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Subject: Economics

  • Section 120B of the Indian Penal Code (IPC)

    Why in the news?

    • The Supreme Court has rejected review petitions challenging its ruling on the initiation of proceedings under the Prevention of Money Laundering Act (PMLA).
    • The judgment clarified that Section 120B of the Indian Penal Code cannot be invoked for PMLA proceedings unless the alleged conspiracy pertains to a scheduled offence.

    Prevention of Money Laundering Act (PMLA), 2002

     

    • The PMLA was enacted in 2002 with the aim of preventing money laundering and providing for confiscation of property derived from money laundering.
    • It applies to all financial institutions, banks (including the RBI), mutual funds, insurance companies, and their financial intermediaries.
    • The Act empowers government authorities to confiscate property and/or assets earned from illegal sources and through money laundering.
    • It has been amended three times, in 2005, 2009, and 2012.
    • Under the PMLA, the burden of proof lies with the accused, who must demonstrate that the suspect property/assets have not been obtained through proceeds of crime.

     

    Penalties under PMLA:

    • Freezing or Seizure of property and records, and/or attachment of property obtained through crime proceeds.
    • Rigorous imprisonment for a minimum of 3 years and a maximum of 7 years. In cases where money laundering is linked with the Narcotic Drugs and Psychotropic Substances Act, 1985, the punishment can extend up to 10 years, along with a fine.
    • Fine imposition.

     

    Authorities for investigation under PMLA:

    1. Enforcement Directorate (ED): It is responsible for investigating offenses under the PMLA.
    2. Financial Intelligence Unit – India (FIU-IND): It is the national agency tasked with receiving, processing, analyzing, and disseminating information related to suspect financial transactions.

    What is Article 120 of Indian Penal Code (IPC)?

    • Section 120 of the Indian Penal Code (IPC) deals with the concept of “Conspiracy to commit an offense”.
    • It states that when two or more persons agree to do, or cause to be done, an illegal act, or an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy.
    • Section 120A defines “criminal conspiracy” as when two or more persons agree to do, or cause to be done, an illegal act or an act which is not illegal by illegal means.
    • Section 120B prescribes the punishment for criminal conspiracy, with death, imprisonment for life, or rigorous imprisonment for a term of two years or upwards, shall be punished in the same manner as if he had abetted such offense.

    Punishment for Criminal Conspiracy

    • Nature of Conspiracy: IPC 120B categorizes conspiracy based on the gravity of the offense and prescribes punishments accordingly.
    • Serious Offenses: Conspiracy to commit serious crimes punishable by death, life imprisonment, or rigorous imprisonment for 2 years or more warrants severe punishment equivalent to the offense committed.
    • Other Offenses: Conspiracy for illegal acts not falling under the serious category incurs imprisonment for up to six months, a fine, or both, as per Section 120B.

    Practice MCQ:

    Which of the following statements are correct regarding ‘Prevention of Money Laundering Act 2002 (PMLA)’?

    1. Enforcement Directorate (ED) is responsible for investigating offences under the PMLA

    2. The Act enables government authorities to confiscate property earned through money laundering.

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

     

  • UNEP Food Waste Index Report, 2024

    Why in the news?

    The Food Waste Index Report, 2024 was recently released by the United Nations Environment Programme (UNEP) and Waste & Resources Action Programme (WRAP), a UK based non-profit organization.

    Food Waste Index Report:

    • It tracks the global and national generation of food and inedible parts wasted at the retail and consumer (household and food service) levels.
    • It was first launched in 2011.
    • It was conceived as a tool to monitor progress towards international targets, such as those outlined in the SDG 12.3, which calls for halving food waste by 2030.

     

    Key Findings of the 2024 Report

    1. Total Food Waste Generation in 2022:
      • Globally, 1.05 billion tonnes of food waste were generated in 2022.
    2. Distribution of Food Waste by Sector:
      • Households accounted for 60% of the total food waste.
      • Food services were responsible for 28% of the total food waste.
      • Retail accounted for 12% of the total food waste.
    3. Per Capita Food Waste:
      • The average per capita food waste was 132 kilograms in 2022.
    4. Economic Cost of Food Waste:
      • The economic toll of food loss and waste is estimated at $1 trillion.
    5. Contribution to Greenhouse Gas Emissions:
      • Food loss and waste contribute significantly to greenhouse gas emissions, accounting for 8-10% of annual global emissions.
    6. Regional Trends:
      • Food waste levels vary minimally across income groups.
      • Hotter climates tend to generate more household food waste due to consumption patterns and infrastructure limitations.
      • Rural areas generally exhibit lower levels of food waste compared to urban areas.
    7. Policy Integration:
      • Only 21 countries, including Australia, Japan, the United Kingdom, the United States, and the European Union, have included food loss and waste reduction in their climate plans or Nationally Determined Contributions (NDCs).

    PYQ:

    2019: In India, ‘extended producer responsibility’ was introduced as an important feature in which of the following?

    (a) The Bio-medical Waste (Management and Handling) Rules, 1998

    (b) The Recycled Plastic (Manufacturing and Usage) Rules, 1999

    (c) The e-Waste (Management and Handling) Rules, 2011

    (d) The Food Safety and Standard Regulations, 2011

     

    Practice MCQ:

    Which of the following statements is correct about the Food Waste Index Report?

    (a) It tracks only the global generation of food waste at the retail level.

    (b) It was first launched in 2011 to monitor progress towards reducing food waste in households and food service sectors.

    (c) It is a tool aimed at monitoring progress towards international targets outlined in SDG 12.3 to halve food waste by 2030.

    (d) It primarily focuses on tracking inedible parts wasted at the industrial level.

     

  • [29 March 2024] The Hindu Op-ed: Understanding India’s coal imports

    [29 March 2024] The Hindu Op-ed: Understanding India’s coal imports

    PYQ Relevance:

    Mains: 

    Q) “Despite the adverse environmental impact, coal mining is still inevitable for Development”. Discuss. (UPSC CSE 2017) 

    Q) What are the consequences of Illegal mining? Discuss the Ministry of Environment and Forest’s concept of GO AND NO GO zones for the coal mining sector. (UPSC CSE 2013) 

    Prelims:

    Q) Despite having large reserves of coal, why does India import millions of tonnes of coal?
    1. It is the policy of India to save its coal reserves for the future and import it from other countries for the present use.
    2. Most of the power plants in India are coal-based and they are not able to get sufficient supplies of coal from within the country.
    3. Steel companies need large quantities of coking coal which has to be imported.

    Which of the statements given above is/are correct? (UPSC CSE 2012) 
    (a) 1 only
    (b) 2 and 3 only
    (c) 1 and 3 only
    (d) 1, 2 and 3

    Note4Students: 

    Prelims: International Organisations;

    Mains: International Organisations; Trades and Practices;

    Mentor comments: The spectre of electricity shortages rises again as hot weather descends across the country. In recent years, increasingly unpredictable weather patterns and a fast-growing economy have led to big increases in electricity demand, the meeting of which reliably becomes a challenge. But some of the discourse in this context deserves greater scrutiny.

    Let’s learn. 

    —

    Why in the News?

    The recent unpredictable Weather Discourse and increase in Energy Demands around the coal sector in India needs a course correction.

    What are the recent challenges highlighted with coal?

    • Challenge with Logistics:
      • Shortage of Domestic Thermal Coal: It is the kind of Coal used in electricity generation, which is primarily blamed for the electricity shortage. Electricity shortage last year was about 840 million units due to poor monsoon, in turn leading to increased demand and reduced supply from some sources. 
      • Shortage of Logistics: According to the Ministry of Power advisory, the core challenge is insufficient logistics to move the coal to power plants. This leads to the second conflation, that the only alternative source is imports. 
    • The issue of imports:
      • Some thermal coal imports to blend with domestic coal may be required even if auctions are used. The question then is about how much of imports for which coal plants. 
      • India has been the major demand side driver of the global coal market. The higher imports is an indication of the preparations to meet the rise in demand of power. 
      • A mandatory blending of 6% imported coal, instead of the current blending levels, can increase the variable cost of coal-based electricity by 4.5%-7.5%. 
      • Indeed, as in the report on Annual Rating of Power Distribution Utilities, power purchase costs increased by 15% in FY23 due to increases in demand, coal imports, and prices of imported coal. 
    • The Issue with Generation and Location:
      • The plants that generate the most (pit-head plants) are situated close to mines, far away from ports, and do not face coal shortages. Shortages in periods of high demand are more likely in plants far away from mines which typically do not generate as much. 

    Way Forward:

    • Reducing Coal dependency: The discourse around coal shortages in the country needs course correction. It cannot be assumed that coal imports are the default way to address shortages. 
    • Increasing Accessibility: The fundamental challenge is to overcome the logistics bottlenecks that are preventing coal from reaching the locations where required. 
    • Government Interventions needed: In the interim, regulatory commissions and distribution utilities must ensure that all coal-based plants are alert to the possibility of coal shortages and identify the cheapest alternative sources which may not be imports to bridge the gap. 

    https://www.thehindu.com/opinion/op-ed/understanding-indias-coal-imports/article68003203.ece

  • T + 0 Settlement System kick starts today

    Why in the news?

    India’s stock market will begin the with a ‘beta version’ of T+0 settlement system (same day settlement) from today. This is the world’s fastest stock settlement system.

    About T+0 Settlement Cycle

    • SEBI has planned to introduce the shorter cycle in two phases:
    1. T+0 Settlement Details: In Phase 1, trades executed until 1:30 PM will be settled by 4:30 PM on the same day.
    2. Instant Settlement Mechanics: Phase 2 envisages immediate trade-by-trade settlement, with trading continuing until 3:30 PM.

    Features of the T+0 Settlement Mechanism

    • Early Pay-In Trend: A large percentage of retail investors already make early pay-ins of funds and securities, indicating readiness for instant settlement.
    • Instant Receipt Benefits: The mechanism enables instant receipt of funds and securities, reducing settlement shortages and enhancing investor control.
    • Investor Protection: Direct crediting of funds and securities into investors’ accounts, especially for UPI clients, strengthens investor protection.

    Settlement Cycle: A Quick History  

     

    • SEBI shortened the settlement cycle from T+5 to T+3 in 2002, and then to T+2 in 2003.
    • The T+1 cycle was introduced in 2021 and fully implemented by January 2023.
    • In T+1, the settlement of funds and securities occurs on the next day after the trade.

    Scope and Implementation of T+0

    • Initially, the T+0 settlement will be available for the top 500 listed equity shares based on market capitalization, implemented in three tranches.
    • The same surveillance measures applicable in the T+1 cycle will apply to the T+0 cycle.
    • Trade-for-trade settlement securities will NOT be eligible for T+0.

    Rationale behind T+O Cycle

    • Market Growth and Efficiency: With the significant growth in market volumes and participants, SEBI aims to enhance market efficiency and safety, especially for retail investors.
    • Technological Advancements: The evolution of payment systems like UPI and the sophistication of market infrastructure support the feasibility of shorter settlement cycles.
    • Investor Attraction: Faster transactions, reliability, and low costs are key factors that attract investors, making Indian securities a more appealing asset class.

    Benefits of the New Mechanism

    • Flexibility for Clients: The new mechanism offers faster payouts of funds to sellers and securities to buyers, providing greater flexibility and control.
    • Market Ecosystem Advantages: The faster settlement cycle is expected to enhance the operational efficiency of the securities market, benefiting the entire ecosystem.

     

    PYQ:

    2017: The term ‘Digital Single Market Strategy’ seen in the news refers to

    a)    ASEAN

    b)    BRICS

    c)    EU

    d)    G20

     

    Practice MCQ:

    With reference to the T+0 Settlement Cycle, consider the following statements:

    1.    Trades executed until 1:30 PM will be settled by 4:30 PM on the same day.

    2.    Trade-for-trade settlement securities will also be eligible for T+0.

    Which of the given statements is/are correct?

    a)    Only 1

    b)    Only 2

    c)    Both 1 and 2

    d)    Neither 1 nor 2

  • Drop in FDI inflows mirrors Global Trends: Finmin 

    Why in the News?

    India’s net Foreign Direct Investment (FDI) inflows have dropped almost 31% to $25.5 billion over the first ten months of 2023-24 as per the Finance Ministry

    Recent key Observations related to FDI inflow as per the Finance Ministry

    Recent FDI in the context of India:

    • From April 2023 to January 2024, the net inflows decreased more significantly due to increased repatriation of investment.
    • India remains one of the top destinations for global greenfield projects, with a stable number of new project announcements.
    • The country received significant FDI in sectors like services, pharmaceuticals, construction, and non-conventional energy.
    • The Netherlands, Singapore, Japan, the USA, and Mauritius contribute around 70% of total FDI equity inflows into India.
    • There’s a possibility of a modest increase in global FDI flows in the current year, driven by a decline in inflation and borrowing costs in major markets. However, significant risks remain, including geopolitical issues, high debt levels in many countries, and concerns about further economic fracturing.

    Recent FDI scenario in the context of the world:

    • Overall, global FDI flows rose by 3% to an estimated $1.4 trillion in 2023 due to economic uncertainty and higher interest rates led to a 9% fall in FDI flows to developing countries.
    • Drivers of Global FDI: Capital-intensive projects, particularly in renewable energy, batteries, and metals sectors, drove a large proportion of global FDI in 2023, highlighting the importance of energy transition.
    • Decline in International Investment Projects: Both greenfield projects and project finance (mainly infrastructure) and cross-border Mergers and Acquisitions (M&As) saw declines in 2023, attributed to higher financing costs. International project finance and M&A activity decreased by 21% and 16%, respectively.

      What is Foreign direct investment (FDI)?

      Foreign direct investment (FDI) is a category of cross-border investment in which an investor resident in one economy establishes a lasting interest in and a significant degree of influence over an enterprise resident in another economy.

      Government Bodies regulating FDI:

      India offers an automatic route for FDI in several sectors, simplifying the investment process for foreign investors in India. However, certain sectors require government approval, and reporting requirements, in line with the Foreign Exchange Management Act (FEMA), are in place to ensure transparency in foreign investments in India. FDI in India is subject to regulation and oversight by various government bodies, such as:

      • Department for Promotion of Industry and Internal Trade (DPIIT): DPIIT formulates and implements policies to promote and regulate foreign investment in India across sectors.
      • Reserve Bank of India (RBI): RBI manages the monetary aspects of foreign investments in India.
      • Securities and Exchange Board of India (SEBI): SEBI regulates FDI in the capital market.

      Conclusion:  India remains a top destination for greenfield projects, but international investment projects declined due to higher financing costs. This is indeed a silver lining for the Indian government to plan and execute for targeting more FDI inflow considering the Global scenario.

     

    Practice Question for mains

    Q- Explain the reasons for India’s decline in net FDI inflows in 2023-24 and analyze its implications amid global trends

  • India Employment Landscape: Insights from the ILO-IHD Report 2024

    Why in the news?

    According to the India Employment Report 2024 released by the International Labour Organisation (ILO) and the Institute of Human Development (IHD), India’s youth account for almost 83% of the unemployed workforce.

    About the International Labour Organization (ILO)

     

    • The ILO is a UN agency whose mandate is to advance social and economic justice through setting international labour standards.
    • Founded in 1919 under the League of Nations (under Treaty of Versailles) it is the first and oldest specialised agency of the UN.
    • India was one of the founding members of the ILO, joining the organization in 1919.
    • The ILO has 187 member states: 186 out of 193 UN member states plus the Cook Islands.
    • Its international labour standards are broadly aimed at ensuring accessible, productive, and sustainable work worldwide in conditions of freedom, equity, security and dignity.
    • The Governing body is the apex executive body of the ILO which decides policies, programmes, agenda, budget and elects the Director-General.
    • It meets 3 times a year, in March, June and November.
    • ILO has received the Nobel Peace Prize in 1969.

     

    Major Conventions of the ILO:

    • Forced Labour Convention (No. 29)
    • Abolition of Forced Labour Convention (No.105)
    • Equal Remuneration Convention (No.100)
    • Discrimination (Employment Occupation) Convention (No.111)
    • Minimum Age Convention (No.138)
    • Worst forms of Child Labour Convention (No.182)
    • Freedom of Association and Protection of Right to Organised Convention (No.87)
    • Right to Organise and Collective Bargaining Convention (No.98)

     

    Highlights of the India Employment Report 2024:

    1. Labour Market Dynamics
    • Long-Term Deterioration: The Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and the Unemployment Rate (UR) showed a long-term deterioration between 2000 and 2018, but witnessed an improvement after 2019.
    • Education Impact: The share of youngsters with secondary or higher education in the total unemployed youth has almost doubled from 35.2% in 2000 to 65.7% in 2022, indicating a significant shift in educational qualifications among job seekers.
    1. Challenges and Insecurities
    • Informal Workforce: Almost 90% of workers remain engaged in informal work, while the share of regular work declined after 2018, leading to widespread livelihood insecurities.
    • Contractualisation: There has been a rise in contractualisation, with only a small percentage of regular workers covered by long-term contracts, exacerbating job insecurities.
    1. Skills Gap and Gender Disparities
    • Skills Deficiency: Despite being a demographic dividend, the report notes a skills gap among India’s young workforce, with a significant percentage unable to perform basic digital tasks or mathematical operations.
    • Gender Gap: India faces substantial gender disparities in the labour market, with low rates of female labour force participation and high levels of unemployment among highly educated young women.

     

    PYQ:

    2018: International Labour Organization’s Conventions 138 and 182 are related to:

    1. Child labour
    2. Adaptation of agricultural practices to global climate change
    3. Regulation of food prices and food security
    4. Gender parity in the workplace

  • RBI Clampdown on Lenders could moderate Credit Growth in 2024-25

    What is the news?

    The Reserve Bank of India (RBI) has undertaken rigorous regulatory actions to address lenders’ over-exuberance, enhance compliance culture, and protect customers.

    RBI’s Regulatory Actions: An Overview

     

    • Recent Examples: Recent regulatory moves by the RBI, such as restraining lending by IIFL Finance and JM Financial Products, and implementing restrictions on customer onboarding at Paytm Payments Bank, mark a departure from historically nominal financial penalties.
    • Implications: S&P Global Ratings predicts that these actions will escalate the cost of capital and moderate loan growth in the fiscal year 2024-25, projecting a decrease from 16% to 14%.

     

    How RBI regulates Lenders in India?

    1. Licensing and Regulation:
      • The Banking Regulation Act, 1949 empowers RBI to grant licenses to banks and regulate their operations.
      • Non-Banking Financial Companies (NBFCs) are regulated under the Reserve Bank of India Act, 1934 and governed by guidelines issued by RBI under Section 45-IA of the RBI Act.
    2. Prudential Regulations:
      • RBI issues prudential regulations under various Acts, including the Banking Regulation Act, 1949 and the RBI Act, 1934.
      • These regulations include guidelines on capital adequacy (Basel III norms), asset classification, provisioning norms, liquidity management, exposure limits, and risk management practices.
      • Non-compliance with these regulations may attract penalties or other enforcement actions under the relevant Acts.
    3. Supervision and Monitoring:
      • RBI conducts supervision and monitoring of banks and NBFCs under Section 35A of the Banking Regulation Act, 1949 and Section 45L of the RBI Act, 1934.
      • It has the authority to conduct on-site inspections, off-site surveillance, and review financial reports to assess compliance with regulatory requirements.
      • RBI may issue directives, guidelines, or corrective actions under Section 35A and Section 45L to address deficiencies identified during supervision.
    4. Policy Framework:
      • Monetary policy frameworks are governed by the RBI Act, 1934 and the Reserve Bank of India (RBI) Act, 1934, which empower RBI to formulate and implement monetary policies.
      • RBI’s Monetary Policy Committee (MPC) sets key policy rates such as the repo rate, reverse repo rate, and statutory liquidity ratio (SLR) to regulate credit flow, inflation, and overall economic conditions.
    5. Consumer Protection:
      • RBI issues guidelines under the Banking Regulation Act, 1949 and the RBI Act, 1934 to ensure fair practices and consumer protection in banking and NBFC operations.
      • The Banking Ombudsman Scheme, 2006 provides a mechanism for redressal of customer grievances against banks.
      • Violations of consumer protection norms may result in penalties or enforcement actions under the relevant Acts.
    6. Financial Stability:
      • RBI’s mandate to maintain financial stability is enshrined in the RBI Act, 1934.
      • It monitors systemic risks, including interconnectedness among lenders, under Section 45J of the RBI Act, 1934, and takes measures to mitigate risks to financial stability.
      • RBI may intervene in the interest of financial stability under Section 45W of the RBI Act, 1934, to prevent disruptions to the functioning of the financial system.

     

    PYQ:

    2012: The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following?

    1. Banks retain their deposits with the RBI.
    2. The RBI lends funds to the commercial banks in times of need.
    3. The RBI advises the commercial banks on monetary matters.

    Select the correct answer using the codes given below:

    1. 2 and 3 only
    2. 1 and 2 only
    3. 1 and 3 only
    4. 1, 2 and 3

     

    Practice MCQ:

    Consider the following statements regarding ‘Payment Banks’ in India:

    1. Payment Banks have the authority to accept demand deposits but are prohibited from issuing credit cards, disbursing loans, offering mutual funds units, and providing insurance products.
    2. Unlike scheduled commercial banks, Payment Banks are exempted from the obligation to maintain a cash reserve ratio with the Reserve Bank.
    3. Payment Banks are mandated to invest a minimum of 75% of their demand deposit balances in Statutory Liquidity Ratio (SLR) eligible Government securities/treasury bills.

    How many of the above statements is/are correct?

    1. One
    2. Two
    3. Three
    4. None

  • Robusta Coffee price touches All-time High

    What is the news?

    • Robusta Coffee farmers in South India are celebrating as their produce fetches an all-time high price.
    • The farmgate price of raw Robusta coffee berries reached ₹172 per kilogram (kg) in the Wayanad market, a significant increase from ₹115 per kg last year.

    Coffee Cultivation in India

    • The coffee cultivation in India began with the planting of 7 seeds of coffee during 1600 AD by saint Baba Budan, in the courtyard of his hermitage in Chikmagalur, Karnataka.
    • Commercial plantations of coffee started in the 18th century under British entrepreneurship.
    • Today, India is among the top 10 coffee-producing countries, with about 3% of the global output.

    Major Varieties Cultivated

    Characteristics Altitude Range Flavor Profile Popular Varieties Regions
    Arabica Coffee Known for mild flavor, aromatic profile, and smooth taste. 800 – 1600 meters above sea level Mild, slightly sweeter, softer taste Kents, S.795, Cauvery, Chandragiri Coorg (Karnataka), Wayanad (Kerala), Nilgiris (Tamil Nadu), Chikmagalur (Karnataka)
    Robusta Coffee Characterized by strong and bold flavor, higher caffeine content, and somewhat bitter taste. Sea level to about 800 meters Strong, bold, somewhat bitter S.274, CxR hybrids Chikmagalur (Karnataka), Coorg (Karnataka), Wayanad (Kerala), Araku Valley (Andhra Pradesh)
    Liberica and Excelsa Less common varieties, with limited plantings in specific regions. Variable Variable Variable Limited plantings; sporadic regions

    Agro-climatic conditions needed for Coffee:

    • Indian coffee has a unique position as it is shade-grown and grown at elevations, while other major producing countries grow coffee in flat lands.
    • It is a tropical plant which is also grown in semi-tropical climate.
    • 16° – 28°C temperature, 150-250cm rainfall and well-drained slopes are essential for its growth.
    • Low temperature, frost, dry weather for a long time and harsh sunshine are harmful for its plant.
    • Coffee plants grow better in the laterite soils of Karnataka in India.

    Market Dynamics

    • Karnataka is the largest producer accounting for about 70% of the total coffee production in India.
    • It is followed by Kerala and Tamil Nadu. Orissa and the North-eastern areas have a smaller proportion of production.
    • Arabica has high market value than Robusta coffee due to its mild aromatic flavor.
    • The country exports over 70% of its production. According to The Food and Agriculture Organization (FAO), India is the eighth largest exporter of coffee by volume.
    • Indian coffee exports display a seasonality, with exports peaking from March to June.

    Coffee Board of India

     

    • The Coffee Board of India is an organization managed by the Ministry of Commerce and Industry and was established in 1942.
    • It is headquartered in Bangalore.
    • The activities of the Board are broadly aimed at:
    1. Enhancement of production, productivity & quality;
    2. Export promotion for achieving higher value returns for Indian Coffee and
    3. Supporting development of Domestic market.
    • Until 1995 the Coffee Board marketed the coffee of a pooled supply.
    • Later, coffee marketing became a private-sector activity due to the economic liberalisation in India.
    • The Board comprises 33 members including the Chairman, who is the Chief Executive and appointed by the Government of India.

     

    PYQ:

    2010: Though coffee and tea both are cultivated on hill slopes, there is some difference between them regarding their cultivation. In this context, consider the following statements:

    1. Coffee plant requires a hot and humid climate of tropical areas whereas tea can be cultivated in both tropical and subtropical areas.
    2. Coffee is propagated by seeds but tea is propagated by stem cuttings only.

    Which of the statements given above is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2

     

    Practice MCQ:

    With reference to the Coffee Cultivation in India, consider the following statements:

    1. Kerala is the largest producer accounting for about 70% of the total coffee production in India.
    2. Robusta coffee has high market value than Arabica due to its mild aromatic flavor.
    3. Indian coffee exports display a perennial nature.

    How many of the given statements is/are correct?

    1. One
    2. Two
    3. Three
    4. None

  • SEBI’s directive on Overseas ETF Investments

    What is the news?

    SEBI has instructed mutual fund houses to halt new inflows into schemes investing in overseas exchange-traded funds (ETFs) from April 1, 2024.

    What are Exchange Traded Funds (ETFs)?

    • ETFs are marketable securities that track various assets, including indices, commodities, or bonds, and trade on stock exchanges like regular stocks.
    • ETFs were started in 2001 in India.
    • Types of ETFs: Equity ETFs, bonds ETFs, commodity ETFs, international ETFs, and sectoral/thematic ETFs cater to diverse investment preferences.

    Market dynamics of ETFs

    • ETFs can be purchased or sold on a stock exchange in the same way that regular stocks can, unlike the mutual funds.
    • The traded price of an ETF changes throughout the day like any other stock, as it is bought and sold on the stock exchange.
    • The trading value of an ETF is based on the net asset value of the underlying stocks that it represents.
    • These funds offer higher liquidity, lower fees, and tax efficiency compared to traditional mutual funds, appealing to individual investors.

    Reasons behind SEBI’s Directive

    • Cap Proximity: The mutual fund industry has nearly reached 95% of the $1 billion investment limit in overseas ETFs, prompting SEBI’s intervention.
    • Temporary Measure: SEBI’s directive aims to temporarily curb inflows into these schemes until the investment limit is revised or additional measures are implemented.
    • Existing Caps: Currently, mutual funds are subject to an overall cap of $7 billion for investments in overseas stocks or mutual funds, with a specific limit of $1 billion for ETFs.

    PYQ:

    2013: The product diversification of financial institutions and insurance companies, resulting in overlapping of products and services strengthens the case for the merger of the two regulatory agencies, namely SEBI and IRDA. Justify.

    2020: With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

    1. It is the investment through capital instruments essentially in a listed company.
    2. It is a largely non-debt creating capital flow.
    3. It is the investment which involves debt-servicing.
    4. It is the investment made by foreign institutional investors in the Government securities.

     

    Practice MCQ:

    With reference to the Exchange Traded Funds (ETFs), consider the following statements:

    1. ETFs are marketable securities that track various assets, including indices, commodities, or bonds, and trade on stock exchanges like regular stocks.
    2. ETFs were started in 2021 in India.
    3. ETFs can be purchased like the mutual funds.

    How many of the given statements is/are correct?

    1. One
    2. Two
    3. Three
    4. None

  • RBI finalises Omnibus Framework for SROs in regulated entities

    Why in the news? 

    • The Reserve Bank of India (RBI) on Thursday said it had finalised the Omnibus Framework for recognising Self-Regulatory Organisations (SRO) for its Regulated Entities.

    The key features of the Self-Regulatory Organization (SRO)- 

    • Omnibus Framework: The RBI has finalized an omnibus framework for recognizing Self-Regulatory Organizations (SROs) for regulated entities. This framework contains broad parameters such as objectives, responsibilities, eligibility criteria, governance standards, application process, and other basic conditions for granting recognition.
    • Sector-Specific Guidelines: Sector-specific guidelines will be issued separately by the respective departments of the Reserve Bank for each sector where an SRO is intended to be set up. This ensures that the SROs cater to the specific needs and requirements of their respective sectors.
    • Draft Framework and Public Consultation: A draft framework for SROs was issued for public comments, and based on the examination of inputs received, the omnibus framework has been finalized. This indicates a consultative approach in the development of the SRO framework.
    • Credibility and Responsibility: SROs are expected to operate with credibility, objectivity, and responsibility under the oversight of the regulator. They aim to improve regulatory compliance for the healthy and sustainable development of the sectors they cater to.
    • Transparency and Independence: SROs are expected to operate with transparency, professionalism, and independence to foster greater confidence in the integrity of the sector. Compliance with the highest standards of governance is a prerequisite for an effective SRO.

    The significance of Self-Regulatory Organizations (SROs)-

    • Enhanced Regulatory Compliance: SROs establish and enforce industry standards and best practices, leading to improved regulatory compliance among member organizations. By setting clear guidelines and monitoring adherence to them, SROs help regulated entities maintain compliance with relevant laws and regulations.
    • Industry Integrity and Confidence: SROs play a crucial role in maintaining and enhancing industry integrity and public confidence. By promoting transparency, professionalism, and ethical conduct, SROs contribute to building trust among stakeholders, including customers, investors, and regulatory authorities.
    • Tailored Regulation: SROs can develop sector-specific regulations and standards that are tailored to the unique characteristics and challenges of their respective industries. This flexibility allows SROs to address industry-specific issues effectively, leading to more efficient regulation.
    • Effective Self-Regulation: SROs enable industry participants to self-regulate by collaboratively developing and enforcing rules and standards. This approach can often be more responsive and adaptable than traditional government regulation, as SROs can quickly respond to emerging risks and market developments.
    • Reduced Regulatory Burden: SROs can help alleviate the regulatory burden on government agencies by taking on certain regulatory functions. By delegating responsibilities such as rule-making, monitoring, and enforcement to SROs, regulators can focus their resources on overseeing broader market activities and addressing systemic risks.
    • Innovation and Growth: SROs can foster innovation and growth within their industries by creating a supportive regulatory environment. By providing guidance on emerging technologies and business models, SROs can encourage innovation while ensuring that it aligns with regulatory requirements and consumer protection standards.
    • Expertise and Knowledge Sharing: SROs serve as repositories of industry expertise and knowledge, allowing members to benefit from collective insights and experiences. Through networking events, training programs, and knowledge-sharing initiatives, SROs facilitate collaboration and learning among industry participants.

    Conclusion-

    Self-Regulatory Organizations (SROs) enhance compliance, integrity, and tailored regulation. They enable effective self-regulation, reduce regulatory burden, foster innovation, and facilitate expertise sharing, ensuring sustainable industry growth and integrity.