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Daily News Analysis 30-06-2015

S.NO.

NEWS ITEM

SYLLUBUS

ESSENCE OF THE ARTICLE

1.         

 

50 nations in, AIIB takes shape (Pages 1 and 10)

a)     I.R

a)     India and 49 other founding members of the Asian Infrastructure Investment Bank signed articles that determine each countrys share and the lenders initial capital.

2.

Greece shuts down banks (Page 12)

a)     International

a)     Greeks faced shuttered banks, long supermarkets lines and growing uncertainty as a breakdown in talks between Athens and its international creditors pushed the country deep into crisis.

3.

US Supreme Court allows use of contentious execution drug (Page 12)

a)     International

a)    In a serious setback for human rights activists in US, the US Supreme Court ruled that the three-drug lethal injection protocol used to execute inmates across the country did not (in terms of being cruel and unusual punishment) violate the Constitution.

4.

Foreign law firms will soon operate in India (Pages 1 and 10)

a)     National

a)     The Centre will in a phased manner soon open up Indias non-litigious services and international arbitration legal services to foreign law firms.

5.

A model for India (Page 8)

a)     National

b)     Social issue

a)     The US Supreme Courts momentous verdict allowing same-sex marriages across that country sparked celebrations among the LGBT community and expressions of support from others.

6.

Manipur ambush: NIA arrests NSCN regional chairman (Pg11)

a)     National

a)     The NIA has registered case against top leadership of NSCN (K) and its affiliates under various provisions of Unlawful Activities (Prevention) Act, the Explosive Substances Act, the Arms Act and Indian Penal Code.

7.

Teaching the poor to behave (Page 9)

a)     National

b)     Social issue

a)    By shifting the burden of poverty alleviation from the state onto the poor themselves, behavioural economists are ignoring the structural causes of poverty.

8.

Households using PDS double in seven years (Page 10)

a)     National

a)     New official data show that the proportion of Indian households using Public Distribution System has nearly doubled over 7 years. These households are relying more on the PDS and less on open market sources than before.

9.

MSP hike can boost pulses production (Page 11)

a)     National

a)     Former Member of the Planning Commission and economist Abhijit Sen said that PM Modi could give a push to increasing pulses production by raising the minimum support price for procurement.

10.

Greek turmoil hits global markets (Page 13)

a)     Economy

a)    European bank stocks and borrowing costs for Italy, Spain and Portugal bore the brunt of financial markets fright at the growing risk that Greece will leave the euro.

11.

Concerns over risk in Algorithm trading? (Page 13)

a)     Economy

a)     Regulators are alarmed by the increasing control of algorithm trading or high frequency trading and fear that it could result in a systemic failure.

12.

Azhagankulam was in the big league (Page 7)

a)     National

b)     History

a)     Renewed excavation from May at Azhagankulam village in Ramanathapuram district (TamilNadu) has thrown up fresh evidence that it was an important trading post between the Sangam Pandyas and the Romans from about 50 BCE to about 500 CE.

 

S.NO.

NEWS ITEM

SYLLUBUS

BACKGROUND

IMPORTANT POINTS

1.         

 

50 nations in, AIIB takes shape (Pages 1 and 10)

a)     I.R

a)     Asian Infrastructure Investment Bank (AIIB)

b)     International Monetary Fund (IMF)

c)     World Bank

d)     New Development Bank (NDB)

a)   India and 49 other founding members of the AIIB signed articles that determine each countrys share and the lenders initial capital. The remaining 7 founding members can sign the agreement before Dec 2015.

b)     AIIB is expected to focus on infrastructure development in Asia and unlike the existing IMF and World Bank, it is unlikely to restrict lending on political considerations.

c)     The AIIB is an example of constructive cooperation among emerging economies to increase the space available for infrastructure financing. It is a regional initiative and fully complements global initiatives such as the NDB (set up by the BRICS nations).

d)    AIIB will be headquartered in Beijing and will have an initial authorised capital stock of $100 billion. Reflecting regional character of the Bank, its regional members will be the majority shareholders, holding around 75 percent of shares.

e)     India had signed the MoU for establishment of AIIB in October 2014 along with 21 regional founding members. With Japan opting out of AIIBs membership, India is the banks second largest shareholder with a stake of 8.52 percent and a voting share of 7.5 percent.

f)    The voting shares are based on the size of each member countrys economy and not contribution to banks authorised capital. Chinas shareholding is 30.34 percent and it has retained 26.06 percent of the voting rights with veto powers for certain key decisions.

2.

Greece shuts down banks (Page 12)

a)     International

a)     Greece debt crisis

b)     European Union (EU)

c)     International Monetary Fund (IMF)

a)     Greeks faced shuttered banks, long supermarkets lines and growing uncertainty as a breakdown in talks between Athens and its international creditors pushed the country deep into crisis.

b)   The frantic efforts to secure Greeces place within Eurozone followed a dramatic weekend.  PM Alexis Tsipras decision to put the aid package to a popular vote took the lenders and some of his own negotiating team by surprise. It also pushed Greece towards defaulting on €1.6 billion due to the IMF.

c)     The Greek govt will keep banks shut at least until after July 5 (the date of referendum) and withdrawals from automated teller machines were limited to €60 a day when they reopened at midday. The stock exchange will also stay shut.

3.

US Supreme Court allows use of contentious execution drug (Page 12)

a)     International

a)     Lethal injection protocol

b)     Midazolam

c)     US Supreme Court

 

a)    In a serious setback for human rights activists in US, US Supreme Court ruled that the three-drug lethal injection protocol used to execute patients across the country did not (in terms of being cruel and unusual punishment) violate the Constitution.

 

b)     Writing the opinion of the 5-4 majority Justice Samuel Alito rejected the arguments presented by lawyers of patients in Oklahoma that the first injection (a sedative called midazolam) would not prevent their clients from feeling searing pain from the second and third injections that caused paralysis and heart failure.

c)     Despite a furore in recent years over several prolonged lethal injections, a divided Supreme Court ruled that the patients who challenged the use of sedative failed to establish that Oklahomas use of a massive dose of midazolam in its execution protocol entails a substantial risk of severe pain.

4.

Foreign law firms will soon operate in India (Pages 1 and 10)

a)     National

a)     Bar Council of India

b)     Society of Indian Law Firms

c)     India-EU trade ties

d)     Free Trade Agreement (FTA)

e)     Doha Round

f)     WTO

a)     The Centre will soon open up Indias non-litigious services and international arbitration legal services to foreign law firms. The pro-posal for reform will be put up for approval in early July to a Committee of Secretaries after which it will be taken up by the Cabinet chaired by PM Modi.

b)     Official said the Bar Council of India (which regulates the legal fraternity) and the Society of Indian Law Firms (which represents the interests of large law firms) have agreed to the pro-posal.

c)     The govt was keen to announce the liberalised policy in January during the visit of US President Obama. However, the move was postponed after resistance from the domestic legal services industry.

d)     After two years, India and the EU will resume negotiations in August on the proposed FTA. Both sides have agreed that negotiators must meet. The India-EU trade talks were launched in June 2007 but the agreement has missed several deadlines.

e)     Official said that India is striving to ensure that a permanent solution to the issue of Centres minimum support prices to farmers breaching the WTO permissible caps for subsidies is found by Dec 31.

f)     He said though India had already bagged immunity against action by other countries in case of breaches of the WTO caps, India still wants a permanent solution as only that will bring predictability and symmetry. India is striving to get the issue included in the work programme for the next Ministerial meeting of the WTO scheduled to be held in December in Nairobi.

g)     Ending months-long deadlock, the WTOs General Council had accepted Indias demand for extending the peace clause till a permanent solution is found for its food stockpiling issue.

h)     This has enabled India to continue to procure and stock foodgrain for distribution to the poor under its food security programme without attracting action from WTO members even if it violates the 10 percent subsidy cap as prescribed by the multilateral trade body.

i)     However, for a permanent solution to food security issue, Indias stand has been that the WTO update the reference price of 1986-88 that is used in the formula for calculating the food subsidy cap or exempt schemes from purview of subsidy caps.

j)     He also said that India wants all the pending issue of Doha Round on the table at the Nairobi Ministerial. The Doha Round of negotiations launched in 2001 has remained stalled since July 2008 due to differences between the rich and developing nations mainly over subsidies given to farmers.

5.

A model for India (Page 8)

a)     National

b)     Social issue

a)     Same-sex marriages law

b)     14th Amendment to the US Constitution

c)     LGBT community  

d)     US Supreme Court

e)     Section 377 of the Indian Penal Code (IPC)

f)     Fundamental rights

g)     Supreme Court

a)     The US Supreme Courts momentous verdict allowing same-sex marriages across that country sparked celebrations among LGBT community and expressions of support from others.

b)     From the time it upheld in 1986 a law that made homosexuality a criminal offence, to overturning ruling in 2003, and now allowing same-sex marriages, the US Supreme Court has made considerable progress in recognising the liberty of individuals with alternative sexual orientation and their right to equal treatment before the law.

c)     Instead of hiding behind traditional arguments to the effect that legal questions concerning personal relations such as marriage be best decided by elected bodies, it has said that the due process and equal protection clauses in the 14th Amendment to the US Constitution are as available to the gay community as anyone else when it comes to marrying a person of his or her choice, including of the same gender.

d)     It is inevitable that such a ruling occasions an evaluation of where India stands. Indian law on homosexuality continues to be backward. The Supreme Courts Dec 2013 judgment upholding Section 377 of IPC (which seeks to punish carnal intercourse against the order of nature) continues to hold field.

e)     The sincere observation by the two-judge Bench that it was up to Parliament to decide whether to retain, amend or delete the section has not been acted upon by the political leadership. The restraint that the court has shown in not striking down Section 377, and the reasoning that it should be left to the legislature to decide whether or not to decriminalise homosexuality, fell short of Indian judicial standards.

f)     Progressive parties and liberal parliamentarians should come forward with amendments to delete or at least dilute Section 377. An outdated provision cannot be allowed to violate fundamental rights and offend human dignity by remaining on the statute book.

6.

Manipur ambush: NIA arrests NSCN regional chairman (Page 11)

a)     National

a)     National Socialist Council of Nagaland-Khaplang (NSCN-K)

b)     Unlawful Activities (Prevention) Act

c)     Explosive Substances Act

d)     Arms Act

e)     Indian Penal Code

a)     National Investigating Agency made its first arrest in connection with the killing of 18 Army personnel at Chandel in Manipur earlier this month.

 

b)     It has registered case against top leadership of NSCN (K) and its affiliates under various provisions of Unlawful Activities (Prevention) Act, the Explosive Substances Act, the Arms Act and Indian Penal Code.

7.

Teaching the poor to behave (Page 9)

a)     National

b)     Social issue

a)     Behavioural economics

b)     Poverty

c)     World Development Report (WDR)

d)     Neoliberalism

e)     World Bank

 

 

a)     The World Banks WDR 2014 was about Risk and Opportunity. The 2013 WDR is simply named Jobs. The 2012 WDR is titled Gender Equality and Development. They all have a clear economic dimension.

b)     But the World Banks 2015 WDR is titled Mind, Society and Behaviour. The World Bank makes a strong voice to govts for applying behavioural economics to development policy.

c)     Behavioural economics uses insights from psychology, anthropology, sociology and the cognitive sciences to come up with more realistic models of how people think and make decisions. Where these decisions tend to be faulty from an economic point of view, governments can intervene with policies aimed at pushing the targeted citizens towards the right decision.

d)     However, things change when behavioural economists focus their attention exclusively on the behaviour of the poor. Till date, there is no evidence that monitoring the behaviour of the worlds poor is a better route to alleviate poverty than monitoring the behaviour of the financial group.

e)     The second assumption of behavioural economics is that the poor are less intelligent than the rich. It is an unpleasant idea and also politically incorrect. The correct way to say it is to state that context of poverty depletes a persons bandwidth (mental resources necessary to think properly) as a result of which he or she is a poor decision-maker, especially compared to those who are not in the context of poverty, such as rich and the middle classes.

f)     The report states in all earnestness that poverty shapes mindsets. From here, it is a hop, skip and jump to holding (as leading behavioural economists of the day do) that the poor are poor because their poverty prevents them from thinking and acting in ways that can take them out of poverty.

g)     Thus the focus as well as the burden/responsibility of poverty-alleviation would shift from the state - from macroeconomic policy, from having to provide employment, health and education to changing the behaviour of poor.

h)     In this context, it might be relevant to note that the rise of behavioural economics as a discipline parallels the rise of neoliberalism, starting from the 1980s and rapidly gaining respectability and funding from 1990s. A fundamental principle of neoliberal thought is to find market-led solutions to socio-economic problems.

i)     No matter that poverty is often a symptom of market failure. Free market ideologues attribute poverty and all socio-economic ills to market distortions caused by state interference. The economists who get to shape the World Banks WDRs are chosen for their ability to push this line.

j)     The point of this deviation into WDR history is that (to borrow the form of behavioural economics) growing necessity to conform to free market ideology may be said to impose a cognitive tax on World Bank economists, as a result of which their mental models do not permit the framing of poverty in ways that may contradict this ideology.

k)     In order to change the behaviour of the poor, one must first understand it. It is this understanding that behavioural economics promises to codify into knowledge. To be sure, the WDR readily acknowledges that even the rich, economists, and the World Bank staff themselves might be subject to cognitive biases.

l)     A major confusion that follows this report is conflation of action and behaviour. The term behaviour comes with the baggage of empirical sciences. It is typically used with reference to animals and objects under scientific observation. Behaviours can be studied for patterns. To the extent that human beings are also animals, they can also be said to exhibit behaviours. But what makes them human is precisely their capacity to surpass behaviour patterns.

m)     Behavioural economics (insofar as it is concerned with behaviour of people in poverty and it is this stream which dominates this years WDR) is simply the latest addition to the neo-liberal toolkit of political management.

8.

Households using PDS double in seven years (Page 10)

a)     National

a)     Public Distribution System (PDS)

b)     National Sample Survey Organisation (NSSO)

a)     New official data show that the proportion of Indian households using PDS has nearly doubled over 7 years. These households are relying more on PDS and less on open market sources than before.

b)     The NSSOs report on the PDS and Other Sources of Household Consumption was released last week and looks at findings from a nationally representative survey on the use of PDS conducted in 2011-12.

c)     The report finds that the proportion of households which reported consuming grain purchased through PDS was up to 46 percent of all households in case of rice and 34 percent in case of wheat for rural India, which is a near doubling since 2004-05, and an increase over 2009-10.

d)     Simultaneously, the monthly per capita consumption of grain bought from PDS has grown in both rural and urban areas, while the amount of grain bought from other market sources has fallen.

e)     Among States, nearly 90 percent of households in rural Tamil Nadu and Andhra Pradesh report consuming PDS rice, and over 75 percent in Kerala and Karnataka. Over 70 percent of households in Karnataka and 60 percent of households in Tamil Nadu told the NSSO that they consume PDS wheat as well.

f)     A study commissioned by the new govt claimed last year that PDS was leaky and was not improving and recommended a move to cash transfers. But Food and Civil Supplies Ministry officials insisted on Monday that there is no plan at the moment to wind up PDS.

9.

MSP hike can boost pulses production (Page 11)

a)     National

a)     Minimum Support Price (MSP)

b)     Pulses produced regions in India

c)     Marginal crops

d)     Soils

a)     Former Member of the Planning Commission and economist Abhijit Sen said that PM Modi could give a push to increasing pulses production by raising MSP for procurement. Only by hiking the MSP of pulses significantly will their cultivation become more attractive over the growing of other crops

b)     An analysis of food grains production data to understand why farmers prefer to grow cereals rather than pulses found that pulses are among the least productive of all crops - the yields are on average 760 kg per hectare, compared to 2400 kg per hectare for cereals and 1100kg per hectare for oilseeds.

c)     He argued that the reason behind this low yield in pulses (which has barely changed in more than three decades) is that pulses are technology-proof crops.

d)     He said another reason for poor level of yields is that farmers are increasingly growing pulses on inferior land. As farmers found that they were getting more out of growing cereals, pulses increasingly became marginal crops grown on marginal (less fertile) land. This has further hit yields.

10.

Greek turmoil hits global markets (Page 13)

a)     Economy

a)     Greece debt crisis

b)     EU

c)     IMF

d)     Wall Street

e)     Sensex

a)    European bank stocks and borrowing costs for Italy, Spain and Portugal bore the shock of financial markets fright at the growing risk that Greece will leave the euro.

b)     Expert said that the European financial system now has much less exposure to Greece than in 2011 and 2012.

c)     Greece banks and stock market were closed and were expected to remain so until after July 5 snap referendum called by Greek PM Alexis Tsipras on further severity demanded by euro zone partners.

d)     US stocks extended their losses in heavy trading after a collapse in Greek bailout talks intensified fears that the country could be the first to exit the euro zone.

11.

Concerns over risk in Algorithm trading? (Page 13)

a)     Economy

a)     Algorithm trading or high frequency trading

b)     Financial Stability Report (FSR)

c)     Financial Stability and Development Council (FSDC)

d)     Direct Market Access (DMA)

e)     Securities and Exchange Board of India (SEBI)

f)     Stock markets

a)     Regulators are alarmed by increasing control of algorithm trading or high frequency trading and fear that it could result in a systemic failure.

b)     FSR June 2015 expressed serious concerns on algorithm trading or algo trading leading to stock price manipulation as well as alienate retail or small investor from stock markets.

c)     The report is a collective assessment of a sub-committee of the FSDC, which includes all financial market regulators. Interestingly, the reports in the past have also emphasised the risks involved with HFT.

d)     Algo trading was introduced in India in April 2008 with the advent of DMA.

e)     Though these trades are monitored by the SEBI (which is mandated to protect interests of small investors), the FSR report expressed worries that they could result in market manipulation.

f)     The report also pointed fingers at certain instances of abnormal market movements in Indian stocks which have been attributed (by market experts) to algo trading/HFT.

12.

Azhagankulam was in the big league (Page 7)

a)     National

b)     History

a)     Azhagankulam

b)     Sangam age

c)     Pandyas

d)     Romans

e)     Yavanas

f)     Vaigai river  

a)     Renewed excavation from May at Azhagankulam village in Ramanathapuram district (TamilNadu) has thrown up fresh evidence that it was an important trading post between the Sangam Pandyas and the Romans from about 50 BCE to about 500 CE.

b)     Archaeologists said that Azhagankulam, Arikkamedu in Puducherry and Pattanam (Muziris) in Kerala formed a troika of trade centres between Rome and the Tamil country during the Tamil Sangam age.

c)     Azhagankulam is about three km from the sea, near the area where the Vaigai river enters the sea.

d)     The State Department of Archaeology had earlier excavated the site in 1986-87 and again for five seasons in the 1990s. Those excavations revealed the trade link between the ancient Tamil country and the Mediterranean region.

e)     Archaeologists highlighted that Roman antiquities thrown up from the renewed excavation at Azhagankulam proved once again trade contacts between Pandya rulers and Romans. Madurai was capital of Pandya country and Ramanathapuram came under the Madurai region.

f)     They said that Azhagankulam, Arikkamedu and Korkai in the Tamiraparani basin on the east coast and Muziris on the west coast saw flourishing trade between the ancient Tamil country and the Romans.

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