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  • How a dollar swap line with US Fed can help in uncertain times?

    India is working with the US to secure a dollar swap line that would help in better management of its external account and provide an extra cushion in the event of an abrupt outflow of funds.

    What are Currency Swaps?

    • A currency swap, also known as a cross-currency swap, is an off-balance sheet transaction in which two parties exchange principal and interest in different currencies.
    • The purpose of a currency swap is to lower exposure to exchange rate risk or reduce the cost of borrowing a foreign currency.

    Why do we need dollars?

    • According to RBI data, 63.7% of India’s foreign currency assets — or $256.17 billion — are held in overseas securities, mainly in the US treasury.
    • While FPIs investors looking for safer investments, the current global uncertainty over COVID outbreak have led to a shortfall in Indian stock markets.
    • This has pulled down India’s foreign exchange reserves.
    • This means that the government and the RBI cannot lower their guard on the management of the economy and the external account.

    How does a swap facility work?

    • In a swap arrangement, the US Fed provides dollars to a foreign central bank, which, at the same time, provides the equivalent funds in its currency to the Fed, based on the market exchange rate at the time of the transaction.
    • The parties agree to swap back these quantities of their two currencies at a specified date in the future, which could be the next day or even three months later, using the same exchange rate as in the first transaction.
    • These swap operations carry no exchange rate or other market risks, as transaction terms are set in advance.

    Benefits of currency swap

    • The absence of an exchange rate risk is the major benefit of such a facility.
    • This facility provides India with the flexibility to use these reserves at any time in order to maintain an appropriate level of balance of payments or short-term liquidity.
    • currency swaps between governments also have supplementary objectives like promotion of bilateral trade, maintaining the value of foreign exchange reserves with the central bank and ensuring financial stability (protecting the health of the banking system).

    Recent examples

    • India already has a $75 billion bilateral currency swap line with Japan, which has the second-highest dollar reserves after China.
    • The RBI also offers similar swap lines to central banks in the SAARC region within a total corpus of $2 billion.

    Note: Relate all other terminologies related to USD-INR convertiblity viz. Current Account, BoP etc.

  • Covid-19 donations to CM Relief Fund won’t qualify as CSR

    The corporate affairs ministry has clarified that COVID-19 donations to CM Relief Fund won’t qualify as CSR contributions.

    Contributions considered under CSR

    • According to the ministry, contributions made to the State Disaster Management Authority to combat COVID-19 would qualify as CSR expenditure.
    • The contributions by companies to PM-CARES Fund to tackle the pandemic would be considered as CSR.
    • Ex-gratia payments made to temporary, casual and daily wage workers by companies will be considered as CSR expenditure under the company’s law, provided that such payments are over and above disbursement of wages.
    • The contribution towards ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ would not be considered as spending towards CSR work.

    Note: Please remember or make note of the various contributions complying for CSR.

    Back2Basics: CSR in India

    • India is the first country in the world to make corporate social responsibility (CSR) mandatory, following an amendment to the Companies Act, 2013 in April 2014.
    • Prior to that, the CSR clause was voluntary for companies, though it was mandatory to disclose their CSR spending to shareholders.
    • Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger as part of any CSR compliance.
    • Under the Companies Act, 2013, certain classes of profitable entities are required to spent at least 2 per cent of their three-year average annual net profit towards CSR activities.
    • Under Section 135 of the Companies Act, 2013, every company having net worth of at least ₹500 crore, turnover of ₹1,000 crore or more, or a minimum net profit of ₹5 crore during the immediately preceding financial year, has to make CSR expenditure.

  • [pib] Operation Lifeline UDAN

    To ensure a steady supply of essentials, even in the most remote locations, the Union Civil Aviation Ministry launched ‘Lifeline Udan’.

    Don’t get confused or correlate this with Ude Desh ka Aam Nagrik (UDAN) Scheme. The name clearly indicates that it is an HADR like operation. Whats HADR? Humanitarian Assistance and Disaster Relief

    Op. Lifeline Udan

    • Under this operation, flights are being operated to transport essential medical cargo to remote parts of the country amid the lockdown to support India’s fight against Covid-19.
    • The flights have been operated by Air India, Alliance Air, Indian Air Force, Pawan Hans and private carriers.
    • The cargo compulsorily supplies goods such as regents, enzymes, medical equipment, testing kits and PPE, masks, gloves and other essential items as applicable by the State and UT Governments.
    • Air India is shouldered to operate dedicated scheduled cargo flights to other countries for transfer of critical medical supplies, as per the requirement.

  • [pib] YUKTI web-portal

    Union Ministry for HRD has launched a web-portal YUKTI (Young India Combating COVID with Knowledge, Technology and Innovation).

    There are various web/portals/apps with peculiar names, ex. DISHA, SWAYAM. Note them down with their one line purpose. UPSC Prelims may quiz you on these.

    YUKTI web-portal

    • YUKTI is a unique portal and dashboard to monitor and record the efforts and initiatives of MHRD.
    • The portal intends to cover the different dimensions of COVID-19 challenges in a very holistic and comprehensive way.
    • The primary aim of the portal is to keep academic community healthy, both physically & mentally and to enable a continuous high-quality learning environment for learners.

    Utility of the portal

    • The portal allows various institutions to share their strategies for various challenges which are there because of the unprecedented situation of COVID-19 and other future initiatives.
    • It will give inputs for better planning and will enable MHRD to monitor effectively its activities for coming six months.
    • It will establish a two-way communication channel between the Ministry of HRD and the institutions so that the Ministry can provide the necessary support system to the institutions.

  • A plan for the aftermath

    Context

    Everyone is agreed that the whole world is hurtling towards an unprecedented economic recession. India, already facing a massive slowdown, is going to get hurt perhaps more than the others, because our economic immune system is already weak.

    Three things that we must do in the present situation

    • The first is containing the spread of the virus.
    • Apart from the manpower, medicines, protective equipment for frontline workers and other methods, it will need massive resources to tackle it.
    • Second, the poor are already suffering in more ways than one, including the daily wage earners. They will have to be taken care of, again needing massive resources.
    • Third, economic activity will have to be revived as soon as conditions return to normal or near-normal, for which businesses will have to be helped, again needing massive resources; both in terms of revenue foregone and actual cash outgo.
    • The question, therefore, on everyone’s mind is how much money will be needed for all this and where will it come from?
    • What the government and the RBI have done so far is clearly awfully inadequate. Other countries have done much more. India can be no exception.

    Where will the government will get resources?

    • Partly from market and partly form RBI: Broadly speaking, resources will come partly through market borrowings and partly from the RBI.
    • Manmohan Singh had decided in 1994 that in future the government of India would not monetise its deficit; in other words, would not borrow from the RBI but go to the money market and borrow from there.
    • Borrow from the RBI: In these unprecedented times, we may take leave from that very sound principle, which all governments have followed religiously since then, and borrow from the RBI.
    • What does it mean? This means printing of more currency notes with all its attendant problems including inflation.
    • Government of India will have to take the steps necessary to tackle the after-effects to the extent possible. It must ensure that the supply chains work smoothly.

    How will the money be spent?

    • The Important role of states: The states will have to play a very important role in this, as much of the work will have to be done by them.
    • Responsibility of finance commission: Since the finance commission continues to be in existence and has a clear idea of the state finances, it should be immediately tasked with the responsibility of discussing this matter with the state governments and making its recommendations available within a period of one month.
    • The task force under the finance minister could work out the needs of businesses and the government of India both in the short as well as the medium term.
    • Spending money properly and efficiently: It should not be wasted and each rupee spent creates its own multiplier effect.
    • Our system leaves much to be desired. And the moment it is known that funding is not a constraint, the system can go berserk.
    • We must guard against that and ensure that rules are in place, specially at the field level to ensure the proper use of resources.

    Role of banks, financial institutions and MGNREGA

    • The banks and other financial institutions will have to be provided with resources to help the private sector, especially the agricultural and MSME sectors.
    • In the rural areas, we must ensure that durable assets are created out of the funds made available.
    • The rules governing the MGNREGA scheme should be tweaked to the extent necessary in order to ensure that more material than labour is used wherever necessary.

    Conclusion

    India should and can come out of the present crisis with as little damage as possible if we tackle it together. We cannot control what happens in other countries, but we can surely learn from them and adopt their best practices. We must also play our role in defining the new global order because the world is more intertwined now than ever before.

  • Know all about the National Board for Wildlife

    The National Board for Wildlife (NBWL) hasn’t met since 2014. Policy decisions and clearances have, meanwhile, come from a standing committee to the dismay of experts.

    This newscard is all about the factoids on National Board for Wildlife. The fact that they haven’t met since 2014 makes it interesting for UPSC to quiz you on its details.

    About National Board for Wildlife

    • The NBWL is constituted by the Central Government under Section 5 A of the Wildlife (Protection) Act, 1972 (WLPA).
    • It serves as an apex body to review all wildlife-related matters and approve projects in and around national parks and sanctuaries.
    • The board is advisory in nature and advises the Central Government on framing policies and measures for conservation of wildlife in the country.

    Composition

    • It is chaired by India’s Prime Minister and its vice-chairman is Minister of Environment.
    • The NBWL has 47 members including the chairperson.
    • Among these, 19 members are ex-officio members.
    • Every new government constitutes a new board, based on the provisions of the WLPA, with the new PM as the chair.

    Functioning

    • The primary function of the NBWL is to promote the conservation and development of wildlife and forests.
    • It has the power to review all wildlife-related matters and approve projects in and around national parks and sanctuaries.
    • No alternation of boundaries in national parks and wildlife sanctuaries can be done without the approval of the NBWL.

    Working through a Standing Committee

    • The National Board may, at its discretion, constitute a Standing Committee.
    • The Committee shall consist of the MoEFCC in charge as Vice-Chairperson, Member Secretary and not more than ten members to be nominated by the Vice-Chairperson from amongst the members of the National Board.
    • The WLPA mandates that without the approval/recommendation of the NBWL, construction of tourist lodges, alteration of the boundaries of PAs, destruction or diversion of wildlife habitat and de-notification of Tiger Reserves, cannot be done.

    Seeking clearances

    • Several proposals seeking statutory approvals for such projects come up before the Standing Committee.
    • Every proposal requires to be submitted by the State Government in the approved format with complete details (maps, field assessments, alternatives explored…).
    • It must also contain the clear opinion of the officer in charge of a PA, the Chief Wildlife Warden and the State Government in consultation with the State Board for Wildlife.
    • The Standing Committee will then have to consider such proposals in accordance with the provisions of the WLPA.

    Back2Basics: Wildlife (Protection) Act, 1972

    • WPA provides for the protection of the country’s wild animals, birds and plant species, in order to ensure environmental and ecological security.
    • It provides for the protection of a listed species of animals, birds and plants, and also for the establishment of a network of ecologically-important protected areas in the country.
    • It provides for various types of protected areas such as Wildlife Sanctuaries, National Parks etc.
    • There are six schedules provided in the WPA for protection of wildlife species which can be concisely summarized as under:
    Schedule I: These species need rigorous protection and therefore, the harshest penalties for violation of the law are for species under this Schedule.
    Schedule II: Animals under this list are accorded high protection. They cannot be hunted except under threat to human life.
    Schedule III & IV: This list is for species that are not endangered. This includes protected species but the penalty for any violation is less compared to the first two schedules.
    Schedule V: This schedule contains animals which can be hunted.
    Schedule VI: This list contains plants that are forbidden from cultivation.

     

  • [pib] ‘Bharat Padhe Online’ campaign

    Union HRD Ministry has launched a week-long ‘Bharat Padhe Online’ campaign for Crowdsourcing of Ideas for Improving Online Education ecosystem of India.

    ‘Bharat Padhe Online’ campaign

    • Students and teachers are the main target audience of this campaign.
    • Students who are currently studying in schools or higher educational institutions are the ones engaging with the existing digital platforms offering various courses etc. on a daily basis.
    • They can share what is lacking in the existing online platforms and how it can be made more engaging.
    • The educators across the country can also come forward to contribute with their expertise and experience in the field of education.

  • Financing the pandemic rescue package

    Context

    The priority for India is to ensure that it overcomes the COVID-19 pandemic and kick-starts GDP growth.

    Financing strategy for the 1.7 lakh crores package

    • Rather than fix the weaknesses in the macroeconomy: a high fiscal deficit of 7.49% and government indebtedness that was 69% of GDP in 2019, the government wants to overcome the pandemic.
    • When COVID-19 cases began to increase, the Government of India (GoI) swung into action by announcing a 21-day national lockdown and a ₹1.7-lakh crore (approximately $22.59 billion) rescue package.
    • Financing strategy: Available in the state disaster relief fund is ₹60,000 crore, comprising ₹30,000 crore of the outstanding balance and the Central government’s allocation of a similar amount for FY2021.
    • Hence, the GoI needs to raise an additional ₹1.1-lakh crore,e., 65% of the rescue package outlay.
    • Its financing strategy should be to raise long-term funds at cost-effective rates, with flexible repayment terms that allow it to take tactical advantage of market movements.
    • Following are some of the options that the government can explore to raise the required amount.

    1. GDP-linked bonds

    • The GoI may issue listed, Indian rupee-denominated, 25-year GDP-linked bonds that are callable from, say, the fifth year.
    • What GDP-linked means? The coupon (interest) on a GDP-linked bond is correlated to the GDP growth rate and is subject to a cap.
    • The issuer, the GoI, is liable to pay a lower coupon during years of slower growth and vice-versa.
    • The callable feature from the fifth year till maturity allows the GoI to effect partial repayments during high growth years and when it earns non-recurring revenues such as proceeds from disinvestment of public sector enterprises (PSEs).
    • The listing of bonds provides investors with an exit option.
    • Examples from the world: Costa Rica, Bulgaria and Bosnia-Herzegovina issued the first pure GDP-linked bonds in the 1990s.
    • Argentina and Greece issued warrant-like instruments similar to GDP-linked bonds in 2005 and 2012 respectively. India could learn from their experience.
    • Timely GDP data is a prerequisite: Publishing reliable and timely GDP data is a prerequisite for the successful issue of GDP-linked bonds, which the GoI may use to part-finance the COVID-19 rescue package and to diversify its borrowing sources.

    2. Streamlining PSEs

    • The 15 largest non-financial central PSEs (CPSEs) in the S&P BSE CPSE index contributed approximately 75% of the GoI’s ₹48,256.41 crore dividend income from PSEs in FY2020.
    • The Union Budget projected PSE dividends to increase by 25% to ₹65,746.96 crore in FY2021.
    • This milestone is unlikely to be achieved in the current environment.
    • The 15 CPSEs have accumulated sizeable non-core assets including financial investments, loans, cash and bank deposits in excess of their operating requirements, and real estate.
    • The return on these assets (excluding real estate) is around 200 basis points lower than the returns on their core businesses.
    • These CPSEs owe the government ₹25,904 crore as of end-March 2019.
    • These non-core assets must be monetised to repay statutory dues and upstream dividends to GoI.
    • Formation of HOLDCO: While loans and excess cash and bank deposits may be monetised within three months, streamlining investments and selling real estate is a time-consuming process.
    • It is imperative for the GoI to form a PSE and public sector bank holding company (‘Holdco’) along the lines of Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional Berhad.
    • The Holdco will enable PSEs to monetise their non-core assets at remunerative prices, maximise their enterprise value and focus on their core businesses.
    • The ₹30,168 crore loans that CPSEs have extended to employees, vendors and associates may be securitised or refinanced, with CPSEs guaranteeing loans extended to weak counterparties.
    • Excess liquidity with PSEs: It is essential that businesses maintain liquidity, especially during a downturn. However, the outstanding cash and bank deposits of the 15 CPSEs (₹64,253 crore) is in excess of their operating requirements.
    • CPSEs must determine the cash they require to meet, say, six months of operating expenses and use the excess cash to repay statutory dues and upstream dividends to the GoI.
    • Banks must extend to CPSEs committed lines of credit that the latter may draw down during exigencies.
    • Financial investments of PSEs be transferred to HOLDCO: The 15 CPSEs have accumulated ₹93,562 crore financial investments comprising listed and unlisted debt, equity and mutual fund units.
    • These exclude investments in associates and joint ventures.
    • The CPSEs ought to transfer these investments to Holdco, which can manage the portfolio and transfer the returns to the original investors.
    • Real estate holdings of PSEs: One important non-core asset, whose value is likely to exceed the combined value of other non-core assets, is the real estate holdings of PSEs.
    • In September 2018, the GoI identified properties of nine PSEs (Air India, Pawan Hans, Hindustan Fluorocarbons, Hindustan Newsprint, Bharat Pumps & Compressors, Scooters India, Bridge and Roof Co, Hindustan Prefab, and Projects & Development India) to be divested.
    • The GoI must mandate all PSEs and government departments to transfer their non-core properties to Holdco, which can opportunistically sell these properties and transfer the proceeds to the owners.

    Refrain from asking RBI to pay more dividend

    • The Reserve Bank of India (RBI) has allocated ₹1 lakh crore to carry out long-term repo operations in tranches and has reduced the repo rates by 75 basis points to 4.4% to help banks augment their liquidity in the wake of the pandemic.
    • Recognising the RBI’s liquidity requirements, the GoI must refrain from asking the RBI to pay more dividends that it can viably pay.
    • During the five years ending on June 30, 2019, the RBI paid the GoI 100% of its net disposable income, with its FY2019 dividends more than trebling to ₹1.76 lakh crore from ₹50,000 crore in FY2018.
    • The Bimal Jalan panel constituted in 2019 to review the RBI’s economic capital framework opined that the RBI may pay interim dividends only under exceptional circumstances and that unrealised gains in the valuation of RBI’s assets ought to be used as risk buffers against market risks and may not be paid as dividends.

    Conclusion

    The Bimal Jalan panel recommendation must be adhered to in letter and spirit. The GoI may finance the COVID-19 rescue package by issuing GDP-linked bonds, tapping PSEs’ excess liquidity and monetising non-core assets.

  • Is e-NAM portal capable of supporting farmers?

    Context

    • The union government has launched new features in electronic agriculture market platform (e-NAM), to decongest wholesale markets amid coronavirus threat.
    • Whether these features would solve the problems of farmers is a matter of question.

    What is e-NAM?

    • eNAM platform is an online trading platform for agricultural commodities in India.
    • It was launched on April 14, 2016 as a pan-India electronic trade portal linking agricultural produce market committees (APMCs) across all states.
    • It facilitates farmers, traders and buyers with online trading in commodities.
    • It helps in better price discovery and provides facilities for smooth marketing of their produce.

    Trading on e-NAM

    • Over 90 commodities including staple food grains, vegetables and fruits are currently listed in its list of commodities available for trade.
    • The farmer needs to upload details of his produce and a photo of the harvest on the platform.
    • It actually provided for evaluation and grading of produce.

    Why farmers don’t prefer e-NAM?

    • Lack of internet connectivity is another issue impeding progress.
    • Farmers feel more comfortable with physical trading rather than going online as they face issues with transportation for their produce.
    • Only 8.42 per cent of the total mandis are connected through the e-NAM platform.

    Issues with grading

    • There are no scientific sorting/grading facilities or quality testing machines.
    • The grading process makes farmers bring a sample of their produce that is evaluated and graded by agricultural assessors.
    • A report on the sample can be accessed by any buyer in any state before making the purchase, once graded by assessors.
    • The government realized the complexities allowed for gradation from a warehouse nearest to them and farmers need not commute to a mandi from remote areas.
    • It is, however, still not clear whether produce can be graded at the warehouse or not.

     

  • India COVID-19 Emergency Response and Health System Preparedness Package

    The Centre has approved a centrally funded ‘India COVID-19 Emergency Response and Health System Preparedness Package’ with the objective of strengthening national and state health systems.

    About the Package

    • The package is 100 per cent centrally funded project under the National Health Mission.
    • It will be implemented in three phases from January 2020 to March 2024.
    • It aims at strengthening national and state health systems to support prevention and preparedness, procurement of essential medical equipment, consumables and drugs, etc.
    • The three phases of the project are Phase – 1 from January 2020 to June 2020, the second phase is from July 2020 to March 2021 and the third phase from April 2021 to March 2024.

    What are the major activities planned under this package?

    • The key activities to be implemented under Phase -1 includes support to states/UTs for the development of dedicated COVID-19 hospitals and other hospitals, isolation blocks, negative pressure isolation rooms, ICUs with ventilators, the oxygen supply in hospitals etc..
    • The central package will also assist the state/ UTs for the Procurement of Personal Protection Equipment (PPE), N95 masks and ventilators, over and above what is being procured and supplied by the govt.
    • The activities under the first phase also include the disinfection of hospitals, government ambulances, etc.