Daily News Simplified - DNS 01 02 2020

Notes

SL. NO. TOPICS

THE HINDU

PAGE NO.

1 Essential Commodities Act is outdated, must go 13

2 Needed fewer regulations

01

3 Thalinomics: the formula behind one square meal 14

4 Bigger banks needed for $5 trillion economy 14

5 Privatisation: Survey suggests new vehicle 16

6 WHO declares coronavirus outbreak a global emergency 14

7 A chance to chart China-like export trajectory 10

8 India has low rates of formal entrepreneurship 10

9 CEA sees growth rebounding to 6% + There is more space for

intervention on monetary front than fiscal front 1

Dated: 01. Feb. 2020 DNS Notes - Revision Title 1. Essential Commodities Act is outdated, must go (The Hindu, Page no. 13)

Syllabus Mains: Paper III – Indian Economy

Theme Inclusive Growth

Highlights Context

• The Centre’s imposition of stock limits in a bid to control the soaring prices of onions over the last few months actually increased price volatility, according to the Economic Survey 2019-20.

• The Essential Commodities Act has been in existence since 1955, when the economy was very different from what it is today.

• In July 2019, the NITI Aayog set up a panel of Chief Ministers to suggest agriculture reforms, whose mandate included possible amendments to the ECA. However, just a few months later, in September 2019, the Centre invoked the Act’s provisions to impose stock limits on onions after heavy rains wiped out a quarter of the kharif crop and led to a sustained spike in prices.

Highlights in Survey

• The Survey argued that if the government had not intervened, traders would have stored part of their produce to ensure smooth availability of the commodity at stable prices throughout the year.

• The Survey argued that the Drug Price Control Order issued under the ECA also distorted the market and actually made medicines less affordable.

• Estimates showed that the prices of drugs that came under the DPCO, 2013, increased ₹71 per mg of the active ingredient, in comparison to just ₹13 per mg for drugs unaffected by the order.

Personal Notes

Dated: 01. Feb. 2020 DNS Notes - Revision Title 2. Needed fewer regulations (The Hindu Page No. 13)

Syllabus Mains: Paper III: Indian Economy Theme Ease of doing business

Highlights Context • India needs to work on improving the ease of doing business, especially the ease of

starting business, registering property, paying taxes, or enforcing contracts, according to the Economic Survey.

• It was pointed out that to open a restaurant in New Delhi, one needs 45 documents to obtain the licence from the Delhi police, whereas for buying a gun just 19 documents are required.

Cumbersome norms • As per the Survey, it takes four years to enforce a contract in India; New Zealand,

Indonesia, China and Brazil require 0.6, 1.2, 1.4 and 2.2 years respectively. “With a rank of 163 of the 190 nations in enforcing contracts, only a few countries...perform worse than India.”

Personal Notes

Dated: 01. Feb. 2020 DNS Notes - Revision Title 3. Thalinomics: the formula behind one square meal (The Hindu Page No. 14)

Syllabus Mains: Paper III: Indian Economy

Theme Inflation

Highlights Context: For the average worker in India’s organised manufacturing sector, the affordability of a plate of vegetarian food — comprising rice or roti, dal and sabzi — has improved 29% since 2006-07, according to Thalinomics, a take on the economics of food by the Economic Survey. For non-vegetarians, affordability has risen 18%.

• Accelerating food inflation over the last few months has broken that trend, with workers now forced to use an increasing share of their wages on food, the data compiled in the Survey shows.

• The thali prices include the costs of raw cereals, vegetables and protein, as well as the spices, condiments, cooking oil and fuel needed to prepare the meal.

• The Survey found that a worker who would have spent 70% of their daily wage on two vegetarian thalis a day for a household of five in 2006-07 would only have to spend 50% of their income for the meals in 2019-20.

• This year, the most affordable meal was in Jharkhand, where two vegetarian thalis for a household of five required about 25% of a worker’s daily wage.

Personal Notes

Dated: 01. Feb. 2020 DNS Notes - Revision Title 4. Bigger banks needed for $5 trillion economy(The Hindu Page No. 14)

Syllabus Mains: GS Paper III – Indian Economy

Theme Banking

Highlights Context The country will need much bigger banks to become a $5 trillion economy, the Economic Survey 2019-20 said.

• In particular, at least eight banks are needed, which are large enough to belong to the top 100 banks globally, the Survey said, noting there is now only one bank in the country, the State Bank of India, with the 55th rank, in the world’s top 100 banks.

• The report highlighted that while a large economy needs an efficient banking sector to support its growth, credit growth among PSBs has declined significantly since 2013 and has also been anaemic since 2016.

• The Survey called for enhancing the efficiency of public sector banks as they operate in the same market as the new private sector banks.

• The report says the decline in the PSB market share has been largely absorbed by new private banks.

• The report also pointed out that the PSBs enjoy less strategic and operating freedom than private banks. It says the majority ownership by the government also subjects public sector bank officers to scrutiny of their decisions by the Central Vigilance Commission and the Comptroller and Auditor General.

• “With no real restrictions on what can be investigated and under what circumstances, officers of state-run banks are wary of taking risks in lending or in renegotiating bad debt, due to fears of harassment under the veil of vigilance investigations,” the Survey added.

Personal Notes

Dated: 01. Feb. 2020 DNS Notes - Revision Title 5. Privatisation: Survey suggests new vehicle (The Hindu Page No. 16)

Syllabus Mains: GS Paper III: Indian Economy Theme Disinvestment Highlights Context

• The Economic Survey has aggressively pitched for divestment in public sector undertakings (PSUs) by proposing a separate corporate entity wherein the government’s stake can be transferred and divested over a period of time.

• The survey has said privatised entities have performed better than their peers in terms of net worth, profit, return on equity and sales, among others.

Independent board

• “The government can transfer its stake in listed CPSEs to a separate corporate entity. This entity would be managed by an independent board and would be mandated to divest the government stake in these CPSEs over a period of time.

• This will lend professionalism and autonomy to the disinvestment programme which, in turn, would improve the economic performance of the CPSEs.

• The survey analysed the data of 11 PSUs that had been divested from 1999-2000 and 2003-04 and compared the data with their peers in the same industry.

• Analysis shows that these privatised CPSEs, on an average, performed better post-privatisation than their peers in terms of their net worth, net profit, return on assets (ROA), return on equity (RoE), gross revenue, net profit margin, sales growth and gross profit per employee.

• The recent approval of strategic disinvestment in Bharat Petroleum Corporation Limited (BPCL) led to an increase in value of shareholders’ equity of BPCL by ₹33,000 crore compared to its peer Hindustan Petroleum Corporation Limited.

• Aggressive disinvestment, preferably through the route of strategic sale, should be utilised to bring in higher profitability, promote efficiency, increase competitiveness and to promote professionalism in management in CPSEs.

• The focus of the strategic disinvestment needs to be to exit from non-strategic business and directed towards optimising economic potential of these CPSEs, highlighting there were about 264 CPSEs under 38 Ministries or departments.

Dated: 01. Feb. 2020 DNS Notes - Revision Title 6. WHO declares coronavirus outbreak a global emergency (The Hindu Pg 14)

Syllabus Mains Paper II: Social Issues

Theme Issues related to Public Health

Highlights Context

• WHO has declared novel Coronavirus as ‘public health emergency of international concern’ (PHEIC).

About PHEIC

• PHEIC is an extraordinary event that constitutes a public health risk to other States through the international spread of disease” and “potentially requires a coordinated international response.”

• The PHEIC framework was defined in 2005. • Accordingly, WHO can set global standards of practice. • This can be done by directing measures including travel, trade, quarantine, screening,

treatment etc. • However it is non-binding.

What it means?

• A PHEIC gives the WHO’s Emergency Committee authority to recommend travel advisories for cities, regions and countries.

• The WHO can review the public health measures put in place by various countries to ensure their scientific validity.

• Further if a nation imposes travel or trade restrictions that go beyond its recommendations the agency can demand scientific justification. Eg: Italy Italy has decided to close all air traffic between Italy and China.

• WHO can advise countries to

Support nations with weaker health systems

To accelerate the development of vaccines and treatments

To stop the spread of rumors and misinformation

To share knowledge with the WHO and other countries

PHEIC declared so far

• H1N1 - Swine flu, 2009 • Polio, 2014 – This was due to rise in polio numbers in 2013. • Zika, 2016 - The WHO declared Zika a public health emergency in 2016 after the disease

spread rapidly through the Americas • Ebola - 2014 • Ebola - 2019

Personal

Notes

Dated: 01. Feb. 2020 DNS Notes - Revision

Title 7. A chance to chart China-like export trajectory (The Hindu Pg 10)

Syllabus Mains Paper III: Economy

Theme Export-led Growth

Highlights

Context

The Economic Survey recommends acceleration of ‘export-led growth’ strategy in the present international trade scenario.

Accordingly the Survey prescribes the following

• Integration of ‘Assemble in India” into ‘Make in India’. This means India should assemble the ‘network products’ that are produced by MNCs like Apple, Samsung etc. This is said to create 4 crore well paid jobs by 2025 and 8 crores by 2030.

• Further India should specialise in areas where its comparative advantage lies and enhance participation in high income countries.

Personal Notes

Dated: 01. Feb. 2020 DNS Notes - Revision

Title 8. India has low rates of formal entrepreneurship (The Hindu Pg: 16)

Syllabus Mains: Paper III: Indian Economy

Theme Growth and Development

Highlights Context The Survey prescribes boosting the entrepreneurship as a way to wealth creation in the country. Entrepreneurship to create wealth

• Indian witnessed creation of large number of new firms. • Start-up India programme aims to promote entrepreneurship to fuel productivity

growth and wealth creation. • India ranks third in the number of new firms created. • Most of the new firms were created in the services sector compared to

manufacturing, infrastructure and agriculture. • The birth of new firms was not uniform among districts and sectors. • Literacy, education and infrastructure were the key in promoting

entrepreneurship across the various states. • States with highest level of entrepreneurial activities in the agricultural sector:

Manipur, Meghalaya, Madhya Pradesh, Assam Tripura and Orissa. • States with highest level of entrepreneurial activities in the manufacturing

sector: Gujarat, Meghalaya, Puducherry, Punjab and Rajasthan. • States with highest level of entrepreneurial activities in the services sector:

DELHI, Mizoram, UP, Kerala, Andaman and Nicobar and Haryana.

Personal Notes

Dated: 01. Feb. 2020 DNS Notes - Revision

Title 9. CEA sees growth rebounding to 6% (The Hindu Pg: 01) + There is more space for intervention on monetary front than fiscal front

Syllabus Mains Paper III: Indian Economy

Theme Growth and Development

Highlights Context

The Economic Survey highlights that India should focus on wealth creation for better wealth redistribution. Accordingly the Survey makes a case for free market and reduced government intervention.

Personal Notes