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9 PM Daily NEWS Brief

9 PM Daily Brief – 5 February 2016

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

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GS PAPER 1


[1]. Off Colour

The Hindu 

Context: Mob attack on Tanzanian student on the outskirts of Bangalore.

What happened: The Tanzanian student had the misfortune of being in the area where a Sudanese man had caused a fatal traffic accident earlier. The only thing common between them-colour of skin and African origin. She was apparently beaten and stripped by the mob.

Other such incidents :

  • Midnight vigilante raid in Delhi’s Khirki extension led by AAP minister Somnath Bharti against Ugandan and Nigerian women who were accused of prostitution and pushing drugs.
  • Persecution of young people from the north-eastern states of India who go to other Indian cities to study and work.. In 2012, hate campaign using SMS and social media against north-east people led to the large scale flee of north-east migrant workers from Bangalore.

Consequences: Racial discrimination will block India’s efforts to position itself as an investment destination. The said mob attack near Bangalore could prove to be a setback for Karnataka CM Siddaramaiah whose govt hopes to see commitments of Rs 1.3crore from a global investor’s meet in Bangalore this week.

Conclusion: Racial discrimination of any form is ethically proscribed(condemned/forbidden) in a nation that is natively many-hued(coloured) and is constitutionally committed to multiculturism.

A responsive police and legal apparatus are crucial for securing the rights of minorities, whether women, Dalits, citizens from north-east or visitors from Africa.


GS PAPER 2


[1]. HAL’s import, assembly and supply model

The Hindu

CONTEXT: Ravindra Gupta Task Force report on defense modernization and self reliance

WHAT HAS HAPPENED: The report submitted in September 2012 recorded that the Hindustan Aeronautics Limited (HAL) has been importing most of its raw material from abroad, assembling them and supplying finished products to the Indian military. And that it has failed to create a robust supply of network of domestic companies and R&D capabilities.


GS PAPER 3


[1]. Big ticket disinvestment likely

The Hindu

Context: Upcoming Union Budget, 2016 and an expectation of declaration of disinvestment and strategic sales in high value companies.

Why there is a need for disinvestment?

There is going to be a stress on fiscal deficit target owing to the implementation cost of centrally sponsored irrigation scheme. On the outgo there is also Seventh Pay Commission recommendation which will be implemented by April 1, with a three month arrears starting from the period January.

Disinvestment will bring proceeds from the sale of stake of government in State owned enterprises, hence shoring up the revenue of government and controlling the revenue deficit.

[2]. Going against the grain

The Hindu

Context: Dismal state of agriculture and rural economy

What has happened?

  • Rate of growth in agriculture and allied activities is down from 4% per annum in the 11th plan period to 1.7% per annum in the first three years of 12th
  • Over 3,00,000 lakh farmers have committed suicide in the last decade. Over 2000 such cases have been reported last year in Maharastra alone
  • India is currently reeling under the impact of successive droughts with 302 districts declared drought hit
  • 55% of cultivated area still has no access to irrigation
  • According to national sample survey(NSS), 2011-12 36 illion workers have shifted from agriculture to non-agricultural sectors. As a result, share of agriculture in the total workforce has fallen below the 50% mark for the first time after Independence.
  • Economic survey 2014-15 shows employment growth(1.40%) has lagged behind labour force growth(2.23%)

All of these above points have pushed the already precarious lives of smallholder farmers and agricultural labourers to the brink, leading to massive rural distress.

Remedy:

World Bank’s “world development report” 2008 shows that agricultural growth is twice as effective in reducing poverty compared to growth in non-agricultural sectors.

  • Public Investment – indian agriculture is primarily rain fed. Hence, investment in irrigation, watershed projects and MGNREGA must be converged into one framework to fight droughts and its consequences.
  • Reframing fertilizer subsidy regime – current fertilizer subsidy has led to the indiscriminate use of chemical fertilizers and poor organic matter incorporation that has eroded the soil health in India. Non Pesticidal Management(NPM) needs to be promoted.
  • Crop Diversification – needs to be promoted in order to ensure country’s food security. Pulses and millets form primary source of protein for the poor. Decentralised procurement of pulses and millets in states where they constitute major share of cropped area as MSP(minimum support price) has been beyond the reach of most farmers growing pulses and millets.
  • Agricultural Research– public expenditure on agricultural research is only 0.7% of agricultural GDP. This must be raised to 3-4 times. Climate resilient cropping system must be developed.
  • Agricultural Technology Management Agency(ATMA) and Krishi Vigyan Kendras must be energized
  • Rural non-farm sector must be developed for more employment generation. E.g.agro-processing and value addition to agricultural produce offer huge scope for local employment.

[3]. Moving for the kill

The Hindu 

Context:  occurrence of dengue, chikungunya and zika infections in a huge global scale

Cause: Aedes aegypti female mosquitoes, are aggressive day time biters, found in tropical and sub-tropical countries and breeds in diverse water bodies and even indoors in nearly any sort of water filled open containers.

Statistics: 390 million dengue infections occur each year in 150 odd countries. 1.5 million people infected with zika last year in Brazil and now has spread to more than 20 countries in Latin America and the Caribbean

Constraints:  Aedes aegypti is resistant to widely used insecticides like organophosphates and pyrethroids.

Vaccines:

For Zika – not yet developed

For Dengue – developed by Sanofi. But it is not yet full proof as it has following limitations:-

  • Low efficacy against the DENV-2 stereotype prevalent in India
  • Vaccine generated anti-bodies that facilitate entry of dengue virus into human cells

Novel Strategies: 2 strategies that have shown promise in reducing mosquitoe population and thus these infections are –

  • Genetically modified male Aedes Aegypti mosquitoes that carry a dominant lethal gene which is passed down to offspring when they mate with wild female mosquitoes. This gene produces a protein which causes these offsprings to die before adulthood. The gene is kept under check in labs via Tetracycline drug. Absence of adequate quantity of this drug in nature leads to the overproduction of the gene induced protein in the offsprings thus leading to their death. As male mosquitoes do not bite humans, the release of genetically modified males will not increase the risk of dengue. Also this technique is “species-specific” i.e. genetically modified males released into the wild will not mate with any other species of Aedes mosquitoes.

Introduction of life-shortening WOLBACHIA bacteria into male and female aedes mosquitoes. This wassuccessfully tested in Australian city of Cairns. Wolbachia’s ability to cut Zika transmission is not yet known but it is effective against dengue, chikungunya, yellow fever and west nile disease. However, the release of even a single female mosquitoe infected with wolbachia could potentially lead to significant risk of species wide invasion.

[4]. Protecting India’s trade interest

The Hindu

Context: Signing of Trans Pacific Partnership at Auckland among US and 11 other countries. The article looks into the consequences and inspiration that Indian can draw at this point of time.

The issues arising out of signing of TPP:

TPP has clearly mentioned details on obligatins which are not covered under labour, investment, environment, e-commerce, competition and government procurement.

Push for TPP by US seems to be indicator of new negotiating template that US wants to bring to WTO also.

A close watch is needed to ensure that countries under TPP don’t violate the regulatory regimes under WTO. There is an expectation that TPP will lead to proliferation of TPP standards. India should actively seek disciplines on private standards at the WTO to restrict their proliferation.

An Example: For instance, in 2006, the Sialkot sports goods manufacturing cluster in Pakistan came close to closure when Nike decided to stop sourcing footballs made in the area, on account of violation of its labour standards that prohibited child labour. Despite significantly impacting international trade, these standards have escaped regulation under the WTO.

Future path for India:

  1. India should conclude it’s ongoing free trade negotiations. (with EU and RCEP)
  2. India also needs to identify its trade interest areas and propose alternative negotiating templates. One such area is biopiracy, protection of traditional knowledge, and the link between the WTO’s Trade-Related Aspects of Intellectual Property Rights agreement and the Convention on Biological Diversity.
  3. On the domestic front, India should accelerate the process of making its products more cost-competitive. infrastructural deficiency, port congestion and poor road connectivity are challenge to this.
  4. The government should launch a comprehensive initiative to enable Indian exporters to not only comply with standards prevalent in the importing market, but also demonstrate the compliance through appropriate conformity-assessment procedures.
  5. If India’s public standards are harmonised with foreign standards, they will be equally applicable to domestic and export sales on account of the ‘national treatment’ principle of the WTO which prohibits less favourable treatment to imported products.

[5]. Stress test for Indian banks

The Business Standard 

Context: Poor condition of banks around the globe and in India

BANKS                                                                       FALL IN SHARES

BANK OF JAPAN                                                        10%

EUROPEAN BANKS                                                  18%

US BANKS                                                                      12%

INDIAN BANKS                                                          35 – 50%

According to author, where bank shares go the economy tends to follow.

Indian Situation

All PSU banks together are worth less than HDFC Bank and have market capitalization equal to Kotak Mahindra bank despite having an asset base 30 times more than kotak’s.

The entire public sector banking system has a market capitalization of less than $ 40billion which is extremely less compared to other emerging economies like China whose state owned banks have a market capitalization of $ 956billion.

Market capitalization to total assets ratio – China 5.8% and India 2.7%.

Reasons

Fear and lack of trust on the part of investors as to the true asset quality embedded in the books of the banks.

Investors are not sure about the actual losses of the bank and whether the restructured cases are true or just a postponed non-performing asset recognition.

Banks are not compelled to disclose such information.

Restructure – convert the debt of a business into another kind of debt, typically one that is repayable at a later time.

Non-performing assets – Bad debts or loans given that could not be recovered.

Proposed remedy

RBI should conduct stress test for individual banks with explicit assumptions and publish individual bank-level data.

This will give clear picture to investors and will subdue the hyped fear that analysts are creating about asset quality.

[6]. Anatomy of revenue deficit

The Business Standard 

Context: India’s ever growing fiscal deficit and its efforts at fiscal consolidation

Fiscal Deficit– when a govt’s total expenditure exceeds its total revenue

Fiscal Consolidation – policy aimed at reducing govt deficits and debt accumulation

Causes: The “golden rule” of economists suggests one must borrow to invest not to consume. However, India has been borrowing to consume not to invest.

Investment generates economic returns that ultimately allows the govt to increase the size of its consumption expenditure. Borrowing for consumption does not do so and adds to the interest burden on the govt.

Since the enactment of the FRBM act, states have been adhering to this golden rule but not the centre.

FRBM – Fiscal Responsibility and Budget management legislated by parliament in 2003. Its objectives:

  • Institutionalize fiscal discipline
  • Reduce fiscal deficit
  • Improve macroeconomic management
  • Promote fiscal stability in the long term by fixing targets
  • Emphasizes a transparent fiscal management system and equitable distribution of debts over the years
  • Gives flexibility to RBI to undertake moneytary policy to tackle inflation and take corrective measures

Consumoption List: In FY13-

  • Interest payments accounted for 25.2% of total revenue expenditure
  • Subsidies accounted for 20.7% of total revenue expenditure
  • Pay and allowance of central govt personnel accounted for 15.5% of total revenue expenditure (very less by international standards)
  • Expenditure on defence personnel and paramilitary forces.

Conclusion: The central govt has been borrowing to consume and the consequences of this has been structurally weakening its fiscal health over the past 35 years. In the absence of structural reforms, there is no option but to persist with fiscal consolidation.


By: ForumIAS Editorial Team


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