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Table of Contents

Economics ...................................................................................... 1

1. Why is the fiscal deficit widening? .................................................................................................................. 1

2. What is the lowdown on the Indian economy? .......................................................................................... 2

3. All you need to know about Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 2

4. FRDI Bill: clearing the air on the bail-in clause ................................................................................................ 6

5. GDP growth seen slowing to 4-year low of 6.5% in 2017- .................................................................... 7

6. Government schemes to reduce MMR .................................................................................................................... 7

7. FDI policy further liberalized in key sectors ......................................................................................................... 9

8. Bitcoin and beyond: What s driving cryptocurrencies, the global frenzy surrounding them

.......................................................................................................................................................................................................... 10

9. India s First agri-Options by National Commodity and Derivatives Exchange Limited ....... 13

10. International Workshop on Disaster Resilient Infrastructure (IWDRI) .......................................... 13

11. All you need to know about e-way bill ................................................................................................................... 14

12. Why did SEBI ban Price Waterhouse? ................................................................................................................... 16

13. National Investment and Infrastructure Fund (NIIF) makes its First Investment ................... 17

14. Govt. unveils Rs. 2.1 lakh crore bank recapitalisation plan ............................................................. 18

15. The oil risk — on the rise in international prices .......................................................................................... 20

16. UP farmers facing problems due to bumper potato production ..................................................... 21

17. India will need USD 4.5 trillion by 2040 for infrastructure: Report .................................................. 22

18. Cabinet approves signing of the Multilateral Convention to Implement Tax Treaty Related

Measures to Prevent Base Erosion and Profit Shifting by India ........................................................... 23

19. Govt. warns the public on investing in the crypto-currency .................................................................... 24

20. Registrar of Companies removed names of 2,26,166 defunct companies in 2017 ..................... 25

21. Amendment in companies act having bearing on working of the Insolvency and

Bankruptcy Code, 2016 (Code) ................................................................................................................................... 26

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22. State of Milk production ................................................................................................................................................. 26

23. GeM 3.0 launched ................................................................................................................................................................ 27

24. Return of long term capital gains tax spooks Sensex ......................................................................... 28

25. Deciphering LTCG tax on equity ................................................................................................................................ 28

26. Launch of Startupindia Ranking Framework .................................................................................................. 30

27. National Steel Policy ......................................................................................................................................................... 31

28. India Post Payments Bank (IPPB) to enable Digital Payments in Post Offices by April 2018

.......................................................................................................................................................................................................... 31

29. The lowdown on the MSP roadmap ........................................................................................................................ 33

30. Why the fuss about fiscal deficit? .............................................................................................................................. 34

31. Government of India makes Amendments in Small Savings Act .......................................................... 35

32. Governance reforms and recognition of losses are a must to solve the bad loans crisis ...... 37

33. Inside the Punjab National Bank fraud: What an LoU is, how case may impact the bank .. 38

34. Gem of a scam: On PNB fraud ..................................................................................................................................... 40

35. Why is the price control of stents essential? ........................................................................................... 41

36. Revival of Industrial activity ........................................................................................................................................ 43

37. Punjab National Bank fraud: How the system was gamed .............................................................. 44

38. Bank bureau stares at uncertain future ............................................................................................................... 48

39. Cloth, idea, brand: What is khadi, to whom does it belong? .................................................................... 50

40. WhatsApp Payments: Who will pay and who will gain? ............................................................................ 51

41. Cabinet approves New Bill to ban Unregulated Deposit Schemes and Chit Funds

(Amendment) Bill, 2018 ................................................................................................................................................. 52

42. Commercial coal mining opened for private sector .................................................................................... 56

43. SWIFT and bank fraud .................................................................................................................................................... 57

44. Aircel files for bankruptcy .............................................................................................................................. 59

45. Cabinet approves Fugitive Economic Offenders Bill, 2018 ............................................................... 59

46. Andhra Pradesh s new capital position ................................................................................................................ 61

47. E-way bill roll-out from April 1: Here is all you need to know .............................................................. 62

48. National Health Protection Scheme (NHPS) Analysis ........................................................................ 64







49. What was the 20:80 gold import scheme? ........................................................................................................... 65

50. Implication of RBI s ban on LoUs .............................................................................................................................. 66

51. RBI ban on LoU ..................................................................................................................................................................... 67

52. Is govt. turning a deaf ear to banks bureau? .................................................................................................... 68

53. Payment of Gratuity (Amendment) Bill, 2018 passed by Parliament ............................................... 69

54. Draft defence policy ............................................................................................................................................................... 70

55. SARAS Aajeevika Mela ...................................................................................................................................................... 71

56. India s Contribution to World s GDP ...................................................................................................................... 71

57. Falling investment in Indian bonds ............................................................................................................ 72

58. Payment of Gratuity (Amendment) Act, 2018 brought in force on 29th March, 2018.......... 73

59. Is India prepared for e-way bill? .................................................................................................................. 74

60. NIRF India Rankings 2018 ............................................................................................................................................ 75

61. All you need to know about the GST e-way bill system ............................................................................... 78

62. RBI switches back to GDP scale to measure economy ........................................................................ 80

63. Walmart and Amazon compete to acquire Flipkart .................................................................................... 81

64. Undermining of multilateral by US ......................................................................................................................... 81

65. India among the hardest hit by protectionism in G-20 club ................................................................... 82

66. 11 public sector banks put under RBI prompt corrective action framework .............................. 84

67. Should you exit your crypto holdings now? ......................................................................................................... 84

68. Which are the top sectors that generate employment in India? ........................................................... 86

69. Are dynamic bond funds worth buying? .............................................................................................................. 90

70. Government names Bhanu Pratap Sharma as new Banks Board Bureau chairman .............. 65

71. The lowdown on poor loan recovery .......................................................................................................... 91

72. Why India is on US currency monitoring list? ........................................................................................ 92

73. Cabinet approves Fugitive Economic Offenders Ordinance 2018 ................................................. 94

74. India s GDP to reach $5 trillion by 2025: World Bank ....................................................................... 95

75. What govt. can do to keep fuel prices under check .............................................................................. 95

76. TCS hits $100 billion market capitalization ........................................................................................... 96







77. India highest recipient of remittances ...................................................................................................... 97

78. Long term tax on equity made taxable ..................................................................................................... 98

79. Nabbing absconders: on Fugitive Economic Offenders Ordinance ............................................... 99

80. Economic freedom index: India ranks 130th, Hong Kong retains top spot ............................. 100

81. NITI Aayog to Open Applications for Atal New India Challenge ................................................. 101

82. Human Resource Development Ministry Launches Unnat Bharat Abhiyan 2.0 .................... 101

83. India signs loan agreement with World Bank for US$ 125 million for Innovate in India for

Inclusiveness Project ..................................................................................................................................... 102

84. Merging associate banks with the SBI .................................................................................................... 103

85. Van Dhan Scheme ............................................................................................................................................. 104

86. The rupee is sliding on account of rising oil prices and FII outflows ......................................... 105

87. Electricity reached all Indian villages ..................................................................................................... 106

88. The lowdown on rising fuel prices ............................................................................................................ 107

89. Why India s fuel prices are sky-high when oil isn t ............................................................................ 109

90. How every village got electricity and why that is still not enough ............................................. 110

91. Cabinet approves continuation of Umbrella Scheme Green Revolution — Krishonnati

Yojana in Agriculture Sector ................................................................................................................................... 111

92. Cabinet approves restructuring of Multi-sectoral Development Programme for its

continuation during remaining period of 14th Finance Commission as Pradhan Mantri Jan

Vikas Karyakram .............................................................................................................................................................. 114

93. Cabinet approves Doubling of Investment Limit for Senior Citizens from Rs. 7.5 lakh to

Rs.15 lakh under Pradhan Mantri Vaya Vandan Yojana (PMVVY) ............................................ 116

94. Regulating cryptocurrencies .................................................................................................................................... 116

95. Ministry fast-tracks security clearance for overseas investment proposals .............................. 117

96. Gram Swaraj Abhiyan evaluation ......................................................................................................................... 118

97. How far will aid for sugar go? ................................................................................................................................. 120

98. What matters in e-com ................................................................................................................................................. 122







99. Van Dhan Vikas Kendras ............................................................................................................................................. 123

100. India ranks 4th in Asia-Pacific on power index, pegged as giant of the future ............. 125

101. Price freeze: on high fuel prices ..................................................................................................................... 126

102. Committed to augmentation of Airport capacity through NABH (Nextgen Airports for

Bharat) ................................................................................................................................................................. 127

103. Walmart buys controlling stake in Flipkart for $16 billion ................................................... 127

104. What the Flipkart-Walmart deal means for e-commerce in India ...................................... 128

105. India to counter U.S. complaint on farm subsidies in WTO .................................................... 130

106. Why is the rupee in a free fall? ............................................................................................................ 130

107. The lowdown on Adopt a Heritage ................................................................................................. 132

108. The lowdown on the recent OALP round ........................................................................................ 133

109. Green Skill Development Programme ............................................................................................ 134

110. Atal Pension Yojana subscribers crosses 1 crore mark ............................................................ 135

111. Allahabad Bank CEO divested of powers ........................................................................................ 135

112. Cabinet approves Corpus for Micro Irrigation Fund with NABARD under Pradhan

Mantri Krishi Sinchayee Yojana ................................................................................................................. 136

113. Swachh rankings are out, Indore gets cleanest city tag .......................................................... 137

114. Making life easier for small savers: On the proposed Government Savings Promotion

Act ........................................................................................................................................................................... 138

115. Indore is India s cleanest city yet again. Just what is it doing right? ............................... 139

116. Why are crude oil prices going up? ................................................................................................... 141

117. Foreign investors cold to Permanent Residency Status scheme ........................................... 142

118. 4 reasons why UPI may overtake mobile wallets soon ............................................................. 144

119. Arunachal finds place on commercial aviation map ................................................................. 147







120. Union Agriculture Minister releases Model Agriculture Produce and Livestock Contract

Farming and Services (Promotion & Facilitation) Act, 2018 ........................................................ 147

121. What the rupee s fall means ................................................................................................................. 149

122. SEBI MF order spurs changes to schemes ...................................................................................... 151

123. National Digital Communications Policy (NDCP), 2018 .......................................................... 152

124. New norms for labelling packaged GM food ready .................................................................... 155

125. Kamaljit Bawa first Indian to receive Linnean Medal .............................................................. 156

126. Auto fuels under GST: Why there s a case for it, and one for caution, too ........................ 157

127. International Conference on the TRIPS CBD Linkage ............................................................... 158

128. Should Chanda Kochhar step down as ICICI Bank CEO? .......................................................... 159

129. Present position of Air India ............................................................................................................................. 161

130. How a comma in FDI policy let AirAsia fly .............................................................................................. 162

131. Government introduces new scheme SevaBhojYojna .............................................................. 163

132. New Benami Transactions Informants Reward Scheme, 2018 launched by the Income

Tax Department ................................................................................................................................................................ 163

133. Why are farmers not getting a fair price? ............................................................................................... 164

134. Mutual fund exit load, credit card dues now taxable under GST? ............................................ 165

135. Why is the MSCI mulling caps on emerging markets, including India? ................................ 166

136. The Zojila Tunnel: How it will boost winter economic activity in Ladakh ......................... 167

137. Achievements of Power Ministry during last 4 years ....................................................................... 169

138. What RBI s rate hike indicates ........................................................................................................................ 172

139. ICICI Bank s growing troubles ......................................................................................................................... 173

140. Bill Averting Ponzi schemes ................................................................................................................. 174

141. Global trade war ....................................................................................................................................... 175

142. What is the Karnataka farm loan waiver plea all about? ....................................................... 176

143. In Jharkhand, starvation and ration woes ..................................................................................... 178

144. Insolvency and Bankruptcy code (Amendment) Ordinance 2018 ....................................... 180







145. Four Years Achievements & Initiatives of the Ministry of Coal ............................................ 180

146. Shri J P Nadda highlights the achievements of the Health Ministry ................................... 181

147. Four-Year Achievements & Initiatives of the Ministry of Railways ..................................... 181

148. How likely US Federal Reserve rate hike could impact India ................................................ 182

149. Need for Bad banks .................................................................................................................................. 183

150. For stronger employee representation: On the amendments to the Major Port

Authorities Bill ................................................................................................................................................... 184

151. Solar Charkha Mission to be launched soon in 50 clusters ..................................................... 185

152. Evaluation of bailout scheme for sugarcane farmers ............................................................... 185

153. Assessing the Balance of Payments position ................................................................................. 186

154. Modi govt plans Pariwartan scheme for power sector revival ........................................... 190

155. How Nirav Modi continued to fly ....................................................................................................... 192

156. How India, US duties trade off ............................................................................................................. 194

157. Ministry of Women & Child Development receives the Best Performing Social Sector

Ministry SKOCH Award for its Achievements and Initiatives ........................................................ 197

158. Plans for new city ...................................................................................................................................... 197

159. Why is external debt a cause for worry? .......................................................................................... 198

160. India is the largest borrower from Asian Infrastructure Investment Bank .................... 199

161. Government proposes to set up 3000 Van Dhan Kendras involving 30,000 SHGs across

the country .......................................................................................................................................................... 200

162. Cabinet approves a Corpus to National Export Insurance Account Trust ....................... 201

163. RBI report warns that the worst on NPAs may be yet to come ............................................. 202

164. LIC planning to buy controlling stake in IDBI .............................................................................. 203

165. Sinking rupee .............................................................................................................................................................. 204

166. DISHA initiative) ...................................................................................................................................................... 205







167. Suresh Prabhu launches Mobile App 'ReUnite' ............................................................................ 206

168. Why are there protests over a highway? ......................................................................................... 206

169. RERA vs IBC: two laws that now ring fence homebuyers .............................................................. 208

170. How GST has performed? ..................................................................................................................................... 209

171. Modi govt raises MSP for paddy by Rs 200 a quintal ................................................................. 209

172. Stopping the rupee s free fall: Why this is happening and what the RBI is likely to do

....................................................................................................................................................................................................... 210

173. Boost to Higher Education: Revitalising Infrastructure and Systems in Higher

Education (RISE) by 2022 and Higher Education Financing Agency (HEFA) scope

expanded ............................................................................................................................................................................... 211

174. How the 1.5-times formula works out MSP ............................................................................................ 212

175. Reforms in Public Sector Banks have taken back seat: Viral Acharya .................................. 214

176. What are currency derivatives ....................................................................................................................... 216

177. Proposal for construction of break water harbour in Konkan) .................................................. 217

178. Why is there a row over Ayushman Bharat rates? ............................................................................ 217

179. Peak hour flights may get costlier ................................................................................................................ 219

180. Understanding inflation ......................................................................................................................... 220

181. Explaining the Fugitive Economic Offenders Ordinance ......................................................... 222

182. Shram Suvidha Portal ............................................................................................................................. 223

183. Samagra Shiksha Scheme ..................................................................................................................... 224

184. National Mission on Teachers Training ........................................................................................... 224

185. Why is the WTO facing challenges? .................................................................................................. 225

186. What is the GDP deflator? ..................................................................................................................... 226

187. Profit, losses, GNPAs of Public Sector Banks ................................................................................. 227

188. Report of Committee on Resolution of Stressed Assets suggests a Five-Pronged

Approach for Stressed Assets Resolution by the Banking Industry ............................................ 229

189. Banks agree to resolve stressed assets quickly ............................................................................ 230







190. Recent performance of Stock markets ............................................................................................. 231

191. Watchdogs and certifiers: why auditors are critical for listed companies ...................... 232

192. Why dairy is in crisis ................................................................................................................................ 234

193. National Skill Training Institute (NSTI) for Women in Mohali) ........................................... 237

194. The lowdown on GST rate cuts ............................................................................................................. 237





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Economics 1.Why is the fiscal deficit widening? The government s fiscal deficit up to November came in at 112% of the amount budgeted for the entire financial year ending in March, prompting a number of commentators to predict that the government would miss its target for the year. What does it mean? The government missing its fiscal deficit target for the year means that either the revenue it collected fell short of projections, or that its expenditure was higher than planned. The data from the Controller General of Accounts shows that the government s expenditure seems to be on track. That is, it has spent 68.9% of the amount budgeted for the year, with four months remaining. In other words, it has 31% of its budgeted expenditure left for the remaining 25% of the year. The revenue side, however, seems to be where the issue is, at only 53% of the full-year target. Looking deeper, the data shows that the government s non-tax revenue, at only 36.5% of the year s target, is lagging behind last year s performance, where it had earned 54.2% of that year s non-tax revenue target by November. Are there any other factors at play? A few days ago, the government announced that it would be borrowing an additional Rs. 50,000 crore during the remaining part of the financial year. While it was assumed that this would lead to a slippage in the fiscal deficit, the government was quick to explain that this would not happen. In its statement, it explained that the additional borrowing would be offset by trimming down the collections from its Treasury Bills. What is the government s view on this? Following the release of the October data, which showed the fiscal deficit at 96% of the full year s target, the Chief Statistician of India, TCA Anant, had said that there was no need to worry and that the fiscal deficit was bound to go up during the year before coming down again towards the end. The main reason for this, he said, was the fact that the government had brought forward the date for the presentation of the Budget. Because of this, the government has been able to smoothen out its expenditure across the year, with more being spent in the first half of the year than was previously possible. At the same time, the revenue profile of the government in terms of direct tax has remained more or less the same. Is a slippage such a bad thing? According to former Chief Statistician Pronab Sen, even a 0.5% slippage in the fiscal deficit would be okay as long as it is being driven by an increase in expenditure on developmental activities such as rural roads, irrigation, and low-cost housing.






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Even though ratings agency Moody s recently upgraded India, it did say that it would be tracking the fiscal situation, so any significant slippages could result in a downgrade in the future. (Adapted from the Hindu) 2.What is the lowdown on the Indian economy? What is it? Two economic decisions, namely demonetisation and the Goods and Services Tax, had major ramifications for almost all metrics of economic performance such as GDP growth, inflation, industrial production and exports. In the first three months of 2017 (the fourth quarter of the financial year 2016-17), GDP growth slowed to 6.1%. The rate dipped to 5.7% in the April-June quarter, but rebounded somewhat to 6.3% from July to September. How did it come about? Before the informal sector could recover from the impact of demonetisation, the government rolled out the GST, a major overhaul of the indirect tax regime, in July. Not only did the new system replace a number of indirect taxes, it also created a huge compliance burden on companies looking to file their returns under the GST. Just before the launch of the new tax regime, companies rushed to get rid of their existing stocks to avoid additional compliance burdens once the GST was in place. This meant very little new production in June. Thereafter, poor customer demand and a complex tax structure meant production never really recovered to its potential. Customers did not flock to markets during the festive season as in other years because a lot of their annual purchases were already made during the June de-stocking period, when companies had offered attractive discounts to incentivise sales. Inflation has mostly been spurred by fuel and food prices. Crude oil prices have remained around $50 a barrel throughout the year, rising to $54 in September, $56 in October, and $61 in November. What next? While the data suggest that the economy has recovered from the effects of demonetisation, the effects of the GST will likely last a little longer, according to analysts. (Adapted from the Hindu) 3. All you need to know about Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 Rationale for the Financial Resolution and Deposit Insurance Bill, 2017 There is no comprehensive and integrated legal framework for resolution, including liquidation, of financial firms in India presently.






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– The powers and responsibilities for resolution of financial services providers are given under multiple laws to regulators, Government and the Courts, which does not facilitate development of specialised resolution capabilities. Also, because of this dispersed role definition, resolution of financial conglomerates becomes difficult. – The resolution instruments presently available under the respective legislations are limited, and so is guidance on the process leading up to the resolution. For example, the Reserve Bank of India (RBI) is empowered to take certain resolution actions with respect to banks, branches of foreign banks in India, and cooperative banks. However, these resolution powers are quite limited. RBI can effect change in bank management, or impose moratorium and recommend mandatory mergers. In the case of a bank, typically either of the two methods of resolution has been used, that is, amalgamation or merger of a weak bank with another bank; or winding up of the bank. Other resolution instruments are not available. – The Central Government has the power to restructure public sector banks, and regional rural banks. Non-banking financial companies can be liquidated or wound up under law by High Courts only, either voluntarily or on the application of RBI. Resolution regimes for insurance companies, financial market infrastructure, and other financial services providers are also quite inadequate. The current resolution regime is especially inappropriate for private sector financial firms in the light of significant expansion of private financial firms and many of these acquiring systemically important status in India. The Insolvency and Bankruptcy Code, 2016 has introduced in the country a comprehensive resolution regime for mainly non-financial firms, but such a regime is not available in the country for financial firms. The Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill) will replace the existing resolution regime by providing a comprehensive resolution regime that will help ensure that, in the rare event of failure of a financial service provider, there is a system of quick, orderly and efficient resolution in favour of depositors. – The impact of failures of financial services providers is much wider and can have a systemic effect on the economy and financial stability of a country, unlike traditional insolvency, where the affected parties are mostly limited to the creditors of the insolvent entity. Since financial service providers handle consumer funds, some of them are critical for financial stability, and therefore, it is important to resolve failing financial service providers expeditiously through a specialised resolution process, as lengthy resolution proceedings can lead to losses for consumers, or instability in the financial system. – The FRDI Bill proposes to establish a Resolution Corporation and a comprehensive resolution regime to enable timely and orderly resolution of a failing financial firm. Such institutional framework for expeditious resolution of financial firms exists in most other comparable countries. Further, it is favourable for depositors if in case of bank failures, a bank is resolved rather than liquidated, because the depositors are expected to get a much higher value in resolution of the bank as a going concern than in liquidation.






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– It provides for detecting incipient insolvencies in financial firms by introducing a five-stage health classification of financial firms and stepping in to appropriately nurse a financial firm at the stage when its health becomes weak and it is classified in the category of material risk to viability, much before it is it is classified in the category of critical risk to viability when there might be no option but to resolve or liquidate the financial firm. – FRDI Bill also introduces a menu of resolution tools, including transfer of whole or parts of the assets and liabilities of a financial firm to another person, acquisition, merger or amalgamation, bridge service provider, and bail-in, and mandates recovery and resolution planning obligations to enable careful monitoring of risk to viability of a financial firm. – The FRDI Bill also transfers the deposit insurance functions from the Deposit Insurance and Credit Guarantee Corporation to the Resolution Corporation, targeting at an integrated approach to the depositor protection and resolution. Protection and enhancement of depositors rights under the FRDI Bill The FRDI Bill does not modify present protections to the depositors adversely at all. The FRDI Bill provides only additional protections to the depositors in a more transparent manner, the details of which are as follows. – At present, deposits with banks are insured upto Rs. 1 lakh. The similar protection would continue under the FRDI Bill and the Resolution Corporation is empowered to increase the deposit insurance amount. – The uninsured depositors, that is, beyond Rs. 1 lakh, of a banking company are treated on par with unsecured creditors under the present law and paid after preferential dues, including Government dues, in the event of its liquidation. As per the provisions of the FRDI Bill, the claims of uninsured depositors in the case of liquidation of a bank will be higher than those of the unsecured creditors and Government dues. Therefore, the rights of uninsured depositors will be better protected and such depositors will have an elevated status in the FRDI Bill compared to the existing legal arrangements. – Thus, the interests of depositors (both insured and uninsured) would be better protected under the FRDI Bill. Bail-in provision Indian Banks have adequate capital and are also under prudent regulation and supervision to ensure safety and soundness, as well as systemic stability. The existing laws ensure the integrity, security and safety of the banking system. In India, all possible steps and policy measures are taken to prevent the failure of banks and protection of interests of depositors (e.g. issue of directions/prompt corrective action measures, capital adequacy and prudential norms). Bail in has been proposed as one of the resolution tools in the event a financial firm is sought to be sustained by resolution. Certain misgivings have been expressed in the media, especially social media, regarding the depositor protection in the context of bail-in






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provisions of the FRDI Bill. These misgivings are entirely misplaced. The Government always stands ready to take care of the capital needs of the public sector banks. Bail-in amounts to liabilities holders bearing a part of the cost of resolution by reduction in their claims. Bail-in is only one of many resolution tools in the FRDI Bill; others are acquisition, merger and bridge service provider, and is to be used either singly or in combination with other tools. Bail in provision may not be required to be used in case of any specific resolution. Most certainly, it will not be used in case of a public sector bank as such a contingency is not likely to arise. Following formal safeguards have been built in the FRDI Bill pertaining to the appropriate use of bail-in, whereas the rights or interests of depositors can be, inter-alia, reduced in case of forced merger of a banking company with another bank under the present law without these explicit safeguards. – Insured deposits of banks can not be used in case of bail-in. – The Resolution Corporation will have the option to design an appropriate bail-in instrument, which will be subject to Government scrutiny and oversight of the Parliament. – Cancellation of the liability of the depositor beyond insured amount will be possible only with the prior consent of the depositor. On the other hand, in case of the forced mergers of banks under the Banking Regulation Act, 1949, the right of depositors of a merging bank (transferor bank) can be reduced and has been reduced, without the consent of depositors. – Bail-in power can be used in a judicious and reasonable manner only by the Resolution Corporation and it will have to ensure that all creditors, including uninsured depositors, get at least such value, which they would have received in the event of liquidation of a bank. In case of injudicious and unreasonable exercise of bail-in power by the Resolution Corporation, for example, where the depositors of a bank get less value than in liquidation, such affected depositors will have the right to get compensation from the Resolution Corporation on an order of the National Company Law Tribunal. The FRDI Bill does not prohibit the Government from extending support to banks The FRDI Bill does not propose in any way to limit the scope of powers for the Government to extend financing and resolution support to banks, including public sector banks. Government s implicit guarantee for solvency of public sector banks remains unaffected as the Government remains committed to adequately capitalise the public sector banks and improve their financial health. The Government is committed to protecting the existing protection to depositors and providing additional protection to them. Examination of the FRDI Bill by the Joint Committee of Parliament on FRDI Bill The FRDI Bill, introduced in the Lok Sabha on August 10, 2017, is presently under the consideration of the Joint Committee of the Parliament, which is consulting all the stakeholders on the provisions of the FRDI Bill. The Joint Committee of Parliament has been asked to submit their Report to the Parliament by the last day of the Budget Session, 2018.






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The Government is awaiting the recommendations of the Joint Committee of Parliament in regard to the FRDI Bill and would favourably consider the recommendations. (Adapted from PIB) 4. FRDI Bill: clearing the air on the bail-in clause Deposits up to Rs. 1 lakh are insured The government on Tuesday issued another clarification on the Financial Resolution and Deposit Insurance Bill in a bid to clear the air about the many misgivings about the proposed Bill s most notorious clause: the bail-in. What does the Bill seek to do? It is meant to consolidate all the various regulatory laws covering India s financial institutions. It also seeks to create a Resolution Corporation (RC) that will be in charge of winding down, reviving, or resolving in any other way an ailing financial company. As such, the Bill is to work in tandem with the Insolvency and Bankruptcy Code. To do this, one of the tools the RC will be empowered with is a bail-in, in which a bank s liabilities can be cancelled or modified to shore up its finances. This clause created a lot of alarm as many felt it would put depositors money in banks at risk. Are deposits at risk? The government said that under the current Deposit Insurance and Credit Guarantee Corporation Act, deposits up to Rs.1 lakh are insured. Under the FRDI Bill, the RC will be empowered to increase this limit to whatever it chooses. So, at least that much will be protected. Further, the government said that under the FRDI Bill, the claims of uninsured depositors (that is, beyond Rs. 1 lakh) would be given precedence over the claims of unsecured creditors and government dues. This is currently not the case. But what about the bail-in? The government has finally clarified that the bail-in clause will not be used for public sector banks (PSBs). It also reiterated its implicit guarantee of PSB solvency. In other words, it said that it stands ready to bail-out the PSBs if needed, removing the need for a bail-in. Equally important, the statement said that the cancellation of the liability of a depositor beyond the insured amount cannot take place without his or her prior consent. So, the bail-in clause can only be used in private banks, and that too only if the customers allow it. Is that all protecting depositors? No. The use of the bail-in clause by the RC will be subject to government scrutiny and parliamentary oversight. In the event of a bail-in, the RC will have to ensure that depositors get back at least as much money as they would have if the bank had been liquidated. (Adapted from the HINDU)






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5. GDP growth seen slowing to 4-year low of 6.5% in 2017-18 Economic growth is likely to be 6.5% this year. Reasons for fall in growth: 1.Gross value added, or GVA — which excludes taxes that feature in the GDP number — is projected to grow by 6.1%, slowing from a provisional 6.6% in 2016-17, as manufacturing and the agriculture, forestry and fishing components of GVA decelerate. 2.The key investment metric of gross fixed capital formation, though estimated to show faster growth, is expected to shrink in terms of proportion to GDP: to 29%, from 29.5% in the provisional estimates for 2016-17 and 30.9% in 2015-16.

Comparison with last year The Central Statistics Office (CSO) forecast that GDP growth in the current financial year ending March 31 will slow to a four-year low of 6.5%, from the provisional 7.1% pace seen in 2016-17, dragged down by deceleration in the agriculture and manufacturing sectors (Adapted from the Hindu) 6. Government schemes to reduce MMR As per the latest Registrar General of India- Sample Registration System (RGI-SRS) Report (Special Bulletin on Maternal Mortality in India 2011-13); the Maternal Mortality ratio(MMR) of India is 167 per 100,000 live births. What is MMR? The Maternal Mortality Ratio is a key performance indicator for efforts to improve the health and safety of mothers before, during, and after childbirth per country worldwide. Often referred to as MMR, it is the annual number of female deaths per 100,000 live births from any cause related to or aggravated by pregnancy or its management (excluding accidental or incidental causes). It is not to be confused with the Maternal Mortality Rate, which is the number of maternal deaths (direct and indirect) in a given period per 100,000 women of reproductive age during the same time period. The key schemes taken under the National Health Mission (NHM) are:






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1.Janani Suraksha Yojana aims to reduce maternal mortality among pregnant women and infant mortality by encouraging women to deliver in an institutionalized set-up such as hospitals. Under the scheme, cash assistance is provided to eligible pregnant women for giving birth in a government health facility. JSY is a 100% centrally sponsored scheme, and it integrates cash assistance with delivery and post-delivery care. The success of the scheme is determined by the increase in institutional delivery among the poor families. ASHA as well as anganwadi activists become the effective link between the government and poor women in this programme. The duties of ASHA or other health worker associated with JSY are as follows: 1.Identify pregnant women as a beneficiary of the scheme and report or facilitate registration for ante-natal checkup. 2.Provide and/or help the women in receiving at least three ante-natal checkups, including Tetanus injections . 3.Counsel for institutional delivery. 4.Escort the beneficiary women to the pre-determined health centre and stay with them till they are discharged. 5.Arrange immunization of the new-born till the age of 14 weeks. Cash assistance in LPS and HPS states The scheme focuses on poor pregnant women with special dispensation for states having low institutional delivery rates. While these states have been named low-performing states (LPS), the remaining states have been named high-performing states (HPS). The women who deliver in government hospitals, health centres, or even in accredited private hospitals are eligible for cash assistance, if they are above 19 years. In LPS states, cash assistance is provided for all women, whereas in HPS states, cash assistance is provided only for BPL women. Cash incentive is also given to ASHA/other health activists per delivery case facilitated by her. 2.Janani Shishu Suraksha Karyakaram (JSSK) has been launched on 1st June, 2011, which entitles all pregnant women delivering in public health institutions to absolutely free and no expense delivery including Caesarean section. The initiative stipulates free drugs, diagnostics, blood and diet, besides free transport from home to institution, between facilities in case of a referral and drop back home. Similar entitlements have been put in place for ante-natal and post–natal complications during pregnancy and all sick infants accessing public health institutions for treatment. 3.The Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA) has been launched by the Ministry of Health & Family Welfare (MoHFW), Government of India to provide fixed-day assured, comprehensive and quality antenatal care universally to all pregnant women on






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the 9th of every month. As part of the Abhiyan, a minimum package of antenatal care services would be provided to pregnant women in their 2nd / 3rd trimesters, by OBGY specialists/ Radiologist/ Physicians at government health facilities, with support from private sector doctors to supplement the efforts of the government. (Adapted from PIB and PrepMate-Cengage Economics Book, Chapter 7 Important Government Schemes) 7. FDI policy further liberalized in key sectors Role of FDI Foreign Direct Investment (FDI) is a major driver of economic growth and a source of non-debt finance for the economic development of the country. Government has put in place an investor friendly policy on FDI, under which FDI up to 100%, is permitted on the automatic route in most sectors/ activities. Measures undertaken by the Government have resulted in increased FDI inflows in to the country. During the year 2014-15, total FDI inflows received were US $ 45.15 billion as against US $ 36.05 billion in 2013-14. During 2015-16, country received total FDI of US $ 55.46 billion. In the financial year 2016-17, total FDI of US $ 60.08 billion has been received, which is an all-time high. Recent changes in FDI policy It has been felt that the country has potential to attract far more foreign investment which can be achieved by further liberalizing and simplifying the FDI regime. Accordingly, the Government has decided to introduce a number of amendments in the FDI Policy. Details: Government approval no longer required for FDI in Single Brand Retail Trading (SBRT) Prsent FDI policy on SBRT allows 49% FDI under automatic route, and FDI beyond 49% and up to 100% through Government approval route. It has now been decided to permit 100% FDI under automatic route for SBRT. Civil Aviation As per the extant policy, foreign airlines are allowed to invest under Government approval route in the capital of Indian companies operating air transport services, up to the limit of 49% of their paid-up capital. However, this provision was presently not applicable to Air India, thereby implying that foreign airlines could not invest in Air India. It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under approval route in Air India subject to the conditions that: 1. Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly






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2. Substantial ownership and effective control of Air India shall continue to be vested in Indian National. Power Exchanges Present policy provides for 49% FDI under automatic route in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. However, FII/FPI purchases were restricted to secondary market only. It has now been decided to do away with this provision, thereby allowing FIIs/FPIs to invest in Power Exchanges through primary market as well. Competent Authority for examining FDI proposals from countries of concern As per the existing procedures, FDI applications involving investments from Countries of Concern, requiring security clearance are to be processed by the Ministry of Home Affairs (MHA) for investments falling under automatic route sectors/activities, while cases pertaining to government approval route sectors/activities requiring security clearance are to be processed by the respective Administrative Ministries/Departments, as the case may be. It has now been decided that for investments in automatic route sectors, requiring approval only on the matter of investment being from country of concern, FDI applications would be processed by Department of Industrial Policy & Promotion (DIPP) for Government approval. Cases under the government approval route, also requiring security clearance with respect to countries of concern, will continue to be processed by concerned Administrative Department/Ministry. (Adapted from PIB and The Hindu) 8. Bitcoin and beyond: What s driving cryptocurrencies, the global frenzy surrounding them DMK MP Kanimozhi wanted to know in Rajya Sabha last week whether the government is considering to regulate cryptocurrencies such as Bitcoin and Ethereum, as India accounts for more than 11% of global cryptocurrency trade . Finance Minister Arun Jaitley replied that a Committee under the Chairmanship of Secretary, Department of Economic Affairs, is deliberating over all issues related to cryptocurrencies to propose specific actions to be taken, and that the Government does not consider cryptocurrencies to be legal tender . Bitcoin was one of biggest buzzwords of 2017, in India and in the world. Google s Year in Search report for 2017 showed How to buy Bitcoin in India and What is Bitcoin were among the year s top queries. The interest was fuelled by a spectacular rally that saw Bitcoin rise from under $ 1,000 at the beginning of the year to an all-time of high $ 19,000 in mid-December. What then, is Bitcoin? Who created it? In 2008, a paper titled Bitcoin: A Peer-to-Peer Electronic Cash System, appeared online via the Cryptography Mailing List. The author (or authors) of the paper identified himself as Satoshi Nakamoto, an identity that has never been confirmed. The paper came in the aftermath of the 2008 financial crisis, and stemmed from inherent trust problems that the






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crisis had laid bare in the traditional banking system. The first software version of Bitcoin client was released in 2009. The idea of cryptocurrencies is much older, having been around since 1998, when computer scientists like Wei Dai came up with the concept of virtual money that would be free from the control of central authorities, and would rely on computer encryption for transactions and creations. Bitcoin was the first implementation of this concept. Bitcoin is peer-to-peer based, and functions through a technology called Blockchain — a kind of open ledger that gets updated in real time. Each Bitcoin transaction on the network can be traced on this Blockchain; a new block is effectively added every time a transaction is made. Each node (computer) involved in the network helps to maintain this record. In effect, every single Bitcoin transaction that has taken place since the first one was created in 2009 is on record. Anyone who joins the Bitcoin network can crosscheck the transactions and help maintain these blocks. There is no one central network managing any of this. So, how does the Blockchain technology work? Computers on the Bitcoin network verify transactions on the Blockchain via the digital signatures that are attached to each transaction. For this, Bitcoin relies on what is known as elliptic curve cryptography — a form of encryption in which each digital signature has a public key and a private key attached. Therefore, when A makes a Bitcoin transfer to B, the transaction has A s digital signature, and A s corresponding public key is used to confirm this. Once this is confirmed, the transaction gets added to the chain. Each Bitcoin also has its own address. For users who might not necessarily be developers or on the network, there are software and wallets to keep track of the number of coins they have associated with their accounts. But how are new Bitcoins created in the network if no one authority is issuing them? In a decentralised network, all nodes in the network must work towards creating new coins. Bitcoin mining happens when computers on the network solve complex mathematical problems, and are rewarded with new coins. Nodes that are involved in updating the blockchain and verifying records can charge some transaction fee for carrying out these processes. The Bitcoin network assumes that most nodes in the network will stay honest. The network relies on CPU time and electricity to keep the system running. Can the Bitcoin blockchain be hacked? On the possibility of the network being overtaken by those with malicious intent, Satoshi Nakamoto said: The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction… The incentive may help encourage nodes to stay honest. If a greedy attacker is able to assemble more CPU power






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than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. Bitcoin relies on cryptographic hashes for validating each transaction. For anyone to hack it would mean reversing these cryptographic hashes, which is not possible without considerable CPU power and energy. Unless an organisation or country comes to control over 51% of the Bitcoin blockchain network, the system cannot be gamed. However, Bitcoins can be stolen from someone s wallet, although their records will still be available on the blockchain. But the inherent anonymity of the network means tracing stolen Bitcoins can be harder. On December 20, 2017, it was reported that a South Korean Bitcoin exchange, Youbit, had gone bankrupt after hackers stole nearly $ 35 million in digital currencies. Earlier that same month, hackers stole $ 60 million worth of Bitcoins from Slovenia-based Nicehash. Can you buy Bitcoins in India? Platforms like ZebPay, CoinDelta, CoinSecure, etc., trade in Bitcoins, and you would have to pay rupees in exchange for Bitcoins. The legal status of bitcoin varies widely across the world, and is sometimes undefined or fluid. Some countries — like Japan — have recognised Bitcoin exchanges as legal. India does not specifically ban Bitcoin trading, but has repeatedly warned the public against cryptocurrencies. The Reserve Bank of India has so far issued three press releases — on December 5, 2017, February 1, 2017, and December 24, 2013 — cautioning users, holders and traders of Virtual Currencies (VCs) including Bitcoins regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with such VCs , and clarifying that it has not given any licence/authorisation to any entity/company to operate such schemes or deal with Bitcoin or any VC . On December 29 last year, days before the Finance Minister s statement in Parliament, the Finance Ministry issued a clear and detailed warning against VCs including Bitcoin , likening them to ponzi schemes , and underlining that those who deal with these VCs (will be doing so) entirely at their risk . Of course, the very founding principle of Bitcoin, and other virtual currencies, is that it does not seek or desire a licence from, or the approval of, any national government or central banking authority. So where is Bitcoin headed? Can a day come when it will actually dominate our lives? Cryptocurrencies like Bitcoin or Ethereum (which was near $ 1,200 in the first week of 2018) represent a powerful idea. But they are not widely accepted yet. They have been used in crime, drug-dealing and other illegal activities on the dark web. Reports of hackings at several exchanges have exposed the risks attached to such investments. The number of Bitcoins that can be mined is 21 million, according to the official Bitcoin.org website. The intense volatility of Bitcoin, in stark evidence last month, makes it an unacceptably risky investment for many — a point that the Finance Ministry made strongly. On






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December 8, Bitcoin stood at $ 16,000-plus, but had tumbled to under $ 14,500 the very next day. On December 19, it had risen to an all-time high of $ 19,000-plus, only to plunge dramatically to $ 12,000 on December 30. But it climbed again, and traded at $ 17,000 levels in the first week of this year. On Tuesday evening at the Indian exchange ZebPay, buy and sell prices of one Bitcoin unit were fluctuating between Rs 10.5 lakh and Rs 11 lakh. For most though, more than Bitcoin, it is blockchain, the core technology on which the cryptocurrency is built, that is really exciting. A decentralised ledger that could replace everything from property transactions to bank records, might just be the future, argue technologists. The question, though, is if — and when. (Adapted from the Indian Express) 9. India s First agri-Options by National Commodity and Derivatives Exchange Limited (NCDEX) The Union Finance & Corporate Affairs Minister launched the country s First Agri-commodity Options. In an effort to make the agri-economy more efficient and bring huge amount of value for the farmers of India, the National Commodity and Derivatives Exchange Limited (NCDEX), is launching the country s First agri-commodity Options in Guar Seed. NCDEX Guar seed options is an important hedging tool. What are Options? Options are further of two types: Call option is an option to purchase a particular commodity or share at a pre-decided price on a future date, on payment of a premium to enter into an agreement. The purchaser of a call option has the option to purchase. The purchaser will exercise the option only if he/she can purchase the asset at a lower price than the prevalent market price on the pre-decided future date. Put option is an option to sell the commodity or share at a pre-determined price on a future date, on payment of a premium. The purchaser of put option has the option to sell. The purchaser will exercise the option only if he/she can sell the asset at a higher price than the prevalent market price on the pre-decided future date. (Adapted from PIB and Background from PrepMate-Cengage Economics Book, Chapter 9 Financial Market) 10. International Workshop on Disaster Resilient Infrastructure (IWDRI) The Union Home Minister Shri Rajnath Singh inaugurated the International Workshop on Disaster Resilient Infrastructure (IWDRI) in New Delhi. The two-day workshop is being






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organised by the National Disaster Management Authority (NDMA) in collaboration with United Nations Office for Disaster Risk Reduction (UNISDR). India s commitment towards global cooperation on Disaster Risk Reduction Reiterating India s commitment towards building resilience and strengthening global cooperation, Shri Rajnath Singh talked about the Prime Minister s 10-point agenda, outlined during the Asian Ministerial Conference on Disaster Risk Reduction (AMCDRR) held in New Delhi in November 2016. At that conference, our Prime Minister outlined a ten-point agenda to give a sense of urgency to the implementation of Sendai Framework for DRR. His 1st point emphasized the need for investing in infrastructure in a manner so that it can withstand hazards not only now but also in the future, he said. Need for robust infrastructure The Union Home Minister said robust infrastructure will be at the core of sustainable development in the coming decades; this is also recognized in the way the (United Nations ) Sustainable Development Goals have been framed. The infrastructure that we will build in the next twenty years will be more than what we built over the last two thousand years. At the global level, by 2040, to adequately meet the infrastructure needs of humanity, we will need nearly $100 trillion. By 2030, Asia alone will need $26 trillion in infrastructure investment, he said. Who all are participating in the conference? Experts from about 23 countries, multilateral development banks, the United Nations, the private sector, academia and other stakeholders are participating in the workshop. Deliberations at the workshop will take the dialogue on Disaster Resilient Infrastructure and global cooperation further. It will also help foster a sustained dialogue and mutual exchange of experiences, lessons and solutions. (Adapted from PIB) 11. All you need to know about e-way bill The e-way bill system, now being tried out by 10 states, becomes mandatory from February What is an e-way bill? An electronic way bill or e-way bill system offers the technological framework to track intra-state as well as inter-state movements of goods of value exceeding Rs 50,000, for sales beyond 10 km in the new Goods and Services Tax (GST) regime. Under the e-way bill system, there will be no need for a separate transit pass for every state — one e-way bill will be valid throughout the country for the movement of goods. According to notified e-way bill rules, every registered supplier will require prior online registration on the e-way bill portal for the movement of these goods. The rules also specify that the permits would be valid for one day for the movement of goods for 100 km, and in the same proportion for following days. Tax officials will have the power to scrutinise the e-way bill at any point during transit to check tax evasion.






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Any supplier/recipient/transporter can generate an e-way bill. Once this is generated, there will be no need to fill the requisite information in the GST return, as there will be an automated filing of GSTR-1 (which records the details of sales made by a seller to a buyer). A unique e-way bill number (EBN) as well as a QR code will be generated for tracking. Digital facilities via SMS/Android apps will also be provided for the generation of e-way bills. The National Informatics Centre (NIC) has developed a separate portal for the e-way bill. When will it be implemented? The e-way bill provisions were approved by the GST Council chaired by Finance Minister Arun jaitley at a meeting on August 5, 2017, and notified on August 30. The e-way bill notification did not specify a rollout date. Government officials said that the e-way bill system was expected to be implemented from October 1, but that timeline was not enforced. At its 22nd meeting on October 6 last year, the GST Council decided to defer the implementation of the e-way bill. Concerns over the functioning of the GST Network portal were at the core of the deferment. On October 6, Jaitley had said that the system would be introduced in a staggered manner with effect from January 1, 2018, and rolled out nationwide with effect from April 1. With the slippage in October s GST revenue falling below the projected monthly target of Rs 91,000 crore at Rs 83,346 crore (as on November 27), the Centre and states huddled in December to discuss ways to plug loopholes that enabled tax evasion. The GST Council met on December 16 to approve early implementation of the e-way bill system and decided on rolling out the system on a voluntary basis for use by trade and transporters from January 16. The Council also approved February 1, 2018 as the date for mandatory e-way bill rollout for inter-state movement of goods, as against the earlier proposed April 1 deadline. It approved June 1 as the deadline for both inter-state and intra-state movement of goods. States have the option to choose their own deadlines for the implementation of the e-way bill for intra-state movement of goods before June 1, 2018. What is the current status at the state-level over the e-way bill? Ten states have started trial runs of the e-way bill system. Karnataka implemented the system in September 2017, followed by Rajasthan, Uttarakhand and Kerala. Six more states - Haryana, Bihar, Maharashtra, Gujarat, Sikkim and Jharkhand — started trial runs for e-way bills on Tuesday. Do any exemptions apply to e-way bills? The GST Council exempted 154 items of common use, such as meat, fish, curd, vegetables and some cereals, human blood, LPG for households and kerosene for the Public Distribution System (PDS). The system will not be applicable on goods being transported by non-motorised conveyance, and where goods are transported from the port, airport, air






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cargo complex and land Customs stations to an inland container depot or a container freight station for Customs clearance. Are there concerns from industry? Trade and industry have raised concerns about the system being a possible route for the re-emergence of supply chain bottlenecks, and discretionary power to tax officials. The industry views the e-way bill as a system that will check tax evasion to some extent, but may not be able to stop it completely. Also, it adds another layer of compliances for GST payers and, in case of technical glitches, may result in supply chain bottlenecks. The government has highlighted the powers provided to transporters in the e-way bill rules to report detention of vehicles beyond 30 minutes on the portal. Also, the e-way bill rules facilitate online reporting of inspection and verification of documents. (News Adapted from The Indian Express) 12. Why did SEBI ban Price Waterhouse? What led to decision? In January 2009, Satyam Computer Services chairman B. Ramalinga Raju wrote a letter admitting that the company s balance sheet was fudged and included inflated and non-existent cash and bank balances. Price Waterhouse (PW) was the auditor. Satyam Computer Services was later acquired by Tech Mahindra. The letter led to the Securities and Exchange Board of India (SEBI) initiating an investigation. Price Waterhouse, among the top four consultancy and audit firms known as the Big Four in industry parlance, was issued the first show cause notice in February 2009. On January 10 this year, nine years after the fraud came to light, the capital market regulator issued a 108-page order, barring Price Waterhouse from auditing any Indian-listed company for two years. Further, the regulator directed the firm and its two former partners, S. Gopalakrishnan and Srinivas Talluri, to pay up Rs.13.09 crore along with 12% interest a year since January 2009. How did the audit go wrong? While Mr. Gopalakrishnan signed the Satyam accounts between April 2000 and March 2007, Mr. Talluri did it between April 2007 and September 2008. According to the regulator, Price Waterhouse based its audit on documents (such as bank account statements and fixed deposits) sourced from the company without trying to get direct confirmation from the banks. The regulator felt that if the auditor had sought confirmation from the banks, the accounting fraud could have been unearthed much earlier. A common investor s reliance on the audit certifications of Satyam Computers at the relevant point of






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time was dependent on the fact that it was attested by one of the internationally reputed firms called Price Waterhouse. The public had no reason to believe that the audit reports were false and misleading, the SEBI order said. The impact of accounting frauds is far more adverse in dimension that the investors feel

cheated on realising that they were led along the garden path all along. It strikes at the very root of the regulatory fabric which ensures protection of their interest and secures market integrity, the order said. What is Price Waterhouse s record? SEBI is not the first regulator to act against Price Waterhouse in the Satyam matter. The order by the Indian regulator comes almost seven years after the U.S. Securities and Exchange Commission (SEC) agreed to a $6 million settlement over charges against the Indian affiliates of Price Waterhouse related to deficient auditing of Satyam. Incidentally, in 2011, it was the then largest-ever penalty levied on a foreign-based accounting firm in an SEC enforcement action. The Price Waterhouse affiliates had also agreed to refrain from accepting any U.S.-based clients for six months and revise audit policies and procedures. In a related development, Satyam Computer also agreed to settle fraud charges by paying $10 million in penalty and undertake a series of internal reforms. What happens now? Price Waterhouse has filed an appeal against the SEBI order at the Securities Appellate Tribunal (SAT), which heard the matter on Friday, but refused to stay the two-year ban. It, however, allowed it to continue servicing clients whose financial year started on January 1, 2018. The tribunal has posted the matter for February. If Price Waterhouse loses its appeal, it can file a writ petition in the High Court on the grounds that the capital market regulator exercised jurisdiction beyond its powers. Incidentally, the auditing major has appealed to the SAT on similar grounds. In the past, during the investigation and in a petition filed at the Bombay High Court, Price Waterhouse said SEBI did not have the power to act against auditors since auditing firms were regulated by the Institute of Chartered Accountants of India (ICAI). Price Waterhouse said in a statement that it was disappointed with the findings of the SEBI investigations and the adjudication order and the order relates to a fraud that took place nearly a decade ago in which we played no part and had no knowledge of. It said it was confident of getting a stay… (Adapted from The Hindu) 13. National Investment and Infrastructure Fund (NIIF) makes its First Investment National Investment and Infrastructure Fund (NIIF) has made its First investment today. NIIF has partnered with DP World to create an investment platform for ports, terminals, transportation and logistics businesses in India. The platform will invest in opportunities in the ports sector, and beyond sea ports into areas such as river ports and transportation,






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freight corridors, port-led special economic zones, inland container terminals, and logistics infrastructure including cold storage. Source of funds The first close of the NIIF Master Fund took place on October, 16, 2017 with contributions from a subsidiary of Abu Dhabi Investment Authority (ADIA) and four Domestic Institutional Investors (DIIs), viz., HDFC Group, ICICI Bank, Kotak Mahindra Life and Axis Bank. India-UK Green Growth Equity Fund (GGEF) An India-UK Green Growth Equity Fund (GGEF) is also being set-up under the fund of funds vertical of NIIF, and shall have anchor commitments 120 million each from Government of India (through NIIF) and Government of UK. About NIIF The NIIF is being operationalized by establishing three Alternative Investment Funds (AIFs) under the SEBI Regulations. The proposed corpus of NIIF is Rs. 40,000 Crores (around USD 6 Billion). GOI s contribution to the AIFs under the NIIF scheme shall be 49% of the total commitment. NIIF has mandate to solicit equity participation from strategic anchor partners, like overseas sovereign/quasi-sovereign/multilateral/bilateral investors. Objective NIIF is a fund created by the Government of India for enhancing infrastructure financing in the country. The objective of NIIF is to maximize economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. It could also consider other nationally important projects, for example, in manufacturing, if commercially viable. Functions of NIIF The functions of NIIF are as follows: 1.Fund raising 2.Servicing of the investors of NIIF. 3.Considering and approving candidate companies/institutions/ projects (including state entities) for investments and periodic monitoring of investments. 4.Investing in the corpus created by Asset Management Companies (AMCs) for investing in private equity. 5.Preparing a shelf of infrastructure projects and providing advisory services. (Adapted from Pib) 14. Govt. unveils Rs. 2.1 lakh crore bank recapitalization plan






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Details of recapitalisation plan The Government of India today unveiled details of the re-capitalisation of Public Sector Banks (PSBs) announced in October, 2017.The capital infusion plan for 2017-18 includes Rs.80,000 crore through Recap Bonds and Rs.8,139 crore as budgetary support. This plan addresses regulatory capital requirement of all PSBs and provides a significant amount towards growth capital for increasing lending to the economy. Recapitalisation along with reforms in functioning of banks The recap would be accompanied by a strong reforms package across six themes incorporating 30 action points. The reforms agenda is based on the recommendations made at the PSB Manthan held in November, 2017 involving senior management of PSBs and representatives from Government. The reform agenda is aimed at EASE – Enhanced Access and Service Excellence, focusing on six themes of customer responsiveness, responsible banking, credit off take, PSBs as Udyami Mitra, deepening financial inclusion & digitalisation and developing personnel for brand PSB. The overarching framework for the reforms agenda is Responsive and Responsible PSBs .






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Capital infusion by the Government is contingent on performance of PSBs on the reform. Whole Time Directors of PSBs would be assigned theme wise reforms for implementation. Their performance in this regard would be evaluated by the bank Board. A survey by an independent agency in respect of EASE would be conducted to measure public perception about improvements in access and service quality. Results of the survey shall be made public each year. Taken together, the recap & reform agenda is sharply focused on strengthening PSBs, increasing lending to MSMEs and making it easier for MSMEs and retail customers to transact as well as significantly increasing access to banking services. It includes a commitment to banking services within 5 kms of every village, refund within 10 days of any unauthorised debit in electronic transactions, a mobile App for locating banking outlets and a mobile ATM in every underserved district. (Adapted from Pib and The Hindu) 15. The oil risk — on the rise in international prices Why India should worry about international oil prices? As international oil prices head higher, India will have to brace itself for the economic risks of expensive energy. Brent crude oil futures are trading at about $70 a barrel, marking a four-year high and a price increase of close to 6% since the start of the year. The rise in international prices has been particularly sharp given that oil had been selling at below $45 in June. This is a rally of about 55% in a matter of just months. What is the reason for recent oil prices? Oil price dynamics have often been explained by changes in the supply outlook influenced by the decisions of major oil producers. Oil trading at $70 should offer some respite to traditional oil producers like the OPEC members, which have suffered the onslaught of U.S. shale producers. According to the IMF, last year, for instance, Saudi Arabia would break even on its budget with oil at $70. The recent spurt in oil prices, however, seems to be more the result of a weakening of the U.S. dollar than anything else. The dollar has been gradually weakening against major global currencies since the beginning of last year. Impact on Indian consumers Consumers in India are already beginning to feel the pinch as petrol and diesel prices have hit multi-year highs. The retail selling price of both petrol and diesel in Delhi, for instance, has risen by close to Rs.3 a litre since the beginning of 2018. What should government do? It should work towards rationalising taxes on petrol and diesel to bring down retail prices. This will help consumers without imposing an undue burden on the oil marketing companies.






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An even bigger risk posed by higher oil prices is to the government s fiscal management. With the fiscal windfall from low oil prices likely to end for now, the government should think for the long term and make crucial tweaks to its hydrocarbon exploration and licensing policy to expedite oil discovery and production. Simultaneously, it must take a leaf from China s book and actively support Indian energy firms bids for overseas oilfields. Self-reliance is ultimately the best hedge. (News Adapted from The Hindu) 16. UP farmers facing problems due to bumper potato production Potato farmers in Uttar Pradesh have a twin crisis on their hands — they brought in a record production of the crop but that has led to a slump in rates. What happened? On January 6, several quintals of potatoes were found strewn outside the Uttar Pradesh Assembly as well as near the Chief Minister s residence, in what appeared to be a mark of protest by distressed farmers. The BJP government dismissed the incident as a politically motivated conspiracy and filed an FIR against unknown persons. It also suspended five policemen for negligence. A few days later, the police arrested two persons linked to the Samajwadi Party from Kannauj on charges of conspiracy. However, the entire fiasco brought the much-needed focus on the dilemma faced by potato farmers. Why have prices fallen? Uttar Pradesh is the largest producer of potatoes in the country and in the 2016-17 season, it broke the previous records, growing 155 lakh metric tonnes. A record 120 lakh tonnes was also stored in the 1,708 cold storages in the State. But rather than bringing cheer, the bumper crop led to a fall in prices. The newly elected Yogi Adityanath government stepped in to launch a market intervention scheme in April, under which one lakh tonnes of potatoes would be purchased from growers at the minimum support price of Rs. 487 a quintal. However, farmers are not satisfied. What are the problems faced by farmers? The grievances of farmers revolve around high input costs and low and unpredictable rates. First, farmers say the minimum support rate set by the government is too low; the cost of growing a quintal of potato, including expenditure on transport and cold storage rent, comes up to Rs. 800-900. They are demanding that the minimum support price be increased to Rs. 1,000. Second, farmers claim the government did not actively purchase their produce as promised.






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Even in cases where the State purchased the potatoes, the farmers complained that the purpose was counter-productive due to the grading system, under which only the best quality was selected by government agencies. The bulk of average-poor quality potatoes was left with the farmers, who had the option of selling it in the market and dumping the rest in cold storages. Horticulture Department Director S.K. Joshi, however, says the State purchased 12,937 tonnes from farmers during April-May, causing the market price to increase by Rs. 100 a quintal. Where to store the excess? The new produce from 2017 is already in the market even as cold storages are still flush with last year s yield. Already bearing the loss of the input costs, farmers are faced with the dilemma of letting their produce rot in the storages or attempt to sell the old produce at throwaway prices in markets, while competing with the new potato. Many farmers chose to let their produce rot in the cold storages or threw them in their fields for cattle to eat, as the costs of transporting them to the market to sell at low prices was unfeasible. As farmers are unable to repay the cold storage rents, they too face losses as they have to incur operational costs. Authorities, however, say the potatoes being dumped by farmers are the rotting old stock, which would have been cleared from the cold storages sooner or later. What happens next? The State has sent a proposal to the Centre for purchasing 2 lakh tonnes from farmers under the market intervention scheme for the new season. Once the Centre approves the rates proposed by the State, the Horticulture Department will start buying potatoes from farmers in districts where rates are lower than the minimum support price. Last year, purchasing was done in 41 districts. Potatoes for the new season are still being dug out and the situation will be clear by February-end. (Adapted from The Hindu) 17. India will need USD 4.5 trillion by 2040 for infrastructure: Report Investment required for infrastructure development India will need investments to the tune of around USD 4.5 trillion till 2040 to develop infrastructure to improve economic growth and community wellbeing, said Global Infrastructure Hub today. According to its report Global Infrastructure Outlook , India has an infrastructure investment need of USD 4.5 trillion by 2040, making it the second largest infrastructure market in Asia after China. The firm, which conducted an intensive study of 50 countries and seven industry sectors, found out that by 2040, the global population will grow by almost two billion people a 25 pet cent increase.






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Infrastructure for SDGs In absolute terms, the total investment needed to meet the SDGs is greatest in India a total of USD 1.3 trillion of investment is needed by 2030, more than China, which is USD 257 billion, the report said. What is Global Infrastructure Hub? What is the GI Hub? Launched by the G20 in 2014, the Global Infrastructure Hub has a mandate to grow the global pipeline of quality, bankable infrastructure projects. (Adapted from The Hindu) 18. Cabinet approves signing of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting by India The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. Background In June 2017, over 70 Ministers and other high-level representatives participated in the signing ceremony of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. Base erosion and profit shifting (BEPS) Base Erosion and Profit Shifting refers to tax avoidance strategies that make use of the gaps in the tax rules of a particular country to shift profit to countries having low or no-tax policies, resulting in little or no overall corporate tax being paid. In other words, it is a technique used by multinational companies by stating low profits in high tax countries and high profits in low tax countries irrespective of the actual economic activity undertaken. BEPS is also called Transfer Pricing. Let us consider an example to understand this. Some countries have an aggressive tax structure (such as in India), while some may have a soft tax structure (such as Cayman Islands). India is one of the potential markets for a multi-national company (MNC) and thus, there is an immense opportunity to make profits. However, the aggressive tax policy would eat large amount of profits. To avoid high taxes in India, MNC sets up a subsidiary in the tax haven. For example, say a parent company, XYZ Inc, sets up a subsidiary in Cayman Islands. Now, the parent company imports stationery, to be used in their office at India, from this subsidiary company at exorbitant prices. During this transaction, the XYZ Inc s profits are






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significantly reduced. Thus, XYZ Inc will pay lower taxes in India. Such transactions erode the tax base in India. As a result, this is called tax base erosion. On the other hand, the subsidiary has gained more profits. This is known as profit shifting. But, due to very soft tax structure, the subsidiary will pay lesser taxes in Cayman Islands. Tax havens Tax haven is a legal jurisdiction that offers foreign individuals and organisations 1.a minimal tax liability 2.politically and economically stable environment for investments 3.secrecy of financial information i.e. financial information is not shared with foreign tax authorities. Tax havens do not require individuals to reside in or businesses to operate out of their countries to benefit from local tax policies. In other words, tax havens aren t tax havens just because they have low taxes—rather, what makes a tax haven is its opacity of financial information. This is why tax havens are often more accurately referred to as secrecy jurisdictions . Tax havens allow their banks, companies, trusts, or other financial actors to accept money from anywhere without reporting it to the authorities in the country where it originates or from which it is controlled. In some cases, it is actually illegal to disclose that information, but in many places, it is simply because the banks or other entities aren t required to disclose it and there is no mechanism to force them to do so. What do Tax Havens get? Tax haven countries benefit by drawing capital to their banks and financial institutions, which can form the foundation of a thriving financial sector. The list of tax haven countries includes Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, Hong Kong, The Isle of Man, Mauritius, Lichtenstein, Monaco, Panama, and St. Kitts and Nevis. (Background from PrepMate- Cengage Economics Book Chapter 18, page 262) 19. Govt. warns the public on investing in the crypto-currency Why Bitcoin became a cause of concern for the government? The price of bitcoin, the most popular of all cryptocurrencies, not only shot up by well over 1000% over the course of the last year but also fluctuated wildly. One of the main reasons for this volatility is speculation and the entry into the market of a large number of people lured by the prospect of quick and easy profits.






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The government s caution comes on top of three warnings issued by the Reserve Bank of India since 2013. 1. Investment in bitcoin and other cryptocurrencies increased tremendously in India over the past year, but most new users know close to nothing of the technology, or how to verify the genuineness of a particular cryptocurrency. 2. A number of investors, daunted by the high price of bitcoin, have put their money into less well-established and often spurious cryptocurrencies, only to lose it all. Even some private cryptocurrency operators in India have gone on record saying that as many as 90% of the currencies are scams. 3. The use value of cryptocurrencies — both as a medium of exchange and as a store of value — is still being explored. International Response to the hype of crypto-currencies: Countries like South Korea and the U.S. are intensifying regulatory scrutiny of the market. 1. South Korea, where bitcoin became something of a craze, recently proposed legislation to either heavily regulate exchanges or ban them. 2. In the U.S., in November, a court ordered a popular cryptocurrency platform to hand over information related to 14,000 accounts to the Internal Revenue Service, undermining the anonymity the digital currencies offer. (Adapted from the Hindu) 20. Registrar of Companies removed names of 2,26,166 defunct companies in 2017 The Government has initiated campaign against black money, wilful defaulters and erring directors. There are a number of registered companies that are facing action from authorities after the demonetisation. Action taken by registrar of companies Prior to demonetisation, 16,08,637 number of companies stood registered. After demonetisation, the Registrars of Companies (RoCs) has identified 2.97 lakh companies during 2017-18 which were not filing their Financial Statements or Annual Returns for a continuous period of two or more financial years and, prima facie, were not conducting any business or in operation. Out of such identified companies, ROCs has removed the names of 2,26,166 companies as on 19.12.2017 from the register of companies by following the due procedure under the Companies Act, 2013. Further, based on information received from various banks, the Central Government has ordered investigations into the true ownership of 68 such companies, which have deposited Rs. 25 crores or more in Bank Accounts and withdrew in an exceptional manner post demonetisation. The investigations are underway.






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As of now, the Government has identified 3,09,619 directors as disqualified u/s 164(2)(a) of the Companies Act, 2013 pertaining to companies for which Financial Statements or Annual Returns have not been filed for a continuous period of three Financial Years. (Adapted from pib) 21. Amendment in companies act having bearing on working of the Insolvency and Bankruptcy Code, 2016 (Code) The Central Government notified the Companies (Amendment) Act, 2017 (Amendment Act) on 3rd January, 2018. The provisions of this Amendment Act shall come into force on the date or dates as the Central Government may appoint by notification(s) in the Official Gazette. A few provisions in the Amendment Act have important bearing on the working of the Insolvency and Bankruptcy Code, 2016 (Code). Provision of issuing shares to creditors at discount Section 53 of the Companies Act, 2013 prohibited issuance of shares at a discount. The Amendment Act now allows companies to issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan such as resolution plan under the Code or debt restructuring scheme. Approval of creditors for paying managerial remuneration in excess of 11% of profits in case of default Section 197 of the Companies Act, 2013 required approval of the company in a general meeting for payment of managerial remuneration in excess of 11 percent of the net profits. The Amendment Act now requires that where a company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, for such payment of managerial remuneration shall be obtained by the company before obtaining the approval in the general meeting. Restrictions on registered valuer in case of interest in company Section 247 of the Companies Act, 2013 prohibited a registered valuer from undertaking valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets. The Amendment Act now prohibits a registered valuer from undertaking valuation of any asset in which he has direct or indirect interest or becomes so interested at any time during three years prior to his appointment as valuer or three years after valuation of assets was conducted by him. (News Adapted from PIB) 22. State of Milk production Important facts






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1.Milk production was around 17-22 million tonnes in the 1960s, increased to 165.4 million tonnes in 2016-17. Particularly, it increased by 20.12% during the year 2016-17 in comparison to 2013-14. 2.Per capita availability of milk increased from 307 grams in 2013-14 to 355 grams in 2016-17, registering a growth of 15.6%. 3.Income of Dairy farmers grew by 23.77% during the period 2014-17 in comparison to 2011-14. 4.The minister said that since last 20 years, India continues to be the largest milk producer in the world and the credit goes to the Government initiatives and implementing various schemes to increase the productivity of milch animals. 5.The Minister said that factors such as increased consumer interest in high protein diets and increasing awareness & availability of value-added dairy products through organised retail chains are also driving its demand. Government initiatives Union Minister for Agriculture & Farmers Welfare Shri Radha Mohan Singh said that Department of Animal Husbandry, Dairying & Fisheries has initiated a number of schemes with the objective of doubling the dairy farmers income by 2022. Rashtriya Gokul Mission He said that for the first time our government started a new initiative called Rashtriya Gokul Mission in December 2014 for the conservation and development of indigenous breeds. Under this scheme, so far proposals worth Rs.1,348 crore from 28 states have been approved and Rs.503 crore has been released. Among other initiatives, Rashritya Gokul Mission also includes setting up of Gokul Gram. These Gokul Grams will act as Centres for development of indigenous breeds and a dependable source for supply of high genetic breeding. Currently, 18 Gokul Grams are being set up in 12 different states. (Adapted from PIB) 23. GeM 3.0 launched What is Government e Marketplace (GeM)? Government e Marketplace (GeM), has been envisaged by Government of India as the National Procurement Portal of India. GeM strives to keep pace with ever-evolving technological challenges and stake holder aspirations and in line with this endeavour, GeM is coming up with a scaled up third version. The GeM 2.0 was launched as a pilot in August 2016 and its success led to this massive transformation program – GeM 3.0 would offer standardised and enriched catalogue






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management, powerful search engine, real time price comparison, template-based Bid and RA creation, demand aggregation, e-EMD, e-PBG, user rating, advanced MIS and analytics and more. What is special about GeM 3.0? Some of the notable enhancements in the 3.0 version: -Market Based generic requirements across all government agencies -Standardisation of specifications of both products and services enabling empirical price comparability -Completely transparent transactions across all ranges -Generic standards established through universal service levels and cost comparison enabled -Open and dynamic market place with rating based on performance of user on website (Adapted from Pib) 24. Return of long term capital gains tax spooks Sensex India s financial markets went into a tailspin with benchmark equity indices clocking the sharpest single-day fall in nearly 15 months following the return of the long-term capital gains (LTCG) tax on equities in this Budget. What has budget proposed? Budget has proposed an LTCG tax on equity instruments on all capital gains exceeding Rs.1 lakh at the rate of 10%, without offering any indexation benefit that allows gains to be set off against inflation. The government introduced STT in October 2004 to replace the then existing LTCG. STT is charged at 0.1% of the trade value in cash market trades. However, now STT will remain and LTCG has been reintroduced. (Adapted from The Hindu) 25. Deciphering LTCG tax on equity What is LTCG? LTCG or long-term capital gains refer to the gains made on any class of asset held for a particular period of time. In case of equity shares, it refers to the gains made on stocks held for more than one year. In other words, if the shares are bought and held for more than a year before selling, then the gains, if any, on the said sale are referred to as long term capital gains or LTCG.






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Why is LTCG tax in the news? It is in the news as Finance Minister Arun Jaitley re-introduced LTCG tax on equity shares. Investors have to pay 10% LTCG tax on gains exceeding Rs. one lakh on the sale of shares or equity mutual funds held for more than one year. Previously, short-term capital gains (STCG) tax of 15% was levied. The Centre said if the gains exceeded Rs. one lakh in a year, then 10% LTCG tax had to be paid without the benefit of indexation (adjusting the profit against inflation to compute the real taxable gains). Was the tax levied on stock market trades earlier? Such a tax existed until October 2004 when it was replaced by the securities transaction tax (STT) which was levied on all trades made on the stock exchanges. STT is charged at 0.1% of the trade value in cash market trades. The issue of tax evasion through stock exchanges by paying a small STT component instead of LTCG had been raised regularly. Further, a study in 2016 stated that between 2005-06 and 2011-12, the Centre lost about Rs. 3.5 lakh crore by replacing LTCG tax with STT. How will LTCG tax be computed? Typically, when such a levy is introduced, it is structured in a manner so that prior investments get some kind of relief. In technical parlance, it is called the grandfathering benefit. The government, while reintroducing the LTCG tax, said all gains made prior to January 31 would be grandfathered. Here is how it works: for example, assume an entity bought shares in January 2017 at Rs.100, which touched a high of Rs. 200 on January 31, 2018. Now, if he or she sells the shares at Rs. 300 in, say, May 2018, then his taxable gains would be Rs. 100. (Rs. 300- Rs. 200). Will all investors be subject to LTCG tax? All investors who trade on stock exchanges would be required to pay LTCG tax. Incidentally, the Centre has brought in LTCG tax while retaining STT as well. So, investors will have to pay both the taxes. However, foreign portfolio investors (FPIs), who invest in India from places like Mauritius and Singapore, would not be subject to LTCG tax, courtesy tax avoidance treaties. This benefit, however, would be available only till the time the treaty benefit exists as the Centre is reworking all such so-called double tax avoidance agreements (DTAA). For instance, the Singapore and Mauritius treaties also have a grandfathering clause plus a tax of only 5% on the computed gains. This, in effect, makes it more attractive for foreign investors to trade through the Mauritius or Singapore route.






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How did the stock markets react to the introduction of the tax? A day after the Budget, benchmark equity indices — Sensex and Nifty — lost more than 2% each. The Sensex lost more than 900 points during intraday trading as it ended with its worst single-day fall in almost 15 months. The introduction of LTCG tax can only increase the cost of trading stocks at a time when various market participants have been highlighting the export of capital to other countries due to lower transaction costs in those nations. Incidentally, there are already reports that the government might look at the possibility of at least allowing the benefit of indexation while computing LTCG that would be a partial relief to investors. (Adapted from the Hindu) 26. Launch of Startupindia Ranking Framework Three new tools for States and Union Territories for ranking of startups in the country was launched by Union Minister of Commerce and Industry. The tools are: The State and Union Territory Startup Ranking Framework, the Compendium of Good Practices for Promoting Startups in India and the Startup India Kit. These will act as catalysts to help the Startup India initiative to drive India s economic growth. Startup States and UTs Ranking Framework The key objective of the Startup States and UTs Ranking Framework is to encourage States and UTs to take proactive steps towards strengthening the Startup ecosystems at the local level. The Ranking Framework will measure the impact of each step initiated at the local level for building a strong Startup ecosystem. The Ranking Framework will also enable contnuous learning through the dissemination of good practices. The parameters of this feedback focus on all the actions and initiatives undertaken by states on or before March 2018. These include having a startup cell or helpline and a mobile or web portal for queries, the size of the startup mentor network created by the state government and the number of key incubators for incubation support to startups. The Startup India Hub portal will provide a platform for the launch of the Ranking Framework. Compendium of Good Practices for Promoting Startups The official release of theStartup India Compendium of Good Practises for promoting Startups in India focuses on enriching the Startup ecosystem through ethical behaviours and is currently followed by 18 States and UTs. It covers 95 good practises across 7 areas of intervention. These are distilled into 38 action points including Incubation Support, Seed Funding, Angel & Venture Funding, Startup Policy & Implementation, Simplified Regulations, Easing Public Procurement, Awareness & Outreach. Startup India Kit






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The Startup India Kit is primarily a one-stop guide on all Startup India offerings. It offers vital information, advice and assistance through website links, statistics, tools, templates, events, competitions and a glossary on startup terms. All the benefits available to startups from the Startup India initiative can be found in the kit. (Adapted from pib) 27. National Steel Policy The National Steel Policy, 2017 envisages a crude steel capacity of 300 MT by 2030-31. India s crude steel production crossed the 100 million tonnes(mt) in the year 2017. The salient features of the National Steel Policy, 2017 are:- -The National Steel Policy, 2017 aspires to achieve 300 MT of steelmaking capacity by 2030. This would translate into additional investment of Rs.10 lakh Crore and 1.1 million additional workforces getting employed in the steel sector by 2030-31. -The policy seeks to increase consumption of steel and major segments are infrastructure, automobiles and housing. -National Steel Policy, 2017 seeks to increase per capita steel consumption to the level of 160 Kg by 2030-31 from the level of around 61 KG. -Policy stipulates that adoption of energy efficient technologies by small steel producers will be encouraged to improve the overall productivity & reduce energy intensity. (Adapted from PIB) 28. India Post Payments Bank (IPPB) to enable Digital Payments in Post Offices by April 2018 India Post Payments Bank (IPPB) Expansion Programme continues to make brisk progress and a nation-wide roll-out is scheduled beginning April 2018. Once the proposed expansion is completed, IPPB will be providing the largest financial inclusion network in the country, covering both urban as well as rural hinterland with ability to provide digital payment services at the doorstep with the help of Postmen and Gramin Dak Sewaks (GDS). IPPB will also enable more than 17 crore active account-holders of Post Office Savings Bank to make interoperable digital payments including the benefit of NEFT, RTGS, UPI and bill payment services. Additionally, the IPPB will enable acceptance of digital payments across post offices in the country in line with the digital payments initiative of the government. Why rope in Indian Post? The main challenge banks today face in financial inclusion is the lack of last mile connectivity. With the government s focus on financial inclusion, it is quite logical to convert India Post to a bank given its strong network pan-India (especially in the rural areas).






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Banks simply do not have the kind of presence required to target the vast unbanked population in the rural areas and even urban poor. However, India Post with its vast network of more than 1.5 lakh offices, 90 per cent of which are in rural areas, can aid in financial inclusion. This should be compared with about 1.05 lakh branches of all the banks in the country. Further India Post is a significant player in the domestic remittance business with experience in managing small savings deposits. What would be new entity known as? The new entity would be known as India Post Payments Bank (IPPB), a public limited company under the Department of Posts, with 100 per cent Government of India equity. As per the guidelines issued by the Reserve Bank of India (RBI), payments banks can accept deposits of up to Rs.1 lakh and sell insurance and mutual fund products. About Payments Bank Payments banks can accept deposits up to `1 lakh per customer and are allowed to pay customers interest on the money that is being deposited. Payments bank can open either current accounts or saving accounts. For companies that have operated as mobile wallets (which are a type of prepaid instrument), this is a big step forward as it raises the funds limit and allows interest to be paid on deposits, making it more attractive for users to store their money. How Is a Payments Bank Different from a Bank? Unlike a regular bank, a payments bank cannot loan money to people or issue credit cards. Also, payments banks are only allowed to invest the money received from customers deposit into government securities. While payments banks cannot issue credit cards, they can issue ATM and debit cards. How Payments Bank Will Ensure Financial Inclusion? A payments bank account holder would be able to deposit and withdraw money through any ATM or even through the small convenience shop in a village that sells mobile recharge coupons. Thus, these small convenience shops will serve the purpose of bank branches. Payments banks can be integrated with savings bank accounts. As already mentioned, payments banks ATM or debit cards will also work on all banks machines. However, payments banks cannot accept NRI deposits. Which Companies Have Been Given Approval? In 2015, RBI had granted in-principle approval to 11 entities, including Department of Posts, to set up payments banks. The RBI guidelines say that payments bank licenses would be granted to mobile firms, supermarket chains and others, to cater to individuals and small businesses. These mobile firms, supermarket chains, mobile wallets would help in extending reach of the payments banks across the country.






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(Adapted from PIB and background from PrepMate-Cengage Economic Book; Chapter 17, page 272) 29. The lowdown on the MSP roadmap What is it? Amid the increasing agrarian distress across the country, the Union Budget 2018-19 proposed to give farmers a minimum support price (MSP) 1.5 times of the production cost. The agriculture sector provides food security to 1.3 billion people, absorbs 54% of the workforce and touches the lives of two-thirds of the rural population. Yet it is lagging, resulting in widening disparity between the farm-dependant population and those working in the other sectors. How did it come about? The Union government introduced public procurement of paddy and wheat at the MSP in 1965-66 to address grain shortage. For calculating production cost, two broad concepts — Cost A 2 and Cost C 2 — are used. Cost A 2 includes all expenses paid by the farmer in cash or kind such as seed, fertilizer, farmyard manure, pesticides, hired labour, machine labour and irrigation and maintenance costs. It also includes rent paid for leased-in land, depreciation of assets, interest on the working capital and the imputed cost of owned seed, farmyard manure and machine labour. Cost C 2 is calculated by adding to Cost A 2 the imputed cost of family labour, the interest on fixed capital and the rental value of owned land. The question being raised from several quarters is whether the proposed increase will be based on the formula for MSP recommended by the National Commission on Farmers, 2006. Dr. M.S. Swaminathan, in his report submitted to the Central government in 2006, recommended that MSP be based on production cost (C 2 cost) plus a 50% margin. The government submitted a written reply in the Supreme Court against this formula. However, Union Finance Minister Arun Jaitley, in his budget speech, announced the MSP fixation on the basis of production cost plus a 50% margin. The technical detail in this regard, though, was missing in the speech. Production cost means all paid-out costs, including the rent paid for leased-in land and the imputed value of family labour. Why does it matter? Baldev Singh Dhillon, Vice-Chancellor of the Ludhiana-based Punjab Agricultural University, a pioneer of the Green Revolution in India, points out that the Finance Minister announced that the MSP for the Rabi crops for the crop year 2017-18 had been fixed on the basis of production cost plus a 50% margin, which is not borne out by data. That indicates that the Central government may be working on some other definition of production cost rather than the C 2 cost. Although remunerative prices are required for a desirable level of living for the farmers, MSP is no panacea for all problems as 85% of the farmers in the country are small farmers (owing less than 5 acres) and have little marketable surplus. Hence, the inputs subsidy policy should have been formulated to watch the interests of these farmers. The staggered MSP is another option for reducing the glut in the market






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during the harvesting season, easing the role of procurement agencies and minimising storage losses and costs. But these issues are missing from the budget, he says. What next? The Ramesh Chand Committee, constituted to examine the methodological issues in fixing MSP, suggested that for calculating production cost, family labour head should be considered a skilled worker. Further, it said the interest on working capital should be given for the whole season against the existing half season, and the actual rental value prevailing in the village should be considered without a ceiling on the rent. Moreover, post-harvest costs, including cleaning, grading, drying, packaging, marketing and transportation, should be included. The committee recommended that the cost C 2 should be raised by 10% to account for the risk premium and managerial charges. Many experts believe that to address the current agrarian crisis, MSP should be fixed on the basis of the Ramesh Chand Committee s report. (Adapted from The Hindu) 30. Why the fuss about fiscal deficit? The fiscal deficit turns out to be 3.5% for the year, instead of 3.2%. What is fiscal deficit? In FY18, the Centre s total income (as per the revised estimates) from taxes, non-tax revenues and capital items is estimated at Rs.16.23 lakh crore. But it expects to incur a total expenditure of Rs.22.17 lakh crore. Expenditure will thus overshoot income by about 36.5%, leaving a shortfall of Rs.5.94 lakh crore. This Rs.5.94 lakh crore shortfall is euphemistically termed as the fiscal deficit. When it is expressed as a percentage of India s nominal GDP (Rs.167 lakh crore as per latest CSO estimates), it appears modest at 3.5%. But this tells you why even a minor slippage in the fiscal deficit is so keenly watched. A 30-basis point overshoot in the deficit means a Rs. 50,000 crore hole in the Budget. Borrowings mount When the Centre ends up spending more than it earns, it takes recourse to market borrowings to bridge the gap. The borrowing target for the year is closely watched by the bond market because the larger the government s loan-taking, the less room for other borrowers — companies, small businesses, individuals — to raise funds from India s relatively shallow bond market. Many years of such profligacy had led to the Indian government sitting on a significant stockpile of debt. By end-March 2018, the outstanding loans of the Central government are estimated to hit Rs. 82.32 lakh crore. That s up from Rs. 57 lakh crore five years ago and






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amounts to 49.3% of the nominal GDP. The saving grace is that the bulk of those loans are from domestic sources, with just Rs. 2.4 lakh crore owed to foreign lenders. Unproductive spends If the government s expenditure routinely overshoots its receipts and budgeted estimates, why is there so much angst about the under-allocation to welfare schemes? The answer lies in the extremely limited elbow room that the Centre enjoys in deciding on its Budget allocations. Expenditure on interest, pensions and subsidies While allocations to pet schemes may take up a lot of time in the Budget speech, the reality is that the bulk of the expenditure each year is absorbed by just three recurring items — interest payments, pensions and subsidies. In the FY18 revised estimates, for instance, interest payments (by far the largest item of expense) were expected to absorb Rs. 5.3 lakh crore, pensions Rs. 1.5 lakh crore and subsidies Rs. 2.3 lakh crore. In short, servicing interest payouts alone will take up 32% of the Centre s earnings this year, while pensions and subsidies absorb another 23%. With 23% allocated to State grants and 16% to defence expenditure, these repetitive expenses will effectively mop up 95% of the total Budget receipts. This makes it evident why there s so little room in the annual Budget for allocations to new ideas or schemes. Lack of asset creation The other long-lamented problem with the expenditure pattern is that the bulk of the Budget spending goes into consumption or maintenance expenses, with very little spent on creating new assets. In FY18, just 12% of the budget was defrayed in capital spending. (Adapted from The Hindu) 31. Government of India makes Amendments in Small Savings Act In order to remove existing ambiguities due to multiple Acts and rules for Small Saving Schemes, Government of India has proposed merger of Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873. With a single act, relevant provisions of the Government Savings Certificates (NSC) Act, 1959 and the Public Provident Fund Act, 1968 would stand subsumed in the new amended Act without compromising on any of the functional provision of the existing Act. Objective of common act All existing protections have been retained while consolidating PPF Act under the proposed Government Savings Promotion Act. No existing benefits to depositors are






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proposed to be taken away through this process. The main objective in proposing a common Act is to make implementation easier for the depositors as they need not go through different rules and Acts for understanding the provision of various small saving schemes, and also to introduce certain flexibilities for the investors. Concerns addressed However, concerns have been raised from different corners and also by print and social media that the Government aims to bring down the protection against the attachment of Public Provident Fund Account under any decree or order of any court in respect of any debt or liability incurred by the depositors. It is made clear that there is no proposal to withdraw the said provision and the existing and future depositors will continue to enjoy protection from the attachment under the amended umbrella Act as well. Also, Apprehension that certain Small Savings Schemes would be closed is also without basis. New benefits Apart from ensuring existing benefits, certain new benefits to the depositors have been proposed under the bill. These are: 1.As per PPF Act, the PPF account can t be closed prematurely before completion of five financial years. If depositor wants to close PPF account before five years in exigencies, he can t close the account. To make provisions for premature closure easier in respect of all schemes, provisions could now be made through specific scheme notification. The benefits of premature closure of Small Savings Schemes may now be introduced to deal with medical emergencies, higher education needs, etc. 2.Investment in Small Savings Schemes can be made by Guardian on behalf of minor(s) under the provisions made in the proposed bill Guardian may also be given associated rights and responsibilities. 3.There was no clear provision earlier regarding deposit by minors in the existing Acts. The provision has been made now to promote culture of savings among children. 4.There were no clear provisions in all the three Acts for the operation of accounts in the name of physically infirm and differently abled persons. Provisions in this regard have now been made. 5.As per existing provisions of the Acts, if depositor dies and nomination exists, the outstanding balances will be paid to nominee(s). Whereas, Hon ble Supreme Court in its judgement stated that nominee(s) is merely empowered to collect the amounts as Trustee for the benefit of legal heirs. It was creating disputes between the provisions of the Acts and verdict of Supreme Court. Hence, right of nominees have now been more clearly defined.






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6.In the existing Acts, there is no provision for nomination with regard to account opened in the name of minor. Further, existing Acts say that if account holder dies and there is no nomination and amount is more than prescribed limit, the amount shall be paid to legal heirs. In this case, the guardian has to obtain succession certificate. To remove this inconvenience, provisions for nomination with regard to account opened in the name of minors have been incorporated. Further the provision has been made that if the minor dies and there is no nomination, the balances shall be paid to guardian. 7.The existing Acts are silent about grievance redressal. The amended Act allows the Government to put in place mechanism for redressal of grievances and for amicable and expeditious settlement of disputes relating to Small Savings. 8.The above provisions which are proposed to be incorporated in the amended Act will add to the flexibility in operation of the Account under Small Savings Schemes. Apart from offering higher interest rates compared to bank deposits, some of the small savings schemes also enjoy income tax benefits. No change in interest rate or tax policy on small savings scheme is being made through this amendment. (Adapted from Pib) 32. Governance reforms and recognition of losses are a must to solve the bad loans crisis If the financial performance of India s largest lender is anything to go by, an end to the severe bad loans crisis may be much farther beyond the horizon than previously anticipated. Financial results of SBI For the first time in almost 19 years, the State Bank of India reported a quarterly loss of Rs. 2,416 crore for the three months ended December, compared with a net profit of Rs. 2,610 crore in the year-earlier period. Reasons for loss While the figures are not strictly comparable after SBI completed merger with its associates, the loss was the result of both a massive increase in provisions to account for bad loans and a substantial amount of mark-to-market losses on its holding of government bonds. Provisions for non-performing assets (NPAs) more than doubled to about Rs. 17,760 crore, from about Rs. 7,200 crore in the third quarter of 2016-17. On treasury operations, SBI recorded a loss of about Rs. 3,255 crore, versus a profit of about Rs. 4,776 crore in the comparable period. The bank revealed that an audit by the Reserve Bank of India showed a divergence of Rs. 23,239 crore in the way it classified assets at the end of the last financial year, which led to increase in provisions in the last quarter. Most of these reclassified assets are linked to troubled projects in sectors including power and telecom. SBI, of course, is not the only lender to have had its assets forcibly reclassified by the RBI. Private






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sector lenders have also been found guilty of pushing troubled assets under the carpet until the RBI called their bluff. Level of NPAs It may be tempting to believe that last year s bankruptcy law reforms will soon begin to ease the pain at banks by encouraging the quick sale of assets of troubled borrowers. The proceeds from such sales, however, would likely amount to very little in comparison with the mammoth scale of troubled assets. According to a joint study by Assocham and Crisil, gross NPAs in the banking system are estimated to increase to Rs. 9.5 lakh crore by March 2018, from Rs. 8 lakh crore a year earlier. In that case, write-offs recognising losses may be the most honest and practical way to deal with the bad loans problem. What needs to be done? So, the RBI in the coming months should continue to push banks, both public and private, to promptly recognise the stressed loans on their portfolios. While it is quite true that the present bad loans crisis has been a long time in the making, the problem of lax corporate governance, which has plagued public sector banks and contributed in no small measure to the present crisis, still remains largely unaddressed by the government. Even the latest plan to recapitalise public sector banks may achieve little more than giving some temporary relief to lenders for the sake of reviving credit growth. The bad loans problem is likely to remain a festering sore and risks undermining the health of the economy until meaningful structural reforms to the banking system are undertaken. (Adapted from The Hindu) 33. Inside the Punjab National Bank fraud: What an LoU is, how case may impact the bank What has happened? State-owned lender Punjab National Bank (PNB) has informed the Bombay Stock Exchange that it has detected fraudulent transactions worth $ 1,771.7 million (over Rs 11,000 crore) in its mid-corporate branch at Brady House, South Mumbai. PNB has alleged that two employees had fraudulently issued Letters of Undertaking (LoUs) and transmitted SWIFT instructions to the overseas branches of Indian Banks to raise buyers credit for companies of billionaire diamond jeweller Nirav Modi without making entries in the bank system . PNB has already suspended at least 10 employees in connection with the alleged crime. However, the bank has not specified if the alleged fraudulent LoUs were backed by collateral/cash margins, or the quantum of liability that the bank faces against the LoUs. So, what is an LoU, and how is it issued? An LoU is an assurance given by one bank to another to meet a liability on behalf of a customer. The LoU is akin to a letter of credit or a guarantee. LoUs are used in international banking transactions. An LoU is issued for overseas import remittances and involves four parties — an issuing bank, a receiving bank, an importer and a beneficiary entity overseas.






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According to norms, the term of an LoU is 180 days, and can be rolled over once for six months. Since LoUs are a form of lending, they are typically backed by security. How are LOUs communicated? LoUs are conveyed from bank to bank through Society for Worldwide Interbank Financial Telecommunication (SWIFT) instructions, which pass through a triple layer of checks. A SWIFT instruction, which represents a bank s consent, is cleared by a maker, a checker and a verifier before it is sent across. There is no reported instance so far of a breach in SWIFT instructions anywhere in the world. What are the specific allegations by PNB in the present case? PNB has alleged that two of its employees fraudulently issued LoUs and transmitted SWIFT instructions to the overseas branches of Indian Banks to raise buyers credit for Nirav Modi s firms, Diamond R US, Solar Exports, and Stellar Diamonds, without making entries in the bank system. The bank has alleged that one such fraudulent LoU issuance took place on January 16, 2018, for and on behalf of Modi s firms, which allegedly presented a set of import documents to the branch, with a request to allow buyers credit for making payments to suppliers overseas. When bank officials requested the firms to furnish 100% cash margin for the LoU, the firms argued that they had availed this facility in the past as well. However, branch records did not have the details of any such facility having been granted to the firms. An internal probe by the bank then found that a few of its employees had fraudulently issued LoUs for Hong Kong branches of two Indian banks for and on behalf of Modi s firms. PNB has alleged that the buyers credit based on the fake LOUs may also have been paid through a Nostro account — which is an account that a bank holds in a foreign currency in another bank. Will the alleged fraud impact the banks that have lent money against the PNB LoUs? According to PNB s complaint to CBI, the LoUs were issued for the Hong Kong branches of Allahabad Bank and Axis Bank which have given money to the beneficiary entity on behalf of Modi s firms. As a result, PNB will have to settle the LoUs with these branches according to the norms of the Hong Kong Monetary Authority. And how will the fraud impact PNB? While the quantum of PNB s liability in the case is not known, market sentiment has already been impacted. The PNB stock fell 9.81% on 15.2.2018 to close at Rs 145.80 per share, and investors lost over Rs 3,000 crore in a single day. The bank may have to set aside higher provisioning in the next few quarters if it unable to recover the money from the accused firms.






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The fraud has been unearthed at a time when Indian banks are reeling under a pile of stressed assets of about Rs 10 lakh crore. Most public sector banks, including the biggest lender, State Bank of India, have posted significant losses for the quarter ended December 31, 2017, due to higher provisioning and a rise in bond yields.

(Adapted from the Indian express and image credit to The Hindu) 34. Gem of a scam: On PNB fraud A regulatory filing to the stock exchanges by Punjab National Bank has blown the lid off a Rs.11,500-crore fraud. Perhaps the largest such scam in India, it was perpetrated by a maverick diamond merchant in collusion with bank officials at a single branch in South Mumbai. What is worrisome? For India s second largest bank to be defrauded in the manner suggested is astounding, especially since there has been heightened scrutiny of public sector banks operations in the last few years. The bank s audit committees and boards, as well as the central bank,






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which conducts routine financial inspections of banks books, have been ostensibly keeping a close watch on the loans that have turned substandard or are on the verge of default. Low capital in PNB The government, which has often blamed the pile of bad loans on crony capitalism during the UPA regime, just last month unveiled a plan to infuse about Rs. 1 lakh crore into 21 capital-starved public sector banks this fiscal. Of this, Rs. 5,473 crore is to be injected into PNB. So even if the actual loss the bank ends up incurring on account of this fraud is half the stated amount, its capital adequacy ratio will be back to the same level before the recapitalisation was announced. Its market capitalisation has tanked Rs. 8,077 crore over the past two days, with the share price falling over 20% since the news broke. Involvement of employees The bank s top brass has said it has acted promptly, suspending around 10 officials. The Central Bureau of Investigation has booked one retired and one serving PNB employee so far. It is also difficult to believe that a handful of junior employees could orchestrate such a massive fraud. Collusion with Nirav Modi The bank s managing director has claimed that supervisory lapses are being probed, and the Enforcement Directorate has initiated a money laundering case against the main accused, billionaire-jeweller Nirav Modi, his wife Ami Modi and close associates and relatives. The firms run by him had seen a meteoric rise and an IPO was in the offing after buyouts of global players and a ramp-up of retail presence in India and abroad. (Adapted from The Hindu) 35. Why is the price control of stents essential? What did the regulator do? The National Pharmaceuticals Pricing Authority (NPPA), India s drug pricing regulator, has further brought down the cost of drug-eluting stents DES from ₹ , to ₹ , , while marginally increasing the cost of bare-metal stents from ₹ , to ₹ , . The move comes a year after the NPPA slashed stent rates by nearly 85%. Price control, it said, is necessary under the failed and exploitive market system characterised by exorbitant, irrational and restrictive trade margin. The NPPA said it was immediately necessary to fix the ceiling prices of coronary stents in order to protect public interest. Coronary stents are used to open narrowed arteries, reduce symptoms like chest pain and treat a heart attack. How will it help? Doctors say the move will help more people opt for DES that are technologically better and more advanced. In just one year after price regulation, the use of bare-metal stents has been reduced by 30% and replaced by DES.






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Bare-metal stents have a significantly higher rate of restenosis (the recurrence of abnormal narrowing of an artery or valve after corrective surgery) and the need for target vessel revascularisation or restoration of perfusion to a body part or organ that has suffered ischemia compared with all DES. Affordability matters, NPPA Chairman Bhupendra Singh said. The new order also allows transparency and better government control and audit ease. With this order, patients will have the option to get a stent and accessories from outside the establishment, and manufacturers are allowed only 8% trade margin. Also stents selling lower than the ceiling rates cannot go up in price now after the new order. The Indian Medical Association has noted that this is a bold move by the NPPA. Dr. K.K. Aggarwal, immediate past president of the IMA, said: Cardiac-related diseases are rising in India. Poor accessibility to quality health care and high pricing is a major deterrent for people seeking medical care. Price capping will minimise the expenditure in the health sector and allow more people to benefit from it. Doctors also say the move sends a strong message to private players that profiteering at the cost of life is unacceptable. This has also brought back attention to the needs of the patients and is now encouraging people to opt for better treatment plans and most importantly break the nexus of unethical pricing, Dr. Aggarwal noted. The NPPA also decided against the request of multinational stent makers for a new category for advanced stents. Was there a need? A core committee, which examined the issues relating to the essentiality of coronary stents, observed in its report to the government in April 2016 that there is a very high incidence of coronary artery disease (CAD) in India associated with high morbidity and mortality; and CAD has become a major public health problem. The NPPA held meetings with eminent cardiologists, who said the price cap had resulted in more angioplasties and fewer bypass surgeries. The NPPA also met stakeholders on February 5 and 8. At a meeting held on February 13, the NPPA said it examined all available information/data of coronary stents supply chain and all relevant options for price fixation of coronary stents before announcing the new rates, which will be valid till March 13, 2019. This is being done to prevent the cardiac stents market from falling back to its old archaic

state... and an extraordinary failed market system, the NPPA noted. What lies in store?






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Based on available data from official sources and manufacturers/importers, the NPPA is now analysing the trade margins in the cardiac guidewire/balloon catheter and guiding. The analysis by the authority notes that profit margins are as high as 400% in this area and thus may need government intervention for cost optimisation. The NPPA has sought comments and views of stakeholders in this matter. (Adapted from the Hindu) 36. Revival of Industrial activity What is it? Industrial activity, as measured by the government s Index of Industrial Production (IIP) and the private sector Purchasing Managers Index (PMI), has improved significantly over the last two months. Growth in the IIP soared to 8.8% in November, the highest since October 2015, and stood at a slightly slower but still robust 7.07% in December. These two instances mark a return to above 5% growth after a year. These two sets of data are interesting because not only do they show the picture from both the government and private sector sides but also highlight different elements of the sectors they measure. While the IIP is an output measure, the PMI is an indication of the activity at the input, or purchasing, level. How did it come about? Given that the average growth in the IIP in financial year 2017-18 prior to November was only 2.5%, the months of November and December certainly stand out as outliers. To understand what happened in these two months, it is important to understand what happened before. The November 2016 demonetisation had a major impact on industrial activity. For example, growth in the IIP was a relatively robust 5% in November 2016, but slowed to 1.2% by February 2017. Activity resumed thereafter, but was hit again by the prospect of the Goods and Services Tax and then its fallout. Industrial activity contracted in June because firms halted production to get rid of their stock in preparation for the GST, which rolled out on July 1. Similarly, July saw only 1% growth as companies came to terms with the new tax regime. A combination of the impending festive season and the re-stocking of inventory led companies to increase their activity thereafter, with a recovering global economy boosting exports, which further propelled industrial growth in November and December. There were other factors at play, such as companies getting increasingly comfortable with the GST regime, the government taking steps to ease the woes of exporters who saw a large chunk of their working capital tied up because of the input tax credit system, domestic demand recovering somewhat, and the government investing heavily in roads. Why does it matter?






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The recovery in manufacturing and in the overall industrial sector should come as some relief to the government, which has come under criticism for the impact demonetisation and the hurried roll-out of GST had on economic growth. Economic growth itself is expected to increase, with private sector analysts and economists saying there are signs of a recovery. With economic growth should come job creation that is needed. However, it is worth keeping in mind that the IIP and the PMI measure only the formal sector. What about informal sector? Several accounts say the informal sector, a very large segment of the economy that accounts for significant employment, is still recovering from the effects of demonetisation. That effect has not been effectively measured, and any talk of a recovery leaves the informal sector out. What next? A significant part of the recovery is based on how the global economy does. Any dip there will have a detrimental effect on India s exports which, in turn, will dampen industrial growth. Recently, U.S. President Donald Trump spoke against India for imposing a tremendous tax on the import of Harley Davidson motorcycles, pitching for a reciprocal

tax in the U.S. Whether this happens or not, such statements add to the uncertainty over Indian exports. That said, most commentators do say there are signs of recovery in the economy and in the manufacturing sector in particular. (Adapted from the Hindu) 37. Punjab National Bank fraud: How the system was gamed The alleged fraud was carried out through misuse of Letters of Undertaking or LoUs issued by Punjab National Bank. What are LoUs, and how do they work? In trade finance, which is the business of imports and exports, companies need funds to pay overseas suppliers in foreign currency. When an Indian company approaches its banker for such funding, designated officials will approve a credit limit for which an LoU can be issued. Once the LoU — essentially an undertaking by a bank to the overseas branches of other Indian banks to meet a liability on behalf of a customer — is issued, a message regarding the funding is sent from India to the bank abroad using the Society for World Interbank Financial Telecommunication (SWIFT) platform. SWIFT is a secure global financial messaging service used by over 11,000 financial institutions in more than 200 countries. On receiving the SWIFT message, the branch (which is mostly of an Indian bank in the case of Indian companies) abroad provides credit against import documents, normally for 90 days. (It could be that the LoU-issuing bank does not have operations in a particular foreign country.) Margins on the borrowing depend on the risk profile of the borrower and the company s credit rating, and the terms of the credit limits set by the issuing bank. This is






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essentially a short-term foreign currency loan, on which banks charge 60 to 90 basis points over the London Interbank Offered Rate or Libor, the international benchmark for pricing loans or lending. This facility is used regularly by companies in the business of gold, gems and jewellery. Companies prefer this form of funding also because the costs of raising money overseas are relatively less compared to rupee funding. And for banks, this is good business — if all goes well. What is the process that is normally followed to issue LoUs and transmit messages by SWIFT? Requests for loans or LoUs for large amounts have to be approved by the senior management. The other part of the story is the transmission of the messages. This is usually a three-layer process that takes place either at the branch or its offices. One bank official is designated as a maker, another a verifier, and a third is the authoriser. All have different logins and passwords, and work independently of each other. What went wrong in the PNB case? SWIFT transactions are linked to the Core Banking Solution (CBS) of banks, which contains transaction histories and other data of all customers, and can be accessed by all branches where a customer has an account. SWIFT transactions, therefore, are automatically recorded, and are seen by officials from regional managers to general managers and, when the amount is big, by the top management. In the PNB case, the scamsters allegedly delinked SWIFT from CBS in the case of companies that were linked to Nirav Modi and Mehul Choksi. However, LoUs of other companies were routed through the SWIFT-CBS system. This meant that funds were provided to the Modi-Choksi companies without being recorded in the bank s CBS. Also, according to the CBI s FIR, two officials at the foreign exchange department at PNB s Brady House branch in Mumbai allegedly issued eight LoUs worth Rs 280 crore in February 2017 to Hong Kong branches of Allahabad Bank and Axis Bank without authorisation. The alleged fraud continued for seven long years without being detected. How? How — and how a handful of staffers could game the system — is baffling. The investigation should reveal details, but it seems reasonable to assume that the fraud could have gone on for so long only with the active collusion of a ring of officials. One of the bankers now under arrest reportedly handled transactions to provide credit to Nirav Modi s firms for seven years — in violation of the normal practice of transfers every two or three years. SBI Chairman Rajnish Kumar said, We don t keep a person for more than three years at one position. There are certain positions which are very sensitive and we monitor those positions very closely. Banking is a risky business. Again, in PNB s case, one out of the three persons that banks typically task to transmit SWIFT messages carried out two roles, according to investigators. Also, several bankers






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wonder how the delinking of SWIFT from CBS could have been achieved without it being detected by the bank s information technology department. These suggest a possible compromising of the sanctity of passwords or authentication, and the breaching of information technology systems. And the fact that at the very beginning, the approval for issuance of LoUs — whether forged or otherwise — for such huge amounts without it being captured in the system or red-flagged, indicates a major failure of internal control systems. OK, in the normal course, how do the banks that lend to a company on the basis of LoUs, get their money back? Banks approach the lender that has issued the LoU — because these are commitments made by the issuing bank on behalf of a customer. Many banks receive their funds at the end of the 90-day period, after which fresh LoUs may be generated, often to keep payments to banks going. The investigation will look at allegedly forged LoUs that seem to have helped the firms secure funding for long. The liability for these LoUs is being contested by PNB — but other banks are unanimous that it must honour the undertaking it gave.






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So, do the banks that provide this facility on the basis of an LoU have no responsibility? Bankers say the bank receiving an LoU sends a letter of confirmation to the issuing branch and its controlling offices. It is not clear whether receiving banks such as Axis Bank, Allahabad Bank and Union Bank sent such letters. And if they did, the question is why no alarm was raised in PNB. It could be that the receiving banks didn t send the confirmation letter. Or it could be that the letters were buried at PNB. The RBI said that the fraud in PNB was the result of delinquent behaviour by some employees, and the failure of internal controls. What are these internal controls?






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Some have been listed in the answer to the question above on how the fraud went on for so long. Ideally, SWIFT messages should have been checked by senior officials in charge of the credit, investment or treasury departments that handle the foreign exchange business. Whenever such huge amounts are sent through SWIFT, daily reports are generated. All banks, including PNB, have vigilance departments and fraud management committees. Banks also have internal branch audits and concurrent audits involving external auditors. They also have risk management and audit committees at the Board level to ensure compliance. The failure of all these controls is a serious concern, also because PNB had been hurt badly because of lending in the past to Winsome Diamonds, which is now listed as one of India s top defaulters. What is the responsibility of the RBI itself? Bankers say all LoUs have to be reported to RBI on a quarterly basis. It is not clear if the regulator s inspection of the bank s books revealed anything earlier. Till a few years ago, RBI used to inspect branches of banks, but it has now switched more to offsite monitoring. Successive RBI Governors have written to the government about the conflict involved in having a central banker sitting on the Board of a bank that RBI regulates. But the government insists that having a regulatory representative helps with checks and balances. This has led to debates on the accountability of the government, which owns many banks. On Friday, the RBI said it had already undertaken a supervisory assessment of control systems in PNB, and would take appropriate supervisory action. (Adapted from the Indian express) 38. Bank bureau stares at uncertain future Members terms end on March 31 this year and no indication yet on extension The Banks Board Bureau (BBB) is facing an uncertain future with the tenure of its members coming to an end on March 31, 2018. About BBB The BBB was set up under the government s Indradanush programme to reform public sector banks. It started operations in April 2016. The BBB was conceived by the PJ Nayak committee and was seen as a step taken towards reforming the boards of public sector banks. The committee, in its report, had recommended that the government should distance itself from the appointment process of top management and board members of PSBs — a function that could be performed by the BBB.






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However, in practise it never happened. While the BBB was involved in shortlisting and interviewing candidates — the final appointment was always made by the government. There were instances of delays in appointment by the government despite the BBB recommending it. Other functions discharged by BBB As part of its mandate, and guided by a spirit of collaboration, the bureau is engaging with

various stakeholders. The objective of such engagement being to help prepare the banks in the public sector universe to take on the competition…The bureau is also engaging with the public sector banks (PSBs) to help build capacity to attract, retain and nurture both talent and technology — the two key differentiators of business competencies in the days to come, the BBB said on its website, referring to its task. Headed by former Comptroller and Auditor General Vinod Rai, BBB has representatives from government and RBI apart from independent banking professionals. (Adapted from the Hindu) 39. Cloth, idea, brand: What is khadi, to whom does it belong? The Khadi and Village Industries Commission (KVIC), the statutory body in charge of the development of khadi and other village industries, has threatened to sue Fabindia, the country s largest private platform for products that are made from traditional techniques, skills and hand-based processes , for Rs 525 crore for illegally using its trademark charkha , and for calling its products khadi . KVIC has argued that khadi is a specific type

of product created by a specific process, which is different from factory-made cotton garments. KVIC had sent a similar notice to Fabindia in 2015. A spokesperson for Fabindia told The Indian Express that the company has been in talks with KVIC ever since. Fabindia had applied to KVIC for Khadi Mark certification (that is, the right to call their products khadi ) in 2016, but its application was rejected. We are evaluating the situation, the

spokesperson said. So, what exactly is khadi? Mahatma Gandhi popularised the charkha and indigenously produced cloth as a symbol of the Swadeshi boycott of foreign-made goods, including cloth. Khadi, fabric that was handwoven from handspun yarn, was meant to make every home self-sufficient, and provide employment for rural India. After Independence, KVIC was established by an Act of Parliament in 1956. The KVIC Act defined khadi as any cloth woven on handlooms in India from cotton, silk or woollen yarn handspun in India or from a mixture of any two or all of such yarns . KVIC has been using the khadi trademark on its products and media displays ever since. With time, however,






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many Indians, including users of khadi, came to be no longer conscious that the cloth must, by definition, be both handwoven and handspun. On July 22, 2013, the government notified The Khadi Mark Regulations, 2013 for the purpose of authentication of genuine khadi . These Regulations specified that for institutions or people to sell, trade, or produce khadi and khadi products, the cloth would have to bear the Khadi Mark Tags and Labels issued by the KVIC. Persons or institutions applying for Khadi Mark registration would be subject to specified sample tests. Which institutions were found using the khadi tag without authorisation? KVIC Chairman Vinai Kumar Saxena told The Indian Express, As many as 176 institutions have been given notices by us over the past three years for violating the khadi trademark in some way or the other. These are mostly single-outlet stores and retailers, including six in Chennai, 30 in Madurai, 34 in Hyderabad, 7 in Ambala and five in the Mumbai region. But while others have stopped any such practices after receiving the said notices, Fabindia is the only repeat offender. Saxena said that Fabindia was warned in 2015 and they apologised, again in 2016 they apologised and assured (us) they will not do it again when we sent them a notice. But they continue to do it even till 2017 despite admitting to the mistake. The legal notice (served in 2018) is part of a process, and it will take its course. But why is the government so possessive about the trademark khadi? Both charkha and khadi have been associated inalienably with Mahatma Gandhi, and are powerful symbols of India s struggle for Independence. While successive governments have been keen to ensure that the khadi brand be not used for private profit, the current dispensation has been especially enthusiastic to protect and promote the brand. The KVIC, which functions under the Ministry of Micro, Small and Medium Enterprises, was reconstituted in October 2015, after which it got more teeth, and Saxena was made Chairman. Soon after taking over, Saxena wrote to BJP president Amit Shah, underlining that khadi provides employment to more than 130 lakh people, and asking that khadi be recommended for use in government departments. Shah subsequently wrote to Ministers, urging them ensure that the use of khadi… is maximised… in a systematic manner . In May 2016, a khadi uniform was proposed for Air India s 4,000-strong cabin crew. Culture Minister Mahesh Sharma, who was also Tourism Minister then, proposed khadi bedsheets and upholstery in ITDC hotels, and the setting up of stalls selling khadi products at all Ministry festivals and fairs. Earlier in January 2016, Prime Minister Narendra Modi had given the slogan, Azaadi Se Pehle, Khadi for Nation; Azaadi Ke Baad, Khadi For Fashion , and KVIC has a section on its website on the PM s mentions or tweets about khadi. The government is working on promoting khadi overseas, and KVIC is in talks with industry associations abroad to open franchises, according to a senior Ministry official. To whom does khadi ultimately belong?






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The government has enacted a law and framed Regulations around it, and its disagreement with entities such as Fabindia will ultimately be resolved either through talks within that regulatory framework, or in the courts. At another level though, irrespective of the government s claim to proprietorship, the brand really belongs to the people who give it their patronage. It is on their continued support that the future of khadi depends. Also, the term khadi has been around from long before KVIC came into existence, and in that sense, it is as generic as ayurveda or yoga . Attached to the argument over khadi also are a few other questions. Besides the cloth, are the symbols of khadi, the charkha, and the artisans, too fall exclusively in KVIC s domain? What about smaller artisans who work on handlooms, but are not registered with KVIC? And what other words can be used in popular parlance to describe handmade products if khadi is to be out of bounds? (Adapted from the Indian Express) 40. WhatsApp Payments: Who will pay and who will gain? What is the Payments feature on WhatsApp? Who can get it? It s a feature that allows users to send money to their contacts on the app directly from their bank accounts. WhatsApp has based its Payments feature on the Unified Payments Interface (UPI), which allows instant direct bank-to-bank transfers via a virtual payee address. Since Payments is still in the live beta-testing stage, not all users are seeing it reflected in their app. Users have reported that the feature appears in their WhatsApp settings after they relaunch the app upon getting a WhatsApp message from someone who already has Payments. The beta is limited to 1 million users now, the National Payments Authority of India (NPCI), the UPI regulator and umbrella body for all retail payments in India, has said in a statement. WhatsApp s terms and conditions for using the feature say the user must be 18 years or older, but it is not clear how this will be verified. So, is WhatsApp now processing monetary transactions? No. WhatsApp is not a bank, and it cannot process financial transactions. The terms and conditions of using the feature say that WhatsApp is partnering with ICICI Bank. Once Payments is activated on a user s WhatsApp, they can link their bank account to the app. A payment instruction can then be attached to a message, in the same way as users attach a file, a video or a photo. A UPI PIN and a bank account where UPI is supported, are needed for the transaction. Also, the receiver of the payment, too, must have the Payments feature enabled in their app. WhatsApp has said all payment transactions are final, and there is no option for refunds or chargebacks. And can WhatsApp Payments be used to pay a business? It looks like businesses and merchant accounts are excluded as of now. However, given that WhatsApp now has a Business version of the app in India, it can be expected that these






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accounts will be allowed to accept payments in the future. But there is no announcement as yet. Why are players like Paytm upset with WhatsApp Payments? WhatsApp s 200 million active user base in India could make Payments a gamechanger — and can potentially wreck other mobile wallets. People may switch entirely to the app for smaller, daily transactions. Once businesses are allowed to accept payments via WhatsApp, the feature s use could be boosted further. Paytm co-founder Vijay Shekhar vented on Twitter that After failing to win (the) war against India s open internet with cheap tricks of free basics, Facebook is again in play. Killing beautiful open UPI system with its custom close garden implementation. What he was targeting is the fact that WhatsApp currently does not allow UPI payments to those who are not on WhatsApp — whereas the NPCI s rules for UPI state that interoperability is key to the system, i.e., a user with a UPI account should be able to transfer to another UPI address irrespective of platform (say, from Google Tez to BHIM). NPCI has, however, clarified that WhatsApp Payments is only in a beta test, and full launch will not be allowed unless all principles of the interface are fulfilled. (Adapted from the Indian express) 41. Cabinet approves New Bill to ban Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018 In a major policy initiative to protect the savings of the investors, the Union Cabinet has given its approval to introduce the following bills in the Parliament:- (a) Banning of Unregulated Deposit Schemes Bill, 2018 in parliament & (b) Chit Funds (Amendment) Bill, 2018 The Banning of Unregulated Deposit Schemes Bill, 2018 The bill is aimed at tackling the menace of illicit deposit taking activities in the country. Companies/ institutions running such schemes exploit existing regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings. The Banning of Unregulated Deposit Schemes Bill, 2018 will provide a comprehensive legislation to deal with the menace of illicit deposit schemes in the country through, a. complete prohibition of unregulated deposit taking activity; b. deterrent punishment for promoting or operating an unregulated deposit taking scheme; c. stringent punishment for fraudulent default in repayment to depositors;






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d. designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit taking establishment; e. powers and functions of the competent authority including the power to attach assets of a defaulting establishment; f. designation of Courts to oversee repayment of depositors and to try offences under the Act; and g. listing of Regulated Deposit Schemes in the Bill, with a clause enabling the Central Government to expand or prune the list. Salient Features: The salient features of the Bill are as follows: •The Bill contains a substantive banning clause which bans Deposit Takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme. The principle is that the Bill would ban unregulated deposit taking activities altogether, by making them an offence ex-ante, rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags. • The Bill creates three different types of offences, namely, running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes. • The Bill provides for severe punishment and heavy pecuniary fines to act as deterrent. • The Bill has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally. • The Bill provides for attachment of properties/ assets by the Competent Authority, and subsequent realization of assets for repayment to depositors. Clear-cut time lines have been provided for attachment of property and restitution to depositors. • The Bill enables creation of an online central database, for collection and sharing of information on deposit taking activities in the country. • The Bill defines "Deposit Taker" and "Deposit" comprehensively. "Deposit Takers" include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation.






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"Deposit" is defined in such a manner that deposit takers are restricted from camouflaging public deposits as receipts, and at the same time not to curb or hinder acceptance of money by an establishment in the ordinary course of its business. • Being a comprehensive Union law, the Bill adopts best practices from State laws, while entrusting the primary responsibility of implementing the provisions of the legislation to the State Governments. Background: The Finance Minister in the Budget Speech 2016-17 had announced that a comprehensive central legislation would be brought in to deal with the menace of illicit deposit taking schemes, as in the recent past, there have been rising instances of people in various parts of the country being defrauded by illicit deposit taking schemes. The worst victims of these schemes are the poor and the financially illiterate, and the operations of such schemes are often spread over many States. Subsequently, Finance Minister in the Budget Speech 2017-18 had announced that the draft bill to curtail the menace of illicit deposit schemes had been placed in the public domain and would be introduced shortly after its finalization. The Chit Funds (Amendment) Bill, 2018 The Union Cabinet has given its approval to introduce the Chit Funds (Amendment) Bill, 2018 in Parliament. In order to facilitate orderly growth of the Chit Funds sector and remove bottlenecks being faced by the Chit Funds industry, thereby enabling greater financial access of people to other financial products, the following amendments to the Chit Funds Act, 1982 have been proposed: • Use of the words "Fraternity Fund" for chit business under Sections 2(b) and 11(1) of the Chit Funds Act, 1982, to signify its inherent nature. • While retaining the requirement of a minimum of two subscribers for the conduct of the draw of the Chit and for the preparation of the minutes of the proceedings, the Chit Funds (Amendment) Bill, 2018 proposes to allow the two minimum required subscribers to join through video conferencing duly recorded by the foreman, as physical presence of the subscribers towards the final stages of a Chit may not be forthcoming easily. The foreman shall have the minutes of the proceedings signed by such subscribers within a period of two days following the proceedings; • Increasing the ceiling of foreman's commission from a maximum of 5% to 7%, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold; • Allowing the foreman a right to lien for the dues from subscribers, so that set-off is allowed by the Chit company for subscribers who have already drawn funds, so as to discourage default by them; and • Amending Section 85 (b) of the Chit Funds Act, 1982 to remove the ceiling of one hundred rupees set in 1982 at the time of framing the Chit Funds Act, which has lost its relevance.






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The State Governments are proposed to be allowed to prescribe the ceiling and to increase it from time to time. About Chit fund A Chit fund is a kind of savings scheme practiced in India. According to the Chit Fund Act, 1982: Chit means a transaction whether called chit fund, chit, kuree or by any other name by or

under which a person enters into an agreement with a specified number of persons such that every one of them shall subscribe a certain sum of money by way of periodical instalments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount . How it works? Chit funds operate in different ways. The basic necessity for conducting a chitty is a group of needy people called subscribers. The foreman—the company or person conducting the chitty—brings these people together and conducts the chitty. The foreman is also responsible for collecting the money from subscribers, presiding over the auctions, and keeping subscriber records. He is compensated by a fixed amount (generally 5% of the gross chitty amount) for his efforts. Other than that, the foreman has no specific privileges; he is just a chitty subscriber. A simple formula depicts the pattern of the chitty: Monthly premium × Duration (in months) = Gross amount For example, 1000 × 50 = 50,000, where 1000 is the maximum monthly contribution needed from a subscriber, 50 is the duration of the chitty in months, and 50,000 is the maximum sum assured. The duration also equals the number of subscribers, as there must be (not more or less) one subscriber to receive the prize money every month. The chitty starts on an announced date, and all subscribers come together for the auction/lot. Usually, the minimum prize money of an auction is limited to 70% of the gross sum assured; that is 35,000 in the above example. When more than one person is willing to take this minimum sum, lots are conducted and the lucky subscriber gets the prize money for the month. If there is no person willing to take the minimum sum, then a reverse auction is conducted where subscribers open-bid for lower amounts; that is from 50,000 >> 49,000 >> 48,000, and so on. The person bidding the lowest sum will get the bid amount. The auction discount, that is the difference between the gross sum and auction amount, is equally distributed among subscribers or is deducted from their monthly instalment. For example, if the auction is settled on a sum of `40,000, then the auction discount of `10,000 , − , is divided among members the total number of subscribers , and






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thus, each subscriber gets a discount of `200. The same practice is repeated every month and every subscriber gets a chance of receiving the money. (Adapted from pib) 42. Commercial coal mining opened for private sector Coal India to lose monopoly Opening up commercial coal mining for Indian and foreign companies in the private sector, the Cabinet Committee on Economic Affairs approved the methodology for auction of coal mines/blocks for sale of the commodity. Basis of auction The auction — on an online transparent platform — will be an ascending forward auction whereby the bid parameter will be the price offer in rupees per tonne, which will be paid to the State government on the actual production of coal. There shall be no restriction on the sale and/or utilisation of coal from the mine. Need for bring private players This reform is expected to bring efficiency into the coal sector by moving from an era of monopoly to competition. It will increase competitiveness and allow the use of best possible technology into the sector. The official statement said the higher investment that the sector will now attract will create direct and indirect employment in coal bearing areas especially in mining sector and will have an impact on economic development of these regions. Present position of Coal India Limited Public sector undertaking Coal India was so far the lone commercial miner in the country for over four decades. The company accounts for 84% of India s coal output. Revenue to be given to States As the entire revenue from the auction of coal mines for sale of coal would accrue to the coal bearing States, this methodology shall incentivise them with increased revenues which can be utilised for the growth and development of backward areas and their inhabitants including tribals, it said. States in Eastern part of the country will be especially benefited.






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Legislative backing According to the government, it had promulgated the Coal Mines (Special Provisions) Ordinance, 2014 in October 2014 for management and reallocation of cancelled coal blocks. It was aimed at ensuring smooth transfer of rights, title and interests in the mines/blocks along with its land and other associated mining infrastructure to the new allottees to be selected through an auction or allotment to government company, as the case may be, it had said. That move followed the Supreme Court order in September 2014 cancelling 204 coal mines/blocks allocated to the various Government and Private Companies since 1993 under the provisions of Coal Mines (Nationalisation) Act, 1973. In a bid to bring transparency and accountability, the Coal Mines (Special Provisions) Bill 2015 was passed by the Parliament which was notified as an Act in March 2015. Enabling provisions have been made in the Coal Mines (Special Provisions) Act, 2015 for allocation of coal mines by way of auction and allotment for the sale of coal, the government said. (Adapted from the Hindu and PIB) 43. SWIFT and bank fraud






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What is it? The Rs.11,500 crore fraud in the Punjab National Bank where fund transfer through an inter-bank messaging system was not reported to the core banking solution, followed by the cyberattack on the City Union Bank, has put the spotlight once again on SWIFT or the Society for Worldwide Interbank Financial Telecommunication. In February 2016, in the Bangladesh Bank heist, $81 million was fraudulently withdrawn from the central bank of the country, at the Federal Reserve Bank of New York through the SWIFT network. The SWIFT is a secure financial message carrier — in other words, it transports messages from one bank to its intended bank recipient. Its core role is to provide a secure transmission channel so that Bank A knows that its message to Bank B goes to Bank B and no one else. Bank B, in turn, knows that Bank A, and no one other than Bank A, sent, read or altered the message en route. Banks, of course, need to have checks in place before actually sending messages. How did it come about? The SWIFT is a global member-owned cooperative that is headquartered in Brussels, Belgium. It was founded in 1973 by a group of 239 banks from 15 countries which formed a co-operative utility to develop a secure electronic messaging service and common standards to facilitate cross-border payments. It carries an average of approximately 26 million financial messages each day. In order to use its messaging services, customers need to connect to the SWIFT environment. There are several ways of connecting to it: directly through permanent leased lines, the Internet, or SWIFT s cloud service (Lite2); or indirectly through appointed partners. Messages sent by SWIFT s customers are authenticated using its specialised security and identification technology. Encryption is added as the messages leave the customer environment and enter the SWIFT Environment. Messages remain in the protected SWIFT environment, subject to all its confidentiality and integrity commitments, throughout the transmission process while they are transmitted to the operating centres (OPCs) where they are processed — until they are safely delivered to the receiver. Why does it matter? While all customers are responsible for protecting their own environments, SWIFT established the customer security programme (CSP) in early 2016 to support customers in the fight against a growing cyberthreat. It is critical that customers prioritise the security network. Last April, SWIFT published a detailed description of the mandatory and advisory customer security controls. This framework describes a set of controls for its customers to implement on their local infrastructure. So, have Indian banks adopted the best practices to keep the network safe? The best practices should be applied not only to the SWIFT infrastructure within banks, but the full end-to-end transaction ecosystem within their firms, including payments, securities trade and treasury. In the PNB case, one of its biggest failures was the missing link between SWIFT and the bank s backend software. This allowed fraudulent use of a key credit






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instrument — letters of understanding or a loan request to another bank through the SWIFT network — to transfer funds. What lies ahead? After the fraud, PNB adopted strict SWIFT controls. It has created a separate unit to reauthorise most messages sent over SWIFT by branches. Many other banks are expected to fast-track the integration between SWIFT and their backend systems. To strengthen internal controls, the RBI has set April 30 as an outer limit for all public sector banks to integrate SWIFT with core banking solutions. As for SWIFT, a spokesperson said: First, there is no indication that SWIFT s own network or core messaging services have ever been compromised. SWIFT cannot comment on particular incidents. However, it continues to share insights into modus operandi and indicators of compromise with its customers. (Adapted from The Hindu) 44. Aircel files for bankruptcy Billionaire T. Ananda Krishnan-led Aircel Limited, along with Aircel Cellular Limited and Dishnet Wireless Limited, has filed for bankruptcy under Section 10 of the Insolvency and Bankruptcy Code, 2016 after the company s failed attempt in 2017 to merge itself with Anil Ambani-led Reliance Communications. Reason for bankruptcy It has been facing troubled times in a highly financially stressed industry, owing to intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses. Attempt at loan restructuring As per Reserve Bank of India guidelines, the company invoked a Strategic Debt Restructuring (SDR) scheme in January 2018, but no agreement could be reached with the lenders with respect to restructuring of its debt and funding. (Adapted from the Hindu) 45. Cabinet approves Fugitive Economic Offenders Bill, 2018 The Union Cabinet has approved the proposal of the Ministry of Finance to introduce the Fugitive Economic Offenders Bill, 2018 in Parliament. The Bill would help in laying down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. The cases where the total value involved in such offences is Rs.100 crore or more, will come under the purview of this Bill. Impact:






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The Bill is expected to re-establish the rule of law with respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences. This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions. It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences. Salient features of the Bill: i. Application before the Special Court for a declaration that an individual is a fugitive economic offender; ii. Attachment of the property of a fugitive economic offender; iii. Issue of a notice by the Special Court to the individual alleged to be a fugitive economic offender; iv. Confiscation of the property of an individual declared as a fugitive economic offender resulting from the proceeds of crime; v. Confiscation of other property belonging to such offender in India and abroad, including benami property; vi. Disentitlement of the fugitive economic offender from defending any civil claim; and vii. An Administrator will be appointed to manage and dispose of the confiscated property under the Act. If at any point of time in the course of the proceeding prior to the declaration, however, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for. Further, provision has been made for appointment of an Administrator to manage and dispose of the property in compliance with the provisions of law. Implementation strategy and targets: In order to address the lacunae in the present laws and lay down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts, the Bill is being proposed. The Bill makes provisions for a Court ('Special Court' under the Prevention of Money-laundering Act, 2002) to declare a person as a Fugitive Economic Offender.






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A Fugitive Economic Offender is a person against whom an arrest warrant has been issued in respect of a scheduled offence and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution. A scheduled offence refers to a list of economic offences contained in the Schedule to this Bill. Further, in order to ensure that Courts are not over-burdened with such cases, only those cases where the total value involved in such offences is 100 crore rupees or more, is within the purview of this Bill. (Adapted from PIB) 46. Andhra Pradesh s new capital position Work is going on at a brisk pace to complete the roads leading to Andhra Pradesh s new capital, Amaravati, but the designs for the various buildings, including the Secretariat, are still being finalised. About 33,000 acres of lush agricultural land on the banks of the Krishna, about 12 km to the northwest of Vijayawada, has been earmarked for Chief Minister N. Chandrababu Naidu s dream project, estimated to cost ₹ lakh crore. The foundation was laid by Prime Minister Narendra Modi on October 22, 2015. Why is it taking so long? The government is spending about Rs. 31,615 crore for infrastructure work, setting the stage for the start of construction of permanent facilities in a few months. Work on government offices is yet to take off as the designs by Foster+Partners and architect Hafeez Contractor are not yet in place. The capital is coming up on 217 sq km. Apart from arterial and sub-arterial roads that are being built, the other significant projects that have so far been completed are two universities — SRM and Vellore Institute of Technology.

The government had laid stress on the designs of the Raj Bhavan, the Legislature Complex, the High Court and the Secretariat, which it sent many times for revision, and it is currently under process by Foster+Partners and other consulting firms.






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The perspective plan of the capital region, which encompasses 26 mandals in Guntur district and 30 in Krishna districts, has been readied. This includes the blueprints for transportation, tourism and townships. What are the hurdles? Preparation of a slew of detailed project reports (DPRs), various procedures involved in mobilising funds from the Central government and other lending agencies, including the World Bank, and awarding projects through international competitive bidding took time. The capital city s master planning and engineering design took up to two years. Then there is the sheer scale of the project, like the construction of 4,900-odd residential units, nearly 200 bungalows and a maze of roads including those as ambitious as the expressway intended to link the faraway Anantapur to Amaravati. The government faced legal wrangles in the form of public interest litigation petitions against the construction of Amaravati at the chosen location and in the selection of the master developer. What about funding? The State government has received ₹ , crore from the Central government and is likely to get more funds. The World Bank had come forward to lend $1 billion for road infrastructure in the capital region, and 10 priority roads are poised for completion at the end of this year. When will it be ready? The construction of the iconic government buildings is likely to begin in a few months, and the laying of the first floor of residential quarters for government employees later this month. Tenders have been just called for building another bridge across river Krishna from Ibrahimpatnam in Krishna district to Amaravati. Already 10,000 plots given to the farmers under the land pooling scheme, which began on January 1, 2015, have been registered and 200-300 are getting registered every day. The Chief Minister has instructed officials to ground the core capital soon, having finished much of the planning and tied up funds. Nevertheless, considering the magnitude of the task, it is going to take at least two years, if not more, to transform the entire capital region into a world-class city. The State government is now functioning from the Interim Government Complex built at Velagapudi nearby. Situated nearby are the temporary Assembly and Council halls under a single roof. (Adapted from the Hindu) 47. E-way bill roll-out from April 1: Here is all you need to know






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What is e-way bill? Under the e-way bill system, goods worth more than Rs. 50,000 have to be pre-registered online before they can be moved from one state to another. An e-way bill is an electric-way bill for the movement of goods which can be generated on the GSTN (common portal). After the implementation of this bill, any movement of goods of more than Rs 50,000 in value cannot be made by a registered person without an e-way bill. It will be allowed to be generated or cancelled through SMS. When an e-way is generated, a unique e-way bill number (EBN) is allocated and is available to the supplier, recipient, and the transporter. What is the status of its implementation? In a GST Council meeting, the decision to implement the e-way bill mechanism throughout the country by April 1,2018 was taken. When is an e-way bill generated? The e-way bill is generated when there is a movement of goods: 1.In relation to the supply. 2.For reasons other than a supply (say a return). 3.Due to inward supply from an unregistered person. In this case, a supply can either be: 1.Sale – sale of goods and payment made 2.Transfer – branch transfers for instance 3.Barter/Exchange – where the payment is by goods instead of in money Who generates an e-way bill? It has to be generated to or from a registered person if the movement of goods is more than Rs. 50,000 in value. A registered person or transporter can choose to generate and carry e-way bill even of the value of goods is less than Rs 50,000. Unregistered persons or their transporters may also choose to generate an e-way bill. This means that an e-way bill can be generated by both registered and unregistered persons. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier. Are there concerns from industry? Trade and industry have raised concerns about the system being a possible route for the re-emergence of supply chain bottlenecks, and discretionary power to tax officials. The industry views the e-way bill as a system that will check tax evasion to some extent, but






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may not be able to stop it completely. Also, it adds another layer of compliances for GST payers and, in case of technical glitches, may result in supply chain bottlenecks. (News Adapted from Financial Express) 48. National Health Protection Scheme (NHPS) Analysis In his Budget speech of February 1, Finance Minister Arun Jaitley announced a National Health Protection Scheme (NHPS) to provide insurance cover to an estimated 50 crore individuals from nearly 10 crore poor and vulnerable families. The announcement of the so-called world s largest health protection plan was followed by questions over whether the healthcare system had the capacity to handle a scheme of such proportions, and whether the NHPS wouldn t end up being an unbearable burden on the exchequer. Moral hazard In health insurance parlance, moral hazard is the tendency of insured people to buy or be sold additional healthcare interventions irrespective of their actual needs, leading to expenses that do not necessarily add to their well-being, but which bleed the insurer. Experts have been cautioning authorities about potential moral hazard challenges. Typical moral hazard procedures include Caesarean sections, hysterectomies, and procedures for inserting orthopaedic implants. The 2015-16 National Family Health Survey (NFHS-4) noted a disproportionately high number of C-sections for childbirth in the private sector, especially in the cities. Nationally, 40.9% of births in the private sector and 11.9% in the government sector happen by C-section. According to the World Health Organisation, the ideal rate for C-sections should be between 10% and 15%. Eligibility criteria Union Health Secretary Preeti Sudan recently informed states that eligibility for NHPS will be determined based on data from the socio-economic caste census (SECC). The number of poor and vulnerable beneficiary families eligible for the scheme is proposed to be based on deprivation and occupational criteria as per SECC data. The scheme will be open to all States/UTs. The proposed target population is (a) families that belong to any of the 7 deprivation criteria (b) automatically included families as per SECC database for rural areas and (c) defined occupational criteria for urban areas, Sudan wrote. But several states argued that depending on the SECC would limit the reach of the scheme. Maharashtra, for example, currently provides a Rs 2 lakh annual health cover to about one crore people; this would fall to 60 lakh people if the state were to follow SECC data. Covered procedures






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Deciding what procedures would be included in the NHPS list is one of the most crucial decisions. During initial meetings with general insurers, NITI Aayog had calculated the annual premium per family to be Rs 1,082. However, insurers have pegged the actuarial premium at Rs 2,500, citing the sustainability of the scheme. If the government agrees to the premium amount put forth by the insurers, the cost will more than double from the present estimate of Rs 10,000 crore. In Tamil Nadu, 686 procedures are covered under the Chief Minister s Comprehensive Health Insurance Scheme, including most complicated cardiac procedures, hernia, tracheotomy and oesophagectomy. The scheme covers 1.57 crore families with an annual income of less than Rs 72,000. The Directorate General of Health Services (DGHS) has been asked to prepare a list of procedures/diseases to be covered under NHPS. Once finalised, the list will be circulated to states who opt for the scheme, with a provision to make marginal changes in the package rates. Packages are important because the coverage amount is limited, and no ceiling has been proposed on family size. In addition, a balance will have to be struck between all the common conditions based on India s unique disease burden and procedures that are value for money. For example, whether organ transplant will be covered is a tricky question, as the money paid as premium is meagre and only a few government hospitals have the capability of carrying out such procedures. Audit mechanism Since Parliament enacted the Clinical Establishments (Registration and Regulation) Act in 2010, the Union government has planned to implement a regulatory framework for private hospitals based on the standard treatment guidelines laid down in the law. Third-party audit of procedures/prescriptions is now back on the table for the Health Ministry. Like Kerala, the Ministry is looking at the option of pre-authorisation for non-emergency procedures. The audit, sources say, could be a mandatory requirement for reimbursement of expenses to private hospitals. (Adapted from The Indian Express) 49. What was the 20:80 gold import scheme? The Centre on Monday announced its intention to probe the circumstances behind the extension of the 20:80 gold import scheme, previously restricted to banks and PSUs, to private parties in the final days of the previous government s term in 2014. What prompted the scheme?






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In response to a stressed current account deficit in 2012-13 due to a surge in gold imports, the government at the time introduced an import scheme in 2013, which mandated that 20% of all gold imports would have to be exported. The scheme was designed to restrict the import of gold, conserve foreign exchange by

imposing export obligations, and ensure that the premium from purchase and sale of gold resided in the hands of public agencies, according to the Commerce Ministry. Who could import gold under the scheme? At the time of its implementation, the 20:80 scheme was open only to banks and to public sector companies such as the Metals and Minerals Trading Corporation and the State Trading Corporation of India. In May 2014, the RBI in consultation with the government widened the scheme to also allow Premium Trading Houses (PTH) and Star Trading Houses (STH), both private sector entities, to import gold. How did the scheme fare? According to the Commerce Ministry, a review of the scheme found that since liberalisation in May 2014, gold imports had increased substantially, averaging about 140-150 tonnes a month. Within this, the government found that gold imported by STHs and PTHs increased 320% following the May 2014 decision compared with the earlier period. The share of these entities in the total gold imported into the country also increased from 20% before May to 60% after, according to the government. The government on November 28, 2014 scrapped the 20:80 scheme and removed all restrictions on gold imports. What was the impact of the abolition? The Centre, citing the Comptroller and Auditor General of India, said that the average monthly import of gold fell to 71.5 million tonnes in the months following the abolition of the 20:80 scheme [December 2014 to March 2015] from the monthly average of 92.16 million tonnes in the period following the widening of the policy [June 2014 to November 2014]. Gold imports averaged 33.6 million tonnes per month before STHs and PTHs were allowed to import under the 20:80 scheme [from August 2013 to May 2014], according to the government. (Adapted from The Hindu) 50. Implication of RBI s ban on LoUs The Reserve Bank of India s decision to ban Letters of Undertaking (LoUs) will raise costs for importers and will hurt export competitiveness, says SBI chairman Rajnish Kumar, in an exclusive interview. Edited excerpts:






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What will be the impact of RBI s ban on Letters of Undertaking (LoU)? The cost of imports will go up. What was happening was importers, through the route of LoU, they were availing dollar funding which was cheaper than rupee funding. So now, the importer will have an option of either opening a letter of credit, but for that they will need suppliers agreement — the supplier should be willing to extend the credit. Or otherwise, they have to fund it through rupee borrowing. So, that will increase the cost. And if they are exporting, then it will impact your export competitiveness also. He said the cost for trade will go up as LoU was a simple method to avail international trade finance. LoUs are the cheapest source of funding as it is prices 20-30 bps above the LIBOR, typically three or six month. The total cost is around 2.3% which is much lower than any rupee loan product which are over 9%. Since LoU route is no longer, importers have to take bank guarantees or letter of credit which are expensive. PNB had said it will pay the bonafide dues to the banks. When are you expecting payments from PNB? We have given our claim and all the supporting documents. Hopefully some repayment will happen this month. What has been the response from the banking regulator for improving checks and balances after the PNB scam? RBI has asked all the banks to integrate SWIFT with the core banking solution. All banks are now linking SWIFT with CBS. RBI has given a circular to do it by April 30. What are the steps SBI has taken? Risk management in the bank is a continuous process and not a one-day process. Period review, see to it that checks and balances are working, you have to on a continuous basis. (Adapted from The Hindu) 51. RBI ban on LoU RBI ban A month after the Rs.12,800-crore letters of undertaking (LoUs) fraud at Punjab National Bank came to light, the Reserve Bank of India has decided to ban such instruments as well as letters of comfort issued by bankers to businesses for international transactions. Extent of import finance It is estimated that overall, bank finance for imports into India is around $140 billion, of which over 60% is funded through such buyers credit. Naturally, industry is unhappy with






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the RBI decision as this would raise the cost for importers, who will now need to rely on more expensive instruments such as bank guarantees and letters of credit. The move will also impact the competitiveness of exporters who import raw materials for their products. Impact of ban RBI omnibus ban of LoUs will impact the $85 billion buyers credit market that was mostly conducted in accordance with the law of the land. If an individual or some failed systems of a bank were indeed to blame, why should bona fide transactions suffer? Perhaps the RBI could have tightened the norms for LoUs and introduced safeguards based on the latest learnings. It is still not too late to do that. (Adapted from The Hindu) 52. Is govt. turning a deaf ear to banks bureau? Is the government ignoring the suggestions of the Banks Board Bureau (BBB) on reforms in public sector banks? The answer is yes if one were to go by the Compendium of Recommendations put up on its website, where it said the bureau was merely functioning as an appointment board . Though the bureau, headed by Vinod Rai, had sought a meeting with finance minister Arun Jaitley to chalk out the action plan for reforms in PSBs in July 2017, the minister had not given it time yet, it said. Background Having begun functioning from April 1, 2016, BBB was seen as step towards governance reforms in public sector banks as recommended by the P.J. Nayak Committee. No executive role

BBB had also sought the government s mandate to rework the Articles of Association of IDBI Bank Ltd. so that it mirrored, to the extent possible, the Articles of Association of other such institutions which were earlier in the public sector. These mandates were suggested to further reinforce and institutionalise the zero interference policy of the government, it said. It clarified that the board did not seek an executive role, however. It was to discuss these matters it had sought a meeting with the Finance Minister. The board was still awaiting a meeting, the letter said. The letter also indicated that reforms could be undertaken without the Centre cutting stake below 51%, contrary to recommendations by the Nayak committee. The present term of BBB members will end on March 31. It is not clear whether the Centre will reconstitute the board or extend their term.






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Banks Board Bureau The BBB is a body of eminent professionals and consists of only one government official. It is a six-member body with at least three former bankers, two professionals and secretary, department of financial services representing government. Vinod Rai, the veteran CAG, has been appointed as head of the BBB. It will replace the existing system of Appointments Board in which appointments for top-level jobs at public-sector banks are made by an appointments committee led by the RBI Governor. The BBB has been set up to insulate public-sector banks from interference by the government. Functions The BBB will hold investment in public-sector banks on behalf of the government. 1. The BBB will recommend the appointment of senior-most officials in public-sector banks. 2. The BBB will advise banks on the ways of raising fund. 3. It will also guide banks on mergers and consolidations. 4. It will also guide banks on mergers and consolidations. (Adapted from The Hindu and Background from PrepMate-Cengage Economics Book, Page 237 ) 53. Payment of Gratuity (Amendment) Bill, 2018 passed by Parliament Objective of amendment The Payment of Gratuity (Amendment) Bill, 2018 has been passed by parliament. The bill ensures harmony amongst employees in the private sector and Public Sector Undertakings/Autonomous Organizations under Government who are not covered under CCS (Pension) Rules. These employees will be entitled to receive higher amount of gratuity at par with their counterparts in Government sector. Whom does the act apply? The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons. The main purpose for enacting this Act is to provide social security to workman after retirement, whether retirement is a result of superannuation, or physical disablement or impairment of vital part of the body. Therefore, the Payment of Gratuity Act, 1972 is an important social security legislation to wage earning population in industries, factories and establishments. What is the recent amendment? The present upper ceiling on gratuity amount under the Act is Rs. 10 Lakh.





https://prepmate.in/product/economics-civil-services/



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The provisions for Central Government employees under Central Civil Services (Pension) Rules, 1972 with regard to gratuity are also similar. Before implementation of 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 Lakh. However, with implementation of 7th Central Pay Commission, in case of Government servants, the ceiling has been raised to Rs. 20 Lakhs. Therefore, considering the inflation and wage increase even in case of employees engaged in private sector, this Government decided that the entitlement of gratuity should also be revised in respect of employees who are covered under the Payment of Gratuity Act, 1972. Accordingly, the Government initiated the process for amendment to Payment of Gratuity Act, 1972 to increase the maximum limit of gratuity to such amount as may be notified by the Central Government from time to time. In addition, the Bill also envisages to amend the provisions relating to calculation of continuous service for the purpose of gratuity in case of female employees who are on maternity leave from 'twelve weeks' to such period as may be notified by the Central Government from time to time. After enactment of the Act, the power to notify the ceiling of the amount of gratuity under the Payment of Gratuity Act, 1972 shall stand delegated to the Central Government so that the limit can be revised from time to time keeping in view the increase in wage and inflation and future pay commissions. (Adapted from PIB) 54. Draft defence policy Aims of defence policy The policy says the vision is to make India among the top five countries of the world in the aerospace and defence industries, with the active participation of the public and private

sectors, fulfilling the objective of self-reliance as well as the demand of other friendly

countries.

30 lakh jobs

1. Turnover Rs .1.7 lakh crore in defence goods and services 2. Attract Investment of Rs. 70,000 crore in defence sector

3. Exports of Rs. 35,000 crore in defence goods and services by 2025

4. Global leader in cyberspace and AI (Artificial Intelligence) technologies. Provisions






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1. Further liberalization of Foreign Direct Investment (FDI), by permitting up to 74% FDI

under the automatic route. At present, up to 49% FDI is allowed through the automatic

route, though no significant investment has come into the sector.

2. Make in India The policy aims to create an environment that encourages a dynamic, robust and

competitive defence industry as an important part of the Make in India initiative . (Adapted from the Hindu)

55. SARAS Aajeevika Mela Union Minister of Rural Development is implementing the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission which aims at making the rural women confident, aware and self-dependent. The SARAS Aajeevika Mela is an attempt to provide direct marketing platform to the rural women producers so that they get proper prices for their products by eliminating middle men. DAY-NRLM Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM) is one of the flagship programmes of the Ministry of Rural Development, Government of India to alleviate rural poverty. The programme aims at mobilizing all rural poor women into self managed community institutions (Self Help Groups, Village Organisations, Cluster Level Federations, Producer Groups/Companies), in a phased manner. The Mission also aims at promoting financial inclusion of the community institutions and provide support for strengthening and diversification of livelihoods resources of the women member households. Since its launch in 2011, the Mission has expanded to 4456 Blocks of 584 Districts, across 29 States and 5 Union Territories. Mahila Kisan Sahshaktikaran Pariyojana Under a sub-scheme called Mahila Kisan Sahshaktikaran Pariyojana (MKSP), the Mission has been supporting about 33 lakh women farmers to enhance farm productivity and diversify their livelihood asset base. In addition, the Mission is promoting individual and collective enterprises of SHG women both under farm and non-farm sector. The Ministry is also implementing sub-schemes under DAY-NRLM to support skill training and placement support under Deen Dayal Upadhyay -Grameen Kaushalya Yojana (DDU-GKY) and Rural Self Employment Training Institutes (RSETIs) scheme and for enterprise support under Start Up Village Entrepreneurship Programme (SVEP) and Aajeevika Grameen Express Yojana .






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About SARAS SHG members are producing various kinds of agricultural and non-agricultural/handicraft products but face problems in marketing their produce. In order to promote marketing of the products of these SHG women, Ministry of Rural Development has been supporting organisation of exhibitions under the brand name of SARAS where Self Help Groups from different states participate to exhibit and sell their products. At present, two SARAS Fairs in State are sponsored by the Ministry in each state during a financial year by way of providing assistance upto Rs 40.00 lakh per fair in Metropolitan cities (Bangalore, Mumbai, Chennai, Delhi, Kolkata and Hyderabad) and upto Rs 35.00 lakhs per fair in non-Metropolitan cities. (Adapted from PIB) 56. India s Contribution to World s GDP As per the information available from World Bank and International Monetary Fund (IMF), the contribution of India to world s Gross Domestic Product (GDP), measured as share of GDP of India in world GDP (at current prices in US$ terms) is consistently increasing since 2014 as shown in the table below. As per the available data, this share in 2017 is the highest. India's share in world GDP at current prices in US$ terms (per cent)

2014 2015 2016 2017

Share of India in world GDP 2.6 2.8 3.0 3.1

(Adapted from PIB) 57. Falling investment in Indian bonds Withdrawal of investment from bonds More people are losing their love for Indian bonds. Foreign investors have been net sellers of over $1 billion in Indian debt this month, almost cancelling out inflows since the beginning of the year. The deserting of the Indian market by foreign investors comes at a time when the Centre is looking at tapping the bond market aggressively to finance its election-year spending. Rise in yield The yield on the benchmark 10-year bond has risen by almost 1 percent since late-July amid lacklustre investor demand. The rise in yields is due to a variety of reasons that have pushed both foreign and domestic investors to re-price Indian sovereign bonds.






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1. For one, the government is expected to step up borrowing ahead of elections; in fact, the fiscal deficit targets for the current as well as the coming fiscal year were revised upwards in the Budget. This has fuelled market fears about a rise in inflation. 2. Further, the public sector banks, typically the biggest lenders to the government, have turned wary of lending. As the losses on their bond portfolios mount, they have turned net sellers of sovereign bonds in 2018. 3. Another tailwind affecting bonds is the prospect of higher interest rates in the West, which has made Indian bonds look a lot less lucrative in the eyes of foreign investors. 4. The weakening rupee, probably a reflection of higher domestic inflation and fund outflows in search of yields, has added to selling pressure. Reduction in borrowing by government Given these pressing concerns, it is no surprise that Indian sovereign bonds have witnessed a relief rally since news broke that the Centre will trim its market borrowing during the first half of the coming fiscal year. The yield on the 10-year Indian sovereign bond has dropped by that day. The Centre s borrowing target for April-September was cut to Rs. 2.88 lakh crore, which is about 48% of the total budgeted borrowing for the year, in contrast to Rs. 3.72 lakh crore in the first half of this year. Interestingly, first-half borrowing was more than 60% of the annual borrowing target in each of the last two years. Way forward The bond rout should thus serve as a timely warning as it looks to ramp up spending ahead of elections. Lastly, with the vacuum created by the state-run banks, it may be time for the Reserve Bank of India to re-examine the rule limiting the role of foreign investors in the bond market. (Adapted from The Hindu)

58. Payment of Gratuity (Amendment) Act, 2018 brought in force on 29th March, 2018 The Payment of Gratuity (Amendment) Bill, 2018 has been passed by Lok Sabha on 15th March, 2018 and by the Rajya Sabha on 22nd March, 2018, has been brought in force on 29th March, 2018. Background The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons. The main purpose for enacting this Act is to provide social security to workman






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after retirement, whether retirement is a result of superannuation, or physical disablement or impairment of vital part of the body. Therefore, the Payment of Gratuity Act, 1972 is an important social security legislation to wage earning population in industries, factories and establishments. Amendments introduced 1. The present upper ceiling on gratuity amount under the Act is Rs. 10 Lakh. The provisions for Central Government employees under Central Civil Services (Pension) Rules, 1972 with regard to gratuity are also similar. Before implementation of 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 Lakh. However, with implementation of 7th Central Pay Commission, in case of Government servants, the ceiling has been raised to Rs. 20 Lakhs. Therefore, considering the inflation and wage increase even in case of employees engaged in private sector, this Government decided that the entitlement of gratuity should also be revised in respect of employees who are covered under the Payment of Gratuity Act, 1972. Accordingly, the Government initiated the process for amendment to Payment of Gratuity Act, 1972 to increase the maximum limit of gratuity to such amount as may be notified by the Central Government from time to time. Now, the Government has issued the notification specifying the maximum limit to Rs. 20 Lakh. 2. In addition, the Bill also envisages to amend the provisions relating to calculation of continuous service for the purpose of gratuity in case of female employees who are on maternity leave from twelve weeks to such period as may be notified by the Central Government from time to time . This period has also been notified as twenty-six weeks. Impact This will ensure harmony amongst employees in the private sector and in Public Sector Undertakings/ Autonomous Organizations under Government who are not covered under CCS (Pension) Rules. These employees will be entitled to receive higher amount of gratuity at par with their counterparts in Government sector. (Adapted from PIB) 59. Is India prepared for e-way bill? Businesses and transporters are sceptical about the successful roll-out of the GST e-way bill system, scheduled from 1 April. Reason cited 1. Though the Goods and Services Tax Network (GSTN), the firm handling the backbone of GST regime, has said that e-way bill generation capacity has been ramped up to handle 7.5 million such bills a day, but businesses remain apprehensive.






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The number of e-way bills that need to be generated may be much higher than 75 lakh.

Around 70 lakh trucks are used for transport of goods and each truck may carry multiple consignments that will need e-way bills, said Abhishek Gupta, office-bearer at Bombay Goods Transport Association (BGTA), adding that many practical issues remain. 2. The anxiety also stems from the fact that the e-way bill system may not adequately address the actual ways of doing business on the ground, in addition to adding to the cost of compliance. About e-way bill While e-way bills will come into force in the entire country for inter-state shipment of goods from 1 April, intra-state movement of goods is expected to come under this system over time. States like Karnataka, Maharashtra and Gujarat are expected to make e-way bills compulsory for goods movement within their states from 15 April, followed by others in the next phase. E-way bill is one of three tools for tackling tax evasion under the GST regime, along with invoice matching and the requirement of large businesses sourcing products and services from micro and small businesses, to collect taxes from them and pay to the government on their behalf under a reverse charge mechanism . Invoice matching and reverse charge mechanism are still to be implemented. What is e-way bill? Under the e-way bill system, goods worth more than Rs. 50,000 have to be pre-registered online before they can be moved from one state to another. An e-way bill is an electric-way bill for the movement of goods which can be generated on the GSTN (common portal). After the implementation of this bill, any movement of goods of more than Rs 50,000 in value cannot be made by a registered person without an e-way bill. It will be allowed to be generated or cancelled through SMS. When an e-way is generated, a unique e-way bill number (EBN) is allocated and is available to the supplier, recipient, and the transporter. (Adapted from Live Mint) 60. NIRF India Rankings 2018 The Union Minister of Human Resource Development, Shri Prakash Javadekar, released the NIRF India Rankings 2018 in various categories on the basis of performance of Higher Educational Institutions What is National Institutional Ranking Framework (NIRF)? It ranks educational institutions based on objective and verifiable criteria. It has been made available separately for Engineering, Management, Pharmaceutical, Architecture, Humanities, Law and for Universities.






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The first ranks were declared in April 2016. More than 3,500 institutions have participated in the exercise, making it the largest educational institutions ranking exercise in the World. The second Rankings were released in April 2017. About 2018 rankings In this third edition of India Rankings, a total of 2809 institutions have participated in 9 categories. Collectively they have submitted 3954 distinct profiles, some in multiple disciplines/categories. This includes 301 Universities, 906 Engineering Institutions, 487 Management Institutions, 286 Pharmacy Institutions, 71 Law Institutions, 101 Medical Institutions, 59 Architecture Institutions and 1087 General Degree Colleges. India Rankings 2018 have ranked institutions in the disciplines/categories mentioned

above, and have also provided a common overall rank across all disciplines for those institutions which have more than 1000 enrolled students. List of top 10 India Rankings 2018 is as follows: Overall:

Indian Institute of Science, Bengaluru 1

Indian Institute of Technology Madras 2

Indian Institute of Technology Bombay 3

Indian Institute of Technology Delhi 4

Indian Institute of Technology Kharagpur 5

Jawaharlal Nehru University, New Delhi 6

Indian Institute of Technology Kanpur 7

Indian Institute of Technology Roorkee 8

Banaras Hindu University, Varanasi 9

Anna University, Chennai 10






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Management

Indian Institute of Management Ahmedabad 1

Indian Institute of Management Bangalore 2

Indian Institute of Management Calcutta 3

University

Indian Institute of Science, Bengaluru 1

Jawaharlal Nehru University, New Delhi 2

Banaras Hindu University, Varanasi 3

Colleges

Miranda House, Delhi 1

St. Stephens`s College, Delhi 2

Bishop Heber College, Tiruchirappalli 3

Pharmacy

National Institute of Pharmaceutical Education and Research Mohali

1

Jamia Hamdard, New Delhi 2

Panjab University, Chandigarh 3

Medical






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All India Institute of Medical Sciences, New Delhi 1

Post Graduate Institute of Medical Education and Research, Chandigarh

2

Christian Medical College, Vellore 3

Architecture

Indian Institute of Technology Kharagpur 1

Indian Institute of Technology Roorkee 2

School of Planning & Architecture New Delhi 3

Law

National Law School of India University, Bengaluru

1

National Law University, New Delhi 2

Nalsar University of Law, Hyderabad 3

Engineering

Indian Institute of Technology Madras 1

Indian Institute of Technology Bombay 2

Indian Institute of Technology Delhi 3

(ADAPTED FROM PIB) 61. All you need to know about the GST e-way bill system






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The GST e-way bill system was rolled out all over India from 1 April as part of anti-tax evasion measures under the new tax regime. A look at the new system What is e-way bill? It is an electronic documentation detailing the movement of goods and has to be carried by transporters for any consignment exceeding Rs50,000 in value. It can be generated from the GSTN set up for the e-way bill system by the transporter before the movement of goods begins. The e-way bill s validity varies depending on the distance that the goods have to travel. Typically, the bill s validity is one day for every 100km of movement of goods. Is it mandatory for all movement of goods? The GST e-way bill is mandatory from 1 April for all inter-state transport of goods valued above Rs50,000. It will be made compulsory for the moving goods within a state in a phased manner from 15 April. Some goods that are out of the e-way bill s ambit include perishable items such as meat, milk and milk products and fruits and vegetables. Other items that don t need an e-way bill are gold and silver jewellery, cooking gas cylinders, raw silk, wool and handlooms. Why is it important? The e-way bill is a key anti-tax evasion measure and is a crucial part of the GST architecture. Tax authorities believe its implementation will dissuade tax evaders from underreporting transactions. It will also check instances where the entire transaction is not recorded due to connivance between the seller and buyer. It will provide a boost to GST revenues, which have stabilized around Rs85,000-90,000 crore. The government is hoping that this anti-evasion measure will bring buoyancy. What are the concerns? The industry is worried that the technology system may not be prepared to handle the huge e-way bill volume and that this may cause a disruption to trade. When the e-way bill system was initially rolled out on 1 February, technological glitches caused long delays in generation of GST e-way bills. This led to trade coming to a standstill, forcing the government to defer its implementation. Another worry for industry is the potential scope for harassment by tax authorities. Taxmen have powers to stop trucks and check e-way bills and transporters fear this may lead to rent-seeking. What safeguards have been put in place? To avoid technological glitches, the GSTN and the National Informatics Centre have ramped up the infrastructure. The system can now handle 75 lakh e-way bills daily, compared with 26 lakh earlier. To prevent harassment of taxpayers, e-way bill rules specify that goods will be inspected only once during the journey except in cases where specific information on tax evasion is received. Further, in case a vehicle is detained for more than 30 minutes, the transporter can report it on the portal.






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(Adapted from Live mint) 62. RBI switches back to GDP scale to measure economy Dumps GVA methodology as it cites global best practices The Reserve Bank switched back to the gross domestic product (GDP)-based measure to offer its growth estimates from the gross value added (GVA) methodology, citing global best practices. The government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January. Demand perspective While GVA gives a picture of the state of economic activity from the producers side or supply side, the GDP model gives the picture from the consumers side or demand perspective. What is Global trend? Globally, the performance of most economies is gauged in terms of gross domestic product (GDP). This is also the approach followed by multilateral institutions, international analysts and investors, and primarily they all stick to this norms because it facilitates easy cross-country comparisons. Gross Value Addedor GDP (FC) Gross value added (GVA) is the measure of the value of goods and services produced in an area, industry, or sector of economy. Relationship to GDP GVA is linked to GDP, as both are measures of output. The relationship is defined as follows: GVA + Taxes on products − Subsidies on products = GDP Why GVA is Calculated? 1. GVA and GDP give a picture of economic activity from producers (supply side) and consumers (demand side) perspective, respectively, because GVA is the net receipt of the producers and GDP is the expenditure incurred by the consumers. 2. Both these measures need not match and there could be a sharp divergence due to net indirect taxes NIT = indirect taxes − subsidies , which are counted in GDP calculations (GDP is the sum of GVA and NIT). 3. GVA provides a better measure of economic activity because GDP can record a sharp increase just on account of increased tax collections due to better compliance/coverage and not necessarily due to increase in output. 4. GVA is a better reflection of the productivity of the producers as it excludes the indirect taxes, which could distort the production process.






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5. A sector-wise breakdown provided by the GVA measure can better help policymakers to decide which sectors need incentives/stimulus or vice versa. (Adapted from the Hindu and Background from PrepMate-Cengage Economic Book, Chapter 1 Page-4) 63. Walmart and Amazon compete to acquire Flipkart Walmart set to acquire Flipkart Walmart Inc. has completed a thorough due diligence process on e-commerce firm Flipkart this week, two people said, as the US retail giant looks to take a controlling stake of 51% or more in the Indian e-commerce firm. Walmart has already floated a shareholder agreement, or offer proposal, and is looking to shell out about $10 billion to $12 billion for the stake that would value Flipkart at roughly $20 billion. Walmart s investment would give Flipkart not just additional funds to fight Amazon, but also arm it with a formidable ally with extensive experience in retailing, logistics and supply chain management. For Walmart, a Flipkart deal would open up a vast market and another front to take on its biggest rival. Amazon also want Flipkart A stake in Flipkart would pit Walmart against Amazon.com Inc. in India. Amazon is exploring a rival offer for India s largest home-grown e-commerce player. Amazon is an e-commerce retailer and Walmart is physical store retailer keen on entering e-commerce. About Flipkart Bengaluru-based Flipkart, started by two former Amazon employees Sachin Bansal and Binny Bansal (not related), is fighting Amazon to grab a bigger piece of India s massive online retail market which, according to Morgan Stanley, could be worth $200 billion in a decade. (Adapted from Livemint) 64. Undermining of multilateral by US Import duties levy This week has seen rounds of tit-for-tat tariffs between the U.S. and China, set off by U.S. President Donald Trump levying import duties of 25% and 10% on American steel and aluminium imports, respectively, in early March. Rationale given by Donald Trump








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Mr. Trump, who has repeatedly used the U.S. trade deficit of over $500 billion as a barometer for the country s lot in the international trade order, has railed against the U.S. being treated unfairly by its trading partners, often singling out China. Biasness in US import policy While it is true that China produces approximately half the world s steel and that the European Union, India and other countries have complained about international steel markets being flooded with Chinese steel, only 3% of U.S. steel is sourced from China. Interestingly, among those exempted from the tariffs are Canada and Mexico, top sources for U.S steel imports. Mr. Trump has linked the threat of tariffs to the North American Free Trade Agreement, a trade deal among the U.S., Canada and Mexico that Mr. Trump has pried open for renegotiation. Tit for tat Earlier this week China retaliated with tariffs that would impact $3 billion worth of American goods. This was followed by the U.S. proposing tariffs on more than $50 billion of Chinese goods, including in the aerospace, robotics and communication industries — the outcome of an investigation of several months into whether Chinese policies were placing unreasonable obligations on U.S. companies to transfer technology and hand over intellectual property while setting up shop in China. Beijing responded with a second round of proposed tariffs impacting a similar value of U.S. imports into China. Mr. Trump has now asked the U.S. Trade Representative to examine if an additional $100 billion worth of goods can be taxed. Chances for settlement Since the proposed tariffs have not kicked off, there may be room for negotiation. The economic ties between the countries are deep; China holds some $1.2 trillion in U.S. debt, and it is in everyone s interest to avoid escalating matters. Undermining multilaterism However, the larger cause for concern here is that Mr. Trump continues to undermine the World Trade Organisation and the international world trade order, now that it has served the West well and developing countries are in a significantly stronger position than when the WTO came into existence in 1995. Mr. Trump has pulled out of the Trans-Pacific Partnership, is pushing changes to NAFTA and has withdrawn from the Paris Agreement to combat climate change. While large-scale protectionism and unilateralism may please some of Mr. Trump s constituents in the short run, undermining existing rules arbitrarily serves no nation, including the U.S., in the long run. In the current climate, it is therefore especially important for India to be a good steward for responsible globalisation. (Adapted from The Hindu) 65. India among the hardest hit by protectionism in G-20 club






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Among the largest economies in the G-20 group, China, the US and India have been hit the hardest by protectionist measures in 2017, according to data from the Global Trade Alerts (GTA) database. Among emerging economies, China faced the greatest number of protectionist interventions in the past year (403), followed by India (236). Recent developments—including US tariff actions against India—suggest that India could be hit hard by the growing tide of protectionism in the coming months as well. Impact on Indian economy The magnitude of loss in export earnings for India might be relatively smaller than in the case of China because of India s lower share in global exports. Nonetheless, the rising tide of protectionism threatens India s trade surplus in the services sector and will hit export earnings of Indian firms. What is Global Trade Alerts (GTA) database ? The GTA database is a trade policy monitoring initiative by Simon Evenett and Johannes Fritz, economists with the University of St. Gallen, Switzerland. The database attempts to record all unilateral actions by governments, including those by public institutions such as the central bank, which affect trade. The countries affected by each such action are identified on the basis of existing trade pattern between the countries concerned. The data shows that protectionism has been on the rise ever since the global financial crash of 2008 shook the world, and disrupted trade and financial flows. The ongoing skirmish between the US and China over tariffs only marks a new phase in the global lurch towards protectionism. Protectionism appears to have been more enthusiastically adopted by advanced countries, which have struggled to grow their economies in the wake of the global financial crisis. Trends in global trade Between 2004 and 2008, the global trade-GDP ratio rose 6.6 percentage points to reach a peak of 60.8% in 2008. The slowdown in global growth and the rising spate of protectionist interventions have brought down that ratio to 56.4% in 2016. Indian firms, which witnessed a significant rise in export earnings in the years leading up to 2008, have witnessed a steep decline in such earnings since then, data from the Centre for Monitoring Indian Economy (CMIE) shows. Services sectors such as IT may be among the hardest hit. India s trade surplus in services is already under pressure. Rise in protectionism will crimp the services trade surplus even further. While import tariffs have been governments most preferred tool to restrict movement of goods, qualitative restrictions have been used to dissuade services. For instance, the US has tightened H-1B visa norms, making it more difficult for other countries to export services supplied through the temporary movement of persons. Response of India






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India followed it up with even more import duty hikes in the Union Budget presented in February 2018. The budget substantially raised tariffs across a range of products, from fruit juice to mobile phones. Finance minister Arun Jaitley cited the goal of job creation and Make in India to justify the move.

These measures might not only be counter-productive but could also invite further backlash. The US has already challenged India s export subsidy programmes at the World Trade Organization (WTO). The US contends that the Indian government is providing $7 billion worth of benefits to Indian companies which have allegedly created an uneven playing field for US companies and workers. India has a trade surplus of around $30 billion with the US. Although most US trade interventions were directed against China in 2017, the GTA database shows that India was also a top target of those interventions. The data suggests that the coming months are not going to be easy for India s trade officials and export-dependent firms. (Adapted from Live Mint) 66. 11 public sector banks put under RBI prompt corrective action framework Lending to the corporate sector, particularly small and medium enterprises, is becoming increasingly difficult with more than half the country s public sector banks (PSBs) now under the RBI s Prompt Corrective Action (PCA) framework, which restricts lending activities of the banks, government sources said. Government sources also confirmed that at least three-four more banks are expected to be brought under the PCA framework because of deteriorating performance. What is Prompt Corrective Action (PCA) framework? Under Prompt Corrective Action (PCA) Framework, Reserve Bank of India has set some trigger points such as CRAR (Capital to Risk weighted Assets Ratio), Non-Performing Assets (NPA), Return on Assets (RoA), Leverage Ratio for initiation of certain structured and discretionary actions in respect of banks breaching such trigger points. The initiation of PCA results in restrictions imposed on the bank from lending to distribution of dividend, expansion of branch, staff expansion etc. In other words, PCA framework are supervisory tools which involves monitoring of certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds as relating to capital, asset quality etc. are breached. (Adapted from The Indian Express) 67. Should you exit your crypto holdings now?






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RBI aunnoucement If you have holdings in cryptocurrencies, in spite of Reserve Bank of India s (RBI) warning in December and the government s word of caution earlier this year, the latest RBI announcement may have worried you. Last week, the RBI clamped down on cryptocurrency-rupee trading in the country. The RBI has given a three-month window to regulated entities such as banks and non-banking finance companies (NBFCs) to wind up existing relationships with firms or individuals dealing in cryptocurrencies. Rationale by RBI Virtual currencies can adversely impact market integrity and capital control. And if they grow beyond a size, they can endanger financial stability as well.

Are cryptocurrencies legal? There is nothing that indicates a ban on crypto assets by the government or the RBI. But there is a clear negative attitude towards cryptocurrencies Whether it will translate to further action, we will have to wait and watch.






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Finance minister Arun Jaitley, in his budget speech had said, The government does not consider cryptocurrencies legal tender... and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. In the past few months, major banks have barred transactions related to cryptocurrencies. Some banks have also closed current accounts of crypto exchanges operational in India. Though cryptocurrencies can still be bought through NEFT, RTGS, IMPS and UPI services by some banks and financial institutions, these too will close in three months. What about existing holdings? If you are an investor, the only change for you is that you will not be able to get the proceeds in your bank account if you sell after three months. You will continue to have your holdings even after three months. You can even sell it after that but you may not be able to withdraw the money in your bank account and will need to convert it into some other crypto asset. Should you exit now? If you want to redeem your crypto assets in rupees into your bank account, then this is the chance. After three months, you will have to trade in crypto assets or sell through other channels. If you are unable to exit or choose not to exit in the three-month window, look at your options in the future and consider the risks, which seem to be very high. New investors should stay away. (Adapted from Live mint) 68. Which are the top sectors that generate employment in India? Growth of jobs in Farm and Non-farm sector






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The growth of jobs in the post-liberalization era has been very narrowly concentrated in a few sectors. Nearly a third of new jobs added in the Indian economy in the post-liberalization era have been in the construction sector alone, the data shows. The construction sector was a major job-creator even in the 1980s but its share in new jobs was much smaller then.






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Since 1990-91, the construction sector added almost as many new non-farm jobs as the next four top job-generating sectors—trade, miscellaneous services, transport and storage, and education—put together.






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In other Asian economies, which witnessed a transition from low-productivity jobs to high-productivity jobs, the manufacturing sector played a big role in that transition. In India, the role of the manufacturing sector has been very limited. Even as the construction and services sectors expanded their share in the total employment pie, the share of manufacturing has remained nearly the same as it was three decades ago.

Manufacturing accounted for a tenth of total employment in the 1980s, and continues to account for about a tenth of total employment today. Within manufacturing, the share of






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labour-intensive industries such as textiles and leather has actually shrunk over the past few decades. (Adapted from Live mint) 69. Are dynamic bond funds worth buying? If dynamic bond funds are meant to be managed dynamically—they increase their duration when interest rates fall and reduce it when interest rates rise—why have most of them lost out in the past 12-14 months? On an average, dynamic bond funds have lost 0.21% from November 2016 till date, when rates have risen. Short-term income funds returned 4.72%, in comparison. Are dynamic bond funds dead or is this just a temporary phase? What are Dynamic bonds? Dynamic bond funds are aggressive income funds where the fund manager can change the underlying portfolios drastically. Every debt fund is supposed to invest as per its mandate: so, short-term bond funds invest in shorter-tenured securities and long-term bond funds invest in longer-tenured ones. But dynamic bond funds don t have such restriction. They can be long-term bond funds in one month and short-term in another, depending on where the interest rates are headed. Since interest rates and bond prices move in opposite directions, a higher portfolio duration (a statistic that measures a bond portfolio s sensitivity to interest rates; higher a portfolio s maturity, higher its duration) is beneficial when rates are down. In these times, dynamic funds increase their duration. But if interest rates are rising, dynamic bond funds typically reduce their duration to cushion the impact of falling bond prices. Shorter tenured bonds are less volatile than longer-tenured bonds. What should you do? Short-term bond funds take lower risks but also give lower, yet stable returns. Dynamic funds can give much higher returns but they come with much higher risk as well. Avoid dynamic funds if your investment horizon is less than three years, and only if you don t mind the volatility. As per the Securities and Exchange Board of India s definition of various mutual fund categories, as per its latest scheme consolidation exercise that is underway at present, dynamic debt funds are free to decide their duration. (Adapted from Live mint) 70. Government names Bhanu Pratap Sharma as new Banks Board Bureau chairman The government appointed Bhanu Pratap Sharma, former secretary of the Department of Personnel and Training (DoPT), as the new chairman of the Banks Board Bureau (BBB) along with three other members. The Board, earlier chaired by former Comptroller and Auditor General Vinod Rai, has been reconstituted after its original two-year term expired last month.






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About Banking Boards Bureau The BBB is a body of eminent professionals and consists of only one government official. It is a six-member body with at least three former bankers, two professionals and secretary, department of financial services representing government. Vinod Rai, the veteran CAG, has been appointed as head of the BBB. It will replace the existing system of Appointments Board in which appointments for top-level jobs at public-sector banks are made by an appointments committee led by the RBI Governor. The BBB has been set up to insulate public-sector banks from interference by the government. Functions The BBB will hold investment in public-sector banks on behalf of the government. 1. The BBB will recommend the appointment of senior-most officials in public-sector banks. 2. The BBB will advise banks on the ways of raising fund. 3. It will also guide banks on mergers and consolidations. 4. It will also guide banks on mergers and consolidations. (Adapted from The Indian express and Background from PrepMate-Cengage Economics book, Chapter 16, page 237) 71. The lowdown on poor loan recovery What is it? The Centre earlier this month told Parliament that non-performing assets (NPAs) worth Rs. 2.41 lakh crore have been written off from the books of public sector banks between April 2014 and September 2017. Since the banks were able to recover only 11% of the distressed loans worth Rs. 2.7 lakh crore within the stipulated time, the rest had to be written off as per regulations. The government, however, clarified that the defaulters will have to pay back the loans, though they were written off. So, a write-off is technically different from a loan waiver in which the borrower is exempted from repayment. This, of course, does not mean banks will manage to collect the dues from defaulting borrowers. How did it come about? For long, India has lacked a proper legal framework to help creditors recover their money from borrowers. According to the World Bank, the country ranks 103rd in the world in bankruptcy resolution, with the average time taken to resolve a case of bankruptcy extending well over four years. Banks in India, in fact, are able to recover on an average only about 25% of their money from defaulters as against 80% in the U.S. Public sector banks have also been lenient in collecting their dues from defaulting borrowers because of








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pressure from powerful interest groups. Instead of classifying sour loans as troubled assets and taking action to recover them, banks have often chosen to hide such assets using unethical accounting techniques. Since 2014, however, the Reserve Bank of India has been stepping up efforts to force both private and public-sector banks to truthfully recognize the size of bad loans on their books. This caused the reported size of stressed assets to increase manifold in the last few years. Why does it matter? The news about the huge loan write-off comes amid the Union government s efforts over the last few years to expedite the process of bankruptcy and improve recoveries. The Insolvency and Bankruptcy Code (IBC), which came into force last year, was the most notable among them. Many large corporations, as well as smaller enterprises, have been admitted undergoing liquidation under the IBC so that the proceeds can be used to pay back banks. The poor loan recovery reported by the government reflects poorly on the ability of the new bankruptcy law to help banks recover loans and mounts more pressure on bank balance sheets. It is notable that the Centre recently vowed to inject Rs. 2.11 lakh crore into public sector banks to cushion their balance sheets from the impact of bad loans. The poor recovery may increase the size of funds the Centre will have to allocate for the purpose. What lies ahead? It seems unlikely that banks will be able to drastically improve their rate of recoveries since the new bankruptcy code is far from perfect. Its critics say the IBC is focussed more on the time-bound resolution of proceedings than on maximizing the amount of money banks can recover from stressed loans. In particular, since there are strict time-limits imposed on the resolution process, there is the imminent danger that it may lead to the fire-sale of valuable assets at cheap prices. This can affect investment incentives. But, for now, the quick resolution of bad loans will free resources from struggling firms and hand them to the more efficient ones. (Adapted from The Hindu) 72. Why India is on US currency monitoring list? For the first time, it meets two of three criteria: significant bilateral surplus with US; and persistent intervention in forex markets. On April 13, the US Treasury Department delivered to Congress the semi-annual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States Treasury, which found that six major trading partners warrant placement on the Monitoring List for their currency practices. Five of these countries — China, Germany, Japan, Korea and Switzerland — were already on the list, India has been added this year. The US move and the higher rise in March trade deficit created nervousness in the foreign exchange market on Monday, with the rupee falling 29 paise against the US dollar to close at 65.49, a more than six-month low.






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What does the report say? Frequent intervention by the central bank in the foreign exchange market means that India has increased its purchases of foreign exchange over the first three quarters of 2017. Despite a sharp drop-off in purchases in the fourth quarter, net annual purchases of foreign exchange reached $56 billion in 2017, equivalent to 2.2% of the GDP. The pick-up in purchases came amidst relatively strong foreign inflows, both of FDI and portfolio investment. Notwithstanding the increase in intervention, the rupee appreciated by over 6% against the dollar and by more than 3% on a real effective basis in 2017. India had a significant bilateral goods trade surplus with the US, totalling $23 billion in 2017, but the current account is in deficit at 1.5% of the GDP and the exchange rate is not deemed to be undervalued by the IMF. So, India met two of the three criteria for the first time in this report — having a significant bilateral surplus with the US and having engaged in persistent, one-sided intervention in foreign exchange markets. US Treasury Secretary Steven T Mnuchin says in the report, We will continue to monitor and combat unfair currency practices, while encouraging policies and reforms to address large trade imbalances. How do central banks intervene and why? Central banks intervene in the foreign exchange market to reduce volatility in the exchange rate and often to build foreign exchange reserves or to manage these reserves. They intervene to ensure that their currencies are neither overvalued or undervalued. If the currency is overvalued, it can hurt a country s competitiveness in exports while an undervalued currency will have an impact on inflation. For instance, when the currency is appreciating, a central bank intervenes in the market by buying foreign exchange — say, the USD or Euro or any other currency — which leads to an increase in the supply of the local currency and in turn lowers its value. To combat depreciation of the currency, the central bank sells foreign exchange. It is also done to manage expectations in the forex market. India s central bank — the RBI has intervened in the market to build the country s reserves especially after 2013 when the rupee came under attack. Since then reserves have risen. Why has the RBI been buying dollars? The US report says India has generally been a net purchaser of foreign exchange since late 2013, when the RBI sought to build a stronger external buffer in the wake of large emerging market outflows globally. Prior to 2013, intervention for several years had generally been less frequent, and when it had occurred, it had been broadly symmetric, as for example during 2007 and 2008, when the RBI engaged in both purchases and sales of foreign exchange at various points in the midst of volatile global financial markets. The RBI has noted that the value of the rupee is broadly market-determined, with intervention used only during episodes of undue volatility . Foreign exchange intervention picked up in the first three quarters of 2017, in the context of strong capital inflows, with FDI of $34 billion and foreign portfolio flows of $26 billion over the first three quarters of the year. On what basis is a country named a currency manipulator ?






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The three pre-conditions for being named currency manipulator are: a trade surplus of over $20 billion with the US, a current account deficit surplus of 3% of the GDP, and persistent foreign exchange purchases of 2% plus of the GDP over 12 months. All three apply to India. While there has not been a dramatic increase in trade surplus with the US, the RBI accumulated reserves by absorbing the inflows into domestic capital markets. This caution seems unwarranted considering that India runs a trade deficit overall, based on 36 currency REER (real effective exchange rate), the rupee is still overvalued, said Abhishek Goenka, CEO, IFA Global. What about the rupee? Will this report of the US Treasury impact the currency? The rupee fell 29 paise against the US dollar to close at 65.49 on Monday. However, forex dealers don t expect a sharp fall as the RBI then props up the rupee by selling dollars. Notwithstanding the pick-up in intervention, the rupee appreciated 6.4% against the dollar over 2017, while the real effective exchange rate also continued its general uptrend from the last few years, appreciating by 3.1%. In its most recent analysis, the IMF maintained its assessment that the rupee is moderately overvalued. The RBI s most recent annual report assessed the rupee to be closely aligned to its fair value over the long term . How have India s foreign exchange reserves moved? According to latest RBI data, released last Friday, India s forex reserves rose by $503.6 million to touch a record high of $424.86 billion in the week ended April 6, 2018. Of this, foreign currency reserves were $399.776 billion. Direct intervention has supported a steady increase in foreign exchange reserve levels. At the end of 2013, foreign currency reserves were $268 billion, or 2.3 times short-term external debt, 6 months of import cover, and 14% of the GDP. How are analysts viewing this Monitoring List of the US Treasury? Indranil Sen Gupta of Bank of America Merrill Lynch Global Research says, We continue to expect the RBI to recoup foreign exchange reserves if it can, despite being put on the US Treasury Report s currency manipulator watch list. It should continue to pursue an asymmetrical policy of buying forex when the dollar weakens and allowing Rs 65-66 per dollar when it strengthens. The RBI s forex reserves are inadequate: import cover, at 11 months, is running well below the pre-global financial crisis level of 14 months, share of portfolio investments has jumped to 120% of forex reserves from pre-crisis level of 70%. Second, we see RBI forex intervention at $15bn/ 0.6% of the GDP in FY19 — which is well

below 2% of the GDP required to be named currency manipulator — with the current account deficit set to rise to 1.9% of the GDP when portfolio inflows are slowing, Merrill Lynch says. (Adapted from The Indian Express) 73. Cabinet approves Fugitive Economic Offenders Ordinance 2018 The ordinance empowers the government to confiscate all the assets of an offender both within and outside the country including properties that are not proceeds or profits of the






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crime. They can also confiscate benami properties and the offender will not be able to pursue any civil cases in India. What is the need of ordinance? 1. The Fugitive Economic Offenders Ordinance 2018 is expected to give Indian authorities more powers to bring to task economic offenders like 2. Vijay Mallya, Nirav Modi and Mehul Choksi, all of whom are not in India and have not returned to the country to face prosecution. 3. It will plug loopholes in existing laws as at present there is no mechanism to force these offenders to be a part of prosecution proceedings and follow the rule of law. 4. The ordinance is expected to re-establish the rule of law with respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences. This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions, said a person familiar with the development. 5. However, only those cases where the amount involved is more than Rs100 crore will be covered under this ordinance. The Fugitive Economic Offenders Bill, 2018 was tabled in the Lok Sabha in the recently concluded budget session of Parliament but could not be taken up after both the houses faced continuous disruptions. (Adapted from Live mint) 74. India s GDP to reach $5 trillion by 2025: World Bank With economic reforms adopted in the last few years starting to bear fruit, India is poised to remain the fastest growing large economy in the world, and its GDP is expected to reach $5 trillion by 2025, a top Indian official has told the World Bank. India is poised to remain as the fastest growing large economy in the world. In 2018, we

expect India to grow at over 7.4%, economic affairs secretary Subhash Chandra Garg told the 97th meeting of the Development Committee of the World Bank in Washington. (Adapted from the live mint) 75. What govt. can do to keep fuel prices under check Petrol and diesel prices touched record levels over the weekend with petrol selling at ₹ . a litre, the highest it s been under the current government s tenure and diesel at Rs. 65.65, largely due to rising global crude oil prices but also on high excise duty on the fuels.






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How are oil prices behaving? Crude oil prices rose at a scorching 24% in the first three months of 2018 before hitting a 40-month high in April following a decline in global inventories, largely caused by the production cuts by the Organisation of Petroleum Exporting Countries (OPEC) members and also by geopolitical tensions in West Asia. Agencies such as Crisil Research expect crude oil prices to settle at about $70 a barrel during the calendar year of 2018, representing a 27% increase over last year s level. As a consequence, India s oil import bill is expected to balloon by about 26% to Rs. 6.5 lakh crore in FY19. What is the impact of taxes? The other aspect has to do with the excise duty on petrol and diesel, imposed by the government, which has risen sharply over the last few years. According to data with the Petroleum Planning and Analysis Cell of the Ministry of Petroleum and Natural Gas, the excise duty on branded petrol is Rs. 20.66 a litre or almost 28% of the total price of the fuel. This proportion is 27% for branded diesel. Excise duties have risen significantly since 2013-14, accounting for 22-25% of the retail

prices of petrol and diesel respectively, compared with 12-15% earlier when crude prices were at similar levels, Crisil had said. What can be done? The advantage of linking domestic fuel prices to the global oil market, as India has done, is that oil marketing companies (OMCs) are no longer forced to sell fuel at subsidised rates. But on the flip side, as can be seen now, is that the consumer is forced to buy fuel at high prices when global price levels are elevated. So, one thing the government can do, and which it is reportedly considering doing, is to ask the OMCs to refrain from passing on the higher oil prices to consumers. In other words, this would represent a return to the previous subsidy regime, albeit somewhat better. If crude price hikes are not allowed to be largely passed on to consumers, the marketing margins of OMCs will decline by 80 paise to Rs. 1 per litre, Rahul Prithiani, director, Crisil Research said in the report. However, that would still be better than the Rs. 1-1.5 per litre margins they have earned historically. Is that all? The government can always reduce the excise duty on petrol and diesel thereby earning a lower revenue but at least easing some burden on the consumers. However, Petroleum Minister Dharmendra Pradhan recently made it clear that the government had no plans to cut the levy as it needed revenue for developmental needs. Centre and States bank on tax revenues to meet developmental needs. Forty-two per cent of collections from excise duty (on petrol and diesel) goes to States and out of the remaining, 60% is used to fund Centre's share in development schemes in States, Mr. Pradhan said. (Adapted from The Hindu) 76. TCS hits $100 billion market capitalization






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Tata Consultancy Services crossed the $100 billion mark in terms of market capitalization. What is 'Market Capitalization'? Market capitalization refers to the total dollar market value of a company's outstanding shares. Commonly referred to as "market cap," it is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to using sales or total asset figures. Using market capitalization to show the size of a company is important because company size is a basic determinant of various characteristics in which investors are interested, including risk. It is also easy to calculate. A company with 20 million shares selling at Rs.100 a share would have a market cap of Rs. 2 billion. (Adapted from The Hindu) 77. India highest recipient of remittances

Largest receiver of remmitances India retained the top position as a recipient of remittances with its diaspora sending about $69 billion back home last year, the World Bank said. Remittances to India picked up sharply by 9.9%, reversing the previous year s dip, but were still short of $70.4 billion received in 2014.






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Global trend In its latest Migration and Development Brief, the World Bank estimated that officially recorded remittances to low-and middle-income countries reached $466 billion in 2017. This was an increase of 8.5% over $429 billion in 2016. Reason for increase in remittances The stronger-than-expected recovery in remittances was driven by growth in Europe, Russia and the U.S. The rebound in remittances, when valued in U.S. dollars, was helped by higher oil prices and a strengthening of the Euro and the Ruble, it added. Other large receiver of remittances India continued to top in terms of receiving remittance and was followed by China ($64 billion), the Philippines ($33 billion), Mexico ($31 billion), Nigeria ($22 billion) and Egypt ($20 billion). (Adapted from The Hindu) 78. Long term tax on equity made taxable The Finance Act, 2018 has withdrawn the exemption under clause (38) of Section 10 of the Income-tax Act, 1961 (the Act) and has introduced a new section 112A in the Act, to provide that long term capital gains arising from transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed at 10 per cent of such capital gains exceeding one lakh rupees. The said section, inter alia, provides that the provisions of the section shall apply to the capital gains arising from a transfer of long-term capital asset being an equity share in a company, only if securities transaction tax (STT) has been paid on acquisition and transfer of such capital asset. What is LTCG? Long-term capital gains (LTCG) refer to the profit made on sale of any asset held for a particular period of time. In case of equity shares, it refers to the profit made on shares held for more than one year. In other words, if the shares are bought and kept for more than a year before selling, then the profit, if any, on the said sale are referred to as long term capital gains (or LTCG). The tax on LTCG is called LTCG tax. Why is LTCG tax in the news? In Budget 2018, Finance Minister Arun Jaitley re-introduced LTCG tax on equity shares. Investors have to pay 10% LTCG tax on gains exceeding Rs. 1 lakh on the sale of shares or equity mutual funds held for more than one year. Gains arising on shares held for less than 1 year are called Short-term capital gains (STCG). STCG are taxed at rate of 15%. In other words, the Centre said that if the gains exceeded Rs. 1 lakh in a year, then 10% LTCG tax had to be paid without the benefit of indexation. Indexation refers to adjusting the profit against inflation to compute the real taxable gains.






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Was the tax levied on stock market trades earlier? Until October 2004, LTCG tax was levied on stock market trades. It was replaced with the Securities transaction tax (STT). STT is levied at 0.1% of the trade value on all trades made on the stock exchanges. A study published in 2016 revealed that between 2005-06 and 2011-12, the Centre lost about Rs.3.5 lakh crore by replacing LTCG tax with STT. The Centre has brought in LTCG tax while retaining STT as well. So, investors will have to pay both the taxes. Who will be exempt? When such a tax is introduced, prior investments get some kind of relief. The relief given is called the grandfathering benefit. While reintroducing the LTCG tax, the government has exempted all gains made prior to January 31, 2018. In other words, all the gains made before January 31, 2018 would be grandfathered. How will the grandfathering benefit work? Let us consider an example. Suppose a person bought shares in May 2017 at Rs.1000. The value of these shares was Rs.1500 on January 31, 2018. Now, if the person sells the shares at Rs.1800 in June 2018, then his taxable gains would be Rs. 300. (Rs. 1800- Rs. 1500). The gain of Rs. 500 (Rs. 1500- Rs. 1000) will not be taxed. Will all investors be subject to LTCG tax? LTCG tax is applicable to all investors who trade on stock exchanges. Only foreign portfolio investors (FPIs), who invest in India from places such as Mauritius and Singapore, are not subject to LTCG tax. This exemption is due to double taxation avoidance treaties. Consequently, foreign investors prefer to invest from Mauritius or Singapore route. However, Centre is reworking on all such double tax avoidance agreements (DTAA). This benefit would be available only till the time the changes are made into treaty. How did the stock markets react to the introduction of the tax? The benchmark equity indices — Sensex and Nifty — lost significant number of points. The introduction of LTCG tax will increase the cost of stocks trading. (Adapted from PIB) 79. Nabbing absconders: on Fugitive Economic Offenders Ordinance Fugitive Economic Offenders Ordinance, 2018 The Union Cabinet recently approved the promulgation of the Fugitive Economic Offenders Ordinance, 2018. A fugitive is defined as someone who has left India to avoid criminal prosecution or who is already overseas and refuses to return to face the law. In recent weeks, banks have been asked to mandatorily collect passport details of those borrowing above Rs. 50 crore, and the passports of some wilful defaulters are being impounded too.






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Need for an ordinance Given that the proposed legislation was announced well over a year ago, the trigger for this belated haste is easy to see. While presenting Budget 2017-18, the Finance Minister referred to instances of offenders fleeing the country to escape its justice system, and said the government was looking at a law to confiscate the assets of such persons till they return to face the law. By September, the Finance and Law Ministries had agreed on a draft Bill, but it was only introduced in the Lok Sabha this March, in a session that proved to be a washout. The government is no doubt conscious of the clamour for tough action on absconding offenders, particularly those involved in financial misdemeanours and wilful defaulters of bank loans. Important cases There remains great consternation over liquor baron Vijay Mallya s flight from the country, with his now-defunct Kingfisher Airlines having run up outstanding loans of over Rs. 9,000 crore from Indian banks. Both Mr. Mallya and former Indian Premier League commissioner Lalit Modi, who faces an Enforcement Directorate probe for foreign exchange law violations, are in Britain. They left Indian shores for safer climes under the NDA government s watch, as did diamond merchants Nirav Modi, Mehul Choksi and their associates, whose firms defrauded the country s second largest public-sector bank of over Rs. 12,800 crore. What is the state of extradition proceedings? India is no closer to getting Mr. Modi or Mr. Mallya back to face the law, with extradition proceedings against the latter crawling through U.K. courts. No clear indications about whether their return could be expedited emerged during Prime Minister Modi s meeting with his British counterpart Theresa May last week. Meanwhile, though government agencies have attached the diamond merchant duo s assets in India, an American court has disallowed the sale of their assets in other jurisdictions while allowing their U.S.-based entity to offload its assets. The reason: India is yet to pass a model law mooted by the UN for cross-border insolvency cases. It is not clear whether this ordinance can tide over this major handicap. Way forward The government may have opted for the ordinance route to deflect the heat from these cases of fraud, but it needs to present a coherent vision about its plans to bring back those fugitives who have already got away and plug the remaining loopholes in the system. (Adapted from The Hindu) 80. Economic freedom index: India ranks 130th, Hong Kong retains top spot India has been ranked 130th among 180 countries in the annual Index of Economic Freedom report released by American think tank Heritage Foundation.






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Hong Kong maintains the number one spot for the 4th consecutive year and is followed by Singapore, New Zealand, Switzerland, Australia, and Ireland. Last year performance India was ranked 143rd with the same score of 52.6 points in 2017. With 54.4 points, Pakistan features at the 131st spot. India was two spots below Pakistan last year. Reason for improvement India s overall score has increased by 1.9 points, led by improvements in judicial effectiveness, business freedom, government integrity, and fiscal health. The think tank also credited prime minister Narendra Modi for India s new rank. System of ranking Countries are ranked under 5 categories according to their scores – free (100-80), mostly free (79.9-70), moderately free (69.9-60) mostly unfree (59.9-50) and repressed (49.9-40). About the index The Index of Economic Freedom is an annual index and ranking created by The Heritage Foundation and The Wall Street Journal in 1995 to measure the degree of economic freedom in the world s nations. The creators of the index took an approach similar to Adam Smith s in The Wealth of Nations, that basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society . (Adapted from International Business Times) 81. NITI Aayog to Open Applications for Atal New India Challenge The Atal Innovation Mission (AIM) under the NITI Aayog shall be launching the Atal New India Challenge. Under the Atal New India Challenge, which shall be run in collaboration with five ministries, AIM will invite prospective innovators/MSMEs/start-ups to design market-ready products, using cutting edge technologies or prototypes across 17 identified focus areas such as Climate Smart Agriculture, Smart Mobility, Predictive Maintenance of Rolling Stock, Waste Management etc. Applicants showing capability, intent and potential to productize technologies will be awarded grants up to Rs. One crore. This grant will be further supplemented by mentoring, handholding, incubating and other support as needed at various stages of commercialisation, while generating wider deployment for the product. (Adapted from PIB) 82. Human Resource Development Ministry Launches Unnat Bharat Abhiyan 2.0






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Human Resource Development Ministry today launches Unnat Bharat Abhiyan 2.0. Under this program students from colleges and universities will go to nearby villages to get acquainted with the life of the village people and the problems faced by them in day to day life. About Unnat Bharat Abhiyan Unnat Bharat Abhiyan is a flagship programme of the Ministry of Human Resources Development, with the intention to enrich Rural India. The knowledge base and resources of the Premier Institutions of the country are to be leveraged to bring in transformational change in rural developmental process. It also aims to create a vibrant relationship between the society and the higher educational institutes, with the latter providing the knowledge and technology support to improve the livelihoods in rural areas and to upgrade the capabilities of both the public and private organisations in the society. About Unnat Bharat Abhiyan 2.0 Under the Unnat Bharat Abhiyan 2.0, the institutions have been selected on a Challenge Mode and the scheme has been extended to 750 reputed Higher Educational Institutes (both public and private) of the country. Also, scope for providing Subject Expert Groups and Regional Coordinating Institutes to handhold and guide the participating institutions has been strengthened. IIT Delhi has been designated to function as the National Coordinating Institute for this programme and the Ministry intends to extend the coverage to all the reputed Higher Educational Institutes, in a phased manner. Each selected institute would adopt a cluster of villages / panchayats and gradually expand the outreach over a period of time. (Adapted from PIB) 83. India signs loan agreement with World Bank for US$ 125 million for Innovate in India for Inclusiveness Project A Loan Agreement for IBRD credit of US$ 125 (equivalent) for the Innovate in India for Inclusiveness Project was signed with the World Bank on 24th April, 2018 in New Delhi. The Loan Agreement was signed by Mr. Sameer Kumar Khare, Joint Secretary, Department of Economic Affairs on behalf of Government of India and Mr. Hisham Abdo, Acting Country Director, World Bank (India) on behalf of the World Bank. The Objectives of the project is to nurture indigenous innovation, foster local product development and accelerate commercialization process by bridging critical skill and infrastructure gaps to promote affordable and innovative healthcare products generation for inclusive development and increasing competitiveness in India. The project would support consortia of public, private, and the academic institutions to overcome the key market failures currently holding back the development of an innovative biopharmaceutical and medical devices industry in India. The project consists of the following parts:






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(i) Strengthening of pilot-to market innovation ecosystem (ii) Acceleration of the pilot –to-market process for specific products and (iii) Project Management and monitoring & Evaluation. The closing date of Innovate in India for Inclusiveness project is 30 June, 2023. (Adapted from PIB) 84. Merging associate banks with the SBI Merger of SBI with subsidiary banks In August 2017, the Lok Sabha passed the State Banks (Repeal and Amendment) Bill of 2017 to amend the State Bank of India (SBI) Act of 1955 to remove references related to subsidiary banks. After the acquisition of subsidiary banks by the SBI, subsidiary banks have ceased to exist. Therefore, the government found it necessary to repeal the SBI (Subsidiary Banks) Act of 1959 and the State Bank of Hyderabad Act of 1956. The government has also found it unnecessary to retain certain provisions in the SBI Act, 1955, which apply to subsidiary banks. These subsidiary banks — State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Patiala, and State Bank of Travancore — were constituted under the SBI (Subsidiary Banks) Act of 1959. The State Bank of Hyderabad was originally constituted as Hyderabad State Bank under the Hyderabad State Bank Act and renamed as the State Bank of Hyderabad under sub-section (1) of Section 3 of the State Bank of Hyderabad Act of 1956. Reason for merger To rationalise resources, reduce costs, improve profits, for lower cost of funds leading to better rate of interest for the public, and to improve productivity and customer service, the SBI, with the sanction of the Central government and in consultation with the Reserve Bank of India (RBI), entered into negotiations with the State Bank of Bikaner and Jaipur, the State Bank of Mysore, the State Bank of Patiala, the State Bank of Travancore and the State Bank of Hyderabad for acquiring their business, including assets and liabilities. The schemes relating to such acquisitions were agreed upon by the Central Board of the SBI and the respective boards of the subsidiary banks and approved by the RBI. In exercise of the powers conferred by sub-section (2) of Section 35 of the SBI Act, 1955, the Central government accorded its sanction. Accordingly, the Central government issued the following orders, sanctioning the scheme of acquisition: (a) the Acquisition of State Bank of Bikaner and Jaipur Order, 2017; (b) the Acquisition of State Bank of Mysore Order, 2017; (c) the Acquisition of State Bank of Patiala Order, 2017; (d) the Acquisition of State Bank of Travancore Order, 2017; and (e) the






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Acquisition of State Bank of Hyderabad Order, 2017. As per these, the business of these subsidiary banks is to be carried out by the SBI in accordance with the SBI Act, 1955, with effect from April 1, 2017. (Adapted from The Hindu) 85. Van Dhan Scheme The Prime Minister of India Shri Narendra Modi launched the Van Dhan Scheme of Ministry of Tribal Affairs and TRIFED on 14th April, 2018 during the celebrations of Ambedkar Jayanti at Bijapur, Chattisgarh. Emphasizing the important role of value addition in increasing tribal incomes, he stated that Van Dhan, Jan Dhan and Gobar-Dhan Schemes had the potential to change the tribal-rural economic system. All these three schemes in tandem need to be promoted for this purpose by the State Governments. The establishment of Van Dhan Vikas Kendra is for providing skill upgradation and capacity building training and setting up of primary processing and value addition facility. This first model Van DhanVikas Kendra in Bijapuris being implemented for training of 300 training beneficiaries with a total outlay of Rs.43.38 lakhs for training, providing equipments & tools for primary level processing and infrastructure & building for housing the Kendra. This Kendra to start with will have processing facility for Tamarind brick making, Mahua flower storage facility and chironjee cleaning and packaging. Under Van Dhan, 10 Self Help Groups of 30 Tribal gatherers is constituted. They are then trained and provided with working capital to add value to the products, which they collect from the jungle. Working under the leadership of Collector these groups can then market their products not only within the States but also outside the States. Training and technical support is provided by TRIFED. It is proposed to develop 30,000 such centres in the country. Value addition assumes critical importance in ensuring remunerative prices to the tribals in this approach. Three stage value addition would be the corner stone for enhancing incomes of the tribals under the scheme. The grass root level procurement is proposed to be undertaken through Self Help Groups associated with implementing agencies. Convergence and Networking with other Govt. departments/scheme shall be undertaken to utilise the services of existing SHGs like Ajeevika, etc. These SHGs shall be appropriately trained on sustainable harvesting/collection, primary processing & value addition and be formed into clusters so as to aggregate their stock in tradable quantity and linking them with facility of primary processing in a Van DhanVikas Kendra. The stock after primary processing shall be supplied by these SHGs to the State Implementing Agencies or direct tie up for supply to corporate secondary processor. For creation of secondary level value addition facility at district level and tertiary level value addition facility at State level, Big Corporates shall be involved under PPP model. This PPP model will be based on utilising Private entrepreneur skills in undertaking processing as






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well as marketing of the produce and Central/ State Govt. support in terms of creating infrastructure and providing enabling environment for undertaking value addition of systematic scientific lines. These will be sophisticated large value addition hubs managed by Private entrepreneur. The Van Dhan Vikas Kendras will be important milestone in economic development of tribals involved in collection of MFPs by helping them in optimum utilization of natural resources and provide sustainable MFP-based livelihood in MFP-rich districts. (Adapted from PIB) 86. The rupee is sliding on account of rising oil prices and FII outflows After a strong showing in 2017, when the rupee appreciated 6% against the dollar, the currency has weaken by about 4.5% so far this year. Reasons for fall in value of rupee 1. Rise in global oil prices: With global oil prices continuing a steady climb on the back of tight output controls marshalled by the Organisation of the Petroleum Exporting Countries, Brent crude futures have gained almost 12% through 2018. This in turn has bloated India s crude import bill and widened the trade deficit appreciably. 2. Rise in bond yields in US: Foreign institutional and portfolio investors — who had pumped in close to $30 billion into Indian debt and equity in 2017 — have turned net sellers, with the pace of outflows accelerating sharply this month to more than $2.3 billion. The prospect of higher interest rates in the U.S., with the Federal Reserve having signalled last month that it is on course to raise the policy rate at least two more times in 2018, have now begun to firmly feed into investors expectations as well. This was best exemplified this week when the yield on the benchmark 10-year U.S. Treasury debt rose above 3% for the first time since January 2014. Global trend While the rupee is not alone among BRICS currencies to have depreciated against the dollar this year, with both the Brazilian real and the Russian rouble losing value, it remains particularly vulnerable to mounting oil costs given the economy s extremely high dependence on crude imports to meet energy needs. Saudi Arabia, one of the world s largest crude producers, is eyeing oil prices in the vicinity of $80 a barrel so as to be able to comfortably balance its budget and have cash to spare to fund Crown Prince Mohammed bin Salman s ambitious socioeconomic reforms. Important factors The spectre of fresh tensions involving Iran if President Donald Trump walks his tough talk over the nuclear agreement with Tehran is also almost certain to prevent any significant softening in oil prices even if American shale producers increase output. Signals from the






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dollar index — a measure of the greenback s value against a basket of six major currencies — too offer little reassurance to the rupee. The index is close to its highest level since mid-January, indicating that investors see assets undergirded by the dollar as a strong bet. For now, the war chest of forex reserves the Reserve Bank of India has accumulated, $423.6 billion in all, remains the key bulwark against excessive currency market volatility. What is Dollar index? The U.S. Dollar Index (USDX, DXY, DX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, [1] often referred to as a basket of U.S. trade partners' currencies. The Index goes up when the U.S. dollar gains "strength" (value) when compared to other currencies. What is a 'Greenback' A greenback is a slang term for U.S. paper dollars. Greenbacks got their name from their colour. (Adapted from The Hindu) 87. Electricity reached all Indian villages All Indian villages now have access to electricity. The last village to be brought on the national power grid was Leisang village in the Senapati district of Manipur at 5.30pm on Saturday. The electricity has been brought to all villages under Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY). State run Rural Electrification corporation (REC) is the nodal agency appointed for executing the scheme. All villages electrified According to the government data, all of India s 597,464 census villages have been electrified. This assumes importance given that at the onset of Rs75,893 crore DDUGJY for village electrification under the National Democratic Alliance (NDA) government, there were 18,452 un-electrified census villages. During the project work it was found out that an additional 1275 villages also didn t have electricity access. As of 28 April, all these villages have got electricity access either through the national grid or off grid solutions. Also, 1,236 villages are uninhabited and 35 have been notified as grazing reserves. Per capita energy consumption The scheme will also help improve India s per capita power consumption of around 1,200 kWh which is among the lowest in the world. About DDUGJY






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Aimed at providing round the clock power to rural households and adequate power to agricultural consumers, the DDUGJY involved feeder separation, strengthening of sub-transmission and distribution network, metering at all levels, village electrification, and setting up micro grid and off grid distribution network. The last village to be provided off grid electricity access was Pakol village in Churachandpur district of Manipur. What is the criteria for electrification? Given that a village is declared to be electrified if 10% of the households can access power along with public institutions such as schools, the panchayat office, health centres, dispensaries and community centres; household electrification remains the final frontier in providing electricity access. Next target Given its electoral potential, the next step now is to provide electricity connections to more than 40 million families in rural and urban areas by March 2019 under the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya), wherein all households will be targeted. Leisang, the last Indian village where the national electricity grid reached.

Location: Sadar Hills West Sub Division of Senapati district of Manipur.

Total number of families: 19

Population: 65

Males: 31

Females: 34 (Adapted from Livemint) 88. The lowdown on rising fuel prices What is it? The prices of petrol and diesel in Indian cities have risen to their highest level since late 2013. This has come as a surprise to many since the price of crude oil, a major ingredient in the production of domestic fuels, is now significantly lower than what it was in late 2013. It is notable that Brent crude oil was trading at over $100 a barrel in 2013, compared to its current price of $75. Even when international crude oil prices fell steeply in 2014 and 2015 — as low as $30 — domestic fuel prices failed to come down as much. Whenever crude oil prices have increased, the prices of domestic fuels have been raised steadfastly. How did it come about? There is no strict rule that lower international crude oil prices must lead to lower domestic fuel prices. This is because, under a free pricing regime, petrol and diesel are priced






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according to what consumers are willing to pay rather than based on input costs. At the same time, there are other ways in which input costs can indirectly influence the retail price. When the price of crude oil is high, oil companies are forced to cut down on their supply to the retail market in order to drive up the prices to competitive levels. It is worth noting that crude oil prices have been on an upward trajectory ever since January 2016 when it hit rock bottom; the agreement between members of the Organisation of the Petroleum Exporting Countries (OPEC) to cut down production in late 2016 has added to its momentum. High taxes are another factor that can discourage producers from bringing enough supply to the retail market, leading to higher prices. This has predominantly been the case in India. When crude oil prices fell drastically in 2014 and 2015, for instance, the government increased the amount of taxes by more than Rs. 10 a litre on both petrol and diesel. While this increased the amount of revenue collected by the government, it prevented retail fuel prices from falling as much as international crude oil prices. Why does it matter? The rising prices of petrol and diesel increase the burden on citizens, affecting to some extent the government s popularity. It also quite often brings into question the government s policy when it comes to taxing basic fuels. More than half of the money that is paid by the consumer goes to the government in the form of taxes. Some have speculated that the government might compromise on its fuel deregulation policy, which allows oil marketing companies (OMCs) to price their output freely. Not surprisingly, the shares of the government-owned OMCs have witnessed a sharp fall in recent weeks. The current price rise will thus act as a litmus test for the government s commitment to reforms in the energy sector. Further, to the extent rising fuel prices have to do with the decreasing supply in the world market, it has a negative impact on economic growth. What lies ahead? The price of domestic petrol and diesel going forward is likely to depend on the price of crude oil in the international market as well as the policy preferences of the government as it heads into a series of elections in 2018 and 2019. While rising geopolitical tensions have been used to explain the rise in crude oil prices this month, where oil prices are headed next is anybody s guess. The oil bulls believe that OPEC countries will drive oil prices even higher in order to meet their increasing revenue needs. The sceptics of the recent rally, on the other hand, expect American shale oil producers to rein in any further rise in oil prices quite soon. If international crude oil prices fail to stabilise or fall, the government may decide to look at either reducing taxes on these fuels or forcing OMCs to incur losses by selling at lower prices.






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(Adapted from The Hindu) 89. Why India s fuel prices are sky-high when oil isn t Present position With rising crude prices still at half their record high, drivers in much of the world are still enjoying pain-free visits to the pump. That s not the case in India, where diesel, the most-used fuel, is more expensive than ever before, and gasoline prices also are hovering around record levels in several cities. India lifted controls on diesel pricing four years ago, after freeing gasoline rates first. But with central elections next year and several state elections in the coming months, the government is feeling the pressure to restore a lid on fuel prices. None of its options are particularly pretty. 1. Why did India stop controlling the price of diesel? A big reason was to relieve the government s massive burden to subsidize fuel. Subsidies had ballooned to $9.6 billion in the year ended 31 March 2014. About seven months later, subsidies on diesel were called off. State-run explorers Oil and Natural Gas Corp. and Oil India Ltd. and state gas utility GAIL India Ltd. also had been paying to subsidize fuel prices, to the tune of $10 billion, by selling crude and fuels to the state retailers at discounts. Making matters worse, the lag in payment of subsidies by the government messed up the finances of state fuel retailers Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp., which were forced to borrow heavily to bridge the gap between the selling price and their cost. 2. What might the government do now? It could slash fuel taxes, which account for about half the per-litre price people pay. But that would mean a major loss to government revenues. Excise duty and additional taxes are estimated to fetch the government about 2.5 trillion rupees in the year ending March 2019, according to the federal budget document. That s 77% more than what it collected five years ago. For a government struggling to meet its fiscal gap goals, any reduction in taxes would stretch its finances. That s why a second option—reinstating price controls, partially or fully—might be the easier route. 3. What price controls are being discussed? The country could reinstate its formula for subsidizing the fuels by asking upstream companies to share a part of the burden. Currently, prices of gasoline and diesel are fixed through a complex formula, which is not fully understood. It is based on what the government terms trade parity price, or the estimated price of the fuel if it were to be imported and exported in the ratio of 80:20. For now, the government is said to have asked the state-owned oil marketing companies to absorb some of the pain and not pass higher costs on to consumers. 4. Why have prices soared? The great global oil price slump of 2014 pushed prices below the levels set by the Indian government. So, when India abolished price controls that year, local prices actually fell. The government made the most of oil s continued tailspin by adding a tax on oil rather than






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passing on the entire reduction to consumers. With the tax still in place, Indians therefore felt the pinch doubly when oil prices started climbing again. On Tuesday, Brent hit $75 a barrel, the highest since 27 November 2014. 5. How high are fuel taxes? Federal taxes on diesel were increased five times since September 2014, to 17.33 rupees a litre, before a 2 rupees-a-litre reduction last October. That cut, along with a reduction in gasoline taxes, were estimated to have reduced the government s revenue by 260 billion rupees during the year ended March. Still, taxes account for more than half of the retail price of gasoline. On 19 April, the pre-tax gasoline price in New Delhi was 35.20 rupees a litre. It finally sold for 74.10 rupees a litre after adding taxes and dealer margins. 6. Who does this affect the most? Diesel accounts for about 40% of all oil products consumed in India, and it s the most important fuel for public transport. Diesel also has a trickle-down effect on inflation: Higher diesel prices mean higher freight, and higher freight makes transportable goods more expensive. The price of gasoline, the primary fuel used by cars, affects a more affluent demographic. But it s also a mass fuel, because almost all of India s scooters and motorcycles run on it. So-called two-wheelers are mainstays of commuters in cities and rural areas. (Adapted from Livemint) 90. How every village got electricity and why that is still not enough

Trend of electrification A mere 3,000 of more than 500,000 Indian villages had an electric pole in 1950. The coverage of India s power network would remain poor for the next two decades. The real leap forward (See Chart 1), in terms of geographic coverage, happened in the early to mid-1970s when Indira Gandhi rode to power with her garibi hatao slogan. Only 18% of






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India s villages were electrified in 1970. By the mid-1980s, there was an electric pole in two-thirds of the villages. Consistent increase in villages covered Under Indira Gandhi s various tenures, the rural electrification drive consistently reached nearly 20,000 villages every year. Thus, the pace of electrification achieved by the Narendra Modi-led government is fairly modest when viewed historically, although many of the villages that got connected to the grid after 2014 were particularly hard to reach. Why then does access to electricity still remain beyond the reach of so many Indians? The government is not considering modifying the current much-criticised definition of an electrified village, which counts a village as electrified if at least 10% of its households have an electricity connection, according to a senior official in the Ministry of Power. According to the definition, in place since October 1997, a village is deemed to be electrified if basic infrastructure such as a distribution transformer and distribution lines are in place in the inhabited locality, electricity is provided to public places like schools, panchayat office, health centres, dispensaries, community centres, and at least 10% of the households in the village are electrified. Present status of electrification in households As of today, in India, the rural household electrification is about 83%. From State to State,

it ranges from 47% to 100%, but on average about 83% of households are electrified. Saubhagya scheme The government had in September 2017 launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya), aimed at covering the last-mile connectivity of taking electricity to the household level. The target for the scheme is March 31, 2019. According to data from the Ministry of Power and the Central Electricity Authority, so far 84.3% of households have been electrified. The Saubhagya scheme defines the electrification of a household as including a service line cable, energy meter, and single point wiring. For unelectrified households in remote areas, electrification will involve the provision of power packs of 200 to 300 W (with battery bank) with a maximum of 5 LED lights, 1 DC Fan, and 1 DC power plug. (Adapted from The Hindu and Livemint) 91. Cabinet approves continuation of Umbrella Scheme Green Revolution — Krishonnati Yojana in Agriculture Sector The Cabinet Committee on Economic Affairs has given its approval for the Umbrella Scheme, "Green Revolution – Krishonnati Yojana" in agriculture sector beyond 12th Five






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Year Plan for the period from 2017-18 to 2019-20 with the Central Share of Rs. 33,269.976 crore. The Umbrella scheme comprises of 11 Schemes/Missions. These schemes look to develop the agriculture and allied sector in a holistic and scientific manner to increase the income of farmers by enhancing production, productivity and better returns on produce. The Schemes that are part of the Umbrella Schemes are: - (i) Mission for Integrated Development of Horticulture (MIDH) with a total central share of Rs. 7533.04 crore, MIDH aims to promote holistic growth of horticulture sector; to enhance horticulture production, improve nutritional security and income support to farm Households. (ii) National Food Security Mission (NFSM), including National Mission on Oil Seeds and Oil Palm (NMOOP), with a total central share of Rs.6893.38 crore. It aims to increase production of rice, wheat, pulses, coarse cereals and commercial crops, through area expansion and productivity enhancement in a suitable manner in the identified districts of the country, restoring soil fertility and productivity at the individual farm level and enhancing farm level economy. It further aims to augment the availability of vegetable oils and to reduce the import of edible oils. (iii) National Mission for Sustainable Agriculture (NMSA) with a total central share of Rs.3980.82 crore. NMSA aims at promoting sustainable agriculture practices best suitable to the specific agro-ecology focusing on integrated farming, appropriate soil health management and synergizing resource conservation technology. (iv) Submission on Agriculture Extension (SMAE) with a total central share of Rs.2961.26 crore. SMAE aims to strengthen the ongoing extension mechanism of State Governments, local bodies etc., achieving food and nutritional security and socio-economic empowerment of farmers, to institutionalize programme planning and implementation mechanism, to forge effective linkages and synergy amongst various stake-holders, to support HRD interventions, to promote pervasive and innovative use of electronic / print media, inter-personal communication and ICT tools, etc. (v) Sub-Mission on Seeds and Planting Material (SMSP) with a total central share of Rs.920.6 crore. SMSP aims to increase production of certified / quality seed, to increase SRR, to upgrade the quality of farm saved seeds, to strengthen the seed multiplication chain, to promote new technologies and methodologies in seed production, processing, testing etc., to strengthen and modernizing infrastructure for seed production, storage, certification and quality etc. (vi) Sub-Mission on Agricultural Mechanisation (SMAM) with a total central share of Rs.3250 crore. SMAM aims to increase the reach of farm mechanization to small and marginal farmers and to the regions where availability of farm power is low, to promote Custom Hiring Centres to offset the adverse economies of scale arising due to small landholding and high cost of individual ownership, to create hubs for hi-tech and high value






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farm equipment, to create awareness among stakeholders through demonstration and capacity building activities, and to ensure performance testing and certification at designated testing centers located all over the country. (vii) Sub Mission on Plant Protection and Plan Quarantine (SMPPQ) with a total central share of Rs.1022.67 crore. SMPPQ aims to minimize loss to quality and yield of agricultural crops from the ravages of insect pests, diseases, weeds, nematodes, rodents, etc. and to shield our agricultural bio-security from the incursions and spread of alien species, to facilitate exports of Indian agricultural commodities to global markets, and to promote good agricultural practices, particularly with respect to plant protection strategies and strategies. (viii) Integrated Scheme on Agriculture Census, Economics and Statistics (ISACES) with a total central share of Rs. 730.58 crore. It aims to undertake the agriculture census, study of the cost of cultivation of principal crops, to undertake research studies on agro-economic problems of the country, to fund conferences/workshops and seminars involving eminent economists, agricultural scientists, experts and to bring out papers to conduct short term studies, to improve agricultural statistics methodology and to create a hierarchical information system on crop condition and crop production from sowing to harvest. (ix) Integrated Scheme on Agricultural Cooperation (ISAC) with a total central share of Rs. 1902.636 crore. It aims to provide financial assistance for improving the economic conditions of cooperatives, remove regional imbalances and to speed up - cooperative development in agricultural marketing, processing, storage, computerization and weaker section programmes; to help cotton growers fetch remunerative price for their produce through value addition besides ensuring supply of quality yarn at reasonable rates to the decentralized weavers. (x) Integrated Scheme on Agricultural Marketing (ISAM) with a total central share of 3863.93 crore. ISAM aims to develop agricultural marketing infrastructure; to promote innovative and latest technologies and competitive alternatives in agriculture marketing infrastructure; to provide infrastructure facilities for grading, standardization and quality certification of agricultural produce; to establish a nationwide marketing information network; to integrate markets through a common online market platform to facilitate pan-India trade in agricultural commodities, etc. (xi) National e-Governance Plan (NeGP-A) with a total central share of 211.06 crore aims to bring farmer centricity & service orientation to the programmes; to enhance reach & impact of extension services; to improve access of farmers to information &services throughout crop-cycle; to build upon, enhance & integrate the existing ICT initiatives of Centre and States; and to enhance efficiency & effectiveness of programs through making available timely and relevant information to the farmers for increasing their agriculture productivity. The Schemes/Missions focus on creating/strengthening of infrastructure of production, reducing production cost and marketing of agriculture and allied produce. These






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schemes/missions have been under implementation for varying duration during past few years. All these schemes/missions were appraised and approved independently as separate scheme/mission. In 2017-18, it has been decided to club all these schemes / missions under one umbrella scheme 'Green Revolution - Krishonnati Yojana'. (Adapted from PIB) 92. Cabinet approves restructuring of Multi-sectoral Development Programme for its continuation during remaining period of 14th Finance Commission as Pradhan Mantri Jan Vikas Karyakram The Cabinet Committee on Economic Affairs has approved the proposal for renaming and restructuring of Multi-sectoral Development Programme (MsDP) as Pradhan Mantri Jan Vikas Karyakram (PMJVK). CCEA has also approved its continuation during the remaining period of the 14th Finance Commission. Impact: • The restructured programme would provide better socio-economic infrastructure facilities to the minority communities particularly in the field of education, health & skill development as compared to the present situation, which would further lead to lessening of the gap between the national average and the minority communities with regard to backwardness parameters. The flexibility introduced in the programme will enable addressing important issues that would result in speedier implementation leading to greater inclusiveness of the minority communities. • The criteria for identification of Minority Concentration Towns and Clusters of Villages have been rationalized by lowering the population percentage criteria of Minority Communities and fulfilment of backwardness parameters in the following manners: - • Earlier only those Towns which were found backward in terms of both in Basic Amenities and Socio-economic parameters were taken up as MCTs. Now, the Towns which were found backward in either or both of the criteria have been taken up as MCT. • Earlier only those Cluster of Villages which were having at-least 50% population of Minority Community were taken. Now the population criteria has been lowered to 25%. • These rationalizations of criteria would facilitate the inclusive growth of communities and social harmony, • The area to be covered under PMJVK would be 57% more as compared to the existing MsDP. •The MsDP covered 196 districts of the country whereas PMJVK will cover 308 districts of the country.






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Expenditure: Funding of the scheme would be from budgetary provision of the Ministry. The Expenditure Finance Committee, Department of Expenditure has recommended for the continuation of the programme as PMJVK at the cost of Rs. 3,972 crore as per layout below:

Year

2017-18*

2018-19

2019-20

Funds required

1200.00

1320.00

1452.00

Total for three years (in Rs. crore)

3972.00

Beneficiaries: The Programme aims to address development deficits in the identified minority concentration areas. The identification of minority concentration areas has been done on the basis of presence of substantial population of notified Minority Communities based on Census, 2011. The inclusion of Minority Concentration District Headquarters along with the Minority Concentration Towns having population more than 25,000, Minority Concentration Blocks and Cluster of Villages as per Census, 2011 data, will extend the coverage of population of minority communities. Special focus by earmarking funds: (i) 80% of the resources under the PMJVK would be earmarked for projects related to education, health and skill development. (ii) 33 to 40% of resources under the PMJVK would be specifically allocated for women centric projects. Background: MsDP has been identified as one of the Core of the Core Schemes under National Development Agenda in the Report of the Sub-Group of Chief Ministers on Rationalization of Centrally Sponsored Schemes, which was constituted by NITI Aayog. The programme was launched in the year 2008-09 in 90 identified Minority Concentration Districts (MCDs) having at least 25% minority population and below national average with respect to one or both of the backwardness parameters with the objective of developing assets for socio-economic and basic amenities. The MCDs were identified on the basis of census 2001 data. (Adapted from PIB)






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93. Cabinet approves Doubling of Investment Limit for Senior Citizens from Rs. 7.5 lakh to Rs.15 lakh under Pradhan Mantri Vaya Vandan Yojana (PMVVY) The Union Cabinet has given its approval for extending the investment limit from Rs 7.5 lakhs to Rs 15 lakhs as well as extension of time limits for subscription from 4thMay 2018 to 31stMarch, 2020 under the Pradhan Mantri Vaya Vandan Yojana (PMVVY) as part of Government's commitment for financial inclusion and social security. As of March 2018, a total number of 2.23 lakh senior citizens are being benefited under PMVVY. In the previous scheme of Varishtha Pension Bima Yojana-2014, a total number of 3.11 lakh senior citizens are being benefited. Background: The PMVVY is being implemented through Life Insurance Corporation of India (LIC) to provide social security during old age and protect elderly persons aged 60 years and above against a future fall in their interest income due to uncertain market conditions. The scheme provides an assured pension based on a guaranteed rate of return of 8% per annum for ten years, with an option to opt for pension on a monthly / quarterly / half yearly and annual basis. The differential return, i.e. the difference between the return generated by LIC and the assured return of 8% per annum would be borne by Government of India as subsidy on an annual basis. (Adapted from PIB) 94. Regulating cryptocurrencies What is the RBI s stance? In the most direct action taken so far by regulatory authorities on the issue of cryptocurrencies, the Reserve Bank of India (RBI), during its monetary policy announcement on April 6, directed all regulated agencies, including banks, to stop doing any business with any person or entity dealing with or settling virtual currencies (VC) . What does this mean? The circular says that banks have to stop all services to those dealing in VCs, including maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to the purchase or sale of VCs. In addition, the RBI gave its regulated entities three months from the date of the circular to exit any such relationship they might already be in. Why did this happen? This decision did not come out of the blue. The RBI and the government have repeatedly issued warnings to people dealing in cryptocurrencies, with the Finance Ministry even referring to them as Ponzi schemes in which investors stand to lose all their money. The fear among regulators and policymakers is that cryptocurrencies, being an alternative source of value to fiat currency, could be misused to launder black money or finance






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terrorist activities. It has also been reported that the RBI has constituted a committee to look into the merits and demerits of issuing a central bank digital currency, which will have the status of a fiat currency. So, ring-fencing non-state cryptocurrencies could be the first step towards the issuing of a single, fiat virtual currency by the RBI. What has been the effect so far? Several cryptocurrency exchanges have said that though harsh, the RBI s stance does not explicitly say that it is illegal to buy and sell cryptocurrencies, or that running a cryptocurrency exchange in India is illegal. Instead, this move only segregates cryptocurrencies from fiat currency. Most exchanges are going ahead with their cryptocurrency to cryptocurrency transactions. Some have filed writ petitions challenging the RBI s order on the grounds that it violates their rights under Article 19(1)(g) of the Constitution. (Adapted from The Hindu) 95. Ministry fast-tracks security clearance for overseas investment proposals

Faster clearance to overseas investment Among foreign countries, the maximum investment proposals in critical sectors like telecom and defence that was cleared by the Home Ministry in 2017, were from China, United Kingdom, U.S. and Mauritius.






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The Ministry said it has given security clearance to more than 5,000 investment proposals, including for Foreign Direct Investment, in the last four years. Reduction in time A senior Ministry official said that earlier the time taken for security clearance for a project was eight-nine months on an average. This has been brought down to 40 days since last year. The Ministry had formulated a new national security clearance policy in 2015 after the government decided to speed up projects, which were stuck for lack of approval by Intelligence Bureau (IB) or other agencies including the State police. 15 parameters The policy has 15 parameters on which inputs from security agencies are sought. Once it has got an application from an investor, the Ministry decides on the status of security clearance to the company within 4-6 weeks. Number of approvals The Ministry granted security clearance to 815 investment proposals in 2014, 1,201 proposals in 2015 and 1,260 in 2016, an official said. In 2017, security clearances were given to around 1,071 proposals, he said. In addition, 543 proposals were automatically cleared in 2015 due to implementation of the revised policy guidelines. Of these proposals, 390 pertained to the Ministry of Information and Broadcasting, 235 related to civil aviation and 46 FDI proposals. Among the foreign countries, U.S., China (including Hong Kong), Mauritius, U.K. has received the green signal for the maximum number of projects at 10 each, followed by Germany 6, Bangladesh 3 and two each for Italy, Israel, Netherlands and Switzerland. (Adapted from The Hindu) 96. Gram Swaraj Abhiyan evaluation Gram Swaraj Abhiyan Gram Swaraj Abhiyaan is a campaign that is being organised on the occasion of Ambedkar Jayanti during the period 14th April to 05th May, 2018. Objectives of the campaign The campaign is undertaken under the name of "Sabka Sath, Sabka Gaon, Sabka Vikas". The objective of the campaign is to promote social harmony, spread awareness about pro-poor initiatives of government, reach out to poor households to enroll them as also to obtain their feedback on various welfare programmes.






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Activities to be taken up The campaign is being held through a partnership of beneficiaries, 33 lakh elected PRIs members, 5 crore women SHG members, MLAs and MPs to achieve goals. The Central/State and Local Governments are also partners in progress. As a special endeavour during the Gram Swaraj Abhiyan, saturation of eligible households/persons would be made under seven flagship pro-poor programmes in 21,058 identified villages covering 530 districts (except Karnataka, West Bengal where Election Code of Conduct is in place). The identified schemes are as follows. • Pradhan Mantri Ujjwala Yojana • Saubhagya • Ujala scheme • Pradhan Mantri Jan Dhan Yojana • Pradhan Mantri Jeevan Jyoti Bima Yojana • Pradhan Mantri Suraksha Bima Yojana and • Mission Indradhanush. An important aspect of the campaign would also be the public disclosure to the Gram Panchayats (GP) regarding funds made available under various schemes of the line departments and activities to be taken up in each GP area. Evaluation Lags behind in power, gas connections At the end of a three-week drive to bring seven flagship schemes to 16,850 villages with a high number of poor, SC (Scheduled Caste) and ST (Scheduled Tribe) households, less than 30% of the target households received an electricity connection, while less than 40% got a gas connection, according to government data. Targeted outreach 1. Financial schemes for rural beneficiaries to get Jan Dhan bank accounts and sign up for life and accident insurance achieved a high level of saturation. Financial schemes also saw high saturation, with a higher number of Jan Dhan bank accounts being opened. The Pradhan Mantri Jeevan Jyoti Bima Yojana, a life insurance scheme, enrolled 73% of targeted beneficiaries, while the Pradhan Mantri Suraksha Bima Yojana, a risk insurance scheme for accidental death or disability, enrolled almost 88% of target beneficiaries. 2. A scheme to fully immunise all pregnant women, and all children under two years, also reached almost all targeted beneficiaries. 3. The Saubhagya scheme to give every household an electricity connection reached 4 lakh homes, as against a target of 14.5 lakh homes, thus reaching 27% of the intended






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beneficiaries. Under the Ujjwala scheme to give gas connections to all homes, 39% or 5.6 lakh households were reached out of a total target of 14.4 lakh. (Adapted from The Hindu) 97. How far will aid for sugar go?

Govt has cleared assistance plan to help mills amid crisis caused by overproduction. Will Rs 5.50/quintal be effective when dues to growers have reached Rs 20,000 crore? Last week, the Union government approved financial assistance of Rs 5.50 per quintal (100 kg) for cane crushed by sugar mills in the ongoing 2017-18 season (October-September). This money would be credited directly into the bank accounts of farmers, who haven t received the fair and remunerative price (FRP) for sugarcane fixed by the Centre. Will the scheme be effective as cane payment dues to growers touch Rs 20,000 crore in a year leading to national elections? How significant is the support that has been announced? Quantitatively speaking, it isn t much. The Centre s FRP of cane for 2017-18, taking an average 10.7% all-India sugar recovery by mills, is around Rs 287 per quintal. The Uttar Pradesh government s advised price is even higher — Rs 315/quintal for normal and Rs






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325/quintal for early-maturing cane varieties. Mills claim they cannot pay farmers beyond 75% of their realisations from sugar. Ex-factory sugar prices are now at about Rs 25.50-26 per kg in Maharashtra and Rs 27 in UP. If a mill produces 10.7 kg of sugar from crushing a quintal of cane, and sells at Rs 27/kg, the maximum it can pay is Rs 217 per quintal. The Rs 5.50/quintal assistance, clearly, cannot bridge the gap vis-à-vis the FRP of Rs 287 per quintal, let alone the UP government s Rs 315-325 price. So, what s the big deal about the announcement? The Centre s Sugarcane (Control) Order mandates mills to pay the FRP within 14 days of cane purchase from farmers, failing which 15% annual interest is charged on the due amount for the period of delay. However, the official statement following Wednesday s Cabinet meeting — that the Rs 5.50/quintal assistance is meant to help sugar mills to clear cane dues of farmers — is an admission by the Centre about the inability of factories to pay the FRP. Further, such assistance will be adjusted against the cane price payable [based on] FRP . That amounts to giving mills considerable leeway in paying even the minimum cane price under the law. How have things come to this pass? Through the usual problem of overproduction, even though its extent is something that has thrown the calculations of millers, traders and even the government out of the window. The country s sugar output in 2017-18 is expected at a record 31.7 million tonnes (mt), a 56% jump over the last season s level. Even more spectacular is the production rebound in Maharashtra, from a 12-year-low of 4.2 mt to an all-time-high of 10.7 mt (see table). It has led to ex-factory prices crashing by Rs 9-10 per kg since the start of the season. With the total availability of 35.5 mt (31.7 mt production plus opening stocks of 3.8 mt) and estimated domestic consumption at 25 mt, there is too much of surplus sugar around. How will the Rs 5.50 per quintal assistance help in addressing this glut? The Rs 5.50/quintal support, even if given on the entire 296 mt of cane likely to be crushed in the 2017-18 season, will entail an outgo of Rs 1,630 crore — a pittance compared to the estimated cane arrears of Rs 20,000 crore. This assistance, moreover, is to be provided only to those mills which will fulfil the eligibility conditions as decided by the Government . While there is no clarity on the eligibility conditions , the expectation is that the payment would be linked to mills meeting export targets. The Centre has already fixed mill-wise minimum indicative export quotas totalling 2 mt for the current sugar season. Forcing

mills to export could be a part solution to the domestic glut, with the Rs 5.50/quintal assistance acting as a performance incentive. And how viable are exports? At current international rates, white sugar will have to be shipped out from India at around Rs 20.50 per kg. That translates into an ex-factory price of Rs 18, way below what mills are realising from domestic sales. Also, the normal crystal sugar produced by Indian mills has an ICUMSA value of over 100. The market for it is limited, unlike the more widely traded highly-refined sugar of 45 ICUMSA grade (the lower the ICUMSA, the more the whiteness).






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Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories, believes that exporting 2 mt of white sugar before September won t be easy. The Centre should, instead, target raw sugar exports of 4 mt before December 2018. Mills can produce it right from the start of the next season. Our raw brown sugar from fresh cane is dextran-free and with very high polarisation of 800-1,200 ICUMSA. There is a good market for it, including refineries in West Asia that now source Brazilian raw sugar, he said. So, is there any ray of hope? Yes, rising global oil prices that may induce mills, particularly in Brazil, to divert cane juice for production of ethanol, as opposed to sugar. Brazil s sugar production in 2017-18 (April-March) stood at 36.05 mt, which is projected to fall to 30.5 mt in the new crushing season, even as its output of ethanol (used both for 25% blending with petrol and as 100% hydrous spirit to power flex-fuel vehicles) might go up from 26.09 billion litres to 27.5 billion litres. That can, in turn, open up a market for Indian raw sugar. This is also the right time for India to embark on a more aggressive ethanol blending programme in auto fuels. Compared to Brazil s 26 billion-plus litres, sugar mills in India have been contracted to supply just 1.4 billion litres of ethanol to oil marketing companies in 2017-18. This is only 4.4% of the country s annual petrol consumption of 32 billion litres, when 10% ethanol-blending has already been allowed. With petrol retailing at Rs 75 per litre, there is even a case for revising upwards the Rs 40.85/litre rate for ethanol that mills are now getting — which should help sugarcane farmers as well. (Adapted from The Indian Express) 98. What matters in e-com Returns or items sent back have been a big challenge for online retailers. U.S retail giant Walmart is said to be keen on a stake in e-tailer Flipkart to take on rival Amazon. So, which metrics do investors track in e-commerce firms? Gross merchandise value Gross merchandise value is the value of goods sold in a period. The price charged to the customer is multiplied by the number of products sold. Chinese e-commerce giant Alibaba had GMV of $768 billion for the year ended March. Customer acquisition cost It is the cost related to persuading a consumer to buy a product or service. Includes research, marketing and advertising costs. It should be reasoned along with other insights, such as the value of the customer to the firm and the resulting return on investment, according to TechTarget. Online marketplace and inventory models






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A marketplace model is an information technology platform run by an e-commerce entity on a digital network to act as a facilitator between buyer and seller. For example, eBay is an online marketplace. The Centre had permitted 100% foreign direct investment in the marketplace model to attract foreign investments. In an inventory model, the inventory of goods and services is owned by the e-commerce entity and is sold to the consumers directly. FDI is not permitted in this model of e-commerce. Cash-on-delivery Cash-on-delivery is a type of purchase where the buyer makes a payment for a product at the time of the delivery. Amazon calls it Pay on Delivery which includes COD as well as digital payment facilities like cards and Internet banking. Fulfilment centres These enable e-commerce merchants to outsource warehousing and shipping, according to tech firm BigCommerce. This relieves the online business of the physical space to store products, which is beneficial for merchants without the capacity to directly manage inventory. Sellers send merchandise to the centre and the outsourced provider ships it to customers for them. Dropshipping It is a retail fulfilment method where a store doesn't keep the products it sells in stock, according to e-commerce firm Shopify. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. The difference between dropshipping and the standard model is the selling merchant doesn't stock or own inventory in the former. Gross margin It is a company's total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue, expressed as a percentage, according to Investopedia. Gross margin is a basic key performance indicator of any business that sells merchandise. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells, according to Investopedia. Repeat order rates, returns Repeat orders refer to the percentage of customers who buy again. Returns or items sent back have been a big challenge for online retailers. A returned item not only impacts the supply chain cost of the e-tailer but also devalues the product. (Adapted from The Hindu) 99. Van Dhan Vikas Kendras What are Van dhan kendras?






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As per the plan,TRIFED will facilitate establishment of Van Dhan Vikas Kendras, a cluster of 10 SHGs comprising of 30 tribal Minor Forest produce (MFP) gatherers each, in the tribal areas. This initiative is aimed at mainstreaming the tribal community by promoting primary level value addition to MFP at grassroots level. What is the vision? Through this initiative, the share of tribals in the value chain of Non-Timber Forest Produce is expected to rise from the present 20% to around 60%. About 3000 such Van Dhan Kendras are proposed to be set up in two years in the forested Tribal Districts of the country. To begin with, this initiative is proposed to be taken up on priority in the 39 Districts with more than 50% tribal population and to then gradually be expanded to other Tribal Districts in India. Implementing agencies The scheme will be implemented through Ministry of Tribal Affairs as Nodal Department at the Central Level and TRIFED as Nodal Agency at the National Level. At State level, the State Nodal Agency for MFPs and the District collectors are envisaged to play a pivot role in scheme implementation at grassroot level. Locally the Kendras are proposed to be managed by a Managing Committee (an SHG) consisting of representatives of Van Dhan SHGs in the cluster. What is the need of initiative? The initiative aims to promote MFPs-centric livelihood development of tribal gatherers and artisans. MFP or what may be more aptly referred to as Non-Timber Forest Produces (NTFPs) are the primary source of income and livelihood for about 5 crore tribal people in the country. Notably, most of the tribal Districts in India are forested Districts. Tribals have enormous traditional skills in the processes involved in collection and value addition of NTFPs. Based on local skills and resources the ideal model of tribal development has, therefore, to be NTFP centric. Key Highlights of Van Dhan Initiative

1. At unit level, aggregation of produce would be done by SHGs having about 30 members each forming Van Dhan Vikas Samuh . The SHGs would also undertake primary value addition of the MFPs using equipment such as small cutting and sieving tools, decorticator, dryer, packaging tool etc based on MFPs available in the area.

2. A typical Van Dhan Vikas Samuh would have the following facilities: (a) Provision for required building/ infrastructure support to be established in one of the

beneficiary s house/ part of house or Government/ gram panchayat building

(b) Equipment/ Tool Kit comprising of equipment such as small cutting and sieving tools, decorticator, dryer, packaging tool etc. based on MFPs available in the area

(c) Fully equipped training facilities for a batch of 30 trainees with provision for raw material for training purpose and supply of trainee kits (comprising of bag, scribbing pad, pen, brochures, training manual, booklet etc.)






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(d) Provisioning of working capital for the SHGs through tie up with financial institutions,

banks, NSTFDC etc.

3. A cluster of ten such SHGs within the same village shall form a Van Dhan Vikas Kendra. Subject to successful operations of the samuhs in a Kendra, common infrastructure facilities (pucca Kendra) may be provided to the Kendra in the next phase in terms of building, warehouse, etc. for use of the samuh members

4. An illustrative list of major MFPs which may be covered under the initiative are tamarind, mahua flower, mahua seed, hill broom, chironjee, honey, sal seed, sal leaves, bamboo split, myrobalan, mango (amchur), aonla (churan/candy), seed lac, tez patta, cardamom, black pepper, turmeric, dry ginger, cinnamon, coffee, tea, sea buckthorn tea, etc. Apart from these, any other MFP with potential for value addition may be included. (Adapted from PIB) 100. India ranks 4th in Asia-Pacific on power index, pegged as giant of the future How did Indian perform? India has ranked fourth out of 25 nations in the Asia-Pacific region on an index that measures their overall power, with the country being pegged as a giant of the future but trails behind in indicators of defence networks and economic relationships. Who issues the report? The Lowy Institute Asia Power Index measures power across 25 countries and territories in the Asia-Pacific region, reaching as far west as Pakistan, as far north as Russia, and as far into the Pacific as Australia, New Zealand and the US. Basis of index A country s overall power is its weighted average across eight measures of power—economic resources, military capability, resilience, future trends, diplomatic influence, economic relationships, defence networks and cultural influence. Key findings Among the key findings from the inaugural 2018 index are that US remains the pre-eminent power in Asia, while China, the emerging superpower, is rapidly closing in on US. Three of the world s four largest economies are in Asia, and the fourth, the United States, is

a Pacific power. By 2025, two-thirds of the world s population will live in Asia, compared with just over a tenth in the West, the Institute said. Specific parameters India is ranked fourth on the parameters economic resources, military capability, diplomatic influence and fifth on resilience. It scores well on the parameters of cultural influence and future trends, ranking third in both. However, it scores low on the measure of economic relationships, ranking seventh and in defence networks, ranking 10th.






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Lowy said economic relationships is measured in terms of the capacity of states or territories to exercise influence through economic interdependencies; measured in terms of trade relations, investment ties and economic diplomacy. Defence networks are defence partnerships that act as force multipliers of military capability; measured through assessments of alliances, non-allied partnerships and arms transfers. Cultural influence is defined as the ability to shape international public opinion through cultural appeal and interaction; measured in terms of cultural projection, information flows and people exchanges. Future trends are the projected distribution of economic, military and demographic resources in 2030, which play into perceptions of power today; measured in terms of GDP, military expenditure and working-age population forecasts. (Adapted from Livemint) 101. Price freeze: on high fuel prices Abandoning daily revision of prices The price of oil has been shooting up for weeks now, with Brent crude oil futures hitting their highest level in more than three years, at more than $75. But for two weeks now, the state-owned oil companies have kept petrol and diesel prices unchanged. Since April 24, the oil companies have abandoned the daily price revision. Since then, the prices of petrol and diesel in the national capital, for instance, are stuck at Rs.74.63 and Rs. 65.93, respectively. Reason for freezing prices 1. This is a glaring freeze, given that since the Centre introduced the dynamic pricing mechanism in June last year allowing oil marketing companies (OMCs) to revise fuel prices daily, the retail prices of various domestic fuels had been on a steady uptrend owing to the steep rise in international crude oil prices. 2. The new pricing mechanism also caused prices to show more volatility on a daily basis compared to the earlier regime when prices were revised periodically, mostly on a fortnightly basis. 3. Further, the rise in domestic fuel prices in response to rising crude oil prices has been quite inelastic recently. Petrol and diesel prices rose by 1 to 2% in April while Brent crude rose by more than 8%. This comes as a pleasant surprise considering that domestic fuel prices, which while not falling to an equal extent when crude prices witness a sharp drop, generally keep pace with any rise in oil prices. Political pressure The retail price of petrol is a hot political subject and successive governments at the Centre are routinely held responsible for it. It is therefore speculated that the OMCs are under






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pressure from the government to withhold upward revisions in the days before Karnataka goes to the polls. What govt should do? The government should opt to ease the burden of fuel taxes. The best way to do this might be to bring domestic fuels under the purview of the goods and services tax. For now, there is enough room to bring down prices by reducing excise duties on oil. (Adapted from The Hindu) 102. Committed to augmentation of Airport capacity through NABH (Nextgen Airports for Bharat) NABH (NextGen Airports for BHarat) Nirman initiative is for building airport capacity. The three key aspects of NABH Nirman are (1) fair and equitable land acquisition, (2) long-term master plan for airport and regional development and (3) balanced economics for all stakeholders. Improving passenger amenities, promoting cargo handling facilities and early operationalization of 56 new airports under UDAN scheme are focus areas while simultaneously working on improving regional connectivity and improving passenger services. Targets under NABH initiative The government is seeking to provide a big push to the country's civil aviation sector, aiming at five-fold growth in passenger traffic to a billion trips a year. Airport Authority of India (AAI) has 124 airports and it is proposed to expand by more than five times the airport capacity to handle a billion trips a year under a new initiative -- NABH Nirman. (Adapted from PIB) 103. Walmart buys controlling stake in Flipkart for $16 billion What is the deal? Walmart Inc has agreed to pay $16 billion for a roughly 77% stake in Indian online shopping site Flipkart, the US retailer s biggest foreign investment ever as it battles rival Amazon.com Inc in one of the world s biggest emerging markets. The remainder of the business will be held by some of Flipkart s existing shareholders, including Flipkart co-founder Binny Bansal, China s Tencent Holdings Ltd, Tiger Global Management LLC and Microsoft Corp, the company said in a statement on Wednesday. Flipkart co-founder Sachin Bansal to exit company by selling his 5.5% stake to Walmart.






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Key facts Bentonville, Arkansas-based Walmart and its partner in the deal, Google parent Alphabet Inc., are looking to buy up to three quarters of Flipkart. Walmart will look to own a roughly 60% stake, while Alphabet will get about 15% ownership of the online marketplace, sources added. The deal is likely to value Flipkart at roughly $18 billion to $20 billion. Indian media reported last week that Amazon.com Inc., which has been pouring billions of dollars into India to ship goods to shoppers faster, had made a formal offer to buy 60% of Flipkart but that Flipkart s founders preferred Walmart. Here are the key facts about Flipkart: ■ The company was founded in 2007 in Bengaluru by Sachin Bansal and Binny Bansal. The Bansals, who are not related, met in 2005 at the Indian Institute of Technology, Delhi. They are both former employees of Amazon. ■ Flipkart at first sold books, later expanding to sell music, movies, games, electronics and mobiles, the category that has driven growth. The first book it sold was John Wood s Leaving Microsoft to Change the World. It launched logistics arm Ekart in 2010 and started the now popular cash-on-delivery service. ■ It opened its first office in Bengaluru in 2008 and opened offices in Delhi and Mumbai in 2009. Last month, Flipkart consolidated all its Bengaluru offices in one large campus. ■ In 2011, Flipkart domiciled to Singapore, as it looked to woo foreign investors to fund rapid growth. ■ Early investors New York-based hedge fund Tiger Global and US private-equity firm Accel Partners will sell a majority of their stakes, Reuters reported on Tuesday. ■ Other investors include the founders and Napsers Ltd, China s Tencent Holdings Ltd, eBay Inc, and Microsoft Corp.invested $1.4 billion last year. ■ Financials, according to filings sourced by business intelligence platform paper. ■ Flipkart Group s consolidated loss attributable to owners of the company in fiscal 2017 widened to Rs8,770 crore, from Rs5,216 crore a year earlier. ■ Consolidated revenue jumped 29% to Rs19,855 crore in fiscal 2017. (Adapted from Livemint) 104. What the Flipkart-Walmart deal means for e-commerce in India






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The world s largest retailer Walmart Inc. finally announced on Wednesday that it had agreed to buy 77% of Flipkart for $16 billion, valuing India s biggest Internet start-up at a whopping $21 billion—as was widely anticipated and reported by several media publications, including Mint, over the past few weeks and months. For the Indian start-up and venture-capital (VC) ecosystem, this deal is its most triumphant moment, marking a remarkable victory for an Internet start-up that was launched a decade ago in a country that has for the longest time been starved of major start-up exits. This deal also has massive ramifications for several stakeholders across the board. Why is the Flipkart-Walmart deal so important? The deal completely redraws the e-commerce landscape in India and escalates Walmart s global battle against Amazon.com Inc., its biggest rival in the US. Several tens of billions of dollars are at stake on both the sides. While this has been a positive outcome for Flipkart and all its stakeholders, the e-commerce landscape in India now is essentially going to be dominated by two American giants. What does the deal mean for Walmart? Arguably, the Flipkart deal is the most significant acquisition in the history of Walmart and one that was pushed by its chairman Greg Penner, heir to the multi-billion-dollar Walton family fortune. For Walmart, this deal represents a fight for everything it has built over the past five decades and a massive bet on the future of retail. Flipkart will be the centrepiece of Walmart s global e-commerce ambitions, given India s standing of being one of the world s last remaining major Internet economies. What does the deal mean for Amazon? While Amazon has missed out on an opportunity to buy out Flipkart, it will be business as usual for the world s largest online retailer. Company insiders at Amazon say that they had long anticipated a situation where they might have to fight Walmart in India. Moreover, from Amazon s perspective, its domination as the global online retailer has forced its biggest American rival, Walmart, to fork out $16 billion for what is easily one of the most expensive acquisitions ever—a clear acknowledgement that Walmart is trying hard to make up for lost time by not investing more aggressively on e-commerce earlier. In fact, the acquisition of Flipkart spooked Walmart s investors and wiped away more than $10 billion of the American retail giant s market value, while Amazon s shares actually closed up 1% on Wednesday. Who has benefitted from the deal? All its stakeholders—including investors, founders and employees. A number of current employees have turned dollar-millionaires overnight, while early investors such as Accel Partners and Tiger Global Management, and even late-stage investor, Japan s SoftBank Group, have made a killing—Accel, Tiger and Softbank put together have raked in an exit of over $8 billion. How does the Flipkart buyout help the Indian start-up ecosystem?






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This deal should catch the eye of a number of large, foreign strategic investors who have been eyeing India for a long time. Broader start-up funding is expected to go up, while the number of ventures starting out is also expected to rise, after witnessing two consecutive years of decline. The VC ecosystem has also received a tremendous boost from this deal and this exit is expected to power the venture-capital business in India for another decade at least. What does it mean for Indian e-commerce? Indian e-commerce has been both a winner and loser because of this deal. While Flipkart s buyout marks the biggest victory ever for an Indian Internet start-up, it also means that for the foreseeable future, the online retail business in India will be controlled firmly by two large American companies—Walmart and Amazon. It will be a bruising battle for supremacy. (Adapted from The Livemint) 105. India to counter U.S. complaint on farm subsidies in WTO View of US The U.S. had filed a counter-notification at the WTO Committee on Agriculture on May 4, alleging that based on U.S. calculations, it appears that India has substantially under-reported its market price support (MPS) for wheat and rice , according to a statement issued by the U.S. Department of Agriculture. According to the U.S. calculations, the value of India s MPS for rice that year was more than Rs.1.7 lakh crore, which would be 76.9% of the total value of production. View of India Indian diplomatic sources told that the U.S. calculations were based on wrong assumptions. They added that India would officially respond at the WTO s Committee on Agriculture meeting in June. India notified the WTO that its MPS for rice in 2013-14 was just over Rs. 12,001 crore. That amounts to 5.45% of the total value of production. WTO provisions WTO permits maximum Market price support cut-off of 10% on total market value of the produce. Issue raised by US One of the issues raised by the U.S. is that India s notification only reflect the national minimum support prices and do not include all state bonuses or other incentives that further increase the MSP provided to farmers. (Adapted from The Hindu) 106. Why is the rupee in a free fall?






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What s the matter with the rupee? The rupee has witnessed a significant fall in its value over the last few months. The value of the rupee against the dollar has fallen by more than 5% since the beginning of 2018, and the fall has gained further momentum in the last few weeks. The currency now trades at its lowest in more than a year. The rupee, however, is not the only currency to face depreciation. Other emerging economies like Indonesia, Argentina, Mexico and Turkey have seen a fall in their currencies. So the rupee s fall is part of a sell-off across emerging markets. Why the slide? The depreciation of a host of emerging market currencies, not just the rupee, suggests that there is a global factor at play. The U.S. Federal Reserve is expected to tighten its monetary policy stance further in the coming months and years by taking steps towards slowing down the growth in U.S. money supply. This is considered the most likely reason for the sell-off. A slowdown in U.S. money supply growth affects the value of other currencies in two ways. For one, interest rates in the U.S. will begin to rise as the Fed s demand for various assets begins to drop. The yield on 10-year U.S. Treasury Bonds has already risen to 3% from around 2% last year, amid the Fed s increasingly hawkish monetary stance. This causes a rush among investors to sell their assets in other parts of the world and invest the money in the U.S., where they could earn higher returns. The consequent flow of capital from the emerging markets to the U.S. increases selling pressure on emerging market currencies and buying pressure on the dollar. Secondly, as the Fed begins to tighten money supply, the availability of dollars in the global market is likely to turn scarce, compared to other currencies. Both these factors affect the price at which traders, who try to speculate on future retail demand, are willing to buy the dollar using other currencies. What does it mean for India? The fall in the value of the rupee means that buyers are now having to shell out more rupees to purchase dollars. The fall in the nominal value of a currency in itself does not suggest that its holders are worse off. If the real value of the dollars bought with the currency were to increase sufficiently, their effective purchasing power would still be intact. In the present case, however, the depreciation of the rupee is due to a fundamental change in investor attitude to the rupee for the worse. So it reflects a fall in the rupee s real purchasing power. Further, as far as the depreciation of the rupee or other emerging market currencies was previously unexpected, it could affect the expected returns of people who invest across borders. A stronger dollar will work to the favour of those who invested in the U.S., adversely affecting the returns of investors who were bullish on emerging markets. What can be done? One major factor determining a currency s exchange rate is its relative scarcity vis-à-vis other currencies. Since central banks are the sole suppliers of national currencies, they can influence the value of their currencies by appropriately regulating their supply. Another factor that determines a currency s exchange rate is the benchmark interest rate, which can






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be used as a tool to directly attract capital into the country and prop up the value of its currency. The Reserve Bank of India can affect both the money supply and domestic interest rates simultaneously through its monetary policy stance. Yet another common way to prop up a currency is through the direct intervention of the central bank in the forex market. (Adapted from The Hindu) 107. The lowdown on Adopt a Heritage What is it? The Adopt a Heritage: Apni Dharohar, Apni Pehchaan scheme is an initiative of the Ministry of Tourism, in collaboration with the Ministry of Culture and the Archaeological Survey of India. It was launched in September 2017 on World Tourism Day by President Ram Nath Kovind. Under it, the government invites entities, including public sector companies, private sector firms as well as individuals, to develop selected monuments and heritage and tourist sites across India. Development of these tourist sites calls for providing and maintaining basic amenities, including drinking water, ease of access for the differently abled and senior citizens, standardised signage, cleanliness, public conveniences and illumination, along with advanced amenities such as surveillance systems, night-viewing facilities and tourism facilitation centres. The sites/monument are selected on the basis of tourist footfall and visibility and can be adopted by private and public-sector companies and individuals — known as Monument Mitras — for an initial period of five years. The Monument Mitras are selected by the oversight and vision committee, co-chaired by the Tourism Secretary and the Culture Secretary, on the basis of the bidder s vision for development of all amenities at the heritage site. There is no financial bid involved. The corporate sector is expected to use corporate social responsibility (CSR) funds for the upkeep of the site. The Monument Mitras, in turn, will get limited visibility on the site premises and on the Incredible India website. The oversight committee also has the power to terminate a memorandum of understanding in case of non-compliance or non-performance. How did it come about? This is not the first time the government has tried to rope in the corporate sector to help maintain tourist sites and monuments. In one such attempt, the government in 2011 formed a National Culture Fund. Since then, 34 projects have been completed under it through public-private partnerships. Another similar scheme under the UPA government was Campaign Clean India, in which the government had identified 120 monuments/destinations. Under this scheme, the India Tourism Development Corporation had adopted Qutab Minar as a pilot project in 2012, while ONGC adopted six monuments — Ellora Caves, Elephanta Caves, Golkonda Fort, Mamallapuram , Red Fort and Taj Mahal — as part of its CSR. Why does it matter? The project kicked up a storm after reports that private entity Dalmia Bharat, under an MoU, would build infrastructure and maintain the iconic Red Fort. Dalmia Bharat has






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committed Rs. 25 crore for the purpose. The Opposition termed it an attack on the idea of India, alleging that the government was handing over the symbol of India s independence to private parties. The government said the scheme would help to increase tourist footfall. What lies ahead? Notwithstanding criticism, the government intends to expand the Adopt a Heritage scheme. Under the scheme, the government has put up a list of over 93 ASI monuments that can be bid for by private and public-sector firms, as well as individuals. This is a pretty small list, as the ASI protects 3,686 ancient monuments and archaeological sites, including 36 world heritage sites. So far, 31 agencies or Monument Mitras have been approved to adopt 95 monuments/tourist sites. However, only four MoUs have been signed. These are between the Ministry of Tourism, the Adventure Tour Operators Association of India and the Government of Jammu & Kashmir for Mt. Stok Kangri, Ladakh; the Ministry of Tourism, the Adventure Tour Operators Association of India and the Uttarakhand government for trail to Gaumukh; the Ministry of Tourism, the Ministry of Culture, the ASI and Dalmia Bharat for the Red Fort (in Delhi) and the Gandikota Fort (in Andhra Pradesh). The government is hopeful of expediting the MoUs with selected entities in the next two months. (Adapted from The Hindu) 108. The lowdown on the recent OALP round The Directorate General of Hyrdrocarbons (DGH) had recently announced the completion of the first round of bidding under its new Open Acreage Licensing Policy (OALP), a part of its revamped Hyrdrocarbon Exploration and Licensing Policy (HELP) unveiled in March 2016. What is OALP? The policy was brought out in June 2017 and marked a departure from the previous regime in terms of the geographical area that could be explored, the number of licences required, the manner in which proceeds are to be shared with the government, and the procedure to sell what is extracted. OALP is a part of HELP, which itself was a replacement to the New Exploration and Licensing Policy. How is the new policy different? The open acreage in OALP refers to the fact that potential investors are now able to choose exactly which areas they want to explore and develop. Under NELP, the government used to select an area and then place it on the block, and investors had to bid for the entire block even if they were interested in only a portion. Under OALP, investors choose the exact areas they are interested in, convey their interest to the government, which then places just those blocks up for bidding, typically twice a year. However, the government has indicated that bidding could take place even more frequently, if needed.






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What else is different? The other major difference between the new and old policies is the new one doesn t require developers to apply for separate licences for each of the hydrocarbons they want to extract from the block. They can obtain a single unified license that will allow them to extract and market oil, gas, coal bed methane, shale oil and shale gas. The new policy also does away with the earlier provision for a profit-sharing model with the government. Profit sharing as a policy led to a number of delays and complications over what exactly constituted the cost, and therefore profit, of the firm doing the exploring. The new policy hinges on revenue-sharing, doing away with this ambiguity. What happened in the bids? The DGH said that it received 110 e-bids for the 55 blocks on offer by the deadline of midnight on May 2, 2018. Of the 110 e-bids received, 92 were received for inland blocks and 18 for offshore blocks. Nine companies — ONGC, OIL, GAIL India, IOCL, BPRL, Vedanta, Selan, HOEC and Sun Petro — participated in the bid. Of these, ONGC placed 37 bids both individually and with consortium partners, and Cairn Vedanta placed 55 bids. (Adapted from the Hindu) 109. Green Skill Development Programme Green Skill Development Programme (GSDP) aims to get 80, 000 people imparted green skills and in filling the skill gaps in the environment sector. Under the programme, more than 30 programmes have been identified, which will be conducted in 84 institutions across the country. BACKGROUND OF GSDP: Realizing the need for developing the green skills, the Ministry of Environment, Forest & Climate Change (MoEF&CC) is utilising the vast network and expertise of Environmental Information System (ENVIS) hubs and Resource Partners (RPs). The Ministry has taken this initiative for skill development in the environment and forest sector to enable India's youth to get gainful employment and/or self-employment. The programme endeavours to develop green skilled workers having technical knowledge and commitment to sustainable development. It will help in the attainment of the Nationally Determined Contributions (NDCs), Sustainable Development Goals (SDGs), National Biodiversity Targets (NBTs), as well as Waste Management Rules (2016). The pilot project of GSDP was launched in June 2017, for skilling Biodiversity Conservationists (Basic Course) and Para-taxonomists (Advance Course) of 3 months duration each at 10 locations, spread over 9 bio-geographic regions of the country. 94 trainees successfully completed the basic course qualifying as skilled Biodiversity Conservationists and 152 Trainees completed the Advanced Course qualifying as skilled






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Para-taxonomists. ENVIS RPs in Botanical Survey of India (BSI), Zoological Survey of India (ZSI) and their respective regional offices were the nodal Centres for the pilot programme. Based on the feedback received from the stakeholders, the GSDP is being scaled up to an all-India level. More than 30 skilling programmes will be conducted during 2018-19. The skilling programmes cover diverse fields such as pollution monitoring (air/water/soil), Sewage Treatment Plant, Effluent Treatment Plants and Common Effluent Treating Plants (STP/ETP/CETP) operation, waste management, forest management, water budgeting, auditing, conservation of river dolphins, wildlife management, para taxonomy, including Peoples Biodiversity Register (PBRs), mangroves conservation, bamboo management and livelihood generation. The duration of the courses ranges from 80 hours to 560 hours approx. In the first stage, a pool of Master Trainers/Specialists is being created, who can further train the youth across the country. All courses will be National Skills Qualifications Framework (NSQF) compliant. The Ministry will give Certificates indicating the skilling levels to all successful candidates. (Adapted from PIB) 110. Atal Pension Yojana subscribers crosses 1 crore mark Atal Pension Yojana (APY) Scheme s subscriber base crossed 1 Crore on completion of 3 years of the Scheme launch. The current number of subscribers stands at 1.10 Crore. About Atal Pension Yojana Atal Pension Yojana (APY), a guaranteed Pension Scheme for citizens of India announced by the Government of India, is focused on the unorganised sector workers which constitute more than 85% of workforce. Under the APY, the guaranteed minimum pension of Rs. 1,000/- or 2,000/- or 3,000/- or 4,000/ or 5,000/- per month will be given at the age of 60 years depending on the contributions by the subscribers. The Spouse of the Subscriber is also eligible for pension and the nominee would be receiving the accumulated pension wealth. Network of APY Across the country, 1.60 lacs branches which include 20 thousand post offices offer the services of opening APY account for their customers. Out of this branch network, nearly 90% of the branches have mobilised one or more APY account in the last 3 years. Till date Rs. 3950 crores of contribution has been collected under theAtal Pension Yojana (APY) Scheme. (Adapted from PIB) 111. Allahabad Bank CEO divested of powers CBI had named her in Nirav Modi FIR State-run lender Allahabad Bank has decided to relieve its managing director and chief executive officer Usha Ananthasubramanian of her powers after she was named in the first






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information report filed by the Central Bureau of Investigation in the Rs. 13,800-crore Nirav Modi scam that defrauded Punjab National Bank (PNB). Ms. Ananthasubramanian was the managing director and chief executive officer of PNB between August 2015 and May 2017. She is due for retirement in August this year. (Adapted from The Hindu) 112. Cabinet approves Corpus for Micro Irrigation Fund with NABARD under Pradhan Mantri Krishi Sinchayee Yojana The Cabinet Committee on Economic Affairs as approved an initial Corpus of Rs.5,000 crore for setting up of a dedicated Micro Irrigation Fund (MIF) with NABARD under Pradhan Mantri Krishi Sinchayee Yojana (PMKSY). Details: • The allocation of Rs. 2,000 crore and Rs. 3,000 crore will be utilised during 2018-19 and 2019-20 respectively. NABARD will extend the loan to State Governments during this period. Borrowings from NABARD shall be paid back in 7 years including the grace period of two years. • The lending rate under MIF has been proposed at 3% lower than the cost of raising the fund by NABARD. • This cost shall be met from the ongoing scheme of PMKSY-PDMC by amending the existing guidelines • The total financial implication on interest subvention comes to about Rs 750 crore. Benefits: • The dedicated Micro Irrigation Fund would supplement the efforts of Per Drop More Crop Component (PDMC) of Pradhan MantriKrishiSinchayeeYojana in an effective and timely manner. • With the additional investment for micro irrigation accessing MIF, innovative composite/ commodity/ community/ cluster based micro irrigation projects/ proposals may bringabout 10 lakh ha. • The Fund will facilitate States to mobilise resources for theirinitiatives, including additional (top up subsidy) in implementation of PMKSY-PDMC toachieve the annual target of about 2 Million ha/year during the remaining period of 14thFinance Commission under Per Drop More Crop Component of PMKSY as recommended by the Group of Secretaries. Implementation Strategy and targets: States may access MIF for innovative integrated projects, including projects in the Public Private Partnership (PPP) mode and also for incentivizing micro irrigation through an






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additional (top up) subsidy over and above the one available under PMKSY-PDMC Guidelines and for covering additional areas. It should not be a substitute for State's share in PMKSY-PDMC. Farmers Producers Organization (FPO)/Cooperatives/State Level Agencies can also access the funds with State Government Guarantee or equivalent collateral. Farmers Co-operatives may access this fund for innovative cluster based Community Irrigation Projects. An Advisory Committee to provide policy direction and ensure effective planning, coordination and monitoring along with a Steering Committee for examining and approving the Projects/proposals from State Governments (total cost, eligible loan amount to the State and phasing), coordination and monitoring to ensure time bound implementation of the assisted projects/proposals within approved cost and phasing is proposed to be constituted. Coverage: The approval shall have Pan India coverage. With the operation of MIF, it is expected that the States which are lagging behind in adoption of Micro Irrigation would also be encouraged to take advantage of the fund for incentivizing farmers as being done by the good performing States. Besides, community driven and innovative projects to be taken up by the States would bring additional coverage of Micro Irrigation. Rationale: The Task Force on Micro Irrigation had estimated a potential of 69.5 m ha under micro irrigation, whereas the area covered so far is only about 10 m. ha (14%). Further, the Group of Secretaries, 2017, emphasized on target of 10 million ha under micro irrigation over the next 5 years, which would require an additional annual coverage of about 1 million ha compared to the present pace of implementation. This can be accomplished by effective utilization of the resources of both PMKSY-PDMC and MIF in any or both of the following manner: • To facilitate the States in mobilising the resources for expanding coverage of Micro Irrigation by taking up special and innovative projects • To incentivise micro irrigation beyond the provisions available under PMKSY-PDMC to encourage farmers to install micro irrigation systems (Adapted from PIB) 113. Swachh rankings are out, Indore gets cleanest city tag Swachh Survekshan 2018






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Jharkhand has emerged as the best-performing State in terms of cleanliness, while Indore in Madhya Pradesh was adjudged the cleanest city in the country, according to the government swachhta survey released. Maharashtra stood second behind Jharkhand, while Chhattisgarh was at the third position in the category of best-performing States in the Swachh Survekshan 2018 released by Housing and Urban Affairs Minister Hardeep Singh Puri. Best cities As far as cities are concerned, table-topper Indore is followed by Madhya Pradesh capital Bhopal, while Union Territory of Chandigarh stands at the third place in the national-level category. Retain positions Indore and Bhopal have retained their respective positions from the last year survey. But this year, the survey has covered 4,203 cities while in 2017 only 434 cities were surveyed. State ranking was introduced in this year s survey, which was conducted between January 4 and March 10. In 2016, the survey was conducted in 73 cities having a population of 10 lakh or more and also the capital cities. Mysuru has been ranked the cleanest medium-sized city in the country. Mysuru has been ranked the cleanest among cities with a population of between 3 lakh and one million. Mangaluru has been ranked the best city in solid waste management. About Swachh Survekshan As a prelude to encouraging cities to improve urban sanitation, Minister of Housing and Urban Affairs (formerly Ministry of Urban Development) had conducted Swachh Survekshan-2016 survey for the rating of 73 cities in January 2016 followed by Swachh Survekshan-2017 conducted in January- February 2017 ranking 434 cities. The objective of the survey is to encourage large scale citizen participation and create awareness amongst all sections of society about the importance of working together towards making towns and cities a better place to live in. Additionally, the survey also intends to foster a spirit of healthy competition among towns and cities to improve their service delivery to citizens, towards creating cleaner cities. (Adapted from The Hindu) 114. Making life easier for small savers: On the proposed Government Savings Promotion Act The Union Cabinet in February 2018 decided to bring a law to make life easier for small savers, especially those who save for girl children and senior citizens, and to further strengthen the objective of minimum government, maximum governance .






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The main objective, as stated by the Ministry of Finance, is to make implementation easier for the depositors through this Act. What is the proposal? It proposed the Government Savings Promotion Act by merging the Public Provident Fund (PPF) Act of 1968, the Government Savings Banks Act of 1873 and the Government Savings Certificates Act of 1959. What does the government say? The government says that the proposed Act has certain new benefits for depositors. 1. For example, the PPF Act states that an account cannot be closed before completion of five financial years. So, if any depositor wished to close his account before five years, she could not. The proposed Act seeks to make premature closure of an account easier by introducing provisions through a specific scheme notification. The benefits of premature closure of Small Savings Schemes (SSS) may now be introduced to deal with medical emergencies, higher education needs, and so on. 2. Investment in SSS can be made by a guardian on behalf of minor(s). Under the provisions in the proposed Act, the guardian may also be given associated rights and responsibilities. There was no clear provision earlier regarding deposits by minors in the existing Acts. A provision has been proposed to promote a culture of savings among children. And if the minor dies and there is no nomination, the balance amount shall be paid to the guardian. The entire rigmarole of procuring a succession certificate has been done away with. The Bill also has clear provisions on the operation of accounts in the name of physically infirm and differently abled persons. 3. As per the existing Acts, if a depositor dies and nomination exists, the outstanding balances will be paid to the nominee. The proposed law has clearly defined the right of nominees. 4. Unlike the existing laws, the proposed law allows the government to put in place a mechanism for redressal of grievances and for amicable and expeditious settlement of disputes relating to small savings. (Adapted from the Hindu) 115. Indore is India s cleanest city yet again. Just what is it doing right? Indore cleanest city The union Ministry of Housing and Urban Affairs declared Indore as the cleanest among 4,203 urban local bodies (ULBs) in the country in the Swachh Survekshan 2018 carried out






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earlier this year. This is the second time in a row that Indore — the commercial capital of Madhya Pradesh, venue for the state government s investment summits, and the constituency of Lok Sabha Speaker Sumitra Mahajan — has been crowned India s cleanest city . Madhya Pradesh capital Bhopal is second, the same position it occupied in the 2017 survey. What did Indore do to defeat 433 other cities to win its maiden cleanest city tag a year ago? Swachhta aadat hai, swachhta utsav hai , goes a line from a series of three songs sung by

Shaan for the Indore Municipal Corporation s cleanliness campaign. The songs play as municipal vehicles go about collecting garbage from households, and they are the caller tune of phones of municipal officials and elected representatives. The campaign claims to have achieved 100% segregation of wet and dry garbage at source. Hundreds of vehicles collect the waste, which is sent to the transportation hub, and from there to the trenching ground. Waste is collected once a day from residential areas and twice from commercial areas. Safai workers clean the streets at night, including those at Sarafa, the city s famous night food market. The IMC has nearly 10,000 employees and officers. Mayor Malini Gaud credits the turnaround as much to these employees as to the participation of people in the campaign. She has held about 400 meetings of citizens and has administered the oath of cleanliness to more than four lakh people over the past year. In late December, the municipal body began to slap spot fines from Rs 250 to Rs 500 on those spitting on roads, urinating in the open, or littering. Other efforts to deter habitual offenders haven t worked in the past. We hope this public shaming will work as a deterrent, the Mayor had said while announcing a plan to publish names of offenders in newspapers and broadcasting them over radio. On several occasions she has stepped out of her official vehicle to fine offenders personally. But it isn t just the stick. In October, IMC distributed 1,000 free dustbins to vehicle owners to encourage them to not throw waste out of windows. The bottle-shaped dustbins fit into car bottleholders, are now sold for Rs 35 each in the city s busy Palasia neighbourhood. There have been other steps too, from employing 1,000 ragpickers to segregate dry waste to installing recycling units in gardens, outside hotels, and marriage halls to make compost from organic waste. Compost pits were built at fruit and vegetable and markets, and a biomethanation plant has been set up at Choitharam Mandi. The IMC removed garbage bins that used to be always overflowing, attracting stray animals and birds besides being an obvious eyesore. Swachhata Samitis were set up in schools and






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colleges, and participants in religious and other processions were encouraged to keep the streets clean. Public toilets were built in large numbers. (Adapted from the Indian Express) 116. Why are crude oil prices going up? What is the trigger? Brent, the international benchmark for oil prices, crossed $80 a barrel this week, touching the highest level since November 2014. The current price is almost three times the cost in early 2016 when it was $29 a barrel. The trend may continue in the coming weeks and months, according to most reporting on oil. Rising oil prices could cause significant inflation, dampen economic growth and alter geopolitics in multiple ways this year. The major trigger that sent crude prices north was U.S. President Donald Trump s decision to withdraw the country from the Iran nuclear deal on May 8. A second factor that is setting crude prices on fire is political and economic instability in Venezuela, another major petroleum exporting country. Further aggravating the situation, the Trump administration is threatening Venezuela with new sanctions that could come as early as next week. India imports significant quantities of oil from Venezuela and Iran. How will it affect us? The full impact of re-imposition of sanctions on Iran will take effect only in six months. The Trump administration has provided a six-month wind-down period for energy-related sanctions against Iran. Sectors such as financial and banking, underwriting services, insurance, shipping and shipbuilding and port operation had got relief from the sanctions under the Iran nuclear deal in 2016, all of which influence oil trade. All these sanctions will kick in again. European countries, Russia and China, who are part of the Iran deal, have said they will not participate in American sanctions. It is unclear how far European companies could withstand American pressure and continue trade with Iran. French oil company Total has announced that it will halt a natural gas development project in Iran unless it receives a waiver from the U.S. government. China will continue to buy from Iran and so will India, even if in reduced quantities. Market analysts differ on how much of Iran s current export of around 2.2 million barrels per day would be off the global market in the coming days. Some say half of it will be unavailable as American sanctions take effect. In 2012, when sanctions were imposed last time, Iran s exports had fallen by half. The Trump administration appears to be in no mood to give any waiver to European companies, and the oil market is betting on America s ability and will to enforce the sanctions.






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What are other factors? Oil prices are also driven up by coordinated action by Russia and Saudi Arabia to keep supply on a tight leash. But the curbs on production by these countries had not anticipated the dramatic fall in production in Venezuela. The heightened instability in West Asia in the form of Saudi Arabia-Iran rivalry and the looming possibility of new military conflicts add to this. What happens next? Instability in oil prices could help America s strategic rivals Russia and China. Russia could benefit from higher prices in the international market. China could get better deals in buying crude cheap from Iran as it could insulate the trade from secondary American sanctions. Higher oil prices could have mixed impact domestically in America. As the summer driving season is about to start, the daily increase in petrol prices and accompanying inflation could ruin Mr. Trump s political posturing. At the same time, higher global prices have accelerated domestic drilling and shale gas production in America, boosting Mr. Trump s politics. Plummeting prices had rendered shale gas extraction unviable in America, and it is coming back to life. Without directly addressing the gasoline prices, Mr. Trump posted on Twitter on Thursday: America is blessed with extraordinary energy abundance, including more than 250 years

worth of beautiful clean coal. We have ended the war on coal, and will continue to work to promote American energy dominance! (Adapted from the Hindu) 117. Foreign investors cold to Permanent Residency Status scheme






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What is the scheme? The Permanent Residency Status (PRS) scheme provide for a host of facilities for foreigners who invest at least Rs.10 crore under the Foreign Direct Investment (FDI). It was launched two years ago. The scheme is not applicable to Pakistani citizens or third-country nationals of Pakistani origin. The scheme is open for citizens of every country. Only residency not citizenship An official said this was not a citizenship that was being offered to foreigners and was subject to review every 10 years. The Union Cabinet had cleared the PRS in 2016 to boost its Make in India policy. The scheme is open for foreign investors who invest a minimum of Rs. 10 crore within 18 months or Rs. 25 crore in 36 months. What are the details? The foreign investment should result in generating employment to at least 20 resident Indians in every financial year … PRS will be granted for a period of years with multiple

entry and can be renewed for another 10 years. There will be no requirement of registration with the Foreigners Regional Registration Office (FRRO), the Home Ministry






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document on the scheme said. The PRS card holders are also eligible to buy residential property in India. What is the response to the scheme? The scheme is yet to find a single applicant. A senior Home Ministry official said no foreigner had applied but cautioned that the lack of applicants should not be seen as no foreign investment . What is the global trend? Most European Union countries, the U.S., Canada and others offer permanent residency to foreign investors. The U.S. offers the EB-5 visa programme where foreigners could apply for permanent residency if they created employment opportunities for 10 people with a minimum investment of Rs. 6.5 crore. (Adapted from the Hindu) 118. 4 reasons why UPI may overtake mobile wallets soon e-wallets vs UPI Digital transactions got a leg-up post demonetisation, in turn giving a boost to mobile wallets, or e-wallets, and the Unified Payments Interface (UPI) platform. While mobile wallets dominated the market immediately after the cash ban, since November 2017, the UPI platform has beaten e-wallets hands down in terms of the value of transactions. Also, the volume of UPI transactions has been steadily increasing; though the volume of mobile wallet transactions is still higher, UPI volumes have recorded higher growth month-on-month.






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UPI open and e-wallet closed system Before e-wallets, there was a lot of friction in making simple payments like recharging a mobile phone. Simplifying these transactions was the purpose of e-wallets. The new challenge emerged that the wallet ecosystem had become a walled garden as you needed a wallet to use their services. UPI is in a way democratizing that space now. Unlike the wallet systems, it goes directly from bank account to bank account. The UPI system, which is based on the IMPS (Immediate Payment Service) platform, allows a user to transfer money from a bank account to another bank account instantly. An e-wallet allows you to make payments for various services or transfer funds, without using internet banking, but the wallet itself needs to be loaded first through internet banking. Though e-wallets are still ahead in volumes, there are indications that they may lose out to the UPI platform, going forward. Here are four reasons why we think so.






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Simpler to use UPI is definitely simpler in peer-to-peer transactions and hence there is a pick-up in UPI transactions. A wallet transaction involves multiple legs, including transfer of money from bank account to the wallet and then to the beneficiary, which the UPI doesn t require. Amount of funds Deepak Abbot, senior vice-president, Paytm, said small-ticket transactions might continue to be dominated by e-wallets for some time before eventually moving to UPI. UPI has a much bigger use case as a user can do larger money transfers. UPI is directly linked to a bank account which is a bigger source of funds. But there are people who will continue to use wallets, he said. Increased adoption Several mobile wallet companies are adopting the UPI platform. While Paytm has already included UPI, Mobikwik will be doing that soon. Choices of consumers For different transactions, consumers choose different methods. Someone might use UPI

to pay the salary of driver. The same person would use a wallet to pay for fuel or food and use a line of credit to make a consumer durable purchase online, she said. When did UPI pick up? UPI picked up quickly after the launch of the Bharat Interface for Money or BHIM mobile app. Subsequently, apps like Google Tez were launched that helped increase the volume and value of UPI transactions. WhatsApp too has started rolling out UPI-based payment features on its app to select users, but has not made a full-fledged launch yet. No KYC Another obstacle that e-wallets are facing is the requirement of mandatory KYC for all customers. This regulatory requirement kicked in from March this year and official data shows a clear impact on transactions. The value of e-wallet transactions has seen a fall of close to 30% between February and March. Volumes too have come down. As of now, KYC is not required for UPI as it is just like any other internet banking transaction. Interoperability One of the major constraints in using an e-wallet is that even after you complete your KYC, it is currently not possible to transfer money from one wallet to another. The interoperability of e-wallets is expected to address this issue and once it is operational, you might be able to make payments and transfers from a single e-wallet account and may not need to have multiple ones for different purposes. (Adapted from Livemint) 119. Arunachal finds place on commercial aviation map






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First commercial airport in Arunachal A wartime airstrip laid 66 years ago helped Arunachal Pradesh create history by becoming the last of the eight northeastern States to be on India s commercial flight service map. Pasighat airport, too, made it to the record books — as India s easternmost airport with civilian operations. Pasighat, about 570 km northeast of Guwahati, is the headquarters of East Siang district and the State s oldest city. The airport is roughly on 95.33°E longitude, while Mohanbari airport near Dibrugarh in adjoining Assam, hitherto the easternmost civilian airport, is on 94.91°E longitude. Built in 1952 Pasighat airport, one of six operational advance landing grounds (ALGs) in Arunachal Pradesh primarily for military use, was laid in 1952 but was virtually abandoned after the China-India war in 1962, until the Indian Air Force took it over in 2010. The airport was inaugurated in August 2016 with the landing of a Sukhoi Su-30 fighter jet. A civilian terminal was built in 2017 and a test landing of Alliance Air s commercial flight was carried out in April this year. Arunachal Pradesh is working on a bigger airport at Hollongi near Itanagar. The project is yet to take off because of land acquisition issues. Connectivity in North east In April, the UDAN scheme connected Meghalaya s Umroi airport near State capital Shillong via an 18-seater Air Deccan flight. Umroi, though, had erratic commercial flight service more than a decade ago. Air connectivity for Sikkim, too, was opened in March this year when a 70-seater SpiceJet flight from Kolkata touched down at Pakyong Airport near Gangtok. Assam is the best air-connected State in the northeast, with Guwahati being the communication hub. The other civilian airports with commercial flight service are at Dibrugarh, Silchar, Jorhat, north Lakhimpur and Tezpur. The busiest airports after Guwahati are Imphal and Agartala, followed by Lengpui near Mizoram s capital Aizawl, and Nagaland s commercial hub of Dimapur. (Adapted from Pressreader) 120. Union Agriculture Minister releases Model Agriculture Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 With a view to integrate farmers with bulk purchasers including exporters, agro- industries etc. for better price realization through mitigation of market and price risks to the farmers and ensuring smooth agro raw material supply to the agro industries, Union Finance Minister in the budget for 2017-18 announced preparation of a Model Contract Farming






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Act and circulation of the same to the States for its adoption. Farmer s producer organizations (FPO s) have a major role in promoting Contract Farming and Services Contract. On behalf of famers they can enter into agreement with the sponsor. The final Model Act The ….State/UT Agricultural Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act 2018 was released by Shri Radha Mohan Singh, Union Agriculture Minister. Salient features of Model Contract Farming Act, 2018 are: • The Act lays special emphasis on protecting the interests of the farmers, considering them as weaker of the two parties entering into a contract. • In addition to contract farming, services contracts all along the value chain including pre-production, production and post-production have been included. • Registering and Agreement Recording Committee or an Officer for the purpose at district/block/ taluka level for online registration of sponsor and recording of agreement provided. • Contracted produce is to be covered under crop / livestock insurance in operation. • Contract framing to be outside the ambit of APMC Act. • No permanent structure can be developed on farmers land/premises • No right, title of interest of the land shall vest in the sponsor. • Promotion of Farmer Producer Organization (FPOs) / Farmer Producer Companies (FPCs) to mobilize small and marginal farmers has been provided • FPO/FPC can be a contracting party if so authorized by the farmers. • No rights, title ownership or possession to be transferred or alienated or vested in the contract farming sponsor etc. • Ensuring buying of entire pre-agreed quantity of one or more of agricultural produce, livestock or its product of contract farming producer as per contract. • Contract Farming Facilitation Group (CFFG) for promoting contract farming and services at village / panchayat at level provided. • Accessible and simple dispute settlement mechanism at the lowest level possible provided for quick disposal of disputes. • It is a promotional and facilitative Act and not regulatory in its structure.






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Background Recently, the Ministry of Agriculture released a draft Model Contract Farming Act, 2018. The draft Model Act seeks to create a regulatory and policy framework for contract farming. Based on this draft Model Act, legislatures of states can enact a law on contract farming as contracts fall under the Concurrent List of the Constitution. In this context, we discuss contract farming, issues related to it, and progress so far. What is contract farming? Under contract farming, agricultural production (including livestock and poultry) can be carried out based on a pre-harvest agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organizations). The producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement. Under contract farming, the producer can reduce the risk of fluctuating market price and demand. The buyer can reduce the risk of non-availability of quality produce. Under the draft Model Act, the producer can get support from the buyer for improving production through inputs (such as technology, pre-harvest and post-harvest infrastructure) as per the agreement. However, the buyer cannot raise a permanent structure on the producer s land. Rights or title ownership of the producer s land cannot be transferred to the buyer. What is the existing regulatory structure? Currently, contract farming requires registration with the Agricultural Produce Marketing Committee (APMC) in few states. This means that contractual agreements are recorded with the APMCs which can also resolve disputes arising out of these contracts. Further, market fees and levies are paid to the APMC to undertake contract farming. The Model APMC Act, 2003 provided for contract farming and was released to the states for them to use this as reference while enacting their respective laws. Consequently, 20 states have amended their APMC Acts to provide for contract farming, while Punjab has a separate law on contract farming. However, only 14 states notified rules related to contract farming, as of October 2016. (Adapted from PIB and prsindia.org) 121. What the rupee s fall means The rupee has fallen 5.2% in the current financial year, from close to 65 on March 28 to an 18-month low of 68.42 against the dollar. As worries for importers, travellers and even students rise steadily, analysts are watching the currency s steady march towards the 70-mark as international crude oil prices continue to rally and foreign funds flow out. Why has the rupee been falling? There are three major reasons. The rise in crude prices, portfolio outflows from India due to the selling of stocks, especially by foreign portfolio investors (FPIs), and a growing anticipation of interest rates rising in the US.






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Brent crude prices have increased from $70.30 to over $80 per barrel since the beginning of the new financial year in April. This is mainly due to concerns over supply disruptions after the rise in US tensions with Iran, which contributes 11-12% of OPEC production. As oil prices rise, India s trade deficit — excess of imports over exports — will worsen, which can in turn impact the current account deficit. Expecting US interest rates to go up, FPIs have taken out Rs 27,000 crore from India in April and May so far, which is over $4 billion in less than two months. As the US Federal Reserve raises rates further — which is bound to happen — FPIs will prefer to invest in their home country as the arbitrage gain while investing in India and emerging markets will decline. A weakening rupee will also lower returns, which will in turn impact future inflows. What does this mean for imports? Importers will be hit as the cost of getting goods or equipment into India will increase. When the rupee weakens, importers, especially oil companies and other import-intensive companies, have to shell out more rupees to buy an equivalent amount of dollars. In this sense, a weak rupee can act as a kind of import tax. For the oil sector, it is a double whammy, as the rise in crude prices and the decline in rupee value add to retail fuel prices. Margins of oil companies will come under pressure. And what about exports, then? Exporters, especially software exporters, stand to benefit, as they get more rupees while converting dollar export earnings into Indian currency. This is expected to boost exports, which have been showing single-digit growth. In FY18, exports grew 9.78%, and given exports in April 2018 showed only 5.17% growth, it appears that the issues with GST implementation are yet to be overcome. The twin impact of FII outflows and worsening trade balance can hit the rupee further; to keep external metrics stable, therefore, exports of both services and merchandise need a further push. So how is this situation affecting the overall economy? The fiscal and current account deficits are interlinked. When fiscal deficit is high, government borrowing rises, leading to higher interest rates. However, when foreign funds start flowing in, the rupee strengthens, and exports become more expensive. Crude prices are expected to rise further this year, and imports are expected to grow by at least 14%, says a note from SBI Research. This is bound to enlarge the import bill and push up the trade deficit, which will in turn add to the CAD and push the FY19 figure to 2.5% of GDP. A widening CAD has macroeconomic implications. The best way to bridge the gap is by boosting inflows, but Indian markets have been witnessing FPI outflows, instead. Also, the rise in import costs as a result of a weak rupee can boost inflationary pressures. Is the middle class affected as well? A weak rupee is making overseas travel costlier this holiday season — a traveller will have to shell out more rupees to buy dollars. Students studying abroad too will see their costs rise. In 2017-18, Indian travellers spent $4 billion abroad; students spent $2 billion.






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But these are good times for those who receive remittances from abroad. According to the World Bank, the Indian diaspora remitted about $69 billion in 2017, the most in the world. The value of these remittances in bank accounts in India rises as the rupee depreciates against the dollar. If non-resident Indians or their families were to receive an amount similar to 2017 this year, and if the rupee were to continue to trade at the current exchange rate, it would translate into an extra $3.5 billion. How desirable is it then, to have the rupee as strong as the dollar ? On August 20, 2013, when the rupee fell by 98 paise to 64.11 in a day, Narendra Modi, who was then the Chief Minister of Gujarat, said, If the rupee keeps falling like this, other countries will start taking advantage of India. Politicians have on several occasions spoken of the need for a stronger rupee. The currency s fall and rise can be both negative and positive, depending on the macroeconomic situation, inflows, crude prices, strength against other currencies, real effective exchange value, etc. A strong rupee can hurt exports, but a weak rupee can push up the import bill. So, what is the ideal value of the rupee against the dollar? It s difficult to say. The RBI, which manages the rupee s movement, says that it never fixes a value; rather, it facilitates the orderly movement of the currency. The RBI buys dollars from the market when the rupee strengthens and sells the US currency when the rupee weakens. It tries to maintain a balance by taking into account all external and internal factors. India s foreign currency assets fell by around $6 billion to around $394 billion recently as the RBI apparently sold dollars from its foreign exchange kitty to stabilise the currency. With the markets witnessing foreign outflows in April and May, the RBI recently took several measures to attract more capital flows. It enhanced investment limits, relaxed rules for foreign investors, and revised the minimum residual maturity requirement and cap on aggregate FPI investments in central government securities. (Adapted from The Indian Express) 122. SEBI MF order spurs changes to schemes Mutual fund houses have been making changes to their schemes following a directive from regulator Securities Exchange Board of India (SEBI) last year. Here is what you need to know: What is the SEBI directive all about? Last year, SEBI had issued a directive regarding categorisation and rationalisation of mutual fund schemes. It defined five categories in which all schemes can be classified: equity schemes, debt schemes, hybrid schemes (which invest in a mix of equity and debt), solution-oriented schemes (such as for retirement) and other schemes (such as index funds and exchange-traded funds). Further, it defined sub-categories like large caps, large and mid-caps and small caps.






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It also defined the individual characteristics of each of the scheme types and what the portfolio allocation should be. For instance, a large cap fund should invest at least 80% in large cap shares and a mid-cap fund should invest at least 65% in mid cap shares. Why did SEBI issue the directive now? The number of mutual fund schemes on offer has become large and some of the offerings have been similar without any differentiation, often creating confusion in the minds of investors. The directive is aimed at bringing uniformity to the schemes and enabling accurate comparisons. What are fund houses doing now? Mutual fund companies have been making changes to their schemes to comply with the directive. Across the industry, firms are either renaming their schemes, changing their categories or merging the schemes with other similar schemes. What must an investor do? Since the changes range from a simple name change to a significant shift in category, investors should take note of the changes. The changes are disclosed in the respective companies websites. Srikanth Meenakshi, founder of mutual fund platform FundsIndia.com, said the impact on the investor could vary depending on the schemes invested in. In some cases, there is just a name change. In other cases, there has been a change in the fundamental attributes of the schemes, he pointed out. For example, a diversified fund would become a large cap fund. He said the return on a diversified fund is higher than from a large cap fund. To that extent, the change would be significant. About 30% of schemes in the industry have seen significant changes, he said. An investor should analyse the changes on a case-by-case basis ensure that the asset allocation and category allocation of their portfolio remains intact, post the changes, he added. (Adapted from the Hindu) 123. National Digital Communications Policy (NDCP), 2018 The DoT had released the draft NDCP on 1st May 2018 for public comments. The key objectives of the Policy include broadband for all, creating 4 million additional jobs in the Digital Communications sector, enhancing the contribution of the Digital Communications sector to 8% of India s GDP from around 6% in 2017, propelling India to the Top 50 Nations in the ICT Development Index of ITU from 134 in 2017, enhancing India s contribution to Global Value Chains, and ensuring Digital Sovereignty of the country. The Department of Telecommunications (DoT) has extended the last date for submission of comments on the recently published draft National Digital Communications Policy (NDCP), 2018.






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What is the policy? 12 key highlights from India s new National Digital Communications Policy

1. Change of name Previously known as the National Telecom Policy 2012, the NDCP marks a clear shift in priorities from just telecommunications to digital infrastructure, services and security. 2. Broadband for All The new policy aims to make sure that every citizen has access to broadband running at least 50Mbps, while all key development institutes should be receiving at least 100Mpbs of






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speed by 2022. The NDCP also seeks to ensure connectivity in all areas that are currently uncovered through channelising the Universal Service Obligation Fund (USOF). 3. Fibre First Initiative There are two parts to this. The first aspect involves the implementation collaborative models to improve infrastructure sharing between public, local and private entities to increase access to fibre optic cables in municipalities, rural areas and national highways. The second fold involves leveraging the existing infrastructure to boost connectivity, affordability and sustainability. 4. National Digital Grid A central authority, called the National Fibre Authority, will be put in place to handle utility between new initiatives being launched under the NDCP. The authority would coordinate access, standardisation of costs and timelines with respect to the National Digital Grid between the centre, states and local bodies. More importantly, such a mechanism will hopefully help remove barriers to obtaining approvals. 5. Create 4 million additional jobs in the Digital arena by 2022 Although the NDCP has stated the creation of additional jobs as a primary strategic goal that needs to be achieved by 2022, no specific measures or plan outline has been presented in the draft. That being said, they do vaguely point towards capacity building as a subset of propelling India forward. 6. Attract $100 billion foreign investment for the telecom sector by 2022 Speaking of pushing India ahead, foreign investment has been highlighted as a major aspect of the policy. The NDCP aims to catalyse investment for the digital sector through various avenues like ensuring a holistic and harmonised approach for harnessing emerging tech, as well as providing an impetus to research and development, start-ups and local manufacturing. 7. Re-train and re-skill 1 million people with new-age skills The people who are already a part of the workforce will be further empowered with the strengthening of PSUs (Public Sector Undertakings). The existing training infrastructure that s already available with the telecom PSUs can be used for further skill development. 8. Expand the Internet of Things (IoT) network to encompass 5 billion connected devices The NDCP envisions to achieve this by simplifying the licensing and regulatory frameworks to ensure that appropriate security frameworks are put in place for using IoT, which is one of the leading concerns as of now. Another venture to promote IoT includes earmarking unlicensed spectrum space for IoT services, which will future-proof the use of IoT devices looking ahead. 9. Review of licence fees and spectrum usage charges The DoT recognized that the spectrum is a key natural resource for public benefit . The policy draft states that it will look into the optimal pricing of the spectrum so that the






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process is sustainable while also providing affordable access. There s also a clause that states that spectrum allocation requires the development of a fair, flexible, simple and transparent method system. 10. The encouragement of Next Generation Access Technologies The policy outlines a basic plan to boost the participation of licensed service providers in using next generation access technologies in order to move towards cost optimisation, service agility and new revenue streams. 11. Creating Broadband Readiness Index for States/UTs A standard measurement mechanism will help attract investments and address challenges from the rest of the world. This initiative will be supported through fiscal stimuli like depreciation and tax incentives. 12. Secure India The aim of the policy is to establish a strong, flexible and robust data protection regime so that each citizen and enterprise can operate with autonomy and be given the freedom of choice. More importantly, the NDCP wants to put forth a Telecom Testing and Security Certification (TTSC) to enforce security standards that are at par will global standards with consideration for local requirements. (Adapted from PIB and https://www.businessinsider.in) 124. New norms for labelling packaged GM food ready Genetically modified food to be labeled All packaged food with at least 5% content from genetically engineered sources need to be labelled so. Moreover, foods that exceed norms of sugar and fat should carry red and green labels specifying the extent to which they do so, according to draft regulations by the Food Safety and Standards Authority of India (FSSAI). This is the first time that the Central government has laid down guidelines for labelling genetically modified (GM) food. Officials say they are awaiting public comments. What is the present position? The government has been contemplating a system for labelling GM foods for at least two years. Current laws prohibit any GM food—unless cleared by the Genetic Engineering Appraisal Committee, a Environment Ministry body-- from being sold in the country. Through a 2007 notification, the Ministry exempted processed foods from this requirement; this has been stayed by the courts. There was also dispute between the FSSAI, a Union Health Ministry body, and the Environment Ministry on who checks if a particular food had a GE provenance. The companies will check the GM content and we will conduct further tests and checks. What are the other provisions of the draft?





https://www.businessinsider.in/


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The draft also defines the safe levels of fat, sugar and salt in processed food. Food packs would have a designated space coloured RED in case the value of energy from total sugar was more than 10 per cent of the total energy (kcal) provided by the 100 g/100 ml of the product; the value of energy (kcal) from trans-fat is more than 1 per cent of the total energy (kcal) provided by the 100 g/100 ml of the product; and total fat or sodium content provided by the 100 g/100 ml of the product is more than certain specified threshold values. (Adapted from The Hindu) 125. Kamaljit Bawa first Indian to receive Linnean Medal Who is Dr. Bawa? Indian botanist Kamaljit S. Bawa, president of Bengaluru-based non-profit Ashoka Trust for Research in Ecology and the Environment (ATREE), received the prestigious Linnean Medal in Botany from the Linnean Society of London on May 24. He is also a Professor of Biology at the University of Massachusetts, Boston. Why he has been honoured? Dr. Bawa is the first Indian to win the award ever since it was first constituted in 1888. According to a press release by ATREE, the scientist is being recognised for his pioneering research on the evolution of tropical plants, tropical deforestation, non-timber forest products and for decades of work on the biodiversity of forests in Central America, the Western Ghats and the Eastern Himalaya. Also cited were Dr. Bawa s efforts in establishing the open-access interdisciplinary journal Conservation and Society (which publishes peer-reviewed research exploring linkages between society, environment and development) in 2003, the online citizen-science repository India Biodiversity Portal and ATREE (ranked second in Asia and 18th globally among the world s environment think tanks, which generates interdisciplinary knowledge to inform policy and practice to achieve environmental conservation and sustainable development). What is Linnean Medal? The Linnean Medal is awarded to a biologist every year by the Linnean Society of London (the world s oldest active biological society founded in 1788 and named after famous Swedish biologist Carl Linnaeus who gave us one of the systems of naming plants and animals). According to the society s website, it is awarded as an expression of the society s esteem and appreciation for service to science. Incidentally, the first scientist to receive the Linnean Medal was Sir Joseph D. Hooker who compiled the monumental seven-volume Flora of British India, the first ever comprehensive account of India s plants. Other recipients include Alfred Wallace (popularly known as the father of biogeography ) in 1892 and Ernst Mayr — famous evolutionary biologist who proposed the biological species concept , which is the most widely-accepted definition of a species — in 1977.






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(Adapted from The Hindu) 126. Auto fuels under GST: Why there s a case for it, and one for caution, too With the prices of automobile fuels surging, Minister for Petroleum and Natural Gas Dharmendra Pradhan said in Bhubaneswar that bringing petroleum products under the ambit of the Goods and Service Tax (GST) was being considered by the government as part of a holistic strategy to address the issue. Transport Minister Nitin Gadkari, too, favours such a move — and Maharashtra Chief Minister Devendra Fadnavis has said that his state was fine with petroleum products being brought under a single rate countrywide, and that a Task Force was working on it. Chief Economic Advisor Arvind Subramanian had earlier this year made out a case for bringing petroleum products under GST. The trigger for all this is rising oil prices — the benchmark Brent crude crossed the $80 per barrel mark earlier this month — and the daily revision of prices of petrol and diesel. How will this help? When India moved to the GST regime last July, petroleum products were excluded, along with alcohol, real estate and power. In the current structure, both the central and state governments levy a tax on petrol, diesel, crude, and natural gas. The Centre charges excise duty, while each state has its own Value Added Tax (VAT). Added to these are the dealer commissions, all of which inflates the price that consumers pay at the retail pumps. (On Tuesday, petrol was Rs 86.24 per litre in Mumbai, Rs 81.43 in Chennai, Rs 81.06 in Kolkata, and Rs 78.43 in Delhi.) Bringing petroleum products under GST would mean a single rate — 18% or 28% — in place of excise duty and state VAT, and lower pump prices. It will take the political heat off the government and is likely to lead to lower transport costs for industry, with benefits in terms of boosting production and competitiveness. It will also be in keeping with the idea of a single nation, single tax , which is aimed at improving production and employment while taxing consumption. Because these products are excluded from GST, many firms are at a disadvantage: they cannot set off inputs costs like transport, logistics, services, spares, or claim input tax credit. They miss out on productivity gains as well. But there s a flip side For both the federal and state governments, petroleum products, like alcohol, are huge revenue earners. The Centre mopped up Rs 1.60 lakh crore in excise duty from petroleum products in FY18, and Rs 2.42 lakh crore in FY17, even as global oil prices fell from 2014-15 through 2016-17. Between 2013-14 and 2016-17, the central government collected Rs 2,79,005 crore in excise duties alone — a windfall that helped it show a better fiscal position. Similarly, states earned Rs 1.66 lakh crore in VAT on these products in FY18; Maharashtra, for example, currently makes close to Rs 22,000 crore.






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Revenue considerations, therefore, are likely to drive the decision on bringing petroleum products under GST. The decision will have to be taken by the GST Council, in which states have a major say. Even if they agree to having petrol, diesel and other products under GST, they will still have the autonomy to levy an additional or top-up tax, which can vary across states. This surcharge can be in the nature of a sin tax — a way for states to discourage consumption of certain products like liquor or tobacco — and to reduce vehicular pollution. Even the Centre will have reasons to worry — not only because of the huge revenue petroleum products bring, but also because it is committed to compensating states for any shortfall in revenues for five years. There are other considerations, too. The decision will have to take into account larger questions such as those of equity, given the consumer profile of those buying fuel for personal vehicles, and the issue of an efficient public transport system. (Adapted from the Indian Express) 127. International Conference on the TRIPS CBD Linkage India has taken the lead in seeking to revive WTO discussions on issues related to preventing theft of traditional knowledge. Government of India, along with the Centre for WTO Studies, Indian Institute of Foreign Trade and the South Centre (an inter-governmental organisation based in Geneva), are organising an International Conference on TRIPS- CBD (Conference on biodiversity) Linkage in Geneva on 7-8 June 2018. What will happen at conference? Brazil and South Africa are some of the other countries that have joined hands with India on this crucial initiative. The international conference will bring together indigenous people/local communities in developing and developed countries, internationally acclaimed academicians working on the subject, Geneva-based negotiators and capital-based experts. They will brainstorm on the options for energising negotiations on this subject in the WTO. What is CBD? The Convention on Biological Diversity is a multilateral agreement on sustainable development and fair and equitable sharing of benefits arising out of the utilization of genetic resource. It has membership of 196 countries. History of examining relationship between TRIPS and CBD The Doha Ministerial Declaration in 2001 had tasked the TRIPS Council of the WTO to examine the relationship between the TRIPS Agreement and the Convention on Biological Diversity, and the protection of traditional knowledge and folklore. It also mandated that while doing so, the Council should be guided by the objectives and principles set out in the TRIPS Agreement and should fully take into account the development dimension. While






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there has been considerable debate and deliberations on the subject no common understanding has yet been reached at the WTO. Importance of TRIPS CBD linkage for India TRIPS CBD Linkage is important for India and other developing countries because it seeks to address bio-piracy. It has been a long-standing demand that patents should not be granted for existing traditional knowledge and associated genetic resources. Further, it has also been argued that where traditional knowledge forms a basis for further scientific developments that are sought to be patented, there should be a mechanism to ensure disclosure of information in this regard. This is considered essential not only from the point of view of addressing information asymmetry at the patent office but in also enabling better assessment of the inventive step involved. The developing countries seek an amendment in the TRIPS Agreement to make disclosure of source or origin of genetic resource by patent applicants, submission of evidence of prior informed consent of local communities and evidence of fair and equitable sharing of benefits under the relevant national regimes mandatory. International efforts In 2008, developing countries garnered the support of the European Union to form a coalition of 109 countries (which included the African and Caribbean and Pacific Countries) for the above proposal seeking amendment of the TRIPS Agreement to enable mandatory disclosures in patent applications. The last major proposal along similar lines but incorporating the mechanism agreed to under the Nagoya Protocol to the Convention on Biological Diversity was submitted by India, Brazil along with other like-minded countries in 2011. After this, the discussions appear to have lost steam. The Nagoya Protocol to the Convention on Biological Diversity on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits arising from their utilization came into effect in 2014. The protocol provides a legal framework for the fair and equitable sharing of benefits arising out of the utilization of genetic resources for research and commercialization purpose. At present, more than 100 countries have acceded to the protocol. This makes its mandatory for them to set down an access and benefit regime in compliance with the protocol. (Adapted from PIB) 128. Should Chanda Kochhar step down as ICICI Bank CEO? With the board of ICICI Bank deciding on an inquiry into the allegations raised by a new whistleblower against its CEO Chanda Kochhar, calls for her exit have resurfaced. Similar instance in the past Bankers and analysts drew parallels to a 2001 case when P.J. Nayak, who was chairman of UTI Bank, went on leave after a draft report of the Joint Parliamentary Committee (JPC) said he stood to gain from his bank s failed merger with Global Trust Bank (GTB). The






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committee was set up following the surfacing of scam that involved Ketan Parekh who was charged for rigging the share price of GTB ahead of the merger. Nayak had asked the board to allow him to go on leave while the board conducted an independent inquiry into the matter. He was later reinstated after the inquiry revealed no evidence of wrongdoing. The final report of the JPC also had no mention of Nayak s involvement in the scam. Proxy shareholders believe following Nayak s example could help Chanda set a high standard of corporate governance. However, it could also set a wrong precedent for other corporates. What is at stake in ICICI bank? Like similar previous instances in cases of other banks, if Kochhar goes on a leave until the

inquiry is completed, it may send out a positive signal to the stakeholders as it will be seen as a sacrifice by her to preserve her reputation. But on the flip side, such a leave or resignation by a bank s chief after an anonymous complaint may often create a damaging situation for the bank because if the probe finds any guilt, people may see the bank s overall policy itself to be flawed.

What is the issue? Kochhar has been in the eye of the storm over the granting of a Rs3,250 crore consortium loan to Videocon group companies given that her husband had business dealings with the Venugopal Dhoot-led conglomerate. On 29 March, M.K. Sharma, chairman of ICICI Bank, said there is no conflict of interest as Videocon group is not an investor in NuPower Renewables. However, markets regulator Securities and Exchange Board of India (Sebi) has sent notices to the bank and Kochhar for non-disclosure of information in the matter. How the bank decided to conduct independent inquiry?






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The bank s decision to conduct an independent inquiry comes after a second complaint was raised by a whistleblower in addition to the 2016 letter by investor Arvind Gupta, who had alleged that loans to Videocon Group pointed to Kochhar s conflict of interest. (Adapted from Livemint) 129. Present position of Air India What is the problem with Air India? The sale of government-owned airline, Air India, is in jeopardy due to a lack of buyer interest. Private airlines such as IndiGo and Jet Airways did evince some enthusiasm but have since opted out of the race. This seems to have pushed the Central government to extend the deadline for submitting a bid. The Centre had earlier approved the sale of a 76% stake in Air India. Why are there no buyers? The airline s poor financial situation is what makes it largely unappealing. The airline had a debt burden of around Rs. 48,781 crore as of March 2017, which poses a huge financial risk to a buyer. To address this issue, the government has offered to transfer about a third of the debt to a special purpose entity. But a buyer will still have to assume responsibility for debt worth Rs. 33,392 crore after acquisition – still a significant burden for many. The total current and non-current liabilities of IndiGo, the market leader in terms of domestic market share, for instance, add up to only around Rs. 14,000 crore. Apart from the huge debt burden, Air India has also been losing money for over a decade, with accumulated losses of Rs. 46,805 crore. In 2016-17, the airline suffered a net loss of Rs. 5,765 crore. A major reason behind its huge losses is the cost of paying interest on its massive debt. Some analysts believe that Air India may not be worth anything to its buyers as they are unlikely to obtain any free cash flow after paying money to lenders. In fact, they may have to pay money from their own pockets if they assume personal liability for the debt. What lies ahead? A buyer with hopes of turning around Air India may still emerge out of the blue and make a bid. Some believe that such a buyer could combine its own business operations with Air India s and reap the benefits of a synergy. Selling some of Air India s assets to pay back a portion of the debt and renegotiating loans are other options on the table. The buyer could also make use of Air India s accumulated losses to offset tax payments in the future. This will reduce the effective debt burden. If no buyer turns up, the government could be forced to either continue running Air India using taxpayer money or just shut it down and sell off its assets.






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(Adapted from The Hindu) 130. How a comma in FDI policy let AirAsia fly The interpretation of a comma in India s foreign direct investment (FDI) policy may have helped AirAsia get a flying licence to start operations in India in a joint venture with Tata Sons Ltd. What is Air Asia? AirAsia (India) Ltd, a joint venture between Tata Sons Ltd (49%) and Malaysia s AirAsia (49%), started operations in June 2014. What are the charges by CBI? The criminal case registered by the Central Bureau of Investigation (CBI) against AirAsia Group s CEO and others indicates the involvement of United Progressive Alliance government in clearing the investment proposal by AirAsia to start operations in India. CBI raided the offices of AirAsia India and filed a complaint against Tony Fernandes, the CEO of the Malaysian parent, for allegedly lobbying the government for overseas flight permits and violating rules. The FIR also said that unnamed officials from the aviation ministry and Foreign Investment Promotion Board (FIPB) entered into a criminal conspiracy with top AirAsia executives. What is the relevant provision of FDI policy? The operative part of the consolidated FDI policy that FIPB relied on to grant clearance to AirAsia reads as follows: Foreign airlines are also allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. What are the different interpretations? While the policy may lead one to believe that FDI up to 49% is allowed only in operating Indian airlines, FIPB concluded that the policy holds for greenfield projects as well, thanks to the comma between Indian companies and operating . According to others, the sentence means Indian company which would operate . Had there been no comma, it would have meant it is an already operating company. By putting a comma, it makes a difference, as it becomes present continuous. So, AirAsia could invest in an Indian company. On whether the introduction of the word operating in the FDI policy was a mistake, some say it was just badly drafted . What is the acceptable view? The normal procedure for companies in sectors where FDI was allowed under government approval route to first apply for FIPB approval and then seek a licence from the authorized regulator or ministry.






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The Tatas and AirAsia had applied to form a joint venture company in which AirAsia

would have 49% shareholding. Most greenfield investments in India are done like this. First you give the approval, then they form a company and then they go and ask for a licence. When it s a brownfield investment, an approval is given for investment in an existing company. FIPB gave similar clearance to Vistara also when they did not have a licence or a company, he said. Regarding the alleged violations against AirAsia, FIPB only approved allowing 49% FDI in an airline. Once the FIPB gave its approval, they had to go to the civil aviation ministry for the licence. It was for the ministry of civil aviation to see that they fulfilled all the conditions of the policy because the aviation policy was enunciated by the civil aviation ministry. Before AirAsia was given the licence to operate, civil aviation would have examined the proposal. But FIPB had nothing to do with that. Our clearance was for investment in an airline in India. This query should be made to the civil aviation ministry, he added. (Adapted from Livemint) 131. Government introduces new scheme SevaBhojYojna The Ministry of Culture, Government of India has introduced a new scheme namely SevaBhojYojna with a total outlay of Rs. 325.00 Crores for Financial Years 2018-19 and

2019-20. What is the scheme for? The scheme envisages to reimburse the Central Government share of Central Goods and Services Tax (CGST) and Integrated Goods and Service Tax (IGST) on purchase of raw items such as ghee, edible oil, atta/maida/rava/flour , rice pulses, sugar, burra/jiggery etc which go into preparation of food/Prasad/langar/bhandara offered free of cost by religious institutions. The objective of the scheme is to lessen the financial burden of such Charitable Religious Institutions who provide Food/Prasad/Langar (Community Kitchen)/Bhandara free of cost without any discrimination to Public/Devotees. (Adapted from PIB) 132. New Benami Transactions Informants Reward Scheme, 2018 launched by the Income Tax Department Need for Benami Transactions (Prohibition) Amendment Act, 2016 It was found in many cases that black money was invested in properties in the names of others, even though benefits were enjoyed by the investor concealing his beneficial ownership in his tax returns. The Government had earlier amended Benami Property Transactions Act, 1988, by Benami Transactions (Prohibition) Amendment Act, 2016 to make the law stronger.






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Need for people participation With the objective of obtaining people s participation in the Income Tax Department s efforts to unearth black money and to reduce tax evasion, a new reward scheme titled Benami Transactions Informants Reward Scheme, 2018 , has been issued by the Income

Tax Department. This reward scheme is aimed at encouraging people to give information about benami transactions and properties as well as income earned on such properties by such hidden investors and beneficial owners. Provisions of Benami Transactions Informants Reward Scheme, 2018 1. Under the Benami Transactions Informants Reward Scheme, 2018, a person can get reward up to Rs. One crore for giving specific information in prescribed manner to the Joint or Additional Commissioners of Benami Prohibition Units (BPUs) in Investigation Directorates of Income Tax Department about benami transactions and properties as well as proceeds from such properties which are actionable under Benami Property Transactions Act, 1988, as amended by Benami Transactions (Prohibition) Amendment Act, 2016. 2. Foreigners will also be eligible for such reward. Identity of the persons giving information will not be disclosed and strict confidentiality shall be maintained. 3. Details of the reward scheme are available in the Benami Transactions Informants Reward Scheme, 2018, copy of which is available in Income Tax offices and on the official website of Income Tax Department www.incometaxindia.gov.in. (Adapted from PIB) 133. Why are farmers not getting a fair price? Why the drop-in rates? Garlic has been the latest casualty of the price crash in the vegetable market after poor returns of tomato and potato crops forced many farmers to abandon their produce owing to a bumper output in recent days. The miseries of financially distressed farmers seem far from over even as they continue to demand waiver of farm loans and remunerative prices for their produce through several platforms across the country. The problem of plenty has hit the farmers badly. While garlic farmers in Madhya Pradesh and Rajasthan, which produce 45% of the country s garlic, recently fetched as low as Rs.1 a kg in wholesale prices, the instances of tomato farmers dumping their harvest on the fields earlier this month — be it in Haryana, Tamil Nadu or Uttar Pradesh after prices nosedived — have only highlighted their woes. Tomato production during 2017-18, according to the first advance estimate, is likely to be 7.8% higher than that of the previous year. However, it is 20% higher than the average production of the past five years. Similarly, potato production is estimated to be 1.5% higher than that of the previous year. However, compared with the average production of the past five years, it is 8.7% higher. These figures indicate that farmers are producing more without good returns. Why are vegetable farmers not getting a fair price? Season after season, farmers face price uncertainties






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mainly owing to fluctuations in demand and supply caused by bumper or poor production, speculation and hoarding by traders. Are traders manipulating prices? In Madhya Pradesh, after garlic prices dropped sharply, the government decided to include it in the Bhavantar Bhugtan Yojana (Price Deficit Payment Scheme) that was introduced in the Kharif 2017 season. Farmers, however, rue that with the conditions associated with the scheme, most of them are unable to gain any benefit. The scheme is aimed at providing price deficit payments to farmers if the market prices are below the minimum support price. Farmer leaders believe the implementation of this scheme in the first season has resulted in little benefit to farmers, with very little to prevent manipulation of prices by traders. The government claims to have disbursed ₹ , crore in compensation, but a large section of farmers has been excluded from the scheme, says Jai Kisan Andolan national convener Avik Saha. Those left out bore the brunt of a larger price crash because of market manipulation. What is the way forward? The fluctuation in vegetable prices has become a perennial problem and is usually associated with the economics of demand and supply. Farmers, mainly marginal and small landholders, depend on intermediaries to sell their produce. Being perishable, vegetables are more prone to price fluctuation, hence they require better infrastructure for storage and marketing. Contract farming is an alternative for farmers to reduce financial risks by providing an assured market for their produce at a pre-agreed price. The Centre last week approved the State/UT Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2018. The Act lays stress on protecting the interests of farmers, considering them as weaker of the two parties entering into a contract. The Act is aimed at ensuring the purchase of the entire pre-agreed quantity of one or more of produce, livestock or its product. Although varied forms of contract farming exist in some pockets, a formal system is not widespread. By and large, cultivation of commercial crops such as cotton, sugarcane, tobacco, tea, coffee, rubber and dairy has had some elements of informal contract farming. Experts believe that integration of vegetable and fruit growers with agro-processing units through contract farming could prove beneficial to producers as it takes care of price fluctuations and helps to mitigate production risk. Pratap Singh Birthal, professor at the National Institute of Agricultural Economics and Policy Research, says: Under the contract farming law, the agreements would help farmers get an assured price for the produce, which will act as a buffer against price volatility and market fluctuations... (Adapted from The Hindu) 134. Mutual fund exit load, credit card dues now taxable under GST? Which banking services are not under GST?






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Free services provided by banks, such as withdrawals from ATMs and issuance of chequebooks to customers, will not be taxed under the goods and services tax (GST), the government clarified, providing relief to financial institutions as well as consumers. What will be taxed? The government, however, said that interest charged on outstanding credit card dues, finance lease and exit fees paid by mutual fund investors will be taxable under GST. Since interest levied on loans are not taxed, any additional interest for delayed payment has also been kept out of GST. Who has issued clarifications? These clarifications were made based on recommendations by one of the groups set up to address sector-specific concerns under the indirect tax regime that came into effect on 1 July. Why the clarifications have been issued? Free services provided by banks have become a major litigation issue with tax officials issuing notices to banks demanding tax for services provided free of cost before the implementation of GST. What will be location of services? Government statement also provides clarity on cases where customers are serviced from multiple branches. In such a case, the location of the supplier of services will be the customer s home branch. Banks and insurers also do not have to ascertain the place of consumption of the services they provide and can rely on the client s GST identification number. Banks can also issue a consolidated tax invoice to clients at the end of a month, the government clarified. Banks also need not register in states where they only have ATMs and no branches. These measures will reduce the compliance burden. With the demand for centralized registration yet to be met, banks have to obtain registration in all states they operate and consequently file multiple returns. (Adapted from livemint) 135. Why is the MSCI mulling caps on emerging markets, including India? Last week, MSCI Inc., a widely-tracked global index provider said it is considering placing some emerging markets including India on notice for limiting investor access. Here is an explainer on what it is all about: What is MSCI? It is the world s biggest index compiler, with more than $10 trillion in assets benchmarked to its products, with emerging markets alone accounting for $2 trillion.






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Why are MSCI indices important? The indices are closely tracked by global investors. Inclusion in MSCI Inc. s stock indices opens up investment interest from foreign investors in a particular country and brings a stamp of financial credibility. Why has MSCI put India on notice? MSCI said it is placing emerging markets including India and Brazil on notice for limiting investor access. For instance, MSCI has cited the fact that international investors face a lengthy and burdensome mandatory registration process with the market regulator, the Securities and Exchange Board of India (SEBI). In February, the National Stock Exchange of India (NSE) barred foreign bourses from trading in Nifty derivatives. NSE and Singapore Exchange Ltd. are in a legal tussle over the issue. MSCI has expressed concerns over the dispute. It is expected that stock exchanges, which often have legal or natural monopolies, should

not impose clauses in their provision of stock market data, MSCI said. The existence of these types of practices will lead to a negative assessment, it added. What next on the issue? MSCI said India and Brazil, along with Turkey and South Korea, are potential future examples of markets whose weights could be capped in its indices. MSCI said it will now consult its clients and announce the results by December 31. What happens if MSCI caps India s weightage? India currently has a weightage of 8.3% in the MSCI Emerging Markets Index. The weightage, which was 8.48% till last month, came down slightly following the partial inclusion of China A- shares on May 31. Since it is a widely tracked index, any changes in weightage would affect inflows from foreign investors. (Adapted from The Hindu) 136. The Zojila Tunnel: How it will boost winter economic activity in Ladakh Last month, Prime Minister Narendra Modi visited Leh to unveil a plaque to mark the commencement of construction of the 14.31 kilometre-long Zojila tunnel in the north-east of Srinagar on Srinagar-Leh section of National Highway 1 in Jammu and Kashmir. The tunnel will reduce the travel time from Baltal to Drass drastically. It will provide all-weather connectivity between Srinagar, Kargil and Leh, which otherwise remain cut-off from rest of country for several months in the winter due to heavy snow.






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Need for an all-weather road Leh is connected to the rest of the country through two main roads: Jammu-Srinagar-Zojila-Kargil-Leh and the Manali-Sarchu-Leh roads. The movement of traffic is limited to around six months on these two routes because of snowfall in the passes and threat of avalanches. The Zojila pass on the Srinagar-Leh route is situated at an altitude of 11,587 feet on the Srinagar-Kargil-Leh national highway. Due to heavy snowfall during the winters, the highway remains closed from December to April, thereby making air the only mode of connectivity. The 14.15 km-long, two-lane bi-directional single tube Zojila tunnel is being constructed along with a 14.20 km long Parallel Escape (egress tunnel). It will be India s longest road tunnel and Asia s longest bi-directional tunnel. The project is estimated to cost Rs 6,808.69 crore, and the tunnel will be constructed between Baltal near Sonamarg and Manimarg in Drass. The Zojila tunnel is the only viable alternative to ensure Ladakh s year-round connectivity. The project will not only enhance the safety of travellers crossing the Zojila Pass but will also make the travel on Srinagar-Kargil-Leh Section of NH-1 free from avalanches. The construction of Zojila Tunnel shall bring about all-round economic and socio-cultural integration of these regions, which remain cut-off from the rest of the country during winters due to heavy snowfall for about six months, Sanjeev Malik, the executive director of National Highways and Infrastructure Development Corporation Limited (NHIDCL), the firm tasked to carry out the project, told The Indian Express. Strategic importance The all-weather safe road connectivity is important from the strategic point of view as well. According to officials, road connectivity is important for defence forces, keeping in view the activities carried out by China and Pakistan along the borders in Ladakh, Gilgit and Baltistan regions. Army officials say that the tunnel will help the Leh-based 14 Corps, which is responsible for military developments in areas near the Pakistan and China borders. While Ladakh is connected to Pakistan through the Line of Control (LoC), Line of Actual Control (LAC) connects the region to China. For six months, due to the closure of roads, our logistics and supplies are shipped through the air. This tunnel will be helpful to the defence forces by all means, a senior army officer posted in Leh told The Indian Express. In hostile times, this tunnel would be very helpful because it would ensure continuous

logistics and other necessary supplies. A modern-day marvel One of the reasons the project is considered a modern-day marvel is because it is the first of its kind in such a tough geography. There will be as many as nine curves, and the design speed will be 80 Kmph. The Zojila tunnel has been planned as a modern tunnel. It will have the latest safety features including a fully transverse ventilation system, tunnel emergency lighting, and a CCTV monitoring tunnel radio system. It will have pedestrian cross-passages at every 250 metres. Also, motorable cross-passages and lay-bys shall be provided at every 750 metres, Malik said. He added that the project will adopt state-of-the-art methods of construction, out-of-the-box technical solutions, and real-time supervisory control and data acquisition.






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The challenges According to NHIDCL officials in New Delhi, tunnelling through the fragile Zojila formations would throw up geological surprises. The officials said that they were aware of the challenges including the lack of oxygen, snow accumulation up to 25-30 feet, and peak minimum temperature of -45°C. We are in talks with an international company, which expertise in construction work in such low temperatures, a senior engineering official involved in the project said. The entire project site is prone to avalanches…, so it is going to be a challenging task, Malik added. A game-changing move On completion, the project could be a game changer for Ladakh. All the sectors will benefit, be it tourism or any other area. This tunnel will definitely bring about a big change in the lives of the people here, Ladakh MP Thupstan Chhewang told The Indian Express. He added that the project would trigger a boost in employment and business opportunities. It (tunnel) will become an economic lifeline for the people living in Ladakh. The economy

will definitely improve, and peoples lives will be more comfortable, Nawang Rigzin Jora, Congress MLA from Leh, said, stressing that the project was approved by the UPA in 2013. The tunnel will actually change the life of the people, especially during the winters… Medicines, vegetables and other important items are flown through the air during winters, which makes them expensive. (Adapted from The Indian Express) 137. Achievements of Power Ministry during last 4 years (i)Generation capacity- • 1 Lakh MW generation capacity added. (2,43,029 MW in March 2014 to 3,44,002 MW in March 2018) • India emerges as net exporter of electricity. 7203 MU supplied to Nepal, Bangladesh and Myanmar in FY 2017-18. • Energy deficit reduced from 4.2 per cent (in FY 2013-14) to 0.7 per cent (in FY 2017-18) (ii) One Grid One Nation- • Expansion of transmission grid by 1 lakh km (iii)DeenDayalUpadhyaya Gram JyotiYojana (DDUGKY) • 100 per cent of village electrification (viii) Integrated Power Development Scheme (IPDS) • Outlay of Rs. 65,424 crore • 1376 towns IT enabled






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(vii) UDAY • More than Rs 20,000 crore interest cost saved by DISCOMs under UDAY • India s rank improved to 29 in 2018 from 111 in 2014on World Bank s Ease of Getting Electricity Ranking. (vi) SAUBHAGYA • Launched for universal electrification • Camps organised at village level. Minimum documentation required • Special drive for economically weaker sections under Gram Swaraj Abhiyan • 60.34 lakh housholds electrified since 11th Oct, 2017 (ix) Power for All 24*7 – • Joint initiative of Govt of India and State Govts. • Roadmap for 24*7 power supply prepared. States ready to ensure 24*7 Power for All from 1st April, 2019. (x) Focus on North-East region- • Electrification of 5855 villages and intensive electrification of 9004 villages completed. (iv)UJALA • 107 crore LED bulbs distributed (v) 4376 MW hydel capacity addition (FY 2014-18) Innovations and Initiatives- Electric vehicles – • No licence required for charging stations • Procurement of 10,000 e-vehicles for Government institutions Smart Metering- • Procurement of 50 lakh smart meters done. • 1 crore prepaid meters under procurement Energy efficiency- • Star labelling program saved energy worth Rs. 22,500 crore. • Energy efficiency measures through PAT in large industries saved energy worth Rs. 9500 crore






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• Energy Conservation Building Code for energy efficient buildings launched in June, 2017 Digital initiatives- • e-Bidding and e-Reverse Auction for short and medium-term procurement of power. • Enabling payments through NPCI platforms such as BHIM, BBPS, Bharat QR etc. More than 24 crore digital transactions in FY 2017-18 for electricity bill payments. To bring transparency and to disseminate information to public at large following Apps are launched by the Ministry of Power:

1. SAUBHAGYA – App for tracking household electrification.

2. VidyutPravah – The Mobile/Web App provides real time information of current demand met, shortages if any, surplus power available and the prices in Power Exchange.

3. UJALA (UnnatJyoti by Affordable LED`S for All) – App provides real time updates on the LED distribution happening across the country.

4. UrjaMitra – monitoring of power availability and sending power cut information through SMS

5. MERIT– information pertaining to marginal variable cost and source wise purchase of electricity.

6. UDAY- Allows people to compare DISCOMs on the basis of 26 major performance parameters.

7. URJA (Urban JyotiAbhiyaan) – It is an informative App for Urban Distribution Sector. It captures Consumer centric parameters from the IT systems created under IPDS.

8. TARANG (Transmission App for real time monitoring & Growth) – It is an IT Web/mobile based platform to provide status of both inter and intra state Transmission Projects in the country. This platform also shows the prospective inter state as well as intra state Transmission Projects.

9. DEEP e-bidding (Discovery of Efficient Electricity Price) – The portal will provide a common e-bidding platform with e-reverse auction facility to facilitate nation-wide power procurement through a wider network so as to bring uniformity and transparency in the process of power procurement.

10. Ash Track- linking fly ash users and power plants for better ash utilisation. (Adapted from PIB)






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138. What RBI s rate hike indicates The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) — the central bank s rate-setting panel — Wednesday raised the repo rate (the short-term lending rate at which it lends money to commercial banks) by 25 basis points. (One basis point is one-hundredth of a percentage point.) This was the first-time interest rates were increased since the NDA government came to power in May 2014, and effectively signalled the end of the rate-easing cycle for now. Rates had been on hold since the last cut in August 2017. The rate hike appeared to be a precautionary move against the backdrop of global volatility in crude and elevated commodity inflation worldwide. It was contrary to the broader market expectation that the RBI would hold rates while revising its stance from neutral to tighten and came as a reassertion by the bank of its inflation-targeting role, and a signal that it did not want to fall behind the curve on its primary mandate. The June hike — which proved wrong the belief that the bank would wait until its August policy review to reset rates — indicated the preference for an early start in dealing with inflationary pressures that are now quite visible. The big surprise came in the MPC s unanimous decision to hike, with both Ravindra Dholakia and Pami Dua, who are known to take a dovish stance, coming on board. The decision to retain the neutral stance despite the rate hike was also unexpected. A neutral stance essentially implies that options remain open as uncertainty continues on the inflation trajectory. Inflation worries The rate hike was clearly prompted by the upside risk to inflation projections on account of (a) sharper-than-expected uptick in both headline inflation and core inflation (inflation excluding food and fuel components), and (b) fresh indicators on the robustness of domestic growth revival. The central bank now expects average inflation to be 4.8%-4.9% in the first half of 2018-19, and 4.7% in the second half of the financial year. In its previous monetary policy meeting two months ago, the RBI had projected average inflation at 4.7%-5.1% for first half of the current fiscal, and a much lower 4.4% for the second half of the year. Compositional shift While conceding that actual inflation outcomes since the April policy have evolved broadly along the projected trajectory, the RBI indicated a compositional shift that cannot be ignored . While the summer momentum in vegetable prices is weaker than the usual pattern , the panel noted that the sudden 80 basis-point acceleration in core inflation in April over March suggested a hardening of underlying inflationary pressures. Government data released earlier had recorded core inflation at 5.92% and general CPI (Consumer Price Index) inflation at 4.58% in April. Another major upside risk is the sharper-than-expected 12% increase in the price of the Indian crude basket ($ 66 per barrel to $ 74) since April, alongside the increase in other global commodity prices, pointing to a firming of input cost pressures. While the RBI has






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noted that the impact of the proposed revision in the minimum support price (MSP) formula for kharif crops cannot be assessed in the absence of adequate details , analysts predict that if the 50% plus MSP is announced, it could increase rice MSP by 18%, adding to the upside risks. The impact of an increase in house rent allowance (HRA) for central government employees has also been factored into the inflation estimates this fiscal. On the growth outlook, the central bank acknowledged that investment activity is expected to improve given the improving capacity utilization and credit offtake, alongside buoyant global demand, which could boost exports. GDP growth for 2018-19 has, therefore, been retained at 7.4%, as in the April policy. Market response Equity benchmarks broke a three-day losing streak to end higher Wednesday; the Sensex closed 275 points up. The market, which started off flat, surged in the last trading hour following the MPC announcement in the afternoon, possibly indicating that investors had priced in the rate hike. More importantly, despite the RBI keeping policy rates on hold for the last 10 months, both market interest rates and bank lending and deposit rates moved up, indicating an implicit tightening of financial conditions even before Wednesday s rate hike. With RBI raising the repo rate, banks are likely to pass on the burden to consumers, which means education, home, auto and other loans could get costlier. Earlier this week, banks including SBI, PNB, HDFC Bank and ICICI Bank raised their benchmark lending rates, or MCLR, by up to 10 basis points, making loans costlier. Global trend The hardening of market interest rates in India mirrors the trend in Asia, where a number of central banks have raised policy rates in response to weaker currencies and tighter global capital flows. Turkey, the Philippines and Indonesia have delivered a preemptive rate hike during the course of the year. In March, China raised a key short-term rate after the US Federal Reserve hiked rates. For the remainder of 2018-19, analysts see the possibility of a further hike of 25-50 basis points if oil prices and US Treasury yields continue to rise. The monsoon s progress, MSP increases, and the government s adherence to its fiscal policy target will also be crucial. (Adapted from The Indian Express) 139. ICICI Bank s growing troubles What is the ICICI Bank controversy about? In 2016, Arvind Gupta, an investor, wrote to the Prime Minister s Office, the then Reserve Bank of India Governor Raghuram Rajan, and others, seeking an inquiry into transactions between ICICI Bank, the Videocon group and NuPower Renewables, a company promoted by Ms. Kochhar s husband, Deepak Kochhar, in 2010. It was alleged that a company related to the Videocon group chairman, Venugopal Dhoot, invested ₹ crore in NuPower in and that proprietorship of the company was transferred to a trust owned by Mr. Kochhar for ₹ lakh after the Videocon group received a loan of ₹ , crore from ICICI Bank in






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2012. Mr. Gupta, who alleged conflict of interest, demanded a forensic audit of the relevant transactions. The controversy came to light last March when the media reported Mr. Gupta s allegations. What is ICICI Bank s response? The board of ICICI Bank had reposed confidence in Ms. Kochhar after the issue came to light in March, denying any conflict of interest. Its chairman, M.K. Sharma, had said Ms. Kochhar had made all the necessary disclosures. ICICI Bank also said that the total loan extended by the lenders consortium to the Videocon group, which included Videocon Industries and of its subsidiaries, was around ₹ , crore. The bank highlighted the fact that it was not the lead bank in the consortium. Further, the bank said the committee of creditors that sanctioned loans to Videocon was chaired by the then chairman of ICICI Bank, K.V. Kamath, and it included independent and working directors of the bank. It is important to note that Ms. Chanda Kochhar was not the Chairperson of this committee, the bank had said. What is the investigative agency s reaction? The Central Bureau of Investigation has registered a preliminary enquiry against Deepak Kochhar, officials of the Videocon group and others, to determine if there was any wrongdoing. However, this inquiry did not name Chanda Kochhar. Where do things stand now? Last week, the bank s board ordered a probe by an independent and credible person following fresh allegations from another whistleblower against Ms. Kochhar. The allegations include a potential violation of the bank s code of conduct and of quid pro quo in dealing with certain borrowers. The board s Audit Committee will appoint the head of the inquiry panel, outline its terms of reference and specify the period covered by the probe. (Adapted from The Hindu) 140. Bill Averting Ponzi schemes A new bill seeks to shield investors from scams Instances of people losing their hard-earned money to Ponzi schemes keep coming to light. The Banning of Unregulated Deposit Schemes Bill, 2018 was approved by the Union Cabinet in February to provide comprehensive legislation to deal with illicit deposit schemes in the country. What are the provisions? The Bill imposes complete prohibition of unregulated deposit taking activity. It provides for deterrent punishment for promoting or operating an unregulated deposit taking scheme, stringent punishment for fraudulent default in repayment to depositors, designation of a competent authority by the State government to ensure repayment of deposits in the event of default by a deposit taking establishment, powers and functions of the competent authority including attachment of assets of a defaulting establishment, designation of






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courts to oversee repayment of depositors and to try offences under the Act, and listing of Regulated Deposit Schemes in the Bill with a clause enabling the Central government to expand or prune the list. The Bill contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme. What are the objectives behind bill? A Cabinet statement notes that the principle is that the Bill would ban unregulated deposit taking activities altogether, by making them an offence ex-ante, rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags. The Bill creates three different types of offences, namely, running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes. It provides for severe punishment and heavy pecuniary fines to act as deterrent. It has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally. The Bill provides for attachment of properties/ assets by the competent authority, and subsequent realization of assets for repayment to depositors. Clear-cut time lines have been provided for attachment of property and restitution to depositors. The Bill enables creation of central online database, for collection and sharing of information on deposit taking activities in the country. Primarily, the Bill defines the deposit taker and deposit comprehensively.

The primary responsibility of implementing the provisions of the proposed legislation lies with the State governments. (Adapted from The Hindu) 141. Global trade war Europe decision to couter America Nobody wants to lose a trade war. The European Commission announced it would impose tariffs as high as 25% on imports worth $3.3 billion from the U.S. beginning July. A whole range of American goods, from motorbikes and jeans to peanut butter and orange juice, will now face higher taxes when sold in the European Union zone. The Commission is also mulling import duties on more American goods if the trade war with the U.S. intensifies. China, Mexico and Canada






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Europe is not alone in waging a battle against imports from the U.S.; China, Mexico and Canada have joined hands in response to President Donald Trump s decision to impose tariffs on steel and aluminium imports. What was done by US? Last week, the U.S. imposed a 25% tax on steel and a 10% tax on aluminium imports from the EU, Mexico and Canada. The first salvo in this ongoing trade war, however, was fired by Mr. Trump in March this year, when he imposed tariffs on Chinese steel and aluminium to protect American producers. Workers in America s manufacturing sector have played a key role in Mr. Trump s electoral success, so his zealousness to be seen to be protecting their interests is unsurprising. However, consumers in America and the rest of the world are likely to suffer as their respective governments make it costlier for them to access foreign goods and services. Implications of trade war Judging by their actions, it is now clear that America s major trading allies would not really want to lose this trade war against the U.S. The sad fact, however, is that at the end of the day nobody actually wins a destructive trade war. Tariffs that seek to disadvantage foreign producers in favour of domestic producers, whether they are imposed by the U.S. or any of its major trading partners such as Europe or China, only increase the burden of taxes. What this leads to eventually is slower global economic growth. The World Bank has warned that the effect of the increased use of tariffs to regulate international trade could be similar to the significant drop in global trade after the financial crisis a decade ago. Countries that are protesting America s metal tariffs in the name of free trade are also only encouraging further protectionism when they impose retaliatory tariffs. As former Reserve Bank of India Governor Raghuram Rajan aptly put it, the ongoing trade war is a lose-lose situation for the warring parties. The only winners will be special interest groups and consumers in countries that do not engage in the tit-for-tat tariff war, but their winnings will come at the cost of global growth. It is high time countries worldwide come together to promote the cause of free trade. (Adapted from The Hindu) 142. What is the Karnataka farm loan waiver plea all about? What is it? Farmers distress has become a major concern in Karnataka, which has seen four years of drought in the past five years that has resulted in profound implications on the quality of life of farmers and the State s economy. In the run-up to the Assembly elections, the Janata Dal (Secular) promised in its manifesto to write off farm loans from cooperative banks, regional rural banks (RRBs) and nationalised banks within 24 hours of the party coming to






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power. After all, between April 2013 and November 2017, at least 3,515 farmers reportedly ended their lives. After the fractured mandate in the elections, the JD(S) and the Congress formed a coalition government headed by H.D. Kumaraswamy. The Opposition and the single largest party, BJP, called for a State-wide bandh on May 28, which evoked a mixed response, demanding that Mr. Kumaraswamy immediately announce a farm-loan waiver. How did it come about? Farmers have been demanding waiver of all loans owing to crop loss and the crash in prices for the past four-five years. The crop loans alone stand at Rs. 53,000 crore, the total outstanding borrowings of farmers is Rs. 1.14 lakh crore. While some representatives of farmers have demanded waiver of all loans (Rs 1.14 lakh crore), the government has made a commitment to waive crop loans, largely for the benefit of small and marginal farmers, who own less than two hectares and constitute 75% of farmer households, in phases. In the State budget for 2017-18, former Chief Minister Siddaramaiah waived crop loans up to Rs. 50,000 borrowed only from the government-run cooperative banks and not from the nationalised banks and the RRBs. Now, farmers have been demanding that the new Chief Minister honour his promise by writing off loans borrowed from all institutions. Why does it matter? The farmers have always been the core vote base of the JD(S). Of the total 36 JD(S) MLAs, 31 were elected from the old Mysuru region, where farming is a major profession. Sugarcane and paddy growers in the Cauvery belt are in distress owing to the shortfall in rain and non-availability of water in canals. During an interaction with farmers last week, both Mr. Kumaraswamy and Deputy Chief Minister G. Parameshwara sought time to study the complex issues involved in loan waiver and to get more details of loans from different banks. Many people have taken farm loans and invested the amount in running fertiliser or pesticide business. Many have borrowed for buying vehicles and tractors and drilling borewells. Moreover, many people residing in the city have borrowed interest-free farm loans and deposited the sums in other financial institutions for higher interest. Many coffee-planters, having estates stretching over 500 acres, have borrowed crores of rupees from banks. Many farmers residing in tier-II cities have borrowed for marketing. Legislators, employees of cooperatives earning a salary of Rs. 3 lakh a year and some individuals paying income tax of Rs. 3 lakh a year have taken farm loans. The question is should the government waive these loans. What lies ahead? Mr. Kumaraswamy now realises that the promise is easier said than done. Compulsions of coalition politics, besides fiscal discipline, have forced the Chief Minister to seek more time to take a decision, though the Congress is not inclined to oppose it. It needs to treat the issue very cautiously to ensure that the benefit reaches the eligible farmers. With the budget to be fixed at Rs. 2.10 lakh crore for 2018-19, the loan waiver, which comprises nearly one-fourth of the budget, will ruin the State s economic health. The Chief Minister argued that resources should also be made available for other welfare schemes and development projects. As the Centre is unlikely to grant funds for loan waiver, State officials have been instructed to cut down on unnecessary expenditure.






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(Adapted from the Hindu) 143. In Jharkhand, starvation and ration woes Around half-a-dozen people have allegedly died of starvation in Jharkhand in the last six months. Most of them were reportedly denied rations from the Public Distribution System shops for failing to have Aadhaar-based biometric authentication. Two women — one in Giridih and the other in Chatra district — died of alleged starvation last week, prompting Chief Minister Raghuvar Das to order a probe. The government reports said the women were sick; family members claimed they died of hunger. What happened? On June 2, Savitri Devi, 58, from Mangragarhi village in the Dumri block of Giridih district, allegedly died of hunger. Family members and villagers said she had nothing to eat at home. She was denied rations from PDS shops because her ration card could not be linked with Aadhaar. On June 4, Meena Musahar, 45, from the Prem Nagar area in the Itkhori block of Chatra district, allegedly died of starvation. Her son said his mother died of hunger; the government said it was awaiting the autopsy report to ascertain the exact cause of death. Recently, Lakhi Murmu, Santoshi Kumari, Ruplal Marandi, Premani Kunwar and Etwariya Devi, too, reportedly died of hunger in different districts. All these deaths took place after the State government cancelled 11.6 lakh ration cards, saying they were not linked to Aadhaar. Why didn t they have ration cards? The ration cards of Savitri Devi and many others were cancelled because they did not have Aadhaar linkage. They were unable to procure food after the Aadhaar-enabled point of sales (PoS) machine could not authenticate their biometrics. Dumri Block Development Officer (in-charge) Rahul Dev confirmed that Savitri Devi did not have a ration card. Village head Ram Prasad Mahto said Savitri Devi was not getting foodgrains from PDS shops as her ration card was cancelled. Till January, of the 2.3 crore people in Jharkhand covered under the PDS, only 1.7 crore had Aadhaar linkage. Why the Aadhaar-PDS link? Though the Supreme Court has said Aadhaar linkage is voluntary, at the village and panchayat levels in Jharkand, little appears to have changed. For a person who gets foodgrains through the PDS, it is mandatory for him or her to follow the Aadhaar-Based Biometric Authentication (ABBA) system that is the practice of using an electric point of sale (PoS) machine for each transaction. For implementing the ABBA system, it is necessary to have Aadhaar seeding, which is to get one s Aadhaar number linked to the ration card. What are the hurdles? To get benefits under the PDS, biometric authorisation is required and this calls for technological necessities which villages lack: uninterrupted power supply, a functioning PoS machine, adequate mobile and Internet connectivity and ensuring that data repository






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servers are running smoothly. So, every time a person has to get rations from a PDS shop, he/she has to pray that all these variables work. What is the government doing? The government says it has begun rechecking the details of those left out of the Aadhaar linkage, but officials admit the process is moving at a slow pace. The government has made Aadhaar seeding compulsory but many tribals, unaware of this requirement, are denied access to food. The government feels that by linking ration cards to Aadhaar, it will remove the corruption in the PDS system. The government has also announced that it has achieved 100% Aadhaar seeding but experts said lakhs of people covered by the PDS are not linked with their Aadhaar numbers. What lies ahead? The government has to take foolproof measures for seeding of Aadhaar numbers, say experts like Jean Dreze. Food, Public Distribution and Consumer Affairs Minister Saryu Rai says his Department has proposed to set up grain banks in blocks and panchayats to help those in need. (Adapted from the Hindu) 144. Insolvency and Bankruptcy code (Amendment) Ordinance 2018 Last week, President Ram Nath Kovind gave his nod to promulgate the Insolvency and Bankruptcy code (Amendment) Ordinance 2018. Key provisions of the ordinance: Homebuyers as financial creditors In a major change, homebuyers would now be treated as financial creditors or, in other words, on par with banks. The amendment enables homebuyers (either as an individual or group) to initiate insolvency proceedings against errant builders. Homebuyers shall have the right to be represented in the committee of creditors (CoC), which takes the key decision regarding revival of the company or its liquidation. Definition of a related party in relation to an individual The amendment now defines related party in relation to an individual running the firm and they would be barred from bidding for the firm under the resolution process. Prior to the amendment, related party was defined only with reference to a company facing insolvency. Changes in voting share of committee of CoC The amendment has changed the voting share required in CoC meetings. For extending the insolvency process beyond 180 days till 270 days and for appointment of the resolution professional (who oversees the process), now a voting share of 66% is sufficient, compared with earlier requirement of 75%. Unless a specific approval is required in the Code, all






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other decisions of the CoC can be taken with 51% voting share against the earlier norm of 75%. Withdrawal from the insolvency process is permitted with the approval of 90% of voting share of the CoC (the norms for which would be prescribed). If a financial creditor is a related party If a financial creditor (banks and other financial institution) or his authorised representative is a related party to the company facing insolvency, it shall not have any participation or voting during a meeting of the CoC. However, exemption is provided in case the financial creditor has become a related party on account of conversion or substitution of debt to equity shares or instruments convertible into equity shares prior to the date of commencement of insolvency proceedings. Moratorium not to be available to the guarantors of a company For a company under insolvency, a moratorium period is provided during which no parallel proceedings are allowed. Whether such moratorium is available to guarantors of the company was a subject of debate. Now the amendment has said that the moratorium is not available to persons who provided guarantee for the loans availed by the corporate debtor. Filing of application by the company A company can file an insolvency application, provided it seeks shareholders approval and at least three-fourth of the stakeholders approve the proposal. Operational creditor to confirm dues only if available Operational creditors (suppliers of the company) are required to furnish a certificate from the financial institution managing their accounts regarding pending dues from the company, only if it is available. Prior to the amendment, it was mandatory. Tenure of an insolvency resolution professional Under the insolvency process, an interim resolution professional (IRP) is appointed first and then, a resolution professional. As per the amendment, the tenure of the IRP would continue till the appointment of the resolution professional (RP), compared with the earlier 30-day fixed tenure. Also, for the appointment of the RP, a written consent from the professional is required in a specified format. (Adapted from the Hindu) 145. Four Years Achievements & Initiatives of the Ministry of Coal 1. Coal production increase Shri Goyal informed that the Coal Production of Coal India Ltd. (CIL) has increased from 462 MT in 2013-14 to 567 MT in 2017-18. This 105 MT increase in production in four years took almost seven years to achieve before 2013-14.






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2. Coal quality check The Minister also talked about how the Ministry has worked for ensuring superior coal quality. Third party sampling procedure have been put in a place. UTTAM App has been launched for ensuring transparency and efficiency in coal quality monitoring process. Re-gradation of all the mines of Coal India Ltd and Singareni Collieries Company Ltd. (SCCL) has been done by Coal Controller s Organization (CCO). 3. Transparency in allocation Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI), for auction and allotment of coal linkages, will lead to affordable power and transparency in allocation of coal. (Adapted from PIB) 146. Shri J P Nadda highlights the achievements of the Health Ministry 1. Reduction in MMR We are saving nearly 12,000 mothers in 2015 (mid-year) as compared to 2012. Compared to 44,000 earlier annual maternal deaths, now there are 32,000 maternal deaths only. Shri Nadda further said that India has registered a record 22% reduction in MMR since 2013. India has met the MDG target for MMR of 139/lakh live births by achieving 130 by 2015. At this rate, we shallachieve SDG target of 70 by 2022, ahead of target timeline of 2030. 2. New AIIMS The Health Minister also stated that Cabinet has approved 8 new AIIMS atMangalagiri (Andhra Pradesh), Nagpur (Maharashtra), Kalyani (West Bengal), Gorakhpur (Uttar Pradesh), Bathinda (Punjab), Guwahati (Assam) and Bilaspur (Himachal Pradesh). (Adapted from PIB) 147. Four-Year Achievements & Initiatives of the Ministry of Railways 1. Safety first Safety has reigned supreme with consequential train accidents reduced to 62% from 118 in 2013-14 to 73 in 2017-18. Rashtriya Rail Sanraksha Kosh (RRSK) fund of Rs. 1 Lakh Cr has been allocated for safety expenditure over 5 years. Addressing the issue of unsafe crossings on a war footing, 5,479 Unmanned Level Crossings have been eliminated in the last four years. 1.1 lakh safety posts are also being filled-up through recruitment amongst other measures to improve safety. 2. Services Railways is improving passenger services including a complete makeover of Stations by installing modern facilities including escalators, lifts, free wifi etc. while instilling local art and culture in the design. 68 stations are slated for improvement by March 2019.






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Government has improved trains and coaches including launching the Tejas, Antyodaya and Humsafar trains. 3. Rail University India s First National Rail & Transportation University in Vadodara is set to open in August 2018. (Adapted from PIB) 148. How likely US Federal Reserve rate hike could impact India Possibility of rate hilke The US Federal Reserve is expected to raise the key interest rate for the second time in 2018. The projected rate hike comes in the backdrop of a sharp uptick in hirings alongside a rising inflationary trend in the US economy, with the consumer inflation readings on both the headline and core (excluding energy and food components) expected to run well above the Fed s target of 2 per cent. Analysts expect a quarter-point hike in interest rates with a possible projection of more increases this year. How does RBI rate hike balance the situation? A Fed rate hike could potentially impact the macroeconomic outlook in other emerging economies, including India. The RBI s Monetary Policy Committee, which hiked the repo rate by 25 basis points in its meeting last week, effectively signalling a reversal of the easy money policies of the last three years, seems to have been partly prompted by the Fed s rate action. Following the RBI rate hike, foreign investors can retain their arbitrage advantage. Had the RBI kept the rate unchanged while the Fed hiked them further, there would have been greater capital outflows, leading to further weakening of the rupee. India s debt and equity markets witnessed outflows of over Rs 40,000 crore in April and May. What is the impact on equity markets? Equity market performance has varied across regions, with the Advanced Economies (AEs) clocking modest gains on strong first quarter earnings and abating of trade tensions, while stocks in major Emerging Market Economies (EMEs) have faced selloffs on a rising dollar and expectations of further rate hikes by the Fed. What is the impact on currency markets? In the currency markets, the US dollar touched its highest level in May since December 2017. The euro slid significantly against the dollar reflecting a combination of factors, including tepid growth data for the Euro Area, and political uncertainty in its southern periphery, including Italy. EME currencies have, by and large, depreciated against the US dollar. (Adapted from The Indian Express)






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149. Need for Bad banks How can a bad bank solve the NPA problem? What is a bad bank ? The Central government has revived the idea of setting up an asset reconstruction or asset management company, a sort of bad bank first mooted by Chief Economic Adviser Arvind Subramanian in January 2017. Mr. Subramanian had envisaged a Public Sector Asset Rehabilitation Agency that would take on public sector banks chronic bad loans and focus on their resolution and the extraction of any residual value from the underlying asset. This would allow government-owned banks to focus on their core operations of providing credit for fresh investments and economic activity. Unlike a private asset reconstruction company, a government-owned bad bank would be more likely to purchase loans that have no salvage value from public sector banks. It would thus work as an indirect bailout of these banks by the government. How will it be capitalised? The bad bank will require significant capital to purchase stressed loan accounts from public sector banks. The size of gross NPAs on the books of public sector banks is currently over ₹10 lakh crore. The chances of private participation are low unless investors are allowed a major say in the governance of the new entity. Private asset reconstruction companies have been operating in the country for a while now, but have met with little success in resolving stressed loans. The CEA had proposed a significant part of the bad bank funding to come from the Reserve Bank of India, which is likely to be a tricky proposition. That means the government, which is already committed to recapitalising state-run banks, will have to be the single largest contributor of capital even if private investors are roped in. How will it help the NPA problem? Hiving off stressed loan accounts to a bad bank would free public-sector bank balance sheets from their deleterious impact and improve their financial position. As the quality of a bank s assets deteriorates, its capital position (assets minus liabilities) is weakened, increasing the chances of insolvency. Some analysts believe that many public-sector banks are effectively insolvent due to their poor asset quality. Consequently, banks have turned risk-averse and credit growth has taken a hit. If managed well, a bad bank can clean up bank balance sheets and get them to start lending again to businesses. But it will not address the more serious corporate governance issues plaguing public sector banks that led to the NPA problem in the first place. (Adapted from the Hindu) 150. For stronger employee representation: On the amendments to the Major Port Authorities Bill Amendments approved by the Union Cabinet to the Major Port Authorities Bill, 2016 are meant to make employee representation stronger in a labour-heavy work environment.






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The amendments are based on the recommendations of the department-related Parliamentary Standing Committee. What are the amendments? 1. The changes include an increase in labour representatives to be appointed in the Port Authority Board, among the serving employees of the port concerned, from one to two. 2. The members representing the interests of the employees will hold office for three years and not for more than two consecutive terms. 3. The number of independent members in the Port Authority Board will be a minimum of two and a maximum of four. 4. Every person who was receiving any retirement benefit from the Board of Trustees under the Major Port Trusts Act, 1963 immediately before such date will continue to receive the same benefit from the Board. 5. The Board of each major port will be entitled to create a specific master plan in respect of any development or infrastructure established, or proposed to be established, within the port limits and the land appurtenant thereto. Such a master plan will be independent of any local or State government regulations of any authority whatsoever. 6. After commencement of the Act, for private-public partnership projects, the concessionaire shall be free to fix the tariff based on market conditions. 7. The proposed law highlights that amounts received by or on behalf of the Board under its provisions will be credited to a general account or accounts of the Ports which the Board may from time to time open with any nationalised or scheduled bank, according to the guidelines of the Finance Ministry. 8. The presiding officer and members of the adjudicatory board have to be appointed by the Centre on the recommendations of the selection committee. 9. The government will have the power to remove the presiding officer or any member of the adjudicatory board from office in accordance with procedure. 10. A saving clause has been kept under repeal and saving so that the existing benefit enjoyed by Mumbai and Kolkata Ports in respect of municipal assessment of property under the Bombay Port Trust Act, 1879 and the Calcutta Port Act, 1890 can continue. (Adapted from the Hindu) 151. Solar Charkha Mission to be launched soon in 50 clusters






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The Solar Charkha Mission of the Ministry of Micro Small & Medium Enterprises (MSME), will be launched by the President, Ram Nath Kovind on June 27, 2018 in New Delhi. The Mission will cover 50 clusters and every cluster will employ 400 to 2000 artisans. The Mission has been approved by the Government of India and will disburse subsidy of Rs. 550 crore to the artisans. The Minister further informed that 15 new state-of-the-art technology centers are being set up all over the country including North-East, of which 10 centers will become operational by March 2019. Each center is being built at a cost of around Rs. 150 crore. The 10 centers which will become operational soon are located in Durg (Chhattisgarh), Bhiwadi (Rajasthan), Rohtak (Haryana), Visakhapatnam (Andhra Pradesh), Bengaluru (Karnataka), Sitarganj (Uttarakhand), Baddi (Himachal Pradesh), Bhopal (M.P.), Kanpur (U.P.) and Puducherry. What are Solar charkha? The Khadi and Village Industries Commission (KVIC) has finalised a project to introduce solar "charkhas" (spinning wheels) across the country and produce "green clothes". Khadi is essentially hand-spun, hand-woven cloth and will now have technological help to assist the production with solar power. The project involves introduction of 100,000 such "charkhas", each costing around Rs 20,000, every year. Generally, one spins the "charkha" wheel with the hand. In the new model, there are solar panels, which would draw solar power. The solar panels are connected to a battery, which stores power. Rhe solar 'charkhas' would help not only to spin effortlessly but the spinners can also earn double their present earnings, from Rs 60 per day to Rs 150 per day. (Adapted from PIB) 152. Evaluation of bailout scheme for sugarcane farmers What are the measures recently undertaken for sugar sector? A little over a month after the Centre proposed a special cess under the GST to help alleviate distress among sugarcane farmers, the Cabinet Committee on Economic Affairs approved a Rs. 7,000- crore package for the sugar sector last week. This package, with a mix of assured minimum pricing and special incentives for increasing molasses and ethanol production to gainfully mop up the glut of sugar in the country, is independent of the cess proposal that was expected to raise Rs. 6,700 crore. What is the need of these measures? To put this in perspective, sugar mills dues to farmers stand at Rs. 22,000 crore. Under the proposed bailout scheme, the government will procure sugar from mills at a fixed minimum price to help them clear dues to farmers, and also offer them other financial assistance.






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How effective these measures will be? Only about Rs. 1,175 crore, however, will be used towards procurement of refined sugar from mills to create a buffer stock of 30 lakh tonnes. This is a fraction of the 63.5 million tonnes output expected in the two sugar seasons from October 2017 to September 2019. With the record output, sugar prices have dropped from an average of Rs. 37 a kg in the previous season to Rs. 26 in the current season. The bailout plan promises to pay Rs. 29 a kg. Sugar mills say this is below their production cost of Rs. 35 a kg, though it may dissipate their immediate liquidity problems to an extent. Rating agency Crisil reckons that the fixed price for sugar at mill gates and the buffer stock will at best help mitigate about 40% of the outstanding arrears to sugarcane farmers. And as production will rise again in the coming season, so will the extent of arrears. The rest of the package will take time to materialise, with Rs. 4,440 crore of loans and Rs. 1,332 crore of interest subsidies for greenfield and brownfield distillery capacities. Over time, this could help to use excess sugar for the manufacture of alcohol or ethanol, but it will not be soon enough to address the present crisis. What is the conclusion? All said and done, the Centre s sweetener for the sector does little to address structural problems and sticks to old-style pricing and stock-holding interventions instead of signalling a shift to market-driven cropping decisions. The political compulsions driving the bailout are obvious, given that the sugarcane crisis was a rallying cry in the by-election in Kairana in Uttar Pradesh, which the BJP lost. But that is no excuse for not thinking the package through. Perpetuating the complex web of state controls in a politically-sensitive sector is no solution. The best way to address the problem of excess supply in the long run is to ensure some linkage between the price paid for sugarcane and the end-products it is used for; and encouraging the feedback from market prices to inform farmers future cropping decisions. The current sops-driven solution could distort the agriculture sector further. (Adapted from The Hindu) 153. Assessing the Balance of Payments position New RBI data on India s Balance of Payments (BoP) for 2017-18 show current account deficit (CAD) at $48.72 bn, the highest since the record $88.16 bn of 2012-13. With CAD expected to widen to $75 bn during this fiscal, how vulnerable is the overall BoP position today? Let s start with foreign exchange reserves. Are they sufficient now? India s forex reserves, at $424.55 billion as on March 2018, are actually the eighth largest in the world (smaller chart right). Also, they can finance 10.9 months of imports, compared to 7.8 months in March 2014. 2.5 months in March 1991 (which forced the country to seek International Monetary Fund assistance).






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So, when economists speak of India s BoP vulnerabilities, what exactly are they trying to say? Countries generally accumulate reserves by exporting more than what they import. IMF data on the current account balances of the top 10 forex reserves holders reveal all of them — barring India and Brazil — to have been running surpluses year after year. India has always had deficits on its merchandise trade account, with the value of its imports of goods far in excess of that of exports. At the same time, the country has traditionally enjoyed a surplus on its invisibles account. Invisibles basically cover receipts from export of software services, inward remittances by migrant workers, and tourism and — on the other side — payments towards interest, dividend and royalty on foreign loans, investments and technology/brands, besides on banking, insurance and shipping services. But with the invisibles surpluses not exceeding trade deficits — except during the three years from 2001-02 to 2003-04 (bigger chart) — it has resulted in the country consistently registering CADs.






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How then has India been managing all these years with CADs, and even accumulating reserves? A country gets foreign exchange not only from exporting goods and services, but also from capital flows, whether by way of foreign investment, commercial borrowings or external assistance. The bigger chart shows that for most years, net capital flows into India have been more than CADs. The surplus capital flows have, then, gone into building reserves. The most extreme instance was in 2007-08, when net foreign capital inflows, at $107.90 billion, vastly exceeded the CAD of $15.74 billion, leading to reserve accretion of $92.16 billion during a single year. However, there have also been years, such as 2008-09 and 2011-12, which saw reserves depletion due to net capital inflows not being adequate to fund even the CAD.






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Is this model sustainable? How long can India continue to import more than it exports, and expect foreign capital to fully bridge the gap? India and Brazil represent unique cases of economies that have built reserves largely on the strength of their capital rather than current account of the BoP. India is even more unique because its currency, unlike the Brazilian real, is relatively stable, and not under frequent speculative attacks. In theory, a country can keep attracting capital flows to fund CADs so long as its growth prospects are seen to be good, and the investment environment is equally welcoming. It would help, though, if such foreign investment also goes towards augmenting the economy s manufacturing and services export capacities, as opposed to simply producing or even importing for the domestic market. In the long run, that can help narrow the CAD to more sustainable levels.

What is the outlook vis-à-vis the CAD and capital flows in this fiscal? The CAD fell sharply from $88.16 billion in 2012-13 to $15.30 billion in 2016-17, mainly because of India s oil import bill nearly halving from $164.04 billion to $86.87 billion. However, in 2017-18, the CAD rose to $48.72 billion, courtesy resurgent global crude prices, and is expected to cross $75 billion this fiscal.






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There are signs of capital flows slowing down as well. Foreign portfolio investors have, since April 1, made $7.9 billion worth of net sales in Indian equity and debt markets. This is part of a larger sell-off pattern across emerging market economies, in response to rising interest rates in the US, and the European Central Bank s plans to end its monetary stimulus programme by the end of 2018. The Swiss investment bank Credit Suisse has forecast net capital flows to India for 2018-19 at $55 billion, which will be lower than the projected CAD of $75 billion. In the event, forex reserves may decline for the first time since 2011-12. The RBI s data already show the total official reserves as on June 8 at $413.11 billion, a dip of $ 11.43 billion over the level of end-March 2018. (Adapted from The Indian Express) 154. Modi govt plans Pariwartan scheme for power sector revival What is Pariwartan Scheme? The government plans to warehouse stressed power projects totalling 25,000 megawatts (MW) under an asset management firm to protect the value of the assets and prevent their distress sale under the insolvency and bankruptcy code till demand for power picks up. State-run Rural Electrification Corp. Ltd (REC) has identified projects with a total debt of around Rs 1.8 trillion as part of the scheme, which is under government consideration and has been tentatively named Power Asset Revival through Warehousing and Rehabilitation, or Pariwartan , said a government official aware of the plan, requesting anonymity. The Pariwartan scheme is inspired by the Troubled Asset Relief Programme, or TARP, which was introduced in the US during the 2008 financial crisis. The proposed plan also aims to stem the rise in bad loans in the power sector.






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What are the details of the scheme? These stressed power projects will be housed under an asset management and rehabilitation company (AMRC) that will be owned by financial institutions. The plan is being driven by concerns that stressed projects have drawn bids for around Rs 1-2 crore per MW under the insolvency and bankruptcy code, a raction of the Rs 5 crore per MW needed to build them. While the promoter s equity will be reduced to facilitate a transfer of management control to the financial institutions, the lenders will convert their debt into equity. The AMRC will manage the projects and may ask utilities such as NTPC Ltd to operate and maintain them. The AMRC will charge a fee and help complete projects that are stranded for lack of funds. These projects will be transferred to the AMRC at net book value, wherein it will own a

51% stake in the projects and the balance 49% will be held by the lenders, said the government official cited above. What are the issues faced by stressed assets? Issues faced by the stressed projects include paucity of funds, lack of power purchase agreements and fuel shortages.






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With promoters losing interest, the value of these assets is deteriorating due to lack of operations and maintenance, added the government official. With no fresh investments in thermal power, once demand kicks in, driven by a strong economic growth and schemes such as Saubhagya, these assets will be back in play. (Adapted from Livemint) 155. How Nirav Modi continued to fly After India had revoked his passport, the fugitive jeweller went on using it for months to travel between countries. How was this possible, and why was an Interpol notice not enough to detect and stop him? What kind of notice has India sought against Nirav Modi, and what has Interpol issued? On June 11, the CBI said it had asked Interpol to issue a Red Corner Notice (RCN) against Nirav Modi, the fugitive jeweller wanted for bank fraud. On June 18, a CBI spokesperson said Interpol had issued a Diffusion Notice against Nirav Modi on February 15. What is the difference? A Red Corner Notice has statutory powers. It is like an arrest warrant. When Interpol issues one, all countries are duty-bound to apprehend the fugitive if s/he is in their country, or if s/he tries to leave. Getting an RCN issued involves a lengthy process, with every request vetted by the legal division of Interpol. Both the Enforcement Directorate and the CBI recently sent requests against Nirav Modi after filing chargesheets against him; Interpol has not yet issued the RCN. A Diffusion Notice is merely a request to various countries through Interpol to keep an eye out for an alleged fugitive, and inform the requesting country of his movements. It is not legally binding, is not vetted by the Interpol legal division, and can be sent directly to various Interpol offices. When did India revoke Nirav Modi s passport? The Ministry of External Affairs did so on February 23, a week after having suspended the passport. On June 18, the CBI said the information about the revocation had been updated in Interpol s central database and was available to all countries . How then could he travel between countries? In a June 5 letter, first reported by The Indian Express, Interpol informed Indian investigators that Nirav Modi had travelled on at least four dates across three countries using his revoked passport — on March 15, March 28, March 30 and March 31. He was able to do so because, sources say, there is no international common database on passports. Only in case of an RCN, sources in Interpol and the Immigration Department say, is the information in the Interpol Central Database directly linked to the database of immigration






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departments of major countries. Therefore, when a fugitive passenger s passport is swiped at the immigration counter, it automatically reflects in the system that there is an RCN pending against him. In countries where the information is not directly linked to the immigration database, Interpol ensures that its National Central Bureaus (NCBs) in those countries make the immigration departments feed the information into their databases. What are these NCBs? These are nodal agencies through which Interpol operates in various countries. They are not established by Interpol, but are existing national agencies, designated to handle Interpol requests. In India, the Interpol s NCB is the CBI, which has a division dealing with Interpol requests and is staffed with officials of the CBI itself. If the information is linked to the database only when Interpol issues an RCN, does it mean that a fugitive facing a Diffusion Notice can clear immigration? For such notices, the Interpol data are not directly linked to the immigration database. So, unless the NCB of each country ensures an update of such data in the immigration database, it will not reflect automatically when a passport is swiped at the immigration counter. The same is the case with information on revocation of a passport. That is why the CBI, after feeding such data in the Interpol Central Database, was also writing constantly to six different countries to ensure that they kept an eye out for Nirav Modi s movements. What are these six countries, and how have they responded? The CBI has claimed that it wrote to the US, the UK, Belgium, France, Singapore and the UAE between April 25 and May 28 —which was after Nirav Modi had already made a few trips on his revoked passports. Responses depend on diplomatic relations, and few countries generally bother to act on Diffusion Notices. Only the UK has responded to India s Diffusion Notice — with delayed information about Nirav Modi s travels two months earlier. Since nothing except an RCN is legally binding, agencies send reminders on pending notices. There is no statutory stipulation or laid-down procedure for this. If a fugitive does not adhere to a set movement pattern, there is little an investigation agency can do. Nirav Modi, last seen in Davos in end-January, has crossed border posts, where immigration authorities have failed to stop him. Governments ultimately depend on cooperation between intelligence agencies for tracking the movement of fugitives. Nirav Modi allegedly had six different passports. How is this possible, and which one of these has India revoked? Only the latest passport will be valid. When a frequent flier s passport booklet runs out of pages, or when a passport-holder has changes made in name, address etc, he or she has to get a new passport. The moment a new one is issued, the previous one is cancelled. How does Interpol work, and what is its record in delivering to Indian agencies the fugitives they want?






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Short for International Criminal Police Organisation, Interpol was established in 1923 and has 192 member countries, with a General Secretariat in Lyon (France), a Global Complex for Innovation in Singapore, seven regional bureaus, and Special Representative offices in the African Union, the European Union and the United Nations, to ensure cooperation among police agencies working in different legal environments to combat crimes of an international nature. Because Interpol has to deal with a number of barriers — such as differing legal systems, definitions of crimes, rules for evidence, incompatible extradition laws, restrictions on sharing information — its success depends largely on cooperation between one country and another, and diplomatic relations have a significant role in this. There are over 650 RCNs pending against criminals wanted by India. These include Indian fugitives Dawood Ibrahim and members of his gang who have been holed up in Pakistan since 1993, and Pakistan nationals Hafiz Saeed and Zaki-ur-Rehman Lakhvi, who are wanted for the 26/11 attacks. India s Chhota Rajan, despite an RCN having been issued against him, managed to keep moving from one country to another on fake passports, until he was finally arrested. What options does the CBI have now? There is nothing the CBI can do on its own when a fugitive is out of its legal jurisdiction. It can hope that Interpol will issue an RCN and that Nirav Modi will be located and detained in whichever country he is found. India will then have to send an extradition request and fight a court battle in that country to get him back. It can also use its diplomatic leverage for extradition, provided it builds a convincing case against him. (Adapted from The Indian Express) 156. How India, US duties trade off India has hiked duty on 29 kinds of goods imported from the US, following a similar move by the US on what it imports. What are these goods, and how much extra duty has India targeted with its move? In a recent notification, India hiked duty on 29 items imported from the US. This was in retaliation against a US announcement in March imposing tariffs on steel and aluminium items — 25% and 10% respectively — imported from all countries except Canada and Mexico. What will be the effect of these moves? As per UN COMTRADE-WITS data sourced by the government, US imports steel items worth approximately $795 million and aluminium products worth $424 million from India. The US move will help it collect an additional $241 million on imports from India — about $198.6 million from the duty on steel products, and $42.4 million from the duty on aluminium goods.






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Balancing act Last week, India told the World Trade Organization (WTO) that it plans to increase the customs duty on 30 products imported from the US. It told the WTO that it has decided these additional duties in a way that it would help the government earn an additional $241 million. India wishes to clarify that suspension of concessions shall be equivalent to the amount of trade affected by United States measures. To this end, India reserves the right to adjust the specific products for which suspension of concessions is effectuated, and its right to adjust the additional rate of duty imposed on such products, India said. The motorcycle The 30 items listed by India included lentils, boric acid, fresh apples and shelled almonds. Another product listed was motorcycles with internal combustion engine capacity over 800






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cc. On Wednesday, India left out such motorcycles and announced imposition of duties on the 29 other products. In the original list to the WTO, India had said it may impose an additional duty of 50% on such motorcycles. This measure was targeted at Harley-Davidson motorcycles. In an address to a joint session of Congress in 2017, US President Donald Trump had hinted at mistreatment to companies such as Harley-Davidson by way of high import duties, up to 100% in some markets, but he did not name India. On February 26, days after India abruptly announced slashing of duties on imported motorcycles, Trump made it clear that he did not think these this was enough. These motorcycles constituted a small fraction of the overall trade involving the 30-product list. In 2017, India imported motorcycles (over 800 cc) worth $10.6 million. Almonds biggest Of the duty-hiked 29 products, the category that will bring in the highest additional duties is almonds that are fresh or dried in shell. According to Indian government estimates, India imported such almonds worth $580.63 million from the US in 2017. On Wednesday, India increased the duty from Rs 35 per kg to Rs 42. This means it will earn additional duty of $116.13 million from almonds in shell alone. The second biggest impact will involve fresh apples. India, which imported fresh apples worth $96.57 million from the US in 2017, has increased the import duty from 50% to 75%. The additional duty this will bring is estimated at $24.14 million. The product facing the third biggest impact will be diagnostic reagents, for which the duty has been doubled to 20%.

Way ahead Commerce and Industry Minister Suresh Prabhu went on a two-day visit to the US earlier this month to discuss these matters with top officials including Secretary of Commerce Wilbur Ross and United States Trade Representative Robert Lighthizer. On June 26-27, senior government officials of the two countries will hold meetings to discuss these matters further. (Adapted from The Indian Express)






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157. Ministry of Women & Child Development receives the Best Performing Social Sector Ministry SKOCH Award for its Achievements and Initiatives Why the Ministry of Women and Child Development has been conferred award? Lauding the achievements of the Ministry of Women and Child Development in delivering the promises made and for its significant achievements and initiatives from the last 4 years, SKOCH has conferred the Best performing Social Sector Ministry award on the Ministry of Women and Child Development. ABOUT SKOCH GROUP Skoch Group is a think tank dealing with socio-economic issues with a focus on inclusive growth since 1997. The group companies include a consulting wing, a media wing and a charitable foundation. Skoch Group is able to bring an Indian felt-needs context to strategies and engages with fortune-500 companies, state owned enterprises, government to SMEs and community-based organisations with equal ease. The repertoire of services include field interventions, consultancy, research reports, impact assesments, policy briefs, books, journals, workshops and conferences. Skoch Group has instituted India s highest independent civilian honours in the field of governance, finance, technology, economics and social sector. (Adapted from PIB) 158. Plans for new city What is the plan? To leverage the potential of the region, the Haryana government plans to develop a new city next to Gurgaon in the National Capital Region. The new city, which is expected to be larger than Chandigarh, will also be planned and developed in a public-private partnership (PPP) model.






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The new city is likely to be spread across at least 50,000 hectares, which is larger than Chandigarh (11,400 hectares) but smaller than Gurgaon (73,200 hectares). The proposed city is located south of New Delhi and will share boundaries with the Gurgaon-Manesar urban area to the North and the Aravalli hills to the North-East. Sources said that NH-8 will define the western boundary of the city while the eastern and the southern sides will adjoin agricultural land. (Adapted from The Indian Express) 159. Why is external debt a cause for worry? What is external debt? External debt is the money that borrowers in a country owe to foreign lenders. India s external debt was $513.4 billion at the end of December 2017, an increase of 8.8% since March 2017. Most of it was owed by private businesses which borrowed at attractive rates from foreign lenders. To be precise, 78.8% of the total external debt ($404.5 billion) was owed by non-governmental entities like private companies. The size of external commercial borrowings and foreign currency convertible bonds, which represents Indian companies foreign borrowings, has risen from Rs. 99,490 crore at the end of December 2015 to Rs. 1,72,872 crore at the end of December 2017. While external debt may be denominated in either the rupee or a foreign currency like the U.S. dollar, most of India s external debt is linked to the dollar. This means Indian borrowers will have to pay back their lenders by first converting their rupees into dollars. As of December 2017, about 48% of India s total external debt was denominated in dollars and 37.3% in rupees.






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What are the risks? There are two major risks involved in foreign borrowings. One is that, like in the case of domestic borrowings, there could be unexpected changes in the interest rates charged on these loans. This can, for instance, cause widespread default when rates rise as borrowers may not be able to make higher interest payments, thus raising the risks of a systemic crisis. The raising of interest rates by the U.S. Federal Reserve has already caused borrowing rates to rise in various countries, including in India where bond yields have shot up sharply. The yield on the 10-year government bond, for instance, has risen to about 8% from around 6.5% at the end of June last year. Another major risk is unexpected changes in the exchange rates of currencies. An unexpected fall in the value of the rupee, for instance, can cause severe difficulties for Indian companies that need to pay back dollar-denominated loans as they will now have to shell out more rupees than they had previously estimated to buy the necessary dollars. Lenders generally take possible fluctuations in the value of currencies into account when determining their lending rates. But such forecasts are not always perfect. Unexpected changes in exchange rates could still impose surprise gains or losses on them. Various emerging market currencies have seen a sharp fall in value this year against the dollar. The rupee, in particular, has fallen about 7% since the beginning of the year. The fall in the value of the emerging market currencies is due to increasing demand for dollars from investors, who wish to sell their assets in the emerging markets and invest them in the U.S. where yields have been rising quite rapidly. What happens next? The U.S. central bank, which has already raised its benchmark interest rate twice this year, is expected to raise rates two more times in the rest of 2018. Further interest rate hikes could cause more outflow of capital from the emerging markets, thus causing unexpected changes in borrowing rates and the value of the rupee. Both government and non-government borrowers in India, who are exposed to foreign debt, could be in trouble in such a scenario. The foreign exchange reserves, held by the Reserve Bank of India (RBI), were around $425 billion as on March 2018. This is the firepower that the RBI can use to support the rupee and bail out borrowers who get into trouble. The RBI, which raised its benchmark interest rate for the first time in more than four years this month, may also decide to raise domestic interest rates further. While such a step could help to stem the capital outflow from the country and support the rupee, it could lead to further uncertainty about borrowing rates in the domestic economy. (Adapted from the Hindu) 160. India is the largest borrower from Asian Infrastructure Investment Bank






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What is the size of India s borrowings from AIIB? With the total project portfolios of US$4.4 Billion, India has been the largest borrower of Asian Infrastructure Investment Bank (AIIB) lending since the time the Bank started its operations. Unlike most other multilateral development banks set up by advanced economies, AIIB is the first major multilateral development bank where principal contributors are the borrowing members themselves. Third Annual Meeting of AIIB The third Annual Meeting of AIIB is being organized by Government of India, in collaboration with Government of Maharashtra at Mumbai during 25-26 June 2018. The third Annual Meeting of the bank focuses on infrastructure, with the theme of innovation and collaboration. The Annual Meeting will see participation from 86 members, and member countries will deliberate upon the strategies to mobilize financing for infrastructure. While 75% of the capital is from Asia, several non-Asian regions like Europe, North America, some East African and Latin American countries have also joined the bank as members. About AIIB The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia and beyond. Headquartered in Beijing, we commenced operations in January 2016 and have now grown to 86 approved members from around the world. By investing in sustainable infrastructure and other productive sectors today, we will better connect people, services and markets that over time will impact the lives of billions and build a better future. (Adapted from PIB) 161. Government proposes to set up 3000 Van Dhan Kendras involving 30,000 SHGs across the country When was scheme launched? The Government proposes to set up 3000 Van Dhan Kendras involving 30,000 SHGs across the country under the Van Dhan Scheme of the Ministry of Tribal Affairs. In a new game changing initiative, the Prime Minister launched the Van Dhan Scheme of Ministry of Tribal Affairs and TRIFED on 14th April, 2018 during the celebrations of Ambedkar Jayanti at Bijapur Chattisgarh. Emphasizing the important role of value addition in increasing tribal incomes, the Prime Minister stated that Van Dhan, Jandhan and Goverdhan Schemes had the potential to






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change the tribal-rural economic system. All these three schemes in tandem need to be promoted for this purpose by the State Governments. What are Van Dhan Kendras? Under Van Dhan Scheme, 10 Self Help Groups of 30 Tribal gatherers each have been constituted at Bijapur, Chhattisgarh. They are then trained and provided with working capital to add value to the products, which they collect from the Jungle. Working under the leadership of Collector, these groups can then market their products not only within the States but also outside the States. Training and technical support is provided by TRIFED. Van Dhan Mission is an initiative for targeting livelihood generation for tribals by harnessing non-timber forest produces, the true wealth of forest i.e. Van Dhan with an estimated value: Rs.2 Lakh Cr. per year. It shall promote and leverage the collective strength of tribals (through SHGs) to achieve scale. It also aims at build upon the traditional knowledge & skill sets of tribals by adding technology & IT for value addition. Further it is to set-up tribal community owned Van Dhan Vikas Kendras (the Kendra) in predominantly forested tribal districts. A Kendra shall constitute of 10 tribal SHGs, each comprising of upto 30 tribal NTFP gatherers or artisans i.e. about 300 beneficiaries per Kendra. What is the logic behind scheme? Value addition assumes critical importance in ensuring remunerative prices to the tribals in this approach. Three stage value addition would be the corner stone for enhancing incomes of the tribals under the scheme. The grass root level procurement is proposed to be undertaken through SHGs associated with Implementing Agencies. Convergence and Networking with other Govt. departments/scheme shall be undertaken to utilise the services of existing SHGs like Ajeevika, etc. These SHGs shall be appropriately trained on sustainable harvesting/collection, primary processing & value addition and be formed into clusters so as to aggregate their stock in tradable quantity and linking them with facility of primary processing in a Van Dhan Vikas Kendra. (Adapted from PIB) 162. Cabinet approves a Corpus to National Export Insurance Account Trust The Cabinet Committee on Economic Affairs has approved contribution of Grant-in-Aid (Corpus) of Rs.1,040 crore to National Export Insurance Account Trust (NEIA). The Corpus is to be utilised during three years from 2017-18 to 2019-20. An amount of Rs.440 crore has already been received for the year 2017-18. Rs.300 crore each will be given to NEIA for the years 2018-19 and 2019-20. The Corpus would strengthen NEIA to support project exports from the country that are of strategic and national importance. What is National Export Insurance Account Trust ?






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National Export Insurance Account (NEIA) is a fund set up in year 2006. NEIA promotes exports from India by providing insurance to exports. NEIA is maintained and operated by a Public Trust set up jointly Department of Commerce and Export Credit Guarantee Council. (Adapted from PIB) 163. RBI report warns that the worst on NPAs may be yet to come Findings in Financial stability report by RBI The worst is far from over for Indian banks. The financial stability report released by the Reserve Bank of India has warned that the gross non-performing assets (GNPAs) of scheduled commercial banks in the country could rise from 11.6% in March 2018 to 12.2% in March 2019, which would be the highest level of bad debt in almost two decades. In fact, the capital to risk-weighted assets ratio of the banking system as a whole is expected to drop from 13.5% in March 2018 to 12.8% in March 2019. The deteriorating health of banks is in contrast to the economy, which is on the path to recovery, clocking a healthy growth rate of 7.7% during the last quarter. Monetary policy tightening by the US The RBI, however, has warned about the rising external risks that pose a significant threat to the economy and to the banks. The tightening of monetary policy by the United States Federal Reserve and increased borrowing by the U.S. government have already caused credit to flow out of emerging markets such as India. The increase in commodity prices is another risk on the horizon that could pose a significant threat to the rupee and the country s fiscal and current account deficits. All these factors could well combine to increase the risk of an economic slowdown and exert pressure on the entire banking system. Proneness of Public sector banks to financial frauds A major highlight of the financial stability report is the central bank s finding that public sector banks (PSBs) are far more prone to fraud than their private sector counterparts. This is significant in light of the huge scam unearthed at a Punjab National Bank branch earlier this year. The RBI notes that more than 85% of frauds could be linked to PSBs, even though their share of overall credit is only about 65%. This should come as no surprise given the serious corporate governance issues faced by public sector banks, which to a large extent also contributed to the lax lending practices that are at the core of the NPA crisis. What should be done? In his foreword to the report, RBI Deputy Governor Viral Acharya has noted that governance reforms at PSBs, if implemented, can help improve their financial performance and also reduce their operational risks. For now, the RBI expects the government s recapitalisation plan for banks and the implementation of the Insolvency and Bankruptcy Code to improve the capital position of banks. These reforms can definitely help. But unless






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the government can gather the courage to make drastic changes to aspects of operational autonomy and the ownership of PSBs, future crises will be hard to prevent. (Adapted from The Hindu) 164. LIC planning to buy controlling stake in IDBI Reports (including in The Indian Express, June 23) of state-owned LIC planning to buy the government s holding in the troubled IDBI Bank to become a majority shareholder have triggered a debate around whether LIC should be using policyholders money to buy a controlling stake in a troubled bank. LIC s bid to acquire controlling stake in the bank may give it an entry into the banking space, while allowing the government to raise around Rs 10,000 crore — thereby helping it meet the disinvestment target for the year. What is the proposal to increase LIC s stake in IDBI Bank? Having been unable to find a suitable private sector buyer for IDBI Bank, the government has initiated discussions with Life Insurance Corporation (LIC) of India to pick up a controlling stake in the bank. According to sources in the government, the proposal involves LIC raising its stake in IDBI Bank to 51% from the around 11% that it had at the end of March. The deal is expected to cost LIC around Rs 10,000 crore, and the Corporation is likely to take the proposal to its Board for approval after getting clearance from the Finance Ministry. LIC has presented to the government a number of synergies and mutual benefits. While IDBI will get the requisite capital, LIC will get a controlling stake in a bank, and is learnt to be preparing to bring in a professional management to run it. But can LIC enter a new business to begin with? In 2013, LIC Housing Finance had applied to the Reserve Bank of India for a universal banking licence. The RBI, however, chose IDFC Bank and Bandhan Bank for licences out of a list of 26 applicants. LIC owns 40.31% stake in its housing finance arm. In its discussions with the Finance Ministry, the Corporation has argued that the Life Insurance Corporation Act, 1956 permits it to enter an unrelated business that it is capable of running — and it can, therefore, pick up a controlling stake in a bank. Section 6(2)(h) of the Act (on the Functions of the Corporation ) says that without prejudice to the generality of the

provisions that make it the general duty of the Corporation to carry on life insurance business , it can carry on any other business which may seen to the Corporation to be capable of being conveniently carried on in connection with its business and calculated directly or indirectly to render profitable the business of the corporation . Will it require changes in regulations as well? The existing rules of the Insurance Regulatory and Development Authority of India (IRDAI), the autonomous, statutory regulator of the Indian insurance and re-insurance industry, do not permit LIC to raise its shareholding in a single listed entity beyond 15%. Since LIC already holds 10.82% stake in IDBI Bank (as on March 31), it would require exemption from the IRDAI to pick up a majority stake in the bank. The insurance regulator has laid






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down this condition to ensure that the Corporation does not put policyholders money at risk, and has a diversified portfolio. But why does the government want to cut its stake in IDBI Bank? IDBI Bank is the worst performing state-owned lender in terms of Non-Performing Assets (NPAs). The government has been trying to privatise IDBI Bank over the past couple of years, but mounting losses and rising bad loans have made it difficult to attract buyers. For the year ended March 31, 2018, IDBI Bank s Gross NPAs rose to 27.95% — which means that out of every Rs 100 loaned by the bank, Rs 28 turned into NPAs — from 21.25% as on March 31, 2017. In 2017-18, the bank reported a net loss of Rs 8,238 crore, up from Rs 5,158 crore in 2016-17. If the government sells nearly 40% of its stake in the bank, it will get Rs 10,000 crore that will not only help meet its disinvestment target, but will also reduce, to a similar extent, the need for future capital infusion. Unlike in the other public sector banks, the government can pare its stake in IDBI Bank to below 50%, because this bank is not governed by the Bank Nationalisation Act, 1969. The central government owned 80.96% equity in IDBI Bank on March 31, 2018, but following a capital infusion of Rs 7,881 crore in May, its stake went up to 85.96%. LIC s stake would have been diluted in proportion to the fresh equity issuance by the bank. Besides issues of legal or regulatory compliance, is there any other problem with LIC buying a controlling stake in IDBI Bank? Because LIC deals with policyholders money and provides them with protection, some experts argue that buying a controlling stake in a beleaguered state-owned bank may not be a prudent decision. It could put the Corporation at risk, since it would be required to pump in capital in the bank year after year. LIC is already a large investor in public sector banks and holds a more-than-9% stake in 16 out of India s 21 public sector banks. Loading up a higher stake in IDBI Bank will expose the Corporation to the concentration risk of investing disproportionately in a single sector. Is this proposed disinvestment similar to oil and gas explorer ONGC buying oil marketing company HPCL? When ONGC bought HPCL, it paid money to the government for picking up its stake in the latter. While LIC s proposed buying in IDBI Bank is somewhat similar, there is one key difference. While ONGC used its own cash reserves and borrowed to complete the deal, the funds at the disposal of LIC are valuation surpluses, reserves, and policyholders money. Using those funds to buy a badly performing bank entails a much greater risk than ONGC took while buying HPCL. (Adapted from The Indian Express) 165. Sinking rupee Weakening rupee The rupee s troubles just do not seem to end. The currency weakened past 69 intraday against the U.S. dollar, an all-time low. The rupee, which has lost almost 8% in value since






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January 1, is the worst-performing currency in Asia this year. It is, however, not the only currency to be in the doldrums. What is the global trend? Emerging market currencies as a group have witnessed a sharp correction in their value against the dollar this year. The MSCI Emerging Markets currency index, for instance, is down about 6% since the beginning of April. The dollar index, which gauges the value of the dollar against a host of major global currencies, is up about 7.5% since February. What are the reasons? 1. The rise in international crude oil prices is one of the reasons behind the rupee s decline as importers have had to shell out more dollars to fund their purchases. India s current account deficit, which jumped to 1.9% of GDP in the fourth quarter of 2017-18 from just 0.6% a year earlier, is now expected to widen to 2.5% in FY 2019. This could spell even more trouble for the rupee as the demand for dollars could turn out to be overwhelming. 2. The rise in global trade tensions amidst the ongoing trade war could be another factor behind the rout in emerging market currencies, but its impact on the rupee remains unclear as of now. 3. But by far the most important reason behind the fall in the rupee and rise of dollar is increase in interest rates in America. Investors attracted by higher yields in the United States have been pulling their capital out of India at an increasing pace over the last few months. Foreign portfolio investors, in fact, took out Rs. 29,714 crore in May, almost a doubling of outflow compared to Rs. 15,561 crore in April. Most of the foreign fund outflow this year has come out of the bond market, which explains the steep fall in Indian bond prices. What is the forecast? But the fact that the American central bank expects to raise interest rates further this year suggests that more pain could be in store. The government, as well as the Reserve Bank of India, which recently raised domestic interest rates in response to rising external economic risks, may need to think out of the box to avoid a crisis similar to the taper tantrum of 2013. (Adapted from the Hindu) 166. DISHA initiative District Development Coordination & Monitoring Committee (DISHA) DISHA initiative enables data regarding various schemes of the government at one dashboard and therefore it makes it easy to identify which districts are lagging behind scheme wise and accordingly corrective action can be taken.






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One Stop – DISHA Dashboard created bythe Rural Development Ministry has been designed to facilitate data driven decision making. Real time data from 18 schemes of 9 ministries have been integrated with the Dashboard and other 12 schemes of 8 Ministries are in the process of integration. One Time Passwords or OTPs are being provided to all MPs to ensure that such key data indicators remain protected from misuse. (Adapted from PIB) 167. Suresh Prabhu launches Mobile App 'ReUnite' App to track missing and abandoned children Union Minister of Commerce & Industry and Civil Aviation, Suresh Prabhu launched a mobile application called ReUnite which helps to track and trace missing and abandoned children in India. Speaking on this occasion the Minister appreciated the work being done by the NGO, Bachpan Bachao Andolan & Capgemini for developing this app. What is the functionality of the app? The app is multiuser where parents and citizens can upload pictures of children, and provide detailed description like name, birth mark, address, report to the police station, search and identify missing kids. The photographs will not be saved in the mobile phone s physical memory. Amazon Rekognition, web facial recognition service, is being used to identify missing kids. The app is available for both Android and iOS. What is Bachpan Bachao Andolan? Bachpan Bachao Andolan, (BBA) is India s largest movement for the protection of children and works along with law enforcement agencies and policymakers. BBA has played a very important role in formulation of several laws for protection of child s rights. It began from the Nithari case in 2006 which finally culminated with the Supreme Court passing the landmark judgement in 2013 ordering that FIR has to be lodged in all cases of missing children. Nobel Laureate and founder of Bachpan Bachao Andolan, Kailash Satyarthi, was alsopresent on this occasion. (Adapted from PIB) 168. Why are there protests over a highway? What is the tussle about? With the BJP-led Central government taking up the Bharatmala (road and highways) project as the top priority, the Chennai-Salem Greenfield Highway has picked up pace rather rapidly, for a project of its size and scope. Land acquisition for the construction of the fully access-controlled highway for 277 km has begun amid widespread protests along the corridor. The opposition to the Green Corridor comes at a time when people in Tamil






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Nadu have found power in protests, and massive demonstrations have come to define the State in the last two years. Why the anger? Immediately after the death of former Chief Minister Jayalalithaa, often referred to as the Iron Lady by her partymen as she had complete control over the party and the government, the State saw massive protests for Jallikattu. Vehement protests, including opposition to the Neutrino Observatory, the violent protests against the Sterlite smelter that led to police firing in Thoothukudi in May, the continuing protests over hydrocarbon mining in the Cauvery delta region, and the Cauvery water sharing dispute, among others, have made the headlines. In all these cases, activists have been alleging that the governments, at the Centre and in the State, have not followed rules — conducting public hearings or revealing pollution data. The list of charges is long and the activists continue their fight. How big is the project? Protests erupted over the Chennai-Salem Greenfield Highway nearly a month ago. It gathered steam as officials went out to the fields and farms with their measuring tapes to survey the lands to be acquired. The project, sanctioned by the Union Ministry for Rs. 10,000 crore, will span 277.3 km across eight lanes. The corridor will cut travel time between Chennai and Salem by half, bringing it down to three hours. It will begin at Ariyanur in Salem and end at Vandalur, near Chennai, passing through the districts of Salem (36.3 km), Dharmapuri (56 km), Krishnagiri (2 km), Tiruvannamalai (123.9 km) and Kancheepuram (59.1 km). The land required will be 1,900 hectares, of which farmland comprises 16% and dryland 66%. The government owns only 18% of the land. Will there be losses? People will lose land, homes and farms in six districts, and will be compensated. In the case of the greenfield highway, the opposition is essentially to the acquisition of land that for many farmers is their only source of livelihood. The highway will be cutting through some of the districts that have not really seen development in decades, and people are sceptical of the government s argument that it will usher in growth in the long term. As the protests intensified, the police made several preventive arrests. The initial reports indicated that the government was using force to quell the protests and get the farmers, who were threatening to self-immolate, to accept compensation. But the government has forsaken the stick and taken to the carrot policy for now. The Collectors are unveiling compensation packages that the State is calling fantastic in courts. There is apprehension among people in Salem and Tiruvannamalai that the road could lead to extensive mining in the hills of Eastern Ghats. A decade ago, a massive protest stopped mining in Tiruvannamalai. This could become a source of unrest in future as spur roads connect the two hills chosen for bauxite mining in the past, officials say. There are 10 reserve forests along the route and clearances are mandatory. The fragility of the Eastern Ghats has to be taken into account.






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What next? The protesters show no signs of giving up. Environment Impact Assessment reports, including a social impact assessment, will have to be done; and officials said public hearing would be conducted. Clearance for forestland is also required. It is a two-tier process, and requires stringent norms to be fulfilled. The State has a tough task ahead, primarily to instil faith in the protesters that it is pro-people. (Adapted from The Hindu) 169. RERA vs IBC: two laws that now ring fence homebuyers The Real Estate (Regulation and Development) Act,2016 (RERA) and the Insolvency and Bankruptcy Code (IBC) offer protection to homebuyers from errant builders. How does RERA protect homebuyers? RERA offers protection to homebuyers by imposing duties on promoters and consists of preventive and penal provisions. Every promoter shall register his project with RERA and 75% of the amount realised shall be deposited in a separate account; withdrawal from the account shall be in proportion to the degree of project completion, among others. Failure to comply entails penalty. On failure to give possession of the apartment, the homebuyer is given the choice to withdraw from the project and the promoter shall be liable to repay the amount received. In case of non-withdrawal, promoter shall pay interest for every month of delay till the date of handing over the possession. Protection that IBC offers Post the recent ordinance promulgated in June 2018, homebuyers are included in the category of financial creditors under the IBC, thereby climbing up the ladder of precedence in recovery proceedings. Money given to real estate companies by homebuyers gets the commercial effect of a borrowing. Homebuyers can now form part of the committee of creditors that has the power to appoint the interim resolution professional and approve resolution plans, ensuring that their interests are not backtracked by other creditors. Being financial creditors, their voting share will be in proportion to the financial debts owed to them. An insolvency professional can be appointed to represent the interests of homebuyers when they exceed a certain number in the CoC. However, the threshold for such appointment is still unclear. Which is the best forum to approach: RERA or IBC? RERA, which caters to the real estate sector, contains stringent norms and penalties against errant builders. The IBC recognised homebuyers as financial creditors to protect their rights even when a creditor, other than a homebuyer, invokes insolvency proceedings against the builder. It may be in the interests of homebuyers to approach the National Company Law Tribunal only when the promoter fails to remedy default under RERA or where RERA is not active. (Adapted from the Hindu)






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170. How GST has performed? Initial glitches normalized Since its midnight launch on July 1 last year, India s Goods and Services Tax regime has evolved significantly. There have been serious implementation issues, but also the administrative will and flexibility to address most of these, with the Centre and States working together in the GST Council. After its initial days were marred by stuttering IT systems, the deadline for filing returns was pushed forward till most taxpayers got a hang of the system and the GST Network could augment its capacity. Industry had anxieties about the multiple tax rates, ranging from zero to 28%, with a cess on demerit goods. But gradually, the number of goods under the 28% bracket has been brought down to 50 from around 200. A unique component envisaged in India s GST regime, matching of invoices for granting tax credits, has been kept on hold for fear of adding to taxpayers transition pains. Contribution of GST Despite its glitches and snarls, the new tax has taken firm root and is altering the economic landscape positively. 1. The strongest sign of this is the entry of over 4.5 million entities in the country s tax net, many of which would have so far been part of the cash-driven, informal economy. This expansion of the tax net will also help increase direct tax collections. 2. There is a clear buoyancy in revenue after a wobbly initial trend. The government was eyeing a little over Rs. 90,000 crore a month to make up for the revenues earned under the earlier regime and to compensate States for any losses due to the GST. Finance Minister Piyush Goyal is confident that the average monthly collections this year could touch Rs. 110,000 crore. What is the way forward? This surge must allay the fiscal concerns of the Centre and the States, and nudge policy-makers towards further rationalising the GST structure. If not a single rate, there is certainly room for collapsing at least two of the current rates. It is also imperative that rates not be tinkered with too often and pricing disputes not be a default option under anti-profiteering norms for industry. If cement, as a critical infrastructure input, must be taxed lower than 28%, then decide a rate and stick to it. In its second year, the GST Council must pursue a time-bound approach to execute plans already announced to ease taxpayers woes, such as an e-wallet for exporters and a simpler return form. Besides, there must be a road map to bring excluded products — petroleum, real estate, electricity, alcohol — into the GST net. This reform still has miles to go, and the government must stare down the temptation to take populist steps ahead of general elections. (Adapted from the Hindu) 171. Modi govt raises MSP for paddy by Rs 200 a quintal






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What is it? The increase in minimum support prices (MSPs) for paddy (per quintal), the crop most planted by farmers, in the 2018-19 rain-fed kharif season, from Rs 1,550 in the previous season. Why is it important? The Cabinet Committee on Economic Affairs approved a hike in MSP—the price at which the government buys from farmers— of all kharif crops for the 2018-19 season. This comes at a time when farmers have been demanding better prices for their produce, after a sharp fall in prices affected their income last year. The announcement comes ahead of state elections in agrarian states such as Madhya Pradesh, Chhattisgarh and Rajasthan, besides the general elections that is less than a year away. What could be possible negative repercursions? The impact of the MSP hike, according to some analysts, could result in an increase in inflation rates, add to fiscal deficit and likely to bring on steeper hikes of interest rates than anticipated. (Adapted from Livemint) 172. Stopping the rupee s free fall: Why this is happening and what the RBI is likely to do What s happening to the rupee? The rupee last week fell to an all-time low of 69.09 against the U.S dollar. The currency has fallen about 7.5% since the beginning of the year, making it the worst-performing currency in Asia. The fall has raised fears of a repeat of the currency crisis of 2013 when the rupee suffered a drastic loss of about 20% in just a few months. Many other emerging market currencies have also witnessed a steep fall in their value against the dollar this year. Why is it falling? The tightening of monetary policy by the U.S. Federal Reserve has caused the price of American debt to fall and yields to rise (bond prices and yields move in opposite directions). This, in turn, has pushed investors to pull money out of India and other emerging market economies in order to invest in the U.S., where they can get higher returns. Foreign portfolio investors pulled out ₹29,714 crore from India in May, the highest outflow since November 2016. Outflows in the first half of 2018 stood at ₹47,836 crore, the highest in a decade. The dollar has benefited immensely as a result. The dollar index, which measures the value of the U.S. dollar against a whole host of other major currencies, has risen by about 6.5% since February. Meanwhile, Indian importers have rushed to purchase oil which is in short supply. This has caused the value of the rupee, which is used to purchase the dollars required to buy oil in the international market, to fall.






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Moreover, investors have also been worried about the government s rising fiscal deficit. A burgeoning fiscal deficit raises the risk of the Reserve Bank of India (RBI) printing rupees to fund the expenses of the government, thus weakening the rupee. What lies ahead? The RBI, which raised interest rates for the first time in more than four years last month, is likely to tighten the supply of money. This may help contain dollar outflows from investors seeking higher yields in the U.S., thus shoring up the value of the rupee. The RBI might also look to intervene directly in the foreign exchange market to prop up the value of the rupee. As of June 22, the RBI had foreign exchange reserves of $407.81 billion, which it can sell in the open market. The Fed, however, is expected to further tighten monetary policy in the coming months, potentially forcing emerging markets like India to raise interest rates further. (Adapted from the Hindu) 173. Boost to Higher Education : Revitalising Infrastructure and Systems in Higher Education (RISE) by 2022 and Higher Education Financing Agency (HEFA) scope expanded The Cabinet Committee on Economic Affairs has approved the proposal for expanding the scope of Higher Education Financing Agency (HEFA) by enhancing its capital base to Rs. 10,000 crore and tasking it to mobilise Rs. 1,00,000 crore for Revitalizing Infrastructure and Systems in Education (RISE) by 2022. Details: In order to expand this facility to all institutions, especially to the institutions set up after 2014, Central Universities which have very little internal resources, and the school education/health education infrastructure like AllMSs, Kendriya Vidyalayas, the CCEA has approved the following five windows for financing under HEFA and the modalities of repaying the Principal portion of the fund (interest continues to be serviced through Government grants in all these cases): 1. Technical Institutions more than 10 years old: Repay the whole Principal Portion from the internally generated budgetary resources. 2. Technical Institutions started between 2008 and 2014: Repay 25% of the principal portion from internal resources, and receive grant for the balance of the Principal portion. • Central Universities started 1. prior to 2014: Repay 10% of the principal portion from internal resources, and receive grant for the balance of the Principal portion. 2. Newly established Institutions (started after 2014): for funding construction of permanent campuses: Grant would be provided for complete servicing of loan including the Principal and interest.






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3. Other educational institutions and grant-in-aid institutions of Ministry of Health: All the newly set up AIIMSs and other health institutions, the Kendriya Vidyalayas / Navodaya Vidyalayas would be funded and the Department/Ministry concerned will give a commitment for complete servicing of the principal and interest by ensuring adequate grants to the institution. The Cabinet has also permitted the HEFA to mobilise Rs 1,00,000 crore over the next 4 years till 2022 to meet the infrastructure needs of these institutions. The CCEA has also approved increasing the authorized share capital of HEFA to Rs. 10,000 crore, and approved infusing additional Government equity of Rs. 5,000 crore (in addition to Rs. 1,000 crore already provided) in HEFA. The CCEA has also approved that the modalities for raising money from the market through Government guaranteed bonds and commercial borrowings would be decided in consultation with the Department of Economic Affairs so that the funds are mobilized at the least cost. This would enable addressing the needs of all educational institutions with differing financial capacity in an inclusive manner. This would enable HEFA to leverage additional resources from the market to supplement equity, to be deployed to fund the requirements of institutions. Government guarantee would eliminate the risk factor in Bonds issue and attract investment in to this important national activity. Background: HEFA has been set up on 31st May 2017 by the Central Government as a Non ¬Profit, Non Banking Financing Company (NBFC) for mobilising extra-budgetary resources for building crucial infrastructure in the higher educational institutions under Central Govt. In the existing arrangement, the entire principle portion is repaid by the institution over ten years, and the interest portion is serviced by the Government by providing additional grants to the institution. So far, funding proposals worth Rs. 2,016 crore have been approved by the HEFA. (Adapted from PIB) 174. How the 1.5-times formula works out MSP The Budget for 2018-19 announced that MSPs would henceforth be fixed at 1½ times of the production costs for crops as a pre-determined principle . The Centre has announced steep hikes in the minimum support prices (MSPs) for most crops planted in the current kharif season. This was based on a new formula, which pays farmers 1.5 times their estimated production costs. How does the government fix MSPs of crops before every planting season?






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The Commission for Agricultural Costs & Prices (CACP) in the Ministry of Agriculture recommends MSPs for 23 crops. These include 14 grown during the kharif/post-monsoon season (see table) and six in rabi/winter (wheat, barley, chana, masur, mustard and safflower), apart from sugarcane, jute and copra. The CACP is supposed to consider various factors while recommending the MSP for a commodity, including cost of cultivation. It also takes into account the supply and demand situation for the commodity; market price trends (domestic and global) and parity vis-à-vis other crops; and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors. So, what has changed now? The Budget for 2018-19 announced that MSPs would henceforth be fixed at 1½ times of the production costs for crops as a pre-determined principle . Simply put, the CACP s job will be only to estimate production costs for a season and recommend the MSPs by applying the 1.5-times formula. Thus, the all-India average production cost for paddy in 2018-19 has been projected at Rs 1,166 per quintal, 1.5 times of which is Rs 1,749 — rounded off to an MSP of Rs 1,750 per quintal.

How is this production cost arrived at?






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The CACP does not do any field-based cost estimates itself. It merely makes projections using state-wise, crop-specific production cost estimates provided by the Directorate of Economics & Statistics in the Agriculture Ministry. The latter are, however, generally available with a three-year lag. For the 2018-19 season, the CACP has used the directorate s state-wise cost estimates for the latest three years, from 2013-14 to 2015-16. These have been projected for 2018-19 by assessing likely changes in input costs based on the latest price data from other sources such as the Labour Bureau (for wages) and Office of the Economic Adviser (which compiles wholesale prices). The CACP further projects three kinds of production cost for every crop, both at state and all-India average levels. A2 covers all paid-out costs directly incurred by the farmer — in cash and kind — on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc. A2+FL includes A2 plus an imputed value of unpaid family labour. C2 is a more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL. Which production costs have been taken in fixing the MSPs for this kharif season? Finance Minister Arun Jaitley s Budget speech did not specify the cost on which the 1.5-times formula was to be computed. But the CACP s Price Policy for Kharif Crops: The Marketing Season 2018-19 report states that its MSP recommendation is based on 1.5 times the A2+FL costs. From the accompanying table, it can be seen the MSPs for 2018-19 derived from this formula are substantially higher than last year s. The increases work out to more than 10% for 11 out of the 14 kharif crops. Farm activists, however, say that the 1.5-times MSP formula — originally recommended by the National Commission for Farmers headed by agricultural scientist M S Swaminathan and promised in the BJP s 2014 Lok Sabha election manifesto — should have been applied on the C2 costs. Had that been done, the MSP for common paddy alone (on a C2 cost of Rs 1,560) would have been Rs 2,340 per quintal, and not Rs 1,750 as announced. (Adapted from Indian Express) 175. Reforms in Public Sector Banks have taken back seat: Viral Acharya The Reserve Bank of India s Deputy Governor in charge of monetary policy, Viral Acharya, recently surprised many with his candid remarks that reforms of public sector banks have taken a back seat. In the RBI s biannual Financial Stability Report, released at the end of June, he said: …governance reforms and market capital-raising appear to have again taken the back seat at the PSBs [public sector banks]... Why should we take note? In August 2015, the BJP government launched Indradhanush, an ambitious plan to reform PSBs. The first step was to separate the chairman and managing director s (CMD) post; the Banks Board Bureau was formed to select board-level appointments. However, though the idea was to distance the government from such appointments, as suggested by the P.J.






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Nayak Committee, it continues to hold sway. Several PSBs have not had a chairman for months. The IDBI Bank, for example, did not have a chairman for the last three years, since the post was split. In this backdrop, some plain speak from Mr. Acharya was not unexpected. He has been speaking his mind at closed-door meetings as well. At the April monetary policy committee meeting — the minutes were made public later as is the convention — he said he would vote for withdrawal of neutral stance. This gave the market the signal for a rate hike in the next policy review of June, though the RBI officially maintained a neutral stance. What is his core expertise? Mr. Acharya was a C.V. Starr Professor of Economics in the Department of Finance at New York University s Stern School of Business, having completed his doctorate on banks and financial institutions from the same institute. An alumni of the Indian Institute of Technology, Mumbai, he has co-authored several research papers with former RBI Governor Raghuram Rajan. While he has been entrusted with monetary policy at the RBI, it has not stopped him from lending his expertise in other issues. In fact, his initial contribution to the RBI was to push the resolution of stressed loans which culminated in the banking regulator nudging banks to file bankruptcy proceedings against large defaulters. This was possible after the government amended the law to give more powers to the central bank for resolving banking sector stress. The resolution process is under way and will hopefully clean up banks balance sheets — a prerequisite to fund credit demand when economic activity starts picking up. While restoring the health of the public sector banks reeling under huge non-performing assets is critical, reforms in their governance are equally important. Without such reforms, the problem of reckless lending could come back to haunt them again. What is in store? At 44, Mr. Acharya is one of the youngest Deputy Governors. He took charge on January 20, 2017, for a three-year term. Mr. Acharya, who sings Kishore Kumar songs, is also known as the poor man s Rajan . Once on a flight, a co-passenger seeing his notes containing words like crisis and banks called him Raghu Rajan. That was the day I realised if I have Raghu [Raghuram Rajan] as my role model and even I hit 5% or 10% of that, I can easily pass off as a poor man s Raghu Rajan, he said once in a lighter vein. Mr. Acharya s push for reforms in the PSBs would certainly please Mr. Rajan s successor and his current boss, RBI Governor Urjit Patel. Soon after the massive fraud at the Punjab National Bank unravelled earlier this year, Mr. Patel had spoken out about the central bank s limited powers in checking malfeasance at government banks. The RBI cannot remove their directors or management, can do little to hold their boards accountable, and cannot force mergers or liquidation of these banks. Mr. Acharya s comments lend more urgency to the central bank honcho s call for legal reforms to ensure that the public sector banks face the same scrutiny as their private peers.






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(Adapted from the Hindu) 176. What are currency derivatives Currency derivatives are considered to be one of the best options to manage any risk against foreign currency exchange rate volatility. Here is a low-down on this hedging instrument: What are currency derivatives? Currency derivatives are exchange-based futures and options contracts that allow one to hedge against currency movements. Simply put, one can use a currency future contract to exchange one currency for an another at a future date at a price decided on the day of the purchase of the contract. In India, one can use such derivative contracts to hedge against currencies like dollar, euro, U.K. pound and yen. Corporates, especially those with a significant exposure to imports or exports, use these contracts to hedge against their exposure to a certain currency. While all such currency contracts are cash-settled in rupees, the Securities and Exchange Board of India (SEBI), early this year, gave a go-ahead to start cross currency contracts as well on euro-dollar, pound-dollar and dollar-yen. How can one trade in currency derivatives? The two national-level stock exchanges, BSE and the National Stock Exchange (NSE), have currency derivatives segments. The Metropolitan Stock Exchange of India (MSEI) also has such a segment but the volumes are a fraction of that witnessed on the BSE or the NSE. One can trade in currency derivatives through brokers. Incidentally, all the leading stock brokers offer currency trading services too. It is just like trading in equity or equity derivatives segment and can be done through the trading app of the broker. While a dollar-rupee contract size is $1,000, one can trade by just providing the 2-3% margin. Why were such derivatives introduced on exchange platforms? Prior to the introduction of currency derivatives on exchanges, there was only the OTC – over the counter – market to hedge currency risks and where forward contracts were negotiated and entered into. It was kind of an opaque and closed market where mostly banks and financial institutions traded. Exchange-based currency derivatives segment is a regulated and transparent market that can be used by small businesses and even individuals to hedge their currency risks. Are the derivatives popular? The currency segment was unveiled in 2008 and since then, the volumes had registered a steady rise. In June, BSE reported an average daily turnover of Rs. 33,961 crore on its currency derivatives platform while NSE clocked Rs. 29,161 crore. MSEI reported a daily average turnover of only Rs. 239 crore in June. The growth in the segment can further be ascertained from the steady rise in the turnover over the years. For instance, the average






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daily turnover of the currency segment of NSE was Rs. 12,705 crore in 2014-15, which rose to Rs. 18,603 crore in 2015-16 and thereafter to Rs. 20,779 crore in 2017-18. In the current financial year till date, the average daily turnover is pegged at Rs. 29,008 crore. (Adapted from The Hindu) 177. Proposal for construction of break water harbour in Konkan The Nivati-Medha break water harbour in the Konkan region of Maharashtra is being considered under 12 Champion Sectors initiative of the Ministry of Commerce. In the absence of such a harbour the financial condition of fishermen in the area is deteriorating as they are totally dependent on the vagaries of the sea. Building of the breakwater harbour will help the fishermen to haul a better catch even in adverse conditions and also give a boost to the tourism industry by allowing cruise ships to dock at the harbour. Other tourism activities will also get a fillip. This will raise the living standards of local people in the area noted the Minister. What are breakwater harbor? Breakwaters are structures constructed on coasts as part of coastal management or to protect an anchorage from the effects of both weather and longshore drift. Breakwaters reduce the intensity of wave action in inshore waters and thereby reduce coastal erosion or provide safe harbourage. Breakwaters may also be small structures designed to protect a gently sloping beach and placed one to three hundred feet offshore in relatively shallow water. An anchorage is only safe if ships anchored there are protected from the force of high winds and powerful waves by some large underwater barrier which they can shelter behind. atural harbours are formed by such barriers as headlands or reefs. Artificial harbours can be created with the help of breakwaters. (Adapted from PIB) 178. Why is there a row over Ayushman Bharat rates? Why are hospitals displeased? Ayushman Bharat, the world s largest health insurance scheme aimed at covering 50 crore Indians, is facing teething troubles. In May, the government published the rates that insurance companies would pay hospitals for the 1,350 procedures covered under the scheme. These rates have become a sticking point for hospitals, which have criticised them as arbitrary and low. For example, the price of Caesarean section, at ₹9,000 for five days of hospital stay, food and consultation, is laughable, says Girdhar Gyani, director-general of the Association for Healthcare Providers India (AHPI). Even government hospitals incur ₹7,000 a day just to maintain a bed, he adds. Doctors have also criticised the clustering of medical conditions in the rate list. For example, treatment for tuberculosis and HIV with






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complications will be reimbursed at the same rate of ₹2,000 a day. Anupam Singh, assistant professor, medicine, at Ghaziabad s Santhosh Medical College, says this is irrational. HIV complications can be pretty serious. Cryptococcal meningitis requires costly anti-fungals, he points out. This means both illnesses must be compensated differently, he says. The fundamental problem, according to doctors and hospitals, is that the reimbursement rates were not calculated in a scientific manner. Ayushman Bharat did rely on a study of over 100 hospitals in 60 cities, according to Dinesh Arora, director of the scheme. But these were mostly hospitals with under 50 beds in tier-2 and tier-3 cities. The cost structure of these hospitals is substantially different from tertiary-care hospitals in tier-1 cities for multiple reasons. Tertiary-care hospitals have super-specialists, a greater nurse/bed ratio, and hi-tech facilities such as catheterization labs, all of which cost more. Mr. Gyani says almost all neurosurgical procedures, and several cardio procedures, have to be carried out in such facilities, because few smaller hospitals can do so. But the Ayushman Bharat rates don t account for these differences. What is the government stand? For now, the government is committed to the launch date of August 15. But officials have acknowledged that the rates will be revised. Ayushman Bharat has asked the AHPI to submit a list of 100 key procedures, for which a detailed cost study will be done. The results may come out around January 2019, says Mr. Arora. Until then, Ayushman Bharat has asked hospitals to cooperate, and the AHPI has agreed. We have more or less agreed to support the scheme until then, says Mr. Gyani. Aren t there costing studies? In 2016, the Karnataka Knowledge Commission, a body under the State government, did a small study comparing the costs of 20 frequent medical procedures with reimbursement rates under the Vajpayee Arogyashree, Yeshaswini and CGHS insurance schemes. The study found rates to be lower than costs for almost all procedures under all schemes. For example, if a surgery to repair an atrial septal defect (a hole in the wall between heart chambers) cost hospitals Rs.1,59,438, they received between 29% and 34% of this amount under the CGHS. The problem was that this study covered only four private hospitals in Bengaluru, and was not representative of Indian variations. But it showed that hospitals could be subsidising medical procedures greatly. One reason reimbursement rates are low under the CGHS is that they are decided through a tender system, which picks the lower quotes from hospitals. Further, even these rates are not paid on time. A 2010 paper from the Indian Council for Research on International Economic Relations calculated that the average delay in paying hospitals under the CGHS was four months. Furthermore, the AHPI claims the CGHS still owes hospitals Rs. 400 crore in back payments. How will payment delays be avoided?






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Mr. Arora says the problems plaguing the CGHS will not affect Ayushman Bharat. We are committed to this. If you see our guidelines, we say the payments will be made within 15 days. A memorandum of understanding to this effect will be signed with the States. (Adapted from The Hindu) 179. Peak hour flights may get costlier Govt. considering congestion surcharge The government is mulling over a proposal to impose a surcharge on airlines for operating flights during peak hours to enhance airport capacity and to avoid flight delays, according to Airports Authority of India (AAI) chairman Guruprasad Mohapatra. What is the present position? Currently, landing fees paid by airlines are determined by the weight of an aircraft and do not vary according to the time of the day. Airlines are awarded slots for summer and winter schedules on a first-come-first-served basis as well as on the historicity of slots. An airline is said to maintain historicity of a particular slot if it is able to operate flights during a given slot punctually 80% of the time for a period of six months or the length of an entire season. What is the rationale behind proposal of congestion charge? Government is persuading airlines to consider large window of non-peak hours. A government official cited the example of Heathrow Airport to make a case for peak-hour pricing. Heathrow introduced the formula in 1972 to check air traffic congestion, when it was already witnessing 72 movements during peak hours. It also levies a steep penalty on airlines that fail to be punctual. What will be impact? An aviation industry insider with experience at a major airport said the move would help spread demand through the day and, if passengers can pay extra for more comfort and leg room, they would be willing to pay more to fly during popular timings, while leisure travellers looking for cheap fares will still have the option of flying at non-peak hours. Chances of resistance by airlines An airline executive said on the condition of anonymity that the move will not be welcomed by airlines as it will impose an additional charge on those already holding such slots without addressing the problem of air traffic congestion. A senior official from a domestic carrier said on the condition of anonymity, We don t welcome such a proposal. The move, if put into effect, is unlikely to change airline behaviour as peak-hour slots are almost impossible to get in large metros such as Mumbai and Delhi. It will become an additional charge on airlines holding peak-hour slots. A high-






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cost environment where airlines pay high fees for airport infrastructure as well as fuel is counter-productive to the growth of a burgeoning market like India. An airport typically sees four peaks in a day. These are approximately between 6 a.m.-8.30 a.m., 10.30 a.m.-noon, 4 p.m.-6 p.m. and 7 p.m.-9.30 p.m. Most congested airports Mumbai s Chhatrapati Shivaji International Terminal and Delhi s Indira Gandhi International airport are two of the most congested airports in the country and see up to 52 and 73 movements per hour (landings and take-offs), respectively, during peak timings. (Adapted from The Hindu) 180. Understanding inflation In June, WPI inflation rose to its highest level in 54 months. Does rising WPI inflation really matter? How does WPI inflation differ from CPI inflation? And how does inflation impact a country s economic growth? India s headline inflation measured by the Wholesale Price Index (WPI) rose 5.77% on a year-on-year basis to a 54-month high in June 2018. The trigger was a perceptible hardening of price levels of manufactured products as well as an unfavourable base effect, along with factors such as delayed transmission of higher crude oil prices, and an increase in electricity tariffs. The impact The increase in the WPI headline print might not appear extremely relevant from a policy perspective, given that the RBI now focuses almost entirely on the other inflation metric — the Consumer Price Index or CPI — to decide on changing key policy rates. The rise in WPI inflation, however, highlights the pressure on prices in the economy, and indicates a further rise in retail inflation. There are two key concerns here: one, that there has been a sustained increase in WPI inflation since the start of the current fiscal, and two, that data released by the government last week showed that retail inflation, too, had risen to a five-month high of 5% in June. Given these trends, the sharper-than-expected uptick in the WPI inflation in June 2018 reinforces expectations of analysts that a repo rate hike is likely at the next meeting of the RBI s Monetary Policy Committee in August. The worry for policymakers in the surge in WPI numbers, even after discounting for the base effect (a low reading of 0.90% in June 2017, the base for calculating the year-on-year inflation for June 2018), is the cascading effect that it could have on CPI. CPI vs WPI While both baskets measure inflationary trends (the movement of price signals) within the broader economy, the two indices differ sharply in the manner in which weightages are






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assigned to food, fuel and manufactured items, as well as at the broken-down level of these segments. So, wholesale inflation, measured by WPI, tracks year-on-year inflation at the producer or factory gate level, and is a marker for price movements in the purchase of bulk inputs by traders. CPI, on the other hand, captures changes in prices levels at the shop end, and is, thereby, reflective of the inflation experienced at the level of consumers. The weightage of food in CPI is far higher (46%) than in WPI (24%). Also, WPI does not capture changes in the prices of services, which CPI does. As in any imperfect market, changes in prices at the producer level get transmitted to consumers, mostly with a lag and, in some cases, not to the full extent of the impact at the producer level. So, while a higher WPI reading can be an aberration at times, a steady upward surge in WPI reading is most certainly an indicator of inflationary pressure entrenching itself within the broader economy and getting eventually reflected in the CPI numbers. In April 2014, the RBI had adopted the CPI as its key measure of inflation. Prior to this, the central bank had given more weightage to the WPI as the key measure of inflation for all policy purposes. Warning signs In its last policy review in June, the RBI had indicated that there could be significant upside inflationary risks, thus leading to an increase in prices of commodities, especially food. The central bank hiked rates unexpectedly in the June review (a hike was expected only in August), and said it wanted to counter rising inflation at an early stage. The worry is that the revised inflation projection of 4.8%-4.9% issued by the RBI in its June review could be breached in the first half of FY 19 due to rising crude oil prices, according to projections by India Ratings and Research (Ind-Ra) earlier this month. On Monday, the International Monetary Fund (IMF), in an update to its World Economic Outlook, said the Indian economy will grow slower than what it had estimated three months ago, because of higher crude prices and faster interest rate hikes. In the fresh update, the IMF trimmed India s growth projection for 2018-19 by 10 basis points to 7.3%. For 2019-20, IMF cut its projection by a sharper 30 basis points to 7.5%. Reflecting this view, Morgan Stanley, in its latest India Equity Strategy Almanac, noted that the likely rise in crude oil prices that could put pressure on growth, an election cycle that brings its own set of uncertainties, and an upward pressure on inflation from food price hikes that sees the RBI hike rates further, are among the top risks to Indian equities. Inflation and growth What toll does inflation take on growth? Based on studies of a wide range of countries over the years, economists have broadly concluded that the threshold values of inflation in developing countries are higher than in developed countries. Studies such as those by Khan and Senhadji (2001) and Lopez-Villavicencio and Mignon (2011), pegged the threshold for inflation in developing countries at 7-11 per cent compared to 1-3 per cent in the developed countries. Most of these papers find the inflation-growth relationship as being






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significantly negative if inflation is above the threshold value, and insignificant or significantly positive if it is below the threshold value. In the Indian context, a significant paper was Inflation Threshold in India: An Empirical Investigation by Deepak Mohanty, A B Chakraborty, Abhiman Das and Joice John (2011), which examined threshold effects in the relationship between inflation rate and real GDP growth using a combination of approaches. The empirical analysis, using data for the period Q1:1996-97 to Q3:2010-11, concluded that inflation threshold (in the sense of structural break point) existed for India, and this implied a non-linear relationship between inflation and growth. The empirical results of this study suggested that there exists a statistically significant structural break in the relation between output growth and

inflation in the 4% to 5.5% inflation range, above which inflation retards growth rate of GDP, and below the threshold level, there is a statistically significant positive relationship between inflation rate and growth. The paper concluded that substantial gains can be achieved if inflation is kept below the threshold. This paper came in the immediate aftermath of the stimulus-fuelled growth strategy resorted to by most countries, including India, in the aftermath of the global financial meltdown in 2008. Also, importantly, this paper used WPI inflation in its empirical analysis. After it shifted to the CPI as its main benchmark for mapping policy rates, the RBI has a target to keep consumer-level inflation at 4% (+/- 2%). Any rise in CPI inflation beyond this comfort zone puts pressure on the central bank to hike rates. (Adapted from The Indian Express) 181. Explaining the Fugitive Economic Offenders Ordinance Who is a fugitive economic offender? Under the Fugitive Economic Offenders Ordinance, promulgated by the President in April, a fugitive economic offender is any individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India and who has either left India to avoid criminal prosecution, or who, being abroad, refuses to return to India to face criminal prosecution. The list of offences that can qualify an individual to be designated an economic offender, enumerated in the schedule to the Ordinance, includes offences under several Acts such as the Negotiable Instruments Act, 1881; the Reserve Bank of India Act, 1934; the Central Excise Act, 1944; the Customs Act, 1962; the Prohibition of Benami Property Transactions Act, 1988; the Prevention of Money Laundering Act, 2002; and the Indian Penal Code. What is the latest development with Vijay Mallya and Nirav Modi? A special Prevention of Money Laundering Act court on June 30 took cognisance of an application by the Enforcement Directorate (ED) under the Ordinance and issued summons to Vijay Mallya and others before it on August 27, 2018. The ED on July 11 also moved a special court in Mumbai seeking fugitive economic offender status for Nirav Modi and his uncle Mehul Choksi.






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What happens if a person is designated a fugitive economic offender? If the special court is satisfied that an individual is a fugitive economic offender, it can direct the Central government to confiscate the proceeds of the crime in India or abroad, whether or not such property is owned by the fugitive economic offender, and any other property or benami property in India or abroad that is owned by the fugitive economic offender. While the confiscation of property within India should not be a problem for the Centre, confiscating properties abroad will require the cooperation of the respective country. The fugitive economic offender will also be disqualified from accessing the Indian judicial system for any civil cases. On whom does the burden of proof lie? In keeping with the principle of innocent until proven guilty , the burden of proof for establishing that an individual is a fugitive economic offender or that certain property is part of the proceeds of a crime is on the Director appointed to file an application seeking fugitive economic offender status. (Adapted from the Hindu) 182. Shram Suvidha Portal Shram Suvidha Portal, launched by the Government on 16.10.2014, caters to four major Organisations under the Ministry of Labour & Employment, namely Office of Chief Labour Commissioner (Central), Directorate General of Mines Safety, Employees Provident Fund Organization and Employees State Insurance Corporation. The main features of the Portal are as follow:- • Allotment of Unique Identity i.e. Labour Identification Number (LIN) for effective, efficient and real-time governance in Labour Administration • To bring transparency and accountability in enforcement of labour laws through Online Inspection System and Filing of Online Inspection Report • Common Online Registration and Filing of Self-Certified and Simplified Single Online Annual Return for multiple labour laws to ease the complexity of compliance • Unified ECR under EPFO/ESIC to encourage compliance by reducing transaction costs and promoting ease of business. With these initiatives, the procedures have been simplified; returns and registration forms have been unified to provide an ease of doing business environment through Shram Suvidha Portal. Further, the portal provides a platform for sharing of information among the labour enforcement agencies. In this way, the Portal has not reduced but eased the compliance burden on establishments by simplifying the way of doing business and also facilitated effective enforcement of labour laws enhancing wage, job and social security for workers.






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(Adapted from PIB) 183. Samagra Shiksha Scheme What is the scheme? The Department of School Education and Literacy has formulated the Samagra Shiksha - an Integrated Scheme for School Education as a Centrally Sponsored Scheme and it is being implemented throughout the country with effect from the year 2018-19. This programme subsumes the three erstwhile Centrally Sponsored Schemes of Sarva Shiksha Abhiyan (SSA), Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and Teacher Education (TE). It is an overarching programme for the school education sector extending from pre-school to class XII and aims to ensure inclusive and equitable quality education at all levels of school education. It envisages the school as a continuum from pre-school, primary, upper primary, secondary to senior secondary levels. What does it involve? The major interventions, across all levels of school education, under the scheme are: (i) Universal Access including Infrastructure Development and Retention; (ii) Gender and Equity; (iii) Inclusive Education; (iv) Quality; (v) Financial support for Teacher Salary; (vi) Digital initiatives; (vii) Entitlements under the Right of Children to Free and Compulsory Education (RTE) Act, 2009 including uniforms, textbooks etc.;(viii) Pre-school Education; (ix) Vocational Education; (x) Sports and Physical Education; (xi) Strengthening of Teacher Education and Training; (xii) Monitoring and (xiii) Programme Management. The main emphasis of the Scheme is on improving quality of school education and the strategy for all interventions would be to enhance the Learning Outcomes at all levels of schooling. What is the financial allocation under the scheme? An allocation of Rs 75,000 crore over the period 1st April, 2018 to 31st March, 2020 has been approved which is a 20% increase over the current allocations. (Adapted from the PIB) 184. National Mission on Teachers Training The Central Sector Scheme of Pandit Madan Mohan Malaviya National Mission on Teachers & Teaching having All India coverage, was launched by the Prime Minister of India on 25th December, 2014 with an outlay of Rs. 900 crore and the scheme has been approved for continuation till March 2020. The Mission addresses current and urgent issues of supply of qualified teachers, attracting talent into teaching profession and raising the quality of teaching in schools and colleges. The Mission also pursues the long term goals of building a strong professional cadre of teachers by setting performance standards and creating top class institutional facilities for innovative teaching and professional development of teachers. (Adapted from the PIB)






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185. Why is the WTO facing challenges? What is the problem? Union Commerce Minister Suresh Prabhu last week stated that India does not subsidise its exports to the rest of the world. The Minister's statement comes in the wake of increasing criticism that financial incentives offered by the Indian government to domestic exporters are distorting international trade. Mr. Prabhu also warned that the very existence of the World Trade Organisation (WTO) is currently under threat amid the rise in trade tensions between the U.S. and its major trading partners such as China, the European Union, Canada and others since the beginning of the year. U.S. President Donald Trump is trying to narrow his country's trade deficit with the rest of the world, particularly China. The trade deficit is the amount by which the value of imports into a country exceeds the value of its exports to other countries. The U.S. believes that sops offered to Indian exporters work against the interests of American companies that are unable to match the price of subsidised Indian goods. This further worsens America's trade deficit. Is WTO under threat? The WTO was formed in 1995 with the goal of regulating trade between countries through appropriate ground rules. Among other things, members of the WTO were supposed to adopt non-discriminatory trade practices that offered a level playing field for all businesses. This has, however, been easier said than done as countries have tried to favour their domestic companies. Domestic companies are generally able to lobby their governments to adopt trade practices favourable to them. In March this year, the U.S. dragged India to the WTO for failing to curb export subsidies that it argues give an unfair advantage to Indian exporters. The WTO had earlier allowed India and a number of other low-income countries with an income per capita of under $1,000 to offer export subsidies. India, however, broke past this threshold in 2013. The Indian government encourages exports through special economic zones and schemes like the Merchandise Exports from India Scheme (MEIS), which offer tax breaks to exporters. What if tensions increase? The increase in trade tensions between countries has raised questions about the WTO s purpose and relevance. The international trade body has been used by politicians as a forum to voice and defend the needs of various special interest groups. India s politicians, for instance, have been keen on protecting the interests of their farmers through the minimum support price. Countries in the West have also tried to protect their farmers and industries through the heavy use of subsidies. Without these subsidies, the production and distribution of goods across the world would be determined purely based on market forces. Many critics have argued that a bureaucratic organisation like the WTO cannot fulfil the ideal of unfettered free trade between countries that can vastly improve global living standards. Instead, they argue that such a bureaucracy is likely to be captured by special interest groups whose demands will harm the free market.






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What is in store? The future of the WTO hangs in the balance as the world slowly slips into a trade war. The biggest casualty is likely to be economic growth as tit-for-tat tariffs increase the tax burden on the global economy. The WTO s track record in achieving free trade is also likely to come under scrutiny. Critics argue that the WTO, by discouraging competition between governments, may be preventing the tearing down of global trade barriers. In fact, they view certain export subsidies like tax breaks, which are prohibited under the rules of the WTO but employed by governments to attract businesses, as lowering the overall tax burden on the global economy. Further, according to the World Bank, the tariff rates applied between 1996 and 2008 under unilateral and preferential trade agreements have actually been lower than under the WTO s multilateral framework. (Adapted from the Hindu) 186. What is the GDP deflator? The GDP deflator, also called implicit price deflator, is a measure of inflation. It is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year. This ratio helps show the extent to which the increase in gross domestic product has happened on account of higher prices rather than increase in output. Since the deflator covers the entire range of goods and services produced in the economy — as against the limited commodity baskets for the wholesale or consumer price indices — it is seen as a more comprehensive measure of inflation. Real vs nominal GDP GDP price deflator measures the difference between real GDP and nominal GDP. Nominal GDP differs from real GDP as the former doesn t include inflation, while the latter does. As a result, nominal GDP will most often be higher than real GDP in an expanding economy. The formula to find the GDP price deflator: GDP price deflator = (nominal GDP ÷ real GDP) x 100 WPI, CPI A consumer price index (CPI) measures changes over time in the general level of prices of goods and services that households acquire for the purpose of consumption. However, since CPI is based only a basket of select goods and is calculated on prices included in it, it does not capture inflation across the economy as a whole.






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The wholesale price index basket has no representation of the services sector and all the constituents are only goods whose prices are captured at the wholesale/producer level. Changes in consumption patterns or introduction of goods and services are automatically reflected in the GDP deflator. This allows the GDP deflator to absorb changes to an economy s consumption or investment patterns. Often, the trends of the GDP deflator will be similar to that of the CPI. Specifically, for the GDP deflator, the basket in each year is the set of all goods that were produced domestically, weighted by the market value of the total consumption of each good. Therefore, new expenditure patterns are allowed to show up in the deflator as people respond to changing prices. The theory behind this approach is that the GDP deflator reflects up-to-date expenditure patterns. GDP deflator is available only on a quarterly basis along with GDP estimates, whereas CPI and WPI data are released every month. (Adapted from The Hindu) 187. Profit, losses, GNPAs of Public Sector Banks Asset Quality Review (AQR) carried-out in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of NPAs. Expected losses on stressed loans, not provided for earlier under flexibility given to restructured loans, were reclassified as NPAs and provided for. PSBs initiated cleaning-up by recognising NPAs and provided for expected losses. The gross NPA ratio for Public Sector Banks (PSBs) as a category is 14.6% in the financial year (FY) 2017-18, as per Reserve Bank of India (RBI) data. In the last 25 financial years, the gross NPA ratio for PSBs was highest in FY 1993-94 at 24.8% and was also higher in six other financial years. Bank-wise details of gross NPAs as of March 2018, and operating profit, provision done and net profit/loss in FY 2017-18, are given below.

Amounts in crore Rs.

S.

No.

Bank As on

31.3.2018

*

FY 2017-18 **

Gross

NPA

Operating

profit

Provisioning

done

Net profit

(amounts with






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ratio (%) a minus sign

are losses) ***

1 Allahabad Bank 16.0 3,438 8,113 -4,674

2 Andhra Bank 17.1 5,361 8,774 -3,413

3 Bank of Baroda 12.3 12,006 14,437 -2,432

4 Bank of India 16.6 7,139 13,183 -6,044

5 Bank of

Maharashtra

19.5 2,191 3,337 -1,146

6 Canara Bank 11.8 9,548 13,770 -4,222

7 Central Bank of

India

21.5 2,733 7,838 -5,105

8 Corporation Bank 17.4 3,950 8,004 -4,054

9 Dena Bank 22.0 1,171 3,094 -1,923

10 IDBI Bank Limited 28.0 7,905 16,142 -8,238

11 Indian Bank 7.4 5,001 3,742 1,259

12 Indian Overseas

Bank

25.3 3,629 9,929 -6,299

13 Oriental Bank of

Commerce

17.6 3,703 9,575 -5,872

14 Punjab & Sind Bank 11.2 1,145 1,889 -744

15 Punjab National

Bank

18.4 10,294 22,577 -12,283

16 State Bank of India 10.9 59,511 66,058 -6,547

17 Syndicate Bank 11.5 3,864 7,087 -3,223

18 UCO Bank 24.6 1,334 5,771 -4,436

19 Union Bank of India 15.7 7,540 12,787 -5,247

20 United Bank of 24.1 1,025 2,479 -1,454






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So

urces:

* RBI (global operations, provisional data for Mar-2018) (Adapted from PIB) 188. Report of Committee on Resolution of Stressed Assets suggests a Five-Pronged Approach for Stressed Assets Resolution by the Banking Industry Suggestions by committee As per bank inputs, banks had set-up a Committee on Resolution of Stressed Assets, which has given its Report suggesting a five-pronged approach for stressed assets resolution by the banking industry in the areas of SME resolution (for which banks may put in place a Robust Monitoring Process), Bank-Led Resolution, AMC/AIF-led resolution, resolution through the Insolvency and Bankruptcy Code, and an asset trading platform. Banks have initiated steps for taking forward the suggestions with due approvals. Steps taken A number of measures have been taken to streamline recovery and introduce innovative methods for recovery of NPAs. The Insolvency and Bankruptcy Code, 2016 (IBC) has been enacted to create a unified framework for resolving insolvency and bankruptcy matters. Under this, by adopting a creditor-in-saddle approach, with the interim resolution professional taking over management of affairs of corporate debtor at the outset, the incentive to resort to abuse of the legal system has been taken away. This, coupled with debarment of wilful defaulters and persons associated with NPA accounts from the resolution process, has effected a fundamental change in the creditor-debtor relationship. The Banking Regulation Act, 1949 has been amended, to provide for authorisation to RBI to issue directions to banks to initiate the insolvency resolution process under IBC. As per RBI s directions, cases have been filed under IBC before the National Company Law Tribunal (NCLT) in respect of 39 large defaulters, amounting to about Rs. 2.69 lakh crore funded exposure (as of December 2017). The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has been amended for faster recovery, with provision for three months imprisonment in case the borrower does not provide asset details and for the lender to get possession of mortgaged property within 30 days. Also, six new Debts Recovery Tribunal have been established to expedite recovery. In addition, under the PSB Reforms Agenda announced by the Government, PSBs have committed to clean and commercially prudent business through Stressed Asset Management Verticals for focussed recovery, rigorous due diligence and appraisal for sanction by scrutinising group balance sheets, at least 10% share in consortium lending,

India

21 Vijaya Bank 6.3 3,098 2,371 727






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ring-fencing of cash flows, initiating use of technology and analytics for comprehensive due diligence across data sources, building capacity for techno-economic valuation, clean and effective post-sanction follow-up on large-value accounts by tying up with Agencies for Specialised Monitoring, and strict segregation of pre and post-sanction roles for enhanced accountability. (Adapted from PIB) 189. Banks agree to resolve stressed assets quickly

24 lenders sign an agreement, more are expected to follow Leading lenders of the country signed an agreement among themselves to grant power to the lead lender of the consortium to draw up a resolution plan for stressed assets. The plan would be implemented in a time-bound manner before bankruptcy proceedings kick in, as was the mandate of the Reserve Bank.






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The move comes after the banking regulator, in its circular, dismantled all the existing resolution mechanisms, such as the joint lenders forum, and asked lenders to start resolution for the asset even if the default was by one day. It had also mandated that if the resolution plan was not finalised within 180 days, the account had to be referred for bankruptcy proceedings. SBI, BoI on board The agreement, known as Inter-Creditor Agreement (ICA) was framed under the aegis of the Indian Banks Association and follows the recommendations of the Sunil Mehta Committee on stressed asset resolution. Lenders including State Bank of India, Bank of India, and Corporation Bank have already signed the pact. To whom ICA is applicable? The ICA is applicable to all corporate borrowers who have availed loans for an amount of Rs. 50 crore or more under consortium lending / multiple banking arrangements, IBA said in a statement. The lender with the highest exposure to a stressed borrower will be authorised to formulate the resolution plan which will be presented to all lenders for their approval. The decision making shall be by way of approval of majority lenders (i.e. the lenders with

66% share in the aggregate exposure). Once a resolution plan is approved by the majority..., it shall be binding on all the lenders that are a party to the ICA, the statement said. Dissenting lenders can either sell their exposure to another lender at a 15% discount or buy the entire exposure of all the banks involved, at a 25% premium. To aid resuscitation One of the major issues that we identified was a [lack of] consensus among the lending

banks on what should have been a common resolution plan which would have benefited the banks, so that there is a resolution in getting the asset back into the resuscitation mode rather than allowing it to impair over a period of time, said Sunil Mehta, chairman, Punjab National Bank, and the head of the panel that had recommended the ICA. This is primarily focussed on the Rs. 50 crore-Rs.500 crore and the Rs. 500 crore-Rs.2,000

crore categories. If there are any specific assets of more than Rs. 2,000 crore, we will deal with that separately, Mr. Mehta said. The Mehta committee had estimated Rs. 2.1 lakh crore of stressed assets in the Rs. 50 crore to Rs. 500 crore category. The total stress in public sector banks is estimated at Rs. 10.6 lakh crore, as on March 31, 2018. (Adapted from the Hindu) 190. Recent performance of Stock markets What is the recent levels of Sensex and Nifty?






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India s benchmark stock indices are roaring again, with the Nifty and the Sensex scaling all-time highs, crossing the 11,200 and 37,300 levels, respectively. What is the reason of rise? A result largely of increased buying by foreign institutional investors and expectations of strong first-quarter earnings results, it took the Sensex just 13 trading sessions to move from 36,000 to 37,000 points. Coming after both indices witnessed extremely sharp corrections a few months ago, the rally has occurred when other emerging market indices have failed to recover their losses since the fall in February. The sharp recovery limited to few stocks The swift recovery, however, is not reflective of a secular rise. While the sharp market correction in February hit stocks across the board, this rally has been limited to a few pockets of the market. Heavyweight blue-chip stocks such as HDFC, Reliance Industries, ITC, Tata Consultancy Services and Infosys have contributed the most while many others have lagged behind. Almost half the companies in the Nifty still trade below their 200-day moving average, a sign of insufficient price strength. Divergence in performance of stocks The divergence in the performance of various stocks becomes clearer when large caps are compared to smaller companies. The mid-cap and the small-cap indices, which fell more sharply than the benchmark indices earlier this year, are still trading well below their historic highs in January. While the Sensex has gained almost 10% since the beginning of the year, the mid- and small-cap indices are significantly down. Not surprisingly, overall market capitalisation is still below its historic high reached in January. The present stock market rally clearly does not yet mark a return to the good old days when investors could expect multi-bagger returns by betting on stocks across the wider market. Several stocks in the mid- and small-cap category have fallen to levels reminiscent of a bear market. Investors are now probably seeking safety in a few large-cap stocks that offer better quality of earnings compared to untested and riskier smaller companies. The return of foreign institutional buying also suggests that investors may be betting on India over other emerging markets that have suffered more severely. It, however, remains to be seen if mid-caps and small caps will follow the large caps and resume their journey upward. Else, the lack of sufficient breadth in the wider market will presage an eventual correction in the large caps too. (Adapted from The Hindu) 191. Watchdogs and certifiers: why auditors are critical for listed companies The Satyam and PNB scandals underlined the dangers of lax auditing. What does recent wave of auditor resignations portend?






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Auditors in as many as 204 listed companies have resigned between January 1 and July 17 this year, an unusual average of a resignation a day, data from the Registrar of Companies show. Why is this significant? Holders of trust An auditor has an especially important role in a listed entity, which has numerous stakeholders, including minority shareholders, whose interests have to be protected, experts say. No one other than the auditor has the permission to go through the accounts of the company. Their role is fundamental and unparalleled, Prithvi Haldea, chairman of Prime Database, said. It is said that the trust of around 3.2 crore active demat account holders in capital markets is primarily on account of auditors — the only outsiders in a company who can verify and certify the books. Among shareholders in most of India s top 10 companies by market capitalisation, over 60 lakh hold up to 500 shares; all these retail investors, as well as institutional investors, rely heavily on auditor s certification, experts say. What the judiciary is for politics, the auditor is for the corporate world and capital

markets, the head of a leading mutual fund company said. In the absence of an auditor, capital markets would collapse. They are the watchdogs who keep an eye on the management and certify the balance sheet. Without the auditor s certification, the balance sheet would mean nothing. Said another fund manager, Since it (auditing) is a highly specialised job that not every one can do, investors rely on the auditor s report and certification before investing in a company. Auditors are the most visible and reliable gatekeepers of accounts. Some auditors who have resigned recently have complained that company managements did not share crucial data with them. Given that several auditors in the past have failed to perform their duty and have, in some cases, been seen to play along with the management, the industry is aware that they are under scrutiny and auditors are, therefore, keen to play safe. Section 132 of the Companies Act, 2013, talks about the constitution of a National Financial Reporting Authority (NAFRA) to look into accounting and auditing standards, and the government has in the past expressed its intention to strengthen the system. The proposed NAFRA will have the powers to investigate misconduct by any member or firm of chartered accountants, and some recent activity suggesting imminent action on the proposal may have contributed to auditors seeking to appear extra diligent, experts said. Watershed moment The 2009 Satyam Computer Services episode, which resulted in big losses for shareholders, marked a turning point in corporate governance practices in India. While Satyam s promoter admitted to reporting inflated, and sometimes non-existent, cash and bank balances for several years, responsibility was also fixed on the auditor, PricewaterhouseCoopers, for having failed to perform its gatekeeping duty and detect or






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report the accounting fraud. In January this year, markets regulator Sebi passed an order barring PwC from auditing any Indian listed company for two years, and slapped a penalty of Rs 13 crore, along with interest at 12% every year since January 2009, on two partners of the auditing firm. More recently, the Rs 13,000 crore PNB fraud has spotlighted the role of auditors. The chartered accountants body ICAI issued showcause notices to the auditors of both the bank and Nirav Modi s Gitanjali Gems, and set up a high-power group to study the case and suggest remedial measures. Prescription in law Among the changes in audit rules that the new Companies Act, 2013, introduced is that beginning April 1, 2014, listed companies can t appoint or re-appoint an individual as auditor for more than one term of five consecutive years , and an audit firm as auditor for more than two terms of five consecutive years . The Act gives the auditor the right to access all records of the company, and enjoins upon the auditor to report any reservations about the maintenance of accounts, and state whether the company has adequate internal financial controls in place. The Act puts the onus of reporting fraud on the auditor, and removes the distinction between material and immaterial fraud. The auditor must report the matter to the central government within 60 days of becoming aware of the fraud; wilful non-compliance will attract a fine of between Rs 1 lakh and Rs 25 lakh. The auditor is required to forward his report to the Board or the Audit Committee immediately after the knowledge of the fraud, and seek their reply within 45 days. On receipt of the reply, the auditor has to forward his report with his comments on the reply to the central government within 15 days. (Adapted from The Indian Express) 192. Why dairy is in crisis Farmers are getting less for milk, but retail prices are unchanged. Global skimmed milk powder prices are down, as are India s exports. A way to absorb surplus could be to include milk in mid-day meals scheme. How have milk prices paid by dairies to farmers, and by consumers buying retail, changed in the last one year? Over the last year, average procurement price for cow milk containing 3.5% fat and 8.5% solids-not-fat (SNF), has fallen from Rs 24-25 to Rs 17-20 per litre in states like Maharashtra. Buffalo milk (6.5% fat, 9% SNF) has fallen from Rs 41-42 to Rs 34-36. But retail price of toned milk in pouches (only 3% fat, 8.5% SNF) has remained at Rs 42 per litre, and full-cream milk (6% fat, 9% SNF) at Rs 52. If consumers are paying the same, why have dairies slashed purchase prices?






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Dairies broadly do two kinds of businesses. One, branded pouch liquid milk; two, commodities, which is mainly skimmed milk powder (SMP), white butter, or ghee. The present crisis has to do with the latter. From 100 litres (or 103 kg) of cow milk, a commodity-focussed dairy can make 8.75 kg SMP (8.5% SNF) and 3.6 kg ghee (3.5% fat). At current per-kg realisations of Rs 130-140 for SMP and Rs 320-325 for ghee, the gross revenue would be Rs 2,300-2,400. Net of Rs 200 post-procurement expenses (for chilling and transport to the dairy) and Rs 300 processing cost, the most that the dairy can pay to farmers is Rs 1,800-1,900 — or Rs 18-19/litre. Contrast this to a year ago, when SMP rates were Rs 200-210/kg and the corresponding gross revenues (ghee prices have been more or less stable) worked out to Rs 29-30 from every litre of milk processed. Does the same logic apply to liquid milk? Not really. Branded pouch milk, unlike SMP and other processed commodities, is not prone to price fluctuations. The processing and packaging cost in liquid milk is hardly Rs 2.5 per litre. Adding post-procurement expenses of Rs 2, and transport, distribution and marketing charges of Rs 5, dairies can pay farmers even Rs 30-31 per litre for cow milk and sell it as toned milk (with slightly less fat content) for Rs 42. While liquid milk marketing is viewed as a low-margin business traditionally monopolised by cooperatives, it is the only profitable segment within the dairy industry today. Value-added products — cheese, paneer, yogurts, milk-based sweets, baby food or flavoured and organic milk — may give more margins, but volumes aren t big. Even then, why should procurement prices fall so much? Branded liquid milk sales in India are roughly 450 lakh litres per day (LLPD). Annual SMP production is estimated at 5.5-6 lakh tonnes (lt). About 11 litres of milk are required to produce 1 kg of SMP, which translates into another 165-180 LLPD.






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SMP manufacture was a thriving business until about five years ago, when global prices were high and India was exporting up to 1.3 lt annually. Average SMP rates at GlobalDairyTrade — the fortnightly online auction platform of New Zealand s Fonterra Cooperative, the world s biggest exporter — hit a record $5,142 per tonne on April 2, 2013. Those prices have since collapsed to well below $2,000, resulting in India s exports, too, plunging to 11,500 tonnes in 2017-18 (see charts).






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Reduced exports have meant there is an annual SMP surplus of over 1 lt now, which the domestic market is unable to absorb. Dairies have had to, therefore, either cut procurement — 1 lt SMP is equivalent to 30 LLPD of milk — or reduce prices corresponding to their lower realisations from powder. Will the Rs 5-per-litre subsidy announced by Maharashtra for dairies to convert surplus milk into powder help? Maharashtra s move will only increase SMP production and add to the surplus. Dairies previously produced powder from the surplus milk during the flush October-March season — when animals produce more due to better fodder and water availability, and lower temperatures and humidity — which they used for reconstitution during the lean April-September months. But with overall rising milk production leading to narrowing deficits, both across time and regions, the requirement for reconstitution has come down. The bulk of domestic SMPs sales are only to confectionary, biscuit or icecream makers. The only feasible solution to the dairy industry s crisis is to find a replacement market for the 1 lt-plus surplus SMP. This could be either through a programme of commodity aid to deficit countries in South Asia and Africa, or boosting domestic consumption by including milk in mid-day meal schemes. Giving 5 crore schoolchildren a 200-ml glass of milk each twice a week, would require 95,000 tonnes of SMP. (Adapted from The Indian Express) 193. National Skill Training Institute (NSTI) for Women in Mohali About National Skill Training Institute The Union Minister for Petroleum & Natural Gas and Skill Development &Entrepreneurship Shri Dharmendra Pradhan laid the foundation stone for permanent campus of National Skill Training Institute (NSTI) for Women at Mohali, Punjab. This is the first NSTI Institute for Punjab and only one of its kind in India which is exclusively for women. The land for the project has been given by the farmers of village Saneta near Mohali and the cost of the project is Rs.17 crores. Later on in the day, Shri Dharmendra Pradhan, Union Minister for Petroleum & Natural Gas and Skill Development &Entrepreneurship launched India s first in-phone guide and mobile application Go whats That . (Adapted from PIB) 194. The lowdown on GST rate cuts What is it? The Goods and Services Tax (GST) Council, at its 28th meeting, reduced the tax rates on more than 50 items, including commonly used products like sanitary pads, and white goods like washing machines, refrigerators and kitchen appliances. Sanitary pads have been






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exempt from the GST — it had a 12% tax rate earlier. White goods have seen their tax rates reduced to 18% from the earlier 28%. Also of interest to the common man, the Council decided to tax footwear of value up to Rs. 1,000 at 5%, where earlier this slab was reserved for footwear up to a value of Rs. 500. The Council also decided to provide relief to the hotel industry by saying that the rate of tax on the accommodation service would be calculated on the basis of the transaction value and not the declared tariff. The Council took a key decision on the returns filing process. Assessees with an annual income of less than Rs. 5 crore can now file their returns on a quarterly basis. This affects more than 90% of GST filers, and so has been seen as a welcome move for small businesses. In addition, the Council finalised two simplified forms — Sahaj and Sugam — for the large filers. How did it come about? The rate reductions are in keeping with the Council s ongoing efforts to rationalise the tax rates and keep as few items in the 28% bracket as possible. The simplification of the return filing procedures is also the next in a series of steps taken by the Council such as widening the eligibility criterion of the Composition Scheme, putting on hold the more complicated aspects of filing GST returns, and simplifying the forms in a staged manner. The decision to exempt sanitary pads from the GST has been seen as a women-friendly and progressive move that will greatly reduce their price. This is an incorrect assessment, given how the GST is structured. Products exempt from the GST are also ineligible for input tax credits. So, while the output tax has been slashed, the input tax burden on companies making these pads has increased. With the two main manufacturers of pads in India likely wanting to maintain their profit margins at the same levels as before the rate cut was announced, the decrease in price for the consumers is likely to only be a few rupees. Why does it matter? Further, the government deflected questions on the revenue impact of its rate reductions on white goods by saying that the increased demand due to the price reduction would mean that the overall tax revenue from these products would remain largely unaffected. First, the tax relief will result in only a 7-8% price reduction of these white goods, many of which cost several thousand rupees. Second, the demand for these white goods is relatively inelastic in the sense that people will not buy more of them simply because they are cheaper. You will buy only as many washing machines as you need. That aside, what the rate cuts have done is to narrow the 28% rate slab to only luxury items and sin goods such as tobacco and cigarettes. This is a welcome move, and a big step towards possibly removing the slab altogether, thereby further simplifying the GST.






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What next? The GST Council takes up new rate-related issues at each of its meetings. Looming over the agenda is the issue of petroleum products and when they will be included in the GST. Reports say the Council will take this up in a staged manner, first considering natural gas, then aviation turbine fuel, and then possibly petrol and diesel. The return filing process is also in for some more gradual changes as the Council finalises the manner in which the invoice-matching system can be incorporated into the system. Without invoice matching, the GST is still incomplete. (Adapted from The Hindu)





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