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Author: Arushi Pathak

All news available date-wise and month-wise. Click on the date to revise news.

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[op-ed snap] Bringing GM to the table

Note4Students

From UPSC perspective, following things are important:

Prelims level: Read the attached story

Mains level: The article explains the problems associated with the GM crops and they can be tackled. Important for Mains Paper 3


News

Context:

  • The article is about the Genetic Engineering Appraisal Committee (GEAC) which had recently cleared GM mustard for commercial production
  • Writer discusses about the relevance of GM Crops in Indian context

Reasons behind the opposition of GM Crops First

  • One of the principal reasons for opposition to GM crops is the potential for serious, irreversible damage to human health and the environment
  • This is especially relevant in the context of crops such as Bt brinjal which involve direct consumption by humans, unlike Bt cotton

Second

  • The precautionary principle for regulatory decisionmaking and a lack of trust in government and industry that promotes and benefits from GM technologies.

Third

  • All the safety tests for regulatory approvals are typically conducted by the same party that applies for commercialisation of GM crops
  • For Example, Mahyco on Bt brinjal or Delhi University on GM mustard

Fourth

  • Conflict of interest was made worse by the refusal of GEAC to publicly release the safety testing data submitted for regulatory approval
  • This tendency to operate in secrecy has not only created a serious distrust of the government and the promoters of GM crops but is also fuelling the conflict

The Way forward

  • Extensive research on GM crops will identify trust in regulatory agencies and industry as being a critical factor in public willingness to accept GM technology
  • The government should adopt a participatory approach to bring together all stakeholders to develop regulatory protocols that restore trust in the process
  • The burden of proof(that GM crops are not harmful) lies with the promoters of GM technology to persuade consumers, farmers and activists that among various alternatives available for sustainable food production

 

First indigenously built floating dock launched

Note4tudents

Mains Paper 3: Science and Technology |indigenization of technology and developing new technology

The Newscard has details on first indigenously built floating dock. Few takeaways:

Prelims Level: Note down the name of the dock, its location and advantages

Mains Level: Not very Mains heavy


Context

  • The Indian Navy’s first indigenously built floating dock (FDN-2), developed by Larsen and Toubro Ltd. (LandT)
  • It was launched at LandT’s shipyard in Kattupalli How is the floating dock?
  • The floating dock is 185 metres long and 40 metres wide
  • It will enable docking of all kinds of vessels This will include naval ships and submarines of up to 8,000 tonnes displacement
  • It would include draughts of up to seven metres, during both day and night

Where will it be placed?

FDN-2 will be based in the Andaman and Nicobar Islands

Importance of FDN-2

  • It will enhance the Navy’s technical repair infrastructure
  • FDN-2 adds much more capability and flexibilty to undertake repair and maintenance works
  • FDN-2 was designed and built by LandT at a cost of Rs. 468 crore

 

NASA finds 10 Earth-sized exoplanets

Notes4Students

Mains Paper 3: Science and Technology | Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology

Prelims Level: know about the Kepler Mission, location of exoplanets etc. for Prelims

Mains Level; Not much Mains worthy


Context

  • NASA revealed new rocky, Earth-sized planetsThese could potentially have liquid water and support life

The Kepler mission

  • The Kepler mission team released a survey of 219 potential exoplanets
  • These planets are outside of our solar systemThey had been detected by the space observatory launched in 2009 to scan the Milky Way galaxy

Location of these exoplanets

  • Ten of the new discoveries were orbiting their suns
  • Their orbit is at a distance similar to the Earth’s orbit around the sun
  • This is the habitable zone that could potentially have liquid water and sustain life

Habitable zones

  • Kepler has already discovered 4,034 potential exoplanets
  • 2,335 of these have been confirmed by other telescopes as actual planets
  • The 10 new Earth-size planets bring the total to 50 that exist in habitable zones around the galaxy
  • The telescope detects the presence of planets by registering minuscule drops in a star’s brightness

Back2basics

Kepler Mission

  • Kepler is a space observatory launched by NASA to discover Earth-size planets orbiting other stars
  • Named after astronomer Johannes KeplerIt was launched into an Earth-trailing heliocentric orbit
  • Kepler is part of NASA’s Discovery Program of relatively low-cost, focused primary science missions
  • The scientific objective of Kepler is to explore the structure and diversity of planetary systems
  • This spacecraft observes:
  • To determine how many Earth-size and larger planets there are in or near the habitable zone (often called “Goldilocks planets”)
  • To determine the range of size and shape of the orbits of these planets
  • To estimate how many planets there are in multiple-star systems
  • To determine the range of orbit size, brightness, size, mass and density of short-period giant planets
  • To identify additional members of each discovered planetary system using other techniques
  • Determine the properties of those stars that harbor planetary systems

[op-ed snap] Bad for health

Note4Students:

Op-ed discusses issue of vegetarianism vs Non-vegetarianism in the context of medicines. From UPSC perspective, following things are important:

Prelims level: Cellulose, gelatin, Drug Controller General of India, Drug Technical Advisory Board.

Mains level: Will push for vegetarianism be helpful or harmful for India in long run, its impact on various stakeholders and other related issues.


News:

Context:

A notice issued by a health ministry expert committee in the first week of June signals the government’s intention to usher major change in India’s pharmaceutical sector

  • It invites comments from stakeholders about replacing widely-used animal parts-based gelatin capsules with those derived from cellulose
  • In 2015, the scientific committee which advises the Drug Controller General of India (DGCI) gave an in-principle approval to the shift to cellulose-based capsules

Current Situation

  • Currently, 98 per cent of the Indian pharmaceutical industry uses animal parts-based capsules

What government wants?

  • Government has been pitching for “vegetarian capsules” for the past two years
  • But there is little medical or commercial reasoning behind this proposal

What this could lead to?

  • A switch over to cellulose-based capsules could jeopardize the government’s recent initiatives to make medicines accessible to all.

Difference in opinions:

  • In an e-mail last year to the joint secretary, health ministry, the DGCI pitched for “vegetable capsules for vegetarian society”
  • The DGCI’s vegetarian fetish found support from the Women and Child Development Minister Maneka Gandhi She argued, “In a country where there are millions of people, this hurts religious sentiments and many people avoid medicines that are in a capsule form”
  • The Drug Technical Advisory Board, health ministry’s premier advisory agency, had dismissed Gandhi’s representation on the grounds that: “Unlike food, drugs are not taken as choice but are prescribed by doctors to save lives and marking them as vegetarian or non vegetarian is not desirable”
  • The health ministry has overruled this reasoning Concerns

Opinions of industry:

  • They have argued that the gelatin capsules have been in use all over the world for more than 180 years
  • They also questioned viability of cellulose-based capsules
  • Various industry associations cited the huge economic cost of the switch, which may also impact accessibility of medicines
  • The cost of raw material required to make cellulose capsules is approximately four times that of gelatin and the manufacturing cost of cellulose-based capsules approximately three times the cost of gelatin capsules

Scorpene submarines to join Navy without AIP modules

Note4Students:

Mains Paper 3: Science and Technology | Science and Technology- indigenization of technology and developing new technology

The newscard has details on the newly inducted Scorpene submarines. This new addition to Indian navy, can be a probable question for UPSC.

Prelims Level: Note down the manufacturers, AIP module, Scorpene submarine (from Back2basics)

Mains Level: Not very Mains heavy topic


Context

The last two Scorpene submarines will roll out of the manufacturing line without the Air Independent Propulsion (AIP) system • This system is meant to extend the reach of the conventional diesel-electric submarines

 Manufacturers:

Two of the six Scorpene submarines are being manufactured by Mazgaon Docks Limited (MDL) in Mumbai

What is AIP module?

  • The AIP module is being developed by Defence Research and Development Organisation (DRDO)
  •  The module enables conventional submarines to stay remain underwater for a longer duration
  • It greatly increases the submarines stealth characteristics

Install during refit

  • The only option of installing the AIP system is during the refit of the submarine
  • This is six years after induction. The normal refit of the submarines is scheduled six years after induction
  • Major refit is after 12 years after induction, It is still not clear if the Navy wants to go ahead with the plan as it would mean opening up of the hulls of the submarines

Back2basics Scorpene submarine

  • The Scorpene-class submarines are a class of diesel electric attack submarines
  • They are jointly developed by the French Direction des Constructions Navales (DCN) and the Spanish company Navantia, and now by DCNS
  • It features diesel propulsion and an additional air-independent propulsion (AIP).

Issue over poor man’s food jowar: House panel questions need to develop GM Sorghum

Note4Students

Mains Paper 3: Science and Technology | Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.

The newcard has information on GM Sorghum-a new Bt crop. Read about the controversy and questions that arise from this

Prelims Level: GM Sorghum, its advantages, the name of the committee, etc.

Mains Level: The questions raised, opinions of activists etc. will be helpful in writing mains answer. The points in this newscard can be further helpful in writing Essay


Context

  • The controversy over GM Mustard rages on another row is over GM crop version of jowar – or sorghum
  • Sorghum is said to be the poor man’s food in India Parliamentary Committee plans
  • The Parliamentary Standing Committee on Science and Technology, Environment and Forests has decided to seek clarifications from Union Agriculture Ministry, and also ask the National Institute of Nutrition (NIN) to do a comparative analysis of the nutritional values of GM and non-GM sorghum
  • The panel is examining the issue of GM crops and its impact on environment
  • It has called for samples of the crop developed by the Hyderabad-based Indian Institute of Millets Research (IIMR)

Questions of this committee

  • To know the need to develop a genetically modified version of sorghum, which is the poor man’s food
  • Sorghum yield was already not fetching a good market price and was more than enough to meet the demand
  • So why was GM Sorghum required?The committee wants to know whether there is a plan to introduce GM Sorghum in ration shops under the PDS

Finances for GM Sorghum

  • The panel will look into issues such as expenditure incurred on research for GM Sorghum
  • The money from the public exchequer was spent on GM Sorghum research even before any forward-backward linkage planning was done

Advantage of Bt Sorghum

  • IIMR had begun research on transgenic jowar around four years ago
  • It has now developed Bt SorghumThis is bigger in size, It also has greater pest resistance What do activists say?
  • Activists contend that the Central government should not allow consumption of genetically modified jowar by either humans or animals
  • They argue that since jowar is largely consumed by the poor, any ill-effect of the GM variety will impact more people
  • It will affect those without much access to preventive medicare

Clearance giving Committee: Genetic Engineering Appraisal Committee (GEAC) History of Bt crops in India

  • The only genetically modified crop that is under cultivation in India is Bt Cotton
  • There was a proposal to allow cultivation of Bt Brinjal, a transgenic variety of brinjal, which did not receive approval

[op-ed snap] A quantum step to a great wall for encryption

Note4students

Mains Paper 3: Science and Technology | Science and Technology- developments and their applications and effects in everyday life

From UPSC perspective, following things are important:

Prelims Level: Basics of Quantum Mechanics and entangled photons

Mains level: The article explains about a new and innovative technology that can help us to switch to more secure platforms for banking transactions(and other applications as well). These days online banking security is a hot topic and hence important for mains.


News

Context

  • The Article is about the Quantum Mechanics(QM) and its practical use in the real world

What is QM?

  • QM deals with the subatomic particles QM inhabitants are electrons and photons. What can we get from QM?
  • We can manipulate sub-atomic particles for purposes that benefit the world such as making integrated circuit chips and fibre-optic lines for global, instantaneous communication

China’s Achievements

  • China has combined satellite technology and the elusiveness of quantum mechanics to demonstrate how secret information can be transmitted over a thousand kilometres
  • This technology also gives the guarantee that any unauthorised attempt to steal secret information can be restricted

What are entangled photons?

  • Pairs of photons share their quantum properties no matter how long they are separated or how far they have travelled. These are called entangled photons

Issues with Entangled photons?

  • The principle of Entangled photons has been understood fairly well since the 1980s,
  • But it has been hard to transmit entangled photons through the atmosphere because they are extremely fragile and can disintegrate through contact with other particles in the air
  • Till now the world record was a transmission of a few hundred kilometres

China’s Achievement in this field

  • The Chinese set-up transferred entangled photons through a satellite, called Micius
  • These entangled photons were transferred between two ground stations that were 1,200 km apart
  • Only one out of six million photons sent ‘entangled photon’ could be recovered, which according to experts was better than previous ground studies of entanglement
  • But still with these results we can’t reach our goal of sending secure keys using quantum mechanics principles

What if we successfully transfer entangled protons?

  • Organisations and people reliant on online financial transactions are increasingly dependent on satellite based Internet
  • But with quantum physics we can switch to more secure platforms than internet based systems

[op-ed snap] Big data, big dangers

Note4Students

Mains Paper 3: Science and Technology | Science and Technology- indigenization of technology and developing new technology

From UPSC perspective, following things are important:

Prelims level: Particulars of Aadhar initiative

Mains level: The article provides good points against the privacy problems associated with the Aadhar Card. As Supreme court is also considering the privacy concerns related to Aadhar Card, it makes it more important for Mains paper.


News

Context

  • The Article is about the privacy concerns related to Aadhar Card(and Big Data Technology)
  • Supreme Court is also considering this issueProblems associated with storing large amount of data(as in the case of Aadhar)
  • One major problem with collecting and storing vast amounts of data overseas is the ability of owners of such data stores to violate the privacy of people
  • Foreign governments or rogue multinationals can also access this personal data in order to affect policies of a nation
  • Another major problem is the potential drain of economic wealth of a nation

How can this problem be solved?

  • The future of BDT(Big Data Technology) in government policies can’t be denied
  • The only way to solve this privacy concern is to make sure that India does it on her own terms with the BDT companies
  • And finds a way to protect both financial rewards and ensure individual privacy and national security through appropriate safeguards

Other Measures

  • For building companies using BDT, India should build sophisticated super-large data centres
  • We should provide subsidies(to BDT companies) such as cheap power and real estate, and cheap network bandwidth
  • In the short term, we should also create a policy framework that encourages overseas multinationals such as Google and Amazon to build large data centres in India and to retain the bulk of raw data collected in India within our national geographical boundaries
  • Also, we should build research and development activities in Big Data Science and data centre technology at our academic and research institutions

The Way forward

  • The government has approved the “Digital India” Plan that aims to connect 2.5 lakh villages to the Internet by 2019 and to bring Wi-Fi access to 2.5 lakh schools, all universities and public places in major cities and major tourist centres
  • This is indeed a very desirable policy stepBut unless we evolve appropriate policies to counter the side effects of the Digital Plan, this could also lead to the unforeseen eColonisation of India

Indian banks’ bad loans may rise to 15% by March 2018: SandP

Note4Students:

Mains Paper 3: Economy | Growth Another important news discussing NPA problem.

Note the issues raised and suggested measures that can be used in Mains answers.

From UPSC perspective, following things are important:

Prelims level: NPA, Various rating agencies, Bank consolidation.

Mains level: How can NPA problem be tackled, suggested reforms and other related topics.


News:

  • Indian banks’ stressed assets are likely to increase to 15% of total loans by March 2018 even as their regulatory capital requirements will continue to rise till 2019, SandP Global Ratings said on Tuesday
  • Indian banks’ credit profiles are unlikely to improve over the next 12 months, said SandP Global Ratings in a report titled ‘No Quick Cure for India’s Banking Blues’
  • PSU banks will be accounting for most of those loans

What led to this situation?

  • High provisions, low profits: Year-over-year increase in non-performing loans (NPLs) led to higher provisions and lower profits and the capital available to absorb unexpected losses remained thin
  • Low loan growth: Besides, loan growth was among the lowest in a decade

Suggested measures:

  • External capital infusion: India’s public sector banks will have to continue to rely on external capital infusion to meet the Basel III capital requirements, or sell off their non-core assets or investments
  • Haircuts obligatory: They may be required to take large “haircuts” on loans to unviable stressed projects, the regulatory capital requirement will continue to rise till 2019 and profitability will remain subdued

Capital shortfall:

  • Government efforts: The government has promised to infuse Rs. 70,000 crore into its PSU banks over 2016- 2019 with Rs. 10,000 crore allocated for fiscals 2018 and 2019 each
  • Bank consolidation speculated: These amounts will not be sufficient to fully resolve the public sector banks’ looming capital shortfall and this could pave the way for consolidation among the government-owned banks.

 

Back2Basics:

  • What is Haircut? A haircut is the difference between the loan amount and the actual value of the asset used as collateral. It reflects the lender’s perception of the risk of fall in the value of assets. But in the context of loan recoveries, it is the difference between the actual dues from a borrower and the amount he settles with the bank.
  • When do lenders opt for haircuts in India? Haircuts are not common in India. However, there have been instances in the past when a lender settles for some equity of a borrower to compensate for a loan loss. But it is often a last re sort when there is absolutely no hope of a recovery and the loan is written off for a one time settlement.
  • The regulators in the recent past have made many other options for banks like the corporate-debt restructuring or allowing sale of bad loans to asset reconstruction companies among others. Why would lenders opt for such a route? This is done because the lender gets at least some amount back instead of not getting any money at all. Besides, the lender’s provisioning liability comes down to the extent of the write-off, thus it ends up freeing capital in the process.
  • Also, there is a regulatory pressure to clean up banks’ balance sheets by March 2017. Why would lenders avoid this option? Experts say there is no single model to arrive at a haircut for a particular loan. Besides, lenders also fear that investigative agencies may get back at them for their judgement on a particular valuation of a haircut. For instance, there was one-time settlement of over Rs 6,000 crore for a Kingfisher BSE 3.03 % loan of Rs 9,000 crore, which was not accepted by the investigators.
  • How does opting for a haircut impact a balance sheet? By opting for an haircut in settling a loan, the entire loan is written off by the bank con and to that extent, the assets cerned and to that extent, the assets shrink. But if the loan is settled through a bond subscription of equity sale, the nature of assets changes. If there is a one-time cash settlement, it gets reflected in the profit-and-loss account.

Social impact of demonetisation may have been greater: World Bank

Note4students

Mains Paper 3: Economy | Inclusive growth and issues arising from it.

Prelims Level: Remember the name of the Report released by World Bank.

Mains Level: The newscard has important information on the effects of demonetisation. Note them down for a good and holistic Mains answer.


Context:

  • The World Bank has said the social impact of demonetisation may have been greater as the informal economy was likely to have been hit especially hard
  • However, the Bank said the impact of demonetisation on the informal economy was difficult to measure
  • Greater data availability, especially on labour markets, is needed to better gauge the social impact of such policies in the future

India development Update:

  • World Bank’s India Development Update is a biannual analysis of the Indian economy.
  • In its India Development Update, the Bank said there were statistical issues that mask some of the impact of demonetisation on measured economic growth in Q3.
  • Demonetization caused an immediate cash crunch and that activity in cash-reliant sectors was affected.
  • The Bank said India’s GDP growth slowed to 7% year-onyear during the third quarter of 2016-2017 from 7.3% in the first quarter.
  • A modest slowdown is expected in the GDP growth in 2016-2017 to 6.8%.
  • According to the Update, growth is expected to recover in 2017-2018 to 7.2% and is projected to gradually increase to 7.7% in 2019-2020.

What about the informal sector?

  • The macro-economic impact of demonetisation has been relatively limited, the distribution of costs is uneven as the informal economy is likely to have been hit especially hard
  • The report said although the informal economy may account for only 40% of (India’s) GDP, it employs 90% of India’s workers
  • The disproportionate impact of demonetisation on India’s informal sector suggests that it would have affected those workers the most
  • The poor and vulnerable are more likely to work in informal sectors such as farming small retail and construction, and are less able to move to non-cash payments, the Bank said

Can demonetisation formalize the economy?

  • Demand for guaranteed employment up to February 2017 exceeded the full year of 2015-16 and rural consumption (in particular, sales of two-wheelers) contracted sharply in November
  • However, in the long-term, demonetization has the potential to accelerate the formalisation of the economy
  • The implementation of the GST is a key complementary reform that will support formalisation, as firms have a strong incentive to register with GST to obtain input tax credits

Private investment

  • Private investment growth continues to face several impediments in the form of excess capacity, regulatory and policy challenges, and corporate debt overhang
  • However, the recent push to increase infrastructure spending and to accelerate structural reforms will eventually drive a sustained rebound of private investments

Low female participation

  • A special focus of the Update was on the low female labour force participation in India
  • India has one of the lowest female participation rates in the world, ranking 120th among the 131 countries for which data are available
  • According the Bank’s assessment, India’s potential GDP growth can go up by a full percentage point if half the gap in female labour force participation rate with Bangladesh or Indonesia, is closed
  • In Bangladesh, 33% of their labour force working in industry is women whereas in India it is only about 17%
  • The key to close the gender gap is to create more jobs, especially regular salaried jobs that are flexible and can be safely accessed by women

World Bank pegs India’s economic growth at 7.2 per cent this financial year

Note4Students:

Mains Paper 3: Economy | Growth

A very good assessment of India’s growth outlook and associated risks that may affect growth. Read and bookmark it for Mains.

From UPSC perspective, following things are important:

Prelims level: Growth forecast, World bank reports and factors affecting growth.

Mains level: What are short term and long term measures that need to be taken by India for maintaining groeth trajectory, associated risks and other related issues.


News:

  • World bank pegged India’s GDP growth at 7.2 per cent in 2017-18
  • This was on account of reforms, domestic consumption, and improvement in trade
  • World Bank on Monday said that there were signs of a slowdown in early part of last fiscal but a favourable monsoon lifted the economy before being temporarily hit due to demonetisation

GST effect:

  • Boost from GST: India remains the fastest growing economy in the world and it will get a big boost from its approach to GST which will reduce the cost of doing business for firms, reduce logistics costs of moving goods across states, while ensuring no loss in equity.
  • Positive impact: Overall the impact of GST on equity and poverty is likely to be positive.

Demonetisation effect:

  • As a result of the immediate cash crunch on account of demonetisation, a modest slowdown is expected in GDP growth in 2016-17 to 6.8 per cent.
  • Recovery expected: Growth is expected to recover in 2017-18 to 7.2 per cent and is projected to gradually increase to 7.7 per cent in 2019-20

Risks to growth outlook:

  • Uncertainty: There are significant risks for India’s growth outlook on the back of uncertain global environment, including the rising protectionism, as well as slowing Chinese economy that may hamper external demand
  • Rising NPAs: Private investment is lagging due to “corporate debt overhang” and financial sector is stressed with high levels of non-performing assets (NPAs) of the banks
  • Rising oil prices: Subdued private investment would put downside pressure on India’s potential growth, besides a rapid increase in global oil and commodity prices
  • Low female participation: According to an assessment done by the World Bank, India’s potential GDP growth can go up by a full percentage point if half the gap in female labour force participation rate with Bangladesh or Indonesia, is closed .The rate has been declining since 2005. This is a matter of concern as women’s paid employment is known to increase their ability to influence decision-making within the household, and empower them more broadly in society as a whole.

Deputy Governor S S Mundra for bank account portability

Note4Students:

Mains Paper 3: Economy | Growth

From UPSC perspective, following things are important:

Prelims level: Not Much

Mains level: Important as an innovative development in the Indian Banking Sector


News:

  • What: Reserve Bank Deputy Governor S S Mundra has proposed for the introduction of bank account number portability(just like Mobile SIM Cards)
  • Why Now: With technological advancements in the field of payment system such as UPI etc, coupled with massive enrolments under Aadhaar and their linkage to individual bank accounts, it has come within the realms of possibility
  • Other Suggestions to Banks: Mundra also warned banks against using charges on maintaining minimum average balance in accounts and offering other facilities as an excuse to deny or deter a few customers from availing Services.
  • The RBI’s concern is limited to ensuring availability of banking services to all customers and it is not looking into amount banks are levying on customers to offer these facilities
  • According to Mundra, documents to serve as an address proof for KYC compliance continues to remain a major irritant even while the customers are permitted to submit a simple declaration about the current address which may be different from the address proof which was originally submitted.

SEBI targets participatory note norms

Note4Students:

Mains Paper 2: Polity | Statutory, regulatory and various quasi-judicial bodies.

Government is concerned that P-notes are being used for money laundering. Special Investigation Team (SIT) wants stricter compliance measures put in place for trading P-notes. However, when the government proposed putting trading restrictions on P-notes in the past, the Indian market became extremely volatile. Read article for new measures proposed and what are the previous measures in place.

From UPSC perspective, following things are important:

Prelims level: P-notes, issuing authority, usage and other related measures (covered in B2B)

Mains level: How P-notes are being used for round tripping black money, what mesaures have been/can be taken to tackle this issue and other related topics.


News:

  • The Securities and Exchange Board of India (SEBI) plans to further tighten norms for issuance of offshore derivative instruments (ODIs) and participatory notes (PNs) as part of its overall effort to reduce the exposure investors take via such instruments in the Indian equity market
  • In a consultation paper released on Monday, the capital market regulator has proposed levying a regulatory fee of $1,000 on every foreign portfolio investor (FPI) that issues ODIs or PNs

How will this work?

  • It is proposed that beginning April 1, 2017, for a period of every three years, regulatory fees of $1,000 be levied on each ODI issuing FPI for each and every ODI subscriber coming through such FPI

Other measures:

  • A few ODI subscribers invest through multiple issuers. This move will discourage the ODI subscribers from taking ODI route and encourage them to directly take registration as an FPI
  • The regulator has also proposed to prohibit ODIs from being issued against derivatives for speculative purposes. Currently, ODIs are issued against derivatives along with equity and debt
  • SEBI has given time until December 31, 2020, to wind up ODIs issued against derivatives, which are not for hedging purpose

Continued tightening of norms:

  • In June last year, SEBI issued instructions on Know Your Customer (KYC) norms for ODI subscribers, transferability of ODIs, reporting of suspicious transactions and periodic review of systems

 

Back2Basics:

  • P-Notes: Participatory notes, also referred to as “P-notes,” are financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India (SEBI) to invest in Indian securities
  • Components: P-notes are offshore derivative instruments with Indian shares as underlying assets Issuing Authority: Brokers and FIIs registered with SEBI issue the instruments and make investments on the FII’s behalf.
  • Brokers must report their P-note issuance status to SEBI each quarter Used for/by: The notes allow foreign investors with high net worth, as well as hedge funds and other investors, to invest in Indian markets without registering with SEBI.
  • Investors save time, money and scrutiny associated with direct registration.
  • Negatives:Indian regulators are not very happy about participatory notes because they have no way to know who owns the underlying securities. It is alleged that a lot of unaccounted money made its way to the country through the participatory note route

[op-ed snap] Ignore the jobs doomsayers

Note4Students:

Mains Paper 3: Economy | Development and employment

The core of unemployment problem in India is not very difficult to find. Another important op-ed discussing this issue and providing solutions. Read and bookmark it from Mains.

From UPSC perspective, following things are important:

Prelims level: H1-B visa, Per Capita income and other important terms.

Mains level: Structural changes required to solve India’s unemployment problem and other related issues.


News:

  • Only 0.7 per cent and 11 per cent of India’s labour force work in information technology (IT) and manufacturing and yet, many pundits predict that India’s IT and manufacturing employment has peaked
  • It can be called as jobs doomsday prediction — because of automation, robots, the immigration backlash and anti-globalization driven-trade barriers

Flaws with such prediction:

  • This prediction is wrong for a low-income and low productivity country like India
  • Shallow prediction: The jobs doomsday prediction is shallow because it blindly extrapolates the labour market context of a rich country like the US (with a per capita income of $45,000) to a poor country like India (with a per capita income of $1,500)
  • Rich and poor divide: America is rich because it has highly efficient and productive land, labour and capital markets. India is poor because 50 per cent of our labour force produces only 11 per cent of our GDP and we only have 18,000 companies with a paid-up capital of more than Rs 10 crore
  • Entirely different problems: Preventing people from falling into poverty (the US’s problem) is a more difficult problem than pulling people out of poverty (India’s problem)
  • Impulsive prediction: The jobs doomsday prediction is impulsive because it does not fully process the implications of India’s huge domestic market for manufacturing and the hard-to-replicate ecosystem for India’s IT industry
  • Network effect: India’s IT industry has network effects in software that parallel China’s in hardware; we produce more engineers than the US and China combined
  • H1-B issue temporary: Also, the passing shower of H1B visas pales compared to the climate change in technology — all companies are technology companies, all hardware has a layer of software, data and smartphone costs are cratering, etc

India needs different approach:

  • Problems in the west: Wutburger — the German compound word for angry citizen — is a Western political reality because it’s unclear what can be done about technology deflating employment in countries used to high incomes (video rental chain Blockbuster’s 83,000 employees have been replaced by 2,000 people at Netflix)
  • Size: India is more than a country; it is a continent that may already have the world’s highest population
  • Data from different countries: India is a big country; most data and anecdotes for the jobs doomsday prediction come from countries that are, relatively small (Rajasthan is bigger than Germany and UP has more people than Germany, France and the UK combined)
  • Scale is the advantage: India’s scale has delivered in the past; remember how the Green Revolution trumped Stanford economist Paul Ehrlich’s suggestion in the 1960s to let Indians die of starvation because the world was running out of food?
  • Tasks in hand: Without finishing the huge tasks of building infrastructure, reducing regulatory cholesterol and raising human capital, jobs are difficult to create

 Conclusion:

  • It is crucial for policymakers to realise that if we lose our 800 million middle-class-creation battle, it will not be because of automation or protectionism but our own inability to make our land, labour and capital markets more productive.

 

Back2Basics:

  • The H1B visa is an employment-based, non-immigrant visa category for USA. It is available to temporary workers.
  • For such a visa, an employer offers the person a job and applies for the person’s H1B visa petition with the US Immigration Department.
  • The approved petition is a work permit which allows the person to obtain a visa stamp and work in the U.S. for that employer.
  • The H1B visa is issued for a specialty occupation and requires the visa holder to have at least a Bachelors degree or its equivalent in a specialized area.

How is India likely to get affected?

  • A clampdown on H1B visas will make it tough for Indian IT majors to grow their US business
  • Indian IT companies will be forced to increase hiring of locals at the expense of Indians. It means there will be fewer job opportunities for Indian IT professionals especially on offshore locations.
  • It will also raise operating costs and lower their forex earnings.
  • At a larger scale, India continuously runs a large deficit in merchandise trade. This is largely funded through a surplus in services exports. Any event or measure that hits services exports will have negative implications for the current account deficit and exchange rate besides economic growth.
  • The employment in IT industry supports a large market for everything from housing to automobiles. Any slowdown in fresh hiring by IT companies or lower salary growth will hit consumption demand across sectors.

Niti Aayog says severe underemployment more serious problem than unemployment

Note4Students:

Mains Paper 3: Economy | Development and employment

Unemployment has emerged as a global problem and especially deepens in India’s context. The newscard dives into further details about it. Read and make notes.

From UPSC perspective, following things are important:

Prelims level: NITI Aayog’s action agenda, NSSO, employment related data and countries mentioned in newscard.

Mains level: How to solve unemployment and underemployment problem, role of various stakeholders and global examples.


News:

  • In its draft three-year action agenda report for 2017-18 to 2019-20, the Niti Aayog stressed on the need for creating high-productivity and high-wage jobs
  • Actual problem: “Severe underemployment” and not unemployment is a more serious problem as a job that needs to be done by one person is often performed by two or more workers, said Niti Aayog
  • Draft circulated: The draft report was circulated among the governing council members (consisting of chief ministers of all states and others) of the Niti Aayog on 23 April

Low and stable rates of unemployment:

  • Contrary to some assertions that India’s growth has been jobless, the Employment Unemployment Surveys of the National Sample Survey Office (NSSO), which till date remain the most reliable sources of information on the country’s employment situation, have consistently reported low and stable rates of unemployment over more than three decades
  • Agriculture: Citing examples, the Niti Aayog said as per an NSSO survey, in 2011-12, 49% of the workforce was employed in agriculture but the sector contributed only 17% of India’s gross domestic product (GDP) at current prices
  • Small industries: Another survey in 2010-11 revealed that firms with less than 20 workers employed 72% of India’s manufacturing workforce but contributed only 12% of manufacturing output, it said
  • Service firms: According to the 2006-07 NSSO survey of service firms, the 650 largest enterprises accounted for 38% of services output but only employed 2% of service workers, the remaining service firms employed 98% of the workforce but produced only 62% of the outcome

Rays of hope from China and East-Asian example(s):

  • Citing the example of China’s ageing workforce, the Niti Aayog stressed on attracting big firms working in that country to India which has availability of large workforce at competitive wages
  • The experience of countries that managed to transform rapidly, such as South Korea, Taiwan, Singapore and China, shows that the manufacturing sector and the ability to compete in the vast global marketplace hold the key to the creation of well-paid jobs for law and semiskilled workers.

Way forward

  • The Make in India campaign needs to succeed by manufacturing for global markets.
  • The report said due to an ageing work force in China with high wages, many big firms in labour-intensive sectors in that country are scouting for lower-wage locations. “With its large workforce and competitive wages, India would be a natural home for these firms.

Back2Basics

  • Underemployment Underemployment is a measure of employment and labor utilization in the economy that looks at how well the labor force is being utilized in terms of skills, experience and availability to work.
  • Labor that falls under the underemployment classification includes those workers who are highly skilled but working in low paying jobs, workers who are highly skilled but working in low skill jobs and part-time workers who would prefer to be full time. This is different from unemployment in that the individual is working but is not working at his full capability.
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