Comprehensive News Analysis – 03 June 2016

Table of Contents:

A. GS1 Related:

1. IMD predicts excess rainfall

B. GS2 Related:

1. India, U.S. to share data on terrorists

3. Crucial meetings await Parrikar on sidelines of Shangri-La Dialogue

4. Ranil aims to present draft Constitution by year-end

5. PM to inaugurate Friendship Dam in Afghanistan

C.GS3 Related:
D. GS4 Related
E. Important Editorials : A Quick Glance

The Hindu

1. Finding judicial closure in Gulbarg

2. Why go it alone?

Indian Express

1. In Afghanistan, PM Modi’s weekend stop in Herat, a massive crisis of state

Others:

1. PIB

a) First Meeting of Governing Council of National Skill Development Mission held under Chairmanship of PM

2. The Financial Express:No point hiking pulse MSPs if there’s no procurement

3. The Financial Express:Judicial over-drive

4. The Financial Express:An elusive search for green shoots

5. The Business Line: Rescind the bad changes

6. The Business Line: Report card on RBI

7. The Economic Times: There should be one rate of spectrum usage charge for all

8. Quick Bits

a) Draft water bill proposes ‘water for life’ for all

b) New aviation policy has fare cap for 1-hour routes: Rs 2,500

c) June 2017 deadline to seal Indo-Bangla border in Assam –

F. Concepts-in-News: Related Concepts to Revise/Learn:
G. Fun with Practice Questions 🙂
H. Archives

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Useful News Articles

A. GS1 Related
  1. IMD predicts excess rainfall

Topic: Geography

Category: Monsoon

Location: The Hindu

Key points:

  • the India Meteorological Department (IMD) said in an update to its April monsoon forecast that rainfall would be 6% above the 50-year average of 89 cm
  • Rains over north-west India would be 8% more; over Central and South India 13% more and over north-east India 6% less than what these regions historically got
  • The IMD maintained that the monsoon was yet to set in over Kerala and would do so “in the next three or four days”
  • The India Meteorological Department (IMD), the official weather agency, laid down a set of criteria in 2005 to define the monsoon onset in Kerala.
  • According to that, at least 8 of 14 meteorological stations Minicoy, Amini, Thiruvananthapuram, Punalur, Kollam, Alappuzha, Kottayam, Kochi, Thrissur, Kozhikode, Thalassery, Kannur, Kasargode and Mangalore ought to report rainfall of 5 mm or more for two consecutive days. Along with that there ought to be minimum range of wind speed and a characteristic heat waves called Outgoing Longwave Radiation as well as a steady pattern of the monsoon winds at specified height in the atmosphere. Only when all of this is satisfied for two days continuously does it count as monsoon

 

B. GS2 Related
  1. India, U.S. to share data on terrorists

Topic: International Relations

Category: Indo-US Relations

Location: The Hindu

Key points:

 

  • The Home Ministry of India signed an agreement  to join the global terror database maintained by the Terrorist Screening Center (TSC) of the U.S
  • Under this arrangement, both sides will give each other access to terrorism screening information through designated contact points, subject to domestic laws and regulations, said the statement
  • The U.S. has already finalized such agreements with 30 countries and the Terrorist Screening Center has details of 11,000 terror suspects on its database, including nationality, date of birth, photos, finger prints (if any) and passport number

 

  1. Crucial meetings await Parrikar on sidelines of Shangri-La Dialogue

Topic: International Relations

Category: Shangri-La Dialogue

Location: The Hindu

Key points:

  • The Defence Minister of India will hold crucial meetings with his counterparts from France and the U.S. on the sidelines of the Shangri-La Dialogue in Singapore over the next two days
  • In his meeting with French Defence Minister, the Minister will review the progress of negotiations for direct purchase of 36 Rafale fighter jets
  • Meanwhile, finalisation of the text of the Logistics Support Memorandum of Understanding is likely to figure in the Minister’s meeting with U.S. Defence Secretary

 

  1. Ranil aims to present draft Constitution by year-end 

Topic: India’s Neighbourhood

Category: Sri lanka

Location: The Hindu

Key points:

  • Sri Lanka Prime Minister RanilWickremesinghe is aiming for the presentation of a draft Constitution Bill by the end of this year
  • The official committee on constitutional reforms in Sri Lanka has not been able to arrive at a consensus while making recommendations on several contentious areas such as the nature of state, national flag, religion, merger of provinces and land powers
  • Despite this, the 20-member committee has come up with an exhaustive Bill of Rights and provisions for curtailment of powers of the office of Governor, a subject that has been of great interest to the Northern and Eastern Provinces
  • Six sub-committees, dealing with various subjects as spelt in the panel report were formed. Once the subcommittees completed their work, they would present their findings to the Steering Committee, which would, in turn, present a report to the Constitutional Assembly along with a draft proposal

 

4. PM to inaugurate Friendship Dam in AfghanistanTopic: India’s Neighbourhood

Category: Afghanistan

Location: The Hindu

Key points:

  • “Prime Minister Modi and Afghan President Ashraf Ghani will jointly inaugurate the Afghan-India Friendship Dam on June 4, in Herat province
  • The Afghan-India Friendship Dam will irrigate 75,000 hectares of farmland in arid parts of western Afghanistan
  • Originally constructed in 1976, the reservoir was damaged in the Afghanistan civil war
  • The Afghanistan government in 2015 changed the name of the project from Salma dam to Afghan-India Friendship Dam

 

C. GS3 Related

 

D. GS4 Related

 

E. Important Editorials: A Quick Glance

 

The Hindu

 

  1. Finding judicial closure in Gulbarg 

Topic: Security

Category: Communal violence

Key points

  • For a country that has borne communal and mob violence of horrific dimensions, every conviction for murder and rioting is a rare victory for justice and accountability
  • The Ahmedabad Gulbarg Society massacre, in which 69 Muslims, including former Congress MP Ehsan Jafri, were murdered by a rampaging mob, was one of the most gruesome incidents of the Gujarat riots of 2002. The conviction of 24 persons, including 11 for murder, by a Special Court in Ahmedabad for their role in the incident, marks a partial, but significant, victory for the Special Investigation Team constituted by the Supreme Court to probe specific cases of the post-Godhra riots, after serious misgivings were expressed on the manner in which the cases were being investigated and tried
  • That identified members of a mob have been found guilty of murder, and several others for rioting, arson and unlawful assembly, will go some way in giving the victims a sense of closure
  • The quantum of punishment will be known shortly, but nothing short of life imprisonment is in store for at least 11 found guilty of capital offences. Given India’s long experience of seeing perpetrators of communal violence get away, it is some consolation that many of the Gujarat riots cases are reaching a logical judicial conclusion
  • The Best Bakery and BilkisBano cases ended in convictions after being transferred out of Gujarat. After the SIT took over, the more sensational cases also saw rioters being jailed. The NarodaPatiya massacre, in which 97 Muslims were killed, resulted in a historic verdict, as the trial court upheld the conspiracy angle and sentenced a former Gujarat Minister and a Bajrang Dal leader to life. For a riot at Sardarpura, in which 33 people were killed, 31 were convicted and 42 acquitted
  • After the SIT gave a clean chit to Narendra Modi and repudiated allegations by Ehsan Jafri’s widow that, as Chief Minister of Gujarat, he had instructed the police to let the mob run riot, the Gulbarg Society case became a rallying point for those pleading that the Modi administration be implicated in the riots
  • The SIT included a police inspector and a BJP councillor in the charge sheet, but both are among the 36 now acquitted. The prosecution was unable to prove any conspiracy behind the communal violence with the court finding insufficient evidence of pre-planning, never easy to establish in a case such as this. The collapse of the conspiracy angle does not imply an acceptance of the narrative that the Gujarat riots were an angry, reflexive response to the Godhra train carnage. The lines between spontaneity and subtle orchestration are hard to delineate. Likewise, there is a difficulty in assessing the varying degree of moral culpability between commission and wilful omission. It would be well to remember this as the Gujarat riot cases reach their judicial closure.

 

2. Why go it alone?Topic: International Relations

Category: India’s role in South Asia

Key points:

  • The Salma Dam in Afghanistan’s Herat Province, built with Indian assistance and scheduled to be inaugurated during Prime Minister Narendra Modi’s upcoming visit to Afghanistan, is a significant landmark in India’s engagement with the war-ravaged country
  • Coming close on the heels of the Indian investment in Iran’s Chabahar port complex and opening a land route onwards to Afghanistan, the ongoing strategic engagement with Tehran and Kabul represents New Delhi’s ambitious foray into its extended neighbourhood. But does India have the material and political wherewithal to stay the course vis-à-vis these long-term projects?
  • India’s strategic engagements in the region and beyond suffer from several handicaps. First of all, New Delhi lacks the financial resources to invest in crucial projects in a sustained manner due to budget constraints and compulsions of domestic priorities. Second, there is also a problem of severe attention deficit resulting from an inability to commit diplomatic and political capital to pursue key strategic objectives. Third, many of India’s strategic initiatives in the region, Chabahar for instance, often get portrayed in competitive terms, thereby getting into the cross hairs of adversarial/insecure neighbours.Finally, this problem is compounded by the fact that New Delhi has traditionally displayed a self-imposed “unilateral bias” in addressing key challenges in the neighbourhood and near abroad. Indeed, this tendency to “go solo” partly explains the lacklustre performance of at least some of India’s strategic initiatives, and has, indeed, contributed to a certain “strategic diffidence” in our strategic culture
  • How can we overcome this material and political inability to take our strategic initiatives to their logical conclusion and leverage them in the longer term?
  • The solution to this problem is not throwing more taxpayers’ money at these initiatives, but by a) adopting a grand strategic approach to addressing key strategic challenges. We need to know why we are doing what we are doing: there should be a clear rationale guiding our strategic engagements b) moving from a unilateral approach to tackling problems to a multilateral approach, and c) creating a regional/global consensus on key challenges. Let’s examine some of our current strategic engagements in the region and see whether a multilateral approach can help us pursue our objectives better
  • Take the case of the Indian investment in Iran’s Chabahar port complex. At the outset, it is important to be cognisant of four important issues. First, much of the Indian commentary has overstated the strategic significance of the recently signed Chabahar deal, with some overenthusiastic media commentators even positing it as a counter to the Chinese-built Gwadar port in Pakistan. Second, Iran was unambiguous in stating that it is not an “Indian” complex (the Indian presence would be limited to developing a small part of a huge complex). The Iranian Ambassador to Pakistan went even further: “The deal is not finished. We are waiting for new members. Pakistan, our brotherly neighbours, and China, a great partner of the Iranians and a good friend of Pakistan, are both welcome.”
  • Third, it is delusional to think we can develop the port complex and the land access to Afghanistan onwards to Central Asia all on our own and maintain them. Finally, even if we are able to, hypothetically speaking, carry out all these grand plans on our own, we may not be able to sustain them in the longer run due to financial and security reasons. Let’s recall that the Chabahar project was conceived of 13 years ago but it could not be completed due to a number of reasons, including financial commitment issues and U.S. sanctions on Iran
  • There is therefore no point in trying to do it all by ourselves: why not get some of India’s key strategic partners, such as the Japanese who might have both the inclination and the money, interested in developing the port with India? Partnering with Japan or European countries to co-develop the port with India would save us some money, enable us to complete the project on time, and ensure more security and acceptability to the project
  • Engagement with Afghanistan is yet another area where India seems to favour unilateralism instead of multilateral approaches. There is no denying the fact that India’s engagement with Kabul has so far been praiseworthy thanks to its well-conceived reconstruction and development assistance (over $2 billion so far) to Afghanistan. The Afghan Parliament, constructed with Indian assistance and inaugurated by Mr. Modi in December last year, and scores of school buildings and hospitals, among others, have generated a lot of goodwill for India there
  • And yet, there is a real danger of Indian interests and assets being the target of adversaries in the days ahead with the Taliban on the rise and NATO and U.S. troops withdrawing from Afghanistan. In the past eight years, the Indian embassy was attacked twice. So were the Indian consulates in Herat and Jalalabad. Moreover, a number of Indian reconstruction workers have been killed, and there was even a reported plot to blow up the Salma dam
  • The problem is twofold. One, while there is no guarantee that India’s investments in Afghanistan would be safe from future attacks, New Delhi does not seem to have a contingency plan to deal with it other than perhaps putting an end to the good work there. Two, New Delhi does not seem to have recognised the fact that reconstruction and peace-building should go hand in hand. It is important to calibrate reconstruction efforts with reconciliation and peace-building to sustain the former. India has so far shied away from participating in the Afghan peace process since the ouster of the Taliban regime in 2001
  • If New Delhi’s Afghan policy is to be meaningful and sustainable, it needs to do two things: get like-minded countries on board India’s reconstruction efforts in Afghanistan, and support and engage in the Afghan reconciliation and peace-building process. Former Afghan President Hamid Karzai recently stated that “India, Iran and Russia should be included in the talks with the Taliban”. Why not?
  • India should also try to engage China more proactively and with a long-term geopolitical imagination
  • A more meaningful Sino-Indian strategic partnership should therefore be undertaken at three levels. First, by jointly fighting terror in the region. Late last year the two countries issued a joint statement on combating international terrorism and described potential steps such as “exchanging information on terrorist activities, terrorist groups and their linkages, exchanging experiences on anti-hijacking, hostage situations and other terrorism related crimes and coordinating positions on anti-terrorism endeavours at regional and multilateral levels and supporting each other”
  • A Sino-Indian joint task force on terrorism to discuss the spread of terrorism in the region and to devise methods to deal with it would be a useful way ahead. More so, if New Delhi is serious about getting Chinese cooperation on fighting terror, a lot more high-level engagement with Beijing would be required
  • Second, New Delhi should join hands with Beijing to develop the region’s economy, trade and infrastructure
  • Finally, Indian reactions to China’s One Belt, One Road (OBOR) project need not be either dismissive or worried, nor should we dismiss it as a “Chinese national project” and look the other way. Our objective should be to see how we can utilise the many economic, infrastructural and other opportunities opened up by OBOR. The rise of China, and the attendant geopolitical transformation of the region, will take place with or without India: so let’s try to use this transformation to further our own national interests
  • It is important for New Delhi’s strategic planners to recognise that when it comes to dealing with key regional challenges and opportunities, unilateralism is not the way. We need to create alliances and coalitions to confront challenges and better utilise opportunities, and in today’s “loose multipolar” world, our alliance behaviour should be guided by clear strategic objectives rather than traditional friendships alone

 

Indian Express:

 

  1. In Afghanistan, PM Modi’s weekend stop in Herat, a massive crisis of state

Topic: India’s Neighbourhood

Category: Afghanistan

Key Points

  • This weekend, Prime Minister Narendra Modi would inaugurate the Salma Dam, the largest of the development projects India initiated after the new Afghan republic was born
  • Few of Afghanistan’s international supporters are even asking about the next steps on its development trajectory — focusing instead on the war material needed to keep the state from lurching over the abyss
  • HaibatullahAkhundzada, the new Taliban chief, signalled with the Kunduz massacre that his policies would be no different from those of his predecessor Akhtar Mansour, slain in a US drone strike last month. Installed with the backing of Pakistan’s ISI, Akhundzada is committed to battering the Afghan state into submission
  • India, and Afghanistan’s other international allies, have to find a way to defeat this campaign — or see a jihadist-run wasteland emerge at the heart of Asia. But guns alone won’t be enough
  • In a paper published by the Stockholm International Peace Research Institute earlier this year, Richard Ghiasy, Jiayi Zhou and Henrik Hallgren noted that more money has been spent in Afghanistan since 9/11, in real dollar terms and corrected for inflation, than was received by all of Europe through the Marshall Plan after World War II. Yet, Afghanistan remains one of the world’s least developed countries. There are precious few projects like the Salma Dam, which will create income-generating infrastructure: the Kajaki Dam in Kandahar, due to come online this year, is one expensive exception, along with some roads and bridges
  • The reasons are corruption, inefficiency, massively wasteful aid programmes that funneled more money back to donor nations than to Afghanistan. To be fair, however, Europe’s war-ravaged states had a robust history of industrial society and its institutions, while the very warp-and-weft of Afghan life had been incinerated by decades of war
  • Deeper reasons for the crisis go to the heart of Afghanistan’s tragic political history. From 1953, Afghanistan’s modernising Prime Minister, Muhammad Daud Khan, nationalised key sectors of the economy, and introduced central planning. But Daud’s economy was deeply tied to foreign aid, with Afghanistan leveraging competition between the US and USSR to draw in assistance. Foreign sources provided some three quarters of the capital for Afghanistan’s five year plans — and by 1973, nearly two-thirds of its revenue
  • The Afghan state never developed a sustainable internal resource base. Big chunks of the foreign funding were frittered away — moreover, because of bureaucratic incompetence and corruption
  • In 1979, Soviet troops crossed the Amu Darya river, sparking off the war that would shape the country’s modern history. The war saw Afghanistan’s rural economy bombed almost to the point of annihilation — and the collapse of the state was followed by the emergence of a highly criminalised economy, in which trafficking and narcotics by warlords played a key role
  • From 1998, the Taliban regime brought a semblance of order — but it had no agenda for rebuilding the state. Its primary source of income remained opium trafficking from Helmand and Kandahar. Illegal cross-border trading and smuggling of goods into Pakistan and the post-Soviet Central Asian states is estimated at over $ 2 billion a year
  • In 2001 began a crippling drought that would run for 7 years, killing off a fledgling revival of the agrarian economy. In 2002-03, the year after international forces went in, the country received some $ 404 million in military and civilian aid. That figure had ballooned to a staggering $ 15.7 billion by 2010-11. This aid economy, and the ensuing boom in everything from salaries to property values, left Afghanistan the renter economy it was in the 1950s — just bigger and even more vulnerable
  • Now that the West has scaled down its presence and the aid economy has vanished, skilled Afghans are leaving the country in droves, there are growing numbers of jobless youths in the cities, and the countryside can no longer count on even the crumbs
  • Fixing this crisis of state-building while also fighting a war needs a government with extraordinary determination and grassroots legitimacy. But the National Unity Government created to resolve the electoral deadlock caused by the bitterly-disputed 2014 election is on the edge. The agreement that allowed President Ashraf Ghani to take power with Abdullah Abdullah as his Chief Executive — a position that does not exist in the Constitution — is scheduled to expire in September. No one knows for sure what might follow
  • Under the 2014 agreement, a Loya Jirga, or General Assembly, was to be called to amend the Constitution to accommodate the position of an executive Prime Minister — thus legitimising the position Abdullah now holds. To call a LoyaJirga, though, the government first needs to hold Parliamentary and District Council elections. The terms of both bodies expired in 2015
  • Former President Hamid Karzai is among those calling for a traditional Loya Jirga, or council of tribal elders, to chose an alternative government — an option the government has flatly rejected
  • Karzai’s former aide, Umar Daudzai, has meanwhile, sought to mount pressure on the government by casting himself as a peacemaker with the Taliban. Since a meeting early this year — at which the Taliban insisted on the right to choose its interlocutors — Daudzai has exchanged at least five drafts on a potential political agreement
  • The Taliban’s Doha office has agreed to negotiate with an interim government — which would presumably replace the one in office — and allow some foreign troops to remain in the country, say sources close to the process
  • Fresh elections, opposition politicians argue, might be another option(Afghanistan follows presidential system of government)
  • These won’t, however, offer a solution to the seemingly intractable crisis of state. Leading an army through a long war against insurgents backed by a hostile neighbour will need real political leadership — and mass legitimacy that can come only from building a sustainable economy generating employment and incomes. Can Afghanistan do it?

 

Others:

 

  1. PIB

 

a) First Meeting of Governing Council of National Skill Development Mission held under Chairmanship of PM

  • The first meeting of the Governing Council of the National Skill Development Mission (NSDM) was held under the Chairmanship of Hon’ble Prime Minister of India, Shri Narendra Modi on 2 June 2016
  • In his remarks at the meeting, the Prime Minister stressed on the need for proper skill mapping and identification of the future requirements for skills, so that school-children and parents are well aware of the emerging trends in the job market. Further, he said a similar exercise should also be done to map the skilled manpower requirements at the global level, so that India can meet the global requirement of skilled workforce
  • The Prime Minister also emphasized the importance of imbibing safety norms and soft skills as integral parts of skill development.

 

Some of the major decisions taken at the meeting included the following:

  • Skill training to be scaled up to cover at least 1.5 crore people during 2016-2017.
  • The Central Board for Skills Certification to be set up by September 2016 to infuse quality into India’s skill development ecosystem.
  • Unutilized infrastructure in existing engineering colleges to be leveraged for skill training courses.
  • Profit making Public Sector Units (PSUs) will be mandated to scale up apprenticeships,upto 10% of total manpower, over the course of this year. Private corporations are also expected to follow suit.
  • 500 Pradhan Mantri Kaushal Kendras, which will provide skill training free of cost to be opened this year, to impart training to India’s aspiring youth.
  • 50 Overseas Employment Skill Training Centres to be opened this year, in migratory pockets of the country.
  • 500 RozgarUtsavs will be held across Industrial Training Institutes (ITIs), Central Training Institutes, PMKVY training centres, toolrooms etc., to make skill training aspirational amongst youth.
  • A national skills competition, known as ‘India Skills’ will be launched during 2016-2017, to recognize the skills of India’s youth. This will be an annual event.
  • This year, a national level Convocation will be held for candidates who successfully complete ITI courses, to recognize their success.
  • Over the next one year, the capacity of ITIs to be further enhanced from 18.5 lakhs to 25 lakhs and over 5000 new ITIs will be created.
  • Traditional skills will be recognized, nurtured and promoted through informal apprenticeships, under various programmes.

 

Background

65% of Indians are under the age of 35. By 2025, almost 1 in 5 of the world’s working age population (18.3%) will be Indian. In order to leverage India’s demographic dividend and prioritise skill development, a dedicated new Ministry for Skill Development and Entrepreneurship (MSDE) was set up, for the very first time, by the government in November 2014 to steer and coordinate skill development efforts. Skill India is anchored within this new Ministry

MSDE inherited a highly fragmented ecosystem. 21 Central Government Ministries and departments were implementing over 50 skill training programmes, operating in silos. Conflicting norms between schemes, poor monitoring mechanisms, varying assessment and certification systems and the absence of a coherent vision of success, limited the effectiveness of these initiatives

MSDE has made great strides in a relatively short span of time. Within just six months, key organizations in the skill training and entrepreneurship ecosystem were brought under the Ministry. In just 8 months, MSDE created a National Policy for Skill Development and Entrepreneurship, which articulated an overarching vision to boost the skills development and entrepreneurship ecosystem in India and designed the India’s first National Skill Development Mission to coordinate and scale up skill training efforts. Both these policy initiatives were formally launched by the Hon’ble Prime Minister on 15 July 2015.

The Mission seeks to converge, coordinate, implement and monitor skilling activities on a pan-India basis. It brings key the stakeholders under the Central Government and the States together under one umbrella Mission with a three-tier structure, consisting of: the Governing Council for policy role, Steering Committee for coordination role and Mission Directorate (along with an Executive Committee) for execution. The Governing Council of the Mission is headed by the Hon’ble Prime Minister of India, and is guided by his vision of a ‘Skilled India’

Skill India has led to transformational change in India’s vocational training ecosystem. Over the last one year, over 1.04 crore youth have been trained under the Mission. This figure is 36.8% higher than the previous year’s recorded data. In the current arrangement, 60% of the trainings are directly under MSDE while 40% are across other Central Ministries. MSDE’s Flagship Scheme, Pradhan Mantri Kaushal VikasYojana (PMKVY), which was launched on July 15, 2015 by the Hon’ble Prime Minister, has trained more than 20 lakh people, of which 40 per cent are women candidates, being trained in their choice of skills

Speed, Scale, Standards and Sustainability are the four core principles of the NSDM. The first Governing Council Meeting was aimed to review the progress undertaken under the Mission on each of these core principles and sought to discuss a concrete agenda for rapidly scaling up skill training efforts, while maintaining high standards.

 

2. The Financial Express: No point hiking pulse MSPs if there’s no procurementTopic: Economy

Category: Agriculture

Key Points

  • Given the wide gap between domestic production and consumption and the sustained surge in inflation in pulses—this rose from 12.4% in April 2015 to a whopping 46.1% in November, before settling to a still-high 34% in April 2016—you would think the government has done well to hike the minimum support price (MSP) for pulses by 8-9%
  • Chances are, however, this will have little impact.The MSP strategy is ineffective unless accompanied by a solid procurement or exports strategy. While irrigation takes care of the weather risk farmers face—pulses, sadly, are grown in areas with the least irrigation—procurement and exports take care of the price risk
  • Which is why, in crops like wheat and rice where 30-40% of the crop is procured by FCI—this also sets a floor to the purchase price for private traders—and are grown in mainly irrigated areas, production has grown from a mere 66 million tonnes in 1970 to around 200 million tonnes today. In the case of oilseeds, due to the vibrant export market for soyameal, production rose from 10 million tonnes to around 28-30 million tonnes. And, in sugarcane, where mills have to buy all that farmers produce, production rose from 126 million tonnes to 350 million tonnes
  • In the case of pulses, however, apart from chickpea, virtually no exports are allowed which means farmers don’t get to benefit from international prices or markets. While the shortage means that domestic prices also rise dramatically, they tend to collapse during the harvest period which is what really matters for farmers and there is a lot of variation across sub-markets—which is why a serious procurement policy is critical. Even in the case of cotton when the vibrant exports market collapsed in 2014-15, the government stepped in and procured nearly a fourth of the crop
  • Since procurement levels in pulses need to be raised to at least 20% as compared to under 1% right now, either FCI has to procure more or state governments have to be paid to do this—it was based on this that, within a few years, states like Madhya Pradesh and Chhattisgarh set up impressive procurement operations for cereals. This can be replicated if the Centre is to make the funds available before the harvest. That, in fact, was a central theme of the Shanta Kumar report on restructuring FCI—to spread procurement to states other than Punjab and Haryana and to crops other than wheat and rice—but the government appears to have junked the report. So much for its pro-farmer policies

 

3. The Financial Express: Judicial over-driveTopic: Polity/economy

Category: Judicial intervention

Key Points

  • Given how the automotive sector contributes around a tenth of the country’s manufacturing, the Supreme Court (SC) and the National Green Tribunal’s (NGT) judgments are unfortunate, prompting the Finance minister to reassure Japanese investors by calling them ‘transient’
  • What is unfortunate is not just that the judgments seem to be based on thin scientific evidence, they represent a fairly substantial inroad into the domain of the executive and they also impose large costs on common citizens
  • In the case of Delhi where the SC has put a ban on registering diesel vehicles of 2,000cc and above, for instance, the IIT-Kanpur report makes it clear that vehicle pollution accounts for 9% of all PM10 pollution and, among this, 4-wheelers account for a tenth—while the share of diesel would be even less, it is important to note that large diesel vehicles of more than 2000cc are a very small fraction of the total. So, if diesel cars are, at all, to be banned, it should be the smaller ones that comprise 70-80% of the population
  • Also, since it is true that some larger vehicles have lower emissions than smaller ones, it is only logical that the emission standards be the yardstick, not the size of the engine
  • And to the extent pollution depends upon fuel standards—PM norms were reduced from 80mg in BS-II diesel cars to 25mg in BS-IV and will fall to 4.5mg when BS-VI is introduced—the deadlines for introduction have to be determined by the executive and not the judiciary given the investments required to be made
  • Indeed, while the NGT has banned diesel cars that are more than 10 years old in certain Kerala cities—the transport minister is working on taking this national—since it is the stock of older cars that need to be tackled more than the more emission-efficient newer ones, there are significant costs for car-owners that need to be kept in mind
  • It has to be recognised that the sharp rise in diesel vehicles has been almost entirely driven by government policy subsidising diesel heavily, on grounds this was used to transport food and other articles for the poor and farmers
  • In 2002, for instance, diesel was a third cheaper than petrol. While the government is trying to fix this now with diesel decontrol, the fact is that, in Delhi for instance, while there is a 60 paise difference in the refinery transfer price, petrol is around R11.7 more expensive at the retail level due to excise duties being Rs4.2 higher and VAT around Rs6
  • On the other hand, the excise duty rate is such that buying a petrol car with engine capacity of over 1,200 cc would attract nearly double the excise duty that buying a 1,500 cc diesel car would. While the courts need to try and encroach less upon the domain of the executive, the latter needs to fix such distortions if it wants its eminence to not become the subject of courtroom drama

 

4. The Financial Express: An elusive search for green shootsTopic: Economy

Category: Growth measurement

Key Points

  • The Central Statistical Office (CSO) has once again served us startling GDP numbers, which make it seem that the economy galloped with great vigor in FY16. It almost hit its potential in the March quarter at 7.9%
  • Unease persists, yet. No more do analysts refrain from raising doubts. Many are uncomfortable about the methodology and data for net indirect taxes’ estimation, which blows up GDP at market prices. Some are convinced an underestimated GDP deflator is masking real growth; others question the wisdom in using WPI instead of CPI to deflate weighty services like trade and finance; still others suggest double deflation method might be better for estimating value addition in manufacturing. Another segment continues its discomfort with the MCA21 database and how the sample is scaled up. High discrepancies of the demand-side GDP estimates cause misgivings about scale and direction of future revisions too. Growth estimates alas, have turned into a binary choice—either you believe them and blow the trumpet or do-your-own national accounts and move on
  • What about the recovery though? There is a strange consensus—most analysts agree there’s a “slow and gradual recovery”, a description seen many times in RBI’s monetary policy reports too. Wherever one might be on the growth scale, a recovery is seen for sure. Rising markers have been the ‘green shoots’ in the economy
  • The trend in most leading indicators, however, is that improvements do not last—expansions for a few months are generally accompanied by matching falters. A look at some signal indicators shows why regular claims of economic progress have still not materialised into a confirmed recovery
  • Start with the IIP, whose pick-up has rarely endured beyond a few months after which it has run out of steam. In some months, its ascent has been statistically exaggerated. Nonetheless, this ‘stop-start-stop’ hasn’t held back ringing recovery bells whenever the IIP got a heave-ho; periodic tail-offs have patiently been ascribed to floods and other such or considered paybacks or consolidation
  • The steady downward drift of bank credit growth, a long-time close correlate of Indian economic activity of which it is the major financier, never dampened the passionate sighting of green shoots. Like the IIP, intermittent growth spurts were reckoned as activity ‘pick-ups’. Soothing explanations for the weakness ranged from ‘shift in borrower-preferences’ to non-bank funds, focus on real against nominal growth due to the enormity in price shifts, while the fact that even the feeble uptick is retail-loan driven hasn’t deterred defense. The most recent acceleration, of the past two quarters, was a ‘green shoot’ too, portending a cyclical recovery. Truth or self-delusion, but inflation-adjusted credit growth trend is flat; it was lower in FY16
  • An occasional rebound in imports (non-gold, non-oil) growth merited a green shoot card too. Its secular flatness or the unsustained uptick (the 2014 bounce is off a negative base) hasn’t affected recovery predictions. Similar false dawns are seen in the occasional slowing of export deceleration, as even it currently is
  • Why are secular trends missed or brushed aside, pluses and minuses not balanced in this elusive search? Do bad assets reduce or mount in a recovering economy? Leading or lagging, what is the direction of asset quality? The latest official update is awaited, but gross and net NPAs surely jumped in the two quarters from September 2015
  • Consider the key macro indicators for March, April and May—the PMI, industrial output, imports (capital and consumption goods), credit growth, inflation, number of stalled or under-implementation projects, banks’ performance, and so on. Most have fallen back or remained weak. The green shoot now is corporate results, where revenues and profits rebounded
  • Green shoots are also seen in motorbike sales (those of cars has wavered), medium and heavy commercial vehicles sales (here, fleet replacement by large operators is the key driver), cement (there’s a base year boost and an average 55% capacities’ use), road cargo pick-up (that of rail is falling as freight charges increased), increase in air passengers (less are taking trains where fares have zoomed), and so on.
  • The elusive search for green shoots has been immensely supported by the oil price crash in late-2014, which raised real incomes somewhat, prompted consumer spending and supported producer margins. But production and other demand indicators have been dropping off? Is there indication that terms of trade benefits are tapering off? Lead indicators ‘then’ (FY04 recovery) and ‘now’ are amazingly different: The slightest of upticks is failing to endure. The pointer seems to be that whatever growth is got largely from the deflator, ‘real’ recovery is subdued

Note: What are the changes made to GDP calculation? Analyse thoroughly

 

5. The Business Line: Rescind the bad changesTopic: Governance

Category: Social Sector Schemes

Key points:

  • SukanyaSamriddhi Scheme- In March, this small savings scheme for the girl child saw several tweaks. Many of the changes are welcome — clarity that the account can be opened for an adopted girl child, allowing deposits for 15 years instead of 14, and enabling electronic transactions — but the devil in the details could derail the objective of the scheme — to build a tidy corpus for daughters
  • Standing out, in particular, is how balances in accounts under default will be treated. If a minimum of ₹1,000 a year is not deposited each year, the account defaults. This can be regularised by paying a penalty of ₹50 for each year of default, along with the minimum ₹1,000 for each such year. But if the default is not regularised within 15 years of the account opening, the entire deposit will stand to earn only post office savings bank interest rate on maturity. You diligently deposited much more than the minimum ₹1,000 each year for 14 years, but missed doing so in the 15th year. Since the time to regularise defaults has passed, all the deposits from the first to the 14th year will now earn a pittance, and not the high rates they would otherwise have got. This is patently unfair
  • As is the rule by which a child who returns to India after having lived abroad for a period that labels her a ‘non-resident’: she may no longer benefit from the scheme. This is harsh
  • Then again, premature account closure even on extreme compassionate grounds such as medical support in life-threatening diseases is not allowed before five years from the account opening. This is clearly ill-advised.

(The scheme currently provides an interest rate of 8.6% (for FY2016-17) and tax benefits. The account can be opened at any India Post office or a branch of some authorised commercial banks)

 

6.The Business Line: Report card on RBITopic: Economy

Category: Role of central Bank

Key points:

  • The preamble of the RBI describes its basic functions. It is to “regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage”.
  • The RBI is, therefore, meant to ensure that there is enough money in circulation as well as in stock, that the currency rates are managed well and that banks in the country provide credit
  • It has become a tradition to expect the RBI to cut repo rates at every monetary policy announcement. We should remember that any cut in repo rates is more a sentiment booster. Too much money circulating in an economy is an open invitation for inflation
  • There is a bewildering array of inflation numbers to choose from in India. But if one looks at one of the popular ones — Consumer Price Index (CPI) — the rate of inflation was 10.92 per cent in 2013 and is expected to be around 6 per cent in 2016. Even if one adds a percentage for statistical error, it is clear that there is not too much money chasing too few goods
  • It is another matter that the amount of black money in circulation probably matches the amount of RBI notes in circulation — but this is something no one can do anything about, save talk about it. On May 17, 2013, India’s foreign exchange reserves were $291.96 billion. Reserves as on May 20, 2016, were $360.90 billion. We should take comfort in the fact that this has not gone down in a period of global headwinds and stress
  • In September 2013, the ₹/$ ratio was ₹63.79, as against ₹67.06 today. The level of the dollar vis-à-vis the rupee seems just about right if one considers the fact that we have seen worse levels
  • A number that provides a snapshot of how banks are using deposits and providing credit is the Credit Deposit Ratio. In September 2013, this ratio was 77.8 and in December 2015 it was 76.8. This drop can be attributed to the reluctance of banks to lend when they realised that they had a lot of bad loans on their books. More than the quantity of credit, it is the deterioration in the quality of credit that should be a cause for worry. If there is one criticism against the RBI, it would be that the asset quality review was done too late
  • Taking a holistic view, the common man need not be too unhappy with the RBI. As always, there will always be areas where it could have done better

 

7. The Economic Times: There should be one rate of spectrum usage charge for allTopic: Economy

Category: competition regulation in the economy

Key points:

  • India’s chief law officer, the Attorney General of India has opined that the government cannot raise the spectrum usage charge (SUC) levied on Reliance Jio and other broadband wireless access (BWA) providers to bring it on par with the rate paid by competitors operating in the same market
  • If the rate cannot be revised upward for one player, for whatever reason, the logic of a level-playing field calls for the rate at which others pay SUC to be brought down to Reliance Jio’s level
  • The Attorney General has based his opinion on the legal terms of the 2010 auction of 2300 MHz spectrum, in which the SUC was set out as 1% of adjusted gross revenue. But then, that auction of wireless broadband spectrum did not envision the broadband access provider offering telephony services. BWA providers were subsequently allowed to offer voice services
  • This brings them on par with other telecom operators. It is against natural justice and fair competition for the government to charge different operators providing the same service different rates of a sovereign levy. In any case, after the government began to allocate spectrum on the basis of competitively bid payment for spectrum, it makes little sense to levy a separate SUC
  • SUC is a legacy from the era when spectrum was allotted, without any separate payment, bundled with a licence to operate. Once operators lease spectrum from the government paying thousands of crore rupees for the favour, why extort an additional SUC from them?
  • The government cannot allow legal quibbles to tilt the playing field in telecom. Institutionalised, unequal competition that favours some at the expense of others will not only lead to legal wrangles but also earn for the country a damaging reputation for crony capitalism

 

8. Quick Bits

 

  1. Draft water bill proposes ‘water for life’ for all

A proposed new law on water promises to give every person the right to a minimum amount of “safe water”, while making the state “obliged” to “protect” and conserve water. The draft National Water Framework Bill says every person would be entitled to “water for life” that shall not be denied to anyone on the ground of inability to pay. It defines this “water for life” as that basic requirement that is necessary for the “fundamental right of life of each human being, including drinking, cooking, bathing, sanitation, personal hygiene and related personal and domestic uses”

 

2. New aviation policy has fare cap for 1-hour routes: Rs 2,500
AN all-inclusive airfare not exceeding Rs 2,500 per passenger for one-hour flights to promote regional connectivity will be a “game-changer” in the new national civil aviation policy to be submitted to the Union Cabinet.Sources said the government may also replace the controversial 5/20 rule — a minimum five-year domestic experience and 20 aircraft for local carriers to fly abroad

 

3. June 2017 deadline to seal Indo-Bangla border in Assam –THE CENTRE has set a deadline of June 2017 to completely seal the Indo-Bangladesh border in Assam to check the influx of illegal Bangladeshi migrants. An Additional Director General of the BSF and Additional Director General (Border), CPWD are already undertaking a site visit to the Indo-Bangladesh Border in Assam to prepare a comprehensive plan for sealing the border by means of physical and non-physical barriers, the Union Home Ministry said.For this, it was decided that 100 locations covering 11.9 km will have physical barriers in the form of fencing, and 22 locations covering 48.8 km of riverine areas will have non-physical barriers including technological barriers

 

F. Concepts-in-News: Related Concepts to Revise/Learn:
G. Fun with Practice Questions 🙂
Question 1: Which of the following statements is/are correct?
  1. GVA at basic prices includes production taxes and excludes production subsidies available on the commodity
  2. GVA at factor cost includes no taxes and excludes no subsidies

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 2: As per the new GDP computation methods:
  1. GDP at factor cost will no longer be discussed; instead, industry-wise estimates will be presented as gross value added (GVA) at basic prices
  2. GDP at market prices will be referred to as GDP and it will be equal to GVA at basic prices plus production taxes minus subsidies

Which of the above statements is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 3: Which of the following statements is/are correct?
  1. The Marshall Plan was an American initiative to help rebuild Western European economies after the end of World War II
  2. The largest recipient of Marshall Plan money was West Germany

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 4: : Which among the following countries share(s) land boundary with Afghanistan?
  1. China
  2. Iran
  3. Kazakhstan
  4. Turkmenistan

a) 1 and 2 only

b) 1,2 and 4

c) 2,3and 4

d) All the Above

 

Question 5: Which of the following statements is/are correct about the Shangri La Dialogue?
  1. It is an inter-governmental security forum held annually, attended by defense ministers of Asia-Pacific states
  2. It is held under the aegis of the UN

a) 1 only

b) 2 only

c) 2 and 3 only

d) All the Above

 

Check Your Answers

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