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Daily News Analysis 28-09-2015

S.NO.

NEWS ITEM

SYLLUBUS

ESSENCE OF THE ARTICLE

1.         

 

Modi boots up Digital India with high-profile Silicon Valley show (Pages 1,13)

a)     I.R

a)     The heads of top tech firms in Silicon Valley took note of Modi-US 2.0 (the Silicon Valley saga) and supplied a bounty of investment and development plans.

2.

For a win-win bilateral trade diplomacy (Pg11)

a)     I.R

a)     With the strong personal commitment of the leaders of both countries, the India-US economic partnership is on track for a transformational jump.

3.

India left out of meeting on Afghanistan (Page 13)

a)     I.R

a)    A meeting on Afghanistan, co-chaired by the US and China with Foreign Ministers of Pakistan, Turkey, Italy, Saudi Arabia, Islamic Republic of Iran, Australia, Kazakhstan, and Norway kept India out, but India made light of it saying it was an informal meeting.

4.

MHA, JIC chief differ on Myanmar border security (Pg 1,12)

a)     I.R

b)     National

a)     After the Naga peace framework agreement, the Union Home Ministry does not seem to be on the same page as Joint Intelligence Committee chief R.N. Ravi on handling of security along the porous Myanmar border.

5.

Sri Lanka to build 65,000 homes for war-hit families (Page 14)

a)     International

a)     Sri Lankan govt has decided to take up construction of 65,000 houses on a priority basis for Eelam War-hit families in the Northern and Eastern Provinces.

6.

Online abuse of women, a major worry (Page 14)

a)     International

a)     The UN Broadband Commission has found that 73 percent of women reported facing violence online.

7.

First French airstrikes destroy IS camp in Syria (Page 14)

a)     International

a)     French President Francois Hollande said six French jet fighters targeted and destroyed an IS training camp in eastern Syria, making good on a promise to go after the group that the President has said is planning attacks against several countries, including France.

8.

Promote green credit (Page 13)

a)     International

b)     National

a)     Union Minister of Environment, Forest and Climate Change Javadekar emphasized the need to promote green credit (instead of carbon credit) so that polluters do not get away with paying for carbon emissions.

9.

Centre dilutes Gujarat anti-terror Bill (Pages 1 and 12)

a)     National

b)     Polity

a)     The Centre has prevailed over the Gujarat govs suggestion to let the State Home Secretary be the final authority on phone-tapping requests, by making it clear that the State cannot have absolute powers and such decisions and clearances will only be processed by the Union Home Secretary.

10.

Hemmed in by the safety net (Page 11)

a)     National

b)     Economy

a)     With the central bank now accountable if inflation exceeds the target, there are no incentives for the RBI governor to take the slightest risk with the policy rate.

 

S.NO.

NEWS ITEM

SYLLUBUS

BACKGROUND

IMPORTANT POINTS

1.         

 

Modi boots up Digital India with high-profile Silicon Valley show (Pages 1 and 13)

a)     I.R

a)     India – US relations

b)     Silicon Valley

c)     Digital India programme

d)     Make in India initiative

a)     The heads of top tech firms in Silicon Valley took note of Modi-US 2.0 (the Silicon Valley saga) and supplied a bounty of investment and development plans.

b)  In response to Modis Digital India, the commitments made include a $150-million investment by Qualcomm into a fund for Indian start-ups, an ambitious project to let Google users be able to type in 10 Indian languages, Microsofts promise to open up cloud computing services out of Indian data centres and critical proposals from Tesla and Apple for long-term solutions in solar energy and the app economy.

c)    Leading the list of strategic policy announcements, Qualcomm boss Paul Jacobs emphasised his companys support for the Digital India and Make in India agenda by establishing a $150-million India-specific Venture Fund formed exclusively to fuel innovation and foster promising Indian start-ups that were contributing to the mobile and the Internet of everything ecosystem.

2.

For a win-win bilateral trade diplomacy (Page 11)

a)     I.R

a)     India – US relations

b)     Ease of Doing Business

c)     Make in India initiative

d)     Skill India programme

e)     Digital India programme

f)     Clean Energy campaign

g)     Swachh Bharat campaign

h)     Smart City initiative

 

a)     PM Modis second visit to the US is garnering even more interest than his first trip, particularly because in the intervening year, the India-US dialogue has intensified. Indian industry has high hopes from the visit.

b)     In the run-up to PMs visit, the Strategic and Commercial Dialogue included encouraging emphasis on economic cooperation, placing it at heart of the India-US relationship. A joint work stream on Ease of Doing Business has been launched to address trade issues through quarterly meetings.

c)   Bilateral exchange of goods and services between the two countries crossed $100 billion in 2014, up five-fold from 2000. The US is Indias second largest trade partner for goods and by far its largest export market. The two countries have decided to take strong measures to increase trade to $500 billion while notable steps have been announced for increasing investments.

d)     Indian industry expects Modis visit to act on a dual-pronged approach. On the one hand, issues hindering trade in goods and services need to be resolved to achieve the $500 billion trade target in shortest possible time. On the other hand, a huge push needs to be imparted to US investments in India, particularly across manufacturing and infrastructure.

e)     Regarding trade, multiple dialogue platforms revived during the past year have set the stage for new announcements. The Trade Policy Forum, High Technology Cooperation Group and CEOs Forum are looking at cooperation in areas such as agriculture, services, manufacturing and intellectual property. Some of the matters taken up in these meetings include social security totalization, visa regulations, ease of doing business and international standards.

f)     On the investment side, Indias development agenda presents many opportunities. The US-India Infrastructure Collaboration Platform has been envisaged to assist US companies explore infrastructure opportunities in India. US initiatives through the US EXIM Bank and US Trade and Development Agency would facilitate $4 billion worth of investments in India.

g)    India-US CEOs Forum has requested an ambitious Bilateral Investment Treaty. Under Indias Smart City initiative, the two govts have identified Allahabad, Ajmer and Visakhapatnam for partnership with US companies. High-level committees are being set up for each of these cities including representatives of different departments, State govts and US industry, and three MoUs have already been signed.

h)     The manufacturing sector as a whole is set for rejuvenation under the Make in India campaign. The 25 sub-sectors identified closely align with strengths of both US and Indian industry, particularly in automotives, chemicals, pharmaceuticals and biotechnology. The campaigns of Skill India, Digital India, Clean Energy and Swachh Bharat offer attractive vehicles for US investors.

i)     With the strong personal commitment of leaders of both countries, the India-US economic partnership is on track for a transformational jump and Indian industry greatly looks forward to the outcomes of the sustained dialogue process and the Prime Ministers upcoming visit.

3.

India left out of meeting on Afghanistan (Page 13)

a)     I.R

a)     India – Afghanistan relations

a)    A meeting on Afghanistan, co-chaired by the US and China with Foreign Ministers of Pakistan, Turkey, Italy, Saudi Arabia, Islamic Republic of Iran, Australia, Kazakhstan, and Norway kept India out, but India made light of it saying it was an informal meeting. EU high representative for foreign affairs and security policy also participated in the meeting.

b)  An Indian diplomat told that the meeting was an informal mechanism and exclusion from it did not matter to India. He pointed that we are part of the UN initiatives on Afghanistan.

c)     The reducing diplomatic space after the Ghani govt took charge remains a matter of concern for India.

4.

MHA, JIC chief differ on Myanmar border security (Page 1 and 12)

a)     I.R

b)     National

a)     India – Myanmar relations

b)     Border disputes

c)     Naga Peace Accord

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

e)     Indo-Tibetan Border Police (ITBP)

a)     After the Naga peace framework agreement, the Union Home Ministry does not seem to be on the same page as Joint Intelligence Committee chief R.N. Ravi on handling of security along the porous Myanmar border.

b)    Ravi has submitted a report to the Ministry in which he has suggested that the Assam Rifles (which is currently posted along the Myanmar border) be replaced by the ITBP.

c)     India and Myanmar share an unfenced border of 1643 km adjoining Arunachal Pradesh (520 km), Nagaland (215 km), Manipur (398 km) and Mizoram (510 km) and permit a free movement regime up to 16 km across the border.

d)     The need to reassess the security along the border was realised when militants belonging to NSCN-K killed 18 Army jawans in Chandel district of Manipur in June this year. Though a committee headed by Ravi had already been constituted by the Home Ministry, the Manipur incident was a wake-up call for the govt.

5.

Sri Lanka to build 65,000 homes for war-hit families (Page 14)

a)     International

a)     Sri Lankas internal issues

b)     Lessons Learnt and Reconciliation Commission

a)     Sri Lankan govt has decided to take up construction of 65,000 houses on a priority basis for Eelam War-hit families in the Northern and Eastern Provinces.

b)     The Lessons Learnt and Reconciliation Commission (which submitted its report to the govt in November 2011) recommended that govt address on an urgent basis the housing needs of those internally displaced persons, who were returning to their places of origin. It had also called for accessing all possible sources of assistance from institutions and individuals, national and international, for the purpose.

6.

Online abuse of women, a major worry (Page 14)

a)     International

a)     Gender equality

b)     Sustainable Development Goals (SDGs)  

c)     UN Broadband Commission 

d)     Information and Communication Technologies (ICTs)

a)   UN Broadband Commission has found that 73 percent of women reported facing violence online.

b)     Given the thrust on promoting ICTs in the SDGs adopted by 193 world leaders, UNDP Administrator said there is need to address gender-based violence in all its forms, including cyberviolence.

c)     She said the Goal 5 of the SDGs which calls for achieving gender equality must be seen together with Goal 16, which calls for promoting peace, access to justice, and strengthening institutions to address violence. She said we cannot hope to achieve gender equality without addressing gender-based violence in all its possible forms.

7.

First French airstrikes destroy IS camp in Syria (Page 14)

a)     International

a)     Islamic State (IS)

b)     Syria crisis

c)     UNGA

 

a)     French President Francois Hollande said six French jet fighters targeted and destroyed an IS training camp in eastern Syria, making good on a promise to go after the group that the President has said is planning attacks against several countries, including France.

b)     The military action came as Western powers were struggling to rebuild a consensus on a new diplomatic strategy to end the war in Syria that would likely include Iran.

c)     French govt has insisted that while it is part of the US-led coalition, France is deciding independently who and what to hit in Syria.

d)     Hollande is due to address the UNGA on Sept 28, after President Obama and Russian leader Putin take the podium.  The President announced earlier this month a change in French strategy expanding its airstrikes over Iraq into Syria.

8.

Promote green credit (Page 13)

a)     International

b)     National

a)     Green Credit

b)     Carbon Credit

c)     Carbon emissions

d)     UN Framework Convention for Climate Change (UNFCCC)

a)   Addressing Second Meeting of Business Dialogue for COP-21 under UNFCCC, Union Minister of Environment, Forest and Climate Change Javadekar said the world must incentivise green growth activities as Green Credit instead of Carbon Credit Mechanism, which provides a way out for the Emitter to get rid of the blame of pollution by paying for the emissions.

b)   He stressed Indias proposed debate on lifestyle issues - climate justice, focussing on the environmental rights of the people in developing and underdeveloped nations and the green credit mechanism, ahead of Modi-Obama meet, where climate change is likely to be a key subject of discussion.

c)    He said the demand-supply mismatch and low ambition for emission reduction expressed by developed countries led to the slowdown of the well-established CDM market.

9.

Centre dilutes Gujarat anti-terror Bill (Pages 1 and 12)

a)     National

b)     Polity

a)     Gujarat Control of Terrorism and Organised Crime (GCTOC) Bill 2015

b)     Maharashtra Control of Organised Crime Act (MCOCA) of 1999

a)     Centre has prevailed over the Gujarat govs suggestion to let the State Home Secretary be the final authority on phone-tapping requests, by making it clear that the State cannot have absolute powers and such decisions and clearances will only be processed by the Union Home Secretary.

b)     Presently, a State Home Secretary is permitted to authorise interception of phone calls as its office has been delegated to do so by the Union Home Secretary. This delegation of power from the Centre to the State is reviewed from time to time and can be revoked too.

c)    The Home Ministry (which recently gave the green signal to the contentious GCTOC Bill 2015) watered down this clause of the State govt, in the final version of the Bill sent to the President of India for his assent. Once the President has signed the Bill, it becomes a law.

d)     The other sticking point in Bill (admissibility of evidence collected through confessions made before an SP rank investigating officer, in a court of law) has been accepted by the Centre as such provisions also exist in MCOCA of 1999.

e)     The Bill (passed by the Gujarat Assembly in March this year) has been rejected by UPA govt thrice earlier. The Bill was first sent for Centres approval in 2003 when PM Modi was the Chief Minister of Gujarat.

10.

Hemmed in by the safety net (Page 11)

a)     National

b)     Economy

a)     Monetary policy

b)     Inflation

c)     Threshold inflation

d)     CPI inflation

e)     GDP

f)     Phillips curve

g)     RBI

h)     US Federal Reserve

 

a)   According to the author, the US Federal Reserve decided not to raise the policy rate at its meeting on Sept 17. The decision provides just the right cause for RBI to announce a steep cut in its own policy rate (say) of 50 basis points. The problem is not the economic conditions on the ground. It is the RBIs present approach to tackling inflation.

b)     Any rise in the US interest rate at this point would have added to the exodus of funds from emerging markets and caused their currencies to fall further. Emerging markets would have had to respond with a sharp rise in their own interest rates. Had the Fed had opted for a rate hike, the RBI would have found it impossible to cut the policy rate in the near term. The Feds decision undoubtedly removes a significant impediment to a rate cut.

c)     The Feds policy stance is not the only factor governing the RBIs decision. In his last policy statement, the RBI governor had mentioned three other factors: the persistence of inflationary pressures, the progress of the monsoon and transmission of the interest rate cuts already effected by RBI.

d)     The inflation rate came in at 3.7 percent in August. The monsoon deficit is of the order of 15 percent, with nearly two-thirds of the country receiving normal or excessive rains. Banks may not have passed on all of 75 basis point reduction effected by RBI but they have passed on 25-50 basis points.

e)     Also, there may be many sources of uncertainty that cloud the future inflationary picture and disconnect it from current inflation - the strength and distribution of monsoon, the extent and persistence of low commodity prices, the effect of external disturbances on the exchange rate, etc. In practice, we use models to project how all this might play out on inflation, and we overlay the models with assessments, to arrive at a policy decision.

f)   Its hard to tell what decision would flow from the above approach. The low inflation rate in August was indeed on account of the base effect. Once the base effect wears out, CPI inflation would be of order of 5-5.5 percent. These numbers are close to the RBIs target of 6 percent for Jan 2016. As for the effect of the monsoon on agriculture output and the trajectory of commodity prices in the future, these can be interpreted in ways that favour or do not favour a rate cut.

g)     This is where the newly devised monetary policy framework comes in. Under the framework for inflation targeting, RBI is accountable if the inflation rate ends up above the target. In this framework, there are no incentives for RBI governor to take the slightest risk with the policy rate. Even if RBIs models were to indicate that inflation rate was likely to stay below 6 percent, it would be natural for any governor to err on the side of caution.

h)     RBI deputy governor Urjit Patel estimates the growth potential today at 8-8.5 percent. Current projections of growth are around 7.5 percent. It would seem that a cut in the policy rate would be in order to close the output gap.

i)     Enter the second element in RBIs approach to inflation, namely, threshold inflation. Going by this relatively recent addition to the Phillips curve, even in the short-run, inflation can deliver higher output only as long as the inflation rate is within a certain threshold. The Urjit Patel committee on monetary policy (January 2014) settled for CPI inflation of 6 percent by January 2016 as the inflation threshold for India.

j)     A third element in RBIs approach is the belief that a cut in the rate will not make much of a difference to investment. RBI believes that investment is being deterred today more by unfavourable business conditions than by the cost of capital.

k)     This is not entirely true. Demand for credit is constrained not just by unfavourable business conditions but by high leverage at many companies. Investment and production are also being constrained by the supply of credit. Banks are unwilling to lend given that their own capital position is constrained.

l)     A rate cut would reduce leverage and enable firms to access more debt and, in some cases, more equity as well. It would boost capital at banks thanks to capital gains on banks substantial holdings of govt securities. This would stimulate the supply of credit. Thus the case for a rate cut of at least 50 basis points is compelling.

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