Abhimanu

Weekly current affairs Series

Week: I, Jan 2016

Abhimanu’s IAS Study Group Chandigarh

NATIONAL ECONOMIC AFFAIRS

Medium-Term Debt Management Strategy (MTDS)

The Reserve Bank of India, in consultation with the Government of India, has placed Medium-Term Debt Management Strategy (MTDS) for a period of three years (2015-16 to 2017-18).

The strategy document contains the objectives, risk analysis of Government borrowings and strategy to be followed.

MTDS has been prepared based on sound international practices and taking into account the domestic economic and financial conditions.

MTDS would be updated on an annual basis to reflect the emergent conditions.

Government aim to better manage public borrowing, government plans to switch Rs 50,000 crore high cost debt each in year ending March 2017 and 2018 into instruments of longer term maturity1.

It is expected that the borrowing cost in the domestic market is expected to be lower in fiscal year 2015-16 due to reversal in the interest rate cycle.

The main objective of this policy is to smoothen redemptions, switching of short tenor bonds maturing at proximate years with long-tenor bonds will be undertaken and is expected to reduce rollover risks2.

About debt management strategy

The objective of the debt management strategy (DMS) is to secure the government’s funding at all times at low cost over the medium /long term while avoiding excessive risk.

The DMS has been articulated in medium-term for a period of three years and it may be reviewed annually and rolled over for the next three years.

The scope of debt management strategy is restricted to active elements of domestic debt management, i.e. , marketable debt of the Central Government only.

Over time, the scope would be progressively expanded to cover the entire stock of outstanding liabilities including external debt as well as General Government Debt including SDL.

The debt management strategy revolves around three broad pillars ,viz.,low cost, risk mitigation and market development.

Low cost objective is attained by planned issuances and offer of appropriate instruments to lower cost in medium to long-run, market conditions, preferences of various investor segments, improved transparency by way of a detailed issuance calendar.

Following risk management tools have been adopted to reduce the risk associated with the sovereign debt:

a)Adoption of portfolio management practices and creating prudent debt structure by containing

rollover risk through switches / buy back;

1 because of less volatility in market than short term debts.

2Reinvest funds from a mature security into a new issue of the same or a similar security.So, if interest rate at the time of reinvesting is adverse, it may harm government interest.

b) Lowering interest rate risk by keeping floating rate debt low;

c) Managing foreign currency risk by issuing debt in domestic currency, developing stable domestic

investor base and calibrated opening of G-sec market to foreign investors; and

d) Reducing rollover risks by elongation of maturity and establishing limits on security issuances and

annual maturities. Reserve Bank, in consultation with the Government, will continue its effort in

development of the G-sec market by a series of measures such as introducing new instruments,

expanding the investor base, strengthening market infrastructure, etc.

Scenario analysis, which contains expected cost of debt based on the assumptions of future interest and exchange rates and future borrowing needs, are included.

Debt sustainability indicators, such as, debt to GDP, average time to maturity and interest expense to GDP are projected.

Stress tests of the debt portfolio on the basis of the economic and financial shocks, to which the government are exposed, are conducted and indicate a very low level of stress.

This confirms that the debt is stable, sustainable over medium to long run.

The Big Impact Of China’s Slowdown

China’s economic slowdown in 2015 will have important consequences for countries in the region and beyond. After three decades of double-digit growth, however, the weakening performance of the world’s second-largest economy is a significant source of concern—and not just for the Chinese.

About Chinese crisis:

Chinese crisis is mainly highlighted with fall in stock market and devaluation of yuan.

Since 2010, Chinese authorities have eased restrictions on using borrowed money to invest in shares.

Retail investors, who account for about 85% of trade in China, made risky investments often bypassing rules.

Estimates say that borrowed money helped push the stock market 150% since June last year. This created a huge bubble around the Chinese stock market which was driven by borrowed money.

Also, China’s slowdown is being driven largely by shrinking labour force and rising labour costs.

So, when China's securities regulator put restrictions on it , Chinese stocks started falling

Recently, due to crisis in Europe, Chinese export to European nations falls . There is also a huge fall of overall Chinese export this year. China devalued its currency so that it can infuse more money to exporters which lead to cheap export. This devaluation helps Chinese export driven economy to come out of the crisis.

There was huge anticipation of Federal Reserve hike in interest rate. So, China devalued its currency as a possible measure as shock absorber.

China wanted to get yuan into “SDR”, which is foreign reserve maintained by the IMF in Dollar, Pound, Yen and Euro. But Chinese currency is not yet fully market driven and transparent. The Chinese central bank wanted to have market driven currency exchange rate. This also results in devaluation of the Yuan. Finally in the end of the year IMF agree to add “yuan” in SDR basket.

The Chinese economy is an export driven economy. China wanted to shift it toward consumer oriented industry. There is less consumerism in China. So this devaluation leads to more money to the people, which might increase consumer consumption.

Analysis

Impact on World Economy:

China is the second biggest economy in the world. It has huge investment all over the world.

Devaluation leads to less import of China, which affects prices of commodities like Crude Oil, Gold, Metal and Agriculture goods. China is the third largest importing nation.

Debt ridden countries will suffer great loss. Because due to less investment, less growth and lower wages, less inflation. And this leads to suffering of borrower country.

Countries that produce raw materials, such as copper, oil and minerals, for manufacturing in China are already seeing the biggest changes. China’s industrial slowdown means a corresponding reduction in world demand for these commodities. Countries such as Kazakhstan and Chile, whose economies are heavily concentrated in such sectors, are finding the contraction a serious challenge.

But some countries also gained from this slowdown. Vietnam, for example, has greatly increased its production and exports of smartphones and consumer electronics—an area where China used to enjoy absolute dominance—partly by attracting more foreign direct investment

Impact on India:

Indian corporate investment in China will suffer like Automobile.

India is one of main importer of Chinese goods. So in case China’s export will get cheaper it will be beneficial to India. But cheap export can also affect local industry.

China is not a major import partner of India. But if China crash lands, it would hit many companies that have a significant manufacturing base in China, especially US based companies. When US based companies are affected, contract for Indian IT services from US companies may shrink. It also leads to a pull-out of money from Foreign Portfolio Investors in India, which can then lead to a fall in the Indian stock markets and also the Indian rupee.

Gain for India:

India is going to be fastest growing country by surpassing china. So this crisis also shifts investors from China to India.

India is a domestic consumption story. India is not an export driven economy like China. India produces and consume by itself.

India is the youngest country in term of manpower.

Fall in prices of crude oil and gold help India to maintain less current A/C deficit.

But India have to reform its economy by tax reforms, land reforms, labor reforms and disinvestment in Indian bank in order to raise more capital.

Conclusion

As China’s slowdown is being driven largely by fundamental factors (especially a shrinking labour force and rising labour costs), it should be understood as part of a new normal for the world economy. Because the Chinese economy is so much larger now, even 6% growth today would contribute more to world output than 10% growth before the global financial crisis.For other countries, the best way to cope with a slowing China is to embrace the domestic reforms needed to reposition themselves within the global economy.

Dialing……mains(General Study II: Effect of policies and politics of developed and developing countries on India’s interests)

Question:

Chinese economic slow down in 2015 has a big impact on global economy as well as on India. Crititcally examine.

‘Swiss Challenge’ Route

An expert committee has warned the government against using ‘Swiss Challenge’ approach for infrastructure investments in the country. This will make India’s ambitious plan to build new expressways across the country by adopting the ‘Swiss Challenge’ method uncertain.

India plans to build 18,637 km expressways in a phased manner by 2022 under an official Master Plan for the National Expressway Network. An express highway is a controlled-access highway, generally six-lane or more, where entrance and exit are controlled by the use of slip roads.

Since it is a difficult task to find builders to develop greenfield expressways, the government was keen on taking the ‘Swiss Challenge’ route to find bidders for building around 19,000 km expressways as per the master plan.

The Union government has identified building 16 Greenfield expressways at present.

In December 2015, the Kelkar Panel on PPP revival had also asked the government to actively ‘discourage’ the ‘Swiss Challenge’ for auctioning infrastructure projects.

About Swiss Challenge route:

Swiss challenge method is a process of giving contracts. Any person with credentials can submit a development proposal to the government. That proposal will be made online and a second person can give suggestions to improve and beat that proposal.

An expert committee will accept the best proposal and the original proposer will get a chance to accept it if it is an improvement on his proposal.

In case the original proposer is not able to match the more attractive and competing counter proposal, the project will be awarded to the counter-proposal.

The Swiss challenge method is one that has been used in India by various states including Karnataka, Andhra Pradesh, Rajasthan, Madhya Pradesh, Bihar, Punjab and Gujarat for roads and housing projects.

In 2009, the Supreme Court approved the method for award of contracts.

Analysis:

According to the panel, Swiss Challenge approaches bring information asymmetries in the procurement process and result in lack of transparency and in the fair and equal treatment of potential bidders in the procurement process.

Given that governments sometimes lack an understanding of risks involved in a project, direct negotiations with private players can be fraught with downsides. In general, competitive bidding is the best method to get the most value on public-private partnership projects. The government might also end up granting significant concessions in the nature of viability gap funding, commercial exploitation of real estate, etc., without necessarily deriving durable and long-term social or economic benefits.

Governments need to have a strong legal and regulatory framework to award projects under the Swiss Challenge method. It can potentially foster crony capitalism, and allow companies space to employ dubious means to bag projects.

But on the positive side the mains advantages are that it cuts red tape and shortens timelines, and promotes enterprise by rewarding the private sector for its ideas. The private sector brings innovation, technology and uniqueness to a project and an element of competition can be introduced by modifying the Challenge.

Also, till now while giving projects, government officials have to pre-design them. Such a project development requires a huge amount of intellectual capacity and bandwidth. The economy today requires around Rs 5 lakh crore in investments per annum by the private sector in core and social infrastructure projects. So, swiss challenge can be a viable option.

Dialing……mains (General Study III: Infrastructure)

Question:

The ‘Swiss method’ is innovative, but there are challenges in the Indian context. Explain.

WTO Nairobi Summit, 2015

10th Ministerial Conference (MC 10) of the World Trade Organization (WTO) ended in Nairobi. There were trade ministers from 162 countries. Many of the trade ministers felt left out of the key negotiations because of the one-upmanship and defiant attitude of developed countries like the United States and the European Union (EU). This summit ended with non confirmation of 14 years old Doha round pact, which can allow developing nation to use special safeguards to protect farmers against import surges. This is a big disappointment for India, as it is harmful for India's farmers interest. Only positive outcome for developing countries from this meeting is SSM(Special Safeguard Mechanism), which will protect their farmers.

Highlights of the Summit:

Fate of the Doha Development Agenda (DDA) still uncertain and no significant progress on the contentious issues of public stockholding of food crops and special safeguard mechanism in agriculture.

On the contentious matter of special safeguards in agriculture, a declaration has recognized developing members will have the right to have recourse to a special safeguard mechanism (SSM) as envisaged under the Hong Kong Ministerial Declaration.

The SSM allows countries to temporarily raise tariffs to deal with surging imports and subsequent price falls.

SSM was off the negotiating table when the current ministerial had begun, the declaration is far from the complete sanction for the SSM, as hoped for by a large number of countries.

Developing countries had demanded that a provision already existing in Article 5 of the multilateral body's Agreement on Agriculture be amended to provide them the same benefit that rich countries derive from the Special (Agricultural) Safeguards (SSGs)

Developed countries have committed to removing export subsidies immediately, except for a few agricultural products, and developing countries will do so by 2018. Developing countries, including India, will keep the flexibility to cover marketing and transport subsidies for agriculture exports until the end of 2023.

All countries agreed to the elimination of agricultural export subsidies subject to the preservation of Special and Differential Treatment (S&DT) for developing countries such as a longer phase-out period for transportation and marketing export subsidies for exporting agricultural products.

Why are developing and developed countries on opposite sides?

Developing countries, including India, and least-developing countries (LDCs) such as Ethiopia and Rwanda were seeking an end to export subsidies given to farmers by developed countries, which, they said, gave these rich countries an edge in the global market.

These subsidies were to be eliminated by 2013 under the 2005 Hong Kong ministerial agreement, but that did not happen. Instead, countries such as the US came up with new laws (US Farm Bill of 2014) to ensure that there would be no cut in export subsidies.

Developing countries and LDCs also wanted special safeguards and changing of rules relating to public stockholding for food security. Public stockholding is, essentially, the food grain the government procures from farmers and stocks in its godowns.

Besides, developed countries have called for the Doha round of negotiations of 2001 to be junked. It’s on this one question that the battle lines had hardened: should the development agenda of the Doha Round of negotiations be continued, as the developing countries and LDCs have been demanding, or should it be junked and new issues, such as investment, government procurement and competition policy, be brought up, as developed countries, including the US, the EU, and Japan want.

Further, developing countries contend that instead of taking measures to reform farm subsidies, developed nations rallied for the Trade Facilitation Agreement (agreed upon in the 2013 Bali ministerial) that opens up markets in developing countries to their goods and services.

NATIONAL POLITY

Lodha Panel's Report on BCCI

The Justice RM Lodha Committee submitted its report suggesting reforms in the Board of Control for Cricket in India to the Supreme Court. The committee, appointed by the apex tribunal to make recommendations to the BCCI in a bid to prevent frauds and conflict of interest in cricket administration, recommended sweeping reforms for the controversy-ridden body.

Main highlights:

1. Membership

One State, One Vote: Only cricket Associations representing the States would have voting rights as Full Members of the Board, thereby ensuring equality among the territorial divisions. Any other existing members would be Associate Members.

2. Zones

Zones for Tournaments alone: The Zones would be relevant only for the purpose of the tournaments conducted amongst themselves, but not for nomination to the governance of the Board or to the various Standing Committees.

3. State Associations

State Associations – Uniformity in Structure: The Associations that are the Members would necessarily have to restrict the tenures of office bearers and prescribe disqualifications, do away with proxy voting, provide transparency in functioning, be open to scrutiny and audit by the BCCI and include players in membership and management. They would also have to abide by the conflict of interest policy prescribed by the Board, and divorce the Association from the social club, if any.

4. Office Bearers

Limited Tenures & Cooling Off: While all the existing office bearers (President, Vice-President, Secretary, Treasurer and Joint Secretary) are retained in honorary positions, the number of Vice Presidents is pruned from five to one. Their duties have been realigned. The President is shorn of his say in selections. The additional vote for the President at meetings is deleted. The terms of these Office Bearers continue to be of 3 years, but with a maximum of 3 such terms regardless of the post held, with a cooling off period after each such term.

5. Governance

Governance separated from management: The 14 member Working Committee is replaced by a 9 member Apex Council (with one-third independent members) consisting of the Office Bearers of the BCCI, an elected representative of the General Body, two representatives of the Players Association (one man and one woman) and one nominee from the C&AG’s office. Terms of eligibility and disqualification are specified with a bar on Ministers and government servants.

6. Management

Professionalism in management: Professionalism is brought in by introducing a CEO with strong credentials assisted by a team of managers to handle non-cricketing affairs. The large number of Standing Committees and Sub-Committees created by the BCCI has been reduced to two essential ones that would advice the CEO with reference to tours, technical aspects and tournaments.

The selection, coaching, performance evaluation and umpiring are to be handled by Cricket Committees manned only by former professionals. Specific provisions have been made to encourage cricket for women and the differently-abled.

7. The IPL

Limited Autonomy for IPL: The Governing Council of the IPL is reduced to 9, but includes 2 representatives of the Franchisees and nominees of the Players’ Association and the C&AG’s office.

8. Players

A voice for Players: There shall be a Cricket Players’ Association affording membership to all international and most first class men and women retired cricketers. This Association shall discharge assigned functions with the financial support of the BCCI. It shall be brought into existence by an independent steering committee.

9. Agents

Arms length for agents: Players’ interests are protected by ensuring that their Agents are registered under the prescribed norms administered by the BCCI and the Players’ Cricket Association.

10. Conflict of Interest

Avoidance of conflicts: Detailed norms have been laid down to ensure there is no direct or indirect, pecuniary or other conflict or appearance thereof in the discharge of the functions of those persons associated or employed by the BCCI, its Committees, its Members or the IPL Franchisees. These norms shall be administered by an Ethics Officer.

11. The Ombudsman and the Electoral Officer

Independent monitors: Provision has been made to have an independent ombudsman to resolve grievances of Members, Administrators, Players and even members of the public as per the procedures laid down. Similarly, an independent Electoral Officer to oversee the entire electoral process is also mandated.

12. Functioning

Transparency: The BCCI must provide the relevant information in discharge of its public functions. All rules and regulations, norms, details of meetings, expenditures, balance sheets, reports and orders of authorities are to be uploaded on the website as well.

13. Oversight

Accountability: An independent auditor to verify how the Full Members have expended the grants given to them by the BCCI, to record their targets and milestones, and to submit a separate compliance report in this regard.

14. Betting & Match-fixing

Legalization for betting and Criminalization for match-fixing: A recommendation is made to legalize betting (with strong safeguards), except for those covered by the BCCI and IPL regulations. Also a recommendation for match/spot-fixing to be made a criminal offence.

15. Ethics for Players

Awareness and sensitization: Provisions to be made for lectures, classes, handbooks and mentoring of young players.

Analysis:

This report details the problems associated with the BCCI - its conflict of interest, corruption, lack of transparency, etc.

By legalizing betting, the money that one earns whilst betting on cricket matches can now be taxed at the MMR (maximum marginal rate of 33.99%) and reduces the circulation of black money in the Indian market to a great extent.

It is an open secret that betting practices are rampant in our country. Legalising the same will only give the business a legal name and purpose. The revenue that can be generated by bringing income earned from betting is bound to be significant enough to impact our economy in a positive manner.

In an attempt to bring all states on the same playing field, the committee has recommended that each state will have one vote; this will make the voting process more even.

This report focused on transparency and less political interference. It is only natural that the sporting body should be run by the players who have played the game rather than politicians or political parties.

BCCI is run entirely by men – and having a woman on the Apex Council would be a historic first step.

Creation of a player’s association, something Indian cricket has desperately needed to bring balance to the relationship between administrators and players. The BCCI has overtly and covertly prevented such an association from rising in the past, thereby making it difficult for the players to speak with one voice.

UDAY:-Ujjwal Discom Assurance Yojana

Jharkhand became one of the very first states to officially join the Ujwal Discom Assurance Yojana (UDAY) central government’s financial restructuring programme for discoms, which will offer the state a net benefit of approximately Rs 5,300 crore.

Salient Features of UDAY:-

UDAY will rearrange Rs 4.3 lakh crore debt of the utilities besides introduce measures to cut power thefts and align consumer tariff with cost of generating electricity.

States shall take over 75% of DISCOM debt as on 30 September 2015 over two years – 50% of DISCOM debt shall be taken over in 2015-16 and 25% in 2016-17.

This will be implemented through 4 initiatives – improving operational efficiencies of discoms, reduction of cost of power, reduction in interest cost of discoms and enforcing financial discipline on discoms through alignment with state finances.

Government of India will not include the debt taken over by the States as per the above scheme in the calculation of fiscal deficit of respective States in the financial years 2015-16 and 2016-17.

States will issue non-SLR including SDL bonds in the market or directly to the respective banks / Financial Institutions (FIs) holding the DISCOM debt to the appropriate extent.

DISCOM debt not taken over by the State shall be converted by the Banks / FIs into loans or bonds with interest rate not more than the bank’s base rate plus 0.1%. Alternately, this debt may be fully or partly issued by the DISCOM as State guaranteed DISCOM bonds at the prevailing market rates which shall be equal to or less than bank base rate plus 0.1%.

States shall take over the future losses of DISCOMs in a graded manner and shall fund them.

State DISCOMs will comply with the Renewable Purchase Obligation (RPO) outstanding since 1st April, 2012, within a period to be decided in consultation with Ministry of Power.

Operational efficiency improvements is proposed to be brought in by compulsory smart metering, upgradation of transformers and meters to reduce electricity lost during transmission and distribution (or theft) from around 22 per cent to 15 per cent by 2018-19.

States accepting UDAY and performing as per operational milestones will be given additional / priority funding through Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY),Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or other such schemes of Ministry of Power and Ministry of New and Renewable Energy

Such States shall also be supported with additional coal at notified prices and, in case of availability through higher capacity utilization, low cost power from NTPC and other Central Public Sector Undertakings (CPSUs).

States not meeting operational milestones will be liable to forfeit their claim on IPDS and DDUGJY grants.

People will not bear the cost of inefficiency of discom. It is states’ responsibility to ensure that discoms become financially viable.

The scheme, which is optional, will be operationalised through signing of MoU

Analysis:

It attempts to enforce discipline on States as it requires them to absorb a part of future losses of the discoms because states will now have to directly bear on their budgets the entire cost of the subsidies.

It accelerates the process of reform across the entire power sector and will ensure that power is accessible, affordable and available for all.

This scheme will ease the financial crunch facing power distribution companies, or discoms, that has impaired their ability to buy electricity

Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development.

Efforts towards 100% village electrification, 24X7 power supply and clean energy cannot be achieved without performing DISCOMs.

Power outages also adversely affect national priorities like “Make in India” and “Digital India”.

In addition, default on bank loans by financially stressed DISCOMs has the potential to seriously impact the banking sector and the economy at large.

Dialing …..mains ( General Study III Infrastructure – energy)

New Railway Regulator

Union government has come out with a concept paper proposing to set up a rail regulator for fixing fares and ensuring level-playing field for private investments in railway infrastructure.

It will be an independent body, housed outside the Ministry of Railways but funded through the annual railway budget sanctioned by the Parliament.

The proposed rail authority will be mandated to: a) Set passenger and freight tariff, b) Ensure fair play and level-playing field for private investments in Railways, c) Maintain efficiency and performance standards, d) Disseminate information such as statistics and forecasts related to the sector.

The proposed body is also likely to be called Railway Development Authority, without raising the hackles of its well entrenched unions, bureaucracy and the political class.

It will be a quasi-judicial body like any other regulator and have sufficient teeth to bite in case of noncompliance.

Government will have the option either to accept the proposal of regulating authority or properly compensate it through budgetary support.

Given the role and mandate of the Development authority, it is proposed to set up an Appellate body. The role, structure and composition of the Appellate body could be similar to such bodies set up by the Government in telecom and electricity sectors.

Why do we need a regulator?

It is a good idea to set up an independent tariff and freight regulator for the railways. This will reduce the scope of the railways being used as a political tool by giving benefits that are financially and commercially unviable.

It will end the practice of freight and upperclass passengers subsidising lower-class fares, and tariffs will reflect actual costs.

More important, realistic tariffs will help revitalise freight transport by rail.

This has the added benefit of lowering emissions from the transport sector, and affecting a reduction in the country's oil consumption, most of which is imported.

The authority will set tariff based on cost recovery principle and “what the traffic can bear.”All the direct and indirect costs such as pension liabilities, debt servicing, replacements and renewals along with productivity parameters, market-driven demand and supply forces and future investments will be considered by the regulator before setting tariffs.

The authority has to ensure level playing field for investors and it will be authorised to penalise cartelisation (a cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market), abuse of dominance and other unfair market mechanisms.

The transporter’s estimated losses in passenger segment is estimated over Rs 30,000 crore in 2015-16 coupled with the steady decline of the share of railways in freight traffic from 89% in 1950-51 to approximately 36% in the last few years. The independent regulator will enable the sector to move towards market-determined tariffs and full recovery of costs as well as reduce the prevalent cross-subsidies.

Dialing….mains(General Study II: Statutory, regulatory and various quasi-judicial bodies)

Stand Up India

Government announced a new Credit Guarantee Fund under the Stand Up India specifically designed to address the needs of the SC/ST categories along with women entrepreneurs.

The government’s ‘Start Up India Stand Up India’ scheme was initially announced by Prime Minister Narendra Modi on 15 August 2015 and is designed to encourage entrepreneurship amongst the youth, especially in semi-urban and rural areas.

The SC/ST categories and women needed specific attention to encourage them to take up self-sustaining entrepreneurship and this scheme addresses that need.

It is expected to benefit atleast 2.5 lakh borrowers. The expected date of reaching the target of at least 2.5 lakh approvals is 36 months from the launch of the Scheme.

Important features of the scheme:

Every branch of each bank will offer loans and credit guarantee protection to at least two entrepreneurs under this scheme.

A fund of Rs 10,000 crore is being set up and will be disbursed by Small Industries Development Bank of India (SIDBI).

All entrepreneurs availing the scheme will be offered mentoring services at the pre-loan and post loan stages, and will also offer guidance on operating their businesses, accessing services like factoring, e-registrations with various online portals and offering their goods and services through e-commerce platforms.

The overall intent of the approval is to leverage the institutional credit structure to reach out to these under-served sectors of the population by facilitating bank loans repayable up to 7 years and between Rs. 10 lakh to Rs. 100 lakh for greenfield enterprises in the non farm sector set up by such SC, ST and Women borrowers.

Under the current proposal, margin money of 25% will have to be contributed by the entrepreneur.

Analysis:

India has vast and untapped youth potential and all cannot be provided with jobs. Therefore, the government has rightly focused on unleashing the entrepreneurial spirit amongst the youth belonging to weaker sections like SC/ST, with special attention to women. It is expected that the Stand Up India scheme will create further jobs and will have a job multiplier effect.

The difference between this scheme and a regular loan offered by a standard bank is that it offers a complete package of mentorship and guidance to the first time entrepreneur. Along with the initial handholding, guidance on go-to-market strategies will help connect rural areas with urban clientele.

Capital risk has been a major reason why most do not take the entrepreneurship path, but now with loans on easy terms and backed with a guarantee, will give a lot of confidence both to the lending bank and the potential entrepreneur to take a business risk. India will now be ready to truly Stand Up.

INTETRNATIONAL AFFAIRS

Border Haats

Government of India has approved an Memorandum of Understanding (MoU) between India and Bangladesh to set up border haats. The MoU was signed in October 2010.

The approval was also given to modify/revise the terms and condition of the MoU in consultation with relevant state governments/central government agencies and Government of Bangladesh.

Four border haats including - Kalaichar (Meghalaya- Bangladesh border); Balat (Meghalaya-Bangladesh border); Kamlasagar (Tripura-Bangladesh border) and Srinagar (Tripura- Bangladesh border) are already operational.

In addition, both the government agreed to further establish two border haats in Tripura and four in Meghalaya on the Bangladesh border.

Border Haats between India and Bangladesh:

Border haat means makeshift bazaar/ market at a certain point on zero lines of the India-Bangladesh borders allowing villagers of both the countries to market and shop each other’s products once a week.

Border haats are in high demand by people on both sides, living in remote enclaves and hilly areas, as they find it difficult to buy and sell products needed in day-to-day life.

The two nations started border trade in April 1972 – only months after Bangladesh became independent. However, it was cancelled a year later because of rampant smuggling along the 4,096 kilometers of border that the two countries share.

Analysis:

North East India has had strong cultural, linguistic and historical trade links with Bangladesh, Myanmar, China and other countries in South East and East Asia. There was a lot of inter-dependence amongst these regions in the past and trade was thriving from ancient times. But in last century, Cross border trade suffered due to new political boundaries and regimes. Now all countries wanted to re-establish people to people connectivity.

To achieve this, India is negotiating and signing various preferential trade agreements with its neighbours to increase people-to-people connectivity and more openness to cross-border trade.

Such initiatives like the initiation of Border Haats (local markets) along the India-Bangladesh border has also shown a lot of promise towards economic development of border communities, formalizing informal trade, building trust and higher trade openness.

But there are some problems faced by people in existing haats. Indian buyers expressed frustration over their Customs Department as they are often barred from buying Bangladeshi goods of their choice at the haat. Bangladeshi traders on the other hand remain frustrated with the small number of buyers from the Indian side.

Physical connectivity remains as the primary reason for slow growth in trade in the border haats. Physical infrastructure in terms of paved pathways and bridges/culverts is of utmost necessity to the proper functioning of the haats. If the existing border infrastructure were upgraded, the volume of trade and business between Bangladesh and the northeastern states of India would increase by five to six times of the current level.

The step to boost the country's trade with Bangladesh through setting up border haats has met limited success due to lack of proper attention by the two governments.

The Border haats will not only contribute in reducing trade deficit between Bangladesh and India, but also significantly help in promoting people to people that is vital for strengthening Bangladesh-India relations in the years to come.

SCIENCE AND TECHNOLOGY

Issue Of Call Drop

Telecom regulator TRAI has written to operators to ensure compliance with call drop regulations, effective January 1.

The Telecom Regulatory Authority of India (TRAI) issued amendment in Telecom Consumers Protection Regulations on October 16, 2015 in which it added a rule mandating mobile service providers to compensate their subscribers for call dropped or automatically disconnected due to technical glitches in their network.

The rules mandate telecom operators to provider Re 1 compensation for each call dropped, with a compensation cap of Rs. 3 per day.

Telecom operators have approached the Delhi High Court against this regulation. They refused to compensate because matter is still sub-judice.

What is a Call Drop?

In telecommunications, it referes to the telephone calls which, due to technical reasons, were cut off before the speaking parties had finished their conversation and before one of them had hung up (dropped calls).

What are the reasons behind call drops?

Mobile phones work using radio waves in the frequency range of 300 MHz and 3,000 MHz. But the entire range is not available for use. Critically, the lower the number, the better the quality of transmisison.If a company has too little of the better bands, the quality of voice service drops.

Inadequate number of cell sites directly impact quality of services.

Limited number of towers is leading to inferior customer experience and growing customer inconvenience.

Several challenges are being faced by the industry during installation of sites, including State bodies’ actions against towers without prior notices, restrictions by municipalities, sealing orders, power supply issues and difficulties in getting clearances for installing sites.

The service providers have also said that over 10,000 cell sites have been made non-operational due to some trivial reasons across major cities like Delhi, Mumbai, Chandigarh, Bengaluru, Hyderabad, Patna and Jaipur

This is benefitting companies when their plans are in minutes instead of seconds. However, Telecom firms claim 95 per cent of tariff plans involve billing in seconds

What should be done to overcome this?

Need of additional spectrum.

Harmonisation of airwaves to improve capacity.

They should be allowed to install towers on government buildings.

Alignment of State policies with the Telecom Department’s advisory of mobile tower installation.

Offer more spectrum by releasing some from the defence services

To set up a nationally publicized database on call drops to force laggard companies to improve on their services.

Dialing….mains (General study III: Science and Technology- developments and their applications and effects in everyday life)

Question:

What is the need of call drop regulations by TRAI in present sceneario? How this situation can be avoidable?

Zika Virus

First case of Zika virus is reported in Puerto Rico. It is an illness transmitted by mosquitoes that has recently been linked to a number of birth defects in Brazil.

The Zika virus was considered to be unknown until recently when scientists, for the first time in November 2015, linked it to a surge in babies born with microcephaly.

According to Brazilian authorities, by the end of the year, Zika could infect over 1.5 million people.

There is no medicine as yet to treat Zika.

About Virus

The virus gets its name from the Zika forest in Uganda, Africa, where it was first identified in rhesus monkeys in 1947.

It was reported in humans in 1952 but was unknown until last year.

The virus is transmitted by the Aedes aegypti mosquito, which is also responsible for the spread of dengue and chikungunya.

In the last few years, confirmed cases have been reported from Brazil, Colombia, the Dominican Republic, El Salvador, Guatemala, Mexico, Panama, Paraguay, Suriname and Venezuela.

The most common symptoms are fever, rash, joint pain, or conjunctivitis (red eyes). Other symptoms include experiencing muscle pain, headache, pain behind the eyes, and vomiting. The virus causes a painful but temporary rash in adults. The illness is usually mild with symptoms lasting for several days to a week but 1 in 5 people infected with the Zika virus become ill.

Snowflake Coral, A Serious Threat To Biodiversity

Scientists have recently discovered the presence of several colonies of an invasive species of snowflake coral off the coast of Thiruvananthapuram and Kanyakumari.

The fast growing alien species have been discovered at a depth of 10 metres off Kovalam, a beach town by the Arabian Sea in Thiruvananthapuram. However, scientists have warned that these invasive species of snowflake coral could pose a serious threat to the marine ecology of the region.

Snowflake coral is a native of the tropical Western Atlantic and the Caribbean,C.riisei was first reported as an invasive species from Hawaii in 1972. Since then, it has spread to Australia, Thailand, Indonesia and the Philippines.

In India, this species has been reported from the Gulf of Mannar, the Andaman and Nicobar Islands, Gulf of Kutch and Goa.

About Snowflake Coral:

What is snowflake coral:

An alien species of soft coral originally from the tropical Western Atlantic – commonly called “snowflake coral” or “branched pipe coral”

A non-photosynthetic coral which feeds on zooplankton (tiny larvae of shellfish and crustaceans) and organic particles by capturing them with tentacles upon contact

Carijoa riisei is an octocoral; its polyps have eight tentacles versus six in most stony corals

Where does this grows:

Carijoa riisei requires firm surfaces to which it attaches using stolons – root-like structures As a passive filter feeder, it requires moderate amounts of water flow which can be provided by wave surge,

tidal currents, or long-shore currents It does not grow in direct sunlight and is often found under ledges and under piers in shallow water At depths below significant light penetration, it can grow in the open on rocky surfaces swept clean of

sediment

It also grows well on artificial surfaces such as metal, concrete, plastic, rope, and even old automobile tires C. riisei is commonly found on artificial reefs visited by recreational SCUBA divers Why is Carijoa riisei a problem?

As a highly successful invasive species, Carijoa riisei threatens biodiversity by monopolizing food & space resources and by displacing native species

Under favorable conditions, it out competes other organisms and saturates the available space.

There is a fear that it will crowd out other species like corals, sponges, algae, ascidians that contribute to the rich marine biodiversity of the region.

As a voracious eater, C. riisei consumes large quantities of zooplankton although the ecological impacts of its appetite are not yet known

Dialing…..mains(General Study III Changes to geographical features : Conservation)

Government Decides To Directly Shift From BS-IV To Bs-VI Emission Norms

The Ministry of Road Transport and Highways has decided to jump from BS-IV to BS-VI emission norms directly. The Indian government will skip BS-V emission norms altogether and the new norms will be in place by April 1, 2020.

The Auto Fuel Policy 2003 had recommended implementation of BS-VI norms by 2024. Earlier in the draft notification issued by the Union Ministry of Road Transport and Highways had advanced dates for implementation of BS-V norms to 2019 and BS-VI norms to 2021.

Presently BS-IV auto fuels are being supplied in whole of northern India covering states like Punjab, Haryana, Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Delhi, parts of Rajasthan and western Uttar Pradesh. While rest of the country is being supplied has BS-III grade fuel. The deadline implementation for BS-IV auto fuels is 2017 across the country

What are BS norms?

Bharat Stage emission standards, introduced in 2000, are emission standards that have been set up by the Central government to regulate the output of air pollutants from internal combustion engine equipment, including motor vehicles.

The different norms are brought into force in accordance with the timeline and standards set up by the Central Pollution Control Board which comes under the Ministry of Environment and Forests and Climate Change.

What is BS VI norms:

The move from BS-IV or Euro 4 to BS VI will require significant investment in technologies like Diesel Particle Filter (DPF) and Selective Catalytic Reduction (SCR). DPF, which comes under BS-V norms will now incorporated in BS-VI vehicles. In stage VI, selective catalytic reduction technology has to be optimized .

DPF(Diesel Particulate Filter)

The diesel particulate filter (DPF) for removing particulate matter is a cylindrical object that has to be mounted inside the engine compartment.

In India, where small cars are preferred, fitting DPF into the limited bonnet space would involve major redesign. The bonnet length may have to be increased, which would make vehicles breach the prevalent excise bracket for sub-4 metre cars.

The DPF would further have to be optimised for Indian operating conditions

In Indian conditions, low driving speed means it is difficult to achieve temperatures of 600°C required to burn the soot in DPF. Usually diesel is injected to increase temperatures but excess fuel can cause a fire.

The injection rate has to be optimised, vehicles re- engineered keeping in mind safety.

SCR(Selective Catalytic Reduction)

The selective catalytic reduction (SCR) module is used to reduce oxides of nitrogen. When the exhaust is moving, an aqueous urea solution (AUS 32) is injected into the system.

AUS 32 contains ammonia, which reacts with and reduces the nitrogen. This means a container needs to be put on board the car for deploying the AUS 32.

Separately, infrastructure also needs to be set up across the country for supply of AUS 32. The optimisation and fitment of this technology would again take three to four years.

Analysis:

The proposed shift is expected to significantly curb emissions of particulate matter (PM) and oxides of nitrogen emitted by petrol cars, diesel cars and heavy duty vehicles. Moving from BS-III to BS-VI will reduce NOX by 84% and PM 2.5 by 90%

There are two major industries which now face problems: first is the oil refineries that will need a substantial investment to upgrade. These upgrades will allow the refineries to supply fuel types that can match the BS-V and BS-VI standards

Second, the automobile manufacturers also need to progress gradually and skipping a step like BS-V might put extra pressure on the manufacturers to produce compliant vehicles.

Huge investments are required to achieve these norms. This costs will have to be passed on to the customer and such a move could meet with some serious resistance in a price-sensitive market like India.

If both DPF and SCR are fitted together for testing, it will be extremely difficult to detect which of the technologies is at fault in case of any errors.

The government has been unable to move completely to BS-IV because refiners have been unable to produce the superior fuel in the required quantities. BS-IV petrol and diesel essentially contains less sulphur, a major air pollutant. Sulphur also lowers the efficiency of catalytic converters, which control emissions.

Dialing…..mains(General Study III: Air Pollution control measures)

Li- Fi

Li-Fi, or light fidelity, invented by German physicist and professor Harald Haas, is a wireless technology that makes use of visible light in place of radio waves to transmit data at terabits per second speeds—more than 100 times the speed of Wi-Fi.

Li-Fi uses common household LED (light emitting diodes) lightbulbs to enable data transfer, boasting speeds of up to 224 gigabits per second.

Li-Fi offers great promise to overcome the existing limitations of Wi-Fi by providing for data-heavy communication in short ranges. Since it does not pollute, it can be called a green technology for device-to-device communication in the Internet of Things (IoT).

LI-FI meets the 3L criteria: low interference, low power and low maintenance.

In addition, it has potential for the first two Hs of the three Hs of high data rates, high reliability and high affordability.

Since Li-Fi relies on visual light and not radio waves as the carrier but the last one—high affordability—may be achieved only when volumes increase, as it has in the case of Wi-Fi.

Li-Fi vs Wi-Fi Li-Fi can also easily work underwater, where Wi-Fi fails completely, and thereby throwing open endless

opportunities for military and navigational operations.

Visible light being safer, they can also be used in places where radio waves can’t be used such as petrochemical and nuclear plants and hospitals.

Similarly, in aircraft, where most of the control communication is performed through radio waves, there are restrictions on passenger communication using the same media, which can be easily handled through use of Li-Fi.

While some may think that Li-Fi with its 224 gigabits per second leaves Wi-Fi in the dust, Li-Fi's exclusive use of visible light could halt a mass uptake.

Li-Fi signals cannot pass through walls, so in order to enjoy full connectivity, capable LED bulbs will need to be placed throughout the home. Not to mention, Li-Fi requires the lightbulb is on at all times to provide connectivity, meaning that the lights will need to be on during the day.

What's more, where there is a lack of lightbulbs, there is a lack of Li-Fi internet so Li-Fi does take a hit when it comes to public Wi-Fi networks.

An extension of standard Wi-Fi is coming and it's called Wi-Fi HaLow.

This new project claims to double the range of connectivity while using less power. Due to this, Wi-Fi HaLow is reportedly perfect for battery powered devices such as smartwatches, smartphones and lends itself to Internet of Things devices such as sensors and smart applications.

Due to its impressive speeds, Li-Fi could make a huge impact on the internet of things too, with data transferred at much higher levels with even more devices able to connect to one another.

Due to its shorter range, Li-Fi is more secure than Wi-Fi and it's reported that embedded light beams reflected off a surface could still achieve 70 megabits per second.

Dialing….mains(General Study paper III: Information Technology)

Reforms In Satellite Communication: Need Of Digital India

To achieve the dream of digital India, we have to deliver connectivity and broadband to the remote and difficult-to-access parts of the country, such as Jammu and Kashmir, Assam, the Northeast, Chhattisgarh, Andaman and Nicobar Islands, Lakshadweep, and rural hinterland and Naxalite areas in various states.

But we are not able to achieve the target to connect the unconnected, because of the challenges in rolling out digital networks in remote parts.

Digital India is restricting itself as a dream of urban area and widening the gap between rural and urban area.

Currently there is no competition, underutilised capacity, inefficient operations and exorbitant prices in this field. There is complete dominance of Antrix/ISRO.

Reform required:

The Department of Space, the policy-making and licensing agency, must be separated from the operator, Antrix, as well as from the research unit ISRO.

All regulatory functions should be vested in the available independent techno-economic authority, TRAI.

A forward-looking satcom policy should be formulated and announced which should lay the essential foundation of fair competition and level-playing field for all players, public (Antrix) as well as private.

Permit direct bandwidth negotiations with international operators by the Bharat Broadband Network Limited (BBNL) as well as private operators, without the intervention of Antrix or the Department of Space.

Like in Australia, BBNL should set up its own National Satellite Network through its High Throughput Satellite (HTS) which will deliver bandwidth of 4-8 Mbps (per site service) in the first phase, subsequently scalable to over 30-100 Mbps to the gram panchayats in a cost-effective manner. It is estimated that a Ka-band HTS satellite could cater for this pan-India connectivity. Just a small part of the government funding for BharatNet and Digital India would amply take care of the National Satellite Network requirement.

Open up Ka-band operations in India and HTS satellites, as well as use of HTS terminals.

Lay down clear guidelines for security compliance by foreign satellites.

Simplify the current extremely-cumbersome and time-consuming Standing Advisory Committee on Radio Frequency Allocation (SACFA) clearance to enable speedier roll-out to Gram Panchayats.

Permit the use of Non Geostationary Orbital (NGSO) satellites

QUICK FACTS

India-France counter-terrorism and counter-insurgency joint exercise Shakti-2016 held at -Mahajan Field Firing Ranges, Bikaner

Book: " Azad Bachpan Ki Or " is written by - Kailash Satyarthi

New Chairman of CCI(Competition Commission of India) - Devender Kumar Sikri

CEO of NITI Aayog - Amitabh Kant.

Central Banker of the Year Award (Global and Asia Pacific) for 2016 - Raghuram Rajan

New High Commissioner for the United Nations Refugee Agency - Filippo Grandi

Col. C.K. Nayudu Lifetime Achievement Award is conferred to - Syed Kirmani

The World Braille Day was observed on – 4 January 2016

103rd Indian Science Congress was held at – Mysuru

Sangita Kalanidhi award, 2015 has won by - Sanjay Subrahmanyam

The Indian-origin cancer research expert who received a Knighthood from Queen Elizabeth II is - Harpal Singh Kumar.