# Comprehensive News Analysis - 16 May 2016

The Hindu

Indian Express:

Others:

##### H. Archives

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### Useful News Articles

##### A. GS1 Related

Nothing here for today folks!

##### B. GS2 Related

Topic: International Relations

Category: Indo-Iran Relations

Location: The Hindu

Key points:

• India has to repay $6.5 billion owed to Iran over the years when it was under sanctions • European banks are reluctant to process the payment without clarity from US on the process of lifting sanctions imposed on Iran • The possibility of a Republican candidate winning the U.S. Presidential elections later this year is another cause of worry, as their campaigns have promised to scrap the nuclear deal with Iran Topic: International Relations Category: Indo – US Relations, NSG Location: The Businessline Key points: • Amid reports that China and Pakistan are jointly opposing India’s bid for the Nuclear Suppliers Group membership, the US has said India meets missile technology control regime requirements and is ready for entry into the NSG • China claimed that several members of the 48-nation bloc shared its view that signing of the NPT was an “important” standard for the NSG’s expansion • India, Pakistan, Israel and South Sudan were the four UN member states which have not signed the NPT, the international pact aimed at preventing the spread of nuclear weapons • Last month, Pakistan had said China has helped Pakistan to stall India’s bid to get NSG membership Topic: Governance Category: Social sector schemes Location: The Financial Express Key points: • The Centre today launched the second phase of PradhanMantriUjjwalaYojana (PMUY) for three states — Gujarat, Madhya Pradesh and Rajasthan • Earlier on May 1, Prime Ministerhad launched the Rs 8,000-crore scheme at Balia in Uttar Pradesh designed to provide 5 crore free LPG connections to Below Poverty Line (BPL) families in the next three financial years Topic: Governance Category: Energy Sector Location: Business Standard Key points: • India’s renewable energy sector has been ranked third in the Renewable Energy Country Attractiveness Index (RECAI) with China at second and the US on top • The index ranks 40 markets on the attractiveness of their renewable energy investment and deployment opportunities, based on a number of macro, energy market and technology-specific indicators. The methodology has been refreshed in the May edition to reflect greater focus on energy imperative, policy stability and routes to market ##### C. GS3 Related Topic: S &T Category: Defence Location: The Hindu Key points: • India successfully test-fired its indigenously developed supersonic interceptor missile, capable of destroying any incoming hostile ballistic missile, from a test range off Odisha coast • The interceptor is a 7.5-metre-long single stage solid rocket propelled guided missile equipped with a navigation system, a hi-tech computer and an electro-mechanical activator, the DRDO sources said • The interceptor missile had its own mobile launcher, secure data link for interception, independent tracking and homing capabilities and sophisticated radars, the sources added Topic: Environment Category: conservation Location: The Hindu Key points: • Conservation has suffered a severe jolt with roadkills in the Chinnar Wildlife Sanctuary accounting for a large number of fatalities over the past six months, mainly owing to lack of strict measures to enforce speed limits on vehicles on the Chinnar-Udumalpet road • As per a government order, the speed limits on roads passing through forest areas are restricted to 30 km an hourand passage of heavy vehicles is banned during night-time. (This had considerably reduced roadkills in the Bandipur and Muthumalai National Park and Parambikulam Wildlife Sanctuary) • Chinnar range officer said that the sanctuary had recently erected 14 speed breakers between Karimutty and the border with the Annamalai National Park on the National Highway. However, the work could not be completed following stiff resistance by taxi drivers and local political leaders Topic: S&T Category: Space Location: The Hindu Key points: • Indian Space Research Organisation (ISRO) is all set to undertake the maiden launch of its ‘space shuttle’, a fully made-in-India effort. It is being given final touches at Sriharikota where it awaiting final countdown. • » India’s space port at Sriharikota on the coast of the Bay of Bengal in Andhra Pradesh will witness the launch of the indigenously made Reusable Launch Vehicle-Technology Demonstrator (RLV-TD). After the launch, it will be glided back onto a virtual runway in the Bay of Bengal. • » The RLV-TD is unlikely to be recovered from sea during this experiment as it is expected that the vehicle will disintegrate on impact with water since it is not designed to float. • » The purpose of the experiment is to help the shuttle glide over a virtual runway in the Bay of Bengal, situated 500 km from the coast • » India’s frugal engineers believe the solution to reducing cost of launching satellites into orbit is to recycle the rocket or make it reusable. • » Scientists at ISRO believe that they could reduce the cost by as much as 10 times if reusable technology succeeds, bringing it down to$2,000 per kg.
• » The final version will take at least 10-15 years to get ready.
• » The special booster or the first stage is powered using a solid fuel and it will hoist the RLV-TD prototype to about 70 km into the atmosphere from where the descent will begin.
• » During the descent phase, small thrusters will help the vehicle navigate itself to the landing area.
• » The making of the Indian space shuttle or RLV-TD has taken five years and the government has invested 95 crore in the project. This flight will test the capability of the vehicle to survive a re-entry at speeds higher than that of sound.

Topic: Economy

Category: Personal Finance

Location: The Financial Express

Key points:

• The Union Labour Minister has said the Employees Provident Fund Organisation (EPFO) may invest more than Rs 6,000 crore in equity market during the current financial year
• Last year, EPFO had invested about Rs 6,000 crore through SBI Mutual Fund’s two index-linked ETFs (exchange-traded funds) — one to BSE’s Sensex and the other NSE’s Nifty

Topic: S &T

Category: ICT Intervention

Location: The Financial Express

Key points:

• In collaboration with the Department of Space, India Post has geo-tagged over 1.5 lakh post offices on the indigenous geo-portal Bhuvan, developed by ISRO, to help people search the nearest post office and know about services and timings
• India Post has over 1.55 lakh post offices of which more than 1.39 lakh are in the rural areas. Communications and IT Ministry said that the remaining post offices would also be geo-tagged soon on Bhuvan, a Hindi word for ‘universe’

Topic: International Organizations

Category: Financial Institutions

Location: The Economic Times

Key points:

• After the BRICS Bank, the five-member bloc of emerging nations is considering setting up a credit ratings firm in its efforts to challenge western hegemony in the world of finance
• The credit rating agency for emerging markets, as it is tentatively called, is likely to take shape at the BRICS Summit to be hosted by India in October.

##### E. Important Editorials: A Quick Glance

The Hindu

Topic: Polity

Category: Executive

Key points:

• Recently, the Aadhaar Bill and the Finance Bill were passed as Money Bills. This meant that the RajyaSabha had only a recommendatory role while discussing these Bills
• Article 110(1) of the Constitution states that a bill can be termed as a Money Bill if it contains “only” six types of provisions or anything incidental to these. Broadly speaking, these include taxation, government receipts and expenditure, government borrowings, and guarantees
• The government has argued that the primary objective of the Aadhaar Bill was to create a system for providing subsidies, and as the provisions relate to government expenditure the Bill can be termed as a Money Bill
•  The counter argument is that the Aadhaar Bill has several other provisions, including permitting use of the system for other purposes, so it does not meet the requirement of having “only” the six provisions. A writ petition has been filed in the Supreme Court challenging this categorisation
• The Finance Bill too had provisions other than those related to taxation. It amended the Reserve Bank of India Act to enable the creation of a monetary policy committee. It also amended the Foreign Contribution Regulation Act (with retrospective effect) to change the definition of foreign company
• Article 110(3) states: “If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker of the House of the People thereon shall be final.” In addition, Article 122 prohibits courts from inquiring into proceedings of Parliament and examining their validity. Given these two Articles, can the Supreme Court examine whether the certificate of the Speaker was correctly given?
• There was a similar case decided in 2014. The Uttar Pradesh Legislative Assembly passed a Bill to amend the Uttar Pradesh Lokayukta and Up-Lokayuktas Act as a Money Bill and did not send this to the Legislative Council. The Act was challenged (Mohd. SaeedSiddiqui v State of U.P.) but the Supreme Court decided that the decision of the Speaker “that the Bill in question was a Money Bill is final and the said decision cannot be disputed nor can the procedure of the State Legislature be questioned by virtue of Article 212”. Article 212 applies to State legislatures and is analogous to Article 122 for Parliament.
• Therefore, the question is: If the Supreme Court cannot examine whether the Speaker gave the certificate correctly, what prevents a misuse of this provision to prevent scrutiny by the RajyaSabha? To illustrate with an extreme example, if a Bill to amend the Indian Penal Code is certified as a Money Bill, is that decision final and not open to judicial scrutiny?
• There are several prior cases in which the Supreme Court has examined the decision of the Speaker or the legislature. One set of cases pertains to the anti-defection law as laid down in the Tenth Schedule to the Constitution. Paragraph 6(1) states: “If a question arises as to whether a member of a House has become subject to disqualification under this Schedule, the question shall be referred for the decision of the Chairman or, as the case may be, the Speaker of such House and his decision shall be final.” Paragraph 6(2) says that all proceedings in relation to such question shall be deemed to be proceedings within the meaning of Articles 122 or 212
• The Supreme Court examined the constitutional validity of this paragraph in KihotoHollohan v. Zachillhu (1992). It said: “That Paragraph 6(1) of the Tenth Schedule, to the extent it seeks to impart finality to the decision of the Speakers/Chairmen, is valid. But the concept of statutory finality embodied in Paragraph 6 (1) does not detract from or abrogate judicial review under Articles 136,226 and 227 of the Constitution in so far as infirmities based on violations of constitutional mandates, mala fides, non-compliance with Rules of Natural Justice and perversity, are concerned.” It went on to say that the protection of Articles 122 and 212 was only to protect the validity of proceedings from mere irregularity of procedure. The Court also struck down paragraph 7 (which barred judicial review) stating that it did not meet the requirements of Article 368(2), which requires ratification of half of all State legislatures for any changes made to provisions related to the higher judiciary
• The Supreme Court has examined its powers of review under Articles 122 and 212 in the Raja Ram Pal case in 2007. This case pertained to the expulsion of some members of Parliament after they were found to have taken cash to ask questions in Parliament. The Court said: “The proceedings which may be tainted on account of substantive illegality or unconstitutionality, as opposed to those suffering from mere irregularity thus cannot be held protected from judicial scrutiny by Article 122(1)”.
• This principle was later applied in Amarinder Singh v. Spl. Committee, Punjab VidhanSabha, in 2010. In that case, the Supreme Court set aside the expulsion of Capt. Amarinder Singh from the Punjab VidhanSabha. The point to note is that the court has set limits to the privilege of the legislature under Article 122, and overturned its resolution to expel a member.
• The Constitution has a system of checks and balances, which includes the RajyaSabha as a check on the LokSabha. It requires all Bills to be passed by both Houses, with the exception of Money Bills (as these Bills are effectively equivalent to confidence motions). While the Speaker has the power to determine whether a Bill fulfils the requirements of a Money Bill, there has to be a check to ensure that this power is not misused. The Supreme Court should examine this issue under its power of judicial review under the principles laid out in the KihotoHollohan and Raja Ram Pal cases

Indian Express:

Topic: Environment

Category: Conservation

Key points:

• Legislations in the pipeline: CAMPA law, Civil Penalties law
• The CAMPA law is a reference to the pending Bill that seeks to create Compensatory Afforestation Management and Planning Authority to deal with the money generated as compensation for diversion of forests for industrial or infrastructure projects. The Civil Penalties law refers to a proposed legislation, still being discussed by various ministries, that will introduce tougher penalties for violators of environmental norms
• The Environment Ministry had, in August 2014, appointed a four-member committee headed by former Cabinet Secretary T S R Subramanian to assess the implementation of environmental laws and to recommend and draft specific amendments to bring them in line with current requirements. The Environment (Protection) Act of 1986, the Forest (Conservation) Act of 1980, and the Indian Forests Act of 1927 were among those that were sought to be reviewed
• The Subramanian committee had submitted its report in November, suggesting an overhaul of existing environmental governance framework. It had recommended measures that would ensure faster environmental clearances to projects but stronger compliance to laws and standards
• Last year, the ministry had appointed a technical consultant and a law firm to finalise amendments to these laws. Javadekar said Sunday that these were attempts at “studying” and seeking opinion. He said he was working towards achieving two objectives: a “strong compliance regime, through rigorous laws, through new technologies, through motivation, and by putting institutional mechanisms in place”, and “to build capacities into local government bodies”. The Civil Penalties law, he said, was part of the effort to improve compliance. Javadekar said he was confident that he will be able to convince opposition members to support the CAMPA Bill in the RajyaSabha in the next Parliamentary session
• The minister said there was no plan to demarcate ‘Go/No-Go’ areas as was done a few years ago to keep certain forest areas completely out of bounds for any mining, industrial or infrastructure activities. “That is not our decision. But we are already mapping the nature of forests, density and quality of forests on all criteria. And we are arriving at marks. Scorecards of forest areas at 1000 square metre blocks are being prepared. That will help us in managing activities in these areas,” Javadekar said

Others:

Topic: Economy

Category:Taxation

Key points:

• The problem of indirect taxes plagues global trade. If India has a 20 per cent excise on domestic steel, fairness requires that imported steel have a 20 per cent excise. What about exports? Suppose Indian steel suffers a 20 per cent excise. If steel is untaxed in the UK, the Indian company is uncompetitive against local (untaxed) steel in the UK
• The solution lay in two steps: first, a shift to the value-added tax (VAT), and second in “zero rating of exports”. VAT made it possible to track the comprehensive incidence of domestic taxes in the supply chain. Steel value-added is taxed, and crankshaft value-added is taxed, so we can identify the full burden of domestic taxation suffered by an Indian crankshaft company
• Under ‘zero rating of exports’, foreign buyers are refunded this full tax burden.
• The rule of tax policy in the age of globalisation is: You do not tax non-residents. If we try to tax French buyers of Indian steel, they will take their business elsewhere. Hence, India must refund all taxes to non-resident buyers of Indian goods and services
• We can tax our residents as we please. When French steel comes into India, we can tax as we like, as the buyer is a resident and has no alternatives. When French steel is imported into India, the Indian buyer is refunded the embedded French taxes (as France practices residence-based taxation). At the entry point in India, the Indian authorities practice residence-based taxation, and impose the Indian VAT rate on the imported steel. This is termed “VAT on imports”
• Some countries have political constraints which hamper international trade. As an example, India and Pakistan do not play by the rules with each other. This creates a need for ‘entrepotcentres’. Indian goods get exported to Dubai, as the India-Dubai relationship plays by the rules. Goods get exported from Dubai to Pakistan, as the Dubai-Pakistan relationship plays by the rule
• When countries do not play by the rules of globalisation, rationality is enhanced by routing through entrepotcentres. This complicates the work of policemen, tax inspectors, etc, who have to work harder at figuring out what is going on. It creates opportunities for tax evasion and crime. That said, entrepotcentres are the junction boxes that deepen globalisation for the countries that do not play by the rules
• They reduce the harm suffered by countries that make mistakes in tax policy.
These ideas apply identically to capital flows and international finance. Singapore makes Nifty futures and the UK makes Nifty futures. If Singapore imposes even a tiny tax upon a Japanese buyer, the order will go to the UK
• The solution is residence-based taxation. Each country taxes the global income of its residents, and exempts non-residents
• Suppose the risk associated with an Indian government bond requires a six per cent interest rate in the world market. Suppose India tries to tax non-residents and demands a tax from them of two percentage points.This simply drives up the interest rate for Indian government bonds up to eight per cent. Everyone suffers administrative overhead: Indian government bonds pay eight per cent, and two percentage points are sent back to India as taxes. A five-year bond would have a 10 per cent lower price when the interest rate goes up from six per cent to eight per cent. When India taxes non-residents, they attach lower values to Indian assets
• OECD (Organisation for Economic Co-operation and Development) countries and mature emerging markets understand these rules and play by them. There are some countries, eg India, who do not. We hanker after source-based taxation.This gives rise to entrepot trading. Some business transactions are routed through Panama as Panama has good tax treaties with certain countries. Certain business transactions were routed through Mauritius as it had a good tax treaty with India
• A Japanese investor who sends a Nifty futures trade to Singapore, London or Chicago faces no taxation there, as all mature countries play by the rules. When India tries to tax this activity, this business moves away
• This harms the export revenues of Indian services firms. This damage was reduced by the presence of the Mauritius treaty. The damage was not eliminated by the Mauritius route, as the non-resident was not refunded the STT
• Again, when countries do not play by the rules of globalisation, rationality is enhanced by routing through entrepotcentres. This complicates the work of policemen, tax inspectors, etc, who have to work harder at figuring out what is going on
• It creates opportunities for tax evasion and crime. That said,entrepotcentres are the junction boxes that deepen globalisation for the countries that do not play by the rules. They reduce the harm suffered by countries who make mistakes in tax policy
• The enforcers complain about entrepotcentres as the increased complexity of business transactions makes their life more difficult. We should ignore their pleas
• The way to eliminate these problems is to modernise our tax policy. We did not stop gold smuggling by having more draconian enforcement. We stopped it by living by the rules of globalisation: by removing the customs duty
• These principles of tax policy are valuable when thinking about an array of issues including the flight of financial activity out of India, ‘permanent establishment’, taxation of FIIs, tax treaties, Panama, STT on FII.

Topic: Economy

Category: Monetary Policy

Key points:

• A question worth asking is: How predictable should monetary policy be? If one looks at the Federal Reserve providing direction, it is clear that rates will only go up
• The European Central Bank (ECB) says that it will do everything to provide liquidity to the system, and one can be sure that rates will remain where they are
• In our case, the Reserve Bank of India has blown hot and cold at different times, taking different actions under similar underlying conditions. Is there a theory behind these actions?
• The movement in the inflation rate juxtaposed against the target stated by the central bank would provide a clue as to whether or not there would be rate action. The Fed’s lower bound of 2 per cent for inflation has become important today
• A corollary to this monetarist tenet is that monetary policy cannot really bring about growth, which in a way is true. Even with the world bringing interest rates close to zero or even negative as in the case of the ECB, growth has not picked up
• An explanation for this is the famous liquidity trap, where demand for money has declined to such an extent that lowering rates or even providing liquidity has not helped except at the margin
• The excess liquidity has flowed into emerging markets as foreign portfolio flows. This has generated volatility in emerging market currencies, requiring remedial action from the respective monetary authorities.
• The Indian path appears to tilt more towards the ‘rational expectations’ hypothesis made popular by John Muth and later by Robert Lucas and Thomas Sargent. They argued that monetary policy cannot influence economic activity if the goals are stated clearly and the central bank pursues them to the hilt. This, in their view, also holds true for fiscal policy
• If an impression is given that the RBI is going to lower rates, or such a perception builds up, then the RBI can be effective by not lowering rates, thus bringing about the desired change,that is, quelling inflationary expectations.
• In the last three policies of the RBI in 2015-16, interest rates were lowered once and left unchanged on two occasions. The factors that could have influenced monetary policy did not change: low current inflation, higher inflationary expectations, uncertain rupee, ambivalence regarding Fed rate hike and global volatility. Yet, the response was different
• Whenever a policy review comes up, the market develops an expectation on what the RBI will do, and it is said that 25 bps or 50 bps cut has been ‘buffered in’.
• This really means that from the market perspective, this quantum of cut does not matter and hence, the G-sec yields begin moving downward in anticipation.
• However, if this rate cut is not invoked, the market is shaken and rates start moving in the opposite direction. In such a situation, the central bank would be justified in not doing anything. If it did, it would not have mattered as the market would have been ahead of the curve, anyway.
• The related ‘efficient market hypothesis’ says that markets are efficient in case all participants have access to the same information and make their conjectures accordingly, which leads to an optimal solution. But in this case, the market while trying to guess the central bank’s action would tend to lose out when the RBI does not act according to expectations
• Therefore, a call has to be taken by the central bank on which approach is more acceptable. Providing certainty helps investors take decisions, but this can create macroeconomic distortions (it can lead to inflation). But markets will be less volatile in this scenario. Keeping the markets guessing is effective, but statements made by the central bank are critical as every word is interpreted by economic agents.
• They are constantly on the lookout for forward guidance and would expect the central bank to adhere to the same. It’s a question of how the central bank plays its cards.
• For the central bank, it would be more effective to surprise the market with action that may not be consistent with the impression created
• This stance is different from the monetarist approach. But it would be congruent with what Keynes is supposed to have said: “When the facts change, I change my mind. What do you do, sir?”

3. Quick Bits:

Economic think-tank NCAER on Saturday projected India’s economic growth rate to improve marginally to 7.7 per cent in 2016-17 against the backdrop of IMD’s forecast of better monsoon rains this year

(NCAER’s annual model for GDP market prices at 2011–12 prices estimates GDP growth rate of 7.6 per cent for 2015 –2016 and forecasts it at 7.7 per cent for 2016–17)

Indian Railways has embarked on a project to integrate its operations using enterprise resource planning (ERP) in order to synergise them and save on costs.

The Railways has signed a memorandum of understanding with the Indian Space Research Organisation (ISRO) for development of applications in the field of Remote Sensing and a Geographic Information System

(The MoU aims to develop applications such as an advance warning system at Unmanned Railway Crossings for road users, mapping of the Railways’ assets through Geospatial technology, developing a paperless unreserved ticketing solution based on geo-fencing of the station area, as well as a real-time Train Information System using Communication Satellite Services)

e-NAM (National Agriculture Market) can be successful only with the concept of Warehouse Based Sell (WBS). The commodities sold through APMCs will have to be routed through warehouses.This will require the active role of an agency such as the Warehousing Development and Regulatory Authority to increase awareness about accreditation of quality warehouses and to also speed up the process of accreditation of warehouses

The Minister said effluent norms for distilleries and sugar factories were changed which is why ‘black liquour’ and ‘spent wash’ no longer flows in the Ganga and this helped bring down the pollution levels.

“We concentrated on industrial pollution in Ganga and monitored effluent flowing from 700 odd units. We mandated them for installing 24/7 monitoring mechanism and changed the effluent norms for distilleries and sugar factories,” he said

A high-level delegation led by NITI Ayog vice chairman ArvindPanagariya will meet Japanese officials in Tokyo tomorrow to finalise key issues relating the Rs 98,000 crore Mumbai-Ahmedabad high-speed rail project

China’s new ‘Guam killer’ missile(DF-26 intermediate-range ballistic missile), capable of hitting targets some 5,500 km away, is raising new fears of a growing Chinese threat to key American military facilities and stability in the Pacific Rim(Guam island), the Congress has been warned

##### F. Concepts-in-News: Related Concepts to Revise/Learn:
• Intermediate range ballistic missile
• e-NAM
• CAMPA Law
• The Civil Penalties Law
• Hollohan v. ZachillhuCase(1992)
• Interceptor missile
• Reusable Launch Vehicle-Technology Demonstrator (RLV-TD)
• NSG
• NPT
• Chinnar Wildlife Sanctuary
• Renewable Energy Country Attractiveness Index (RECAI)
• PMUY
• Bhuvan
##### G. Fun with Practice Questions 🙂
Question 1: Which of the following statement(s) is/are correct?
1. Bhuvanis a software application which allows users to explore a 2D/3D representation of the surface of the Earth
2. ISRO has used data provided by satellites including Resourcesat-1, Cartosat-1and Cartosat-2 to develop Bhuvan
3. Apart from visualization Bhuvan provides timely disaster support services as well

a) 1 only

b) 1 and 2 only

c) 1 and 3 only

d) All the above

Question 2: Which of the following statement(s) is/are correct about The Compensatory Afforestation Fund (CAF) Bill, 2015?
1. The proposed law seeks to provide an institutional mechanism, both at the Centre and in the states, to ensure utilisation of the amounts realised from diversion of forest land to non-forest purposes
2. The Bill intends to establish a National Compensatory Afforestation Fund (CAF) and state-level CAF to credit amounts collected by state governments in lieu of forest land diverted for non-forest purposes

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Question 3: Which of the following country (ies) are UN member states which have not signed the NPT?
1. France
2. Syria
3. Israel
4. India
5. Pakistan

a) 1 , 2 and 3

b) 2,3 and 4

c) 1,4 and 5

d) 3,4 and 5

Question 4: Which of the following country (ies) have developed ICBM ( InterContinental Ballistic Missile)  technology?
1. India
2. China
3. France
4. Germany

a) 1,2 and 3

b)1,3 and 4

c)1,2 and 4

d)All the above

Question 5: Which of the following statement(s) are correct about the Indian Ballistic Missile DefenceProgramme?
1. It consists of a double-tiered system consisting of two interceptor missiles, namely the Prithvi Air Defence (PAD) missile for high altitude interception, and the Advanced Air Defence (AAD) Missile for lower altitude interception
2. The two-tiered shield should be able to intercept any incoming missile launched 5,000 kilometres away

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2