9 PM Daily Brief -29 July 2016

29-july (1)

 Brief of newspaper articles for the day bearing
relevance to Civil Services preparation

What is 9 PM brief?


GS PAPER 1


[1] Earthquake clues found in ancient temples in Himalayas.

The Hindu

Context:

The seventh-century stone and wooden temples having the hand-carved sculptures of gods and goddesses scattered in northwestern India have tilted pillars, slanted rooftops and warped stone floors which according to the archaeo-seismologists are the signs of massive earthquakes that once devastated the region.

Analysis:

  1. A pair of researchers used the damaged temples of Chamba and Bharmour, to better understand the extent of damage caused by a quake in 1905 and 1555 which gave them a clue of temblors to come.
  2. The powerful earthquakes of magnitude 7.5 or more have damaged the surrounded regions of this area. One of the deadliest struck the eastern part of Kashmir in 2005.
  3. The researchers related the earthquakes with damage in the ancient structures by studying the broken bricks, cracked walls and deformed doorsteps in the temples in both towns and comparing it with historical accounts of natural disasters.
  4. It has also been suggested that because Chamba is surrounded by faults, the area has the potential to become active again.


GS PAPER 2


[1] Green light for Afforestation Fund Bill.

The Hindu

Context

Compensatory and Afforestation Fund (CAF) Bill, 2016 has been passed by the Rajya Sabha unanimously.

Analysis

  • Bill seeks to establish a National Compensatory Afforestation fund and State Compensatory Afforestation fund for each state.
  • Environment ministry has assured the house that due respect will be given to the rights of the tribals, panchayats etc. There were earlier apprehensions about the bill promoting strong forest bureaucracy rather than local communities.

Other provisions of the bill

  • The Bill establishes the National Compensatory Afforestation Fund under the Public Account of India, and a State Compensatory Afforestation Fund under the Public Account of each state.
  • These Funds will receive payments for: (i) compensatory afforestation, (ii) net present value of forest (NPV), and (iii) other project specific payments.  The National Fund will receive 10% of these funds, and the State Funds will receive the remaining 90%.
  • These Funds will be primarily spent on afforestation to compensate for loss of forest cover, regeneration of forest ecosystem, wildlife protection and infrastructure development.
  • The Bill also establishes the National and State Compensatory Afforestation Fund Management and Planning Authorities to manage the National and State Funds.

 

[2] Centre seeks States’ views on pay panel recommendations.

The Hindu

Context:

  • The State governments has been asked by the Union government to give the views on the recommendations of the 7th Central Pay Commission implemented with effect from January 1, 2016.
  • In case of no reply before August 3, it would be presumed that the State government has agreed with the proposals related to the pay scale revision of All-India Service officers

Analysis:

  1. Although the Centre is having limited concerns over the parity issue between AIS and other services, the States are bound to have the impact of the Pay Commission’s recommendations.
  2. There was no consensus among the three-member Pay Commission on the IAS officer’s financial and career-related edge over other services officers. A group representing officers of 20 civil services, including the IPS, have been demanding parity in pay and other benefits with IAS officers.
  3. As a norm, most of the State governments, under pressure from the unions, adopt the Central Pay Commission recommendations though it imposes immense strain on their finances.
  4. According to an IIM Calcutta study commissioned by the 7th Pay Commission 8 States has opted to switch expenditure to meet the additional demands during the implementation of 6th Pay Commission.
  5. The study has cautioned that if socially important revenue expenditures were squeezed and capital assets creation was suspended, the impact on the nation’s economy could be as adverse as in the earlier case, or even more.
  6. The 7th Pay Commission in its report urged States to calibrate the speed and the extent of their own awards depending on their fiscal condition. “In the case of States that have been in chronic revenue deficit, there is no doubt that even the awards with the level of fiscal prudence of Seventh CPC will cause a fiscal strain. These States must cut their coat according to their cloth,” it said.

[3] India-US trade: give some, take some.

Livemint

Despite Indo-US trade being worth more than $100 billion today, their economic relations are facing a bit of a headwind.

Bilateral investment treaty (BIT) would enhance the political commitment, reduce uncertainties and boost the investment climate.

Countries have been exploring the possibility of a BIT for the past eight years

What are the issues in negotiation?

India and the US have had been opposing each other at the WTO pertaining to poultry imports, solar panels.

Recent fee hike in two major visa categories (H-1B and L1) by US has also added to the tension.

India’s model BIT excludes most favoured nation clause, taxation, compulsory licences and intellectual property rights from its purview, which has not gone well to US.

And the most controversial provision of investor-state disputes, it requires investors to pursue domestic courts for at least five years before resorting to international for a.

While US wants a liberal BIT.

Way Ahead

One was to resolve these challenges is negotiating a broad based agreement, Which may help in settling sticky issues pertaining to:-

  • Tariffs on ICT goods,
  • Agricultural goods,
  • Mutual recognition of testing certificates,
  • Movement of workers including a totalization pact

Parallel course is to find a midway between India’s model BIT and US’ model BIT.


GS PAPER 3


[1] Green bonds can finance the future.

The Hindu

Context

An ambitious aim of producing 100 GW of solar energy and 60 GW of wind energy, India needs large chunk of capital as the green energy is costlier than the ‘non-green’ energy. This is where green bonds come into play.

Why not banks?

As of now, most of the renewable energy projects are financed by banks which charge a high interest rate of 11-12%. With NPAs of the banks rising, they might not be able to provide loans on a large scale for such projects. This deficit can be filled up by green banks.

What are green bonds?

A green bond is a fixed income instrument for the purpose of raising debt capital through markets. It certifies that the proceeds will be used exclusively for specific “green” purposes.

What is the status now?

  • The demand for green bonds i.e investment in green bonds will increase only when government starts bringing in policies which aim at low carbon development (development that is done by emitting less carbon).
  • This has till now been done by making policies like Renewable Purchase Obligation (RPO).  Under renewable purchase obligations, the National Action Plan on Climate Change (NAPCC) has set an ambitious RPO target of 15 per cent by 2020. But more such policies are needed.

How to develop a Green Bond market

  • Green bonds have been existing for a long time now  but investment in them is still very small compared to the total market for debt. This is because of lack of green bond standards, low credit rating of potential issuers, and higher cost of issuance.
  • When fossil fuels have enjoyed huge subsidies  in the recent past subsidised diesel, kerosene and gas) while contributing to the  environmental degradation and global warming, it will be wise that clean energy initiatives get equitable treatment.
  • The government essentially needs to increase the funds available for investment in green projects, by providing for specific tax incentives and development of long-term finance markets in general.
  • Though the market is still in its infant stage, broad guidelines have now started coming out in the forefront. As the market matures, investors will require that green bond issuers report on status of deployment and environmental outcomes of the investments.
  • For the green bond market to have long-term credibility, investors and governments would need evidence that the projects funded have in fact delivered the intended environmental benefits.

Conclusion

In order to make the growth environmentally sustainable as well as to come out as a global leader in addressing the problem of climate change, such tools like green bonds must be developed to their full potential

[2] Step up to the fiscal challenge.

Indian Express

Context

Central Statistics Office’s has released latest figures of the decline in investment rates in 2016.

Facts

Inflation rates shot up to above 5 per cent in April and the trend persists.

Late monsoon is adding up to the problem. Most crops in the kharif season — apart from sugarcane — have a cropping season of 80 days or less. A delay of eight days, all things being equal, means a 10 per cent shortfall in yield.

Need for fiscal stimulus

GDP growth in manufacturing is higher than the index of industrial production, it implies, while value added growth is improving but not the production of goods, with which employment rises.

Fiscal stimulus should focus on capital and intermediate goods’ demand which is suffering the most

Where government went wrong?

Many global bankers have suggested,  Raghuram Rajan’s exit has affected market sentiments.

Graveness of drought never discussed seriously at the official level.

In Gujarat and in other parts of western and central India, after two years of continued drought, the water shortage was devastating. The rainfall deficit is high in western and eastern India.

Way ahead

Policymakers should take the country into confidence on their understanding of the macroeconomic perspective.

There is need of a contingency plan in case the monsoon is not adequate in some areas. An action-based policy needs to be in position.

If the first crop fails, there has to be a detailed plan for the distribution of seeds and agricultural credit which becomes very critical for farmers to maximise their yield through nutrients for the second crop


Comments

One response to “9 PM Daily Brief -29 July 2016”

  1. jannat jahan Avatar
    jannat jahan

    thanks

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