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Daily News Analysis 26-02-2016

S.NO.

NEWS ITEM

SYLLUBUS

ESSENCE OF THE ARTICLE

1.         

 

India moving UN to blacklist Masood (Page 12)

a)     I.R

a)     In its biggest diplomatic move after the Pathankot attack, India will approach the United Nations on Feb 26 to include the Pakistan-based terror mastermind Maulana Masood Azhar on list of globally designated terrorists.

2.

Panel calls for political dialogue in Maldives (Page 14)

a)     International

a)     At its meeting in London, the Commonwealth Ministerial Action Group called upon Maldives to show progress in many areas (including political dialogue) to ensure inclusive, free and fair elections in 2018.

3.

Customer takes first class seat in Prabhus plans (Pages 1 and 13)

a)     National

b)     Economy

a)     Railway Minister Suresh Prabhu effected no hike in passenger fares, indicated a cut in freight tariffs, admitted that the global economic slowdown is hurting Indias core sectors and pointed out that the looming impact of the Seventh Pay Commission made it one of the toughest times to formulate a Budget.

4.

Marshalling resources to stay on track (Page 10)

a)     National

b)     Economy

a)     Railway Budget is notable both for the absence of big-ticket schemes and for its quiet emphasis on process changes that hold the promise of ushering in long-term improvements in the viability of the Indian Railways.

5.

Global slowdown, wages headwinds for growth (Page 15)

a)     National

b)     Economy

a) Railway Minister Suresh Prabhu announced increasing investments by 21 percent to Rs.1.21 lakh crore in 2016-17 - more than double the average investments made by the previous UPA govt in the 2009-14 period.

6.

Public-private partnerships to fuel future growth of Indian Railways (Pg 16)

a)     National

b)     Economy

a)     The Railway Budget has laid emphasis on Public Private Partnerships to implement initiatives such as rail connectivity for ports, station-redevelopment, rail-side logistics parks and warehousing as well as satellite terminals.

7.

Meeting great expectations (Page 10)

a)     National

b)     Economy

a)     The choice between growth and fiscal policy is a false one. We need both fiscal consolidation and a high growth momentum. Enhancing non-tax revenues through a more robust disinvestment programme can reconcile this hiatus.

8.

Quantifying the caste quotas (Page 11)

a)     National

b)     Social issue

a)     The lack of any established principles or credible data prompts demands for reservation such as those of the Patels and Jats. The solution lies in shuffling reserved categories.

 

 

S.NO.

NEWS ITEM

SYLLUBUS

BACKGROUND

IMPORTANT POINTS

1.         

 

India moving UN to blacklist Masood (Page 12)

a)     I.R

a)     India – Pakistan relations

b)     Terrorism

c)     Pathankot terror attack

d)     Jaish-e-Mohammed (JeM)

e)     UN 1267 Sanctions Committee

a)     In its biggest diplomatic move after the Pathankot attack, India will approach the UN on Feb 26 to include the Pak-based terror mastermind Maulana Masood Azhar on the list of globally designated terrorists.

b)     Officials said India would formally request the 1267 Sanctions Committee (which consists of 15 members) to schedule a discussion on Masood Azhar. The decision is significant since it is the second time in less than a year that India will attempt to isolate an international terrorist through the anti-terror committee.

c)     In June 2015, India moved the committee in the UN, demanding an explanation from Pak for its decision to release the 26/11 attack plotter Zakiur Rahman Lakhvi from jail.

d)     However, the attempt to isolate Pakistan failed at the last moment because of Chinas opposition. Officials said that this year too, Chinas attitude would be watched.

e)     However, according to experts, the attempt to isolate Masood Azhar has a greater possibility to succeed at the 1267 Sanctions Committee.

2.

Panel calls for political dialogue in Maldives (Page 14)

a)     International

a)     Maldives internal issues

b)     Commonwealth Ministerial Action Group (CMAG)

a)     At its meeting in London, the Commonwealth Ministerial Action Group called upon Maldives to show progress in many areas (including political dialogue) to ensure inclusive, free and fair elections in 2018.

b)     During the meeting, ministers expressed their continuing concern regarding political space available to the opposition and detention or custody of opponents.

c)     Separation of powers, independence of the judiciary and, the independence and lawful functioning of democratic institutions were the other areas over which they had conveyed their opinion.

d)     The ministers called for an inclusive, purposeful, time-bound and forward-looking political dialogue aimed at achieving deeper and enduring understanding between the govt and opposition parties.

3.

Customer takes first class seat in Prabhus plans (Pages 1 and 13)

a)     National

b)     Economy

a)     Railway Budget 2016

b)     Seventh Pay Commission

 

a)     Railway Minister Suresh Prabhu effected no hike in passenger fares, indicated a cut in freight tariffs, admitted that the global economic slowdown is hurting Indias core sectors and pointed out that the looming impact of the Seventh Pay Commission made it one of the toughest times to formulate a Budget.

b)     While Prabhu reiterated the governments commitment to rev up the economy through public investments, he is betting on a string of belt-tightening measures, other income and optimism to fulfil that commitment with gross budgetary support of Rs. 45,000 crore for the public utility in 2016-17.

4.

Marshalling resources to stay on track (Page 10)

a)     National

b)     Economy

a)     Railway Budget 2016

b)     Seventh Pay Commission

c)     Public-Private-Partnership (PPP)

a)     Railway Budget is notable both for the absence of big-ticket schemes and for its quiet emphasis on process changes that hold the promise of ushering in long-term improvements in the viability of the Indian Railways.

b)     Given the backdrop of a shortfall in traffic receipts, Railway Minister Suresh Prabhus projection of savings of  Rs. 8720 crore compared with budget estimates for the current fiscal year reflects a finance professionals approach in adopting austerity measures to contain costs.

c)     The budget has projected that notwithstanding the substantial jump in salary and pension costs consequent upon the implementation of the Seventh Pay Commissions recommendations, the impact would be minimised to an 11.6 percent increase in working expenses next year.

d)     To address the resultant paucity of funds for capital expenditure, the Minister plans to step up efforts to monetise various assets, including land, and boost non-fare revenue, use the PPP model more extensively, and work jointly with State governments to both formulate and fund region- or city- specific projects.

e)     Citing the international average of 10 to 20 percent of railway network revenues accruing from non-tariff sources, the budget sets a goal of bringing that share on a par over the next five years from the prevailing sub-5 percent.

f)     Prabhu has rightly realised that a major challenge is to recover lost ground in freight haulage, where a persistent decline has had a negative impact not only on the Railways finances but on the economy as well.

g)     The approach enunciated to address this spans three key tacks - expanding the freight basket by moving away from dependence on bulk commodities, rationalising tariffs to stay competitive and building terminal capacity.

h)     The Railway Board is to be reorganised along business lines with cross-functional teams focussed on areas such as non-fare revenues, speed enhancement and information technology. 

5.

Global slowdown, wages headwinds for growth (Page 15)

a)     National

b)     Economy

a)     Railway Budget 2016

b)     Seventh Pay Commission

 

a)     Railway Minister Suresh Prabhu announced increasing investments by 21 percent to Rs.1.21 lakh crore in 2016-17 - more than double the average investments made by previous UPA govt in 2009-14 period. In 2015-16, the plan outlay stood at Rs. 1 lakh crore.

b)     The budget factored in Rs. 20,500 crore as impact of the recommendations of the 7th Pay Commission in 2016-17; leading to a decline in the projection of the operating ratio to 92 percent (the Railways will spend 92 paisa to earn a rupee).

c)   Operating ratio is a measure of financial performance of the Indian Railways and a lower ratio means better efficiency. In 2015-16, the operating ratio declined to 90 percent from 91.3 percent in 2014-15.

6.

Public-private partnerships to fuel future growth of Indian Railways (Page 16)

a)     National

b)     Economy

a)     Railway Budget 2016

b)     Public Private Partnership (PPP)

c)     Ease of doing business

d)     Dedicated freight corridors

a)     The Railway Budget has laid emphasis on PPPs to implement initiatives such as rail connectivity for ports, station-redevelopment, rail-side logistics parks and warehousing as well as satellite terminals.

b)     Railway Minister said a committee appointed for the purpose of revamping ministrys PPP cell has submitted its report and the initiative is under implementation. The cell will be strengthened as part of organisational restructuring process to improve ease of doing business with the Indian Railways.

c)     He said his ministry would take up dedicated freight corridors and implement it in a time-bound manner through innovative financing mechanisms, including PPP.

d)     According to the Railway Budget 2016, the country will get three new dedicated freight corridors in addition to Delhi-Mumbai and Delhi-Kolkata freight corridors that are due to be commissioned in 2019.

e)     The new projects are a North-South corridor, from Delhi to Chennai, an East-West corridor from Karaghpur to Mumbai and an East Coast corridor, from Kharagpur to Vijayawada.

7.

Meeting great expectations (Page 10)

a)     National

b)     Economy

a)     Union Budget 2016-17

b)     Global economic situation

c)     Indias economic growth

d)     GDP

e)     Inflation

f)     Wholesale Price Index (WPI)

g)     Consumer Price Index (CPI)

h)     Current account deficit

i)     Fiscal deficit

j)     Fiscal consolidation

k)     Goods and Services Tax (GST)

l)     Jan-Dhan Yojana, Aadhar, Mobile (JAM) initiative

m)     Public Private Partnership (PPP)

a)     According to the author, Budget-making remains an enigma. Expectations always outstrip reality. Finance Ministers are hard put to prejudge and predict its outcome. This is in spite of the 25 years of economic liberalisation, covering trade, expenditure, tax policies, infrastructure to mention a few.

b)     The OECD Best Practices for Budget Transparency report argues that a pre-budget report serves to encourage debate on the budget aggregates and how they interact with the economy. As such, it also serves to create appropriate expectations for the budget itself.

c) Policymaking is a continuing process and the Budget is only one (although important) act in the annual policy cycle.

d)     The international backdrop is full of uncertainties. On the external front, oil and commodity prices are likely to remain soft. While hurting many commodity-exporting economies, this has given us greater fiscal room and less painful rationalisation of subsidies for petroleum and fertilisers, high current account balance due to lower value of imports, and lower inflation.

e)     The US upturn looks halting. Europe is struggling to cope with the geopolitics of unplanned and unwanted migration. The Chinese slowdown looks prolonged - uncertainties surround exchange rate behaviour, recovery pattern and the probability of a soft landing.

f)     Fortunately, our macro fundamentals and growth trends remain robust. Inflation is subdued - the WPI is negative for the 15th month in succession, while the CPI (at 5.69 per cent) is more obstinate, largely due to weightage and high inflation in some food products, particularly lentils, and more recently vegetable, eggs, meat, and fish.

g)     Current account deficit is down to 0.7 percent, FDI flows registered a 48 percent increase during Oct 2014-April 2015, reserves are at a healthy $349.97 billion (as of Sept 25 2015) and the Central Statistics Office has projected a GDP growth of 7.6 percent.

h)     While the methodology of GDP computations is unbiased, there are persistent doubts that real economy does not feel a growth of 7.6 percent in overall GDP and a higher growth in services and manufacturing. Part of the problem is the curious divergence between nominal and real GDP growth with negative WPI.

i)     Some important policy options are the following. First is the issue of fiscal consolidation versus growth. Finance Minister had presented a new fiscal road map entailing a fiscal deficit of 3.9 percent this year and declining to 3.5 percent in the coming year.

j)     Further, a recalibration of the fiscal road map raises issues of credibility and compromising the hard-earned macro stability, given international fragility. Relaxing the fiscal target may also raise concerns about the sustainability of public debt going forward.

k)     The hiatus between growth and fiscal policy is a false one. We need both fiscal consolidation and sustaining of growth momentum. Enhancing non-tax revenues through a more robust disinvestment programme can reconcile this hiatus.

l)     On tax reforms, hopefully the GST legislation can be enacted sooner than later. Its compelling economic rationale needs no reiteration. The shadows of retrospective taxation continue to hound us.

m)     On corporate taxes, the issue of whether to reduce them to 25 percent in one go or calibrate them over four years or accelerate the pace of calibration and getting rid of exemption is a difficult balancing act. We must desist from falling between two stools - continuing with the exemptions and also bringing corporate rate taxes down.

n)    Finally, the issue of public-private partnerships. PPPs need to be reinvigorated by accepting the recommendations of the Kelkar committee. The digital coverage would be crucial in harnessing the benefits of JAM and anti-poverty programmes. Options like upgrading existing systems and alternative mechanisms to complete digital coverage expeditiously deserve consideration.

8.

Quantifying the caste quotas (Page 11)

a)     National

b)     Social issue

a)     Caste quotas in India

b)     Other Backward Classes (OBCs)

c)     Scheduled Tribe (ST)

d)     Scheduled Caste (SC)

e)     National Sample Survey Office (NSSO)

f)     Socio-Economic Caste Census (SECC)

g)     Below Poverty Line (BPL) Census  

h)    National Commission for Backward Classes

i)     Sixth Pay Commission

j)     Seventh Pay Commission

 

a)     According to the author, it is only when Jats, Gujjars or Muslims demand reservation, and particularly when these demands become aggressive, that our political system suddenly wakes up and takes notice. Little attention is paid to re-examining the global picture or viewing the conundrum of reservation holistically.

b) The proportion of individuals identifying themselves as OBCs has steadily grown over the years. NSSO data show that in 1999-2000, about 36 percent of the population fell in the self-identified OBC category; by 2011-12, this proportion had grown to 44 percent.

c)     If combined with about 9 percent of the ST and 20 per cent of the SC population, the total proportion eligible for reservation comprises 73 per cent of the Indian population.

d)     If new claimants to OBC category are added to this group, easily 80 percent of Indians would be eligible for reservation of some kind. It would be impossible to provide effective benefits to this large a group. Thus, some choices within these categories will inevitably need to be made.

e)     The external conditions which initially led to reservations have changed tremendously. Economic growth has resulted in a decline in poverty numbers from 37 per cent of the population to 22 per cent, which should bring down the number of people seeking reservations, but over the same period, rewards to government jobs have grown sharply.

f)     Wage increases associated with the 6th Pay Commission and expected implementation of 7th Pay Commission have made govt jobs highly attractive. Many groups historically tied to the land are now seeking favourable treatment while seeking entry into non-farm work. Simultaneously, access to government jobs has been declining for all groups.

g)    Thus it is imperative to consider some sensible exit strategies. First, we must try to identify the contours of the problem. Since the First Backward Classes Commission headed by Kaka Kalelkar submitted its report in 1955, several attempts have been made to identify backward castes, resulting in frequent discordance between these lists.

h)     Lack of consistency and clarity lead to ambiguity in the entire process of reservation, leaving communities like Jats dissatisfied. This is exacerbated by the lack of credible recent data. Since the 1931 Census, the only effort at collecting data on different castes and their socio-economic circumstances was undertaken by SECC 2011.

i)     The National Commission for Backward Classes claimed, in a report dated Feb 2015, that these data are neither available nor usable for the purpose of establishing the economic condition of various castes.

j)     The present phase in the planning cycle of 2021 Census is the ideal time for ensuring that comprehensive data about caste and religion for all the groups (including forward castes, backward castes, and SCs and STs) are included in this Census.

k)     These data should allow us to re-evaluate the eligibility of groups for inclusion in reserved categories every 10 or at least every 20 years. Much of the social stratification in India is linked to the occupational status of the various castes. With the changes in the economy, we can expect both the link between caste and occupation to weaken and the economic fortunes of various occupations to change considerably.

l)     If India can conduct a full BPL Census where each household is identified as poor or non-poor, providing data for caste group should be feasible.

m)     We must find a way of ensuring a churn in number of individuals eligible for benefits to ensure that these benefits reach the widest segment of society. With the advent of the Aadhar card, one way of ensuring that the same families do not capture all the benefits is to ensure that each time someone uses their reserved category certificate, their Aadhar number is noted down and linked with the certificate.

n)     All these principles are consistent with the democratic ideals and vision of social justice envisaged in Indias Constitution.  It may be possible to achieve a consensus across the political spectrum for adopting a non-political and pragmatic approach to reservations.

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