Comprehensive News Analysis - 29 June 2016

Table of Contents:

A. GS1 Related:

1. Median marriage age up: Census data

2. The declining power of Babel

B. GS2 Related:

1. Centre to clarify in SC its stand on homosexuality

2. Sri Lankan forces release 700 acres more in North

3. Parched Panchayati Raj Ministry on verge of closure

C.GS3 Related:

1. Over 30 killed as explosions rock Istanbul airport

2. Booster rocket fires in key NASA test for Mars missions

3. Over 23% pay hike likely for govt. employees, pensioners

4. Bank NPAs may hit 8.5 % by March

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

The Hindu

1. Joining the elite non-proliferators

2. End the confrontation

3. Smart Cities Mission: Flaws in a flagship programme

The Indian Express

Others

1. PIB

a) MoU Signed for Coal Quality Analysis

b) Exercise Jalrahat a Joint Initiative by State Govt and Armed Forces for Flood Relief in Assam Commences

c) Shri Radha Mohan Singh launches a web based App CMRS for better crop and Nutrient management released for Bihar farmers

2. The Financial Express:

a) Brexit impact on India, China: Complicating rules

b) 7th Pay Commission: Too many clerks spoiling govt broth

3. The Business Line:

a) An ill wind

b) Getting real with the Model GST Law

The Economic Times:

a) A chilling argument for cleaner energy

5. Quick Bits and News from States

a) Recovery of Rs. 29,000 cr. rail freight dues stalled

b) Call for HC bandh as 9 more judges suspended in Telangana

c) Ministries can approve up to Rs. 500 cr. of non-Plan spending

d) India to teach Africa how to protect VIPs

e) Centre seeks to calm black money fears

f) App downloads expose most Indian users

g) India ranks low at 105th on human capital index, Finland tops

h) India can gain hugely from regional power trade, says World Bank study

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

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Useful News Articles

A. GS1 Related

 

  1. Median marriage age up: Census data

Topic: Marriage age of the population of India

Category: Demographics (Geography)

Key points:

  • New Census data released by  the Registrar-General and Census Commissioneron Monday shows that the median age at the time of marriage has increased across categories of people and genders, a trend that experts say will continue due to the socio-economic changes taking place in the country

Median marriage age up

 

2. The declining power of BabelTopic: Languages

Category: Culture

Key points:

  • Nearly 300 languages have gone extinct in the country since the time of independence.Close to 800 languages and dialects exist across India, according to the People’s Linguistic Survey of India, an independent study conducted by Bhasha Research Centre, an NGO, under the leadership of SahityaAkademi award-winning writer Dr. G.N. Devy
  • Reviewing the findings of the four-year survey that began in 2010, involving 3,000 scholars, researchers and historians, Dr.Devy suggests support for ‘linguistic cities’, just as for Smart Cities
  • Bhasha’s language count includes all those in currency, irrespective of the number of users. What makes the PLSI findings unique is that Census of India surveys found close to 1,600 languages in use in 1961, 108 in 1971 and 122 in 2011. Those spoken by less than 10,000 people were excluded after 1961
  • The UN Educational Scientific and Cultural Organisation has been counting too, and found there are 197 endangered languages in India, with 42 classified as Critically Endangered. Included in the list is Nihali, traced to the pre-Aryan and pre-Munda period
  • Conserving languages should be seen as an opportunity and not a burden, since languages represent cultural and economic capital, says Dr.Devy
  • Nations that neglected indigenous languages suffered extinction of aboriginal culture, he points out. Languages are a collection of memories, helping to cultivate a science that would help future generations, the scholar says
  • The government could develop institutions and programmes to help people learn languages and explore culture. “Schools and colleges can adapt their medium of instruction to the mother tongue of the student, and technology can bridge any gap. University grants and scholarships could create awareness and encourage people to explore languages, Mr. Devy said
  • On Nihali, Professor Shailendra Mohan of Deccan College, Pune, who is documenting the language says, “It is considered a Language Isolate, with no relation with other languages.”Spoken by some 2,500 villagers on the Maharashtra-Madhya Pradesh border, the language is on the verge of extinction as speakers are migrating to find work, and merging with other communities
  • Similarly, Professor Anvita Abbi, who has documented Great Andamanese, is now recording the oral tribal languages in Tamil Nadu and Chhattisgarh. The number of speakers was reducing and intergenerational transfer was low. “We worked on Todi in Chhattisgarh, but it is difficult, and we don’t have the technology. The Education Ministry must take it up,” she adds
  • Another linguist, Prof. K. Shrikumar of Lucknow University, is documenting the Jad language of Uttaranchal, with less than 2,000 speakers. He has been commissioned by the HRD Ministry’s Central Institute of Indian Languages. The government plans to develop a trilingual E-dictionary which will contain audio-visual elements as well as the grammar of the language

 

B. GS2 Related 

 

  1. Centre to clarify in SC its stand on homosexuality

Topic: Law

Category: Governance

Key points :

  • The Union Law Minister on Tuesday clarified that the government would make its stand known before the Supreme Court on Wednesday on the issue of decriminalisinggay sex among consenting adults
  • It is currently an offence under Section 377 of the Indian Penal Code
  • In 2013, the apex court set aside the Delhi High Court judgment of July 2, 2009, de-criminalising Section 377, saying that the decision should be left entirely within the domain of Parliament

 

2. Sri Lankan forces release 700 acres more in NorthTopic: Sri Lanka

Category: India’s Neighbourhood

Key points :

  • Sri Lankan security forces have released 700 more acres and a railway station in the Northern Province, a few days before the UN High Commissioner for Human Rights is to give an update to the Human Rights Council in Geneva on the status of implementation of the October 2015 resolution
  • Meanwhile, in a letter to the UN High Commissioner, the Sri Lanka Monitoring and Accountability Panel, constituted by the Transitional Government of Tamil Eelam, referred to the reported stand of the government against meaningful participation of international judges in the proposed judicial mechanism and described this as a “serious blow to the possibility of victims ever obtaining independent and impartial justice.”

 

3. Parched Panchayati Raj Ministry on verge of closureTopic: Panchayati Raj Institutions

Category: Governance

Key points:

  • After facing a massive budget cut last year, the future of the Panchayati Raj Ministry continues to look bleak. The government shuttered two of its key programmes — the Backward Regions Grants Fund (BRGF) and the Rajiv Gandhi Panchayat SashaktikaranAbhiyan (RGPSA)

Parched Panchayati Raj

 

C. GS3 Related 

 

  1. Over 30 killed as explosions rock Istanbul airport

Topic: Terrorism

Category: Security

Key points:

  • Two explosions rocked Istanbul’s Ataturk airport, killing 31 people and wounding 147 others
  • Turkey has suffered several bombings in recent months linked to Kurdish or Islamic State group militants

 

2. Booster rocket fires in key NASA test for Mars missionsTopic: Space

Category: S&T

Key points:

  • NASA fired a booster intended to hoist astronauts into true outer space. The ground test lasted the full two minutes and it has been termed successful
  • This 154-foot-long booster was horizontal and pointing toward a mountain near Promontory, Utah
  • NASA plans to use the mega-rocket for trips to Mars in the 2030s
  • This is the second and final test-firing of the booster designed for NASA’s Space Launch System. The debut launch from Florida’s Kennedy Space Centre in 2018 won’t carry people. But a few years later, astronauts will climb aboard for a flight near the moon

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3. Over 23% pay hike likely for govt. employees, pensionersTopic: Government’s Finances

Category: Economy

Keypoints:

  • The Finance Ministry is set to propose on Wednesday a 23.55 per cent overall increase in salaries and pensions for more than 1 crore government employees and pensioners, in line with the 7th Pay Commission’s recommendations

28-pensioners_2912396f

 

4. Bank NPAs may hit 8.5 % by MarchTopic: Banking

Category:Economy

Keypoints:

  • Gross bad loans at commercial banks could increase to 8.5 per cent of total advances by March 2017, from 7.6 per cent in March 2016, according to a baseline scenario projection by the Reserve Bank of India (RBI) in its Financial Stability Report released on Tuesday
  • The central bank has been pushing lenders to review the classification of loans given by them as part of an Asset Quality Review (AQR). The resultant sharp surge in provisions for bad debts has eroded profitability, especially at state-owned banks, in recent quarters. The gross bad loans of public sector banks increased to 9.6 per cent as of March 2016, from about 6 per cent a year earlier, RBI data showed

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D. GS4 Related

 

E. Important Editorials: A Quick Glance

 

The Hindu

 

  1. Joining the elite non-proliferators

Topic: MTCR

Category: International Groupings

Keypoints:

  • The four clubs, the Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group and the Wassenaar Group, make rules for their members to control the export of sensitive materials and technologies to non-members
  • India could not secure NSG membership even after much deliberation. A few members, including China, underlined the need for all applicants to the NSG to be signatories of the Nuclear Non-Proliferation Treaty
  • India officially entered the 34-member MTCR after years spent in aligning its export controls with the Regime’s. In the coming years, this membership of a multilateral export control club is likely to yield a rich harvest of state-of-the-art technologies for ballistic missile and drone systems, including those that are in theory nuclear-capable
  • This much is evident on the surface although there is far less clarity about the politics of India’s negotiations with the elite global non-proliferation clubs
  • For example, Beijing’s application to join the MTCR has been gathering dust for years; hints from the Ministry of External Affairs suggest that New Delhi may use this as a bargaining chip to win backing for its NSG position
  • Similarly, the opposition has been quick to link India’s MTCR entry to a “deal” struck with the sole holdout, Italy, over the issue of two Italian marines charged with killing two Indian fishermen. While India could not have joined without Italy’s support, given the Regime’s consensus-based approach, the principle underpinning the entry relates to a broader acceptance of India’s verifiable export controls and its perceived potential as a supplier of, and market for, ballistic and drone technologies
  • But no matter what the political intricacies that have contributed to the gradual realisation of India’s non-proliferation dreams, it would be premature to gloat over the new pride and glory accruing to India on the global stage owing to its MTCR admission
  • It is indeed a positive development to be counted among the responsible nations of the world from the non-proliferation perspective
  • However, many more strands of interlocking strategic interest need to be untangled before full-throttle trade in sensitive technology, such as the sale of India’s BrahMos missile to Vietnam or the purchase of armed Predator drones from the U.S., could become a reality

 

2. End the confrontationTopic:Centre-UT Relations

Category: Polity

Key points:

  • Once again, the Delhi government finds itself locked in a battle with the Centre. With the Union Home Ministry returning 14 Bills passed by the Delhi Legislative Assembly in the course of one year, another round of confrontation is in the offing
  • The Bills have been returned for want of compliance, with the stipulation that the Centre must grant its ‘prior assent’ before they can be introduced in the Delhi Assembly
  • In its response, the Delhi government has cited Section 26 of the Government of the National Capital Territory of Delhi Act, 1991, that says no Act can be held invalid for the sole reason that it did not have the previous sanction or recommendation required by the Act
  • Both sides can marshal arguments to support their claim, but the provisions they cite are subject to limitations. The ‘prior assent’ clause that the Centre is referring to is limited to Financial Bills, and those that relate to taxation and appropriation from the Consolidated Fund of the Capital. Whether a particular Bill requires prior assent or not depends on its subject matter
  • But the Delhi government is mistaken insomuch as Section 26 is applicable only to Acts that had received the assent of the Lieutenant Governor, or, in some cases, the President
  • But one conclusion is inevitable: the relationship between the Centre and the Delhi government is coloured by the underlying political confrontation
  • The Delhi government believes that the Centre’s reluctance to grant full statehood to Delhi is at the heart of the problem. The Centre wants the Delhi government to focus on governance and not to be in permanent confrontation mode
  • Until the full statehood question is settled by Parliament, he will have to work within the existing framework. The Union government, on its part, should be more accommodative of an elected government’s legitimate functions and avoid taking a narrow legal interpretation of issues whenever a broader interpretation is possible and warranted. Working in a spirit of accommodation is the way forward

 

3. Smart Cities Mission: Flaws in a flagship programme
Topic: CitiesCategory: GovernanceKey Points:

  • The Indian government would be celebrating a year of the launch of its flagship urban programme, the Smart Cities Mission, this month. In January, 20 from a pool of 100 cities were selected by the Central government under the Smart Cities Mission
  • Aimed at allocating Rs.10 billion to each selected city over a span of five years (Central government funding of Rs.5 billion, matched with equal funding from States/local bodies), the mission has been claimed by the Minister for Urban Development, as a “first in the country and even in the world [where] investments in urban sector are being made based on competition-based selection of cities”
  • According to Census 2011, 31 per cent of India’s total population lives in urban areas — a marginal increase of a little over three percentage points from the previous Census of 2001. In absolute numbers, however, India added about nine million people to the urban areas, bringing the number of urban residents in India to a total of 377 million. Additionally, for the first time since Independence, the growth in total urban population is higher than the absolute rural population growth. It is in this context that a close scrutiny of the Smart Cities Mission, as this government’s articulation of what it thinks of India’s urbanisation, is warranted. With the final list of smart cities being announced, the process route taken and the proposals selected provide profound insight into what the mission would do for our cities
  • The 20 cities were selected on the basis of a “Smart City Proposal” which was submitted by the city. The proposal was to contain two ideas — one, for the development of an area, and two, for the entire city. Proposals from a majority of cities have financially prioritised developing a small area rather than the entire city. 71 per cent of the funding from the mission will be spent on area-based development, the beneficiaries of which are about 4 per cent of the city’s population on average
  • Under area-based development, cities have proposed redevelopment of old and creation of new central business districts, retrofitting infrastructure such as water supply, sewerage, and creation of public spaces apart from reinventing landscape. The proposal for the entire city, however, has been limited to IT-based services like CCTV-monitored central command system, “smart” education portals and “intelligent” water and traffic management systems. This prioritisation of area might enhance the lived experience of residents of the area, but poses two larger questions on the substance of this mission
  • First, the Central government incentivising development of a small area and not the entire city doesn’t augur well. Explicitly, the Smart Cities Mission is aimed at land monetisation. Indeed, one of the big issues of our cities is that land, as a resource, hasn’t been fully exploited. The mission is arguably trying to articulate this particular aspect of our cities — that is, to suggest that land monetisation has not been addressed and there needs to be some thinking on this. One of the ways of doing this is to begin a project-based development, something that the mission proposes. But to present a land monetisation plan in the garb of national urban policy and encourage it as a model for the entire city is inappropriate and deeply worrying
  • Second, the mission also fails to articulate an institutional framework for urban development — a sustainable blueprint for governance for our cities — on two counts
  • The first is convergence. There are multiple policies for urban India: the Swachh Bharat Mission which is gearing up to make urban areas clean; Housing for All which promises universal housing by 2022; the National Urban Livelihoods Mission; the National Urban Information System; and the Heritage City Development and Augmentation Yojana (HRIDAY). Additionally, there are multiple infrastructure projects like expansion of city roads and highways, water reservoir and storage-related development which are mostly undertaken by development authorities or the State governments. The Smart Cities Mission’s convergence with all these schemes is not known
  • The second is governance. During the launch of the mission last year, the prime minister said, “The decision to make the city smart should be taken by the city, its citizens and its municipalities.” Ironically though, in the guidelines for the mission, the role of the local governments was significantly cut short — delegating the decision-making powers to a Special Purpose Vehicle (SPV), a body to be set up and which would implement the mission. The purported lack of capacities in our city government is arguably the rationale for the creation of an SPV. But is an SPV the right institutional architecture for our urbanisation and city development?
  • In 1992, the 74th constitutional amendment had envisioned an elected local government with neighbourhood committees and mohallasabhas as an institutional architecture vis-à-vis the functional, financial and legislative domain of city governments. The mission buries this arrangement and at the same time fails to provide an alternative
  • Bypassing political chaos and employing participation shortcuts to produce aggrandising structures of glass and steel, thinking that our cities would become inclusive and sustainable, is clearly not a very smart idea

 

The Indian Express

 

Others:

 

  1. PIB

 

a) MoU Signed for Coal Quality Analysis CSIR- Centre Institute of Mining and Fuel Research (CSIR-CIMFR) signed a Memorandum of Understanding here today with Coal Supplying companies and Power Utilities for quality analysis of coal being supplied to power utilities by coal companies. The collaboration will enhance energy efficient use of coal by power sector.

 

b) Exercise Jalrahat a Joint Initiative by State Govt and Armed Forces for Flood Relief in Assam Commences The much awaited event, Exercise JALRAHAT commenced today at NarangiCantt. Taking the leaf from the latest National Disaster Management Policy – 2016 and the call given by the Prime Minister urging the enhanced cooperation and involvement by Armed Forces in mitigating disasters, the Exercise JALRAHAT is a joint initiative taken by the Assam State Govt and the Armed Forces that is being led by GAJRAJ Corps with full support from HQ Eastern Command.

 

c) Shri Radha Mohan Singh launches a web based App CMRS for better crop and Nutrient management released for Bihar farmersCMRS: Crop Manager for Rice-based Systems

The Union Agriculture & Farmers’ Welfare Minister today launched Crop Manager for Rice-based Systems (CMRS) – a web based App for better crop and Nutrient management released for Bihar farmers in a program organised at ICAR-RCER in Patna. CMRS is designed for use by extension workers, crop advisers, input providers, and providers of services who interview a farmer using a personal computer, smartphone, or tablet.

 

2. The Financial Express:

 

a) Brexit impact on India, China: Complicating rulesTopic: Investment

Category: Economy

Key points:

  • Among various uncertainties following Brexit, those on investment rules as part of the FTAs recently concluded, or being negotiated by the EU, can be significant. The EU is engaged in several trade and investment negotiations, including the Trans-Atlantic trade and investment partnership (TTIP) with the US. It has recently finished negotiating important trade agreements with Canada and Vietnam and is discussing Economic Partnership Agreements (EPAs) with African countries. Discussions on trade and investment with India, and on investment with China, are also significant
  • The EU has been a major actor in bilateral free trade and regional trade agreements. Over time, it has taken over the mandate of negotiating trade and investment agreements on behalf of its member states with the rest of the world. This includes negotiating bilateral investment treaties (BITs)
  • The EU’s Lisbon Treaty of 2009 gave it exclusive authority for negotiating foreign investment issues on behalf of members. This meant henceforth there would be only one overarching EU BIT that members would adhere to and partners would have to deal with. The move created confusion over the fates of existing BITs that individual EU members had with other countries. China and India, for example, have BITs with 25 of the EU member countries, signed before the Lisbon Treaty. These BITs have been variously invoked in investment disputes, such as, for example, India’s BIT with the Netherlands. While the confusion was yet to be resolved, Britain’s exit from the EU has added new complications. China is already negotiating a BIT with the EU, while India’s FTA talks with it include trade and investment
  • These would now have to proceed on the assumption that investment issues pertaining to Britain would not be resolved within these frameworks
  • The implications are significant for China and India as they are now significant capital exporters into EU and Britain. In all probability, they will have to revisit bilateral investment protection agreements with the UK separately. They still have time to absorb the implications of Brexit on investment negotiations with the EU given that their talks are yet to be concluded. In a sense, the delay in concluding their negotiations with the EU can be seen as a blessing in disguise. The situation though is more complicated for other countries that have recently concluded trade and investment negotiations with the EU. These include Canada, Vietnam and the US
  • Both Canada and Vietnam are members of the US-led TPP. They have worked out individual FTAs with the EU with the larger objective of gaining preferential market access in Europe so that they have similar market access conditions and are able to trade with broadly identical rules in both the Pacific and Atlantic. With the US and EU negotiating the TTIP, which is almost at its final stages, the urge of other TPP members to work out preferential trade and investment deals with the EU is understandable. EU’s FTAs with Canada and Vietnam contain elaborate provisions on investment. The most significant among these are the Investor-State Dispute Settlement rules (ISDS)
  • The ISDS empower businesses to arbitrate against sovereign governments of parties of the FTAs. It is not necessary that the ISDS only feature in FTAs and RTAs. On the contrary, they used to mostly feature in BITs earlier. But the EU and US have preferred their inclusion in the FTAs they are negotiating given that investments are integral to cross-border trade in services between countries. Thus the ISDS feature in EU’s FTAs with Canada and Vietnam and are part of the TTIP as well
  • The Canada and Vietnam FTAs are done deals. Given that the ISDS provisions in both these agreements have been based on the assumption of cross-holding of companies across Europe, including Britain, the latter’s exit has implications for the protection that both businesses and states would visualize for capital exports into Europe. A necessary implication would be negotiating separate BITs with the UK by Canada and Vietnam, as well as by the US, post-TTIP. But that would take time. The contents of future BITs with the UK would require aligning them as close to investment provisions in FTAs and BITs with the EU as possible
  • As Britain and EU work out modalities in the coming months over Britain’s exit, considerable attention will be on the institutional economic relationship between them. International persuasion is likely to play an important role in this regard
  • Most countries having FTAs with the EU, or working them out, would prefer Europe and Britain to retain a certain degree of institutional synergy. This is particularly important from the perspective of investments. The larger objective of the non-European partners of the EU and Britain would be to ensure that rules governing cross-border management of investments, particularly arbitration, remain similar between EU and Britain, so that, for investment purposes, both continue to be visualised integrated notwithstanding Brexit

 

b) 7th Pay Commission: Too many clerks spoiling govt brothTopic: Non plan expenditure

Category: Governance

Key points:

  • If all goes to plan, the Cabinet will approve the Seventh Pay Commission’s whopping 24% hike in salaries on Wednesday for close to 5 million employees and an equal amount of pensioners and, if all is given out this year, that’s an additional R1-lakh-crore stimulus or around 0.7% of GDP
  • Since this will also have to be given for teachers and PSU and state government employees, that will ensure a regular dose of stimulus for the next few years
  • Chambers of commerce will cheer it, markets will bounce back and little will be done to address the real issue of too many clerks in the government and too few officers which is the primary reason for service quality being so poor despite India’s large bureaucracy
  • In the end, since pay commissions are really about balancing the maximum demands of the bureaucracy with the minimum needed to keep it from revolting, the issue of fixing the head-to-tail ratio and implementing performance-linked-pay will be cursorily mentioned by the Eighth Pay Commission, and then the Ninth
  • No attempt, similarly, will be made to fix the issue of salaries. Even after their very generous pensions —which are adjusted for inflation every quarter and hiked dramatically every decade—top bureaucrats typically get paid much less compared to the private sector while the legion of peons, drivers, secretaries and teachers get paid 3-4 times as much; and with little pressure on performance, deliver very little
  • A government school teacher, before the pay panel award, with no experience gets paid Rs52,000 as compared to a mere Rs19,000 (at the top end) in the private sector; a fresh government nurse gets 3.4 times her private sector counterpart, a driver 1.8-2 times. It pays a lot more to be a doctor in a government hospital if you’re an MBBS but as the skill levels rise—to an MD or an MS—private jobs pay much more
  • As for the impact, as Kotak Institutional Equities points out, things are quite different from the last pay panel report in 2008. Halving of excise duties—from 16% to 8% between February 2008 and 2009—ensured automobile prices were dropped significantly, a 425 bps cut in the policy rate in a span of just seven months made money much cheaper. The rural economy was also in far better shape, thanks to big hikes in MSPs, and with private sector investment peaking that year, overall sentiment was buoyant
  • Even so, a Rs1-lakh-crore stimulus will help, though this will have to be balanced by lower spending elsewhere. While that will play out as it will, the important question to ask when the Cabinet clears the pay panel award, is when the larger issues of right-sizing—and right-paying—the bureaucracy will happen

 

3. The Business Line:

 

a) An ill windTopic: Brexit

Category: Economy

Key points:

  • The Indian financial markets have weathered the fallout of the Brexit referendum rather well. The 2.2 per cent correction in India’s stock indices on Friday was modest, on a day when major European and Japanese indices crashed 7-10 per cent and the US markets lost 3-4 per cent
  • Domestic bond yields have also held steady and Indian stocks have been quick to regroup, along with other Asian peers, since Monday. The rupee weakened by just 1.4 per cent against the dollar, compared to the 11 per cent slide in the pound, the 4 per cent depreciation in the euro, and the 2 per cent dip in the Chinese yuan
  • This relative resilience of Indian markets to global turbulence is a break from the past, as any episode of risk aversion has earlier had foreign investors stampeding for the exit door. While it isn’t right to conclude that Indian markets are out of the woods yet, there are sound fundamental reasons for long-term foreign investors to think twice before exiting India in a hurry, this time around
  • From an equity investor’s point of view, renewed downgrades in global growth forecasts (Brexit is expected to cut EU growth by 0.5 percentage points) actually make India’s prospects appear in better light
  • Quite apart from the 7.6 per cent GDP growth, a stable political regime and well-contained twin deficits offer strong arguments for portfolio investors to bet on the country, once the dust settles
  • For India Inc — which is a large net importer of materials — a weakening of global oil and commodity prices is good news. This can unleash further raw material and fuel savings that can aid the earnings recovery evident in the recent March quarter results
  • Yes, select companies from sectors such as auto components, garment exporters and IT who rely on the UK or the EU for revenues will face headwinds from business uncertainties. But as a majority of listed firms are domestically focussed, a good monsoon and rising government spending may cushion the Brexit impact on India Inc’s profit growth
  • From the bond investors’ perspective, the widening differential between Indian and global bond yields may offer a compelling reason to bet on domestic g-secs. Liquidity factors may favour bright spots such as India too. Post-Brexit, global central banks have reason to continue with extremely accommodative monetary policies in a bid to stave off a liquidity freeze and stimulate their faltering economies
  • While these factors are positive from a medium-term perspective, it would not pay for policymakers to be complacent. Foreign fund flows both into the stock and bond markets are heavily reliant on the exchange rate. While prompt intervention may have helped the currency weather the last few sessions, the Reserve Bank of India cannot fritter away all its firepower given imminent outflows of over $20 billion on account of maturing FCNR deposits
  • Post-Brexit, it’s up to the Centre to sustain the momentum in growth and foreign investment

Note:An FCNR(Foreign Currency Non-Resident) account is a term deposit account that can be maintained by NRIs and PIOs in foreign currency. Thus, FCNRs are not savings accounts but fixed deposit accounts

 

b)  Getting real with the Model GST LawTopic: GST

Category: Economy

Key points:

  • While the 122nd Constitutional Amendment Bill, which is the vital legislation to make the much awaited Goods and Services Tax a possibility, is still not passed by the Rajya Sabha, the ministry of finance has recently released the Model GST Law as drafted by the empowered committee of State finance ministers
  • It is well in tune with the basic dual GST structure with the States empowered to levy State GST (SGST) on supply of goods and services within the State, the Centre to levy central GST (CGST) on intra-State supplies of goods and services, with integrated GST (IGST) being imposed by the Centre on import as well as inter-State supplies of goods and services
  • Though subsuming all the taxes in the State (SGST) and the Centre (CGST) is the highlight of GST, expectations are very high in the real estate sector which has the most complicated tax structure, be it State levy or central levy. With its volatile and diversified rates as well as rules across the States, real estate expects GST to be the panacea for all its woes
  • But the proposed Model GST Law doesn’t offer much solace. While treating construction activities in line with current “works contracts”, it has disappointed the crucial real estate sector by keeping the construction sector away from ITC (input tax credit) and being silent about the guidelines regarding valuation of land. If denial of ITC (goods such as cement and steel) means higher costs for the consumer, the non-integration of stamp duty into GST would only make it worse for him
  • Another striking issue is the valuation of goods based on retail sale price (RSP). Today, most FMCG goods and commodities such as cement are valued based on their RSP for payment of central excise duty when they are cleared from the factory. In the proposed law, the levy of GST would be on value addition at each stage of business
  • The Model GST Law has proposed a uniform basis for valuation of goods based on transaction value. Thus, the RSP-based levy would lose relevance under the GST regime. One of the key issues to keep in mind while finalising the valuation framework is the business dynamics of brand-owners who do contract manufacturing, toll manufacturing, and so on
  • The other major concern would be to address the issues relating to the variety of discounts offered at each and every stage of the supply chain, and pre- and post-sale discounts, turnover discounts, performance discounts, etc. Further, the various incentives and commissions given and the treatment of promotional packs supplied free of cost or at a discounted price should also be factored in while arriving at the appropriate valuation mechanism
  • With the RSP-based valuation being done away with under the GST regime, the valuation of imported goods currently assessed to countervailing duty (CVD) could be another important challenge
  • Coming to the legal angle, the Model GST Law is a potential can-opener for the tin of litigation worms. The critical term “supply” is defined as “Supply includes…” instead of “Supply means…”, leaving the definition open to varying interpretations. This is similar to the definition of “manufacture” under the Central Excise Act. The term is defined as “manufacture includes….”, thus introducing an element of ambiguity. Despite landmark judgments from the apex court interpreting this ambiguous definition, till date litigation continues
  • Other potential contentious areas could be valuation, classification, capital goods and input tax credits. Even on procedural aspects such as registration and returns, the prescription is extremely cumbersome and highly regressive
  • Further the Model GST Law also leaves many unanswered questions in key areas such as treatment of supplies to SEZ/STP, and transition of area-based and State incentives in the GST regime. Also at this stage no negative list has been prescribed. These issues require consensus and hopefully there will be clarity in the coming months
  • One of our major concerns is the potential abuse of power. The penal provisions prescribed are somewhat draconian; it includes imprisonment. GST is a new law, rather a transformation for all stakeholders. For the GST to become a successful reform tool, first and foremost the mindset of those in charge of administering GSTat the national level or State should undergo a major metamorphosis
  • Slogans such as “ease of doing business” have remained slogans; on the ground, tax administrators at all levels are bogged down by revenue bias, target orientation, fear of audit and vigilance, a policing attitude and looking at the assessee as potential evader. Unless there is a fundamental psychological change backed by genuine support from the top, GST can never be what it is intended to be
  • Tax collectors should realise that taxes will come in either because of or in spite of them. To quote the Prime Minister, 92 per cent of the tax revenue will flow to the government kitty, even if the tax departments are closed down
  • The Bill may be passed by the Upper House in the coming monsoon session. Sooner or later, the States will ratify it. Either before or during the coming Budget, GST could well become law. But how well are we prepared to implement GST? That’s an entirely different story altogether.

 

4. The Economic Times:

 

a) A chilling argument for cleaner energyTopic: Clean Energy

Category: Environment

Key points:

  • It is shocking and wholly unacceptable that air pollution results in an estimated 1.6 million premature deaths annually in India, according to the International Energy Agency (IEA). Given the alarming links between fuel choice, air pollution and human health, with the poor most affected, it is vital that we have proactive policy in place to tackle the negative externalities of fossil fuels and boost clean energy usage across the board
  • Evidently, the harmful externalities of fossil fuels have not been adequately factored into their retail prices
  • The actual cost shows up as morbidity and mortality. We have traditionally preferred to distort energy prices with populism and giveaways. Rightly, energy taxes and levies have lately been raised in India to better address the challenges of global warming and climate change
  • Rising pollution levels are not inevitable as we address energy poverty. The IEA report does stress that a small increase in energy investment can sharply reduce the casualty figures related to outdoor and indoor air pollution. It adds that energy production and use — mostly from unregulated or poorly regulated sources — and inefficient fuel consumption raise pollution levels. Hence the pressing need to boost energy efficiency, tighten emission norms and substitute traditional fuels like biomass
  • The focus needs to be on reducing small particulate matter (PM2.5) emissions. It is welcome that the Centre has brought forward the date for ultra-low sulphur automotive fuels — Bharat Stage VI — to April 2020, and has opted to sidestep BS V norms. A relatively modest upfront investment in oil refining and retrofitting can significantly reduce PM levels. The plan to boost supply of LPG cylinders for both the poor and non-poor is most welcome
  • Next, we need to shore up usage of natural gas, by far the cleanest fossil fuel. Also, we need a nation-wide plan to step-up thermal efficiency levels in brownfield coal-fired power plants by better allocating resources for the purpose, including by tapping multilateral sources. Our energy systems do need to be cleaner and greener

 

5. Quick Bits and News from States

 

a) Recovery of Rs. 29,000 cr. rail freight dues stalledA CAG audit report tabled in May 2015 estimated that the Railways could recover Rs. 29,236.77 crore from the exporters who transported iron ore meant for export on freight charges meant for domestic consumption movements. The loss estimates were for a period from May 2008 up to September 2013. Those moving iron ore for export had to pay four to five times more than those transporting iron ore for the manufacture of steel within India.  Even as the recovery is slipping, the Anti-Corruption Unit CBI, Kolkata that is conducting its own investigation into the evasion, has completed its investigations and filed charge sheets against many freight evading companies vindicating Railway’s stand

 

b) Call for HC bandh as 9 more judges suspended in TelanganaThe High Court of Judicature in Hyderabad suspended nine more judges, who joined the protest demanding withdrawal of the provisional list of appointments of judicial officers on Tuesday.The advocates and Bar Associations in Telangana are up in arms against the High Court, demanding recall of the provisional list because it had judges hailing from Andhra Pradesh who were being posted to subordinate courts in Telangana.

 

c) Ministries can approve up to Rs. 500 cr. of non-Plan spendingThe spending autonomy of Ministries has gone up with the threshold of non-Plan project expenditure that can be approved by them raised from Rs. 150 crore to Rs. 500 crore, the Union government announced on Tuesday.

The Finance Ministry’s nod will be needed for expenditure between Rs. 500 crore and Rs. 1,000 crore, beyond which Cabinet approval would be required.Earlier, Plan projects needed the approval of the Planning Commission and the Finance Ministry, which created two bottlenecks. Then, with NITI Aayog, this was removed. The new changes on Tuesday have now extended this independence to non-plan projects as well.

 

d)  India to teach Africa how to protect VIPsAs Prime Minister Narendra Modi sets out on a four-nation African tour next month, the government has decided to share India’s expertise in securing VIPs and vital security installations with these countries. Mr. Modi will embark on a five-day trip to the African countries from July 11-17.

 

e) Centre seeks to calm black money fears“The compliance window is open for people with undisclosed income to legitimise it by paying 45 per cent tax between June 1 to September 30. Any declaration made under this law (the Income Declaration Scheme 2016) is protected, (and) that information won’t be shared with any other authority”, said the Finance Minister.

 

f) App downloads expose most Indian usersAbout one in two Indians have allowed app developers to access their contact directories and other data stored on their smartphones in exchange for free applications, exposing themselves to privacy risks in the process, according to a study by Norton.

 

g) India ranks low at 105th on human capital index, Finland topsIndia was today ranked low at 105th position globally on a worldwide Human Capital Index, which measures countries’ ability to nurture, develop and deploy talent for economic growth and was topped by Finland.

India ranks much below China’s 71st position while Bangladesh, Bhutan and Sri Lanka are also placed higher on the index released today by Geneva-based World Economic Forum (WEF) at its Annual Meeting of New Champions — also known as ‘Summer Davos’ summit

 

h)  India can gain hugely from regional power trade, says World Bank studyRegional trade in electricity can spare India from investing in 35,000 MW coal-fired capacities (at estimated $26 billion) over the next 25 years, according to a World Bank study covering all SAARC nations except the Maldives.

Larger benefits will accrue through reduction in fuel cost and 6.5 per cent cut in greenhouse gas emission. The savings should come through replacement of thermal power with hydro-electricity to be sourced mostly from Nepal, followed by Bhutan and Afghanistan.The study by World Bank economists Michael Torman and GovindaTimilsina expects Nepal to add 52.1 GW (giga-watt) in 2040, over and above the existing 1 GW. Bhutan will add 9.1 GW and Afghanistan 3.6 GW.

Without trade opportunities, Nepal and Bhutan cannot maximise hydro-electric generation potential because of the smaller size of domestic economies.

 

G. Fun with Practice Questions 🙂
Question 1: Which of the following data is/are correct according to Census 2011?
  1. India’s effective literacy rate is about 74%
  2. The state of Kerala has the highest density of population among the states of India

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 2: Which of the following statements is/are correct about the civil war in Sri Lanka?
  1. The Indian Army was deployed in Sri Lanka from 1987 to 1990
  2. The Sri Lankan Government made a number of concessions to Tamil demands in 1987 by the signing of the Indo-Sri Lanka Peace Accord, including devolution of power and official status for the Tamil language which was enacted as the 13th Amendment to theConstitution of Sri Lanka

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 3: Which of the following statements is/are correct?
  1. The Human Capital Index(HCI) is released by the World Economic Forum
  2. HCI measures countries’ ability to nurture, develop and deploy talent for economic growth

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 4: Which of the following can be classified as non-plan expenditure?
  1. Interest payments on the loans taken by Government of India
  2. Expenditure incurred on Defence Services
  3. Subsidies and grants to the states and UTs
  4. Pensions

a) 1 and 4 only

b) 1,2 and 3

c) 2,3 and 4

d) All the Above

 

Question 5: Which of the following space crafts were sent to explore Mars?
  1. Curiosity Rover
  2. Spirit Rover
  3. Opportunity Rover
  4. Dawn Spacecraft

a) 1 and 2 only

b) 2 and 3 only

c) 1, 2 and 3

d) All the Above

 

Check Your Answers

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