17 May 2018: UPSC Exam Comprehensive News Analysis

A. GS1 Related

B. GS2 Related

• Karnataka Governor Vajubhai Vala invited former Chief Minister B.S. Yeddyurappa to form the government on the basis of his election as Leader of the BJP Legislature Party.
• Yeddyurappa will take oath — for the third time — as the 29th Chief Minister of Karnataka on Thursday morning. He has been asked to prove he enjoys the confidence of the Assembly within 15 days of assuming office.
• The Governor’s decision came after both the BJP and the Janata Dal (Secular), with the support of the Congress, staked claim to form the government. Although the signatures of 117 elected members were submitted by the leaders of the JD(S) and the Congress, the Governor invited Mr. Yeddyurappa, the leader of the single largest party in the Assembly.
• The Governor’s decision to invite the BJP, which emerged as the single largest party with 104 seats (eight short of majority in the 222-member House, with two constituencies yet to go to the polls), is expected to intensify the political slugfest after the people’s mandate threw up a hung Assembly.
• By inviting the BJP to form the government, Karnataka Governor Vajubhai Vala chose the single largest party over the post-poll alliance of Congress-JD(S).

Governor’s Role

• Legal experts are divided over the question whether the Governor violated the law by choosing the BJP over the numerically stronger post-election alliance of Congress and JD (S).
• After all, it was only in April 2017 that the Supreme Court ordered a floor test despite the Congress being the single largest party in Goa. Governor Mridula Sinha brazenly did not invite the Congress first to form the government in Goa but chose the BJP alliance.
• Governor Vala did the reverse in Karnataka. He ignored the post-poll alliance to give first preference to the single largest party, BJP. Former Supreme Court judge, Justice K.T. Thomas, said it is political ethics for the Governor to first invite the single largest party to form a stable government.
• Justice Thomas refers to the Bommai judgment of 1994 to support his argument. The Bommai judgment endorses the Sarkaria Commission report of 1988. The Commission recommends that in case of no pre-poll alliance among parties, the Governor should give first preference to the single largest party.
• However, senior advocate K.V. Vishwanathan refers to a paragraph in the same 24-year-old Bommai judgment by a seven-judge Constitution Bench to argue the very opposite. He notes that the judgment also mentions that the Governor can either invite the “single largest party/group.”
• The Rameshwar Prasad judgment in 2006 by a five-judge apex court Bench endorses the Sarkaria Commission and Bommai judgment.
• This 2006 judgment even quoted how post-poll alliances were a source of instability in government. It further cited the observation made by the National Commission to Review the Working of the Constitution that changing alignment of the members of political parties so openly really makes a mockery of our democracy.

• Jharkhand has emerged as the best-performing State in terms of cleanliness, while Indore in Madhya Pradesh was adjudged the cleanest city in the country, according to the government swachhta survey released on Wednesday.
• Maharashtra stood second behind Jharkhand, while Chhattisgarh was at the third position in the category of ‘best-performing States’ in the ‘Swachh Survekshan 2018’ released by Housing and Urban Affairs Minister Hardeep Singh Puri here.
• As far as cities are concerned, table-topper Indore is followed by Madhya Pradesh capital Bhopal, while Union Territory of Chandigarh stands at the third place in the national-level category.
• Indore and Bhopal have retained their respective positions from the last year survey. But this year, the survey has covered 4,203 cities while in 2017 only 434 cities were surveyed.
• State ranking was introduced in this year’s survey, which was conducted between January 4 and March 10. In 2016, the survey was conducted in 73 cities having a population of 10 lakh or more and also the capital cities.
• The New Delhi Municipal Council (NDMC) got the tag of India’s ‘cleanest small city’ (urban local body) with population between 1 lakh and 3 lakh in the 2018 survey.
• In the ‘cantonment’ category, the Delhi Cantonment has emerged as the cleanest, followed by Almora, Ranikhet and Nainital (all three in Uttarakhand).
• Uttar Pradesh’s Ghaziabad was adjudged the “fastest mover big city” in this survey.
• Mysuru has been ranked the cleanest medium-sized city in the country. Mysuru has been ranked the cleanest among cities with a population of between 3 lakh and one million. Mangaluru has been ranked the best city in solid waste management.

C. GS3 Related

• The Union Cabinet approved a national policy on biofuels that seeks to not only help farmers dispose of their surplus stock in an economic manner but also reduce India’s oil-import dependence.
• The policy expands the scope of raw material for ethanol production by allowing use of sugarcane juice, sugar-containing materials like sugar beet, sweet sorghum, starch-containing materials like corn, cassava, damaged food grains like wheat, broken rice, rotten potatoes [that are] unfit for human consumption for ethanol production.
• Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase.
• Taking this into account, the policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.
• The policy also provides for a viability gap funding scheme of Rupees 5,000 crore in six years for second generation (more advanced) ethanol bio-refineries in addition to tax incentives and a higher purchase price as compared to first generation biofuels.
• One crore litres of E10 [petrol with 9-10% ethanol blended in it] save 28 crore rupees of forex at current rates. The ethanol supply year 2017-18 is likely to see a supply of around 150 crore litres of ethanol which will result in savings of over Rupees 4,000 crore of forex.
• The release added that one crore litres of E10 reduce carbon dioxide emissions by about 20,000 tonnes.
• For the ethanol supply year 2017-18, there will be lesser emissions of CO2 to the tune of 30 lakh tonnes. By reducing crop burning and conversion of agricultural residues/wastes to biofuels there will be further reduction in greenhouse gas emissions.

• Representatives from British IT, engineering, medical and other bodies, and politicians have come together to call for changes to Britain’s immigration rules after it emerged that more than 6,000 skilled professionals were refused the necessary visa because of a monthly cap for that visa category.
• A freedom of information request by the Campaign for Science and Engineering (CaSE) revealed that 6,080 Tier 2 (general) visas — including for professionals from India — were refused due to the annual cap between December 2017 and March 2018, putting the British economy and public services at risk.
• While the figures don’t break down the refusals by nationality, they do by sector, revealing that 1,814 refusals for roles in professional services were made, alongside 1,226 for IT roles, 1,518 for doctors and 392 for engineers.
• Last month, it emerged that hundreds of Indian doctors on Tier 2 as well as a separate Tier 5 visa categories had been refused visas despite having been offered roles in NHS Trusts up and down the U.K.
• These figures show the scale of the problem and the urgency to find a solution. Across the country, businesses and public services are being blocked at the last hurdle from recruiting the people they need, including in health, engineering and tech, due to the visa cap.
• CaSE is calling for roles on the “shortage occupation list” as well as PhD level roles to be exempt from the cap.
• Under the current system, there is an annual limit of 20,700 Tier 2 (general) visas for non-EU professionals allocated by Britain, broken down into monthly limits which vary between 1,000 and 2,200 a month.
• Once the monthly cap is reached, further certificates of sponsorship are allocated based on a points-based system, dependent on whether work for an occupation on the official shortage list is being applied for, whether the work is Ph-D level, and also on the basis of salary.

• A government committee has drafted the definition of ‘shell-company’ to plug a loophole in existing laws that empower enforcement agencies to initiate legal proceedings against such entities.
• The issue had come up after a large number of entities, against which action had been taken, contested their classification as shell companies.
• The committee also examined the definition provided by the Organisation for Economic Co-operation and Development (OECD), which has defined a ‘shell company’ as “a company that is formally registered, incorporated, or otherwise legally organised in an economy but which does not conduct any operations in that economy other than in a pass-through capacity.”
• The authorities encountered some issues with the OECD definition, and hence explored other definitions.
• They have arrived at one such definition, which is being tested on the basis of the data on such entities that is available with the Ministry of Corporate Affairs.
• After determining that the definition is wide enough to cover all aspects of such entities, the Centre may soon adopt it for inclusion and implementation for legal purposes.

• Global financial major Credit Suisse believes that the Indian equity market is in a worrisome zone due to a combination of global and domestic macro-economic factors like high crude prices, current account deficit and consecutive years of earnings downgrades.
• In its latest India strategy report, Credit Suisse said that India could be the next shoe to drop while reiterating its underweight stance on the Indian equity market.
• Close to highest ever premiums versus the region, four consecutive years of downgrades to consensus EPS, current account deficit, rising oil prices further pressuring the current account and fiscal deficit and the fact that foreign investors have yet to capitulate – suggest India could be the next shoe to drop.
• While highlighting the fact that MSCI India index had fallen the least from its highs when compared to the fall of MSCI Indonesia or MSCI Philippines, the financial major says that India’s premium had risen to 64% — close to its highest ever — amidst continued downgrades to consensus EPS and weak return on equity (RoE).

Equity Market

• An equity market, often know as stock market or share market, is a market where shares of companies or entities are issued and traded, either through exchanges or through listed dealers or brokers. Stock exchanges list shares of common equity as well as other security types, e.g. corporate bonds and convertible bonds.
• Equity market is the aggregation of buyers and sellers of stocks. The equity sale gives a company access to capital and investors a slice of ownership in a company with the potential to realize gains based on the future performance of the company.

D. GS4 Related

E. Editorials

Context in view of trade deficit:

• India’s macroeconomic threats lie exposed as it grapples with the rupee’s slide. The currency sunk to a closing low of 68.07 against the U.S. dollar on Tuesday, its lowest level in 16 months, before recovering slightly the next day.
• The rupee, already one of the worst performing Asian currencies, has now weakened 6.2% in 2018. The rise in crude oil prices through this year, amidst rising geopolitical tensions in West Asia and dwindling global supply, have obviously hurt the rupee and the trade balance.
• Meanwhile, despite a depreciating currency, India’s merchandise exports are stumbling instead of gaining from the opportunity.
• There is a sharp decline in exports from employment-intensive sectors such as readymade garments and gems and jewellery, according to official data.
•  The trade deficit has consequently widened to $13.7 billion in April, compared to $13.25 billion in the same month in 2017.
• The value of oil and petroleum product imports increased by 41.5% from last year to hit $10.4 billion. U.S. sanctions following Washington’s withdrawal from the Iran nuclear deal and a June 22 meeting of OPEC should drive oil price trends hereon.
• Oil prices apart, the tightening of U.S. monetary policy has almost always spelled trouble for emerging market economies hooked to Western capital inflows. This time it is no different; capital outflows are scuppering the currencies of many emerging market economies.

Why is the rupee in a free fall?

• As the U.S. Federal Reserve has come to adopt a more hawkish stance, investors in search of higher risk-adjusted yields have started to pull money out of emerging markets.
• Yields on emerging market bonds have risen as investors sold them off aggressively. The yield on the 10-year bond issued by the Indian government has risen to more than 7.8%, from 7.1% in early April.
• Foreign portfolio investors (FPIs) pulled out Rs.15,500 crore from India’s capital markets in April, which is the highest monthly outflow since December 2016.
• Not surprisingly, about two-thirds of the outflow was attributed to the bond market.
• The current headwinds from the reversal of capital flows were only to be expected. India is better placed than countries such as Argentina or Turkey.
• But that’s no reason to be complacent as external account risks can get out of hand very quickly.
•  A hike in the RBI’s benchmark interest rates could stem the capital exodus, but with core inflation picking up and the government keen on a rate cut as a growth catalyst, the RBI has an unenviable dilemma on its hands.
• Policymakers, blessed with relatively benign external economic conditions after the taper tantrum of 2013, will have to find means to spur exports — whether by facilitating swifter GST refunds or taking on tariff and non-tariff barriers from the developed world. Efforts to diversify India’s energy basket also need greater stress.

Category: INTERNATIONAL RELATIONS

1. A pilgrimage to Nepal

Question 1. Consider the following statements about Equity Markets:

Question 2. Consider the following statements about Shell Companies:

Question 3. Consider the following statements about Biofuels:

Question 4. Consider the following statements about Categories of Biofuels:

Question 5. Consider the following statements:

Also, check previous Daily News Analysis