Monthly Current Affairs December 2019

Easy to PICK251 - “UPSC Monthly Magazine” energy production in stars. Another important possible application of neutrinos is in the area of neutrino tomograph of the earth, that is detailed investigation of the structure of the Earth from core on wards. This is possible with neutrinos since they are the only particles which can probe the deep interiors of the Earth. Why underground laboratory? Neutrinos are notoriously difficult to detect in a laboratory because of their extremely weak interaction with matter.  The background from cosmic rays (which interact much more readily than neutrinos) and natural radioactivity will make it almost impossible to detect them on the surface of the Earth. This is the reason most neutrino observatories are located deep inside the Earth’s surface.  The overburden provided by the Earth matter is transparent to neutrinos whereas most background from cosmic rays is substantially reduced depending on the depth at which the detector is located.

Easy to PICK252 - “UPSC Monthly Magazine” Slowdown can be early warning for growth recession Syllabus subtopic: Indian Economy and News: The term ‘growth recession’ has issues relating to planning, mobilization of gained traction after comments made by resources, growth, development and former RBI governor Raghuram Rajan. employment. The question is whether the current Prelims and Mains focus: About the economic slump is a recession, an growth recession and its impact on the economic slowdown or a growth recession. Indian economy What does growth recession mean? jobless growth. During a recession both Growth recession is a situation in which the size of the economy and available jobs growth is slow for a few quarters but not contract simultaneously. The difference negative to be a technical recession, when with respect to an economic slowdown is low growth pushes up unemployment. The in terms of employment: due to significant term was coined by Solomon Fabricant. costs of hiring, companies are reluctant to Growth recessions are more common cut back on employment as they expect a than recessions as growth has often cyclical reversal. Therefore, as opposed to slowed at different periods in various growth recession and recession, an countries. An indicator of growth recession economic slowdown does not always is when the growth rate reduces imply a reduction in the number of jobs. substantially, coinciding with a job Is India experiencing a growth contraction. It combines the feature of recession? both an economic slowdown and a The jury is out on whether India is recession as growth slows while the experiencing a growth recession as we economy experiences job contractions don’t have credible data on the number of just as during an economic recession. jobs available. Payroll data suggests that What about recession and slowdown, there continues to be some job creation in then? the formal economy. Employment data During a growth recession the economy from the Centre for Monitoring Indian continues to expand, albeit at a lower rate. Economy shows substantial deviation over That is, the economy experiences slow the last couple of months.

Easy to PICK253 - “UPSC Monthly Magazine” Are there similar instances in the past? When will the recovery cycle begin? India has experienced many growth Many have indicated that recovery will be recessions and slowdowns in the last two slow and it will be two more quarters decades. A slowdown can be an early before we return to 7% growth. Recent warning of a growth recession. In 2002, evidence suggests a V-shaped recovery is we experienced a slowdown that was unlikely and we may experience sub-6% reversed by 2003. There was a slowdown growth this quarter and the next. The in 2008 due to the global financial crisis, finance ministry has initiated policy which was followed by expansionary fiscal interventions, including a corporate tax and monetary policy to address this. The cut. Such interventions will start showing 2011-2013 slump was a severe instance of an impact from the second quarter of 2020 growth recession as unemployment rose and the next fiscal might see a growth rate sharply and growth collapsed for of 7%. successive quarters.

Easy to PICK254 - “UPSC Monthly Magazine” Fiscal deficit may not matter much during slowdown Syllabus subtopic: Indian Economy and Mains focus: about the impact of fiscal issues relating to planning, mobilization of deficit on inflation, different steps taken by resources, growth, development and the govt. to check inflation employment. Context: India’s economic slowdown has Prelims focus: About fiscal deficit, led to a severe revenue shortfall in direct revenue deficit, primary deficit, FRBM and indirect taxes. As expenditure Act expands while revenue falls short of budgeted expectations, the fiscal deficit will rise. What exactly is a government deficit? believe that if the expenditure is greater Government finances are adequately than the revenue, then it must be a bad discussed during the budget and at times of thing. Unfortunately, there’s no simple slowdown. One such indicator of interest answer to this question. A prolonged fiscal is the deficit of the government. There are deficit above 4% is likely to be three measures of government deficits: problematic, but there’s little difference 1. Revenue deficit is the difference between a deficit of 3.5% or 3.8%. More than the amount of fiscal deficit, what between the total expenditure of the really matters is how the borrowed money government and its total revenue. is being utilized. If it is utilized for 2. Fiscal deficit is the difference between construction of physical infrastructure, total expenditure and its total revenue then it is not necessarily a bad thing. But if except borrowings. it is used for farm loan waivers or other 3. Primary deficit is the difference such subsidies, then a high fiscal deficit between fiscal deficit and interest should be a cause of major concern. payments. Fiscal deficit is one of the What is the expected fiscal deficit for most discussed of the three, as it is the FY20? money the government borrows to The budget estimates indicated a fiscal meet its expenditure. deficit close to 3.3% of GDP that seemed So, is it bad if the fiscal deficit unrealistic given the extent of the current increases? A natural inclination is to

Easy to PICK255 - “UPSC Monthly Magazine” economic slump. The FRBM Act allows The objective of FRBM Act was to a 0.5 percentage point relaxation in inculcate the habit of fiscal discipline in deficit in the event of a severe the governance structure of the country. It slowdown. This allows the government a sets targets and suggests means of fiscal deficit till 3.8% without violating reducing fiscal and revenue deficits. the provisions of the FRBM Act. Targets: How does fiscal deficit impact inflation? The targets that were set in original Conventional wisdom has been that fiscal version of act were: deficits result in undue inflationary pressures. This is based on India’s  Reduction and Elimination of revenue experience with high deficits in the 1980s deficit by 2008-09 and since 2009 onwards, when inflation and fiscal deficits were both high. But an  Thereafter build up adequate revenue important fact during these two periods surplus was high international prices of global commodities and high minimum support  Reduction of fiscal deficit to no more prices for farmers. Moreover, not all than 3 per cent of GDP at the end of deficits are inflationary: if the additional 2008-09 money is utilized for investments rather than subsidies, inflation is likely to be  Reduce the Gross Fiscal Deficit (GFD) muted. by March 31, 2008 Can the govt keep on spending as it wants? Statements mandated under FRBM Act Not at all. Though fiscal deficits may not The Central government shall lay in each impact inflation, they do impact interest financial year before both houses of rates—the cost of government borrowings. Parliament the following statements A higher cost of borrowing constrains of fiscal policy along with the annual government borrowings. In the present financial statement and demands for situation, the government must respond grants: with a countercyclical fiscal policy. 1. The Medium-term Fiscal Policy Luckily, that has been the stance of the finance ministry; however, it must share a Statement credible long-term, medium-term fiscal 2. The Fiscal Policy Strategy Statement consolidation road map. 3. The Macro-Economic Framework FRBM Act Explained – Objectives, targets, Amendments Statement Fiscal Responsibility and Budget Exemptions Management Act (FRBM Act) was Section 4 of the FRBM Act, 2003 states introduced in Parliament as the FRBM Bill that “due to ground or grounds of national in December 2000. It seeks to foster fiscal security or national calamity or such other discipline on the Central Government and exceptional grounds as the Central achieving a balanced budget with effective Government may specify”, the set targets revenue management. The Act was passed for revenue and fiscal deficit can be on August 26, 2003, therefore it is also exceeded called Fiscal Responsibility and Budget Amendments in FRBM Act Management Act (FRBMA), 2003. More than 15 years has passed since FRBMA was brought into effect from July FRBM Act was first introduced. But still 5, 2004. the government is nowhere near the targets Objective: set under the act. The subsequent governments at Centre have amended the act to achieve fiscal prudence. Here are the amendments that have been done in the act so far:  FRBM Rules 2004

Easy to PICK256 - “UPSC Monthly Magazine” 1. To bring down the GFD to not more than 3 1. GFD not more than 3 per cent of GDP at per cent of GDP at end of March 31, 2008. end of March 31, 2018 with annual To achieve this target of GFD the Central reduction by an amount equivalent to 0.4 Government shall reduce the GFD by an per cent or more of GDP at end of each amount equivalent to 0.3 percent or more financial year beginning with Financial of GDP at end of each financial year Year 2015-16 beginning with financial year 2004-05. 2. RD of not more than 2 percent of GDP by 2. To achieve target of RD by March 31, March 31, 2018 with annual reduction by 2008, Central government shall reduce RD an amount equivalent to 0.4 per cent or by an amount equivalent to 0.5 percent or more of GDP at the end of each financial more of GDP at end of each financial year, year beginning with Financial Year 2015- beginning with 2004-05. 16. 3. The Central government shall not give 3. In order to achieve target of effective guarantees aggregating to an amount revenue deficit by March 31, 2018, Central exceeding 0.5 percent of GDP in any Government shall reduce such deficit by financial year beginning with financial an amount equivalent to 0.5 per cent or year 2004-15 more of GDP at end of each financial year,  FRBM Rules 2013: It introduced two beginning with financial year 2015-2016 changes:  Budget 2018-19 1. The concept of effective revenue deficit 1. The central government shall reduce the was introduced fiscal deficit by an amount equivalent to effective revenue deficit = revenue deficit 0.1 percent or more of the gross domestic – grants to states for creation of capital product at the end of each financial year assets beginning with the financial year 2018-19, so that fiscal deficit is brought down to not 2. Medium Term Expenditure Framework more than 3 percent of the GDP by 31st Statement: medium-term framework day of March, 2021 provides for rolling targets for expenditure, imparting greater certainty, and 2. It proposed to bring down fiscal deficit to encourages prioritization of expenditure 3.3 percent, 3.1 percent and 3 percent of the gross domestic product by 2018-19, 3. To bring down the GFD to not more than 3 2019-20 and 2020-21 per cent of GDP at the end of March 31, 2017. To achieve this target of GFD, FRBM Review Committee (N.K Singh Central Government shall reduce the GFD by an amount equivalent to 0.5 percent or Committee) more of GDP at end of each financial year beginning with financial year 2013- 14. The government formed the committee to 4. To achieve the target of RD by March 31, review the FRBM Act, 2003 to suggest 2015 Central government shall reduce RD by an amount equivalent to 0.6 percent or changes in the act. The committee was more of GDP at end of each financial year, beginning with 2013-14. headed by Mr. N K Singh (politician, 5. In order to achieve target of effective economist and former Indian revenue deficit by March 31, 2015, Central Government shall reduce such deficit by Administrative Service officer). an amount equivalent to 0.8 per cent or more of GDP at end of each financial year, Recommendations of the committee were: beginning with financial year 2013- 2014.  FRBM Act Amendment 2015  Debt to GDP ratio: The Committee suggested using debt as the primary target for fiscal policy. A debt to GDP ratio of 60% should be targeted with a 40% limit for the centre and 20% limit for the states. The targeted debt to GDP ratio should be achieved by 2023.

Easy to PICK257 - “UPSC Monthly Magazine”  Fiscal Council: The Committee  The Committee suggested that grounds proposed to create an autonomous in which the government can deviate Fiscal Council with a Chairperson and from the targets of FRBM should be two members appointed by the centre. clearly specified, and the government To maintain its independence, it should not be allowed to notify other proposed a non-renewable four-year circumstances term for the Chairperson and members. Further, these people should not be  Borrowings from the RBI: The draft employees in the central or state Bill restricts the government from governments at the time of borrowing from the Reserve Bank of appointment. India (RBI) except when: (i) the centre has to meet a temporary shortfall in receipts, (ii) RBI subscribes to government securities to finance any deviations from the specified targets, or (iii) RBI purchases government securities from the secondary market

Easy to PICK258 - “UPSC Monthly Magazine” ‘U.S., Saudi Arabia at bottom of climate class’ Syllabus subtopic: Important gas production, a global assessment of countries’ emissions trajectories said at International institutions, agencies and United Nations climate talks. fora, their structure, mandate. About CCPI The Climate Change Performance Index Prelims and Mains focus: About CCPI (CCPI) measures the emissions, and its key findings, their significance, renewable energy share and climate India’s performance in the index policies of 57 countries and the European Union. News: The U.S. and Saudi Arabia are among major polluters showing “hardly any signs” of reducing their greenhouse Its findings: found that none of the countries  It found the U.S. ranks last, followed surveyed were currently on a path compatible with the Paris climate by Saudi Arabia and Australia, goals. although several countries did report falls in emissions last year, largely due  China, the world’s largest single to an industry-wide fade out of coal. emitter, was found to have taken “medium action” due to its high  While climate performance varied investment in renewables. greatly — even within the EU, with Sweden leading the way — the report India’s performance

Easy to PICK259 - “UPSC Monthly Magazine”  India, for the first time, ranks among  The current levels of per capita the top 10 in this year’s Climate emissions and energy use in India, Change Performance Index (CCPI) ranked 9th in the “high category”, are presented at the COP25 climate still comparatively low and, along with summit in Madrid. ambitious 2030 targets, result in high ratings for the green house gas emissions and energy use categories, said the report. Govt plans PDS portability for 12 states by January

Easy to PICK260 - “UPSC Monthly Magazine” Syllabus subtopic: Issues related to direct It is expected that nearly a total of 20 and indirect farm subsidies and minimum states/UTs shall be brought under the fold support prices; Public Distribution System of National Portability by June 2020 in a objectives, functioning, limitations, phased manner. revamping; issues of buffer stocks and food security; Technology missions; One Nation One, Ration Card Scheme economics of animal-rearing. Prelims and Mains focus: About One Nation, One Ration Card scheme and its significance in food security News: In a step towards the launch of ‘One Nation, One Ration Card’ by June next year, the Ministry of Consumer Affairs, Food and Public Distribution is working to integrate 12 states on a single portability platform that will enable beneficiaries of the National Food Security Act (NFSA) to purchase subsidised food grains from any fair price shop in these states. Objective It is planned that inter-state portability through One Nation, One Ration Card system shall be launched in four other states of Goa, Madhya Pradesh, Tripura and Jharkhand and these shall be integrated along with the eight existing states into the single portability platform — Public Distribution System Network (PDSN) — with effect from January next year. On-boarding/integration of the remaining states/UTs on the PDSN platform shall be done as and when the process of national de-duplication is completed for all beneficiaries and biometric/Aadhaar authentication distribution is enabled in all FPS of the states/UTs. GST rate rationalisation should lead to gain in revenue, not inconvenience people: States

Easy to PICK261 - “UPSC Monthly Magazine” Syllabus subtopic: Government policies  Raising tax rates in times of and interventions for development in slowdown has a repercussion and various sectors and issues arising out of maybe the states could consider their design and implementation bringing in more items under the ambit of cess or increase cess rates Prelims focus: about GST, GST Council for existing items. Not much scope to Mains Focus: About various challenges in raise cess on automobiles, but maybe it implementing GSt, Concerns raised by the can be increased for aerated drinks, states and govt’s efforts to address them. tobacco. News: As talks of a hike in goods and  The revenue gap has to be filled; it’s services tax (GST) rates gain momentum, not related to one state, every state there is a sense of disquiet among states wants compensation at 14 per cent. regarding any major tinkering of the How to do it, what can be done, this is slabs, especially the lower tax slab and a difficult exercise. exempted items. The Council meeting of December 18, coming in the backdrop of  Any such rate change exercise needs the Centre’s struggles on the revenue to be done slowly, with due inputs side sets the stage to reverse the direction from officers and ministers of all states of rate cuts. and after a thorough perusal by the fitment committee. About the issue The emerging view is that revenue gain  States are of the view that hardly any from any such rate hike has to be luxurious or high-end items are there in substantial and not cause inconvenience the list of exempted items at present, to the common man, though they are of so taking out items from that list may the view that ways need to be found to not be feasible. narrow the widening revenue gap. Concerns raised and Suggestions by the  Also, a merger of 12 per cent and 18 States per cent slabs may not result in  Knee-jerk reactions such as a cut in revenue gain on a net basis. GST rates before elections and a hike  Kerala FM Thomas Isaac has spoken in rates in times of revenue slowdown against tweaking rates for lower slabs are not needed and GST needs to be and suggested tinkering with items in looked afresh and a “holistic the higher slabs of 18 per cent and 28 overview” needs to be taken. per cent. “In the last GST Council  The scope to increase rates is very meeting Union FC (Finance “limited”, especially of exempted Commission) Chairman suggested items and 5 per cent slab. Making states should revisit the compensation changes in the lower slab of 5 per package in the context of decline in tax cent is not going to yield much collection. All state ministers revenue. This is a sensitive issue and irrespective of politics rejected it. Now all states need to be on board. It is to Centre is bringing it back to the agenda be seen what will help in raising by forcing a dispute,” he tweeted. revenues without hurting the sentiment of the common man. Every state would Present scenario want that revenues should also go up, tax compliance improves and cess pool  Over 50 per cent of the total items are also improves. under the 18 per cent slab under GST, around 20 per cent are in the 12 per cent slab and about 23 per cent of the items are in the lower slab of 5 per cent. 25 per cent of the items are in the peak 28 per cent slab, while 13 per

Easy to PICK262 - “UPSC Monthly Magazine” cent of the items are in the zero within 60 days of the commencement of category. the Article 279A.  So far, the GST Council, since the According to the article, GST Council GST rollout from July 1, 2017, has will be a joint forum for the Centre and held 19 meetings in which it has the States. It consists of the following undertaken around 10 rounds of rate members: cuts. Any rate hike decision would be the first such move under the 1. The Union Finance Minister will be indirect tax regime. the Chairperson About GST Council 2. As a member, the Union Minister of The Goods and Services Tax (GST) is State will be in charge of Revenue of governed by the GST Council. Article 279 Finance (1) of the amended Indian Constitution states that the GST Council 3. The Minister in charge of finance or has to be constituted by the President taxation or any other Minister nominated by each State government, as members. 50th PSLV launch carries radar satellite Syllabus subtopic: Science and applications and effects in everyday life Technology- developments and their Achievements of Indians in science &

Easy to PICK263 - “UPSC Monthly Magazine” technology; indigenization of technology from the refurbished first launchpad, and developing new technology. marking the 50th launch for the vehicle. Prelims and Mains focus: About the Initially, the PSLV had a carrying recent launch by PSLV, its achievements capacity of 850 kg, and over the years it so far and their significance in making has been enhanced to 1.9 tonnes. The India a prominent player in satellite PSLV is very versatile, having various launching industry mission options. News: India’s Polar Satellite Launch The PSLV had helped take payloads into Vehicle (PSLV) marked its ‘Golden almost all the orbits in space, including the Jubilee’ launch on Wednesday by the Geo-Stationary Transfer Orbit injecting India’s advanced radar (GTO), the moon and mars, and would imaging satellite RISAT-2BR1 and nine soon be launching a mission to the Sun. other customer satellites from Japan, In the last 26 years, the PSLV had lifted Italy, Israel and the U.S. into their intended more than 52 tonnes into space, of which orbits. about 17% were for commercial Objective of RISAT-2BR1 satellite customers. It will be used for agriculture, forestry, The PSLV has failed only twice — the disaster management support and maiden flight of the PSLV D1 in national security. ISRO will launch the September 1993 and the PSLV C-39 in next version of RISAT within the next two August 2017. While it had taken ISRO 26 months. years to achieve 50 launches, the next 50 would likely be done in the coming five Other achievements of PSLV years. The PSLV, which has a history of successful launches of payloads that What is the difference between GSLV include Chandrayaan-1, Mars Orbiter and PSLV Mission and the space recovery mission, Both PSLV (Polar Satellite Launch soared into clear blue skies at 3.25 p.m. Vehicle) and GSLV (Geosynchronous Satellite Launch Vehicle) are the satellite-launch vehicles (rockets) developed by ISRO. PSLV is designed mainly to deliver the “earth-observation” or “remote-sensing” satellites with lift-off mass of up to about 1750 Kg to Sun- Synchronous circular polar orbits of 600- 900 Km altitude. The remote sensing satellites orbit the earth from pole-to-pole (at about 98 deg orbital-plane inclination). An orbit is called sun-synchronous when the angle between the line joining the centre of the Earth and the satellite and the Sun is constant throughout the orbit. Due to their sun-synchronism nature, these orbits are also referred to as “Low Earth Orbit (LEO)” which enables the on-board camera to take images of the earth under the same sun-illumination conditions during each of the repeated visits, the

Easy to PICK264 - “UPSC Monthly Magazine” satellite makes over the same area on ground thus making the satellite useful for earth resources monitoring. Apart from launching the remote sensing satellites to Sun-synchronous polar orbits, the PSLV is also used to launch the satellites of lower lift-off mass of up to about 1400 Kg to the elliptical Geosynchronous Transfer Orbit (GTO). PSLV is a four-staged launch vehicle with first and third stage using solid rocket motors and second and fourth stages using liquid rocket engines. It also uses strap-on motors to augment the thrust provided by the first stage, and depending on the number of these strap-on boosters, the PSLV is classified into its various versions like core-alone version (PSLV-CA), PSLV-G or PSLV-XL variants. The GSLV is designed mainly to deliver the communication-satellites to the highly elliptical (typically 250 x 36000 Km) Geosynchronous Transfer Orbit (GTO). The satellite in GTO is further raised to its final destination, viz., Geo-synchronous Earth orbit (GEO) of about 36000 Km altitude (and zero deg inclination on equatorial plane) by firing its in-built on- board engines. Due to their geo-synchronous nature, the satellites in these orbits appear to remain permanently fixed in the same position in the sky, as viewed from a particular location on Earth, thus avoiding the need of a tracking ground antenna and hence are useful for the communication applications. Heavy metals contaminating India’s rivers

Easy to PICK265 - “UPSC Monthly Magazine” Syllabus subtopic: Conservation, Sources and impact of heavy metals environmental pollution and degradation, contaminated water environmental impact assessment. The main sources of heavy metal Prelims focus: about heavy metals, pollution are mining, milling, plating and Central water commission, Bureau of surface finishing industries that Indian Standards discharge a variety of toxic metals into the Mains focus: impact of water pollution on environment. human health, govt. efforts to check pollution The presence of metals in drinking water is News: Samples taken from two-thirds of the water quality stations spanning to some extent unavoidable and certain India’s major rivers showed contamination by one or more heavy metals, in trace amounts, required for good metals, exceeding safe limits set by the Bureau of Indian Standards (BIS). health. However, when present above safe About the findings of the report limits, they are associated with a range of The findings are part of a report, which is the third edition of an exercise conducted disorders. by the Central Water Commission (CWC) from May 2014 to April 2018. Long-term exposure to the Samples from only one-third of water quality stations were safe. The rest, or above-mentioned heavy metals may result 287 (65%) of the 442 sampled, were polluted by heavy metals. Samples from in slowly progressing physical, muscular, 101 stations had contamination by two metals, six stations saw contamination by and neurological degenerative processes three metals. Iron emerged as the most common that mimic Alzheimer’s disease, contaminant with 156 of the sampled sites registering levels of the metal above Parkinson’s disease, muscular safe limits. None of the sites registered arsenic levels above the safe limit. dystrophy and multiple sclerosis. “Arsenic and zinc are the two toxic metals whose concentration was always obtained Other heavy metals found within the limits throughout the study The other major contaminants found in the period,” the report noted. samples were lead, nickel, chromium, Not all the rivers are equally sampled. cadmium and copper. The study spanned Several rivers have only been sampled at a 67 rivers in 20 river basins. Lead, single site whereas others such as the cadmium, nickel, chromium and copper Ganga, the Yamuna and the Godavari contamination were more common in non- are sampled at multiple sites. Marked monsoon periods while iron, lead, variation was found in contamination chromium and copper exceeded ‘tolerance levels depending on the season. limits’ in monsoon periods most of the Samples were collected in three time. different seasons: pre-monsoon, Not all the rivers are equally sampled. monsoon and post-monsoon. Several rivers have only been sampled at a

Easy to PICK266 - “UPSC Monthly Magazine” single site whereas others such as the coordinating schemes of control, Ganga, the Yamuna and the Godavari utilization and conservation of water are sampled at multiple sites. Marked resources throughout the country. variation was found in contamination  These schemes are meant for purpose levels depending on the season. of Flood Control, Irrigation, The main sources of heavy metal pollution Navigation, Drinking Water Supply are mining, milling, plating and surface and Water Power Development. finishing industries that discharge a variety of toxic metals into the environment.  It also undertakes the investigations, construction and execution of any such About Bureau of Indian Standards schemes as required. (BIS)  The work of the Commission is 1. The Bureau of Indian Standards (BIS) divided among 3 wings namely : is the national Standards Body of India working under the aegis 1. River Management Wing (RM), of Ministry of Consumer Affairs, 2. Designs and Research Wing Food & Public Distribution. (D&R) and 2. It is established by the Bureau of 3. Water Planning and Projects Wing Indian Standards Act, 1986. (WP&P). 3. The Minister in charge of the Ministry or Department having Heavy metals administrative control of the BIS is the ex-officio President of the BIS. 4. Composition: As a corporate body, it has 25 members drawn from Central or State Governments, industry, scientific and research institutions, and consumer organisations. 5. It also works as WTO-TBT (Technical Barriers to Trade Agreement) enquiry point for India. About Central Water Commission (CWC)  CWC is apex Technical Organization of India in the field of Water Resources.  It is presently functioning as an attached office of Union Ministry of Water Resources, River Development and Ganga Rejuvenation.  It is charged with the general responsibilities of initiating and Nod to ring-fence successful IBC suitors

Easy to PICK267 - “UPSC Monthly Magazine” Syllabus subtopic: Indian Economy and In a separate decision, the Union Cabinet issues relating to planning, mobilization of also approved the Aircraft resources, growth, development and (Amendment) Bill to enhance the safety employment. and security of aircraft operations. The Bill enhances the maximum limit of fine Prelims focus: About IBC 2016, key from the existing ₹10 lakh to ₹ 1 crore. changes proposed by the amendment Bill The Cabinet also approved the ‘Partial Credit Guarantee Scheme’ for the Mains focus: key steps taken by the govt. purchase of high-rated pooled assets from to check NPA crisis , challenges and financially sound non-banking financial achievements so far companies (NBFCs) and housing finance companies (HFCs) by public sector banks. News: The Union Cabinet on Wednesday approved the proposal to make  The amount of overall guarantee will amendments in the Insolvency and be limited to the first loss of up to Bankruptcy Code 2016, through the 10% of fair value of assets being Insolvency and Bankruptcy Code purchased by the banks under the (Second Amendment) Bill, 2019. This Scheme, or ₹10,000 crore, whichever also includes a provision to ring-fence is lower. successful resolution applicants from criminal proceedings with regard to  The window for one-time partial offences committed by previous promoters credit guarantee offered by the of a company. government will remain open till June 30, 2020 or till such date by which ₹ Aim of the amendment 1,00,000 crore assets get purchased by The amendments aim to remove certain the banks, whichever is earlier. difficulties being faced during insolvency resolution process to realise  The scheme would cover the objects of the code and to further ease NBFCs/HFCs that may have slipped doing of business. into SMA-0 category during the one year period prior to August 1, 2018, The amendments aim to remove and asset pools rated “BBB+” or bottlenecks, streamline the corporate higher. insolvency resolution process, and protect the last mile funding in order to boost SMA-0 accounts are the special mention investment in financially distressed accounts (SMA) against which the sectors. The amended Act would also principal or interest or any other ensure that the substratum of the amount wholly or partially is overdue business of a corporate debtor is not between 1-30 days. lost. It can continue as a going concern by clarifying that the licences, permits, concessions, clearances etc. cannot be terminated or suspended or not renewed during the moratorium period, the release said.

Easy to PICK268 - “UPSC Monthly Magazine” Equity support for IIFCL The Union Cabinet also approved the proposal for providing additional equity support to India Infrastructure Finance Company Limited to the tune of ₹5,300 crore in financial year 2019-20 and ₹10,000 crore in financial year 2020-21. This will be done through regular budgetary support and/or through issue of recapitalisation bonds.

Easy to PICK269 - “UPSC Monthly Magazine” Low risk a draw for investors in Bharat Bond ETF Syllabus subtopic: Indian Economy and How is it different from other products? issues relating to planning, mobilization of Bharat Bond is a target maturity ETF resources, growth, development and unlike other ETFs and mutual fund employment. (MF) schemes that are open- ended Prelims and Mains focus: About ETFs, products. The three-year ETF will only Bharat Bond ETF, advantages of ETFs invest in bonds with similar tenures and over mutual funds likewise the 10-year ETF. The tenure of News: The Bharat Bond exchange-traded the bonds will roll down over time and fund (ETF), which has opened for mature around the time of maturity of the subscription, is a new category of debt ETF. The interest rate risk will thus come investment with the benefits of low-cost down over time, as bonds with lower passive investing in a fixed maturity maturity will see less volatility in their product that invests in a portfolio of prices. The portfolio of other ETFs and AAA-rated bonds. MFs reflect the maturity band of the product category specified by SEBI: say, a What is the Bharat Bond ETF? short duration fund has to always run a It is an investment product that invests in a duration between 1-3 years in its portfolio. portfolio of AAA-rated bonds issued by government entities. The portfolio will How does a target maturity ETF benefit mimic the Nifty Bharat Bond Index that its investor? includes bonds of issuers such as NTPC A target maturity ETF gives investors and REC. The three-year variant tracks the visibility on their yield: it’s like buying a three-year Nifty Bharat Bond Index and bond and holding it to maturity. You will matures in April 2023; the 10-year variant get interest payments and repayment of tracks the 10-year index and matures in principal on maturity. Bharat Bond ETF April 2030. Investors will be allotted units will, similarly, hold a basket of bonds and in the ETF in demat form, which will be receive coupon income and the repayment listed and traded on the stock exchange. of principal on maturity, which will be On maturity of the ETF, the bonds held in distributed to the unit holders. the portfolio will also mature and the money received will be paid out to unit What is the likely yield for Bharat Bond holders. ETF? The fact sheets for the Bharat Bond indices indicate a yield of 7.58% for the 10-year index and 6.69% for the three-year index as on 5 December. The yields for the two variants are likely to be around these levels. SBI’s fixed deposit rates for similar tenures is around 6.25%. The gains from the ETF held for over three years are taxed as long-term capital gains with indexation benefits, which reduce the incidence of tax, especially on the 10-year ETF.

Easy to PICK270 - “UPSC Monthly Magazine” However, interest income on fixed deposit selling of shares on the open market has no is taxed at the marginal rate of tax. impact on an ETF’s tax liability While IPOs and stake sales depend on How does the ETF manage risks? market conditions and investor appetite, The structure of the Bharat Bond ETF exchange-traded funds allow the eliminates the risk of volatility in net asset government to lower its holding in public value for investors who hold the units to sector companies without being concerned maturity. Sebi’s recent guidelines on ETFs about the volatility in the market capping the exposure to issuers at 15%, along with the quasi-sovereign nature of Disadvantages the issuers, makes the default risk in the Although exchange-traded funds offer investment negligible. As an ETF, the several advantages over traditional mutual units are available for purchase and sale funds, they also have distinct anytime during trading hours on the disadvantages. exchange. There are market makers, who The securities that an ETF tracks are will provide buy and sell quotes to ensure largely fixed, so investors that prefer liquidity for the investors. active management will probably find ETFs wholly unsuitable. What is an Exchange-traded-fund? Since ETFs are traded as stocks, each ETF purchase will be charged a brokerage commission PSUs suffer from constant government intervention in their business and pricing decisions which can have serious impact on returns on investment. Benefits of ETF Low Cost – Unlike traditional mutual and index funds, ETFs have no front- or back- end loads. In addition, because they are not actively managed, most ETFs have minimal expense ratios, making them much more affordable than most other diversified investment vehicles. Liquidity – Whereas traditional mutual funds are only priced at the end of the day, ETFs can be bought and sold at any time throughout the trading day Tax-Advantages – In a traditional mutual fund, managers are typically forced to sell off portfolio assets in order to meet redemptions. Often, this act triggers capital gains taxes, to which all shareholders are exposed. By contrast, the buying and

Easy to PICK271 - “UPSC Monthly Magazine” NASA scientists map presence of water ice on Mars Syllabus subtopic: Awareness in the the rocks of the Martian surface. Some key fields of IT, Space, Computers, robotics, facts about Mars are as follows: nano-technology, bio-technology and issues relating to intellectual property  Martian year is of 687 days and rights. Martian day is 24h 37m. Prelims and mains focus: About NASA’s missions to Mars and their achievements,  Martian atmosphere is very thin—only India’s MOM. about 7000th the density of Earth’s News: Nasa scientists have developed a atmosphere. The atmosphere is mostly map detailing the presence of water ice carbon dioxide, with tiny fractions of on Mars, with some believed to be as little Oxygen, Nitrogen and other gases. as 2.5 centimetres below the Red Planet’s surface.  At the equator, during the warmest What is it about? times of the Martian summer, the The researchers, including those from temperature can reach nearly –18°C at Nasa’s Jet Propulsion Laboratory in the poles, during the coldest times of California, said in a statement that water the Martian winter, temperatures drop ice will be a key consideration for any to -85°C and beyond. potential landing site on Mars. In the current study, published in the  Mars is known for fascinating geologic journal Geophysical Research Letters, the features on its surface; it is covered scientists used data from two satellites with all sorts of mountains, craters, orbiting the Red Planet—Nasa’s Mars channels, canyons, highlands, Reconnaissance Orbiter (MRO), and lowlands, and even polar ice caps. Mars Odyssey orbiter—to locate water ice that could potentially be within  Scientific evidence strongly suggests reach of astronauts. that once, billions of years ago, Mars The regions noted in the study are near the was much warmer than it is now, and Martian poles, and have been studied by was an active, dynamic planet. Nasa’s Phoenix lander, which scraped up ice, and by the MRO, which has taken Polar Ice Caps on Mars images from its orbit of meteor impacts Polar Ice Caps were first observed by that have excavated this ice. Italian astronomer Gian Domenico “You wouldn’t need a backhoe to dig up Cassini, who is known for many important this ice. You could use a shovel,” said discoveries, including a gap in Saturn’s study’s lead author, Sylvain Piqueux. rings (This is called Cassini division). “We’re zeroing in on the best places for He made detailed observations of Mars, astronauts to land,” Piqueux said. and discovered light-colored patches at the About Mars Martian north and south poles. These polar Mars is known as the red planet because it caps showed seasonal variations, spreading looks red from Earth. The reddish color during the Martian winter and shrinking comes from the high concentration of during the summer. iron oxide compounds—that is, rust—in Martian polar ice caps are made up mostly of frozen carbon dioxide {dry ice.}. Some frozen water, or just plain ice, may also be embedded within the polar caps. Due to the atmospheric conditions on the surface of Mars, however, neither the ice nor the dry ice would melt to make water or liquid carbon dioxide when the temperatures go

Easy to PICK272 - “UPSC Monthly Magazine” up; rather, they would sublimate, or turn irregularly shaped rocky objects. They look very much like asteroids. Phobos is directly into gas. Thus, polar ice caps on about 10 miles across, and Deimos is about half that size. The proximity of Mars are not a source of liquid water. Mars to the asteroid main belt, suggests that they were indeed once asteroids whose Geological features of Mars orbits took them close to Mars. The orbital conditions were just right for Mars to Mars has a rich variety of geological capture them with its gravity, causing them to enter into stable orbits around Mars. features: huge craters, broad plains, tall India’s Mars Orbiter Mission (MOM) mountains, deep canyons, and much more, all with colorful names. The tallest mountain in the solar system, the extinct volcano Olympus Mons, rises 24 kilometers above the Martian surface. A massive canyon called the Vallis Marineris (Mariner Valley) cuts across the northern hemisphere of Mars for more than 3,200 kilometers; it is three times deeper than the Grand Canyon on Earth. On the southern hemisphere of Mars is Hellas, an ancient canyon that was probably filled with lava long ago and is now a large, light area covered with dust. Martian meteorite ALH84001 ALH84001 was so named because it was found in the Allan Hills region of Antarctica in 1984 . It is the most famous of a number of meteorites that are thought to have been pieces of the Martian surface millions of years ago. They were probably knocked loose by a powerful collision from a comet or asteroid, which sent pieces of rock into orbit around the Sun that later landed on Earth. Mars Exploration Rovers, Spirit and Opportunity, are geological robots that have explored several areas of Mars. Among the many discoveries made with them are minerals that form only in the long term presence of water; microscopic mineral structures nicknamed “blueberries” that only form when moisture is present, along with chemical and isotopic ratios in Martian rocks that would have formed only if liquid water were in the environment. The strong scientific conclusion is that Mars is currently dry on its surface, but that this was not always the case. It may even have been awash with liquid water billions of years ago. Moons of Mars – Phobos and Deimos, Phobos and Deimos are

Easy to PICK273 - “UPSC Monthly Magazine” IIP shrinks again, inflation accelerates Syllabus subtopic: Indian Economy and high inflation combined with stagnant issues relating to planning, mobilization of or declining demand). resources, growth, development and employment. The momentum of IIP remaining in the Prelims focus: Terms like inflation, negative zone has continued while CPI stagflation, IIP and CPI inflation, led by food and vegetable Mains focus: the impact of recent inflation, has crossed 5.5%. This is slowdown on various sectors of the developing into a classic situation of economy and govt’s efforts to check it stagflation. News: Industrial activity contracted for the third consecutive month in October by Within the IIP, the mining sector shrunk 3.8%, driven by a fall in activity across by 8% in October compared with a sectors. contraction of 8.5% in the previous month. The manufacturing sector contracted for Inflation and Contraction data the third consecutive month in October, by Retail inflation had surged to a 40-month 2.1%, compared with a contraction of high of 5.54% in November, driven by 3.9% in September. rising food inflation. The Index of Industrial Production (IIP) What is meant by the term Inflation? had contracted by 4.3% in September and  Inflation is a quantitative measure of 1.1% in August. Within the IIP, the mining sector shrunk the rate at which the average price by 8% in October compared with a level of a basket of selected goods contraction of 8.5% in the previous month. and services in an economy increases The manufacturing sector contracted for over a period of time. the third consecutive month in October, by  It is the constant rise in the general 2.1%, compared with a contraction of level of prices where a unit of 3.9% in September. currency buys less than it did in Growth in the Consumer Price Index prior periods. Often expressed as a (CPI) accelerated in November for the percentage, inflation indicates a fourth consecutive month. It stood at decrease in the purchasing power of 4.62% in October. a nation’s currency. Impact Types of Inflation Indexes This combination of contraction in Depending upon the selected set of goods industrial activity and rising inflation and services used, multiple types of has led experts to fear that India is entering a phase of stagflation (a situation in which there is persistent

Easy to PICK274 - “UPSC Monthly Magazine” inflation values are calculated and tracked change in selling prices received by as inflation indexes. Most commonly used domestic producers of goods and inflation indexes are the Consumer Price services over time. Index (CPI) and the Wholesale Price Index  The PPI measures price changes (WPI). from the perspective of the seller and differs from the CPI which measures The Consumer Price Index (CPI) price changes from the perspective  The CPI is a measure that examines the of the buyer. weighted average of prices of a Note: In all such variants, it is possible basket of goods and services which that the rise in the price of one component are of primary consumer needs. (say oil) cancels out the price decline in They include transportation, food, another (say wheat) to a certain extent. and medical care. Overall, each index represents the average  CPI is calculated by taking price weighted cost of inflation for the given changes for each item in the constituents which may apply at the predetermined basket of goods and overall economy, sector or commodity averaging them based on their relative level. weight in the whole basket. The prices in consideration are the retail prices of About Index of Industrial Production each item, as available for purchase by (IIP) the individual citizens. It is an index that shows the performance  Changes in the CPI are used to assess of different industrial sectors of the Indian price changes associated with the cost economy. The IIP is estimated and of living, making it one of the most published on a monthly basis by the frequently used statistics for Central Statistical Organisation (CSO). As identifying periods of inflation or an all India index, it gives general level of deflation. industrial activity in the economy. Importance of Index of Industrial The Wholesale Price Index (WPI) Production. The IIP is used by public  The WPI is another popular measure of agencies including the Government agencies/ departments including that in the inflation, which measures and tracks Ministry of Finance, the Reserve Bank of the changes in the price of goods in India etc. for policy purposes. The all- the stages before the retail level. India IIP data is used for estimation of  While WPI items vary from one Gross Value Added of Manufacturing country to other, they mostly include sector on quarterly basis. Similarly, the items at the producer or wholesale data is also used extensively by analysts, level. For example, it includes cotton financial intermediaries and private prices for raw cotton, cotton yarn, companies for various purposes. cotton gray goods, and cotton clothing.  Although many countries and Following are the main changes brought organizations use WPI, many other in the new series of IIP: countries, including the U.S., use a  Base year has been updated to 2011-12 similar variant called the producer price index (PPI). by upgrading the item basket and weighting structure. The Producer Price Index  National Industrial Classification  The producer price index is a family of (NIC) 2008 has been adopted in the new series of IIP. indexes that measures the average

Easy to PICK275 - “UPSC Monthly Magazine”  Number of item groups has increased from 399 to 407 out of which 149 are new/ emerging items.  Electricity generation from renewable energy sources has been included under the ‘Electricity’ sector.  Weights are rationalised to appropriately to reflect the actual value addition of each sector incorporating effects of subsidies.  New use-based classification has been adopted with following categorisation: (i) Primary goods, (ii) Capital goods, (iii) Infrastructure/ construction goods, (iv) Intermediate goods, (v) Consumer durables, and (vi) Consumer non- durables.  A review mechanism has been introduced through a Technical Review Committee. Note: In the new base year (i.e. 2011-12), the 407 item groups are divided under three sectors i.e. Mining (1 item group), Manufacturing (405 item groups) and Electricity (1 item) with weights of 14.37%, 77.63% and 7.99% respectively.

Easy to PICK276 - “UPSC Monthly Magazine” Govt’s steps showing some results, says FM Syllabus subtopic: Indian Economy and capital expenditure (capex) of ₹3.38 issues relating to planning, mobilization of trillion for 2019-20. Key resources, growth, development and infrastructure ministries, including employment. railways and highways, has projected Prelims focus: about NBFC, Capital capex of ₹2.46 trillion by December- expenditure, Alternative Investment Funds end. Besides, 32 public sector Mains focus: about the recent slowdown companies have undertaken capex of in the economy and measures taken by the ₹98,000 crore till November and will govt. to check it further spend ₹60,000 crore till March News: A series of measures taken by the 2020. Along with the corporate tax government in the last few months to cut, these steps are expected to boost revive growth has started showing some investment, he said. results and the Centre will continue to 4. The government has also infused support the industry and intervene as and ₹60,314 crore equity into public when required, finance minister Nirmala sector banks. Government capex has Sitharaman said. the benefit of crowding in private Background: India’s economic downturn investment and, therefore, government had deepened in the September quarter capital expenditure is extremely with growth down to 4.5%, its slowest critical. pace since March 2013. Tepid 5. Last week, the finance minister had consumption and sluggish private hinted at a cut in personal income tax investment has been the pain points for to revive consumption, among others the economy. steps, to boost growth. Measures taken by the government to boost consumption and improve What more is to be done? liquidity in the system. 1. However, concrete results are yet to 1. All dues of goods and services follow despite the measures taken by providers were cleared, most tax the government. refunds were processed, and small 2. The ₹25,000-crore alternative businesses were supported through investment fund (AIF) to revive bill-discounting to enable cash flows. stalled housing projects, is also 2. Besides, the liquidity-starved non- expected to boost investment. banking financial companies 3. Last week, the finance minister had (NBFCs) and housing finance hinted at a cut in personal income tax companies (HFCs) were given credit to revive consumption, among others for smooth functioning. As much as steps, to boost growth. ₹4.47 trillion was sanctioned to NBFCs and HFCs to support retail About NBFC lending, he said, adding that 17 Non-banking finance companies proposals amounting to ₹7,657 crore (NBFCs) are a fundamental part of the have been approved under the partial Indian financial system playing a credit guarantee scheme in the last significant role in nation building and two days alone. 3. The central government has achieved more than two-thirds of the budgeted

Easy to PICK277 - “UPSC Monthly Magazine” financial inclusion. It plays a Alternative Investment Funds complementary role to the banking system As defined in Securities and Exchange in promoting financial inclusion. There are Board of India (Alternative Investment multiple varieties of NBFCs and so the Funds) Regulations, 2012, AIFs refer to sector demands a well-coordinated any privately pooled investment fund, response from all stakeholders keeping in (whether from Indian or foreign sources), mind the differential contextual in the form of a trust or a company or a requirements of different categories of body corporate or a Limited Liability NBFCs. Partnership (LLP). The Non-Banking Financial Companies (NBFCs) are the financial institutions that AIF does not include funds covered offer the banking services, but do not under the SEBI (Mutual Funds) comply with the legal definition of a Regulations, 1996, SEBI (Collective bank, i.e. it does not hold a bank license. Investment Schemes) Regulations, 1999 Both banks and NBFCs are financial or any other regulations of the Board to intermediaries. NBFCs can lend and make regulate fund management activities. investments. Hence, their activities are Hence, in India, AIFs are private funds akin to that of banks. However, there are a which are otherwise not coming under few differences between NBFCs and the jurisdiction of any regulatory banks: agency in India. 1. NBFC cannot accept demand deposits; 2. Banks can maintain demand deposits Categories: As per SEBI (AIF) Regulations, 2012, (savings/current accounts) but NBFCs AIFs shall seek registration in one of the accept only term deposits; three categories: 3. Banks form a part of Payment and Category I: Mainly invests in start- ups, Settlement Mechanism but NBFCs do SME’s or any other sector which Govt. not form part of the payment and considers economically and socially settlement system and cannot issue viable. cheques drawn on itself; Category II: These include Alternative 4. Deposit insurance facility of Deposit Investment Funds such as private equity Insurance and Credit Guarantee funds or debt funds for which no specific Corporation is not available to incentives or concessions are given by the depositors of NBFCs, unlike in case of government or any other Regulator banks. Category III : Alternative Investment Capital expenditure (Capex) Funds such as hedge funds or funds which Capital expenditure has strong multiplier trade with a view to make short term effects as it involves acquisition of assets returns or such other funds which are open such as land, buildings, machinery, and ended and for which no specific incentives equipment. or concessions are given by the government or any other Regulator.

Easy to PICK278 - “UPSC Monthly Magazine” Indices soar on U.S.-China trade deal Syllabus subtopic: Indian Economy and It is the world’s fastest stock exchange, issues relating to planning, mobilization of with a median trade speed of 6 resources, growth, development and microseconds. employment. The BSE is the world’s 10th largest stock Prelims and Mains focus: about various exchange with an overall market indices and how they perform during capitalization of $2.29 Trillion as of April fluctuations in the market 2018. News: Tracking strong gains in the global More than 5500 companies are publicly markets, Indian benchmark indices rose listed on the BSE. significantly on Friday with the What is an Index? Since there are benchmark Sensex closing above the thousands of company listed on a stock 41,000-mark for the first time since exchange, hence it’s really hard to track November 28. The broader Nifty also every single stock to evaluate the market managed to close above the psychological performance at a time. Therefore, a smaller 12,000 mark. sample is taken which is the representative of the whole market. This small sample is What made the indices jump? called Index and it helps in the The news report on a possible trade deal measurement of the value of a section of between the U.S. and China and exit polls the stock market. The index is computed showing a comfortable win for Boris from the prices of selected stocks. Johnson in the U.K. elections triggered gap-up start in the Nifty. SENSEX: Reports suggested U.S. and China have Sensex, also called BSE 30, is the market arrived at a consensus on the first phase of index consisting of 30 well-established and their trade talks. financially sound companies listed on Other Asian indices Bombay Stock Exchange (BSE). The effect was clearly visible across 30 companies are selected on the basis of markets with Hang Seng gaining nearly the free-float market capitalization. 700 points while Nikkei was up almost These are different companies from the 600 points. The benchmarks of most Asian different sectors representing a sample of markets ended with strong gains on Friday. large, liquid and representative companies. The base year of Sensex is 1978-79 and What is Nifty and Sensex? the base value is 100. In order to understand what is nifty and It is an indicator of market movement. sensex, you need to understand the Indian If the Sensex goes down, this tells you that stock exchanges first. Now, let’s discuss the stock price of most of the major stocks the two major stock exchanges in India i.e on the BSE has gone down. If Sensex goes the ‘Bombay stock exchange’ and the up, it means that most of the major stocks ‘National stock exchange’ along with in BSE went up during the given period. their indexes. For example, suppose the Sensex is Bombay Stock Exchange (BSE) 26,000 today. If Sensex drops to 25,950 Bombay stock exchange is an Indian stock tomorrow, it means that the majority of the exchange located at Dalal Street, Mumbai, 30 companies financial condition is not Maharashtra. good i.e. their share price is falling. It was established in 1875 and is Asia’s oldest stock exchange. National Stock Exchange (NSE):

Easy to PICK279 - “UPSC Monthly Magazine” The National Stock Exchange (NSE) is the given period. With respect to NIFTY and leading stock exchange of India, located in NSE, we can say that: Mumbai, Maharashtra, India. It was started to end the monopoly of the Bombay stock If Nifty goes up, this means that the stock exchange in the Indian market. price of most of the major stocks on NSE has gone up. NSE was established in 1992 as the first On the other hand, if nifty goes down, this demutualized electronic exchange in the tells you that the stock price of most of the country. major stocks on NSE has gone down. It was the first exchange in the country to When Sensex/Nifty increases, it shows the provide a modern, fully automated screen- economic growth of the country. For based electronic trading system which example, during the Indian recession of offered the easy trading facility to the 2008-09, the Sensex fell over 12000 points investors spread across the length and (-60%). breadth of the country. NSE has a total market capitalization of Importance of Market Index: more than US$ 2.27 trillion, making it the The market indexes are the barometer for world’s 11th-largest stock exchange as of the market behavior. It gives a general idea April 2018. about whether most of the stocks have NSE’s index, the NIFTY 50, is used gone up or gone down. extensively by investors in India and Often, Market Index is used as a around the world as a barometer of the benchmark portfolio performance. Indian capital markets. It is used as a reflector of investor’s sentiments. NIFTY: Market indexes are used for sorting and Nifty, also called NIFTY 50, is the market comparison of the various companies. index consisting of 50 well-established and Indices act as an underlying for Index financially sound companies listed on Funds, Index Futures, and Options. National Stock Exchange of India (NSE). They are used in passive fund management by Index funds. The base year is taken as 1995 and the The index can give a comparison of base value is set to 1000. returns on investments in stock markets as Nifty is calculated using 50 large stocks opposed to asset classes such as gold or which are actively traded on the NSE. debt. The 50 companies are selected on the basis of the free float market capitalization. Here, the 50 top stocks are selected from different 24 sectors. Nifty is owned and managed by India Index Services and Products (IISL) Since inception in 1995, Nifty has given a return of 11.13% CAGR (till April 30, 2018). NOTE: The Sensex and Nifty are both indicators of market movement. If the Sensex or Nifty go up, it means that most of the stocks in India went up during the

Easy to PICK280 - “UPSC Monthly Magazine” Bank NPAs again stoke asset quality concerns Syllabus subtopic: Indian Economy and auditing that bank’s books. SBI also issues relating to planning, mobilization of reported divergence in provision of resources, growth, development and ₹12,036 crore. employment. The bank disclosed the divergence to the stock exchange last week. Prelims and mains focus: above the NPA Earlier, SBI had reported its highest bad crisis and the role of auditors in reporting loan divergence of ₹23,239 crore for 2016- bad loans; ethical standards related to 17. auditing While loans turn bad once the repayment overdue exceeds 90 days, News: India’s bad loan crisis seems far provision is the money set aside for each from over, with as many as 10 banks loan a bank disburses. Provisions mirror disclosing they had under-reported non- the change in an asset’s classification from performing assets (NPAs) of close to standard to NPA and increases as the asset ₹24,000 crore in the year ended 31 March. deteriorates. These banks are State Bank of India (SBI), Following these disclosures, experts have Yes Bank, Punjab National Bank, Central raised questions about the role of auditors Bank of India, UCO Bank, Bank of India, in the reporting process. Union Bank of India, Indian Overseas Bank, Indian Bank and Lakshmi Vilas Role of auditors in regulation of bank Bank. For India’s banks, saddled with bad accounts loans of ₹9.5 trillion, the findings by the From a regulatory perspective, auditors Reserve Bank of India do not bode well. are the first line of defence, as bank accounts are prepared in accordance Background with the guidelines determined by RBI, with which bank auditors are well- In 2017, the central bank directed banks to versed. Hence, if the regulator RBI has detected misreported accounts, the auditors disclose the extent to which their have to be held responsible and need to be penalized. assessment of NPAs and their provisioning As banks hold unsecured deposits from the public, are highly leveraged and play a diverged from that of RBI, and released critical role in payments in the economy, they have to maintain the highest ethical guidelines for such classification. In April, standards. Indeed, by their very nature, banks are meant to stand for integrity and RBI mandated banks to disclose trust. information about provisioning Is the fault only of auditors? Lenders are not always at fault and the divergence, if it exceeded 10% of a bank’s central bank would have sought NPA classification of some assets in retrospect pre-provisioning profit. and with abundant caution. Not all divergences are a result of Banks were also directed to disclose incorrect reporting or error of judgement. information if additional NPAs were more than 15 % of reported NPAs. SBI’s case The country’s largest lender, SBI, reported the largest bad loan divergence so far this year, under-reporting gross NPAs of ₹11,932 crore. Divergence refers to the difference between what a bank reports as its bad loans and provisions, and what the central bank finds when

Easy to PICK281 - “UPSC Monthly Magazine” In many cases, the stress in the account interest rate of say 5 percent per annum. may have become apparent only in subsequent quarters after March ending. In Now suppose that initially everything was such cases, it would be challenging for banks to pre-empt stress and, hence, report good and the market forces were working such account as non-performing. Further, in many cases, divergent accounts would in support of the company. In this have been factored in the reported results of the first half of the year. scenario, the company was able to service About NPAs (non performing assets) the interest amount. Later, due to Classification of NPAs administrative, technical, legal, Depending upon the period up to which a loan has remained as NPA, it is classified environmental, corporate reasons etc. into three types: Substandard Assets: An asset which suppose the company is not able to pay the remains as NPA for less than or equal to 12 months. interest rates for 90 days. In that case, a Doubtful Assets: An asset which remained in the above category for 12 loan given to the company is a good case months. Loss Assets: These are assets where loss for the consideration as NPA. has been identified by the bank or the RBI. However, there may be some value Origin of the present NPA crisis: remaining in it and hence the loan has not The origin of the crisis lies partly in the been not completely written off. credit boom of the years 2004-05 to An example of NPA: Suppose State Bank 2008-09. In that period, commercial credit of India (SBI) gives a loan of Rs. 5 crore (‘non-food credit’) doubled. to a company. They agreed upon for an It was a period in which the world economy as well as the Indian economy were booming. Indian firms borrowed furiously in order to avail of the growth opportunities they saw coming. Most of the investment went into infrastructure and related areas: telecom, power, roads, aviation, steel. Businessmen were overcome with exuberance, partly rational and partly irrational. They believed, as many others did, that India had entered an era of 9% growth. Thereafter, as the Economic Survey of 2016-17 notes: Many things began to go wrong. Thanks to problems in acquiring land and getting environmental clearances, several projects got stalled. Their costs soared. At the same time, with the onset of the global financial crisis in 2007-08 and the slowdown in growth after 2011-12, revenues fell well short of forecasts. Financing costs rose as policy rates were tightened in India in response to the crisis. The depreciation of the rupee meant higher outflows for companies that had borrowed in foreign currency. This combination of adverse factors made it difficult for companies to service their loans to Indian banks.

Easy to PICK282 - “UPSC Monthly Magazine” In the recovery game, Indian banks seem to lend it, leave it and forget it Syllabus subtopic: Indian Economy and otherwise. State Bank of India, the issues relating to planning, mobilization of largest lender and one with heft, has resources, growth, development and recovered a measly ₹3,222 crore in the employment. first half of FY20 from written off Prelims and Mains focus: about the bad accounts. If the largest lender cannot loan crisis in the Indian banking system increase its recovery rate, the chances and the reasons for it; its implications and of other banks doing so are slim. measures taken by the govt. News: Bank stocks have been among the  To be sure, banks historically have top performers so far this year compared not been able to recover much from with the broad market trend. This written-off accounts. exuberance comes from the fact that bad loans have fallen in absolute terms.  WHY? The reasons are varied: In an How? economic downturn, it is difficult to Since dud assets have reduced, the press for repayments from companies propensity to earn interest increases for given that their earnings are hurt. Also, lenders. Logically, as earnings increase, the infrastructure, such as courts or the estimates of earnings per share for recovery mechanisms, were not robust banks would also be raised. enough to help banks recover written-off What is the reality about reduction in loans. bad loans  But investors should look closely at  In a disappointment, even the Insolvency and Bankruptcy Code how banks have been able to hack (IBC) has failed to notch up down their bad loan stock. As the recoveries, barring a few marquee accompanying chart shows, write-offs cases. IBC may have resulted in many have contributed in a big way to the promoters being ousted from their fall in bad loans. companies owing to non-repayment of  In the first six months of FY20, banks loans. wrote off more than Rs.80,000 crore of loans. In the past two years, this ran  But banks are yet to ratchet up their close to ₹2 trillion. risk-management practices to assess  In essence, the lenders could not and price loans. As such, even today recover any money and were resigned banks are unable to get back what to just forget about it in these cases. they have lent in many cases, leave alone the time value of the money, But why have banks given up? Or have which is interest. they?  Bankers argue write-offs do not mean  Write-offs are akin to giving up. Indian banks have been giving up for they have washed their hands of these long now. Add the fact that banks borrowers. Efforts at the branch level have been lax in their assessment of are made to get the money back. bad loans, investors should be  But the track record of recoveries worried. As a Mint story points out, as from written-off accounts shows many as 10 banks under-reported bad loans for FY19, according to a Reserve Bank of India audit. Both these factors show banks’ risk management in poor light.

Easy to PICK283 - “UPSC Monthly Magazine” Android vulnerable to cyberattack: MHA Syllabus subtopic: Awareness in the the main entry points for ‘StrandHogg’ fields of IT, Space, Computers, robotics, to launch the attack. nano-technology, bio-technology and  An app in which the user is already issues relating to intellectual property logged in asking him/her to login again rights. is another anomaly pointing to the Prelims and Mains focus: About possibilities of a cyberattack. Once StrandHogg bug and cyberthreats users approve such requests, the associated with it; types of malware malware would instantly access the News: The Union Home Ministry has sent mobile phone or tablet for specific an alert to all States warning them about purposes. the vulnerability of the Android  It can activate the microphone, operating system to a bug called allowing a hacker in a remote location ‘StrandHogg’ that allows real-time to listen to live conversations. The malware applications to pose as genuine camera can also be switched on to applications and access user data of all capture visuals. kind.  Links and buttons that become non- functional, apps asking for permissions What is the threat? that are not required are among the  While all versions of Android, other warning signs. including Android 10, are vulnerable to How can you be safe from this attack? this bug, it may not be apparent to the Currently, there is no effective block or affected users that malware even detection method against StrandHogg applications are already on board their on the device itself. However, as an user, device. These malware can then you should be alert to the following potentially listen to their conversations, discrepancies in your device: access photo album, read/send  An app or service that you’re already messages, make calls, record conversations and get login credentials logged into is asking for a login. to various accounts.  Permission popups that does not  This apart, things that such malware can access include private images, contain an app name. files, contact details, call logs, and  Permissions asked from an app that location information.  At least 500 popular apps are at risk shouldn’t require or need the because of this malware that hackers permissions it asks for. For e.g., a can deploy to attack mobile phone calculator app asking for GPS users. An alert has been sent to all permission. senior police officials to sensitise them  Typos and mistakes in the user to the threat. Steps will be taken to interface. create awareness among the public on  Buttons and links in the user interface the vulnerability of Android to that does nothing when clicked on. ‘StrandHogg’. How does it enter the system?  Pop-ups asking for permission to send notifications, messages etc., are one of

Easy to PICK284 - “UPSC Monthly Magazine”  Back button does not work like Worms: This type of malware will expected. replicate itself and destroys information and files saved on the host PC. It works to What is a Malware? eat up all the system operating files and Malware is software written specifically to data files on a drive. harm and infect the host system. Malware includes viruses along with other types of Trojan: Trojans are a type of virus that software such as trojan horses, worms, are designed to make a user think they are spyware, and adware. Advanced malware a safe program and run them. They may be such as ransomware are used to commit programmed to steal personal and financial financial fraud and extort money from information, and later take over the computer users. resources of the host computer’s system files. In large systems, it may attempt to Common Types of Malware make a host system or network resource Virus: As discussed, Virus is a specific unavailable to those attempting to reach it. type of malware by itself. It is a contagious Example: you business network becoming piece of code that infects the other unavailable. software on the host system and spreads itself once it is run. It is mostly known to Ransomware: Ransomware is an spread when software is shared between advanced type of malware that restricts computers. This acts more like a parasite. access to the computer system until the user pays a fee. Your screen might show a Adware: Adware is also known as pop-up warning that your have been advertising-supported software. It is locked out of your computer and that you software which renders advertisements for can access only after paying the the purpose of generating revenue for its cybercriminal. The cybercriminal demands author. The advertisements are published a ransom to be paid in order for the on the screen presented to the user at the restriction to be removed. The infamous time of installation. Adware is WannaCry one type of ransomware. programmed to examine which Internet sites, the user visits frequently and to A software bug is an error, flaw or fault in present and feature related advertisements. a computer program or system that causes Not all adware has malicious intent, but it it to produce an incorrect or unexpected becomes a problem anyway because it result, or to behave in unintended ways. harms computer performance and can be The process of finding and fixing bugs is annoying. termed \"debugging\" and often uses formal techniques or tools to pinpoint Spyware: This type of malicious software, bugs, and since the 1950s, some computer spies on you, tracks your internet systems have been designed to also deter, activities. It helps the hacker in gathering detect or auto-correct various computer information about the victim’s system, bugs during operations. without the consent of the victim. This spyware’s presence is typically hidden from the host and it is very difficult to detect. Some spyware like keyloggers may be installed intentionally in an organization to monitor activities of employees.

Easy to PICK285 - “UPSC Monthly Magazine” NEFT round the clock set to boost digital payments Syllabus subtopic: Indian Economy and News: National electronic funds transfer issues relating to planning, mobilization of (NEFT), a retail payment system resources, growth, development and operated by the Reserve Bank of India employment. (RBI), became a 24x7 facility on 16 Prelims and Mains focus: about the December. The facility will be available difference between various payment on all days of the year, including bank systems like NEFT, RTGS and IMPS holidays. and their use How did NEFT function before 16 hours on December 16, 2019,” the banking December? regulator said. This is the second of two Before 16 December, NEFT was available major changes implemented by RBI in the for customers from 8am to 7pm on all context of NEFT. In its July monetary working days, except the second and policy review, the regulator decided to do fourth Saturdays of the month and other away with processing charges levied by it bank holidays. NEFT transactions do not for NEFT and real-time gross settlement happen in real time. They were settled in (RTGS). RBI specified in November that half-hourly batches through 23 this would come into effect for banks from settlements. Despite the time restrictions, January next year. NEFT handled 2.3 billion transactions What other modes of fund transfer are valued at around ₹228 trillion in 2018-19, available? up from 1.9 billion transactions valued at Two other systems of fund transfer are ₹172 trillion in the previous year—a RTGS and immediate payment service growth of 19.1% in terms of volume and (IMPS). Under RTGS, the minimum 32.3% in terms of value. At the end of transfer amount is ₹2 lakh and the facility March, it was available through 144,927 is available only during working hours of branches of 209 banks. banks. IMPS is a real-time payment What has changed now in the system? service available even on holidays with an RBI has now made the facility available 24 upper limit on transactions of ₹2 lakh, but hours a day and 365 days a year. “It has no lower limit. been decided that NEFT shall be made What impact will this have on users? available from December 16, 2019, with The change is part of RBI’s push to drive the first settlement taking place after 00:30 digital fund movement and increase usage by offering more convenience to users.

Easy to PICK286 - “UPSC Monthly Magazine” RBI’s mandate to do away with charges on RBI joined an elite club of nations having retail transactions through NEFT, RTGS payment systems that enable round-the- and IMPS was also aimed at encouraging clock fund transfer and settlement of any bank customers to adopt these digital value, the regulator tweeted after facilities. Making N announcing the change. The club includes EFT available round the clock will further Hong Kong, the UK, South Korea, this agenda. With no upper limit on fund Singapore and China. RBI’s digital push transfers, combined with no transaction may reduce the use of cash and cheque for cost or time barrier, NEFT is likely to fund transfer. It will also add to the become the most favoured payment impetus driving the rise in India’s digital method. payments transaction value, projected to What does this mean for digital more than double to $135.2 billion in payments? 2023, according to an Assocham-PwC India study.

Easy to PICK287 - “UPSC Monthly Magazine” RBI to steadily tighten NBFC regulations Syllabus subtopic: Effects of to the current recovery of the sector, RBI liberalization on the economy, changes in governor Shaktikanta Das said. industrial policy and their effects on industrial growth. What changes are on the anvil?  RBI has mandated that there should be Prelims focus: difference between NBFCs and regular banks a chief risk officer. Mains focus: about the NBFC crisis and  It has also mandated that NBFCs its implications; efforts of RBI to check further downfall in growth should have liquidity coverage ratio (LCR) requirement to take care of News: The Reserve Bank of India (RBI) is asset-liability (ALM) mismatches. looking to steadily tighten regulation of  There are a few other regulatory non-banking financial companies measures, which are under (NBFCs) without causing any disruption consideration and will be brought in steadily. These new regulations have to be brought in a non-disruptive manner. Green shoots Infrastructure Leasing and Financial Services (IL&FS).  There are signs that bank credit to NBFCs is slowly reviving and the  Overall, non-bank credit growth is, better-performing ones are able to however, yet to return to pre-IL&FS access funds from the market at rates levels. According to RBI data, assets that prevailed before the collapse of of deposit and non-deposit-taking

Easy to PICK288 - “UPSC Monthly Magazine” systemically important NBFCs,  He said revenue maximization, excluding housing finance companies, have grown from ₹28.3 trillion in therefore, assumes greater September 2018 to ₹31.95 trillion in September 2019, a growth of 12.9%. importance in the current context.  There are some indications of investment taking place. However, it’s  In the October monetary policy, Das too early to rush to a conclusion. It is to be seen if this gets entrenched and had said that the Reserve Bank decided sustained over or one or two quarters. to go for a “temporary pause” in the RBI’s efforts in regulating NBFCs  In the October policy, the RBI interest rate-cutting cycle and wait for governor had said that RBI was the government to announce further regularly monitoring the top 50 NBFCs much more closely and measures in the Union budget for fiscal intensively than anyone could expect.  He had also said the central bank was 2020-21. aware of vulnerabilities in the NBFC sector. Non-banks are yet to  Spike in food inflation appears to be completely absorb the systemic shock following defaults by IL&FS in transient. With inflation at around 4%, September 2018, and a consequent liquidity crunch. nominal GDP growth will come down  Besides, considering that most NBFCs have borrowed short-term money to compared to what it was 7-8 years ago. fund long-term assets, they were able to continually refinance their With current nominal GDP down to borrowings as long as liquidity conditions were easy. As liquidity 7%, it’ll be a challenge for the tightened, they were left facing debt repayment challenges and prospects of government to find space. rating downgrades.  To ensure greater credit flow from  Therefore, the government will have to banks to NBFCs, in August 2019 RBI also increased exposure limits to a focus on accretion of additional single NBFC from 15% to 20% and allowed banks to lend to NBFCs for revenue, goods and services tax on-lending to customers. streamlining and plugging loopholes, Challenges and way ahead  Referring to the recent measures taken if any, disinvestment programme and by the finance ministry, Das said the other revenue mobilization measures. government could find it challenging to find the fiscal space to provide further boost to the ailing economy.

Easy to PICK289 - “UPSC Monthly Magazine” Non-GST tax revenue subdued in current fiscal Syllabus subtopic: Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal and Telangana.  Indian Economy and issues relating to planning, mobilization of resources,  There are 18 Non-Special Category growth, development and employment. states but the latest data is not available for Bihar and Goa.  Government policies and interventions for development in various sectors and  The data have been compared against issues arising out of their design and Budget targets of current and last implementation. financial years as comparable full year non-GST revenue figures of states are Prelims and Mains focus: key findings of available only 2018-19 onwards. the report; reasons for sluggish non-GST revenues and their impact on fiscal health  The analysis shows the combined mop- of the Indian economy; measures to be up of State Excise Duties in these taken to address them states was Rs 81,764.25 crore or 51.29 News: Even as the government struggles per cent of their total Budget target to shore up the GST revenue, the during the first seven months of the collection of non-GST tax revenue too current financial year. However it was seems to be subdued at a time when the Rs 74,809.6 crore or 55.05 per cent in economy is slowing down. the year-ago period. What do the findings reveal?  The state excise duties levied on liquor is the second biggest  A scrutiny of revenue figures of 16 contributor to the state’s Own Tax major states reveals a sluggish revenue after sales tax. Though there growth in non-GST tax collection is no reason given for the sluggishness during the first seven months of the in the collection of state excise current financial year as compared duties, it can be attributed to the to the same period last fiscal. slowdown as well as prohibition in few states. Besides this, collections of  The data, compiled from unaudited Stamps and Registration Fees and provisional figures of states’ monthly Land Revenue are also subdued. accounts available on the Comptroller and Auditor General of India (CAG)  During the April-October period of website, shows that combined non- 2019-20, the collection of Stamps and GST tax collection of 16 Non-Special Registration Fees in these 16 states Category states during April-October was Rs 68,367.97 crore — 53.40 per 2019 was Rs 3,03,106.03 crore, 50.52 cent of the Budgeted target of Rs per cent of the budget target of Rs 1,28,035 crore. However, collection of 5,99,987.7 crore. Stamps and Registration Fees was much faster — 58.33 per cent of the  It is lower in comparison to the 52.72 Budget target of Rs 1,10,668.96 crore per cent collected during the same in the first seven months of 2018-19. period of the last fiscal against the The collection of sales tax has also budget targets of 2018-19. been sluggish this fiscal.  The states for which data have been What constitute non-GST taxes? analysed include Andhra Pradesh, Chhattisgarh, Gujarat, Haryana,  The non-GST taxes include mainly Jharkhand, Karnataka, Kerala, Madhya four taxes: Pradesh, Maharashtra, Odisha, Punjab,

Easy to PICK290 - “UPSC Monthly Magazine” 1. Stamps and Registration Fees; 2. Land Revenue; 3. Sales Tax; and 4. State Excise Duties. Difference between Nil Rated, Exempt, Zero Rated and Non-GST supplies Supply Description Name Zero Rated Exports Supplies made to SEZ or SEZ Developers. Nil Rated Supplies that have a declared rate of 0% GST. Exempt Example: Salt, grains, jaggery etc. Supplies are taxable but do not attract GST and for which ITC cannot be claimed. Example: Fresh milk, Fresh fruits, Curd, Bread etc. Non-GST These supplies do not come under the purview of GST law. Example: Alcohol for human consumption, Petrol etc.

Easy to PICK291 - “UPSC Monthly Magazine” How coal power increases infant mortality Syllabus subtopic: Conservation,  When compared to imported coal, environmental pollution and degradation, Indian coal has higher ash content environmental impact assessment and releases more pollutants. The Prelims and Mains focus: about the authors, therefore, caution against the findings of the study and its significance new policy of the Indian government to News: More than 70% of India’s power place curbs on imported coal. generation comes from coal, a dependence that comes with serious health  They also find that cities are more consequences, according to research. vulnerable to the effects of coal- burning as these are areas with higher Findings of the research on harmful pollution levels and older coal-fired impact of coal-fired power plants power plants.  In a study, Geoffrey Barrows of the  Taken together, the authors estimate École Polytechnique and others find that the health costs of coal power that the expansion of coal-based plants outweigh any local economic power generation can have adverse benefits. Much of the power produced effects on infant mortality through in plants is transmitted elsewhere. increased pollution levels in the form They say environmental regulations of nitrogen dioxide (NO2). need to target the use of domestic coal and older plants located in  Coal power plants are responsible for polluted areas. around 60% of NO2 emissions in the country, according to their estimates.  The researchers use gridded pollution data between 1996-2015 and district- level infant mortality rates to show that the expansion of coal power generation in India has increased infant mortality significantly.  Specifically, they show that 1 gigawatt (GW) rise in coal power generation capacity increases NO2 levels by 7.6% and, consequently, infant mortality by 14%.  In contrast, a similar increase in power capacity in the US results in only a 4.8% increase in infant mortality. The authors attribute the difference to the technology used in Indian plants, higher baseline pollution and the type of coal used in India.

Easy to PICK292 - “UPSC Monthly Magazine” Disinflation may be a concern for India in new year Syllabus subtopic: Indian Economy and leverage for firms, dampening economic issues relating to planning, mobilization of activity and job creation. resources, growth, development and employment. Is India experiencing a disinflationary phase? Prelims and Mains focus: about CPI and The increased divergence between the WPI, disinflation, stagflation and their role Wholesale Price Index (WPI) and CPI in determining economic performance should be a cause of concern. But WPI figures suggest the existence of a News: Consumer Price Index (CPI) disinflationary phase as WPI inflation was inflation for November was at 5.5%, while 5.68% in June 2018 and 0.16% in October core CPI was at 3.26%. The CPI print, 2019. This shows a consistent drop in WPI along with the low growth rate, suggests over 15 months despite some periods of the possibility of sustained high inflation temporary increase. We witnessed a next year. similar increase for November as WPI was 0.58%. But since January, WPI has What is disinflation and why is it bad? consistently been below 4%. If WPI A general reduction in inflation is often figures continue to be below 2% in the first termed disinflation. Central banks do half of 2020, it would demonstrate the want prices to moderate and temporary extent of weakness in demand that reduction in inflation is desired as it can followed the crisis at non-banks. imply a productivity increase. Prolonged periods of disinflation result in a Why are many people calling it revision of inflation expectations by stagflation? households and firms, which expect The increase in CPI figures when the prices to drop further. This results in economic growth rate slowed to 4.5% in deferment of spending and investment the September quarter has led many people decisions, which would result in to term it stagflation. Stagflation is a contraction of demand leading to simultaneous increase in inflation and deflationary pressures. Persistent unemployment. However, this increase is disinflation may result in deflationary because of seasonal factors and inflation is cycles, which could cause an increase in likely to be moderate for a few months. Onion prices are high, how is inflation ‘low’? Indeed, onion prices have risen and consumer food price inflation was 10.01%, while CPI was 5.5% for November. Delayed arrival of the new crop and damage to the harvested crop in Maharashtra, Karnataka and Madhya Pradesh have pushed up onion prices. Over

Easy to PICK293 - “UPSC Monthly Magazine” the next few months, food price inflation may moderate and, thus, CPI could be back under 4%. Core CPI is at 3.26%, while WPI has been under 3% since May and under 2% since July. This suggests the bogey of disinflation is real, despite a temporary surge in CPI. When will CPI inflation start moderating? Many believe inflation will moderate from March, while others say the ghost of inflation is back. But persistently low WPI and core CPI figures suggest inflation would be back to the 3% level by March. Low commodity prices combined with excess capacity will ensure the bogey of inflation is unlikely to cause concern for a major part of FY21. This open the possibility of more interest rate cuts to revive growth and generate an inflationary impulse. hat is the C

Easy to PICK294 - “UPSC Monthly Magazine” In a first, GST Council votes on tax proposal as consensus collapses Syllabus subtopic: seven, while three abstained. The  Statutory, regulatory and various change is effective from 1 March. quasi-judicial bodies.  Government policies and  The Council also took a few steps to interventions for development in curb tax evasion, but did not take up various sectors and issues arising any proposal for GST rate increase. out of their design and The decision to abstain from raising implementation. GST rates comes after official data  Indian Economy and issues relating issued last week showed consumer to planning, mobilization of goods output had shrunk 18% in resources, growth, development October, its fifth straight month of and employment. contraction. Several state ministers also said the time was not right for Prelims and Mains focus: about the key raising GST rates. decisions taken in the GST Council meeting and their significance; GST  The anti-evasion measures included Council and its structure limiting input tax credit in cases where invoices or debit notes are not News: Goods and Services Tax (GST) properly reflected in records, Council, the federal indirect tax body, blocking fraudulently availed tax broke from its tradition of consensus- credits and invalidating e-way bills based decision-making to vote on a generated by taxpayers who have not proposal for imposing a uniform tax filed their tax return forms for two rate on lotteries. tax periods. Why this change happened?  The Council also decided to exempt The decision to go for voting was taken entities in which either the central or after efforts by Union finance minister state government owns 20% or more Nirmala Sitharaman to build consensus from paying an upfront amount for on the proposal failed as states were long-term lease of industrial or divided on the issue and one Kerala financial infrastructure plots. insisted on voting. Currently, this relief is available to entities with at least 50% state What did the Council decide? ownership. Also, businesses will get an  The Council decided to set the GST extra month for filing annual returns and tax audit report for the first year of rate on all lotteries at 28%. At GST, 2017-18. The new due date is 31 present, lotteries run by state January. governments are taxed at 12%, while those authorized by states and GST Council operated by private players as well The Goods and Services Tax (GST) is as interstate suppliers of lotteries are governed by the GST Council. Article 279 taxed at 28%. The decision was favoured by 21 states and opposed by

Easy to PICK295 - “UPSC Monthly Magazine” (1) of the amended Indian Constitution states that the GST Council has to be constituted by the President within 60 days of the commencement of the Article 279A. According to the article, GST Council will be a joint forum for the Centre and the States. It consists of the following members: 1. The Union Finance Minister will be the Chairperson 2. As a member, the Union Minister of State will be in charge of Revenue of Finance 3. The Minister in charge of finance or taxation or any other Minister nominated by each State government, as members.

Easy to PICK296 - “UPSC Monthly Magazine” India should be wary of middle income trap Syllabus subtopic: Indian Economy and Which countries have escaped it? issues relating to planning, mobilization of In the history of development, the success resources, growth, development and stories of transformation to high-income employment. status include Japan, South Korea, Portugal, Poland and Latvia. Countries Prelims and Mains focus: about Middle such as Brazil, South Africa, Egypt, Income Trap; why is India facing it; Thailand and Turkey also tried to develop about GNI but could not transition to the high-income level. These countries failed to develop News: Many economists believe that and remain stuck below their potential. countries that grow from low-income to Argentina, Mexico, and Russia, middle-income levels tend to get stuck in a meanwhile, have been trapped in the upper trap that prevents them from graduating to middle-income category for a long time. high-income status. India runs the risk of China, with a GNI per capita of around getting caught in that trap. $9,800, is most likely on its way out of the middle-income trap—unless it stumbles. What is the middle-income trap? World Bank defines a middle-income How has India moved up the country as one with a gross national development ranks? income (GNI) per capita of $1,000- In 1960, India had a per capita income of 12,000 in 2011 prices. $1,033 (in 2011 purchasing power parity Those below the $4,000 mark are “lower terms). This was equivalent to 6% of the middle-income” countries, and those per capita income of the US. India attained above it “upper middle-income” ones. lower middle-income status in 2008. By The middle-income trap refers to the 2017-18, the country’s per capita income phenomenon where rapidly growing was $6,538—or 12% of the per capita economies graduate to the middle- income of the US. income tier but then stagnate. They get squeezed from below by intense Is India caught in the middle income competition from lower-cost competitors trap? while failing to transition to high-income Rathin Roy, a former member of Prime levels for a variety of reasons— Minister Narendra Modi’s economic especially a failure to build institutional, advisory council, has cautioned that India human and technological capital. runs the risk of getting caught in the middle-income trap. According to him, the country’s growth has mostly been driven by demand generated by the richest 100 million Indians. However, as this demand cannot keep growing infinitely, a failure to broaden the income base—and, therefore, the demand base or the market size—could act as a growth barrier, resulting in India slipping into a middle-income trap. Is India’s market too small?

Easy to PICK297 - “UPSC Monthly Magazine” Inequality is a barrier to the broadening  The net domestic product (NDP) equals the gross domestic product of the demand base in an economy. Even (GDP) minus depreciation on country capital goods. at $2.7 trillion, India’s GDP is relatively  NDP= GDP – Depreciation small—it’s about the size of California’s 3. Gross national product (GNP): GDP. China’s is over 4 times as large.  GNP is an estimate of the total value of The 2017 Economic Survey warned that all the final products and services produced in a given period by the four factors could hurt India: means of production owned by a country’s residents.  hyper-globalization repudiation,  thwarted/impeded structural transformation,  human capital regression due to technological progress, and  climate change-induced agricultural stress. Following are the measures of National Income: 1. Gross Domestic Product (GDP): 4. Gross National Income (GNI):  GDP is the final value of the goods and  Gross national income is a services produced within the measurement of a country’s geographic boundaries of a country income. It includes all the income during a year. earned by a country’s residents and  GDP growth rate is an important businesses, including those earned indicator of the economic performance abroad. of a country.  The gross domestic product (GDP) is  GNI measures all income of a one of the primary indicators used to country’s residents and businesses, gauge the health of a country’s regardless of where it’s produced. economy  In India, contributions to GDP are  Gross domestic product (GDP), on mainly divided into 3 broad sectors – the other hand, measures the agriculture and allied, industry and income of anyone within a service sector. country’s boundaries, regardless of who produces it. 2. Net domestic product (NDP): Difference between GNI and GNP  GNI measures income earned, including that from investments that flow back into the country. Gross National Product (GNP) includes the earnings from all assets owned by residents.  It even includes those that don’t flow back into the country.

Easy to PICK298 - “UPSC Monthly Magazine”  It then omits the earnings of all foreigners living in the country back to foreigners living in the country, their home countries). even if they spend it within the GNI (calculated from GNP) = GNP + country. (income spent by foreigners within the country) – (foreign income not remitted by Calculation of GNI and NNI: citizens). GNI (calculated from GDP) = GDP + Net National Income (NNI) = GNI- (income from citizens and businesses Depreciation= NDP+ (income from earned abroad) – (income remitted by citizens and businesses earned abroad) – (income remitted by foreigners living in the country back to their home countries).

Easy to PICK299 - “UPSC Monthly Magazine” Industry asks govt to boost private investments to kick-start growth Syllabus subtopic: Indian Economy and creating an effective and stable issues relating to planning, mobilization of business environment, time-bound resources, growth, development and decisions for augmenting ease of employment. business both at the central and state levels and fresh capital investment by Prelims and Mains focus: about the key the government towards takeaways from the meeting; suggestions infrastructure development. given by various stakeholders and their significance  They also stressed on the need to prevent predatory pricing and News: Prominent industrialists on dumping in India, facilitate research Thursday urged finance minister Nirmala and development in the country to Sitharaman to kick-start economic boost Make in India, and harness growth by encouraging private public-private partnership by investment, improving the regulatory leveraging social funding through a environment and increasing export new programme, as well as ensuring competitiveness. liquidity for NBFCs (non-bank financial companies) with focus on Context: rural economy, and ways to increase The finance minister is slated to present consumption in the economy. her second budget on 1 February amid expectations that she would announce  Decriminalizing various laws and fresh measures to reverse the current procedures would address the issue of economic downturn that has led to GDP trust deficit. This will be in line with growth hitting a six-and-a-half year low the principle that entrepreneurship is a at 4.5% in the September quarter. risky venture. Wilful defaulters should be dealt with firmly. However, in most Suggestions given by industrialists cases, the fine should be enough to  In a customary pre-budget deal with inadvertent non-compliance. consultation with Sitharaman and top Concerns raised by representatives of officials of the finance ministry, the trade organisations industrialists suggested ways to revive The Finance Minister on Thursday also the rural economy by boosting met representatives of trade unions and consumption. labour organizations as part of the pre-  The suggestions included ideas to budget consultations. improve the Insolvency and Bankruptcy Code with regard to the  The participants aired their concerns National Company Law Tribunal about provision of social security for and banks, faster merger, acquisition workers besides skilling, re-skilling, and demerger processes, and ways to and up-skilling of the labour force. reduce time for approval of foreign direct investment proposals.  They also emphasized on the quality  The industrialists also called for of job creation, the need to ensure structural changes in laws for minimum wages for workers in detail, and the need for streamlining various schemes for better results.

Easy to PICK300 - “UPSC Monthly Magazine” Rhinos to be re-introduced in Uttarakhand Syllabus subtopic: Conservation, thereby minimising conflict with environmental pollution and degradation, people. environmental impact assessment  Rhinos were once found in the Terai Prelims and Mains focus: About the grassland in the state and adjoining relocation plan; About Indian rhinos and areas but were wiped out by threat to their survival; WII poaching. The horn of a rhino is believed to be an aphrodisiac. Corbett News: The Uttarakhand State Wildlife is well protected and hence the rhinos Board has cleared a proposal by the will safely survive there. Wildlife Institute of India (WII) to introduce rhinoceroses in the Corbett  Experts say that each of the founding Tiger Reserve (CTR) to boost tourism population animals would be fitted and revive the habitats of species that with a GPS radio-collar. A team of survive on low-height grass. researchers would be allocated for monitoring their ranging patterns, Process foraging habits, demography and According to officials, around 10 rhinos habitat use. The Forest Department will be brought in CTR in the first phase would be responsible for the safety and subsequently, 10 more would be of these re-introduced rhinos. added. A proposal will be sent to the Researchers will share data with the Centre soon in this regard to transport department’s staff. rhinos from either Assam or West Bengal or both. The capture and  There are less challenges in re- translocation are likely to cost about Rs 15 introduction of rhinos. The animals lakh per individual animal. only have to be brought here. Food and water are available. Challenge ahead  Experts claim that protecting these  According to wildlife experts, rhinos reduce the size of elephant grass by rhinos from poaching will be the only eating it. This would mean that species challenge for the state’s forest that thrive on lower-height grass — department staff after the move. Hog Deer, Cheetal, Sambar and Swamp Deer, among others — would Why CTR was found suitable for also be encouraged. relocation  The geographical terrain and Significance of the move environmental conditions in CTR are  The rhino’s range was once continuous suitable for rhinos. across the flood plains of the Indus,  The ideal sites chosen in Corbett are Ganges and the Brahmaputra, but valley habitats bounded on either side today, it is limited to small by the lower Himalayas (north), fragmented pockets in India and Shivalik Hills (south) and the Nepal as a result of anthropogenic Ramganga Reservoir (east), which pressures. would also act as natural barriers to rhino movement outside these area,  Re-introduction into habitats in its historic range would not only create safety-net populations for the species but also restore their ecological role in these faunally-degraded habitats.