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05 November, 2019

15 Min Read

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Paper Topics Subject
GS-II Regional Comprehensive Economic Partnership (RCEP)
Agreement on Reciprocal Logistics Support (ARLS) International Relations
GS-III NBFC Liquidity Framework Economic Issues
Odd Even Scheme
GS-II :
Regional Comprehensive Economic Partnership (RCEP)

Syllabus subtopic: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

 

News:  In the recently held Regional Comprehensive Economic Partnership (RCEP) Summit in Thailand,  India decided not to finalize the RCEP trade deal. India has expressed its concerns over lowering and elimination of tariffs on products from other countries, as it would negatively affect the domestic agricultural and industrial sector.

Prelims Focus: about RCEP.

Mains Focus:  India’s concerns due to which it refused to sign 

Why India refused to sign it?

  1. Domestic industry and dairy farmers had strong reservations about the trade pact.
  2. India’s trade deficit with the RCEP nations is $105 billion, of which China alone accounts for $54 billion.
  3. The worry is also over Chinese manufactured goods and dairy products from New Zealand flooding Indian markets, hurting domestic interests.
  4. The trade agreement was also seen as being detrimental to the government’s Make in India initiative. India was looking for specific rules of origin to ensure the trade pact wasn’t abused by non-partner countries and an auto-trigger mechanism to protect it from a surge in imports. 
  5. Ecommerce and trade remedies were among other key areas of concern that failed to find satisfactory redressal.
  6. India was also worried about keeping 2014 as the base year for tariff reductions. 

Why Confederation of Indian Industry (CII) called for signing of RCEP?

Trade within RCEP nations would increase. And India can leverage advantage in areas such as ICT, IT- enabled services, healthcare and education services.

It also provides an opportunity for India to tap large and vibrant economies and increase its exports. As the RCEP progresses and favourable tariffs and Rules of Origin (ROOs) kick in, India could become a major hub for coordinating regional value chains through itself.

India could serve not only as a major market for final markets but also as a base for third-country exports, primarily to West Asia, Africa and Europe.

 

Why farmers were opposed to this?

Trade tariffs: Farmers fear that the RCEP will permanently bring down import duties on most agricultural commodities to zero which will lead to countries looking to dump their agricultural produce in India which would lead to a drastic drop in prices.

This will aggravate the agrarian crisis even as the input prices in India are heavily taxed and farmers are not given profitable prices, resulting in substantial losses and farmer debts.

The dairy sector and plantations sector are going to be hit very hard. It is because New Zealand and Australia being part of RCEP will invariably lead to the dumping of their dairy products into India.

The south east Asian countries have larger and cheaper production of plantation crops like rubber, coconut, palm oil as compared to India and opening up of the markets will lead to a large inflow of these products given their price competitiveness.

The IPR clauses are likely to seriously impinge on farmers’ seed freedoms. Seed companies will get more powers to protect their Intellectual Property Rights, and farmers would be criminalized when they save and exchange seeds.

India’s food sovereignty would be at stake. Opening up of the markets will lead to dependence on foreign imports. Any differences in the future might impact the food import supply.

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GS-II : International Relations
Agreement on Reciprocal Logistics Support (ARLS)

Syllabus subtopic: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

 

News: India and Russia are finalising a defence agreement that will simplify interoperability and enable military platforms to receive support and supplies across bases in both nations- Agreement on Reciprocal Logistics Support (ARLS).

Prelims and mains focus: Key features, need for and significance of ARLS.

Agreement on Reciprocal Logistics Support (ARLS)

It is an arrangement that will allow access to India and Russia, to each other’s military facilities for supplies and fuel, expanding the logistics support and operational turnaround of the Indian military.

 

Benefits and mutual significance:

  1. This will be beneficial for the Indian Navy, which has a large number of Russian origin ships, that will get access to Russian ports for supplies and refuelling. It would be crucial for joint exercises.
  2. The air force too will benefit by finding it easier to deploy aircraft for the same purpose.
  3. This access will also be for ports in the Russian part of the Arctic, allowing access to energy resources there.
  4. Russia, on the other hand, will be able to access Indian ports and air bases.
  5. Russia has also assured India access to energy resources in the vast Arctic region.
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GS-III : Economic Issues
NBFC Liquidity Framework

Syllabus subtopic: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

News:

  • The Reserve Bank of India (RBI) has introduced ‘liquidity management framework’ for Non-Banking Financial Companies (NBFCs).
  • The new guidelines are applicable to all non deposit-taking NBFCs with an asset size of ?100 crore and above, systemically important Core Investment Companies and all deposit-taking NBFCs irrespective of their asset size.

 

Prelims focus: about the new liquidity norms.

Mains focus: requirement and significance of these norms.

  

Why this was necessary?

This has come following liquidity crunch among some NBFCs in meeting their recent repayment obligations after the collapse of the Infrastructure Leasing and Financial Services (IL&FS) group.

This was necessary to strengthen their asset-liability management following the liquidity crisis faced by these firms in the past year.

 

What’s changed?

  • Specific cap on negative asset liability mismatches for particular liquidity buckets.
  • NBFCs are mandated to maintain liquidity coverage ratios (LCR). LCR will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLA) to survive any acute liquidity stress scenario lasting for 30 days.
  • Net cumulative mismatches for 1-7 days, 8-14 days, and 15-30 days shall not exceed 10%, 10% and 20% of the cumulative cash outflows in the respective time buckets.
  • NBFCs should monitor their cumulative mismatches [running total] across all other time buckets up to one year by establishing internal prudential limits with the approval of the board.
  • The LCR requirement will be binding on NBFCs from December 1, 2020, with the minimum HQLAs to be held being 50% of the LCR, progressively reaching up to the required level of 100% by December 1, 2024.

Exemption from LCR norms: Core Investment Companies, Type 1 NBFC-NDs, Non-Operating Financial Holding Companies and Standalone Primary Dealers.

 

What caused the non-bank lending sector crisis?

  • NBFC crisis is being held up as one of the culprits of the current slowdown.
  • There is a near consensus that this crisis was triggered by the collapse of Infrastructure Leasing and Financial Services Ltd (IL&FS) and the unfolding of the problems of Dewan Housing Finance Corporation Ltd (DHFL).
  • Besides, Raising capital adequacy limits and liquidity margins for NBFCs might have tempered their profitability and hurt their valuations.
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GS-III :
Odd Even Scheme

Syllabus subtopic: Conservation, Environmental Pollution & Degradation, Environment impact assessment

 

News: The odd-even scheme for automobiles plying in Delhi has begun. Due to a steep deterioration in the air quality index or AQI in the city, the Environmental Pollution (Prevention and Control) Authority (EPCA) had to declare a public health emergency as a desperate measure to contain the silent killer.

Mains Focus: Odd-Even scheme; Delhi’s air pollution - reasons

 

About Odd-Even scheme

  • Innovative idea – The odd-even scheme was first introduced three years ago. It is an out-of-the-box idea with unproven claims on containing AQI levels.
  • Limited to 4 wheelers – It is terrific to focus attention on air pollution caused by automobiles. It exempts two-wheelers and does not allow privately-owned hybrids and CNG vehicles. 
  • Need for rains – Unless the rains turn up, and the cross winds regain momentum, Odd-Even is unlikely to bring down AQI below the prevailing hazardous levels.

Crisis

  • Annual event – For three years now, NCR has seen the pollution saga every winter.
  • Beyond one cause – There is a need to take the debate beyond the single causes like stubble burning.

 

Understanding the problem

Topography – NCR pollution problem is partly because of the nature of its topography. 

  • It is shaped like a saucer and hence is hugely dependent on a cross breeze.
  • This breeze serves it for most of the year, except in winter—to keep its AQI under control.
  • This is the reason why the stubble burning that happens in the early part of the year does not harm Delhi as much.

Growing vehicles

  • Vehicular pollution has been growing very sharply.
  • The emissions of PM by automobiles have surged by 40% in the eight years that ended 2018.
  • According to the Economic Survey put out by the Delhi government, there were 10.9 million vehicles in NCR at the end of 2018.
  • In the absence of winds, stubble burning and bursting of crackers send the pollution problem over the tipping point.

 

Need for a comprehensive solution

  • Public transport – Metro Rail has been critical in addressing transport woes of NCR’s working population. This has to be dovetailed with a robust public bus network.
  • Road design – government should focus on building and maintaining good roads and implementing laws to ensure only road-worthy vehicles ply.
  • Need for a public movement – the residents of Delhi have to force a public debate.
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