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  • In news: National Export Co-operative Society

    The first consignment expected to be exported by the first-ever National Export Co-operative Society.

    Why in news?

    • The Union Cabinet on January 11 approved the setting up Multi-State Seed Society, Multi-State Organic Society and Multi State Export Society.

    What is National Export Co-operative Society (NECS)?

    • The society will have an authorised share capital of ₹2,000 crore with the area of operation all over the country.
    • It will be registered under the Multi-State Cooperative Societies (MSCS) Act, 2002.
    • It will have its registered office in Delhi.
    • The Society’s registration will be complete in the next few days and the first consignment will be exported in three months.
    • It will work as an export house for handicrafts, handlooms, khadi and other products, ensuring enhancement of income of the cooperative member entrepreneurs.

    Funding of NECS

    • Leading cooperatives like IFFCO, KRIBHCO, NAFED, Amul and National Cooperative Development Corporation (NCDC) will be the promoters of the Society.
    • They will contribute ₹100 crore each.

    Working of NECS

    • The Society will be different from the Export Promotion Council under the Ministry of Commerce.
    • This Society will provide end-to-end services to the cooperatives.
    • It will open foreign bank accounts and complete all the formalities, including necessary permissions for exporting a product.
    • The dividends will be shared with the manufacturer instantly and without any brokerage fee.
    • The Society will hire consultants in foreign countries who will help expand its footprint across continents.

    Why need cooperatives for export promotion?

    • Cooperatives contribute 28.80% in fertilizer production, 35% in fertilizer distribution, 30.60% in sugar production and 17.50% in milk in the national economy.
    • However, their contribution to exports is negligible.
    • Society will benefit the smallest of farmer or artisan who has a good product but does not have access to the right platform.
    • Through this Society, they will get access to international market and good returns too.
    • Once a product has been tested for international standards, the packaging and export will be done by the Society.

     

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  • TRAI’s Calling Name Presentation (CNAP) Proposal

    cnap

    Telecom operators have expressed concerns over user privacy on the Telecom Regulatory Authority of India’s Calling Name Presentation (CNAP) proposal.

    Calling Name Presentation (CNAP)

    • Under this phones would need to display the name of a caller, by extracting the name of the telecom subscriber from their SIM registration data.
    • The feature would provide the called individual with information about the calling party (similar to ‘Truecaller’ and ‘Bharat Caller ID & Anti-Spam’).
    • The idea is to ensure that telephone subscribers are able to make an informed choice about incoming calls and curb harassment by unknown or spam callers.

    Why need CNAP?

    • Securing important calls: Genuine calls should not get unanswered. Hence proper system is solicited.
    • Blocking of spammers: Since subscribers are not given the name and identity of the caller, they may choose not to answer them believing it could be commercial communication from unregistered telemarketers.
    • Rise of robocalls: There have been rising concerns about robocalls (calls made automatically using IT-enabled systems with a pre-recorded voice), spam calls and fraudulent calls.

    What are the proposed models? 

    The regulator has proposed four models for facilitating the CNAP mechanism-

    1. TSPs operating CNAP database: The first model involves each telecom service provider (TSP) establishing and operating a CNAP database of its subscribers. Here, the caller’s TSP would have to extract the relevant data from its own database.
    2. Database sharing: In the second model, the operator of the calling entity shares its CNAP database with the receiver’s operator. The difference here is that the calling operator would permit the receiver’s operator to access its database for the caller’s CNAP data.
    3. Creating a Centralised database: The onus rests on the receiver’s operator to delve into the centralized database to retrieve and present the caller’s data. This model is similar to a plan envisaged by the Department of Telecommunications (DoT) in 2018, involving the setting up of a Digital Intelligence Unit at the central level.
    4. Centralized CNAP database: TSP retains a copy of a synchronized central database operated by a third party. It works this way: the call is facilitated as per the routine procedure, and since the receiver’s operator has access to both the centralized and their own database, the lookup is, therefore, internal.

    Issues involved

    • Latency: The regulator has said that latency in setting up the call must be ensured and CNAP must be inter-operable. The responsiveness might also suffer when moving from a faster wireless network (4G or 5G) to a comparatively slower one (2G or 3G), or vice-versa.
    • Privacy Issue: It is not clear how the CNAP mechanism would balance the caller’s right to remain anonymous, an essential component of the right to privacy. To put it into perspective, an individual may opt to remain anonymous for multiple reasons, for example, whistle-blowers or employees being harassed.
    • Gendered impact: The proposal may particularly harm women. The service will display a woman subscriber’s name and data, to every calling party whether or not she consents to it.
    • Data sharing without consent: We have to see it in parallel with The Digital Personal Data Protection Bill (2022) which has a clause on deemed consent lacking adequate safeguards including sharing of data with third parties.
    • Implementation loopholes: Marketers have figured out newer ways to circumvent the existing framework. Previously, telemarketers were required to be registered as promotional numbers. Now they have started deploying people not necessarily part of the entity’s set-up, but rather “at-home workers”.

    Way forward

    • Innovative solution: TRAI must build an interface that is user-friendly and in turn, an effective mechanism.
    • Spam identification: Active participation from the subscribers would ensure that spammers are rightly identified and are unable to make further calls.
    • Digital literacy: The government must also invest in digital literacy, skilling citizen’s to navigate and use the tech better, ensuring they do not share their data indiscriminately and are informed about dangers such as financial fraud and spoofing.

     

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  • Why India needs a fresh Fertilizer Policy?

    fertilizer

    The government is expected to come out with a new fertilizer policy.

    What is the news?

    • A task force to examine the production and promotion of bio-fertilizer and organic fertilizers has already been set up under the NITI Aayog.

    How much fertilizer does India consume?

    • Total consumption of fertilizers between April and mid-December 2022 was 40.146 million metric tonnes (mmt), with production of 32.076 mmt and imports of 12.839 mmt.
    • The gap between demand and production is met through timely imports.

    How is fertilizers availability monitored?

    • Some steps undertaken by the government to improve the availability of fertilizers include:
    1. Assessment of state-wise requirements every month;
    2. 100% neem coating of urea, which increases nutrient efficiency;
    3. Monitoring of crop yield and soil health; and
    4. Online monitoring of the movement of fertilizers through the integrated Fertilizer Monitoring System.

    Impact of the current policy

    • Heavy subsidies: This has prompted many farmers to use chemical fertilizers like urea, which leads to higher productivity, but affects soil fertility in the long run.
    • Excessive and inefficient use of fertilizers: This leads to nutrient losses to the environment and could also result in drinking water contamination and impact human lives as a result of unsafe storage practices, as per a UN report.
    • Emission causing: With the subsidy being released directly to companies, technology-inefficient companies are being protected causing carbon emission.

    While attempts have been made to reform the fertilizer policy, they had to be rolled back after pressure from various quarters.

    Trend in government expenditure

    • Food subsidy: The government has spiked spending on food, fertilizer and fuel subsidy by nearly 70%.
    • Increased expenditure: For 2023-24, the fertilizer ministry might seek budgetary support of ₹2.5 trillion subsidy – outgo for FY23 has already crossed ₹2 trillion.
    • Increased import bill: Russia being a major exporter of liquefied natural gas -critical input for manufacturing of urea – has also led to higher prices.

    Steps taken in 2022

    • Implementation of DBT: The department of fertilizers disbursed subsidies for urea and nutrient-based subsidy, and implemented direct benefit transfer.
    • One Nation One Fertilizers Scheme: It also implemented the ONOF scheme which aims to ensure timely supply of fertilizers.
    • Model fertilizer retail outlets: The existing village, block/sub district/taluk and district level fertilizer retail outlets are being converted into model fertilizer retail outlets.

    Way forward

    • Promoting local fertilizers: Lower duty on imported phosphoric acid to raise the competitiveness of local fertilizer manufactures, and an incentive for promoting organic fertilizers, could be proposed.
    • Bio-fertilizer and organic fertilizers: A task force on bio-fertilizer and organic fertilizers has already been set up under NITI Aayog.
    • Curbing hefty subsidies: Considering the long-term interests of agriculture and the effects of using inorganic fertilizers, saving a huge amount on account of subsidy support is a step in the right direction.

     

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  • What is National Coal Index (NCI)?

    The Ministry of Coal has launched the sixth round of commercial coal mines’ auction for 141 coal mines.

    What is the news?

    • As per the provisions of the tender document, the Performance Bank Guarantee (PBG) to be submitted for each successfully auctioned coal mine is to be revised annually based on the National Coal Index (NCI).

    What is National Coal Index (NCI)?

    • Ministry of Coal has started commercial auction of coal mines on revenue share basis.
    • In order to arrive at the revenue share based on market prices of coal, one National Coal Index (NCI) is conceptualized.
    • The NCI is a price index which reflects the change of price level of coal on a particular month relative to the fixed base year.
    • The base year for the NCI is FY 2017-18.
    • NCI is a price index combining the prices of coal from all the sales channels- Notified Prices, Auction Prices and Import Prices.
    • It is released every month.

    Components of NCI

    • The concept and design of the Index as well as the Representative Prices have been developed by the Indian Statistical Institute, Kolkata.
    • NCI is composed of a set of five sub-indices: three for Non-Coking Coal and two for Coking Coal.
    • The three sub-indices for Non-Coking Coal are combined to arrive at the Index for Non-Coking Coal and the two sub-indices for Coking Coal are combined to arrive at the Index for Coking Coal.
    • Thus, indices are separate for Non-coking and Coking Coal.
    • As per the grade of coal pertaining to a mine, the appropriate sub-index is used to arrive at the revenue share.

    Implementation of NCI

    • The amount of revenue share per tonne of coal produced from auctioned blocks would be arrived at using the NCI by means of a defined formula.
    • The Index is meant to encompass all transactions of raw coal in the Indian market.
    • This includes coking and non-coking of various grades transacted in the regulated (power and fertilizer) and non-regulated sectors.
    • Washed coal and coal products are not included.

     

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  • Agnipath Scheme game changer says PM

    unsc

    The Agnipath scheme for recruitment is a “transformative policy” which will be a “game changer” in strengthening the armed forces, said the Prime Minister.

    What is Agnipath Scheme?

    • This will be the only form of recruitment of soldiers into the three defence services from now.
    • Recruits under the scheme will be known as ‘Agniveers’.
    • After completing the four-year service, they can apply for regular employment in the armed forces.
    • They may be given priority over others for various jobs in other government departments.
    • The move is expected to decrease the average age profile of armed forces personnel from the current 32 to 24-26 years over a period of time.

    Working of the scheme

    • The process of recruitment will commence in 90 days with a planned intake of 46,000 young men and women this year.
    • Enrolment to all three services will be through a centralized online system, with special rallies and campus interviews at recognized technical institutes.
    • Recruitment will be carried out on an “All India All Class” basis with the eligibility age ranging from 17.5 to 21, with medical and physical fitness standards in accordance with existing norms.

    Payouts of the Agniveers

    • The ‘Agniveers’ will receive an annual package of ₹4.76 lakh in the first year to ₹6.92 lakh in the fourth year, apart from risk and hardship and other allowances as applicable.
    • Under the ‘Seva Nidhi’ package, they will receive about ₹11.71 lakh, including contribution and interest, on completion of service.
    • The recruits will have to contribute 30% of their monthly emoluments to Seva Nidhi, with a matching contribution made by the government.
    • There will be no entitlement to gratuity and pension benefits under the scheme.
    • However, the ‘Agniveers’ will be provided a non-contributory life insurance cover of ₹48 lakh during their service.

    Why are aspirants protesting?

    • Contractualisation of armed forces: The foundation of this scheme is a four-year contract.
    • Jobs for the majority: States such as Bihar, Jammu & Kashmir, Punjab, Himachal Pradesh, Haryana, Uttar Pradesh, Uttarakhand and Rajasthan, are where the bulk of the Army recruitment takes place.
    • Perks and benefits: Many of these people value job stability, which includes retirement benefits and pensions over competitive salaries.
    • Uncertainty after end of commission: Most of them will be forced to leave the job within four years, which doesn’t fit into their hopes and aspirations.
    • Casualization of Training: It reportedly takes two to three years to train a member of the army, but as a part of the Agnipath, soldiers will only be trained for six months.
    • Threats to national security: Defence analysts have allegedly pointed out that the Russian soldiers who were trained for a limited amount of time before they went to war have performed disastrously.
    • Conflicts of interest: Apprehensions have been voiced against how the new recruits will be adjusted in the existing system under which most of the Army units are region, caste or class-based.

    Reasons behind aspirants’ frustration

    • Unemployment: Analysts always cite the crunch of gazetted officers in the Armed forces and there has been no recruitment for the last two years.
    • Pandemic impact: Many aspirants lost their chance to join the Armed forces as they are now overage.’
    • Unanticipated reforms: In guise of a push for “major defence policy reform”, the scheme is a fuss.
    • Coaching mafias: Coaching mafias have played a significant role in sparking and provoking protesters.

    Need for the Scheme: Official explanation

    • Budgetary efficiency: With the largest volunteer army in the world, paying an increased salary and pension bill, given rising incomes all around, has steadily eroded the capital side of the defence budget.
    • Preferential treatment: For job-seekers, the government has already said they will get priority in the Central Armed Police Forces.
    • Promotional avenues: One significant advantage of this scheme would be the much lower age profile of the service. It will increase the promotional avenues of the permanent cadre.
    • Diverse career options: Once retired, aspirants will be free to pursue other careers, with several departments and governments.
    • Selective skilling: Aspirants will get preference, educational credits, skill certificates, to help them rehabilitate in other fields.
    • Financial assistance: Those wishing to be entrepreneurs will get a financial package and bank loans and those wishing to study further will be given 12 class equivalent certificate.

    Way forward

    • Longer contract term: Make the period of the contract for new recruits longer than four years. The present clarification fails to address this issue.
    • Continuance of the commission: Relook the 25 per cent re-enlistment at the end of the contractual period. Ideally, it should be over 50 per cent retention for long-term posts.
    • Policy commitment for reabsorption: For those leaving after their short service, do obtain a binding commitment from CAPFs, states’ police forces and other organisations that they are willing to absorb this trained military manpower.
    • Gradual shift in recruitment policy: Continue with existing regular enrolment, in reduced numbers, and gradually shift to the Tour of Duty once it stabilizes after five to ten years.

    Conclusion

    • A nation should never compromise with the personnel who make up the fighting sinews of its armed forces.
    • The best way to prevent such an impression is to look upon them not as a burden to the exchequer, but as rough diamonds, to be cut and polished to their maximum capabilities and then deployed in the defence of the nation.
    • A diamond is forever, our future men and women in uniform too deserve to serve to their maximum for the betterment of the nation and their own lives.

     

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  • UNSC bans LeT’s Makki after China lifts its hold

    makki

    The ISIL and Al Qaida Sanctions Committee of the UN Security Council (UNSC) has placed Abdul Rehman Makki, a fundraiser and key planner of the Pakistan-based terrorist outfit Lashkar-e-Taiba (LeT), on its sanctions list.

    Blacklisting Maki: Under UNSC 1267 list 

    • The UNSC resolution 1267 was adopted unanimously on 15 October 1999.
    • It came to force in 1999, and strengthened after the September, 2001 attacks.
    • It is now known as the Da’esh and Al Qaeda Sanctions Committee.

    What is UNSC 1267 committee?

    • It comprises all permanent and non-permanent members of the United Nations Security Council (UNSC).
    • The 1267 list of terrorists is a global list, with a UNSC stamp.
    • It is one of the most important and active UN subsidiary bodies working on efforts to combat terrorism, particularly in relation to Al Qaeda and the Islamic State group.
    • It discusses UN efforts to limit the movement of terrorists, especially those related to travel bans, the freezing of assets and arms embargoes for terrorism.

    How is the blacklisting done?

    (1) Submission of Proposal

    • Any member state can submit a proposal for listing an individual, group, or entity.
    • The proposal must include acts or activities indicating the proposed individual/group/entity had participated in the financing, planning, facilitating, preparing, or perpetrating of acts or activities linked to the said organizations.

    (2) Actual decision

    • Decisions on listing and de-listing are adopted by consensus.
    • The proposal is sent to all the members, and if no member objects within five working days, the proposal is adopted.
    • An “objection” means rejection for the proposal.

    (3) Putting and resolving ‘Technical Holds’

    • Any member of the Committee may also put a “technical hold” on the proposal and ask for more information from the proposing member state.
    • During this time, other members may also place their own holds.
    • The matter remains on the “pending” list of the Committee.
    • Pending issues must be resolved in six months, but the member state that has placed the hold may ask for an additional three months.
    • At the end of this period, if an objection is not placed, the matter is considered approved.

    How China supports Terror in Pakistan?

    • China has exposed its double standards on the issue of terrorism for consistently stopping the listing of Pakistan-based terrorists.
    • This time, Beijing has argued that the blacklisting is in fact a “recognition” of Pakistan’s record of fighting terrorism.

    Here is a timeline of how China disrupts the global efforts against terrorism:

    • 2009: After the 26/11 Mumbai attacks, India moved an independent terror designation proposal against Masood Azhar but China blocked the move.
    • 2016: After seven years, India proposes listing of Masood Azhar as a global terrorist and is supported by the US, the UK and France. China blocks the move again.
    • 2017: The trio moves a third proposal only to be blocked by China again.
    • 2019: After the attacks on the CRPF personnel in J-K’s Pulwama, India calls 25 envoys of different countries to highlight the role Islamabad plays in funding, promoting and strengthening global terrorism. India moves the fourth proposal demanding Masood Azhar’s listing. China lifted its technical hold.
    • June 2022: China blocked a proposal by India and the US to list Pakistan-based terrorist Abdul Rehman Makki as a ‘Global Terrorist’
    • August 2022: China blocks India-US joint proposal to list Jaish-e-Mohammad (JeM) deputy chief Abdul Rauf Azhar as UNSC designated terrorist.

    Why China shields Pak-based terrorists?

    • Rewarding Pakistan: China rewards Pakistan to keep India engaged in regional battles and internal conflicts.
    • Oppressing the Uighurs: The quid pro quo is that Pakistan does not utter a word against Uighur Muslim oppression by China in restive Xinjiang province.

    Conclusion

    • China’s actions expose its double speak and double standards when it comes to the international community’s shared battle against terrorism.
    • This clearly depicts its care for its vassal state Pakistan.

    Back2Basics: United Nations Security Council (UNSC)

    • The UNSC is one of the six principal organs of the United Nations and is charged with the maintenance of international peace and security.
    • Its powers include the establishment of peacekeeping operations, the establishment of international sanctions, and the authorization of military action through Security Council resolutions.
    • It is the only UN body with the authority to issue binding resolutions to member states.
    • The Security Council consists of fifteen members. Russia, the United Kingdom, France, China, and the United States—serve as the body’s five permanent members (P5).
    • These permanent members can veto any substantive Security Council resolution, including those on the admission of new member states or candidates for Secretary-General.
    • The Security Council also has 10 non-permanent members, elected on a regional basis to serve two-year terms. The body’s presidency rotates monthly among its members.

     

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  • UPI for NRIs: What it means for India and Indians abroad

    upi

    The National Payments Corp. of India (NPCI) has allowed Indians abroad to use fast payments network UPI, if their domestic bank accounts are linked to their foreign mobile numbers.

    What is UPI?

    • UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions.
    • The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

    What exactly has NPCI allowed on UPI?

    • NPCI issued a circular that paved the way for wider adoption of homegrown payments platform UPI.
    • So far, only Indian phone numbers were allowed on UPI, leaving out non-resident bank accounts linked to their phone numbers abroad.
    • In the first phase, phone numbers from 10 countries including Singapore, Australia, Canada, Hong Kong, Oman, Qatar, the US, Saudi Arabia, United Arab Emirates, and the UK have been allowed to be used on UPI.
    • NPCI said it could extend this to other nations as well.

    How will it benefit Indians abroad?

    • Once the systems are in place, non-resident Indians will be able to transact using UPI, irrespective of whether they are in India or abroad.
    • To use UPI, non-residents need to have either a non-resident external (NRE) account or a non-resident ordinary (NRO) account in India.
    • It would, of course, be more useful when account holders visit India, given the scale of UPI merchant infrastructure in India.
    • While abroad, they can use UPI to transfer funds to families in India and use it on e-commerce portals that allow such payments.

    What are the prerequisites for this facility?

    • NPCI has asked banks to onboard only those accounts that meet the Foreign Exchange Management Act guidelines and instructions issued by the departments of the Reserve Bank of India (RBI).
    • Apart, the remitter, as well as beneficiary banks, will have to ensure they comply with anti-money laundering (AML) and combating of financial terrorism (CFT) checks.

    Does it help the plan to take UPI global?

    • NPCI has been attempting to make UPI a global phenomenon and the idea to tap NRIs is a step towards that.
    • 10 countries are just to begin with and the list will expand in future.
    • NPCI has been trying to push homegrown payment systems in other countries through NPCI International Payments Ltd, a subsidiary it set up in 2020.
    • It has already tied up with payment system operators in Nepal, UAE, France, UK and others to allow UPI usage there.
    • There is also a plan to link UPI with Singapore’s Paynow.

    How will it help the UPI ecosystem?

    • UPI is almost synonymous with digital payments in India, clocking over ₹12.8 trillion worth of transactions in December.
    • After a slow start in 2016, UPI payments have grown at a rapid pace. Given there are over 13.5 million NRIs, the availability of UPI is expected to raise transaction volumes.
    • Industry experts said that just like resident Indians do not have to pay for UPI, it will also be available to NRIs at no extra cost.
    • That said, it might be off to a slow start as the acceptance infrastructure abroad is still being developed.

     

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  • [pib] First evidence of Solitary Waves near Mars

    In a first-of-its-kind discovery, a team of Indian scientists from the Indian Institute of Geomagnetism (IIG) reported the first evidence of the presence of solitary waves around Mars.

     

    Mars

    mars

    • Of the largest Mars is the fourth planet from the Sun and the second-smallest planet in the Solar System, being larger than only Mercury.
    • In English, Mars carries the name of the Roman god of war and is often referred to as the “Red Planet”.
    • The latter refers to the effect of the iron oxide prevalent on Mars’s surface, which gives it a reddish appearance distinctive among the astronomical bodies visible to the naked eye.
    • Mars is a terrestrial planet with a thin atmosphere, with surface features reminiscent of the impact craters of the Moon and the valleys, deserts and polar ice caps of Earth.
    • The days and seasons are comparable to those of Earth, because the rotational period, as well as the tilt of the rotational axis relative to the ecliptic plane, is similar.
    • Mars is the site of Olympus Mons, the largest volcano and highest known mountain on any planet in the Solar System, and of Valles Marineris, one canyons in the Solar System.

     

    What are Solitary Waves?

    • Solitary waves are distinct electric field fluctuations (bipolar or monopolar) that follow constant amplitude-phase relations.
    • Their shape and size are less affected during their propagation.
    • Solitary waves are known to be responsible for the plasma energization and its transport in Earth’s magnetosphere.

    Unveiling the undercover solitary waves

    • Earth is a giant magnetic entity, wrapped in a magnetosphere generated by the motion of molten iron in its core.
    • This magnetosphere casts a protective layer around our home planet, shielding us from the solar winds coughed towards us by the Sun.
    • But unlike Earth, Mars lacks a robust intrinsic magnetic field, which effectively allows the high-speed solar wind to interact directly with the Martian atmosphere.
    • This interaction suggests that even with a weak and flimsy magnetosphere, the frequent occurrences of solitary waves on Mars remain a possibility.

    Why this is a significant feat for India?

    • Despite several missions to Mars, their presence has never been detected — until now.
    • However, Indian Scientists have successfully identified and reported the first-ever solitary waves detected on Mars.
    • They arrived at this result by analyzing about 450 solitary wave pulses observed by the Langmuir Probe and Waves instrument on NASA’s Mars Atmosphere and Volatile EvolutioN (MAVEN) spacecraft.

    Decoding the data

    • Their analysis revealed distinct electric field fluctuations, which lasted for about 0.2-1.7 milliseconds.
    • Such signals were predominant during dawn or between afternoon to dusk at an altitude of 1000-3500 km from Mars’ surface.
    • Further investigation is needed to determine exactly why these waves are dominant during a fixed time of the day.

    Significance of such waves on Mars

    • These pulses are dominantly seen in the dawn and afternoon dusk sectors at an altitude of 1000–3500 km around Mars.
    • Researchers are further exploring their role in the particle dynamics in the Martian magnetosphere and whether such waves play any role in the loss of atmospheric ions on Mars.
    • The study of these waves is crucial as they directly control particle energization, plasma loss, transport, etc., through wave-particle interactions.

     

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  • Making The Case for Wealth Tax

    Wealth Tax

    Context

    • The discourse on efficient, effective and equitable public spending often takes us into the realm of limited resources facing competing demands. India definitely needs to widen its revenue collection as well as base. In this context, it is important to discuss the need for levying a wealth tax, and levying it now.

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    Why wealth needs to be taxed?

    • Accumulation of wealth: The most compelling reason stems from evidence that there has been massive accumulation of wealth in a few hands. A small section of people has access to a large share of economic assets and resources that remain almost completely untaxed and thus unavailable for public allocation.
    • Wealth without hard work: Wealth, much less than even income, has little to do with one’s education, merit or efforts; it is largely dependent on inheritance and opportunities that come with the advantages associated with belonging to one of India’s privileged classes and castes.
    • Income inequality: India’s top 10% population owns 65% of the country’s wealth, while the bottom 10% owns only 6%, according to the World Inequality Database, 2022.
    • Wealth of rich doubled in pandemic: An Oxfam report has highlighted how India’s richest doubled their wealth during the pandemic. This happened for a variety of reasons, including profits made on vaccines and commodity and asset price movements.
    • Wealth doesn’t translate into productive resources: But the fact remains that India, despite facing grave financial and economic challenges, has no means to convert any of this growing wealth into productive resources that can generate employment opportunities and push up the incomes of multitudes, which in turn can drive demand for goods something that is needed to counter an economic drag-down.

    What is the government’s attitude towards wealthy?

    • Rich knows how to invest: One may argue and it is common to hear this that wealth is better left to the wealthy, as they know best how to invest. This has not been in sufficient evidence, at least in India.
    • Corporate tax lowered: The government lowered the corporate tax rate significantly from 30% to 22% in 2019-20, which has continued despite the economic crises caused by the pandemic. However, this did not elicit much private investment.

    Wealth Tax

    History of Wealth taxation in India

    • Wealth tax: Wealth tax, which is a direct tax unlike the goods and services tax or value-added tax, can take several forms, such as property tax, inheritance or gift tax and capital gains tax.
    • Capital gains tax: Capital Gains tax exists in India, but applies only to transactions and hence is limited in its base.
    • Estate duty: India scrapped its estate duty in 1985 and has no inheritance tax. Although the receipt of gifts is subject to income tax in the beneficiary’s hands, it has various exemptions; it is almost entirely exempt if received from within the family, including the extended family of self and spouse.
    • Exemption leads to accumulation: These exemptions shrink the base significantly, as most accumulated wealth is acquired through family, and that remains outside the gift tax’s ambit. Given the cultural context of wealth inheritance, some exemptions make sense, but upper thresholds can be easily added to make it more effective.

    Present status of wealth taxation

    • No wealth tax: India presently does not have any wealth tax i.e., a tax levied on one’s entire property in all forms.
    • One time solidarity tax: It did not impose a one-time ‘solidarity tax’ on wealth in post-covid budgets that could have generated resources for essential public investment.
    • Example of developing countries: A number of Latin American countries, including Argentina, Peru and Bolivia, have either introduced or are introducing a progressive annual wealth tax levied on the wealth gains of each year or a one-time covid ‘solidarity’ tax.

    Wealth Tax

    Conclusion

    • Idea of wealth tax appear good on paper however; it may negatively impact the domestic and foreign investment in the country. Direct tax slab for superrich in India is already among the highest in the world. The idea of wealth taxation needs careful deliberation before implementation.

    Mains Question

    Q. Comment on history of wealth tax in India. why wealth tax is necessary in India? elaborate.

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  • RBI proposes Expected Loss-based Approach for Loan Provisioning

    The Reserve Bank of India (RBI) has proposed a framework for the adoption of an expected loss-based approach for loan provisioning by banks.

    What is Loan-Loss Provision?

    • The RBI defines a loan loss provision as an expense that banks set aside for defaulted loans.
    • Banks set aside a portion of the expected loan repayments from all loans in their portfolio to cover the losses either completely or partially.
    • In the event of a loss, instead of taking a loss in its cash flows, the bank can use its loan loss reserves to cover the loss.
    • Since the bank does not expect all loans to become impaired, there is usually enough in the loan loss reserves to cover the full loss for any one or a small number of loans when needed.
    • An increase in the balance of reserves is called loan loss provision.
    • The level of loan loss provision is determined based on the level expected to protect the safety and soundness of the bank.

    And what is the expected loss-based approach?

    • Under this practice, a bank is required to estimate expected credit losses based on forward-looking estimations, rather than wait for credit losses to be actually incurred before making corresponding loss provisions.
    • As per the proposed framework, banks will need to classify financial assets (primarily loans, including irrevocable loan commitments, and investments classified as held-to-maturity or available-for-sale) into one of three categories — Stage 1, Stage 2, or Stage 3.
    • This depends upon the assessed credit losses on them, at the time of initial recognition as well as on each subsequent reporting date, and make necessary provisions.
    1. Stage 1 assets are financial assets that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses are recognised and interest revenue is calculated on the gross carrying amount of the asset.
    2. Stage 2 assets are financial instruments that have had a significant increase in credit risk since initial recognition, but there is no objective evidence of impairment. For these assets, lifetime expected credit losses are recognised, but interest revenue is still calculated on the gross carrying amount of the asset.
    3. Stage 3 assets include financial assets that have objective evidence of impairment at the reporting date. For these assets, lifetime expected credit loss is recognised, and interest revenue is calculated on the net carrying amount.

    What are the benefits of this approach?

    • The forward-looking expected credit losses approach will further enhance the resilience of the banking system in line with globally accepted norms.
    • It is likely to result in excess provisions as compared to shortfall in provisions as seen in the incurred loss approach.

    What is the problem with the incurred loss-based approach?

    • The incurred loss approach requires banks to provide for losses that have already occurred or been incurred.
    • The delay in recognising expected losses under an “incurred loss” approach was found to exacerbate the downswing during the financial crisis of 2007-09.
    • Faced with a systemic increase in defaults, the delay in recognising loan losses resulted in banks having to make higher levels of provisions which ate into the capital maintained precisely at a time when banks needed to shore up their capital.
    • This affected banks’ resilience and posed systemic risks.
    • Further, the delays in recognising loan losses overstated the income generated by the banks which, coupled with dividend payouts, impacted their capital base

     

    Which banks are covered under this approach?

    • The proposed norms are for all scheduled commercial banks, excluding regional rural banks.
    • Regional rural banks and smaller cooperative banks (based on a threshold to be decided based on comments) are proposed to be kept out of the framework.

     

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