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My Notes 27-April-2017 27-04-2017

Dear students

Please follow my notes and my video date 27-4-2017

https://youtu.be/WIaW9hNbnYU

Article: The world is still flat

Context: IMF world economic outlook report

Notes: world economic outlook of IMF has projected a favorable economicgrowth for the world with some caveats. These are

  1. Secular stagnation is expected to continue due to income inequalities.
  2. US policy agenda – US is widening fiscal deficit by 2 percentage points by 2019. It has a chance to raise interest rates with out any significant rise in output.
  3. Deregulation of financial sector as proposed by President Trump can lead to financial sector instability.
  4. Debt overhang in economies such as India and china.
  5. Geo political tensions.
  6. Protectionism and anti globalization sentiments in Europe and USA.

To remember :

secular stagnation :it was given by Alvin Hansen in 1930s. He argued that where savings substantially exceed investment, the real interest rate tends to drop. As interest rates are already low, monetary policy looses its effectiveness as a policy tool. The burden of reviving the growth in such a situation falls on fiscal policy.

Higher savings can be due to

  1. Greater inequalities ( the rich can not spend beyond a point)
  2. Greater life expectancy
  3. Reduced post retirement benefits ( people save for security)

Investments can fall due to

  1. Decreased cost of capital goods
  2. Changing nature of economy to service sector that is not capital intensive.
  3. Decreasing population growth.

Debt overhang : Debt overhang is a debt burden that is so large that an entity cannot take on additional debt to finance future projects, even those that are profitable enough to enable it to reduce its indebtedness over time. 
(Investopedia)

Carry home points: global economic outlook is showing favorable signs. Growth is expected to be revived in developed and emerging markets. India is expected to see an acceleration and deceleration in china. Debt overhang is a major challenge in both the economies.

 

Article: Navigating between friends

Context: Iran nuclear deal and sanctions

Notes: USA is accusing Iran for exporting terror in Yemen and for its support to Assad in syria. It  accuses Iran of destabilizing activities in the region. Added to this, US close allies Saudi Arabia and Israel are in favor of stippling sanctions against Iran.

Anybody sanctions against Iran has implications for India for the following reasons

  1. Iran is the largest oil exporter to India and Exports are on very concessional terms. India is also building strategic petroleum reserves from Iranian oil.
  2. India is developing chabahar port in Iran
  3. India operating rights over Farzad B gas fields.

To remember :

Carry home points: USA actions against Iran will have impact on India.

 

Article: Politics and the police

Context: Supreme Court judgement on the removal of the DGP of Kerala

Notes: police force shall be guided by rule of law but not considerations of political masters. They need fixed tenure to avoid unnecessary political interference. In this context, Supreme Court in Prakash singh case has stated that police chief shall have a fixed tenure of 2 years. Later soli sorbjee committee also stated for a separate board/commission to look in to the matters of top police appointments and transfers. 

To remember : state security commission and fixed tenure

Carry home points:

  1. 1.       Security of tenure can ensure between functioning from bureaucracy. In Prakash singh case Supreme Court has clearly stated that chief of a state police force should have a fixed tenure of at least 2 years.
  2. 2.       Subjective satisfaction of the state Government in the removal of DGP must be based on cogent and rational material.
  3. 3.       Police force shall be guided by the considerations of rule of law but not on the political factors.

 

Article: A stretched market

Context: bullish run in Indian stock markets

Notes: Indian stock markets are showing a bullish run for the following reasons.

  1. Better than expected earnings by blue chip companies.
  2. Strong fund flows from FII’s.

Risks on the other side are

  1. Corporate earnings are still at a very low level.
  2. Appreciating rupee could reduce the earnings of companies.

To remember : bulls and bears.

Carry home points:

 

 

Article: A solution in Search of a problem

Context: constitutional status to National commission on backward classes

Notes: 123 constitutional amendment of constitution has created National commission for backward classes. (Art 338B). Originally constitution of India under art 340 has recommended for the creation of commission for backward classes.

Present amendment act de links backward classes form art 340 and brings them close to the provisions related to SCs/STs. Issues here are

  1. Many times clashes have occurred among dalits and OBC s in Bihar. In those contexts, it leads to a fight between two constitutional bodies.
  2. The proposed system will treat the developmental issues related to BCs on par with caste discrimination and untouchability suffered by SCs and STs.
  3. Commission is not in a position to find any solution to the demand of many upper castes seeking reservations under OBC status.

To remember :

Carry home points:123 amendment act has created National commission for minorities  (art 338B)

 

Article: caught in the cross fire

Context: status of children in disturbed areas.

Notes: My Lai in Vietnam and recent chemical attacks in syria have common victims – children. To address the problem, morality has to dominate power considerations.

To remember : Morality has to preside over power during humanitarian crisis.

Carry home points: Children are  never  responsible  for  wars  and  conflict,  yet they  are  the  worst  sufferers.

 

News

  1. 1.       China has launched its second air craft carrier shandong.
  2. 2.       The annual report of the U.SCommission on International Religious Freedom said that religious tolerance and religious freedom continued to deteriorate in India in2016.
  3. 3.       Finance minister clarified that there is no intention for the centre to tax on agricultural income.
  4. 4.       BJP sweeps Delhi Muncipal elections.
  5. 5.       SC seeks law to regulate NGO funds
  6. 6.       Reorient social sector subsidies – NITI Aayog

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