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Daily News Analysis 04-04-2016

S.NO.

NEWS ITEM

SYLLUBUS

ESSENCE OF THE ARTICLE

1.         

 

GST will happen soon, Modi tells entrepreneurs in Saudi (Page 1,12)

a)     I.R

a)     Highlighting fast-evolving bilateral priorities, India and Saudi Arabia on Sunday agreed to diversify more bilateral trade and investment into the non-oil sector.

2.

US Act to institutionalise defence, trade ties with India (Pg 12)

a)     I.R

a)     The US-India Defence Technology and Partnership Act would institutionalise the Defence Technology and Trade Initiative framework between the two countries and the Indian-specific cell in the Pentagon.

3.

Human rights concerns should not impair India-EU relations (Page 14)

a)     I.R

a)     Geoffrey Van Orden (a Member of the European Parliament from Britains Conservative Party) said that he would like to see a more practical and realistic relationship between India and the EU.

4.

The need to pre-empt nuclear terrorism (Page 10)

a)     International

a)     The worlds major nations seeking to develop nuclear power gathered in Washington last week for the Obama administration-led Nuclear Security Summit, a platform to discuss strategies to block terror groups such as the Islamic State from obtaining radioactive material and setting off a dirty bomb, or worse.

5.

Modi to launch Stand up India scheme tomorrow (Page 8)

a)     National

b)     Social issue

a)     On April 5, PM Modi will launch the Stand up India scheme, aimed at providing credit to Scheduled Caste, Scheduled Tribe, and women borrowers. 

6.

Revisiting the EPF rollback (Page 11)

a)     National

b)     Economy

a)     The proposal to tax EPF savings would have been better thought through had a Debt Management Office been in place and consulted on the proposal.

7.

Reserve Bank may cut rate by 25 bps (Page 15)

a)     Economy

a)    With most of the conditions set by the RBI Governor Raghuram Rajan for further easing of the monetary policy met, market participants said the stage is set for at least a 25 bps reduction in interest rate in the first bi-monthly review of monetary policy scheduled on April 5.

8.

Indias gross fiscal deficit to exceed target (Page 16)

a)     Economy

a)     According to an analysis, Indias gross fiscal deficit for 2015-2016 could be 6.9 percent of GDP, wider than the budget estimate of 6.3 percent.

9.

Triple sunset: New planet with 3-star system found (Page 20)

a)     S&T

b)     Geography

a)     Scientists have discovered a rare triple-star system with a gas giant planet similar in size to Jupiter.

 

 

S.NO.

NEWS ITEM

SYLLUBUS

BACKGROUND

IMPORTANT POINTS

1.         

 

GST will happen soon, Modi tells entrepreneurs in Saudi (Page 1 and 12)

a)     I.R

a)     India – Saudi Arabia relations

b)     Counter-terrorism cooperation

c)     Ease of doing business

d)     Goods and Services Tax (GST)

 

a)     Highlighting fast-evolving bilateral priorities, India and Saudi Arabia agreed to diversify more bilateral trade and investment into the non-oil sector.

b)   In a bid to boost confidence of Saudi investors in Indias economy, PM Modi told a select group of Saudi entrepreneurs in Riyadh during the last day of his visit that India will increase ease of doing business and bring in the long awaited GST.

c)     He also said that India has a stable tax regime and his govt has successfully removed the retrospective taxation policy creating ease of doing business.

d)     The assertion of India and Saudi Arabia to boost counter-terrorism cooperation was made after PM Modis wide-ranging talks with Saudi King Salman bin Abdulaziz and delegation-level parleys between two sides following which 5 agreements were signed including one on cooperation in the exchange of intelligence related to money laundering and terror financing.

e)     A joint statement issued after the talks called on states to cut off any kind of support and financing to terrorists operating and perpetrating terrorism from their territories against other states and bring perpetrators of acts of terrorism to justice.

f)     That apart, four other bilateral agreements were signed focused on financial intelligence, handicrafts, labour cooperation and technical cooperation between the Bureau of Indian Standards and the Saudi Standards, Meteorology and Quality Organisation.

g)     Apart from the agreements, the bilateral Joint Statement issued at the end of the visit highlighted that both sides are willing to coordinate efforts on countering international terror networks.

h)    While Saudi Arabia briefed India about the grand coalition that it has formed with three dozen predominantly Sunni-majority countries, both sides also agreed to work jointly at the level of the United Nations to deal with terror sponsors.

2.

US Act to institutionalise defence, trade ties with India (Page 12)

a)     I.R

a)     India – US relations

b)     US-India Defence Technology and Partnership Act

c)     Defence Technology and Trade Initiative (DTTI)

d)     India Rapid Reaction Cell (IRRC)

a)     A senior US Defence official said the US-India Defence Technology and Partnership Act (which was introduced in the US Congress a couple of weeks ago) would institutionalise the DTTI framework between the two countries and the Indian-specific cell in the Pentagon.

b)   The resolution was intended to amend the US Arms Export Control Action to formalise Indias status for the purpose of Congressional notifications as a major partner of equal status as Americas treaty allies and closest partners. The US-India Business Council played a major role in pushing the resolution forward.

c)     It will institutionalise what we are doing with DTTI and the IRRC. In fact, IRRC is specifically mentioned in this Act.

d)     IRRC is the only country-specific cell in the Pentagon and functions under the office of the Under Secretary of Defence Acquisition, Technology and Logistics. It was set up in Jan 2015 with a six-member team which is indicative of the importance attached to deepening strategic cooperation with India.

e)   The IRRC was the initiative of US Defence Secretary Ash Carter, also the key architect of the DTTI, launched in 2012 to deepen high-technology cooperation and move towards co-development and co-production of high technology platforms.

3.

Human rights concerns should not impair India-EU relations (Page 14)

a)     I.R

a)     India – EU relations

b)     India – EU summit

c)     Defence cooperation

d)     Counter-terrorism cooperation

a)      In response to a question on whether Indias relationship with EU as a bloc had slipped between cracks because of its strong relationship with several individual countries within the Union, Geoffrey Van Orden (a Member of the European Parliament from Britains Conservative Party) said that he would like to see a more practical and realistic relationship between India and the EU.

b)     The Summit of March 30 was an opportunity to continue expanding ties beyond trade and this was reflected in some of the items on agenda - a water and clean energy partnership and a commitment to cooperate on counter-terrorism issues.

c)     Despite the scope for cooperation, bilateral engagement at the higher levels had become a casualty of irritants between the two govts, such as the banning of some 700 generic drugs from India by the EU in 2015 and the issues concerning the Italian marines.

d)     The Indian govt has been criticised in international political and civil society circles for its restrictions on free speech and on the   functioning of several NGOs.

e)     There was greater scope for engagement, including in security and defence, because of a shared history and the large Indian diaspora there. Britain will deploy a carrier strike force East of Suez in 2020 and this will be a significant opportunity for defence cooperation.

4.

The need to pre-empt nuclear terrorism (Page 10)

a)     International

a)     Nuclear Security Summit (NSS)

b)     International Atomic Energy Agency (IAEA)

c)     INTERPOL

d)     Global Partnership Against the Spread of Weapons and Materials of Mass Destruction

e)     Global Initiative to Combat Nuclear Terrorism

f)     Nuclear Security Contact Group

g)     Islamic State (IS)

a)     The worlds major nations seeking to develop nuclear power gathered in Washington last week for the Obama administration-led NSS, a platform to discuss strategies to block terror groups such as the Islamic State from obtaining radioactive material and setting off a dirty bomb, or worse.

b)   Russias absence (apparently owing to Putins diplomatic stand-off with Obama over the crisis in Syria and Iraq) to an extent doomed the fourth and final NSS to piecemeal rather than dramatic goals.

c)     Nevertheless, the Summit saw the 50-odd participant-nations celebrate the creation of a strong legacy in detecting, intercepting and securing vulnerable and illicitly trafficked nuclear materials, including pre-emptively safeguarding stockpiles of highly enriched uranium. 

d)     Indias achievements in the realm of improving nuclear security have been considerable during this time, including in establishing a rigorous legislative framework for developing nuclear resources and a Global Centre for Nuclear Energy Partnership, the contribution of $2 million towards the Nuclear Security Fund, and participation in UN and IAEA joint mechanisms to strengthen nuclear security.

e)     However, along with Russia, China and Pakistan, India has been frustrating the West as a hold-out that refuses to sign a 2014 Nuclear Security Implementation initiative.

f)     The pact was joined by more than two-thirds of the participating states and is arguably the most significant instrument to build a robust nuclear security system based on national commitments to the application of international principles and guidelines, including peer reviews.

g)    India cannot be complacent  over securing vulnerable nuclear material, and the first step has to be a willingness to speak openly about the risks of terrorism and sabotage posed by its clandestine nuclear weapons development sites, and not just on its safeguarded civilian nuclear energy programme.

5.

Modi to launch Stand up India scheme tomorrow (Page 8)

a)     National

b)     Social issue

a)     Stand up India scheme

b)     Small Industries Development Bank of India (SIDBI)

c)     RuPay card

 

a)     On April 5, PM Modi will launch the Stand up India scheme, aimed at providing credit to Scheduled Caste, Scheduled Tribe, and women borrowers. 

b)     The scheme is intended to promote entrepreneurship among SCs, STs and women and will involve loans ranging from Rs. 10 lakh to Rs. 1 crore.

c)     The scheme includes a composite loan of between Rs. 10 lakh and Rs. 100 lakh for setting up any new enterprise. In addition, borrowers will be provided a RuPay debit card to enable the withdrawal of the working capital.

d)     The govt will also develop credit histories of these under-banked sections of society and will open a refinance window through SIDBI with an initial amount of Rs. 10,000 crore.

6.

Revisiting the EPF rollback (Page 11)

a)     National

b)     Economy

a)     Union Budget 2016-17

b)     Public Debt Management Agency

c)     Employees Provident Fund (EPF)

d)     Employees Provident Fund Organisation (EPFO)

e)     National Pension System (NPS)

f)     Public Provident Fund (PPF)

g)     Kisan Vikas Patra

 

 

a)     Finance Minister Jaitleys Budget 2015-16 promised to set up a Public Debt Management Agency to bring the govts external borrowings and domestic debt under one roof.

b)     While the govt claims to be committed to creating such an office, in April 2015, while introducing official amendments to Finance Bill, it withdrew the ministers promise. A Debt Management Office was first announced in the 2007-08 Budget, but the idea has been floating between the corridors of North Block and Mint Street since.

c)     On March 7, Jaitley also informed Parliament that two paragraphs from his 2016-17 Budget speech (that sought to nudge the working class into reconsidering their preference for the EPF as a retirement saving tool) stand deleted.

d)     Multiple theories were floated by Finance Ministry to justify the proposal to tax EPF savings prior to this, such as the need to promote the national pension system set up by the Ministry and deprive the well-off from milking tax breaks.

e)    The revenue expected from the tax on EPF savings was just around Rs. 200-300 crore. The larger system-wide implications of the move would have, perhaps, been better thought through had a public debt office been in place and consulted on the proposal.

f)    The Middle Office is tasked with formulating strategies for sustainable long-term debt management. And it is precisely here that the plan to tax 60 per cent of EPF savings could have had profound implications on Centres borrowing programme in the years to come.

g)     Two hours later, the Ministry notified a new regime of quarterly interest rates on small savings instruments, including the Public Provident Fund, Kisan Vikas Patra and post office savings deposits.

h)     The sharpest reduction in returns is on one year time deposits with post offices, which will now earn 7.1 percent as opposed to 8.4 percent. This would narrow the gap between returns on one year bank deposits and the competing post office scheme to just 0.35 percent as opposed to 0.95 percent at present.

i)     Jaitley has firmly and rightly defended the move, as high small savings rates make it difficult for banks that compete with them for deposits to lower their lending rates and effectively distort the transmission of monetary policy changes effected by the Central Bank on the ground.

j)     For instance, the RBI has cut one of its benchmark rates (repo rate) by 125 basis points since Jan 2015, but this has not been passed through by banks.

k)     Over the past six months, the govt had signalled its intent to lower small savings rates and bring them closer to market-determined rates for its own borrowings over comparable tenures in the interest of overall economic growth of country.

l)     This is probably why the outcry over small savings rate cuts was sharp, but short-lived. Plausibly, a similar building up of the case to bring parity in tax treatment for retirement schemes like EPF and NPS could have blunted the outcry over the EPF tax proposal.

m)     Indias largest retirement fund, the EPFO (with oversight over Rs. 10 lakh crore) is a captive financier of govt debt thanks to investment norms set by the Finance Ministry and has the appetite for longer term debt. And unlike other entities (including the NPS), the EPF holds securities till they mature.

n)     The Finance Ministry has termed EPF members as hostages that must be freed and questioned the subsidy to its members. It may have ended up paying more for its borrowings if it had succeeded. That is, if the idea would have passed muster with a functional Debt Management Office.

7.

Reserve Bank may cut rate by 25 bps (Page 15)

a)     Economy

a)     Monetary policy

b)     Repo rate

c)     Retail inflation

d)     Food inflation

e)     Fiscal deficit

f)     Fiscal consolidation

g)     RBI

 

a)   With most of the conditions set by the RBI Governor Rajan for further easing of the monetary policy met, market participants said the stage is set for at least a 25 bps reduction in interest rate in the first bi-monthly review of monetary policy scheduled on April 5.

b)   Retail inflation for February grew by 5.18 percent, the slowest in four months due to lower food inflation. In the budget, the government showed resolve in adhering to the fiscal consolidation path by keeping the fiscal deficit target for 2016-17 at 3.5 percent.

c)     The central bank has reduced interest rate by 125 bps to 6.75 percent since January 2015. However, it kept interest rate unchanged in the last two monetary policy reviews.

8.

Indias gross fiscal deficit to exceed target (Page 16)

a)     Economy

a)     Fiscal deficit

b)     Fiscal Responsibility and Budget Management (FRBM)

c)     GDP

d)     IMF

a)     According to an analysis, Indias gross fiscal deficit for 2015-2016 could be 6.9 percent of GDP, wider than the budget estimate of 6.3 percent.

b)     Although the Centres estimates show that it will succeed in keeping its fiscal deficit within the target of 3.9 percent of GDP, a slippage is expected by the States as a whole.

c)     An analysis of the budget documents of States by HSBC Global Research estimates that the aggregate fiscal deficit for all States will be 2.7 percent of GDP, wider than the official estimate of 2.3 percent.

d)     The study is based on the budget projections of 18 States, which make up just less than 80 percent of Indias economy. These States released their budget projections for the upcoming fiscal year over the past month.

e)     The IMF estimates that the average fiscal deficit for the emerging market and middle-income economies was 1.1 percent in 2015. For G20 emerging market economies it was 4 percent. Its latest data shows that Chinas general govt deficit was 1.9 percent of GDP in 2015 and is projected to rise to 2.3 percent in 2016.

f)     The IMF calculates fiscal deficit differently than how it is done in India. It excludes disinvestment proceeds, which are essentially capital receipts, from the calculations for instance. Therefore, its estimate for India of 7.2 percent for 2015 is higher than official estimates.

g)    One of the reasons why the Centre chose to retain the 3.5 percent target (as per the FRBM roadmap in the Union Budget it presented last month) is that it wanted to make space for the expected increase this year in the States borrowing requirements.

9.

Triple sunset: New planet with 3-star system found (Page 20)

a)     S&T

b)     Geography

a)     Triple-star system

b)     KELT-4Ab

c)     KELT system

 

a)     Scientists have discovered a rare triple-star system with a gas giant planet similar in size to Jupiter.

b)     Known planets with three stars appearing in their sky are rare - the new discovery is just the fourth and the closest one to Earth yet, allowing a better look than has been possible.

c)     The main star is also brighter than the other two, making it easier for astronomers to study both the star and the planet. The newly found planet (called KELT-4Ab) orbits one star. It takes three days to make its way around the star KELT-A, which serves as its sun.

d)     Scientists have known of the existence of the KELT system for several years, but it was thought that the binary stars were actually just one star.

e)     The triple-star system offers a unique opportunity for scientists trying to understand how it is that gas giants (such as KELT-4Ab) manage to orbit so close to their star.

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