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  • Species in news: Sal Forest Tortoise

    A recent study by ecologists in the Wildlife Institute of India, Dehradun, has found that the area designated as a protected area network has only a small overlap with the actual habitat of Sal forest tortoise. Over 90% of the potential distribution of the species falls outside the current protected area’s network.

    What you should focus on?

    On map, identify areas where Sal forest tortoise are found.

    Revise the map of various Forest system of India and their characteristics as well.

    Also…..Is tortoise a mammal or an amphibian?…..or something else??

    Sal Forest/ Elongated Tortoise

    • Also known as the elongated tortoise (Indotestudo elongata), the sal forest tortoise, recently assessed as Critically Endangered, is heavily hunted for food.
    • It is collected both for local use, such as decorative masks, and international wildlife trade.
    • The Sal forest tortoise is widely distributed over eastern and northern India and Southeast Asia.
    • It is one of the only four land tortoises found in India. It is legally protected under Schedule IV of the Indian Wildlife (Protection) Act, 1972 as amended up to 2006.
    • According to the IUCN, the population of the species may have fallen by about 80% in the last three generations (90 years).

    About Sal Forest

    • It is a forest type dominated by a single plant species, commonly known as Sal tree (Shorea robusta).
    • It belongs to the category ‘Tropical Moist Deciduous Forest’.
    • The distribution of Sal forests is controlled by the conditions of topography, geology, and soil.
    • Sal forests are mainly distributed in the South and Southeast Asia, occurring along the base of Tropical Himalayas from Assam to Punjab, in the eastern districts of Central India, and on the Western Bengal Hills.

    Also read the complete series on-

    Natural Vegetation and Wildlife- Part 1 | An Overview of Natural Vegetation Types Found in India

  • [pib] Mission SAGAR

    As part of India’s outreach amidst the ongoing COVID-19 pandemic, ships have departed for Maldives, Mauritius, Seychelles, Madagascar and Comoros, to provide Food Items, COVID related Medicines including HCQ Tablets and Medical Assistance Teams under Mission Sagar.

    Mission SAGAR, unlike other missions, can create confusion with the name and its purpose. Make note of such special cases. UPSC can ask such questions as one liner MCQs.

    Mission SAGAR

    • As part of the mission, INS Kesari would enter the Port of Male in the Republic of Maldives, to provide them 600 tons of food provisions.
    • The deployment is in consonance with the PMs vision of Security and Growth for All in the Region ‘SAGAR’.
    • This deployment is in line with India’s role as the first responder in the region and builds on the excellent relations existing between these countries to battle the COVID-19 pandemic and its resultant difficulties.
    • The operation is being progressed in close coordination with the Ministries of Defence and External Affairs, and other agencies of the govt.

    Back2Basics

    SAGAR Programme (Security and Growth for All in the Region)

    • SAGAR is a term coined by PM Modi in 2015 during his Mauritius visit with a focus on the blue economy.
    • It is a maritime initiative which gives priority to the Indian Ocean region for ensuring peace, stability and prosperity of India in the Indian Ocean region.
    • The goal is to seek a climate of trust and transparency; respect for international maritime rules and norms by all countries; sensitivity to each other`s interests; peaceful resolution of maritime issues; and increase in maritime cooperation.
    • It is in line with the principles of the Indian Ocean Rim Association.

    IORA (Indian Ocean Rim Association)

    • Established in 1997 in Ebene Cyber City, Mauritius.
    • First established as Indian Ocean Rim Initiative in Mauritius on March 1995 and formally launched in 1997 by the conclusion of a multilateral treaty known as the Charter of the IORA for Regional Cooperation.
    • It is based on the principles of Open Regionalism for strengthening Economic Cooperation particularly on Trade Facilitation and Investment, Promotion as well as Social Development of the region.
  • [Burning Issues] Fiscal Push for MSME Sector of India (Part II)

    COVID-19 and MSMEs

    • The MSMEs were already struggling — in terms of declining revenues and capacity utilization — in the lead-up to the Covid-19 crisis.
    • The total lockdown has raised a question mark on workers payment primarily because these firms mostly transact on cash. That explains the job losses.
    • The problem with most small Indian businesses is that they operate on thin margins and don’t have the deep financial resources to survive a significant dip in cash flows.
    • So, when an unexpected event like a lockdown happens and MSMEs can’t sell/produce their goods or services, it also means for many they can’t meet their monthly expenses – this includes costs like paying salaries to their employees.

    Fiscal stimulus package to MSMEs under Atmanirbhar Bharat Abhiyan

    Finance Minister has announced the first tranche of the Atmanirbhar Bharat Abhiyan economic package. The main thrust of the announcements was a relief to Medium, Small and Micro Enterprises (MSMEs) in the form of a massive increase in credit guarantees to them.

    What is the package about?

    Instead of directly infusing money into the economy or giving it directly to MSMEs in terms of a bailout package, the government has resorted to taking over the credit risk of MSMEs.

    1) 100% credit guarantee

    • Firstly, it will give a 100% credit guarantee for Rs 3 lakh crore worth of collateral-free loans to MSMEs that were doing fine before the pandemic hit and are now in trouble.
    • This deal will only apply to small businesses that already had an outstanding loan of Rs 25 crore or those with a turnover of less than Rs 100 crore.
    • This doesn’t mean the government is directly infusing Rs 3 lakh crore into India’s MSMEs.
    • Put simply, if an MSME wants to take a loan of Rs 1 crore from a bank now, the Centre is saying that if the business fails to repay that loan, it will step in and make good all of that Rs 1 crore.
    • Thus, banks don’t have to worry about potential NPAs – that headache is transferred to the government.

    2) Subordinate debt scheme

    • The second measure is a ‘subordinate debt scheme’ worth Rs 20,000 crore and is mainly for MSMEs who are already struggling with debt and are unlikely to get fresh funding by themselves.
    • This scheme will allow banks and NBCs to give loans to MSMEs which are already deemed as ‘stressed’ and are thus less credit-worthy.
    • For these firms, the government will only provide partial credit guarantee support to banks.

    3) Availability of Funds

    • The final step involves the government creating a Rs 50,000-crore fund which will infuse equity into “viable” MSMEs, thus helping them to expand and grow.
    • The Centre will put only Rs 10,000 crore into this and get other PSU institutions like SBI or LIC to help fund the remaining amount.
    • The basic idea behind this is that MSMEs who have been forced into a cash-strapped corner by the national lockdown will be able to apply for some working capital that will keep their businesses afloat until they are able to operate at pre-pandemic levels.
    • By doing this, the government also hopes to protect the employment that MSMEs create and thus save jobs.

    4)Other measures

    • There are two other MSME policy announcements – one aimed at bringing more firms into the MSME net, while the other is oriented towards providing a level playing field.
    • The first is defining what the firm gets to be an ‘MSME’ and avail of all the government benefits that are given to that category of business.
    • The criteria have been expanded quite loosely and will mean that companies don’t have to be as small as they were to avail of MSME benefits.
    • Put simply, the government will now subsidize more smaller companies than they used to.
    • Second, there is a change in the definition of an MSME that was pending for long.
    • Now MSMEs will be judged on turnover and there will be no difference between a manufacturing MSME and services MSME.
    • FM also extended the initiation period of fresh insolvency proceedings against MSMEs by six months to up to one year depending upon the COVID situation.

    Need for such measures

    • Even before the Covid-19 crisis, Indian government finances were in poor health. This pandemic has meant that government revenues will come under further pressure.
    • For instance, experts are already talking about a GDP contraction of 5% to 10% in the current financial year. It will result in a revenue loss of anywhere between Rs 5 to 7 lakh crore.
    • And yet, this is also the year when employees and firms want the government to help them out financially.
    • Banks, quite justifiably, suspect that any new loans will only add to their growing mountain of non-performing assets (NPAs).
    • So the government was facing an odd problem: Banks had the money but were not willing to lend to the credit-starved sections of the economy, while the government itself did not have enough money to directly help the economy.

    • The solution — credit guarantees — finally chosen by the government is not a new one, because this fiscal conundrum is not a new one either (see chart).

    Why Rs 3 lakh crore?

    • The total outstanding loan to MSMEs by the banking and NBFC sector is around Rs 16 to 18 lakh crore.
    • Assuming that 80% of these loans are working capital loans where there would be a 20% incremental funding needs, that gives an amount of approximately Rs 3 lakh crore.
    • So the government is hoping that this credit guarantee will help those MSMEs take out another loan and recover.
    • The hope is that since these MSMEs were able to pay back before the crisis, there is no reason why they cannot after the crisis, provided they are given some extra money to survive this period.

    How far will these measures help?

    • The Rs 3 lakh crore credit guarantees are the most substantive announcement as it will most likely have a significant impact.
    • It will help MSMEs pay salaries and keep their heads above the water even as the economy slows down.
    • This measure is expected to help as many as 45 lakh MSMEs.

    Issues with the package

    1) No banks consulted

    • The scheme for MSMEs has left bankers unhappy as the guarantee is not being offered by the government, but from the credit guarantee trust fund for micro and small enterprises (CGTMSE) instead of being a sovereign guarantee.

    2) Criteria of availability

    • The benefits of the package will not be available to businesses which had repayments overdue by more than 30 days as on Feb 29, 2020.
    • Only for the stressed MSMEs and those whose loans have turned bad, a Rs 20,000-crore subordinated debt scheme has been envisaged.

    3) Employee’s welfare faintly addressed

    • With the package, the government has mandated MSMEs for paying the wages.
    • The MSMEs are short of revenues to be able to pay the salaries. It has now become a matter of ability to pay.
    • Manpower cost for ancillary suppliers is one of the largest. Not every company has the ability to pay their employees so going forward will be more stressful.

    4) Too much of loans

    • The package has offered for taking additional loans, but the MSME sector is already leveraged heavily.
    • At this point, taking additional loans can help with major short term liquidity, but in the longer-term, the companies or the units abilities for repaying these loans is grossly neglected.
    • Also the onus on increasing the competitiveness of MSMEs post the lockdown has been grossly neglected.

    Way forward

    • The challenge now is to create a policy environment that will encourage the growth of more MSME that can hold their own in a competitive market.
    • The problems faced by MSMEs need to be considered in a disaggregated manner for successful policy implementation as they produce very diverse products, use different inputs and operate in distinct environments.
    • In general, there is a need for tax provisions and laws that are not only labour-friendly but also entrepreneur-friendly.
    • More importantly, there is a need for skill formation and continuous upgrade both for labour and entrepreneurs.
    • While the government has to strengthen the existing skilling efforts for labour, there is an urgent need for managerial skill development for entrepreneurs running MSMEs — an area that is considerably neglected.
    • Further, the government could consider dedicated television and radio programmes, similar to agriculture, to help educate entrepreneurs running small businesses.

    Conclusion

    Covid-19 is a crisis with an unforeseeable ending. What is clear though is that the government and businesses—both large and small—will have to work together to ensure the protection of workers, be ready for risk management in terms of phased re-starting of business operations and be prepared and open to structural changes in business activities.

    • Issues related to credit, like adequacy, timely availability, cost and mortgages continue to be a concern for MSME. These enterprises are dependent on self-finance. Profit margins are also low.
    • The government drive for financial inclusion could benefit such entities.
    • The government could consider dedicating specialised financial schemes for addressing difficulties in assessing and providing credit for small enterprises, as also providing a line of credit to firms which are under financial stress.
    • The road ahead remains unclear, but it is likely that the economic damage is already much larger than the measures undertaken so far.
    • A continued focus on reforms and on sustaining India’s growth potential will be critical in preventing macroeconomic instability.

     

     

     




    References

    https://www.civilsdaily.com/news/what-makes-msmes-most-vulnerable-to-covid-19-disruptions/

    https://www.cii.in/Sectors.aspx?enc=prvePUj2bdMtgTmvPwvisYH+5EnGjyGXO9hLECvTuNuXK6QP3tp4gPGuPr/xpT2f

    https://economictimes.indiatimes.com/cibil/articles/msme-sector-panacea-of-all-ills/articleshow/61836122.cms?from=mdr

    https://thewire.in/economy/narendra-modi-msme-package-cost


    Also read: Various schemes related to MSME Sector

    [Prelims Spotlight] Acts and schemes related to MSME sector

  • [Prelims Spotlight] Important summits, conventions and Declarations (Part 2)

    Prelims Spotlight is a part of “Nikaalo Prelims 2020” module. This open crash course for Prelims 2020 has a private telegram group where PDFs and DDS (Daily Doubt Sessions) are being held. Please click here to register.

    Important Summits, Conventions and Declarations (Part 2)


    11 May 2020

    1.Convention on biological diversity

    The Convention on Biological Diversity (CBD), a legally binding treaty to conserve biodiversity has been in force since 1993.

    Objectives-

    • It has 3 main objectives: The conservation of biological diversity.
    • The sustainable use of the components of biological diversity.,fair and equitable sharing of the benefits arising from the use of genetic resources.
    • The CBD, one of the key agreements adopted during the Earth Summit held in Rio de Janeiro in 1992, is the first comprehensive global agreement which addresses all aspects relating to biodiversity.

    2.Asia Lpg summit 2019

    The summit will offer a unique opportunity to the global LPG industry to interact with development agencies, NGOs and non-profit organizations who have facilitated last-mile access to LPG for the beneficiaries.

    Objectives-

    • The summit will also bring together academia and private sector to exchange their views on the use of LPG and how pathbreaking initiatives such as ‘Pradhan Mantri Ujjwala Yojana’ can bring remarkable socio-economic transformation.
    • The WLPGA promotes the use of LPG to foster a cleaner, healthier and more prosperous world.
    • With over 200 members and presence in more than 125 countries, the WLPGA represents the interests of private and public companies from the entire LPG value chain under one umbrella.
    • The WLPGA provides a platform for the exchange of best practices, facts and figures among its members.
    • The Association regularly organises interactive meetings between technical experts, members and key stakeholders to demonstrate the benefits of LPG.

    3.Global Digital Health Partnership Summit

    The Global Digital Health Partnership (GDHP) is an international collaboration of governments, government agencies and multinational organisations dedicated to improving the health and well-being of their citizens through the best use of evidence-based digital technologies.

    Objectives-

    • Governments are making significant investments to harness the power of technology and foster innovation and public-private partnerships that support high quality, sustainable health and care for all. The GDHP facilitates global collaboration and co-operation in the implementation of digital health services.The GDHP is committed to improving health and care through promoting its principles of equality, co-operation, transparency and responsibility.
    • Equality: All participants will have an equal opportunity to participate and contribute to the development of the GDHP deliverables and share in the lessons learnt and outputs of the GDHP.
    • Co-operation: Participants are helpful and supportive and participate in debates thoughtfully, constructively and respectfully.
    • Transparency: Participants act with openness in their engagement with fellow participants to contribute to improved health services, promote innovation and create safer and healthier communities.
    • Responsibility: Participants are responsible for their country’s input through their active contribution to GDHP activities that are guided by the annual work plan. Each participant shall endeavour to ensure that outcomes from meetings, such as tasks appointed to them or in general, are carried out effectively and efficiently. Participants will make decisions and participate in discussions in a transparent and fair manner, using evidence, and without discrimination or bias, ensuring they act in the public interest and not for commercial purposes.

    4.TIR

    The Convention on International Transport of Goods Under Cover of TIR Carnets is a multilateral treaty that was concluded at Geneva on 14 November 1975 to simplify and harmonise the administrative formalities of international road transport.

    Objectives-

    • The TIR Convention establishes an international customs transit system with maximum facility to move goods:in sealed vehicles or containers;
    • from a customs office of departure in one country to a customs office of destination in another country;
    • without requiring extensive and time-consuming border checks at intermediate borders;
    • while, at the same time, providing customs authorities with the required security and guarantees.

    5.International Workshop on Disaster Resilient Infrastructure

    The workshop aims to i) identify good practices of disaster risk management in key infrastructure sectors, ii) identify specific areas and pathways for collaborative research on DRI (Transport, Energy, Telecom and Water), iii) discuss and co-create the broad contours of the Coalition for Disaster Resilient Infrastructure (CDRI) as well as a notional roll-out plan for the next three years, and iv) build a forum for members to work on areas of common interest and make specific commitments.Various international agreements have also reiterated the importance and long-term benefits of investing in resilient infrastructure.

    Objectives-

    • The Sendai Framework for Disaster Risk Reduction (SFDRR), 2015-2030, which is the first major agreement of the post-2015 development agenda, identifies investing in Disaster Risk Reduction (DRR) for resilience and to build back better in reconstruction as priorities for action towards reducing disaster risk.
    • Similarly, Goal 9 of the Sustainable Development Goals (SDGs) recognizes disaster resilient infrastructure as a crucial driver of economic growth and development.
    • Besides reducing infrastructure losses, disaster resilient infrastructure will also help achieve targets pertaining to reduction in mortality, number of affected people and economic losses due to disasters.

    6.International Chemical Weapons Convention (CWC)

    The Chemical Weapons Convention is an arms control treaty that outlaws the production, stockpiling, and use of chemical weapons and their precursors.

    Key points of the Convention

    Objectives-

    • Prohibition of production and use of chemical weapons
    • Destruction (or monitored conversion to other functions) of chemical weapons production facilities
    • Destruction of all chemical weapons (including chemical weapons abandoned outside the state parties territory)
    • Assistance between State Parties and the OPCW in the case of use of chemical weapons
    • An OPCW inspection regime for the production of chemicals which might be converted to chemical weapons
    • International cooperation in the peaceful use of chemistry in relevant areas

    7.Convention on Supplementary Compensation for nuclear Damage (CSC)

    The Vienna Convention on Civil Liability for Nuclear Damage is a 1963 treaty that governs issues of liability in cases of a nuclear accident. It was concluded at Vienna on 21 May 1963 and entered into force on 12 November 1977. The convention has been amended by a 1997 protocol. The depository is the International Atomic Energy Agency.

    Objectives-

    • The Convention on Supplementary Compensation (CSC) aims at establishing a minimum national compensation amount and at further increasing the amount of compensation through public funds to be made available by the Contracting Parties should the national amount be insufficient to compensate the damage caused by a nuclear incident.
    • The Convention is open not only to States that are party to either the Vienna Convention on Civil Liability for Nuclear Damage or the Paris Convention on Third Party Liability in the Field of Nuclear Energy (including any amendments to either) but also to other States provided that their national legislation is consistent with uniform rules on civil liability laid down in the Annex to the Convention.

    8.Hague Code of Conduct

    The International Code of Conduct against Ballistic Missile Proliferation, also known as the Hague Code of Conduct (HCOC), was established on 25 November 2002 as an arrangement to prevent the proliferation of ballistic missiles.

    Objectives-

    • The HCOC is the result of international efforts to regulate access to ballistic missiles which can potentially deliver weapons of mass destruction. The HCOC is the only multilateral code in the area of disarmament which has been adopted over the last years.
    • It is the only normative instrument to verify the spread of ballistic missiles.
    • The HCOC does not ban ballistic missiles, but it does call for restraint in their production, testing, and export.

    9.Refugee Convention

    The Convention Relating to the Status of Refugees, also known as the 1951 Refugee Convention, is a United Nations multilateral treaty that defines who is a refugee and sets out the rights of individuals who are granted asylum and the responsibilities of nations that grant asylum. In the general principle of international law, treaties in force are binding upon the parties to it and must be performed in good faith. Countries that have ratified the Refugee Convention are obliged to protect refugees that are on their territory, in accordance with its terms. There are a number of provisions that States parties to the Refugee Convention must adhere to.

    10.Biological weapons convention

    The Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological and Toxin Weapons and on Their Destruction was the first multilateral disarmament treaty banning the production of an entire category of weapons.

    Objectives-

    • Each State Party to this Convention undertakes never in any circumstances to develop, produce, stockpile or otherwise acquire or retain:
    • Microbial or other biological agents, or toxins whatever their origin or method of production, of types and in quantities that have no justification for prophylactic, protective or other peaceful purposes;
    • Weapons, equipment or means of delivery designed to use such agents or toxins for hostile purposes or in armed conflict.”
    • The United States Congress passed the Bioweapons Anti-Terrorism Act in 1989 to implement the Convention. The law applies the Convention’s convent to countries and private citizens, and criminalizes violations of the Convention.

    11.Sendai Framework

    The Sendai Framework for Disaster Risk Reduction (2015-2030) is an international document which was adopted by UN member states between 14th and 18th of March 2015 at the World Conference on Disaster Risk Reduction held in Sendai, Japan and endorsed by the UN General Assembly in June 2015. It is the successor agreement to the Hyogo Framework for Action (2005–2015), which had been the most encompassing international accord to date on disaster risk reduction.

    Objectives-

    • The Sendai Framework sets four specific priorities for action:
    • Understanding disaster risk;
    • Strengthening disaster risk governance to manage disaster risk;
    • Investing in disaster risk reduction for resilience;
    • Enhancing disaster preparedness for effective response, and to “Build Back Better” in recovery, rehabilitation and reconstruction.

    12.Outer Space Treaty

    The Outer Space Treaty, formally the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies, is a treaty that forms the basis of international space law. The 1967 Outer Space Treaty bans the stationing of weapons of mass destruction (WMD) in outer space, prohibits military activities on celestial bodies, and details legally binding rules governing the peaceful exploration and use of space.

    13.Kyoto Protocol

    The Kyoto Protocol is an international treaty which extends the 1992 UNFCCC that commits State Parties to reduce greenhouse gas emissions, based on the premise that

    (a) global warming exists and (b) human-made CO2 emissions have caused it.

    Objectives-

    • The main feature of the Protocol is that it established legally binding commitments to reduce emissions of greenhouse gases for parties that ratified the Protocol.
    • The commitments were based on the Berlin Mandate, which was a part of UNFCCC negotiations leading up to the Protocol.
    • Minimizing Impacts on Developing Countries by establishing an adaptation fund for climate change.

    14.U.N. Frame Work Convention on Climate Change (UNFCCC)

    Objectives-

    • A framework for international cooperation to combat climate change by limiting average global temperature increases and the resulting climate change, and coping with impacts that were inevitable.
    • The primary goals of the UNFCCC were to stabilize greenhouse gas emissions at levels that would prevent dangerous anthropogenic interference with the global climate.
    • The convention embraced the principle of common but differentiated responsibilities which has guided the adoption of a regulatory structure.

    15.Basel Convention

    • The industrialized world in the 1980s had led to increasing public resistance to the disposal of hazardous wastes, in accordance with what became known as the NIMBY (Not in My Back Yard) syndrome, and to an increase of disposal costs.
    • This, in turn, led some operators to seek cheap disposal options for hazardous wastes in the developing countries.
    • Environmental awareness was much less developed and regulations and enforcement mechanisms were lacking. The objectives of the convention are to reduce trans-boundary movements of hazardous wastes, to minimize the creation of such wastes and to prohibit their shipment from developed countries to the LDCs.

    16.Montreal Protocol

    Objectives-

    • The protocol set targets for reducing the consumption and production of a range of ozone-depleting substances.
    • In a major innovation, the protocol recognized that all nations should not be treated equally.
    • The agreement acknowledges that certain countries have contributed to ozone depletion more than others.
    • It also recognizes that a nation‘s obligation to reduce current emissions should reflect its technological and financial ability to do so.
    • Because of this, the agreement sets more stringent standards and accelerated phase-out time tables to countries that have contributed most to ozone depletion

    17.World Conservation Strategy

    Objectives-

    • It set out fundamental principles and objectives for conservation worldwide and identified priorities for national and international action.
    • It is considered one of the most influential documents in 20th-century nature conservation and one of the first official documents to introduce the concept of sustainable development.

    18.Convention on Migratory Species of Wild Animals (Bonn Convention)

    Objectives-

    • Aims to conserve terrestrial, marine and avian migratory species throughout their range.
    • The Convention facilitates the adoption of strict protection measures for endangered migratory species, the conclusion of multilateral agreements for the conservation and management of migratory species, and co-operative research activities.

    19.World Sustainable Development summit

    • WSDS has replaced TERI’s earlier called Delhi Sustainable Development Summit (DSDS). The first DSDS was organised in 2005. It underscored the need for businesses and the private sector to take lead in poverty reduction and to ensure rapid and sustained adoption of Sustainable Development Goals (SDGs).
    • It had brought together Nobel laureates, decision-makers political leaders from around the world to deliberate on issues related to sustainable development.
    • The aim of the summit is to provide various stakeholders with a single platform in order to provide long-term solutions for the benefit of the global community.

    20.Kigali Agreement

    The Kigali Amendment amends the 1987 Montreal Protocol to now include gases responsible for global warming and will be binding on countries from 2019.

    Objectives-

    • It also has provisions for penalties for non-compliance.
    • It is considered absolutely vital for reaching the Paris Agreement target of keeping global temperature rise to below 2-degree Celsius compared to pre-industrial times.
    • Under it, developed countries will also provide enhanced funding support estimated at billions of dollars globally. The exact amount of additional funding from developed countries will be agreed at the next
    • Meeting of the Parties in Montreal in 2017 to reduce the emissions of category of greenhouse gases (GHGs) which leads to hydro fluorocarbons (HFCs)
  • New approach to the revival of economy

    As our attention now shifts to the revival of the economy, we have to take stock of the damage to the economy. As recently as 2008 we have faced a financial crisis, but this crisis is bigger in the scale and our fiscal health is weaker than it was at the time of the 2008 crisis. So, to deal with the situation we have to adopt a novel approach. What should be the approach? Read further to know.

    From 2014 to Covid-19 in finance and banking

    • TBS challenge: As far back as December 2014, the banking sector and infrastructure firms had come under financial stress, a problem that was termed the Twin Balance Sheet (TBS) challenge.
    • By December 2019, the problem had spread to the NBFC and real estate sectors, raising the number of stressed balance sheets to four.
    • Following the Covid-19 shock, the problem of stressed balance sheets will spread across the economy.

    How bad is the damage likely to be?

    • Reports suggest that around one-third of industrial and service firms have applied for moratoria on their bank loans.
    • If only a quarter of these deferred loans eventually go bad, then the stock of non-performing assets (NPAs) would increase by Rs 5 lakh crore.
    • Senior bank officials have been quoted as estimating that the stock of NPAs could increase by as much as Rs 9 lakh crore.
    • In this case, we would be looking at NPAs of Rs 18 lakh crore, equivalent to around 18 per cent of current loans outstanding.

    So, how is the situation different from 2008 financial crisis?

    • At one level, the answer is simple: The shareholders of the financial institutions, which in most cases means the government.
    • But this is where the ubiquity of the balance sheet problem comes in.
    • When the TBS challenge first materialised, after the Global Financial Crisis of 2008-09, the government had a relatively strong balance sheet.
    • Deficits were low, and the consolidated debt-GDP ratio, having fallen by 17 percentage points over the previous 7 years, stood at just over 60 per cent of GDP.
    • So, fiscal room was available, allowing the government to recapitalise the PSU banks.
    • This time, the government’s financial position will be quite different.
    • Central and state government deficits and debts will increase dramatically this year.
    • Revenues, already slowing, have been decimated by the Covid crisis, while expenditures have increased.
    • Add in a slowly recovering economy, and it becomes clear that the fiscal position will remain weak for some considerable time.
    • What are the options with the government? The government will want to pass the burden onto the corporate and household sectors, in the form of higher taxes, more arrears, and possibly higher inflation.
    • But these sectors will resist, for they have financial problems of their own.

    2 ways to minimise the size of the loss

    • It will be tempting to delay recognising the problem, pushing it into the future, by allowing banks not to classify bad loans as NPAs, and barring them from taking defaulters to the IBC system.
    • But this would be the wrong approach and there are two ways to minimise the loss.
    • 1. Prevent bankruptcies from occurring.
    • To do this, banks will need to identify the firms that are viable, and lend them the funds they need to tide them over the immediate crisis.
    • But banks are reluctant to bear the risk of making such loans.
    • So, the government might need to create a guarantee fund to support lending.
    • 2. When firms default, resolve as quickly as possible
    • Speed is necessary because the financial position of stressed firms tends to worsen over time.
    • By definition, stressed firms have poor cash flows and can’t obtain much in the way of loans from banks.
    • So, they don’t have enough money to fund their operations properly.
    • Which means that over time their underlying business deteriorates, destroying the firms’ market value.
    • While public attention focuses on the size of the NPAs, a much more important number is the recovery rate — the degree to which the banks can recover on these loans.
    • And the only way to maximise the recovery rate is to sort out the bad loans speedily.
    • The economy will reap an additional benefit since the resolved firms will be able to contribute to the recovery.

    Consider the question “As the economy stares at the destruction caused by the pandemic certain novel measures to salvage the economy are necessary. In light of this statement suggest the measures that the government should take to avoid the NPA problem from mounting.”

    Conclusion

    A new approach is consequently needed. The immediate problems created by the crisis must be addressed, decisively and quickly. Then the attention will have to turn to address the pre-COVID legacy balance sheet problems.


    Back2Basics: What is NPA?

    • A non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
    • Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.
    • Substandard assets: Assets which has remained NPA for a period less than or equal to 12 months.
    • Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months.
    • Loss assets: As per RBI, “Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.”
  • #justiceforZsirsfamily #supportforZeeshan

    Dear students,

    It’s with a heavy heart that we inform you that our beloved Zeeshan Sir and his family are battling COVID-19 in Aurangabad. We hope he comes out of this like a Phoenix. His father is a Police Inspector in the city and, like many frontline warriors, contracted Covid which later affected the entire family including Zeeshan Sir.

    Zeeshan Sir’s lectures have benefitted lakhs of aspirants and he has been a source of inspiration for many. A force to be reckoned with. Some of his work is as follows

    It is unfortunate that someone enjoying so much goodwill has to face such odds.

    Zeeshan Sir’s father contracted Covid in the line of duty. Despite orders clearly stating that staff above 50 years of age suffering from ailments like blood pressure, diabetes, etc should not be deployed in frontline duty, when asked by superiors, he rendered his services. As a result, Covid caught hold of him.

    What’s worse is the fact that 4 female members of his family are being denied the same support that Sir and his father are receiving at Dhoot Hospital, Aurangabad.

    Some newspapers have falsely reported that Zeeshan Sir’s travel from Delhi was the reason for him getting infected. Nothing can be far from the truth as Sir took a flight 1.5 months back. 20th March Air Ticket

    It is indeed shocking that a newspaper of a decent reputation will be publishing information without verification.

    https://www.deccanherald.com/national/maharashtra-cop-family-test-positive-for-covid-19-in-aurangabad-834697.html

    Such claims are being used to dilute the fact that his father was working in the frontline protecting other families.

    The condition of 4 other female members of his family seems to be deteriorating. All Zeeshan Sir is asking is that his family is provided the same support as his father is receiving at Dhoot Hospital.

    Share the highlighted part tagged with #justiceforZsirsfamily #supportforZeeshan #aurangabad

    As a community, we need to come together and ensure we do our part to spread the word far and wide so concerned authorities take notice of the same.

  • Economy and the challenges ahead

    Various projections of growth paint a grim picture of the Indian economy as well as the global economy. This article analyses the sector-wise impact and comes with the GVA projections for 2020-21. The government has to deal with serious challenges like financing huge fiscal deficits. So, what will be the growth rate for 2020-21 and what will be the size of GVA? Read to know!

    Projections of growth and uncertainty

    • Various institutions have assessed India’s growth prospects for 2020-21 ranging from 0.8% (Fitch)to 4.0% (Asian Development Bank).
    • This wide range indicates the extent of uncertainty and tentative nature of these forecasts.
    • The International Monetary Fund (IMF) has projected India’s growth at 1.9%, China’s at 1.2%, and the global growth at (-) 3.0%.
    • The actual growth outcome for India would depend on: 1) the speed at which the economy is opened up 2) the time it takes to contain the spread of virus, and, 3) the government’s policy support.

    Health of India economy before the crisis

    • India slid into the novel coronavirus crisis on the back of a persistent economic downslide.
    • There was a sustained fall in the saving and investment rates with unutilised capacity in the industrial sector.
    • In 2019-20, there was a contraction in the Centre’s gross tax revenues in the first 11 months during April 2019 to February 2020, at (-) 0.8%.
    • These trends continue to beset the Indian economy in this crisis.

    Growth prospects for 20-21 from the output side

    • In 2019-20, which would serve as the base year, India may show GVA growth of about 4.4%,
    • This is well below the Central Statistics Office’s second advance estimate of 9%.
    • The IMF’s GDP growth estimate for 2019-20 is at 2%.
    • GVA is divided into eight broad sectors. Although all sectors have been disrupted, some may be affected less than the others. We divide the output sectors in four groups.
    • Group A- This group is likely to suffer minimum disruption.
    • Agriculture and allied sectors, and public administration, defence.
    • Despite some labour shortage issues, agriculture sector may show near-normal performance.
    • The public and defence services have been nearly fully active, with the health services at the forefront of the the COVID-19 fight.
    • For the group A sectors, it may be possible to achieve 90% of the 2019-20 growth performance.
    • Group D- This group is likely to suffer maximum disruption.
    • This includes, trade, hotels, restaurants, travel and tourism under the broad group of “Trade, Hotels, Transport, Storage and Communications”.
    • This sector may be able to show 30% of 2019-20 growth performance.
    • Group B
    • This comprises sectors which may suffer average disruption showing 50% of 2019-20 growth performance.
    • These sectors are mining and quarrying, electricity, gas, water supply and other utility services, construction, and financial, real estate and professional services.
    • Group C
    • In this group come manufacturing which has suffered significant growth erosion in 2019-20.
    • It is feasible to stimulate this sector by supporting demand.
    • In this case a 40% performance factor on the average growth of the preceding three years is applied.

    So, what are the estimates for 2020-21 GVA?

    • Considering these four groups together, a GVA growth of 2.9% is estimated for 2020-21.
    • Realising this requires strong policy support, particularly for the manufacturing sector which has a weight of 17.4%.
    • It is also based on the assumption that the Indian economy may move on to positive growth after the first quarter.
    • In the first quarter, GVA growth will be negative.

    Policy support for the growth

    • Monetary policy initiatives undertaken so far include a reduction in the repo rate to 4.4%, the reverse repo rate to 3.75%, and cash reserve ratio to 3%.
    • The Reserve Bank of India has also opened several special financing facilities.
    • These measures need to be supplemented by an appropriate fiscal stimulus.
    • Cash-constrained central and State governments have taken expenditure reducing measures by announcing freezing of enhancements of dearness allowance and dearness relief.
    • This may result in savings of ₹37,000 crore for the Centre and about ₹82,000 crore for the States, together amounting to 6% of GDP.
    • There is also talk of substantially reducing non-salary defence expenditure.
    • With lower petroleum prices, fertilizer and petroleum subsidies may be reduced.
    • These expenditure cuts are contemplated to keep the fiscal deficit under some control.

    Fiscal stimulus and fiscal deficit

    • Fiscal stimulus can be of three types:
    • 1) Relief expenditure for protecting the poor and the marginalised.
    • 2) Demand-supporting expenditure for increasing personal disposable incomes or government’s purchases of goods and services, including expanded health-care expenditure imposed by the novel coronavirus, and,
    • 3) Bailouts for industry and financial institutions.
    • The Centre had earlier announced a relief package of ₹1.7-lakh crore.
    • The Centre’s budgeted fiscal deficit of 3.5% of GDP may have to be enhanced substantially to 1) make up for the shortfall in budgeted revenues; 2) account for a lower than projected nominal GDP for 2020-21, 3) provide for a stimulus.
    • Thus, the Centre’s fiscal deficit may increase to 6.0% of GDP.
    • Expenditure on the construction of hospitals, roads and other infrastructure and purchase of health-related equipment and medicines require prioritisation.
    • These expenditures will have high multiplier effects.
    • Similar initiatives may be undertaken by the State governments which may also enhance their combined fiscal deficit to about 0% of GDP to account for 3.0% of GDP under their respective Fiscal Responsibility Legislation/Law and to provide for the shortfall in their revenues and some stimulus.

    Challenges

    • Financing of the fiscal deficit poses a major challenge this year.
    • On the demand side, the Central (6.0%) and State governments (4.0%) and Central and State public sector undertakings (3.5%).
    • These together present a total public sector borrowing requirement (PSBR) of 13.5% of GDP.
    • Against this, the total available resources may at best be 9.5% of GDP.
    • The gap of 4.0% points of GDP may result in increased cost of borrowing for the Central and State governments.

    Consider the question, “Examine the sector-wise damage caused to the economy due to Covid-19 pandemic. What were the fiscal and monetary measures taken to mitigate the damage and challenges faced by the government in meeting the required revenue demands.”

    Conclusion

    The gap in requirement of resources and availability may be bridged by enhancing net capital inflows including borrowing from abroad and by monetising some part of the Centre’s deficit. The monetisation of debt can at best be a one-time effort. This cannot become a general practice. 


    Back2Basics: What is GVA?

    • GVA it is a measure of total output and income in the economy.
    • It provides the rupee value for the amount of goods and services produced in an economy after deducting the cost of inputs and raw materials that have gone into the production of those goods and services.
    • It also gives sector-specific picture like what is the growth in an area, industry or sector of an economy.
    • While GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP gives the picture from the consumers’ side or demand perspective.
    • Both measures need not match because of the difference in treatment of net taxes.
    • GDP = GVA + taxes on products – subsidies on products
  • Opportunity for India in changing global order

    The world is going through a transition phase. We are experiencing the rise of new powers and the decline of the old. India has to navigate its path through this changing order keeping its interests in mind. The double opportunity in current scenario for India is explained in the article. To know more about it, continue reading.

    The changing global stage

    • The world today is fragmenting and slowing down economically.
    • Asia-Pacific is the new economic and political centre of the world with the rise of China, India and other powers — Indonesia, South Korea, Iran, Vietnam.
    • Rapid shifts in the balance of power in the region have led to arms races and the US’s “America First” attitude has led to rising uncertainty.
    • China-U.S. strategic contention is growing, uninhibited so far by their economic co-dependence.
    • As China seeks primacy in a world so far dominated by the U.S., the world faces a destabilising power transition which may or may not be completed.

    What should India’s response be to the new situation?

    Alliance with the US?

    • Many experts advocate that India should enter into an alliance with the U.S in the wake of rising China.
    • But India is much greater and more resilient than these people think.
    • Also, the aim of foreign and security policies of India has been the pursuit of strategic autonomy for India.
    • Thus, in the present situation, India should retain the above initiative and not get entangled in others’ quarrels. (i.e. the US-China quarrel)
    • Also, India should focus on pursuing its own national interest in this disorganized and uncertain world by creative diplomacy and flexibility.
    • An alliance seems to be exactly the wrong answer.

    China challenge

    • One way to handle China could be to see whether the two countries can evolve a new modus vivendi.
    • This new modus vivendi shall replace the one that was formalised in the 1988 Rajiv Gandhi visit.
    • The old framework is no longer working and the signs of stress in the relationship are everywhere.
    • The more India rises, the more it must expect Chinese opposition.
    • So, India will have to work with other powers to ensure that its interests are protected in the neighbourhood, the region and the world.
    • The complexity of India-China relations suggests there is a scope for new modus vivendi.
    • This would require a high-level strategic dialogue between the two sides about their core interests, red lines, differences and areas of convergence.

    What India can do to keep the region multi-polar?

    • As U.S. is withdrawing from the world, it will no longer be the upholder of international, economic and political order.
    • There is uncertainty over how the US will choose to deal with China.
    • India must work with other powers to ensure that this region stays multi-polar and that China behaves responsibly.

    Double opportunity for India

    • 1. Opportunity in the US-China contention
    • US-China contention will continue in future. Hence, both China and the U.S. will look to put other conflicts (eg: conflicts with India on trade or border issue) and tensions on the back burner.
    • This effect is already perceptible in the Wuhan meeting between China’s President Xi Jinping and Mr. Modi in early 2018.
    • And the apparent truce and dialing back of rhetoric by both India and China.
    • 2. Opportunity to Change national security Structures
    • Today, India is more dependent on the outside world than ever before.
    • It relies on the world for energy, technology, essential goods like fertilizer and coal, commodities, access to markets, and capital.
    • Adding the new security agenda and the contested global commons in outer and cyberspace and the high seas to India’s traditional state-centred security concerns gives India a sense of insecurity.
    • So, India needs to adapt to the changes and avoid imitating China.

    Consider the question-“The global order is experiencing geopolitical churn, new powers are rising and older are staring at the decline. In such a scenario, examine the opportunities India can explore in the context of the US-China contention”.

    Conclusion

    India risks missing the bus to becoming a developed country if it continues business and politics as usual. The most important improvement that India needs to make concerns its national security structures and their work — introducing flexibility into India’s thinking and India’s structures. For change is the only certainty in life.

  • What is Stringency Index?

    India enforced one of the strongest lockdowns at an early phase of case growth. Now, an index created by the University of Oxford quantifies that.

    The Stringency Index provides a computable parameter to evaluate the effectiveness of the nationwide lockdown in India.

    What is Stringency Index?

    • It is among the metrics being used by the Oxford COVID-19 Government Response Tracker.
    • The Tracker involves a team of 100 Oxford community members who have continuously updated a database of 17 indicators of government response.
    • These indicators examine containment policies such as school and workplace closings, public events, public transport, stay-at-home policies.
    • The Stringency Index is a number from 0 to 100 that reflects these indicators. A higher index score indicates a higher level of stringency.

    What does the Stringency Index tell us?

    • It provides a picture of the stage at which any country enforced its strongest measures.
    • Oxford provides an overlay of countries’ death curve and their stringency score.
    • Some countries saw their deaths just begin to flatten as they reached their highest stringency, such as Italy, Spain, or France.
    • As China pulled stronger measures, its death curve plateaued.
    • In countries such as the UK, the US, and India, the Oxford graphs find that the death curve has not flattened after strictest measures were enforced.

    How does India compare with others?

    • The Index has found that India indeed had one of the strongest lockdown measures in the world — at a 100 score since March 22.
    • When compared to other countries with the similar or higher caseload, India called its strict lockdown at a much earlier point on its case and death curves.
    • These 18 other countries had more than 500 cases when they called their strictest lockdown, while India had 320.
    • Again, India had only four deaths on March 22, when its score reached 100, while most countries had more deaths at that point (except Switzerland; no deaths).
    • Spain called for its strictest measures later in its case and death count than all others. Sweden has had the most liberal measures in this set, and Iran the second most liberal.

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