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  • Centre enhances Subsidy for Non-Urea Fertilizers

    With urea and fertilizer prices shooting up in the wake of Russia’s invasion of Ukraine, the Union Cabinet approved an enhancement in subsidies on non-urea fertilisers for the upcoming Kharif crop, to ₹60,939 crore.

    What is the news?

    • The government fixes the retail price of urea and subsidises producers based on the difference between costs and the fixed selling price.
    • It pays a subsidy to non-urea fertiliser makers on the basis of nutrient-based rates.
    • The increase in the prices of Di-ammonium phosphate (DAP) and its raw material is in the range of about 80%.

    Fertilizer Subsidy in India

    • Subsidy as a concept originated during the Green Revolution of the 1970s-80s.
    • Fertiliser subsidy is purchasing by the farmer at a price below MRP (Maximum Retail Price), that is, below the usual demand-and-supply-rate, or regular production and import cost.

    How is the subsidy paid and who gets it?

    • The subsidy goes to fertiliser companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates.
    • From March 2018, a new so-called direct benefit transfer (DBT) system was introduced, wherein subsidy payment to the companies would happen only after actual sales to farmers by retailers.
    • With the DBT system, each retailer — there is over 2.3 lakh of them across India — now has a point-of-sale (PoS) machine linked to the Department of Fertilizers’ e-Urvarak DBT portal.

    How does this system work?

    • A popular example of how this system works is that of the neem coated urea fertiliser.
    • Its MRP (Maximum Retail Price) is fixed by the government at Rs. 5922.22 per tonne.
    • The average cost of domestic production is at Rs 17,000 per tonne. The difference is footed by the centre in the form of subsidy.
    • This fertiliser has high Nitrogen content and is cheaper than usual fertilizers.
    • While this may be perceived as a good thing, excess of Nitrogen can disrupt the NPK (Nitrogen, Phosphorus and Potassium) balance in the soil.

    What about non-urea fertilizers?

    • The non-urea fertiliser is decontrolled or fixed by the companies.
    • The non- urea fertilizers are further divided into two parts, DAP (Diammonium Phosphate) and MOP (Muriate of Phosphate).
    • The government pays a flat per tonne subsidy to maintain the nutrition content of the soil, and ensure other fertilizers are economical to use.

    Issues with such subsidies

    • A flawed subsidy policy is harmful not just for the farmer, but to the environment as well.
    • Indian soil has low Nitrogen use efficiency, which is the main constituent of Urea.
    • Consequently, excess usage contaminates groundwater.
    • The bulk of urea applied to the soil is lost as NH3 (Ammonia) and Nitrogen Oxides. The WHO has prescribed limits been breached by Punjab, Haryana and Rajasthan.
    • For human beings, “blue baby syndrome” is a common side ailment caused by Nitrate contaminated water.

    Try answering this PYQ:

    Q.What are the advantages of fertigation in agriculture? (CSP 2020)

    1.Controlling the alkalinity of irrigation water is possible.
    2. Efficient application of Rock Phosphate and all other phosphatic fertilizers is possible.
    3. Increased availability of nutrients to plants is possible.
    4. Reduction in the leaching of chemical nutrients is possible.

    Select the correct answer using the code given below:
    (a) 1, 2 and 3 only

    (b) 1,2 and 4 only

    (c) 1,3 and 4 only

    (d) 2, 3 and 4 only

     

    Post your answers here.

     

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  • SSLV ‘development flights’ likely in 2022

    The Indian Space Research Organisation (ISRO) is hoping to have all three development flights planned for its ‘baby rocket’ — the Small Satellite Launch Vehicle (SSLV) — in 2022 itself.

    What is SSLV?

    • The SSLV is a small-lift launch vehicle being developed by the ISRO with payload capacity to deliver:
    1. 600 kg to Low Earth Orbit (500 km) or
    2. 300 kg to Sun-synchronous Orbit (500 km)
    • It would help launching small satellites, with the capability to support multiple orbital drop-offs.
    • In future a dedicated launch pad in Sriharikota called Small Satellite Launch Complex (SSLC) will be set up.
    • A new spaceport, under development, near Kulasekharapatnam in Tamil Nadu will handle SSLV launches when complete.
    • After entering the operational phase, the vehicle’s production and launch operations will be done by a consortium of Indian firms along with NewSpace India Limited (NSIL).

    Vehicle details

    (A) Dimensions

    • Height: 34 meters
    • Diameter: 2 meters
    • Mass: 120 tonnes

    (B) Propulsion

    • It will be a four stage launching vehicle.
    • The first three stages will use Hydroxyl-terminated polybutadiene (HTPB) based solid propellant, with a fourth terminal stage being a Velocity-Trimming Module (VTM).

    SSLV vs. PSLV: A comparison

    • The SSLV was developed with the aim of launching small satellites commercially at drastically reduced price and higher launch rate as compared to Polar SLV (PSLV).
    • The projected high launch rate relies on largely autonomous launch operation and on overall simple logistics.
    • To compare, a PSLV launch involves 600 officials while SSLV launch operations would be managed by a small team of about six people.
    • The launch readiness period of the SSLV is expected to be less than a week instead of months.
    • The SSLV can carry satellites weighing up to 500 kg to a low earth orbit while the tried and tested PSLV can launch satellites weighing in the range of 1000 kg.
    • The entire job will be done in a very short time and the cost will be only around Rs 30 crore for SSLV.

    Significance of SSLV

    • SSLV is perfectly suited for launching multiple microsatellites at a time and supports multiple orbital drop-offs.
    • The development and manufacture of the SSLV are expected to create greater synergy between the space sector and private Indian industries – a key aim of the space ministry.

    Back2Basics:

     

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  • [Prelims Spotlight] Important Financial Institutions in News

    Dear Aspirants,

    This Spotlight is a part of our Mission Nikaalo Prelims-2022

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    Important Financial Institutions

    28 Apr 2022

    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
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  • Common values, shared threats in India-Australia cyber security ties

    Context

    Western and media attention may be focused on the conflict between Russia and Ukraine, but countries have not taken their eye off the Indo-Pacific where there is clear evidence of the changing world order.

    India and Australia faces a common threat to cyber security

    • The India-Australia ECTA is a concrete example of the bilateral faith in common values, and understanding of threats and goals.
    • A reflection of this is cooperation in cyber security.
    • China is accused of having amassed a large number of cyber weapons and has allegedly carried out sophisticated operations aimed at espionage, theft of intellectual property, and destructive attacks on internet resources of some countries.
    • Advanced Persistent Threat (APT) groups: Australia and India have been at the receiving end of several such campaigns by the so-called Advanced Persistent Threat (APT) groups, supported by or assumed to be located in China.

    Steps toward cooperation in cyber security

    • At the June 2020 virtual bilateral summit, Prime Minister Narendra Modi and his Australian counterpart Scott Morrison elevated the bilateral relationship to a Comprehensive Strategic Partnership.
    • New cyber security framework: The new cyber framework includes a five-year plan to work together on the digital economy, cybersecurity and critical and emerging technologies.
    • Bilateral research: This will be supported by a $9.7 million fund for bilateral research to improve regional cyber resilience.
    • An annual Cyber Policy Dialogue, a new Joint Working Group on Cyber Security Cooperation and a joint working group on ICTs have been established.
    • An annual India-Australia Foreign Ministers Cyber Framework Dialogue will be held.
    • India to be part of International Cyber Engagement Strategy: India will now be included in a core Australian initiative called the International Cyber Engagement Strategy — it began in 2017 to actively conduct capacity-building arrangements in Indonesia, Singapore and Thailand, and support similar activities in Malaysia, Vietnam and Cambodia.
    • A joint Centre of Excellence for Critical and Emerging Technology Policy, to be located in Bengaluru, will be set up.

    Steps taken by India to improve cyber security

    • India has set up the office of the National Cybersecurity Coordinator, a national Computer Emergency Response Team (CERT-IN), a national Critical Information Infrastructure Protection Agency (NCIIPC), and made appropriate amendments to the Information Technology Act and Rules to enhance its cyber security posture.
    • This has upped India’s rank to 10th in the Global Cyber Security Index (GCI) 2020, from 47th just two years earlier.
    • India has capable cybersecurity professionals.

    Conclusion

    Deepening cooperation can develop avenues for mutual learning and create complementary markets in cyber tools and technologies, boosting bilateral business and strategic commitments on both continents.

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  • ‘Mission Antyodaya’ can help transform rural India

    Context

    This article argues that given the right momentum, the ‘Mission Antyodaya’ project bears great promise to eradicate poverty in its multiple dimensions among rural households.

    Background of Mission Antyodaya

    • The ‘Mission Antyodaya’ project was launched by the Government of India in 2017-18.
    • The Ministry of Panchayati Raj and the Ministry of Rural Development act as the nodal agents to take the mission forward.
    • Key goals: The main objective of ‘Mission Antyodaya’ is to ensure optimum use of resources through the convergence of various schemes that address multiple deprivations of poverty, making gram panchayat the hub of a development plan.
    • Annual survey: This planning process is supported by an annual survey that helps to assess the various development gaps at the gram panchayat level, by collecting data regarding the 29 subjects assigned to panchayats by the Eleventh Schedule of the Constitution.
    • Also, data regarding health and nutrition, social security, good governance, water management and so on are also collected.
    • The idea of the Ministry of Panchayati Raj to identify the gaps in basic needs at the local level, and integrating resources of various schemes, self-help groups, voluntary organisations and so on to finance them needs coordination and capacity-building of a high order.
    • If pursued in a genuine manner, this can foster economic development and inter-jurisdictional equity.

    Infrastructural gaps as pointed out by the Mission Antyodaya Survey

    • The ‘Mission Antyodaya’ survey in 2019-20 for the first time collected data that shed light on the infrastructural gaps from 2.67 lakh gram panchayats, comprising 6.48 lakh villages with 1.03 billion population.
    • The maximum score values assigned will add up to 100 and are presented in class intervals of 10.
    • While no State in India falls in the top score bracket of 90 to 100, 1,484 gram panchayats fall in the bottom bracket.
    • Even in the score range of 80 to 90, 10 States and all Union Territories do not appear.
    • The total number of gram panchayats for all the 18 States that have reported adds up only to 260, constituting only 0.10% of the total 2,67,466 gram panchayats in the country.
    •  If we consider a score range of 70-80 as a respectable attainment level, Kerala tops but accounts for only 34.69% of gram panchayats of the State, the corresponding all-India average is as low as 1.09%.
    • The composite index data, a sort of surrogate for human development, are also not encouraging.
    • Although only 15 gram panchayats in the country fall in the bottom range below 10 scores, more than a fifth of gram panchayats in India are below the 40 range.
    • The gap report and the composite index show in unmistakable terms that building ‘economic development and social justice’ remains a distant goal even after 30 years of the decentralisation reforms and nearly 75 years into Independence.

    Way forward

    • Converge resources: Given the ‘saturation approach’ (100% targets on select items) of the Ministry of Panchayati Raj, the possibilities of realising universal primary health care, literacy, drinking water supply and the like are also immense.
    • But there is no serious effort to converge resources (the Mahatma Gandhi National Rural Employment Guarantee Act, the National Rural Livelihood Mission, National Social Assistance Programme, Pradhan Mantri Awas Yojana, etc.) and save administrative expenses.
    • Deploy the data to India’s fiscal federalism: Another lapse is the failure to deploy the data to India’s fiscal federalism, particularly to improve the transfer system and horizontal equity in the delivery of public goods in India at the sub-State level.
    • The constitutional goal of planning and implementing economic development and social justice can be achieved only through strong policy interventions.

    Conclusion

    The policy history of India has been witness to the phenomenon of announcing big projects and failing to take them to their logical consequence. ‘Mission Antyodaya’ is a striking case in recent times.

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  • 27th April 2022 | Prelims Daily with Previous Year Questions

    [WpProQuiz 983]

    [WpProQuiz_toplist 983]

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  • Goan politician accorded Lifetime Rank of Cabinet Minister

    Recently a politician in Goa was accorded the lifetime status of the rank of Cabinet Minister who was, a six-time Chief Minister of Goa and a legislator for a full 50 years. Hence a PIL has been filed in the High Court of Bombay at Goa.

    What is the “Lifetime Status of the rank of Cabinet minister”?

    • The former Chief Minister and former Speaker (of the Goa Legislative Assembly) had completed 50 years as a legislator.
    • The Cabinet decided that in future also, those who complete 50 years and hold posts like CM and Speaker will be given the Cabinet status even after their retirement.

    What is the PIL against this designation?

    • The PIL has urged the High Court to quash the notification of the government under which the person was conferred with the “lifetime status”.
    • It has contended that Goa has a 12-member Cabinet, and the conferment of Cabinet status results in the number of Cabinet ranks rising to 13, which exceeds the ceiling mandated by the Constitution.
    • This ceiling was mandated by the 91st Amendment which aimed to prevent jumbo Cabinets and the resultant drain on the public exchequer.

    How the 91st Amendment Act does relates here?

    • The Constitution (91st Amendment) Act, 2003 inserted clause 1A in Article 164.
    • It says the total number of Ministers, including the Chief Minister, in the Council of Ministers in a State shall not exceed 15% of the total number of members of the Legislative Assembly of that State.
    • It provided a condition that the number of Ministers, including the Chief Minister in a State shall not be less than twelve.
    • There are 40 seats in the unicameral Goa Assembly.

    Why is the designation problematic?

    • A cabinet minister for life would be entitled to 12 staff members – OSDs, support staff, peons, driver – which would cost the exchequer Rs 90 lakh a year.
    • The ‘Cabinet’ rank would also entitle him to government accommodation, vehicle and unlimited free travel for him and his spouse.
    • This is just none other case but political self-appeasement.

    Back2Basics: 91st Constitutional Amendment Act, 2003

    • It made the provisions to limit the size of Council of Ministers, to debar defectors from holding public offices, and to strengthen the anti-defection law.
    • The total number of ministers, including the Prime Minister, in the Central Council of Ministers shall not exceed 15% of the total strength of the Lok Sabha.
    • A member of either house of Parliament belonging to any political party who is disqualified on the ground of defection shall also be disqualified to be appointed as a minister.
    • The total number of ministers, including the Chief Minister, in the Council of Ministers in a state shall not exceed 15% of the total strength of the legislative Assembly of that state.
    • But, the number of ministers, including the Chief Minister, in a state shall not be less than 12.
    • A member of either House of a state legislature belonging to any political party who is disqualified on the ground of defection shall also be disqualified to be appointed as a minister.
    • The provision of the Tenth Schedule (anti-defection law) pertaining to exemption from disqualification in case of split by one-third members of legislature party has been deleted.
    • It means that the defectors have no more protection on grounds of splits.

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  • India’s CPC designation by the USCIRF

    In its 2022 Annual report, the United States Commission on International Religious Freedom (USCIRF) has recommended that India be designated a ‘Country of Particular Concern’ (CPC).

    What is the USCIRF and how is it constituted?

    • The USCIRF is an independent, bipartisan body created by the International Religious Freedom Act, 1998 (IRFA) of the US.
    • It has a mandate to monitor religious freedom violations globally and make policy recommendations to the President, the Secretary of State, and the Congress.
    • It is a congressionally created entity and not an NGO or advocacy organisation.
    • It is led by nine part-time commissioners appointed by the President and the leadership of both political parties in the House and the Senate.

    Why in news now?

    • USCIRF wants India to be designated under the CPC category of governments performing most poorly on religious freedom criteria.
    • It has called for “targeted sanctions” on individuals and entities responsible for severe violations of religious freedom by freezing those individuals’ or entities’ assets and/or barring their entry” into the US.

    What does a ‘Country of Particular Concern’ (CPC) designation mean?

    • IRFA requires the USCIRF to annually identify countries that merit a CPC designation.
    • As per IRFA, CPCs are countries whose governments either engage in or tolerate “particularly severe violations” of religious freedom.
    • Such freedoms are defined as systematic, ongoing, egregious violations of the internationally recognized right to freedom of religion.
    • The other designation, for less serious violations, is Special Watch List (SWL)

    Which other countries have been designated as CPCs?

    • For 2022, based on religious freedom conditions in 2021, a total of 15 countries have been recommended for the CPC designation.
    • They include India, Pakistan, Burma, China, Eritrea, Iran, North Korea, Russia, Saudi Arabia, Tajikistan, Afghanistan, Nigeria, Syria and Vietnam.
    • Countries recommended for a SWL designation include Algeria, Cuba, Nicaragua, Azerbaijan, Central African Republic, Egypt, Indonesia, Iraq, Kazakhstan, Malaysia, Turkey, and Uzbekistan.

    Why does USCIRF want India to be designated as a CPC?

    • The USCIRF, in its annual report, states that in 2021, religious freedom conditions in India significantly worsened.
    • It has noted that the Indian government escalated its promotion and enforcement of policies —including those promoting a Hindu-nationalist agenda.
    • This negatively affects Muslims, Christians, Sikhs, Dalits, and other religious minorities.
    • It highlighted the use of the Unlawful Activities Prevention Act (UAPA) against those documenting religious persecution and violence.
    • It also criticised the spate of fresh anti-conversion legislations, noting that “national, State and local governments demonised and attacked the conversion of Hindus to Christianity or Islam.”

    Are USCIRF recommendations binding on the US government?

    • No, they are not. The USCIRF typically recommends more countries for a CPC label than the State Department will designate.
    • This happens because the USCIRF is concerned solely with the state of religious freedom when it makes a recommendation.
    • However, the US State Department also takes into account other diplomatic, bilateral and strategic concerns before making a decision on a CPC designation.

    Is this the first time India is being designated as a CPC by the USCIRF? What has been India’s reaction?

    • This is the third year in a row that India has received a CPC recommendation.
    • India has in the past pushed back against the grading, questioning the locus standi of USCIRF.
    • In 2020, External Affairs Minister S. Jaishankar called the Commission an “Organisation of Particular Concern.”
    • US needs to introspect itself on the HR violations by the state authorities on the basis of racism, ethnocentrism and religion (particularly Sikhs).

    What is the likely impact of the USCIRF’s recommendation?

    • The US State Department hasn’t acted on such recommendations so far.
    • But India may come under greater pressure this time, given its divergence from the American position on the Ukraine war and refusal to endorse US-backed resolutions against Russia at the UN.
    • Hence the USCIRF is another force of Anti-India lobby in the US to bully other nations by countering an accusation with another.

     

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  • Countries will have to ‘justify’ Veto Votes at UN

    The 193 members of the United Nations General Assembly adopted by consensus a resolution requiring the five permanent members of the Security Council to justify their use of the veto.

    Why such move?

    • The push for reform was driven by Russia’s invasion of Ukraine.
    • The measure is intended to make veto-holders United States, China, Russia, France and Britain “pay a higher political price” when they use the veto to strike down a Security Council resolution.
    • For years Russia (and the US) has used its veto power to block UNSC resolutions — which, unlike General Assembly resolutions, are enforceable under international law.

    What is the Veto Power at the UN?

    • The UN Security Council veto power is the power of the five permanent members of the UN Security Council to veto any “substantive” resolution.
    • They also happen to be the nuclear-weapon states (NWS) under the terms of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT).
    • However, a permanent member’s abstention or absence does not prevent a draft resolution from being adopted.
    • This veto power does not apply to “procedural” votes, as determined by the permanent members themselves.
    • A permanent member can also block the selection of a Secretary-General, although a formal veto is unnecessary since the vote is taken behind closed doors.

    Issues with Veto Power

    • The veto power is controversial. Supporters regard it as a promoter of international stability, a check against military interventions, and a critical safeguard against US domination.
    • Critics say that the veto is the most undemocratic element of the UN, as well as the main cause of inaction on war crimes and crimes against humanity.
    • It effectively prevents UN action against the permanent members and their allies.

    Back2Basics: United Nations Security Council

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

    Also read

    Explained: India at United Nations Security Council

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  • Direct Tax collections surge in FY22

    India’s net direct tax collections amounted to ₹14,09,640.83 crore for FY22, which is the highest collection ever.

    What are Direct Taxes?

    • A type of tax where the impact and the incidence fall under the same category can be defined as a Direct Tax.
    • The tax is paid directly by the organization or an individual to the entity that has imposed the payment.
    • The tax must be paid directly to the government and cannot be paid to anyone else.

     Why in news?

    • The surge in direct tax collection signals that the Indian economy has bounced back after two years of the pandemic.

    Rise in direct tax collection

    • As against ₹14.09 lakh crore this year, our collection in 2020-21 was only ₹9.45 lakh crore.
    • In a single year, the economy has moved upward by nearly ₹4.5 lakh crore, registering a growth of 49%.
    • The collection is the best-ever as far as income tax and corporation tax are concerned.

    What about direct tax-to-GDP ratio?

    • The direct tax-to-GDP ratio is around 12%.
    • The Central Board of Direct Taxes (CBDT) was working to raise the ratio to 15-20% in 5-10 years.

    Why is it significant?

    • A tax-to-GDP ratio is a gauge of a nation’s tax revenue relative to the size of its economy as measured by gross domestic product (GDP).
    • The ratio provides a useful look at a country’s tax revenue because it reveals potential taxation relative to the economy.
    • It also enables a view of the overall direction of a nation’s tax policy, as well as international comparisons between the tax revenues of different countries.

    Back2Basics: Types of Direct Taxes

    The various types of direct tax that are imposed in India are mentioned below:

    (1) Income Tax

    • Depending on an individual’s age and earnings, income tax must be paid.
    • Various tax slabs are determined by the Government of India which determines the amount of Income Tax that must be paid.
    • The taxpayer must file Income Tax Returns (ITR) on a yearly basis.
    • Individuals may receive a refund or might have to pay a tax depending on their ITR. Penalties are levied in case individuals do not file ITR.

    (2) Wealth Tax

    • The tax must be paid on a yearly basis and depends on the ownership of properties and the market value of the property.
    • In case an individual owns a property, wealth tax must be paid and does not depend on whether the property generates an income or not.
    • Corporate taxpayers, Hindu Undivided Families (HUFs), and individuals must pay wealth tax depending on their residential status.
    • Payment of wealth tax is exempt for assets like gold deposit bonds, stock holdings, house property, commercial property that have been rented for more than 300 days, and if the house property is owned for business and professional use.

    (3) Estate Tax

    • It is also called Inheritance Tax and is paid based on the value of the estate or the money that an individual has left after his/her death.

    (4) Corporate Tax

    • Domestic companies, apart from shareholders, will have to pay corporate tax.
    • Foreign corporations who make an income in India will also have to pay corporate tax.
    • Income earned via selling assets, technical service fees, dividends, royalties, or interest that is based in India is taxable.
    • The below-mentioned taxes are also included under Corporate Tax:
    1. Securities Transaction Tax (STT): The tax must be paid for any income that is earned via security transactions that are taxable.
    2. Dividend Distribution Tax (DDT): In case any domestic companies declare, distribute, or are paid any amounts as dividends by shareholders, DDT is levied on them. However, DDT is not levied on foreign companies.
    3. Fringe Benefits Tax: For companies that provide fringe benefits for maids, drivers, etc., Fringe Benefits Tax is levied on them.
    4. Minimum Alternate Tax (MAT): For zero tax companies that have accounts prepared according to the Companies Act, MAT is levied on them.

    (5) Capital Gains Tax:

    • It is a form of direct tax that is paid due to the income that is earned from the sale of assets or investments. Investments in farms, bonds, shares, businesses, art, and home come under capital assets.
    • Based on its holding period, tax can be classified into long-term and short-term.
    • Any assets, apart from securities, that are sold within 36 months from the time they were acquired come under short-term gains.
    • Long-term assets are levied if any income is generated from the sale of properties that have been held for a duration of more than 36 months.

    Advantages of Direct Taxes

    The main advantages of Direct Taxes in India are mentioned below:

    • Economic and Social balance: The Government of India has launched well-balanced tax slabs depending on an individual’s earnings and age. The tax slabs are also determined based on the economic situation of the country. Exemptions are also put in place so that all income inequalities are balanced out.
    • Productivity: As there is a growth in the number of people who work and community, the returns from direct taxes also increases. Therefore, direct taxes are considered to be very productive.
    • Inflation is curbed: Tax is increased by the government during inflation. The increase in taxes reduces the necessity for goods and services, which leads to inflation to compress.
    • Certainty: Due to the presence of direct taxes, there is a sense of certainty from the government and the taxpayer. The amount that must be paid and the amount that must be collected is known by the taxpayer and the government, respectively.
    • Distribution of wealth is equal: Higher taxes are charged by the government to the individuals or organizations that can afford them. This extra money is used to help the poor and lower societies in India.

    What are the disadvantages of direct taxes?

    • Easily evadable: Not all are willing to pay their taxes to the government. Some are willing to submit a false return of income to evade tax. These individuals can easily conceal their incomes, with no accountability to the law of the land.
    • Arbitrary: Taxes, if progressive, are fixed arbitrarily by the Finance Minister. If proportional, it creates a heavy burden on the poor.
    • Disincentive: If there are high taxes, it does not allow an individual to save or invest, leading to the economic suffering of the country. It does not allow businesses/industry to grow, inflicting damage to them.

     

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  • [Prelims Spotlight] Important UN Organizations

    Dear Aspirants,

    This Spotlight is a part of our Mission Nikaalo Prelims-2022

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    Important UN Organizations in News

    27 Apr 2022

    United Nation Overview:

    • The United Nations is an international organization founded in 1945.  It is currently made up of 193 Member States.  The mission and work of the United Nations are guided by the purposes and principles contained in its founding Charter.
    • Due to the powers vested in its Charter and its unique international character, the United Nations can take action on the issues confronting humanity in the 21st century, such as peace and security, climate change, sustainable development, human rights, disarmament, terrorism, humanitarian and health emergencies, gender equality, governance, food production, and more.
    • The UN also provides a forum for its members to express their views in the General Assembly, the Security Council, the Economic and Social Council, and other bodies and committees. By enabling dialogue between its members, and by hosting negotiations, the Organization has become a mechanism for governments to find areas of agreement and solve problems together.
    • The main organs of the UN are the General Assembly, the Security Council, the Economic and Social Council, the Trusteeship Council, the International Court of Justice, and the UN Secretariat.  All were established in 1945 when the UN was founded.

    General Assembly

    • The General Assembly is the main deliberative, policymaking and representative organ of the UN. All 193 Member States of the UN are represented in the General Assembly, making it the only UN body with universal representation.
    • Each year, in September, the full UN membership meets in the General Assembly Hall in New York for the annual General Assembly session, and general debate, which many heads of state attend and address. Decisions on important questions, such as those on peace and security, admission of new members and budgetary matters, require a two-thirds majority of the General Assembly.
    • Decisions on other questions are by a simple majority.  The General Assembly, each year, elects a GA President to serve a one-year term of office.

    Security Council

    The Security Council has primary responsibility, under the UN Charter, for the maintenance of international peace and security.  It has 15 Members (5 permanent and 10 non-permanent members). Each Member has one vote. Under the Charter, all Member States are obligated to comply with Council decisions. The Security Council takes the lead in determining the existence of a threat to the peace or act of aggression. It calls upon the parties to a dispute to settle it by peaceful means and recommends methods of adjustment or terms of the settlement. In some cases, the Security Council can resort to imposing sanctions or even authorize the use of force to maintain or restore international peace and security.  The Security Council has a Presidency, which rotates, and changes, every month.

    Economic and Social Council

    The Economic and Social Council is the principal body for coordination, policy review, policy dialogue and recommendations on economic, social and environmental issues, as well as the implementation of internationally agreed development goals. It serves as the central mechanism for activities of the UN system and its specialized agencies in the economic, social and environmental fields, supervising subsidiary and expert bodies.  It has 54 Members, elected by the General Assembly for overlapping three-year terms. It is the United Nations’ central platform for reflection, debate, and innovative thinking on sustainable development.

    Trusteeship Council

    The Trusteeship Council was established in 1945 by the UN Charter, under Chapter XIII, to provide international supervision for 11 Trust Territories that had been placed under the administration of seven Member States, and ensure that adequate steps were taken to prepare the Territories for self-government and independence. By 1994, all Trust Territories had attained self-government or independence.  The Trusteeship Council suspended operation on 1 November 1994. By a resolution adopted on 25 May 1994, the Council amended its rules of procedure to drop the obligation to meet annually and agreed to meet as occasion required — by its decision or the decision of its President, or at the request of a majority of its members or the General Assembly or the Security Council.

    International Court of Justice

    The International Court of Justice is the principal judicial organ of the United Nations. Its seat is at the Peace Palace in the Hague (Netherlands). It is the only one of the six principal organs of the United Nations not located in New York (United States of America). The Court’s role is to settle, in accordance with international law, legal disputes submitted to it by States and to give advisory opinions on legal questions referred to it by authorized United Nations organs and specialized agencies.

    Secretariat

    The Secretariat comprises the Secretary-General and tens of thousands of international UN staff members who carry out the day-to-day work of the UN as mandated by the General Assembly and the Organization’s other principal organs.  The Secretary-General is the chief administrative officer of the Organization, appointed by the General Assembly on the recommendation of the Security Council for a five-year, renewable term. UN staff members are recruited internationally and locally, and work in duty stations and on peacekeeping missions all around the world.  But serving the cause of peace in a violent world is a dangerous occupation. Since the founding of the United Nations, hundreds of brave men and women have given their lives in its service.

    UN Specialized Agencies

    The UN specialized agencies are autonomous organizations working with the United Nations. All were brought into relationship with the UN through negotiated agreements. Some existed before the First World War. Some were associated with the League of Nations. Others were created almost simultaneously with the UN. Others were created by the UN to meet emerging needs.

    FAO

    Headquarters: Rome, Italy

    The Food and Agriculture Organization leads to international efforts to fight hunger. It is both a forum for negotiating agreements between developing and developed countries and a source of technical knowledge and information to aid development.

    ICAO

    Headquarters: Montreal, Canada

    The International Civil Aviation Organization develops standards for global air transport and assists its 192 Member States in sharing the world’s skies to their socio-economic benefit.

    IFAD

    Headquarters: Rome, Italy

    The International Fund for Agricultural Development, since it was created in 1977, has focused exclusively on rural poverty reduction, working with poor rural populations in developing countries to eliminate poverty, hunger and malnutrition; raise their productivity and incomes; and improve the quality of their lives.

    ILO

    Headquarters: Geneva, Switzerland

    The International Labor Organization promotes international labor rights by formulating international standards on the freedom to associate, collective bargaining, the abolition of forced labor, and equality of opportunity and treatment.

    IMF

    Headquarters: Washington, DC, USA

    The International Monetary Fund fosters economic growth and employment by providing temporary financial assistance to countries to help ease balance of payments adjustment and technical assistance. The IMF currently has $28 billion in outstanding loans to 74 nations.

    IMO

    Headquarters: London, United Kingdom

    The International Maritime Organization has created a comprehensive shipping regulatory framework, addressing safety and environmental concerns, legal matters, technical cooperation, security, and efficiency.

    ITU

    Headquarters: Geneva, Switzerland

    The International Telecommunication Union is the United Nations specialized agency for information and communication technologies. It is committed to connecting all the world’s people – wherever they live and whatever their means. Through our work, we protect and support everyone’s fundamental right to communicate

    UNESCO

    Headquarters: Paris, France

    The United Nations Educational, Scientific and Cultural Organization focuses on everything from teacher training to helping improve education worldwide to protecting important historical and cultural sites around the world. UNESCO added 28 new World Heritage Sites this year to the list of irreplaceable treasures that will be protected for today’s travelers and future generations.

    UNIDO

    Headquarters: Vienna, Austria

    The United Nations Industrial Development Organization is the specialized agency of the United Nations that promotes industrial development for poverty reduction, inclusive globalization and environmental sustainability.

    UNWTO

    Headquarters: Madrid, Spain

    The World Tourism Organization is the United Nations agency responsible for the promotion of responsible, sustainable and universally accessible tourism.

    UPU

    Headquarters: Bern, Switzerland

    The Universal Postal Union is the primary forum for cooperation between postal sector players. It helps to ensure a truly universal network of up-to-date products and services.

    WHO

    Headquarters: Geneva, Switzerland

    The World Health Organization is the directing and coordinating authority on international health within the United Nations system. The objective of WHO is the attainment by all peoples of the highest possible level of health. Health, as defined in the WHO Constitution, is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.

    WIPO

    Headquarters: Geneva, Switzerland

    The World Intellectual Property Organization protects intellectual property throughout the world through 23 international treaties.

    WMO

    Headquarters: Geneva, Switzerland

    The World Meteorological Organization facilitates the free international exchange of meteorological data and information and the furtherance of its use in aviation, shipping, security, and agriculture, among other things.

    World Bank

    Headquarters: Washington, DC, USA

    The World Bank focuses on poverty reduction and the improvement of living standards worldwide by providing low-interest loans, interest-free credit, and grants to developing countries for education, health, infrastructure, and communications, among other things. The World Bank works in over 100 countries.

    • International Bank for Reconstruction and Development (IBRD)
    • International Centre for Settlement of Investment Disputes (ICSID)*
    • International Development Association (IDA)
    • International Finance Corporation (IFC)
    • Multilateral Investment Guarantee Agency (MIGA)*

    * International Centre for Settlement of Investment Disputes (ICSID) and Multilateral Investment Guarantee Agency (MIGA) are not specialized agencies in accordance with Articles 57 and 63 of the Charter but are part of the World Bank Group.

    Other Entities and Bodies

    UNAIDS

    Headquarters: Geneva, Switzerland

    The Joint United Nations Programme on HIV/AIDS (UNAIDS) leads and inspires the world to achieve its shared vision of zero new HIV infections, zero discrimination and zero AIDS-related deaths. UNAIDS unites the efforts of 11 UN organizations—UNHCR, UNICEF, WFP, UNDP, UNFPA, UNODC, UN Women, ILO, UNESCO, WHO and the World Bank—and works closely with global and national partners towards ending the AIDS epidemic by 2030 as part of the Sustainable Development Goals.

    UNHCR

    Headquarters: Geneva, Switzerland

    The United Nations High Commissioner for Refugees – UNHCR protects refugees worldwide and facilitates their return home or resettlement.

    UNIDIR

    Headquarters: Geneva, Switzerland

    The United Nations Institute for Disarmament Research is a voluntarily funded autonomous institute within the United Nations. An impartial actor, the Institute generates ideas and promotes action on disarmament and security. UNIDIR brings together states, international organizations, civil society, the private sector and academia to work together—internationally, regionally and locally—to build and implement creative solutions that will benefit all states and peoples.

    UNITAR

    Headquarters: Geneva, Switzerland

    An autonomous UN body established in 1963, the United Nations Institute for Training and Research is a training arm of the United Nations System and has the mandate to enhance the effectiveness of the UN through diplomatic training, and to increase the impact of national actions through public awareness-raising, education and training of public policy officials.

    UNOPS

    Headquarters: Copenhagen, Denmark

    The mission of the United Nations Office for Project Services is to help people build better lives and help countries achieve peace and sustainable development. UNOPS helps the UN, governments and other partners to manage projects, and deliver sustainable infrastructure and procurement in an efficient way.

    UNRWA

    Headquarters: Amman, Jordan

    The United Nations Relief and Works Agency for Palestine Refugees has contributed to the welfare and human development of four generations of Palestine refugees. It’s services encompass education, health care, relief and social services, camp infrastructure and improvement, microfinance and emergency assistance, including in times of armed conflict.  It reports only to the UN General Assembly.

    UNSSC

    Headquarters: Turin, Italy

    The United Nations System Staff College is the learning organization of the United Nations system. It designs and delivers learning programmes for staff of the UN system and its partners. It helps the United Nations become more effective by fostering a common leadership and management culture across the system.

    UN Women

    Headquarters: New York City, USA

    UN Women merges and builds on the important work of four previously distinct parts of the UN system, which focus exclusively on gender equality and women’s empowerment.

    Related Organizations

    CTBTO

    Headquarters: Vienna, Austria

    The Preparatory Commission for the Comprehensive Nuclear-Test-Ban Treaty Organization promotes the Comprehensive Nuclear-Test-Ban Treaty (which is not yet in force) and the build-up of the verification regime so that it is operational when the Treaty enters into force.

    IAEA

    Headquarters: Vienna, Austria

    The International Atomic Energy Agency, is the world’s centre for cooperation in the nuclear field. The Agency works with its Member States and multiple partners worldwide to promote the safe, secure and peaceful use of nuclear technologies.

    IOM

    Headquarters: Geneva, Switzerland

    The International Organization for Migration works to help ensure the orderly and humane management of migration, to promote international cooperation on migration issues, to assist in the search for practical solutions to migration problems and to provide humanitarian assistance to migrants in need, including refugees and internally displaced people.

    OPCW

    Headquarters: The Hague, Netherlands

    The Organisation for the Prohibition of Chemical Weapons is the implementing body of the Chemical Weapons Convention (CWC), which entered into force in 1997. The OPCW Member States work together to achieve a world free of chemical weapons.

    UNFCCC

    Headquarters: Bonn, Germany

    The UNFCCC Secretariat (UN Climate Change) was established in 1992 when countries adopted the United Nations Framework Convention on Climate Change (UNFCCC). With the subsequent adoption of the Kyoto Protocol in 1997 and the Paris Agreement in 2015, Parties to these three agreements have progressively reaffirmed the Secretariat’s role as the United Nations entity tasked with supporting the global response to the threat of climate change.

    WTO

    Headquarters: Geneva, Switzerland

    The World Trade Organization is a forum for governments to negotiate trade agreements and a place where member governments try to sort out the trade problems they face with each other.

  • [Sansad TV] Perspective: Dollar Dominance: Under threat?

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    Context

    As per IMF’s first deputy managing director Gita Gopinath, financial sanctions imposed on Russia threaten to gradually dilute the dominance of the U.S. dollar and could result in a more fragmented international monetary system.

    To understand more on this and related risks to the dominance of the dollar in view of the prevailing global situation and what it means for the international financial market.

    Russia- Ukraine War and USD

    • The Russia-Ukraine conflict conveys no signal of coming to an end or any tendency towards a peaceful settlement.
    • This has disrupted the global supply chain and has caused a major blow to the global economy.
    • The World Bank has reduced its annual global growth forecast for 2022 by nearly a full percentage point, from 4.1% down to 3.2%.
    • The financial sanctions imposed on Russia by the major Western powers have prompted changes in the international financial order driven by USD.
    • The United States has to some extent weaponized the dollar against Russia.
    • Countries are concerned that the money it holds in dollars would be worthless if dollar inflation set in.

    How US Dollar became the global currency?

    • The U.S. dollar has been the world’s dominant currency since the end of World War II.
    • Roughly half of international trade, international loans, and global debt securities are denominated in USD.
    • The USD became the official reserve currency of the world in 1944. The decision was made by a delegation from 44 Allied countries called the Bretton Woods Agreement.
    • Despite the challenges faced by the US economy due to fiscal and external deficits of the 1980s, the dollar’s share of global reserves remained steady and reserves even grew as time progressed.
    • The dominance of the dollar is backed by strong and highly credible institutions, deep markets and the fact that it is freely convertible.
    • Almost 40% of the world’s debt is issued in dollars. As a result, foreign banks need a lot of dollars to conduct business. This became evident during the 2008 financial crisis.

    Implications of USD led inflation

    • The dollar’s role as the world’s “reserve currency” is a cornerstone of the global economy and global finance as well as geopolitics.
    • Most of the transactions are dollar-dominated, currency depreciation is rather unlikely to increase exports.
    • A depreciation in the currency relative to the dollar leads to an increase in the price of imported goods which means high pressures on inflation.

    Challenges to USD

    • In the 1990s the dollar’s role started diminishing and the US became a net debtor to the world.
    • With the emerging global value chains, China’s integration into the world economy has been an impediment to the economic growth of the US.
    • A considerable decline in the dollar’s share can be attributed to the greater use of the Chinese renminbi.
    • It was notified by the IMF official that the dollar’s share of international reserves had fallen from 70% to 60% over a period of time with the growing trading currencies led by the Australian dollar.

    Calls for a one world currency

    • In March 2009, China and Russia called for a new global currency.
    • China is a huge player in world trade, which you might think would make people want to hold a lot of yuan assets.
    • They wanted the world to create a reserve currency that is disconnected from individual nations and is able to remain stable in the long run.
    • They thus want to remove the inherent deficiencies caused by using credit-based national currencies.
    • In the fourth quarter of 2016, the Chinese renminbi became another one of the world’s reserve currencies.
    • China wants its currency to be fully traded on the global foreign exchange markets. It would like the Yuan to replace the dollar as the global currency.

    What lies ahead?

    • For many years, undermining the dollar’s dominance has been the dream of governments that have looked uneasily at US global primacy, and formed coalitions.
    • Some experts also advocate that either China’s or Russia’s threat to the dollar hegemony will remain a fantasy.
    • It is predicted that the sanctions against Russia will not foreshadow the decline of the dollar as the reserve currency.
    • The Russia-Ukraine Conflict will definitely slow down the global economy but will not cause a global recession.

  • The goal of an energy-secure South Asia

    Context

    Given that a 0.46% increase in energy consumption leads to a 1% increase in GDP per capita, electrification not only helps in improving lifestyle but also adds to the aggregate economy by improving the nation’s GDP.

    Widening electricity coverage in South Asian nations

    • The electricity policies of South Asian countries aim at providing electricity to every household.
    • The issues these policies address include generation, transmission, distribution, rural electrification, research and development, environmental issues, energy conservation and human resource training.
    • Bangladesh has achieved 100% electrification recently while Bhutan, the Maldives, and Sri Lanka accomplished this in 2019.
    • For India and Afghanistan, the figures are 94.4% and 97.7%, respectively, while for Pakistan it is 73.91%.
    • Bhutan has the cheapest electricity price in South Asia (U.S.$0.036 per kilowatt hour, or kWh) while India has the highest (U.S.$0.08 per kWh.) 
    • South Asia is reinforcing its transmission and distribution frameworks to cater to growing energy demand not only through the expansion of power grids but also by boosting green energy such as solar power or hydroelectricity.

    Adapting to renewable

    • Geographical differences between these countries call for a different approach depending on resources.
    •  India leads South Asia in adapting to renewable power, with its annual demand for power increasing by 6%.
    • India’s pledge to move 40% of total energy produced to renewable energy is also a big step.
    • Prime Minister Narendra Modi in his ‘net-zero by 2070’ pledge at COP26 in Glasgow asserted India’s target to increase the capacity of renewable energy from 450GW to 500GW by 2030.
    • The region is moving towards green growth and energy as India hosts the International Solar Alliance.
    • South Asia has vast renewable energy resources — hydropower, solar, wind, geothermal and biomass — which can be harnessed for domestic use as well as regional power trade.

    Steps toward SDGs

    • Solar power-driven electrification in rural Bangladesh is a huge step towards Sustainable Development Goal 7.
    • Access to electricity improves infrastructure i.e., SDG 9 (which is “build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation”).
    • Energy access helps online education through affordable Internet (SDG 4, or “ensure inclusive and equitable quality education and promote lifelong learning opportunities for all”), more people are employed (SDG 1: “no poverty”), and are able to access tech-based health solutions (SDG 3, or “ensure healthy lives and promote well-being for all at all ages”).

    Regional energy trade

    • The South Asian Association for Regional Cooperation (SAARC) prepared the regional energy cooperation framework in 2014, but its implementation is questionable.
    • Energy trade agreements: There are a number of bilateral and multilateral energy trade agreements such as the India-Nepal petroleum pipeline deal, the India-Bhutan hydroelectric joint venture, the Myanmar-Bangladesh-India gas pipeline, the Bangladesh-Bhutan-India-Nepal (BBIN) sub-regional framework for energy cooperation, and the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, rumoured to be extended to Bangladesh.
    • Challenges: ‘South Asia’s regional geopolitics is determined by the conflation of identity, politics, and international borders.
    • The current participation in cross-border projects has been restricted to respective tasks, among Bhutan and India or Nepal and India.
    • It is only now that power-sharing projects among the three nations, Nepal, India, and Bangladesh, have been deemed conceivable.

    Way forward

    • Energy framework: Going forward, resilient energy frameworks are what are needed such as better building-design practices, climate-proof infrastructure, a flexible monitory framework, and an integrated resource plan that supports renewable energy innovation.
    • Public-Private Partnership: Government alone cannot be the provider of reliable and secure energy frameworks, and private sector investment is crucial.

    Conclusion

    While universal coverage can catalyse the region’s economic growth, energy trade must be linked to peace building.

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  • Anchoring inflationary expectations

    Context

    The RBI released the Inflation Expectations Survey of Households (IESH) for March 2022 on April 8. The survey results present interesting behavioural insights for public policy, particularly from a gender perspective.

    Significance of inflation expectations

    • The impact of inflation — the overall increase in the prices in an economy — is felt by everyone.
    • High inflation adversely affects the poor.
    • Individuals, therefore, form expectations about how prices will behave in the future to take precautions.
    • If they anticipate high inflation, they negotiate wages or rents to compensate against a potential fall in their purchasing power.
    • Self-fulfilling: Increased wages increase the cost of production, making expectations self-fulfilling and, therefore, playing a pivotal role in determining inflation.
    • Anchoring inflation expectations: Central banks raise interest rates to ‘anchor’ high inflationary expectations when temporary price shocks, on account of drought or disruption in global supply chains, entail the risk of getting transmitted into actual inflation.

    What shapes inflation expectations of individuals?

    • A recent study carried out by Acunto et al., 2020, validates that what agents frequently purchase, instead of those purchased infrequently, shape their perception of the general level of inflation.
    • Factors shaping individual’s perception: A significant factor shaping perceptions on inflation are the prices that individuals observe in their daily lives, originally posited by Robert Lucas in his seminal Islands model.
    • Therefore, generalising aggregate inflation expectations for making general views of prices in the economy could be misleading.
    • This insight has implications for gender-based differences in anticipating inflation in the future.
    • Existing literature shows that women have higher inflationary expectations compared to men.
    •  However, a new study reveals that it is not the innate characteristics as much as the traditional gender roles that explain this divergence.

    Natural experiments

    • To test its validity, trends of Inflation Expectations Survey of Households (IESH) before and after the lockdown period present itself as a crude ‘natural experiment’.
    • The authors hypothesise that if traditional gender roles are the primary reasons behind the gender inflation expectation gap, then the lockdown-imposed work-from-home (WFH) arrangements or loss of employment should contribute in closing this gap.
    • The logic: during the lockdown, people in urban areas lost jobs or remained at home, taking a relatively equal share in the frequent day-to-day purchases.
    • Two categories of occupations are studied here: homemakers (assumed to be dominated by women) and financial sector employees (assumed to be dominated by men).
    • Looking at the trends of the RBI surveys for the period between March 2018 and March 2020, homemakers report higher inflation expectations than financial sector employees.
    • However, this gap has narrowed over the last two years and has almost converged in March 2022.
    • A possible explanation of closing of the gap could be the gradual ‘experience effect’ of male-dominated financial sector employees.
    • Experience effect, contrary to Rational Expectations Theory that assumes individuals base their decisions on the information available to them, is based on the premise that actual personal experiences shape behaviour more than being informed about the outcome of the event.

    Conclusion

    Focus could be shifted more on the microfoundations — understanding macroeconomic outcomes by studying factors that shape individual behaviour and decision making — for making better policy decisions concerning macroeconomic phenomena.

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  • India, Europe and the Russian complication

    Context

    The re-election of Emmanuel Macron as the president of France on Sunday has sent a sigh of relief across Europe and North America. Delhi too is pleased with the return of Macron, who laid a strong foundation for India’s strategic partnership with France.

    Why France election matters to the regional and domestic order in Europe

    • Unlike the Soviet Union, which sought to shape European politics though left-wing parties, Russia today influences European politics through right-wing parties.
    • Victory for Marine Le Pen, Macron’s opponent, would have dramatically complicated the geopolitics of Europe.
    • Le Pen, like so many other right-wing leaders in Europe, has close ties to Vladimir Putin.
    • Le Pen’s victory would have not only altered France’s international trajectory, but also shaken the EU to its political core.

    Three factors shaping the transformation of India’s ties with Europe

    • Russia’s threat to the regional and domestic order in Europe is among multiple factors shaping Delhi’s intensifying engagement with Brussels.
    • Three major external factors are facilitating the transformation of India’s ties with Europe.

    1] Russian Question

    • For India, a normal relationship between Russia and the West would have been ideal.
    • But Russia’s confrontation with the West comes during India’s rapidly expanding economic and political ties to Europe and America.
    • Delhi might be sentimental about India’s historic Russian connection but it is not going to sacrifice its growing ties to the West on that altar.
    • Russia’s declining economic weight and growing international isolation begins to simplify India’s choices.
    • During the last few weeks, Delhi has insisted that its silence is not an endorsement of Russian aggression.
    • India’s position has continued to evolve.
    • Delhi’s repeated emphasis on respecting the territorial integrity of states is a repudiation of Russia’s unacceptable aggression.
    • Meanwhile, geographic proximity and economic complementarity have tied Europe even more deeply to Russia.
    • The EU’s annual trade with Russia at around $260 billion is massive in comparison to India’s $10 billion.
    • Putin’s reckless invasion of Ukraine has compelled Europe to embark on a costly effort to disconnect from Russia.
    • The war in Ukraine has certainly presented a major near-term problem that needs to be managed by Delhi and Brussels.

    2] China Question

    •  Moscow has been deepening ties with Beijing for more than two decades triggering many anxieties in Delhi.
    •  In February, Putin travelled to Beijing to announce a partnership “without limits”.
    • India has no option but to manage the consequences of the Russian decision.
    • In the last two decades, China has emerged as a great power and now presents a generational challenge for Indian policymakers.
    • That challenge has been made harder by Putin’s alliance with Xi Jinping.
    • As Delhi strives to retain a reasonable relationship with Moscow, Europe emerges as an important partner in letting India cope with the China challenge.
    •  Thanks to the growing problems of doing business with Xi’s China, Beijing’s geopolitical alliance with Moscow, and the rapid deterioration of Sino-US relations, Brussels is ready to invest serious political capital in building purposeful strategic ties with India.

    3] American Question

    • Until recently it appeared that Europe’s calls for “strategic autonomy” from the US were in sync with India’s own worldview.
    • But the Ukraine crisis has underlined the US’s centrality in securing Europe against Russia.
    • In Asia, Chinese assertiveness has brought back the US as a critical factor in shaping peace and security.
    • Washington wants a strong Europe taking greater responsibility for its own security; it would like Delhi to play a larger role in Asia and become a credible provider of regional security.
    • Above all, America wants India and Europe to build stronger ties with each other.

    Conclusion

    For the first time since independence, India’s interests are now aligning with those of Europe. Together, Delhi and Brussels can help reshape Eurasia as well as the Indo-Pacific.

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  • Effective and Efficient: The Insolvency and Bankruptcy Code

    Context

    The performance of the Insolvency and Bankruptcy Code (IBC) has been under intense scrutiny.

    Basis for the criticism of IBC

    • The Code has been mainly criticised on three counts:
    • 1] Delay in resolution: There are inordinate delays in the resolution procedure.
    • 2] Liquidation:  There have been more liquidations than resolutions.
    • 3] Low recovery amount: The recovery amounts under IBC are not substantial, making it more of a talking point than an effective structural reform.

    Is the criticism about the delay justified?

    • Assessing IBC based only on the average time taken to resolve successful cases does a substantial disservice to how much more efficient the IBC is compared to the previous regimes.
    •  It is calculated by taking a simple average of time taken on each completed case.
    • This is one of the metrics used by the Insolvency and Bankruptcy Board of India (IBBI) to compare the IBC regime with the earlier Board of Industrial and Financial Reconstruction (BIFR) regime.
    •  However, the performance of a bankruptcy resolution should ideally be evaluated along at least three dimensions:
    • The average time taken to resolve a case, the fraction of cases resolved within a given timeframe, and the recovery rate conditional on resolution.
    • Focusing on any single parameter may result in a gross under (over) estimation of the IBC’s (BIFR’s) performance.
    • By examining the fraction of cases that are resolved within a specific timeframe, we see that for any fraction of the total cases resolved under each scheme, the IBC took considerably less time than BIFR.
    • Total number of cases solved: Since its inception in 1987, the BIFR has resolved less than 3,500 cases while the IBC, since it was launched in 2016, resolved about 1,178 cases until it was suspended at the onset of the COVID pandemic.
    • Most analyses of IBC’s performance overlook the important fact that many of the legacy BIFR cases were subsumed by IBC, and these were often zombie firms that were kept alive due to massive evergreening of loans between 2008-2015.

    Conclusion

    The bottom line is straightforward: The IBC has significantly outperformed the earlier BIFR regime in terms of the speed of resolution.

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  • 26th April 2022 | Prelims Daily with Previous Year Questions

    [WpProQuiz 981]

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  • 26th April 2022 | Nikaalo Prelims- Current Affairs Test 7: January 2022

    [WpProQuiz 980]

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  • NITI Aayog’s Draft Battery Swapping Policy

    The NITI Aayog has released a draft battery-swapping policy targeted at electric two- and three-wheelers as the government think tank aims to expedite large-scale adoption of EVs.

    What is Battery Swapping?

    • Battery swapping is a mechanism that involves exchanging discharged batteries for charged ones.
    • This provides the flexibility to charge these batteries separately by de-linking charging and battery usage, and keeps the vehicle in operational mode with negligible downtime.
    • Battery swapping is generally used for smaller vehicles such as two-wheelers and three-wheelers with smaller batteries that are easier to swap, compared to four-wheelers and e-buses, although solutions are emerging for these larger segments as well.

    What is BaaS?

    • Battery-as-a-service (BaaS) is seen as a viable charging alternative.
    • Manufacturers can sell EVs in two forms: Vehicles with fixed or removable batteries and vehicles with batteries on lease.
    • If you buy an electric scooter with battery leasing, you do not pay for the cost of the battery—that makes the initial acquisition almost 40% cheaper.
    • Users can swap drained batteries for a fully charged one at a swap station. The depleted batteries are then charged on or off-site.
    • The advantages of swapping include low downtimes for commercial fleets, reduced space requirements, and lower upfront costs.
    • It is also a viable solution for those who don’t have parking spots at home.

    Draft Battery Swapping Policy: Key Proposals

    • Rationalizing taxes on battery: The draft policy has suggested that the GST Council consider reducing the differential across the tax rates on Lithium-ion batteries and electric vehicle supply equipment. Currently, the tax rate on the former is 18 per cent, and 5 per cent on the latter.
    • Incentivization for swapping enabled vehicles: The policy also proposes to offer the same incentives available to electric vehicles that come pre-equipped with a fixed battery to electric vehicles with swappable batteries. The size of the incentive could be determined based on the kWh (kilowatt hour) rating of the battery and compatible EV.
    • Terms of contracts for battery providers: The government will specify a minimum contract duration for a contract to be signed between EV users and battery providers to ensure they continue to provide battery swapping services after receiving the subsidy.
    • Public battery charging stations: The policy also requires state governments to ensure public battery charging stations are eligible for EV power connections with concessional tariffs. It also proposes to install battery swapping stations at several locations like retail fuel outlets, public parking areas, malls, kirana shops and general stores etc.
    • Tariff rationalization: It also proposes to bring such stations under existing or future time-of-day (ToD) tariff regimes, so that the swappable batteries can be charged during off-peak periods when electricity tariffs are low.
    • Registration ease: Transport Departments and State Transport Authorities will be responsible for easing registration processes for vehicles sold without batteries or for vehicles with battery swapping functionality.
    • Unique identification number (UIN): The policy also proposes to assign a UIN to swappable batteries at the manufacturing stage to help track and monitor them. Similarly, a UIN number will be assigned to each battery swapping station.
    • Locations: The NITI Aayog has proposed that all metropolitan cities with a population of more than 40 lakh will be prioritized for the development of battery swapping networks under the first phase, which is within 1-2 years of the draft policy getting finalized.

    Why hasn’t BaaS taken off yet?

    • Hefty taxes: There are economic and operational constraints. Energy service providers offering swapping solutions have to charge 18% goods and services tax (GST) for swapping, compared to 5% GST on the purchase of an EV.
    • No incentives yet: Additionally, the government’s FAME-II incentives are not offered to vehicles sold with BaaS or swap station operators.
    • Lack of interoperability infrastructure: While these are economic disadvantages compared to direct charging solutions, the lack of a dense and interoperable battery swap infrastructure has also hindered the roll-out.

    Does the draft policy talk about EV safety?

    • To ensure a high level of protection at the electrical interface, a rigorous testing protocol will be adopted, the draft said, to avoid any unwanted temperature rise at the electrical interface.
    • The battery management system, which is a software that controls battery functions, will have to be self-certified and open for testing to check its compatibility with various systems, and capability to meet safety requirements.
    • This particularly assumes significance given the recent incidents of electric two-wheelers bursting into flames.

    Issues with BaaS

    • Standardization of specifications: There is a need for standardization of safety specifications as well as the battery.
    • Safety hazard: Swapping in the various permutations and combinations of batteries at a station where  they  have not been tested for compatibility could lead to safety hazards.
    • Non-competitive nature: Also, mandating only one type of battery to  be eligible for  concessions  would be  disadvantageous  to  many  players.

    Significance of battery swapping

    • High Cost of EVs: An EV, by industry standards, is 1.5-2x costlier than IC Engine counterpart and at least half the cost is from the battery pack.
    • Cost reduction: Many manufacturers are offering batteries separately from a vehicle, reducing the cost. In that case, a fleet owner can buy vehicles without battery and utilize battery swapping.
    • Range Anxiety: Another major reason stopping people from buying EVs is range anxiety, or in simple terms, the fear of battery getting empty without finding a charging station.
    • Inadequate charging infrastructure: Unlike petrol pumps, EV charging stations are rare to spot and that further increases the range anxiety exponentially, especially while going on a road trip.
    • Hazard management: In case of a Swapping Station, one can simply locate a station, go and replace the empty battery with a new one.

     

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