29 Sep 2020: UPSC Exam Comprehensive News Analysis

29 Sep 2020 CNA:- Download PDF Here

TABLE OF CONTENTS

A. GS 1 Related
SOCIAL ISSUES
1. UN expert raises concerns over eviction of slum dwellers in Delhi
B. GS 2 Related
POLITY AND GOVERNANCE
1. Land acquisition order gifted govt. laxity: CJI
C. GS 3 Related
DEFENCE
1. Offset clause goes for IGAs
ECONOMY
1. 'New codes don't promote hire and fire'
2. RBI extends enhanced borrowing limit for banks till March 31
D. GS 4 Related
E. Editorials
INTERNATIONAL RELATIONS
1. UN and the retreat from multilateralism
F. Prelims Facts
1. 'Engineering exports drop 18% in April-August'
G. Tidbits
1. Two speeches
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions

Category: ECONOMY

1. ‘New codes don’t promote hire and fire’

Context:

The Parliament has passed three Bills in the Lok Sabha to amalgamate laws on social security, occupational safety and health and industrial relations.

This topic has been covered in 20th September 2020 and 26th September 2020 Comprehensive News Analysis.

Details:

  • Concerns have been raised about the increase in threshold from 100 workers to 300 workers for seeking prior permission for retrenchment, lay-off and closure.
  • The government has responded saying:
    • Workers’ rights such as notice before retrenchment, compensation at the rate of 15 days wages per completed year of service and pay in lieu of notice period have not been compromised.
    • Further, the Industrial Relations Code envisages an additional monetary benefit equivalent to 15 days of wages under the newly created Reskilling Fund.
    • There has been no empirical evidence to suggest that higher threshold promotes hire and fire.
  • The Ministry also said that the Economic Survey, 2019 analyzed the pain of dwarfism prevalent in Indian firms.
    • Dwarfism refers to the phenomenon in which firms survive for more than 10 years but their growth in terms of employment is stunted.
  • It was observed that the threshold under labour legislation creates a perverse incentive to remain small.
  • The Ministry said fixed-term employment had already been notified by the Central Government and 14 States.
    • It was pro-worker and such employees would be eligible for all benefits and service conditions that a regular employee enjoyed.
    • ​Non-availability of fixed-term employment implied that an employer had options to either employ on regular basis or through contractual basis.
    • The employment of workers through contractual basis means higher transaction cost to the employer, lack of permanence of contract labour, untrained and unskilled contract labour.
    • It also lacks a committed and long-term relationship between employer and contract labourer, as there are on the ground, two employers, i.e., contractor and principal employer.

2. RBI extends enhanced borrowing limit for banks till March 31

Context:

The Reserve Bank of India has decided to extend the enhanced borrowing facility provided to banks to meet the shortage of liquidity by six months.

Details:

  • The RBI had increased the borrowing limit for scheduled banks under the marginal standing facility (MSF) scheme from 2% to 3% of their net demand and time liabilities (NDTL) with effect from March 27, 2020.

Significance:

  • The announcement comes as a move to provide comfort to banks on their liquidity requirements.
  • It provides increased access to funds and also qualifies as high-quality liquid assets (HQLA) for the liquidity coverage ratio (LCR).
  • It enables banks to continue to meet LCR requirements.
    • The liquidity coverage ratio (LCR) is the requirement whereby banks must hold an amount of high-quality liquid assets that’s enough to fund cash outflows for 30 days.

Marginal Standing Facility:

  • Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.
  • Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under the liquidity adjustment facility. The MSF rate is pegged 100 basis points or a percentage point above the repo rate.

G. Tidbits

1. Two speeches

What’s in News?

The speeches at the UN General Assembly, by Pakistan’s Prime Minister Imran Khan, and by Prime Minister Narendra Modi, were a study in contrast.

  • India’s Prime Minister focused on India’s own role on the world stage and the need to reform the UN and expand the Security Council to give India more representation.

This topic has been covered in the 23rd September 2020 Comprehensive News Analysis.

  • While India’s PM made no reference to Pakistan and spoke about terrorism only in broader terms, the Pakistani counterpart focused less time on Pakistan, launching a verbal attack against India.

Pakistan’s Prime Minister’s Speech:

  • With references to India forming more than a third of his text, he repeated the condemnation in his previous speeches: accusing the Indian government of “state sponsorship of Islamophobia”, of following an extremist ideology, which he claims is inspired by Nazi concepts of “racial purity and supremacy”, and of planning to cleanse the country of minorities.
  • Extreme comparisons were made between the Citizenship (Amendment) Act and the Nuremberg laws, as well as between detention camps in Assam and the concentration camps of Nazi Germany.
  • Jammu and Kashmir also formed a part of his speech which included accusations that the government’s moves to dilute Article 370 and reorganise J&K State into Union Territories contravene UN laws.
  • The speech was concluded with a reference to LoC tensions and an exaggerated note that referred to Kashmir as a nuclear flashpoint.

H. UPSC Prelims Practice Questions

Q1. Consider the following statements with respect to the Monetary Policy Committee 
(MPC):
  1. The RBI Governor chairs the committee and enjoys a veto power.
  2. Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
  3. No government official will be nominated to the MPC.

Which of the given statement/s is/are INCORRECT?

  1. 1 only
  2. 2 and 3 only
  3. 1 and 3 only
  4. None of the above
CHECK ANSWERS:-

Answer: a

Explanation:

  • The RBI Governor will chair the committee.
  • The governor does not enjoy a veto power to overrule the other panel members but will have a casting vote in case of a tie.
  • The committee will have six members. Of the six members, the government will nominate three. No government official will be nominated to the MPC.
  • The other three members would be from the RBI with the governor being the ex-officio chairperson.
  • Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
Q2. Consider the following statements with respect to the Marginal Standing Facility 
(MSF):
  1. It is the rate at which banks can borrow overnight funds from RBI against the approved government securities.
  2. The MSF rate is always lesser than the repo rate.
  3. An increase in the cap for MSF will decrease liquidity with banks.

Which of the given statement/s is/are correct?

  1. 2 only
  2. 1 and 2 only
  3. 1 only
  4. 1, 2 and 3
CHECK ANSWERS:-

Answer: c

Explanation:

  • Marginal standing facility (MSF) is the rate at which banks can borrow overnight funds from RBI against the approved government securities.
  • It is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.
  • Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under the liquidity adjustment facility. The MSF rate is pegged 100 basis points or a percentage point above the repo rate.
  • Generally, banks are allowed to borrow under MSF within a cap (based on SLR reserves or NDTL). An increase in this cap will open up more avenues for the bank to borrow from the RBI. Hence an increase in the cap for MSF will increase liquidity with banks.
Q3. Which of these countries border the Caspian Sea?
  1. Iran
  2. Russia
  3. Armenia
  4. Azerbaijan
  5. Turkmenistan

Options:

  1. 1, 2, 3 and 5 only
  2. 2, 3 and 5 only
  3. 1, 2, 4 and 5 only
  4. 1, 2, 3, 4, 5 and 6
CHECK ANSWERS:-

Answer: c

Explanation:

Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan border the Caspian Sea.

Q4. Consider the following statements with respect to the Liquidity Coverage Ratio 
(LCR):
  1. It indicates the proportion of highly liquid assets held by banks to ensure their ability to meet short-term obligations.
  2. The LCR is calculated by dividing a bank’s high-quality liquid assets by its total net cash flows, over a 30-day stress period.

Which of the given statement/s is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
CHECK ANSWERS:-

Answer: c

Explanation:

  • Liquidity Coverage Ratio (LCR) indicates the proportion of highly liquid assets held by banks to ensure their ability to meet short-term obligations.
  • The LCR is calculated by dividing a bank’s high-quality liquid assets by its total net cash flows, over a 30-day stress period. The high-quality liquid assets include only those with a high potential to be converted easily and quickly into cash.

I. UPSC Mains Practice Questions

  1. The retreat from multilateralism would undermine the UN’s capacity to face diverse challenges. Discuss. (10 Marks, 150 Words) (GS 2 International Relations).
  2. At a time when the COVID-19 pandemic has exposed the lack of basic safety nets for large sections of the labour force, the introduction of the Labour Codes is a step in the right direction to bring about a transformational impact on labour empowerment in the country. Critically comment. (15 Marks, 250 Words) (GS 3 Economy).

Read the previous CNA here.

29 Sep 2020 CNA:- Download PDF Here

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