9 PM Daily Brief – 22 February 2016

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

What is 9 PM brief?

• GS PAPER 1
  1. Unemployment down in urban centres, but persists in rural areas, says survey – {Social Problems}
  2. Unreasonable demands – {Reservation}
  3. From sabhas to fishing villages – {Art and Culture}
• GS PAPER 2
  1. ‘Provisional deal reached on Syria ceasefire’ – {International Affairs}
  2. Storm over Sri Lankan deal with India – {India & her neigbours}
  3. Delivering on Make in India – {Government Policies}
  4. Need for restoring order in Parliament – {Parliament}
• GS PAPER 3
  1. Digital ‘magic wand’ for healthcare, cyber-security – {Science & Technology}
  2. Scheme for projects in Naxal zones extended– {Internal Security}
  3. To grow or not to grow– {National Income Accounting}
  4. Can Union budget turbo-charge start-ups? / Start-ups will need more tax exemptions, incentives to flourish– {Start – Ups}
  5. Adequacy of foreign exchange reserves and currency turmoil– {Currency Reserves}
• Prelims Facts

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GS PAPER 1

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[1]. Unemployment down in urban centres, but persists in rural areas, says survey

The Hindu

Who surveyed?

National Sample Survey Office

About What?

Umemployment.

Number of persons unemployed as a proportion of the labour force (persons who are either ‘working’ or ‘seeking or available for work’), not the total population

Facts:-

Unemployment rate in urban areas reduced from 4.5 per cent in 2004-05 to 3.4 per cent in 2011-12,

In rural areas, the rate has been stable at around 1.7 per cent .

In all religions rural area was on the lower side than those in urban areas for both males and females.

Christians have the highest rate of unemployment in both rural (4.5 per cent) and urban (5.9 per cent) areas in 2011-12.

Nature of employment:-

Self-employment is the major source of income for almost half the households, across all religious groups, in rural areas, followed by casual labour.

In urban areas, the proportion of households deriving major income from regular wage or salary earnings is the highest.

Interesting feature:-

Unemployment is highest among those people who are richer and more educated.

Why?

Poor people can’t afford to stay unemployed, and hence, opt for any kind of work, irrespective of the nature of the job.

The better off have the capacity to be unemployed as they look for the right job.

Christians are the most educated group, hence unemployment rate is higher among them

[2]. Unreasonable demands

The Hindu

Reservation: Reduce the gap between upper and lower strata in the society created due to historical discrimination of one or more sections of the society.

Well off communities are demanding for reservations, like

1. Patidars in Gujarat
2. Jats in Haryana

Jats:

1. Relatively prosperous land-owning community in Haryana.
2. High on the “social ladder”.
3. They are politically dominating .

Previous government promised a special quota for Jats.

SC: slashed the reservation by stating that stating that “caste alone could not be the criterion for determining socio-economic backwardness”.

What Jats are demanding?

1. Success of reservation system.
2. Land holding has reduced due to distribution of land over generations.
3. Sluggishness in agrarian economy.

Why Patidars are demanding?

1. To do away with reservation system itself.

Opportunities ahead:

1. List of castes in OBC can be reviewed.
2. Definition of creamy layer can be updated.
3. Socio-Economic caste census can be bought in.

[3]. From sabhas to fishing villages

The Hindu

Context: An art festival in Chennai presents classical art and the art forms of the fisher folk on an equal footing in order to make all art accessible to everyone.

 Diversity:

1. No two people are truly equal within society’s multi-layered segmentations.
2. Once we move into the realm of communities, these differentiations only become more complex.
3. “art transcends all boundaries”
4. For art to be a cultural and social enabler, it has to be redesigned as an artistic conversation that is equal and mutually inspiring.

A socio-cultural conversation

People from fishing village were invited to perform their own art . Classical singers were asked to perform classical art, which they usually perform in shabas in Fishing village .

How it helped,

1. Challenge stereotypes about Fisherfolk.
2. Reduce social inequality though art. Shows that every art is equal.
3. This initiative spurred many debates beyond art — about people, spaces, livelihoods, environment, security, sharing and ownership.

More such initiatives will help reduce inequalities.

Urur Olcott Kuppam Vizha – https://www.youtube.com/watch?v=6EmyjgXf26M

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GS PAPER 2

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[1]. ‘Provisional deal reached on Syria ceasefire’

The Hindu

What has happened?

A “provisional agreement” has been reached on a cease-fire in Syria between US and Russia.

Cease Fire could begin in the next few days in Syria’s five-year civil war after reaching out to the parties in the conflict zone.

Significance:-

Cease fire will help delivery of urgently needed aid to besieged areas of Syria and a return to peace talks in Geneva.

[2]. Storm over Sri Lankan deal with India

The Hindu

Context:-

Storm over the proposed Economic and Technology Cooperation Agreement between India and the island nation.

Criticism:-

Agreement is alleged to be a fresh variant of the Comprehensive Economic Partnership Agreement (CEPA), which was aborted earlier

Deal would pave the way for Indian professionals and semi-skilled and unskilled persons to “flood” Sri Lanka’s labour market.

 Counter arguments:-

The  critics are sabotaging employment opportunities for young Sri Lankans.

Assurance:-

Currently discussing with India about the framework for a bilateral cooperation.

After reaching an understanding the content of the agreement will be taken up.

[3]. Delivering on Make in India

The Hindu

Congress government‘s last 18 months:

1. New investments had come to a halt.
2. Projects worth lakhs of crores of rupees caught in red tape were turning unviable.
3. Banks are heavily stressed.

When the NDA government assumed office:

1. Used the mechanism of Dr.Manmohan Singh’s “Project Monitoring Group” in the Cabinet Secretariat.
2. It steered roadblocks in big ticket investment.
3. 6.5 lakh crore worth projects were cleared.

Make in India:

1. To encourage the world to use India as a global production hub.
2. FDI norms are relaxed to boost investment.
3. Reforms are going on in tax policies and regulatory mechanisms.
4. Make in India week was celebrated last week in Mumbai.
5. The Industries Ministry has claimed that Rs.15.2-lakh crore worth of investments were committed at that event.

Concerns:

1. Retrospective law problem (Vodafone Case).
2. Foxconn was yet to follow through on a $5-billion investment it had announced in Maharashtra last August.

To Capitalize MII:

1. Ease of doing business must be improved.
2. Transparent and stable tax environment is needed.

[4]. Need for restoring order in Parliament

The Livemint

Disruptions have gone up in recent years and need deeper attention; Parliament’s functioning in the budget session will depend on the Congress’ strategy

Two back-to-back Parliament sessions ended without desirable movement on the government’s legislative agenda. Due to constant disruption by the opposition.

There are plenty of issues that can be debated or used to disrupt proceedings.

1. JNU issue
2. Rohith Vemula Case
3. There are a number of other issues—from Gujarat to Jammu and Kashmir to the economy and the state of farmers

While the opposition may want to draw attention to a particular issue by way of disruption, it loses the opportunity to hold the government accountable on other important subjects.

For example,

1. 15th Lok Sabha lost 61% of the time allotted to question hour.
2. 2015’s monsoon session, the Rajya Sabha utilized only 9% of the total allocated time.
3. Time spent on discussion and passage of budget has also come down over the years.

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GS PAPER 3

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[1]. Digital ‘magic wand’ for healthcare, cyber-security

The Hindu

What is the device?

“Wanda” – A hardware device to improve home healthcare and prevent hackers from stealing personal data.

Issue till now?

Security and Privacy of digital devices.

Critical devices such as heart rate monitors or dialysis machines prone to attack by hackers.

Specifics:-

a small device with two antennas separated by one-half wavelength and uses radio strength as a communication channel.

How it works?

Easy for people to add a new device to their Wi-Fi network by

• Pulling the wand from a USB port on the Wi-Fi access point
• Carrying it close to the new device
• Point it at the device.
• Within a few seconds, the wand securely beams the secret Wi-Fi network information to the device.

[2]. Scheme for projects in Naxal zones extended

The Hindu

Default Approval :-

Scheme granting default Forest Department approval for public utility projects in Naxal-affected regions is extended till 2018 December.

Criteria:-

Projects that take up no more than five hectares.

Coverage:-

Covers 117 districts, including those in Jharkhand, Maharashtra and Telangana from 2011.

 Normal Process:-

All projects require separate forest and environmental clearances, given the specific circumstances of a project.

Public Utilities:

Schools, dispensaries/hospitals, electric and telecommunication lines, drinking water projects, water/rainwater harvesting structures, minor irrigation canals, non-conventional sources of energy, skill upgrade/vocational training centres, power substations, rural roads, communication posts, police establishments like police stations/outposts/border outposts/watch towers,underground laying of optical fibre cables, telephone lines and drinking water supply lines.

Examples:-

• Government polytechnic at Bagodhar in Giridih, Jharkhand;
• Construction of a Kendriya Vidyalaya at Deogarh, Odisha;
• Vocational Bamboo Research and Training Centre at Chandrapur, Maharashtra
• Esstablishment of Telangana School of Horticulture in Medak, Telangana.

[3]. To grow or not to grow

The Hindu

A departure from the fiscal consolidation path is the best answer to flagging growth. The risk to macro-economic stability can be managed.

Present Condition:

1. The world economy is facing the severest stresses since the financial crisis of 2008.
2. Indian economy will grow at 7-7.5 per cent, less than the 8.1-8.5 per cent projected earlier.
3. India’s public sector banks (PSBs) are in their worst shape .
4. The stock market has declined.

What is needed?

1. Fiscal and Monetary stimuli.
2. Fiscal stimulus is limited by the commitment on a fiscal consolidation path.
3. A monetary stimulus is limited by the monetary policy framework .By which RBI commits to reach specific targets for inflation.

Target:

1. Fiscal deficit target of 5 per cent for 2016-17.

Negatives of Relaxing Fiscal consolidation Target:

1. It will undermine investor confidence.
2. FIIs might flee the Indian market.
3. This will devastate the markets and the rupee.

On the other hand:

1. Foreign investors will see the case for boosting growth in the present international environment.
2. India’s macro-economic indicators are in better shape.
3. Rational investors will focus on the quality of spending, not the size of the fiscal deficit itself.

The Brazil comparison

1. Brazil went down the path of fiscal stimulus only to end up with a shrinking economy last year.
2. Brazil is a commodity exporter and is a loser in a context in which commodities prices have been hammered down. But India is a net importer of oil and hence a potential gainer.

Public Debt:

India’s public debt to GDP ratio has declined over the years and is today below 70 per cent, which looks a lot better than that of many advanced economies, including the U.K. and the U.S.

Why monetary stimulus is hard?

1. RBI’s rate cuts are not completely reflected in lending rates of commercial banks.
2. Banks are more stressed. RBI has made clear its objective of cleaning up banks’ balance sheets by 2017.
3. This can happen only if there is a substantial infusion of capital into PSBs by the government. The infusion of capital will have to be higher than the Rs.70,000 promised over four years under the Indradhanush plan.

Other Info:

Banks have traditionally priced their loans using the average cost of funds. This wont impact much lending rate. The RBI has recently asked that banks link their lending rates for new loans to the marginal cost of funds.

Author’s View:

Considering the above problems, Relaxing fiscal consolidation targets to push more money into economy will be most desirable solution.

[4]. Can Union budget turbo-charge start-ups?

The Hindu | The Hindu

Chronology:-

• Word ‘start-ups’explicitly mentioned in  Indian Budget – 2014.
• Independence Day – Start-up India; Stand-up India campaign started.
• ‘Start-up India’ Action Plan in January 2016
• Budget 2016 will have a part of the Start up Package.

‘Stay-in India-Checklist’ By Software product think tank iSPIRT:-

These issues range from focus on easy tax regimes to software product trade promotion in domestic market.

Ease and promotion of investments in young firms and incentivising innovation are other areas that need attention.

1)Tax regime :-

 a)Defining Goods versus Service Tax:-

Confusion on ‘goods’ versus ‘service’ tax on online downloads and tax deducted at source (TDS) on sale of software products.

Removing the confusion of ‘goods’ versus ‘service’ tax by provisioning a definition for them.

It will help streamline tax regime for a single digital market.

Also, classifying downloaded software product under Harmonised System, an international nomenclature for the classification of products, will provide a boost to the domestic software product trade.

b)Exemption from TDS:-

Tax deducted at source on sale of software product should be only limited to non-permanent establishment entities selling software in India. Indian entities should be exempted from it.

Favouring Intellectual Property Rights:- 

Need to create a favourable tax regime for intellectual property rights like in Singapore, Ireland and Netherlands.

A concessional rate of 10 or 12 per cent on total net income should be received from licensing of intellectual property rights.

Allowing capitalisation of expenditure in intellectual property rights creation on par with capital expenditure in manufacturing.

A lower rate of tax on licensing and efficient registration and enforcement process for intellectual property would definitely help.

2) Investment Friendly environment:-

Reforms in creating an investment-friendly environment.

a)Exemption for Angel Investors:-

Government’s Action Plan also proposes the investments by incubators in new firms to be exempted from tax.

This provision needs to be extended to angel investments by making suitable amendments to the existing law. This will allow young firms to attract investments.

b)Attracting Rupee capital:-

Foreign investors, depending upon the country that they invest from, get tax exemptions.

Indian ‘rupee’ investors do not have any such incentive and are subjected to capital gains tax in India.

Capital gains tax is a type of tax levied on capital gains incurred by individuals and corporations.

“It is important to attract the ‘rupee capital’ in start-ups which otherwise remains invested in ‘low risk’ investment avenues such as gold.

c)Accredited Investors:-

The regulations introduced by Securities and Exchange Board of India require an investor to invest at least Rs.1 crore in alternative investment funds (AIFs) or any privately pooled investment fund.

Globally, a concept of ‘accredited investors’ is used and this can be evolved with a defined criteria to promote investments in alternative investment funds, with a monitoring system.

3) ESOPS:-

The employee stock ownership plan (ESOPs) can be a great tool for young technology companies to attract and retain talent

It is recommended that tax incidence should arise in the year of the sale of shares and not the year of exercise of the option

4) Single window for start-up closure

The process of voluntary winding-up is also extremely painful and time-consumingand a  single window for efficient closure of start-ups should be set up.

5) Exempting from VAT:-

The action plan announced an exemption for start-ups from paying income tax for the first three years whichh is not useful as start ups do not get any taxable income in their first three years.

Selling products and services is the biggest challenge a start-up faces, service tax/VAT is a huge burden on the resources of start-ups early on in their lifecycle.

An exemption should be provided to start-ups from paying service tax/VAT that will make them more competitive and improve their chance of success.

6) Share Swap:-

A share swap for a private company essentially results in the shareholder receiving illiquid shares and no cash in lieu of his shares.

Currently such share swaps are taxed in the same manner as transfer of shares.

The same principles that are applicable for a tax-free merger should also apply to share swaps.

[5]. Adequacy of foreign exchange reserves and currency turmoil

The Hindu

Rise of Forex Reserve:-

Rapid rise in foreign exchange reserves from about $60 billion in 2002 to a little over $160 billion by mid-2006.

Reasons?

• Large portfolio capital inflows
• RBI’s continuous buying of U.S. dollars from the local forex market

Adequacy of Reserve:-

The framework developed by the IMF reveals that adequacy for emerging market countries is best captured in a 100-150 per cent range around a metric comprising

• 30 per cent of short-term foreign debt,
• 15 per cent of equity and debt liabilities,
• 5per cent each of broad money and annual exports.

This approach embodies the so-called precautionary purpose for holding reserves, with the main objectives being

• Countering BoP pressures
• Maintenance of orderly market conditions.

India:- The current level of reserves at $ 350 billion as well foreign currency assets at $ 326 billion both fall within this range.

Lessons to be learnt from the decline of reserves in China:-

• Residents take the lead in taking capital out of the country if they see the exchange rate to be seriously misaligned.
• RBI has been prudent in agreeing to invest only a very small amount not exceeding $5 billion out of reserves for domestic purposes which is not the case with other emerging sconomies/
• Market intervention, even in large quantities, will have limited effect even in curbing volatility, in the face of a general market pessimism that can be triggered by a sharp drop in yuan and emerging markets’ stocks and bonds.
• RBI and government should avoid the communication slippages of the Chinese authorities
• Only effective way to convince the market is to demonstrate by actions to address the structural impediments to achieving higher growth and to pursue time-consistent monetary policy aiming for low inflation and inflationary expectation.
• The lingering doubts and confusion at home and abroad on the accuracy of the new GDP series tend to have exaggerated impact on market sentiment.

Qualities of a reserve currency:-

confidence, liquidity and adjustment

Drawbacks of Yuan as Reserve Currency:-

• Economic policy-making is still opaque in China and authorities are not open about communicating the aims and objectives of what they are doing even in major areas.
• Policies with regard to yuan from the point of view of the economy seem to be at variance with those driven by geopolitical and diplomatic consideration.
• Chinese A shares are not yet in the benchmark MSCI emerging market index despite intense Chinese lobbying.

Warning:-

If the yuan falls sharply and breaches the level 7 against dollar, the rupee will also come under intense pressure.

If Hong Kong were to adjust or abandon its U.S. dollar peg, the event will send shock waves all around.

It may turn out to be worse in terms of its impact on India than the global financial crisis of 2008-10.

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PrelimsFacts

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[1]. ‘Mini-stomachs’ that can make insulin developed

What – ‘mini-organs’ that produce insulin
Significance:- Patient-specific therapy for diabetes. It replaces the insulin-producing pancreatic cells, called beta cells, that are lost in diabetes.
How –  

• Tissue from the lower stomach (Pylorus Region) can be reprogrammed into a beta-cell state.
  Replenish the insulin-producing cell population, giving the tissue a sustainable regenerative boost.

Pylorus Region:-

• Region connects the stomach to the small intestine.
• Cells in this area were the most responsive to high glucose levels.

[2]. Soon, GI tag for four Bengali sweets

 

What are the sweets?

• ‘Moa’ of Jainagar
• ‘Sarpuria’ of Krishnagar
• ‘Sitabhog’ and ‘Mihidana’ of Burdwan

What is GI Tag?

A GI tag is given to products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.

Significance:-

• To protect them from cheap imitations.
• To help preserve quality

Other plans:-

• Plans to export sweets from the State
• To provide good packaging inorder to increase the shelf life of Bengali sweets.

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By: ForumIAS Editorial Team

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