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Current Events 1 February 2017 Page 1

 

NEWS 

1 February 2017


Sr. No.

Topic

News

1.

GS II : POLITY JUDICIARY

SC rejects plea to stay jallikattu law

2.

GS II : POLITY JUDICIARY

Supreme Court condemns defiance of ban

3.

GS II : POLITY LEGISLATURE

Debate simultaneous polls: Pranab

4.

GS III : ECONOMIC SURVEY

Note ban a radical measure: CEA

5.

GS III : ECONOMIC SURVEY

‘Review of demonetization impact by June’

6.

GS III : ECONOMIC SURVEY

‘Reward States’ good fiscal show’

7.

GS III : ECONOMIC SURVEY

‘Time ripe for discussions on Universal Basic Income’

8.

GS III : ECONOMIC SURVEY

Survey uses Big Data for first time

9.

GS III : ECONOMIC SURVEY

Smaller States trade more

10.

GS III : ECONOMIC SURVEY

‘Labour migration rose to 90 lakh over last 5 years’

11.

GS III : ECONOMIC SURVEY

‘Mother, child bearing brunt of weak health services’

12.

GS III : ECONOMIC SURVEY

Push to solve India’s twin balance sheet problem

13.

GS III : ECONOMIC SURVEY

Economic Survey wants modification of FRBM Act

14.

GS III : ECONOMIC SURVEY

Apparel, leather sectors need policy shift to boost jobs

15.

GS III : ECONOMIC SURVEY

‘Ambivalence’ towards private players exists

16.

GS III : ECONOMIC SURVEY

India ranks 4th globally in wind power installation: Survey

17.

GS III : ECONOMY

CSO revises 2015-16 GDP growth to 7.9%

18.

GS III : ECONOMY

Eight core industries grow 5.6% in December

19.

GS II : MULTILATERAL SAARC

Kathmandu meet to finalise SAARC budget, agenda

20.

GS II : BILATERAL INDIA-USA

Denied visa under new U.S. policy, say Kashmir athletes

21.

GS II  : BILATERAL INDIA-USA

‘U.S. visa rules to hit Indian IT majors’

22.

GS II : INTERNATIONAL ASIA

Rohingya refugees to be relocated on remote island

23.

GS II : INTERNATIONAL RUSSIA

Russia makes big military push in Arctic

24.

GS III: S&T - IT

Researchers employ laser light to speed up electronics

 
































 

 

GS II : POLITY JUDICIARY

SC rejects plea to stay jallikattu law

  • A few hours after the President gave his assent on 31 January 2017  to the Tamil Nadu amendments in the Prevention of Cruelty Act of 1960 to allow jallikattu, the Supreme Court refused to stay the new State law.
  • Allowing the Central government to withdraw its January 7, 2016 notification permitting jallikattu, a Bench of Justices Dipak Misra and Rohinton F. Nariman declined the plea of NGO Compassion Unlimited Plus Action for an interim stay on the operation of the Prevention of Cruelty to Animals (Tamil Nadu Amendment) Act, 2017.
  • It asked the organisation and other animal rights activists the ‘basis’ of their challenge to the new State law.
  • Referring to the amendments made by the Tamil Nadu Assembly to the 1960 Central Act, Justice Misra pointed out that the declared object of the new legislation is the preservation of a particular breed of bulls.
  •  “They say that the new law is for the preservation of a variety of bulls… they call it [jallikattu] a culture. This has to be debated,” he observed.
  • The Bench has given them two weeks to file fresh writ petitions challenging the Tamil Nadu amendments.
  • The State government and others supporting jallikattu in the current litigation were given four weeks to file their counter-affidavits.

GS II : POLITY JUDICIARY

Supreme Court condemns defiance of ban

  •  A Bench of Justices Dipak Misra and Rohinton F. Nariman  on 31 January 2017  said the violence and holding of jallikattu events across Tamil Nadu indicated sheer defiance of the Supreme Court’s A. Nagaraja judgment of 2014 banning jallikattu.
  • The judgment had termed the sport an act of ‘inherent cruelty’.
  • “When the Supreme Court, the final arbiter of the Constitution, is seized of the matter, there should be complete obeisance and compliance. We have said this in the Cauvery water dispute matter.” said  Justice Misra.


GS II : POLITY LEGISLATURE

Debate simultaneous polls: Pranab

  • President Pranab Mukherjee called for a constructive debate on simultaneous elections to the Lok Sabha and the Assemblies and state funding of polls to eradicate money power.
  • Frequent elections put on hold development programmes, disrupt normal public life and impact essential services and burden human resource with prolonged period of election duty,” he said.
  • My government welcomes a constructive debate on simultaneous conduct of elections to the Lok Sabha and State Legislative Assemblies. Funding of elections to eradicate misuse of money power also needs to be debated,” he said.

 

GS III : ECONOMIC SURVEY

Note ban a radical measure: CEA

  • The government’s Chief Economic Adviser Arvind Subramanian said there was a sense of anxiety about the economy’s prospects following demonetisation and stressed the need to allay the fears of an overzealous tax regime in its aftermath.
  • Speaking soon after Union Finance Minister Arun Jaitley tabled the Economic Survey for 2016-17 in Parliament, Mr. Subramanian termed the move to cancel the legal tender nature of high-value currency notes a “radical currency-cum-governancecum- social engineering measure to permanently and punitively raise the cost of illicit and unaccounted transactions or kala dhan (black money).”
  • Bank credit growth has come down, two-wheeler sales have come down. There will be an impact on GDP. But the question is how much,” he said.
  • “It would be fair to say that short-term costs include the hardships and inconvenience faced particularly by those in the informal sector.”
  • The Reserve Bank of India had in December 2016 trimmed its projection for Gross Value Added growth for the current financial year to 7.1% from 7.6% after considering the short-term disruptions caused by demonetisation.
  • Mr. Subramanian also stressed that it wouldn’t be appropriate to compare the Survey’s forecast of “a quarter to half percentage point decline in growth” to projections made by other agencies, including the International Monetary Fund, which has scaled down its India growth estimate to 6.6%.
  • The Survey pegs economic growth in 2016-17 at 7.1%, but this is based mainly on information for months before the November 8 demonetisation of Rs 500 and Rs1,000 notes.
  • After a temporary slowdown in GDP growth, the Survey expects the economy to return to normal, once the scrapped currency is replaced by March.
  • In the long run, tax revenues and GDP growth would be bolstered on account of greater tax compliance and a reduction in real estate prices.

 

GS III : ECONOMIC SURVEY

 ‘Review of demonetization impact by June’

  • The Economic Survey for 2016-17 doesn’t include the traditional detailed review of the year gone by — thanks to the budget presentation being advanced to February 1 from the last working day of February.
  • This review is expected to be completed by June and would take a fresh look at the impact of demonetisation , on the basis of more data that comes in over the next four-five months.
  • With the Budget and Survey dates being advanced, it makes less sense to review the year based on data for just two quarters. We will do this later and you will have a full-blown, backward looking review,” Chief Economic Adviser Arvind Subramanian told on 31 January 2017 .
  • The Survey has projected growth of 7.1% in 2016-17 based on data for the first seven-eight months of the financial year.


GS III : ECONOMIC SURVEY

 ‘Reward States’ good fiscal show’

  • The Economic Survey recommended the Centre to incentivise good fiscal work by States to keep the overall fiscal performance on track.
  • It, however, added that incentivising good performance by the States will require the Centre to be an exemplar of sound fiscal management itself.
  • The Economic Survey pointed out that there has been an improvement in the financial position of the States over the last few years.
  • “The average revenue deficit has been eliminated, while the average fiscal deficit was curbed to less than 3% of GSDP. The average debt to GSDP ratio has also fallen,” it said.
  • Pointing out that the progress cannot be attributed entirely to Fiscal Responsibility Legislations (FRL) adopted in the States, the Survey noted that much of the improvement in financial positions was possible because of exogenous factors, most notably
  • assistance from the Centre in the form of

(a)   increased revenue transfers,

(b) the assumption of state debt, and

(c)  the introduction of centrally sponsored schemes. “…

  • the role of the FRL may really have been to prevent them from spending all of their windfall,” according to the Survey.
  • The Survey also highlighted that Pay Commission recommendations, and mounting payments from the UDAY bonds will lead to increase in fiscal challenges for the States. Hence, there is a need “to review how fiscal performance can be kept on track.”
  • The Survey has further suggested that Redistributive Resource Transfers should be significantly linked to fiscal and governance efforts on the part of the States.
  • Redistributive Resource Transfer or RRT to a state (from the Centre) is defined as gross devolution to the state adjusted for the respective state’s share in aggregate GDP.
  • The top 10 recipients are: Sikkim, Arunachal Pradesh, Mizoram, Nagaland, Manipur, Meghalaya, Tripura, Jammu and Kashmir, Himachal Pradesh and Assam.
  • The Economic Survey pointed out that there is no evidence of a positive relationship between these transfers and various economic outcomes, including per capita consumption, GSDP growth, development of manufacturing, own tax revenue effort, and institutional quality.
  • Instead, there is a suggestive evidence of a negative relationship. For example, larger RRT flows seem to negatively affect fiscal effort. “…the existence of a ‘RRT curse’ and the lack thereof of a ‘natural resource curse’ in the context of Indian States implies that both the Centre and States need to act to mitigate the effects of the former and guard against the emergence, in future, of the latter.
  • In this context, the question is whether RRT, in future, can be linked more saliently to fiscal and governance efforts on the part of the States.”
  • It also recommended using a part of the RRTs or redistribute the gains from resource use, as a Universal Basic Income directly to households in relevant states which receive large RRT flows and are more reliant on natural resource revenues.

 

GS III : ECONOMIC SURVEY

 ‘Time ripe for discussions on Universal Basic Income’

  • A Universal Basic Income (UBI) will be an efficient substitute for a plethora of existing welfare schemes and subsidies, according to the annual Economic Survey.
  • In a chapter ‘Universal Basic Income: A Conversation With and Within the Mahatma,’ the Survey dwelt at length on the pros and cons of introducing UBI in India before concluding that it was “a powerful idea whose time even if not ripe for implementation is ripe for serious discussion.”
  • The report justified the introduction of UBI citing several reasons such as

1.     promoting social justice,

2.     reducing poverty,

3.     an unconditional cash transfer that lets the beneficiary decide how she uses the money and

4.     generating employment by promoting labour flexibility since it allows “individuals to have partial or calibrated engagements with the labour market without fear of losing benefits.”

5.     Administrative efficiency

  • It also said the move would bring in administrative efficiency as a direct cash transfer through a JAM (Jan Dhan-Aadhar-Mobile) platform would be more efficient compared to the “existing welfare schemes which are riddled with misallocation, leakages and exclusion of the poor.”
  • Pointing out that the Budget for 2016-17 had about 950 central sector and centrally– sponsored schemes (CSS) that accounted for about 5% of the GDP, the Survey suggested that “considerable gains could be achieved in terms of bureaucratic costs and time by replacing many of these with a UBI.”


 

 

 

 

 


 GS III: ECONOMIC SURVEY

Survey uses Big Data for first time

  • For the first time, the Economic Survey has used Big Data Analysis to “shed new light on the flow of goods and people within India.”
  • “With some immodesty, we claim that this Survey produces the first estimate of the flow of goods across states within India, based on analyzing transactions level data provided by the Goods and Services Tax Network (GSTN),” CEA Arvind Subramanian wrote in the preface of the Economic Survey 2016-17.
  • He added that the Survey furnishes “exciting new evidence on the flows of migrants within India, based on detailed origin-destination passenger data provided by the Ministry of Railways and on a new methodology for analysing the Census data.”


GS III : ECONOMIC SURVEY

Smaller States trade more

  • Smaller States such as Uttarakhand, Himachal Pradesh and Goa trade more, while the net exporters are the manufacturing powerhouses of Tamil Nadu, Gujarat, and Maharashtra, according to the Economic Survey.
  • One other finding on internal trade between States, of the first-ever estimates for interstate trade flows, is that cross border exchanges between and within firms amount to at least 54% of GDP (in 2015), implying that India’s interstate trade is 1.7 times larger than its international trade of 32% of GDP.
  • Belying their status as agricultural and/or less developed, Haryana and Uttar Pradesh appear to be manufacturing powerhouses because of their proximity to the national capital region, according to the Survey.
  • A potentially exciting finding for which there is tentative, not conclusive, evidence is that while political borders impede the flow of people, language (Hindi specifically) does not seem to be a demonstrable barrier to the flow of goods, the Survey found.
  • India’s aggregate interstate trade (54% of GDP) is not as high as that of the U.S. (78% of GDP) or China (74% of GDP), but substantially greater than provincial trade within Canada and greater than trade between Europe Union countries (which is governed by the “four freedoms”: allowing unfettered movement of goods, services, capital, and people).
  • The costs of moving (within India) are about twice as great for people as they are for goods, the Survey said.
  • However, it said there is a potential dampener on the finding that trade in goods is high within India.
  • Explaining the puzzle of ‘why does India trade so much’, the Survey noted: “This (high level of trade in goods) may be a consequence of the current system of indirect taxes which perversely favours interstate trade over intra-state trade.”


GS III : ECONOMIC SURVEY

‘Labour migration rose to 90 lakh over last 5 years’

  • The inter-state migration of workers in India has increased substantially to 90 lakh annually between 2011-16 compared to the previous years, according to the Economic Survey 2016-17.
  • The survey arrived at a much larger estimate of labour migration in India by analysing census data of 2011 and railway passenger traffic in the unreserved category between 2011-16.
  • “The first-ever estimate of internal work-related migration using railways data for the period 2011-16 indicates an annual average flow of close to 9 million (90 lakh) people between the states,” according to the Survey.
  • Inter-state labour mobility average was between 50–65 lakh people in the 2001-2011 period, yielding an interstate migrant population of about 6 crore and an interdistrict migration as high as 8 crore, according to a new Cohort- based Migration Metrics.
  • “Both these estimates are significantly greater than the annual average number of about 3.3 million (33 lakh) suggested by successive censuses and higher than previously estimated by any study,” the Survey noted.
  • The acceleration of migration was particularly high for women and increased at nearly twice the rate of male migration in the 2000s, according to the Survey.
  • “The patterns of migration observed conform to priors – less affluent states and districts evince higher out-migration and rich metropolises attract large inward flows of labour.”
  • The largest recipient of migrant workers was the Delhi region, which accounted for more than half of migration in 2015-16, while Uttar Pradesh and Bihar together accounted for half of total out-migrants, as per the survey.
  • “Over time, there has been a shift towards the southern states, reflecting the opening up of new migration corridors in recent years,” it said.


GS III; ECONOMIC SURVEY

‘Mother, child bearing brunt of weak health services’

  • The Economic Survey stated that despite growing rapidly on average, there is sign of growing regional inequality among the Indian states.
  • On health and fertility the Economic Survery has noted signs of a, “sign of growing regional inequality among the Indian states.”
  • Further, the survey notes that with regards to life expectancy, the Indian states are close to where they should be given their level of income. “However, this is not true of IMR, suggesting that the ‘mother and child’ (discussed also in last year’s Survey) bear the brunt of weaker delivery of health services.
  •  Janani Suraksha Yojana is a Central Government scheme aimed at decreasing the neo-natal and maternal deaths happening in the country, by promoting institutional delivery of babies.
  • The Survey states that despite growing rapidly on average, there is sign of growing regional inequality among the Indian states. This is puzzling because the underlying forces in favour of equalization within India — namely strong and rising movements of goods and people — are strongly evident.
  • “One possible hypothesis that there might be governance traps that impede the catch-up process,” but does not explain what these traps may be. “But why such traps persist if competitive federalism is forcing change upon the lagging states remains an open question,” according to the survey.
  • The survey does not look at morbidity or mortality caused by infectious and non-communicable disease (NDCs). In fact, it makes no mention of NCDs at all, which is among the biggest disease burden in India.


GS III : ECONOMIC SURVEY

Push to solve India’s twin balance sheet problem

  • The Economic Survey called for a need to set up a government-owned asset reconstruction company, PARA (Public Sector Asset Rehabilitation Agency) in an attempt to resolve India’s twin balance sheet problem - over-leveraged companies and the rising bad loans in public sector banks.
  • Devoting considerable attention to India’s twin-balance sheet problem, the Survey said that the agency could take charge of the largest, most difficult cases, and make politically tough decisions to reduce debt.

Debt repayment problem:

  • Some debt repayment problems have been caused by diversion of funds. But the vast majority has been caused by unexpected changes in the economic environment after the Global Financial Crisis, which caused timetables, exchange rates, and growth rate assumptions to go seriously wrong,” it said.
  • This concentration creates a challenge since large cases are difficult to resolve, but also an opportunity since TBS could be overcome by solving a relatively small number of cases, it said, adding that restoring them to financial health will require large write-downs.

Its Consequences:

  • “The consequent squeeze of banks has led them to slow credit growth to crucial sectors-especially to industry and medium and small scale enterprises (MSMEs)-to levels unseen over the past two decades.
  • As this has occurred, growth in private and overall investment has turned negative.
  • A decisive resolution is urgently needed before the ‘Twin Balance Sheet’ problem becomes a serious drag on growth,” an official statement said.
  • “Among other issues, they face severe coordination problems, since large debtors have many creditors, with different interests. And they find it hard –financially and politically—to grant them sizeable debt reductions, or to take them over and sell them…It increases the costs to the government since bad debts of the state banks keep rising, and increases the costs to the economy, by hindering credit, investment, and therefore growth,” it said.

Advocating PARA:

  • The Survey contends that a professionally-run central agency with the government backing could overcome the coordination and political issues that have impeded progress over the past eight years.
  • Advocating PARA to resolve the problem of twin balance sheets (corporates and banks) to be funded by the windfall gain to the government (from the unreturned old demonetised notes), the Economic Survey said, so far, public discussion of the bad loan problem had focused on bank capital, under the assumption that the main obstacle to resolving the twin balance sheet (TBS) concern was finding the funds needed by the public sector banks.
  • “But securing funding is actually the easiest part, as the cost is small relative to the resources the government commands. Far more problematic is finding a way to resolve the bad debts in the first place,” according to the survey.

India’s NPA ratio:

  • India’s NPA ratio at its current level of 9.1% of the gross loans is higher than any other major emerging market (with the exception of Russia), higher even than the peak levels seen in Korea during the East Asian financial crisis.


GS III : ECONOMIC SURVEY

Economic Survey wants modification of FRBM Act

  • India has “changed utterly” over the last 13 years since the Fiscal Responsibility and Budget Management (FRBM) was enshrined in law for prudent fiscal management and therefore, the FRBM operational framework designed in 2003 “needs to be modified to reflect the India of today and even more importantly, the India of tomorrow,” according to the Economic Survey.
  • This suggestion assumes significance in the backdrop of the N.K. Singh panel recently submitting its report on revising the FRBM Act to finance minister Arun Jaitley.

Fiscal policy principles:

  • Noting that India’s economic experience shows that the fiscal activism embraced by advanced economies — giving a greater role to counter-cyclical policies and attaching less weight to curbing debt — was not relevant for India, the Survey said
  • The pre-Budget document pointed out that since the 2008-09 global financial crisis, internationally fiscal policy has seen a paradigm shift from the emphasis on debts to deficits, arguing for greater activism in flows (deficits) and minimising concerns about sustainability of the stocks (debt).
  • India’s fiscal experience has underscored the fundamental validity of the fiscal policy principles enshrined in the FRBM Act.
  • India’s experience has reaffirmed the need for rules to contain fiscal deficits because of the proclivity to spend during booms and undertake stimulus during downturns, it observed.
  • “It (India’s experience) has also highlighted the danger of relying on rapid growth rather than steady and gradual fiscal and primary balance adjustment to do the ‘heavy lifting’ on debt reduction,” the Survey said.

Fiscal deficit targets:

  • The government has set a target for fiscal deficit (the gap between expenditure and revenue for the financial year) of 3.5% of GDP for FY’17, a lower target than the 3.9% set for 2015-16 which was achieved.
  • In his Budget 2016-17 speech, Mr. Jaitley had said: “There is now a school of thought which believes that instead of fixed numbers as fiscal deficit targets, it may be better to have a fiscal deficit range as the target, which would give necessary policy space to the government to deal with dynamic situations.”

 


GS III : ECONOMIC SURVEY

Apparel, leather sectors need policy shift to boost jobs

  • The Centre needs to focus on apparel, leather and footwear sectors to boost formal and productive job creation in the economy, according to the Economic Survey.
  • The Survey has recommended that labour and taxation reforms along with Free Trade Agreements (FTA) with the European Union and the U.K. were key to make apparel and leather sector globally competitive.
  • “Apparels and leather sectors offer tremendous opportunities for creation of jobs, especially for women… Apparels are 80-fold more labour- intensive than autos and 240-fold more jobs than steel,” according to the annual Survey.
  • The Survey highlighted challenges faced by the apparel and leather sectors: logistics, labour regulations, tax and tariff policy along with “disadvantages emanating from the international trading environment compared to competitor countries.”
  • “More FTAs, GST-induced tax rationalization, and labour law reform would add considerably to the job creation potential of the clothing and footwear sectors.”
  • The Survey called for giving workers in the apparel sector choice to decide on various statutory deductions “that become de facto taxes for low-paid workers in small firms that result in a 45% lower disposable salary.”
  • The workers should decide whether they want 12% employee contribution to be deducted for provident fund from their income, whether their 12% employer contribution goes towards Employees’ Provident Fund scheme or National Pension System and whether their health insurance premium should go to Employees’ State Insurance or a private health insurance of the employer’s choice.
  • It also highlighted high minimum wages as another hurdle, as overtime wage rate is twice that of ordinary wage rate, according to the Minimum Wages Act of 1948.


GS III : ECONOMIC SURVEY

 ‘Ambivalence’ towards private players exists

  • Calling for more privatisation in civil aviation, banking and fertiliser sectors, the Economic Survey cited Air India’s example to show India’s “ambivalence” towards private players.
  • “The symptoms of this ambivalence towards the private sector manifest in multiple ways. The most well-known example is the difficulty of privatising public enterprises, even for firms where economists have made strong arguments that they belong in the private sector,” according to the Survey.
  • “Consider the civil aviation sector. Defying history, there is still the commitment to make the perennially unprofitable public sector airline “world class.”
  • Air India is surviving on a Rs. 30,231 crore equity bailout package approved by the previous government for a ten -year period ending 2021- 22.
  • The Centre has so far infused around Rs. 24,000 crore into the national carrier since 2011-2012. The airline posted net loss of Rs3,936 crore in 2015-16 and has outstanding loans of Rs46,570,35 crore as on September 30, 2016.
  • The Survey further highlighted the government’s changed approach towards airport privatisation from change in ownership to awarding management contracts.
  • In 2015, the Centre had decided to hand over the operations, management and development of four airports to private players but the plan was dropped later that year.
  • The Centre recently decided to privatise terminal buildings at Jaipur and Ahmedabad airports.


GS III : ECONOMIC SURVEY

India ranks 4th globally in wind power installation: Survey

  • India has attained the fourth position globally in installed wind power capacity after China, U.S. and Germany as a result of various steps in the “right” direction, the Economic Survey said.
  • It said that currently, India’s renewable energy sector is undergoing transformation with a target of 175 GW of renewable energy capacity to be reached by 2022.
  • In order to achieve the target, some of the major programmes launched in recent years are:

1.     Solar Park,

2.     Solar Defence Scheme,

3.     Solar scheme for Central Public Sector Undertakings,

4.     Solar photovoltaic (SPV) power plants on canal bank and canal tops,

5.     solar pump,

6.     solar rooftop

  • A capacity addition of 14.30 GW of renewable energy has been reported during the last two and half years under Grid Connected Renewable Power, which include

(a)           5.8 GW from Solar Power,

(b)          7.04 GW from Wind Power,

(c)           0.53 GW from Small Hydro Power

(d)          0.93 GW from Bio-power

  • Rs. 38,000 crore worth of Green Energy Corridor is being set up to ensure evacuation of renewable energy, i.e. to enable the flow of renewable energy into the National Grid Network.

International Solar Alliance (ISA):

  • With the legal framework in place for the International Solar Alliance (ISA), the brainchild of Prime Minister Narendra Modi and launched during the UN climate summit in Paris in 2015, ISA will be a “major” international body headquartered in India, it added.
  • With India’s initiative, ISA envisaged as a coalition of solar resource-rich countries to address their special energy needs, will provide a platform to collaborate on addressing the identified gaps through a common and agreed approach.
  • “24 countries have signed the Framework Agreement of ISA after it was opened for signature on November 15, 2016. ISA is expected to become inter-governmental treaty-based organisation that will be registered under Article 102 of the UN charter after 15 countries ratify the Agreement.
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