14 Dec 2019: UPSC Exam Comprehensive News Analysis

14 Dec 2019 CNA:- Download PDF Here

TABLE OF CONTENTS

A.GS1 Related
B.GS2 Related
SOCIAL JUSTICE
1. Targets missed, Accessible India campaign’s deadline extended
POLITY AND GOVERNANCE
1. Assembly unanimously passes A.P. Disha Act
2. ‘Centre in talks with J&K, Ladakh on special status’
C.GS3 Related
ECONOMY
1. Moody’s cuts India GDP forecast to 5.6% for 2019
2. RBI central board meets over cooperative banks
3. No talks yet in FinMin on GST hike: FM
ENVIRONMENT AND ECOLOGY
1. ‘Need community-driven, decentralised solutions to water crisis’
D.GS4 Related
E. Editorials
ECONOMY
1. Twin troubles
1. Savings with a bonus — financial peace of mind
F. Tidbits
1. Govt. adds 30 more services to doorstep delivery scheme
2. Exports contract for fourth month in a row
G. Prelims Fact
H. Practice Questions for UPSC Prelims Exam
I. Practice Questions for UPSC Mains Exam

Category: POLITY AND GOVERNANCE

1. Assembly unanimously passes A.P. Disha Act

Context:

The rape and murder of the 26-year-old veterinarian in Hyderabad, that sparked off national outrage.

Details:

• Andhra Pradesh is the first state to enact a law aimed at awarding capital punishment to the guilty in specified offenses against women and to complete the trial in such cases within 21 days of the crime.
• The A.P. Assembly has unanimously passed two Bills, Andhra Pradesh Disha Act — A.P. Special Courts for Specified Offences against Women and Children Act 2019, and A.P. Disha Act — Criminal Law (AP Amendment) Act 2019, to constitute special courts in every district for speedy trial of specified offenses against women and children and for amending sections in the Indian Penal Code, 1860, and the Code of Criminal Procedure, 1973, adding new sections and awarding capital punishment to those convicted of rape.
• The bill states that the period of disposal of appeals will be reduced to 3 months.
• The bill also deals with setting up of ‘Women and children offenders register’ in electronic form.

2. ‘Centre in talks with J&K, Ladakh on special status’

Context:

Abrogation of Article 370 and the subsequent formation of the Union territories of Jammu and Kashmir (J&K) and Ladakh.

Details:

• The Ministry of Home Affairs (MHA) is holding consultations with the Union Territories of Jammu and Kashmir (J&K) and Ladakh to grant them “special status” on the lines of Article 371 of the Constitution.
• Article 371 provision is applicable in the States of Maharashtra, Gujarat, Nagaland, Assam, Manipur, Goa, Andhra Pradesh, Sikkim, Arunachal Pradesh and Karnataka to protect their unique cultural identity and economic interest.
• In Maharashtra and Gujarat, the provision enables separate ‘boards’ in certain areas for “equitable allocation of funds for developmental work” and “adequate opportunity for employment in service under the control of the State government.”
• There have been demands that the UT of Ladakh be brought under the Sixth Schedule of the Constitution to provide it protection as a tribal area.

1. Moody’s cuts India GDP forecast to 5.6% for 2019

2. RBI central board meets over cooperative banks

Context:

The RBI Central Board’s review of Urban Cooperative Banks (UCBs).

Details:

• The RBI Central Board reviewed the functioning of the urban cooperative banks and enforcement framework in the backdrop of scam in the Punjab and Maharashtra Cooperative (PMC) Bank affecting lakhs of depositors.
• The Board’s discussions focused on issues related to urban cooperative banks, the extension of the enforcement policy and framework to cooperative banks and NBFCs (non-banking financial companies).

Co-operative banks:

• Co-operative banks, which are distinct from commercial banks, were born out of the concept of co-operative credit societies where members from a community come together to extend loans to each other, at favourable terms.
• Credit co-operatives (or co-operative banks) are broadly classified into urban or rural co-operative banks based on their region of operation. Urban co-op banks are classified into scheduled and non-scheduled banks.
• There are three key points of difference between scheduled commercial banks and co-operative banks.
• Unlike commercial banks, UCBs are only partly regulated by the RBI. While their banking operations are regulated by the RBI, which lays down their capital adequacy, risk control, and lending norms, their management and resolution in the case of distress is regulated by the Registrar of Co-operative Societies either under the State or Central government.
• Unlike commercial banks that are structured as joint-stock companies, UCBs are structured as co-operatives, with their members carrying unlimited liability.
• While there is a clear distinction between a commercial bank’s shareholders and its borrowers, in UCB, borrowers can double up as shareholders.
• In the event UCBs fail, deposits with them are covered by the Deposit Insurance and Credit Guarantee Corporation of India up to a sum of Rs.1 lakh per depositor, the same as for a commercial bank.

Significance:

• UCBs are attractive for retail savers and small businesses because they offer attractive interest rates on deposits, far higher than commercial banks.
• UCBs in 2018 managed Rs.4.56 lakh crore in deposits, had advances of Rs.2.80 lakh crore and managed total assets of Rs.5.63 lakh crore. It constitutes a large proportion of credit in India.

Concerns:

• After initially encouraging UCBs to spring up all over India for financial inclusion, the RBI began to wake up to their poor governance from 2005 when it stopped issuing new UCB licenses. With many of these banks failing, and the RBI encouraging weak ones to merge, the number of UCBs operating in India has shrunk from 1,926 in 2005 to 1,551 by 2018.
• The RBI has also been trying to improve governance at these banks by putting up a Board of Management to oversee them. But the PMC Bank case reveals that a lot of the activities still escape RBI’s oversight.
• PMC Bank is one of the top five urban co-operative banks in the country.
• Statutory inspection of PMC by the RBI had revealed large group exposure towards Housing Development and Infrastructure Ltd.’s (HDIL) group companies to the tune of about Rs.6,226.01 crore pointing towards concentrated lending which is not allowed as per the current regulations.
• Out of the total exposure of Rs.6,226.01 crores at the end of March 2019 to the HDIL group, only Rs. 439.58 crores was disclosed to the RBI and the remaining Rs. 5,786.43 crores remained undisclosed. This points towards the undisclosed bad loans, which went undetected even by the regulators. The depositors’ money is being put to risk.
• Following exposure of the scam in the PMC Bank, which had over 9.15 lakh depositors, the RBI had imposed restrictions on withdrawals.
• Past investigations have revealed instances of accounting fraud, funds diversion and politically motivated lending at UCBs.
• Though the PMC Bank case is not the first such case in UCBs, yet the regulations in place have not been able to control such malpractices in UCBs.

3. No talks yet in FinMin on GST hike: FM

Context:

Chief Economic Advisor’s (CEA) update on the progress made after governments reform measures to revive the economy.

Details:

Moves to revive economy:

Liberalization:

• On steps to boost investment, the government’s continuous liberalization reforms had resulted in record foreign direct investments of $35 billion in the first half of 2019-20, up from $31 billion in the first half of the previous year. It marks an impressive 13% growth.

Increasing Government expenditure:

• The government has already undertaken 66% of the budgeted capital expenditure of Rs.3.38 lakh crore for the current fiscal year.

Other observations:

Repo-rate linked loans:

• Following the Reserve Bank of India’s guidelines mandating banks to link their lending rates to external benchmarks, all public sector banks had introduced repo rate-linked loan products. As of November 27, 8.18 lakh repo-linked loans, amounting to Rs.72,201 crores, had been sanctioned.

Composition of employment:

• The composition of employment in the country was gradually changing. While casual workers made up 30% of the workforce in 2011-12, they made up 25% in 2017-18. This shift has been towards salaried employment, which rose to 23% in 2017-18 from 17% in 2011-12.
• In the same period, the proportion of workers in agriculture had decreased to 44% from 49%. The proportion in services had increased to 31% from 27%, and in manufacturing to 25% from 24%.

Category: ENVIRONMENT AND ECOLOGY

1. ‘Need community-driven, decentralised solutions to water crisis’

Context:

Ramon Magsaysay awardee Rajendra Singh’s talk on “Citizen-centric Advocacy and Water Literacy in India”

Details:

The water crisis in India:

• Sharing data on water crisis in India, Dr. Singh, also the winner of the Stockholm Water Prize, said that in 2019, 190 districts were flooded while 365 districts across 17 states faced drought. He said that 72% of India faced high to extremely high water stress.
• Water in 2.65 lakh villages across the country was not fit for drinking.

Solutions propounded:

Awareness generation:

• There is an urgent need for a “water literacy” movement in India and especially in urban areas to create awareness of the problem.
• There is the need for a national water-policy which must be people-centric.

Decentralized approach:

• Rajendra Singh, better known as ‘The Waterman of India’, believes that community-driven, and decentralized water management solutions are the answers to the country’s water crisis. And that, though the water crisis is a global problem, the solution to it has to be local.

Water harvesting:

• Singh has asserted that the solution to the water crisis does not lie in the linking of the rivers, but in water harvesting.
• In metro cities such as Delhi, Gurugram, Faridabad, and Meerut, where the problem of depleting groundwater was even more severe, rainwater should be harvested and not allowed to be mixed with sewage.

Focus on Agricultural water productivity:

• There is a need for congruity between the crop and the rain patterns since around 80% of the water is used in agriculture.

Concept of River rights:

He has asserted that it is high time to talk about the “river rights” and not just human rights. India has had an age-old tradition of respect for water and can offer solutions to the world.

Works carried out:

• Referring to the community-based efforts in water harvesting in Rajasthan for more than four decades, Dr. Singh said that around 12,000 waterbodies were built leading to recharge of 2.5 lakh tube wells and reverse migration of around 17 lakh people.

Nothing here for today!!!

1. Twin troubles

2. Savings with a bonus — financial peace of mind

Context:

Current state of flux in the financial sector of India.

Significance of a vibrant financial system:

• Indian savers have access to simple fixed return products offering safety of capital.
• The borrowers be it the government or the private players have access to finances at affordable rates.

Current concerns:

Lack of Safe investment options:

• The confidence that ordinary Indian savers repose in guaranteed return products has been hit due to a few recent events.
• There was the scare about public sector banks being placed under prompt corrective action by the Reserve Bank of India (RBI).
• There were the defaults by some AAA-rated non-banks.
• The recent RBI’s strictures on Punjab & Maharashtra Co-operative Bank Limited (PMC) have cast doubts on the safety of co-operative banks, and the gaps in the working of deposit insurance.

Lack of financial literacy:

• A majority of households in India have a subsistence level of income and scant access to financial literacy.
• The average Indian earned a per capita income of Rs.1.26 lakh in FY19. A Global Wealth report from Credit Suisse (October 2019) found that the median wealth of an Indian adult was $3,042 (Rs. 2.1 lakh). A survey on financial literacy among Indian savers by the Tarun Ramadorai committee in 2015, found that over 30% of savers did not grasp the concept of compound interest.
• This highlights the crying need for Indian savers to have access to simple fixed return products that offer complete safety of capital without their having to dig into balance sheets.
• The small savings schemes (also called national savings schemes) from India Post caters to the needs of the Indian savers with limited financial literacy by providing an attractive investment option. Given that these schemes make up part of Central government borrowings, they are sovereign-guaranteed.

Below par performance of small savings scheme:

• Despite the attractiveness of the small savings scheme, numbers from the RBI show that by the end of FY19, while commercial banks were sitting pretty on deposits of Rs.126 lakh crore, small savings schemes managed just Rs.8.9 lakh crore. HDFC, a private sector non-bank, has managed to garner the same volume of deposits (Rs.1.2 lakh crore) as post office time deposits with their massive outreach.

Way forward:

• There is immense scope for reviving the popularity of the post office schemes, if the Central government can make five design changes that tailor them to better meet the needs of small savers.

Transparent Spreads:

• In a bid to wean savers away from administered interest rates, post office schemes were transitioned to floating rates by pegging their interest rates to government securities with comparable maturity. Over time though, the quarterly rate changes have acquired a life of their own, bearing limited correlation to market rate movements.
• There is nothing wrong, in the Central government offering small savers with special needs, a premium over prevailing market interest rates. But to make such rate moves transparent, it is best that the Government specifies and sticks to a fixed spread over G-sec rates for each scheme.
• The banking lobby is bound to be up in arms against “high” rates on small savings impeding transmission. But the caps on individual investments in the more popular schemes (Rs.1.5 lakh for Public Provident Fund, Rs.15 lakh for Senior Citizens Savings Scheme (SCSS), Rs.4.5 lakh for Monthly Income Account) restrict the sums that savers can park in these schemes. Such caps can be extended to all schemes with high spreads.

Long term schemes:

• Indian savers have felt a need for 10-year or 20-year fixed return instruments to park their long-term money. Presently though, a majority of debt options available to them are in the one to five-year bucket.
• Even among the post office schemes, six of the nine available ones cater to savings needs for one to five years only. Investors who would like a longer-term option have just two choices — the Public Provident Fund (PPF, 15 years) and Kisan Vikas Patra (KVP, 9 years), as the Sukanya Samriddhi Yojana is restricted to those with a girl child.
• Re-introducing National Savings Certificates in the 10, 15 and 20-year tenors can meet this need while helping the Central government source long-term funds for capital spending.
• While deposits with private entities offer both regular income and cumulative options, with post office schemes it is an “either or” choice. Having both options on the menu can help savers decide whether they want regular cash flows or compounding benefits.

Friendlier tax breaks

• Today, most post office schemes offer tax breaks on the principal invested under Section 80C but their returns are taxed at income tax slab rates (the only exceptions being PPF and Sukanya Samriddhi).
• Reversing the above position may render these schemes more attractive to small savers. For savers whose income levels are likely to be at or below the lowest tax slab, the 80C benefit has limited utility. But an extra percentage point in tax-free returns can mean a great deal.
• If the Central Government is loath to extend such tax benefits to all post office schemes, it can restrict them to special-purpose schemes.
• Taxation on more than three-year small savings products that accumulate interest, needs to be brought on a par with market products and given inflation indexation benefits.

Exit options:

• Small savers may like the predictability of a fixed return for the long term. But given their limited savings, they also need early exit options in case they are beset by an emergency.
• While the time deposits and SCSS offer early exit on fairly simple terms, early withdrawals from the PPF or Sukanya Samriddhi are subject to convoluted conditions. Doing away with bureaucratic rules for investors to get their hands on their own money is critical to make post office schemes more attractive to their target audience.

Better customer service:

• The foremost reason savers cite in shying away from post office schemes despite their safety and reasonable returns is the woefully poor customer service that they need to deal with.
• At a time when Indians from every strata have taken to digital transactions, India Post continues to rely on archaic modes of working in dealing with customers.
• Its insistence on a paper application process, old-fashioned passbooks, cheque payments and branch visits ensures a process that is time-consuming and arduous for those seeking to invest their money with it.

Conclusion:

• If India Post can shed its half-hearted attempts to transform itself into a payments bank and convert itself into a digitally enabled, pure deposit-taking bank, it can render a yeoman service both to the government and small savers of this country.

Q1. Which of the following statements are correct?

Q2. Which of the following statements are wrong?

Q3. which of the following statements are correct?

Q4. Which of the following statements are correct?