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Daily News Analysis 04-06-2015

S.NO.

NEWS ITEM

SYLLUBUS

ESSENCE OF THE ARTICLE

1.         

 

India, Belarus agree on road map for stronger ties (Page 10)

a)     I.R

a)     India and Belarus decided to work together on defence and security issues as President Pranab met his Belarusian counterpart and agreed on a 17-point road map aimed at strengthening mutual trust and confidence.

2.

India signs pact on automatic exchange of tax information (Page 10)

a)     I.R

a)     In keeping with what was decided at G20 Finance Ministers meeting in Sept last year, India joined the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information. The declaration to comply with provisions of agreement was signed in Paris by the Indian ambassador to France.

3.

India raises with US arms sale to Pak (Page 10)

a)     I.R

a)     On a day when Army Chief of Pakistan described Kashmir as unfinished agenda of Partition, India took up with the visiting US Defence Secretary the issue of arms sale to Islamabad.

4.

Knowledge network to be open to all SAARC nations (Page 11)

a)     International

a)     External Affairs Minister Sushma said that India is in the process of extending its National Knowledge Network to all members of SAARC to allow students open access to digital libraries and network resources.

5.

GST: Good for business, snag for federalism? (Pg 9)

a)     National

b)     Economy

a)     The uniform Goods and Services Tax regime needs to be viewed in the context of a steady erosion in the States freedom to decide on taxes and tax rates.

6.

Beyond the rate cut (Page 8)

a)     Economy

a)     The 25 basis-point cut announced in the repo rate was indeed on expected lines, although there might be some disappointment with regard to the quantum of the reduction.

7.

Cashing in on Treaty (Page 13)

a)     Economy

a)     Benefits of Tax Pact are prompting investors to route their investments from Mauritius into India.

8.

Fishermen discover river in Bay of Bengal (Page 14)

a)     S&T

b)     Geography

a)     Fishermen have helped oceanographers discover a river in the sea that has been meandering its way along eastern coast of Bay of Bengal after summer monsoon.

9.

Indian Ocean warms as Pacific cools (Page 14)

a)     S&T

b)     Geography

a)     Though surface heat of Earth has stabilised since 1999, studies have found that atmospheric heat continues to rise unabated with oceans absorbing a large amount of this heat and warming in the past decade (2000-2012).

10.

Monsoon: need for better prediction of Indian Ocean events (Page 14)

a)     S&T

b)     Geography

a)     As a deficient southwest monsoon looms large, scientists are predicting that a developing El Nino condition in the Pacific Ocean might cause possible below normal rains this year.

11.

LHC restarts with doubled energy levels (Page 12)

a)     S&T

a)     Scientists hailed a new era in their search to resolve more mysteries of the universe as the worlds biggest particle smasher started experiments with nearly doubled energy levels in a key development.

 

S.NO.

NEWS ITEM

SYLLUBUS

BACKGROUND

IMPORTANT POINTS

1.         

 

India, Belarus agree on road map for stronger ties (Page 10)

a)     I.R

a)     India – Belarus relations

b)     Trade ties

c)     Defence cooperation

d)     Security cooperation

e)     Securities and Exchange Board of India (SEBI)

f)     Bureau of Indian Standards (BIS)

 

a)     India and Belarus decided to work together on defence and security issues as President Pranab met his Belarusian counterpart and agreed on a 17-point road map aimed at strengthening mutual trust and confidence.

b)     During the talks, the President discussed a host of issues, including increasing trade ties, besides boosting co-operation in mining, education and heavy machinery.

c)     Later, the two Presidents witnessed signing of several agreements and MoUs, including agreements between the SEBI and the Ministry of Finance, the BIS as well as between the Prasar Bharati and the National State Television.

d)     The agreements included the road map for strengthening mutual trust and having a strong commitment to develop multifaceted and long term co-operation.

e)     The two countries will work for full implementation of the MoU on defence-related technical cooperation and to develop a legal framework for security cooperation

f)     Under the agreement, the two countries will enhance coordination in science and technology, energy sector, metals and mining, potash fertilizers, give boost to raw material in textile sector, extend cooperation by Belarus in modernisation of public electric transport system in India, agriculture and agro procession.

2.

India signs pact on automatic exchange of tax information (Page 10)

a)     I.R

a)     India – France relations

b)     Multilateral Competent Authority Agreement (MCAA)

c)     Automatic Exchange of Financial Account Information (AEOFAI)

d)     Common Reporting Standards (CRS)

e)     Automatic Exchange of Information (AEOI)

f)     Section 285BA of the Income Tax Act 1961

a)     In keeping with what was decided at G20 Finance Ministers meeting in Sept last year, India joined the MCAA on AEOFAI. The declaration to comply with provisions of agreement was signed in Paris by the Indian ambassador to France.

b)     Prior to the agreement, 54 countries had joined MCAA. India is among 6 countries that joined this pact in Paris, taking the number to 60. The target is to reach 94 countries by 2017.

c)     The new system (dubbed the CRS on AEOI) is very wide in scope and requires the treaty partners to exchange a wide range of financial information, including that about the ultimate controlling persons and beneficial owners of entities.

d)     To be able to comply with the new system, amendments have been made to section 285BA of the Income Tax Act 1961. Necessary rules and guidelines are being formulated in consultation with financial institutions.

e)     Previously, information was exchanged between countries on basis of specific requests relating to cases of tax evasion and other financial crimes. AEOI (when fully implemented) sets up a system wherein bulk taxpayer information will periodically be sent by the source country of income to the country of residence of the taxpayer.

3.

India raises with US arms sale to Pak (Page 10)

a)     I.R

a)     India – US relations

b)     2015 Framework Agreement for India-US Defence cooperation

c)     US military aid to Pakistan

d)     India – Pakistan border disputes

e)     Kashmir issue

 

a)     On a day when the Army Chief of Pakistan described Kashmir as unfinished agenda of Partition, India took up with the visiting US Defence Secretary (Ashton Carter) the issue of arms sale to Islamabad.

b)     Carter signed the 2015 Framework Agreement for India-US Defence cooperation with Defence Minister Parrikar.

c)   The defence agreements are a part of a broader US-India engagement to cement ties. Even as the US sees India as an ally in the Asia-Pacific, Indian leadership raised the issue of military hardware support to Islamabad with Carter.

d)     The US has given multimillion dollar military hardware (including F16 fighter planes) to Pakistan and pitched as a means of capacity-building to fight terrorists on Islamabad border.

e)     US President Obamas proposal to give over $1 billion in civilian and military aid to Pakistan for fighting terror, economic development, safety of nuclear installations and improving ties with India, among other objectives, was followed closely by New Delhi.

4.

Knowledge network to be open to all SAARC nations (Page 11)

a)     International

a)     National Knowledge Network

b)     SAARC summit

c)     South Asian University (SAU)

 

a)     External Affairs Minister Sushma said that India is in the process of extending its National Knowledge Network to all members of SAARC to allow students open access to digital libraries and network resources.

b)     As PM Modi said in his speech at the 18th SAARC summit, She said that Indias vision for the region rests on the pillars of trade, investment, assistance, cooperation, people-to-people contacts and connectivity.

c)     At 13th SAARC summit in Dhaka, India offered to host the SAU. The university (raised as one dedicated to the region) has had its share of teething troubles, mainly on account of financial constraints.

d)     While India has offered to pay capital cost of $198 million for its establishment, Pakistan is yet to pay its share.

5.

GST: Good for business, snag for federalism? (Pg 9)

a)     National

b)     Economy

a)     Goods and Services Tax (GST)

b)     Constitution (122nd Amendment) Bill 2014

c)     Central GST (CGST)

d)     States GST (SGST)

e)     GST Council

f)     Value-Added Tax (VAT)

g)     Sales tax

h)     Wealth tax

a)    The GST is a tax reform that has been on the cards for more than a decade. In principle, it is the same as VAT (already adopted by all Indian States) but with a wider base. While the VAT (which replaced the sales tax) was imposed only on goods, the GST will be a VAT on goods and Services.

b)     In the current tax regime, States tax sale of goods but not services. The Centre taxes manufacturing and services but not wholesale/retail trade. The GST is expected to guide in a uniform tax regime across India through an expansion of base of each into the others territory. This is why a constitutional amendment was necessary to give concurrent powers to both the States and the Centre to make laws on the taxation of goods as well as services.

c)     The economic arguments proceeded out in favour of GST are basically the same as were given two decades ago for the introduction of VAT. These are twofold. First, the GST will simplify tax administration, improve compliance, and eliminate economic distortions in production, trade, and consumption. Second, by giving credit for taxes paid on inputs at every stage of supply chain and taxing only the final consumer, it avoids the cascading of taxes, thereby cutting production costs, and making exports more competitive.

d)     According to GST Bill (actually Constitution (122nd Amendment) Bill 2014 passed in the Lok Sabha last month), India will have not a single federal GST but a dual GST, levied and managed by different administrations.

e)     The Centre will administer the CGST and the States the SGST. Compliance will be monitored independently at two levels. The rates for both CGST and SGST will be fixed by the GST Council, whose members will be State finance/revenue ministers and the chairman will be the Union Finance Minister. Once rates are set by the GST Council, individual States will lose their right to tax commodities at rates they want.

f)     The development needs to be viewed in context of a steady erosion in the States freedom to decide on taxes and tax rates. Economists point out that (according to the Constitution), States have complete autonomy over levy of sales taxes, which on average accounted for 80 percent of their revenue.

g)     An attempt was made to reduce this autonomy with the introduction of VAT. But it did not totally succeed because the VAT still had four different rates that States could play with. But with the GST (which mandates a uniform rate) even this limited autonomy will be gone.

h)     Moreover, the restrictions imposed by a uniform tax regime could adversely impact States that may be more committed to welfare expenditures. However, a GST regime where each State has a different tax rate for different goods and services does not sit well with industrys demand for a single national market with a uniform tax regime.

i)     While the GST (like all indirect taxes) is a tax on consumption in seeking to institute a uniform rate on all forms of consumption, it tightens the tax net (currently riddled with numerous holes in the form of multiple rates and exemptions and classification) in addition to widening it.

j)     Many countries that have accepted the GST have also exempted essential commodities from it, or kept lower rates for select goods. But the very logic of GST is such that it works best when the exemptions are zero or minimal. Once implemented, this is the direction GST regimes gravitate toward fewer exemptions, higher rates.

k)     Around the world, govts faced with declining tax revenues, and fearful that higher corporate taxes will lead to capital flight, are turning to indirect taxes, which have a wider base than direct taxes, are more difficult to evade, and not income-dependant beyond a point.

l)     The NDA govt has already ticked two of those boxes. The 2015-16 Budget (which fixed a roll-out date for GST as April 1 2016) also abolished the wealth tax and announced a lowering of corporate tax rate from 30 to 25 percent over a 4-year period.

m)    According to a 2013 study by the Centre for Budget and Governance Accountability, this is despite the fact that Indias direct taxes contribute only 37.7 percent of total tax revenue. This make Indias taxation regime already more regressive than that of other emerging markets such as South Africa or Indonesia. When GST box is also ticked, it will become even more so.

6.

Beyond the rate cut (Page 8)

a)     Economy

a)     Monetary policy

b)     Repo rate

c)     Bad loans

d)     Inflation

e)     RBI

f)     South-west monsoon

a)     The 25 basis-point cut announced in the repo rate was indeed on expected lines, although there might be some disappointment with regard to the quantum of the reduction.

b)     The banking sector (which has been struggling to bring down the bad loan load) has shown a certain defiance when it came to passing on rate cuts to borrowers. With the latest cut, the RBI appears to have given banks a fresh message.

c)     Given the level of bad loans in their books, the banks will now have to do a tough balancing act. The central bank is still unsure if the inflation clouds have disappeared completely. Concerns over the below-normal south-west monsoon predictions, oil prices firming up among volatility and the ever-present geopolitical risks, appear to be bothering it.

d)     Given the complexities of Indian economy and its inter-connections with outside world, a rate reduction by monetary authority alone will not enough at the present juncture. The latest policy suggests that fiscal bosses cannot avoid the responsibility of pushing the economy to a higher growth trajectory without inflationary consequences.

e)     The RBI has said that strong food policy and management will be important to help keep inflation and inflationary expectations contained over near-term. At the same time, it has advocated a step up in public investment in several areas that could crowd in private investment.

f)     The RBI has stated that a targeted infusion of capital into scheduled public sector commercial banks is also warranted so that adequate credit flows to the productive sectors as investment picks up.

7.

Cashing in on Treaty (Page 13)

a)     Economy

a)     Tax Treaty

b)     FDI

c)     Department of Industrial Policy and Promotion (DIPP)

d)     General Anti-Avoidance Rule (GAAR)

e)     Bilateral Investment Promotion and Protection (BIPP) agreements

f)     Bilateral Investment Treaties (BITS)

g)     WTO

 

a)     WTO has said that tax treaty benefits are prompting investors to route their investments from Mauritius into India. Between 2010-11 and 2013-14, Mauritius was largest source of FDI (followed by Singapore) except in 2013-14.

b)     According to a report by WTO, it would appear that part of these large flows may result from the advantages of the tax treaty between Mauritius and India, which may make it attractive for investors to route their investment through Mauritius to take advantage of the preferential provisions, which include exemption from capital gains tax.

c)     As per the DIPP, India received $9.49 billion in 2012-13 and $4.85 billion in 2013-14. In 2013-14, India attracted $5.98 billion FDI from Singapore.

d)     It said that FDI inflows had been strong in services including financial, banking, insurance, business, outsourcing, R&D, courier, and technical services and the automobile industry and telecommunications.

e)     However, FDI flows into India through Mauritius are estimated to have gone down from last couple of years due to concerns of GAAR and other steps taken by Indian govt. FDI from other countries (including the US, the Netherlands and Germany) are increasing.

f)     The report also said that India had BIPP agreements that are in force with 72 countries and regions. In addition, BITS with 14 countries have been signed but are not yet in force.

8.

Fishermen discover river in Bay of Bengal (Page 14)

a)     S&T

b)     Geography

a)     Bay of Bengal (BoB)

b)     Paradeep

c)     Colachel

d)     Southwest monsoon

e)     Salinity

f)     Water vapour

g)     East Indian Coastal Current

h)     Ganges

i)     Brahmaputra

j)     Irrawaddy

k)     Mahanadi

l)     Godavari

m)     Krishna

 

 

a)     Fishermen have helped oceanographers discover a river in sea that has been meandering its way along the eastern coast of Bay of Bengal after summer monsoon. A decade-long coastal salinity observations (carried out at eight collection points with local fishers from Paradeep downwards up to Colachel) allowed a detailed description of this uncommon oceanic feature.

b)     A research paper on the formation of the river in the sea flowing along eastern coast of India was recently published. The presence of the river was confirmed through continuous monitoring of salinity levels for nearly a decade

c)     The southwest monsoon roughly lasts from June to Sept. During this period, water vapour collected at the ocean surface by the powerful southwesterly winds is flushed over Indian continent and BoB. A large fraction of the monsoon shower reaches the ocean in the form of runoff and contributes to the freshwater flux into the BoB in equal proportion with rainfall over the ocean.

d)     The large rivers (Ganges, Brahmaputra and Irrawaddy) and 3 small others (Mahanadi, Godavari and Krishna) together contribute approximately 1100 kms of continental freshwater into the BoB between July and September.

e)     The paper said that over 100 km-wide freshwater mass that is formed from river discharges and runoffs is transported down south by the East Indian Coastal Current, the western boundary current of BoB. The freshwater signal generally becomes smaller and occurs later while progressing toward the southern tip of India.

f)     According to the research paper, the occurrence of this river in the sea along the eastern coast of India was probably not a generic feature that could be observed in many locations in the world.

g)     The paper suggested that the peculiar geography of the northern Indian Ocean that resulted in both a massive inflow of freshwater into the semi-enclosed northern BoB and the strong coastally trapped currents along the eastern coast of India were responsible for the formation of the river.

9.

Indian Ocean warms as Pacific cools (Page 14)

a)     S&T

b)     Geography

a)     Ocean warming

b)     Indian Ocean

c)     Pacific Ocean

d)     Ocean Heat Content (OHC)

e)     La Nina

f)     Indonesian Throughflow (ITF)

g)     Easterlies

h)     Pressure gradient

i)     Walker circulation

j)     Monsoon

a)     Though surface heat of Earth has stabilised since 1999, studies have found that atmospheric heat continues to rise unabated with oceans absorbing a large amount of this heat and warming in the past decade (2000-2012).

b)     However, a new study has found that the Indian Ocean has been warming the most rapidly while the adjoining Pacific Ocean has been getting cooled during the past decade.

c)     The analysis shows that the abrupt increase of the Indian Ocean Heat Content at 700 mtrs depth during 2003-2012 was not due to surface heating, but rather due almost entirely to horizontal advective heat convergence (caused by winds and resulting currents). Further heat budget analysis indicates that inter-ocean heat transport from Pacific Ocean to Indian Ocean via the Indonesian passages was the main cause of the increased Indian OHC.

d)     The study found that the La Nina-like conditions in the Pacific Ocean, caused by a number of La Nina events in the last decade have caused the cooling of the Pacific ocean by transfer of heat to the Indian Ocean, warming the latter. The La Nina conditions cause strong easterly winds to blow from the western Pacific Ocean and these winds cause currents to flow westward conveying heat of Pacific Ocean into Indian Ocean through what is known as the ITF.

e)     The easterlies are formed due to a pressure gradient between the Pacific and Indian Oceans caused by cold conditions in east and warm wet conditions in the west during a La Nina. Also during a LaNina, walker circulation (an ocean-atmospheric phenomenon of the Indian Ocean) is strengthened.

f)     The walker circulation leads to abnormally high sea surface temperatures in western Indian Ocean which in turn leads to abundant rainfall in the western Indian Ocean at cost of Indian subcontinent and results in a weak monsoon. In contrast to this, as there were relatively much fewer La Ninas in the previous decade (1990-99) there was much less warming in the Indian Ocean.

10.

Monsoon: need for better prediction of Indian Ocean events (Page 14)

a)     S&T

b)     Geography

a)     Southwest monsoon

b)     El Nino

c)     El Nino and Southern Oscillation (ENSO)

d)     La Nina

e)     Indian Ocean Dipole (IOD)

f)     Equatorial Indian Ocean Oscillation (EQUINOO)

a)     As a deficient southwest monsoon looms large, scientists are predicting that a developing El Nino condition in the Pacific Ocean might cause possible below normal rains this year. During El Nino, the surface of the eastern and central Pacific Ocean gets unusually warmer as against the normal pattern of western parts of Pacific Ocean being warmer and the eastern surface remaining cooler.

b)     According to an expert, the occurrence of El Nino is preceded by several changes in the overlying atmosphere and underlying ocean much before it peaks in northern hemisphere winter season.

c)     He said El Nino develops as a coupled ocean-atmosphere system called ENSO as nature of Pacific Ocean was generally favourable for a strong ocean-atmosphere interaction. Normally ENSO has a life span of 12-18 months and general belief was that there was a higher propensity for drought in India during the developing phase of El Nino.

d)     However, a reverse of this condition leading to excess monsoon occurs during a La Nina event, which was nothing but the opposite of El Nino. But a near normal monsoon during 1997 when the El Nino phenomenon was the strongest ever recorded in the century forced meteorologists to look for other factors that influence year-to-year variation of Indian summer, he said and observed that around same time scientists discovered an El Nino-like phenomenon in Indian Ocean called the IOD.

e)     It was noticed that during a positive IOD, the eastern part of the equatorial Indian Ocean becomes abnormally cool and western part remains unusually warm, while the reverse of this pattern occurs during a negative IOD. However (unlike El Nino) IOD lasts only 6 to 9 months due to smaller size of the Indian Ocean basin.

f)     He said that subsequently it was shown that EQUINOO (which was nothing but an oscillation of atmospheric cloudiness between eastern and western parts of Indian Ocean) together with ENSO could explain the large variation in the monsoon. It was generally seen that positive EQUINOO with enhanced cloudiness over western part as compared to eastern region was favourable to Indian monsoon.

g)     During the last 65 years, the monsoon never failed when both the phases of ENSO and EQUINOO were positive. Similarly, the monsoon was never above normal when both theses phenomenon were negative.

11.

LHC restarts with doubled energy levels (Page 12)

a)     S&T

a)     Large Hadron Collider (LHC)  

b)     Higgs Boson

c)     God particle

d)     Dark matter

e)     Universe

f)     European Organisation for Nuclear Research (CERN)

 

a)     Scientists hailed a new era in their search to resolve more mysteries of the universe as the worlds biggest particle smasher started experiments with nearly doubled energy levels in a key development.

b)     The tests at CERN came after a sweeping 2-year revamp of the collider and will help scientists to study fundamental particles, the building blocks of all matter, and the forces that control them.

c)     The collisions of 13 TeV followed a muscling of LHC, used in 2012 to prove existence of the Higgs Boson - which confers mass and is also known as the God particle.

d)     During what it dubbed as its Season Two, the LHC will in the course of next 3 years strive to fill gaps in the so-called Standard Model - mainstream theory of how the visible Universe was created but which does not explain dark matter.

e)     LHC was used to prove the existence of the Higgs Boson, a discovery that earned the 2013 Nobel physics prize for two of the scientists who had theorised the existence of the Higgs back in 1964. LHC allows beams containing billions of protons to shoot through the massive collider in opposite directions.

NOTE: Read all snapshots in S&T Page 14.

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