A brief of newspaper articles for the day bearing
relevance to Civil Services preparation
National
[1]. Nairobi deadlocked over draft deal on agriculture
What has happened?
With just one day left for the end of Nairobi WTO meet, there is still no deal in sight to liberalise global trade.
The developed nations propose a Declaration on agriculture which had ignored the demands of the developing countries.
In addition it mentioned a short deadline for arriving at a permanent solution for the issue of public stockholding for food security purposes.
This is against the demand of Special safeguard mechanisms by developing nations to protect the interests of farmers.
[2]. Centre contemplating launch of insurance scheme for farmers
What has happened?
Centre is planning to launch a new insurance scheme for farmers as the agri sector is facing a lot of uncertainties.
Agriculture extension system:-
India is having a pluralistic extension system which is dominated by the public extension system which has two approaches: field extension pursued by the development departments and frontline extension pursued by the ICAR and agricultural universities through Krishi Vigyan Kendras.
What is Agricultural extension?
It (also known as agricultural advisory services) plays a crucial role in promoting agricultural productivity, increasing food security, improving rural livelihoods, and promoting agriculture as an engine of pro-poor economic growth. Extension as a rural support service is needed to meet the new challenges agriculture is confronted with.
What is field extension?
Field demonstration is a long term educational activity conducted in a systematic manner in farmers’ fields to show worth of a new practice/ technology.
“Seeing is believing” is the basic philosophy of field demonstrations. Only proven technologies are therefore selected for field demonstrations.
What is Front line extension?
The field demonstrations conducted under the close supervision of scientists of the National Agriculture Research System are called front-line demonstrations because the technologies are demonstrated for the first time by the scientists themselves before being fed into the main extension system of the State Department of Agriculture.
For more: http://www.icarzcu3.gov.in/kvk/technical/9.pdf
Other schemes:-
Pradhan Mantri Krishi SinchaiYojana, the Soil Health Card Scheme, the Paramparagat Krishi VikasYojana and the proposed National Agricultural Market Scheme will revolutionise agriculture in the years to come.
Wastage of food:-
At present, one third of global production is lost or wasted annually which is enough to feed two billion people for a year.
Most of which takes place in post-production, harvesting, transportation and storage. This is a huge loss on account of economy, environmental and societal significance.
Around 800 million people in the world suffer from hunger and under-nutrition remains widespread with some two billion people lacking essential nutrients like iron, zinc and vitamin A,
Climate impact:-
U.N.’s Food and Agriculture Organisation estimate, world food production must rise 60 per cent to keep pace with the demographic change. Whereas the International Panel on Climate Change predicts that crop yields may decline by 10-20 per cent by 2050.
Land fragmentation:-
As the holdings are getting smaller, the farmers need models which could ensure food security as well as regular flow of income from their land.
[3]. Three charts that show why reservations are desirable
Context:-
Debate on need for reservation was kick started by a two-judge Supreme Court bench comment that “national interest requires doing away with all forms of reservations in higher education”.
The judges also expressed regret that “some privileges remained unchanged” even after 68 years of independence.
It is felt that social inequities have been abridged but data shows otherwise.
Study 1:- It shows that inequalities still exist in higher education of which scheduled caste are the most deprived followed by scheduled tribes.
Study 2:- It has shown that in Allahabad most of the top government posts are occupied by upper castes who also maintain dominance in civil society
Study 3:- It shows that in spite of reservation which is said to compromise on merit, in Indian railways this has not led to a decrease in productivity. On the contrary labour diversification is said to increase efficiency.
Conclusion:-
Finally, while the data and studies here show the time may not have come yet to do away with reservations, even its supporters have emphasized that it cannot be the sole means of dealing with existing inequalities, even in the field of education.
It is noteworthy that economic and social entitlements crucially determine the access to primary education, the state of which is far from satisfactory in India.
[4]. Tackling the demographic challenge
Context:-
Initially huge population was considered as a negative aspect, later after seeing the example of china which transformed its population into a huge work force the notion changed.
Now demographic dividend is the key word which is seen a huge opportunity.
But the real question is whether the work force is equipped to face the scramble for jobs in the era of globalisation.
Problems faced by India:-
a) Lack of Infrastructure:-
The paucity of good quality schools, proper infrastructure and facilities, and well-trained teachers poses enormous challenges in primary and secondary level education.
b) Drop outs:-
The huge dropout rate—more than half of India’s literate youth drop out of the education system by the age of 15—is a cause for concern.
c) Lack of Merit based system:-
Caste-based reservations is damaging both for the nation and for the morale of the youth.
d) Regionalism:-
The debate over the preference for English—which is the global language of business—versus regional languages continues endlessly.
e) Lack of suitable job profile
Our analysis reveals that nearly 40% of employed people are not satisfied with their job profiles. The major reasons for dissatisfaction cited are “unsecure” jobs, low salaries, stressful environment, and mismatch between job and qualification.
f) Lack of proper measures to harness women workforce:-
Another appalling concern is that a significant proportion of qualified women (for example, having earned PhDs but sitting idle at home—about 30%) drop out of the workforce for reasons ranging from no suitable jobs in the locality.
g) Threat:-
The gap between the haves and have-nots is increasing.
Unemployment, injustice and corruption only add to the feeling of victimhood, destroy the confidence of citizens, and leads to strife and violence at a societal level.
h) What needs to be done?
Engage with the youth and create an enabling environment for entrepreneurship.
Improved infrastructure, skill development, access to easy finance, reducing barriers to entrepreneurship and forums for mentorship of emerging entrepreneurs in partnership with corporate are some of the measures.
The approach has to be two-fold—creating more jobs, and ensuring better quality of jobs with a focus on matching skill-sets and job opportunities
There is a need to look into these qualitative issues of job satisfaction, job profile and skill matching, and the creation of opportunities for entrepreneurship in order to be able to harness the vast potential of human resources.
Science & Technology
[1]. Hubble spots first ever supernova explosion
The Hubble Space Telescope has captured the image of the first-ever predicted supernova explosion offering a unique opportunity for astronomers to test how mass is distributed within a galaxy cluster.
Hubble telescope:-
It was launched in 1990.
Hubble is a telescope that orbits Earth.
Its position above the atmosphere, which distorts and blocks the light that reaches our planet, gives it a view of the universe that typically far surpasses that of ground-based telescopes.
Hubble has shown scientists galaxies in all stages of evolution, including toddler galaxies that were around when the universe was still young, helping them understand how galaxies form.
It found protoplanetary disks, clumps of gas and dust around young stars that likely function as birthing grounds for new planets. It discovered that gamma-ray bursts — strange, incredibly powerful explosions of energy — occur in far-distant galaxies when massive stars collapse.
For more: – http://hubblesite.org/the_telescope/hubble_essentials/
Supernova:-
A supernova is the explosion of a star. It is the largest explosion that takes place in space.
Supernovas are often seen in other galaxies. But supernovas are difficult to see in our own Milky Way galaxy because dust blocks our view.
A supernova happens where there is a change in the core, or center, of a star.
Scientists also have determined that supernovas play a key role in distributing elements throughout the universe.
When the star explodes, it shoots elements and debris into space.
Many of the elements we find here on Earth are made in the core of stars. These elements travel on to form new stars, planets and everything else in the universe.
For More:- http://www.nasa.gov/audience/forstudents/5-8/features/nasa-knows/what-is-a-supernova.html
Opinion & Editorial
[1]. Still in the pipeline
Context: Launch of TAPI gas pipeline, at Mary, Turkmenistan on 14th Dec, 2015. Representing India was Mr. Hamid Ansari Vice President of India.
TAPI Gas Pipeline Project:
a) Source: Galkynysh, Turkmenistan – second largest reservoir of natural gas.
b) Countries Involved: India, Afghanistan, Pakistan and Turkmenistan
c) Benefit: Will increase economic co-operation in above mentioned countries
d) Benefit to India: Seen as a counter to China one belt one road (OBOR) policy.
e) Benefit for Turkmenistan: Russia withdrawal as major importer of Gas from Turkmenistan made it look for other avenues for economic benefits which can be realised through TAPI gas pipeline.
Issues Around the Pipeline
Most of the issues surrounding the pipeline is more strategic and political. It is because of difference between below mentioned countries on issue of border, security and terrorism.
a) India – Pakistan
b) Pakistan Afghanistan
[2]. India’s climate leadership at Paris
Context:-
The article discusses how India has performed in the Paris climate change and how well it has been able to achieve its demands.
Bonn Context:-
Despite the pressure, CBDR, a tenet central to the UNFCCC charter, was defended valiantly by India with support from other like-minded developing countries.
While the agreement has responsibilities for all nations, India was able to get the agreement to retain the principle of CBDR (Common but Differentiated Responsibility) in the key elements of technology transfer, finance, adaptation and capacity building.
Kyoto context
The Paris agreement, if viewed from this perspective, is a loss for India.
In all probability, given past failures of developed countries to meet their obligations in finance and technology, they will not be forthcoming for all domestic mitigation actions.
India played a constructive role in arguing for ambitious commitments on finance (a floor under of $100 billion), capacity building (including for monitoring and reporting) and technology support (including partnerships) from developed to developing countries, without being obstructionist as it was often wrongly accused of being.
International Solar Alliance (ISA)
ISA spearheaded by India, through the principle of demand aggregation, could potentially lead to significant further decline in solar technology costs, as multiple countries come together for scaling global solar power production.
This is what India did domestically with the hugely successful LED procurement and distribution programme.
The progressive monitoring of actions by the developed world as well as the scaling up of commitments (which are optional for developing countries) provide a lever for India and other developing countries to hold the developed world accountable, compelling them to do more than they have done so far.
From challenges to opportunities:-
India could do well to grab the opportunities for developing
a) Domestic solar panel manufacturing industries,
b) Energy storage solutions,
c) Grid integration solutions,
d) Electric vehicles,
e) Battery manufacturing facilities
f) Building a skilled renewable energy workforce.
[3]. The Force Reawakens / Liftoff / At any Rate / Fed lifts up rates
Context: The rise in interest rate by US Federal Reserve board
Effect: Most of the economies have shown a positive reaction with their market indices rallying ahead. But there is an underlying fear that capital will move out from the countries and invested in US due to better returns.
India: Rupee gained against dollar as well stock market gained 1.21%.
More rate hikes by US fed is predicted. What can be consequence on India?
According to author, Indian economy is not integrated with global economy which has affected the desired growth as well as insulation from global economic shocks.
In near future the rate increase is going to pull capital out of India and skew dollar – rupee equation.
India has enough foreign exchange to weather this issue but there is a need for policy actions like GST to be implemented as well as to address domestic supply constraints.
Another Reason why India should be cautious?
Exports have fallen 18.5% in dollar terms between April and November
Saving Grace:
India’s $65-70 billion of annual remittances, largely from the Gulf, will remain same.
India’s forex reserves are now up to around 11 months of imports also gives the central bank more room to defend the rupee if need be.
India’s FDI—$16.6 billion during April-September this year—would also be higher than the projected current account deficit, thereby lowering the vulnerability to volatile FII flows
[4]. No Proof Required: Jaago, aur jaagte raho
Current Scenario:
- GDP Deflator is negative
- Nominal GDP growth is lower than Real GDP
The Question
Why are policy rates not being cut down even when GDP Deflator is negative
The answer
Argument Wholesale prices are “contaminating” consumer prices and making the deflator artificially negative. So in conclusion, consumer inflation is quite high and likely to go up, and the RBI has no room to cut policy rates further.
Argument against Policy Rates Cut:
Corporations are not investing because capacity utilisation is too low, and because they have too many bad loans, stressed assets.
What is?
- Nominal GDP: GDP calculated at the market price is known as Nominal GDP
- Real GDP: GDP calculated at base price (a fixed year price) is known as Real GDP.
- GDP Deflator: It is the ratio of nominal gdp to real gdp. The deflator is the measure of inflation of domestically produced goods & services. It does not have the component of imported inflation.
- Policy Rates: The interest rates used by the Central bank of a country to regulate liquidity in the country (regulate monetary policy) is known as policy rates. In India, repo rate is the policy rate.
Economic Digest
[1]. Fed raises interest rates, citing ongoing U.S. recovery
What has happened?
The US Federal Reserve has raised the interest rates by one quarter percentage, the first in seven years when America tumbled into a deep financial crisis with the collapse of the Wall Street.
Federal Reserve funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression.
It is also hinted that the rate hike in future might be a gradual one.
Impact on India:-
The rate hike by the US Federal Reserve is in line with global expectations and its impact on India will be “very minimal” due to our strong macroeconomic conditions.
Impact on Emerging Markets:-
As many emerging markets have amassed greater debts while interest rates have been at historic lows. Now with rate hike, payments on those loans could become unmanageable.
Brazil, Chile and South Africa are among the most exposed, with their currencies likely to slump if the Fed tightens more rapidly than anticipated
Asian stock markets jumped on Thursday as investors chose to take an historic rise in US interest rates as a mark of confidence in the world’s largest economy
[2]. RBI links lending rates to loan tenor
What has happened?
The Reserve Bank of India (RBI) on Thursday issued fresh norms on how banks ought to calculate their lending rates — a move which is aimed at lowering borrowing costs.
Marginal Cost of funds based Lending Rate (MCLR) — will replace the present base rate system.
RBI said the guidelines were also expected to ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.
MCLR:-
It mandates banks to calculate the lending rate taking into account the marginal cost of funds.
MCLR will be a tenor-linked benchmark, and banks should arrive at the MCLR of a particular maturity by adding the corresponding tenor premium to the sum of marginal cost of funds, cost of maintaining cash reserve ratio and operating costs.
Base rate system:-
In this it was left to the individual banks as to what cost it used, which typically was the average cost of funds.
Benefits:-
Transmitting RBI rate cuts to customers:-
Banks have been slow in cutting their base rate as they have only reduced it by about 70 bps despite RBI reducing the policy rate (repo rate) by 125 bps since January 2015.
This move will improve the transmission of policy rates into the lending rates of banks.
Transparency:-
It improves transparency in the methodology followed by banks for determining interest rates on advances.
International standards:-
With marginal cost of funds including tenor premium we have moved closer to international manner of benchmark rates.
[3]. FATCA Prompting US NRIs to Sell Property in India
US Foreign Account Tax Compliance Act (FATCA): a law aimed at ensuring that tax is paid on income generated from wealth parked overseas. Under the agreement, they would share information about citizens with assets in each other’s countries.
The Fear: The fear of consequences of being caught by US tax authorities for tax evasion through the route of FATCA is making US based non resident Indians sell off their properties in India. Apart from fear the confusion in provision of FACTA is also partly responsible for this distress sale of properties by US based NRIs.
Schemes under FATCA:
Under the first scheme, there is no penalty for those who declare they were unaware of the liability, although tax for income generated over the past three years has to be paid.
In the other scheme, back taxes for eight years can be paid along with interest as well as a 27.5% penalty to compensate for non-compliance.
Indian Banks Fear: In addition, Indian banks are reluctant to open accounts that will help US-based NRIs to invest in India because it will increase their reporting obligations.
[4]. MNEs must start test runs fast
What you need to know in the article
Transfer Pricing : Transfer pricing is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. For example, if a subsidiary company sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price.
Base Erosion & Profit Shifting:
MNCs have HQ in first world and subsidiaries in third world.
Subsidiaries (third world) send profit$ to parent company (first world) in form of dividend, royalty and loan-interest payments.
Over the years, MNCs came up with 3 methods to shift these profits in such way, they’ve to pay minimum taxes
- In third world (usually the source of profit) AND
- In first world (usually the destination of profit).
Three methods for profit shifting:
- Transfer pricing
- Special purpose entity.
- Hybrid mismatch.
Why the news
New transfer pricing documentation by OECD known as Action plan 13.
New requirements, multinational enterprises (MNEs) will need to maintain three-layered transfer-pricing documentation—a master file, a local file, and a country by country reporting (CbCR) template.
The CbCR template will contain key financial information about each group entity, including its revenues, profits, taxes paid, information on capital and assets, etc. Importantly, it will also provide crucial non-financial information such as nature of activity performed by each group entity, number of employees, country of tax residence, etc.
Mandatory for firms having turnover more than 750 million euros.
Effect on India
a) India-based MNEs that have made outbound investments will need to file information about all subsidiaries across the world with the Indian tax authorities, as a part of the return of income or through separate transfer-pricing filings
b) Subsidiaries of foreign MNEs will need to provide the requisite information to their global headquarters in a prompt manner, consistent with their group reporting systems
By: ForumIAS Editorial Team
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