9 PM Daily Current Affairs Brief – April 6 2017

[1]. Sonar Bangla, again

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Live Mint

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[1]. GDP is a flawed but magical indicator

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Front Page / NATIONAL

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1. Ties severely damaged, says China

Context

Because of the recent visit of Dalai Lama to Arunachal Pradesh, tensions between India and China have increased. China has released its official statement in this matter.

About the Dispute

• Arunachal Pradesh is at the heart of the Sino-Indian boundary dispute in the eastern sector.
• The dispute in this zone is over territory south of the McMahon Line in Arunachal Pradesh, which includes Tawang.

What is China saying?

• Dalai Lama’s visit has “severely damaged” Sino-Indian ties.
• It will escalate disputes in border areas.
• India should not hype up sensitive issues and take concrete steps to safeguard growth of India-China relations.
• Statement of Pema Khandu, Chief Minister of Arunachal Pradesh that India does not share a boundary with China, but with Tibet, can be interpreted as questioning “One-China” principle.
• India is playing the Tibet card because of China’s stance over NSG and Masood Azhar’s issue.

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2. Rail regulator gets green light

Context

Setting up of an independent rail regulator, Rail Development Authority (RDA) to look into fares and private sector role.

About Rail Development Authority

• Rail Development Authority (RDA), will be based in Delhi with an initial corpus of Rs. 50 crore.
• RDA will act within the parameters of the Railway Act, 1989 and make recommendations to the Ministry which will take a final call on passenger and freight fares.
• It will be responsible for recommending passenger fares, setting performance standards for rail operations and creating level playing policy for private sector participation.

Functions of Rail Development Authority

• Recommend tariff “commensurate with costs”.
• Frame principles for social service obligation.
• Ensure a level playing field for stakeholders by suggesting policies for private investment.

Benefits of an Independent Rail Regulator

• Improve services offered to passengers.
• Provide comfort to investors in the rail sector.
• To enhance transparency and accountability.

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3.  Centre hands over to SC accreditation guidelines for NGOs, VOs

Context

The Centre handed over the Supreme Court new guidelines framed for accreditation of nearly 30 lakh NGOs and voluntary organizations (VOs) in the country.

Need for accreditation guidelines

The need for the guidelines is to regulate the manner in which the VOs/NGOs, which are recipient of grants, maintain their account, procedure for audit of account, including procedure to initiate action for recovering grants in case of misappropriation and criminal action.

Role of NITI Aayog in accreditation of VOs/NGOs

• NITI Aayog has been appointed as the nodal agency for the purpose of registration and accreditation of VOs/NGOs seeking funding from the Government of India.
• The Aayog has been tasked with maintaining database systems to manage and disseminate information relating to NGOs/VOs.

Benefits of new guidelines

• It would facilitate seamless operation of the IT Act and the FCRA with respect to NGOs.
• There would be no need of any cumbersome and intrusive process, which creates mutual distrust and scope for misuse.

View of Supreme Court

• The court ordered that any NGO, found in the audit to have indulged in misappropriation of the public funds should be subject to criminal prosecution.
• Government should initiate civil recovery proceedings from the rogue NGOs.

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4. BC Commission set to get constitutional status

Context

New Constitution Bill (123rd Amendment) introduced in Lok Sabha to accord constitutional status to the Backward Classes Commission.

Why this Bill?

• This will bring the Backward Classes Commission (which looks after the interests of Other Backward Classes) on equal footing with that of Scheduled Castes and Tribes Commission.
• It will give powers to Parliament to designate castes as OBCs.

Proposed changes and limitations of the commission currently

Proposed Changes:

• The proposed commission will have a chairperson, vice-chairperson and three other members and will hear the grievances of socially and educationally backward classes, a function discharged so far by the Scheduled Castes commission.
• In order to safeguard the interests of the socially and educationally backward classes more effectively, it is proposed to create a National Commission for Backward Classes with constitutional status at par with the National Commission for Scheduled Castes and the National Commission for Scheduled Tribes.

Limitations:

At present, the functions of the commission are limited to examining the requests for inclusion of any class of citizens as a backward class and hear complaints of over-inclusion or under-inclusion of any backward class in the existing quota and advise the Central government, the Constitution Amendment Bill said.

Note: The bill will require the support of two-third members of the House for its passage, as it is a Constitution Amendment Bill.

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5. India asserts sovereignty over Gilgit-Baltistan

Context

India has asserted its territorial sovereignty over the Gilgit-Baltistan region, in response to the recent reports of declaring Gilgit-Baltistan as Pakistan’s new province.

Stand of India

• Both the Houses of Parliament had passed resolutions reiterating India’s claims over Pakistan-occupied-Kashmir and Gilgit Baltistan. Thus, the government was bound by it.
• India wouldn’t let go of any area.
• The entire State of Jammu and Kashmir acceded to India in 1947. It has been and will always be an integral part of India.

India therefore sees Gilgit-Baltistan as part of Indian territory illegally occupied by Pakistan.

Location and History of Gilgit-Baltistan

• It is a chunk of high-altitude territory at the northwestern corner of Jammu and Kashmir.
• The region was a part of the erstwhile princely state of Jammu and Kashmir, but has been under Pakistan’s control since November 4, 1947 following the invasion of Kashmir by tribal militias and the Pakistan army.
  

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Editorial/OPINION

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1. A new Delhi chapter for Sheikh Hasina

Context

There are high expectations from Bangladesh’s Prime Minister, Sheikh Hasina’s forthcoming visit to India.

Important areas of cooperation

• Both India and Bangladesh have a common stand on tackling terrorism.
• Similar  views on how organizations such as the South Asian Association for Regional Cooperation (SAARC) should be going forward in promoting cooperation among its member nations
• Indian investment in Bangladesh
• Defense deals
• Other areas of cooperation include: Bangladesh’s measures toward setting up a power plant in Sundarbans, economy, etc.

Major Problem Area

Sharing of Teesta waters between India and Bangladesh.

Teesta Water and the Dispute

• Teesta originates from Kangse Glacier, Charamu Lake in Sikkim. Most of its catchment area lies in India.
• It starts from Sikkim and joins Bramhaputra in Bangladesh. It is an important irrigation source for paddy farmers on both sides.
• A new formula in 2011 proposed – India & Bangladesh to get 42.5% and 37.5% respectively.
• Both India and Bangladesh need to take steps for early conclusion of Teesta agreement, to show themselves as good neighbors.

Conclusion

The Sheikh Hasina visit should show positive results for both Bangladesh and India.

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2. Painting it all black

Context

Demonetization may not uncover a lot of amount because large deposits in banks are not always black money.

What is Demonetization?

Demonetization is the act of stripping a currency unit of its status as legal tender.

Implication of large sum of money being deposited to Bank Accounts (post Demonetization)

There may be two possibilities:

• These may be black funds and they are tracked.
• People behind them will be caught.

Budget Speech of Finance Minister

The following things were stated:

• Deposits of more than ₹80 lakh were made in 1.5 lakh accounts with average deposit size of ₹3.31 crores.
• Deposits between ₹2 lakh and ₹80 lakh were made in about 1.1 crore accounts with an average deposit size of ₹5 lakh.
• Small businesses work mostly in cash and, therefore, may hold fairly large sums of it.
• Companies not filing returns or running at a loss or at zero profit also hold cash to hire labor, buy inputs, spend on overheads.
• Narrow direct tax base: Number of people declaring income of above ₹50 lakh is only 1.72 lakh.

Black Money or not?

• The government has said it will use ‘data mining’ to figure out whether the large deposits in accounts are consistent with their declared incomes or not.
• Given the large number of concessions and deductions available, actual incomes are much greater than the taxable income.

Conclusion

Data given in the Budget speech does not imply that demonetisation will help recover substantial black incomes, because cash deposited does not automatically make it black. And, black cash is a small part of the black economy.

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 Economy

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1. ‘Steps on liquidity will be in focus’

Context

Excess liquidity is a concern. RBI will take steps to reduce the surplus liquidity in the banking system.

Statistics

Post demonetization:

• Deposits increased by ₹4.27 lakh crore. Deposits grew 13% year-on-year till March 17. Credit growth was 4.4%.
• The surplus liquidity in the system is estimated to be about ₹4 lakh crore.

Possible actions by RBI

• If the rupee appreciates, there will be added pressure as RBI will start buying dollars to cap gains in the currency.
• Leaving the surplus problem unattended could lead to investments into riskier assets.
• It is likely that RBI will implement measures to soak up excess liquidity.

What is CRR?

• Cash reserve Ratio(CRR) is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the available amount with the banks will come down. The RBI uses the CRR to drain out excessive money from the system.
• Simply put, CRR is the proportion of deposits that banks have to keep with RBI.

What is Standing Deposit Facility (SDF)?

• SDF is a mechanism to drain surplus cash at a rate lower than the repo rate without the need for any collateral. The implementation of SDF requires an amendment to the RBI Act.

Ways to reduce excess liquidity

• A way to drain excess liquidity is to raise the cash reserve ratio (CRR) which is at 4%.
• The proposed standing deposit facility (SDF) could be a useful tool to tackle liquidity.

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Indian Express

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Sonar Bangla, again

Context

The bilateral relationship between India and Bangladesh needs reframing.

Issues

• India’s insufficient strategic appreciation of the importance of Bangladesh.
• Border Issue.
• Bangladesh’s leadership role in the subcontinent. Dhaka also has the central role in shaping the future of sub-regional cooperation with Bhutan, Burma, India and Nepal.
• Other issues: Dealing with the consequences of the partition for management of shared river waters, making the boundary tranquil, and restoring the lost trans-frontier economic connectivity.

Areas of cooperation and Prospects

Following opportunities/steps can be taken to advance the relationship:

• Tackling terrorism.
• Indian investment in Bangladesh.
• Defense deals.
• Open up Indian market for goods produced in Bangladesh
• Extend economic assistance to developmental projects
• Negotiate agreement on sharing the waters of Teesta river

Conclusion

Bangladesh, which has a settled land and maritime border with India, is well positioned to play a larger regional and international role. Growing mutual trust and political comfort between India and Bangladesh will have long-term consequence.

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Live Mint

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GDP is a flawed but magical indicator

Context

There are flaws with the GDP calculation, but still it is used as an important reference.

What is GDP?

Gross Domestic Product (GDP) is a broad quantitative measure of a nation’s total economic activity. More specifically, GDP represents the monetary value of all goods and services produced within a nation’s geographic borders over a specified period of time.

What is Per Capita GDP?

Per capita GDP is a measure of the total output of a country that takes gross domestic product (GDP) and divides it by the number of people in the country. The per capita GDP is especially useful when comparing one country to another, because it shows the relative performance of the countries. per capita GDP is one of the strongest predictors of happiness measured through people’s subjective perceptions of their well-being.

Drawbacks of GDP as an indicator

• It does not account for the underground economy
• It emphasizes economic output without considering economic well-being
• GDP calculations underestimate actual growth and productivity sometimes.
• Difficulty of measuring changes in the quality of products and services
• Doesn’t account for a product’s actual contribution to consumers’ well-being or to the economy.
• GDP doesn’t count unpaid volunteer work

Advantages of GDP

• Ability of GDP to give an overall picture of the state of the economy
• The national income and product accounts (NIPA), which form the basis for measuring GDP, allows to analyze the impact of variables likemonetary and fiscal policy.

Conclusion

GDP is still the best indicator of a nation’s overall economic health, in spite of its shortcomings.

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