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  • Trans Pacific Partnership: Latest updates and developments

     

    What is the TPP?

    Trans-Pacific Partnership (TPP) is a trade agreement between several Pacific Rim countries concerning a variety of matters of economic policy.

    The aims of the TPP include the lowering of barriers to trade in goods and services, reducing tariffs to zero by 2015. In addition, the TPP hopes to promote investment and job creation in member states.

     

    How does it come into reality?

    TPP initially called the Trans-Pacific Strategic Economic Partnership Agreement, the pact began as a 2005 trade agreement between Brunei, Chile, New Zealand and Singapore in an effort to integrate their economies, drive growth and create unified regulations.

    In 2008, during the Bush administration, the U.S. joined talks to expand the agreement, along with Australia, Peru and Vietnam. The U.S. trade representative under Obama, Ron Kirk, declared the American interest in forging a broad-based regional pact.

    Then, in 2010, under the new name the Trans-Pacific Partnership, Malaysia entered the discussions, followed by Canada and Mexico in 2012.

    By 2013, Japan began participating in the talks. South Korea and Taiwan have subsequently announced their interest but not formal participation.

    Though all of the negotiating parties belong to the Asia-Pacific Economic Cooperation forum (APEC), the TPP is a separate initiative but with similar goals as APEC’s proposed Free Trade Area of the Asia Pacific.

     

     

    Why the Trans-Pacific Partnership Matters?

    The Pacific accord would phase out thousands of import tariffs as well as other barriers to international trade, like Japanese regulations that keep out some American-made autos and trucks.

    It also would establish uniform rules on corporations’ intellectual property, and open the Internet even in communist Vietnam.

    It eventually would end more than 18,000 tariffs that the participating countries have placed on American exports, including autos, machinery, information technology and consumer goods, chemicals and agricultural products as varied as avocados in California and wheat, pork and beef from the Plains states.

    The trade ministers who negotiated it predicted the overall economic and political heft of the 12-nation group would turn the accord into a model for future trade agreements.

    It would overhaul the system for settling disputes between nations and foreign companies, while barring tobacco companies from using that process to block countries’ antismoking initiatives.

    It also would enforce higher standards for labor conditions and environmental protection, including wildlife-trafficking.

    How will it benefits to USA ?

    Expanding the orbit of U.S. free trade is a major foreign policy goal of the Obama administration, and as a part of its desired international “pivot” toward Asia, it hopes to increase its economic presence in the region.

    Supporters of the partnership say by lowering barriers to trade and increasing avenues for economic globalization, the enlarged $2 trillion zone of diminished tariffs would stimulate employment in U.S. and provide an incentive to invest abroad.

    Agreement hopes to show China that the U.S. will remain a committed economic partner for the nations of the Pacific Rim, without excessively provoking Beijing.

    Who opposes the TPP?

    Opposition to the proposed agreement and to the perceived influence of multinational corporations in the process has been led by public health advocates, labor groups and environmentalists and politicians.

    Some U.S. legislators have voiced concerns that the TPP requirements would prevent access to medicine in developing countries, due to excessive patent protection. Doctors Without Borders argues against “dangerous provisions that would dismantle public health safeguards enshrined in international law.”

    Many activists also focused criticisms on the intellectual property section of the proposed partnership, which, according to WikiLeaks, could have “wide-ranging effects on medicines, publishers, internet services, civil liberties and biological patents.”

    As a trade agreement, the TPP would require House and Senate majorities and then the president’s signature. Domestic American opposition has concentrated their skepticism not just on how “free” the agreement would be but also on problems with the “fast track” congressional voting procedure.

    Japanese producers in the anime and manga industry say the TPP could damage their business by allowing companies to halt imports of intellectual property, in order to protect local distributors of licensed merchandise.

    Rice farmers, as well as beef, poultry and pork producers, have mounted firm resistance to the pact, which would dramatically decrease import tariffs.

    Geopolitically, China is concerned that the partnership is designed to exclude its economic activities, while some American officials have expressed doubts whether the market-oriented pact would ever be compatible with Beijing’s command economy.

    In Europe, analysts view the TPP as a trade regime that could set a precedent for the nascent Transatlantic Trade and Investment Partnership (TTIP).

     

    Published with inputs from Arun

  • Nobel and other Prizes

    Cells’ Toolbox for DNA repair honoured with Nobel Prize in Chemistry

    The Nobel Prize in Chemistry 2015 is awarded to Tomas Lindahl (UK), Paul Modrich (USA) and Aziz Sancar (USA) for having mapped, at a molecular level, how cells repair damaged DNA and safeguard the genetic information.

    Their work has provided fundamental knowledge of how a living cell functions and is, for instance, used for the development of new cancer treatments.

    What’s the DNA repair toolbox ?

    Each day our DNA is damaged by UV radiation, free radicals and other carcinogenic substances, but even without such external attacks, a DNA molecule is inherently unstable.

    Thousands of spontaneous changes to a cell’s genome occur on a daily basis. Furthermore, defects can also arise when DNA is copied during cell division, a process that occurs several million times every day in the human body.

    The reason our genetic material does not disintegrate into complete chemical chaos is that a host of molecular systems continuously monitor and repair DNA.

    The Nobel laureate scientists, who have mapped how several of repair systems function at a detailed molecular level.

     

    Tomas Lindahl – Puts together the pieces of base excision repair

    In the early 1970s, scientists believed that DNA was an extremely stable molecule, but Tomas Lindahl demonstrated that DNA decays at a rate that ought to have made the development of life on Earth impossible. This insight led him to discover a molecular machinery, base excision repair, which constantly counteracts the collapse of our DNA.

    This was the start of 35 years of successful work, during which Tomas Lindahl has found and examined many of the proteins in the cell’s toolbox for DNA repair.

    Bit by bit, Lindahl pieced together a molecular image of how base excision repair functions, a process in which glycosylases, enzymes similar to the one he had found in 1974, are the first step in the DNA repair process.

    Base excision repair also occurs in human beings and, in 1996, Tomas Lindahl managed to recreate the human repair process in vitro.

    The decisive factor for Tomas Lindahl was the realisation that DNA inevitably undergoes change, even when the molecule is located in the cell’s protective environment. However, it had long been known that DNA can be damaged by environmental assaults such as UV radiation.

    The mechanism used by the majority of cells to repair UV damage, nucleotide excision repair, was mapped by Aziz Sancar, born in Savur, Turkey, and professionally active in the USA.

    Base Excision repair

    Aziz Sancar’s Nucleotide excision repair

    Aziz Sancar has mapped nucleotide excision repair, the mechanism that cells use to repair UV damage to DNA. People born with defects in this repair system will develop skin cancer if they are exposed to sunlight. The cell also utilises nucleotide excision repair to correct defects caused by mutagenic substances, among other things.

    Aziz Sancar’s ability to generate knowledge about the molecular details of the process changed the entire research field. He published his findings in 1983.

    He mapped the next stages of nucleotide excision repair. In parallel with other researchers, including Tomas Lindahl, Sancar investigated nucleotide excision repair in humans.

    The molecular machinery that excises UV damage from human DNA is more complex than its bacterial counterpart but, in chemical terms, nucleotide excision repair functions similarly in all organisms.

    nucleotide_excision_repair

     

    Paul Modrich – illustrating DNA mismatch repair

    Once his father, a biology teacher, said: “You should learn about this DNA stuff.” This was in 1963, the year after James Watson and Francis Crick had been awarded the Nobel Prize for discovering the structure of DNA.

    A few years later, that “DNA stuff” really became central to Paul Modrich’s life.

    Paul Modrich has demonstrated how the cell corrects errors that occur when DNA is replicated during cell division. This mechanism, mismatch repair, reduces the error frequency during DNA replication by about a thousandfold. Congenital defects in mismatch repair are known, for example, to cause a hereditary variant of colon cancer.

    In conclusion, the basic research carried out by the 2015 Nobel Laureates in Chemistry has not only deepened our knowledge of how we function, but could also lead to the development of lifesaving treatments.

    In the words of Paul Modrich: “That is why curiosity-based research is so important. You never know where it is going to lead… A little luck helps, too.”

     

    Irish-born William Campbell and Japan’s Satoshi Omura won half of the prize for discovering avermectin, a derivative of which has been used to treat hundreds of millions of people with river blindness and lymphatic filariasis, or elephantiasis.

    China’s Tu Youyou was awarded the other half of the prize for discovering artemisinin, a drug that has slashed malaria deaths and has become the mainstay of fighting the mosquito-borne disease. She is China’s first Nobel laureate in medicine.

    Lets’s talk about Satoshi Omura’s invention

    Satoshi Ōmura

    So, how did the journey start for Satoshi Omura?

    Satoshi Omura, a Japanese microbiologist and expert in isolating natural products, focused on a group of bacteria, Streptomyces, which lives in the soil and was known to produce a plethora of agents with antibacterial activities (including Streptomycin discovered by Selman Waksman, Nobel Prize 1952).

    Equipped with extraordinary skills in developing unique methods for large-scale culturing and characterization of these bacteria, Omura isolated new strains of Streptomyces from soil samples and successfully cultured them in the laboratory.

    From many thousand different cultures, he selected about 50 of the most promising, one of these cultures later turned out to be Streptomyces avermitilis, the source of Avermectin, a medicine that has nearly eradicated river blindness and radically reduced the incidence of filariasis, which can cause the disfiguring swelling of the lymph system in the legs and lower body known as elephantiasis.

     

    Bacteria.

    Puzzle about River Blindness?

    Also known as onchocerciasis or Robles’ Disease, is caused by transmission of the parasitic worm Onchocerca volvulus by black flies of the genus Simulium. Vector lives near rivers, thus the name.Inside the host, the worms create larvae that travel to the skin, and infect other flies that bite the victim.

    Symptoms include severe itching, eruptions under the skin, and blindness. About 17-25 million are infected; some 0.8 million have some degree of vision loss. Most infections in sub-Saharan Africa.

    Then, what about Lymphatic Filariasis or Commonly known as elephantiasis ?

    It is tropical disease caused by transmission of parasites classified as nematodes (roundworms) of the family Filariodideato, to humans by mosquitoes.

    Adult worms lodge in lymphatic system and disrupt immune system. Causes abnormal enlargement of body parts, pain, severe disability and social stigma.

    Over 120 million people are infected, about 40 million disfigured or incapacitated. About 1.23 billion in 58 countries are threatened, 80% of whom live in 10 countries, including India, Bangladesh and Nepal.

    Our next Pioneer William C. Campbell

    William C. Campbell

    An expert in parasite biology working in the USA, acquired Omura’s Streptomyces cultures and explored their efficacy.

    Campbell showed that a component from one of the cultures was remarkably efficient against parasites in domestic and farm animals.

    The bioactive agent was purified and named Avermectin, which was subsequently chemically modified to a more effective compound called Ivermectin. 

    Ivermectin was later tested in humans with parasitic infections and effectively killed parasite larvae (microfilaria) .

    Collectively, Omura and Campbell’s contributions led to the discovery of a new class of drugs with extraordinary efficacy against parasitic diseases.

     

    Scheme.

     

    What a breakthrough, China’s first Nobel laureate in medicine, Let’s talk about it?

     

    Youyou Tu

    Ms. Youyou Tu, won Nobel in Medicine for a therapy against malaria.

    Malaria was traditionally treated by chloroquine or quinine, but with declining success. By the late 1960s, efforts to eradicate Malaria had failed and the disease was on the rise.

    At that time, Youyou Tu in China turned to traditional herbal medicine to tackle the challenge of developing novel Malaria therapies.

    Tu revisited the ancient literature and discovered clues that guided her in her quest to successfully extract the active component from Artemisia annua. 

    Tu was the first to show that this component, later called Artemisinin, was highly effective against the Malaria parasite, both in infected animals and in humans.

    Artemisinin represents a new class of antimalarial agents that rapidly kill the Malaria parasites at an early stage of their development, which explains its unprecedented potency in the treatment of severe Malaria.

     

    Herbal medicine

     

    How do you think these inventions will change the world?

    The discoveries of Avermectin and Artemisinin have fundamentally changed the treatment of parasitic diseases.

    Ivermectin is highly effective against a range of parasites, has limited side effects and is freely available across the globe.

    The importance of Ivermectin for improving the health and wellbeing of millions of individuals with River Blindness and Lymphatic Filariasis, primarily in the poorest regions of the world, is immeasurable.

    Treatment is so successful that these diseases are on the verge of eradication, which would be a major feat in the medical history of humankind. Malaria infects close to 200 million individuals yearly.

    Artemisinin is used in all Malaria-ridden parts of the world. When used in combination therapy, it is estimated to reduce mortality from Malaria by more than 20% overall and by more than 30% in children. For Africa alone, this means that more than 100 000 lives are saved each year.

    The discoveries of Avermectin and Artemisinin have revolutionized therapy for patients suffering from devastating parasitic diseases.

    Campbell, Ōmura and Tu have transformed the treatment of parasitic diseases. The global impact of their discoveries and the resulting benefit to mankind are immeasurable.

    Published with inputs from Arun

  • Uniform Civil Code: Triple Talaq debate, Polygamy issue, etc.

     

    What is the idea behind a Uniform Civil Code for India?

    Currently, believers of various religions can marry, adopt, inherit property and divorce under their own customs.

    Under a Uniform Civil Code, it is believed, personal laws and sanctioned practices of different religions will be largely harmonised with accepted fair practices for all citizens, under guidelines laid down by Constitution.

    Does the Constitution mention a Uniform Civil Code?

    Article 44 of the Constitution, which is one of the Directive Principles of State Policy, says: “The State shall endeavour to secure for the citizens a uniform civil code throughout the territory of India.”

    Directive Principles are not justiciable or mandatory, only a guideline.

     

    Then, what is the debate about?

    Articles 29 and 30 guarantee minorities the right to conserve their culture and script, and run their own educational institutions.

    It was understood that minorities could practise their religion and follow their customs and traditions.

    The Supreme Court asked the central government, whether it was willing to bring a Uniform Civil Code to ride over inconsistent personal laws in different religions.

    There was “total confusion” over the incoherent stipulations about marriage, divorce, adoption, maintenance and inheritance.

    Currently, different laws regulate these aspects for adherents of different religions.

    Is the debate over Uniform Civil Code just a Hindu-Muslim issue?

    Far from it. Parsis, Jains, Sikhs, Christians, apart from of course Hindus and Muslims, have their own civil codes.

    While the Muslim Personal Law is yet to be codified (because of deep divisions within), Christian and Parsi codes were specified before Independence.

    The personal laws of Hindus, Jains, Sikhs and others were codified in the 1950s.

    So, What does our secular Constitution say?

    Article 25, which guarantees the freedom to practise, profess and propagate any religion. By the 42nd Amendment of 1976, India was declared a secular nation.

    The understanding of Article 25, the State and its institutions have not interfered with religious practices, including in relation to various personal laws.

    There is a view that this principle runs contradictory to the idea of secularism which requires the State to be inert to religious considerations, and not tacitly support them by following a practice of non-interference, no matter what.

    Clause (2) of Article 25 empowers the State to frame any law to regulate or restrict “secular activity which may be associated with religious practice”, therefore, it is argued, Article 25 is no bar to having a Uniform Civil Code.

    The inconsistency in personal laws has been challenged on the touchstone of Article 14, which ensures the right to equality.

    Historical Judgements

    Litigants have contended that their right to equality is endangered by personal laws that put them at a disadvantage.

    The first prominent case founded on Article 14 was Shah Bano case (1985) in which the apex court ruled that a Muslim woman was entitled to alimony under the general provisions of the CrPC, like anybody else.

    Following protests from Muslim leaders, Rajiv Gandhi’s government in 1986 got the Muslim Women (Protection of Rights on Divorce) Act passed in Parliament, which nullified the ruling.

    In effect, the verdict did a balancing act between the Shah Bano judgment and the 1986 law.

    In Githa Hariharan vs RBI (1999), the top court adjudicated upon the constitutional validity of certain provisions of the Hindu Minority and Guardianship Act, 1956 and the Guardian Constitution and Wards Act, on a petition claiming they violated Articles 14 by treating the father as the natural guardian of a child under all circumstances.

    It ushered in the principle of equality in matters of guardianship for Hindus, making the child’s welfare the prime consideration.

    That’s some history! what is today’s scenario ?

    The BJP, kept the Uniform Civil Code in its 2014 election manifesto. The BJP and RSS have long demanded it, and cited the example of Goa, which has a common law called the Goa Civil Code.

    What the government tells the court next month will be a test of its political will , and mark the next chapter in the evolution of this debate.

    So, do we really want a Uniform Civil Code? Is there a way forward ?

    Yes, you say? Well, there seems only one way to see through this crazy fog.
    Every aspect of the personal laws must be examined in the light of constitutional guarantees to every Indian, equality, justice, right to life.

    Laws that fail to uphold these basics must be thrown away, Isn’t it ?

    Published with inputs from Arun

  • Gold Monetisation Scheme

    PM Modi Launches 3 Gold Schemes

    In a bid to rein in the gold imports and attract investors away from physical assets, PM Modi launches 3 Gold Schemes: 

    1. Gold Coin and Bullion scheme
    2. Gold Monetisation Scheme
    3. Gold Sovereign Bond Scheme

    #1. India Gold Coin and Bullion scheme

    • The coin will be the first ever national gold coin minted in India and will have the National Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi on the other side.
    • Initially, the coins will be available in denominations of 5 and 10 grams.
    • The Indian Gold coin is unique in many aspects and will carry advanced anti-counterfeit features and tamper proof packaging that will aid easy recycling.

    #2. Gold Monetisation Scheme (GMS), 2015

    • Scheme allows you to earn some regular interest on your gold and save you carrying costs as well.
    • It replaced the existing Gold Deposit Scheme, 1999.
    • It offers option to resident Indians to deposit their precious metal and earn an interest of up to 2.5 per cent.

    Who can make deposits?

    • Resident Indians (individuals, HUF, trusts, including mutual funds/exchange traded funds registered under Sebi norms) can make deposits under the scheme.
    • No maximum limit for deposit under the scheme and the metal will be accepted at the Collection and Purity Testing Centres (CPTC) certified by the Bureau of Indian Standards.

    #3. Sovereign Gold Bond Scheme

    • Investors can earn an interest rate of 2.75 per cent per annum by buying paper bonds.
    • Sovereign Gold Bonds will be issued in multiple tranches subject to the overall borrowing limits.
    • The bond would be restricted for sale to resident Indian entities and the maximum allowable limit is 500 grams per person per year.
    • They can be used as collateral for loans and can be sold or traded on stock exchanges

    Few more things to know

    1. Minimum investment in the bond shall be 2 grams.
    2. The bonds can be bought by Indian residents or entities and is capped at 500 grams.
    3. The RBI has fixed the public issue price of sovereign gold bonds at Rs 2,684 per gram.
    4. The borrowing through issuance of Bond will form part of market borrowing programme of Government.
    5. The Bonds will be eligible for Statutory Liquidity Ratio (SLR).

    Why was there a need for such schemes?

    1. To lure tonnes of gold from households into banking system.
    2. According to the World Gold Council, an estimated 22,000-23,000 tonnes of gold is lying idle with households and institutions in India.
    3. Huge gold imports pushed India’s current account deficit (CAD) to a record $190 billion in 2013, prompting the hike its duty on imports to a record 10 percent.
    4. The government wants to reduce the reliance on gold imports over time.

    But, will these schemes succeed in bringing down Gold imports?

    1. Experts who believe, investors will still find 8 percent offered for bank deposits as more attractive.
    2. The present scheme will not bring out even 20 tonnes of gold.
    3. Investors fear that the tax department will hound them questioning the source of gold.

    Okay! But tell me how good are they from investing point of view?

    1. A section of experts feels the interest rates being offered (on both deposits and bonds) are attractive.
    2. For people who have gold as an investment asset, it is a good opportunity to gain some interest out of it.
    3. Gold is always written off as a zero-yield instrument compared to equities, which give dividend and fixed income which gives fixed interest.

    From now on, gold will not only be an instrument of security but will also give earnings and will become part of nation building.

     

    Published with inputs from Arun

     

  • FDI in Indian economy

     

    What is Foreign Direct Investment (FDI)?

    FDI means where a foreign company, generally an MNC, may invest in a country in any of the following 3 forms:

    #1. Setup a plant or project to manufacture a commodity- consumer goods, capital goods, automobile, aircrafts, ships etc. It may also engage itself in construction activity- highways, roads, bridges, ports, airports, real estate etc.

    #2. Setup network for providing services- banking, insurance, shipping, telecom, software, civil aviation etc.

    #3. Only provide technology by way of Technology Transfer through any company of the country. It can provide technology only or provide technology along with #1 & #2 above

    Foreign Portfolio Investment (FPI):

    • It means that foreign investors, generally Foreign Institutional Investors in case of India (FIIs are very large investors who invest bulk amounts just like Mutual Funds), invest in country stock market by investing in shares, debentures, bonds, Mutual Funds etc.
    • The objective here is to make capital gains in the stock markets
    • Hence this is investment is also called ‘Hot Money’ or ‘Fly-by-Night Money’ as it has a tendency to move from one country to another in search of quick profit
    • Therefore it has a potential to cause volatility in those markets from where it leaves

    FDI routes:

    #1. Automatic

    A foreign company wishing to invest in India doesn’t have to seek prior approval of any body/ agency in India
    It can straight away bring in investments in India & has only to inform the RBI within 1 month of bringing its investment in a certain sector
    This route is relatively hassle free due to which more than 55% of total FDI has come through this route

    #2. Foreign Investment Promotion Board (FIPB)

    It was established in 1992 (just after L-P-G reforms)
    Investments upto Rs. 5000 crore from notified sectors have to go through its approval

    #3. Cabinet Committee on Economic Affairs (CCEA)

    This approves investments above Rs. 5000 crores from notified sectors

    Merits of FDI:

     

    • Adds to the productive capacity of a nation (by definition, as mentioned above)
    • Long term and stable- Because an MNC would continue to manufacture in a country, earn profits, engage in exports and thus spread its wings across the world as it enjoys a global name
    • No repayment obligation on part of the country where it is operating. This is the most important feature
    • Brings in capital and bolsters FOREX reserves
    • Brings in technology
    • Helps export promotion (because of global brands)
    • Generates employment
    • Expands markets (domestic as well as foreign)
    • International Best Practices- Brings in latest administrative and work culture
    • Infuses competition among domestic industries

    What is the impact of FDI on Inflation?

     

    • FDI has been generally touted as a measure to dampen inflation. But this can NOT be concluded in all situations
    • The FDI’s impact on dampening the inflation is based upon the assumption that FDI would result in the developing of country’s back-end infrastructure and crack the supply bottlenecks. Practically, it may or may not happen
    • Economics has no rule to link FDI and Inflation because inflation may have many reasons behind it rather than only infrastructure and supply bottlenecks
    • Generally the FDI’s role in containing inflation is supported by the facts that- it improves infrastructure, improves supply chain, brings permanent investment

    Demerits:

    • May threaten a country’s economic and political sovereignty (remember East
    • India Company which came to India just as a trader)
    • It may bring obsolete technology (this was true especially during 1950-90 because US and UK were the only countries bringing FDI. But now due to many countries bringing FDI, there is competition and this risk is reduced)
    • Focus on short term profit earning tactics rather than long term investments with a view of national industrial development
    • Indulging in cut-throat competition
    • Indulging in transfer pricing practices

    Why Foreign Investors go for FDI?

    • To take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive
    • To gain tariff-free access to the markets of the country
    • To acquire lasting interest in enterprises operating in the target country.

    What attracts FDI?

    • The growth rate of the source economy is an important determinant
    • The political and economic stability of the target region
    • How ‘open’ the economy is towards foreign trade (both imports and exports)
    • The policies, rules, regulations and loopholes incidental thereto
    • For example, Mauritius has been top FDI source for India due to the later (loophole) reasons

    Recent FDI reforms (November 2015):

    #1. Townships, shopping complexes & business centres – all allow up to 100% FDI under the auto route

    Conditions on minimum capitalisation & floor area restrictions have now been removed for the construction development sector

    #2. India’s defence sector now allows consolidated FDI up to 49% under the automatic route

    FDI beyond 49% will now be considered by the Foreign Investment Promotion Board

    Govt approval route will be required only when FDI results in a change of ownership pattern

    #3. Private sector banks now allow consolidated FDI up to 74%

    #4. Up to 100% FDI is now allowed in coffee/rubber/cardamom/palm oil & olive oil plantations via the automatic route

    #5. 100% FDI is now allowed via the auto route in duty free shops located and operated in the customs bonded areas

    #6. Manufacturers can now sell their products through wholesale and/or retail, including through e-commerce without Government Approval

    #7. Foreign Equity caps have now been increased for establishment & operation of satellites, credit information companies, non-scheduled air transport & ground handling services from 74% to 100%

    #8. 100% FDI allowed in medical devices

    #9. FDI cap increased in insurance & sub-activities from 26% to 49%

    #10. FDI up to 49% has been permitted in the Pension Sector

    #11. Construction, operation and maintenance of specified activities of Railway sector opened to 100% foreign direct investment under automatic route

    #12. FDI policy on Construction Development sector has been liberalised by relaxing the norms pertaining to minimum area, minimum capitalisation and repatriation of funds or exit from the project

    To encourage investment in affordable housing, projects committing 30 percent of the total project cost for low cost affordable housing have been exempted from minimum area and capitalisation norms

    #13. Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents

    #14. Composite caps on foreign investments introduced to bring uniformity and simplicity is brought across the sectors in FDI policy

    #15. 100% FDI allowed in White Label ATM Operations White Label ATMs? Answer in comments>

    Crux of the reforms:

    • To further ease, rationalise and simplify the process of foreign investments in the country
    • To put more and more FDI proposals on automatic route instead of Government route where time and energy of the investors is wasted
    • Refining of foreign investment norms in construction is to facilitate the construction of 50 million houses for poor
    • Opening up of the manufacturing sector for wholesale, retail and e-commerce is aimed at motivating industries to Make In India and sell it to the customers here instead of importing from other countries

    Sectoral caps:

    • Petroleum Refining by PSU (49%)
    • Teleports (setting up of up-linking HUBs/Teleports),Direct to Home (DTH), Cable Networks (Multi-system operators (MSOs) operating at national, state or district level and undertaking upgradation of networks towards digitalisation and addressability), Mobile TV and Headend-in-the-Sky Broadcasting Service (HITS) – (74%)
    • Cable Networks (49%)
    • Broadcasting content services- FM Radio (26%), uplinking of news and current affairs TV channels (26%)
    • Print Media dealing with news and current affairs (26%)
    • Air transport services- scheduled air transport (49%), non-scheduled air transport (74%)
    • Ground handling services – Civil Aviation (74%)
    • Satellites- establishment and operation (74%)
    • Private security agencies (49%)
    • Private Sector Banking- Except branches or wholly owned subsidiaries (74%)
    • Public Sector Banking (20%)
    • Commodity exchanges (49%)
    • Credit information companies (74%)
    • Infrastructure companies in securities market (49%)
    • Insurance and sub-activities (49%)
    • Power exchanges (49%) power exchanges? What are the issues with them? Hint- Economic Survey 2015-16 Chapter 11>
    • Defence (49% above 49% to CCS)
    • Pension Sector (49%)

    Sectors which need Govt (FIPB/ CCEA) approval:

    • Tea sector, including plantations – 100%
    • Mining and mineral separation of titanium-bearing minerals and ores, its value addition and integrated activities -100%
    • FDI in enterprise manufacturing items reserved for small scale sector – 100%
    • Defence – up to 49% under FIPB/CCEA approval, beyond – 49% under CCS approval (on a case-to-case basis, wherever it is likely to result in access to modern and state-of-the-art technology in the country)
    • Teleports (setting up of up-linking HUBs/Teleports), Direct to Home (DTH), Cable Networks (Multi-system operators operating at National or State or District level and undertaking upgradation of networks towards digitisation and addressability), Mobile TV and Headend-in-the Sky Broadcasting Service(HITS) – beyond 49% and up to 74%
    • Broadcasting Content Services: uplinking of news and current affairs channels – 26%, uplinking of non-news and current affairs TV channels – 100%
    • Publishing/printing of scientific and technical magazines/specialty journals/periodicals – 100%
    • Print media: publishing of newspaper and periodicals dealing with news and current affairs- 26%, Publication of Indian editions of foreign magazines dealing with news and current affairs- 26%
    • Terrestrial Broadcasting FM (FM Radio) – 26%
    • Publication of facsimile edition of foreign newspaper – 100%
    • Airports – brownfield – beyond 74%
    • Non-scheduled air transport service – beyond 49% and up to 74%
    • Ground-handling services – beyond 49% and up to 74%
    • Satellites – establishment and operation – 74%
    • Private securities agencies – 49%
    • Telecom-beyond 49%
    • Single brand retail – beyond 49%
    • Asset reconstruction company – beyond 49% and up to 100%
    • Banking private sector (other than Branches) – beyond 49% and up to 74%, public sector – 20%
    • Insurance – beyond 26% and up to 49%
    • Pension Sector – beyond 26% and up to 49%
    • Pharmaceuticals – brownfield – 100%

    All sectors other than these are under automatic route.

    Sectors where FDI is prohibited:

    • Lottery Business including Government /private lottery, online lotteries, etc.
      Gambling and Betting including casinos etc.
    • Chit funds
    • Nidhi company-(borrowing from members and lending to members only)
    • Trading in Transferable Development Rights (TDRs) <What are TDRs? Answer in comments>
    • Real Estate Business (other than construction development) or Construction of Farm Houses
    • Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
    • Activities/ sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than construction, operation and maintenance of
      (i) Suburban corridor projects through PPP,
      (ii) High speed train projects,
      (iii) Dedicated freight lines,
      (iv) Rolling stock including train sets, and locomotives/coaches manufacturing and maintenance facilities,
      (v) Railway Electrification,
      (vi) Signaling systems,
      (vii) Freight terminals,
      (viii) Passenger terminals,
      (ix) Infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines and connectivities to main railway line and
      (x) Mass Rapid Transport Systems)
    • Services like legal, book keeping, accounting & auditing.
    Published with inputs from Swapnil

  • Keep Going

     

    You keep going because, what’s the alternative? Give up? Chalk it up to what “could have” been? Tell yourself that you don’t deserve it? Say you’ll try again some other day? Put it off until tomorrow?

    The only thing that matters and the thing that separates failure and success is that you keep going — you keep trying — and you keep moving forward.

    Even when it sucks. Especially when it sucks. Even when it’s hard. Especially when it’s hard. That’s when you keep going. That’s when the world needs your effort the most. When you dig deeper.

    The world does need you effort, your passion, and your momentum.

    Think about a world if no one kept going. Think about your life if you never kept going. We wouldn’t be “here”. We’d be “back there”. And “back there” — lingering in the past, dwelling on what could’ve been — is a dark and scary and demotivating place.

    I tell myself to keep going all the time. Almost every day. Sometimes about little things, and sometimes about really big, scary things.

    Keep going. I need you to, the world needs you to, and you need to. When you do, wonderful, amazing, game-changing things happen.

  • Did you check out the calendar widget on the NEWS tab?

    Hello,

    Now news is easy to access and revise! We have introduced a calendar widget on the NEWS tab so that you can hop on & around and date of any month and read the connected NEWS summaries of a particular day.

    Click on the “green text on top of every newscard” to go to the connected story so that you find a better analysis of the theme in full.

    We have been working on our STORY pages and have consolidated the CD explains articles under them so that you get everything under the same roof

    What’s more! NEWS is available in HINDI as well. Toggle the language switch on top right of the webpage.

  • Masala Bonds

    What’s New In The Masala Bonds?

     

    During his visit to the UK last week, Prime Minister Narendra Modi spoke about the Indian Railways issuing bonds and listing them on the London Stock Exchange.

     

    Let’s explore the Bonds as a financial instrument and then dive deep into Masala Bonds.

    What are Bonds?

    Bonds are debt instruments which allow the companies or govt. to raise funds only by incurring debt and lender is guaranteed of a fixed repayment (Principle and Interest).

    What are instrument available with Company to raise funds?

    1. Issue Bonds – Companies will have to pay the fixed amount when the bond matures.

    2. Issue Shares – Companies would like to raise money, but don’t want is as a debt, so company will issue shares.

    Can you imagine who (Company/Investor) will prefer what (Debt/Shares)?

    Companies will prefer to raise money through equities i.e. issuing shares because they will part a share of the company to the investors, while the investors will prefer to purchase bonds because bonds are more secured.

    Shares may give higher returns in the long run. So, it is risk-return trade-off.

    How the bonds are more secure than shares?

    In case of liquidation of the company, the bond holders are the one who get their claim before the share holders.

    Now, let’s get into main discussion on Masala Bonds

     

    What’s new in the Masala Bonds?

    Basically, overseas rupee bonds are known as Masala bonds.

    • Indian firms have earlier raised money abroad through bonds and other forms of borrowings, but always in foreign currency.
    • However, the first overseas rupee bonds were issued in 2013 by the International Finance Corporation, the World Bank’s private sector investment arm.
    • To raise funds for capital expenditure, the Indian Railway Finance Corporation will be issuing bonds denominated in rupees.

    What are the risk associated Indian companies with foreign currency overseas bond? 

    • An Indian company issuing a overseas bond(i.e. in other currencies specially dollar) runs into a risk on account of currency fluctuation.
    • If rupee weakens during the period of bond, then it add significantly to costs at the time of repayment, normally at the end of 5 years.

    How Masala Bonds will benefit Indian companies?

    • If the issuer, issues bonds in rupees, then he gets rid of this risk (currency fluctuation) which passes on to the investor.
    • This bond brings a new and diversified set of investors for Indian companies, and more liquidity in foreign exchanges, apart from bank funding and the corporate bond market in India.

    Does Masala bond offer something for foreign investors?

    The investor who purchases a bond issued by an Indian entity is betting on India, in a hope that currency and inflation would be stable enough to ensure good returns after hedging for foreign exchange risks.

    With India’s GDP or national income rising, and projected to grow at a reasonably fast clip over the next few years, many overseas investors would like to buy into such bonds to join the party and to earn higher returns compared to the US and Europe where interest rates are still low.

    How does Govt. and RBI view Masala Bonds?

    The local currency bond markets can contribute to financial stability by reducing currency mismatches and extending the duration of debt.

    It will also be a sign of early acceptance of the Indian currency in trading and settlement overseas, showing the confidence of investors and can lead to  internationalization of the currency over the medium- and long term.

    Foreign investors prefer to hedge their risks overseas because there are limited products in the Indian market, especially for longer periods.

    The other worry, if the overseas rupee bond market takes off, will be about the growth of the Indian corporate bond market and Indian banks as top companies shift to another market, impacting growth here.

    Was such an approach adopted by any emerging economies in past?

    China’s People’s Bank of China has previously issued yuan denominated bonds to raise funds at a little over 3%.

    China had issued bonds in its own currency in Hong Kong dubbed dimsum bonds and plans to issue more as part of its plan to push its currency for global trade.

    1. Unlike China, the Indian govt. has never borrowed abroad on its own, preferring to push its state owned firms, instead.
    2. RBI, unlike the Chinese central bank, cannot issue debt with no legal sanction for it.

    But these have been borrowings in dollar or other currencies. The Railways bond, on the other hand, will be denominated in rupees.

     

    Published with inputs from Pushpendra

  • UDAY Scheme for Discoms

    UDAY: Reviving Power Discoms

    In a bid to rescue almost bankrupt state electricity retailers, the Cabinet recently approved this scheme for reviving power utilities having debt amounting to Rs 4.3 lakh crore.

    uday-head-for-BLOG

    What is Ujjwal Discom Assurance Yojana?

    UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem. It has ambitious target of making all discoms profitable by 2018-19.

    The scheme will ease the financial crunch faced by power distribution companies, that has impaired their ability to buy electricity.

    It is based on the premise that it is states’ responsibility to ensure that discoms become financially viable.

    UDAY

     

    How UDAY will revive Discoms?

    It has all the 3 elements —

    1. Clear up the legacy issues of past losses and debt.
    2. Provide a financial road map to bring tariffs in line with costs by FY19.
    3. Provide enough deterrents for the state govt to not allow the state discoms to become loss ridden post FY18, as losses start to impact their FRBM limits.
    • The State govt. will takeover the discom liabilities over 2-5 year period.
    • This will allow discoms to convert their debt into State bond. These bonds will have a maturity period of 10-15 years.
    • It will allow transfer of 75% outstanding debts incurred by stressed discoms to States’ debt, 50% in 2015-16 and 25% in 2016-17.
    • The central government will not include the loans of the discoms in calculation of the state’s deficit till 2016-17.

    Why are these Discoms so stressed?

    There are various reasons that lead to Discoms becoming unsustainable over the period of time.

    1. Politics of free power, repressed tariffs and power thefts leading high transmission losses.
    2. Poor infrastructure and low standard of management.
    3. Power subsidies are given to all, irrespective of rich/poor.
    4. Discoms in states of Rajasthan, Tamil Nadu and UP are the most stressed ones.

    Almost 25% T&D ( Transmission & Distribution) losses suffered by discoms. Remaining 75% is sold at a price much lower than discoms’ procurement costs. Wondering Why??

    The most obvious reason is political interference, i.e. tariff is set by a group of largely political appointees.

    Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development.

    What will be the impact of this scheme?

    • It is expected to help the banks in managing their bad loans.
    • It will relieve discoms who can push power distribution in right way.
    • It will allow states to align tariff costs, so that discoms run on a sustainable basis.

    What are thrust areas of UDAY to turnaround discoms?

    1. Improve operational efficiency.
    2. Reduction in cost of power – By monitoring technical and commercial losses by smart metering and feeder separation.
    3. Reduction in the interest cost of discoms.
    4. Enforcing financial discipline on discoms through alignment with States’ finances.

    What could be potential challenge to UDAY?

    • Electricity is not a central subject, states’ cannot be made to participate in the programme.
    • Finding buyers for such bonds might prove difficult, as these would enjoy the SLR status.
    • It has not laid down a specific performance-monitoring and compliance mechanism.
    • It does not cover inadequate investment in network & poor supply, which is essential for reliable and quality supply.
    • No central monetary assistance is provided, rather states’ will be provided subsidised funding from the central govt.’s power schemes as well as priority in supply of coal.
    Published with inputs from Pushpendra

     

  • WTO Nairobi meet: Updates on the 10th Ministerial Conference

    WTO Nairobi Ministerial Meeting – What’s at stake for India?

    Recently, the WTO Trade Ministers concluded their talks without any commitment on rich countries being asked to check their domestic subsidies. The negotiations exceeded by one day due to lack of consensus among the developed and developing world.

     

    India and other developing countries were particular about the re-affirmation to conclude the 14-year old Doha Round. < Let's begin with the basics of WTO negotiations>

    What is Doha Development Round?

    It is the latest round of trade negotiations among the WTO members, which started in 2001, to sign a pact to open up world trade by lowering or eliminating trade barriers.

    The focus is on helping developing countries join the global marketplace, and boost their economies as a result.

    The Doha Round is also known as the Doha Development Agenda.

    What are they negotiating?

    The goal of any trade talks is to make it easier for goods and services to be bought and sold across national borders.

    The negotiations includes:

    • Restricting countries’ use of subsidies for farmers and fishermen.
    • Lowering taxes and regulatory barriers that affect the cross-border trade in services, such as banking and consulting.
    • Negotiating new intellectual property rules on things such as drugs and copyrighted works.

    Why developing countries are pressing for conclusion of Doha round?

    Basically, the benefits for developing countries depends on the the kind of agreement the negotiators come up with.

    However, the developing countries are hoping that stronger restrictions on farm subsidies in developed countries would be good for farmers in the developing world.

    What was the outcome of 2013 Bali Ministerial Meeting?

    • Protection of the interests of poor farmers and food security.< This is what India wants to be honoured and implemented>
    • Exporters from Least developing countries(LDCs), will get duty free, quota free access to markets in foreign countries
    • Trade facilitation agreement, to ease the customs clearance.

    What is Special Safeguard Mechanism and its need for poor & developing countries?

    Basically, SSM will allow developing countries to temporarily increase the import duties on farm products, so as to counter the sudden increase in imports and price falls.< Actually, the developed countries have well-developed and mechanised agriculture along with that, huge subsidies are extended to farmers in these countries>

    This mechanism would empower the developing countries to impose additional duties on agri-products, when their imports breach specified ceilings or price.

    What’s the problem here?
    The negotiations are on the extent to which different categories of developing countries will be allowed to hike duties using the SSM, beyond their tariff.

    What are the new issues that have emerged?

    1. Rich countries are diluting the development dimension. Some developing countries are attempting to categorise nations such as India and China as emerging economies, instead of developing. 
    2. The developed countries are also redefining the developmental aspects.
    3. Rich countries wanted to revitalise WTO by introducing new issues, often called emerging trade issues:
      • Labour and environmental standards
      • Global value chains and promotion of supply chains
      • e-Commerce
      • Competition & investment provisions
      • Environmental and sustainable goods produced using clean and green energy
      • Transparency in govt. procurement
      • Transparency in state-owned enterprises and designated monopolies

    < If these issues are included in the agreement, developing and poor countries feel that these standards or rules might become non-tariff barriers, hurting their exports>

    What is India’s stand on these issues?

    • India has made it clear that it will not undertake any binding commitments.
    • The issues of labour and environment should be taken at concerned international bodies such as ILO and UNFCCC, not at WTO.
    • India wants new issues should also include those with a development angle such as easier movement of natural persons, such as skilled professionals.

    < Developed countries are fearing large scale migration, on account of increase in skilled manpower in developing countries such as India. India is looking for such concessions so that it's skilled manpower can find access to developed countries market.>

    What was India’s demand at Nairobi Meeting?

    • India wants the rich countries to drastically reduce their trade distorting farm subsidies.
    • India wants on priority that a permanent solution to the issue of public food stock holding in developing countries for the purpose of food security.
    • India is also looking for effective implementation of a package for LDCs including duty-free and quota-free market access.

    What does draft declaration at Nairobi says?

    • A commitment to allow developing nations to use special safeguards to protect farmers against import surges.
    • It reflects India’s demand for a reaffirmation from all members to work towards a permanent solution on public stockholding.
    • All countries agreed to the elimination of agricultural export subsidies subject to preservation of Special and Differential Treatment for developing countries such as longer phase-out period for transporting and export subsidies for exporting agricultural products.
    • Developed countries have committed to remove export subsidies immediately, except for a few agricultural products, and developing countries will do so by 2018.
    • However, developing countries will keep the flexibility to cover marketing and transport subsidies for agriculture exports until the end of 2023.
    • The talks concluded without any commitment on rich countries to check their domestic subsidies.
    • There was division among the WTO members on the issue of the reaffirmation of the Doha mandate.
    • However, some of the WTO members excluding India agreed on the timetable to implement a major deal to get rid off tariffs on 201 IT products valued at over $1.3 trillion/annum, and accounting for around 10% of total global trade.

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