Comprehensive News Analysis - 21 June 2016

A. GS1 Related

B. GS2 Related

1. Liberalised norms may nudge arms-makers to bite the bullet

Topic: Defence

Category: Governance

Location: The Hindu

Key points:

• The government on Monday removed the condition of “state-of-the-art” technology for permitting 100 per cent FDI in the defence sector. The new condition is that the companies wanting to invest 100 per cent FDI and open a subsidiary needs to bring in only “modern” technology
• The new rule is 49 per cent FDI in defence under the automatic route. Foreign investment beyond that would be permitted through government approval route in cases resulting in “modern” technology. The FDI limit for the defence sector has been made applicable to manufacturing of small arms and ammunition covered under the Arms Act, 1959

2. Foreign investors can have the cockpit to themselvesTopic: Civil Aviation-FDI

Category: Governance

Key points:

• “It has now been decided to raise this limit to 100 per cent, with FDI up to 49 per cent permitted under the automatic route and beyond 49 per cent through government approval,” said a statement from the Prime Minister’s Office on Monday
• Though equity holding of foreign airlines is still limited to 49 per cent, a foreign airline can join hands with its sovereign fund or private investors and set up a 100 per cent foreign-owned airline in India
• To give a fillip to airport modernisation, 100 per cent FDI will be allowed for existing airports under the automatic route. Currently, while this is allowed for greenfield airport projects, FDI beyond 74 per cent in existing airports requires government approval
• 100 per cent FDI is now allowed in airports, airlines, ground handling, flying training institutes and maintenance, repair and overhaul (MRO) units

3.  U.S. to push for India’s case

Topic: India and US

Category: International Relations

Key points:

• The US will continue to nudge members of the Nuclear Supplier Group (NSG) to take up India’s application for admission, during the plenary of the 48-member club in Seoul “this week itself,” said the State Department
• Earlier Beijing had issued a statement that the question was not on the agenda of this week’s plenary

4. Made-in-India food products more delectableTopic: FDI in Retail

Category: Governance

Key points:

• In the Union Budget, the government said 100 per cent FDI would be allowed in the marketing of food products made in India. Monday’s FDI announcements extends it to e-commerce, with the likely beneficiaries being firms such as Bigbasket and Gofers — but one needs to wait for the final blueprint
• The only possible dampener is that the demand of industry to allow restricted retailing of essential commodities [like detergents], along with food products, does not seem to have been accepted

C. GS3 Related

1. Pickup in investments crucial to sustain economic growth: World Bank

Topic: Development Update

Category: Economy

Key points

• The World Bank expects India’s economy to expand 7.6 per cent in 2016-2017, followed by a modest acceleration in the rate of growth to 7.7 per cent in 2017-2018 and 7.8 per cent in 2018-2019,the World Bank’s India Development Update released on Monday said
• Agriculture faced a second consecutive year of drought, rural households were under stress, private investments remained flat and exports plummeted, the report said. Despite these drags, the working engines — demand from urban households and public investments — propelled the economy to a higher growth path
• To remain on this growth path and sustain the 7.6 per cent growth rate in 2016-17, India will need to re-start dormant growth drivers while ensuring that the working engines do not run out of fuel, according to the report
• The Update suggests two key reform fronts for the financial sector. First, accelerate the ongoing structural transformation of the sector towards one that is more market-oriented and competitive. For example, by providing a roadmap for relaxing government mandates on banks. Second, address the non performing assets(NPAs) challenge, both by its branches (through recapitalisation of public sector banks and providing tools for banks to manage stressed assets), and its roots (through stronger governance of both commercial banks as well as the corporate sectors that have generated the largest share of NPAs)

2. New Chinese system named world’s top supercomputerTopic: Computation Technology

Category: S&T

Key points

• A new Chinese computer system that can make 93 quadrillions calculations per second has claimed the top spot on the list of the world’s most powerful supercomputers
• The computer called Sunway TaihuLight developed by the National Research Centre of Parallel Computer Engineering and Technology (NRCPC) is built entirely using processors designed and made in China
• The supercomputer installed at the National Supercomputing Centre in China displaced Tianhe-2, an Intel-based Chinese supercomputer that has claimed the top 1 spot on the past six TOP500 lists. The closely watched list is issued twice a year.
• Sunway TaihuLight is twice as fast and three times as efficient as Tianhe-2, which posted a performance of 33.86 quadrillions of calculations per second

3. ISRO goes for record 20-satellite launch on WednesdayTopic: Space

Category: S & T

Key points

• PSLV C34 is all set to launch 20 satellites, a record of sorts by the ISRO
• The primary load is a 727.5 kg satellite on the Cartosat-2 series. The Cartosat satellites are meant to map the cartographic information of the earth’s surface. The current satellite is similar to Cartosat 2, 2A and 2B that have been launched earlier, ISRO has said. It will be used for similar purposes as well, for urban and rural land management, coastal land use and regulation, utility management like laying of road network or water pipelines, creation of land use maps, precision studies relating to changes in land use, and improving on land information systems, and strengthening of geographical information system (GIS) applications
• The Cartosat will take more than half of the weight of all the payloads put together. The total weight of all the satellites on the rocket is 1,288 kg. The PSLV has carried heavier weights in the past
• Thirteen of the satellites are from USA including the 12 Dove satellites from Planet Labs organisation, each of which weighs just 4.7 kg. There are two Canadian satellites and one each from Germany and Indonesia.Two are from Indian academic institutions
• ISRO has so far launched 57 satellites of foreign countries on eighteen different PSLV missions.

D. GS4 Related

E. Important Editorials: A Quick Glance

The Hindu

1. The Centre’s big reform push

Topic: Indo-US Relations/Energy sector

Category: International Relations/Economy

Key points

• With India now acknowledged as the fastest growing large economy in the world and also edging up in the World Bank’s ease of doing business rankings, the time is ripe for the country to open its doors wider to Foreign Direct Investment (FDI)
• This is exactly what the Centre has done by raising FDI caps in some sectors (airlines from 49 to 100 per cent), sweeping others entirely into the automatic route (cable TV, brownfield airports) and diluting preconditions for sectors with restrictions (relaxation of sourcing norms in single-brand retail and technology norms for defence)
• FDI is stickier and more resilient to business cycles than Foreign Portfolio Investor (FPI) flows. At a time when the private sector has a limited appetite to invest and when the government is tied down by fiscal constraints, India needs to seek out foreign capital to keep its growth engines purring. That foreign investors are interested in India is evident: there has been a 23 per cent surge in inbound FDI, which touched a record $55.5 billion in 2015-16
• Even so, it is simplistic to assume that merely opening up more sectors or setting more liberal equity caps will have foreign investors queuing up to invest. India’s experience suggests that actual investment interest in the newly liberalised sectors will be tied to three factors
• One, foreign investors, like domestic ones, are ROI (Return on Investment) focussed. Therefore, sectors that are already witnessing booming consumer demand — such as DTH television, airlines and pharmaceuticals — are more likely to attract quick investment flows than those that are in need of bailouts (asset reconstruction firms) or entail long gestation periods (airports or defence)
• Two, even if the Centre is willing to reduce initial entry barriers, frequent market or pricing interventions can deter investors. The Centre seems to have recognised this in watering down the sourcing norms for FDI in single-brand retail. But its attempts to woo FDI into pharma may be stymied by increasing price controls and the lack of clarity in the policy on essential drugs
• Three, the experience with sectors such as insurance suggests that foreign investors committing long-term capital expect to exercise control over the entities they fund. Overall, there is no disputing that the FDI relaxations are a step in the right direction. But as we have learnt from the past, the devil is usually in the detail

2. It’s about propriety, not constitutionalityTopic: Legislation

Category: Polity

Key points:

• The issue of whether the 21 MLAs of the Delhi assembly who have been appointed as parliamentary secretaries are holding an “Office of Profit” under the government has been the cause of much speculation. If the office of parliamentary secretary is an office of profit under the government then they are liable to be disqualified. But this issue is at present before the Election Commission, which will decide it after proper hearings
• What the President refused assent to is a Bill passed by the Delhi Assembly declaring that the office of parliamentary secretary shall not disqualify the holder of this office. As a matter of fact the Constitution of India empowers every legislature in the country to pass such a law and exempt any such office from disqualifying its holder. So the Delhi government has only exercised a power which is vested in it by the Constitution. It is not known why the President withheld assent to this Bill
• All legislatures including Parliament have passed such laws exempting one office or the other from the disqualifying effect and many such laws were also given retrospective effect. In any case the President’s decision to reject the Bill has no impact on the main issue before the Election Commission
• “Office of Profit” is not a term which can be easily understood or explained. This concept originated in the House of Commons in England. The history of British House of Commons is the history of conflicts with the crown. The king, in his efforts to undermine the House of Commons, used to offer positions of executive nature with pecuniary benefits to its members and buy their loyalty. This practice kept the members out of the House most of the time and thus there arose a conflict between their duty and their personal interest
• The continued absence of a large number of members because of their preoccupation with executive functions weakened the House of Commons in course of time and therefore it passed a law prohibiting its members from accepting any office from the Crown which gave them any pecuniary benefits. It was provided that any such office which a member may accept will disqualify him
• In essence, the law of office of profit was introduced to end the conflict between the duty of a member of the legislature towards the House and public and his personal interest
• There is no law which defines the term “Office of Profit”. Therefore, one has to depend on the decisions of the Supreme Court of India
• Fortunately for us the court has explained with great clarity the law of office of profit in a large number of cases. Articles 102 and 191 of the Constitution say that a person shall be disqualified for being chosen and for being a member of the House if he holds any office of profit under the Government of India or the government of any State
• A large number of cases like Abdul Shakur v. Rikhab Chand (AIR 1958 SC 52), Ramappa v. Sangappa (AIR 1958 SC 937), Guru GobindBasu v. Sankari Prasad Ghosal (AIR 1964 SC 254), Shivamurthy Swami v. SangannaAndanappa(1971) 3 SCC 870, RavannaSubanna v. G.S. Kaggeerappa (AIR 1954 SC 653),  KantaKathuria v. M. Manak Chand Khurana (ELR Vol. XLIII, Page 158) laid down the conditions for deciding whether an office is an office of profit
• These conditions are: The government makes the appointment; the government has the right to remove or dismiss the holder; the government pays the remuneration; the holder performs the functions for the government; and the government exercises control over the performance of those functions
• All the later cases decided by the Supreme Court like Jaya Bachchan v. Union of India(2006) 5 SCC 266 andC. Raman v. P.T.A Rahim (2014) 8 SCC 934 followed the decisions in the earlier cases. The crucial point decided in all cases is that unless some remuneration is attached to the office or the office is capable of yielding some pecuniary gains it would not be an office of profit
• This point is clearly stressed by the Supreme Court in the C. Raman case. The court says “this court has given categorical clarification on more than one occasion that an Office of Profit is an Office which is capable of yielding a profit or pecuniary gain”. It has also been made clear by the court that compensatory allowances are meant to meet the out-of-pocket expenses and hence do no constitute any profit. It becomes thus clear that an office to which no salary or remuneration is attached or which is not capable of yielding a profit is not an office of profit
• A lot of uninformed discussion has taken place on the question of the retrospectivity of the bill passed by the Delhi Assembly. The Supreme Court has held in a number of cases that State Legislatures and Parliament can legislate retrospectively
• In KantaKathuria case, an Act of the Rajasthan legislature removed the disqualification retrospectively. Ms. Kathuria, a member of the legislature was disqualified by the High Court for holding an office of profit. When the appeal was filed in the Supreme Court, the Assembly passed an Act removing the disqualification. This was upheld by the Supreme Court. The court said “there is nothing in the words of the article (191) to indicate that this declaration cannot be made with retrospective effect”
• Some news reports quoted Law Ministry officials as saying that the creation of 21 posts of parliamentary secretaries is unconstitutional as it violates Article 239 AA(4) which limits the number of ministers to 10 per cent of the strength of the Assembly and therefore the President withheld his assent to the Bill
• The Law Ministry presumes that the parliamentary secretaries are Ministers. Ministers are appointed by the President. He administers the oath of office and secrecy to them. Without meeting these constitutional requirements one cannot be treated as a minister. Parliamentary secretaries are not ministers within the meaning of Article 239 AA(4) because they are not appointed by the President and are not administered the oath of office and secrecy by him. Appointing 21 parliamentary secretaries may raise a question of propriety but not a question of constitutionality
• Some reports held that it was wrong and illegal for the Arvind Kejriwal-led Delhi government to create these posts without the backing of a law. This argument is born out of total ignorance of the Constitution. Articles 73 and 162 declare that the Union executive and the State executive respectively have power to take executive action on all matters on which Parliament and State legislature have power to legislate
• The noise that is being made today on the Delhi Bill is quite unnecessary. Much of the debate that has gone on is uninformed. The Bill was a legitimate exercise of the power vested in the Delhi Assembly to declare that the office of parliamentary secretary shall not disqualify the holder. Even when this office, which has no salary or remuneration attached to it, is not an office of profit, the Bill was passed by way of abundant caution. In fact the Supreme Court has in C. Raman’s case approved this course of action

3. Getting around the U.S.’s Persian blockTopic: India and Iran

Category: International Relations

Key Points:

• Prime Minister Narendra Modi’s visit to Iran a month ago was significant on all counts. The discussions signalled an eagerness by India and Iran to promote bilateral ties. Twelve agreements were signed, the most strategic of them being the one for the development of Iran’s Chabahar Port
• Before the visit, several policy analysts flagged important issues in areas such as energy and trade, with the most troublesome of them being India’s delay in remitting oil dues estimated at $6.5 billion for crude supplies made in recent years. Hurried arrangements were made to remit a sum of $750 million days prior to Mr. Modi’s visit
• Most surprisingly, it appears that the issue did not come up for discussion at all. From the press briefing by Mr. Modi and Iranian President Hassan Rouhani, it was clear that both had convergence on the extraordinary situation created by the U.S. until the conclusion of the Joint Comprehensive Plan of Action (JCPOA) — the international agreement on the nuclear programme of Iran reached in Vienna in 2015 between Iran, the P5+1 (China, France, Russia, United Kingdom, United States plus Germany), and the European Union — leading to the lifting of sanctions against Iran
• A close look at the delay in payments by India will show that it was attributable solely to U.S. sanctions. Perhaps, Mr. Rouhani realised that there was no bad faith on India’s part with regard to the efforts it had made from time to time to address the issue
• Prior to December 27, 2010, India had arranged to make payments through the Asian Clearing Union (ACU), a mechanism established in 1974 by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). The U.S.’s Iran sanctions commenced in 1979 after the Islamic Revolution. Over time, these began to bite hard, extending their reach globally to include a ban on transactions with “designated” banks and parties. It culminated in the passage of the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (CISDA) from July 1, 2010 which denied Iranian banks even access to SWIFT — the global financial network that banks use to transfer money. This was unilateral, illegal and not covered by United Nations Security Council (UNSC) resolutions
• The ACU became a victim of CISDA as the U.S. Treasury began to view it as an agency defeating sanctions. The Reserve Bank of India also yielded to U.S. pressure and terminated the ACU
• Indeed, it was a precipitate step done without prior consultations with the Iranians and resulted in a crisis considering that India imported 20 per cent of its oil from Iran valued at $12 billion per annum. There were hurried consultations with the Iranians. After six weeks, a new arrangement was reached to route payments through the Hamburg-based Europaisch-IranischeHandelsbank AG (EIH). The system, legally perfect inasmuch as it complied with UNSC sanctions while bypassing the U.S.’s sanctions as payment was in euros, was hailed as a “diplomatic feat” by some analysts
• Unfortunately, the arrangement was stillborn. The EIH had long been suspect in the U.S.’s eyes and viewed as an agency which openly violated Iran sanctions. The State Department could prevail upon German Chancellor Angela Merkel to terminate the arrangement. Sadly, India’s payment gate became hostage to the vagaries of U.S.-German diplomatic relations. Germany terminated the EIH gate abruptly without so much as informing the government of India
• Back to square one, India made desperate efforts to make payments through Russia which had dealings with Iran and also through some banks from the United Arab Emirates operating in the grey market.
• Even as India was looking for a new payment route, its policymakers took note of the rise of Turkey as a lead player in West Asia and its growing economic relations with Iran. Turkey was also observed to distance itself from the U.S. over its policies such as sanctions and Iran’s nuclear ambitions
• India noticed that the state-owned Halkbank of Turkey playing a growing role in promoting trade with Iran and remitted $100 million, but for a short duration. Unfortunately, the arrangement was aborted as Halkbank lost its elbow room when Iranian banks were “designated” by the U.S. Treasury and lost access to SWIFT
• India was again clueless. After prolonged negotiations, an agreement was reached with Iran to pay 45 per cent of the dues in rupees and the balance 55 per cent in escrow accounts of Iranian banks with our banks. The escrow amount could be remitted only after sanctions are lifted. Sadly, unlike in the case of China, they could not be cleared bilaterally due to a heavy trade imbalance. The backlog since 2013 began to balloon
• In the meantime, disputes arose over exchange rates for past supplies and the interest payable on outstanding amounts, but were settled amicably. India agreed to pay interest at LIBOR rate (1.5 per cent), though the bilateral agreement did not provide for it. These were gestures made in good faith in the hope that sanctions would come to an end soon, as negotiations had commenced in 2006
• An interim agreement, the Joint Plan of Action (JPOA), was signed between Iran and the P5+1 in Geneva in November 2013. However, sanctions were lifted in a limited manner, restricted to certain categories of transactions. In terms of the JPOA, oil dues of $4.2 billion held in central banks of China, India, Japan, South Korea, Taiwan and Turkey were allowed to be remitted in a phased way. India availed of this slot and arranged to remit $1.65 billion
• Though JCPOA was signed in 2015, it is still a work in progress, neither having led to the lifting of all sanctions nor giving Iranian banks the full freedom to operate globally. As per JCPOA, all sanctions — UN, the U.S. or EU — will not be lifted till October 18, 2025. Only limited relief has been granted. The sanctions bundle is so complicated and riddled with a backlog of trade, human rights and other abuse-related sanctions that it is impossible for banks to operate on the basis of the limited window opened without falling foul of the U.S. Treasury
• Iranian businesses are still hobbled by the sanctions fallout. It does seem that the U.S. is not ready to open all doors. There is the lurking fear within the country that Iran could use the money to finance militant non-state actors.
• Lastly, when compared with assets blocked globally estimated at $100 billion of which oil assets contribute $89.6 billion, India’s share of $6.5 billion is small. This came about because of U.S. sanctions and not due to wilful default by us. It is certain that the Iranian leadership would have taken note of these and did not make it an issue

1. What Brexit could mean for Indian business

Topic:Brexit

Category: Economy

Key Points:

• Indian policymakers are gearing up with evasive action focussed on the most immediate impact of a Brexit — that of trying to ensure sufficient liquidity in the domestic market as Britain gears up for the crucial referendum on whether or not to remain in the European Union (EU)
• If a Brexit vote on June 23 does indeed go through, it will compound worries for policymakers

What can be the impact?

• The overall impact in real terms is likely to be broadly muted — as the flows of trade and investment would likely continue in the regular course. Two potential casualties, if a Brexit were to happen, could be manufacturing companies that have set up base in the UK while having a substantial exposure to mainland Europe, and firms in the services sector, especially information technology firms
• According to a Bank of America Merrill Lynch analysis, a Brexit may create recession risks that could dent IT demand further, hurting the 10-14% revenue growth forecast for the UK businesses of the Indian IT companies in FY ’17. Worse is the fact that the five large Indian IT companies have an 8-15% revenue exposure to the British Pound, the bulk of which is unhedged, according to Bank of America Merrill Lynch
• There is also the potential currency impact, with a fall in the Euro likely to have a cascade impact on currencies such as the Chinese Renminbi, which could potentially appreciate and force an intervention by authorities in China, something that could trigger an adjustment in the broader currency markets. While the Rupee has the Dollar as the primary anchor, some element of volatility in these markets can be expected, according to Care Ratings
• The UK is the third largest inward investor into India, after Mauritius and Singapore, with cumulative FDI equity investments of $ 22.7 billion from April 2000 to December 2015 — accounting for 8% of the total FDI inflows into the country. India, on the other hand, is the third largest investor in terms of number of projects into the UK. The number of Indian companies in the UK, growing at more than 10%, has nearly doubled from 36 to 62 firms in a year. The combined turnover of these businesses has increased from £ 22 billion in 2014 to £ 26 billion in 2015, according to Grant Thornton UK LLP-Confederation of Indian Industry (CII) estimates
• While the UK accounted for 15% of India’s total merchandise trade last year, its share has been declining. Trade in services has also eased, with UK service imports from India slowing and making up only about 2% of the total, much lower than with the US and Asia. In this context, a Brexit could potentially open up new trading opportunities with Britain
• “Admittedly, it is difficult to draw an empirical impact on India’s real economy. But if the Leave camp wins, it is likely that the UK will seek trade agreements with non-EU partners, including India,” DBS said in a report, India: Monitoring External Fault Lines. But this will require the UK to sort out its post-exit arrangement with its main trading partner, i.e. the EU, first. Thereafter, for India, a bilateral trade agreement with the UK might become viable as an alternate to the tough and drawn-out negotiations on the EU Free Trade Agreement
• A looming risk is that of an imposition of trade barriers, scrapping of preferential rates, and higher taxes between the UK and rest of the EU, which might pose a hurdle for foreign companies to invest in the UK

a) Major impetus to job creation and infrastructure: Radical changes in FDI policy regime; Most sectors on automatic route for FDIi) Radical Changes for promoting Food Products manufactured/produced in India

It has now been decided to permit 100% FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.

ii) Foreign Investment in Defence Sector up to 100%

Present FDI regime permits 49% FDI participation in the equity of a company under automatic route.  FDI above 49% is permitted through Government approval on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country. In this regard, the following changes have inter-alia been brought in the FDI policy on this sector:

1. Foreign investment beyond 49% has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded.  The condition of access to ‘state-of-art’ technology in the country has been done away with.
2. FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.

iii) Review of Entry Routes in Broadcasting Carriage Services 

FDI policy on Broadcasting carriage services has also been amended. New sectoral caps and entry routes are as under:

iv) Pharmaceutical

The extant FDI policy on pharmaceutical sector provides for 100% FDI under automatic route in greenfield pharma and FDI up to 100% under government approval in brownfield pharma. With the objective of promoting the development of this sector, it has been decided to permit up to 74% FDI under automatic route in brownfield pharmaceuticals and government approval route beyond 74% will continue.

v) Civil Aviation Sector

(i)  The extant FDI policy on Airports permits 100% FDI under automatic route in Greenfield Projects and 74% FDI in Brownfield Projects under automatic route. FDI beyond 74% for Brownfield Projects is under government route.

(ii)   With a view to aid in modernization of the existing airports to establish a high standard and help ease the pressure on the existing airports, it has been decided to permit 100% FDI under automatic route in Brownfield Airport projects.

(iii) As per the present FDI policy, foreign investment up to 49% is allowed under automatic route in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport Service. It has now been decided to raise this limit to 100%, with FDI up to 49% permitted under automatic route and FDI beyond 49% through Government approval. For NRIs, 100% FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and  non-scheduled air-transport services up to the limit of 49% of their paid up capital and subject to the laid down conditions in the existing policy.

vi) Private Security Agencies

The extant policy permits 49% FDI under government approval route in Private Security Agencies.FDI up to 49% is now permitted under automatic route in this sector and FDI beyond 49% and up to 74% would be permitted with government approval route.

vii) Establishment of branch office, liaison office or project office

For establishment of branch office, liaison office or project office or any other place of business in India if the principal business of the applicant is Defence, Telecom, Private Security or Information and Broadcasting, it has been decided that approval of Reserve Bank of India or separate security clearance would not be required in cases where FIPB approval or license/permission by the concerned Ministry/Regulator has already been granted.

viii) Animal Husbandry

As per FDI Policy 2016, FDI in Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture and Apiculture is allowed 100% under Automatic Route under controlled conditions. It has been decided to do away with this requirement of ‘controlled conditions’ for FDI in these activities.

ix) Single Brand Retail Trading

It has now been decided to relax local sourcing norms up to three years and a relaxed sourcing regime for another five years for entities undertaking Single Brand Retail Trading of products having ‘state-of-art’ and ‘cutting edge’ technology.

Today’s amendments to the FDI Policy are meant to liberalise and simplify the FDI policy so as to provide ease of doing business in the country leading to larger FDI inflows contributing to growth of investment, incomes and employment.

b) Memorandum of Understanding (MoU) signed between IWAI and IPGPL on the Kaladan Multimodal Transit Transport Project 

The Kaladan Multimodal Transit Transport Project (KMTTP) in Myanmar was conceptualized and is being administered by the Ministry of External Affairs (MEA) with a view to facilitate connectivity between the mainland and the North Eastern States of the country through maritime shipping, inland waterways and roads of Myanmar.

MEA had appointed Inland Waterways Authority of India (IWAI) as the Project Development Consultant (PDC) for the implementation of the Port & Inland Water Transport (IWT) component of the Kaladan Project on 19.3.2009 and by Supplementary Agreement dated 28.4.2016.

India Ports Global Private Limited (IPGPL) has been established as a Joint Venture between Kandla Port Trust and Jawaharlal Nehru Port Trust for the purpose of development of ports overseas.

IPGPL was asked to partner IWAI in the Kaladan project as a sub-PDC. This was suggested mainly to use and develop the capabilities of IPGPL which has been created for a specialized purpose, completing the implementation of Kaladan project within the scheduled timeframe of April 2019 and to provide relief to IWAI whose responsibilities have increased manifold due to declaration of 106 new National Waterways and implementing the ambitious ‘Jal Marg Vikas” project

c) The Expert Committee set on examining Specific Relief Act, 1963 submits its Report to Union Law & Justice MinisterIn its report the committee has recommended modifications in the Specific Relief Act, 1963  for ensuring the ease of doing business.The committee observed that there   is a need to classify diverse Public utility Contracts as a distinct class recognising the inherent public interest/importance to be addressed in the Act. Any public work must progress without interruption. This requires consideration whether a court’s intervention in public works should be minimal. Smooth functioning of Public works projects can be effectively managed through a monitoring system and regulatory mechanism. The role of courts in this exercise is to interfere to the minimum extent so that public works projects will not be impeded or stalled

a) Education reforms ball now in govt’s courtTopic: Education

Category: Governance

Key Points

• It is difficult to understand why the government was so reticent about making the TSR Subramanian committee report on a new national policy on education public, given the progressive recommendations made in it
• It backs the setting up of a standing Education Commission to continually assess the changing circumstances of the education sector and advise the HRD ministry on the need to upgrade or change policy
• At the school level, the panel recommends that the no-detention policy, currently in place till Class VIII, should be applicable only up to Class V since learning gaps will only widen between a slow-learner and her peers beyond this
• It also stresses on mandatory learning outcome norms under the RTE Act—just like existing norms on infrastructure—and subjecting minority institutions to the 25% seat reservation rule for students from the economically weaker sections (EWS)
• The panel also makes the case for increasing the efficiency of public education spending by consolidating clusters of small schools that form the bulk of public education infrastructure in a given geographical area to create bigger schools. By proposing an autonomous body for government teachers’ selection, the panel also shows a way out of the corruption and politicisation associated with the process
• At the higher education level, the panel proposes workable solutions to the vexing problems of politicisation of campuses and capitation fees in private colleges
• Against the backdrop of the recent student agitations in universities such as Jawaharlal Nehru University (JNU) and University of Hyderabad—where the agitations were shaped as much on mainstream political party lines as on deeply divisive ideological lines—the panel calls for a strict implementation of the JM Lyngdoh committee recommendation of derecognising student outfits explicitly based on religious or caste or mainstream party lines, even as it has clarified that it doesn’t endorse curbing free speech or association; in other words, political parties can no longer be an integral part of campus politics. Its suggestion of capping the period for which a student can stay on campus could end the use of institutes’ resources to nurse political ambitions
• On the issue of capitation fees, while avoiding the endorsement full autonomy for institutions, the panel calls for a “flexible and nuanced” regulatory regime—“much greater freedom” for high-quality institutions on fixing fees and salaries and greater controls for institutes of a poor grade. Here, the panel suggests, accreditation of quality needs to shift from being largely input-based (institute’s spending on infrastructure, etc.) to being more outcome-based (R&D output, industry perception)

b) AI SupportTopic: ICT Intervention

Category: Governance

Key points:

• It is not only the private sector that has taken to artificial intelligence (AI) of late. Amelia is the AI entity that London’s Enfield Council(Local Authority of Enfield, a London Borough) is now using to respond to queries. Developed by IPsoft, a ‘digital labour’ company, Amelia is capable of sensing emotion, analysing natural language, and applying logic and reason. The purpose, for the Council, is to aid users in finding key information, filing standard forms and authenticating certain licenses and permits
• The heightened role of technologies like Amelia makes you wonder if these have a future in India. The Prime ministerhas championed Digital India. He has spoken of revamping the online portals of numerous government undertakings. There definitely is potential for AI here
• Smart Cities too could greatly benefit. Given how this autonomous technology was designed with a heavy emphasis on customer support, it could greatly increase the accessibility and maintenance of several services
• Furthermore, in a country like India where the system is known to clog up easily, a platform that can process and certify applications would be of great benefit in expediting time-consuming procedures. An added bonus could be the removal of middlemen. Between TCS’s Ignio and Wipro’s Holmes, there is no shortage of homegrown potential, and yet insufficiency runs deep

a) We’d better not miss the bus Topic: Urban development

Category: Governance

Key points:

• Sixty per cent of India’s GDP and 90 per cent of government revenues are generated from urban areas. As the government seeks to step up economic growth, making cities more efficient becomes an imperative
• Programmes such as AMRUT and the Smart Cities Mission are aimed precisely at this
• A key measure to be addressed in this regard is improving the mobility of people in cities by improving public transport (PT).Bus transport is arguably the most suitable mode of PT from an economic and practical perspective, despite metro services being introduced in many cities
• The investment required to upgrade bus transport in the 100 largest Indian cities exceeds ₹100,000 crore for around 150,000 new buses and upgraded ancillary transport infrastructure
• Given the poor financial health of State Road Transport Undertakings (SRTUs) and the fiscal constraints of various State governments, it is only programmes such as AMRUT (Atal Mission for Rejuvenation and Urban Transportation) that can finance such expansions. But SRTUs need more than just money to put their houses in order
• The bus financing scheme under the erstwhile JnNURM (Jawaharlal Nehru National Urban Renewal Mission) programme was a potential game-changer, but the results have been mixed. There are some key lessons that future bus financing schemes can take note of to be more effective
• First, SRTUs need a significant level of preparation before they can use such funding; second, city authorities should implement regulatory reforms in urban transport as a condition precedent; third, unless a long-term plan for improving governance of STRUs is implemented, they will remain eternally unviable. Stepping up financial support for SRTUs to modernise their bus systems without these preparatory steps is akin to repairing a leaking water-pipe by turning up the pressure
• Government programmes for financing of buses need to factor in the varying maturity levels of the SRTUs that determine their capabilities to absorb financial assistance
• There are two types of SRTUs: a few that have long years of experience in managing formal bus transport operations, while the majority that does not have such experience. Merely extending funding support to SRTUs and prescribing technical standards and a charter of reforms, as the JnNURMprogramme attempted, will not yield satisfactory results
• Smaller SRTUs need significant hand-holding for several activities, such as procuring buses, enhancing ancillary infrastructure, evolving a governing structure, and making a transition to managing a formal bus system. Interestingly, even mature SRTUs require selective institutional strengthening in many of these areas
• The technical standards specified by the ministry of urban development under Urban Bus Specifications, UBS1 and UBS2, are comprehensive. However, translating these standards into efficient bus procurement outcomes requires highly evolved organisational processes, which most SRTUs lack
• SRTUs need to enhance their procurement paradigms for better articulation of performance specifications of buses/sub-systems for quality, durability, and failure rates. The procurement systems of most SRTUs in India follow an upfront, least cost model and do not fully consider lifecycle costs encompassing repairs, maintenance, spare parts, and downtime. An undesirable outcome is inadequate longevity of buses and fleet availability. While poor maintenance is one contributory factor, an inadequate procurement process also constrains SRTUs from holding bus manufacturers to account
• SRTUs have not comprehensively reviewed their bus routes or networks for several years; consequently, they do not ply the routes where demand actually exists. In many cities that have other established public transits, such as metro or rail, bus networks end up competing with them rather than supplementing them. In the absence of a sound business plan for deployment of buses, many SRTUs have used funding programmes for merely replacing their aged fleet with new buses, and do not get the desired increase in ridership
• Most SRTUs also fail in operational inefficiency in areas of maintenance scheduling, revenue maximisation, service orientation towards commuters, and having a motivated workforce. The government needs to consider if competitively discovered private management of bus operations (under the PPP mode) better aligns efficiency with financial gains than a pure public sector model where assurance of tenure breeds complacence
• City authorities in India generally fall short in effective regulation of the urban transport sector. While governments issue directives on setting up urban mass transit authority, parking policy for cities, a process for resetting fares, redesigning bus routes, promoting non-motorised transport and so on, in reality, most of these reforms are implemented only on paper
• SRTUs face competition from intermediate private transport (IPT) vehicles and lose as much as 40 per cent of the potential fare-box revenues to them. Clearly, IPT needs better regulation than is the case today
• For the initial rounds of bus funding programmes, the government can look at a strategy of not charging SRTUs for the capital cost of buses, but instead getting them to invest the necessary amounts in ancillary infrastructure, workshops, personnel training, ITS and MIS, and implementing the necessary reforms and governance structures
• Without the burden of servicing capital, the financial sustainability of SRTUs will get the necessary time and space to improve if they implement the stipulated measures
• In the long run, alternative financing measures for SRTUs will need to be developed so that they do not become perpetually dependent on the exchequer
• Such avenues will call for reform in borrowing rules of SRTUs and other innovative financial measures such as bond financing based on State government guarantees, tapping funds from corporate social responsibility budgets, asset financing models, tapping increase in property values in cities to fund urban transport, and so on
• Serious reform in urban transport has been long overdue and its delay is starting to weigh heavily on the competitiveness of our cities. It is a fervent hope that AMRUT and other bus funding schemes adopt some of the outlined measures and do not continue to peddle old wine in new bottles

a) Welcome opening to foreign investmentTopic: FDI

Category: Economy

Key points

• The government has done well to take bold decisions in liberalising foreign direct investment (FDI) norms in a number of sectors. India, as the fastest-growing large economy, already is a magnet for foreign capital. Self-imposed constraints have been keeping some capital out. With Monday’s major reform, some of these constraints have been removed
• India still needs to do some things to make foreign investors inclined to invest in India shed their inhibitions. One, make contract enforcement time-bound and effective; two, rid the political culture of all tolerance/patronage of power theft, so that the installed generation capacity can profitably produce power; and, three, extend the reduction in retail corruption achieved at the level of the central government to all levels of government across the country, so that no investor has to worry about violating anti-bribery laws back home
• The reform in defence is to remove some confused drafting in the earlier norm, to allow the government proper discretion in allowing FDI up to 100%, instead of being limited by the condition of ‘state of the art technology’
• The reform in brownfield pharma sheds an irrational restriction. The liberalisation in airlines, allowing 100% foreign investment, although foreign airlines continue to be restricted to 49% ownership in an airline operating in India, is far-reaching. A foreign airline can, for example, tie up with a sovereign wealth or private equity fund and start a new airline with 20 or more aircraft and start flying Indian flyers from any part of the country to its hub abroad and thereon to any destination in the world. The 100% automatic investment in brownfield airports improves the pricing of existing assets for project developers seeking to divest their holdings so as to pay off their debt
• The liberalisation of food retail and single-brand retail are likely to fetch immediate results. Apple needs to worry about local sourcing eight years later. Grocery sales can be, if the government approves, fully open to FDI. This big dose of reform should cheer up sentiment

b) Empowered doesn’t mean unaccountableTopic: education

Category: governance

Key points

• The proposed new education policy offers a chance to make a difference. The T S R Subramanian panel’s report on education correctly identifies the teacher as the pivot in a country like India where a large proportion of students are first-generation schoolgoers. The report restates well-known problems — the five lakh-plus shortage of teachers in the elementary school system, the high level of absenteeism (over 25% every day), the unwillingness of teachers to serve in remote and tribal areas, the poor quality of training — without suggesting any radical solutions
• Improvement is imperative in two areas: accountability of teachers and their empowerment. Changing the method of appointment is the key to accountability. Teachers should be appointed not to a state-wide cadre but to individual schools, run by empowered management committees that liaise with or have representation of local government bodies, besides of parents. Teachers so appointed are more likely than not to be versed in the local language, history and culture, making for a classroom that is not a world completely alien from the reality of the homes of most of their students
• It will allow school management to identify the next generation of teachers from within their student body and assist them with scholarship and training opportunities. The committee errs in looking upon teachers’ unions solely as obstacles. Once local accountability is established, unions are likely to help empower teachers to deliver better, via collectively bargain for better service conditions, training opportunities and so on
• Training is important, but not sufficient. It has to be complemented with incentives, and disincentives, which can be implemented only by a local, empowered management

a) Cabinet to take up proposal on spectrum auction on June 22The Union Cabinet is likely to take up for approval the Telecom Ministry’s proposal on various issues related to upcoming spectrum auctions such as pricing and timing, on Wednesday, according to a telecom ministry official. The approval will pave the way for putting the largest ever amount of spectrum – 2000 MHz – on sale for telecom companies.

The auction process is expected to generate about Rs. 5.36 lakh crore for the government.

b) No categorical response to report on use of cluster bombsThe Sri Lanka government has not come out with any categorical response to the latest news report on the use of cluster bombs in the final stages of the civil war.

The report of the U.N. Secretary General’s Panel of Experts on Accountability of March 2011 also referred to the allegations of the use of cluster munitions.

The Paranagama Commission, in its report of September 2015 on the facts and circumstances surrounding civilian loss of life during the war, called for further investigation into the matter and suggested a “comprehensive medical review” of recorded injuries.Sri Lanka is not a signatory of the Convention on Cluster Munitions and the Ottawa Convention or the Mine Ban Treaty

c) Environment ministry comes out with draft forest policy, brace for green tax The environment ministry has come out with a draft National Forest Policy (NFP), proposing levy of a green tax while calling for safeguarding forest land by exercising strict restraint on diversion for non-forestry purposes like mining and industrial projects and practising responsible eco-tourism in forest areas to ensure safety of wildlife. The policy is aimed at facilitating ecologically responsible behaviour among stakeholders.It will replace the existing one that has been guiding the government to manage forests since 1988

F. Concepts-in-News: Related Concepts to Revise/Learn:

• FDI
• TaihuLight
• Tianhe-2
• PSLV-C34
• Cartosat
• Office of Profit
• Asian Clearing Union
• TSR Subramaniam Committee
• Brexit
• Cluster Bomb
• AMRUT
• Ottawa Convention

G. Fun with Practice Questions 🙂

Question 1: Which of the following statements is/are correct?

Question 2: Which of the following statements is/are correct about Atal Mission for Rejuvenation and Urban Transformation (AMRUT)?

Question 3: Which of the following conventions and their agenda are correctly matched?

Question 4: Which of the following statements is/are correct?

Question 5: Which of the following statements is/are correct?

H. Archives:

You can check out some more recent News Analysis sections to build even more context

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2nd June 2016: Daily News & Current Affairs Analysis

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