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  • India’s Permanent Mission to the United Nations

    Syed Akbaruddin, a fiery spokesperson, who is credited with effectively presenting India’s position on a range of crucial issues at the UN headquarters in New York for the last several years, has retired. A 1985-batch IFS officer T S Tirumurti, currently serving as Secretary in the Ministry of External Affairs will succeed him.

    Permanent Missions to the United Nations

    • The Permanent Mission is the diplomatic mission that every member state deputies to the UN, and is headed by a Permanent Representative, who is also referred to as the “UN ambassador”.
    • Article 1 (7) of the Vienna Convention on the Representation of States provides for a permanent mission.
    • UN Permanent Representatives are assigned to the UN headquarters in New York City, and can also be appointed to other UN offices in Geneva, Vienna, and Nairobi.
    • The Mission in New York is housed in a 27-story building designed by the noted architect Charles Correa in 1993 and is decorated with MF Hussain paintings.

    The Indian Permanent Mission at the UN

    • According to the website of the Permanent Mission of India in New York, there are currently eight Indians in senior leadership positions at the UN at the levels of Under-Secretary-General and Assistant Secretary-General.
    • The first Indian delegates at the UN included statesman Arcot Ramasamy Mudaliar, and freedom fighters Hansa Mehta, Vijayalakshmi Pandit, and Lakshmi Menon.
    • Mehta and Pandit were among the 15 women members of the Indian Constituent Assembly.
    • India was among the select members of the United Nations that signed the United Nations Declaration at Washington on January 1, 1942.
    • India also participated in the historic UN Conference of International Organization at San Francisco from April 25 to June 26, 1945.

  • Why May 1 is observed as Labour Day?

    Today (May 1) is May Day, also known as International Workers’ Day and as Labour Day in different parts of the world. It is an occasion that commemorates the contributions of workers and the historic labour movement.

    Personality based history question in the UPSC CSE prelims is on the way to become the new normal. Kindly note all such phenomena in the news which tend to invoke some aspects of the modern Indian history. You can find all such news here.

    The Haymarket incident

    • While observed as an ancient northern hemisphere spring festival, May 1 became associated with the labour movement in the late 19th century, after trade unions and socialist groups designated it as a day in support of workers.
    • It was decided to do so in memory of the Haymarket affair of 1886, in Chicago in the United States, in which a peaceful rally in support of workers led to a violent clash with the police, leading to the deaths of 4 civilians and 7 police officers.
    • Many of the agitationists, who were protesting workers’ rights violations, straining work hours, poor working conditions, low wages and child labour, were arrested and served terms of life imprisonment, death sentences, etc., and those who died were hailed as “Haymarket Martyrs”.
    • The incident is believed to have given the workers’ movement a great impetus.

    Linked to the Russian Revolution

    • In 1889, The Second Communist International, an organisation created by socialist and labour parties, declared that May 1 would be commemorated as International Workers’ Day from then on.
    • Finally, in 1916, the US began to recognise eight-hour work timings after years of protests and uprisings.
    • In 1904, the International Socialist Congress at Amsterdam called on to demonstrate energetically on the First of May for the legal establishment of the 8-hour day.
    • After the Russian Revolution in 1917, the celebration was embraced by the Soviet Union and the Eastern bloc nations during the Cold War– becoming a national holiday in many of them.
    • Parades were a part of the celebration– the one at Moscow’s Red Square was attended by top Communists leaders and displayed Soviet military might.

    Indian Case

    • In India, May Day was first celebrated on May 1, 1923, after the Labour Kisan Party of Hindustan initiated and Comrade Singaravelar (Singaravelu Chettiar) helmed the celebrations.
    • Chettiar was known for being one of the leaders of Self Respect Movement in the Madras Presidency and for his fight for the rights of backward classes.
    • In one of his meetings, Chettiar passed a resolution stating the government should allow everybody a national holiday on Labour Day.

  • [pib] Earth’s Magnetosphere and its dynamics

    Scientists at the Indian Institute of Geomagnetism (IIG) have developed a generalized one-dimensional fluid simulation code capable of studying a wide spectrum of coherent electric field structures of earth’s magnetosphere which can be useful in the planning of future space missions.

    The newscard talks of not so new phenomenon but a basic terminology of space sciences. Kindly make a note of what the Magnotesphere is, how it is formed, role of solar winds, Geodynamo etc.

    Earth’s Magnetosphere

    • The magnetosphere is the region of space surrounding Earth where the dominant magnetic field is the magnetic field of Earth, rather than the magnetic field of interplanetary space.
    • It is generated by the interaction of the solar wind with Earth’s magnetic field.

    Features of the Earth’s magnetosphere

    1) Bow shock,

    2) Magnetosheath,

    3) Magnetopause,

    4) Northern tail lobe,

    5) Southern tail lobe,

    6) Plasmasphere,

    7) Solar wind.

    How is it formed?

    • Sun is the major source of plasma deposition in space around the Earth. Sun forces some of its plasma towards the earth in the form of the solar wind.
    • The speed of this wind varies between 300 to 1500 km/s, which carries with it solar magnetic field, called as Interplanetary Magnetic Field (IMF).
    • The magnetic field is generated by electric currents due to the motion of convection currents of a mixture of molten iron and nickel in the Earth’s outer core.
    • These convection currents are caused by heat escaping from the core, a natural process called a geodynamo.

    Why study the magnetosphere?

    • The Earth’s magnetosphere is a vast region which has a finite number of satellites hurtling through this realm.
    • The morphology of the plasma processes around the satellite can be understood quite well.
    • However, when they leave the observational domain of one satellite to enter into another, a vast blind arena is created.
    • How the morphology of these processes changes over space and time can be ideally deciphered only through computer simulations.

    Outcome of the study

    • Almost 99% of matter in the universe is in the form of plasma, Earth’s magnetosphere, too, contains this material and the plasma.
    • They have the ability to hamper the working of a number of satellites that have been placed in orbit in the magnetospheric region.

    Significance

    • Apart from the well being of these expensive satellites, the academic understanding of this region is quite essential to comprehend the cosmos in its entirety.
    • The study will help advance the knowledge of plasma waves, instabilities, and coherent effects associated with wave-particle interactions that are useful in planning of future space missions.
    • It can also lead to precisely controlled fusion laboratory experiments for ever-expanding energy needs of humanity.

  • GI tag to Manipur black rice, Gorakhpur terracotta and Kovilpatti kadalai mittai

    Chak-Hao, the black rice of Manipur and the Gorakhpur terracotta and the Kovilpatti kadalai mittai of Tamil Nadu have bagged the Geogrphical Indication (GI) tag.

    Must read: GI Tags in news for 2020 Prelims

    Chak-Hao

    • Chak-Hao, the scented glutinous rice which has been in cultivation in Manipur over centuries.
    • It is characterized by its special aroma. It is normally eaten during community feasts and is served as Chak-Hao kheer.
    • The application for Chak-Hao was filed by the Consortium of Producers of Chak-Hao (Black Rice), Manipur and was facilitated by the Department of Agriculture.
    • Chak-Hao has also been used by traditional medical practitioners as part of traditional medicine.
    • According to the GI application filed, this rice takes the longest cooking time of 40-45 minutes due to the presence of a fibrous bran layer and higher crude fibre content.
    • At present, the traditional system of Chak-Hao cultivation is practised in some pockets of Manipur.
    • Direct sowing of pre-soaked seeds and also transplantation of rice seedlings raised in nurseries in puddled fields are widely practised in the State’s wetlands.

    Gorakhpur terracotta

    • The terracotta work of Gorakhpur is a centuries-old traditional art form, where the potters make various animal figures like, horses, elephants, camel, goat, ox, etc. with hand-applied ornamentation.
    • The application was filed by Laxmi Terracotta Murtikala Kendra in Uttar Pradesh.
    • Some of the major products of craftsmanship include the Hauda elephants, Mahawatdar horse, deer, camel, five-faced Ganesha, singled-faced Ganesha, elephant table, chandeliers, hanging bells etc.
    • The entire work is done with bare hands and artisans use natural colour, which stays fast for a long time.
    • There are more than 1,000 varieties of terracotta work designed by the local craftsmen.
    • The craftsmen are mainly spread over the villages of Aurangabad, Bharwalia, Langadi Gularia, Budhadih, Amawa, Ekla etc. in Bhathat and Padri Bazar, Belwa Raipur, Jungle Ekla No-1, Jungle Ekla No-2 in Chargawan block of Gorakhpur.

    Kovilpatti kadalai mittai

    • It is a candy made of peanuts held together with glistening syrup, and topped with wisps of grated coconut dyed pink, green and yellow.
    • It is made using all natural ingredients such as the traditional and special ‘vellam’ (jaggery) and groundnuts and water from the river Thamirabarani is used in the production, which enhances the taste naturally.
    • It is manufactured in Kovilpatti and adjacent towns and villages in Thoothukudi district.
    • It is produced by using both groundnuts and jaggery (organic jaggery), in carefully selected quantities from selected specific locations in Tamil Nadu.

    Back2Basics: Geographical Indications in India

    • A Geographical Indication is used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
    • Such a name conveys an assurance of quality and distinctiveness which is essentially attributable to its origin in that defined geographical locality.
    • This tag is valid for a period of 10 years following which it can be renewed.
    • Recently the Union Minister of Commerce and Industry has launched the logo and tagline for the Geographical Indications (GI) of India.
    • The first product to get a GI tag in India was the Darjeeling tea in 2004.
    • The Geographical Indications of Goods (Registration and Protection) Act, 1999 (GI Act) is a sui generis Act for protection of GI in India.
    • India, as a member of the WTO enacted the Act to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights
    • Geographical Indications protection is granted through the TRIPS Agreement

  • Festival in news: Chithirai Festival

    For the first time, in place of Madurai’s Chithirai Festival, a simple celestial union is set to take place that will be streamed online.

    Match the pair based question can be asked from festivals as such. Recently, the following festivals were in the news: Ambubachi Mela, Thrisoor Puram, Meru Jatara, Nagoba Jatara etc.

    Chithirai Festival

    • Chithirai Festival or Chithirai Thiruvizha is an annual celebration celebrated in the city of Madurai during the month of April.
    • It is celebrated during the Tamil month of Chithirai.
    • It lasts for one month of which the first 15 days mark the celebrations of the coronation of Goddess Meenakshi and the Marriage of Lord Sundareswara and Goddess Meenakshi.
    • The next 15 days mark the celebrations of the Journey of Lord Alagar from Kallazhagar temple in Alagar Koyil to Madurai.

    About Meenakshi Temple

    • The ancient city of Madurai, more than 2,500 years old, was built by the Pandyan king, Kulashekarar, in the 6th century B.C.
    • But the reign of the Nayaks marks the golden period of Madurai when art, architecture and learning flourished expansively.
    • The most beautiful buildings in the city including its most famous landmark, the Meenakshi temple, were built during the Nayak rule.
    • Located in the heart of the city, the Meenakshi-Sundareshwarar temple is dedicated to goddess Meenakshi, the consort of lord Shiva.
    • The sculpted pillars are adorned with the exquisite murals that celebrate the ethereal beauty of princess Meenakshi and the scenes of her wedding with Lord Shiva.
    • The pillars depict scenes from the wedding of Meenakshi and Sundareswarar. There are 985 richly carved pillars here and each one surpasses the other in beauty.

  • [Prelims Spotlight] Important Financial Institutions in News

    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 Financial Institutions in News

    01 May 2020

    Development Finance Institutions

    The Need of DFIs

    Classification of DFIs

    All India DFIs Special DFIs Investment Institutions Refinance Institutions State Level DFIs
    Industrial Finance Corporation of India

    Industrial Development Bank of India

    Small Industries Development Bank of India (SIDBI)

    ICICI

    ICICI ceased to be a DFI and converted into a Bank on 30 March 2002.

    IDBI was converted into a Bank on 11 October 2004.

    		 EXIM Bank

    IFCI Venture Capitalist Fund

    Tourism Finance Corporation of India.

    IDFC.

    		 LIC

    Union Trust of India.

    General Insurance Corporation.

    		 National Housing Board.

    NABARD.

    		 State Financial Corporation.

    State Industrial Development Corporations.

     

    All India Development Finance Institutions

    IFCI ICICI IDBI SIDBI
    IFCI was the first DFI to be setup in 1948. It was setup in January 1995. The IDBI was initially set up as a Subsidiary of the RBI. In February 1976, IDBI was made fully autonomous. SIDBI was setup as a subsidiary of IDBI in 1989.
    With Effect from 1 July 1993, IFCI has been converted into Public Limited Company. With effect from April 2002, ICICI has been converted into a Bank. The IDBI was designated as apex organisation in the field of Development Financing. However, it was converted in a bank wef Oct 2004. The SIDBI was designated as apex organisation in the field of Small Scale Finance.The Union Budget of 1998-99 proposed the delinking of SIDBI from IDBI.
    The key function of IFCI was; granting long-term loans(25 years and above); Guaranteeing rupee loans floated in open markets by industries; Underwriting of shares and debentures; Providing guarantees for industries. The key functions of ICICI were; to provide long term or medium term loans or equity participation; Guaranteeing loans from other private sources; providing consultancy services to industry. The key functions of IDBI were; it provides refinance against loans granted to industries; it subscribed to the share capital and bond issues of other DFIs; it also acted as the coordinator of DFIs at all India level. The key function of SIDBI was; to provide assistance to small scale units; initiating steps for technological up gradation and modernization of SSIs; expanding the marketing channel for the Small Scale Industries product; promotion of employment creating SSIs.
    IFCI was a public sector DFI. The ICICI differed from IFCI and IDBI with respect to ownership, management and lending operation. ICICI was a Private sector DFI. It was a Public sector DFI.

     

    Investment Institutions

    Union Trust of India Life Insurance Company General Insurance Corporation
    The UTI was setup on Nov 1963 after Parliament passed the UTI Act. LIC was set up in 1956 after the insurance business was nationalised. The GIC was formed by the central government in 1971.
    The objective of UTI was to channel the savings of people into equities and corporate debts. The flagship scheme of the UTI was called Unit Scheme 64. The objective of LIC is to provide assistance in the form of term loans; subscription of shares and debentures;resource support to financial institutions and Life insurance coverages. The GIC had four subsidiaries; National Insurance Co; New India Assurance; Oriental Insurance; and United India Insurance.
    In 2002, the Union Cabinet had decided to split UTI into UTI 1 and UTI 2 as a result of the prolonged crisis in UTI. The General Insurance Nationalisation Amendment Act, 2002, has delinked the GIC from its four subsidiaries.

     

    Commercial Banks

    • Organised under the Banking Companies Act, 1956
    • They operate on a commercial basis and its main objective is profit.
    • They have a unified structure and are owned by the government, state, or any private entity.
    • They tend to all sectors ranging from rural to urban
    • These banks do not charge concessional interest rates unless instructed by the RBI
    • Public deposits are the main source of funds for these banks

    What are cooperative banks?

    • Cooperative banks are financial entities set up on a co-operative basis and belonging to their members.
    • This means that the customers of a cooperative bank are also its owners. They are registered under the States Cooperative Societies Act and they come under the RBI regulation under two laws:
    • Banking Regulations Act, 1949
    • Banking Laws (Cooperative Societies) Act, 1955
    • They aim to promote savings and investment habits among people, especially in rural areas.
    • These banks are broadly classified under two categories – Rural and Urban.
    • The rural cooperative credit institutions can be further classified into:
    • Short-term cooperative credit institutions
    • Long-credit institutions

    The short-term credit institutions can further be sub-divided into:

    • State cooperative banks
    • District Central Cooperative banks
    • Primary Agricultural Credit Societies

    Long-term institutions can either be:

    • State Cooperative Agricultural and Rural Development Banks (SCARDBs), or
    • Primary Cooperative Agriculture and Rural Development Banks (PCARDBs)
    • Urban Cooperative Banks (UCBs) can be further classified into scheduled and non-scheduled.
    • The scheduled and unscheduled can either be operating in a single state or multi-state

    Regional Rural Banks (RRBs)

    • RRBs have Scheduled Commercial Banks operating at the regional level in different states of India. They are recognized under the Regional Rural Banks Act, 1976 Act.
    • They have been created with a view of serving primarily the rural areas of India with basic banking and financial services.
    • However, RRBs may have branches set up for urban operations and their area of operation may include urban areas too.
    • The area of operation of RRBs is limited to the area covering one or more districts in the State.

    Their functions

    RRBs also perform a variety of different functions. RRBs perform various functions in the following heads:

    • Providing banking facilities to rural and semi-urban areas
    • Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc.
    • Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI etc.
    • Small financial banks etc.

    About NABARD

    • NABARD is an apex development financial institution in India, headquartered at Mumbai with regional offices all over India.
    • It is India’s specialised bank in providing credit for Agriculture and Rural Development in India.
    • The Bank has been entrusted with “matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India”.
    • It was established on the recommendations of B.Sivaraman Committee on 12 July 1982 to implement the NABARD Act 1981.
    • NABARD supervises State Cooperative Banks (StCBs), District Cooperative Central Banks (DCCBs), and Regional Rural Banks (RRBs) and conducts statutory inspections of these banks.

    About National Housing Bank

    • NHB is an All India Financial Institution (AIFl), set up in 1988, under the National Housing Bank Act, 1987.
    • The National Housing Policy, 1988 has envisaged the setting up of NHB as the Apex level institution for housing.
    • It is an apex agency established to operate as a principal agency to promote housing finance institutions both at local and regional levels.
    • It aims to provide financial and other support incidental to such institutions and for matters connected therewith.

    EXIM Bank

    • EXIM stands for Export-Import
    • Export-Import Bank of India is a wholly-owned Govt. of India entity
    • Established in 1982
    • HQ : New Delhi
    • Aim : financing, facilitating and promoting foreign trade of India.
    • The EXIM bank extends Line of Credit (loC) to overseas financial institutions, regional development banks, sovereign governments and other entities abroad.
    • Thus the EXIM Banks enables buyers in those countries to import developmental and infrastructure, equipment’s, goods and services from India on deferred credit terms.
    • The bank also facilitates investment by Indian companies abroad for setting up joint ventures, subsidiaries or overseas acquisitions.

    International Financial Services Centres

    • IFSCs are intended to provide Indian corporates with easier access to global financial markets, and to complement and promote further development of financial markets in India.
    • An IFSC enables bringing back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of financial institutions (FIs) to India.
    • This is done by offering business and regulatory environment that is comparable to other leading international financial centres in the world like London and Singapore.
    • The first IFSC in India has been set up at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.

    Banks Board Bureau

    • Banks Board Bureau is an autonomous body of Union Government of India
      It is tasked to improve the governance of Public Sector Banks, recommend the selection of chiefs of government-owned banks and financial institutions and to help banks in developing strategies and capital raising plans
    • It will have three ex-officio members and three expert members in addition to Chairman
    • Financial services secretary, deputy governor of the Reserve Bank of India and secretary- public enterprises are BBB’s ex-officio members

    Non-Banking Financial Companies

    • A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
    • A non-banking institution which is a company and has a principal business of receiving deposits under any scheme or arrangement in one lump sum or in instalments by way of contributions or in any other manner is also a non-banking financial company (Residuary non-banking company).

    NBFCs are doing functions similar to banks. What is the difference between banks & NBFCs?

    NBFCs lend and make investments, and hence their activities are akin to that of banks; however, there are a few differences as given below:

    1. NBFC cannot accept demand deposits;
    2. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself.
    3. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
    4. Unlike Banks which are regulated by the RBI, the NBFCs are regulated by multiple regulators; Insurance Companies- IRDA, Merchant Banks- SEBI, Micro Finance Institutions- State Government, RBI and NABARD.
    5. The norm of Public Sector Lending does not apply to NBFCs.
    6. The Cash Reserve Requirement also does not apply to NBFCs.

    Classification and Categorization of NBFCs

    Asset Finance Company AN AFC is a company which is a financial institution whose principle business is the financing of physical assets such as automobiles, tractors, machines etc.
    Investment Company AN IC is any company which is a financial institution carrying on its principle business of acquisitions of securities.
    Loan Company LC is a financial institution whose primary business is of providing finance by making loans and advances.
    Infrastructure Finance Company IFC is an NBFC which deploys 75% of its total assets in infrastructure loans and has a minimum net owned fund of Re 300 Crore.
    Systematically Important Core Investment Company CIC is an NBFC carrying on the business of acquisition of shares and securities. CIC must satisfy the following conditions:It holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies;

    Its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its Total Assets;

    (c) it does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;

    (d) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI Act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.

    (e) Its asset size is ₹ 100 crore or above and

    (f) It accepts public funds
    Infrastructure Debt Fund NBFC IDF NBFC primary role is to facilitate long term flow of debt into infrastructure projects. Only Infrastructure Finance Companies can sponsor IDF.
    Micro Finance NBFC MFI NBFC is a non-deposit taking NBFC having not less than 85% of its assets in the nature of qualifying assets which satisfy the following criteria:a) loan disbursed by a NBFC-MFI to a borrower with a rural household annual income not exceeding ₹ 1,00,000 or urban and semi-urban household income not exceeding ₹ 1,60,000;

    b. loan amount does not exceed 50,000 in the first cycle and 1,00,000 in subsequent cycles;

    c. total indebtedness of the borrower does not exceed 1,00,000;

    d. tenure of the loan not to be less than 24 months for the loan amount in excess of 15,000 with prepayment without penalty;

    e. loan to be extended without collateral;

    f. aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the MFIs;

    g. loan is repayable on weekly, fortnightly or monthly instalments at the choice of the borrower

     

     

  • Afghan peace and India’s elbow room

    The article discusses India’s exclusion from the Afghan peace process. As India seeks to fight back its exclusion there are certain issues that need to be addressed. India’s reluctance to enter into talks with the Taliban in one such issue, which needs a rethink. And there are several areas in which India needs to continue working like-the goodwill in Afghanistan, participation in assistance work, bringing together the major leaders in that country.

    India left out of the meeting on peace in Afghanistan

    • Earlier this month, the United Nations Secretariat held a meeting of what it calls the “6+2+1” group on regional efforts to support peace in Afghanistan.
    • The group includes six neighbouring countries: China, Iran, Pakistan, Tajikistan, Turkmenistan and Uzbekistan; global players the United States and Russia, and Afghanistan itself.
    • India was conspicuous by its absence from the meeting on April 16, given its historical and strategic ties with Afghanistan.
    • This has not happened for the first time, India was left out form talks similarly in 2001 and 2010.
    • In both 2001 and 2010, however, India fought back its exclusion
    • At the Bonn agreement of 2010, India played a major role in Northern Alliance accepting Hamid Karzai as the Chairman of the interim arrangement that replaced the Taliban regime.
    • After the 2010 conference, New Delhi redoubled its efforts with Kabul, and in 2011 India signed the historic Strategic Partnership Agreement, which was Afghanistan’s first such agreement with any country.

    Reasons for not inviting India

    • In 2020, the reason given for keeping India out of regional discussions on Afghanistan was ostensibly that it holds no “boundary” with Afghanistan.
    • But in fact, it is because New Delhi has never announced its support for the U.S.-Taliban peace process.
    • As planners in South Block now consider their next steps in Afghanistan, they must fight back against the idea that any lasting solution in Afghanistan can be discussed without India in the room, while also studying the reasons for such exclusions.

    Following are the issues that Indian must consider and act on as it seeks to fight back its exclusion from the peace talks.

    India’s position on Afghan-led peace process and reality

    • India’s resistance to publicly talking to the Taliban has made it an awkward interlocutor at any table.
    • Its position that only an Afghan-led, Afghan-owned, and Afghan-controlled process can be allowed is a principled one but has no takers.
    • The Ashraf Ghani government does not lead, own or control the reconciliation process today, comprising the U.S.-Taliban negotiation for an American troops withdrawal, and intra-Afghan talks on power-sharing.
    • The U.S.-Taliban peace deal means that the Taliban, will become more potent as the U.S. withdraws soldiers from the country.
    • Taliban will hold more sway in the inter-Afghan process as well, as the U.S. withdraws funding for the government in Kabul.

    Two effects of India’s position

    • New Delhi’s decision to put all its eggs in the Ghani basket has had a two-fold effect:
    • 1) Its voice in the reconciliation process has been limited.
    • 2) It has weakened India’s position with other leaders of the deeply divided democratic setup in Kabul such as the former chief executive Abdullah Abdullah.

    India should not let its diplomatic strength weaken

    • India painstakingly built up its presence inside Afghanistan since 2001.
    • This presence is being threatened anew by terror groups such as the Islamic State Khorasan Province (ISKP).
    • ISKP is believed to be backed by Pakistan’s establishment.
    • Intercepts showed that the brutal attack, in March, that killed 25 at a gurudwara in Kabul was meant for the embassy in Kabul.
    • The government cleared out both of its consulates this month.
    • While the government has said that the novel coronavirus pandemic prompted its decision to clear out both consulates.
    • The truth is that a full security reassessment is under way for them.
    • Either way, India’s diplomatic strength in Afghanistan should not appear to be in retreat just when it is needed the most.

    Goodwill in Afghanistan and damage caused due to CAA

    • The government must also consider the damage done to the vast reservoir of goodwill India enjoys in Afghanistan because of recent events in the country, especially the controversy over the Citizenship (Amendment) Act.
    • The building blocks of that goodwill are India’s assistance in infrastructure projects, health care, education, trade and food security, and also in the liberal access to Afghans to study, train and work in India.
    • Above all, it is India’s example as a pluralistic, inclusive democracy that inspires many.
    • Afghanistan’s majority-Muslim citizens have felt cut out of the move to offer fast track citizenship to only Afghan minorities.
    • The damage was also done by reports of anti-Muslim rhetoric and incidents of violence in India.

    Regain upper hand in the narrative in Afghanistan

    • While many of these are problems of perception, New Delhi must move swiftly to regain the upper hand in the narrative in Afghanistan.
    • India has provided the assistance of more than $3 billion in projects.
    • Bilateral trade is about $1 billion.
    • A $20 billion projected development expenditure of an alternate route through Chabahar.
    • And support to the Afghan National Army, bureaucrats, doctors and other professionals for training in India should assure it a leading position in Afghanistan’s regional formulation.
    • Three major projects along with hundreds of small development projects (of schools, hospitals and water projects) have cemented that position in Afghan hearts nationwide, regardless of Pakistan’s attempts to undermine that position, particularly in the South.
    • The three major projects include 1) the Afghan Parliament, 2) the Zaranj-Delaram Highway, 3)the Afghanistan-India Friendship Dam (Salma dam).

     Pursue opportunities to fulfil its role in the peace efforts

    • India must also pursue opportunities to fulfil its role in the peace efforts in Afghanistan, starting with efforts to bridge the Ghani-Abdullah divide.
    • India could also play role in bringing together other major leaders with whom India has built ties for decades.
    • It would be an utter tragedy if the Taliban were to enter the government in Kabul as the U.S. deal envisages, to find the opposing front collapse as it did in 1996.
    • An understanding between Iran and the U.S. on Afghanistan is necessary for a lasting peace as well, and India could play a mediatory part, as it did in order for the Chabahar project.

    Return of the Taliban has several implications for India. In 2013, the UPSC asked a question related to developments in Afghanistan against the backdrop of the proposed withdrawal of the International Security Assistance Force. Similarly, a question based on the latest development can be asked, for ex-“The return of Taliban after the US-Taliban deal in Afghanistan is fraught with major security implications for the countries in the region. Examine in the light of the fact that India is faced with a plethora of challenges and needs to safeguard its own strategic interests.”

    Use UN call for peace to put hostilities with Pakistan on hold

    • Finally, New Delhi should use the United Nations’s call for a pause in conflicts during the novel coronavirus pandemic, to ensure a hold on hostilities with Pakistan.
    • This will be even more difficult than it sounds given the abyss that bilateral relations have fallen into in the past year over Kashmir.

    Conclusion

    It would be a mistake, at this point, to tie all India’s support in only to Kabul or the Ghani government; the government must strive to endure that its aid and assistance is broad-based, particularly during the novel coronavirus pandemic to centres outside the capital, even if some lie in areas held by the Taliban.

  • 30 April 2020 | Nikaalo Prelims Quiz -Art and Culture Test 3

    [WpProQuiz 428]

  • It is time to design clear rules for departure from accepted norms of fiscal prudence

    This editorial spells out the size of the stimulus package that would be required to restart the economy. It also discusses the possible sources that the government could tap to raise the revenue. Such huge expenditure is likely to result in the huge fiscal deficit which would necessitate that the stimulus is time-bound and transparent.

    Prospects of substantially negative growth

    • Arvind Subramanian has likened the current economic situation to a “pralay (deluge)”.
    • A deluge in which the government should spend more than even what it ought to in a rainy day.
    • India, the former chief economic adviser said that India must plan for a “substantially negative” growth this year that might require an additional fiscal expenditure of Rs 10 lakh crore.
    • Corporate indebtedness was already high before the lockdown.
    • Insolvency cases will mount further.
    • Even companies facing no significant cash flow issues wouldn’t invest in uncertain public health as well as the demand-constrained environment.
    • Banks, too, aren’t going to lend, no matter how much liquidity the Reserve Bank of India (RBI) may infuse.
    • The burden of non-performing assets, which is set to get heavier in the coming months, makes it impossible for them to finance an economic recovery.
    • Last, but not the least, are faced with layoffs and pay cuts, they would rather save and will be afraid to spend.

    Importance of government spending in the current situation

    • Under the circumstances, the onus for ensuring that the wheels of the economy start moving lies on the government.
    • There’s no guarantee of it happening even with all lockdown restrictions being lifted.
    • Without somebody to spend, the economy is in real danger of contraction, which will, in turn, worsen the problem of businesses going bust, joblessness and loan defaults that can spread to the entire financial services industry.

    No “3F” constraints and risk of deflationary shocks

    • The one consolation today is that India is not saddled with its traditional “3F” constraints — food, fuel and foreign exchange — which were triggers for inflation and balance of payments crises.
    • On the contrary, public foodgrain stocks are at an all-time high, global oil prices have crashed and there is no run on the rupee, unlike during the “taper tantrum” period of May-August 2013.
    • Risk of deflationary shock: The risks, if at all, are tilted more towards demand-side “deflationary shocks” than supply-side inflation concerns.

    How will the government manage the resources?

    • The finances of both the Centre and states are in a mess, with receipts from tax and non-tax sources hardly covering even existing expenditures.
    • But governments enjoy sovereign borrowing powers that allow fund-raising at rates below that of triple A-rated instruments issued by private corporates, more so in the present risk-averse scenario.
    • Also, there is the option of deficit financing (“printing money”) through the RBI subscribing to primary auctions of government securities.
    • There are, of course, costs in such powers being exercised.
    • Past precedents — whether the issuance of ad hoc Treasury Bills to the RBI prior to April 1997 or the stimulus package post the 2008 global financial crisis — do not inspire confidence.

    A question based on the stimulus package and its consequences can be framed, for ex- “Do you agree with the view that a stimulus package by the government to restart the economy is necessary? What are the options with the government to raise the money for such a package? What could the consequences of such a package on the economy in the future?”

    Conclusion

    This is the time to design clear rules for departure from accepted norms of fiscal prudence. Any stimulus has to be transparent and time-bound.

  • Ease legal constraints on fiscal expenditure

    The article discusses the two legal provisions that need to be changed in order to provide a fiscal stimulus of the size that could save the economy from collapse. Other major concern after the package would be the inflationary pressure resulting from government spending.

    The urgency of the fiscal package by the Centre

    • The longer the Centre dithers over a big-bang fiscal package to counter the adverse economic fallout of covid-19, the closer it risks pushing India’s economy to the precipice of disaster.
    • The nationwide lockdown has more or less paralysed commercial activity, our exit path looks dreadfully long-winded, and the distress being seen right now could just be an early sign of what is to come.
    • The suffering of citizens will likely expand once the shutdown’s second-order effects, which operate with a lag, begin to kick in.
    • Estimates of ₹10 trillion needed by way of fiscal relief, once seen as too much by some, could yet turn out to be too little.
    • Either way, preparatory work in terms of legal enablers should be done alongside the arithmetic

    Legal constraints in the way of the stimulus programme

    • There are two major constraints that we need to be relieved of—if only temporarily—for a stimulus programme to take shape.
    • The first is the Fiscal Responsibility and Budget Management (FRBM) Act of 2003.
    • And the second is the amendment done in 2016 of the Reserve Bank of India Act to give legislative cover to a flexible inflation-targeting framework that set our central bank the task of keeping India’s retail price index within a certain band.
    • Both of these were aimed at long-term economic stability but made no allowance for a robust fiscal response to the kind of crisis we now face.
    • It would be best if these were tweaked appropriately by a special session of Parliament.
    • If not, then ordinances should be issued to suspend specific restrictions for a while.

    Projections of fiscal deficit

    • Under the budget presented in February, the Centre’s fiscal deficit for 2020-21 was projected at 3.5% of gross domestic product (GDP).
    • This included a half percentage point deviation from the FRBM glide path allowed by the law’s contingency clause.
    • Total expenditure was placed at a little over ₹30.4 trillion, and receipts at ₹22.4 trillion-plus.
    • With tax revenues and asset-sale realizations expected to fall short, the fiscal gap could widen to about ₹10 trillion even without any extra spending.
    • Drastic cuts in expenditure could save some money, but even if a heavy axe is wielded on expenses, the government’s deficit this year would have to exceed twice the legal limit for a stimulus that saves the economy from collapse.
    • If this turns out to be a year of negative growth, as some fear, effecting a revival will only get harder.
    • For pre-emptive action, the government should use its parliamentary clout to permit a limitless deficit for 2020-21.

    A question based on the limits placed by the FRBM Act and the changes brought by the amendment to the RBI Act which mandated RBI with managing the inflation could be asked by the UPSC.

    Prospects of inflationary pressure and RBI’s mandate

    • An effort to spend our way out of an economic morass could prove inflationary if too much cash ends up chasing too few goods and services.
    • As we have undergone both demand and supply shocks, opinion is divided on whether prices will go haywire.
    • This risk would depend on how much cash gets pumped around at what point in time and the pace at which supplies are restored.
    • In other words, the inflation outlook is highly uncertain.
    • But should prices threaten to rise, it would be counterproductive of the central bank to tamp them down by tightening credit.
    • As of now, RBI’s mandate is to keep inflation at 4%, with a tolerance band of 2% on either side.
    • This target is valid till March 2021, but needs to be reviewed right away to let the central bank focus on growth.
    • The acceptable range could be widened and the time limit to achieve the goal lengthened as a special reprieve.

    Conclusion

    A few tweaks of the law must go alongside calculations of a stimulus package designed to relieve economic distress. The government should act on these quickly to save the day.

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