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Daily News Analysis 05-09-2015

S.NO.

NEWS ITEM

SYLLUBUS

ESSENCE OF THE ARTICLE

1.         

 

Blend of excitement and disquiet over Prime Minister Modis California trip (Page 14)

a)     I.R

a)     The visit of Indian PM Modi to Silicon Valley at the end of September appears to be evoking a similar balance of emotion from his supporters and critics to what was witnessed when he landed in New York last year.

2.

Bhopal gas tragedy victims press on with appeal arguments in US (Page 13)

a)     I.R

b)     National

a)     Victims of the 1984 Bhopal poison gas disaster refused to let the embers die on their US lawsuit against alleged water polluters Union Carbide Company when their lawyers this week filed arguments with the US Court of Appeals for the Second Circuit.

3.

Sri Lanka gets 42-member Cabinet (Page 14)

a)     International

a)     A 42-member Council of Cabinet Ministers was sworn in by President Sirisena in Sri Lanka.

4.

Obama, Saudi King smoothen frayed ties (Page 14)

a)     International

a)     Hosting Saudi Arabias new monarch for the first time, President Obama said that the US shares King Salmans desire for an inclusive government in Yemen that can relieve that Arab countrys humanitarian crisis.

5.

Seventh Pay Commission is no ogre (Page 11)

a)     National

a)     Its recommendations impact need not give us jitters because the rise in government wages will amount to only 0.8 percent of GDP.

6.

RBI crisis fund short of target (Pages 1 and 12)

a)     National

b)     Economy

a)     Contingency funds with the RBI (used in case of unforeseen shocks) have fallen to 8.4 percent of total assets, against a target of 12 percent, as shown in its Annual Report for 2014-15 released on August 27.

7.

Friendly signal (Page 10)

a)     National

b)     Economy

a)     The Union govts decision to waive (through an amendment to the Income Tax Act), minimum alternate tax liability on capital gains made by foreign portfolio investors and Foreign Institutional Investors is a welcome move, especially from their point of view.

8.

Rajan urges global economies to hike rates, but not in one go (Page 13)

a)     Economy

a)     Under pressure back home to cut rates, RBI Governor Rajan said global economies witnessing sustainable growth needed to hike rates although not in a one go, big bang manner.

9.

Pulling vultures back from the brink (Page 9)

a)     Environment

b)     Geography

a)     Protecting the last six long-billed vultures in inland south India has become a challenge for the Forest Department even in a protected vulture sanctuary in Ramanagaram.

10.

Saving the yellow-throated bulbul (Page 8)

a)     Environment

b)     Geography

a)     Yellow Throated Bulbul could be the next in the line of wildlife species to find place in the conservation plans of the Laboratory for the Conservation of Endangered Species, a conservation arm of the Centre for Cellular and Molecular Biology.

 

S.NO.

NEWS ITEM

SYLLUBUS

BACKGROUND

IMPORTANT POINTS

1.         

 

Blend of excitement and disquiet over Prime Minister Modis California trip (Page 14)

a)     I.R

a)     India – US relations

b)     Silicon Valley

c)     Indo-American Community of the West Coast (IACWC)

 

a)     The visit of Indian PM Modi to Silicon Valley at the end of September appears to be evoking a similar balance of emotion from his supporters and critics to what was witnessed when he landed in New York last year.

b)     The group organising the community reception for Modi at the SAP Centre at the heart of Silicon Valley, the IACWC noted that preparations for Modis visit were in full swing and the final phase of registration was concluded, with the total number of registrants surpassing 45,000.

c)     With Silicon Valley as the centre of innovation, an official said we are all very excited about the possibilities that exist for India under the leadership of PM Modi who has outlined several key initiatives, including digital cities, alternate power and cleanliness that requite innovative approaches.

2.

Bhopal gas tragedy victims press on with appeal arguments in US (Page 13)

a)     I.R

b)     National

a)     Bhopal gas tragedy

b)     Bhopal Act

c)     Earth Rights International (ERI)

 

 

a)    Victims of the 1984 Bhopal poison gas disaster refused to let the embers die on their US lawsuit against alleged water polluters Union Carbide Company when their lawyers this week filed arguments with the US Court of Appeals for the Second Circuit that the company behind the deadly leak of methyl isocyanate was continuing to foul local wells from its plant located in the area.

b)   The arguments in the appeal come more than a year after a New York federal district court found that UCC could not be sued in the Sahu II case, despite compelling evidence that UCC caused the harm, including arguments presented by plaintiff representatives Earth Rights International.

c)    Official noted that although the US courts have shied away from any further involvement in the gas disaster case since the passage of the Bhopal Act, if we establish in the US that UCC was responsible for the plant that could be significant for the case in India from an evidentiary standpoint.

3.

Sri Lanka gets 42-member Cabinet (Page 14)

a)     International

a)     Sri Lankas internal issues

b)     United National Party (UNP)

c)     Sri Lanka Freedom Party (SLFP)

a)     A 42-member Council of Cabinet Ministers was sworn in by President Sirisena in Sri Lanka.

b)     Thirty-one of the Cabinet Ministers belong to the UNP and the remaining 11 to SLFP. There are three Ministers from the Tamil community and four Muslims. The Cabinet includes two women, both from UNP.

c)     PM Ranil Wickremesinghe was the first to take oath as Minister in charge of National Policy and Economic Affairs.

4.

Obama, Saudi King smoothen frayed ties (Page 14)

a)     International

a)     US – Saudi Arabia relations

b)     Saudi Arabias humanitarian crisis

c)     Yemens crisis

d)     Islamic State (IS)

e)     Iran nuclear deal

a)     Hosting Saudi Arabias new monarch for the first time, President Obama said that the US shares King Salmans desire for an inclusive govt in Yemen that can relieve that Arab countrys humanitarian crisis.

b)     Since March, the US has been supporting a Saudi-led intervention against Yemens Iran-aided Shia rebels. Their talks also addressed the Iran nuclear deal, a source of lingering tension in the US-Saudi relationship.

c)     Beyond Yemen, Saudi Arabia wants the US to increase support for Syrian rebels fighting the IS and seeking to topple President Bashar al-Assads government after four-and-a-half years of civil war.

d)   Saudis also want assurances that the Iran deal comes with a broader effort to counter Irans destabilising activities in the region.

5.

Seventh Pay Commission is no ogre (Page 11)

a)     National

a)     Seventh Pay Commission

b)     Sixth Pay Commission

c)     Fifth Pay Commission

d)     Fourteenth Finance Commission (FFC)

e)     One Rank, One Pension scheme

f)     GDP

a)     The report of the Seventh Pay Commission is set to be released soon. The new pay scales will be applicable to Central govt employees with effect from January 2016. Many commentators ask whether we need periodic Pay Commissions that hand out wage increases across the board.

b)     They agonise over the havoc that will be wrought on govt finances. They want the workforce to be downsized. They would like pay increases to be linked to productivity. These propositions deserve careful scrutiny. The reality is more nuanced.

c)     Critics say we dont need a Pay Commission every ten years because salaries in government are indexed to inflation. At the lower levels, pay in the govt is higher than in the private sector. The annual increment in the Central govt is 3 percent. Adding dearness allowance increases of around 5 percent, we get an annual revision of 8 percent. This is not good enough, because pay at the top in the private sector has increased exponentially in the post-liberalisation period.

d)     Pay scales at the lower levels of govt are higher than those in the private sector. But that is unavoidable given the norm that the ratio of minimum to maximum pay in govt must be within an acceptable band. Higher pay at lower levels of govt also reflects shortcomings in the private sector, such as hiring of contract labour and the lack of unionisation. They are not necessarily part of the problem with government.

e)     Perhaps the strongest criticism of Pay Commission awards is that they play havoc with govt finances. At the aggregate level, these concerns are somewhat exaggerated. Pay Commission awards typically tend to disrupt govt finances for a couple of years. Thereafter, their impact is digested by the economy.

f)     Thus, pay, allowances and pension in Central govt climbed from 1.9 percent of GDP in 2001-02 to 2.3 percent in 2009-10, following the award of the Sixth Pay Commission. By 2012-13, they had declined to 1.8 percent of GDP.

g)     The medium-term expenditure framework recently presented to Parliament looks at an increase in pay of 16 percent for 2016-17 consequent to the Seventh Pay Commission award. That would amount to an increase of 0.8 percent of GDP. This is a one-off impact. A more correct way to represent it would be to amortise it over five years. Then, the annual impact on wages would be 0.16 percent of GDP.

h)     The medium-term fiscal policy statement presented along with the last budget indicates that pensions in 2016-17 would remain at the same level as in 2015-16, namely, 0.7 percent of GDP. Thus, the cumulative impact of any award is hardly something that should give us insomnia.

i)     There are a couple of riders to this. First, the government is committed to One Rank, One Pension for the armed forces. This would impose an as yet undefined burden on Central govt finances. Second, while the aggregate macroeconomic impact may be bearable, the impact on particular States tends to be destabilising.

j)     The FFC estimated that the share of pay and allowances in revenue expenditure of States varied from 29 to 79 percent in 2012-13. The corresponding share at the Centre was only 13 percent. The problem arises because since the time of the Fifth Pay Commission, there has been a trend towards convergence in pay scales. Therefore, FFC recommended that the Centre should consult the States in drawing up a policy on government wages.

k)    The Sixth Pay Commission estimated that the share of pay, allowances and pension of the Central govt in revenue receipts came down from 38 percent in 1998-99 to an average of 24 percent in 2005-07. Based on the budget figures for 2015-16, this share appears to have declined further to 21 percent.

l)     It is often said that pay increases in govt must be linked to productivity. We are told that this is where government and the private sector differ hugely. However, the notion that private sector pay is always linked to productivity is a myth.

m)   Improving service delivery in government is the key issue. Periodic pay revision and higher pay at lower levels of govt relative to private sector could help this cause provided these are accompanied by other initiatives. The macroeconomic impact is nowhere as severe as it is made out to be.

6.

RBI crisis fund short of target (Pages 1 and 12)

a)     National

b)     Economy

a)     Contingency Fund

b)     Asset Development Fund

c)     Financial crisis

d)     RBI

a)     Contingency funds with the RBI (used in case of unforeseen shocks) have fallen to 8.4 percent of total assets, against a target of 12 percent, as shown in its Annual Report for 2014-15 released on August 27.

b)     For the last two years, the RBI has made no transfers to its Contingency Fund or its Asset Development Fund. Therefore, the balance in these funds has barely changed since 2013, when they made up 10.1 percent of total assets.

c)     According to the annual report, the capital requirements of a central bank can vary considerably depending on a number of factors. The wider the area of responsibilities of a central bank, greater the risks and higher the requirement of capital. A central bank may require recapitalisation, precisely at a time when the fiscal position is under strain due to a financial crisis.

d)     The annual report also showed that the RBI had been transferring 99.9 percent of its profits to the govt, without keeping any amount for itself. This is a sharp increase from 40-50 percent it had transferred in the 2010-13 period.

7.

Friendly signal (Page 10)

a)     National

b)     Economy

a)     Minimum Alternate Tax (MAT)

b)     Foreign Portfolio Investors (FPIs)

c)     Foreign Institutional Investors (FIIs)  

d)     Income Tax Act

e)     Participatory Notes (P-Notes)

f)     Black money

g)     Special Investigation Team (SIT)

 

a)     Union govts decision to waive (through an amendment to Income Tax Act), minimum alternate tax liability on capital gains made by FPIs and FIIs is a welcome move, especially from their point of view. It is in line with the spirit of promise in the BJPs manifesto for the 2014 general elections to put an end to tax terrorism.

b)   In these times of heightened uncertainty in global financial markets, when risk appetite of investors is especially low, the govts decisions would serve to restore some of the lost faith of investors in India as an investment destination that does not resort to retrospective taxation.

c)     As the govt has taken a position on and dispelled the uncertainty around MAT, it must quickly make up its mind and come out with an announcement on another outstanding issue, concerning P-Notes. Indias indecision on this matter is affecting FIIs.

d)     Supreme Court-appointed SIT has asked regulators to put in place regulations to identify individuals holding P-Notes and take other steps to curb black money and tax evasion through the stock market route.

e)     P-Notes are offshore derivative instruments that a large number of FIIs use to park funds in the equity market without disclosing their identity to Indian regulators. The tax authorities suspect that a huge chunk of these investments could in fact be Indian money masquerading as foreign funds.

8.

Rajan urges global economies to hike rates, but not in one go (Page 13)

a)     Economy

a)     Global economic situation

b)     Monetary policy

c)     RBI

d)     US Federal Reserve  

a)     Under pressure back home to cut rates, RBI Governor Rajan said global economies witnessing sustainable growth needed to hike rates although not in a one go, big bang manner. He added that market volatility concerns should not come in the way of central bank decisions.

b)     While Rajan did not name the US Federal Reserve, his comments before a grouping of global central bankers and international business community come against the backdrop of the widespread speculation about an imminent rate hike by US central bank.

c)     The RBI Governor is under intense pressure from the govt and industry to further lower the rates, although he has already announced three cuts of 25 basis points each so far in 2015. RBIs next monetary policy review is scheduled on September 29.

d)     Rajan said the economies returning to a sustainable growth path should start unprecedented monetary policies that they had resorted to after the financial crisis of 2007-08.

9.

Pulling vultures back from the brink (Page 9)

a)     Environment

b)     Geography

a)     Ramadevara Betta sanctuary

b)     Vultures

a)     Protecting the last 6 long-billed vultures in inland south India has become a challenge for the Forest Department even in a protected vulture sanctuary in Ramanagaram.

b)   With rampant trespassing in 346.14 hectares in and around Ramadevara Betta (which became the countrys second vulture sanctuary in Jan 2012), the department has now decided to fix a fee to enter the park.

c)     Expert said the long-billed vultures made Ramadevara Betta their home as the crevices of tall granite hills (which are among the worlds oldest granite outcrops) are suitable for their mating and breeding activities.

10.

Saving the yellow-throated bulbul (Page 8)

a)     Environment

b)     Geography

a)     Yellow Throated Bulbul

b)     Centre for Cellular and Molecular Biology (CCMB)

c)     IUCN

d)     Red List

a)     Yellow Throated Bulbul could be the next in the line of wildlife species to find place in the conservation plans of the Laboratory for the Conservation of Endangered Species, a conservation arm of the Centre for CCMB, Hyderabad.

b)     It is studying ecology and population distribution of this infrequently sighted avian species endemic to the southern part of India, so as to make a strong case for preventive conservation. Protection of this bird is hoped to make a case for extension of conservation efforts to its habitat - the scrublands.

c)     Experts said though categorised as vulnerable under the IUCN Red List, there have not been definitive population studies on this species, and if ignored further, it could end up being another Jerdons Courser of India - a near-extinct bird also from the scrublands of Eastern Ghats.

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