9 PM Daily Brief – 4th December 2015

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

 

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National

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[1]. G77, China mount sharp attack on rich nations

What has happened?

The developing country bloc of G77 and China on 3^rd Dec 15, launched a sharp attack on some developed countries at the climate talks here for trying to amend the UN Framework Convention on Climate Change (UNFCCC) by tying finance to conditionalities in the draft agreement.

What is the accusation of the G77+China bloc?

The developing country bloc has aired its criticism on following two issues,

1. Inclusion of loosely defined text – The bloc raised its concern over developed countries’ tries to include following words into the text, like

1). Draft says that developed countries “in a position to do so” will provide finances to help developing countries adapt.

1. Conditionalities to financing – Developed countries are trying to include conditionalities to financing. Developing countries on the other hand say that it is only on the basis of proper financial and technological commitments that Paris agreement would be a success.
2. Foregrounding of decarbonisation– In the draft, the term decarbonisation has been foregrounded meaning it has been emphasized as compared to other words surrounding it. This term has not been mentioned in UNFCC and including it in Paris agreement can be dangerous as it can be used as a means to impose sanctions.

What is G77?

The Group of 77 (G-77) was established on 15 June 1964 by seventy-seven developing countries signatories of the “Joint Declaration of the Seventy-Seven Developing Countries” issued at the end of the first session of the United Nations Conference on Trade and Development (UNCTAD) in Geneva.

First ministerial meeting: Beginning with the first “Ministerial Meeting of the Group of 77 in Algiers (Algeria) on 10 – 25 October 1967, which adopted the Charter of Algiers”, a permanent institutional structure gradually developed which led to the creation of Chapters of the G-77 with Liaison offices in

1. Geneva (UNCTAD),
2. Nairobi (UNEP)
3. Paris (UNESCO),
4. Rome (FAO/IFAD),
5. Vienna (UNIDO),
6. Group of 24 (G-24) in Washington, D.C. (IMF and World Bank)

 

Although the members of the G-77 have increased to 134 countries, the original name was retained due to its historic significance.

 Aim of G77

The Group of 77 is the largest intergovernmental organization of developing countries in the United Nations, which provides the means for the countries of the South to,

1. Collective interest: Articulate and promote their collective economic interests
2. Negotiating capacity: Enhance their joint negotiating capacity on all major international economic issues within the United Nations system,
3. Co-operation: Promote South-South cooperation for development.

 

What is Group of 24 or G-24?

The Group of 24 (G-24) is a chapter of the G-77 that was established in 1971 to coordinate the positions of developing countries on international monetary and development finance issues and to ensure that their interests were adequately represented in negotiations on international monetary matters.

 G-24 is not a part of IMF

The Group of 24, which is officially called the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, is not an organ of the International Monetary Fund, but the IMF provides secretariat services for the Group. Its meetings usually take place twice a year, prior to the IMFC and Development Committee meetings, to enable developing country members to discuss agenda items beforehand.

 Membership of G-24

Although membership in the G-24 is strictly limited to 24 countries, any member of the G-77 can join discussions (Mexico is the only G-24 member that is not a G-77 member, when it left the G-77 without resigning its G-24 membership).

China has been a “special invitee” since the Gabon meetings of 1981. Naglaa El-Ehwany, Minister of International Cooperation, Egypt, is the current chairman of the G-24.

Conclusion

Developed countries, instead of trying to subvert the interests of developing countries through subterfuge and wordplay, should focus on creating a Paris agreement which is just and equitable.

 

[2]. Myanmar’s best hope

Context: In this article author states that, although military has accepted the Myanmar election mandate and will co-operate in the smooth transition of power, it still won’t cede full control of the government to Ms Aung San Suu Kyi’s party.

Ms Aung San Suu Kyi’s National League for democracy won the national election in Myanmar with an absolute majority. She had called Myanmar’s President Thein Sein and military chief General Min Aung Hlaing for a meeting.

Author says,

1. Election comes as a new hope for the Myanmar people but military leadership would still control important ministries like Defence, interior and border security
2. Constitution of Myanmar is also written by army. Army has maintained that constitution shall not be changed in any case. As per the constitution, Ms Aung San Suu kyi can’t become a president, as her children are not Burmese.

Author goes on to say that,

1. Ms Suu Kyi is the best chance that Myanmar has got as she is a stout democrat and very popular

 

Problems before Myanmar

1. Discrimination: The Rohingya community, Muslims castigated as illegal immigrants, have been widely discriminated against by sections of the Buddhist majority. The government’s efforts to end the civil war with ethnic groups through negotiated agreements were only partially successful as rebels in the region bordering China refused to sign ceasefire pacts in October
2. Economic challenges

 

Conclusion

A large number of people inside and outside the country believe that, under the circumstances Ms. Suu Kyi may be the best person to take up the challenge. But the question is whether the generals would let her do it. For her part, Ms. Suu Kyi needs to be more forthright in articulating an inclusive agenda, for example vis-à-vis the Rohingya, that addresses ethnic tensions, and gives democracy in Myanmar a stronger chance.

 

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Business & Economy

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[1]. Government’s gold bond scheme may not attain target

Gold Monetisation Scheme, Sovereign Gold Bond and India Gold Coin are the new investment arenas in gold initiated by the Government.

What is Sovereign Gold Bond (SGB)? Who is the issuer?

1. SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

Why should one buy SGB rather than physical gold? What are the benefits?

1. The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption.
2. The SGB offers a superior alternative to holding gold in physical form.
3. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest.
4. SGB is free from issues like making charges and purity in the case of gold in jewellery form.
5. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

Who is eligible to invest in the SGBs?

1. Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities, charitable institutions, etc.
2. The minimum investment limit is 2 units (2 grams) and a maximum is 500 grams. Investors can apply for 2 grams and in multiples of one gram.

Who are the authorized agencies selling the SGBs?

1. Bonds are sold through scheduled commercial banks and designated Post Offices either directly or through their agents like NBFCs, NSC agents, etc.

 

What’s all in news about it

1. The recently launched schemes on gold are primarily intended to reduce the country’s reliance on import and to manage the widening current account deficit.
2. The government says its Sovereign Gold Bond Scheme got off to a ‘successful” start. However, industry officials say more needs to be done to ensure its success.
3. Presently, only banks and post offices are allowed to distribute the scheme. The issue is that the banks (distributors) need to be commercially incentivised to run the scheme, officials said.
4. The current scheme price was fixed for a long period which was turned out to be higher than the prevailing market prices.

Issues and Actions

1. The commercial details are left to the banks, which were not yet been announced.
2. It can become more popular if more touch points or agents are allowed to market it, where consumers find it comfortable to go
3. The government is hoping to make the scheme more attractive to customers and reduce large scale import of gold.
4. Increased accessibility to the product is an indeed requirement to draw more retail participation.
5. Since the product is largely focused on retail investors, permission given to NBFC’s and retail broking companies to sell the product along with banks and selected post offices would attract more investor attention into the platform.

Current Scenario/Further Indications

1. As the price of gold is slowing down in the international market, according to sources, imports of gold in the current fiscal likely to escalate compared to previous year’s gold import.
2. India imported Rs.2.10 lakh crore worth of gold (other than jewellery) in financial year 2014-15. Between April-September 2016, Rs.1.12 lakh crore worth of gold has been imported.
3. In the current market price, it would be at around Rs.12,735 crore.(So, its nearly profitable)
4. This amount was calculated on the basis of the draft document prepared by the Government in July 2015.
5. The government plans to distribute bonds worth 50 tonnes of gold in this financial year 2015-16, which is worth around Rs.13,500 crore.
6. The extension of the issue date of Sovereign Gold Bond indicated that the new scheme had a positive response.

[2]. RBI to comb bank books to unearth hidden bad loans

Let us understand a little more about NPAs but before learning about NPAs, let us talk about assets.

 What is an asset?

For a bank, an asset is a loan which it gives to individuals or companies and it gets regular income from it in the form of interest.

What is NPA?

When these assets stop generating regular cash flow (or become non-performing), they are known as NPAs.

Example: If you have taken an education loan and have been unable to repay the interest or the principal amount for three months, the bank from where you have taken this loan will record it in its books as NPA.

Types of assets

Standard asset – An asset which is generating regular income to the bank

Sub-standard asset – If an asset remains non-performing for a period less than or equal to 12 months, it would be classified as a sub-standard asset. These assets attract a provisioning, the money that a bank should set aside to cover potential losses, of 15%.

Doubtful asset – If an asset remains in the sub-standard category for 12 months, it would be considered a doubtful asset with 25-100% provisioning

Loss asset – Assets which are doubtful and considered as non-recoverable by bank, internal or external auditor or central bank inspectors.

Sub-standard assets, Doubtful assets and Loss assets are classified as NPAs. A majority of NPAs for banks come from small and medium enterprises and companies.

What has happened?

The Reserve Bank of India Bank is set to intensify its scrutiny of banks’ financial accounts during the annual financial inspection process as the banking regulator races to achieve the goal of cleaning up bank balance sheets by March 2017

 Why is RBI intensifying the scrutiny?

1. Increase in NPAs: Non-Performing Assets have risen to 6% in June 2015, up from 5.2% in March 2015.
2. Difference in actual stressed assets: Time and again RBI has found that a discrepancy in the non-performing asset numbers that banks report and what the central bank finds during the annual inspections. It is often the case that a loan is kept as a standard asset despite there being incipient signs of stress

 

[3]. India opposes attempts of rich nations to stall WTO’s Doha Round talks

 

What has happened?

The government opposed alleged attempts of the developed world to “abandon” the 14-year-old Doha Round talks of the World Trade Organization (WTO) at the coming Nairobi ministerial meeting by citing the slow progress of negotiations to liberalize world trade.

What India wants from Nairobi ministerial?

1. Successful completion: Doha Round to be successfully concluded expeditiously, but only after ensuring that the “development’ dimension of the round is fulfilled in all aspects
2. Special Safeguard Mechanism (SSM): In order to protect interests of its poor farmers, India has been trying to push forward SSM, a tool that will allow developing countries to raise tariffs temporarily to deal with import surges or price falls.
3. Reduction of subsidies: India also wants the rich countries to drastically reduce their ‘trade distorting’ farm subsidies
4. Stock-holding: Permanent solution to the issue of public food stockholding in developing countries for the purpose of food security

 When is Nairobi ministerial?

Nairobi ministerial is from December 15^th – 18^th

What some developed nations are trying to do?

A). Rich nations are trying to end Doha round by saying that the progress has been slow. Moreover, they are trying to introduce new issues into the round, like,

1. Labour and environmental standards
2. E-commerce
3. Global value chains and promotion of supply chains
4. Environmental and sustainable goods produced using clean and green energy
5. Transparency in government procurement, state-owned enterprises and designated monopolies
6. Competition and investment provisions

B). Attempts are also being made to categorise countries such as India, China and Indonesia as ‘emerging market economies’ (as opposed to them currently being termed as ‘developing countries’) and asking them to undertake greater market opening commitments.

 

[4]. An elusive quest to internationalize renminbi

What has happened?

China’s Yuan or renminbi has been included in the Special Drawing Right (SDR) basket by IMF. It became a world reserve currency on Nov 30^th 2015. Starting in October of 2016, it will account for 10.92% of the IMF total reserve currency. This would make Chinese Yuan the fifth reserve currency after US dollar, Euro, British pound sterling and Japanese yen

Author says that adding Yuan to SDR and declaring it a reserve currency won’t make it a ‘preferable’ reserve currency.

Author’s reasons are,

1. World contribution very low: China is the third largest exporter in the world; its currency contributes just about 1% of the total reserves held globally, according to IMF data. The use of the renminbi has increased in cross-border payments in recent years but that number is still a small fraction of the transactions settled in dollars or euros
2. SDR’s significance: Author says that SDR has lost much of its significance after the collapse of the fixed exchange rate regime in the early 1970s and the subsequent development of financial markets which has allowed countries to maintain reserves in globally traded currencies.

What China needs to do?

It needs to do following things,

1. Open up its financial markets
2. Let go of Capital controls
3. Building a robust regulatory architecture

Why it is unlikely that China would open up its financial markets?

There are questions over the extent to which the Chinese government would be willing to cede control and allow market forces to play a greater role. China is already suffering from a slowdown and it is trying to shift from a manufacturing based export-led growth to a service oriented economy. At such a point it is unlikely that the Chinese government would want to open up the financial sector in a hurry and induce more uncertainty.

What India should do now?

Inclusion of Yuan in SDR and being declared as a reserve currency is a symbolic victory for China but India should not be worried. It should continue with its own efforts to increase the international use of the rupee.

1. Allowing Indian corporations to issues rupee denominated bonds—the so-called ‘masala bonds’—in overseas markets is a step in the right direction

Must read: http://www.cnbc.com/2015/12/02/who-loses-when-the-renminbi-joins-the-imf-basket.html

[5]. Declining per capita protein intake spells trouble

 What has happened?

UN has declared 2016 as the International Year of Pulses (IYOP)

Why has UN done so?

To achieve following objectives,

1. Increase awareness about nutritional benefits of pulses,
2. Give a boost to production of pulses and crop rotation
3. Address challenges in the pulses trade

Indian food habits

Key sources of protein include pulses, milk, dairy products, eggs, fish and meat.

1. Consumption: In terms of quantity, India happens to be the largest global consumer of dairy, pulses, sugar and spices.
2. Production: On the production side, India is the world’s third-largest producer of food grains and the largest producer of milk and spices.
3. Demand & Supply gap: Yet apart from cereals and dairy, demand outpaces supply in most other food categories—namely pulses, edible oil, fruits and vegetables—resulting in rising levels of inflation.

 Increase in the price of pulses

Based on WPI, it is observed that prices of pulses increased by 53% between October 2014 and October 2015.

Change in food habits of Indians

1. A fall in cereal intake and a non-significant rise in consumption of other food items, especially in the rural areas
2. Increasing preference for packaged food among consumers

 Impact of changing food habits

This change in consumption behaviour has resulted in declining average per capita calorie and protein intake despite the rise in expenditure levels. It means that although expenditure on food items is increasing, the average calorie intake is not improving much. This is due to the fact that consumers are moving towards expensive calories

Scope of improvement

As per the Indian Consumer market 2020 report, there is substantial inter-state variation in the pattern of spending on protein food.

Top three protein-food markets in terms of size in financial year 2015,

1. Uttar Pradesh
2. Maharashtra
3. Tamil Nadu

Above states together make up for 31% share of all India market. Thus, unlike many other product categories, there is still scope for growth in protein food consumption in large markets in India. The pace of growth in case of the largest market, Uttar Pradesh (6.3%) is little slower than the all India average of 6.6% per annum.

Market size vs spending intensity

While the size of a market reflects the total magnitude of expenditure, spending intensity (average spending per household) tells us how much an average household is ready to spend on that product category.

Significantly, none of the top five states in terms of market size appears in the list of top five in terms of spending intensity. While the largest market (Uttar Pradesh) occupies the 11th position in terms of spending intensity, the second- and third-largest markets (Maharashtra and Tamil Nadu) have been ranked at 13th and 10th positions respectively.

Conclusion

Given the huge nutritional benefits of protein food, it is important for all states to take up sustained efforts to increase awareness among the general public about pulses, take appropriate measures to enable improvement of yields and remove supply side constraints.

The demand-supply mismatch is expected to become much more acute in the next decade unless these initiatives are initiated without further delay.

 

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Opinion & Editorial

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 [1]. Need to go beyond GST

 Context: Author in this article has stated that it is high time that government and opposition work together to sort out their differences over GST bill and ensure that other important bills are not left untouched during the winter session of the parliament.

1. Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Amendment Bill 2015,
2. The Whistle Blowers Protection (Amendment) Bill 2015
3. The Juvenile Justice (Care and Protection of Children) Bill 2015
4. The Prevention of Corruption (Amendment) Bill 2013
5. The Child Labour (Prohibition and Regulation) Amendment Bill 2012
6. The Negotiable Instruments (Amendment) Bill 2015
7. The Real Estate (Regulation and Development) Bill 2013
8. Bankruptcy Bill

Bankruptcy bill is critical

Bankruptcy bill, as per author is a critical one because despite several laws to make it easier for creditors (those who lend money) to secure their rights, borrowers manage to get stay orders from various courts, and the result is there for all to see, there is no single case that can be cited of a bank being able to take over a company in default quickly and sell it off to recover debt.

To fasten the pace of lending, passage of this bill is necessary.

 

[2]. Is India actually free of polio?

Context: Author in this article states that despite being declared polio free country by WHO, India still is not free from it. Different types of polio exists and certification from WHO is only for a particular kind of polio.

WHO certification

India received the polio-free country certificate in 2014 as from January 2012 it didn’t report a single case of polio. This certification is for eradication of Wild Polio Virus (WPV).

There is another strain of polio known as Vaccine-Derived Polio Virus (VDPV).

What is VDPV?

Oral polio vaccine (OPV) contains an attenuated (weakened) vaccine-virus, activating an immune response in the body. When a child is immunized with OPV, the weakened vaccine-virus replicates in the intestine for a limited period, thereby developing immunity by building up antibodies. During this time, the vaccine-virus is also excreted. In areas of inadequate sanitation, this excreted vaccine-virus can spread in the immediate community (and this can offer protection to other children through ‘passive’ immunization), before eventually dying out.

On rare occasions, if a population is seriously under-immunized, an excreted vaccine-virus can continue to circulate for an extended period of time. The longer it is allowed to survive, the more genetic changes it undergoes. In very rare instances, the vaccine-virus can genetically change into a form that can paralyse – this is what is known as a circulating vaccine-derived poliovirus (cVDPV)

Acute Flaccid Paralysis (AFP)

The polio virus causes paralysis — medically known as an acute flaccid paralysis (AFP) — which is characterised by sudden muscle weakness, and fever in one or more limbs. AFP can occur due to many reasons, one of which is vaccine-linked.

Other cases of the same condition are called non-polio AFP.

Hidden truth behind statistics

Between January 2014 and March 2015, India reported four cases from four different States, of vaccine-derived polio (VPD).

Until November 2015, India has reported 36,968 cases of non-polio AFP.

A surge in non-polio AFP

There has been a surge of non-polio AFP since India eradicated polio. The number of cases reported

1. in 2012 was 59,436,
2. in 2013 it was 53,421,
3. in 2014 it was 53,383.

Three years after India reported its last case of WPV, the country has, in one form or another, been reporting around 50,000 cases of flaccid paralysis that, clinically, is exactly like polio, indicating how hollow the polio-free status is.

Link between increase in incidence of non-Polio AFP (NAFP) and the number of OPV doses delivered in any region. Low immunity communities are at a risk of VPDV.

 Low vaccine coverage

The problem is not with the vaccine itself, but low vaccination coverage. That VDPV is circulating in the community that is under-immunised marks the failure of the Central government

What steps government is taking?

• Addition of Injectable Polio vaccine (IPV) to routine immunization programme
• switch from trivalent to bivalent Oral polio vaccine
• To prevent re-emergence a booster dose of inactivated polio vaccine (IPV) is recommended in routine immunization, prior to the switch.

Conclusion

We may be polio-free but we are reporting the world’s largest number of NPAFP. Realistically speaking, we need an urgent policy intervention to address NPAFP and VDPV with the same urgency and political will with which we addressed the wild polio virus cases

 

[3]. Intolerance fuels radicalization

Context: In light of recent rise in incidents of anti-minority violence, author expresses his fears that we are giving terrorist organizations like IS a reason to get a stronghold amidst ourselves.

Recent incidents cited by author,

1. When Amir khan expressed concern over rising anti-minority violence, he was made a target of hateful tweets and comments
2. Black ink was spilled on the Observer Research Foundation’s Sudheendra Kulkarni in November for organising a book release event for a former Pakistani foreign Minister
3. mob lynching of Mohammad Akhlaq in Dadri, Uttar Pradesh, over rumours that he had stored beef in his home
4. August’s murder of notable rationalist M.M. Kalburgi, who was shot dead after being threatened for his criticism of idolatry in Hinduism

Why India should stop such incidents?

1. Respect for India’s constitutionally protected secular credentials,
2. The maintenance of broader societal peace and harmony between communities
3. The alarming proliferation of support for Islamic State (IS), the jihadist terror outfit that controls parts of Syria and Iraq.

Recruitment from India by IS is increasing slowly and steadily, which spells bad signs for our nation as a whole.

Persons from Cuddalore to engineers from Bangalore to Kashmir valley, IS has managed to woo Indian youth from a diverse background.

Conclusion

Unless there is a concerted effort to neutralize the impunity of extremist elements that regularly engage in anti-Muslim violence, there may be little to halt the drift of a few members of an overwhelmingly moderate community into the arms of IS radicals.

 

[4]. The myth of intolerant India

Context: Author in this article has stated that the outcry against intolerance is unjustified

Author examines the following questions,

Has India really become intolerant, particularly in the past 15 months? Are religious minorities now unsafe? Are they being systematically targeted and marginalised?

1. One Dadri does not make a country of 1.24 billion people intolerant. The noise over banning beef, the disruption of Valentine’s Day celebrations, the chopping-off of a professor’s hand and the banning of the works of Taslima Nasreen and Salman Rushdie are isolated, regrettable incidents and are not indicators of a nation’s intolerance

Constitutional safeguards and provisions that indicate we are not intolerant nation

1. Secularism: A country is intolerant if its institutions and the constitution is intolerant, which is not the case. Secularism (positive) has been declared a part of the basic structure of the constitution by Supreme court in Aruna Roy vs Union of India (2002) and S.R. Bommai vs Union of India (1994)
2. Article 25, 29, 30: Article 25 of our constitution confers on all persons, including non-citizens, a fundamental right to freely profess, practice and propagate their religion — a right that is exercised effectively to convert people to another faith every day. Articles 29 and 30 constitutionally protect the language, script and culture of minorities and give them the right to establish educational institutions of their choice. Can the same be said of countries that systematically target churches and individuals of other religions?
3. Article 15(5): Minority communities are not required to reserve 25% of the seats, free of cost, for economically and socially backward students, in their educational institutions as is required of the other communities under The Right of Children to Free and Compulsory Education Act, 2009
4. Shah Bano Case: Author cites the Shah Bano case as an evidence of the tolerance of views of the minority wherein a SC judgement was overruled by the Parliament when it enacted Muslim Women (Protection of Rights on Divorce) Act, 1986, which took away the rights of divorced Muslim women to claim maintenance under the Code of Criminal Procedure.
5. No Uniform Civil Code yet: It is only the tolerance and respect for minorities, particularly Muslims, that has restrained our lawmakers from enacting a Uniform Civil Code for all citizens despite a mandate under Article 44 of the Constitution

 Selective show of anguish not justified

Not one artist complained about the extreme intolerance in the Kashmir Valley that drove out thousands of Kashmiri Pandits. Did anyone protest against the desecration of temples in the Valley? Is that less worthy of condemnation than the attack on churches?

Conclusion

The unfortunate existence of a few intolerant Indians does not make India intolerant.

By: ForumIAS Editorial Team