector has been discussed in brief below.
  • 1. Agriculture Sector:
    • Agri-credit availability set at ₹15 lakh crore for 2020-21.
    • A budget allocation of ₹2.83 lakh crore for 16 action points.
    • The action points include measures to provide farmers access to faraway markets by running trains (Kisan Rail) and flights (Krishi Udaan) and providing relief to farmers from water shortage.
    • It will also include ‘One-Product One-District’for better marketing and export in the Horticulture sector. The scheme is already functional in Uttar Pradesh.
    • The focus is also on Jaivik Kheti Portal(online national organic products market), Zero-Budget Natural Farming, PM-KUSUM.
  • 2.Health Sector:
    • An allocation of ₹69,000 crore for the health sector.
    • Proposal to set up hospitals in Tier-II and Tier-III cities with the private sector using PPP model.
    • Expansion of Jan Aushadhi Kendra Scheme to all districts by 2024.
    • A task force to be appointed to recommend regarding steps required to lower the Maternal Mortality Rate (MMR) and Improving Nutrition.
  • 3. Education:
    • An amount of ₹99,300 crore has been allocated for the education sector and about ₹3,000 crore for skill development respectively.
    • Degree-level full-fledged online education programmes by institutions ranked in the top 100 in NIRF rankings, especially to benefit underprivileged students.
    • Urban local bodies to provide internship to young engineers for a year.
    • Proposal to set up National Police University and a National Forensic Science University.
    • IND SAT exam for students of Asia and Africa to promote “study in India” programme.
  • 4. Infrastructure:
    • Rs. 103 lakh crore’s for National Infrastructure Pipeline projects announced.
    • An international bullion exchange to be set up at GIFT City.
    • The budget has also announced that proceeds from divestment will go only into capital expenditure and not revenue expenditure.

Transport:

  • Budget proposes to provide ₹1.7 lakh crore for transport infrastructure in 2021.
  • National Logistics Policy to be released soon.
  • Chennai-Bengaluru Expressway to be started.

Railways

  • Aims to achieve electrification of 27,000 km of railway lines.
  • Plan to have a large solar power capacity for Indian Railways.
  • 100 more airports will be developed by 2024 to support UDAN.
  • 5 new smart cities in public-private partnership mode.
  • 5. Culture and Tourism
    • Five Archaeological Sites to be developed as Iconic Sites:

    a)Rakhigarhi (Haryana)
    b)Hastinapur (Uttar Pradesh)
    c)Shivsagar (Assam)
    d)Dholavira (Gujarat)
    e)Adichanallur (Tamil Nadu)

    • Proposal to Establish:

    a)Indian Institute of Heritage and Conservation.
    b)Maritime museum at Lothal (Gujarat).
    c)Tribal Museum in Ranchi
    d)A museum on Numismatics and Trade.

EDUCATION & ASPIRING INDIA

Context:

  • In the Union Budget 2020, Finance Minister Nirmala Sitharaman has suggested speedy implementation of the new education policy and several other measures. The budget earmarked Rs 99,300 crore for the education sector in 2020-21 and about Rs 3,000 crore for Skill Development.

Budget Highlights:

  • About 150 higher educational institutions would start apprenticeship embedded degree/diploma courses by March 2021.
  • A programme would be started whereby urban local bodies across the country would provide internship opportunities to fresh engineers for a period up to one year.
  • To create infrastructure in the education sector, steps would be taken to enable sourcing External Commercial Borrowings and FDI so as to be able to deliver higher quality education.
  • Institutions that are ranked within the top 100 in the National Institutional Ranking framework will start a degree level full-fledged online education programme for students of deprived section of the society.

Need for Skilling:

  • The Education – Knowledge Gap:

    1.Literacy rate in India as per Census 2011: 74%.

    2.Literacy rate: Male: 82.1%; Female: 65.5%

  • Annual Status of Education Report (ASER) reflects the deteriorating quality of knowledge from education.
  • The report opines that deficits in foundational reading and arithmetic skills are cumulative, which leaves students grossly handicapped for further education.

The Knowledge – Skill Gap:

  • By 2030, the country will have the highest working age population. Youths coming out of the higher education system in India are not employable, as they lack relevant industry-level skills.
    • The Governments are tasked with the responsibility of empowering the present day children to make them employable by 2030.
    • In this regard, the Union Budget 2020-21 has earmarked about Rs 3,000 crore for Skill Development.

The Issues in Skilling:

  • Skilling can be done with primary education as a base, however, in India these domains are seen separate from one another. No skill development program can succeed without an underlying foundation of basic education.
  • There is a growing gap between skilling and knowledge, which increases inequality.
  • Skilling requires infrastructure boost to support the increasing number of entrants.
  • Less than 5% of the workforce in the age-group of 19-24 receives vocational education in India, in contrast to 52% in the USA, 75% in Germany and 96% in South Korea.

Way Forward:

  • Secondary education and skilling should go together.
  • Skilling framework should be improved
  • Higher Education Institutions must offer vocational courses that are integrated into Undergraduate Education Programs.

Issues in Teacher Education:

  • Teachers play a most critical role in a student’s development. There is a need for better incentives for teachers, investments in teacher capacity through stronger training programs and addressing the problems in the teaching-learning process. However,there is a decline in the quality and training of teachers.
    • Disproportionate Student and teacher ratio in both public and private institutions.
    • Challenges in governance and monitoring mechanisms for tracking performance of the teachers.
    • Lack of accountability systems in Government Schools.
    • Inadequate teacher training, large number of teaching vacancies and rampant absenteeism.
    • Limited options for teacher education in the school system.

Way Forward:

  • Fraudulent or dysfunctional teacher education institutions should be closed as soon as possible.
  • In-service teacher professional development programs should be redesigned with continuous progressive development such as peer-learning, demonstration classes, sabbaticals for research/advanced studies etc.
  • A national electronic teacher registry should be setup to bring together employers and job aspirants in this sector.
  • States should test teachers tri-annually on the same test designed for the children they are teaching which will ensure competency of the teacher.
  • The Teacher Eligibility Test (TET) across states should be strengthened as per central TET through standardization of results, quality benchmarking of testing-items and extending the TET for teachers at pre-school and classes at 9-12 levels.

FINANCE COMMISSION

Why in News?

  • The report of the Fifteenth Finance Commission, along with an Action Taken Report, was tabled in Parliament. The Commission, headed by N.K Singh, had submitted its Report to the President in December 2019.

Highlights:

  • Article 280 of the Constitution requires that a Finance Commission be constituted to recommend the distribution of the net proceeds of taxes between the Centre and states, and among the states.
  • Parliament may by law determine the requisite qualifications for appointment as members of the commission and the procedure of selection.
  • Every member will be in office for the time period as specified in the order of the President, but is eligible for reappointment provided he has, by means of a letter addressed to the president, resigned his office.

Functions:

  • The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds;
  • The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
  • The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
  • Any other matter referred to the Commission by the President in the interests of sound Finance.

Appointment Criteria:

  • As per the provisions contained in the Finance Commission [Miscellaneous Provisions] Act, 1951 and The Finance Commission (Salaries & Allowances) Rules, 1951, the Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who:
  • are, or have been, or are qualified to be appointed as Judges of a High Court; or have special knowledge of the finances and accounts of Government;
  • or have had wide experience in financial matters and in administration;
  • or have special knowledge of economics.

Powers:

  • Have all powers of a civil court as per the Civil Procedure Code, 1908.
    • Can summon and enforce the attendance of any witness or ask any person to deliver information or produce a document, which it deems relevant.
    • Can ask for the production of any public record or document from any court or office
    • Shall be deemed to be a civil court for purposes of Sections 480 and 482 of the Code of Criminal Procedure, 1898

Removal:

  • A member may be Disqualified If:
    • He is mentally unsound;
    • He is an undischarged insolvent;
    • He has been convicted of an immoral offence;
    • His financial and other interests are such that it hinders the smooth functioning of the commission.

DIVIDEND DISTRIBUTION TAX (DDT)

Why in News?

  • Finance Minister announced abolition of DDT to be paid by companies in her budget speech.

DDT:

  • A dividend is a return given by a company to its shareholders out of the profits earned by the company in a particular year.
  • Dividend constitutes income in the hands of the shareholders which ideally should be subject to income tax.
  • However, the income tax laws in India provide for an exemption of the dividend income received from Indian companies by the investors by levying a tax called the DDT on the company paying the dividend.

Who were required paid DDT?

  • Any Domestic Company which is declaring/distributing dividend is required to pay DDT at the rate of 15% on the gross amount of dividend as mandated under Section 115O of the Income Tax Act.
  • DDT was also applicable on Mutual Funds.

Why it is Scrapped?

  • Every MNE investing in India is faced with the question of tax-efficient repatriation of profits that accumulate here.
  • The dividend that the holding company would receive would have already suffered substantial tax in India, although indirectly.
  • The foreign company would normally be required to pay tax on the dividend so received in its home jurisdiction.DDT being a tax in the Indian company and the foreign company not paying taxes directly on such Dividend Income in India, it would not be able to claim foreign tax credit in its Home Jurisdiction.
  • This resulted in a double whammy for foreign companies as, at a group level, they suffered Double Taxation.

INSURANCE COVER ON BANK’S DEPOSIT

Why in News?

  • Finance Minister has recently proposed to increase the limit of insurance cover in case of Bank Failure on deposits to ₹5 lakh from ₹1 lakh.

What is Deposit Insurance?

  • Deposit insurance is Providing Insurance Protection to the Depositor’s Moneyby receiving a premium.
  • The government has set up Deposit Insurance and Credit GuaranteeCorporation (DICGC) under RBI to protect depositors if a bank fails.
  • Every insured bank pays premium amounting to 0.001% of its deposits to DICGC every year.
  • This scheme insures all types of bank deposits including savings, fixed and recurring with an insured bank.

What happens to Depositors’ Money when a Bank Fails?

  • When a bank is liquidated, depositors are entitled to receive an insurance amount of ₹1 lakh per individual from the Deposit Insurance and Credit Guarantee Corporation of India (DICGC).
  • The ₹1 lakh insurance limit includes both principal and interest dues across your savings bank accounts, current accounts, fixed deposits and recurring deposits held with the bank.
  • Now this 1 lakh amount has been proposed to 5 lakhs recently.

How the Depositors 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.
  • In FY19, it took an average 1,425 days for the DICGC to receive and settle the first claims on a De-Registered Bank.

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.
  • Primary Cooperative Credit Societies are formed at village or town level.
  • A primary credit society refers to any cooperative society other than a primary agricultural credit society. It is basically an association of members residing in a particular locality. The members can be borrowers or Non-Borrowers.

What Kind of Depositors is not included in DICGC?

  • Deposits of foreign governments. However, foreign banks in India are excluded.
  • 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.

What are the Benefits of this Move?

  • Guaranteed Returns:Investors can rest assured that his investments are safe and he will be getting back a guaranteed amount at the end of the tenure.
  • Encourages Saving Habit:This encourages the saving habit of an individual. He will not be tempted to spend the money and find a way to manage his finances more efficiently.
  • Increases Bank Accounts:It also increases the banking habits of the people.

PUBLIC PROCUREMENT POLICY & E-AUCTION

Context:

  • Public Procurement policy aims at incentivizing production linked through local content requirements, thereby encouraging domestic manufacturers’ participation in public procurement activities over entities merely importing to trade or Assemble Items.
  • Various Ministries and Departments have been designated as nodal for notifying minimum local content for the relevant product categories.
  • The Government has notified Public Procurement Policy for Micro and Small Enterprises as well.
  • Under this policy, 25% of annual procurement by Central Ministries/Departments/Public Sector Enterprises has to be made from Micro & Small enterprises.

What is Public Procurement?

  • Public procurement refers to the process by which governments and state-owned enterprises purchase goods and services from the private sector.
  • As public procurement utilises a substantial portion of taxpayers’ money, governments are expected to follow strict procedures to ensure that the process is fair, efficient, transparent and minimises wastage of public resources.

How does this Promote MSEs?

  • The Public Procurement Policy for MSMEs has mandated that every Central Ministry/Department/PSU shall set an annual goal of minimum 25 percent of the total annual purchases from the products or services produced or rendered by MSEs.
  • Out of the total annual procurement from Micro and Small Enterprises, 3 percent from within the target shall be earmarked for procurement from Micro and Small Enterprises owned by women.
  • A sub-target of 4% out of  annual procurement is earmarked for procurement from MSEs owned by SC/ST entrepreneurs.

What is GEM?

  • Government e-Marketplace (GeM) is a one stop portal to facilitate online procurement of common use Goods & Services required by various Government Departments / Organizations / PSUs.
  • GeM aims to enhance transparency, efficiency and speed in public procurement. It provides the tools of e-bidding, reverse e-auction and demand aggregation to facilitate the government users achieve the best value for their money.

GeM Advantages For Buyers

  • Offers rich listing of products for individual categories of Goods/Services
  • Makes available search, compare, select and buy facility
  • Enables buying Goods and Services online, as and when required.
  • Provides transparency and ease of buying
  • Ensures continuous vendor rating system
  • Up-to-date user-friendly dashboard for buying, Monitoring Supplies and Payments
  • Provision of Easy Return Policy

GeM Advantages for Sellers

  • Direct access to all Government Departments.
  • One-stop shop for marketing with Minimal Efforts
  • One-stop shop for bids / reverse auction on products / services
  • New Product Suggestion facility available to Sellers
  • Dynamic Pricing:Price can be changed based on market conditions
  • Seller friendly dashboard for selling, and monitoring of supplies and payments
  • Consistent and uniform Purchase Procedures

How does GeM Portal help MSEs?

  • Reduce Transaction Costs:Government e-Marketplace portal has reduced the transaction cost of the MSEs which are involved in the marketing and delivering of products to any public agency.
  • Transparency:It had also made the public procurement process transparent, where there is an equal competition between various MSEs.
  • Reduce Time Taken:The GeM portal has reduced the time taken for the public procurement process and the red tape involved with it.
  • Public procurement worth Rs 50,000 crore is expected to take place through GeM during 2019-20, up from Rs 33,366 crore in 2018-19.

Difficulties faced by the MSEs in GeM

  • Delay in Payments:The delay in payments for the goods or services purchased increases the business of the MSEs.
  • Minimum Requirements: The certain criteria laid down by the buyers makes it difficult for the new entrants and other MSEs to comply and qualify, as they are of high standards.
  • Digital Hassles:Different GeM versions were launched from time to time with improvements, where MSEs finds it difficult to shift from one online platform to Another.

What is “GeM StartUp Runway”?

  • Launched in February 2019, it is a unique concept initiated by Government e Marketplace in partnership with Startup India, to promote entrepreneurship through innovation.
  • It enables the Start Ups to offer products & services that are unique in- Concept, design, process, and functionality.
  • The current system appears to be complex due to the operational hassles in the implementation.
  • The system is moving towards transparency, accountability, and improved ease of doing business. In this time, the government needs a standardized procedures and rules, sufficient procurement professionals, and a robust grievance redressal mechanism to take it further.

ECONOMIC SURVEY AND ITS IMPORTANCE

Why in News?

  • One day before the Union budget, the Chief Economic Adviser (CEA) of the country releases the Economic Survey. The Economic Survey for 2019-2020 will be tabled in Parliament on January 31.

Highlights:

  • The Economic Survey is a report the government presents on the state of the economy in the past one year, the key challenges it anticipates, and their possible solutions.
  • The document is prepared by the Economic Division of the Department of Economic Affairs (DEA) under the guidance of the CEA, currently Dr.Krishnamurthy Subramanian.
  • For the past few years, the Economic Survey has been presented in two volumes. For example, in 2018-19, while Volume 1 focussed on research and analysis of the challenges facing the Indian economy, Volume 2 gave a more detailed review of the financial year, covering all the major sectors of the economy.

Importance:

  • The Economic Survey is a crucial document as it provides a detailed, official version of the government’s take on the country’s economic condition. It can also be used to highlight some key concerns or areas of focus.
  • The government is not constitutionally bound to present the Economic Survey or to follow the recommendations that are made in it. But while the Centre is not obliged to present the Survey at all, it is tabled because of the significance it holds.

Expectations from the 2020 Survey:

  • The Economic Survey ahead of the Union Budget is expected to offer key insights into the path ahead for the government to revive growth.
  • The Survey is expected to shed light on the crucial gaps that the Budget will aim to fill in terms of unemployment, private investment, and a slump in Consumption.
  • The Dilema of remaining fixated on deficit targets or making a concerted push towards more expenditure to kickstart growth is one of the key challenges the Government is Facing.

CHEMICAL RIPENING FRUITS-POISONING

Context:

  • Recently, the Delhi High Court has observed that use of chemicals to ripen fruits amounts to poisoning the somebody.

Artificial Ripening of Fruits:

  • Ripening is associated with change in composition i.e. conversion of starch to sugar.

Food Safety and Standards (Prohibition and Restriction on sales) regulations, 2011 Prohibits:

  • Prohibition of use of carbide gas in ripening of fruits: No person shall sell or offer or expose for sale or have in his praises for the purpose of sale under any description, fruits which have been artificially ripened by use of acetylene gas, commonly known as Carbide Gas.
  • Provided that fruits may be Artificially Ripened by use of ethylene gas at a concentration up to 100 ppm (100µl/L) depending upon the crop, variety and maturity.

What are the Health problems caused by Calcium Carbide?

  • Calcium Carbide is a colourless chemical or greyish white to black in colour. It is cheap and easily available chemical.
  • Acetylene is believed to affect the nervous system by reducing oxygen supply to brain. Calcium carbide, once dissolved in water, produces acetylene which acts as an artificial ripening agent.
  • It breaks down the organic composition of vitamins and other Micronutrients.
  • Industrial-grade calcium carbide usually contains traces of arsenic and Phosphorus.
  • Arsenic and phosphorus are toxic and exposure may cause severe Health Hazards
  • It causes Vomiting, Diarrhoea, Weakness, Burning Sensation in the chest and abdomen, thirst, problem in swallowing, burning of eyes, permanent eye damage, ulcers on the skin, mouth, nose and throat.
  • It damages the mucosal tissuein the stomach and disrupts the intestinal function. If a person is exposed to the chemicals for a long time, they can cause Peptic Ulcers.

Is there any Other Techniques for Ripening of Fruits?

  • There are Several Simple Methods Available Today for Farmers for Proper Ripening.
    • A simple techniques practiced in households to trigger ripening is to keep unripened and ripened fruits together inside an air tight container.
    • Another method is to place the fruits intended for ripening inside an air tight room and induce ripening through smoking inside smoke chambers. Smoke emanates acetylene gas.
    • Several fruit traders follow this technique to achieve uniform ripening especially in edible fruits like banana and mango. But the major drawback of this method is that the fruits do not attain uniform colour and flavour. In addition, the persistence of smoke odour on the product impairs its quality
    • Spreading of unripe fruits as layers over paddy husk or wheat straw for a week to ripen is an another alternative.
    • Another practice is that some farmers dip unripe mature fruits in 0.1 per cent ethrel solution (1 ml of ethrel solution in 1 litre of water) and wipe it dry. The fruits are then spread over a newspaper without touching each other and a thin cotton cloth is covered over this. In this method, the fruits will ripen within two days.
    • In one of the simple and harmless techniques, 10 ml of ethrel and 2 gm of sodium hydroxide pellets are mixed in five litres of water taken in a wide mouthed vessel. This vessel is placed inside the ripening chamber near the fruits and the room is sealed air tight. About a third of the room is filled with fruits leaving the remaining area for air circulation.
    • Ripening of fruits takes place in about 12 to 24 hours. In order to reduce the cost of chemical, some ethylene releasing fruits such as papaya and banana can also have kept in the same room.

ORGANISED MANUFACTURING TO BOOST JOB GROWTH

Why in News?

  • There have been several reports, both official and by independent academics, that have painted a dark picture on the jobs front. A 2017-18 National Sample Survey Office’s (NSSO) survey pegged unemployment at a 45-year high.
  • It has been suggested that India’s unemployment woes can only be solved by boosting the Manufacturing Sector.

Highlights:

  • It has been argued that between the three broad sectors of the economy- agriculture, industry and services — it is the industry sector, and within industry, the manufacturing sector that has the highest potential to absorb the surplus labour in the economy. Agriculture, which engages almost half the Indian workforce, does not grow fast enough and is, as such, not remunerative enough to provide gainful employment to the millions who join India’s workforce each year.
  • Services is a fast-growing sector and pays well but it places far greater demands on job seekers in terms of skills and education. Often, the rural millions looking for a job find themselves inadequate in terms of delivering in the services sector.
  • Research shows that the employment elasticity, the ability to create new jobs with every additional increase in a sector’s growth, of the manufacturing sector is the highest.
  • Both UPA and NDA governments have tried to focus on boosting the growth in the manufacturing sector. For instance, in 2011, UPA came out with a new National Manufacturing Policy that aimed at raising the share of the manufacturing sector to 25% of the GDP by 2022.
  • The NDA too unveiled the Make in India initiative that focussed using manufacturing as the main platform to create jobs.
  • Despite such a focussed stand right through the past decade, manufacturing’s share is still under 17% of the GDP and the jobs situation in the country has only got worse.

The Current Situation:

  • An Analysis of the Indian manufacturing sector shows that manufacturing units in the organised sector are becoming more capital intensive, that is the capital-to-labour ratio is
  • In other words, instead of increasing the number of workers in a unit, owners are choosing to increase the amount of capital.
  • This trend holds true across the board including those sectors such as textiles and leather products that are considered “labour-intensive” and most capable of creating jobs and soaking up surplus labour.

Issues that needs to be Addressed:

  • Why are manufacturing owners increasingly preferring to substitute labour with capital? It is important to note that they continue to do so even when the return on capital is falling.
  • If this is the trend, how reasonable is it to assume that boosting manufacturing growth will create more jobs for the Indian youth.
  • To what extent the lack of significant labour reform is holding back manufacturing from achieving its potential to create jobs.

PRIVATE TRAINS IN INDIA

Context:

  • NITI Aayog and Indian Railways have come out with a discussion paper for running 150 trains on 100 routes by private operators. The recommendations of the high powered committee envisaging an investment of 22500 crore rupees have been put in public domain for stakeholder consultations.
  • The 100 identified routes which include Mumbai Central – New Delhi , Patna – New Delhi , Howrah- Chennai and Lucknow- Jammu Tawi etc. have been split into 10-12 clusters.
  • As per the report the private operator will have the right to collect market linked fares and will be provided flexibility of class composition and halts.
  • The aim for this overhaul is said to ensure world class service experience to passengers, reduce supply demand deficit and introduce modern technology

Advantages of Privatisation of Railways:

  • Improved Infrastructure:Privatisation will lead to better infrastructure which in turn would result in improved amenities for Travellers.
  • Normalization of prices due to the competition: when private players are allowed to enter the sector would foster competition and hence lead to overall betterment in the quality of services in line with the costs and prices.
  • Improved Security:Private participation can lead to better accountability and monitoring, which can keep a check on rising accidents in railways.
  • Better Technological Innovation:Private participation can lead to the infusion of modern technology and capacity building of Indian railways.

Disadvantages of Privatisation of Indian Railways:

  • Limited Coverage:Privatisation of railways would mean the railways will become a profit-making enterprise, this would lead to the elimination of railways routes that are less popular.
  • This can have a negative impact on connectivity and further increase the rural-urban divide.
  • Lesser Inclusive:Hike in fares can render the railways out of reach for lower-income groups.
  • Issue of Accountability:The whole railway system cannot be handled by a single party or coordination will be very difficult if area wise given to private parties, which may lead to accountability issues.
  • Impact on the Economy:Indian Railways is the backbone of India, it provides low fare transportation to agricultural and industrial trade. Therefore, privatisation of Indian railways shall definitely affect the Indian economy at large.

 Challenges:

  • Absence of Independent Regulator in the railway sector:In the absence there are chances of litigation or other issues as cropped up in the road sector.
  • No Past Experiencein the PPP model for the implementation of projects for railways.
  • Accountability:Private companies are unpredictable in their dealings and do not share their governance secrets with the world at large. In such a scenario it would be difficult to pin the accountability on a particular entity.
  • The existing Railway workers would be affected and may lead to severe job losses.

Recommendations of the Bibek Debroy Committee:

  • Transition to Commercial Accounting:The financial statements of Indian Railways need to be redrawn, in accordance with principles and norms nationally and internationally accepted.
  • The non-core function of railways must be privatized:These activities include running hospitals and schools, catering, real estate development, including housing, construction and maintenance of infrastructure, manufacturing locomotives, coaches, wagons and their parts.
  • Expansion of Indian Railways Manufacturing Company:Wagons are already produced by the private sector. Coaches and locomotives could follow.
  • Encouraging Private Entry:Private entry into running both freight and passenger trains in competition with Indian railways should be allowed and private participation.
  • Independent Regulator: Shift regulatory responsibility from the government to an independent regulator as the private sector will only come in if there is fair and open access to Railway Infrastructure.

TIME TO PRIORITISE EDUCATION AND HEALTH

Why in News?

  • In the backdrop of current economic slowdown, few eminent economists have been prescribing investments in human capital formation in order to spur growth and counter the slowdown.

Background Info:

  • To counter the economic slowdown the government is attempting to spur demand by increasing the private consumption expenditure.
  • Accordingly a number of steps taken by the government include
    • Corporate tax rate cut
    • Investment in infrastructure inclusion National Infrastructure Pipeline
    • Setting up of Alternate Investment Fund in the Housing Sector.
    • Higher spending in MGNREGA etc.
  • The policy currently being pursued by the government is intended primarily to incentivise potential investors by facilitating ease-of-doing-business and making large-scale concessions to the corporate sector including tax cut.
  • Despite of these efforts, there is little evidence of any significant increase in investment by the private sector to boost consumption expenditure.
  • There are few who argue that the government must implement labour market reforms, remove constraints on land acquisition, accelerate investments in physical infrastructure mainly transport and energy to boost consumption expenditure.

The Way Around:

  • Alternatively few of the eminent economists prescribe increased social sector spending particularly on education and health in order to counter slowdown.
  • They suggest this as it have 2-fold Effect Including:

1.Human Capital Formation

2.Increased Demand as a result of improved employment in education and health in the form of new recruitments of healthcare professionals, teachers, improved infrastructure etc. (Counters Economic Slowdown)

Importance of Investments in Education and Health:

  • Investments in social sector are grossly underfunded as the target to invest in education is 6 per cent of GDP whereas in Health the target as per the National Health Policy is to invest upto 2.5 per cent of GDP.
  • Thus the increased public expenditure in social sectors in the magnitudes required for meeting the constitutionally mandated objectives can have short- and medium-term effect of enhancing employment, generating demand and attracting investment.
  • Investments in health and education will serve two main objectives:
  1. 1.It will boost human capital – efforts of humans
  2. 2.It can counter economic slowdown
  • In the field of education, primarily by investing in teacher recruitment and building school infrastructure. Thus, recruitment of 5.7 million additional teachers over a period of five years, can create huge scale demand. And, this is only one factor essential for universalising quality school education.
  • There is also a large gap between requirement of infrastructure in the schools and that available and built recently.
  • According to government data, only 12.5% of the schools covered by the RTE Act were compliant with RTE norms, most of which are related to infrastructure. Meeting these norms has the potential of creating employment on a large scale.
  • Education has a crucial role to play for an individual in Gaining Employment and Retaining Employability.
  • In the field of health, there is a huge deficit of paramedical workers, middle-level health workers, nurses and trained doctors.

Conclusion:

  • Health and education are of instrumental value in driving growth, creating employment and improving people’s well-being is widely recognised but often forgotten when it comes to making investment in these sectors.
  • The government has a well-entrenched policy of Encouraging Privatisation in both health and education. But, privatisation in these sectors has not led to efficiency or improvement of quality.
  • It has only destroyed public sector institutions, promoted greater inequality and pushed the poor out. The gestation period of projects in social sectors is not as long as it is considered.
  • It is therefore time for reprioritising education and health in the scheme of development strategy and the allocation of budgetary resources so as to counter current economic slowdown and also build strong infrastructure necessary in the fields of health and education.

 

 

 

 

 

 

AIR INDIA DISINVESTMENT

Why in News?

  • The Government has kicked off the complete disinvestment process of Air India for the second time after it failed to receive a single bid in the first attempt back in 2018.

100% Stake Sale:

  • Most significantly, the government will offload 100% of its stake in Air India, compared with 76% put on the block last time.
  • The government holding even a minor stake in the airline post disinvestment was seen as a huge negative for any potential buyers.
  • The buyer will have to take on Rs 23,286 crore of debt out of a total Rs 60,074 crore.
  • Compared with this, in the last attempt, a potential buyer would have to take on Rs 33,392 crore of debt and current liabilities.
  • The amount of debt being bundled with the airline in this attempt is towards the aircraft that are being sold off along with the carrier as part of the transaction.
  • The working capital and other non-aircraft debt will be retained by the Government.

Employees:

  • All present employees of Air India totalling as many as 9,617 permanent employees, including pilots and cabin crew, will go to the new buyer.
  • The buyer should retain these employees for a certain lock-in period, which would be divulged in the share Purchasing Agreement. The government is exploring different modalities to ensure that the retired staff members have a Medical Cover.

Eligibility:

  • Any private or public limited company, a corporate body and a fund with a net value of ₹3,500 crores will be eligible to bid.
  • The present offer involves a clean exit by the government and complete transfer to the private player. This would ensure the private players enough freedom to run the state of affairs in the company without many regulations.
  • The bid document also states that the existing FDI policy, which allows a foreign airline to buy up to 49% in Air India, will continue to apply.

Air India’s Assets:

  • The new owner will be taking on a fleet of 121 aircraft in Air India’s fleet and 25 planes in Air India Express’ fleet.
  • These exclude the four Boeing 747-400 Jumbojet aircraft that the airline plans to transfer to its subsidiary Alliance Air, which is not a part of the current transaction.
  • However, like the last attempt, the properties currently in use by Air India, including the Nariman Point building and the company’s headquarters near Connaught Place in New Delhi will be retained by the government.

Pro’s of Air India:

  • Air India has a 50.64% market share in international traffic among Indian carriers.
  • The government is hopeful of attracting investors with the new sale criteria, coupled with the main benefits of the airline, which are prime slots in capacity-constrained airports across the world.
  • However, any potential investor is also expected to look at the size of the airline’s operations with reference to what those operations generate.
  • For example, both Air India and Singapore Airlines operate with a fleet of 121 aircraft, but in 2018-19 Air India posted a net loss of Rs 8,556 crore, whereas Singapore Airlines reported a net profit of Singapore $ 779.1 million (Approx Rs 4,100 crore).

THE AVIATION TROUBLE

Context:

  • Indian aviation industry is staring at a fresh crisis. Recently, low-cost carrier GoAir temporarily suspended some flights, as its A320neo planes are Facing Frequent Snags.

The on-going Crisis:

  • The issue in the A320neo class planes had led to several groundings last year and this year.
  • The Directorate General of Civil Aviation (DGCA) pressed the airlines to fix the issues soon.
  • Both the engine manufacturer Pratt and Whitney and aircraft maker Airbus SE expressed their inability to deliver engines and aircraft on time, which means Go Air has no option but to truncate its operating fleet of planes.
  • The problem is not confined to the short term.
  • As many as 15% of passenger planes in India could be affected due to this, as leading airlines like Indigo, GoAir and SpiceJet have the same issue.
  • Aviation experts say that frequent snags in Pratt and Whitney engines may not have easy and immediate fixes. Which means the problem is not likely to go away any time soon.

The Issues Plaguing Aviation Sector in India:

  • Increase in Fuel Prices:
    • Aviation turbine fuel (ATF) is one of the important sections of the industry.
    • The Centre and the states pile on their taxes on ATF, which can go as high as 29%.
    • ATF charges are vulnerable to currency movements and leads to high operating expenses—some 40% compared to 20% for Foreign Carriers.
  • Rupee Depreciation:
    • The rupee’s depreciation is hitting carriers hard as it did a few years ago.
    • About 25-30% of their costs, excluding fuel, are dollar denominated—from aircraft lease rents and maintenance costs to ground handling and parking charges abroad.
  • Excessive parking and Landing Charges:
    • High Airport (aeronautical) Charges levied by Airport Authority of India.
    • These charges payable at the International Airports are higher than those payable at the airports designated as Domestic Airports.
    • As a result, the domestic airlines in India are incurring additional costs at the international designated airports without deriving any Extra Facilities.
  • Fare Wars:
    • Established Airlines are threatened by low cost carriers, which are eating up their market share.
    • In order to consolidate their market share, top premium airlines were forced to reduce their ticket fares to around 15- 20 per cent, which reduces their profitability.
  • Loads of Debt:
    • Poor operational efficiency, steady losses in the wake of higher fuel costs and a weaker rupee leads to non-payment of debts.
    • No airline company has been able to devise a credible currency policy to protect them against Sharp Currency Movements.
  • Lack of Managerial Expertise:
    • Indian aviation sector is struggling due to lack of managerial expert and expertise in the sector and lack of a regulator to Monitor the Industry
  • Government policies limitations:
    • The National civil aviation policy (NCAP) 2016’s regional connectivity scheme imposes ticket price caps, which also makes the airliners fly their aircrafts in Unprofitable Routes.

The International Civil Aviation Organization (ICAO):

  • ICAO is a UN specialized agency, established by States in 1944 to manage the administration and governance of the Convention on International Civil Aviation (Chicago Convention).

Functions of ICAO:

  • ICAO works with the Convention’s 193 Member States and industry groups to reach consensus on international civil aviation Standards Recommended Practices (SARPs) and policies.
  • It supports creating a safe, efficient, secure, economically sustainable and environmentally responsible civil aviation sector.
  • ICAO also coordinates assistance and capacity building for States in support of Numerous Aviation Development Objectives.
  • It produces global plans to coordinate multilateral strategic progress for safety and air navigation.
  • Monitors and audits States’ civil aviation oversight capabilities in the areas of safety and security.

 Chicago Convention:

  • Convention on International Civil Aviation (also known as Chicago Convention), was signed in 1944 by 52 States.
  • ICAO came into being in 1947.
  • In the same year, ICAO became a specialized agency of the United Nations linked to Economic and Social Council (ECOSOC).
  • The Convention establishes rules of airspace, aircraft registration and safety, and details the rights of the signatories in relation to air travel.
  • The Convention also exempts air fuels in transit from (Double) Taxation.

ENSURING WATER SECURITY

Context:

  • Recently, the operational guidelines for Jal Jeevan Mission (JJM) has been released. The initiative aims to provide Functional Household Tap Connections (FHTC), to every rural household i.e., ‘Har Ghar Nal Se Jal’ by 2024.

What is the status of household water connections in India?

  • Out of 17.87 crore rural households in the country, about 81.67% households are yet to have tap connections for water.
  • As the National Sample Survey Office’s (NSSO) 76th round in rural India, just 11.3 per cent of the rural households receive potable water directly at homes.
  • In urban India, 40.9 per cent households have piped water connections.
  • Around 58.3 per cent of households still rely on hand pump, tube well, public tap, piped water from neighbour, protected or unprotected well, and private or public taps.

What is Jal Jeevan Mission?

  • JJM focuses on integrated demand and supply-side management of water at the local level.
  • It includes creation of local infrastructure for source sustainability like rainwater harvesting, groundwater recharge and management of household wastewater for reuse.
  • Waterbeing a subject mentioned in the State List, the guidelines for the scheme were formed by the Centre in close consultation with the state governments.

Works to be undertaken under JJM:

  • Piped Water Supply infrastructure for tap water connection to every household
  • Reliable drinking water source development/augmentation of existing sources
  • Transfer of water between villages
  • Technological intervention for water treatment to make water potable
  • Greywater(Any domestic wastewater produced, Excluding Sewage) Management
  • Capacity Building of various stakeholders and support activities to facilitate the implementation.

Implementation of JJM:

  • The Scheme will be implemented at four levels- National, State, District, and Gram Panchayat
  • Paani Samiti/User Group:
    • It is a statutory committee of the Gram Panchayat.
    • There is a need for community participation, ownership and contribution in all decisions pertaining to water supply systems.
    • Therefore, community-led partnership to achieve the objectives of JJM will help in bringing long term sustainability.
  • Role of Women:
    • Women will play a vital role from being beneficiaries to getting empowered and playing leadership.
    • As per the guidelines, there has to be at least 50% representation of women in the Paani Samiti.
  • Complementary Schemes:
    • Similar schemes like Atal Bhujal Yojana (for sustainable management of groundwater with community participation) will play a crucial role, as groundwater is an important component in JJM.

Funds for the implementation of JJM

  • The scheme is said to work in convergence with the other existing schemes to prevent creation of a parallel water supply infrastructure deviating from the approved plan. It will work in convergence with–
    • MGNREGA funds
    • Grants under Finance Commission, State Finance Commission,
    • District Mineral Development Fund (DMDF),
    • MPLADS, MLALADS, or donations, etc.
  • ‘Rashtriya Jal Jeevan Kosh’ will mobilize and accept donations/contributions received from various sources to fund JJM.
  • The total project is estimated to cost about ₹3.60 lakh Crore. The fund sharing pattern between the Centre and states is 90:10 for Himalayan and North-Eastern States, 50:50 for other states, and 100% for Union Territories.

 Challenges to the Implementation

  • Sustainability:
    • Household water connection should also be linked to the availability of water in those taps.
    • In India, there is a mismatch between water demand and water availability.
    • By 2050, it is expected that this gap will get widened.
  • Coverage:
    • The issue of supplying water to the households located in the peripheral areas of the city (viz. the marginal population), as piped supply is not physically feasible in difficult terrain.
  • Capacity Building:
    • State actors and policy-makers are poorly equipped with tools for formulation and implementation of the water management strategies.

Way Forward:

  • More focus towards water management– There is a need to pay focussed attention and planning for the efficient usage of freshwater.
  • Managing the demand side of water– There should be a region-specific plan for water-stressed states.
  • Participation –The participation of individuals, NGOs and different communities in the water management process shall be Promoted.
  • Role of Government –The Government needs to holistically handle the supply as well as the demand side of Water Management

 

IS ‘MAKE IN INDIA’ A FAILURE

Context:

  • Five years later, as we brace for another Union Budget, it would be appropriate to take stock of the much-hyped initiative which is on a slippery slope.

Major Objectives of Make in India:

  • To increase the manufacturing sector’s growth rate to 12-14% per annum in order to increase the sector’s share in the economy.
  • To create 100 million additional manufacturing jobs in the economy by 2022
  • To ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (revised to 2025) from the current 16%.
  • The policy approach was to create a conducive environment for investments, develop modern and efficient infrastructure, and open up new sectors for foreign capital.

Outcomes of the Scheme:

  • The last five years witnessed slow growth of investment in the economy. This is more so when we consider capital investments in the manufacturing sector. Gross fixed capital formation of the private sector, a measure of aggregate investment, declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14 (Economic Survey 2018-19).
  • Interestingly, though the public sector’s share remained more or less the same during this period, the private sector’s share declined from 24.2% to 21.5%. Part of this problem can be attributed to the decline in the savings rate in the economy.
  • Household savings have declined, while the private corporate sector’s savings have increased. Thus we find a scenario where the private sector’s savings have increased, but investments have decreased, despite policy measures to provide a good investment climate.Regarding employment growth, we have witnessed questions being raised over the government’s delay in releasing data as well as its attempts to revise existing data collection mechanisms. Employment, especially industrial employment, has not grown to keep pace with the rate of new entries into the labour market.

What could be the Reasons for Failure?

  • The bulk of these schemes relied too much on foreign capital for investments and global markets for produce. This created an inbuilt uncertainty, as domestic production had to be planned according to the demand and supply conditions elsewhere.
  • Policymakers neglected the third deficit in the economy, which is implementation. While economists worry mostly about budget and fiscal deficit, policy implementers need to take into account the implications of implementation deficit in their decisions.
  • It set out too ambitious growth rates for the manufacturing sector to achieve. An annual growth rate of 12-14% is well beyond the capacity of the industrial sector. Historically India has not achieved it and to expect to build capabilities for such a quantum jump is perhaps an enormous overestimation.
  • Its initiative brought in too many sectors into its fold. This led to a loss of policy focus. Further, it was seen as a policy devoid of any understanding of the comparative advantages of the domestic economy.
  • Given the uncertainties of the global economy and ever-rising trade protectionism, the initiative was spectacularly ill-timed.

INTEGRATED ROAD ACCIDENT DATABASE (IRAD)

Why in News?

  • Recently, the government has launched a Central Accident Database Management System.

About Integrated Road Accident Database (IRAD):

  • It has been developed by the Indian Institute of Technology-Madras (IIT-M) and will be implemented by the National Informatics Centre and is being supported by the World Bank.
  • It will be first piloted in the six States with highest fatalities from road crashes of Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu and Uttar Pradesh.
  • It is comprehensive web-based Information Technology (IT) solution and will enable various agencies such as the police, Public Works Department (PWDs), etc. to enter details on a road accident from different perspectives such as investigation, road engineering, vehicle condition etc.

Working of IRAD:

  • It will enable police personnel to enter details about a road accident, along with photos and videos, following which a unique ID will be created for the incident.
  • Subsequently, an engineer from the Public Works Department or the local body will receive an alert on his mobile device. He or she will then visit the accident site, examine it, and feed the required details, such as the road design.
  • The Data thus collected will be analysed by a team at IIT-M, which will then suggest if corrective measures in road design need to be taken.
  • Road users will also be able to upload data on road accidents on a separate mobile application.

Road Accidents in India:

  • According to the World Road Statistics, India recorded the highest number of road accident deaths across 199 countries in 2018 followed by China and the US.
  • According to Government Data, more than 1.5 lakh people lost their lives in road crashes in the country in 2018.
  • Of the total people killed in road crashes in 2018, 48% were between 18 years and 35 years old, and more than 60% of such fatalities were due to over speeding.

National Informatics Centre:

  • NIC of the Ministry of Electronics and Information Technology provides network backbone and e-Governance support to the Central Government, State Governments and UT Administrations.
  • It was established in 1976 and is located in New Delhi.

ANNUAL STATUS OF EDUCATION REPORT (ASER) 2019

Why in News?

  • Recently, the Non-Governmental Organization (NGO) Pratham’s Annual Status of Education Report 2019 has flagged poor learning outcomes in schools.

About ASER 2019:

  • ASER 2019 reported on the pre-schooling or schooling status of children in the age group 4 to 8 years in 26 rural districts (districts with rural population >70%) across 24 States.
  • It focuses on the “early years” and lays emphasis on “developing problem-solving faculties and building memory of children, and not content knowledge”.
  • It is defined globally as age 0-8, is known to be the most important stage of cognitive, motor, social and emotional development in the human life cycle.
  • It explores children’s performance on four competencies that are identified as important predictors of future success, viz.

1. Cognitive Development,
2. Early Language,
3. Early Numeracy, and
4. Social and Emotional Development

About the Key Findings of the ASSE:

  • ASER Report 2019 argues that a focus on cognitive skills rather than subject learning in the early years can make a big difference to basic literacy and numeracy abilities.
  • It tests the cognitive skills of children. Tests included sorting images by colour and size, recognising patterns, fitting together a four-piece animal puzzle — as well as simple literacy and numeracy tests.
  • However, of those children who could correctly do all three cognitive tasks, 52% could read words, and 63% could solve the addition problem.
  • It shows that children’s performance on tasks requiring cognitive skills is strongly related to their ability to do early language and Numeracy Tasks.
  • This suggests that focusing on play-based activities that build memory, reasoning and problem-solving abilities is more productive than an early focus on content knowledge.

Reading and Early Childhood Education:

  • Only 16% of children in Class 1 can read the text at the prescribed level, while almost 40% cannot even recognise letters.
  • Early childhood education has the potential to be the “greatest and most powerful equaliser”.
  • Global research shows that 90% of brain growth occurs by age 5, which meaning that the quality of early childhood education has a crucial impact on the development and long-term schooling of a child.
  • More than a quarter of Class 1 students in government schools are only 4 or 5 years old, younger than the recommended age. These younger children struggle more than others in all skills.
  • At the same time, 36% in Class 1 are older than the Right to Education (RTE) Act (2009) -mandated age of 6.
  • It can be noted that the draft New Education Policy (NEP), 2019 also links the “severe learning crisis” to what goes on with young children in India.

About the Draft New Education Policy (NEP), 2019:

  • Draft NEP points out that close to 5 crore children currently in elementary schools do not have foundational literacy and numeracy skills.
  • Several possible reasons for this:
    • Many children enter school before age 6. This is partly due to the lack of affordable and accessible options for pre-schooling. Therefore, too many children go to Std I with limited exposure to early childhood education.
    • Children from poor families have a double disadvantage – lack of healthcare and nutrition on one side and the absence of a supportive learning environment on the other.
    • School readiness or early childhood development and education activities have not had a high priority in the Integrated Child Development Scheme (ICDS) system

Annual Status of Education Report (ASER):

  • It uses Census 2011 as the sampling frame. It continues to be an important national source of information about children’s foundational skills across the Country.
  • In 2016, ASER switched to an alternate-year cycle where this ‘basic’ ASER is conducted every other year (2016, 2018, and next in 2020); and in alternate years ASER focuses on a different aspect of children’s schooling and learning.
  • In 2017, ASER ‘Beyond Basics’ focused on the abilities, experiences, and aspirations of youth in the 14-18 age group. In 2018 ASER had data on enrolment patterns in age group 4 to 8.

Way Forward:

  • Strengthen the early childhood components in the Integrated Child Development Scheme (ICDS) system for raising school readiness among young children. There is considerable scope for expanding Anganwadi outreach for 3- and 4-year-old children.
  • A reworking of curriculum and activities is urgently needed for the entire age band from 4 to 8, cutting across all types of preschools and early grades regardless of whether the provision is by government institutions or by private agencies.
  • The year 2020 marks the 10th anniversary of the RTE Act. This is the best moment to focus on the youngest cohorts before and during their entry to formal schooling and ensure that 10 years later they complete secondary school as well-equipped and well-rounded citizens of India.

COAL MINING AND ITS INVESTMENTS

Why in News?

  • Recently, the Union Cabinet has approved the ordinance that amends the Mines and Minerals (Development and Regulation) Act, 1957 and the Coal Mines (Special Provisions) Act, 2015.

About Coal Mining and its Investments:

  • The Mines and Minerals (Development and Regulation) Act, 1957: It regulates the mining sector in India and specifies the requirement for obtaining and granting mining leases for mining operations.
  • The Coal Mines (Special Provisions) Act, 2015: It is an act that provides for allocation of coal mines and vesting of the right, title and interest in and over the land and mine infrastructure together with mining leases to successful bidders with a view to ensure continuity in coal mining operations and production of coal.

Key Points of the Amendment:

  • Democratizing the coal mining sector– Previously, the government used to auction coal and lignite mining licences only to companies engaged in iron and steel, power coal washing sectors. Now, it had been opened to all.
  • Allowing FDI:It will promote foreign direct investment in the sector. This will help India gain access to sophisticated technology for underground mining used by global miners. It may also bring an end to state-run Coal India Ltd’s (a Maharatna company) monopoly in the sector.
  • Improving the Production:The government aims at greater participation in commercial mining of coal and targets 1000 Million Tonnes (MT) coal production by Financial Year (FY) 2023 -24. The country produced 730 million tonne of coal in 2018-19.
  • Moving towards import substitution:It will boost both production and mining efficiency besides substituting import of coal worth Rs 30,000 crore. Despite having the world’s fourth largest coal reserves, India imported 235 million tonnes (mt) of coal in 2019.
  • Improving the competitiveness:The steel industry would get cheaper inputs, leading to an increase in ‘competitiveness’.
  • Extending the policy of composite mining licence to the coal sector – Previously, the policy of composite mining licence was in force for unexplored blocks of most non-coal minerals.
  • What is Composite Mining Licence? –  Composite Mining Licence is a prospecting license which is followed by a grant of Mining Lease. It will add to the certainty of tenure from the prospecting to the production stages.

Background:

Ownership of Mineral:

  • The Central Government is the owner of the minerals underlying the ocean within the territorial waters or the Exclusive Economic Zone of India.
  • The State Governments are the owners of minerals located within the boundary of the State concerned. They grant mineral concessions for all the minerals located within the boundary of the State, under the provisions of the Mines and Minerals (Development and Regulation) Act, 1957 and Mineral Concession Rules, 1960.
  • Though for the minerals specified in the First Schedule to the Mines and Minerals (Development and Regulation) Act, 1957 approval of the Central Government is necessary. Schedule I contains minerals such as coal and lignite, minerals of the “rare earths” group containing Uranium and Thorium.
  • Also, the Central Government notifies certain minerals as ‘minor’minerals from time to time for which the absolute powers for deciding on procedures of seeking applications for and granting mineral concessions, fixing rates of royalty, dead rent, and power to revise orders rest only with the State Government. Example of minor minerals include building stones, gravel, ordinary clay, ordinary sand.

Coal in India:

  • It is the main source of energy in India. This fossil fuel is found in a form of sedimentary rocks and is often known as ‘BlackGold’.
  • It can be classified on the basis of carbon content as follows:
  • Anthraciteis the best quality of coal which carries 80 to 95% carbon content. It has the highest calorific value. It is found in small quantity in Jammu and Kashmir.
  • Bituminouscarries 60 to 80% of carbon content and a low level of moisture content. It is widely used and has high calorific value. It is found in Jharkhand, West Bengal, Odisha, Chhattisgarh and Madhya Pradesh.
  • Ligniteis often brown in colour. It carries 40 to 55% carbon content. It has high moisture content so it gives smoke when burnt. It is found in Rajasthan, Lakhimpur (Assam), and Tamil Nadu.
  • Peathas less than 40% carbon content. It has low calorific value and burns like wood.

INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (LIQUIDATION PROCESS) (AMENDMENT) REGULATIONS, 2020

Why in News?

  • The Insolvency and Bankruptcy Board of India (IBBI) amended the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

Amendments:

  • The amendment clarifies that a person, who is not eligible under the Insolvency & Bankruptcy Code (IBC) to submit a resolution plan for insolvency resolution of the corporate debtor, shall not be a party in any manner to a compromise or arrangement of the corporate debtor under section 230 of the Companies Act, 2013.
  • It also clarifies that a secured creditor cannot sell or transfer an asset, which is subject to security interest, to any person, who is not eligible under the Code to submit a resolution plan for insolvency resolution of the corporate debtor.
  • The amendment provides that a secured creditor, who proceeds to realise its security interest, shall contribute its share of the insolvency resolution process cost, liquidation process cost and workmen’s dues, within 90 days of the liquidation commencement date.
  • It shall also pay excess of realised value of the asset, which is subject to security interest, over the amount of its claims admitted, within 180 days of the liquidation commencement date.
  • Where the secured creditor fails to pay such amounts to the Liquidator within 90 days or 180 days, as the case may be, the asset shall become part of Liquidation Estate.
  • The amendment provides that a Liquidator shall deposit the amount of unclaimed dividends, if any, and undistributed proceeds, if any, in a liquidation process along with any income earned thereon into the Corporate Liquidation Account before he submits an application for dissolution of the corporate debtor.
  • It also provides a process for a stakeholder to seek withdrawal from the Corporate Liquidation Account.

Insolvency and Bankruptcy Board of India (IBBI):

  • The IBBI was formed in 2016 under the IBC.
  • It is the regulator responsible for overseeing the insolvency proceedings.
  • It is responsible for the implementation of the IBC that consolidates and amends the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals.
  • It has regulatory oversight over:
    • Insolvency Professionals
    • Insolvency Professional Agencies
    • Insolvency Professional Entities
    • Information Utilities
  • It frames and enforces rules for:
    • Corporate Insolvency Resolution
    • Corporate Liquidation
    • Individual Insolvency Resolution
    • Individual Bankruptcy

MAINTENANCE AND WELFARE OF PARENTS AND SENIOR CITIZENS (AMENDMENT) BILL, 2019

Why in News?

  • The Maintenance and Welfare of Parents and Senior Citizens (Amendment) Bill, 2019 has been referred to the Standing Committee on Social Justice and Empowerment by the Lok Sabha Speaker. The bill was introduced in Lok Sabha in December, 2019.

Key Provisions of the Bill:

  • It seeks to amend The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007.
  • Definition of ‘children’ and ‘parents’, ‘maintenance’ and ‘welfare’ has been expanded.
  • Mode of submission of application for maintenance has been enlarged.
  • Ceiling of Rs 10,000/- as maintenance amount has been removed.
  • Preference to dispose of applications of senior citizens, above eighty years of age, early has been included.
  • Registration of Senior Citizens Care Homes/Homecare Service Agencies etc. have been included.
  • Minimum standards for senior citizen care homes have been included in the Bill.
  • Appointment of Nodal Police Officers for Senior Citizens in every Police Station and District level Special Police Unit for Senior Citizens has been included.
  • Maintenance of Helpline for senior citizens has been Included.”

 

Elders – A Key Resource:

  • The elderly should be seen as a blessing, not a burden.
  • The elderly are becoming the fastest growing, but underutilized resource available to humanity.
  • Rather than putting them aside, physically (and mentally), to be cared for separately, they should be integrated into the lives of communities where they can make a substantial contribution to improving social conditions.
  • The benefits of turning the ‘problem’ of the elderly into a ‘solution’ for other social problems are being demonstrated in several countries.

Need of an Hour:

  • As a signatory to Madrid International Plan of Action on Ageing (MIPAA), India has the responsibility to formulate and implement public policy on population ageing.
  • Issues of poverty, migration, urbanisation, ruralisation and feminisation compound the complexity of this emerging phenomenon.
  • Public policy must respond to this bourgeoning need and mainstream action into developmental planning.
  • Gender and social concerns of elderly, particularly elderly women, must be integrated at the policy level.
  • The elderly, especially women, should be represented in decision making.
  • Increasing social/widow pension and its universalisation is critical for expanding the extent and reach of benefits.
  • Renewed efforts should be made for raising widespread awareness and access to social security schemes such as National Old Age Pensionand Widow Pension Scheme.
  • Provisions in terms of special incentives for elderly women, disabled, widowed should also be considered.

2ND NATIONAL GST CONFERENCE

Why in News?

  • The 2nd National GST Conference was held for streamlining the GST system.

Highlights:

  • The 2ndNational GST Conference of the Commissioners of State Tax and Chief Commissioners of Central Tax was held under the chairmanship of the Revenue Secretary, Ministry of Finance.
  • The conference focused on streamlining the GST system and plugging revenue leakages.
  • This was the 2ndedition of the all India conference where both tax administrations came together formally to build synergy and to share their knowledge and best practices with intent to bring about uniformity in tax administrations.

Outcomes of the Conference:

  • To constitute a Committee of Centre and State officers to examine and implement quick measures in a given time frame to curb fraudulent refund claims including the inverted tax structure refund claims and evasion of GST.
  • Considering fraudulent IGST refund claims, it was explored to link foreign exchange remittances with IGST refunds for risky and new exporters.
  • All major cases of fake Input Tax Credit, export/import fraud and fraudulent refunds shall also be compulsorily investigated by the Income Tax Department.
  • MoU would be signed among the Central Board of Direct Taxes (CBDT), the Central Board of Indirect Taxes (CBIC) and GSTN to exchange data through API, from CBDT to GSTN and CBIC and vice-versa. It was decided that this data should be shared on a quarterly basis, instead of being shared on a yearly basis.
  • To explore access to banking transactions (including bank account details) by GST system, in consultation with RBI and NPCI.
  • To share data of cases involving evasion and fraudulent refund detected by CBIC with CBDT and vice versa, so that proper profiling of these fraudsters could be done.
  • It was also suggested to provide a single bank account for foreign remittance receipt and Refund Disbursement.
  • A self-assessment declaration to be prescribed by suitable amendments in GSTR Forms in case of closure of businesses.
  • To undertake verification of unmatched input tax credit availed by taxpayers.

UJALA AND SLNP

Why in News?

  • The Government of India’s UJALA & Street Lighting National Programme (SLNP) complete five successful years.

UJALA:

  • Unnat Jyoti by Affordable Lighting for All (UJALA) is a zero-subsidy scheme launched by the Government in 2015.
  • It is touted as the world’s largest domestic lighting project.

Objectives:

  • The UJALA scheme also known as the LED-based Domestic Efficient Lighting Programme (DELP) aims to promote the efficient usage of energy for all i.e., its consumption, savings and lighting.
  • According to the UJALA scheme, LED bulbs would be distributed by the Electricity Distribution Company at subsidized rates to every grid-connected customer with a metered connection.

Implementation of UJALA scheme:

  • Implementation of the UJALA scheme was done successfully in terms of investment and risk factors. The scheme was implemented as a joint contribution of EESL and DISCOM. Some of the outputs that were put forward by the UJALA scheme were:
  • Replacing 200 million ordinary light bulbs by LED bulbs.
  • Load reduction of 5000 MW.
  • To reduce the emissions caused by greenhouse gases by 79 million tonnes of carbon dioxide.

SLNP:

  • The SLNP is a government scheme to promote energy-efficiency in India.
  • Energy Efficiency Services Limited (EESL), a joint venture of PSUs under the Power Ministry, is the implementing agency for SLNP.
  • EESL, launched in 2015, has already replaced 50 lakh street lights with LED bulbs in more than 500 cities of India.
  • To bring in mass-scale transformation, EESL has adopted a unique strategy by joining hands with states, municipal bodies and Urban Local Bodies (ULBs).
  • Under the programme, EESL replaces the conventional street lights with LEDs at its own costs, with no upfront investment by the municipalities, thereby making their adoption even more attractive.
  • Over a period, EESL is repaid through the consequent reduction in energy and maintenance cost of the municipality.
  • This scheme is expected to enable peak demand reduction of 500 MW, annual energy savings of 190 crore kWh, and reduction in 15 lakh tons of CO2.

Objectives:

  • Mitigate climate change by implementing energy-efficient LED-based street lighting.
  • Reduce energy consumption in lighting which helps DISCOMs to manage peak demand.
  • Provide a sustainable service model that obviates the need for upfront capital investment as well as additional revenue expenditure to pay for the procurement of LED lights.
  • Enhance municipal services at no upfront capital cost of municipalities. The Government of India’s UJALA & Street Lighting National Programme (SLNP) complete five successful years.

PRADHAN MANTRI FASAL BIMA YOJANA (PMFBY)

Why in News?

  • Maharashtra has become the first state in the country to integrate its land records with the web portal of the Pradhan Mantri Fasal Bima Yojana (PMFBY).
  • This will help in checking the cases of “over-insurance” (insurance of more land than in possession) as well as insurance of ineligible people.

About PMFBY:

  • Launched in April, 2016, after rolling back the earlier insurance schemes viz. National Agriculture Insurance Scheme (NAIS), Weather-based Crop Insurance scheme and Modified National Agricultural Insurance Scheme (MNAIS).

Premium:

  • It envisages a uniform premium of only 2% to be paid by farmers for Kharif crops, and 1.5% for Rabi crops. The premium for annual commercial and horticultural crops will be 5%.

Objectives:

1.Providing financial support to farmers suffering crop loss/damage arising out of unforeseen events.
2. Stabilizing the income of farmers to ensure their continuance in farming.
3.Encouraging farmers to adopt innovative and modern agricultural practices.
4.Ensuring flow of credit to the agriculture sector which contributes to food security, crop diversification and enhancing growth and competitiveness of agriculture sector besides protecting farmers from production risks.

Farmers to be Covered:

  • All farmers growing notified crops in a notified area during the season who have insurable interest in the crop are eligible.

Compulsory Coverage:

  • The enrolment under the scheme, subject to possession of insurable interest on the cultivation of the notified crop in the notified area, shall be compulsory for following categories of Farmers:

1.Farmers in the notified area who possess a Crop Loan account/KCC account (called as Loanee Farmers) to whom credit limit is sanctioned/renewed for the notified crop during the crop season. and
2. Such other farmers whom the Government may decide to include from time to time.

Voluntary Coverage:

  • Voluntary coverage may be obtained by all farmers not covered above, including Crop KCC/Crop Loan Account holders whose credit limit is not renewed.

Challenges at Present:

1.Insufficient reach and the issue of penetration.
2.Data Constraints:With just around 45% of the claims made by farmers over the last three crop seasons data for the last rabi season is not available paid by the insurance companies.
3.Low Payout of claims:The reason for the very low payout of claims is that only few state governments are paying their share of the premiums on time and till they do, the central government doesn’t pay its share either. Till they get the premium, insurance companies simply sit on the claims.
4.Gaps in assessment of crop loss:There is hardly any use of modern technology in assessing crop damages. There is lack of trained outsourced agencies, scope of corruption during implementation and the non-utilisation of technologies like smart phones and drones to improve reliability of such sampling.
5.Less number of Notified Cropsthan can avail insurance, Inadequate and delayed claim payment
6.High Actuarial Premium Rates:Insurance companies charged high actuarial premium rates. If states delay notifications, or payment of premiums, or crop cutting data, companies cannot pay compensation to the farmers in time.
7.Poor capacity to deliver:There has been no concerted effort by the state government and insurance companies to build awareness of farmers on PMFBY. Insurance companies have failed to set-up infrastructure for proper Implementation of PMFBY.

WEIGHING IN ON THE PUBLIC SECTOR PRIVATISATION DEBATE

Context:

  • While there is justification in selling loss-making units, the situation is more difficult to understand in the case of profit-making entities.

Different Modes of Privatization:

  • There seem to be broadly three positions with respect to the privatisation of public sector undertakings (PSUs).
  • The left position is “PSU is family silver (i.e.), selling for your own benefits, and should not be sold irrespective of its performance”.
  • The divergent stand is that “business is not the business of government”, which found resonance in the United Kingdom, and, of late, in India.
  • There is also the third position: Why privatise profit-making PSUs? Why do you sell the family silver? Bharat Petroleum Corporation Limited (BPCL) which is making handsome profits comes under this category.

What is the case of Loss-Making units?

  • Loss-making PSUs certainly merit privatisation — but no one would buy them with their huge debt and employee liabilities.
  • The government may even have to pay the buyer, as it happened in the case of the Delhi Discom privatisation.
  • Even then it may be worth it, since privatisation will stop fiscal flows to these PSUs.
  • Alternatively, there is the exit route through the new Insolvency and Bankruptcy Code.
  • Some of the major loss-making PSUs, Bharat Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited and Air India should go under the block as their losses are greater than their revenue. They are called as value subtracting enterprises.
  • Restructuring them and even ensuring an additional infusion of funds and other resources have not produced results.

 

When Privatization is More Needed?

  • Privatisation is not a default option; rather, it is resorted to only out of extreme necessity.
  • “Privatization is resorted not just when the firm makes losses, but only when the physical performance is so bad that the PSU becomes a political embarrassment to the Government.”
  • This may explain the hesitation to privatise some of the largest loss-making PSUs — Air India, the BSNL and MTNL — as the embarrassment threshold may not have been reached as yet.

What to be done after Privatization?

  • There is no point in converting a public monopoly to a private monopoly; it will only result in inefficiency being replaced by private profits.
  • Privatisation must be accompanied by competition in the post-privatized scenario.
  • However, the government will face a dilemma. If high price is needed, it should allow a monopoly situation post-privatisation, and if it wants competition and low price for consumers, it should be content with a modest sale price, as the post-privatisation valuation of the firm critically depends on the market structure post-privatisation.
  • If that is to be competitive, other PSU national oil companies such as the IOC and HPCL should also be privatized.
  • Similarly, LPG and kerosene subsidies can be handled by direct benefit transfer, which is already in vogue in the case of LPG.

YEAR END REVIEW 2019 – MINISTRY OF ROAD TRANSPORT & HIGHWAYS

Major initiatives of the Ministry of Road Transport & Highways in 2019:

National Electronic Toll Collection (NETC) program:

  • The Ministry of Road Transport and Highways has launched the National Electronic Toll Collection (NETC) program which provides for the collection of user fee through FASTags based on RFID technology.
  • In order to save fuel, time and pollution and to ensure seamless movement of traffic, it has been decided to enable all lanes in Fee Plazas for electronic toll collection program through FASTags.
  • The Ministry is trying to bring inter-operability of the FASTags with the State Governments so that a single FASTag can be used both at State Highways Toll Plaza and National Highways Toll Plaza.
  • An NHAI Prepaid Wallet was also launched giving customers the choice of not linking their FASTags to their bank accounts and includes the feature of UPI recharge.

State Support Programme:

  • A State Support Programme aimed at incentivising the states to improve their road safety performance is proposed to be launched to reduce the overall fatalities by road accidents by 25% by 2024.
  • With a view to accurately recording the accident details so that timely corrective action is undertaken a geo-tagged accident data collection programme would be launched under the project “Integrated Road Accident Database (IRAD)”.

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 for the first time in a comprehensive way after thirty years by the Motor Vehicles (Amendment) Act, 2019, passed by the Parliament and published in the Gazette of India in August 2019.
  • The Act will bring reforms in the area of road safety, bring citizen facilitation, transparency, and reduce corruption with the help of information technology and removing intermediaries.
  • The Act will strengthen public transport, safeguard and protect Good Samaritan and reform the insurance and compensation regime.
  • It will allow innovation and new technologies such as driverless vehicles, to be tested in a live environment and increase efficiency in research.
  • The Act will facilitate physically handicapped people by allowing motor vehicles to be converted to adapted vehicles with post-facto approval and facilitating licence to drive adapted vehicles.
  • The provisions of compensation and post-accident treatment have been amended and measures will be taken to provide cashless treatment for accident victims.

NATIONAL INFRASTRUCTURE PIPELINE

  • The Government has recently released a report of the “Task force on National Infrastructure Pipeline” for 2019-2025. The government has also released its outline to invest ₹102 lakh crore on infrastructure projects by 2024-25 as part of its National Infrastructure Pipeline.

Investment in Infrastructure:

  • The government has also outlined its plan to invest more than ₹102 lakh crore on infrastructure projects by 2024-25 with the Centre, States and the private sector to share the capital expenditure in a 39:39:22 formula.
  • This was in line with the statement of our Prime Minister, who has announced plans to invest ₹100 lakh crore on modern infrastructure in order to fulfil his vision of making India an $5 trillion economy by 2024-25.
  • This investment would be a significant increase over the last six years, when the Centre and States together spent ₹51 lakh crore on infrastructure.

Task force on National Infrastructure Pipeline:

  • A Task Force was constituted to draw up the National Infrastructure Pipeline (NIP) for each of the years from financial years 2019-20 to 2024-25.
  • A task force of senior bureaucrats chaired by Economic Affairs Secretary Atanu Chakraborty then identified ₹102 lakh crore projects in 18 States as part of a National Infrastructure Pipeline. Government also added that another ₹3 lakh Crore worth of projects are likely to be added soon. The investment is phased over a six-year period, including the current financial year. The funds would come from budgetary and extra-budgetary resources, as well as funds raised from the market and internal accruals of the relevant state-owned companies.

Major Focus Areas of Investment:

  • Almost a quarter of the capital expenditure will be going to the energy sector, with ₹24.5 lakh crore expected to be invested in power, renewable energy, atomic energy and petroleum and natural gas.
  • The other major focus areas are roads (19%) and railways (13%), urban (16%) and rural (8%) infrastructure, and irrigation (8%).
  • Social infrastructure, including health and education, will get 3% of the capital expenditure, with digital communication and industrial expenditure each getting the same amount as well.
  • Agriculture and food processing infrastructure will get one per cent of the planned capital expenditure.
  • The emphasis would be on ease of living: safe drinking water, access to clean and affordable energy, healthcare for all, modern railway stations, airports, bus terminals and world-class educational institutes.

About the National Infrastructure Pipeline and its significance:

  • It is estimated that India would need to spend $4.5 trillion on infrastructure by 2030 to sustain its growth rate. The endeavour of the National Infrastructure Pipeline (NIP), is to make this happen in an efficient manner.
  • It will help in stepping-up annual infrastructure investment to achieve the Gross Domestic Product (GDP) of $5 trillion by 2024-25.
  • 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.
  • National Infrastructure Pipeline will ensure that infrastructure projects are adequately prepared and launched.
  • Each Ministry/ Department would be responsible for the monitoring of projects so as to ensure their timely and within-cost implementation.
  • Funding:The central government and state governments would have an equal share of 39% each in the NIP. The private sector, on the other hand, would have 22% share which the government expects to increase to 30% by 2025.

KERALA TOPS NITI AAYOG’S SDG INDEX

Why in News?

  • Kerala tops states in progress towards UN Sustainable Development Goals, while Bihar is at the bottom of recently released NITI Aayog’s SDG Index.

About Sustainable Development Goals:

  • The Sustainable Development Goals (SDGs) are officially known as Transforming our world: the 2030 Agenda for Sustainable Development.
  • There are 17 Sustainable Development Goals, associated 169 targets and 304 indicators.
  • They are universal call by United Nations Development Programme (UNDP) for action towards ending poverty, improving health and education, protecting planet, and ensuring that all people enjoy peace and prosperity by 2030.
  • India has been closely monitoring its progress on SDGs through its National Indicator Framework and India SDG Index released in 2018.

About the Report:

  • The SDG India Index was developed in collaboration with the Ministry of Statistics & Programme Implementation (MoSPI), Global Green Growth Institute and United Nations in India.
  • The index comprises a composite score for each State and Union Territory based on their aggregate performance across 13 of the 17 SDGs (leaving out Goals 12, 13, 14 and 17).
  • The score, ranging between 0 and 100, denotes the average performance of the State/UT towards achieving the 13 SDGs and their respective targets.
  • The states were classified under 4 categories based on their scores. The states with scores between 0 and 49 were categorized ‘Aspirant’, between 50 and 64 were ‘Performers’, between 65 and 99 were ‘Front Runner’ and with a score of 100 were categorized ‘Achiever’.
  • The aim of the index is to instill competition among States to improve their performance across social indices as the States’ progress will determine India’s progress towards achieving the set goals by 2030. Using the index, States will be monitored on a real-time basis.

Key Findings of the Report:

  • Kerala ranked first in composite SDG index with score of 70. Kerala was followed by Himachal Pradesh, Andhra Pradesh, Telangana and Tamil Nadu.
  • The biggest improvement was seen in states such as Uttar Pradesh, Odisha and Sikkim. The score of UP improved from 29 in 2018 to 23 in 2019. Also, the rank of Odisha improved from 23 in 2018 to 15 in 2019.
  • The least performing states were Bihar, Jharkhand and Arunachal Pradesh.
  • In terms of poverty reduction, states such as Tamil Nadu, Andhra Pradesh, Tripura, Mizoram, Meghalaya and Sikkim performed well.
  • The states Uttar Pradesh, Assam and Bihar that were in Aspirant category moved to performers in 2019.
  • The states that were in performer category in 2018 and moved to front runner include Andhra Pradesh, Karnataka, Telangana, Sikkim and Goa.

What is the Concern?

  • Ending hunger and achieving gender equality are the areas where most states fall far short, with the all-India scores for these goals at 35 and 42 points respectively.
  • The second SDG – zero hunger – shows sharp divergence in the performance of states, with little middle ground.
  • Kerala, Goa and parts of the north-east — including Mizoram, Nagaland, Arunachal Pradesh and Sikkim – have scored above 65, with Goa at 75 points.
  • However, 22 of the states and union territories have scored below 50, with the central Indian states of Jharkhand, Madhya Pradesh, Bihar and Chhattisgarh scoring below 30, showing abysmal levels of hunger and malnutrition.
  • The chosen indicators are related to child stunting, obesity and anaemia, as well as agricultural production and subsidised food distribution.
  • On the fifth SDG – gender equality – almost all states fare poorly. Only Jammu and Kashmir, Himachal Pradesh and Kerala have managed to cross 50 points.
  • The indicators considered include crimes against women, eradicating sex selection and discrimination against daughters, and access to reproductive health schemes, as well as indicators showing women’s economic and political empowerment and leadership.
  • A sex ratio of 896 females per 1000 males, a 17.5% female labour participation rate, and the fact that one in three women experience spousal violence all contribute to a low score countrywide.
  • The Swachh Bharat Mission has contributed largely to the high scores on the sixth SDG – clean water and sanitation – although that was helped by the fact that four out of seven indicators dealt with toilets and sanitation, while only one indicator was related to safe and affordable drinking water.
  • All states and union territories except for Delhi have scored above 65, with the national capital scoring poorly on the percentage of urban households with individual household toilets (less than one percent) and, oddly, providing no data on districts verified to be open defecation free.
  • Delhi also has 81% of blocks with overexploited groundwater, vastly higher than any other state.

Way Forward:

  • Unless development becomes a mass movement, India can’t achieve what it is essential as of now.
  • India’s progress in achieving these goals are crucial for the world as it is home to about 17% of the world population, said a statement from NITI Aayog.

NEED A DIFFERENT APPROACH TO ADDRESS CHILD MALNUTRITION

Why in News?

  • Though National Family Health Survey-4 (NFHS-4) shows an encouraging improvement in child nutrition, the world level rankings on child nutrition draws a different picture about India.

Reports that pings on Child Nutrition:

  • UNICEF’s report– one in three malnourished child in world belongs to India, half of the children under three years old are underweight and a third of wealthiest children are over-nutrient-ed.
  • The 2018 Global Hunger Index (GHI)report ranked India 103rd out of 119 countries.
  • According to the Indian Council of Medical Research (ICMR), in 2017, malnutrition was the predominant risk factor for death in children younger than five in every state of India.
  • According to the Global Burden of Disease Study 2017,malnutrition is among the leading causes of death and disability in India.

Measures to address the lag in Improving Child Nutrition:

1.Timely Intervention:

  • The focus must be on the pregnant, breastfeeding mother and the child, especially in the first two years of the child’s life, which is the crucial phase for physical, mental and cognitive development.

2.Targeted Approach:

  • A targeted approach is needed because the size of the needy and the budgetary constraints already pose a big challenge.
  • NFHS-4 provided district level data as well, hence the focus should be on the ones which require urgent attention.
  • More public programmes which cover important nutrition-specific areas such as maternal nutrition should be started.

3.No “one size fits all approach”:

  • As these districts are concentrated in Uttar Pradesh, Bihar, Madhya Pradesh and Jharkhand , Karnataka, Maharashtra, Rajasthan and Gujarat – their governments should make arrangements for the required funds and formulate policies to tackle high incidence of stunting in these districts.
  • Further, even within these districts, the pockets where child malnutrition is high should be identified and the intervention or the target should go down till the clusters of Anganwadis where the problem is concentrated.

4.Policy Implementation based in Real Time Data:

  • Policy initiatives should be guided by accurate real-time data at the sub-district level also.

5.Educating Girls and Spreading Awareness:

  • Efforts should be made to spread messages on hygiene and sanitation, particularly the need to do away with open defecation practices.
  • Similarly, education for girls should be advocated, as should the importance of enabling the financial independence of women through skilling and employment opportunities along with their inclusion in the formal financial network.

6.Sound public Service Delivery Institutions:

  • Lastly, Programmes will have an impact only when there are sound public service delivery mechanisms, especially in the nutrition, health and education sectors.
  • Hence, building a cadre of dedicated professionals in the government needs a high degree of political will and administrative commitment, centred around developing skills and knowledge and building motivation to stay the course.

30% OF POSHAN ABHIYAAN FUNDS USED

Why in News?

  • The State governments and the Union Territories utilised a mere 30% of the funds released under the Poshan Abhiyaan, or the National Nutrition Mission, since it was launched in 2017.

About POSHAN Abhiyaan:

  • POSHAN Abhiyaan (National Nutrition Mission) was launched by the government on March 8, 2018.
  • It is implemented by the Ministry of Women and Child Development.
  • The Abhiyaan targets to reduce stunting, under nutrition, anemia (among young children, women and adolescent girls) and reduce low birth weight by 2%, 2%, 3% and 2% per annum respectively.
  • 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.
  • It is meant to benefit more than 10 crore people and was launched after a Cabinet decision on December 1, 2017, with a total budget of ₹9,046.17 crore for three years, 50% of which is through budgetary support, which is further divided into 60:40 between the Centre and the States, 90:10 for the north-eastern region and the Himalayan States and 100% for the Union Territories without legislature.
  • The remaining 50% is from the World Bank or other multilateral development banks. As a result, the Centre’s total share will be ₹2,849.54 crore.
  • 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.

Are the Funds Used?

  • Barring Mizoram, Lakshadweep, Himachal Pradesh and Bihar, none of the governments used even half of the sum granted in the past three years, according to an analysis of the data shared in Parliament.
  • According to the information given by Minister for Women and Child Development in the recent session of Parliament, a total of ₹4,283 crore was disbursed by the Centre to different States and Union Territories.
  • Of this, ₹1,283.89 crore was utilised until October 31, 2019, or only 29.97% of thefunds granted. Figures were not available for 2017-2018 as the scheme was launched at the end of the fiscal.

Important Stats of the Report:

  • The five best performers were Mizoram (65.12%), Lakshadweep (61.08%), Bihar (55.17%), Himachal Pradesh (53.29%) and Meghalaya (48.37%).
  • The worst five performers were Punjab (0.45%), Karnataka (0.74%), Kerala (8.75%), Jharkhand (13.94%) and Assam (23.01%).
  • During 2019-20, funds were released for 19 States, though 12 of them had used less than a third of the funds released in the previous two years.
  • The CNNS, released by the Ministry of Health and Welfare in October, showed that 35% of children under the age of 5 are stunted and in this age group, 17% are wasted (low weight for height) and 33% underweight (low weight for age).

Way Forward:

  • It is, thus, expected that utilisation will increase over years. A number of activities had a slow start but are now picking up. These include the Integrated Child Development Services-Common Application Software (ICDS-CAS) meant to monitor anganwadis.
  • However, given the stiff targets, translating the activities into outcomes will be critical, and that remains to be seen.

FINANCE MINISTER LAUNCHES EBKRAY FOR ONLINE AUCTION OF ASSETS ATTACHED BY BANKS

Why in News?

  • Finance Minister Nirmala Sitharaman discussed banking issues with chiefs of Public Sector Banks (PSBs), chief executive of Indian Banks’ Association and representatives of leading private sector banks.

eBkray:

  • It is a common e-auction platform launched today by the Finance Minister.
  • It has been launched to enable online auction of attached assets transparently and cleanly for improved realisation of value.
  • The platform is equipped with property search features and navigational links to all PSB e-auction sites.
  • It provides single-window access to information on properties up for e-auction as well as facility for comparison of similar properties.
  • It contains photographs and videos of uploaded properties.

Steps for enhancing Digital Transactions:

  • In order to strengthen the digital payment eco-system and move towards less-cash economy, the Finance Minister in her budget speech of 2019-20 had, inter alia, announced that business establishments with annual turnover of more than Rs. 50 crore shall offer low cost digital modes of payment (such as BHIM UPI, UPI QR Code, Aadhaar Pay, Debit Cards, NEFT, RTGS, etc.) to their customers, and no charge or merchant discount rates (MDR) shall be imposed on customers as well as merchants.
  • To facilitate Implementation of the announcement, it was decided as under:
  • Department of Revenue (DoR) will notify RuPay and Unified Payments Interface (UPI) as the prescribed mode of payment for undertaking digital transactions without any MDR.
  • All companies with a turnover of Rs. 50 crore or more shall be mandated by DoR to provide the facility of payment through RuPay Debit card and UPI QR code to their customers.
  • All banks will start a campaign to popularise RuPay Debit card and UPI.

 

PROTECTING MINORS/CHILDREN IN CONFLICT WITH LAW

Why in News?

  • In the backdrop of protests against the Citizenship (Amendment) Act, 2019, a number of minor under the age of 18 have been detained by the law enforcement authorities.
  • This has invigorated the debate around child rights especially of those children who are in conflict with the law.

Legislative Framework in India regarding Child Rights (Children in conflict with law):

1.Juvenile Justice Act:

  • Section 10 of the Juvenile Justice (Care and Protection of Children) Act, 2015 provides for a Special juvenile police unitor the designated child welfare police officer.
  • A child is found to be in conflict with law he/she shall be placed under the charge of this officer who shall produce that child before the Juvenile Justice Board within a period of 24 hours.
  • Thus the Juvenile Justice Act prohibits the detention of a child in police custody.

2.U.N Convention on Rights of Child

  • The United Nations Convention on the Rights of the Child, 1989 (CRC), is a comprehensive document containing a set of universal legal standards or norms for the protection and well-being of children
  • As per this document, they have a right to be protected from certain acts, such as torture, exploitation, abuse, arbitrary detention and unwarranted removal from parental care, and children.
  • India ratified this convention in 1992 and enacted various laws in conformity of this convention for the protection of children.
  • So, in accordance with that convention, the National Commission for Protection of Child Rights (NCPCR) a statutory body was set up under the Commission for Protection of Child Rights Act, 2005.
  • It is entrusted with the responsibility to protect, promote and defend child rights in India.
  • The commission works under the aegis of the Ministry of Women and Child Development.

NCPCR Guidelines:

  • The National Commission for Protection of Child Rights guidelines on children’s rights in areas of civil unrest provide that law enforcement authorities should avoid blanket characterization of adolescent boys as security threats.
  • Besides the guideline also direct the authorities to take the cases of arbitrary detention, mistreatment, or torture of children extremely seriously and investigate the violations and take appropriate action against personnel involved.
  • In the context of the CAA protests, the NCPCR had highlighted that children were being used by certain groups of protesters were in unlawful activities such as stone-pelting which violates their rights under Juvenile Justice (Care and Protection of Children) Act, 2015

FREE TRADE AGREEMENT WITH THE EURASIAN ECONOMIC UNION

Why in News?

  • Russia is hopeful of India concluding a new Free Trade Agreement with the Eurasian Economic Union(EAEU).

Eurasian Economic Union (EAEU):

  • The Eurasian Economic Union is an international organization for regional economic integration. It has international legal personality and is established by the Treaty on the Eurasian Economic Union.
  • The EAEU provides for free movement of goods, services, capital and labor, pursues coordinated, harmonized and single policy in the sectors determined by the Treaty and international agreements within the Union.
  • The Member-States of the Eurasian Economic Union are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic and the Russian Federation.
  • The Union is being created to comprehensively upgrade, raise the competitiveness of and cooperation between the national economies, and to promote stable development in order to raise the living standards of the nations of the Member-States.

Structure & Governance of EAEU:

  • Supreme Eurasian Economic Council:The Supreme Council, which is composed by the heads of state of the member states, makes important decisions for the union. It approves the budget and the distribution of the contribution of the Member States.
  • Eurasian Economic Commission:The Eurasian Economic Commission (EEC) is the permanent regulatory body of the Eurasian Economic Union (EAEU). It started work on February 2, 2012. The main purpose of the Eurasian Economic Commission is ensuring the functioning and development of the EAEU, and developing proposals for the further development of integration.

The most important feature of the Commission lies in the fact that all decisions are based on a collegial basis. The Eurasian Economic Commission consists of two bodies: the Council and the Board.

  • Council:The council is composed of the Vice Prime Ministers of the member states. The council of the Commission oversees the integration processes in the Union, and is responsible for the overall management of the Eurasian Commission.
  • Board:The Board of the Eurasian Economic Commission consists of 10 members (2 Members (Minister) from each Member State), one of whom is the Chairman of the Commission Board.
  • Court of the Eurasian Economic Union:The Court of the Eurasian Economic Union replaced the Court of the Eurasian Economic Community (EurAsEC Court) in 2015. It is in charge of dispute resolution and the interpretation of the legal order within the Eurasian Economic Union. Its headquarters is in Minsk.

GROSS NPAS MAY RISE, SAYS RBI REPORT

Why in News?

  • According to an RBI report, the gross non-performing asset (GNPA) ratio of banks may increase to 9.9% by September 2020 from 9.3% in September 2019.

About NPA:

  • Any asset which stops giving returns to its investors for a specified period of time is known as Non-Performing Asset (NPA).
  • Generally, that specified period of time is 90 days in most of the countries and across the various lending institutions.
  • However, it is not a thumb rule and it may vary with the terms and conditions agreed upon by the financial institution and the borrower.
  • According to RBI, an asset including a leased asset becomes non­performing when it ceases to generate income for the bank.

Report’s Data:

  • “Stress tests indicate that under the baseline scenario, the GNPA ratios of banks may increase to 9.9% by September 2020 due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth,” the RBI said in its Financial Stability Report.
  • State-run banks’ GNPA ratios may increase to 13.2% by September 2020 from 12.7% in September 2019, whereas for private banks it may climb to 4.2% from 3.9%, under the stress scenario.
  • Foreign banks’ gross bad loans may increase to 3.1% from 2.9% in September 2019. Net non-performing assets (NNPA) ratio declined in September 2019 to 3.7%.
  • The aggregate provision coverage ratio (PCR) of all banks rose to 61.5% in September 2019 from 60.5% in March 2019.
  • The state-run banks’ CRAR improved to 13.5% from 12.2% during the same period.
  • The asset quality of Agriculture and services sectors, as measured by their GNPA ratios, deteriorated to 10.1% in September 2019 from about 8% in March 2019.
  • For industry, slippages during the period declined to 3.79% from about 5% in March 2019.

What could be the solution to this problem?

  • Since the problem is more concentrated in PSBs, some have argued that public ownership must be the problem.
  • Public ownership of banks, according to them, is beset with corruption and incompetence (reflected in poor appraisal of credit risk). The solution, therefore, is to privatise the PSBs, at least the weaker ones.
  • However, there are problems with this idea of privatising PSBs.
  • First, there are wide variations within each ownership category (within Indian banks).
  • In 2018, the State Bank of India’s (SBI’s) gross NPA/gross advances ratio was 10.9%. This was not much higher than that of the second largest private bank, ICICI Bank, 9.9%.
  • The ratio at a foreign bank, Standard Chartered Bank, 11.7%, was higher than that of SBI.
  • Moreover, private and foreign banks were part of consortia that are now exposed to some of the largest NPAs. Therefore the explanation lies elsewhere.
  • A brief look at the state of PSBs show that they are not in as bad a shape as many make them out to be.
  • For example, PSBs had a higher exposure to the five most affected sectors — mining, iron and steel, textiles, infrastructure and aviation.
  • These sectors accounted for 29% of advances and 53% of stressed advances at PSBs in December 2014. For private sector banks, the comparable figures were 13.9% and 34.1%.
  • Rough calculations show that PSBs accounted for 86% of advances in these five sectors. (By an interesting coincidence, this number is exactly the same as the PSBs’ share in total NPAs)
  • Wholesale privatisation of PSBs is thus not the answer to such a complex problem.
  • We need a broad set of actions, some immediate and others over the medium-term and aimed at preventing the recurrence of such crises.

Way Forward:

  • Banks have to accept losses on loans.
  • They should be able to do so without any fear of harassment by the investigative agencies.
  • The Indian Banks Association has set up a six-member panel to oversee resolution plans of lead lenders. To expedite resolution, more such panels may be required.
  • An alternative is to set up a Loan Resolution Authority, if necessary through an Act of Parliament.
  • Also, the government must infuse at one go whatever additional capital is needed to recapitalise banks — providing such capital in multiple instalments is not helpful.

A COMPLETE OVERHAUL OF INDIAN RAILWAYS

Why in News?

  • India has the fourth largest railway network in the world. It has come a long way since 1950-51 in terms of number of trains and quantum of traffic carried. However, it has been highlighted that Indian Railways may end up as burden on the national economy due to the number of issues.
  • For instance, according to the recent CAG report, the operating ratio of Railways has increased to 98.4%, which is considered to be the highest in the last 10 years.
  • In this regard, let us discuss in detail about the various problems with the Indian Railways and what can be done in order to improve its performance.

 Existing Problems with the Indian Railways:

1. Decline in share of Freight Traffic: The modal share of railways in the transportation of surface freight has declined from 86.2 per cent in 1950-51 to 33 per cent in 2015. This decrease is on account of shortfall in carrying capacity and lack of price competitiveness. The Indian Railways has kept the passenger fares at lower value while it has increased the freight charges to compensate for this loss. Hence, the cross-subsidization of low passenger fares by artificially high freight rates has led to shift in favour of road transport, for both freight as well as short distance passenger traffic.

2. Under- Investment: The expenditure on the railways as a percentage of transport expenditure declined from 56 per cent in 1985-90 to 30 per cent in 2007- 12. The under-investment in the sector has crippled operations and Hampered Capacity Augmentation.

3. Organizational structure: Delays in decision making, inadequate market orientation lead to slow turnover times and delays in the implementation of railways projects. For instance, introduction of new trains, provision of halts and establishment of new projects are taken on the basis of political considerations rather than commercial considerations.

4. Internal generation of resources: The lower relative cost of transporting freight by road has led to a decline in the share of the railways. Low and static prices for the passenger segment have also contributed to low internal generation of resources.

5. Safety and poor quality of service delivery: There have been a number of accidents and safety issues in the recent years. Poor cleanliness of trains and stations, delays in train departures/arrivals, quality of food and difficulties in booking tickets are key issues.

6. Higher Operating Cost: According to CAG’s Report, the operating cost of Indian railways has increased to 98.4% which means that Indian Railways is spending around Rs 98 to earn Rs 100.

The higher operating cost of the Indian railways is on account of higher expenditure due to salaries and pensions of the Railway personnel. The higher operating cost has in turn reduced the capability of the Indian railways to undertake capital investments to improve the railway network within India.

Few Recommendations to Address the Problem:

  • The Bibek Debroy committeeon Railway Modernisation and Anil Kakodkar Committee on improving railway safety have given a number of recommendations to improve the performance and safety of Indian railways. Some of these recommendations are:

1. Rationalize fare structures and subsidies: There is a need to rationalise the passenger fares and freight charges by ending the cross-subsidisation model presently followed by railways. Freight tariffs should be competitive with the cost of road transportation so that there is increase in the modal share of Railways.

2. Independent Regulator for Railways: There is a need to set up an Independent Railways Regulatory Authority. Such an authority would not determine the tariff, but it will monitor whether the tariff is market determined and competitive. It will also bring in specialised and technical expertise which is needed to manage the Indian railways.

3. Focus on Core Activities: Apart from its core function of running trains, Railways also engages in non-core activities such as running schools, hospitals and a police force. To enable to perform its core-function effectively, railways would have to reduce costs on these non-core activities that are non-remunerative in nature, and instead improve the efficiency of running trains by greater resource allocation to this function. Non-core activities can be outsourced to Private Entities.

4. Accounting Reforms: The current accounting system does not provide details of the cost of various activities and services, such as introduction of new trains and scheduling of stops. It neither tracks assets nor assesses liabilities. Consequently, it becomes difficult to compute the costs and benefits of any project or activity. Hence, in this regard, there is a need to adopt accounting reforms to track these details. This will enable us to understand how efficiently the Indian railways is managing its finances.

5. Financing of Projects: The Finance Minister has recently stated that Indian railways would need an investment of around Rs 50 lakh crores between 2018 and 2030. However, the financial status of the Indian Railways is at ‘precarious’ situation which has a direct bearing on the modernization, upgradation of technology, replacement of the old assets and safety aspects of railways. Hence, in this regard, there is a need to improve the expenditure management of Indian railways and improve the internal revenue generation. For instance, the Railways can lease huge amount of land that it holds to the private sector for certain duration of time and earn revenue. Similarly, railways can enter into PPP agreements for the development of stations.

6. Better utilization of existing infrastructure to address congestion: There is a need to prioritize ongoing projects to improve capacity utilization. Timely completion of these projects will generate more revenue.At the same time, we need to maintain and upgrade the existing network to ensure that supply keeps up with demand.

7. Safety of Railways: The Kakodkar committee had recommended for an investment of Rs 1 lakh crores over a period of 5 years to improve the safety of Indian railways. It had recommended the creation of a statutory Railway Safety Authority with enough powers to have a safety oversight on the operational mode of Railways.

 Proposed Organizational Restructuring:

1. Indian Railway Management Service (IRMS):

  • The Union Cabinet approved an organisational restructuring of the Indian Railways, including the merger of eight Group A services into a central service called the Indian Railway Management Service (IRMS), which is expected to end departmentalism, promote smooth working and expedite decision-making.

2. Changes in the Railway Board:

  • Currently, the board comprises eight members, each representing their service, with the chairman being the first among equals. The structure has remained unchanged since 1905.
  • The Board will now consist of five members– Chairman, along with four members responsible for infrastructure, operations and business development, rolling stock and finance. There will also be a DG (HR) under the Chairman.
  • In addition, the board will have independent members, who will be experts in fieldssuch as finance, industry and management, much like independent directors on corporate boards.
  • The chairman will have the CEO tag attachedand will be the final authority on all Issues.

ATAL BHUJAL YOJANA

Why in News?

  • Prime Minister Narendra Modi launched the Atal Bhujal Yojana to strengthen the institutional framework for participatory groundwater management and bringing about behavioural changes at the community level for sustainable Groundwater Resource Management in seven States.

Highlights:

  • The scheme will be implemented in about 8,350 gram panchayats in 78 districts of Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh.
  • Of the total outlay of ₹6,000 crore to be provided from 2020-­21 to 2024-­25, 50% will be in the form of World Bank loan to be repaid by the Central government.
  • The remaining part will be made available via Central assistance from regular budgetary support.
  • The entire World Bank’s loan component and the Central assistance will be passed on to the States as grants.
  • The Prime Minister said the scheme, or the guidelines related to the Jal Jeevan Mission, were big steps in proving the resolve to deliver water to every household in the country by 2024.
  • He said the country had to prepare itself for dealing with every situation of water crisis, for which the government had been working at five levels.
  • Modi said a comprehensive and holistic approach had been adopted with the setting up of the Jal Shakti Ministry, which this monsoon made extensive efforts for water conservation.
  • The Jal Jeevan Mission would work towards delivering piped water supply to every house and Atal Bhujal scheme would pay special attention to those areas where the groundwater was very low.
  • To incentivise gram panchayats, the Prime Minister said those with better performance would be given more allocation under the scheme.
  • He said both the Central and State governments would spend ₹3.5 lakh crore on water-related schemes in the next five years.

Background:

  • Over-exploitation of groundwater resources in India has been of great concern due to its impact on water availability and as well as on the environment.
  • A recent report of NITI Aayog on groundwater level says 21 Indian cities including Delhi, Bengaluru, Chennai, and Hyderabad – will run out of groundwater by 2020.
  • It also says that 40 percent of India’s population will have no access to drinking water by 2030.
  • So in order to promote conservation of groundwater resources and their sustainable usage, the government has been working on various strategies.

“TREND AND PROGRESS OF BANKING IN INDIA 2018-19”

Why in News?

  • The RBI has recently released “Trend and Progress of Banking in India 2018-19“. This Report presents the performance of the banking sector during 2018-19 and 2019-20 so far.
  • Before dwelling into the report, let us have a brief look into the key terminologies used in the report for better understanding.

Basic Terminologies:

1.Non-Performing assets (NPA):

  • The assets of the banks which don’t perform (that is – don’t bring any return) are called Non Performing Assets (NPA) or bad loans.
  • According to RBI, terms loans on which interest or instalment of principal remain overdue for a period of more than 90 days from the end of a particular quarter is called a Non-performing Asset.

Depending upon the due period, the NPAs are categorized as under:

  • Sub-Standard Assets: > 90 days and less than 1 year
  • Doubtful Assets: greater than 1 year
  • Lost Assets: loss has been identified by the bank or RBI but the amount has not been written off wholly.

2.Gross and Net NPA: Gross NPA refers to the total NPAs of the banks. The Net NPA is calculated as Gross NPA -Provisioning Amount.
3.Provisioning Coverage Ratio (PCR):

  • Under the RBI’s provisioning norms, the banks are required to set aside certain percentage of their profits in order to cover risk arising from NPAs.
  • It is referred to as “Provisioning Coverage ratio” (PCR). It is defined in terms of percentage of loan amount and depends upon the asset quality. As the asset quality deteriorates, the PCR increases.

The PCR for different categories of assets is as shown below:

  • Standard Assets (No Default) : 0.40%
  • Sub-standard Assets ( > 90 days and less than 1 year) : 15%
  • Doubtful Assets (greater than 1 year): 25%-40%
  • Loss Assets (Identified by Bank or RBI) : 100%

4.Special Mention Accounts (SMA):

  • Special Mention Account (SMA) Category has been introduced by the RBI in order to identify the incipient stress in the assets of the banks and NBFCs.
  • These are the accounts that have not-yet turned NPAs (default on the loan for more than 90 days), but rather these accounts can potentially become NPAs in future if no suitable action is action.
  • The SMA has the various sub-categories as shown below:
    • SMA-0: Principal or interest payment not overdue for more than 30 days but account showing signs of incipient stress
    • SMA-1: Principal or interest payment overdue between 31-60 days
    • SMA-2: Principal or interest payment overdue between 61-90 days
  • If the Principal or interest payment is overdue for more than 90 days, then the loan is categorized as NPA.

5. Leverage Ratio (LR):

  • The Basel Committee on Banking Supervision (BCBS) introduced Leverage ratio (LR) in the 2010 Basel III package of reforms. The Formula for the Leverage Ratio is (Tier 1 Capital/ Total Consolidated Assets) ×100 where Tier 1 capital represents a bank’s equity.
  • It is to be noted that the Tier 1 capital adequacy ratio (CAR) is the ratio of a bank’s core tier 1 capital to its total risk-weighted assets. On the other hand, leverage ratio is a measure of the bank’s core capital to its total assets.
  • Thus, the Leverage ratio uses tier 1 capital to judge how leveraged a bank is in relation to its consolidated assets whereas the tier 1 capital adequacy ratio measures the bank’s core capital against its risk-weighted assets.

6.Liquidity Coverage Ratio (LCR):

  • A failure to adequately monitor and control liquidity risk led to the Great Financial Crisis in 2008. To improve the banks’ short-term resilience to liquidity shocks, the Basel Committee on Banking Supervision (BCBS) introduced the LCR as part of the Basel III post-crisis reforms.
  • The LCR is designed to ensure that banks hold a sufficient reserve of high-quality liquid assets (HQLA) to allow them to survive a period of significant liquidity stress lasting 30 calendar days.
  • HQLA are cash or assets that can be converted into cash quickly through sales (or by being pledged as collateral) with no significant loss of value.
  • Total net cash outflows are defined as the total expected cash outflows minus the total expected cash inflows arising in the stress scenario.

Now we can dive into the Key Highlights of the Report.

Health of the Banking Sector: Important Highlights:
1.Decline in Gross and Net NPA:

  • For the first time in the last 7 years, the Gross NPAs of the Scheduled Banks has declined to 9.1% by the end of September 2019. Similarly, the net NPAs has declined to 3.7% in September 2019. The decrease in the Gross NPAs and Net NPAs can be attributed to success of the Insolvency and Bankruptcy Code (IBC).

2.Concentration of NPAs:

  • Most of the NPAs are concentrated in the larger borrower accounts (exposure of Rs 5 crore or more) which account for almost 82% of the GNPAs. The report has highlighted that there has been increase in stress of these accounts and hence it may be difficult to reduce NPAs in future.

3.Decline in Special Mention Accounts (SMA): In 2018-19, scheduled Banks recorded decline in all the special mention accounts (SMA-0, SMA-1 and SMA2) which points to the broad-based improvement in asset quality. However, in the first half of 2019-20, there has been increase in the number of SMA accounts.
4.Provisioning Coverage Ratio (PCR): The provision coverage ratio (PCR) of all Scheduled Banks improved to 61 per cent by end of September 2019.
5.Leverage Ratio (LR): The leverage ratio of Scheduled Banks was at 6.6 per cent, above the prescription of 3 per cent by the Basel Committee on Banking Supervision (BCBS).
6.Banking Frauds: The Public sector Banks (PSBs) accounted for the bulk of the banking frauds reported in 2018-19 accounting for almost 55% of the total cases pending.

 

  • The following table shows India’s position in the list of countries with emerging economies.
  • The table shows India holding 3rdposition among the highest NPA holding economies.

NO PARKING, NO CAR: NATIONAL GREET TRIBUNAL

Context:

  • The National Green Tribunal asked the authorities of 122 cities (which lack ambient air quality), including Delhi, to curtail registration of vehicles if they do not have adequate parking space. And instead, the NGT asked the authorities to, upgrade the Public Transport System.

What is the Issue?

  • Two major factors that will hinder development in urban areas are

1.The lack of available public and Private Parking
2.The lack of a Robust Transit System.

  • While many of the urban cities in India have been performing better in the latter, they lack proper private or public parking facilities. Improper parking leads to congestion, which results in air pollution.
  • The NGT, concerned over the growing air pollution in India, had said, the environment protection measures require – the number of vehicles in any city must be limited to the available parking space.

The Tribunal’s Directions:

  • Parking can be allowed only at designated places.
  • Stringent measures must be taken by statutory authorities including the traffic police against any such parking.
  • The transport departments of the states and the Union territories, must assess the available parking capacities in their cities and determine the number of vehicles that can be accommodated in these available parking space.
  • In case, if the number of vehicles had exceeded the capacity, there should be an action plan for providing adequate additional parking space.
  • The number of vehicles to be registered must be curtailed by using appropriate economic disincentives or otherwise, if the number of vehicles had exceeded the capacity.
  • There should be an alternative provided to the citizens in the form of a public transport system.
  • Concerned over the threat posed to limited natural resources due to their overuse, the NGT had directed for assessment of carrying capacityof 122 cities, including Delhi, where air quality does not meet the National Ambient Air Quality Standards.

What is Carrying Capacity?

  • The concept of “carrying capacity” addresses the question as to how many people can be permitted into any area without the risk of degrading the environment In case of urban cities, the carrying capacity is largely determined by the level of economic activity carried out by the residents of the city.

The Issue of Parking Capacity:

  • The NGT has directed the states and the Union territories, to assess the available parking capacities in their cities and determine the number of vehicles that can be accommodated in these available parking space.

1.Indian cities often lack in discipline of vehicle parking, leading to congestion, which results in pollution.
2.In Indian urban spaces, there is no clear regulation regarding parking spaces.
3.The safety of bicyclers and pedestrians is also affected due to unavailability of parking spaces.
4.Delhi’s parking woes – Though the public transport in Delhi is far better than other cities, the aim of last mile connectivity is still unachieved. The vehicles from the neighbouring states, also occupy the streets of Delhi leading to congestion.

Denying Registration of New Vehicles:

  • The NGT has ruled that, the number of vehicles to be registered must be curtailed by using appropriate economic disincentives or otherwise, if the number of vehicles had exceeded the capacity.

1.This can hurt the movement of urban citizens, who rely on private mode of transportation.
2.This is only a temporary fix, as the issue of construction and demolition waste has not been addressed.
3.This would also affect the automobile sector, which is already reeling under pressure due to Unfavourable Market.

  • Preventing the urban people from buying new vehicles, without improving the parking space, may lead to chaos in the urban areas.

Solution to the Parking Problems:

  • Indian cities should move toward more organised parking management systems. This would not only reduce the congestion, but also increase the effectiveness of the Public Transport Systems.
  • Increased Parking Fees for parking in public spaces
  • Increase On-Street Parking facilities.
  • On-Street Angled Parking – increases the space availability.
  • Remote Parking and Shuttle Service – feeder facility.
  • GPS Tracking on Buses – to make the public transport reliable.
  • Parking Database – for better planning.
  • Informal Markets for Off -Street Parking.
  • Parking Spaces Sales and leasing.
  • Financial Incentives for using public transit.
  • Advanced Parking Management Systems.
  • On Demand Parking Mobile Apps.
  • Transferable Parking Rights.
  • Temporary Parking Structures.
  • By integrating the parking database with the urban transit systems, these cities can fill the gaps in their last mile connectivity. The tribunal had made it clear that the adverse impact on public health and constitutional mandate that right to clean air is a fundamental right cannot be violated for long.

Background:

1. National Clean Air Programme

  • It was envisioned as a scheme to provide the States and the Centre with a framework to combat air pollution.
  • The intention is to cut the concentration of PM10 and PM2.5 by at least 20% in the next five years, with 2017 as the base yearfor comparison.
  • Which cities will Fall Under This?
    • Based on the reports by WHO and the air quality data obtained, 122 citieshave been chosen as Non-Attainment Cities.
  • Who All Will Participate?
    • Industry and academia, Ministry of Road Transport and Highways, Ministry of Petroleum and Natural Gas, Ministry of New and Renewable Energy, Ministry of Heavy Industry, Ministry of Housing and Urban Affairs, Ministry of Agriculture, Ministry of Health, NITI Aayog, and Central Pollution Control Board.

2. National Air Quality Index (AQI):

  • Based on ‘One Number- One Colour-One Description’.
  • There are six AQI categories, namely Good, Satisfactory, Moderately polluted, Poor, Very Poor, and Severe.
  • The index will measure eight major pollutants, namely, particulate matter (PM 10 and PM 2.5), nitrogen dioxide, sulphur dioxide, ozone, carbon monoxide, ammonia and lead.
  • The simplicity of the NAQI also makes it accessible to the common man.
  • The use of the colour coded system makes is easier for people to comprehend instantly.

3. Ambient Air Quality Standards in India

  • Ambient air quality refers to the condition or quality of air surrounding us in the outdoors.
  • National Ambient Air Quality Standards are the standards for ambient air quality set by the Central Pollution Control Board (CPCB) that is applicable nationwide.
  • The CPCB has been conferred this power by the Air (Prevention and Control of Pollution) Act, 1981.
  • Government of India has laid down National Ambient Air Quality standards
  • (NAAQS)for twelve air pollutants, namely, PM10, PM2.5, Carbon Monoxide (CO), Sulphur Dioxide (SO2), Nitrogen Dioxide (NO2), Ammonia (NH3), ground level Ozone (O3), Lead, Arsenic, Nickel, Benzene and Benzo Pyrene.

SWADESH DARSHAN SCHEME

Why in News?

  • The Cabinet approves the release of funds for 10 projects of the Swadesh Darshan Scheme sanctioned in 2018-19.

Swadesh Darshan Scheme:

  • The scheme was launched by the Union Tourism Ministry with the objective to develop theme-based tourist circuits in India.
  • These tourist circuits will be developed on the principles of high tourist value, competitiveness and sustainability in an integrated manner.
  •  The scheme was launched in 2015.
  •  It is a Central Sector Scheme (which means 100% sponsored by the GOI).
  •  Under the Scheme 15 circuits have been identified for development namely Himalayan Circuit, North East Circuit, Krishna Circuit, Buddhist Circuit and Coastal Circuit, Desert Circuit, Tribal Circuit, Eco Circuit, Wildlife Circuit, Rural Circuit, Spiritual Circuit, Ramayana Circuit, Heritage Circuit, Tirthankar Circuit and Sufi Circuit.

Objectives of the scheme:

  • To position tourism as a major engine of economic growth and job creation.
  • Develop circuits having tourist potential in a planned and prioritized manner.
  •  Promote cultural and heritage value of the country to generate livelihoods in the identified regions.
  • Enhancing the tourist attractiveness in a sustainable manner by developing world-class infrastructure in the circuit/destinations.
  • Follow community-based development and pro-poor tourism approach.
  •  Creating awareness among the local communities about the importance of tourism for them in terms of increased sources of income, improved living standards and overall development of the area.
  • To create employment through the active involvement of local communities.
  •  Harness tourism potential for its effects on employment generation and economic development.
  • To make full use of the potential and advantages in terms of available infrastructure, national culture and characteristic strong points of each and every region throughout the country by the development of theme-based circuits.
  •  Development of tourist facilitation services to enhance visitor experience/satisfaction.

Tourist Circuit:

  • A Tourist Circuit is defined as a route having at least three major tourist destinations which are distinct and apart.
  •  Circuits should have well-defined entry and exit points. A tourist who enters should get motivated to visit most of the places identified in the circuit.
  • A Circuit could be confined to a State or could be a regional circuit covering more than one State/Union Territory. These circuits may have one dominant theme and other sub-themes.

DO RBI’S INFLATION TARGETING REALLY PROMOTES INDIA’S GROWTH?

Why in News?

  • Indian Economy is being through a slowdown, and in this scenario, the efficacy of RBI’s Inflation targeting process has come under criticism, stating it as a reason behind this slowdown.
  • So, the process of inflation targeting and the benefits accrued due to it and the possible reasons (apprehensions) behind various criticism and the way forward has been discussed in this article in brief.

What is Inflation Targeting?

  • Inflation Targeting is a part of monetary policy framework wherein the Central Bank of a country focuses on maintaining the rate of Inflation within a targeted range.
  • It is believed that increasing prices in an economy create uncertainties in decision making, adversely affecting savings and encouraging speculative investments (such as buying Gold).  Inflation targeting brings in more predictability and transparency in deciding monetary policy.
  • Inflation targeting was first adopted by New Zealandand subsequently, a large number of countries including India have been following Inflation Targeting as their core element of monetary policy.
  • In case of India, the Inflation targeting was introduced through the Monetary Policy Framework Agreement signed between the RBI and Government in 2015. As per terms of the agreement, RBI’s primary objective would be to maintain price stability, while keeping in mind the objective of growth. The RBI is required to maintain rate of inflation of 4% with a deviation of 2% i.e. inflation has to be maintained between 2% to 6%.

 

Benefits of Inflation Targeting

1. Enhanced Transparency: The Inflation targeting explicitly states as to what would be the targeted rate of Inflation in an economy. Such explicitly mandated target brings in more clarity and predictability with respect to the rate of Inflation and monetary policy formulation.
2.Promote Growth: A high rate of inflation leads to decrease in the purchasing power of currency, reduces the savings and investment rate, increases the unemployment and leads to overall decrease in the GDP growth rate.  Further, high rate of inflation is accompanied by higher levels of Fiscal Deficit and Current Account Deficit leading to an adverse impact on the macro-economic stability of the country. Hence, low and moderate level of inflation would incentivise the investors to undertake the investment in the economy leading to the promotion of higher growth and development.
3.Autonomy and Accountability of RBI: As per the monetary policy framework agreement, the RBI has been given complete autonomy in maintaining the rate of inflation within the mandated targets. If the RBI fails to maintain the Inflation within the target, then it would be required to submit in writing, the reasons for its failure.

Such a provision enables the RBI to enjoy autonomy and at the same time, it enables the Government to have enhanced accountability over the actions of the RBI.

4. Empirical Evidence:  The Inflation targeting has been quite successful in some of the advanced economies such as UK, New Zealand etc. These advanced economies have been able to maintain moderate rate of inflation for a much longer time leading to increased macro-economic stability.

Problems and Challenges with Inflation Targeting

1. Disregards the Multi-faceted role of RBI: In a developing country like India, it is not practical for the central bank to focus exclusively on inflation without taking into account the larger development context. The RBI needs to balance between growth, price stability and financial stability.
2. No Clear link between Price Stability and Financial Stability: Prior to 2008, advanced economies were able to maintain moderate rate of inflation for a long term mainly due to adoption of Inflation Targeting. It was believed that Inflation targeting was responsible for overall macroeconomic stability of the country.
However, the 2008 Global Financial Crisis has clearly proved that price stability alone cannot lead to financial stability and the excessive focus of the Central banks on the price stability may lead to neglect of other crucial functions such as regulation leading to the economic crisis.

3. Empirical Evidence failing in India: The RBI has been able to maintain stable rate of Inflation within the mandated range since last 2-3 years. However, inspite of stable rate of Inflation, Indian economy is facing challenges on multiple fronts. The GDP growth rate has been reduced to 25 quarter low of 5% for the first quarter of financial year 2019-20.

The unemployment has increased to 45- year high of 6.1%. There has been contraction in the manufacturing activity as evident in declining IIP. The agriculture sector is staring at agrarian distress. All these clearly highlight that the Inflation targeting has failed to promote growth and development.

4.Poor Monetary Policy Transmission: The Inflation targeting is more suited to the developed economies since the monetary policy transmission in such economies is quite efficient. However, in case of India, the monetary policy transmission is quite inefficient and this can in turn reduce the effectiveness of Inflation Targeting.
5. Hinder GDP Growth: In order to contain Inflation, the RBI would be required to increase the rate of Interest by following the contractionary monetary policy. However, such a policy would lead to increase in the rate of interest on the loans leading to decrease in investment and consumption expenditure leading to decline in the GDP growth rates. For example, during 2013-2015, the higher interest rates in the country on account of higher rate of inflation had led to decrease in the GDP growth rates.
6. Does not address the Supply Side Inflation: The inflation in India may take place due to supply side bottlenecks such as increase in global crude oil prices, poor monsoon, floods etc. For instance, the recent increase in the prices of Tomato and Onions is mainly on account of supply side disruptions.
Under such circumstances, RBI would have limited role to play in easing the rate of inflation. Rather, the Government of India would be required to address these supply side disruptions in order to moderate the prices of such commodities.

Way Forward

  • Post-Global Financial crisis, the dominant view around the world is that flexible inflation targeting, rather than pure inflation targeting is more efficient for monetary policy formulation.
  • According to the Flexible inflation targeting, the major role of the Central Bank would depend on the prevailing rate of inflation in the country. If the rate of inflation is way off the target, the primary emphasis of the central Bank would be to bring the rate of inflation within an acceptable range.
  • On the other hand, if the rate of inflation is within the range, the central Bank should focus on its other core objectives. Thus, it is being said that the Central banks should focus on flexible inflation targeting rather than pure inflation targeting. Here pure inflation targeting means RBI solely concentrating on the inflation targeting at the cost of other major functions of it.
  • In this aspect, there is a need for greater debate around kind of Inflation targeting in India.

NATIONAL POPULATION REGISTER (NPR)

Why in News?

  • The Kerala Government has recently decided to put on hold to all proceedings for updating the National Population Register (NPR).

About NPR:

  • It is a Register of usual residents of the country.
  • It is being prepared at the local (Village/sub-Town), sub-District, District, State and National level under provisions of the Citizenship Act 1955 and the Citizenship (Registration of Citizens and issue of National Identity Cards) Rules, 2003.
  • It is mandatory for every usual resident of India to register in the NPR.
  • A usual resident is defined for the purposes of NPR as a person who has resided in a local area for the past 6 months or more or a person who intends to reside in that area for the next 6 months or more.
  • To create a comprehensive identity database of every usual resident in the country.

What does NPR consists of?

  • The NPR database would contain demographic as well as biometric details.
  • As per the provisions of the NPR, a resident identity card (RIC) will be issued to individuals over the age of 18.
  • This will be a chip-embedded smart card containing the demographic and biometric attributes of each individual.
  • The UID number will also be printed on the card.

What is the Controversy Around It?

  • It comes in the backdrop of the NRC which excludes lakhs of people in Assam.
  • It intends to collect a much larger amount of personal data on residents of India.
  • There is yet no clarity on the mechanism for protection of this vast amount of data.

Significance of the Data:

  • Every country must have a comprehensive identity database of its residents with relevant demographic details. It will help the government formulate its policies better and also aid national security.
  • It will ease the life of those residing in India by cutting red tape. Not only will it help target government beneficiaries in a better way, but also further cut down paperwork and red tape in a similar manner that Aadhaar has done.
  • With NPR data, residents will not have to furnish various proofs of age, address and other details in official work.
  • It would also eliminate duplication in voter lists, Government Insists.

NATIONAL FOOD SECURITY MISSION (NFSM) – OILSEEDS AND OIL PALM

Why in News?

  • The Government is implementing the National Food Security Mission (NFSM) – Oilseeds and Oil Palm to increase production of oilseeds and domestic availability of Edible Oils.

NFSM – Oilseeds and Oil Palm:

  • This scheme is under implementation in 29 States and has three subcomponents namely, Oilseeds, Oil palm and Tree Borne Oilseeds (TBOs).
  • The main objective is to increase oilseeds production & productivity and area expansion under oil palm & TBOs cultivation.

Objectives of NFSM:

  • Increasing the production of rice, wheat, pulses, coarse cereals (maize and barley) and nutri-cereals through area expansion and productivity enhancement in a sustainable manner in the identified districts of the country.
  • Restoring soil fertility and productivity at the individual farm level.
  • Enhancing farm level economy (i.e. farm profits) to restore confidence amongst the Farmers.

Oilseeds Agriculture in India:

  • India is one of the major oilseeds grower and importer of edible oils.
  • India’s vegetable oil economy is the world’s fourth-largest after USA, China & Brazil.
  • Oilseeds account for 13% of the Gross Cropped Area, 3% of the Gross National Product and 10% value of all agricultural commodities.
  • The diverse agro-ecological conditions in the country are favourable for growing 9 annual oilseed crops, which include 7 edible oilseeds (groundnut, rapeseed & mustard, soybean, sunflower, sesame, safflower and niger) and two non-edible oilseeds (castor and linseed).
  • Oilseeds cultivation is undertaken across the country in about 27 million hectares mainly on marginal lands, of which 72% is confined to rain-fed farming.
  • During the last few years, the domestic consumption of edible oils has increased substantially and has touched the level of 18.90 million tonnes in 2011-12 and is likely to increase further.
  • A substantial portion of our requirement of edible oil is met through import of palm oil from Indonesia and Malaysia.

OPERATION TWIST

Why in News?

  • Recently, RBI has planned to conduct “Operation Twist”.

About Operation Twist:

  • Operation Twist is actually a move that is used by U.S Federal Reserve in past.
  • The central bank uses the proceeds from the sale of short-term bonds to buy long term government bonds, leading to easing of interest rates on the long-term bonds.
  • It involves simultaneous purchase and sale of government securities under Open Market Operations (OMO) for 10,000 crore each.
  • It will purchase the longer (government bonds maturing in 2029), and simultaneously sell the shorter duration ones (short-term bonds maturing in 2020).
  • It will be done through electronic platform.

About Open Market Operations:

  • Open Market is known as unrestricted, free access market.
  • It aims to regulate the money supply in the economy.
  • It is used to adjust the liquidity conditions in the market.
  • It is the sale and purchase of government securities and T-bills by RBI.
  • During increase in liquidity condition then RBI sells G-secs to Open Market.
  • During decrease in liquidity condition then RBI buys G-secs from Open Market.

Repurchase or buyback of G-secs:

  • It is known as buying back the existing securities that are sold in Open Market.
  • Sometimes RBI Prematurely buys G-secs.
  • The Reasons are to:
    • Reduce the cost of particular G-secs (High coupon G-secs),
    • Reduce the number of outstanding G-secs and improve liquidity,
    • Infuse liquidity in the system

 Government Securities (G-Secs):

  • It is a Tradeable Instrument that is issued by the central Government/ state governments.
  • It is also called as risk-free gilt-edged instruments. It has two types, short term bonds and long-term bonds.
  • Short term bondsare also known as Treasury Bill. Its maturity period is less than 1 year.
  • Long Term Bondsare also known as Government Bonds or Dated Securities.
  • Central Government issues both Government bonds and Dated Securities.
  • In case of State Government either Government bonds or Dated Securities through RBI. It is called as State Development Loan. Its maturity period is greater than or equal to 1 year.
  • G-sec is issued through auctions conducted by RBI, by an electronic platform called

E-Kuber. It is the Core banking Solution platform of RBI.

  • RBI issues Indicative auction calendar, which contains details of calendar. It also contains information regarding amount of borrowing, maturity time period and time of auction.

SILVER LINE RAILWAY PROJECT

Why in News?

The Ministry of Railways granted in-principle approval for the ‘Silver Line’ project, a proposal of the Kerala government that involves laying of semi high-speed trains between the two corners of the state of Kerala.

The Silver Line project:

  • The Silver Line project aims to connect major districts and towns with semi high-speed trains that will run on their own tracks.
  • The 532-km corridor is projected to be built at a cost of Rs 56,443 crore. Trains would complete the journey at four hours instead of 12, with a maximum speed of 200 km/h.
  • The corridor will be built away from the existing line between Thiruvananthapuram and Thrissur.
  • The semi high-speed trains will traverse through 11 of the state’s 14 districts, Alappuzha, Wayanad and Idukki being the exceptions.
  • There are also plans to connect the corridor with the international airports at Kochi and Thiruvananthapuram. The project is scheduled to be commissioned by 2024.

Significance:

  • Kerala’s road networks are clogged and experience dense traffic during peak hours.
  • According to a data, less than 10% of the state’s roads handle nearly 80% of the traffic.
  • This also gives rise to accidents and casualties; in 2018, Kerala recorded 4,259 deaths and 31,687 grievous injuries.
  • Experts have been demanding faster transportation options including railways and waterways
  • The current railway network is congested with a large number of trains, level crossings and sharp curves.
  • The project will result in direct and indirect employment opportunities for 50,000 people, and the project once completed would create direct employment for at least 11,000 people.

Implementation:

  • The Kerala Rail Development Corporation (K-Rail), a joint venture between the Ministry of Railways and the Kerala government to execute projects on a cost-sharing basis, will be the nodal agency.
  • The government is believed to be looking at external funding agencies.
  • An initial investment is likely to be made by K-Rail for acquiring land. A Detailed Project Report (DPR) will be commissioned soon.

ONE NATION ONE RATION CARD SCHEME

Why in News?

  • The Centre has designed a standard format for ration cards as it moves ahead with ‘one nation, one ration card’ initiative and has asked State governments to follow the pattern while issuing fresh Ration Cards.

About the Ration Card and Ration Shop:

  • A ration cardis issued to the head of the family, depending on the number of members in a family and the financial status of the applicant.
  • It is used by households to get essential food grains at subsidised prices from designated ration shops (also called fair price shops) under the Targeted Public Distribution System (TPDS).
  • Over the years, different types of ration cards were issued depending on the level of deprivation. Later, in 2013, when the National Food Security Billwas passed, different ration cards were compressed to just two — priority and Antyodaya (for the poorest).
  • The responsibility of identifying eligible families and issuing ration cards to them rests with the state/UT government.
  • Ration shopscan be privately owned or owned by cooperative societies or by the government. Ownership licenses are issued by the concerned state government.
  • Presently, commodities including wheat, sugar, rice and kerosene are being allocated as part of the (TPDS). State governments have the discretion to provide additional commodities.

About the Scheme:

  • Since Ration Cards are issued by State Governments, this implied that beneficiaries could procure food grains only from the designated ration shops within the concerned state.
  • If a beneficiary were to shift to another state, he/she would need to apply for a new ration card in the second state. There were other complications.
  • For instance, after marriage, a woman needed to get her name removed from the ration card issued to her parents, and get it added to the ration card issued to her husband’s family.
  • The ONORC schemeattempts to address this gap in TPDS delivery. Essentially, the scheme has been launched keeping in mind the internal migration of our country, since people keep moving to different states in search of better job opportunities and higher standards of living.
  • As per Census 2011, 4.1 crore people were inter-state migrants and 1.4 crore people migrated (inter and intra-state) for employment.
  • With the ONORC scheme being implemented, the beneficiary can buy food grains from ration shops located in any of the states.
  • Currently, the central government’s ambitious initiative is being implemented on a pilot basis in a cluster of six States. The government hopes to implement the scheme across India by June 1, 2020.

Benefits of the Proposed Scheme:

  • According to Census 2011, there are more than 45 crore internal migrants in India, of whom more than half have not completed primary education, while 80% have not completed secondary education.
  • Lower levels of education are linked to lower income, which would make a large percentage of these migrants eligible for NFSA benefits.
  • Registering for ration cards at their new location is an arduous process, especially if some members of the household still remain in their original home.
  • Apart from this, there are short-term migrants, often working in cities, but not moving there permanently.
  • Women who change locations after marriage also find it difficult to start accessing ration benefits using a new household’s card.
  • To curb corruption and improve access and service quality by Removing Monopolies.

Drawbacks of the Scheme:

  • Since the scheme is based on technology, the government may face some technical challenges during the implementation of the scheme.
  • Few Regional Parties have expressed apprehensions on bearing the cost of additional ration cards. This is a matter which is to be settled between the states and the Government of India.
  • One of the apprehensions mentioned by few states is the cost of additional food grain to be supplied to the migrant workers.
  • However, the whole system is based on the entitlements mandated under the NFSA and this prevents the charges of additional cost. Beneficiaries will continue to pay the same issue prices that are fixed under the NFSA.

DOES INDIA UNDERGOES STAGFLATION?

Why in News?

  • The recent deceleration in the economic growth and sharply rising inflation, there is a growing murmur about India facing stagflation.

What is Stagflation?

  • Simply put, Stagflation is a portmanteau of stagnant growth and rising inflation.
  • Typically, inflation rises when the economy is growing fast. That’s because people are earning more and more money and are capable of paying higher prices for the same quantity of goods. When the economy stalls, inflation tends to dip as well – again because there is less money now chasing the same quantity of goods.
  • Stagflation is said to happen when an economy faces stagnant growth as well as persistently high inflation. In other words, the worst of both worlds. That’s because with stalled economic growth, unemployment tends to rise and existing incomes do not rise fast enough and yet, people have to contend with rising inflation. So people find themselves pressurised from both sides as their purchasing power is reduced.

Why is everyone asking about Stagflation in India?

1. Deceleration in Growth:

  • Over the past six quarters, economic growth in India has decelerated with every quarter. In the second quarter (July to September), for which the latest data is available, the GDP grew by just 4.5%.
  • In the coming quarter (October to December), too, GDP growth is likely to stay at roughly the same level. For the full financial year, the GDP growth rate is expected to average around 5% – a six-year low.

2. Rise in Inflation:

  • Yet, in October and November, retail inflation has soared. In fact, the October inflation was a 16-month high and the November inflation, at 5.54%, is at a three-year high.
  • Inflation for the rest of the financial year is expected to stay above the RBI’s comfort level of 4%.
  • So, with growth decelerating every quarter and now inflation rising up every month, there are growing murmurs of stagflation.

Is India really faces Stagflation?

  • Although it appears so at the first glance, India is not yet facing stagflation. The three broad reasons behind it are:
  • One, although it is true that we are not growing as fast as we have in the past or as fast as we could, India is still growing at 5% and is expected to grow faster in the coming years. India’s growth hasn’t yet stalled and declined; in other words, year on year, our GDP has grown in absolute number, not declined.
  • Two, it is true that retail inflation has been quite high in the past few months, yet the reason for this spike is temporary because it has been caused by a spurt in agricultural commodities after some unseasonal rains. With better food management, food inflation is expected to come down. The core inflation – that is inflation without taking into account food and fuel – is still benign.
  • Lastly, retail inflation has been well within the RBI’s target level of 4% for most of the year. A sudden spike of a few months, which is likely to flatten out in the next few months, it is still early days before one claims that India has stagflation.

Structural reforms to overcome the slowdown:

  • Various Suggestions to overcome the existing slowdown, as per G20s Structural Reform Agenda are as:
  1. 1. Advancing Labour Market Reforms, Educational Attainment and skills:
  2. Fixed term contracts are expected to liberalise labour markets.
  3. Certain States such as Rajasthan have liberalized labour markets regulations.
  4. Reforms in the apprentice acts.
  • Central Government has come up with 4 draft legislations for comprehensive reforms in the labour sector.  Focus should be also on skill development and industrial partnership for skilling of population.
  1. 2. Promoting trade and investment openness:
  2. a. Focus on improvement of logistics sector
  3. b. Reforms of the customs procedure and Trade Facilitation.
  4. c. RCEP not signed by India and growing protection across the globe has shown that more needs to be done on this front.
  1. 3. Encouraging Innovation:
  2. a. India’s ranking has improved on the Global Innovation Index.
  3. b. Patent fillings in India has increased but not comparable to similar economies such as China, South Korea.
  4. c. Patent filing procedure eased.
  5. d. Focus on start-ups and Innovative Firms.
    • India needs to increase R&D expenditure as a percentage of GDP.
    1. 4. Promoting Fiscal Reform:
    2. a. FRBM legislation has led to intergeneration equity. However, targets are not followed strictly.
    3. b. State governments have abided to FRBM targets.
    4. c. Removal of plan and non-plan classification of budget expenditure led to better results.
    5. d. Outcome: Output framework to make budget expenditure more Outcome Centric.
    • Targets under the FRBM law should be strictly followed. Impact analysis of expenditures incurred should be improved.
    1. 5. Promoting Competition  and an Enabling Environment:
    2. a. Privatisation of Air India, Bharat Petroleum etc.
    3. b. Strategic disinvestment of PSUs.
    4. c. FDI reforms for liberalization of entry of foreign firms into the country.
    5. d. Competition Commission of India has improved the competitive landscape in India.
    • Enhanced competition can be introduced by further boosting FDI in the country. Domestic firms can be made more competitive by dismantling the loss making PSUs. Opening up of restricted sectors such as coal, railways, oil marketing, electricity distribution etc.
    1. 6. Improving Infrastructure
    2. a. Proposal to spend 1 Trillion dollar on the infrastructure in this budget.
    3. b. Focus on highway development: Bharatmala scheme, removal of blind spot, transition to Fastag, Transition to electric mobility planned.
    4. c. Investment in Railway sector: Dedicated Freight Corridor, High-speed Rail Networks.
    5. d.Sagarmala Scheme to boost the port sector.
    • India has made good improvement in its infrastructure. However, more needs to be done as India is still a infrastructure deficit country. Focus should be on early completion of projects and availability of finance for ease terms for infrastructure.
    1. 7. Strengthening the Financial System:
    2. a. Capitalisation of Public Sector Banks
    3. b. Relaxation of banking licenses- licenses to payment banks, Small Finance banks.
    4. c. Insolvency and Bankruptcy code altered the creditor and debtor relations.
    5. d. FRBM caps on government spending
    6. e. Inflation targeting in monetary policy led to curbing inflation in the economy in a sustainable way.
    7. f. GST reforms led to widespread reforms in the indirect tax regime and led to economic integration of the country.
    • Suggestions of the NK Singh Committee should be followed. FRBM legislation should be strictly enforced.
    1. 8. Enhancing Environmental Sustainability:
    2. a. EIA and forest clearance
    3. b. Increasing pollution in the urban areas, Threat of climate change.
    4. c. Loss of Biodiversity
    • India is a signatory to Paris Climate Deal where India has committed to increasing share of renewable energy sources in the overall energy mix, intensification of forests, and reducing overall the carbon intensity of the economy.
    • Targets under the Paris Climate deal  and Sustainable development goals should be followed. Strict enforcement of EIA and forest clearance.
    1. 9. Governance Reforms
    2. a. Reforms of the civil service to make them more responsive, sensitive
    3. b. Making citizens more empowered by RTI act, Lokpal Act, Citizen charter etc.
    4. c. Corruption: Reforms in the Benami Property Act, Fugitive Economic Offenders Act, Prevention of Corruption act.
    5. d. Empowerment of local governments.
    • This is the mother of all structural reform required in the economy which is expected to have most lasting impact. The suggestions of various committees such as ARC II, Punchii Commission etc should be followed. Necessity of political will.

COMPREHENSIVE LACTATION MANAGEMENT CENTRES

Why in News?

  • Breast Milk Banks in India are known as Comprehensive Lactation Management Centres (CLMC) and Lactation Management Unit (LMU) depending on the level of health facilities where these units are established.

Comprehensive Lactation Management Centres (CLMC):

  • CLMC works as per the National Guidelines on Establishment of Lactation Management Centres in Public Health Facilities.
  • The foremost endeavour of the health care providers in a health centre is to conserve the natural act of breastfeeding.
  • Lactation Management Centres are in no way intended to lessen the importance of mother’s own milk or the practice of breastfeeding.
  • If mother’s own milk is insufficient or not available for any unavoidable reason, Donor Human Milk (DHM) is the next best alternative to bridge the gap.
  • The Government has set a target of ensuring 70 per cent infants to have access to breast milk by the year 2025. Target will subsequently be increased to 100 per cent.

Significance:

  • It is universally accepted that breast milk is the optimum exclusive source of nutrition for the first six months of life, and may remain part of the healthy infant diet for the first two years of life and beyond.
  • Despite advances in infant formulas, human breast milk provides a bioactive matrix of benefits that cannot be replicated by any other source of nutrition.
  • When the mother’s own milk is unavailable for the sick, hospitalized new born, pasteurized human donor breast milk should be made available as an alternative feeding choice followed by commercial formula.
  • There is a limited supply of donor breast milk in India and it should be prioritized to sick, hospitalized neonates who are the most vulnerable and most likely to benefit from exclusive human milk feeding.

Milk Banks in India:

  • Asia’s first milk bank was established in 1989 at Sion Hospital, Mumbai.
  • In 2017, the first public milk bank, called the Vatsalya — Maatri Amrit Kosh, was established at Lady Hardinge Medical College.
  • It was established in collaboration with the Norwegian government and the Oslo University as part of the Norway–India Partnership Initiative (NIPI).

MINISTRY OF SKILL DEVELOPMENT SKILLS BUILD PLATFORM IN COLLABORATION WITH IBM

Why in News?

  • India is the 4thcountry where Skills Build platform was launched in November 2019, in alliance with the Directorate General of Training (DGT), after being launched in UK, Germany and France.

SkillsBuild-Platform-2019:

  • SkillsBuild offers digital learning content from IBM and other online coding teaching companies.
  • A two-year advanced diploma in IT, networking and cloud computingwill be offered at the Industrial Training Institutes (ITIs) & National Skill Training Institutes (NSTIs).
  • The platform will be extended to train ITI & NSTI facultyon building skills in Artificial Intelligence (AI).

Features:

  • Provide a personal assessmentof the cognitive capabilities and personality via My Inner Genius to the students.
  • Teach digital technologiesand professional skills such as resume-writing, problem solving and communication.
  • Students will receive recommendationson role-based education for specific jobs.
  • Will help develop the skills required to join the workforce in these “New Collar” roles, from the first-of-its kind ‘New Collar Curriculum’ for ITI launched in 2018 by IBM.

 

New-collar-jobs-2019:

  • New collar jobs are occupations which focus more on a candidate’s skills during the hiring process, rather than his or her level of education.
  • Although new collar jobs do not require a four-year degree, they often do require other types of vocational training and certifications. This are mostly found in the information technology (IT), manufacturing and healthcare industries.

DIVERSION OF LPG CYLINDERS FOR COMMERCIAL USE

Why in News?

  • The Comptroller and Auditor General (CAG), in its report on the Pradhan Mantri Ujjwala Yojana (PMUY), have highlighted the risk of diversion of domestic cylinders for commercial use.

About PMUY:

  • It aims to provide LPG (liquefied petroleum gas)connections to poor households.
  • Under the scheme, an adult woman member of a Below Poverty Line (BPL)family identified through the Socio-Economic Caste Census (SECC) is given a deposit-free LPG connection with financial assistance of Rs 1,600 per connection by the Centre.
  • Eligible households will be identified in consultation with state governments and Union territories. The scheme is being implemented by the Ministry of Petroleum and Natural Gas. Under this scheme, initially 5 crore connections were to be provided to the people needing them. But now it has been extended to 8 crores.
  • The scheme also provides interest-free loans to buy stove and refill by oil marketing companies.
  • An initial outlay of Rs.8000 crore was sanctioned for the implementation of the scheme.The scheme is also expected to create employment to the tune of about a lakh.
  • It will also boost the ‘Make in India’ programme for manufacturers of gas cylinders, stoves, gas hose and regulators. Only domestic manufacturers are engaged in this.
  • It is also a business opportunity to the tune of a minimum of Rs.10000 crore.

What did the Report Say?

  • The CAG said this level of consumption seemed improbable in view of the BPL status of such beneficiaries. Similarly, 96lakh beneficiaries consumed 3 to 41 refills in a month. Further, IOCL and Hindustan Petroleum Corporation Limited (HPCL) in 3.44 lakh instances issued 2 to 20 refills in a day to a PMUY beneficiary having single-bottle cylinder connection.
  • As on 31March 2019, Oil Marketing Companies had issued 19 crore LPG connections, which is about 90% of the target to be achieved till March 2020.
  • Audit noticed that out of 3.78 crore LPG connections, 60 crore (42%) connections were issued only on the basis of beneficiary Aadhaar which remained a deterrent in de- duplication.
  • The CAG said that the laxity in identification of beneficiaries was noticed as 9,897 LPG connections were issued against Abridged Household List Temporary Identification Numbers (AHL TINs) where names of all family members and the beneficiary were blank in the Socio-Economic and Caste Census (SECC)-2011 list.
  • Similarly, 4.10lakh connections were issued against AHL TINs where entire details of family except that of one member were blank in the 2011 list.
  • Audit also observed that due to lack of input validation check in Indian Oil Corporation Limited (IOCL) software, 88lakh connections were released against AHL TIN of males.
  • Data analysis also revealed that 8.59 lakh connections were released to beneficiaries who were minor as per the SECC-2011data, which was in violation of PMUY guidelines and LPG Control Order, 2000.
  • It also exposed the mismatch in the name of 12.46 lakh beneficiaries between the PMUY database and SECC-2011 data.

Grievances to be Addressed:

  • Lack of input validation check in the IOCL software allowed issue of 0.80 lakh connections to beneficiaries aged below 18 years.
  • The audit also highlighted the delay of more than 365 days in the installation of 4.35 lakh connections against the stipulated time period of seven  days.
  • Adequate efforts were not made in distributing the small 5-kg cylinders for encouraging usage.
  • Encouraging the sustained usage of LPG remains a big challenge as the annual average refill consumption of 93 crore PMUY consumers (who have completed more than one year as on March 31,2018) was only 3.66 refills as worked out by audit.
  • For the 18crore PMUY beneficiaries, as on December 31, 2018, refill consumption declined to 3.21 refills per annum.
  • The low consumption of refills by 92lakh loanee consumers (who had completed one year or more as on 31 December 2018) hindered recovery of the outstanding loan of ₹1,234.71 crore.

Immediate Requirements:

  • The PMUY is a bold and much-needed initiative, but it should be recognised that this is just a first step.
  • The real test of the PMUY and its successor programmes will be in how they translate the provision of connections to sustained use of LPG or other clean fuels such as electricity or biogas.
  • Truly smokeless kitchens can be realized only if the government follows up with measures that go beyond connections to actual usage of LPG.
  • This may require concerted efforts cutting across Ministries beyond petroleum and natural gas and including those of health, rural development and women and child welfare.

CABINET APPROVES AMENDMENT TO IBC CODE

Why in News?

  • The Union Cabinet has recently approved certain crucial amendments to the IBC code, 2016 through Insolvency and Bankruptcy (Second Amendment) Bill, 2019.

Background Information:

About Insolvency and Bankruptcy Code (IBC):

  • Objective of IBC: Earlier, there were multiple overlapping laws and adjudicating forums dealing with financial failure and insolvency of companies and individuals in India. This led to undue delays in the recovery of the NPAs by the Banks.
  • Hence, the IBC Code was introduced to consolidate all the existing laws related to Insolvency and Bankruptcy in India and to simplify the process of insolvency resolution.
  • The Central government introduced the Insolvency and Bankruptcy Code (IBC) in 2016 to resolve claims involving insolvent companies. This was intended to tackle the bad loan problems that were affecting the banking system.

Need for New Amendments:

  • Previously, some of the successful bidders of the stressed firms faced problems in taking over the stressed firm due to offences committed by the previous management/promoters of the stressed firms.
  • Recent Example: JSW Steel had successfully bid for taking over Bhushan Power and Steel. However, the Enforcement Directorate filed a case against Bhushan Power and Steel’s former promoter Mr. Sanjay Singhal in connection with the money laundering case. Subsequently, the ED attached assets worth Rs 4,000 crores of the Bhushan Power and steel (BPSL). Such an attachment of the assets went against the interests of the successful bidder JSW Steel.
  • Protection offered to Successful bidders through new amendment: In this regard, the new amendment to the IBC seeks to protect the successful bidders from the criminal proceedings against the offences committed by the previous promoters of the stressed firms. Going forward, the assets of the stressed firms bought by a successful bidder under the IBC would not be attached and hence would offer higher protection to the successful bidders.

Additional Info:

This is Regarding Previous Amendments passed to IBC:

1.  Insolvency Proceedings against Real Estate Developers:

  • Initially, when the IBC was passed by the Indian Parliament, it did not include Home-buyers as the creditors. This made it difficult for the home buyers to initiate cases against the real estate developers for the delay in the completion of the Housing projects.
  • Subsequently, this flaw was addressed by including the home-buyers as financial creditors under the amendment made to the IBC. As per the amended provision, even a single home buyer having a claim of more than Rs 1 lakh can drag a real estate developer to the National Company law tribunal.
  • However, the real estate developers have raised concerns that the some of the home-buyers are misusing such a provision and a large number of cases have been filed against them. This has in turn led to undue delay in the completion of the pending housing projects.
  • The new amendment approved by the cabinet is aimed to address this misuse by the home buyers. As per the amendment proposed, a single home-buyer would not be able to invoke insolvency against the real estate developer. 

Institutional Mechanism of IBC:

  • Insolvency Professionals: A specialized cadre of licensed professionals 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: These agencies conduct examinations to certify the insolvency professionals and enforce a code of conduct for their performance.
  • Information Utilities: The creditors would report financial information of the debt owed to them by the debtor.
  • Adjudicating Authorities: The proceedings of the resolution process would 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.
  • Committee of Creditors (CoC) :During the insolvency resolution process, a committee consisting of lenders would  be constituted for taking decisions (by voting) on the resolution process. The CoC may either decide to restructure the debtor’s debt by preparing a resolution plan or liquidate the debtor’s assets. However, such a decision has to be approved by at least 66% of the votes in the committee of creditors. (Earlier, the voting threshold for the approval was 75%, but it was reduced to 66% through the IBC amendment act, 2019)
  • Insolvency and Bankruptcy Board: The Board would regulate insolvency professionals, insolvency professional agencies and information utilities set up under the Code. The Board would consist of representatives of Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law.
  • Procedure to resolve Insolvency and Bankruptcy: The Code proposes two independent stages: Insolvency Resolution Process, during which lenders assess whether the debtor’s business is viable to continue and the options for its rescue and revival; and Liquidation (Sale of Assets), if the insolvency resolution process fails.
  • 1.   Insolvency Resolution Process (IRP):  When a default occurs, the resolution process may be initiated either by the debtor or creditor before the adjudicating authority. The NCLT appoints an insolvency professional to administer the IRP. The Resolution Professional identifies the financial creditors and constitutes a Committee of Creditors (CoC). The CoC would prepare the resolution plan for the restructuring the loans of the defaulted borrower which may be in the form of extending the maturity period of the loan, reducing the rate of interest on loans etc. However, such a resolution plan has to be approved by at least 66% of the votes in the committee of creditors.
  • 2 .  Liquidation (Sale of Assets): If the Committee of Creditors fail to come up with a resolution plan within the time limit of 330 days, then the proceeds from the sale of the debtor’s assets are distributed in the following order of precedence: i) insolvency resolution costs, including the remuneration to the insolvency professional, ii) secured creditors, whose loans are backed by collateral, dues to workers, other employees, iii) unsecured creditors, iv) dues to government, v) priority shareholders and vi) equity shareholders.

PARTIAL CREDIT GUARANTEE SCHEME

Why in News?

  • The Union Cabinet has recently approved the Partial Credit Guarantee Scheme for the benefit of the banks and NBFCs.

Background Info:

  • Over a period of time, the NBFC sector in India has emerged as major source of loans. However, the sector been facing liquidity crunch due to Asset-Liability Mismatch.
  • The poor financial condition of the NBFCs has in turn adversely affected the credit creation in the Indian Economy.
  • In this regard, the Union Budget 2019 had announced Partial Credit Guarantee Scheme. Now, the Union cabinet has decided to adopt certain modifications in the existing scheme.

About Partial Credit Guarantee Scheme:

  • Under the Partial Credit Guarantee Scheme, the Public Sector Banks would purchase highly rated assets of the NBFCs and HFCs (Housing Finance Companies) in order to address the temporary liquidity crunch.
  • Under this Scheme, the Government has agreed to provide 10% first loss guarantee to assets, amounting to total of ₹ 1 lakh crore.
  • Here it is important to note that the limit of ₹ 1 lakh crore refers to the total amount of assets against which guarantee will be extended and not the total amount of guarantee. The maximum exposure that the Government will take under the Scheme is ₹ 10,000 crores (10% of ₹ 1 lakh crore).
  • Such a move by the Government is expected to inject more liquidity into the economy so as to counter the present Economic Slowdown.

Modifications in the Scheme:

  • Based upon suggestions received from various stakeholders and discussions held with them, the Union Cabinet has now decided to adopt the following modifications:

    1.Inclusion of NBFCs in the SMA-0 Category

    • Earlier, the Scheme did not cover the assets of NBFCs that had slipped into Special Mention account (SMA) category. Now, the Union Cabinet has decided to even include those assets that have slipped into SMA-0 Category.(But does not include SMA-1 and SMA-2 category assets).

    2. Ratings of the Underlying Assets:

    • Earlier, the Public Sector Banks were allowed to buy only those assets which were rated “AA” and above. However, as per the new modification, the Public Sector Banks are now allowed to buy those assets which are rated “BBB+” and above. Such an increase in the ambit of assets would enable the Public Sector Banks to buy more assets from the NBFCs and HFCs.

Benefits of the Scheme

  • Provide Liquidity Support to the NBFCs and HFCs
  • Improve the Credit Creation in the Economy.
  • Protect the financial system from any adverse contagion effect that may arise due to failure of NBFCs and HFCs.

Additional Information:

About Special Mention Category Assets:

  • It is to be noted that Special Mention Category has been introduced by the RBI in order to identify the incipient stress in the assets of the banks and NBFCs. These are the accounts that have not-yet turned NPAs , but rather these accounts can potentially become NPAs in future if no suitable action is action.
  • The SMA has the various sub-categories as shown below:
    1. SMA-0:Principal or interest payment overdue for not more than 30 days
    2. SMA-1: Principal or interest payment overdue between 31-60 days
    3. SMA-2: Principal or interest payment overdue between 61-90 days

INFRASTRUCTURE INVESTMENT TRUST (INVIT)

Why in News?

  • Recently, Cabinet authorises NHAI to set up Infrastructure Investment Trust

About InvIT:

  • It will be established as a Trust, named as ‘InvIT Trust’.
  • It will be set up under Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

Objective:

  • It will be formed with an objective of investment primarily in infrastructure projects as defined by Union Ministry of Finance and may hold assets either directly or through a Special Purpose Vehicles (SPV) or a holding.
  • Retail domestic savings and corpus of special institutions such as mutual funds, Pension Fund Regulatory and Development Authority (PFRDA), among others, will be invested in infrastructure sector through InvIT.
  • It would attract patient capital for about 20-30 years to Indian highway market, as investors are unwilling towards construction risk and are interested in investment in assets which provide long-term stable returns.It will enable the NHAI to monetize completed national highways that have a toll collection track record of at least one year and the NHAI reserves the right to levy toll on the identified highway.

About NHAI:

  • The National Highways Authority of India was constituted by an act of Parliament, the National Highways Authority of India Act,1988.
  • It is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental thereto.
  • Given the magnitude of the Bharatmala, the government’s flagship highway development program, NHAI would need adequate funds to complete the projects within the prescribed Timelines.

MISSION FOR INTEGRATED DEVELOPMENT OF HORTICULTURE (MIDH)

Why in News?

  • Information about the MIDH was provided by the Union Minister of Agriculture and Farmers’ Welfare in the Lok Sabha.

MIDH:

  • The MIDH is a centrally sponsored scheme for the holistic growth of the horticulture sector covering fruits, vegetables, root & tuber crops, mushrooms, spices, flowers, aromatic plants, coconut, cashew, cocoa and bamboo.
  • Under MIDH, the Government of India contributes 60% of the total outlay for developmental programmes in all the states except states in the North East and the Himalayas. 40% share is contributed by State Governments. In the case of North Eastern and Himalayan States, GOI contributes 90%.
  • MIDH also provides technical advice and administrative support to State Governments/State Horticulture Missions (SHMs) for the Saffron Mission and other horticulture-related activities like the Rashtriya Krishi Vikas Yojana (RKVY).
  • The Mission was started in 2014.

Objectives of the MIDH:

  • To promote the holistic growth of horticulture sector, including coconut through area-based regionally differentiated strategies which include research, technology promotion, extension, post-harvest management, processing and marketing in consonance with comparative advantage of each State/region and its diverse agri-climatic features.
  • To encourage aggregation of farmers into farmer groups like FIGs/FPOs and FPCs to bring economy of scale and scope.
  • To enhance horticulture production.
  • To augment farmers’ income.
  • To strengthen nutritional security.
  • To improve productivity by way of quality germ-plasm, planting material and water use efficiency through micro-irrigation.
  • To support skill development and create employment generation opportunities for the rural youth in horticulture and post-harvest management, especially in the cold chain sector.

MIDH Sub-Schemes:

  • National Horticulture Mission (NHM)
  • Horticulture Mission for North East & Himalayan States (HMNEH)
  • National Horticulture Board (NHB)
  • Coconut Development Board (CDB)
  • Central Institute for Horticulture (CIH), Nagaland

Major interventions of MIDH:

  • Setting up of nurseries, tissue culture units for production of quality seed and planting material.
  • Area expansion i.e., the establishment of new orchards and gardens for fruits, vegetables, and flowers.
  • Rejuvenation of unproductive, old, and senile orchards.
  • Protected cultivation, i.e. poly-house, green-house, etc., to improve productivity & grow off-season high value vegetables and flowers.
  • Organic farming and certification.
  • Creation of water resources structures and watershed management.
  • Bee-keeping for pollination.
  • Horticulture mechanization.
  • Creation of post-harvest management and marketing infrastructure.

PROTECTION OF PLANT VARIETIES AND FARMERS’ RIGHTS AUTHORITY AMENDS IT’S FAQ DOCUMENT

Why in News?

  • The government has decided to set up an expert committee revise the FAQ document of the Protection of Plant Varieties and Farmers’ Rights Authority, which was quoted by the PepsiCo in the ongoing issue at the Authority.

Recent Issue:

  • The ongoing case at the PPV&FRA revolves around PepsiCo’s FC5 variety of potatoes, which it grows through a collaborative farmer’s programme, wherein the company sells seeds to 12,000 farmers and has an exclusive contract to buy back their produce to make its chips.
  • PepsiCo supplies the FC5 potato variety to a group of farmers who in turn sell their produce to the company at a fixed price.
  • PepsiCo has exclusive rights on the variety by virtue of a Plant Variety Certificate granted under the Protection of Plant Varieties and Farmers’ Rights Act of 2001.
  • PepsiCo had sued nine farmers for cultivating the FC5 potato variety without permission of PepsiCO.
  • This variety of potatoes is grown exclusively for its popular Lay’s potato chips. PepsiCo has filed lawsuits for violating the company’s intellectual property rights on this variety of potato.
  • The damages claimed are over one crore from some farmers.
  • The farmers, on the other hand, have sought protection under Clause 39 of the same law which states that farmers are allowed “to save, use, sow, re-sow, exchange, share or sell… farm produce including seed of a variety protected under this Act” so long as they does not sell a “branded seed”.

Stand of PepsiCo:

PepsiCo has stated that:

  • The Frequently Asked Questions or FAQ document of the Protection of Plant Varieties and Farmers Rights Authority (PPV&FRA), had claimed that “only small and marginal farmers involved in subsistence farming” are eligible to claim rights under the Protection of Plant Varieties and Farmers Rights (PPV&FR) Act, 2001.
  • The FAQ also said these rights are not for “commercial farmers” and are only meant for “small scale” use.So PepsiCo has used the same argument in an ongoing case at the Authority over its registered potato variety used for Lays chips. The company has also cited the FAQ document to justify dragging more than nine farmers to court in 2018 for growing and selling its registered variety.

Decision of PPV&FRA:

  • The government has decided to set up an expert committee revise the FAQ document.
  • The document consisted of some statements that could have been explained in simpler language and some could be interpreted differently from what is provided.
  • So, in order to solve ongoing impasse, government has decided to update the FAQ document.

About Protection of Plant Varieties and Farmers’ Rights (PPVFR) Act of 2001:

  • It is an act of the parliament of India that was enacted to provide for the establishment of an effective system for protection of plant varieties, the rights of farmers and plant breeders and to encourage the development and cultivation of new varieties of plants.
  • India have ratified the Agreement on Trade Related Aspects of the Intellectual property rights hasd to make provision for giving effect to agreement. So, in order to give effect to the aforesaid objectives, the Protection of Plant Varieties and Farmers Rights Act , 2001 has been enacted in India.
  • The PPV&FR Act was enacted to grant intellectual property rights to plant Breeders, researchers and farmers who have developed any new plant varieties.

Farmers’ rights ensured in the Act:

  • Farmers are entitled to save, use, sow, re-sow, exchange or sell their farm produce including seed of a registered variety in an unbranded manner.
  • Farmers, varieties are eligible for registration and farmers are totally exempted from payment of any fee in any proceedings under this act.
  • The period of protection for field crops is 15 years and for trees and vines is 18 years and for notified varieties it is 15 years from the date of notification under section 5 of Seeds Act, 1966.
  • Farmers can claim for compensation if the registered variety fails to provide expected performance under given conditions.

FATAL FIRES: THE NEED FOR STRICT SAFETY NORMS

  • The Discovery and use of firemay be regarded as the beginning of civilization. Anthropologist Claude Levi-Straus said that ‘primitive people became different From Animals when they started cooking their food’. Not only in cooking, fire was used by them in crafts, in industries and in clearing forests for agriculture and new settlements.
  • However, fire also kills people and destroys their possessions.
  • Recently, the National Capital witnessed one of the worst fire tragedies in almost two decades when at least 43 people were killed, and several others injured in north Delhi’s Anaj Mandi. Initial enquiries points to many glaring negligence such as locked escape routes, unavailability of fire safety equipment and buildings without the fire safety clearances from the authorities. Rescue operations were also hampered due to narrow lanes.

Fire Safety in India:

  • India’s abysmal record on fire safety is reflected in the death of 17,700 people countrywide in fires in both public and residential buildings during 2015, according to the National Crime Records Bureau.
  • It should be noted here that the record of rural areas, which remains largely unreported, is no better and on addition will push the figure further up from the estimated total of 20,000 deaths per annum.
  • Likewise, the property loss is estimated to be 0.3% of the Gross Domestic Product (GDP).

“Don’t dig well when house is on fire”

  • Fire prevention and fire protection is a state subject. The primary responsibility for fire prevention and fire protection lies primarily with State Governments.
  • Fire services in India come under the Twelfth Scheduleof the Constitution of India, under the provisions of Article 243W of the Constitution. The performance of the functions listed in the Twelfth Schedule comes under the domain of Municipalities.

The National Building Code (NBC):

  • The National Building Code is published by Bureau of Indian Standards. The first edition of the NBC was published in 1970. The third edition of the NBC was published in 2016, incorporating the latest developments in the construction activities in the country.
  • The National Building Code (NBC) is the basic model code in India on matters relating to building construction and fire safety. The rules for fire prevention and fire protection are laid in the form of State Regulations or Municipal By-Laws.

Codes and Standards:

  • Bureau of Indian Standardshas formulated more than 150 standards on fire safety in buildings and firefighting equipment & systems.
  • Oil Industry Safety Directorate(OISD) is a technical directorate under the Ministry of Petroleum and Natural Gas of Government of India. It formulates and coordinates the implementation of a series of self-regulatory measures aimed at enhancing the safety in the oil & gas industry in India.

Fire and laissez-faire:

  • According to the India Risks Survey, there has been a 300% increase in fire incidents of commercial buildings in 2014-15. This highlights the gap between India’s dreamy visions of smart cities and the cruel reality of urban chaos.
  • Periodically, high-profile cases such as the Uphaar cinema blaze in Delhithat killed 59 people in 1997, and the Kumbakonam school fire in Tamil Nadu in 2004 in which 94 children perished shock the nation, but the issue of fire safety is largely unattended.
  • Flouting Fire Safety Norms – Many commercial and residential buildings, have been found flouting fire safety norms. Many occupiers or societies do not bother to conduct regular maintenanceof the fire prevention systems installed in their buildings.

Why does India lag in Fire Safety?

  • Prospective Laws– Fire Safety Laws that are framed now are not applicable to the existing buildings, they cannot be implemented retrospectively. For instance, a 100-year old building is not required to obtain fire safety certificate, and the present building codes are not applicable to such buildings.
  • Commercial Use– Residential buildings that are considered as low hazard occupancies and are exempted from safety guidelines but being used for commercial purposes increases the risks associated.
  • Town Planning – Horizontal and vertical expansion of the cities, without proper planning leads to congestion, which increases the risks.
  • Fire Master Plans – Many cities are planned without Fire Protection Masterplans; this makes them vulnerable.
  • Citizen Training – Least importance is given to create a knowledged community, which can pro-actively take part in prevention of such incidents. They should at least be trained to operate fire extinguishers and other basic escape precautions.
  • Monitoring– Fire safety audits are not conducted properly, due to the unavailability of trained personnel.
  • Laxity in following fire safety measures –It was observed that most skyscrapers in Mumbai continue to overlook the fire safety norms compliance certificate. Several prominent high rises in New Delhi are at a high risk of turning into fire traps.

Way Forward:

  • Hazard Identification & Risk Assessment (HIRA)can be focused to identify potential hazards.
  • A comprehensive fire safety audit can address the inherent fire hazards and recommend measures to reduce the potential fire hazards.
  • The fire safety auditwork shall be entrusted to Third Party Agencies, who have expertise in it.
  • Training the personnel and creating a well-informed citizenry.
  • The State Governmentsshould shed more towards modernization of the fire fighting force.
  • Mandating compulsory insurance for all public buildingsagainst fire risk and public liability can bring about a change to the way architects and builders approach the question of safety, since the insurer would require a reduction of risk and compliance with building plans.
  • In India, although there are many rules and regulations, codes and standards related to fire safety, these are seldom followed. By 2050, almost 70% of the world’s population will live in cities. India and all countries around the world must see the importance of fire safety when building and extending cities. If not, we will be walking unprepared into a deadly inferno.

PALESTINE-INDIA TECHNO PARK

Why in News?

  • The Representative of India to Palestine released third tranche of funding, worth $3 million, for the construction of a Palestine-India Techno Park.

The Palestine-India Techno Park:

  • The techno park is meant to create a national business environment and culture “that will enable knowledge-based and creative enterprises as well as technology clusters to successfully operate locally, regionally and globally”.
  • In 2017, the park became a member of the International Association of Science Parks and Areas of Innovation (IASP), a global network of science and technology parks.
  • Its objectives include establishing an environment that is accessible to industry, supporting the process of commercialisation and industrialisation, supporting entrepreneurship and bridging the knowledge gap between the private sector and academia.

Indian investment in Palestine:

  • In total, India has made a commitment of investing over $12 million, part of India’s broader framework of capacity building in Palestine.
  • The Indian government pays $3 million on a half-yearly basis.
  • Trade between India and Palestine stands at roughly US $40 million and spans automotive spare parts, medical tourism, agro-products, textiles, agro-chemicals and pharmaceuticals among others.
  • India’s investment towards the park is part of India’s support to the Palestinian cause.

India, Palestine & Israel:

  • Historically, India’s ties with Israel and Palestine have been more or less balanced. India fully established diplomatic relations with Israel in 1992.
  • Defence and agriculture have formed the main pillars of their relationship.
  • In 1974, India became the first non-Arab state to recognise the Palestine Liberation Organisation (PLO) as the sole legitimate representative of the Palestinian people.
  • In 1938, while expressing sympathies for the persecution of Jews in Germany, Mahatma Gandhi said, “Palestine belongs to the Arabs in the same sense that England belongs to the English or France to the French”.
  • In 1988, India was one of the first countries to recognise the state of Palestine after the Palestinian National Congress declared independence.
  • At that time, India maintained its support for the two-state solution and championed a “sovereign, independent, united” Palestine with its capital in East Jerusalem.
  • In 1996, India opened its Representative Office to the State of Palestine in Gaza, which was shifted to Ramallah in 2003.
  • In July 2017, PM Modi became the first Indian Prime Minister to visit Palestine.

 

 

KALIA SCHEME

Why in News?

  • Odisha government has decided to merge its KALIA Scheme with centre’s PM-KISAN Scheme recently.

About KALIA Scheme?

  • KALIA or “Krushak Assistance for Livelihood and Income Augmentation” scheme was launched by the Odisha Government for farmer’s welfare.
  • The aim of the scheme is to accelerate agricultural prosperity and reducing poverty in the State by encouraging cultivation and associated activities through financial assistance to farmers.
  • The scheme is being seen as a viable alternative to farm loan waivers.

About Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) Scheme:

  • Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs. 6,000 per year.
  • This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal installments of Rs. 2,000 each.

About the Merger:

  • Odisha government has decided to merge its KALIA Scheme with centre’s Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) Scheme.
  • So, in wake of this, Odisha government has also reduced the financial assistance given to farmers under the Kalia scheme to Rs 4,000 per annum from Rs 10,000.
  • This is because of the reason to keep parity between both the schemes.
  • The small farmers/marginal farmers may be given with Rs Rs.4,000 per year under KALIA scheme, so that they will get Rs 10,000 cumulatively per year. (i.e. Rs 6,000 from PM-KISAN and Rs 4,000 from KALIA).
  • The Odisha government has also announced that the actual cultivators (share croppers) who are landless, if any, will also continue to get assistance from Kalia i.e; Rs 10,000 annually, since they are not considered under PM-KISAN.

Eligible Beneficiaries under KALIA Scheme (Before Merger):

  • This scheme is for the benefit of Small and marginal farmers, landless Agricultural household, vulnerable Agricultural household, landless Agricultural labourers and sharecroppers (Actual cultivators)
  • Small and Marginal Farmers are eligible to get benefit financial assistance of Rs.25000 per family over 5 seasons under support to cultivators for cultivation.
    • Marginal Farmer – who owns less than 1 hectare of Agricultural land
    • Small Farmer – who owns 1 hectare (2.5 acres) to 2 hectares (5 acres) of Agricultural land.
  • Land less agricultural households is eligible to get financial Assistance of Rs.12500 for the livelihood support under the scheme.
  • Vulnerable agricultural household covering vulnerable cultivators/ landless agricultural labourers are eligible to get financial assistance of Rs, 10,000 per year under the KALIA scheme. Vulnerable cultivators/ landless agricultural labourers include old age, disability, disease or any other reason. Out of the above three components viz., support to cultivators for cultivation, livelihood support for landless agricultural household and financial assistance to vulnerable agricultural household, one beneficiary will avail only one benefit as per the eligibility. Apart from these components, the scheme also provides for life insurance support and interest free crop loans for all the categories of beneficiary under KALIA scheme.

Similar Farmer Assistance Schemes Elsewhere:

Rythu Bandhu Scheme of Telangana:

  • Rythu Bandhu scheme also known as Farmers’ Investment Support Scheme (FISS) is a farmer welfare program of the Government of Telangana. This scheme has been introduced in order to support farmers’ investment in the agriculture so as to boost the agricultural prosperity.
  • Under this scheme, the government is providing Rs 4,000 per acre per season, twice a year for growing Kharif and Rabi crops.
  • The financial assistance is provided to all the farmers and there is no cap on the number of acres owned by the farmers.
  • It is to be noted that more than 75% of the agricultural land in Telangana is under the control of small and marginal farmers and hence this scheme is considered to be of immense benefit to the small and marginal farmers.

A Comparison in Brief:

KALIA SchemeRythu Bandhu SchemePM-KISAN SCHEME
StateOdishaTelanganaCentre
CoverageSmall and marginal farmers Landless Agricultural household, Vulnerable Agricultural household Landless Agricultural labourers Sharecroppers (Actual cultivators)All the FarmersAll the land holding Farmers
Tenants and Sharecroppers includedYesNoNo
Financial Assistance ProvidedDiffers for different categories of beneficiariesUniform financial assistance of Rs 8,000 per yearRs.6000 per year
Life Insurance SupportYesNoNot provided
Interest Free Crop LoansYesNoNot provided

A POTENTIAL SEEDBED FOR PRIVATE PROFITS

Context:

  • Seeds Bill 2019 which was introduced in the parliament was taken up for consideration recently. The earlier versions of the Bill, in 2004 and 2010, had generated heated debates. The present version has also been with certain problematic provisions and the article discusses it in brief.

Background Information:

1. India Signing TRIPS and UPOV

  • In 1994, India signed the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In 2002, India also joined the International Union for the Protection of New Varieties of Plants (UPOV) Convention.
  • The above two agreements has made a nation has to give priority to Seed breeder’s rights over farmer’s rights.
  • Both TRIPS and UPOV led to the introduction of some form of Intellectual Property Rights (IPR) over plant varieties.
  • Member countries had to introduce restrictions on the free use and exchange of seeds by farmers unless the “breeders” were remunerated.

2. India signing CBD and ITPGRFA:

  • In 1992,India signed the Convention on Biological Diversity (CBD) which provided for “prior informed consent” of farmers before the use of genetic resources and “fair and equitable sharing of benefits” arising out of their use.
  • In 2001, India signed the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA) which recognised farmers‟ rights as the rights to save, use, exchange and sell farm-saved seeds.
  • It is clear that these two agreements has made a country to favour farmer’s rights over breeder’s rights. So, national governments had the responsibility of protecting farmer’s rights.
  • Here we can notice TRIPS and UPOV runs counter to the above two international conventions.

3. A Delicate Balance of all:

  • As India was a signatory to TRIPS and UPOV (that gave priority to breeders‟ rights) as well as CBD and ITPGRFA (that emphasised farmers‟ rights), any Indian legislation had to be in line with all.
  • Protection of Plant Varieties and Farmers‟ Rights (PPVFR) Act of 2001 was enacted with this delicate balance.
  • The PPVFR Act retained the main spirit of TRIPS viz., IPRs as an incentive for technological innovation. However, the Act also had strong provisions to protect farmers‟The PPVFR Act also recognised three roles for the farmer: cultivator, breeder and conserver. As cultivators, farmers were entitled to plant-back rights. As breeders, farmers were held equivalent to plant breeders. As conservers, farmers were entitled to rewards from a National Gene Fund.

Introduction of New legislation – Seed Bill, 2019

  • According to the government, a new Seeds Bill is necessary to enhance seed replacement rates in Indian agriculture, specify standards for registration of seed varieties and enforce registration from seed producers to seed retailers.
  • While these goals are indeed worthy, any such legislation is expected to be in alignment with the spirit of the PPVFR Act. Not surprisingly, many of the Bill’s provisions deviate from the spirit of the PPVFR Act, are against farmers’ interests and in favour of private seed companies. For instance, a shift from farm-saved seeds to certified seeds, which would raise seed replacement rates, is desirable. Certified seeds have higher and more stable yields than farm-saved seeds. However, such a shift should be achieved not through policing, but through an Enabling Atmosphere.

Interest of Private Companies:

  • From the late-1980s, Indian policy has consciously encouraged the growth of private seed companies, including companies with majority foreign equity.
  • Today, more than 50% of India’s seed production is undertaken in the private sector.
  • These firms have been demanding favourable changes in seed laws and deregulation of seed prices, free import and export of germplasm, freedom to self-certify seeds and restrictions on the use by farmers of saved seeds from previous seasons.
  • Through the various versions between 2004 and 2019 of the same bill, private sector interests have guided the formulation of the Seeds Bill.
  • As a result, even desirable objectives, such as raising the seed replacement rates, have been mixed up with an urge to encourage and protect the business interests of private companies.

Problematic Provisions of the New Bill:

  • The provisions of the new bill that runs counter to the existing PPVFR Act are as follows:

1. Compulsory Registration of Seeds

  • The Seeds Bill insists on compulsory registration of seeds. However,The PPVFR Act was based on voluntary registration of seeds.
  • As a result, many seeds may be registered under the Seeds Bill but may not under the PPVFR Act.
  • Assume a seed variety developed by a breeder, but derived from a traditional variety. The breeder will get exclusive marketing rights. But no gain will accrue to farmers as benefit-sharing is dealt with in the PPVFR Act, under which the seed is not registered.

2. Compensation for Farmer’s Role in Development of a Seed Variety:

  • As per the PPVFR Act, all applications for registrations should contain the complete passport data of the parental lines from which the seed variety was derived, including contributions made by farmers.
  • This allows for an easier identification of beneficiaries and simpler benefit-sharing processes.
  • Seeds Bill, on the other hand, demands no such information while registering a new variety. As a result, an important method of recording the contributions of farmers is overlooked and private companies are left free to claim a derived variety as their own.

3. Ever-Greening of registration

  • The PPVFR Act, which is based on an IPR like breeders‟ rights, does not allow re-registration of seeds after the validity period.
  • However under the new bill private seed companies can re-register their seeds an infinite number of times after the validity period. Given this “ever-greening” provision, many seed varieties may never enter the open domain for free use.

4. Seed Pricing

  • The new bill has vague provisions for regulation of seed prices which appears neither sufficient nor credible.
  • This has been the scenario ,when strict control on seed prices has been an important demand raised by farmers’ organisations.
  • In its absence, they feel, seed companies may be able to fix seed prices as they deem fit, leading to sharp rises in costs of cultivation.

5.Compensation to Farmers:

  • According to the PPVFR Act, if a registered variety fails in its promise of performance, farmers can claim compensation before a PPVFR Authority.
  • This provision is diluted in the Seeds Bill, where disputes on compensation have to be decided as per the Consumer Protection Act 1986. Consumer courts are hardly ideal and friendly institutions that Farmers can Approach.

Way Ahead:

  • Private seed companies prefer policing because their low-volume, high-value business model is crucially dependent on forcing farmers to buy their seeds every season.
  • So, on the other hand, an enabling atmosphere has to be generated by the strong presence of public institutions in seed research and production.
  • When public institutions, not motivated by profits, are ready to supply quality seeds at affordable prices, policing becomes redundant.
  • For the seed sector and its laws to be truly farmer-friendly, the public sector has to recapture its lost space.

About Protection of Plant Varieties and Farmers’ Rights Authority, India:

  • It has been established under the provisions of Protection of Plant Varieties and Farmers’ Rights Act, 2001.
  • Its Objectives Includes:
  • An effective system for protection of plant varieties,
  • The rights of farmers and plant breeders and
  • To encourage the development of new varieties of plants it has been considered necessary to recognize and protect the rights of the farmers in respect of their contribution made at any time in conserving, improving and making available plant genetic resources for the development of the new plant varieties.
  • To accelerate agricultural development, it is necessary to protect plants breeders’ rights to stimulate investment for research and development for the development of new plant varieties.
  • Such protection is likely to facilitate the growth of the seed industry which will ensure the availability of high quality seeds and planting material to the Farmers.

GUIDELINES FOR “ON TAP LICENSING” OF SMALL FINANCE BANKS

Context:

  • The RBI has recently released the Guidelines for “on tap Licensing” of Small Finance Banks in the Private Sector.

What is On-Tap Licensing?

  • An “on-tap” facility would mean the RBI would accept applications and grant license for Small Finance Banks (SFBs) throughout the year. The policy allows aspirants to apply for small finance bank license at any time, subject to the fulfilment of the conditions laid down by the RBI.

What are Small Finance Banks?

  • The Small Finance Banks (SFBs) are the differentiated banks which have been set up to further the objective of financial inclusion by primarily undertaking basic banking activities of acceptance of deposits and lending to un-served and underserved sections without any restriction in the area of operations.

Scope of Activities:

  • Accept deposits and extend loans
  • Undertake non-risk financial services activities such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI
  • Open at least 25 per cent of its banking outlets in unbanked Rural Centres.
  • Sell Forex to Customers
  • No restriction in the area of operations of small finance banks

How are Small finance banks different from the Payment banks?

  • Both Payment Banks and Small Finance Banks are the differentiated banks which have been set up to promote financial inclusion. While Small Finance Banks can undertake both deposit and lending activity, the Payment banks cannot lend loans.
  • Further, the Payment Banks cannot accept deposits more than Rs 1 lakh. The Payment Banks need to invest 75 per cent of their deposits in government securities with maturity up to one year, and the balance 25 per cent with the Commercial Banks.

RBI’s Guidelines on Small Finance Banks

1. Eligible Promoters:

  • Resident individuals/professionals (Indian citizens) having at least 10 years of experience in banking and finance at a senior level;
  • Companies and Societies having successful track record of running their businesses for at least a period of five years Existing
  • Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) in the private sector.

2. Fit and Proper‟ Criteria:

  • RBI would assess the „fit and proper‟ status of the applicants on the basis of their past record of sound credentials and integrity; financial soundness and successful track record of professional experience or of running their businesses.

3. Capital Requirement:

  • The minimum equity capital for small finance banks shall be Rs.200 crore.
  • For the Primary (Urban) Co-operative Banks (UCBs), desirous of voluntarily transiting into Small Finance Banks (SFBs) the initial requirement of net worth shall be at Rs 100 crore, which will have to be increased to Rs 200 crore within five years from the date of commencement of business.
  • SFBs will be given scheduled bank status immediately upon commencement of operations

4. Prudential Norms:

  • The small finance bank will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

5. Priority sector Lending Requirements:

  • The SFBs would be required to extend 75% of their loans for the priority sectors.

6. Dominance of Small value Loans:

  • In order to ensure that the bank extends loans primarily to small borrowers, at least 50 per cent of its loan portfolio should constitute loans and advances of up to Rs.25 lakh.

RBI KEEPS INTEREST RATES UNCHANGED

Why in News?

  • The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to keep the interest rate unchanged at 5.15% in the fifth bimonthly policy review, citing inflation concerns despite economic growth continuing to slow down.

Instruments for implementing Monetary Policy:

  • Repo Rate: The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
  • Reverse Repo Rate: The (fixed) interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF.
  • Liquidity Adjustment Facility (LAF): The LAF consists of overnight as well as term repo auctions. Progressively, the Reserve Bank has increased the proportion of liquidity injected under fine-tuning variable rate repo auctions of a range of tenors.
  • The aim of term repo is to help develop the inter-bank term money market, which in turn can set market-based benchmarks for pricing of loans and deposits, and hence improve the transmission of monetary policy.
  • The Reserve Bank also conducts variable interest rate reverse repo auctions, as necessitated under the market conditions.
  • Marginal Standing Facility (MSF): A facility under which scheduled commercial banks can borrow an additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest.
  • This provides a safety valve against unanticipated liquidity shocks to the banking system.
  • Corridor: The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.
  • Bank Rate: It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers. The Bank Rate is published under Section 49 of the Reserve Bank of India Act, 1934. This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes.
  • Cash Reserve Ratio (CRR): The average daily balance that a bank is required to maintain with the Reserve Bank as a share of such percent of its Net demand and time liabilities (NDTL) that the Reserve Bank may notify from time to time in the Gazette of India.
  • Statutory Liquidity Ratio (SLR): The share of NDTL that a bank is required to maintain in safe and liquid assets, such as unencumbered government securities, cash and gold. Changes in SLR often influence the availability of resources in the banking system for lending to the private sector.
  • Open Market Operations (OMOs): These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively.
  • Market Stabilisation Scheme (MSS): This instrument for monetary management was introduced in 2004. Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through the sale of short-dated government securities and treasury bills. The cash so mobilised is held in a separate government account with the Reserve Bank.

About Monetary Policy Committee:

  • The policy interest rate required to achieve the inflation target is decided by the Monetary Policy Committee (MPC).
  • MPC is a six-member committee constituted by the Central Government (Section 45ZB of the amended RBI Act, 1934) – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
  • The MPC is required to meet at least four times in a year. The quorum for the meeting of the MPC is four members.
  • Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.
  • The resolution adopted by the MPC is published after the conclusion of every meeting of the MPC.
  • Once in every six months, the Reserve Bank is required to publish a document called the Monetary Policy Report to explain: (1) the sources of inflation and(2) the forecast of inflation for 6-18 months ahead.

Decisions Taken by MPC:

  • The MPC recognises that there is monetary policy space for future action.
  • However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture.
  • The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target”.

Current Economic Situation:

  • Inflation forecast had been raised to 5.1-4.7% for H2:2019-20 and 4.0-3.8% for H1:2020-21, with risks broadly balanced, the RBI said.
  • In October, CPI inflation was projected at 3.5-3.7% for H2:2019-20 and 3.6% for Q1:2020-21.
  • Growth forecast for the current financial year was revised downward sharply — from 6.1% projected in October policy to 5%.

INITIATIVES FOR PROMOTING LEATHER INDUSTRY

Why in News?

  • The government aims at the development of infrastructure for the leather sector, address environment concerns specific to the leather sector, facilitate Additional Investments, Employment Generation and increase in production.

Merchandise Exports from India Scheme (MEIS):

  • MEIS was introduced in the FTP from 01.04.2015, providing rewards for exporters of specified goods.
  • The objective of the MEIS is to offset infrastructural inefficiencies and associated costs involved in exporting goods/products which are produced/manufactured in India.
  • The scheme incentivizes exporters in terms of Duty Credit Scrips at the rate of 2, 3, 4, 5, 7 % of FOB Value of exports realized.
  • Goods and Service Tax (GST) Rates for selected leather industry items have been reduced.
  • Duty-Free Import of Inputs: Enhancement of duty-free limit (Basic Customs duty exemption) for import of critical import by manufacturer exporters of footwear and other leather products.
  • Interest equalization rate was enhanced from 3% to 5% for Micro Small and Medium Enterprises units
  • Removal of Animal Quarantine clearance for most of the categories of finished and crust leathers imported into India
  • In order to promote Green Tanning, the Union Budget 2017-18 announced the reduction of Basic Customs Duty on Vegetable Tanning Extracts.

Indian Footwear, Leather & Accessories Development Programme:

  • Human Resource Development (HRD) sub-scheme: HRD sub-scheme provides assistance for Placement Linked Skill Development training to unemployed persons and skill up-gradation training to employed workers.
  • Integrated Development of Leather Sector (IDLS) sub-scheme: IDLS sub-scheme incentivizes investment and manufacturing including job creation by providing backend investment grant/subsidy at 30% of the cost of new Plant and Machinery to Micro, Small & Medium Enterprises (MSMEs).
  • Establishment of Institutional Facilities sub-scheme: The sub-scheme provides assistance to Footwear Design & Development Institute (FDDI) for up-gradation of some of the existing campuses of FDDI into “Centres of Excellence” and establishing 3 new fully equipped skill centres alongside the upcoming Mega Leather Cluster.
  • Mega Leather, Footwear and Accessories Cluster (MLFAC) sub-scheme: The MLFAC sub-scheme provides infrastructure support to the Leather, Footwear and Accessories Sector by the establishment of Mega Leather, Footwear and Accessories Cluster.
  • Leather Technology, Innovation and Environmental Issues sub-scheme: Under this sub-scheme, assistance is provided for upgradation/installation of Common Effluent Treatment Plants (CETPs) at 70% of the project cost.
  • Promotion of Indian Brands in Leather, Footwear and Accessories Sector sub-scheme: Under this sub-scheme, the eligible units approved for Brand Promotion are assisted.
  • Additional Employment Incentive for Leather, Footwear and Accessories Sector sub-scheme: Under this sub-scheme, employers’ contribution of 3.67% to Employees’ Provident Fund for all new employees in Leather, Footwear and Accessories sector, are provided for enrolling in EPFO for first 3 years of their employment.

FUGITIVE ECONOMIC OFFENDERS

Why in News?

  • A special court on Thursday declared absconding Nirav Modi, prime accused in the Punjab National Bank scam, a fugitive economic offender (FEO).
  • The declaration allows the government to initiate action to confiscate the offender’s properties.
  • Nirav Modi is the second person to be declared a fugitive economic offender, under the new fugitive Economic Offenders Act, after Vijay Mallya.

“Fugitive Economic Offender”

  • A person can be named an offender under this law if there is an arrest warrant against him or her for committing any offence listed in the schedule of the act and for involvement in economic offences involving at least Rs. 100 crore or more and has fled from India to escape Legal Action.
  • Major criteria that have to be satisfied are:
    • The Person has left the country to avoid facing prosecution.
    • He refuses to return to India to face prosecution.

About Fugitive Economic Offenders Act, 2018:

  • The Fugitive Economic Offenders Act, 2018 seeks to confiscate properties of economic offenders who have left the country to avoid facing criminal prosecution.
  • Offences involving amounts of Rs. 100 crore or more fall under the purview of this law.
  • Some of the offences listed in the schedule of the bill are-counterfeiting government stamps or currency, cheque dishonour for insufficiency of funds, money laundering, transactions defrauding creditors etc.

Proceedings as per the Act:

  • To declare a person an FEO, an application will be filed in a Special Court (designated under the Prevention of Money-Laundering Act, 2002) containing details of the properties to be confiscated, and any information about the person’s whereabouts.
  • The Special Court will require the person to appear at a specified place at least six weeks from issue of notice.  Proceedings will be terminated if the person appears.
  • Attachment of the property of a fugitive economic offender.
  • Confiscation of the property of an individual declared as a fugitive economic offender resulting from the proceeds of crime.Confiscation of other property belonging to such offender in India and abroad including benami property.
  • Disentitlement of the fugitive economic offender from defending any civil claim.
  • All cases under the proposed law will be tried under the Prevention of Money Laundering (PMLA) Act and the administrator will sell the fugitive’s properties to pay off the lenders.
  • The proposed law will have an overriding effect over all other pieces of legislation.

United Nations Convention against Corruption:

  • Non conviction based asset confiscation for corruption related cases are enabled under provisions of United Nations Convention against Corruption which India ratified in 2011. This Act is adopted based on this principle.
    • The United Nations Convention against Corruption is the only legally binding universal anti-corruption instrument.
    • It was adopted by the General Assembly in 2003 and entered into force on December 14, 2005.
    • The Convention covers five main areas: preventive measures, criminalization and law enforcement, international cooperation, asset recovery, and technical assistance and information exchange.

GOVERNMENT PROCURED ONLY 3% OF OILSEEDS AND PULSES UNDER PM-AASHA

Why in News?

  • Data from Agriculture Ministry has indicated that only less than 3% of this season’s sanctioned amount of pulses and oilseeds have actually been procured so far under the once-hyped PM-AASHA scheme.

About PM-AASHA:

  • The PM-AASHA or Pradhan Mantri Annadata Aay Sanrakshan Abhiyan was announced with great fanfare in September 2018, as an effort to ensure that farmers growing pulses, oilseeds and copra actually get the minimum support prices they are promised for their crops each year.
  • Apart from initiatives to allow cash payment to farmers or procurement by private traders, PM-AASHA’s main feature was a price support scheme whereby Central agencies would procure pulses and oilseeds directly from farmers.
  • The three schemes that are part of AASHA are:
    • The Price Support Scheme (PSS)
    • The Price Deficiency Payment Scheme (PDPS)
    • The Pilot of Private Procurement and Stockist Scheme (PPPS)
  • PSS – Under the PSS, physical procurement of pulses, oilseeds and copra will be done by Central Nodal Agencies.
  • Besides, NAFED and Food Cooperation of India will also take up procurement of crops under PSS.
  • The expenditure and losses due to procurement will be borne by the Centre.
  • PDPS – Under the PDPS, the Centre proposes to cover all oilseeds.
  • The difference between the MSP and actual selling/modal price will be directly paid into the farmer’s bank account.
  • Farmers who sell their crops in recognised mandis within the notified period can benefit from it.
  • PPSS – In the case of oilseeds, States will have the option to roll out PPSSs in select districts.
  • Under this, a private player can procure crops at MSP when market prices drop below MSP.
  • The private player will then be compensated through a service charge up to a maximum of 15% of the MSP.
  • The Centre had budgeted ₹15,053 crore over two years to implement the scheme apart from an additional government credit guarantee of ₹16,550 crore for agencies undertaking procurement.
  • It was launched as increasing MSP was not adequate and it is more important that farmers should get full benefit of the announced MSP.
  • Crops covered under the Scheme for this Season:
  • The main crops covered under the scheme this season are moong, urad, arhar, and groundnut and soya bean.
  • The late arrival of the monsoon means that harvests and crop arrivals also began slightly later than expected, especially for arhar or tur dal, so procurement is likely to continue, though tapering, until February.

Issues Associated with the MSP Scheme:

  • The scheme provides little to strengthen the procurement mechanism infrastructure in the country which largely only works for two crops – wheat and rice.
  • According to a survey conducted by the National Sample Survey Office (NSSO) in the 70th round in 2013, only 6% of farmers are able to sell their produce at MSP.
  • A 2017 study found that only 24% households were aware about the MSP of crops grown by them.
  • Further, the study found, although MSP is announced for the whole of India, the operation is limited only to few states where the designated government agencies procure the produce from farmers and except for crops like rice and wheat, quantity procured is very limited leading to low level of awareness.
  • According to a 2016 NITI Aayog evaluation report 79% farmers were dissatisfied with the MSP regime.
  • Some of the reasons for their dissatisfaction were delay in payments, lack of infrastructure at procurement centres, distance to procurement centres and delayed announcement of MSP rates.
  • NITI Aayog’s evaluation also found that there were several states where the procurement infrastructure facilities were ‘inadequate’.

What is the Current Issue regarding the PM-AASHA?

  • Procurement is still lagging badly in most States.
  • The highest sanctioned procurement is in Maharashtra, where 10 lakh tonnes of soya bean procurement were sanctioned, apart from 58,000 tonnes of moong and urad dal. However, barely 1,709 tonnes have been procured in the State so far, including just 14 tonnes of soya bean.
  • The highest procurement so far has taken place in Rajasthan, where more than 51,000 tonnes of moong and groundnut have been procured, against a total sanctioned amount of 9.6 lakh tonnes.
  • While almost 5 lakh tonnes had been sanctioned in Madhya Pradesh, and 1.18 lakh tonnes in Uttar Pradesh, procurement has not yet begun in either State.

BHARAT BOND EXCHANGE TRADED FUND

Why in News?

  • The Cabinet Committee on Economic Affairs (CCEA) has given its approval for creation and launch of Bharat Bond Exchange Traded Fund (ETF).

Exchange Traded Fund:

  • Exchange Traded Funds (ETFs) are mutual funds listed and traded on stock exchanges like shares.
  • Index ETFs are created by institutional investors swapping shares in an index basket, for units in the fund.
  • Usually, ETFs are passive funds where the fund manager doesn’t select stocks on your behalf. Instead, the ETF simply copies an index and endeavours to accurately reflect its performance.
  • In an ETF, one can buy and sell units at prevailing market price on a real time basis during Market Hours.

Significance of ETF:

  • ETFs are cost efficient. Given that they don’t make any stock (or security choices), they don’t use services of star fund managers.
  • They allow investors to avoid the risk of poor security selection by the fund manager, while offering a diversified investment portfolio.
  • The stocks in the indices are carefully selected by index providers and are rebalanced periodically. They offer anytime liquidity through the exchanges.

What is Bharat ETF?

  • Bharat Bond ETF would be the first corporate Bond ETF in the country.
  • Bharat Bond ETF will create an additional source of funding for Central Public Sector Undertakings (CPSUs) Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other Government organizations.
  • ETF will be a basket of bonds issued by CPSE/CPSU/CPFI/any other Government organization Bonds.

Features of Bharat ETF:

  • Tradable on exchange
  • Small unit size Rs 1,000
  • Transparent Net Asset Value (NAV) i.e. periodic live NAV during the day
  • Transparent Portfolio (Daily disclosure on website)
  • Low cost (0.0005%)

Structure of Bharat ETF:

  • Each ETF will have a fixed maturity date
  • The ETF will track the underlying Index on risk replication basis, i.e. matching Credit Quality and Average Maturity of the Index
  • Will invest in a portfolio of bonds of CPSE, CPSU, CPFI or any other Government organizations that matures on or before the maturity date of the ETF
  • As of now, it will have 2 maturity series – 3 and 10 years. Each series will have a separate index of the same maturity series.

RATNA STATUS TO CPSES

Why in News?

  • The criteria laid down by the Government for grant of Maharatna, Navratna and Miniratna status to Central Public Sector Enterprises (CPSEs) is given below:

Criteria for Grant of Maharatna status to CPSEs:

  • Having Navratna status
  • Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations
  • An average annual turnover of more than Rs. 25,000 crore during the last 3 years
  • An average annual net worth of more than Rs. 15,000 crore during the last 3 years
  • An average annual net profit after tax of more than Rs. 5,000 crore during the last 3 years
  • Should have significant global presence/international operations.

Criteria for Grant of Navratna Status to CPSEs:

  • The CPSEs which are Miniratna I, Schedule ‘A’ and have obtained ‘excellent’ or ‘very good’ MOU rating in three of the last five years and having composite score of 60 or above in following six selected performance indicators are eligible to be considered for grant of Navratna status.
    • Net Profit to Net worth: 25
    • Manpower Cost to total Cost of Production or Cost of Services: 15
    • PBDIT to Capital employed: 15
    • PBIT to Turnover: 15
    • Earning Per Share: 10
    • Inter Sectoral Performance: 20

Criteria for grant of Miniratna status to CPSEs:

  • Miniratna Category-I status: – The CPSEs which have made profit in the last three years continuously, pre-tax profit is Rs.30 crores or more in at least one of the three years and have a positive net worth are eligible to be considered for grant of Miniratna-I status.
  • Miniratna Category-II status: – The CPSEs which have made profit for the last three years continuously and have a positive net worth are eligible to be considered for grant of Miniratna-II status.

PEDESTRIAN DEATHS IN ROAD ACCIDENTS

Why in News?

  • The Ministry of Road Transport & Highways has formulated a multi-pronged strategy to address the issue of road safety based on Education, Engineering (both of roads and vehicles), Enforcement and Emergency Care.

Highlights:

  • The Ministry of Road Transport & Highways has constituted a Parliamentary Constituency Committee on Road Safety in each district of the country to promote awareness amongst road users under the chairmanship of the MPs.
  • The National Road Safety Policy outlines various policy measures such as promoting awareness, establishing road safety information database, encouraging safer road infrastructure including the application of intelligent transport, enforcement of safety laws with regard to road safety.
  • The Motor Vehicles (Amendment) Act, 2019 focuses on road safety and includes, among other things, stiff hike in penalties for traffic violations and electronic monitoring of the same, enhanced penalties for juvenile driving, computerization/automation of vehicle fitness and driving, tests, recall of defective vehicles, extending the scope of third party liability and payment of increased compensation for hit and run cases, etc.

Some of the other Initiatives of the Government:

  • Advocacy/Publicity campaign on road safety through the electronic media and print media to create awareness.
  • Issue of Guidelines for the protection of Good Samaritans.
  • Setting up of model driving training Institutes in States.
  • Launch of mobile app for highway users i.e. “Sukhad Yatra 1033” which enables highways users to report potholes and other safety hazards on National Highways including Observance of Road Safety Week every calendar year for spreading awareness and strengthening road safety.
  • Safety standards for automobiles have been improved.
  • High priority has been accorded to identification and rectification of black spots (accident-prone spots) on national highways.

THE TRANSGENDER PERSONS (PROTECTION OF RIGHTS) BILL, 2019

Why in News?

  • Rajya Sabha has recently passed “The Transgender Persons (Protection of Rights) Bill, 2019” without any Amendments.

About Transgenders:

  • Transgender community includes Hijras, Eunuchs, Kothis, Aravanis, Jogappas, ShivShakthis etc., who have been a part of Indian society for centuries. The Vedic and Puranic literatures mention “tritiyaprakriti” meaning the third gender.
  • Though most of the eunuchs seen today are begging at traffic signals or during weddings, they were a respected lot during the Mughal rule in the Medieval India.
  • During the British rule, they were denied civil rights and were considered a separate caste or tribe who did kidnapping and castration of children and danced and dressed?like women.
  • In Post-Independence Era, the Act was repealed but its legacy continues and many local laws reflected the prejudicial attitudes against certain tribes, including Hijras.
  • In contemporary times, the LGBTQ group is referred to as the “lesbian, gay, bisexual, transgender, and queer community” which includes those with gender dysphoria and different sexual orientations.

Sex (vs) Gender:

  • It also needs to be understood that “Sex” and “Gender” are different things. One may be born as Male (sex) but may identify himself like a Woman (Gender). So “Sex” is biological and “Gender” is the real sexual identity of a person.

Transgenders in India:

  • According to the 2011 Census, the number of persons who do not identify as ‘male’ or ‘female’ but as ‘other’ stands at 4,87,803 (i.e. 0.04% of the total population)
  • Indian census has never recognized the third gender, i.e., transgender while collecting census data for years.
  • The 2011 census also reported 55,000 children as transgender identified by their parents.

About Transgender Persons (Protection of Rights) Bill, 2019:

Key Provisions of the Bill:

1. Definition of a Transgender Person:The Bill defines a transgender person as one whose gender does not match the gender assigned at birth.  It includes trans-men and trans-women, persons with intersex variations, gender-queers, and persons with socio-cultural identities, such as kinnar and hijra.Intersex variations are defined to mean a person who at birth shows variation in his or her primary sexual characteristics, external genitalia, chromosomes, or hormones from the normative standard of male or female body.

2.Certificate of identity for a Transgender Person:A transgender person may make an application to the District Magistrate for a certificate of identity, indicating the gender as ‘transgender’.  A revised certificate may be obtained only if the individual undergoes surgery to change their gender either as a male or a female.

3.Prohibition against Discrimination:The Bill prohibits the discrimination against a transgender person, including denial of service or unfair treatment in relation to:(i) education; (ii) employment; (iii) healthcare; (iv) access to, or enjoyment of goods, facilities, opportunities available to the public; (v) right to movement; (vi) right to reside, rent, or otherwise occupy property; (vii) opportunity to hold public or private office; and (viii) access to a government or private establishment in whose care or custody a transgender person is.

4.National Council for Transgender persons (NCT):The NCT will consist of:

(i) Union Minister for Social Justice (Chairperson); (ii) Minister of State for Social Justice (Vice- Chairperson); (iii) Secretary of the Ministry of Social Justice; (iv)one representative from ministries including Health, Home Affairs, and Human Resources Development.  Other members include representatives of the NITI Aayog, and the National Human Rights Commission.  State governments will also be represented.  The Council will also consist of five members from the transgender community and five experts from non-governmental organisations.

5.Right of Residence: Every transgender person shall have a right to reside and be included in his household.

6.Employment:No government or private entity can discriminate against a transgender person in employment matters, including Recruitment, and Promotion.

7.Education: Educational institutions funded or recognised by the Relevant Government shall provide inclusive education, sports and recreational facilities for Transgender Persons, without Discrimination.

8.Health Care:The government must take steps to provide health facilities to transgender persons including separate HIV surveillance centres, and sex reassignment surgeries.  The government shall review medical curriculum to address health issues of transgender persons, and provide comprehensive medical insurance schemes for them.

9.Welfare Measures by the Government:The Bill states that the relevant government will take measures to ensure the full inclusion and participation of transgender persons in society.

10.Offences and Penalties: The Bill recognizes the following offences against transgender persons: (i) forced or bonded labour (excluding compulsory government service for public purposes), (ii) denial of use of public places, (iii) removal from household, and village, (iv) physical, sexual, verbal, emotional or economic abuse.  Penalties for these offences vary between six months and two years, and a fine.

Arunkumar (vs) The Inspector General of Registration case:

  • In April 2019, the Madurai Bench of the Madras High Court delivered a historic judgment in Arunkumar v. The Inspector General of Registration. This judgment marks the beginning of a normative journey of intersex human rights in India. The court took up the issue of validity of consent given on behalf of intersex infants for undergoing sex selective surgeries.
  • It held that the consent of the parent cannot be considered as the consent of the child. Hence, such surgeries should be prohibited.
  • This is a momentous judgment as it recognises the consent rights of intersex children and the right to bodily integrity.

Major Concerns in the Bill:

  • Definition:The definition of ‘transgender persons’ in the Bill is at variance with the definitions recognised by international bodies and experts in India. The terms, ‘trans-men’, ‘trans-women’, persons with ‘intersex variations’ and ‘gender-queers’ have not been defined.
  • Self-Identity:Even though the bill says that a transgender person “shall have a right to self-perceived gender identity,” its language could be interpreted to mean transgender people are required to have certain surgeries before legally changing their gender.
  • Privacy: A District Screening Committee would issue a certificate of identity to recognise transgender persons. This is also a violation of Fundamental Right to Privacy.
  • Existing Framework: Certain criminal and personal laws that are currently in force only recognise the genders of ‘man’ and ‘woman’. It is unclear how such laws would apply to transgender persons who may not identify with either of the Two Genders.

Other Issues to be considered:

  • If a transgender person is denied a Certificate of Identity, the Bill does not provide a mechanism for appeal or review of such decision of the District Screening Committee.
  • The bill is also silent on whether a trans-person who holds a male or female gender certificate will have access to government welfare schemes and programs meant for transgender people.
  • The Bill is silent on granting reservations to transgender persons.
  • The Bill does not mention any punishments for rape or sexual assault of transgender persons as according to Sections 375 and 376 of the Indian Penal Code, rape is only when a man forcefully enters a woman.

Key Recommendations towards the Bill:

  1. 1.The title of the Bill itself is exclusionary as it does not accommodate all persons whose legal protection it seeks to recognise. Therefore, the definition should highlight this distinction between transgender persons and intersex persons enabling them to exercise the rights which they are entitled to.Parliament will be well-advised to consider changing the title of the Bill to Gender Identity, Gender Expression and Sex Characteristics (Protection of Rights) Bill, 2019.
  2. 2.The Bill doesn’t say much about discrimination against intersex persons. Intersex conditions are termed in derogatory terms even by medical professionals. To address this, the Bill should have included a provision directing medical professionals to ensure that intersex traits are not characterised as “disorders of sex development”.Intersex traits should not be considered as genetic defects/ disorders, and terms like ‘gender dysphoria’ should be used to characterise them.
  3. 3.The bill should be revised to emphasize training teachers to help them adopt inclusive teaching methods to ensure that children are not harassed or discriminated against by staff or other children.

STOP THE BRUTALITY: THE RAPE CULTURE IN INDIA

  • The recent issue of rape in Hyderabad has triggered an intense debate on sexual violence, and the punishment that should be meted out to perpetrators. Rape is a stigma which exists in the society from a long time. The word rape is legally defined under Section-375[1] of Indian Penal Code, 1860. It defines the rape and also prescribes its punishment
  • “While a murderer destroys the physical frame of the victim, a rapist degrades and defiles the soul of a Helpless Female.”

No Stranger to Crime:

  • According to a National Crime Records Bureau (NCRB) (2017) report, around 93% Rapes in India Committed by Persons Known to the Victim. Large number of rape cases were filed against “family friends”, employers, neighbours or other known persons.
  • In most cases, the victims are specifically not allowed to speak to the investigating team and police officers under the pressure of their families who are stuck between getting justice and what the society says for a girl being raped.

Gender Stereotyping in the Society:

  • Socio-culturally transmitted attitudes toward women, rape, and rapists are often internalized from the male dominated viewpoint. The Patriarchal Mindset showcases women as weaker sex, which leads to sexual violence against women.
  • This brings out the Misogynist Attitude prevalent in the Indian culture.

Disclosure of Identity and Victim Blaming:

  • Despite clear legal prohibitions, victim’s names are used in media and social media, causing real damage to the mental state of the victims. This may intensify the aftershocks on victims including depression, fear, guilt-complex, suicidal-action, diminished sexual interest etc,.
  • According to the Section228-A of IPC, no person can disclose the name of the rape victim and if anybody discloses the name, he shall be punished with either description for a term which may extend to two years and shall also be liable for fine.
  • Despite these provisions and the punishments clearly specified, nothing much has changed. Poor journalism and the irresponsible social media have breached both ethical and legal norms, after every such incident.
  • Even the dead have their own dignity” – The Supreme Court, in a judgement, held the name and identity of a victim who was either dead or of unsound mind should also not be disclosed even under the authorisation of the next of the kin.
  • Victim Blaming in India- In the Indian society, the victim of a sexual offence, especially a victim of rape, is treated worse than the perpetrators of the crime.
  • Identification of the survivors, either through names or other characteristics that point out to them have become reasons of ill-treatment and sometimes even abandonment of the survivors by their family.

Justice Verma Committee Report:

  • Justice Verma Committee was constituted to recommend amendments to the Criminal Law. The committee was set up after the Nirbhaya incident of December 2012.
  • Rape: The Committee recommended that the gradation of sexual offences should be retained in the Indian Penal Code, 1860. The IPC differentiates between rape within Marriage and Outside Marriage.  Under the IPC sexual intercourse without consent is prohibited.
  • Verbal Sexual Assault: The Committee has suggested that use of words, acts or gestures that create an unwelcome threat of a sexual nature should be termed as sexual assault.
  • To ensure Speedy Disposal of Complaints, the Committee proposed a tribunal must be set up and it should not function as a civil court but may choose its own procedure to deal with each complaint.

Way Forward:

  • The government should create a separate cell under the Union Home Ministry to address the sexual crimes against the women.
  • Schools should take forward the cause of sex education and also the sexual education.
  • Reforms in police department to gender sensitize them, in treating the cases involving sexual violence.
  • Implementing the recommendations of the Justice Verma Committee, to ensure timely justice.
  • Make a directory of sex offenders in the lines of the western countries where such directories are used to trace paedophiles.
  • Media, both visual and print media should be penalised, if they disclose name and photo of the victims.
  • Conducting a Census of missing children in India, particularly girl children, might give the data of children who might have been trafficked.
  • As women go about getting an education, doing work or simply doing daily chores, the inability of state and society to provide them – either safe passage or safe public spaces, effectively reduces their rights to that of second-class citizens.

WHO IS A FARMER?

Why in News?

  • Union Agriculture Minister has failed to answer the question regarding the definition of farmer, when it was asked in Parliament last week. This has raised a debate in the parliament regarding the issue.

Background:

  • In the discussion last week in parliament, MPs pointed out that the number of land holdings do not necessarily equate with the number of farming households.
  • It was noted that dairy farmers, fisher-folk, fruit and flower growers, as well as landless agricultural workers who cultivate the land belonging to others, would not fit into a narrow definition where farmers are linked to ownership of land alone.
  • The government’s ambiguity has serious implications for the design and beneficiaries of the schemes meant to help them, including its flagship PM-KISAN (Pradhan Mantri Kisan Samman Nidhi).

Definition as per National Policy for Farmers:

  • There is a clear and comprehensive definition available in the National Policy for Farmers, which was drafted by the National Commission of Farmers headed by M.S. Swaminathan and officially approved by the Centre in 2007 following consultations with the States.
  • As per the Policy, the term ‘FARMER’ will refer to a person actively engaged in the economic and/or livelihood activity of growing crops and producing other primary agricultural commodities and will include all agricultural operational holders, cultivators, agricultural labourers, sharecroppers, tenants, poultry and livestock rearers, fishers, beekeepers, gardeners, pastoralists, non-corporate planters and planting labourers, as well as persons engaged in various farming related occupations such as sericulture, vermiculture and agro-forestry.
  • The term will also include tribal families / persons engaged in shifting cultivation and in the collection, use and sale of minor and non-timber forest produce.

Impact of Ambiguity:

  • The definition of a farmer is not merely a philosophical or semantic question, but rather has practical implications.
  • Most of the schemes meant for farmers’ welfare, including the procurement of wheat and paddy at minimum support prices, are effectively available only for land owners.
  • Even in death, those who work on the land may not be identified as farmers for the purposes of counting farmer suicides.
  • In practice, those who cultivate or work on the land but do not own it are excluded from access to agricultural credit and interest subvention for farm loans.
  • Crop insurance and loan waivers go to loaners so they are left out of that as well.
  • Access to subsidised crop inputs is difficult without identification as farmers. In the event of crop failure, compensation is only given to owners.
  • Direct income support schemes such as PM-KISAN are limited to owners
  • Tax exemption is usually claimed by owners who give an unverified affidavit that they cultivate the land.

Way Ahead:

  • S. Swaminathan Commission’s definition should be converted into a legal and actionable tool for identification.
  • Already, the revenue department is supposed to annually record who is actually cultivating each piece of land. So, the above step will be useful for this exercise too.
  • Apart from adding inclusion criteria other than land-ownership, the Centre must add exclusion criteria so absentee landlords are left out. Otherwise, the farmer who actually takes the risk gets no support, but those who treat land as an investment or speculation get all the benefits.

INDUSTRIAL RELATIONS CODE BILL, 2019

Context:

  • The Industrial Relations Code Bill, 2019 bill has been recently introduced in the Lok Sabha.

Background:

  • As a part of its ease of doing business initiative, the government has decided subsuming a total of 44 labour laws into four codes — on wages, social security, industrial safety and welfare and industrial relations.
  • The Four codes of Labour laws are as:
  1. 1.Code on Wages Bill
  2. 2.Code of Occupational, Safety, Health and Working Conditions Bill, 2019
  3. 3.Code on Industrial Relations
  4. 4.Code on Social Security
  • As part of its commitment to simplify and consolidate labour rules and laws under four codes, the Union Cabinet has already cleared the Occupational, Safety, Health and Working Conditions Code and the Code on Wages Bill.

About the Industrial Relations Code Bill, 2019:

  • The Industrial Relations Code proposes to amalgamate the following laws into a single code:
  1. 1.The Trade Unions Act, 1926
  2. 2.The Industrial Employment (Standing Orders) Act, 1946
  3. 3.and The Industrial Disputes Act, 1947.
  • It is the Third out of Four Labour Codes that have got approval from the cabinet.

Key Features of the Bill:

  • Seeks to allow companies to hire workers on fixed-term contract of any duration.
  • Has retained the threshold on the worker count at 100 for prior government approval before retrenchment, but it has a provision for changing ‘such number of employees’ through notification.
  • Provides setting up of a two-member tribunal (in place of one member) wherein important cases will be adjudicated jointly and the rest by a single member, resulting speedier disposal of cases.
  • Has vested powers with the government officers for adjudication of disputes involving penalty as fines.
  • Introduces a feature of ‘recognition of negotiating union’ under which a trade union will be recognized as sole ‘negotiating union’ if it has the support of 75% or more of the workers on the rolls of an establishment.
  • As several trade unions are active in companies, it will be tough for any one group to manage 75% support, hence taking away their negotiating rights. In such a case, a negotiating council will be constituted for negotiation.
  • Underlines that fixed-term employees will get all statutory benefits on a par with the regular employees who are doing work of the same or similar nature.
  • Under the code, termination of service of a worker on completion of tenure in a fixed-term employment will not be considered as retrenchment.
  • Proposes setting up of a “re-skilling fund” for training of retrenched employees. The retrenched employee would be paid 15 days’ wages from the fund within 45 days of retrenchment.

GDP GROWTH PLUNGES TO 4.5%

Why in News?

  • The government has announced that Growth in the gross domestic product (GDP) in the July-September quarter hit a 25-quarter low of 4.5%.

Agriculture Sector:

  • Growth in gross value added (GVA) also dipped to 4.3% in Q2 of 2019-20 from 4.9% in Q1, and 6.9% in the Q2 of last year.
  • The agriculture sector saw growth coming in at 2.1% in second quarter of this year compared with 4.9% in Q2 of last year.
  • The sector grew just 2.1% over the first six months of the year compared with 5% in the first half of the previous year.

Manufacturing Sector:

  • According to the data released, the manufacturing sector contracted 1% in the second quarter of the current financial year, compared with a robust growth of 6.9% in the same quarter of the previous year.
  • The manufacturing sector saw an overall contraction of 0.2% in the first half (April to September) of the current financial year compared to a growth of 9.4% in the first half of last year.
  • The International Monetary Fund has projected India’s GDP growth at 6.1% in financial year 2019-20 and 7% in 2020-21 in its October 2019 report.

Service Sector:

  • Among the services sectors measured, only the ‘Public Administration, Defence & Other Services’ category saw growth quicken in the second quarter of this year, to 11.6%, compared with 8.6% in the same quarter of the previous year.
  • The ‘Financial, Real Estate & Professional Services’ category saw growth slow to 5.8% in Q2 of 2019-20, compared with 7% in Q2 of the previous year.

Gross Fixed Capital formation:

  • Gross fixed capital formation, which is a measure of the level of investment in the country by both the government and the private sector, grew only 1.02% in the second quarter of this financial year, compared with a growth of 4.04% in the first quarter, and drastically lower than the growth of 11.8% seen in the Q2 of last year.

Consumption:

  • Private final consumption expenditure, the closest proxy in the data to a measure of consumption demand, grew 5.06% in the second quarter of this financial year, compared with a growth of 3.14% in the first quarter.
  • However, the growth in the second quarter this year is still significantly lower than the growth of 9.79% recorded in the second quarter of the previous year.

OPERATION BLACKBOARD COMES HOME IN TELANGANA

Why in News?

  • Over 41,000 women in Telangana’s Sangareddy district can now fell the power of the written word after learning the alphabet for the first time.

About:

  • These women were home-schooled by their own children and have cleared the examination conducted by the National Institute of Open Schooling (NIOS).
  • The NIOS exam is normally taken by 4,000 to 5,000 neo-literates from each district annually, but that number exceeded the norm ten times due to the Sangareddy programme for female literacy initiated by the then District Collector in 2017.
  • The Saakshar Bharat Mission (SBM) imparts functional literacy and numeracy, but faced a shortage of coordinators. So, the Collector decided to rope in school children.
  • In 2017, the district administration developed ‘Ammaku Akshara Mala’ (alphabet garland for mother) and roped in students in Classes VII to X.
  • They were asked to teach their mothers to read and write the Telugu alphabet at home.
  • Most women were part of Self-Help Groups but not literate. The administration identified 52,000 women as eligible to take the exam and sent the list to the Central government.
  • Of 48,000 women who took the exam in March 2018, 41,000 passed in writing, reading and numerical skills. In a 15-day literacy module, the women were taught four letters of the Telugu alphabet in a day.

What is Operation Blackboard?

  • Operation Blackboard is a centrally sponsored programme which was started in 1987 immediately after the Rajiv Gandhi National Policy on Education (NPE) of 1986 was released to supply the bare minimum crucial facilities to all primary schools in the country.

What is Operation Whiteboard?

  • Simdega district of Jharkhand recently launched ‘Operation Whiteboard’ on the lines of ‘Operation Blackboard’ which was launched by the Government of India in 1981.
  • The primary goal of the operation is to equip all the classrooms of the government schools of the district with whiteboards, hence ensuring ‘Freedom from Chalk Dust’ to the students as well as teachers.

Operation Digital Blackboard (ODB):

  • ODB aims to have digital and interactive boards in every classroom, which is on the lines of Operation Blackboard which was started in 1987 to supply the bare minimum crucial facilities to all primary schools in the country.
  • Introduction of the digital board all over the country in government and government aided schools from class 9th onwards as well as in higher education institutions, from the coming session of 2019 itself.
  • University Grants Commission (UGC) will be the implementing agency for ODB in Higher Education Institutions (HEIs). It will be implemented as a Central scheme, as a loan from Higher Education Financing Agency (HEFA).
  • At school level, Digital / SMART board will be provided in all Government and Government – aided schools by the Central Government in collaboration with the State and UTs.
  • It aims at converting a classroom into a digital classroom.
  • Ensure availability of e-resources at any time and at any place to students.
  • It helps in provisioning of personalized adaptive learning as well as Intelligent Tutoring by exploiting emerging technologies like Machine Learning, Artificial Intelligence & Data Analytics.

 

 

HELPING 10-YEAR-OLDS TO READ BY 2030

Context:

  • India has been successful in increasing access to school, but now the focus must shift to quality.

Global Learning Crisis:

  • For most children, turning 10 is an exciting moment. They are learning more about the world and expanding their horizons.
  • But too many children — more than half of all 10 year olds in low- and middle-income countries — cannot read and understand a simple story.
  • We are in the middle of a global learning crisis that stifles opportunities and aspirations of hundreds of millions of children. That is unacceptable.
  • In October, we released data to support a new learning target: by 2030, we want to cut, by at least half, the global level of learning poverty.

Eliminating Learning Poverty:

  • Learning to read is an especially critical skill: it opens a world of possibilities, and it is the foundation on which other essential learning is built — including numeracy and science.
  • Wiping out learning poverty (defined as the percentage of children who cannot read and understand a simple story by age 10) is an urgent matter.
  • It is a key to eliminating poverty in general and boosting shared prosperity. It is a key to helping children achieve their potential.
  • But over the last several years, progress in reducing learning poverty has been stagnant.
  • Globally between 2000 and 2017, there has only been a 10% improvement in learning outcomes for primary school-aged children.
  • If this pace continues, 43% of 10-year-olds will not be able to read in 2030.
  • The good news is, the children who will turn 10 in 2030 will be born next year. If we work urgently, there is an opportunity to reverse this trend.
  • The target we have set is ambitious but achievable — and should galvanize action toward achieving Sustainable Development Goal (SDG4) — ensuring quality education for all.
  • It will require nearly tripling the rate of progress worldwide, which can be done if every country can match the performance of the countries that made the most progress between 2000 and 2015.

Global Challenges:

  • The challenges of reducing learning poverty will differ between countries and regions. In some countries, access to school remains an enormous problem — 258 million young people were out of school globally, in 2018.
  • In other countries, children are in classrooms but are not learning.
  • By setting a global target, the World Bank can work with countries to define their own national learning targets. Cutting learning poverty in half by 2030 is only an intermediate goal. Global ambition is to work with governments and development partners to bring that number to zero.As the largest financier of education in low-and middle-income countries, the World Bank will work with countries to promote reading proficiency in primary schools.  Policies include providing detailed guidance and practical training for teachers, ensuring access to more and better age-appropriate texts, and teaching children in the language they use at home.

Setting India as an example:

  • In India, the Right-to-Education Act has been successful in increasing coverage and access to school education but now there is an urgent need to shift the focus to quality.
  • The decision of India to join the Programme for International Student Assessment and the merger of schemes under Samagra Shiksha are encouraging signs that India is moving in this direction.
  • In Kenya, the government’s national reading programme has more than tripled the percentage of grade two students reading at an appropriate level.
  • This was accomplished through technology-enabled teacher coaching, teacher guides, and delivering one book per child.
  • In Vietnam, a lean, effective curriculum ensures that the basics are covered, there is deep learning of fundamental skills, and all children have reading materials.
  • Learning outcomes of Vietnamese students in the bottom 40% of the income ladder are as high, or higher, than the average student in high-income countries.

What can be Done?

  • The World Bank is also working with governments and development partners to improve entire education systems, so advancements in literacy can be sustained and scaled up.
  • That means making sure children come to school prepared and motivated to learn; teachers are effective and valued and have access to technology; classrooms provide a well-equipped space for learning; schools are safe and inclusive; and education systems are well-managed.
  • An ambitious measurement and research agenda supports these efforts and includes measurement of learning outcomes and their drivers, continued research and innovation, and the smart use of new technologies on how to build foundation skills.
  • The learning crisis not only wastes the children’s potential, it hurts entire economies.
  • It will negatively impact future workforces and economic competitiveness — as the World Bank’s Human Capital Index shows that, globally, the productivity of the average child born today is expected to be only 56% of what it would be if countries invested enough in health and education.
  • Eliminating learning poverty must be a priority, just like ending hunger and extreme poverty.
  • Even though it is not easy, we cannot back down from the challenge.

GDP SLUMP WILL HIT $5-TRILLION ECONOMY TARGET

Why in News?

  • NITI Aayog has warned the Government that GDP slump will hit $5-trillion economy target.

What did NITI Aayog said?

  • The nominal GDP growth — a measure of growth without accounting for inflation — has to be at least 12.4% on an average if that target has to be reached but the current rate was a mere 8% in the first quarter of the current financial year.
  • Experts estimate that growth will dip in Q2 compared to Q1 in both real and nominal terms.
  • For example, while GDP growth in real terms in Q1 stood at 5%, state-run lender State Bank of India recently estimated that this could dip to 4.2% in Q2, with a corresponding dip in nominal growth as well.
  • “Domestic investment and consumption” are the only dependable drivers for sustainable re-acceleration of the economy.
  • However a deceleration in investment is visible, primarily in the household sector, due almost entirely to real estate.
  • Gross fixed capital formation in the sub-sector of ‘dwellings, other buildings and structures’ fell from 12.8% of GDP in 2011-12 to 6.9% in 2017-18.
  • The slowdown in the domestic market is also because of limited availability of capital with the banks which are tied down due to high non-performing assets in heavy industry and infrastructure.
  • In the power sector, there is a high cross-subsidization in favour of residential tariff leading to very high industrial tariffs.
  • The electric power transmission and distribution (T&D) losses in India stand at 19%, higher than that of Bangladesh and Vietnam.

What are the implications?

  • The presentation flagged the urgent need to focus on export of high-value technology and manufacturing goods instead of primary goods currently exported.
  • Citing an example, the NITI Aayog chief said 98% of phones exported by India are in the low-value category, to the Middle East and Africa.
  • There has been a sharp decline in exports in the textiles from 2017 onwards, according to the presentation.
  • Several financial experts have blamed the decline on the November 2016 decision to demonetize high value currency that drained vital liquidity out of the cash-dependent textile market.

THE INDUSTRIAL RELATIONS CODE BILL, 2019

Why in News?

  • The Union Cabinet on Wednesday approved The Industrial Relations Code Bill, 2019.

About the Bill:

  • The Industrial Relations Code Bill, 2019 proposes to amalgamate The Trade Unions Act, 1926, The Industrial Employment (Standing Orders) Act, 1946, and The Industrial Disputes Act, 1947.
  • Apart from offering some degree of flexibility on government permissions for retrenchment, the most important aspect of the Bill is that it presents the legal framework for ushering in the concept of ‘fixed-term employment’ through contract workers on a pan-India basis.
  • Currently, companies hire contract workers through contractors.
  • With the introduction of fixed-term employment, they will be able to hire workers directly under a fixed-term contract, with the flexibility to tweak the length of the contract based on the seasonality of industry.
  • These workers will be treated on a par with regular workers during the tenure of the contract.
  • The move to include it in a central law will help in wider reach, and states are expected to follow similar applicability.
  • The government had tried a move last year to apply fixed-term employment across “central sphere establishments” (which are establishments under the authority of the central government, Railways, mines, oilfields, major ports, or any other central public sector undertaking) in all sectors, but it failed to elicit the desired results as states did not notify similar provisions for it.
  • The Bill now ensures a pan-India impact of this move.

What are the Changes Made in the Bill?

  • The threshold required for government permission for retrenchment has been kept unchanged at 100 employees, as against the proposal for 300 employees in an earlier draft of the Bill, which was opposed by trade unions.
  • Instead, the government has now provided flexibility for changing the threshold through notification.
  • The rigidity of labour laws about laying off labour has often been cited by industry as the main reason limiting scalability and employment generation.
  • At present, any company having 100 workers or more has to seek government approval for retrenchment.
  • The provision of fixed-term employment, which helps in the flow of social security benefits to all workers along with making it easier for companies to hire and fire, in The Industrial Relations Code Bill.
  • Last year, the government had included the category of ‘Fixed Term Employment Workman’ for all sectors in the Industrial Employment (Standing Orders) Act, 1946.
  • This was only applicable to ‘central sphere’ establishments, and the states did not follow suit.

Challenges Regarding the Bill:

  • While industry has welcomed the changes, others have said that the unclear provision regarding retrenchment would lead to uncertainty and discretionary behaviour during implementation by the central or state government.
  • “The moment flexibility is provided for the applicability and then it leaves the matter to the discretion to the appropriate government (states or Centre). Then the clause can be misused.
  • Any discretion in law leads to uncertainty, lack of clarity, discriminatory implementation, and provides scope for unnecessary usage.
  • The government should be clear whether to increase the threshold or retain the threshold and face the consequences.
  • Also, fixed-term employment needs to be introduced with adequate safeguards, otherwise it runs the risk of encouraging conversion of permanent employment into fixed-term employment, he said.

Response from the Industry:

  • Industry has welcomed the Bill since it has met their demand of providing flexibility in retrenchment.
  • If there is more employment in the organised sector, industry would demand flexibility.
  • The original laws were made at a time when one would join and retire from the same company.
  • Earlier, there were so many interpretations, and simplifying so many laws into four Codes is a good thing.
  • There is no intention of industry to exploit labour, but one cannot run the company to create employment — it has to be commercially viable.
  • Today we are competing with global players so there should be a level playing field. We want to protect employment as much as possible, when there is commercial viability.
  • There is no unending amount of money available with anyone of us to continue to employ labour when business is not viable.
  • Fixed-term employment will help in keeping salaries and facilities to workers such as PF, gratuity, and medical benefits, the same as those for permanent labour
  • Inclusion in the central law will also help in applicability of fixed-term employment uniformly across the country.

SPIKE IN INDIAN ROAD ACCIDENTS

Why in News?

  • The Ministry of Road Transport and Highways recently released the annual report on road accidents in India.

What does the Report Say?

  • More than 1.5 lakh people lost their lives in road crashes in the country in 2018, registering an increase of 2.4% as compared to the year before, when there were 1.47 lakh fatalities.
  • It shows a daily average of 1,280 road crashes and 415 deaths which is 53 crashes and the loss of 17 lives every hour.
  • Road traffic injuries constitute the eighth leading cause of deaths in India in 2018.
  • Geneva-based World Road Federation’s World Road Statistics 2018 says India is the most unsafe country in the world for road users across 199 countries. It’s followed by China (63,000 deaths) and the U.S. (37,000 deaths).
  • The annual report also reveals that of the total people killed in road crash deaths in 2018, 48% were between 18 years and 35 years old. Minors involved in road crash deaths were at 6.6% of the total deaths.
  • Among the States, Tamil Nadu (13.7%) topped the country in terms of the total number of road crashes, followed by Madhya Pradesh (11%) and Uttar Pradesh (9.1%).
  • The highest road fatalities were observed In Uttar Pradesh (22,256) followed by Maharashtra (13,261) and Tamil Nadu (12,216).

What is the Cause for Accidents?

  • Over-speeding is a major cause, accounting for 64.4% of the persons killed.
  • This category was followed by driving on the wrong side of the road, which accounted for 5.8% of the accident related deaths.
  • Use of mobile phones accounted for 2.4% of the deaths and drunken driving accounted for 2.8% of the persons killed.

What is the Cause for Death?

  • Not wearing helmets and seat belts are not causes of crashes, but are critical for avoiding grievous injuries and fatalities.
  • As many as 43,614 deaths or 28.8% of total road accident deaths in the country last year were caused due to “non-wearing of helmets”.
  • “Non-wearing of seat belts” was linked to 24,435 deaths or 16.1% of total road accident deaths in the country.

What do Experts Say?

  • Lot of States have opposed the implementation of the Motor Vehicles Amendment Act or have reduced the fines are amongst the States with the highest road crash fatalities.
  • Uttar Pradesh, Gujarat and Uttarakhand were among the States that heavily slashed the penalties levied under the amended law.
  • The latest data highlights the urgent need on part of the States to implement key road safety provisions of the Motor Vehicles Amendment Act, 2019

HOUSEHOLD CONSUMER EXPENDITURE SURVEY

Why in News?

  • Govt has scrapped this year’s NSOs Consumer Expenditure survey Over Data Quality.

Consumer Expenditure Survey:

  • The Consumer Expenditure Survey (CES) is usually conducted at quinquennial intervals and the last survey on consumer expenditure was conducted in the 68th round (July 2011 to June 2012).
  • It is conducted by National Statistical Office (NSO), MoSPI.
  • It generates estimates of household Monthly Per Capita Consumer Expenditure (MPCE) and the distribution of households and persons over the MPCE classes.
  • It is designed to collect information regarding expenditure on consumption of goods and services (food and non-food) consumed by households.
  • The results, after release, are also used for rebasing of the GDP and other Macro-Economic Indicators.

Highlights of the 2018-19 survey:

  • Consumer spending is falling and the report has been withheld due to its ‘adverse’ findings.
  • There was a significant increase in the divergence in not only the levels in the consumption pattern but also the direction of the change when compared to the other administrative data sources like the actual production of Goods and Services.

Why is the Survey not Published?

  • In view of the data quality issues, the Ministry has decided not to release the Consumer Expenditure Survey results of 2017-2018.
  • Concerns were raised about the ability/sensitivity of the survey instrument to capture consumption of social services by households especially on health and education.
  • The Advisory Committee on National Accounts Statistics has also separately recommended that for rebasing of the GDP series, 2017-18 is not an appropriate year to be used as the new base year.
  • The MoSPI is separately examining the feasibility of conducting the next Consumer Expenditure Survey in 2020-2021 and 2021-22 after incorporating all data quality refinements in the survey process.
  • The survey allegedly showed that the average amount spent by an Indian in a month fell 3.7% to Rs 1,446 in 2017-18 from Rs 1,501 in 2011-12.
  • While consumer spending declined 8.8% in 2017-18 in India’s villages, it rose 2% over six years in cities, it said.

MATERNITY SCHEME REACHES ONLY ONE-THIRD OF BENEFICIARIES

Why in News?

  • Researchers assert that extrapolation of RTI data show only 31% of eligible mothers got benefits.

About Maternity Benefit Scheme:

  • Pradhan Mantri Matru Vandana Yojana (PMMVY) is a maternity benefit programme being implemented in all districts of the country with effect from 1st January, 2017.
  • It is a centrally sponsored scheme being executed by the Ministry of Women and Child Development.
  • Cash benefits are provided to pregnant women in their bank account directly to meet enhanced nutritional needs and partially compensate for wage loss.
  • Beneficiaries receive a cash benefit of Rs. 5,000 in three instalments on fulfilling the following conditions:

1.Early registration of pregnancy
2.Ante-natal check-up
3.Registration of the birth of the child and completion of first cycle of vaccination for the First Living Child of the Family.

  • The eligible beneficiaries also receive cash incentive under Janani Suraksha Yojana (JSY). Thus, on an average, a woman gets Rs. 6,000. Implementation of the scheme is closely monitored by the central and state governments through the Pradhan Mantri Matru Vandana Yojana – Common Application Software (PMMVY-CAS). PMMVY-CAS is a web based software application that enables tracking the status of each beneficiary under the scheme, resulting in expedited, accountable and better grievance redressal.

Who are the 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 on or after 1st January 2017 for the first child in the family.

What does the RTI Extrapolation say?

  • A vital programme to support lactating mothers and pregnant women by compensating them for loss of wages during their pregnancy has been able to reach only less than a third of the eligible beneficiaries.
  • Almost 61% of beneficiaries registered under the Pradhan Mantri Matru Vandana Yojana (PMMVY) between April 2018 and July 2019 (38.3 lakh out of the total 62.8 lakh enrolled) received the full amount of ₹6,000 promised under the scheme.
  • The scheme brings under its ambit 23% of all births and pays full benefits to a mere 14% of all births, which was at 270.5 lakh for 2017.
  • The data extrapolated from the RTI reply is also consistent with a survey coordinated by three development economists.
  • The survey team covered a district each in six States — Chhattisgarh, Himachal Pradesh, Jharkhand, Madhya Pradesh, Uttar Pradesh and Odisha — in 2019 to interview women and inspect anganwadis. A total of 706 women were interviewed, including 342 pregnant and 364 lactating women. 

Inadequate Awareness:

  • The study found that only 50% of pregnant women and 57% of nursing women surveyed were eligible for the scheme.
  • It also throws light on the need for higher awareness among the pool of beneficiaries — only 66% of pregnant women and 69% of nursing women knew about the scheme.
  • Only 8% of pregnant women and 23% of nursing mothers received some benefits.
  • Several factors impeded proper implementation of the programme that aims to fight malnutrition among children.
  • These include an application form of about 23 pages, a slew of documents such as mother-child protection card, Aadhaar card, husband’s Aadhaar card and bank passbook aside from linking their bank accounts with Aadhaar.
  • The requirement to produce the husband’s Aadhaar card results in excluding women who may be living with men they are not married to, single mothers and those who may be staying at their natal home.
  • Women must also have the address of their marital home on their Aadhaar card, which often results in newlyweds being either left out or forced to go from door-to-door when pregnant and needing rest and care.
  • The survey findings also highlight the need to pay greater attention to the special needs of pregnancy — good food, extra rest and health care.
  • Only 22% of the nursing women surveyed reported that they had been eating more than usual during their pregnancy and the average weight gain was barely 7kg when it should be at least 13-18kg.
  • Almost all the respondents had done household work regularly during their last pregnancy — 21% of nursing women said that they had no one to help them with domestic chores and 63% said that they had been working right until the day of delivery.

DEPOSIT INSURANCE COVER TO BE RAISED?

Why in News?

  • The central government now plans to raise the cover of deposit insurance after the failure of the Punjab and Maharashtra Co-operative (PMC) Bank on the low level of insurance for deposits held by Customers in Banks.

About Deposit Insurance:

  • Currently, in the event of a bank going bust in India, a depositor has claim to a maximum of Rs 1 lakh per account as insurance cover — even if the deposit in their account far exceeds Rs 1 lakh. This amount is termed ‘deposit insurance’.
  • Depositors holding more than Rs 1 lakh in their account have no legal remedy in case of the collapse of the bank.
  • The cover of Rs 1 lakh per depositor is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a fully owned subsidiary of the Reserve Bank of India.
  • The Rs 1 lakh-cover is for deposits in commercial banks, regional rural banks (RRBs), local area banks (LABs), and cooperative banks.

How Depositors Claim the Money from the 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.
  • In FY19, it took an average 1,425 days for the DICGC to receive and settle the rest claims on a de-registered bank.

What is the Issue?

  • As per DICGC data, over the years the level of insured deposits as a percentage of assessable deposits has declined from a high of 60.5% in 2007-08 to 28.1% in 2018-1.
  • At the end of March 2019, the number of registered insured banks with DICGC stood at 2,098 — comprising 103 commercial banks, 1,941 cooperative banks, 51 RRBs, and three LABs.
  • DICGC last revised the deposit insurance cover to Rs 1 lakh on May 1, 1993 — raising it from Rs 30,000, which had been the cover from 1980 onward.
  • DICGC charges 10 paise per Rs 100 of deposits held by a bank. The premium paid by the insured banks to the Corporation is required to be borne by the banks, and not be passed on to depositors.
  • As per DICGC data, commercial banks paid a total premium of Rs 11,190 crore in 2018-19, while cooperative banks paid a premium of Rs 850 crore to cover deposits against the risk of default.
  • As for cooperative banks, only 44.5% of their assessable deposits were covered in 2018-19, while for commercial banks this ratio was 25.7%.
  • Commercial banks account for the largest share of bank deposits in India.

SUPREME COURT’S JUDGMENT ON ESSAR’S INSOLVENCY CASE

Why in News?

  • The Supreme Court has recently given its judgement in the Essar Insolvency case that has paved the way for ArcelorMittal and Nippon Steel to take over debt-laden Essar Steel.

What is the Issue?

  • In March 2019, National Company Law Tribunal (NCLT) approved global steel-giant ArcelorMittal’s bid for Essar Steel.
  • The Committee of Creditors (CoC) approved the resolution plan offered by the ArcelorMittal. Under the resolution plan, ArcelorMittal offered an advance cash payment of about ₹42,000 crore to the financial creditors and capital infusion of ₹8,000 in the next few years.
  • However, the offer did not have much for operational creditors to Essar Steel.
  • In 2019, the National Company Law Appellate Tribunal (NCLAT) cleared the CoC’s plan but changed the financial distribution plan by ordering an equal recovery plan for all creditors, including financial and operational creditors.

What did SC Say?

  • Wisdom of CoC: It is the commercial wisdom of the requisite majority (66%) of the CoC under the Insolvency and Bankruptcy Code (IBC) to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors.
  • Principle of Equality: The Court held that the equality principle cannot be stretched to treating unequal’s equally.
  • This will destroy the very objective of the IBC to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational.
  • Restriction on Tribunals: Tribunals have no “residual equity jurisdiction” to interfere in the merits of a business decision taken by the CoC. This implies that the NCLT and NCLAT cannot interfere with the commercial decisions taken by the CoC.
  • Financial vs. Operational Creditors: The Court upheld the primacy of financial creditors over operational creditors in the distribution of funds received under the corporate insolvency scheme.
  • The Court explained that financial creditors are capital-providers for companies, i.e. help companies to purchase assets and run business operations.
  • Operational creditors, in a way, are beneficiaries of amounts lent by financial creditors.
  • Relaxation of Resolution Deadline: The Supreme Court has done away with the 330-day mandatory deadline for the resolution of insolvency and bankruptcy cases after which liquidation is invoked. The bench allowed a bit of flexibility by allowing exceptions where the resolution plan is on the verge of being finalised.
  • The 330-day mark is violation of Article 14 (right to equal treatment) of the Constitution and Article 19(1)(g) ( Right to carry any business) of the Constitution.

Insolvency Resolution Process in India:

  • Eligibility: Under IBC, companies (both private and public limited company) and Limited Liability Partnerships (LLP) can be considered as defaulting corporate debtors.
  • A corporate debtor is any corporate organization which owes a debt to any person.
  • Default Amount: The Insolvency and Bankruptcy Code can be triggered if there is a minimum default of Rs 1 lakh.
  • This process can be triggered by way of filing an application before the National Company Law Tribunal (NCLT).
  • Resolution Initiation: The process can be initiated by two classes of creditors which would include financial creditors and operational creditors.
  • Creditors: A Creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, etc.
  • Financial Creditors: The financial creditor in simple terms is the institution that provided money to the corporate entity in the form of loans, bonds etc. E.g. banks.
  • Operational Creditors: An operational creditor is the entity who has a claim for providing any of the four categories to the defaulted corporate- goods, services, employment and Government dues (central govt, state or local bodies).
  • Appointment of Interim Resolution Professional: As soon as the matter is admitted by the NCLT, the NCLT proceeds with the appointment of an Interim Resolution Professional (IRP) who takes over the management of the defaulting debtor.
  • Committee of Creditors (CoC): A committee consisting only of the Financial Creditors i.e. the CoC is formed by the IRP.
  • Only operational creditors having aggregate dues of at least 10% of the total debt are invited into the meeting CoC (Operational creditors are not a member of CoC). The operational creditors don’t have any voting power.
  • Corporate Insolvency Resolution Process (CIRP): The Corporate Insolvency Resolution Process (CIRP) process includes necessary steps to revive the company such as raising fresh funds for operation, looking for new buyer to sell the company as going concern, etc.
  • The CoC takes a decision regarding the future of the outstanding debt owed to it. The resolution plan can be implemented only if it has been approved by 66% of the creditors in the CoC
  • Liquidation Proceedings: In the event a resolution plan is not submitted or not approved by the committee of creditors (COC), the CIRP process is deemed to have failed. In such a situation the liquidation proceedings commences subject to the order of the tribunal.

 

BASE YEAR IN GDP CALCULATIONS

Why in News?

  • At a time when India is facing an economic slowdown in GDP growth the Ministry of Statistics and Programme Implementation announced that the new base year for the GDP series will be decided in a few months.

Base Year:

  • The base year of the national accounts is chosen to enable inter-year comparisons.
  • It gives an idea about changes in purchasing power and allows calculation of inflation-adjusted growth estimates.
  • The last series has changed the base to 2011-12 from 2004-05.
  • The base year is a benchmark with reference to which the national account figures such as gross domestic product (GDP), gross domestic saving, gross capital formation are calculated.

How is a Base Year calculated?

  • In India, the first estimates of national income were published by the Central Statistical Organisation (CSO) in 1956 taking 1948-49 as the base year.
  • With the gradual improvement in availability of data, the methodology was revised.
  • Earlier, CSO depended on the population figures in the National Census to estimate the workforce in the economy.
  • Therefore, the base year always coincided with the census figures like 1970-71, 1980-81 etc.
  • Subsequently, CSO decided that the National Sample Survey (NSS) figures on the workforce size were more accurate and hence, the base year would change every five years when the NSS conducted such survey.
  • This system was started from 1999 when the base year was revised from 1980-81 to 1993-94.

Need and Changes:

  • The base year prices are termed as at constant prices. This reduces all the data to a comparable benchmark, base year price.
  • The base year is a representative year which must not experience any abnormal incidents such as droughts, floods, earthquakes etc.
  • It is a which is reasonably proximate to the year for which the national accounts statistics are being calculated.
  • The base year has to be revised periodically in order to reflect the structural changes taking place within an economy, such as increasing share of services in GDP.
  • The more frequently the base year can be updated, the more accurate the statistics will be.

SHRINKAGE IN IIP RECORDED THE LOWEST IN 8 YEARS

Why in News?

  • According to official data released recently, Industrial activity in September contracted sharply by 4.3%, a historical low, driven by major slowdowns in the capital goods, mining, and manufacturing sectors.

Historical Shrinkage:

  • The contraction in the Index of Industrial Production (IIP) in September was compared with the contraction of 1.1% in August. The Index had grown 4.3% in September of the previous year.
  • “This is the first time after November 2012 that all three broad-based sectors have contracted and the lowest monthly growth in the 2011-12 base year series. “In the old (2004-05) base, IIP in October 2011 contracted by 5%.”
  • Various SectorsGrowth rate in September (%)Growth rate in August (%)
    Capital Goods SectorDecreased by 20.7Decreased by 21
    Mining SectorDecreased by 8.5Increased by 0.1
    Manufacturing SectorDecreased by 3.9Decreased by 1.2
    Electricity SectorDecreased by 2.6Decreased by 0.9
    Consumer Durables SectorDecreased by 9.9Decreased by 9.1
    Consumer Non-durables SectorDecreased by 0.4Increased by 4.1
  • “The Indian economy is presently facing a structural growth slowdown originating from declining household savings rate, and low agricultural growth”.
  • “Low agricultural growth is feeding into low agricultural and non-agricultural wage growth in rural areas, which is impacting rural demand adversely.”

About IIP:

  • IIP is a composite indicator measuring changes in the volume of production of a basket of industrial products over a period of time, with respect to a chosen base period.
  • It is compiled and published on a monthly basis by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation with a time lag of six weeks from the reference month.
  • Base year for IIP is 2011-2012 (Earlier 2004-05) i.e. it is calculated on the basis of their share of GDP at factor cost during 2011-12.
  • The revised IIP (2011-12) reflects the changes in industrial sector and also aligns it with base year of other macroeconomic indicators like Wholesale Price Index (WPI) and Gross Domestic Product (GDP).
  • IIP covers 865 (Older series 682) items comprising :

1.Manufacturing (809 items, Older series 620 items) – 77.63%

2.Mining (55 items, Older Series 61 items) – 14.37%

3.Electricity (1 item) – 7.99%

  • The eight Core Industries comprise nearly 40.27 % of the weight of items included in IIP. They are :

1.Coal (10.33%)

2.Crude oil (8.98%)

3.Natural gas (6.88%)

4.Refinery products (28.04%)

5.Fertilizers (2.63%)

6.Steel (17.92%)

7.Cement (5.37%)

8.Electricity (19.85%)

STEEL SCRAP RECYCLING POLICY

Why in News?

  • Ministry of Steel has issued the Steel Scrap Recycling Policy.

Background:

  • Steel Ministry’s endeavor is to develop a globally competitive steel industry by adopting state of the art environment friendly technologies.
  • Ferrous Scrap being the primary raw material for electric arc furnace (EAF) and induction furnace (IF) based steel production, the policy envisages a framework to facilitate and promote establishment of metal scrapping centers in India. This will ensure scientific processing & recycling of ferrous scrap generated from various sources and a variety of products.
  • The policy framework shall provide standard guidelines for collection, dismantling and shredding activities in an organized, safe and environmentally sound manner.
  • Steel is a material most conducive for circular economy as it can be used, reused and recycled infinitely.
  • While iron ore remains the primary source of steel making, used or re-used steel in the form of Scrap is the secondary raw material for the steel industry.
  • Indian steel industry is characterized by the presence of a large number of small steel producers who utilize scrap with other inputs in EAF/IF for steel making.

Objectives:

  • To promote circular economy in the steel sector.
  • To promote a formal and scientific collection, dismantling and processing activities for end of life products that are sources of recyclable (ferrous, non- ferrous and other non-metallic) scraps which will lead to resource conservation and energy savings and setting up of an environmentally sound management system for handling ferrous scrap.
  • Processing and recycling of products in an organized, safe and environment friendly manner.
  • To evolve a responsive ecosystem by involving all stakeholders.
  • To produce high quality ferrous scrap for quality steel production thus minimizing the dependency on imports.
  • To decongest the Indian cities from end-of-live vehicle (ELVs) and reuse of ferrous scrap.
  • To create a mechanism for treating waste streams and residues produced from dismantling and shredding facilities in compliance to Hazardous & Other Wastes (Management & Trans boundary Movement) Rules, 2016 issued by MoEF & CC.
  • To promote 6Rs principles of Reduce, Reuse, Recycle, Recover, Redesign and Remanufacture through scientific handling, processing and disposal of all types of recyclable scraps including non-ferrous scraps, through authorized centers / facility.

Significance:

  • The availability of scrap is a major issue in India and in 2017 the deficit was to the tune of 7 million Tons. This was imported at the cost of more than Rs. 24,500 crores (approx.) in 2017-18.The gap between demand and supply is can be reduced in the future and the country may be self-sufficient by 2030.This is mainly because with the increase in consumption of steel in the recent past and ELVs, the generation of scrap is likely to be increased considerably.This scrap has to be channelized so that the same can be utilized for steel production in an environmentally friendly manner.
  • The scrapping policy shall ensure that quality scrap is available for the steel industry.

National Steel Policy 2017:

  • National Steel Policy 2017 (NSP-2017) aims to develop a globally competitive steel industry by creating 300 Million TPA Steel production capacity by 2030 with a contribution of 35-40% from EAF/IF route.
  • The availability of raw materials at competitive rates is imperative for the growth of the steel industry and to achieve NSP-2017 target. Thus, the availability of right quality of scrap, in adequate quantity is one of the critical factors for the future growth for both EAF/IF sector & primary sector.
  • Scrap based steel making technologies have been envisaged as one of the important options to reduce GHG emission intensity. This shall feature as an important initiative of the steel sector to minimize Green House Gas (GHG) emissions.

MOODY DOWNGRADES INDIA’S RATING

Why in News?

  • Global ratings agency Moody’s Investors Service has recently cut India’s ratings outlook to ‘negative’ from ‘stable’ but affirmed the Baa2 foreign-currency and local-currency long-term issuer ratings.

Reason behind Moody’s Rate Cut:

  • A crunch that started out in the non-banking financial institutions (NBFIs) spreading to retail businesses, car makers, home sales and heavy industries has made India’s growth outlook deteriorated this year,
  • Government’s policy ineffectiveness in addressing economic weakness has led to an increase in debt burden which is already at high levels.
  • A breach of the government’s target of 3.3 per cent, as slower growth and a surprise corporate-tax cut affects revenue.

Impact:

  • Reduction in outlook is the first step towards an investment downgrade, as India is now just a notch above the investment grade country rating.
  • An actual downgrade in country ratings can lead to massive foreign fund outflows.
  • However, if the government is able to address fiscal deficit concerns through higher fund raising from stake sales, the rating agencies tend to revise up their outlook.

About Moody’s Investor Service:

  • Moody’s Investors Service, often referred to as Moody’s, is the bond credit rating business of Moody’s Corporation.
  • They provide international financial research on bonds issued by commercial and government entities.
  • Moody’s, along with Standard & Poor’s and Fitch Group, is considered one of the Big Three credit rating agencies.

Credit Rating Categories:

S.NoCREDIT RATINGDESCRIPTION
1.       AAAHighest credit quality that denotes the lowest expectations of default risk.
2.      AA+/AA/AA-Very high credit quality. ‘AA’ ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments.
3.      A+/A/A-High credit quality that denotes expectations of low default risk. The capacity for payment of financial commitments is considered strong, however, vulnerability to adverse business or economic conditions exists.
4.      BBB+/BBB/BBB-Good credit quality that indicates that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.
5.      BB+/BB/BB-This rating indicates an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments.
6.      B+/B/B-This rating indicates that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
7.       CCC+/CCC/CCC-Substantial credit risk exists in this rating, where the default is a real possibility.
8.      CCThis rating shows a very high level of credit risk with a possibility of defaults.
9.      CThis rating shows that a default or default-like process has begun, or the issuer is in a standstill.
10.  DDD/RD/SD/DD/DThis indicates that the issuer has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure or has ceased business.

RBI PANEL MOOTS TIGHTER NORMS FOR CICS

Why in News?

  • In 2018, Infrastructure Leasing and Financial Company (IL&FS), a core Investment company (CIC) with over 300 subsidiaries, defaulted on its payment following which over Rs 90000 crore worth of combined banking sector exposure was declared as non-performing or bad asset in the subsequent months.
  • Experts have been seeking a review of CIC guidelines ever since.
  • A working group formed by Reserve Bank of India has now suggested simplified structure for CICs.

Core Investment Companies (CIC):

  • A core investment company is a non-banking financial company (NBFC) which carries on the business of acquisition of shares and securities and holds not less than 90 per cent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group
  • In August 2019, there were 63 CICs registered with RBI.

Concerns:

  • Unlike NBFCs which are required to constitute board level committees, no such standards are mandated for CICs.
  • The same director could be part of boards of multiple companies in a group, including CICs.
  • In a few cases, the working group said, “it has been observed that the CIC had lent funds to group companies at zero percent rate of interest with bullet repayment of 3-5 years and without any credit appraisal”.

Rules for Core Investment Companies as suggested by the RBI Panel:

  • It is suggested that such entities should only have a two-tier structure, and stronger boards, with at least 50% independent directors.
  • The group has also recommended formation of board level committees for audit and remuneration for CICs as well as group risk management committees to address the   concerns over corporate governance that were compromised over the years with opaque ownership structures in large conglomerates.
  • At least one third of the board should comprise of independent members if chairperson of the CIC is non-executive, otherwise at least half of the board should comprise of independent member.
  • It was also suggested that Audit Committee of the Board should be chaired by an independent director and the committee should meet at least once a quarter.
  • It is suggested that capital contribution by a CIC in a step-down CIC, over and above 10% of its owned funds, should be deducted from its adjusted net worth.
  • Step-down CICs should not be permitted to invest in any other CIC, but can ‘freely’ invest in other group companies. The number of layers of CICs in a group should be restricted to two. As such, any CIC within a group shall not make investment through more than a total of two layers of CICs, including itself.

ALTERNATIVE INVESTMENT FUNDS (AIFS)

Why in News?

  • The Union Cabinet has recently approved the creation of an Alternative Investment Fund (AIF) of Rs. 25,000 crores for the realty sector. This is to provide last-mile funding for stalled affordable and middle-income housing projects across the country.

Key Features of the Decision:

  • The fund size is of Rs. 25,000 crores with the government providing Rs. 10,000 crore and the State Bank of India and the Life Insurance Corporation providing the balance.
  • The fund was set up as Category-II Alternative Investment Fund registered with the SEBI and will be managed by SBICAP Ventures Limited.
  • The open-ended fund is expected to increase in time. The government is also in talks with sovereign bonds and pension funds to put in money in this fund further.
  • The Cabinet also approved the establishment of a ‘Special Window’ to provide priority debt financing for completion of stalled housing projects in the affordable and middle-income housing sector.

What is Alternative Investment Fund:

  • AIFs refers to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP).
  • In India, AIFs are private funds which are otherwise not coming under the jurisdiction of any regulatory agency in India, since it does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities.

ADJUSTED GROSS REVENUE (AGR) IN TELECOM SECTOR

Why in News?

  • In a strongly-worded order, the Supreme Court of India upheld the Department of Telecom (DoT)’s interpretation of “adjusted gross revenue” (AGR).
  • This came as a huge blow to telecom service providers.
  • Following the order, the telcos are now staring at dues of an estimated ₹1.4 lakh crore, which needs to be paid to the government within three months.
  • Most industry players and analysts have argued that the payout of the huge amount could be the final straw for the already distressed sector.

AGR:

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.
  • The definition of AGR has been under litigation for 14 years.
  • While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.
  • Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.

Why do telcos need to pay out Large Amounts?

  • Telecom companies now owe the government not just the shortfall in AGR for the past 14 years but also an interest on that amount along with penalty and interest on the penalty.
  • While the exact amount telcos will need to shell out is not clear, as in a government affidavit filed in the top court, the DoT had calculated the outstanding licence fee to be over ₹92,000 crore.
  • However, the actual payout can go up to ₹1.4 lakh crore as the government is likely to also raise a demand for shortfall in SUC along with interest and penalty.
  • Of the total amount, it is estimated that the actual dues is about 25%, while the remaining amount is interest and penalties.

Concerns:

  • The telecom industry is reeling under a debt of over ₹4 lakh crore and has been seeking a relief package from the government.
  • Even the government has on various occasions admitted that the sector is indeed undergoing stress and needs support.
  • Giving a ray of hope to the telecom companies, the government recently announced setting up of a Committee of Secretaries to examine the financial stress in the sector, and recommend measures to mitigate it.

“GLOBAL MICROSCOPE 2019: THE ENABLING ENVIRONMENT FOR FINANCIAL INCLUSION REPORT”.

Why in News?

  • The Economist Intelligence Unit has released the 2019 edition of “Global Microscope: The enabling environment for Financial Inclusion report”.
  • The report assessed 55 countries based on enabling environment for financial access.
  • The report is a benchmarking index that assesses enabling environment for financial access in 55 countries.

Key Findings of the Report with Respect to India:

  • As per the report, India was placed at the 5th spot in the nations having the most conducive environments for inclusive finance.
  • The overall environment for financial inclusion has improved globally with India, Colombia, Peru, Uruguay and Mexico having the most favourable conditions for inclusive finance.
  • India is among top nations with most conducive environment for financial inclusion in terms of allowing non-banks to issue e-money, proportionate customer due diligence and effective consumer protection.

Government Interventions in this Aspect:

  • RBI has released the Enabling Framework for Regulatory Sandbox (RS), which creates the basis for a regulatory sandbox that will allow fintech start-ups to live-test innovative products and services.
  • Reserve Bank has prepared a draft National Strategy for Financial Inclusion to deepen financial services coverage in the country.
  • The long-awaited strategy is expected to be finalised in 2019 and will cover a five-year period.
  • The RBI has set up a high-level committee to review the existing status of digitisation and devise a medium-term strategy for increasing digital payments.

 About the Report:

  • Produced by Economist Intelligence Unit (EIU), the research and analysis division of The Economist Group.
  • It is created in 1946 and is the world leader in global business intelligence.
  • The 2019 edition of Global Microscope report features 11 new gender focussed indicators that measure financial inclusion for both women as well as men.

Domains Covered under the Survey:

  • Government and Policy Support
  • Products and Outlets
  • Stability and Integrity
  • Consumer Protection
  • Infrastructure

MERGER OF BSNL AND MTNL

Why in News?

  • In an effort to revive the beleaguered state-owned telecom firms BSNL and MTNL, the Union Cabinet on Wednesday approved a package worth nearly ₹70,000 crore. The Cabinet, chaired by Prime Minister Narendra Modi, also gave an in-principle nod for the merger of the two entities.

The Crisis:

  • BSNL is in extreme financial trouble. The company has been in this situation for a while and the condition has worsened to an extent that it is not able to pay salaries to its employees.
  • BSNL has been in trouble since the last 10 years due to poor government policies and delays in bringing new infrastructure. The inferior infrastructure, as well as the company structure, have further resulted in this situation. Even the Department of Telecommunications has asked BSNL not to go to banks for getting more loans.
  • Main reasons are stiff competition in mobile segment, high employee cost and absence of 4G services (except in few places for BSNL) in the data-centric telecom market which is eroding the competitive strength. Human resource comprises 5% of cost for other telecom operators, for BSNL and MTNL the number is over 70%.

Recent Cabinet Decisions:

  • Administrative allotment of spectrum for 4G services to BSNL and MTNL so as to enable these PSUs to provide broadband and other data services.
  • The said Spectrum will be funded by the Government of India by capital infusion in these PSUs at a value of Rs 20,140 Cr in addition; the GST amount of Rs 3,674 Cr to this spectrum value will also be borne by the Government of India through Budgetary resources.
  • By using this spectrum allotment, BSNL and MTNL will be able to deliver 4G services, compete in the market and provide high speed data using their vast network including in rural areas.
  • BSNL and MTNL will also raise long-term bonds of Rs 15,000 Cr for which sovereign guarantee will be provided by the Government of India (GoI). With the said resources, BSNL and MTNL will restructure their existing debt and also partly meet CAPEX, OPEX and other requirements.
  • BSNL and MTNL will also offer Voluntary Retirement to their employees, aged 50 years and above through attractive Voluntary Retirement Scheme (VRS), the cost of which will be borne by the Government of India through budgetary support. The ex-gratia component of VRS will require Rs. 17,169 Cr in addition, GoI will be meeting the cost towards Pension, Gratuity and Commutation. Details of the scheme will be finalised by BSNL/MTNL.
  • BSNL and MTNL will monetise their assets so as to raise resources for retiring debt, servicing of bonds, network upgradation, expansion and meeting the operational fund requirements.
  • In-principle merger of BSNL and MTNL

Benefits:

  • It is expected that with the implementation of said revival plan, BSNL and MTNL will be able to provide reliable and quality services through its robust telecommunication network throughout the country including rural and remote areas.

EASE OF DOING BUSINESS INDEX

Why in News?

  • India climbed 14 ranks in the World Bank’s Ease of Doing Business 2020 survey to stand at 63, among 190 countries, making it the one of world’s top 10 most improved countries for the third consecutive time.

About:

  • Ease of Doing Business report is an annual report published by the World Bank which ranks countries based on their performance in easing the rules and regulations to start a business.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • Even this year New Zealand has topped the rank followed by Singapore and Hong Kong with 2nd and 3rd rank respectively.
  • US and China are placed at 6th and 31st position respectively where both has been improved when compared to last year.

Indicators of Ease of Doing Business:

  • A Nation’s ranking on the index is based on the average of 10 Sub-Indices:
  • Starting a business – Procedures, time, cost, and minimum capital to open a new business.
  • Dealing with construction permits – Procedures, time, and cost to build a warehouse.
  • Getting electricity – procedures, time, and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse.
  • Registering property – Procedures, time, and cost to register commercial real estate.
  • Getting credit – Strength of legal rights index, depth of credit information index.
  • Protecting investors – Indices on the extent of disclosure, extent of director liability, and ease of shareholder suits.
  • Paying taxes – Number of taxes paid, hours per year spent preparing tax returns, and total tax payable as share of gross profit.
  • Trading across borders – Number of documents, cost, and time necessary to export and import.
  • Enforcing contracts – Procedures, time, and cost to enforce a debt contract
  • Resolving insolvency – The time, cost, and recovery rate (%) under bankruptcy proceeding.

Ease of Doing Business with India’s Perspective:

  • Last year, India jumped 23 places to reach 77th position. In the last five years, India’s ranking has improved 79 places – to 63 in 2019 from 142 in 2014 – a record for a major economy.
  • Compared with last year, India’s ranking deteriorated on only two parameters — “protecting minority investors” (from 7th to 13th position) and “getting electricity” (from 22nd to 25th) — and remained unchanged in “enforcing contracts”.
  • Among the BRICS countries only Russia and China are ahead of India with their rankings at 28 and 31 respectively.
  • Among the SAARC countries India is the topper in rankings.

KHADI AND VILLAGE INDUSTRIES COMMISSION

Why in News?

  • The Khadi and Village Industries Commission (KVIC) and the Goa State Government have joined hands with an aim to generate employment opportunities in Goa.

Khadi and Village Industries Commission (KVIC):

  • KVIC is a statutory body established by an Act of Parliament in 1956.
  • The body is charged with the planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development wherever necessary.

Objectives of KVIC:

  • The social objective of providing employment.
  • The economic objective of producing saleable articles.
  • The wider objective of creating self-reliance amongst the poor and building up of a strong rural community spirit.
  • Its functions also comprise building up of a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials as semi-finished goods and provisions of facilities for marketing of KVI products.
  • It also imparts training to artisans engaged in these industries.
  • It also engages in research of production techniques and equipment employed in the Khadi and Village Industries sector.
  • It also provides financial assistance to institutions and individuals for the development and operation of Khadi and village industries and guides them through the supply of designs, prototypes and other technical information.
  • It functions under the Ministry of Micro, Small and Medium Enterprises, and is headquartered in Mumbai.

Khadi:

  • Khadi, also called khaddar, is a hand-spun, hand-woven natural fibre cloth. It is woven from cotton. It may also include silk or wool. It originates from India and Bangladesh. It is associated with the freedom struggle and Mahatma Gandhi, who urged people to use Khadi and ditch foreign imported cloth.

LIVESTOCK CENSUS

Why in News?

  • Department of Animal Husbandry & Dairying releases 20th Livestock Census; Total Livestock population increases 4.6% over Census-2012, Increases to 535.78 million

Livestock Census:

  • The Livestock Census has been conducted in the country periodically since 1919-20.
  • The Livestock Census covers all domesticated animals and its headcounts.
  • So far 19 such censuses have been conducted in participation with State Governments and UT Administrations.
  • The 20th Livestock Census was conducted in participation with all States and Union Territories.
  • The enumeration was done both in rural and urban areas. Various species of animals (Cattle, Buffalo, Mithun, Yak, Sheep, Goat, Pig, Horse, Pony, Mule, Donkey Camel, Dog, Rabbit and Elephant)/poultry birds (Fowl, Duck, Emu, Turkeys, Quail and other poultry birds) possessed by the households, household enterprises/non-household enterprises and institutions have been counted at their site.

Features of 20th Livestock Census:

  • The major thrust given to 20th Livestock Census is the collection of data through tablets computers. The 20th livestock census is indeed a unique attempt as for the first time such a major initiative has been take to digitise household level data through online transmission from the field. National Informatics Centre (NIC) has developed a mobile Application software and was used for data collection as well as online transmission of data from the field to the NIC server.

20th Livestock Census:

  • The total Livestock population is 535.78 million in the country showing an increase of 4.6% over Livestock Census-2012
  • Total Bovine population (Cattle, Buffalo, Mithun and Yak) is 302.79 Million in 2019 which shows an increase of about 1% over the previous census.
  • The total number of cattle in the country in 2019 is 192.49 million showing an increase of 0.8 % over previous Census.
  • The Female Cattle (Cows population) is 145.12 million, increased by 18.0% over the previous census (2012).
  • The Exotic/Crossbred and Indigenous/Non-descript Cattle population in the country is 50.42 million and 142.11 million respectively.
  • The Indigenous/Non-descript female cattle population has increased by 10% in 2019 as compared to previous census.
  • The population of the total Exotic/Crossbred Cattle has increased by 26.9 % in 2019 as compared to previous census.
  • There is a decline of 6 % in the total Indigenous/ Non-descript cattle population over the previous census. However, the pace of decline of Indigenous/ Non-descript cattle population during 2012-2019 is much lesser than as compared to the 2007-12 which was about 9%.
  • The total buffaloes in the country is 109.85 million showing an increase of about 1.0% over previous Census.
  • The total milch animals (in-milk and dry) in cows and buffaloes is 125.34 million, an increase of 6.0 % over the previous census.
  • The total sheep in the country is 74.26 million in 2019, increased by 14.1% over previous Census.
  • The Goat population in the country in 2019 is 148.88 million showing an increase of 10.1% over the previous census.
  • The total Pigs in the country is 9.06 Million in the current Census, declined by 12.03% over the previous Census.
  • The other livestock including mithun, yak, horses, ponies, mule, donkeys, camel together contribute around 0.23% of the total livestock and their total count is 1.24 million.
  • The total poultry in the country is 851.81 million in 2019, registered an increase of 16.8% in the total poultry.
  • The total birds in the backyard poultry in the country is 317.07 million. The backyard poultry has increased by around 46% as compared to previous Census.
  • The total Commercial Poultry in the country is 534.74 million in 2019, increased by 4.5% over previous Census.

INDIA INTELLECTUAL PROPERTY (IP) GUIDE

Why in News?

  • The Services Export Promotion Council (SEPC), set up by the Ministry of Commerce & Industry, has brought out the India Intellectual Property (IP) Guide at Cannes in MIPCOM 2019 for the Media and Entertainment (M&E) industry.

India Intellectual Property (IP) Guide:

  • The guide features a catalogue of over 60 Indian IPs, popular in over 160 countries.
  • It tries to comprehensively break the narrative of only low-end work being done in India.
  • IP is the most important asset for its creators in the media and entertainment sector.
  • Intellectual Property (IP) is vital to a large number of SEPC’s stakeholders. Creation, protection and expansion of IP products alone will bring huge benefits to the sector.
  • SEPC will also be setting up a committee to help small and medium entertainment companies to navigate critical aspects of IP creation.
  • The aim is to assist companies and content creators to maximise the value that IPs can provide.

MIPCOM:

  • MIPCOM stands for Marché International des Programmes de Communication (French). In English, it can be translated as the International Market of Communications Programmes.
  • It is a trade show held annually primarily geared towards the television/entertainment industry. It is held in Cannes, France.
  • It is the world’s largest exhibition of studios and distributors, and also the top showcase for content across all platforms and genres.
  • Many important personalities from the global entertainment industry participate in the 4-day event.It also serves as a global premier for highly anticipated programmes.
  • A spinoff event called the MIPJunior also takes place prior to MIPCOM, which is targeted towards the children’s television industry.
  • MIPCOM 2019 is being attended by some of the top renowned Indian media and entertainment companies.
  • The Indian exhibitors and visiting companies are participating to buy, sell, serve and partner with companies present at MIPCOM from over 111 countries across the world.
  • The India Pavilion is the one-stop place to meet content creators, audio-visual service providers in animation, VFX, AR/VR, gaming, new media services, film production services and much more.
  • Many of the Indian companies are at Cannes with their completed IPs or pitch for their in-production properties.

Services Export Promotion Council (SEPC):

  • SEPC is an Export Promotion Council set up by the Ministry of Commerce & Industry, Government of India, in 2006.
  • It is an apex trade body which facilitates service exporters of India.
  • As an advisory body, it actively contributes to the formulation of policies of the Government and acts as an interface between the Services Industry and the Government.
  • SEPC has been instrumental in promoting the efforts of the Indian service exporting community, and in projecting India’s image abroad as a reliable supplier of high-quality services.
  • It organizes a large number of promotional activities such as buyer-seller meets (BSM) – both in India and abroad, overseas trade fairs/exhibitions, and India pavilion/information booths in selected overseas exhibitions to demonstrate the capabilities of the Indian Services Industry.
  • It currently has a membership base of over 3000 companies from 14 service sectors including accounting/auditing/bookkeeping, advertising, architectural, consultancy, distribution, educational, entertainment, environmental, healthcare, hotel and tourism, legal, maritime, market research/management, printing and publishing services.

IMF’S WORLD ECONOMIC OUTLOOK (WEO)

Context:

  • International Monetary Fund (IMF) has released its report “World Economic Outlook” (WEO)- 2019 recently.

About the Report:

  • The World Economic Outlook is a biennial report that is released in April and October of every year. According to the report released recently, the global economy is at its slowest pace of growth at 3%. This is a serious climb down from 3.8% in 2017.

Key Findings of the Report:

  • The world economy is projected to grow only 3 per cent this year and 3.4 per cent next year amid a synchronised slowdown.
  • The Global growth rate is projected to improve to 3.4% by 2020. The growth of advanced economies is projected to slow down by 1.7%.
  • The emerging and developing economies are projected to experience a growth pick up from 3.9% in 2019 to 4.6% in 2020.
  • Reasons for slowdown: rising trade barriers, uncertainty surrounding trade and geopolitics, and structural factors, such as low productivity growth and an aging population in Developed Countries.

India- Specific Observations:

  • India retains its rank as the world’s fastest-growing major economy, tying with China.
  • It has a projected growth rate of 6.1 per cent for the current fiscal year, despite an almost one per cent cut in the forecast.
  • The report downgraded India’s growth projections to 6.1% in 2019, however, India’s economy is projected to pick up and grow by 7 per cent in the 2020 fiscal year.
  • According to the report, China is projected to grow at 6.1% in 2019 and 5.8% in 2020. The trade volume reached the lowest since 2012. It reduced by 1% since 2012.

Reasons behind the downgraded growth projection of India:

  • India’s economy decelerated further in the second quarter, as its growth is held back by sector-specific weaknesses in the automobile sector and real estate as well as lingering uncertainty about the health of non-bank financial companies.
  • Corporate and environmental regulatory uncertainty are part of the factors that weighed on the demand.
  • The reduction in India’s growth projection for this year “reflects a weaker-than-expected outlook for domestic demand”.

Way Ahead:

  • India should make use of the following measures to improve its overall growth:
    • It must make use of its monetary policy and broad-based structural reforms to address cyclical weakness and strengthen confidence.
    • A credible fiscal consolidation path is needed to bring down India’s elevated public debt over the medium term.
    • This should be supported by subsidy-spending rationalisation and Tax-Base Enhancing Measures.

About IMF:

  • The International Monetary Fund (IMF) is the inter-governmental organisation established to stabilize the exchange rate in the international trade.
  • It helps the member countries to improve their Balance of Payment (BOP) condition thorough the adequate liquidity in the international market, promote the growth of global monetary cooperation, secure financial stability, facilitate international trade.
  • It is one of the Bretton woods twins, which came into existence in 1945, is governed by and accountable to the 189 countries that make up its near-global membership.
  • HQ – Washington
  • Official language – Chinese, English, French, Russian, Spanish, Arabic

INTERCONNECT USAGE CHARGE (IUC)

Why in News?

  • Telecom Regulatory Authority of India (TRAI) has decided to review the scrapping of interconnect usage charge from January 2020.

What is IUC?

  • Interconnect Usage Charge or IUC is a cost paid by one mobile telecom operator to another, when its customers make outgoing mobile calls to the other operator’s customers. These calls between two different networks are known as mobile off-net calls.
  • The objective of this calling-party pays regime (CPP) is to allow operators cover network usage costs. Since it needs infrastructure investment, the IUC ensures that operators make enough operations to keep their business viable.
  • The IUC charges are fixed by Telecom Regulatory Authority of India (TRAI).

Implications and Criticism

  • As IUC directly impacts the call tariff, reduction in IUC is likely to yield consumer benefits through low call charges.
  • Scrapping IUC helps to deploy new technologies like VoLTE (Voice over Long Term Evolution), migration to Internet Protocol networks by operators, wherein there are no interconnection charges. This is due to the fact the charges in 2G is higher than the 4G technologies.

RANDOMISED CONTROLLED TRIAL (RCT)

Why in News?

  • The new Economics Nobel laureates – Abhijit Banerjee, Esther Duflo and Michael Kremer – are considered to be instrumental in using randomised controlled trials to test the effectiveness of various policy interventions to alleviate poverty.

What is a Randomised Controlled Trial?

  • A randomised controlled trial is an experiment that is designed to isolate the influence that a certain intervention or variable has on an outcome or event.
  • A social science researcher who wants to find the effect that employing more teachers in schools has on childrenʼs learning outcomes, for instance, can conduct a randomised controlled trial to find the answer.
  • The use of randomised controlled trials as a research tool was largely limited to fields such as biomedical sciences where the effectiveness of various drugs was gauged using this technique.
  • Banerjee, Ms. Duflo and Mr. Kremer, however, applied RCT to the field of economics beginning in the 1990s. Mr. Kremer first used the technique to study the impact that free meals and books had on learning in Kenyan schools.
  • Banerjee and Ms. Duflo later conducted similar experiments in India and further popularised RCTs through their book Poor Economics, published in 2011.

Significance of RCTs:

  • RCTs allow economists and other social science researchers to isolate the individual impact that a certain factor alone has on the overall event.
  • For instance, to measure the impact that hiring more teachers can have on childrenʼs learning, researchers must control for the effect that other factors such as intelligence, nutrition, climate, economic and social status etc., which may also influence learning outcomes to various degrees, have on the final event.
  • Randomised controlled trials promise to overcome this problem through the use of randomly picked samples.

Criticisms against RCTs:

  • A popular critic of randomised controlled trials is economist Angus Deaton, who won the economics Nobel Prize in 2015.
  • Deaton has contended in his works, including a paper titled “Understanding and misunderstanding randomised control trials” that simply choosing samples for an RCT experiment in a random manner does not really make these samples identical in their many characteristics.
  • While two randomly chosen samples might turn out to be similar in some cases, there are greater chances that most samples are not really similar to each other.
  • Other economists have also contended that randomised controlled trials are more suited for research in the physical sciences where it may be easier to carry out controlled experiments.
  • They argue that social science research, including research in the field of development economics, may be inherently unsuited for such controlled research since it may be humanly impossible to control for multiple factors that may influence social events.

NOBEL PRIZE FOR ECONOMICS

Why in News?

  • The Royal Swedish Academy of Sciences has decided to award the 2019 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, popularly called the Nobel Prize in Economics, to Abhijit Banerjee, Esther Duflo, and Michael Kremer “for their experimental approach to alleviating global poverty”.

About the Awardees:

  • While Dr.Banerjee (Indian-born American economist) and Dr.Duflo are both affiliated with the Massachusetts Institute of Technology, Dr.Kremer is with Harvard University. Dr. Banerjee and Dr. Duflo, who are incidentally married to each other, have had a long history of conducting research together, often collaborating with Dr. Kremer as well.
  • The three will equally share the prize money of 9 million Swedish krona (about $916,798 and ₹6.53 crore).

Achievements of the Awardees:

  • The laureates have, since the mid-1990s, sought to introduce a new approach to obtaining reliable answers about the most effective ways to combat global poverty.
  • Rather than focussing on big-picture questions, they divided the issue into smaller, more manageable and measurable questions.
  • They then showed that these smaller questions could be best answered through carefully designed experiments among the people who are most affected.
  • This thought process has resulted in what are called randomised control trials, previously used in the pure sciences and in clinical drug trials, to be deployed in the social sciences.

Resultant of their Work:

  • The resultant of their tiring work was a large number of concrete results on specific mechanisms behind poverty and specific interventions to alleviate it.

Examples:

1.On schooling, strong evidence now shows that the employment of contract teachers is generally a cost-effective way to improve student learning, while the impact of reduced class size is mixed, at best.

2.On health, poor people’s investment in preventive care has been shown to be very sensitive to the prices of health products or services, giving a strong argument for generous subsidies to such investments,” the paper added.

3.On credit, growing evidence indicates that micro-finance programmes do not have the development effects that many had thought when these programmes were introduced on a Large Scale.

About Nobel Prize:

  • Alfred Nobel, a Swedish chemist, engineer, industrialist, and the inventor of dynamite, in his last will and testament in 1895, gave the largest share of his fortune to a series of prizeswhich were collectively came to be known as the “Nobel Prizes”.
  • The awards are started from the year of 1901 for five different fields and in the year 1969, the field of Economic sciences was also included.
  • The Nobel Prizes are widely regarded as the most prestigious awards given for intellectual achievement in the world.
  • The Nobel Memorial Prize in Economic Sciences, officially known as The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, is an award funded by Sveriges Riksbank and is annually awarded by the Royal Swedish Academy of Sciences to researchers in the field of economic sciences. The first prize was awarded in the year 1969.
  • The various awards that forms the group of “Nobel Prizes” are as follows:

1.Nobel Prize for Physics

2.Nobel Prize for Chemistry

3.Nobel Prize for Physiology or Medicine

4.Nobel Prize for Literature

5.Nobel Prize for Peace.

6.Nobel prize for Economic Sciences (added only in the year 1969)

GLOBAL COMPETITIVENESS INDEX 2019

Why in News?

  • The annual Global Competitiveness Index (GCI) compiled by Geneva-based World Economic Forum (WEF) is released.
  • India slipped to 68th rank in the annual Global Competitiveness Index 2019. It was ranked 58th in the 2018 edition.
  • The GCI was launched in 1979, maps the competitiveness landscape of 141 economies through 103 indicators organised into 12 pillars.

Highlights:

  • The Global Competitiveness Index 2019 ranks 140 countries on the basis of 98 indicators organised into 12 pillars.
  • Singapore with a score of 84.8 took the top spot in this year’s index, pushing the United States to the second spot.The top-five economies in the Global Competitiveness Index 2019 included Singapore, US, Hong Kong, Netherlands and Switzerland.
  • Japan took up the 6th spot, Germany ranked 7th, Sweden ranked 8th, UK ranked 9th and Denmark ranked 10th to complete the top ten economies in the index.
  • China was ranked at the 28th spot, while Hong Kong was ranked 3rd and Taiwan, which it claims as its own territory, also ranked higher at the 12th

Global Competitiveness Index 2019: India

  • According to the World Economic Forum, the major reason for the fall in India’s rank is due to improvements witnessed by several other economies.
  • India was ranked second in shareholder governance and third in terms of market size and renewable energy regulation.In corporate governance also, India was ranked considerably higher at the 15th In macroeconomic stability also, India was ranked high at the 43rd rank. However, India was performed poorly in pillars including Information, communication and technology adoption (120 rank), health (110), skills (107), product market (101), labour market(103) and stability (103).
  • In terms of healthy life expectancy, India was ranked 109 out of 141 countries. In meritocract and incentivization also, India was ranked at the 118th position, largely due to its low ratio of wage and salaried female workers to male workers, in which it was ranked 128Among its neighbours, India was ranked ahead of Sri Lanka, Pakistan, Bangladesh and Nepal. Only China ranked better at the 28th position.

CABINET HIKES DEARNESS ALLOWANCE BY 5%

Why in News?

  • The Union Cabinet decided to increase the Dearness Allowance (or DA) that it pays its current employees and existing pensioners by 5 percentage points.
  • Accordingly, 50 lakh central government employees and 65 lakh pensioners will henceforth receive 17% of their basic salary as DA instead of 12%.

What is DA and how is it calculated?

  • DA is provided by the government to its employees to cushion the impact of the rising cost of living. Inflation (or rate of increase in prices) eats away the buying power of money; hence the justification for DA.
  • For instance, if the annual inflation is 5%, it means that a commodity that cost Rs 100 in the first year, would cost Rs 105 in the second. If the employee has a salary that allows her to spend Rs 100 on that commodity, she will be able to buy that commodity in the first year.However, in the second year, that Rs 100 will no longer be enough for the employee to buy that commodity, which now costs Rs 105, thanks to the inflation rate. It is to compensate for this gap that the government pays DA to its employees.
  • To calculate DA, the government typically uses the All India Consumer Price Index-based inflation rate as a broad marker. For greater effectiveness, the DA is revised twice a year.

Possible Positive Impacts on the Economy:

  • An increase in DA provides additional money in the hands of government employees. If all this additional money is spent, it will have a positive impact on the sagging consumption demand, which the biggest problem in the economy right now.
  • However, the impact will depend on whether — and to what extent — employees actually spend this money. It is possible that given the prevalent sentiment of insecurity, they may choose to simply save it in their bank accounts. But given that deposit rates on short-term savings are being cut, it seems likely that people would choose to spend, rather than save.
  • But even if all this money is simply kept in the banks, it will help the economy by bolstering the flow of funds to the banking system.

Possible Negative Impacts on the Economy:

  • This money will come out of the government’s coffers. And to the extent that this will hit the resources available with the government, it will constrain economic activity.
  • For example, under the current circumstances, when government is finding it difficult to raise revenues, an additional outgo for DA will either push the government to borrow money from the market — thus leaving less money to be lent to private businessmen and businesswomen — or it will come as the cost of some other expenditure such as the spending that could have built more roads or more schools.

GREEN CHANNEL COMBINATION

Why in News?

  • Putting in place a speedier approval mechanism, Competition Commission has introduced a green channel route for clearing certain categories of mergers and acquisitions.

The Green Channel Concept:

  • Mergers and Acquisitions (M&As) or combinations beyond a certain threshold are required to have mandatory approval from the fair trade regulator.
  • The green channel is aimed to sustain and promote a speedy, transparent and accountable review of combination cases, strike a balance between facilitation and enforcement functions, create a culture of compliance and support economic growth.
  • This concept recommended by the high level panel that reviewed competition law — would allow for an automatic system for speedy approval of combinations subject to certain conditions.
  • Under this process, the combination is deemed to have been approved upon filing the notice in the prescribed format.
  • Parties to a combination can avail the green channel route subject to various conditions, including that there is no horizontal overlap or vertical relationship.

Significance:

  • The amended regulation provide for a single summary of the proposed combination.
  • Earlier, entities had to provide both a short as well as a long summary.
  • This system would significantly reduce time and cost of transactions.

TAX RELIEF FOR FOOD AT INCORPORATED CLUBS

Why in News?

  • In a significant judgment, the Supreme Court has held that supply of food, drinks and beverages by an incorporated members’ club to its permanent members is not liable for sales or service tax.

Issue:

  • The Bench was answering a reference on the question of whether the doctrine of mutuality highlighted in the Young Men’s Indian Association judgment of the Constitution Bench would survive the 46th Constitutional Amendment, which introduced Article 366 (29-A) into the Constitution.
  • The particular Article dealt with the taxation of sale of goods. Its clauses said that the supply or service of ‘goods’ like food or drink by an “unincorporated association or body of persons’ would be taxable.

Highlights:

  • The Supreme Court has ruled that the doctrine of mutuality continues to be applicable to incorporated and unincorporated members’ clubs.
  • The doctrine of mutuality, based on common law principles, is premised on the theory that a person cannot make a profit from himself.
  • An amount received from oneself, therefore, cannot be regarded as income and is not taxable.
  • Thus, Sales Tax cannot be levied on Clubs, whether incorporated or unincorporated for the supply of food and drinks to permanent members.
  • The Court said such supply of goods lacks the essential aspect of a sale — a seller and a buyer.It was said that the legal entity called the club and its members are one and the same. The club, though a distinct legal entity, is only an agent of its members.
  • The Supreme Court has held that, in the case of sales tax, both incorporated and un-incorporated members’ clubs are exempt from liability of paying sales tax.
  • The Bench referred to the Constitution Bench judgment in the Young Men’s Indian Association case and held that the doctrine of mutuality between the club and its members would dominate the relationship between an incorporated members’ club and its permanent members.
  • The rendering of service by the petitioner-club to its members is not taxable service under the Finance Act, 1994, the court held.

WORLD COTTON DAY

Why in News?

  • The Ministry of Textiles, Government of India, is participating in the World Cotton Day event being observed from 7th October to 11th October 2019 in Geneva.

World Cotton Day:

  • It is being organised by the World Trade Organisation (WTO) in collaboration with the Secretariats of the United Nations Food and Agriculture Organization (FAO), the United Nations Conference on Trade and Development (UNCTAD), the International Trade Centre (ITC) and the International Cotton Advisory Committee (ICAC).
  • WTO is hosting the event at the request of the Cotton – 4 countries – Benin, Burkina Faso, Chad and Mali to celebrate their official application for the recognition of 7th October as World Cotton Day by the United Nations.
  • World Cotton Day will celebrate the many advantages of cotton, from its qualities as a natural fibre, to the benefits people obtain from its production, transformation, trade and consumption.World Cotton Day will also serve to shed light on the challenges faced by cotton economies around the world because cotton is important to least developed, developing and developed economies worldwide.
  • Cotton occupies just 2.1 % of the world’s arable land, yet it meets 27% of the world’s textile need.
  • In addition to its fibre used in textiles and apparel, food products are also derived from cotton, like edible oil and animal feed from the seed.
  • Cotton is a drought-resistant crop ideal for arid climates.
  • A sculpture of Mahatma Gandhi made out of cotton will be displayed to commemorate the 150th birth anniversary of Mahatma Gandhi, at the event.
  • The Cotton Textiles Export Promotion Council (TEXPROCIL) will be displaying India’s high-quality cotton textiles at the exhibition.
  • Between 2011 and 2018, India implemented a Cotton Technical Assistance Programme (Cotton TAP-I) of about USD 2.85 million for seven African countries namely Benin, Burkina Faso, Mali and Chad and also Uganda, Malawi and Nigeria.
  • The technical assistance focused on improving the competitiveness of the cotton and cotton-based textiles and apparel industry in these countries through a series of interventions that had significant outcomes leading to a demand for a follow on project

TITLE INSURANCE

Why in News?

  • The Insurance Regulatory and Development Authority of India has constituted a working group that will revisit the product structure of title insurance.

Highlights:

  • The group will study the structure of title insurance products available in the current Indian Market and analyse the reasons for its sluggish demand.
  • The 12 member working group is tasked with:
    • Developing a standard product.
    • Coming out with recommendations to spur demand.
    • Examining the legal and regulatory framework in place and its impact on the marketability of title insurance.
    • Studying the structure of such products available and analyse reasons for sluggish demand.
    • Suggesting augmentation of reinsurance capacity.
  • The group has been asked to submit its recommendations within 12 weeks.

Title Insurance:

  • Title insurance is a form of indemnity insurance that protects the holder from financial loss sustained from defects in a title to a property.
  • It basically provides indemnity to developers and the subsequent homeowners of the property against losses and risks related to defects in the title of the property.
  • It even covers issues which are not discovered prior to the commencement date of the policy.
  • A few general insurers offer title insurance.
  • Their product features vary in policy terms and conditions and scope of coverage depending on the support received from their reinsurers.

Issues:

  • The number of title insurance policies sold is minimal, despite availability for the last one and half years and the obligation cast under the Real Estate (Regulation and Development) Act, 2016 upon promoter/developers to obtain the said policy.
  • The decision comes in the backdrop of a less-than-desired response to title insurance products.
  • Feedback received from the Government of India revealed that stakeholders, especially developers associations, had flagged the need for standardisation in title insurance products.

BHARAT 22 ETF

Why in News?

  • The Further Fund Offer 2 (FFO 2) of Bharat 22 Exchange-Traded Fund (ETF), which is part of the government’s divestment programme, will be open for subscription for investors.

Bharat 22:

  • Bharat 22 is an ETF that will track the performance of 22 stocks, which the government plans disinvest.
  • The ETF unit represents a slice of the fund, issued units are listed on exchanges for anyone to buy or sell at the quoted price.
  • The B22 will span six sectors, such as basic materials, energy, finance, FMCG, industrials and utilities.
  • Besides public sector banks, miners, construction companies, and energy majors, the ETF will also include some of the government’s holdings in SUUTI (Specified Undertaking of Unit Trust of India).
  • The B22 ETF will be managed by ICICI Prudential AMC while Asia Index will be the index provider.
  • The index will be rebalanced annually.

Exchange Traded Funds (ETFs):

  • ETFs are mutual funds listed and traded on stock exchanges like shares.
  • The ETF simply copies an index and endeavours to accurately reflect its performance.
  • In an ETF, one can buy and sell units at a prevailing market price on a real-time basis during market hours.
  • There are four types of ETFs already available — Equity ETFs, Debt ETFs, Commodity ETFs and Overseas Equity ETFs.
  • The Bharat 22 ETF to be offered now allows the Government to park its holdings in selected PSUs in an ETF and raise disinvestment money from investors at one go.

PRAKASH PORTAL

Why in News?

  • Ministry of Power launched PRAKASH (Power Rail Koyla Availability through Supply Harmony)

About PRAKASH (Power Rail Koyla Availability through Supply Harmony) Portal:

  • The Portal aims at bringing better coordination for coal supplies among all stakeholders viz – Ministry of Power, Ministry of Coal, Coal India, Railways and power utilities.
  • The Portal is designed to help in mapping and monitoring entire coal supply chain for power plants, viz:
    • Coal Stock at supply end (mines),
    • coal quantities/ rakes planned,
    • coal quantity in transit and
    • coal availability at power generating station.

Benefits of Portal to the Stakeholders:

  • The portal makes available following information on a single platform:
    • Coal company will be able to track stocks and the coal requirement at power stations for effective production planning.
    • Indian Railways will plan to place the rakes as per actual coal available at siding and stock available at power stations.
    • Power stations can plan future schedule by knowing rakes in pipe line and expected time to Reach.
    • Stock at power generating station
    • Ministry of Power /Ministry of Coal/ Central Electricity Authority/ Power System Operation Corporation (POSOCO) can review overall availability of coal at thermal power plants in different regions.
  • PRAKASH Portal is developed by NTPC and sources data from different stakeholders such as Central Electricity Authority (CEA), Centre for Railway Information System (CRIS) and coal companies. All reports are available in PDF/Excel format. However, to present information in a user friendly method, the Portal gives graphical representation of reports with details shown on the map of India.
  • Currently, the Portal will make available four reports as detailed below:
    • Daily Power Plant Status: This report gives Station data related to power generation, coal receipt, consumption and stock. Report can be generated utility wise, state wise and sector wise (default utility-wise).
    • Periodic Power Plant Status: Report gives Station data related to power generation, coal receipt, consumption and stock for selected period. Coal materialisation based on dispatch by coal company is available.
    • Plant Exception Report: This report gives materialisation and rakes in pipeline through Rail.
    • Coal Dispatch Report: Report gives coal subsidiary wise dispatch for particular period. It also gives source wise details of coal dispatch. Dispatch trend is also shown. Plant wise and siding wise details are available.

Present Mechanism:

  • Present mechanism to review coal supply situation consists of an inter-ministerial group which has officials from Ministries of Power, Coal, Railways, CEA, power utilities and coal companies.
  • This group holds weekly meetings to review coal supply situation as well as railway logistics.
  • It was observed that this mechanism faced several issues such as scattered information, correctness of data from different organizations, timely availability of data etc. This often led to difficulties in decision making
  • To address such situations, Ministry of Power asked CEA for establishment of a transparent mechanism to monitor the coal availability at loading site (CIL,SCCL), placement of rakes by Railways (CRIS) and availability of coal at power stations (NTPC / DVC /State utilities) and also directed NTPC to facilitate CEA for portal development.

SOVEREIGN GOLD BONDS SCHEME 2019 – 2020

Why in News?

  • The Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds.

Sovereign Gold Bond Scheme:

  • The SGB will be issued in six tranches from October 2019 to March 2020
  • The Bonds will be sold through:
    • Scheduled Commercial banks (except Small Finance Banks and Payment Banks)
    • Stock Holding Corporation of India Limited (SHCIL)
    • Designated post offices
    • Recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited
  • The main features of the SGB are:
    • It will be issued by Reserve Bank India on behalf of the Government of India.
    • The Bonds will be restricted for sale to resident individuals, Universities, Charitable Institutions, HUFs and Trusts
    • The tenor of the Bond will be for a period of 8 years with exit option after 5th year to be exercised on the interest payment dates.
    • The minimum permissible investment will be 1 gram of gold.
    • The maximum limit of subscribed shall be 4 KG for individual and HUF each and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time.
    • In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.The investors will be compensated at a fixed rate of 2.50 % per annum payable semi-annually on the nominal value.
    • Bonds can be used as collateral for loans.

GREEN ENERGY TARGET LACKS DEADLINE

Why in News?

  • Prime Minister Narendra Modi at the Climate Action Summit in New York announced India’s ambitious aim to increase its renewable energy target to 450 GW (gigawatts). A senior official in the Union Environment Ministry has pointed out that there is not yet a deadline for when this target would be achieved.

Highlights:

  • India had previously set a target for increasing the non-fossil fuels to 175 GW in 2022.
  • India’s plan for installing 175 GW of renewable energy capacity by 2022 was first announced in 2015.
  • It included 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro-power.
  • Recent announcements highlight India’s aim to achieve 450 GW target, with no particular deadline.

Concerns:

  • Given that the country right now has an installed renewable energy capacity of 80.47 GW, of which 29.55 GW is solar, 36.37 GW is wind, 9.81 GW is biomass and 4.6GW is small hydropower, achieving the 450 GW target, which is a more than 460 per cent jump from the current level, in 3-5 years is an extremely tough task. For the record, India’s renewable power capacity had jumped nearly 150 per cent in the past five years.
  • The announcement comes at a time when commissioning of projects has slowed and states are raising red flags.Slow project allocation and financial stress have halted wind power projects.Solar projects have been facing land crunch and grid connectivity issues.
  • As India expands it renewables portfolio, wind power seem to be losing steam. Leading domestic wind turbine manufacturers, with more than 80 per cent market share, are staring at a weak order pipeline, financial losses and regulatory niggles. Foreign companies, including some Chinese ones, are increasing footprint in India.
  • Commissioning from wind power projects has slowed to historic lows.
  • In solar, the challenge is the low capacity of domestic solar panels and increased influx of imports from China.

Way Forward:

  • The renewable energy ministry is planning to introduce a standard power-purchase agreement (PPA) for projects.
  • The terms of the PPA will ensure any default from the procuring state would lead to stringent penalty. A letter of credit-type system of payment would be made mandatory.
  • To sort out land-acquisition issues, the ministry plans to change the project-award system.
  • The government will acquire the land.
  • Special-purpose vehicles (SPVs) will be formed by state-owned companies.
  • The land will then be allotted to private companies bidding for projects
  • The government should implement anti-dumping duty on a priority to deal with cut-throat competition from international players.
  • In order to boost Make in India, the renewable power ministry has asked the Ministry of Finance to impose

FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT (FRBM)

Why in News?

  • States’ gross fiscal deficit (GFD) has remained within the Fiscal Responsibility and Budget Management Act (FRBM) threshold of 3% of gross domestic product (GDP) during 2017-18 and 2018-19, a Reserve Bank of India report on State Finances said.

FRBM Act:

  • Fiscal Responsibility and Budget Management (FRBM) Act enacted in 2003 by the Indian parliament aims at bringing financial discipline on government expenditure.
  • Aimed primarily to bring a check on revenue deficit, the act strives to improve the overall management of public finance by controlling unchecked borrowings and imparting financial discipline.
  • When it was introduced for the first time, its target was to bring down the fiscal deficit to 3 percent of the GDP by 2008.
  • However, the act suffered several challenges, such as the global financial crisis of 2007, when it came to implementation due to several reasons.
  • On more than one occasion, the target planned to be achieved was relaxed or time frame was extended.

NK Singh Committee:

  • A committee was set up under NK Singh in 2016 to review the act.
  • The committee on its part recommended that the government should target a fiscal deficit that is 3 percent of the GDP by 2020 and bring it down to 2.5 percent by 2023.

Report Highlights:

  • “States’ gross fiscal deficit (GFD) has remained within the FRBM threshold of 3 per cent of gross domestic product (GDP) during 2017-18 and 2018-19. This has, however, been achieved by sharp retrenchment in expenditures, in particular, capital expenditure.
  • For 2019-20, states have budgeted for a consolidated GFD of 2.6 per cent of GDP with a marginal revenue surplus (as against revenue deficits in the previous three years).
  • The report said sharp reduction in capital expenditure by states has potentially adverse implications for the pace and quality of economic development, given the large welfare effects of a much wider interface with the lives of people at the federal level.
  • “Currently, states employ about five times more people and spend around one and a half times more than the Centre. Moreover, public expenditure by states influences the quality of physical and social capital infrastructure of the economy
  • “States’ revenue prospects are confronted with low tax buoyancies, shrinking revenue autonomy under the GST framework and unpredictability associated with transfers of IGST and grants.

BAN ON EXPORT OF ONION

Why in News?

  • Union ministry of commerce and industry amended export policy of onion from free to prohibited, which amounts to banning of onions from export, with immediate effect.

    Reasons behind the Decision:

  • The prohibition by the government comes amid rising prices of onions across the country.
  • The commerce and industry ministry amended the export policy of onion, making it ‘prohibited’ from ‘free’ earlier.
  • The decision has:
    • banned exports of all varieties of onion in a bid to tame prices.
    • imposed stock limits on onion traders to facilitate release of stocks and prevent hoarding by traders.

Impact of the Decision:

  • Retail traders across the country will now be able to stock only up to 100 quintals of onion while wholesale traders will be allowed to stock up to 500 quintals.
  • In the past, the Centre had authorised states to impose stock limits but this time it has imposed the limits on its own.
  • Sudden export bans shut off the possibility of the farmer getting a bumper price for his crop, something that he feels he is entitled to, as the obverse of the distress sale he often has to undertake.

Way Ahead:

  • States must act expeditiously and launch a crackdown on hoarders to bring the stocks to the market swiftly.
  • Promote modern infrastructure facilities like cold storages and warehouses to use it as buffer stock.
  • Instead of banning exports, the government should encourage export of onion in its raw and processed forms.
  • The government must invest in food technology that would permit farmers to increase output without fear of distress sales, onion offtake assured because of its storage in a processed state
  • More policy making and political attention should be devoted to raising onion output, or for that matter farm output in general. Complacency on the farm front is wholly avoidable.

EIGHT CORE SECTORS SHRINK 0.5% IN AUGUST

Why in News?

  • The eight core sectors that form the bellwether for the Indian economy slumped in August to their lowest growth in four years and four months as per the Index of Eight Core Industries.

About the Slump:

  • The index for these industries contracted 0.5%, the weakest since April 2015. Growth in five sectors of the Index of Eight Core Industries fell into the negative zone in August.
  • Within the Index, the coal sector saw the sharpest contraction, with the sector contracting 8.6% in August 2019 compared with a contraction of 1.6% in the previous month. This is the sector’s worst performance in three years.
  • It is an indication of a continuing slowdown and weak demand in the system. The core sectors reflect demand from the power and infrastructure sectors, where the government’s own demand is important and public sector spending has been also low.

About Index of Eight Core Industries (ICI):

  • It is monthly production volume index considered as lead indicator of monthly industrial performance. It measures performance of production in selected eight core industries viz. Natural Gas, Coal, Crude Oil, Fertilizers, Petroleum Refinery Products, Steel, Cement and Electricity.
  • It is compiled and released by Office of Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry.
  • The eight infrastructure sectors, constitute 40.27% of total index of industrial production (IIP)
  • Base year taken as reference for ICI is 2011-12.

Components of Eight Core Industries (ICI)

S.NoEight core IndustriesContribution to IIPDescription
1. Coal4.38 %It includes coal production excluding coking coal.
2.Crude Oil5.22 %It includes total crude oil production.
3.Natural Gas1.71 %It includes total natural gas production.
4.Refinery Products5.94%It includes total refinery production (in terms of crude throughput).
5.Fertilizers1.25%It includes production of Urea, Calcium Ammonium Nitrate (CAN), Ammonium Sulphate (A/S), Diammonium Phosphate (DAP), Ammonium chloride (A/C), Complex Grade Fertilizer and Single superphosphate (SSP).
6.Steel6.68%It includes production of alloy and non-alloy steel only.
7.Cement2.41%It includes production of both large plants and mini plants.
8.Electricity10.32%It includes actual electricity generation of thermal, nuclear, hydro, imports from Bhutan

What is IIP?

  • Index of Industrial Production (IIP) is a composite indicator measuring changes in the volume of production of a basket of industrial products over a period of time, with respect to a chosen base period. Currently, the base year is 2011-12.
  • It is computed and published by the Central Statistical Office (an office under the Ministry of Statistics and Programme Implementation) on monthly basis with a time lag of six weeks from the reference month.

APPRENTICESHIP (AMENDMENT) RULES, 2019

Why in News?

  • Central government has notified changes in Apprenticeship Rules (1992) with an aim to increase skilled manpower in the country, and raise monetary compensation of apprentices.

Key Highlights:

  • As per the notified Apprenticeship (Amendment) Rules, 2019, the hiring limit of apprentices has been raised to 15 per cent of total strength of an establishment.
  • Minimum stipends have been doubled to between Rs 5,000 and Rs 9,000 per month.
  • The stipend for graduate apprentices or degree apprentices has been increased to Rs 9,000 per month.
  • For school pass outs, between Class 5th and 9th, the stipend has been increased to Rs 5,000 per month.
  • The Centre has also lowered the size limit of an establishment with a mandatory obligation to engage apprentices on an optional basis from 40 to 30, and reduced the size-limit of an establishment wanting to engage apprentices from 6 to 4.

Data:

  • In India, less than 0.1% of the employed workforce or just 0.3 million people are apprentices.
  • In comparison, the UK has 1.5% or 0.5 million, China has 2.5% or 20 million, and Germany has 5% or 2.5 million apprentices.

Significance:

  • The new rules will allow smaller companies to hire more trainees and give more youths an opportunity to get into the apprenticeship fold.
  • Though it will add to the cost of firms, the government believes apprenticeship is one of the most sustainable models globally for skill training as it allows the youth to earn while they learn.

INDUSTRY 4.0

Why in News?

  • A Pilot Project for ushering in ‘Industry 4.0’ in the country, is launched for implementation at the Modern Coach Factory (MCF), Raebareli.

Industry 4.0:

  • ‘Industry 4.0’ commonly referred to as the fourth industrial revolution, is a name given to the current trend of automation, interconnectivity and data exchange in manufacturing technologies to increase productivity.
  • Industry 4.0 is a complex Cyber-Physical Systems which synergizes production with digital technologies, the Internet of Things, Artificial Intelligence, Big Data & Analytics, Machine Learning and Cloud Computing.
  • Therefore, the architecture to be conceptualized and formulated in MCF initially would be gradually expanded in a phased manner to encompass all complexities that constitute Industry 4.0 in all manufacturing spheres in the country.
  • Full transition to the digital factory using ‘Industry 4.0’ across entire value chain from design to production will help enhance productivity hugely by providing insight into production process and also make the decisions in real-time basis.
  • This will also help in minimizing human errors by effective monitoring to ensure that resources are put to the best utilization measured by, what is called the Overall Equipment Effectiveness (OEE).
  • Such a National Policy for Advanced Manufacturing envisages that manufacturing sector should contribute at least 25% to GDP.
  • All over the world, countries who have been able to achieve phenomenal growth, could do that with the advent of rapid strides in manufacturing sector. This initiative in Railways may have wider ramifications to spur growth in defence production as well as in private manufacturing sector also.

 

WORRY FOR ECONOMY: LABOUR’S CONTRIBUTION TO INCOME KEEPS DIPPING

Why in News?

  • Labour’s share to national incomes has been declining in both developing and developed countries for around four decades now, highlighted the latest United Nations Conference on Trade and Development (UNCTAD) report.

Key Stats of the Report:

1.Decline in the Labour’s share to national incomes:

  • The report stated that Labour’s share to national incomes has reduced to around 54 per cent in 2018 from 61.5 per cent in 1980 in developed countries.
  • In developing economies, the labour share dipped to 50 per cent in 2018 from 52.5 per cent in 1990.
  • In the same period, more than 10 per cent of GDP was transferred from workers to capitalists.
  • The report also showed that labour wages did not grow at the same pace as the cost of living, but the profit share of corporations increased.

Effect of the decline:

  • Affecting living conditions can decrease productivity and further cause erosion of social security, growing market concentration and spread of outsourcing through global value chains, highlighted the UNCTAD report.
  • In developing countries, labour market liberalisation weakened the prospects of full-time and regulated employment. This made workers lose bargaining power and borrow money for household expenditure. All this finally slowed down demand and led to a recession-like situation.

2.Decline in Public spending:

  • Public spending has been on a declining trend in both developed and developing countries since the 1970s. But public spending is more important for social protection system and long-term asset creation.
  • The spending, which included stimulus packages and corporate and banking bailouts, increased inequalities, according to the UNCTAD report.

3.Weak Investment Growth

  • Globally, both developed and developing economies tried to increase profit share and cut down corporate taxes to promote productive investment but it didn’t work out.
  • Credit has been expanding since 1980s without productive investment. The global financial system is going in the wrong direction, which neither encourages productive investment nor creates an environment of productive investment.

4.Growing stock of Carbon Dioxide

  • The current financial mechanism is also at odds with the growing stock of atmospheric carbon dioxide that increases temperature. The prevailing economic pattern where big corporations have a say over carbon-free technology is making it costlier to adopt a solution.The report added that in the last one decade, production of carbon dioxide from developing economies has accelerated, but per capita production of CO2 is less. Developing countries produce around 80 per cent less CO2 when compared with per capita production, read the report.
  • The report also established a link between rising inequality and rising temperatures. The threat of rising temperatures from high levels of atmospheric carbon is in large part due to emissions from the richest 10 per cent of people in the world.

Conclusion of the Report:

  • Impact on SDGs: Reducing labour share, erosion of public spending, weakening of productive investment and rise in stock of carbon dioxide are factors that stand in the way of countries achieving Sustainable Development Goals (SDGs), according to the UNCTAD findings.
  • Misplaced Structural Reforms: The report highlighted the fact that there are underlying structural challenges that stand in the way of revival of global economy.
  • The global market, instead of pondering over challenges, brought some misplaced structural reform that further targets liberalisation in labour, products and financial markets, found the UNCTAD.

About UNCTAD:

  • United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as a permanent intergovernmental body.
  • UNCTAD is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues.
  • The organization’s goals are to: maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis.
  • Permanent secretariat — Geneva.
  • Other Reports: World Investment Report, Trade and Development Report, Technology and Innovation Report, Commodities and Development Report

ADDRESSING THE DEMAND DROUGHT IN OUR ECONOMY

Background:

  • A persistent slowdown has dragged economic growth in India down to 5% in the fiscal first quarter, weakest in more than six years.
  • Recent weeks have seen the possible reasons for the slowdown, as well as the government’s policy measures to ostensibly help revive the economy being put under the spotlight, the missing demand is yet to be addressed in a direct and concerted manner.
  • As data from the National Statistical Office show, private consumption expenditure, which contributes more than half the gross domestic product and is the mainstay of demand, has decelerated so sharply that at 3.1%, the expansion is at an 18-quarter low.
  • Automobile sales continued to plunge in August, posting their worst drop since the Society of Indian Automobile Manufacturers (SIAM) started collating wholesale vehicle sales data in 1997-98.The absence of demand pervades almost every key sector: from consumer durables to biscuits and housing.

What Has Caused This Demand Drought?

  • Multiple factors have contributed to the demand drought.
  • Lack of jobs, or even where jobs are available — like in the new or digitally enabled “gig” economy — a tenuousness about the incomes from such work, the abiding rural distress, widening inequality and, interestingly, in the opinion of some economists, even the Reserve Bank of India’s successful targeting of inflation are all cited as contributors.
  • For an economy such as India’s, the central bank’s remit of containing consumer price index-based inflation within a 2-6% band may be proving less than ideal, especially if monetary policy makers fix their sights on trying to peg inflation at or less than 4% — even it means retarding growth as a fallout.
  • Low inflation extracts costs in the form of lower nominal growth (growth measured in current prices) that could crimp tax receipts and in turn lead to cuts in government spending.
  • With wage/salary increases most often linked to inflation, slower price gains result in smaller annual increments that leave the earners more wary of spending on discretionary or non-essential purchases.
  • The crisis of demand in the rural hinterland has snowballed to the point where sellers of consumer goods including Hindustan Unilever (HUL) and ITC have seen appreciable slowing in sales growth in recent quarters.
  • Rural growth rates — which were almost double those in urban areas earlier — have eased to the point where they are now almost at par with those in urban areas, according to HUL’s first-quarter results statement.

What Can Be Done to Revive Demand?

  • Consumer sentiment is a key ingredient affecting consumption and it is vital for policy makers to address weakness in consumer sentiment through a mix of measures in the economic realm, both monetary and fiscal, as well as ensuring a congenial socio-political climate that enhances the ‘feel-good’ factor.
  • On the monetary side, ensuring lower borrowing costs as well as adequate availability of credit are crucial to helping create an enabling environment for consumers to consider taking out loans to fund their purchases.
  • However, fiscal measures are in many ways far more crucial. Targeted tax breaks or non-tax sops that incentivise consumption is one option.
  • The government’s latest decision to cut baseline corporate tax rates is certainly a good move, aimed at incentivising and spurring sluggish capital investment by businesses.
  • However, companies may balk at adding capacity when demand for their manufactured goods is still weak and it is therefore imperative that the revival of demand stays front and centre of any new policy measures.
  • As far as rural demand goes, the government must go beyond the Pradhan Mantri KIsan SAmman Nidhi, or PM-KISAN income supplementing scheme and tackle the crisis of low real farm incomes by radically recalibrating its approach to the agrarian economy.
  • As an immediate and necessary measure, the Mahatma Gandhi National Rural Employment Guarantee Scheme needs to be reinvigorated by ensuring timely and adequate funding and the fixing of appropriate wage levels.
  • As studies have shown, in its first five years, the scheme gave a big fillip to rural incomes and consumption in the hinterland.

What, if any, are the Risks?

  • Any economic stimulus package that the government may come up with would necessarily assume a short-term loosening of the fiscal deficit goals, whether from enhanced spending or from reduced tax revenues as the corporate tax cut may engender.
  • If the stimulus also entails a large expenditure component, there could also be second-order inflationary consequences.
  • However, the risks of failing to revive demand, at a juncture when the economy is heading for a stall, are far greater in the long run.
  • Once, the economy has been reflated and demand revives, revenue buoyancy is bound to return and prudent management can ensure a gradual return to normal service on long-run fiscal goals.

16TH GLOBAL SME BUSINESS SUMMIT

Why in news?

  • Union Minister Shri Nitin Gadkari inaugurated the 16th Global SME Business Summit 2019 in New Delhi on 24th September.

Global SME Business Summit:

  • The Summit is organised every year by the Ministry of MSME and the Confederation of Indian Industries (CII) for bringing together stakeholders and leaders in the MSME sector.
  • Theme for 2019: “Making Indian MSMEs Globally Competitive”.
  • The summit will help:
    • Disseminate knowhow on assessing the export potential of the products and services of Indian MSMEs.
    • Identify suitable markets.
    • Develop strategies to penetrate new markets through trade associations, multi-lateral agencies, international business forums and E-Commerce platforms.
    • The event will also help participating Indian MSMEs to single out avenues for joint ventures, franchising, cross-marketing, buyer-seller meets, etc.
    • The Minister, speaking on the occasion, said that the Government’s target is to increase MSME’s present share of 29 percent of GDP to 50 percent in the next five years and raise its export contribution from 49 percent to 60 percent.

NATIONAL CONCLAVE ON ENERGY EFFICIENCY IN MSME SECTOR

Why in News?

  • The National Conclave on Energy Efficiency in MSME sector was inaugurated by Union Ministers in Hyderabad.

Highlights:

  • The two-day Conclave was organized by the Bureau of Energy Efficiency (BEE) with participation from MSME entrepreneurs, industry associations, technology and service providers, sectoral energy experts and senior officials from the Government.
  • The Ministers also released Energy Conservation Guidelines for MSMEs.
  • They also launched the Knowledge Management Portal “SIDHIEE” under the BEE’s MSME Programme.
  • The SIDHIEE portal will host useful information including fifty videos of multimedia tutorials for MSMEs for early adoption of energy-efficient technologies.
  • The Conclave is expected to be useful in creating a platform for pooling the knowledge and synergising the efforts of various stakeholders.
  • The participantsdiscussed various issues such as strategies to promote energy efficiency, technical and financial capabilities of MSMEs, capacity-building and awareness programmes.

Bureau of Energy Efficiency (BEE):

  • It is a statutory body under the Ministry of Power, Government of India.
  • It assists in developing policies and strategies with the primary objective of reducing the energy intensity of the Indian economy.
  • It coordinates with designated consumers, designated agencies, and other organizations to identify and utilize the existing resources and infrastructure, in performing the functions assigned to it under the Energy Conservation Act.

PARTICIPATORY GUARANTEE SYSTEM (PGS)

Why in News?

  • Chairperson of the Food Safety and Standards Authority of India (FSSAI) said on the sidelines of a function of Food and Agriculture Organisation (FAO) and the World Health Organisation’s (WHO’s) Coordinating Committee for Asia (CCASIA) in Panaji that she expects the Union Agriculture Ministry’s Participatory Guarantee Scheme (PGS) to incentivise more farmers to grow organic food.

About Participatory Guarantee System (PGS):

  • PGS is a process of certifying organic products, which ensures that their production takes place in accordance with laid-down quality standards. The certification is in the form of a documented logo or a statement.
  • pgsindia-ncof.gov.in is web based platform to simplify the process of certifying organic products in accordance with the standards laid down for organic products for export purpose. Thus it seeks to curb third party certification.
  • Implemented: by the Department of Agriculture and Cooperation under the aegis of Union Ministry of Agriculture.

Guiding Principles of PGS:

  • PGS India system is based on participatory approach, a shared vision, transparency and trust. In addition it gives PGS movement a National recognition and institutional structure.

Participation:

  • Participation is an essential and dynamic part of PGS. Participation embodies the principle of collective responsibility for ensuring the organic integrity of the PGS. This collective responsibility is reflected through:
    • Shared ownership of the PGS
    • Stakeholder engagement in the development and operation process
    • Understanding of how the system works and
    • Direct communication between producers and consumers and other stakeholders

Shared Vision:

  • Collective responsibility for implementation and decision making is driven by common shared vision. All the key stakeholders (producers, facilitating agencies, NGOs, social organizations, State Governments and state agencies) support the guiding principles and goals, PGS is striving to achieve and this is achieved initially through their participation and support in the design and then by joining it. This may include commitment in writing through signing an application and pledge that includes the vision.

Transparency:

  • Transparency is created by having all stakeholders, including producers and consumers, aware of exactly how the guarantee system works to include the standards, the organic guarantee process (norms) with clearly defined and documented systems and how decisions are made.

Trust:

  • The integrity base upon which PGS-India programme is built, is rooted in the idea that producers can be trusted and that the organic guarantee system can be an expression and verification of this trust. The foundation of this trust is built from the idea that the key stakeholders collectively develop their shared vision and then collectively continue to shape and reinforce their vision through the PGS. The idea of ‘trust’ assumes that the individual producer has a commitment to protecting nature and consumers’ health through organic production.

Horizontality:

  • PGS India is intended to be non-hierarchical at group level. This will reflect in the overall democratic structure and through the collective responsibility of the PGS group with sharing and rotating responsibility, by engaging producers directly in the peer review of each other’s farms; and by transparency in decision making process.

National Networking:

  • PGS India while keeping the spirit of PGS intact aims to give the entire movement an institutional structure. This is achieved by networking the groups under common umbrella through various facilitating agencies, Regional Councils and Zonal Councils.
  • National Centre of Organic Farming shall be the custodian of data, define policies and guidelines and undertake surveillance through field monitoring and product testing for residues. Regional councils and facilitating agencies facilitate the groups in capacity building, training, knowledge/ technology dissemination and data uploading on the PGS website.

Advantages:

Among the advantages of PGS over third-party certification, identified by the government document, are:

  • Procedures are simple, documents are basic, and farmers understand the local language used.
  • All members live close to each other and are known to each other. As practising organic farmers themselves, they understand the processes well.
  • Because peer appraisers live in the same village, they have better access to surveillance; peer appraisal instead of third-party inspections also reduces costs
  • Mutual recognition and support between regional PGS groups ensures better networking for processing and marketing.
  • Unlike the grower group certification system, PGS offers every farmer individual certificates, and the farmer is free to market his own produce independent of the group.

Limitations:

  • PGS certification is only for farmers or communities that can organise and perform as a group within a village or a cluster of contiguous villages, and is applicable only to farm activities such as crop production, processing, and livestock rearing, and off-farm processing “by PGS farmers of their direct products”.
  • Individual farmers or group of farmers smaller than five members are not covered under PGS. They either have to opt for third party certification or join the existing PGS local group.
  • PGS ensures traceability until the product is in the custody of the PGS group, which makes PGS ideal for local direct sales and direct trade between producers and consumers.

A DEEP CUT IN THE CORPORATE TAXES

Context:

  • In order to revive the economy from the economic slowdown, the Finance Minister has announced a slew of major changes in corporate income tax rates. This has been made through an ordinance – the Taxation Laws (Amendment) Ordinance 2019 that amends Income Tax Act of 1961 and the Finance Act of 2019.

Key provisions of the ordinance:

  • The central government slashed corporate tax rates for domestic firms from 30% to 22% and for new manufacturing companies from 25% to 15% to boost economic growth.
  • Effective corporate tax rate after surcharge and cess on this companies would be 25.17 percent. No Minimum Alternate Tax (MAT) applicable on such companies.
  • Local companies incorporated after October 2019 and till March 2023, will pay tax at 15 percent.
  • That effective tax for new companies shall be 17.01 percent, including cess and surcharge.
  • Companies enjoying tax holidays would be able to avail concessional rates post the exemption period.
  • MAT relief for those companies opting to continue paying surcharge and cess. MAT has been reduced to 15 percent from 18.5 percent for companies who continue to avail exemptions and incentives.
  • Enhanced surcharge announced in Budget 2019 will not apply on capital gains arising on sale of any security, including derivatives by foreign portfolio investors (FPI).

Pros associated with the above move:

  • Lower taxes will result in higher profit margins. This will bolster their books, and some of these companies should be able to pass on the higher margins in the form of lower product prices to consumers.
  • Lower corporate income tax rates and the resultant increase in profitability of the company will definitely prompt companies to invest more, raising their capital expenditure (capex).
  • Increase in the capacities of the company will eventually result in the increased employment opportunities for the youngsters.
  • Given the substantially lower rates would imply that many corporates will break even much ahead than what would have been the case with the earlier rates.
  • The ultimate goal of turning India into investors’ darling, demonstrating the government’s intent to walk the talk on economic management, restoring investors’ confidence and boosting sentiments and demand will be definitely meet its success point.
  • It is expected that it will give a great stimulus to ‘Make in India’, attract private investment from across the globe, improve the competitiveness of the private sector, create more jobs.
  • The reduction in corporate tax, effectively, brings India’s ‘headline’ corporate tax rate broadly at par with an average of 23% rate in Asian countries.

Impacts of the Rate Cut:

  • The latest corporate income tax will result in the revenue foregone to the tune of Rs 1.45 lakh crore a year to the government.
  • The government has set a fiscal deficit target of 3.3 percent of GDP for 2019-20. So the latest move has raised concerns of fiscal slippage, given that tax collections have been far below the budgeted estimates.

Corporate tax – A Global Scenario

  • The new corporate income tax rates in India will be comparatively lower than USA (27 percent), Japan (30.62 percent), Brazil (34 percent), Germany (30 percent) and is similar to China (25 percent) and Korea (25 percent).
  • Effective tax rate of 17 percent on newly incorporated companies in India with is almost equivalent to what corporates pay in Singapore (17 percent).

What is Revenue Foregone?

  • Foregone earnings are the difference between earnings actually achieved and earnings that could have been achieved with the absence of specific fees, expenses or lost time.

37TH GST COUNCIL MEETING

Why in News?

  • The 37th GST Council met on 20th September 2019 in Goa under the chairmanship of Union Finance Minister.

Key Recommendations:

  • Relaxations in annual returns filing for MSMEs for the financial year 2017 – 18 and 2018 – 19.
  • A committee of officers would be appointed for examining the simplification of forms for annual return and reconciliation statement.
  • Extension of the last date for filing of appeals against orders of the Appellate Authority before the GST Appellate Tribunal as the Appellate Tribunals are yet not functional.
  • The new return system would be introduced from April 2020 instead of the previously proposed October 2019.
  • Suitable amendments would be made to the CGST Act, UTGST Act and corresponding SGST Acts in view of the creation of the union territories of Jammu & Kashmir and Ladakh.Integrated refund system with disbursal by a single authority to be introduced from 24th September 2019.
  • The Council also took an in-principle decision to link Aadhaar with the registration of taxpayers under GST and also to examine the possibility of making the 12-digit unique identification number mandatory for claiming refunds.
  • Changes were also made to the GST rates for various goods and services.

GST Council:

  • The Goods and Services Tax Council is a constitutional body for making recommendations to the Union and State Governments on issues related to Goods and Service Tax.
  • It is chaired by the Union Finance Minister.
  • The other members are the Union State Minister of Revenue or Finance, and Ministers in-charge of Finance or Taxation of all the States.

NIRVIK SCHEME

Why in News?

  • To enhance the loan availability of exporters, and the MSME sector the Export Guarantee Corporation of India (ECGC) has launched a new scheme called ‘Nirvik’.
  • To revive the export sector, Commerce Ministry also launched the common digital platform for the issuance of certificates of origin

Nirvik Scheme:

  • If there is any loss, then ECGC provided credit guarantee of up to 60% loss approximately.
  • Now under new scheme Nirvik consumers and exporters will covered up to 90% and if there is any loss then in that case ECGC will refund 90% to the banks including principal and interest.
  • Both pre and post shipment credit will also be covered under the new scheme.
  • Banks will get up to 50 % within 30 days of complain lodge.
  • Enhanced cover will ensure that Foreign and Rupee export credit interest rates will be below 4% and 8% respectively for exporters.
  • The scheme envisages simplified procedure for settlement of claim and for provisional payment up to 50% within 30 days on production of proof of end-use of the advances in default by the Insured Bank.

Electronic Certificates of Origin (CoO):

  • This platform will be a single access point for all exporters, for all Free Trade Agreements (FTAs)/ Preferential Trade Agreements (PTAs) and for all agencies concerned.
  • As we know, for exports to countries with which India has free trade agreements (FTA), exporters have to show a certificate that the consignment originated in India.
  • With the launch of this platform, these certificates can be obtained online and all the issuing authorities will be on the same portal.
  • Certificate of Origin will be issued electronically which can be in paperless format if agreed to by the partner countries.Authorities of partner countries will be able to verify the authenticity of certificates from the website.

IMPACT OF ATTACK ON SAUDI ARABIA’S OIL FACILITY

Why in News?

  • Last week the Houthis, a rebel Shia group of Yemen that is backed by Iran, bombed the Abqaiq plant as well as the Khurais oil field in Saudi Arabia.
  • The attack, executed by drones is the largest-ever disruption in crude oil production in Saudi Arabia, which supplies 10 per cent of global world supply and is the world’s largest crude oil exporter.

Global Impacts:

  • Saudi Aramco, the state-owned oil companysuspended the production of almost 6 million barrels per day (about 6 per cent of global oil supply) and also restricted the use of 2 mbd of spare capacity.
  • This is the largest-ever disruption in crude oil production and therefore oil prices across the world are expected to rise.

Impacts on India:

  • India imports 80 per cent of the oil it consumes, which means there are multiple ways in which the country will be impacted by this disruption.
  • The first issue is supply. India is already trying to make up for the loss of supply from Iran after US-imposed sanctions.
  • After Iraq, Saudi Arabia is India’s second-largest supplier of crude oil — it accounts for almost 17 per cent of the country’s imports.
  • Although Saudi Arabia has assured that there will be no loss of supply, if the process of restoration takes more time than anticipated, India would have to look for alternatives. This may not be easy since the global supply has been fairly volatile because of disruptions in some of the other big suppliers such as Venezuela, Libya and Nigeria.
  • India is expected to import 1.6 billion barrels of crude oil in the current financial year. So an increase in oil prices by just one dollar essentially means an increase of $1.6 billion in the import bill. That’s an additional Rs 11,500 crore at the current exchange rate.
  • But supply constraints and rising oil prices would mean that the rupee will weaken further against the dollar — that’s because, as the dollar prices of crude oil rise, India would need to buy more dollars for the same amount of oil, thus depreciating the value of the rupee vis-a-vis the dollar.
  • Rising oil prices will worsen the Indian government’s fiscal balance.
  • higher crude oil prices would also lead to higher domestic oil prices, which, in turn, will further depress the demand for all things, especially those that use oil as the primary inputsay, cars.
  • This dip in consumption demand, which is already under strain as the recent growth slowdown has shown, would likely mean lower economic activity and consequently lower revenues for the government.

MEASURES TO ENHANCE IPR ECOSYSTEM THROUGH LOWER FEES

Why in News?

  • The Ministry of Commerce and Industry has proposed to reduce the fees for various IPRs (Intellectual Property Rights).

Highlights:

  • The fee structure reduced is for both e-filing and physical filing.
  • The reduction in fees ranges from a 50% decrease to a 100% reduction (waiver of fees) for different sectors.
  • Geographical Indications have been given a 100% reduction in the fees.
  • Domestic filing for patents has increased from 22% in 2013-14 to 34% in 2018-19.
  • Awareness programmes for IP are being conducted at schools, colleges, universities, R&D institutes and industry clusters.
  • To address the issue of pendency in IP applications, the government has streamlined the process, and also increased manpower in this field.

DIGITAL CERTIFICATES OF ORIGIN & STEEL IMPORT MONITORING SYSTEM

Why in News?

  • In continuation of Finance Minister announcements to revive the export sector, Commerce Minister has launched the common digital platform for the issuance of certificates of origin and a steel import monitoring system (SIMS).

What is a certificate of origin?

  • The Certificate of Origin is used to certify that the export products are obtained, produced or manufactured in India. Currently, it is issued by various notified agencies around the country through manual processes after vetting of the rules of origin criteria as per the respective Free Trade Agreement /Preferential Trade Agreement. India has 15 FTAs/PTAs with various partner countries, under which Indian exporters avail reduced import tariffs in the destination country. The exporters are required to produce a certificate that the consignment originated in India to claim the tariff and other benefits.

Digital Certificate of Origin System:

  • The common digital platform will be a single access point for all exporters, for all Free Trade Agreements (FTAs)/Preferential Trade Agreements (PTAs) and for all agencies concerned.Exporters can register on this platform and apply for the Certificate of Origin to any of the designated agency.If the partner countries agree to this, the Certificate of Origin will be issued electronically and the authorities of partner countries will be able to verify the authenticity of certificates from the website.
  • The system provides administrative access to the Department of Commerce for reporting and monitoring purposes.

About the other New Schemes:

1.Enhanced Export Credit Insurance Scheme:

  • The minister has provided more details about the enhanced export credit insurance scheme for banks that lend working capital to exporters. The new export credit insurance scheme will be called “Nirvik”.
  • The Export Credit Guarantee Corporation (ECGC) gives a cover of 60% of the loss to banks. The new scheme will give 90% coverage of the principal and interest of the loan for pre- and post-shipment credit, and half of this will be provided in 30 days.”
  • He said claim inspection would be waived for up to ₹10 crore. For claims higher than this amount, inspection of bank documents and records by ECGC officials will be mandatory. The previous limit for document inspection was ₹1 crore.
  • The minister added that the existing premium rate would be lowered, and loans categorised into two broad categories of those below ₹80 crore and those above that amount. Loans above ₹80 crore will be further divided into those that are not for gold, jewellery or diamonds, and those that are.

2.Steel Import Monitoring System (SIMS).

  • The Commerce and Industry Ministry on Monday launched Steel Import Monitoring System (SIMS) which will provide advance information about steel import to government and other stakeholders, including producers and consumers, to have effective policy interventions.
  • In this system, the importers of specified steel products will register in advance on the web portal of SIMS, providing necessary information.
  • Commerce and Industry Minister said that registration will be online and automatic, and no human intervention will be required.The importer can apply for registration not earlier than 60th day and not later than 15th day before the expected date of arrival of import consignment.
  • The automatic registration number thus granted shall remain valid for a period of 75 days.The information about the steel imports provided by the importers on SIMS will be monitored by the steel ministry.
  • There has been complaints from officials that collecting data on what grade of steel was being imported, how much was being imported, from where, and what the domestic market potential is quite difficult.
  • The government wants to assure the export community that the SIMS is not a licensing mechanism, and that nobody will be stopped from importing.

NEW MEASURES TO BOOST EXPORTS AND HOUSING SECTOR

Why in News?

  • Finance Minister Nirmala Sitharaman has announced a fresh set of measures worth around 70,000 crore rupees to boost exports and housing sector.
  • The government will provide a 10,000 crore rupees special window with an aim to help complete ongoing affordable and middle-income housing projects.

Background:

  • As part of the third stimulus package for the economy, Finance Minister unveiled a set of stimulus measures to boost exports and the housing sector.
  • New Booster dose for the economy comes at a time when the country had reported its weakest growth in more than six years at 5 per cent in the June quarter.
  • The previous low in GDP growth was recorded at 4.3 percent in Jan-Mar quarter of 2012-13. The economic slowdown has particularly been harsh on the automobile sector with domestic passenger vehicle sales having skidded for the 10th consecutive month in August, registering a 31.57 percent decline.
  • The International Monetary Fund (IMF) said that Indian economy was “much weaker” than expected. This was attributed to the corporate and environmental regulatory uncertainty and lingering weakness in some non-banking financial companies.
  • The new package of measures for exports sector came in six different silos and covered steps that would address comprehensively tax and duties refunds for exporters; improve credit flow to the export sector and launch of a special free trade agreement (FTA) utilisation mission. India will also now host annual mega shopping festivals in 4 places.

Steps to Boost Exports:

  • Government announced the introduction of a new attractive scheme for Remission of Duties or Taxes on Export Product (RoDTEP) to replace the existing Merchandise Exports from India Scheme (MEIS) from January 2020 and revised priority sector lending norms for export credit that will release an additional Rs 36,000 crore to Rs 68,000 crore as export credit under priority sector.
  • It was made clear that RoDTEP would span all the sectors and the revenue foregone could be about Rs 50,000 crore.
  • The duty remission will vary from sector-to-sector. With the introduction of RoDTEP, all the uncertainty over continuation of MEIS is over.

Steps to Boost Housing Sector:

  • New measures to boost housing sector were brought in owing to the fact that nearly 3.5 lakh dwelling units (non NPA and non NCLT) in the country are plagued with last mile funding problem.
  • Rs 20,000 crore fund (Rs 10,000 crore from Government and roughly same amount from outside investors) would be set up to provide last mile funding for affordable and middle-income housing.
  • This fund will be used to support projects that are non-NPA and non-NCLT projects and the objective is to focus on construction of unfinished units.
  • The fund would be set up as a Category-II AIF trust and would be professionally run with experts from housing and banking sector.
  • It was made clear that the Government was “open” to bring in sovereign wealth funds as investors. Besides the Government, the other investors who are likely to contribute to the fund include LIC and other institutions and private capital from banks and DFIs.
  • External Commercial Borrowing (ECB) guidelines will be relaxed to facilitate financing of home buyers who are eligible under the PMAY, in consultation with RBI.
  • This will be in addition to the existing norms for ECB for affordable housing.
  • Also, the Finance Minister came up with some good news for government servants, stating that interest rates on house building advance will be lowered and linked with the 10-year G-sec yields.

GOVT IMPOSES MINIMUM EXPORT PRICE ON ONION

Why in News?

  • The government has imposed a minimum onion export price of 850 US dollars per tonne to curb its exports and help bring down Domestic Prices.
  • A notification to this effect was issued by the Directorate General of Foreign Trade. This is the first time that a MEP has been imposed on onions this year.
  • During the financial year 2018-19, India had exported 21.82 lakh tonnes of onion.

What is Minimum Export Price?

  • Minimum Export Price (MEP) is the price below which an exporter is not allowed to export the commodity from India.
  • MEP is imposed in view of the rising domestic retail/wholesale price or production disruptions in the country.
  • MEP is a kind of quantitative restriction to trade.
  • Government fixes MEP for the selected commodities with a view to arrest domestic price rise and augment domestic supply.
  • This is intended to be imposed for short durations and is removed when situations change.
  • The removal of MEP helps farmers / exporters in realising better and remunerative prices and would also help in earning valuable foreign exchange for the country.

What Does Such Imposition Mean?

  • Simply put, henceforth exports will not be allowed if the consignments are priced below $ 850 per tonne. The steep MEP will, in a way, stop all outbound shipment of onions from India.

Reason Behind the Imposition:

  • This move comes after the state-owned MMTC Ltd had floated a tender for import of onions from “Pakistan, Egypt, China, Afghanistan or any other origin”, triggering criticism from farmers in Maharashtra.
  • The inclusion of Pakistan in the tender list had evoked extreme criticism from various quarters.
  • The MMTC, however, issued a fresh corrigendum to its tender, excluding Pakistan as the country of origin, thereby making bids from the neighbouring country ineligible.
  • Prices in mandis of Maharashtra — the largest onion Growing State which accounts for over 33 per cent of national produce — has been on the rise since April.
  • Imposition of the MEP are steps taken by the Centre to prevent further rise in prices.

MARKET INTERVENTION PRICE SCHEME

Why in News?

  • Kashmir’s famed apple is battling to get exported outside the State this year as militants are campaigning against the fruit’s trade.
  • The government is planning to procure almost 12 lakh metric tonnes of apple this season, under the MISP, with the help of the National Agriculture Cooperative Marketing Federation of India (NAFED).

Market Intervention Price Scheme:

  • MIP is a price support mechanism implemented on the request of State Governments for procurement of perishable and horticultural commodities in the event of a fall in market prices.
  • The Scheme is implemented when there is at least 10% increase in production or 10% decrease in the ruling rates over the previous normal year.
  • MIP works in a similar fashion to Minimum Support Price based procurement mechanism for food grains, but is an adhoc mechanism.
  • Its objective is to protect the growers of these horticultural/agricultural commodities from making distress sale in the event of bumper crop during the peak arrival period when prices fall to very low level.
  • Thus, it provides remunerative prices to the farmers in case of glut in production and fall in prices.

Working:

  • Proposal of MIP is approved on the specific request of State/UT Government, if the State/UT Government is ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation.
  • Further, the extent of total amount of loss shared is restricted to 25% of the total procurement value which includes cost of the commodity procured plus permitted overhead expenses.

Implementation of MIS:

  • The Department of Agriculture & Cooperation is implementing the scheme.
  • Under MIP, funds are not allocated to the States.
  • Instead, central share of losses as per the guidelines of MIP is released to the State Governments/UTs, for which MIP has been approved, based on specific proposals received from them.
  • Under the Scheme, a pre-determined quantity at a fixed Market Intervention Price (MIP) is procured by NAFED as the Central agency and the agencies designated by the state government for a fixed period or till the prices are stabilized above the MIP whichever is earlier.
  • The area of operation is restricted to the concerned state only.
  • The MIS has been implemented in case of commodities like apples, kinnoo/malta, garlic, oranges, galgal, grapes, mushrooms, clove, black pepper, pineapple, ginger, red-chillies, coriander seed etc.

THE NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF INDIA (NAFED)

Context:

  • NAFED has been tasked with purchasing all the apples that growers bring to sell at mandis in the Kashmir Valley.

Background:

  • The National Agricultural Cooperative Marketing Federation of India (NAFED) has not bought a single kilogram of apples for the last three decades or more.
  • This trade was always in private hands and the government didn’t think it necessary to intervene.

Concern:

  • A bumper crop, for which there would hardly be any private buyers with all the current movement restrictions, makes it all the more challenging.
  • There is no MSP for apple.
  • The state government will fix the procurement prices for different grades (A, B and C) and varieties.
  • It is expected that we will pay 5 per cent more than the market price prevailing last year.
  • The total cost of procurement operations is tentatively assessed at Rs 5,000 crore.
  • Apple harvesting is now on mainly in HP, where an estimated 50-60 per cent of the fruit in the main belt of Shimla, Narkanda, Sainj and Rohru are still on the trees.
  • Currently, Royal Delicious apple is fetching an average modal price of Rs 3,300 per quintal in Shimla, as against Rs 7,800-7,900 at this time last year. That has mainly to do with a bigger crop, likely in Kashmir as well.

Why Such Move:

Kashmir unrest

  • Apple cultivation is the mainstay of Kashmir’s economy with revenue of around Rs1,200 crore a year, and has been hit due to the clampdown post abrogation of the state’s special status guaranteed under Article 370 of the Constitution.
  • The move is aimed at helping farmers, and comes in the backdrop of New Delhi imposing long-pending retaliatory tariffs on 29 US products.
  • Key items imported by India from the US include almond and fresh apples worth $645 million and $165 million, respectively.

Stats:

  • Jammu & Kashmir accounts for about 18 lakh tonnes (lt) out of India’s total annual apple production of 23-24 lt, which also includes 4.5-5 lt from Himachal Pradesh and 50,000-60,000 tonnes from Uttarakhand.
  • This year, the country’s output is projected to touch 26 lt due to good snowfall, with J&K alone harvesting 20 lt or so.

What is National Agriculture Cooperative Marketing Federation of India?

  • The objectives of the NAFED shall be to organize, promote and develop marketing, processing and storage of agricultural, horticultural and forest produce, distribution of agricultural machinery, implements and other inputs, undertake inter-state, import and export trade, wholesale or retail as the case may be and to act and assist for technical advice in agricultural, production for the promotion and the working of its members, partners, associates and cooperative marketing, processing and supply societies in India.
  • NAFED is the central agency assigned to procure directly from farmers and is expected to play a pivotal role in helping double farmers’ income by 2022.

Apple Economy:

  • J&K apple production contributes 10 per cent to the total state income of $20 billion.
  • India is the fifth largest producer of apples in the world, even though its share in global apple production is just 3 per cent.
  • More than two thirds of the National Apple Production comes from the Valley of Kashmir.
  • Absence of Logistics and Infrastructure
    • The complete concentration of production and area under apple cultivation is matched only by a complete absence of infrastructure; only 0.3 per cent of national storage capacity is in the state.
    • There are just 36 cold storages in J&K out of the 6,000 in the country. In addition to this, there is no logistics infrastructure.

About Apple:

  • Around 20 Lakh tonnes of Apple is produced in India every year.
  • The top apple producing states of India are Jammu & Kashmir, Himachal Pradesh, Uttarakhand & Arunachal Pradesh with their respective shares of 70%, 21.5%, 6.4% and 1.6%.
  • Further, apple is also produced in Mizoram, Sikkim, Tamil Nadu and Nagaland also. Key apple varieties include: Michal, Mollies Delicious, Maayan, Anna, Chaubattia Anupam, Rich-e-Red, Gala, Firdous, Lal ambri , Kinnauri Apple etc.

INDIA’S SECOND MULTI-MODEL TERMINAL

Why in News?

  • The Prime Minister dedicated to the nation India’s second riverine Multi-Modal terminal built at Sahibganj in Jharkhand
  • This is the second of the three Multi-Modal Terminals being constructed on river Ganga under Jal Marg Vikas Project (JMVP).

Jal Marg Vikas Project (JMVP):

  • Jal Marg Vikas Project (JMVP) for capacity augmentation of navigation on National Waterway-1 (NW-1) is being implemented with the technical assistance and investment support of the World Bank.
  • One of the major problems for commercially viable and safe navigation on NW-1 is low depth upstream of Farakka due to low discharges from tributaries and difficult hydro morphological characteristics of river Ganga.
  • A pilot study on the Allahabad-Ghazipur stretch was commissioned by Inland Waterways Authority of India (IWAI) to find solutions to this problem.
  •  Based on the findings of this study, a proposal for development of NW-1 was taken up for seeking technical assistance and investment support from the World Bank
  • Finance Minister announced JMVP in Budget Speech in July 2014, to enable commercial navigation of at least 1500 tonnes vessels in Ganga.
  • States that come under this project are: Uttar Pradesh, Bihar, Jharkhand, West Bengal

Significance of the Project:

  • The alternative mode of transport will be Environment-Friendly and Cost-Effective. The project will contribute to bringing down the logistics cost in the Country.
  • Mammoth Infrastructure development like multi-modal and inter-modal terminals, rollon –Roll off (Ro-Ro) facilities, ferry services, navigation aids.
  • Socio-economic impetus; huge Employment Generation

‘ANGAN’- INTERNATIONAL CONFERENCE ON ENERGY EFFICIENCY IN BUILDING SECTOR

Why in News?

  • An international conference ANGAN (Augmenting Nature by Green Affordable New-habitat) focussed on Energy Efficiency in Building Sector
  • The Conference is being organised by the Bureau of Energy Efficiency (BEE), Ministry of Power, Government of India in collaboration with GIZ under the Indo German Technical Cooperation.

Highlights:

  • The International Conference will provide a platform to deliberate on interdependence between organizations, systemic sustainability and feedback loops for better resource efficiency.Given the formidable challenge of providing adequate energy of desired quality to the consumers at reasonable costs, improving the efficiency in high energy consumption sectors like buildings have become important component of our integrated energy policy.
  • Due to lack of awareness and knowledge about latest technologies, financial assistance, suppliers and purchase of energy-efficient equipment, etc. efforts on energy efficiency and conservation in this sector have been moderate and therefore require greater push.
  • This event aims to provide thrust in this direction so as to address such challenges faced by the stakeholders.

BEE:

  • The BEE is a statutory body under the Ministry of Power, Government of India. It assists in developing policies and strategies with the primary objective of reducing the energy intensity of the Indian economy.
  • BEE coordinates with designated consumers, designated agencies, and other organizations to identify and utilize the existing resources and infrastructure, in performing the functions assigned to it under the Energy Conservation Act.

NATIONAL INFRASTRUCTURE PIPELINE OF RS. 100 LAKH CRORE

Why in News?

  • To achieve the GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion (Rs. 100 lakh crore) over these years on infrastructure.
  • To achieve this task, a Task Force under the chairmanship of Secretary (DEA) has been constituted by Union Finance Minister to draw up a National Infrastructure Pipeline for each of the years from FY 2019-20 to FY 2024-25.

Highlights:

  • In the past decade (FY 2008-17), India invested about $1.1 trillion on infrastructure.
  • The challenge is to step-up annual infrastructure investment so that lack of infrastructure does not become a binding constraint on the growth of the Indian economy.
  • Hon’ble Prime Minister in his Independence Day speech highlighted that Rs.100 lakh crore would be invested on infrastructure over the next five years.
  • Infrastructure projects will include social and economic infrastructure projects. To implement an infrastructure program of this scale, it is important that projects are adequately prepared and launched.

National Infrastructure Pipeline:

  • The National Infrastructure Pipeline would include greenfield and brownfield projects costing above Rs 100 crore each.
  • Other qualifications for inclusion in the pipeline for the current year will include availability of a DPR, feasibility of implementation, inclusion in the financing plan and readiness/ availability of administrative sanction.
  • Each Ministry/ Department would be responsible for monitoring of projects so as to ensure their timely and within-cost implementation.
  • The Task Force will also enable robust marketing of the pipeline of projects requiring private investment through the India Investment Grid (IIG), National Investment & Infrastructure Fund (NIIF), etc.

FIRST MEGA FOOD PARK OF TELANGANA STATE

Why in News?

  • Union Minister of Food Processing Industries today inaugurated the first Mega Food Park in Telangana promoted by M/s Smart Agro Food Park Pvt. Ltd. at Village Lakkampally, Nandipet Mandal of Nizamabad District, Telangana state.

Mega Food Park:

  • The Mega Food Park will leverage an additional investment of about Rs. 250 crores in 22 food processing units in the park and generate a turnover of about Rs. 14000 crores.
  • The Park will also provide direct and indirect employment to 50,000 youth and benefit about 1 lakh farmers.
  • Mega Food parks shall facilitate doubling of farmer’s income by 2022 which is a primary agenda of Govt in the field of agriculture.
  • Telangana government also providing financial support to farmers, ultimately farmers will be benefitted.

Significance:

  • Mega Food Parks shall further complement the Govt’s scheme by reducing post-harvest losses and hedging the farmer’s risk.
  • Mega Food Park shall provide gainful employment to women and hence help support their livelihood.
  • The Mega Food Park Scheme is being implemented in order to give a major impetus by adding value and reducing food wastage at each stage of the supply chain with particular focus on perishables.
  • Mega Food Parks create modern infrastructure facilities for food processing along the value chain from farm to market with strong forward and backward linkages through a cluster-based approach.
  • Common facilities and enabling infrastructure are created at Central Processing Centre and facilities for primary processing and storage is created near the farm in the form of Primary Processing Centers (PPCs) and Collection Centers (CCs).
  • Under the Scheme, Government of India provides financial assistance upto Rs. 50.00 Crore per Mega Food Park project.

The Smart Agro Mega Food Park:

  • It will benefit the people of Nizamabad District and the people of nearby Districts of Nirmal, Jagtial, RajannaSircilla Kamareddy of Telangana &Nanded district of Maharashtra state.
  • This Mega Food Park has been set up in 78 acres of land at a cost of Rs. 108.95 crore.
  • The facilities being created by the developer at Central Processing Centre (CPC) of this Mega Food Park include
    • Raw Material Warehouse of 5000 MT,
    • Finished Good Warehouse- 5000 MT,
    • Multi Commodity Cold Storage-5000 MT,
    • Deep Freeze Store-500 MT,
    • Turmeric-Curcumin,
    • Oleoresin Extraction unit-5 MT/Day,
    • QC Laboratory and other related food processing facilities.
  • The Park also has a common administrative building for office and other uses by the entrepreneurs and 3 PPCs at Medak, Gouraram and Nandipet having facilities for primary processing and storage near the farms.
  • The modern infrastructure for food processing created at Park will benefit the farmers, growers, processors and consumers of Telangana and adjoining areas.

EXTERNAL BENCHMARK-BASED LENDING

Why in News?

  • The RBI has made it mandatory for all banks to link floating rate loans — to retail customers and loans to micro, small and medium enterprises (MSME) — to an external benchmark.
  • Some banks have already started to link home and auto loan rates to the repo rate, which is an external benchmark.
  • Banks can choose from one of the four external benchmarks — repo rate, three-month treasury bill yield, six-month treasury bill yield or any other benchmark interest rate.
  • The interest rate under external benchmark shall be reset at least once in three months.

Why Such Move?

  • At present, interest rates on loans are linked to a bank’s marginal cost of fund-based interest rate (MCLR).
  • It has been observed that due to various reasons, the transmission of policy rate changes to the lending rate of banks under the current MCLR framework has not been satisfactory.
  • The RBI, therefore, has issued a circular making it mandatory for banks to link all new floating rate personal or retail loans and floating rate loans to MSMEs to an external benchmark effective October 1, 2019.
  • The move is aimed at faster transmission of monetary policy rates.

Repo wasn’t Useful:

  • Even before RBI had made it mandatory, several banks had launched repo-linked lending rate products.
  • This was done in an effort to ensure faster transmission of policy rate cuts to borrowers.
  • The repo (or repurchase) rate is the rate at which the Reserve Bank of India (RBI) lends money to other banks.
  • Hence, cuts in the repo rate are meant to lead to cuts in home loan and other lending rates as banks get to borrow money cheaply from the RBI.
  • By pegging the rate to an external benchmark RBI is hoping for a faster transmission of rate cuts than has happened so far under the MCLR system.

MCLR:

  • MCLR (Marginal Cost of funds-based Lending Rate) replaced the earlier base rate system to determine the lending rates for commercial banks.
  • RBI implemented MCLR on 1 April 2016 to determine rates of interests for loans.
  • It is the minimum interest rate that a bank can lend at.
  • MCLR is a tenor-linked internal benchmark, which means the rate is determined internally by the bank depending on the period left for the repayment of a loan.
  • MCLR is closely linked to the actual deposit rates and is calculated based on four components: the marginal cost of funds, negative carry on account of cash reserve ratio, operating costs and tenor premium.