This portal ( http://forumias.com/portal ) is now deprecated and not updated any longer.

Print Friendly

9 PM Daily Brief – 9th November 2016

ca-digest


Click here to Download 9 PM Daily Brief PDF (9th November 2016)


Front Page / NATIONAL (The Hindu)


The Hindu

Context

Five hundred and 1,000 rupee notes will cease to be legal tender from midnight on Tuesday, Prime Minister announced in a surprise address to the nation. He said the decision was taken to root out the menace of black money and corruption.

Meaning: Legal tender – coins or banknotes that must be accepted if offered in payment of a debt.

Still valid

Notes of 100, 50, 20, 10, five, two and one rupee remain legal tender and will be unaffected by the decision

 Where to deposit old notes?

Existing Rs. 500 or Rs. 1,000 notes can be deposited in an individual’s bank or post office accounts between November 10 and December 30.

  • Currency value of up to Rs. 4,000 can be exchanged from any bank or post office per day till November 24 by showing a government identity card

Exception

For 72 hours, government hospitals, railway, air and government bus ticket booking counters will continue to accept the old notes. Old notes will also be accepted till November 11 at petrol, diesel and gas stations authorized by public sector oil companies, consumer co-operative stores authorized by State or Central government, milk booths authorized by States as well as crematoriums.

New notes

The Reserve Bank of India will issue new Rs. 500 and Rs. 2,000 notes starting from November 10. The new Rs. 500 note will feature the Red Fort and the new Rs. 2,000 note will feature Mangalyaan

Withdrawal limits

Once the ATMs start functioning, there will be a withdrawal limit of Rs. 2,000 per debit card, which will be increased to Rs. 4,000 later

  • There will, however, be an overall limit on withdrawal from banks of Rs. 10,000 per day and Rs. 20,000 per week, which will be increased in the coming days.

Why the government announced this move at the last time?

An element of surprise was essential otherwise the drug cartels and terrorists would have made alternate arrangements


[2]. ‘Corruption, black money & terrorism are festering sores’

The Hindu

Context

We are now No. 1 in the rate of economic growth. But on the other hand, we were ranked close to 100 in the global corruption perceptions ranking two years back.

Article lists the entire speech of our PM. Please read it.


[3]. Move was in the pipeline for months

The Hindu

Context

The case for introducing new notes followed prolonged deliberations within the top echelons of government, based on inputs from security agencies and the central bank.

Secrecy was maintained

The government’s move to scrap nearly 23.2 billion high-value currency notes of Rs. 500 and Rs. 1,000, was in the pipeline for several months but was kept tightly under wraps, with just a handful of officials in the know.

  • The Reserve Bank of India’s central board had approved the production of the Rs. 2,000 notes several months ago and even began production of the new Rs. 500 and Rs. 2,000 notes, which are to be issued from November 10 a few months ago.

Decision based on analysis

The bold and decisive step to fight black money and the use of fake currency notes to finance terrorism was backed by analysis of India’s currency trends

Disproportionate rise

Statistics show that high denomination currency in circulation has risen sharply between 2011 and 2015.

  • When all currency notes grew 40 per cent, Rs. 500 notes in circulation rose by 76 per cent and Rs. 1000 notes went up by 109 per cent. But during this period, the economy expanded by 30 per cent so the circulation of such notes had gone up disproportionately


[4]. Centre extends AFSPA to check Naga factions

The Hindu

Context

The Centre has decided to extend the Armed Forces Special Powers Act (AFSPA) in three districts of Arunachal Pradesh.

Main reason

One of the primary reasons cited by the Centre is “extortion and intimidation” by the cadres of National Socialist Council of Nagaland (Isak-Muivah), who are planning to dominate areas hitherto occupied by NSCN (Khaplang)

  • AFSPA has been extended in the districts of Tirap, Changlang and Longding, all bordering Assam
  • The three districts have been declared as “disturbed area” under Section 3 of the AFSPA as Naga underground factions including NSCN-IM and NSCN-K continue to indulge in extortion, area domination, recruitment of locals and inter-factional rivalry

 BACKDROP

It should be noted that NSCN-K was banned in 2015 after its alleged involvement in an ambush on an Army convoy in Manipur’s Chandel district, resulting in the death of 17 personnel. So, now the NSCN-IM is trying to regain the control from NSCN-K

Ceasefire:

  • NSCN-IM had entered into a ceasefire agreement with India in 1997. It is the largest group representing the Nagas and has demanded a “Greater Nagalim” or a contiguous land for the Nagas, across the States of Nagaland, Arunachal Pradesh, Manipur and Mizoram
  • NSCN-K had unilaterally abrogated the ceasefire in March 2015 but NSCN-IM continues to be in a ceasefire pact with the Government of India.

 So, if a ceasefire exists then why this notification?

The ceasefire signed with NSCN-IM is only for Nagaland; it does not include Arunachal Pradesh and Manipur. This notification has been issued after much consultation between the security agencies


[5]. ‘Keep birth database to curb female foeticide’

The Hindu

Context

Noting that the “female child is entitled to enjoy equal rights that a male child is allowed to have,” the Supreme Court has issued a series of directions to clamp down on the crime of female foeticide, including an all-India database to keep tabs on the number and gender of new-borns

Backdrop

The Supreme Court passed the verdict while disposing of a PIL by NGO Voluntary Health Association of Punjab

  • The Bench passed 16 directions to ensure immediate and effective implementation of the Pre-conception and Pre-natal Diagnostic Techniques (Prohibition of Sex Selection) Act and the Rules framed thereunder

Bench & the judges observed

  • Damaging the dignity: When a female foetus is destroyed through artificial means, which is legally impermissible, the dignity of life of a woman to be born is extinguished. It corrodes the human values
  • Centralised database: All the States and the Union Territories in India shall maintain a centralised database of civil registration records from all registration units so that information can be made available from the website regarding the number of boys and girls being born
    • Information display: The information that shall be displayed on the website shall contain birth information for each district, municipality, corporation or gram panchayat so that a visual comparison of boys and girls born can be immediately seen
  • Incentive schemes: SC directed that States and Union Territories, which do not have any incentive schemes for the girl child, shall frame the same.
  • Committee to oversee progression: Noting that courts hearing cases of female foeticide should expedite hearing, the court requested the Chief Justices of High Courts to constitute a committee of three judges to periodically oversee the progress of these cases.

 


Economy


 

[1]. India to seek greater market access in U.K. for IT, drugs

The Hindu

Context

India and the U.K. have begun to look at ways to deepen trade & investment ties even without a Free Trade Agreement (FTA).

India will seek greater market access in the U.K. for goods including generic drugs and services such as IT/ITeS and healthcare through a bilateral FTA as well

Why no talks on FTA?

Negotiations on the proposed India-U.K. FTA can begin only after Britain completes the formalities for withdrawal from the European Union (EU) by around 2019

What does the proposed FTA aims for?

The proposed FTA is aimed at

  • Opening up, further, the trade in goods and services
  • Liberalisation of investment policies

Benefits to UK& India

  • Indian generic drugs and hospitals can help Britain in reducing healthcare costs, making the system in that country more affordable
  • Both the nations will gain if the U.K. National Health System procures generic drugs from India and if British insurance companies recognise the relatively low-cost treatment in India’s globally accredited hospitals.

 


Editorial/OPINION (Indian Express)


[1]. The arhar solution to pollution

Indian Express

Context

In the wake of prevailing environment conditions in the capital and its surroundings, author tries to propose a long-term solution

Author delineates the causes of the detrimental environmental conditions that Delhi and its neighboring areas is suffering from,

  • Weather conditions (thermal inversion) that facilitate the settling of particulate matter and other pollution
  • Dust on the streets generated in part from construction activity, and vehicle-related emissions
  • Burning of paddy after the kharif harvest which happens every year

 Addressing the issue of paddy burning

Author says that a broad-based response is required to deal with multiple factors listed above but one of the permanent solutions to the pollution problem must address paddy burning.

Author points towards a new variety of arhar as a possible solution to the problem of paddy burning.

Solution: Pusa arhar16, a new variety of arhar (pigeon pea). It has been developed by K.V. Prabhu and his colleagues at the Indian Agricultural Research Institute (IARI)

Potential

Pusa Arhar16 has the potential to be grown in the paddy-growing regions of Punjab, Haryana and Uttar Pradesh and eventually in all of India.

Higher Yield: Its yield (about 2000 kg/hectare) will be significantly greater than those of the existing varieties

Uniform size: As its size will be uniform, it will be open to mechanical harvesting, an attractive feature for farmers in northern India who currently use this technology for paddy

How Pusa arhar16 removes the problem of paddy burning?

Farmers resort to burning paddy waste because after harvesting they want to clear their fields for the next harvest and burning takes less time.

  • Secondly, they are unaware of the damage that their actions cause to the environment because they are accustomed to the practice.

Now, how does arhar eliminates the problem? Read on to find out.

Arhar straw vs the Paddy straw

Arhar straw, unlike paddy straw, is green and can be ploughed back into the soil.

  • Fast decomposition: In the case of arhar, the farmer, even after combine harvesting, just needs to run a rotovator to cut the left-over straw into pieces, which can be ploughed back and will decompose very fast

Problem with paddy straw

High silica content: In paddy straw, the problem is the high silica content, which does not allow for easy decomposition

Difficult to plough it back: The paddy straw is very firm and it cannot be simply cut into pieces and ploughed back in the soil unlike the arhar straw

Social benefits of paddy replacement

Pulses will,

  • Use less fertilizer
  • Use less water
  • Fewer emissions
  • Replenish the soil with nitrogen unlike paddy which depletes the soil

Subramanian Committee report

Next, the author lists outs the policy measures as provided in the Subramanian Committee report on pulses that was submitted in October 2016 to the ministers of finance, agriculture and consumer affairs

  1. Encouraging agricultural science: The future of sustainable agriculture must be based on encouraging agricultural science and research. Agricultural research institutions must be free from political interference, must be accorded autonomy, and must reward proven talent.
  2. Proper incentives vis-à-vis risk: Without proper incentives, the commercial viability of a product cannot be guaranteed. In the case of pulses and paddy, a factor that determines the relative incentives is risk. Because of guaranteed MSPs in paddy, it is less risky to grow than pulses. The Subramanian Committee estimated that pulses production was about six times riskier than paddy production. To compensate this, the required MSP for pulses would have to be about Rs1100 per ton greater than otherwise.

What is an externality?

It is a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices like in agriculture that would be the over-production of paddy because of a higher MSP which leads to a waste of fertile land which otherwise could have been used for growing other items like pulses

  1. Taking into account social costs & benefits: Pricing in India must increasingly take account of externalities, positive and negative. In the case of agriculture, that means adapting the current methodology of setting MSPs used by the Commission for Agricultural Costs and Prices (CACP) that focuses exclusively on private costs and benefits. This tends to encourage socially wasteful production and specialisation such as excessive paddy production in north India with all the asssociated consequences. As argued by Professor Ramesh Chand of NitiAayog and recommended by the Subramanian Committee report, MSP setting must incorporate social costs and benefits.

Conclusion

Author concludes on a positive note saying that current situation has given us a chance to address the underlying problems and mould a crisis into an opportunity.


[2]. Clear the haze

Indian Express

Context

Cleaning Delhi’s air requires urban planners, health experts and policymakers to work together

The current article also talks about the prevailing environmental conditions in Delhi and how the government should devise a policy plan so that the problem does not recur frequently every winter.

No solutions have been ordained in the article.

So just give it a light read.

 

 


Live Mint


[1]. Towards a new fiscal policy framework

Live Mint

Context

The quest for a new fiscal law is absolutely fine as long as it does not become an excuse for abandoning fiscal discipline.

The issue will be covered in detail when the recommendations of NK Singh Committee are out.


[2]. More bad news from struggling Indian banks

Live Mint

Context

Author has tried to bring out the fact that Indian banks have still not got past the first stage of addressing the problem of Non-Performing Assets (NPA).

 A four step solution to address NPA

  1. Recognition
  2. Resolution
  3. Recapitalisation
  4. Reform

Why author thinks that the stage of recognition is not yet over?

He points out at following statistics to explain his viewpoint,

  • Axis Bank & ICICI banks have reported an increase in bad loans in its second-quarter results

Problems

Author lists out few problems that signify that the problem of bad loans is not an easy one to solve.

Budget constraints: Only a massive recapitalisation drive by the government will expedite the solution of the problem of NPA. In absence of such a drive, it will take around 3-5 years

Absence of Buffers: Author points out that Indian banks do not seem to have adequate buffers to deal with such shocks (bad loans).

Evidence: As an evidence of his opinion, author directs us towards the data from the October 2016 edition of the “Global Financial Stability Report” from the International Monetary Fund which shows that the loan-loss reserves in Indian banks are barely a third of the requirement.

What are loan loss reserves?

The portion of a bank’s cash or cash equivalents holdings set aside to cover estimated potential losses from its loan portfolio. Example: Consider a person defaults on the initial payment of his loan then bank utilize the loan loss reserve to cover the unpaid portion of the loan.

Calculation: They are calculated as a sum of expected losses from NPAs and potential further losses from corporate loans that are at risk.

  • Loan loss reserve = Expected losses from NPAs + Potential losses from corporate loans at risk

[3]. Why Delhi smog is a call to address India’s farm crisis

Live Mint 

Context

Article talks about the reasons as to why farmers of Punjab & Haryana have been forced to resort to the practice of stubble burning.

Backdrop

Focus has inadvertently shifted on the farmers of Punjab & Haryana as experts have pointed that the smoke from the burning fields of these states contributes to the polluting smog cloud that currently shrouds the capital.

This article focusses on the Why of the matter. Why farmers resort to burning? Can they employ other methods?

Read on to find out

Rising farm Costs

Farm costs have been rising over the past few years, and labour costs have seen the sharpest rise over the past decade.

0

Source: Live Mint

Mechanization fails: Farmers, in presence of costly labor, took to machines. They replaced the labor with machines but here also they have seen diminishing returns. The Planning Commission said in the 12th five-year-plan mechanization helped farmers to cope with labour scarcity (due to it being costly), it exacerbated a decline in capital productivity.

Explanation: A decline in capital productivity means that the a unit of capital is producing less output as compared to previous year or , in our case here, same amount of money is resulting in less quantity of agricultural production

Behind China

India is far behind China when it comes to total factor productivity (TFP) growth. TFP measures how effectively all the inputs of production are combined to produce a unit of output.

01

Source Live Mint

Mechanization to blame

Stubble burning started with the use of combine harvesters (some 15 years ago).

  • As giant combines harvest the crop, it leaves behind a stubble, about 6-8 inches long. Farmers then burn the stubble as it makes no sense to manually harvest the stubble since it cannot be used as animal fodder. Also, manual harvesting of paddy costs over Rs.4,000 per acre compared to Rs.1,200 by using combines

A possible solution: The solution lies in using a baler which can collect the straw neatly but the government has to put in place the right financial incentives and ensure the collected straw can be used in biomass plants (for power generation).

  • A baler costs about Rs.11 lakh which is not easy for an individual farmer to invest in. With subsidies for balers and setting up of biomass-based power plants, using a baler can be viable for contractors who rent out farm machinery.

In short

  • The absence of a well-thought farm policy for promoting sustainable farm practices has led to a degradation of key resources such as soil and water
  • The ill-planned use of machinery without commensurate returns has put a heavy financial strain on farmers

Conclusion

While banning stubble burning might provide temporary relief, it is important for our policymakers to realize that there is no alternative to a well-designed agricultural strategy to raise farm output and incomes exponentially

 

Print Friendly

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

  • Sid

    Great