Comprehensive News Analysis – 11 May 2016

Table of Contents:

A. GS1 Related:
B. GS2 Related:

1. Congress may seek early poll in Uttarakhand

2. U.S., Bangladesh moot plan to fight extremism together

3. Will T.N. swing back to bicameral balance?

C. GS3 Related:

1. Capital gains on FDI from Mauritius to be taxed

2. Tax dodge of Rs.50,000cr found

3. A billion Indians yet to benefit from digital economy: WB

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

The Hindu

1. Freedom to map India

2. Job growth at a snail’s pace

3. The meaning of Pokhran and Chagai

Others:

1. The Business line: For a free trade pact within India

2. To Read: Infra tweets: Green surge

3. Quick Bits

a) TRAI regulation on call drops is arbitrary, unreasonable: Supreme Court

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

Nothing here for today folks!

B. GS2 Related

1. Congress may seek early poll in Uttarakhand

Topic: polity

Category: federal relations

Location: The Hindu

Key points:

  • Congress won the floor test in Uttarakhand state assembly
  • The party had challenged the imposition of President’s rule in the State without allowing for a floor test, as mandated in the Bommai judgment

 

2. U.S., Bangladesh moot plan to fight extremism together

Topic: India’s Neighborhood

Category: Bangladesh

Location: The Hindu

Key points:

  • The U.S. and Bangladesh are working out a strategy to fight violent extremism in the South Asian nation, which saw a number of killings in recent months of activists and writers by alleged Islamists
  • The plan, mooted by the U.S., is currently being discussed
  • A U.S. delegation is expected to visit Dhaka soon to discuss the counter-terrorism plan

 

3. Will T.N. swing back to bicameral balance?

Topic: Polity

Category: State Legislative Council

Location: The Hindu

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C. GS3 Related

1. Capital gains on FDI from Mauritius to be taxed

Topic: Economy

Category: Taxation

Location: The Hindu

Key points:

  • the Double Taxation Avoidance treaty between India and Mauritius(signed in 1983) had made Mauritius which taxes capital gains at near-zero rates, an attractive option for foreign investors to route investments into India
  • Starting next year, the Centre will tax capital gains on investments from Mauritiusfrom where India has received nearly a third of its total foreign direct investment (FDI) inflows since 2000
  • The source of the leak in tax revenue was plugged after the two countries signed a protocol on Tuesday at Port Louis, Mauritius. The protocol amends the convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains

 

2. Tax dodge of Rs.50,000cr found

Topic: Economy

Category: Taxation

Location: The Hindu

Key points:

  • The government has unearthed evasion of about Rs.50,000 crore of indirect taxes and undisclosed income of Rs.21,000 crore over the last two years, according to the Finance Ministry
  • The government statement listed out other steps taken to tackle black money, including the Black Money Act being enacted with strict penalty provisions and the Special Investigation Team constituted under the chairmanship of ex -Supreme Court Judge Justice M.B. Shah
  • The government has also formulated a new Income Disclosure Scheme, which will open on June 1, 2016, and has introduced amendments to the Prevention of Money-laundering Act, 2002. At the same time, the government amended the Foreign Exchange Management Act (FEMA), 1999 as well.

(The amendments provide for seizure and confiscation of value equivalent, situated in India, in case any person is found to have acquired any foreign exchange, foreign security or immovable property, situated outside India, in contravention of Section 4 of FEMA)

 

3. A billion Indians yet to benefit from digital economy: WB

Topic: Economy

Category: Digital Economy

Location: The Hindu

Key points:

  • India has the largest offline population in the world with nearly a billion Indians still not able to tap the benefits of a digital economy, the World Bank said on Tuesday.
  • At least 8 in 10 individuals in India own a mobile phone and digital technologies are spreading rapidly, but the aggregate impact of digital technologies has fallen short and is unevenly distributed, noted a 2016 development report on Digital Dividends released by the Bank
  • At the end of 2014 India had more than 200 million Internet users, compared to 665 million in China, according to the report

 

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

The Hindu

1. Freedom to map India

Topic: Governance

Category: Legislation

Key points:

  • Draft of the Geospatial Information Regulation Bill says all information that can be represented on geographical maps will have to be necessarily vetted by a special authority before being publicized
  • There is a possibility of harassment for possession of widely prevalent cartographic imagery at odds with the official boundary (think most foreign magazines), and the implications for a host of applications, commercial or in the public interest, that need real-time updates
  • Any company, organisation or individual that disseminates maps contradicting official versions could face up to seven years in prison and a fine of up to Rs. 100 crore
  • The proposed legislation envisages appellate authorities and enforcement agencies — a signal that issues of misrepresentation could be dealt with more strictly than they are currently.
  • The Survey of India’s two-dimensional, multi-coloured maps, of varying resolutions, have served to give us a static picture of the world around us. But geospatial maps, which the government wants to oversee, reflect how our neighbourhoods are changing in real time
  • The provisions suggest that any modification to the maps or value addition also need to be cleared. The time lag the proposed process would impose, as well as the possibilities of updates being rejected have worrying, disruptive implications
  • The draft Bill says that the government will vet geospatial information to preserve the “security, sovereignty and integrity” of the country — a broad objective that could be misused by the authoritiesto prevent any inconvenient information from being tracked, besides creating an avenue for rent-seeking
  • This is ironic considering that the Centre has a data-sharing policy in place since 2012 that exhorts departments to make their data on health statistics, forests, weather, and so on, more accessible to the public and in machine-readable formats
  • That the government says it is open to modifying the draft is reassuring. Much like telecom spectrum, geospatial imagery too is a resource that is only beginning to be valued. It would be better mined — to the profit of the public and the government — with a transparent policy that values information more than fines.

 

2.  Job growth at a snail’s pace

Topic: Governance

Category: Jobs

Key points:

 

  • Growth in industrial and service sector jobs is a must for job creation
  • The underlying logic behind a demographic dividend is that as jobs grow, incomes rise and so do savings. Based on higher savings, the investment rate to GDP grows, resulting in faster GDP growth
  • One of the most important sources of increased consumer demand since the turn of the century was the increase in infrastructure investment. The combined effect of non-agricultural job growth plus real wage growth would lead to consumer demand booming in both rural and urban areas. The combined demand and supply effects of investment plus job growth resulted in sustained economic growth at a rate unprecedented in India’s economic history
  • But job growth has been much slower since 2012 (Data of The Labour Bureau of the Ministry of Labour)
  • The pace of job growth is even more worrying for the following three reasons. First, while the share of organised sector jobs is increasing, most of the job increases are still taking place in the unorganised segment of industry and services, and in informal jobs
  • Second, while construction had been booming from 2000 to 2012, its growth dipped since 2012, and has begun to revive only since late 2015 as infrastructure investment revived
  • Third, education enrolment levels of youth joining the labour force have been increasing every year since 2010 or so. As a result, secondary gross enrolment ratio has increased from 62 to 79 per cent between 2010 and 2014. The educated youth are unlikely to join agriculture and will look for non-agricultural jobs in urban areas. The revolution in rising expectations is already causing social movements (the Patel and Jat agitations in Gujarat and Haryana, for instance).
  • This raises the question whether government efforts to revive growth and create jobs add up. Certainly the revival of infrastructure investment will create more construction jobs to absorb those leaving agriculture (more than 5 million per annum).

 

  • In addition, three schemes of three Ministries stand out. First, the Ministry of Labour is finalising the scheme to offer to pay 8.33 per cent of the salary as contribution for a pension scheme for new employees getting formal sector jobs. The scheme will be applicable to those with salary up to Rs.15,000 per month

 

  • Second, the Ministry of Commerce is customising incentives for labour-intensive export sectors. It has already initiated an Interest Equalisation Scheme and the Merchandise Exports from India Scheme to support declining exports, given that exports have been declining for 15 months. In the Budget, the government also announced that 100 per cent FDI in food retail will be permitted on the condition that the goods have to be manufactured in India

 

  • Third, under the Stand Up India scheme, Scheduled Castes, Scheduled Tribes and women entrepreneurs will get support such as free pre-loan training and facilitating loan and marketing. There will be a Rs.10,000 crore refinance window to the Small Industries Development Bank of India (SIDBI), and the National Credit Guarantee Trustee Company will create a corpus of Rs.5,000 crore. SIDBI will engage with the Dalit Indian Chamber of Commerce and Industry and other institutions to take the scheme forward
  • However, government schemes rarely create many jobs. International evidence is that when consumer demand grows consistently, whether from domestic or international markets, that is when jobs grow. That requires an industrial policy
  • Ease of doing business improvement and infrastructure investment increases should improve the economic environment. But they don’t necessarily add up to an industrial policy, which has been lacking in India ever since economic reforms began in 1991
  • The international evidence on incentives to employers for creating jobs (which is the idea behind the first scheme) is not promising, certainly not in creating jobs on the scale that India needs

Note: Take a look at the industrial policy of 1991

 

3. The meaning of Pokhran and Chagai

Topic: Governance

Category: nuclear warfare

Key Points:

  • Eighteen years after India and Pakistan tested nuclear devices in Pokhran and Chagai on May 11, 13, and 28, 1998, there is still a lack of clarity in perception on what this nuclear “deterrent” spells for the other country
  • It must be remembered that while India’s decision to test was a proactive one, the Pakistani call to test was a reaction, a response. Had India not gone first, it would have been nearly impossible for Islamabad to test.
  • Though nuclear devices were clearly available to Pakistan for some time, the country’s permanent establishment lay low, choosing a policy of ambiguity or suggesting through the media that they possessed a nuclear deterrent
  • An emboldened neighbour
  • There could be a direct link between Pakistan’s publicly demonstrated acquisition of nuclear weapons capability and its decision to try and alter the Line of Control in Kargil in 1999, an attempt that came a cropper
  • Emboldened by leveling its nuclear score with India, Pakistan allowed the hijackers of Indian Airlines flight IC-814, and the hostages released by India, to enter and disappear within its territory in December 1999
  • In November 2008, Pakistan’s permanent establishment watched as 10 members of the Lashkar-e-Taiba launched a sea-borne attack on India’s commercial capital of Mumbai, killing 164 people
  • From the Indian side, a massive military build-up followed the December 2001 attack on Parliament House in New Delhi, for which the Vajpayee government directly held the Pakistan-based Jaish-e-Muhammad responsible. Operation Parakram, as the Indian build-up was known, ended when India chose to withdraw its troops in October 2002.
  • Coming a couple of years after it, India escorted wanted terrorist MasoodAzhar to Kandahar for release during the IC-814 hijacking
  • It’s evident that as we approach the two-decade mark after the Indian and Pakistani nuclear tests, both countries, especially Pakistan, have indulged in acts of conventional military provocation, reflected in the mini Kargil war
  • Equally, the bilateral dialogue, supposed to discuss conventional and nuclear confidence-building measures, has yielded nothing tangible in the nearly 20 years that have gone by
  •  There has been a discussion or two, but beyond exchanging a list of their nuclear installations — an annual routine — nothing new has happened. In fact, this agreement on non-attack of each other’s nuclear installations is of 1988 vintage
  • For long, Pakistan has been talking about a strategic restraint regime between India and Pakistan, an idea that hasn’t gained much traction. Islamabad’s objective in proposing this regime is essentially aimed at limiting the acquisition of conventional weapons by India.
  • There’s little doubt that the May 1998 nuclear tests conducted by India, signaling its big-power intent, came with a regime keen to ally with the U.S., a signal that was clearly picked up by Washington after initial resistance
  • However, the clear and present danger to the subcontinent stems from the intent behind Pakistan’s piling up of nuclear weapons. These weapons are not for show, and key functionaries in Pakistan have threatened their use against India. Equally, an extremist mindset in India in taking national security decisions must be eschewed
  • India’s hawks naively believe that Pakistan intends its nuclear arsenal merely as a deterrent. If a Kargil-type scenario happens in reverse and the conflict escalates to new fronts, India and the world would not want to test the rationality of Pakistan’s nuclear decision-makers
  • Exchanging information on each other’s nuclear doctrines and a robust, consistent discussion on possible nuclear confidence-building measures, and quiet attempts to arrest the tide of sliding bilateral relations could be the best scenario on the 18th anniversary of Pokhran-II

To Read:

  1. All you need to know about the draft Geospatial Information Regulation Bill
  2. Digital disruption: It’s not just internet access, how many can use it?

 

Others:

1. The Business line: For a free trade pact within India

Topic: Economy

Category: trade

Key points:

  • India’s merchandise exports have fallen over the last 16 months. Global demand and India is being blocked out of regional trade deals such as TPP
  • On the other hand, despite all policy attempts, corporate investment has not picked up. That calls for urgent internal actions to sustain growth momentum. One such action could be tapping indigenous sources of growth
  • Trade within India is fraught with a series of impediments that inhibit seamless movement of merchandise across states and UTs. That limits India’s potential growth at a time when the global environment is not conducive to rising exports and protectionism is on the rise
  • It’s easier to bring in or move out merchandise from outside than from within the country. It won’t be wrong to say that India itself is not a free market area. India Inc. often complains of underdeveloped transport infrastructure and a complex tax regime that aids cascading of taxes. Over regulation of inter-State trade with frequent checks, stoppages and inspection at State borders often leads to delays in moving merchandise from one State to the others
  • These factors add to the cost of doing business in India (against the spirit of Make-in-India initiative) and escalate the final price of finished goods. That encourages imports from countries like China.
  • A series of market distorting rules and regulations impede India’s evolution as a nationally integrated market. For instance, under the Essential Commodities Act (ECA) the government can declare any commodity as essential and impose stocking limits, creating uncertainty in the market.
  • The Agriculture Produce Market Committee (APMC) Act mandates purchase and sale of agri commodities in government regulated local mandis only. That inhibits farmers from selling their produce in markets located outside their districts/States
  • Setting up of national agricultural market can solve many problems

 

  • Multiplicity of taxes levied on manufactured goods in India has fragmented India into numerous State-level sub-markets. Despite VAT, the cascading effect of taxes persists.
  • Entry and exit taxes, and formalities required for inter-State movement of goods, add to manufacturers’ woes
  • India’s poor transport infrastructure also hampers seamless movement of merchandise within the country. World Economic Forum reports that “a truck carrying goods from Gurgaon to Mumbai has to pass through 36 checkpoints and takes up to 10 days. While 57 per cent of goods in India are transported by road, the most inefficient, expensive and emissions-intensive mode of transport, the figure in China is just 22 per cent.
  • District and rural road network which accounts for 95 per cent of India’s total road network is fairly underdeveloped. State border check-posts further add to delays. The result is: Indian trucks cannot move beyond 20 km/h on average.
  • Around 40 per cent of the time lost on road is due to stoppages at state border check posts
  • World Bank estimates that simply halving the delays due to road blocks, tolls and other stoppages could cut logistics costs by 30-40 per cent. India spends roughly 13 per cent of its GDP on logistics compared to 7-8 per cent in developed countries.
  • An early implementation of GST will create a pan-India common market of $2 trillion GDP and 1.2 billion people — a big attraction for any investor — and add as much as 1-2 per cent to GDP by creating a nationally integrated market

 

 

1. Quick Bits

F. Concepts-in-News: Related Concepts to Revise/Learn:
  • Bommai Act
  • PMLA
  • PMLA
  • FEMA
  • State Legislative Council
  • GST
G. Fun with Practice Questions 🙂
Question 1: Which of the following statement(s) is/are correct about state legislative councils?
  • The strength of the state legislative council should not exceed 1/3rd of the strength of the assembly
  • The strength of the state legislative council should not be less than 40

Which of the following is correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 2: Which of the following international organization releases the Development report on Digital Dividends
a) IMF
b) World Bank
c) UNDP
d) OECD

 

Question 3: Which of the following statement(s) is/are true about Income disclosure Scheme?
  1. Under the scheme those with undisclosed income and assets located in India can come clean by paying a tax of 45%
  2. Penalty of 7.5% is charged under the scheme

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 4: Which of the following item(s) is/are up to the GST Council to decide when GST would be levied on?
  1. Aviation Turbine Fuel
  2. Alcoholic liquor
  3. Natural gas
  4. high speed diesel

a) 1 and 2 only

b) 1,2 and 3

c) 1,3 and 4

d) All the Above

Question 5: Which of the following are reforms brought by the FEMA (Foreign Exchange Management Act) on the FERA(Foreign Exchange Regulation Act)?
  1. An offence under the FEMA is considered to be a civil offence while under the FERA it was considered a criminal offence
  2. The monetary penalty has been brought down under the FEMA compared to the FERA

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Check Your Answers

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