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  • Modern Indian History-Events and Personalities

    ‘Pagri Sambhal Jatta’ Movement

    | | Mains Paper 1: Modern Indian History

    Sardar Ajit Singh Sandhu,  the brain behind the ‘Pagri Sambhal Jatta’ movement is now being remembered in the ongoing agrarian resentments in Punjab.

    Try this PYQ:

    Q.What was the immediate cause for the launch of the Swadeshi movement?

    (a) The partition of Bengal done by Lord Curzon.

    (b) A sentence of 18 months rigorous imprisonment imposed on Lokmanya Tilak.

    (c) The arrest and deportation of Lala Lajpat Rai and Ajit Singh; and passing of the Punjab Colonization Bill.

    (d) Death sentence pronounced on the Chapekar brothers.

    ‘Pagri Sambhal Jatta’ Movement

    • In 1879, the British constructed the Upper Bari Doab canal to draw water from the Chenab river and take it to Lyallpur (now in Pakistan and renamed Faisalabad) to set up settlements in uninhabited areas.
    • Promising to allot free land with several amenities, the government persuaded peasants and ex-servicemen from Jalandhar, Amritsar and Hoshiarpur to settle there.
    • In 1907, in Lyallpur, Ajit Singh Sandhu also Bhagat Singh’s uncle headed the movement that articulated this discontent.
    • The catchy slogan, Pagdi Sambhal Jatta, the name of the movement, was inspired by the song by Banke Lal, the editor of the Jang Sayal newspaper.
    • The agitated protestors ransacked government buildings, post offices, banks, overturning telephone poles and pulling down telephone wires.

    Who was Ajit Singh?

    • He was a revolutionary and a nationalist during the time of British rule in India.
    • With compatriots, he organised agitation by Punjabi peasants against anti-farmer laws known as the Punjab Colonization Act (Amendment) 1906 and administrative orders increasing water rate charges.
    • He was an early protester in the Punjab region of India who challenged British rule and openly criticized the Indian colonial government.
    • In May 1907, with Lala Lajpat Rai, he was exiled to Mandalay in Burma.
    • Due to great public pressure and apprehension of unrest in the Indian Army, the bills of exile were withdrawn and both men were released in November 1907.

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  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    Production Linked Incentive (PLI) Scheme

    | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    The Ministry of Electronics and IT had approved some proposals by electronics manufacturers under its Production Linked Incentive (PLI) Scheme.

    Try this MCQ:

    Q.The Production Linked Incentive (PLI) Scheme often seen in news is related to-

    a) Electronics manufacture

    b) Khadi and Village Industries

    c) MSMEs

    d) None of these

    What is the PLI scheme?

    • As a part of the National Policy on Electronics, the IT ministry had notified the PLI scheme on April 1 this year.
    • The scheme will, on one hand, attract big foreign investment in the sector, while also encouraging domestic mobile phone makers to expand their units and presence in India.
    • It would give incentives of 4-6 per cent to electronics companies which manufacture mobile phones and other electronic components.
    • A/c to the scheme, companies that make mobile phones which sell for Rs 15,000 or more will get an incentive of up to 6 per cent on incremental sales of all such mobile phones made in India.
    • In the same category, companies which are owned by Indian nationals and make such mobile phones, the incentive has been kept at Rs 200 crore for the next four years.

    Tenure of the scheme

    • The PLI scheme will be active for five years with financial year (FY) 2019-20 considered as the base year for calculation of incentives.
    • This means that all investments and incremental sales registered after FY20 shall be taken into account while computing the incentive to be given to each company.

    Which companies and what kind of investments are considered?

    • All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme.
    • These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.
    • Any additional expenditure incurred on the plant, machinery, equipment, research and development and transfer of technology for the manufacture of mobile phones and related electronic items will be eligible for the incentive.
    • However, all investment done by companies on land and buildings for the project will not be considered for any incentives or determine the eligibility of the scheme.

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  • Gravitational Wave Observations

    Physics Nobel for discoveries about Black Holes

    | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    Three scientists won this year’s Nobel Prize in Physics for advancing our understanding of black holes, the all-consuming monsters that lurk in the darkest parts of the universe.

    Try this PYQ:

    Q.Recently, scientists observed the merger of giant ‘blackholes’ billions of light-years away from the Earth. What is the significance of this observation?

    (a) ‘Higgs boson particles’ were detected.

    (b) ‘Gravitational waves’ were detected.

    (c) Possibility of inter-galactic space travel through ‘wormhole’ was confirmed.

    (d) It enabled the scientists to understand ‘singularity’.

    Who are these laureates?

    • Briton Roger Penrose received half of this year’s prize for the discovery that black hole formation is a robust prediction of the general theory of relativity.
    • German Reinhard Genzel and American Andrea Ghez received the second half of the prize for the discovery of a supermassive compact object at the centre of our galaxy.

    What are black holes?

    • A black hole is formed when stars collapse and can be defined as a space in the universe with an escape velocity so strong that even light cannot escape it.
    • Escape velocity is the speed at which an object must travel to override a planet or an object’s gravitational force.
    • For instance, for a spacecraft to leave the surface of the Earth, it needs to be travelling at a speed of about 40,000 km per hour.
    • Since light cannot get out, black holes are invisible and can only be tracked with the help of a space telescope or other special tools.
    • And the reason light cannot escape is mainly that the gravity inside a black hole is very strong as a result of a lot of matter being squeezed into a small space.

    Their contributions

    • Penrose has been awarded the prize for the discovery that black hole formation is a robust prediction of the general theory of relativity.
    • Genzel and Ghez have been awarded the prize for the discovery of a supermassive compact object at the centre of our galaxy.
    • Penrose’s work has shown that black holes are a direct consequence of Albert Einstein’s general theory of relativity.
    • Einstein himself did not believe that black holes exist and presented his theory in November 1915, providing a new way to look at and understand the gravity that shapes the universe “at the largest scale”.
    • Penrose used Einstein’s general theory of relativity in order to prove that the process of formation of black holes is a stable one.
    • Genzel and Ghez, on the other hand, have discovered that an invisible and an extremely heavy object governs the stars’ orbit at the centre of the Milky Way.

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  • Indian Missile Program Updates

    Supersonic Missile Assisted Release of Torpedo (SMART) System

    Prelims Only | | Mains Paper 3: Awareness in various sc and tech fields

    DRDO successfully conducted the flight test of its Supersonic Missile Assisted Release of Torpedo (SMART) system.

    Try this MCQ:

    Q.The SMART system recently tested by the DRDO is essentially a-

    a)Radar

    b)Torpedo

    c)UAV

    d)Missile

    What is the SMART system?

    • Torpedoes are self-propelled weapons that travel underwater to hit a target but are limited by their range.
    • In the mid-2010s, DRDO undertook a project to build capacity to launch torpedoes assisted by missiles; Monday’s was the first known flight test of the system.
    • This SMART system comprises a mechanism by which the torpedo is launched from a supersonic missile system with modifications that would take the torpedo to a far longer range than its own.
    • For example, a torpedo with a range of a few kilometres can be sent a distance to the tune of 1000 km by the missile system from where the torpedo is launched.

    Why is it significant?

    • SMART is a game-changing technology demonstration in anti-submarine warfare.
    • India’s anti-submarine warfare capacity building is crucial in light of China’s growing influence in the Indian Ocean region.
    • Assets of such warfare consist of the deployment of submarines, specialised anti-submarine ships, air assets and state-of-the-art reconnaissance and detection mechanisms.
    • The Navy’s anti-submarine warfare capability got a boost in June after the conclusion of a contract for Advanced Torpedo Decoy System Maareech, capable of being fired from all frontline warships.
    • India has been indigenously developing and building several anti-submarine systems and vessels in the recent past.

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  • Roads, Highways, Cargo, Air-Cargo and Logistics infrastructure – Bharatmala, LEEP, SetuBharatam, etc.

    Kozhikode-Wayanad Tunnel Project

    Prelims Only | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    Kerala CM has launched a tunnel road project that would connect Kozhikode with Wayanad.

    Try this PYQ:

    Q.From the ecological point of view, which one of the following assumes importance in being a good link between the Eastern Ghats and the Western Ghats?

    (a) Sathyamangalam Tiger Reserve

    (b) Nallamala Forest

    (c) Nagarhole National Park

    (d) Seshachalam Biosphere Reserve

    Kozhikode-Wayanad Tunnel Project

    • The 7-km tunnel, being described as the third-longest in the country, is part of an 8-km road cutting through sensitive forests and hills of the Western Ghats.
    • Its endpoints are at Maripuzha in Thiruvambady village panchayat (Kozhikode) and Kalladi in Meppadi panchayat (Wayanad).
    • The tunnel is an outcome of a decades-long campaign for an alternative road as the Thamarassery Ghat Road is congested and gets blocked by landslides during heavy monsoon.

    How will the road impact the ecology?

    • The Forest Department has identified the proposed route as a highly sensitive patch comprising evergreen and semi-evergreen forests, marshlands and shola tracts.
    • This region is part of an elephant corridor spread between Wayanad and Nilgiri Hills in Tamil Nadu.
    • Two major rivers, Chaliyar and Kabani that flows to Karnataka, originate from these hills in Wayanad.
    • Eruvazhanjipuzha, a tributary of Chaliyar and the lifeline of settlements in Malappuram and Kozhikode, begins in the other side of the hills.
    • The region, known for torrential rain during the monsoon, has witnessed several landslides, including in 2019 at Kavalappura near Nilambur and at Puthumala, Meppadi in Wayanad.

    Environmental clearance issues

    • Proponents of the project have been stressing that the tunnel will not destroy forest (trees).
    • The MoEFCC guidelines state that the Forest Act would apply not only to surface area but the entire underground area beneath the trees.
    • For tunnel projects, conditions relating to underground mining would be applicable.
    • As the proposed tunnel is 7 km long, it will require emergency exit points and air ventilation wells among other measures, which would impact the forest further.

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  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    Labour code reforms address basic needs

    op-ed snap | Governance | : Laws, Institutions & Bodies Constituted For The Vulnerable Sections

    The article highlights the key provision of the labour code and how it will help in removing the various hurdles faced by the key stakeholders.

    Increase in the threshold for closure/lay-off and its impact

    • The Industrial Relations Code 2020 increased the threshold for retrenchment/closure or lay-off without requiring government approval, from 100 to 300 workers.
    • This will help in addressing the matter of expansion of the firms.
    • In 2014, Rajasthan had increased the threshold of taking prior permission of the government before retrenchment.
    • The reform has helped firms to set up larger operations in Rajasthan, and the same amendment was followed by 15 states.

    Fixed Term Employment(FTE): Ensuring flexibility and tackling exploitation

    • In many jobs employees are required for a few months such as infrastructure projects, textiles and garments, food and agro-processing, etc.
    • However, the contractual employment workforce is quite often exploited with respect to wages, social security, and working conditions as well as welfare facilities.
    • Fixed Term Employment is an intervention to enable the hiring of employees directly instead of hiring through contractors, which will ensure flexibility.
    • For employees, all statutory entitlements and service conditions equivalent to those of a regular employee have now been made applicable.
    • The Code on Industrial Relations also extends the benefit of gratuity even for an FTE contract of one year, which is five years in the case of regular employees.

    Strengthening the formal economy

    • The inclusion of the gig and platform workers in the Social Security Code 2020 is a step towards strengthening the formal economy.
    • The provision for insurance coverage has been extended to plantation workers, and free annual health check-ups and a bipartite safety committee has been introduced for establishments such as factories, mines and plantation sectors in place of hazardous factories.
    • The ESIC and EPFO requirements will now apply to establishments employing less than 10 and 20 workers respectively on a volunteer basis.

    Ensuring female labour force participation

    • Falling women’s workforce participation in India has been a matter of concern for a long time.
    • Female labour force participation is a driver of growth and, therefore, participation rates indicate the potential for a country to grow more rapidly.
    • The new Code ensures the employment of women in night shifts for all types of work.

    Expansions of the provisions for migrant workers

    • The Occupational Health, Safety & Working Conditions Code expands the definition of a migrant worker.
    • The expanded definition includes workers who would be directly employed by the employer besides those employed through a contractor.
    • Also a migrant, who comes on his own to the destination state, can declare himself a migrant worker by registering on an electronic portal.
    • Registration on the portal has been simplified and there is no requirement of any other document except Aadhaar.
    • For de-licencing/de-registration, it is mandated to notify registering officers about the closure of their establishment and certify payment of dues to all employed workers.
    • This will ensure that workers will not be exploited even during the closure of the concerned establishment.

    Other provisions

    • The introduction of a concept of conducting web-based inspections can be seen as an attempt of matching corporate needs in the digital world.
    • The provision for a 14-day notice period before strikes and lockdowns would allow both workers and employers to attempt resolving the issues.
    •  The codes also promote lifelong learning mechanism to match the evolving skill sets required for technology and process changes through the introduction of a reskilling fund.

    Consider the question “What are the various provision added in the three labour code and how it will help revive the economy and tackle barriers in the expansion of firms?”

    Conclusion

    The reform measures address basic needs — to revive the economy and tackle barriers in the expansion of firms. Moreover, they promote the employment of women as well as reskilling of the workforce for the deployment of migrants.

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  • Foreign Policy Watch: India-China

    Confusion on what the Quad is and its future

    | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    The article analyses the basics of India’s foreign policy and its implications for the Quad.

    Context

    • There is confusion on what the Quad is and its future in India’s international relations.
    • Sustaining that confusion is the proposition that India is abandoning non-alignment in favour of a military alliance with the US in order to counter the China threat.

    4 Question on Quad’s future and India’s role

    1) What is the nature of alliance?

    • Alliances involve written commitments to come to the defence of the other against a third party.
    • Working of alliance varies according to the distribution of power within the members of an alliance and the changing nature of the external threat.
    • Alliances come in multiple shapes and forms — they could be bilateral or multilateral, formal or informal and for the long-term or near term.
    • Alliances feature in India’s ancient strategic wisdom and contemporary domestic politics in India.
    • Yet, when it comes to India’s foreign policy, alliances are seen as a taboo.
    • Part of the problem is that India’s image of alliances is frozen in the moment when India became independent.
    • After the Second World War, a newly independent India did not want to be tied down by alliances of the Cold War.
    • That notion is seen as central to Indian worldview.

    2) Does India forge alliances?

    • Contrary to conventional wisdom, India has experimented with alliances of different kinds.
    • During the First World War, some nationalists aligned with Imperial Germany to set up the first Indian government-in-exile in Kabul.
    • In the Second World War, Subhas Chandra Bose joined forces with Imperial Japan to set up a provisional government.
    • Policy of non-alignment among the great powers also did not rule out alliances in a different context.
    • For example, when Bhutan, Nepal and Sikkim turned to Delhi for protection amidst Maoist China’s advance into Tibet during 1949-50, Nehru signed security treaties with them.
    • India turned to the US for military support to cope with the Chinese aggression in 1962.
    • Indira Gandhi signed a security cooperation agreement with the Soviet Union in 1971 to cope with the crisis in East Pakistan.
    • Then, as now, there was much anxiety in Delhi about India abandoning non-alignment.
    • India does do alliances but the question is when, under what conditions and on what terms.

    3)  Is the US offering India an alliance against China?

    • The current political discourse in Washington is hostile to alliance-making.
    • President Donald Trump does not miss an opportunity to trash US alliances.
    • In any case, formal commitments do not always translate into reality during times of war.
    • Even within the long-standing US military alliances with Japan and the Philippines, there is much legal quibbling over what exactly is the US’s obligation against, say, Chinese aggression.
    • In case of the Quad, it is quite clear that Washington is not offering a military alliance, nor is Delhi asking for one.
    • Because it knows India has to fight its own wars.
    • Both countries, however, are interested in building issue-based coalitions in pursuit of shared interests.

    4) Instrumental nature of alliance

    • Agreements for security cooperation are made in a specific context and against a particular threat.
    • When those circumstances change, security treaties are not worth the paper they are written.
    • Consider India’s security treaties with Nepal, Bangladesh and Russia.
    • The 1950 Treaty was designed to protect Nepal against the Chinese threat.
    • Now, Nepali communists have long argued that the Treaty is a symbol of Indian hegemony.
    • India’s 1972 security treaty with Bangladesh did not survive the 1975 assassination of the nation’s founder, Mujibur Rahman.
    • India’s own enthusiasm for the 1971 treaty with Moscow waned within a decade.
    • Today Beijing is Moscow’s strongest international partner, a reality that has a bearing on India’s strategic partnership with Russia.

    What India can learn from China about alliances

    • Mao aligned with the Soviet Union after in 1949 and fought the Korean War against the US during 1950-53.
    • He broke from Russia in the early 1960s and moved closer to the US in the 1970s.
    • Mao, who denounced US alliances in Asia, was happy to justify them if they were directed at Russia.
    • He also welcomed Washington’s alliance with Tokyo as a useful means to prevent the return of Japanese nationalism and militarism.
    • Having benefited from the partnership with the US, China is trying to push America out of Asia and establish its own regional primacy.
    • Delhi could learn from Beijing in not letting the theological debates about alliances cloud its judgements about the extraordinary economic and security challenges India confronts today.

    Conclusion

    The infructuous obsession with non-alignment diverts Delhi’s policy attention away from the urgent task of rapidly expanding India’s national capabilities in partnership with like-minded partners.

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  • Parliament – Sessions, Procedures, Motions, Committees etc

    Legal challenges the Farm Acts could face

    op-ed snap | Polity | Mains Paper 2: Government Scheme/Policies,Parliament & State Legislatures

    Farm Acts passed by the Parliament could face the legal hurdle in the court when challenged on its constitutional basis. This article explains the issue.

    Background

    • Recently, Parliament passed three acts related to agriculture. These Acts are-
    • 1) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
    • 2) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.
    • 3) The Essential Commodities (Amendment) Act, 2020.
    • This has led to the question: Does the Union government have the authority to legislate on what are rightfully the affairs of States?

    Why agriculture is considered as States’ prerogative

    • Agriculture is a State subject in the Constitution, listed as Entry 14 in the State List (List II).
    • Entry 26 in the State List refers to “trade and commerce within the State”.
    • Entry 27 in the State List refers to “production, supply and distribution of goods”.
    • Entry 28 refers to “markets and fairs”.
    • For these reasons, intra-State marketing in agriculture was always considered a legislative prerogative of States.

    What was the legal basis used by the Parliament to pass the Farm Acts

    • The central government invoked Entry 33 in the Concurrent List (List III).
    • Entry 26 and 27 in List II are listed as “subject to the provisions of Entry 33 of List III”.

    Entry 33 in List III: Trade and commerce in, and the production, supply and distribution of, — (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) foodstuffs, including edible oilseeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unginned, and cotton seed; and (e) raw jute.

    Historical background of  “Entry 33” of Concurrent List

    • Entry 33, in its present form, was inserted in List III through the Constitution (Third Amendment) Act, 1954 after heated constitutional debates.
    • The contention of the dissent was the following:
    • As per Article 369 in the original version of the Constitution, the responsibility of agricultural trade and commerce within a State was temporarily entrusted to the Union government for a period of five years beginning from 1950.
    • The 1954 Amendment attempted to change this into a permanent feature in the Constitution.
    • According to dissident “if matters enumerated in Article 369 in were placed in List III, State autonomy would be rendered illusory and State powers and rights would be progressively pulverised…”.
    • While another dissident argued that “passage of the Bill would transform the Indian Constitution into a “unitary Constitution” instead of a “federal Constitution” and reduce “all the States’ powers into municipal powers”.
    • Notwithstanding the strong dissenting voices, the Bill was passed.

    Let’s look into the related Supreme Court Judgments

    • In many of its judgments after 1954, the Supreme Court of India has upheld the legislative powers of States in intra-State agricultural marketing.
    • Most notable was the ruling of the five-judge Constitution Bench in I.T.C. Limited vs. Agricultural Produce Market Committee (APMC) and Others, 2002.
    • The Tobacco Board Act, 1975 had brought the development of the tobacco industry under the Centre.
    • However, Bihar’s APMC Act continued to list tobacco as an agricultural produce.
    • In this case, the question was if the APMC in Monghyr could charge a levy on ITC for the purchase of unprocessed tobacco leaves from growers.
    • An earlier judgment had held that the State APMC Act will be repugnant to the Central Act, and hence was ultra vires.
    • But the Constitution Bench upheld the validity of the State APMC Act, and ruled that market fees can be charged from ITC under the State APMC Act.

    Consider the question “Examine the validity of legal basis used by the Parliament to pass the Farm Acts. Why it could face the legal challenge?”

    Conclusion

    It was unwise on the part of the Centre to use Entry 33 in List III to push the Farm Bills. Such adventurism weakens the spirit of federal cooperation that India needs in this hour of crisis. Second, agriculture is exclusively a State subject.

    Back2Basics: Read more about 3 Agricultural Acts passed by the Parliament here-

    [Burning Issue] Agricultural Reform Bills, 2020

     

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  • Insolvency and Bankruptcy Code

    Asset Reconstruction Companies

    op-ed snap | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth,Indian Economy

    The article argues for the greater role to Asset Reconstruction Companies by allowing them to invest in the equity [shares] of the distressed companies.

    Context

    • In a recently released paper “Indian Banks: A time to reform” Viral Acharya and Raghuram Rajan argued for a greater role for Asset Reconstruction Companies.
    • They argue that when there are fewer bids in a bankruptcy auction, the value on loans is better realised if read an asset reconstruction company takes over the borrower and places the firm under new management.

    Current limits on the role of ARC

    • The RBI limited the role of  ARC to participation in resolutions under the Insolvency and Bankruptcy Code, 2016 (IBC) only by partnering with an equity investor, which is the resolution applicant.
    • If the application succeeds, the equity investor would acquire the shares, while the ARC trust would acquire the debt.

    Background of the ARCs

    •  Some stakeholders are asking for extending the role of ARCs by allowing direct invest in the equity of distressed companies through IBC resolution just like private equity funds.
    • The RBI doesn’t appear to favour such an extended role for ARCs.
    • This is due to the uninspiring performance of the Asset Reconstruction Companies in the past.
    • At the time of the Asian Financial Crisis,  India’s non-performing assets stood at a whopping 14.4 per cent.
    •  It was in this context that the Narasimham Committee (1998) recommended setting up an ARC specifically for purchasing NPAs from banks and financial institutions.
    • Subsequently, the SARFAESI Act, 2002 created the legal framework for establishing multiple private ARCs.
    • This policy achieved only modest success.
    • The maximum average recovery by ARCs as a percentage of total bank claims stood at 21.5 per cent in 2010.
    • Since then, it has steadily declined and reached 2.3 per cent in 2018.
    • This low recovery could be the result of collateral disposal rather than genuine business turnarounds [i.e. operating the business and turning it profitable].

    Need for extending the role of ARCs

    • In 2002, India lacked an effective bankruptcy system.
    • There was no market for corporate control of distressed firms.
    • ARCs were originally designed for this peculiar institutional ecosystem.
    • They were required to hand over the distressed business back to the original promoter once they had generated enough value to repay the debt.
    • Consequently, ARCs had little incentive to turn around distressed businesses.
    • This situation completely changed in 2016 as the IBC seeks to maximise the value of distressed businesses through a market for corporate control.
    • ARCs should be able to fully participate in this market and attempt successful turnarounds by acquiring strategic control over distressed businesses.
    • In a solvent company, shareholders have stronger incentives than creditors to maximise enterprise value.
    • This is because an increase in enterprise value automatically increases the value of its equity.
    • In contrast, creditors do not benefit from increases in enterprise value beyond their individual claims.
    • If ARCs could hold more equity instead of debt in the resolved company, they would also have a stronger incentive to take strategic control to ensure successful turnaround.

    Way forward

    • The law should enable ARCs to invest in a distressed company’s equity, whether by infusing fresh capital or by converting debt into equity.
    • Effectively, an ARC should act more like a private equity fund, as Acharya and Rajan suggested.
    • This in turn would make the market for corporate control under IBC deeper and more liquid, improving ex-ante recovery rates for banks.

    Consider the question “What are Asset Reconstruction Companies? How allowing the ARCs to invest in equity of distressed companies under IBC help successful turnaround of the distressed business?”

    Conclusion

    •  If only ARCs are allowed to directly participate in IBC resolutions by infusing equity, they could emerge as the most efficient vehicle for turning around distressed Indian businesses.

    Back2Basics: Difference between debt and equity

    • Debt market and equity market are two broad categories of investment available in the general investment milieu.
    • Equity markets trade in shares or stocks of the company listed on the stock exchanges.
    • A stock in a company indicates a unit in the ownership of the company.
    • As shareholders, you become part owners of the company.
    • The largest shareholder, with 50% or more shares, becomes the owner of the company.
    • Equity markets are riskier than debt markets.
    • Debt is a form of borrowed capital.
    • The central or state governments raise money from the market by issuing government securities or bonds.
    • In effect, the government is borrowing money from you and will pay interest to you at regular intervals.
    • The principal amount is returned on maturity.
    • In the same way, a company raises money from the market by selling debt market securities such as corporate bonds.
    • The debt market is made up of bonds issued by government authorities and companies.

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  • Goods and Services Tax (GST)

    GST Council and its Functioning

    | Economics | Mains Paper 3: Indian Economy

    The Goods and Services Tax (GST) Council has failed to iron out differences between some States and the Centre over the plan to get States to borrow from the market to meet the shortfall in compensation cess collections this year.

    Try this question from CSP 2018:

    Q.Consider the following items:

    1. Cereal grains hulled
    2. Chicken eggs cooked
    3. Fish processed and canned
    4. Newspapers containing advertising material

    Which of the above items is/are exempt under GST (Goods and Services Tax)?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4

    About GST Council

    • The GST Council is a federal body that aims to bring together states and the Centre on a common platform for the nationwide rollout of the indirect tax reform.
    • It is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of goods and services tax in India.
    • The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.
    • The predominant responsibility of the GST Council is to ensure to have one uniform tax rate for goods and services across the nation.

    How is the GST Council structured?

    • The GST is governed by the GST Council. Article 279 (1) of the amended Indian Constitution states that the GST Council has to be constituted by the President within 60 days of the commencement of the Article 279A.
    • According to the article, the GST Council will be a joint forum for the Centre and the States. It consists of the following members:
    1. The Union Finance Minister will be the Chairperson
    2. As a member, the Union Minister of State will be in charge of Revenue of Finance
    3. The Minister in charge of finance or taxation or any other Minister nominated by each State government, as members.

    Terms of reference

    • Article 279A (4) specifies that the Council will make recommendations to the Union and the States on the important issues related to GST, such as the goods and services will be subject or exempted from the Goods and Services Tax.
    • They lay down GST laws, principles that govern the following:
    1. Place of Supply
    2. Threshold limits
    3. GST rates on goods and services
    4. Special rates for raising additional resources during a natural calamity or disaster
    5. Special GST rates for certain States

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