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GS Paper: GS3-12.Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

  • In news: Liberalised Remittance Scheme (LRS)

    Central idea: The Reserve Bank of India (RBI) is being asked to monitor card spend under the Liberalised Remittance Scheme (LRS).

    Liberalised Remittance Scheme (LRS)

    • LRS is a facility provided by the Reserve Bank of India (RBI) to resident individuals to remit funds abroad for permitted current or capital account transactions or a combination of both.
    • The scheme was introduced in 2004 and has been periodically reviewed and revised by the RBI.
    • Under the scheme, resident individuals can remit up to a certain amount in a financial year for permissible transactions including education, travel, medical treatment, gifts, and investments in equity and debt securities, among others.
    • The limit for LRS is currently set at USD 250,000 per financial year.

    Eligibility for LRS

    • LRS is open to everyone including non-residents, NRIs, persons of Indian origin (PIOs), foreign citizens with PIO status and foreign nationals of Indian origin.
    • The Scheme is NOT available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc.

    Benefits provided by LRS

    • LRS is an easy process that anyone can use to transfer money between two countries.
    • It’s especially useful for businesses because they can use it to transfer funds to India, and investors can receive their investments back home.
    • LRS also has some added benefits, like fast transfer timing and no issues with exchange rates.

     

     

  • Return of the Net Neutrality debate in India

    net neutrality

    Since November 2022, India’s Cellular Operators Association (COAI) has been requesting that platforms like YouTube and WhatsApp pay a share of revenue to offset network costs, reigniting the net neutrality debate.

    What is Net Neutrality?

    • Net Neutrality is the concept that all traffic on the internet should be treated equally, without discrimination or preference given to certain types of content, websites, or users.
    • This means that internet service providers (ISPs) should not be allowed to block, slow down, or prioritize traffic based on the source, destination, or content of that traffic.
    • Net Neutrality is considered important for ensuring a level playing field for all internet users and promoting innovation, competition, and freedom of expression online.
    • It has been a subject of debate and regulatory action in many countries, including India, the United States, and the European Union.

    Features of Net Neutrality

    The following are some of the features of net neutrality:

    • Non-discrimination: All data should be treated equally, and internet service providers (ISPs) should not discriminate or prioritize any type of content, application, service, or device based on its source, destination, or ownership.
    • Transparency: ISPs should provide customers with clear and accurate information about their internet services, including their network management practices, terms of service, and fees.
    • No blocking: ISPs should not block or censor lawful content, applications, services, or devices that customers want to access, use, send, receive, or offer on the internet.
    • No throttling: ISPs should not intentionally slow down or degrade the quality of any lawful content, application, service, or device that customers want to access, use, send, receive, or offer on the internet.
    • No paid prioritization: ISPs should not offer faster or better access to any content, application, service, or device in exchange for payment or other consideration from content providers, developers, or users.
    • Competition: Net neutrality promotes competition among ISPs by preventing them from using their control over access to the internet to favor their own content, applications, services, or devices or those of their partners, affiliates, or subsidiaries over those of their competitors.

    Why in news?   

    Ans. BIF responds to COAI’s demands

    • The Broadband India Forum (BIF), which represents Internet firms such as Meta and Google, responded to the COAI’s demands by refuting them.
    • The COAI’s argument that the current demand has nothing to do with Net neutrality was contested by the BIF.
    • The COAI argued that Net neutrality pertains to the non-discriminatory treatment of content that has no nexus to the usage fee issue.

    Arguments for and against the usage fee

    • Net neutrality activists and content providers argue that imposing a usage fee, even on a limited number of large players, would be a distortion of the Internet’s architecture.
    • They contend that content providers and telecom operators enjoy a symbiotic relationship without charging each other.
    • On the other hand, the COAI argues that a network fee is not related to Net neutrality and suggests that the government reduce spectrum fees and support telecom companies with the Universal Service Obligation Fund (USOF).
    • Worldwide, telecom operators in the European Union are also demanding similar usage fees from content providers.

    TRAI ruling and the Unified License

    • In 2016, the Telecom Regulatory Authority of India (TRAI) ruled in favour of Net neutrality, which requires that all traffic on an Internet network be treated equally.
    • In 2018, the Department of Telecommunications embedded the net neutrality concept into the Unified License, which binds all telecom operators and Internet providers.

     

     

  • Rise of the Environmental, Social and Governance (ESG) Regulations

    esg

    Central idea: Regulators and corporations worldwide now measure businesses on ESG criteria. ESG criteria is crucial for investors to assess a company’s risk profile accurately. India is still in the nascent stage of ESG laws and regulations.

    What is ESG?

    • ESG Regulations are a set of standards used by investors to evaluate a company’s environmental and social impact, as well as its corporate governance practices.
    • They require companies to be transparent about their environmental and social performance, as well as their governance structure.
    • ESG factors are increasingly being used by investors to make investment decisions, and ESG ratings are becoming an important metric for companies seeking to attract investment.
    • The ESG regulations differ by country, but many require companies to disclose information on environmental and social issues, as well as on their governance practices.
    • ESG regulations are becoming increasingly important as investors and consumers demand greater transparency and accountability from companies.Top of FormBottom of Form

    Features of ESG Mechanism

    • Environmental factors: These include a company’s impact on climate change, greenhouse gas emissions, pollution, waste management, and natural resource conservation.
    • Social factors: These include a company’s impact on society, such as labor practices, human rights, community relations, customer satisfaction, and product safety.
    • Governance factors: These include a company’s management structure, board diversity, executive compensation, shareholder rights, and business ethics.
    • ESG ratings and metrics: Companies are evaluated based on ESG ratings and metrics, which can help investors assess a company’s overall sustainability and ethical impact.
    • ESG investing: ESG investing refers to investing in companies that meet certain ESG criteria, with the aim of generating financial returns while also having a positive impact on society and the environment.
    • ESG reporting: Many companies are now required to disclose their ESG performance and report on their sustainability practices, in order to meet regulatory requirements and respond to growing investor demand for transparency and accountability.Top of FormBottom of Form

    Corporate Social Responsibility: ESG-like mechanism in India

    • India has a robust corporate social responsibility (CSR) policy that mandates that corporations engage in initiatives that contribute to the welfare of society.
    • This mandate was codified into law with the passage of the 2014 and 2021 amendments to the Companies Act of 2013.

    How ESG differs from CSR?

    • ESG regulations differ from CSR regulations in their process and impact
    • For example, the U.K. Modern Slavery Act requires companies with business in the U.K. and with annual sales of more than £36 million to publish their efforts in identifying and analysing the risks of human trafficking, child labour and debt bondage in their supply chain.
    • It seeks to establish internal accountability procedures, evaluate supplier compliance, and train supply chain managers regarding these issues
    • The EU’s Sustainable Finance Disclosure Regulation requires financial market participants to disclose how they have integrated sustainability risks into their investment decision-making processes
    • There are scores of such regulations at the state, national and transnational level.

    Why is ESG relevant in India?

    Ans. Existing mechanisms serve ESG purpose

    • India has long had a number of laws and bodies regarding environmental, social and governance issues, including the Environment Protection Act of 1986.
    • It has quasi-judicial organisations such as the National Green Tribunal, a range of labour codes and laws governing employee engagement and corporate governance practices.
    • These initiatives established guidelines that emphasise monitoring, quantification and disclosure, akin to ESG requirements found in other parts of the world.

    ESG for Indian companies

    Here are some key considerations for Indian companies in relation to ESG:

    • Compliance with global ESG regulations: Compliance in the US, UK, EU and elsewhere is critical for Indian companies to take full advantage of the growing decoupling from China and play a more prominent role in global supply chains and the global marketplace overall.
    • Due diligence: This will play a key role in ESG risk management, which means going beyond questionnaires and conducting deeper assessments that may include looking at company records, interviewing former employees, and making discreet visits to observe operations to ensure that measures to comply with international ESG standards are in effect.
    • Revamp organizations: ESG due diligence should be supported within the company with detailed procedures for assessing risks and controls for assuring that no corners are cut. Companies that wish to maximise their opportunities in the global economy need to embrace these new requirements and adjust their organisations accordingly.

    Way forward

    • Encouraging and incentivizing companies: To adopt ESG practices voluntarily through education, training and awareness-raising programs.
    • Developing national guidelines and standards for ESG: To promote consistency and comparability of ESG performance data among Indian companies.
    • Tailor-made Policy catering to domestic needs: Implementing ESG regulations that are tailored to the specific needs and challenges of Indian companies, with a focus on promoting transparency, accountability and stakeholder engagement.
    • Facilitating access to capital for companies that demonstrate strong ESG performance: By establishing ESG-focused investment funds and credit facilities.
    • Promoting international collaboration and harmonization of ESG standards: To facilitate global trade and investment while ensuring that ESG risks are appropriately addressed.

    Conclusion

    • Overall, a comprehensive and collaborative approach is needed to ensure that Indian companies can effectively manage ESG risks and opportunities and contribute to sustainable development.

     

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  • What is Angel Tax?

    angel

    Central idea: The article provides an overview of the angel tax provisions in the Finance Bill, which were introduced in the Budget. It highlights the concerns raised by the start-up community regarding the impact of these provisions on their operations.

    Angel Investment

    • An angel investor is an individual who provides financial backing to early-stage startups or entrepreneurs, typically in exchange for equity in the company.
    • Angel investors are typically high-net-worth individuals who invest their own personal funds, rather than investing on behalf of a firm or institution.
    • Features of Angel Investing:
    1. Early-stage funding
    2. Equity investment
    3. High-risk, high-reward
    4. Active involvement
    5. Personal investment
    6. Flexible terms
    7. Shorter investment horizon

     

    What is Angel Tax?

    • Referred to as Angel Tax, this rule is described in Section 56(2)(viib) of the Income Tax Act, 1961.
    • Essentially it’s a tax on capital receipts, unique to India in the global context.
    • This clause was inserted into the act in 2012 to prevent laundering of black money, round-tripping via investments with a large premium into unlisted companies.
    • The tax covers investment in any private business entity, but only in 2016 was it applied to startups.

    Why was angel tax introduced?

    • The complicated nature of VC fundraising with offshore entities, multiple limited partners and blind pools is contentious.
    • There has been some element of money laundering or round-tripping under guise.

    Details of its levy

    • The Angel Tax is being levied on startups at 9% on net investments in excess of the fair market value.
    • For angel investors, the amount of investment that exceeds the fair market value can be claimed for a 100% tax exemption.
    • However, the investor must have a net worth of ₹2 crores or an income of more than ₹25 Lakh in the past 3 fiscal years.

    Startups under scrutiny

    • As more and more new-age tech startups started raising VC funding, they came under the IT department scrutiny.
    • These funding deals often saw investors paying a premium above the face value or the fair market value of securities, and therefore were taxed as income for the startup.
    • Between 2016 and 2019, startups urged the government to add exceptions that would allow them to be exempt from the Angel Tax.

    Which startups are exempted?

    • There is a clear provision that says that start-ups which are recognized by DPIIT are out of the proposal’s purview.
    • The start-up recognition process is also very simple where any applicant gets it automatically.
    • However, the key condition for exemption is that the aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share does not exceed INR 25 Cr.

    Concerns raised by startup

    • Compliance burden: Even beyond the issue of taxation, the compliance burden on startups will potentially increase significantly under the new rules.
    • Persisting slowdown: The timing of this potential tax is most worrying since it coincides with the ongoing startup funding slowdown.
    • Fear of off-shoring: Entrepreneurs and investors are concerned that applying strict taxes on capital receipts without adequate exceptions will lead to startups moving overseas.

    Back2Basics: Startups in India

    • Startups are young companies founded to develop a unique product or service, bring it to market and make it irresistible and irreplaceable for customers.
    • In India, start-up should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership.
    • Turnover should be less than INR 100 Crores in any of the previous fiscal years.
    • An entity shall be considered a Start-up up to 10 years from the date of its incorporation.
    • The Start-up should be working towards innovation/ improvement of existing products, services, and processes and should have the potential to generate employment/ create wealth.
    • An entity formed by splitting up or reconstruction of an existing business shall not be considered a “Startup”.

     

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  • How is the Stock Market regulated in India?

    stock

    The Supreme Court asked the Securities and Exchange Board of India (SEBI) and the government to produce the existing regulatory framework in place to protect investors from stock market volatility.

    Central idea

    • After short-seller Hindenburg Research published a report accusing the Adani Group of stock market manipulation and accounting fraud, its shares plummeted.
    • Investors were reported to have lost lakhs of crores.

    Laws governing the Indian Stock Market

    • The securities market in India is regulated by four key laws —
    1. Securities and Exchange Board of India Act, 1992 (SEBI Act)
    2. Securities Contracts (Regulation) Act, 1956 (SCRA) and
    3. Depositories Act, 1996
    4. Companies Act, 2013
    • The framing of these laws reflect the evolution and development of the capital market in India.

    Brief explanation of each acts-

    (1) Securities and Exchange Board of India Act, 1992 (SEBI Act)

    (2) Securities Contracts (Regulation) Act, 1956 (SCRA)

    • The SCRA empowers SEBI to recognise (and derecognise) stock exchanges, prescribe rules and bye laws for their functioning, and regulate trading, clearing and settlement on stock exchanges.

    (3) Depositories Act, 1996

    • As part of the development of the securities market, Parliament passed the Depositories Act and SEBI made regulations to enforce the provisions.
    • This Act introduced and legitimised the concept of dematerialised securities being held in an electronic form.
    • Today almost all the listed securities are held in dematerialised form.

    (4) Companies Act, 2013

    • It is an Act of the Parliament on Indian company law that regulates incorporation of a company, responsibilities of a company, directors, and dissolution of a company.
    • It stipulates the type of Companies that can be formed such as- Public Ltd., Pt. Ltd., One Person Company ex.

    Key role-player: SEBI

    • SEBI set up the infrastructure for doing this by registering depositories and depository participants.
    • The depository regulations empower SEBI to regulate functioning of depositories and depository participants by prescribing eligibility conditions, periodic inspections and powers to impose penalties including suspending or cancelling the registration as well as monetary penalties.

    You should know this!

    Shares and stocks both represent ownership in a company, but they are not the same thing

    • A share is a unit of ownership in a company. It represents a portion of the company’s capital, and the shareholder is entitled to a corresponding portion of the company’s profits or losses.
    • A company can issue different types of shares with varying rights, such as voting rights or dividend payments.
    • Stock, on the other hand, is a broader term that refers to the total capital raised by a company through the issuance of shares.
    • It represents the ownership of a company as a whole, rather than an individual unit of ownership.
    • So, shares are a component of stock, and owning shares of a company means owning a portion of the company’s stock. Stock represents the aggregate value of a company and includes all its shares.

    Can SEBI step in to curb market volatility?

    • No direct meddling: While SEBI does not interfere to prevent market volatility, exchanges have circuit filters — upper and lower — to prevent excessive volatility.
    • Issue directions: SEBI can issue directions to those who are associated with the market, and has powers to regulate trading and settlement on stock exchanges. Using these powers, SEBI can direct stock exchanges to stop trading, totally or selectively.
    • Instant regulation: It can also prohibit entities or persons from buying, selling or dealing in securities, from raising funds from the market and being associated with intermediaries or listed companies.

    What about stock exchanges?

    • The SCRA has empowered SEBI to recognise and regulate stock exchanges and later commodity exchanges in India; this was earlier done by the Union government.
    • In fact, the term “securities” is defined in the SCRA and powers to declare an instrument as a security remain vested in SEBI.
    • The rules and regulations made by SEBI under the SCRA relate to listing of securities like equity shares, the functioning of stock exchanges including control over their management and administration.
    • These include powers to determine the manner in which a settlement is done on stock exchanges (and to keep them with the times for e.g. T+1) etc.
    • It seeks to protect the interests of investors by creating an Investor Protection Fund for each stock exchange.

    Safeguards against fraud

    • Fraud undermines regulation and prevents a market from being fair and transparent. To prevent the two key forms of fraud, market manipulation, and insider trading, SEBI notified-
    1. Prohibition of Fraudulent and Unfair Trade Practices Regulations, 1995
    2. Prohibition of Insider Trading Regulations, 1992
    • These regulations, read with provisions of the SEBI Act, define species of fraud, who is an insider and prohibit such fraudulent activity and provide for penalties including disgorgement of ill-gotten gains.
    • It must be noted that violation of these regulations are predicate offences that can lead to a deemed violation of the Prevention of Money Laundering Act.

    Do you know?

    • SEBI has been given the powers of a civil court to summon persons, seize documents and records, attach bank accounts and property, and to carry out investigations.
    • Using these powers, SEBI has acted against entities and individuals like Satyam, Sahara India, Ketan Parekh and Vijay Mallya.

     

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  • Govt. likely to place Reverse Charging of GST on Scrap before Council

    gst

    Central idea: The article discusses the possibility of the government presenting the reverse charging of Goods and Services Tax (GST) on Steel and other metal scraps before the GST council.

    Scrap recycling in India

    • India is now the world’s second-largest steel producer, with output expected to increase by 17.8 per cent to 118.1 million tonnes in 2021.
    • In contrast to countries that take pride in using increasing amounts of steel scrap to produce ferrous metal and thus reduce carbon dioxide (CO2) emissions, India only uses about 30 MT of scrap per year.
    • India is still in its early stages, with low recycling awareness. Unfortunately, only 30 per cent of India’s recyclable scrap is recycled.

    What is Reverse Charging of GST?

    • Reverse charging of Goods and Services Tax (GST) is a mechanism in which the liability to pay the tax is shifted from the supplier to the recipient of goods or services.
    • Under normal circumstances, it is the supplier who is liable to pay GST to the government.
    • However, in cases of reverse charging, the recipient of the goods or services becomes liable to pay the tax instead of the supplier.
    • Reverse charging is usually implemented in situations where the supplier is not registered under GST or has failed to deposit the GST dues with the government.
    • Reverse charging is a way for the government to ensure that the GST liability is fulfilled even if the supplier does not fulfill its obligations.

    Some examples of goods and services on which reverse charging is already applied are:

    1. Services provided by a goods transport agency
    2. Services provided by an advocate to a business entity
    3. Supply of manpower for any purpose
    4. Renting of a motor vehicle provided by any individual or HUF to a business entity
    5. Supply of specified goods like gold, silver, or precious stones by an unregistered supplier to a registered person.

    Why scrap industry?

    • The scrap industry in India is a largely unorganized sector, and many small players operate without proper registration or compliance.
    • This has led to tax evasion and revenue losses for the government.
    • Reverse charging on the scrap industry is aimed at plugging this gap and ensuring that the GST liability is fulfilled even if the supplier (in this case, the scrap dealer) is not registered or fails to deposit the GST dues with the government.

    Consequences of the move

    • Compliance Costs: The implementation of reverse charging on the scrap industry may increase compliance costs for stakeholders. Small players in the industry may find it challenging to comply with the new regulations, leading to increased compliance costs.
    • Administrative Burden: The scrap industry in India is largely an unorganized sector, and the application of reverse charging may impose an administrative burden on stakeholders. Many small players may not have the necessary infrastructure or resources to comply with the new regulations.
    • Cash flow impact: Reverse charging could impact the cash flow of small businesses, as they would have to pay GST upfront and then claim it back through input tax credit. This could lead to a shortage of working capital for small businesses.
    • Increased Paperwork: The application of reverse charging on the scrap industry may lead to an increase in paperwork and documentation for stakeholders. This could be challenging for small players who may not have the resources to handle the additional paperwork.
    • Implementation Challenges: The implementation of reverse charging on the scrap industry could be challenging, given that the sector is largely unorganized. It could be challenging to track unregistered players, and the government may face difficulties in enforcing the new regulations.

    Woes of Scrap Industry in India

    • Lack of infrastructure: The scrap industry in India is primarily an unorganized sector, with limited access to infrastructure such as proper storage facilities, transport, and handling equipment. This can limit the efficiency and productivity of the sector.
    • Low productivity: The scrap industry in India faces low productivity due to the use of outdated technology and inadequate skills among workers. This can limit the competitiveness of the industry and its ability to meet the demand for scrap.
    • Inadequate regulatory support: The scrap industry in India lacks adequate regulatory support, which can result in a lack of standardization and transparency in the sector. This can lead to issues such as underreporting of sales, tax evasion, and other malpractices.

    Stakeholder response

    • The scrap industry has expressed concerns over the potential increase in compliance costs and administrative burden that may arise from the implementation of reverse charging.
    • This might affect the recycle economy.

     

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  • Industry pushes separate Ministry for Microenterprises

    Central Idea: The Consortium of Indian Associations (CIA) has suggested the formation of an independent ministry for the self-employed and microenterprises to address specific issues concerning the sector.

    Why demand for new Ministry?

    • Micro entrepreneurs continue to be governed by complicated and outdated laws and dispensable compliance burdens.
    • Despite the government’s efforts, MSMEs in India face several challenges such as access to finance, lack of skilled labor, and inadequate infrastructure.
    • New ministry might help in providing different types of support and benefits from the government, such as access to credit, subsidies, and tax exemptions.

    What are Microenterprises?

    • Microenterprises are small businesses that typically have a small number of employees, limited assets, and low levels of annual turnover or revenue.
    • The term “microenterprise” is often used interchangeably with “microbusiness” or “micro firm.”
    • Microenterprises can be found in a wide range of sectors, including retail, manufacturing, and services.
    • Examples of microenterprises include small retail shops, food stalls, street vendors, small manufacturing units, and service providers such as plumbers, electricians, and small-scale service providers.

    Features of Microenterprises

    • In general, microenterprises are considered the smallest type of business.
    • They are typically characterized by their low capital investment and simple production processes.
    • These businesses are often started by entrepreneurs who are seeking self-employment and a means to earn a livelihood.

    Why are they important?

    • Employability: Microenterprises are an important part of many economies, especially in developing countries, where they can provide vital employment opportunities and contribute to economic growth.
    • Scale of business: Such enterprises have huge potential of business penetration at household and domestic level by providing a range of services.

    Microenterprises in India

    • According to the Ministry of Micro, Small and Medium Enterprises (MSMEs), there are approximately 6.3 crore (63 million) MSMEs in India, which employ around 11 crore (110 million) people.
    • In India, MSMEs are classified based on their investment in plant and machinery or equipment, as well as their annual turnover.
    • The classification of MSMEs is as follows:
    1. Micro Enterprises: Micro enterprises are the smallest type of enterprises and have a lower investment limit than the other two categories. For manufacturing enterprises, the investment limit is up to Rs. 1 crore in plant and machinery, while for service enterprises, the investment limit is up to Rs. 50 lakh. The turnover limit for both types of enterprises is up to Rs. 5 crore.
    2. Small Enterprises: Small enterprises are those that have an investment in plant and machinery or equipment between Rs. 1 crore to Rs. 10 crore. For service enterprises, the investment limit is between Rs. 50 lakh to Rs. 2 crore. The turnover limit for both types of enterprises is between Rs. 5 crore to Rs. 50 crore.
    3. Medium Enterprises: Medium enterprises have a higher investment limit than small enterprises. For manufacturing enterprises, the investment limit is between Rs. 10 crore to Rs. 50 crore, while for service enterprises, the investment limit is between Rs. 2 crore to Rs. 5 crore. The turnover limit for both types of enterprises is between Rs. 50 crore to Rs. 250 crore.

    Various initiatives

    The government of India has taken several initiatives to support the growth of MSMEs in the country, such as:

    • Udyam Portal: The government has introduced a new registration process called Udyam Registration to make it easier for MSMEs to register and avail of various government schemes and benefits.
    • Credit Guarantee Fund Scheme: The Credit Guarantee Fund Scheme provides collateral-free loans to MSMEs from banks and other financial institutions.
    • Cluster Development Programme: The government has launched the Cluster Development Programme to enhance the competitiveness of MSMEs by providing support for infrastructure, technology, and marketing.
    • National SC-ST Hub: The National SC-ST Hub aims to promote entrepreneurship among Scheduled Castes and Scheduled Tribes by providing support for capacity building, market linkages, and access to finance.
    • Technology Upgradation: The government provides financial support to MSMEs for technology upgradation through various schemes such as the Technology Upgradation Fund Scheme and the Credit Linked Capital Subsidy Scheme.

    Way forward

    If the govt. is to consider creating a separate ministry for microenterprises, there are several steps that could be taken to ensure its effectiveness:

    • Defining clear objectives: This should be based on a thorough understanding of the challenges faced by microenterprises and the opportunities available to them.
    • Coordination with other ministries: The new ministry should coordinate with other ministries to ensure that the policies and initiatives developed are aligned with the broader economic and social objectives of the government.
    • Developing policies and initiatives: The ministry should develop policies and initiatives that address the specific needs of microenterprises in India such as access to finance, technology, and markets.
    • Strengthening institutional capacity: The ministry should have a strong institutional capacity to implement policies and initiatives effectively. This could involve recruiting experts in the field of microenterprises and strengthening the capacity of existing institutions.
    • Creating awareness: The ministry should create awareness among microenterprises about the support and services available to them. This could involve organizing workshops and training programs, as well as leveraging digital platforms to disseminate information.

     

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  • What is Additional Surveillance Mechanism (ASM)?

    The National Stock Exchange (NSE) placed very famous enterprises of business tycoons under the additional surveillance mechanism (ASM).

    Why in news?

    • The Adani Group has shed $108 billion in market value since Hindenburg Research accused it of stock manipulation and accounting fraud.

    What is Additional Surveillance Mechanism (ASM)?

    • 2018 saw the establishment of the Additional Surveillance Measure (ASM), a measure by SEBI and recognised stock exchanges to control the incredibly volatile stocks on the Indian stock market.
    • ASM in the stock market functions as a control measure for speculative trading to safeguard the interests of retail investors and keep them out of potentially dangerous trading situations.
    • There are two parts of additional margins:
    1. Long-term ASM
    2. Short-term ASM

    What is ASM list in the stock market?

    • ASM list means a collection of securities currently under observation owing to variables like price volatility, volume variation, etc.
    • Investors are alerted to unexpected price movement by stocks that have been shortlisted for the ASM list.
    • These equities are subject to various trading restrictions to halt any speculation.
    • The regulations that apply to stocks on the ASM list are more stringent.
    • They are prohibited from being pledged and using intraday leverages like bracket and cover orders, among others.

    How does it work?

    • For instance, the stock will be moved to a 5% price band the day it joins the ASM list; from then on, it may only move 5% up or down from the previous day’s closing level.
    • As a result of this limit violation, the stock can no longer trade on the market once this limit is violated.
    • In addition, the investor ought to have 100% margin money to trade the stock as of the fifth day.
    • The selected securities will be monitored further, based on predetermined criteria and transferred into Trade to Trade settlement once the criterion is met.

    Criteria to determine ASM list stocks

    The following criteria are used to select stocks for inclusion in ASM and were mutually decided upon by SEBI and Exchanges:

    • Close-to-Close Price Variation
    • Market Capitalisation
    • Volume Variation
    • Delivery Percentage
    • High Low Variation
    • Client Concentration
    • of Unique PANs

     

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  • What are Lab-Grown Diamonds?

    diamond

    During her Budget speech, Finance Minister announced the government’s move to focus on lab-grown diamonds (LGDs).

    What did the FM announce?

    • Customs duty on the seeds used in lab-grown diamond manufacturing will be reduced, announced the finance minister.
    • She also announced a grant to IITs to facilitate the growth of LGDs in India.

    What are Lab-Grown Diamonds (LGD)?

    • Lab-grown diamonds are diamonds that are produced using specific technology which mimics the geological processes that grow natural diamonds.
    • They are not the same as “diamond simulants” – LGDs are chemically, physically and optically diamond and thus are difficult to identify as “lab-grown.”
    • While materials such as Moissanite, Cubic Zirconia (CZ), White Sapphire, YAG, etc. are “diamond simulants” that simply attempt to “look” like a diamond.
    • LGDs have basic properties similar to natural diamonds, including their optical dispersion, which provide them the signature diamond sheen.
    • They lack the sparkle and durability of a diamond and are thus easily identifiable.
    • However, differentiating between an LGD and an Earth Mined Diamond is hard, with advanced equipment required for the purpose.

    How are LGDs produced?

    There are multiple ways in which LGDs can be produced.

    • High pressure, high temperature (HPHT) method: This method requires extremely high pressure, high temperature presses that can produce up to 730,000 psi of pressure under extremely high temperatures (at least 1500 Celsius). Usually graphite is used as the “diamond seed” and when subjected to these extreme conditions, the relatively inexpensive form of carbon turns into one of the most expensive carbon forms.
    • Other processes: These include “Chemical Vapor Deposition” (CVD) and explosive formation that creates what are known as “detonation nano-diamonds”.

    What are LGDs used for?

    (1) Production

    • For instance, LGDs are most often used for industrial purposes, in machines and tools. Their hardness and extra strength make them ideal for use as cutters.
    • Furthermore, pure synthetic diamonds have high thermal conductivity, but negligible electrical conductivity.

    (2) Electronics industry

    • This combination is invaluable for electronics where such diamonds can be used as a heat spreader for high-power laser diodes, laser arrays and high-power transistors.

    (3) Jewelleries

    • Lastly, as the Earth’s reserves of natural diamonds are depleted, LGDs are slowly replacing the prized gemstone in the jewellery industry.
    • Crucially, like natural diamonds, LGDs undergo similar processes of polishing and cutting that are required to provide diamonds their characteristic lustre.

     

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  • RBI says no Foreign Investment cap on Sovereign Green Bonds

    green bond

    The sovereign green bonds issued by the Indian government will not have any restrictions on foreign investment, the Reserve Bank of India (RBI) said.

    What are Sovereign Green Bonds?

    • A bond is an instrument to raise debt.
    • Since 2007, a market for bonds specifically self-labeled or designated as ‘green’ has emerged.
    • This label differentiates a green bond from a regular bond, which signifies a commitment to exclusively use funds raised to finance or re-finance “green” projects, assets, or business activities.
    • When these bonds carry guarantees related to the repayment of principal and payment of interest by the sovereign or the government, they are called sovereign green bonds (SGrB).

    How are the projects for green bonds selected?

    • A project is classified “green” on the basis of four key principles. These include-
    1. Encouraging energy efficiency in resource utilisation
    2. Reducing carbon emissions and greenhouse gases
    3. Promoting climate resilience and
    4. Improving natural ecosystems and biodiversity, especially in accordance with SDG (Sustainable Development Goals).

    When is the first sovereign green bond likely to be issued? 

    • In her Budget speech early this year, Finance Minister announced that sovereign green bonds will be issued for mobilising resources for green infrastructure.
    • The proceeds will be deployed in public sector projects that help in reducing the carbon intensity of the economy.
    • These green bonds would be available in 5-year and 10-year tenure.

    How are they different from conventional government bonds?

    • Government bonds or government securities (G-Secs) are normally categorised into two — Treasury Bills and dated or long-term securities.
    • These bonds carry coupon rates and are tradable in the securities market.
    • SGrB is one form of dated security. It will have a tenor and interest rate.
    • Money raised through SGrB is part of overall government borrowing.

    Who are likely to be the buyers of these bonds? 

    • Both domestic and international investors are expected to be interested in SGrB.
    • However, one thinking is foreign investors may be slightly hesitant due to currency risk.

     

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