14 December, 2019
0 Min Read
|GS-II||Shinzo Abe defers visit to India amid North-East protests||International Relations|
|Boris Johnson wins huge majority||International Relations|
|Centre in talks with J&K, Ladakh on special status|
|Targets missed, Accessible India campaign’s deadline extended|
|In a first, regulator hikes prices of essential medicines|
|GS-III||Govt’s steps showing some results, says FM||Economic Issues|
|Indices soar on U.S.-China trade deal||Economic Issues|
Syllabus subtopic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora.
Prelims and Mains focus: about Citizenship Amendment Act 2019 and the diplomatic pressure faced by India, About Indo-japan relations
News: Japanese Prime Minister Shinzo Abe’s visit to India for a planned summit with Prime Minister Narendra Modi has been deferred amid violent protests over the citizenship law in Assam and elsewhere in the North-East.
The Japanese government clearly conveyed to New Delhi that it would not be possible for Abe to travel to Guwahati in view of large-scale protests in the northeastern region, news agency PTI reported, citing diplomatic sources.
However, given the importance of Japanese-funded infrastructure projects in the North-East, it was expected to be held in Guwahati.
Resentment among Indian States
Some state governments have said they will not implement the amended Citizenship law. West Bengal chief minister Mamata Banerjee said the amended law will not be implemented in West Bengal. Besides, Punjab, Kerala, Madhya Pradesh and Chhattisgarh have voiced their disapproval of the law.
What does the Citizenship Amendment Act propose?
The Citizenship (Amendment) Bill was signed into law by President Ramnath Kovind late on Thursday night.
The amended law says that Hindus, Sikhs, Buddhists, Jains, Parsis and Christians who have come to India till 31 December 2014 from Pakistan, Bangladesh and Afghanistan due to religious persecution are eligible for Indian citizenship.
India and Japan have robust economic and defence ties bolstered by heads of state-level annual summits. Both nations signed deals for defence exchange and technology cooperation as well as for protection of classified military information during Prime Minister Abe’s visit to India in December 2015.
These deals lay down the framework for enhanced cooperation in defence including through joint research, development and production.
Syllabus subtopic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora.
Prelims and mains focus: about Brexit and its consequences for geopolitics in Europe and the world
News: Britain was speeding towards Brexit on Friday after Prime Minister Boris Johnson won a crushing election victory, ending three years of uncertainty since the country decided to leave the bloc.
Exiting the European Union (EU), a goal Mr. Johnson has pursued relentlessly since he put himself forward as the face of the victorious “Leave” campaign in a 2016 referendum, is Britain’s biggest leap into the unknown since the Second World War..
Later, he went to Buckingham Palace to ask Queen Elizabeth for permission to form a new government — a formal step required under the U.K.’s constitutional monarchy system.
Results pouring in from the 650 parliamentary constituencies showed that Mr. Johnson’s Conservative Party had trounced its main opponent, winning 365 seats to the Labour Party’s 203. The Scottish National Party won 48, while Liberal Democrats got 11 seats.
A vindication for Mr. Johnson and his simple campaign message “Get Brexit Done”, the result represented the biggest House of Commons majority for the Conservatives since Margaret Thatcher’s 1987 triumph.
Mr. Johnson is now free to lead his country swiftly out of the vast trading bloc, but faces the daunting task of negotiating trade deals around the world, not least with the EU itself, and of keeping a divided kingdom in one piece.
About the Brexit issue
The Brexit issue, which has consumed politics and the public debate since 2016, has eroded traditional party loyalties, dividing the nation along new fault lines. The Brexit effect was most starkly illustrated by the crumbling of Labour’s so called Red Wall, a rampart of working class areas across northern and central England where most people had voted “Leave” in 2016.
Frustrated at the country’s failure to quit the EU and at Labour’s equivocal stance on Brexit, large numbers of voters deserted the party and flocked to the Conservatives.
The Irish backstop
The “Irish backstop” is effectively an insurance policy in UK-EU Brexit negotiations. It’s meant to make sure that the Irish border remains open (as it is today) whatever the outcome of the UK and the EU’s negotiations about their future relationship after Brexit.
The “Irish backstop” would kick in at the end of the transition period if the UK and EU had failed to negotiate a future trade deal that kept the Irish border open as it is today.
Under the backstop the whole of the UK would enter a “single customs territory” with the EU. There are many parts to this but essentially there would be no tariffs on trade in goods between the UK and the EU and some (though not all) trade restrictions would be removed.
However, Northern Ireland alone would remain aligned to some extra EU rules to ensure the Irish border remains open as it is today. These separate regulations for Northern Ireland would mean there would be some checks on goods entering Northern Ireland from the rest of the UK.
The Irish backstop has been highly controversial among some MPs, and is one of the main reasons why the withdrawal agreement has so far failed to pass through parliament. The new Prime Minister, Boris Johnson, now claims the backstop is “dead”.
Syllabus subtopic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
Prelims and mains focus: about the ‘special status’ and how is it different from ‘special cateogory status’; benefits associated with them
News: 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, a senior government official said.
Jammu and Kashmir enjoyed a special status as per Article 370 and also Special Category Status. But now that Article 35A has been scrapped and it has become a union territory with legislature, SCS doesn't apply to J&K anymore.
People in Leh and Ladakh were initially very happy and by and large welcomed the announcement of the Union Territory as opposed to the people of Kargil. However, that initial euphoria is now giving way to a lot of apprehension, fear and disenchantment, if they are not able to protect and safeguard their resources or their unique cultural identity.
Where is Article 317 applicable?
The said provision is applicable in 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.”
The proposal is still at a consultation stage. The Centre has sought response from the two UTs.
Meaning and history of the term SCS
SCS is a classification given by Centre to assist in the development of those states that face geographical & socio-economic disadvantages like hilly terrains, strategic international borders, economic & infrastructural backwardness and non-viable state finances.
What is Special Category Status to states and how is it different from Special Status?
Special Category Status (SCS) is a classification given by Centre to assist in the development of those states that face geographical and socio-economic disadvantages like hilly terrains, strategic international borders, economic and infrastructural backwardness, and non-viable state finances.
The concept of a special category status was first introduced in 1969 when the fifth Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks, establishing special development boards, reservation in local government jobs, educational institutions, etc.
This formula was named after the then Deputy Chairman of the Planning Commission, Dr Gadgil Mukherjee and is related to the transfer of assistance to the states by centre under various schemes.
Initially, three states; Assam, Nagaland and Jammu & Kashmir were granted special status but from 1974-1979, five more states were added under the special category. These include Himachal Pradesh, Manipur, Meghalaya, Sikkim and Tripura.
In 1990, with the addition of Arunachal Pradesh and Mizoram, the states increased to 10. The state of Uttarakhand was given special category status in 2001.
But after the dissolution of the planning commission and the formation of NITI Aayog, the recommendations of the 14th Finance Commission were implemented which meant the discontinuation of the Gadgil formula-based grants.
The 14th Finance Commission effectively removed the concept of special category status after its recommendations were accepted in 2015.
The rationale for special status is that certain states, because of inherent features, have a low resource base and cannot mobilize resources for development.
Who grants special status to states?
The decision to grant special category status lies with the National Development Council, composed of the prime minister, union ministers, chief ministers and members of the planning commission, who guide and review the work of the commission.
Special category status for plan assistance has been granted in the past by the National Development Council (NDC) to some states that are characterized by a number of features necessitating special consideration.
Criteria for special category status:
Can special category status be granted to more states now?
In the present scenario, it is believed that no more states can be given the status of a special category state.
The Constitution of India does not include any provision for the categorization of any state in India as a 'special category state.
However, a wide range of provisions are available to as many as 10 states that have been listed under Articles 371, 371-A to 371-H, and 371-J.
Some of these states are Maharashtra and Gujarat, Nagaland, Assam, Manipur, Andhra Pradesh, Sikkim, Mizoram, Arunachal Pradesh and Telangana and Goa. (Art 371I deals with Goa, but does not include any provision that can be termed 'special'.)
While these set of provisions were incorporated into the Constitution by Parliament through amendments under Article 368, Articles 370 and 371 have been part of the Constitution from the time of its commencement on January 26, 1950.
Why these special provisions?
The intention behind these provisions is to safeguard the interest and aspirations of certain backward regions or to protect cultural and economic interests of the tribal people or to deal with the disturbed law and order in some parts.
Benefits states confer with special category status:
States which are granted special category status enjoy several benefits.
1. The central government bears 90 percent of the state expenditure on all centrally-sponsored schemes and external aid while rest 10 percent is given as loan to state at zero percent rate of interest.
2. Preferential treatment in getting central funds.
3. Concession on excise duty to attract industries to the state.
4. 30 percent of the Centre's gross budget also goes to special category states.
5. These states can avail the benefit of debt-swapping and debt relief schemes.
6. States with special category status are exempted from customs duty, corporate tax, income tax and other taxes to attract investment.
7. Special category states have the facility that if they have unspent money in a financial year; it does not lapse and gets carry forward for the next financial year.
What is the difference between special category status and special status?
Which states have been demanding special category status
Syllabus subtopic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Prelims and Mains focus: about Accessible India Campaign and its significance, steps taken for its implementation
News: The deadline for the government’s Accessible India campaign that aims at making public spaces friendly for persons with disabilities has been extended due to “slow progress,” the Ministry of Social Justice and Empowerment has informed the Lok Sabha.
Due to slow progress, revised deadlines have been extended to March 2020.
Steps taken and challenges
Statewise details of the facilities for the disabled at railway stations were not maintained, but the Indian Railways was committed to making its stations accessible.
Shortterm facilities like standard ramps, nonslippery walkways, signages, disabledfriendly toilets and help desks are included in the plan.
In the longterm, inter-platform transfer and engraving on the edges of the platforms are proposed. Regarding Central government buildings maintained by the Central Public Works Department, 211 CPWD buildings had been made accessible. In all, a total of ?354.45 crore had been released for making 1,058 public buildings accessible around the country, the reply said.
Under the Rights of PwD Act, 2016, all existing and new public buildings have to follow the accessibility standards notified on June 15, 2017. The existing buildings were given five years to comply.
The original deadlines under the Accessible India campaign were July 2016 for conducting an accessibility audit of 2550 of the most important government buildings in 50 cities and making them completely accessible and March 2018.
Syllabus subtopic: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.
Prelims and Mains focus: about NPPA and its mandate, DPCO order 2013; India’s efforts to regulate essential medicines and check price hike
News: To ensure supply of crucial medicines, India’s drug pricing regulator has allowed an increase in the maximum retail prices of 21 drugs currently under price control by as much as 50 per cent.
This is the first time the National Pharmaceutical Pricing Authority (NPPA) — which is known to slash prices of essential and life-saving medicines — is increasing prices in public interest to prevent patients opting for costlier alternatives in the face of shortage of these drugs.
The Authority is of the considered view that unviability of these formulations should not lead to a situation, where these drugs become unavailable in the market and the public is forced to switch to costly alternatives.
Where will it apply?
The decision by the NPPA, taken at a meeting on December 9, will apply to formulations like the BCG vaccine for tuberculosis, vitamin C, antibiotics like metronidazole and benzylpenicillin, anti-malarial drug chloroquine and leprosy medication dapsone.
Most of these drugs are used as first line of treatment and are integral to public health programmes.
Present scenario of affordable drugs in India
With India still dependent on China for over 60 per cent of its API (active pharmaceutical ingredient) requirement, higher API costs for price-controlled medicines eat into profits and sometimes make production of these drugs unviable here.
For instance, costs of ingredients to make vitamin C went up as much as 250 per cent, leading to a 25-30 per cent shortage of this drug in India last year.
Suppliers of key ingredients do not want to negotiate the prices they charge companies, because they are not affected by price control. In such an environment, firms would begin to exit the market over time.
About Drugs (Prices Control) Order (DPCO)
The Drugs Prices Control Order, 1995 is an order issued by the Government of India under Sec. 3 of Essential Commodities Act, 1955 to regulate the prices of drugs.
The Order interalia provides the list of price controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by Govt., penalties for contravention of provisions etc.
For the purpose of implementing provisions of DPCO, powers of Govt. have been vested in NPPA. Later, the Drugs (Prices Control) Order (DPCO) 2013 was notified.
Why the DPCO is issued under Essential Commodities (EC) Act ?
Drugs are essential for health of the society. Drugs have been declared as Essential and accordingly put under the Essential Commodities Act.
Are all the drugs marketed in the country under price control ?
No. The National List of Essential Medicines (NLEM) 2011 is adopted as the primary basis for determining essentiality, which constitutes the list of scheduled medicines for the purpose of price control. The DPCO 2013 contains 680 scheduled drug formulations spread across 27 therapeutic groups. However, the prices of other drugs can be regulated, if warranted in public interest.
About NPPA and its mandate
National Pharmaceutical Pricing Authority (NPPA), was established on 29th August 1997 as an independent body of experts as per the decision taken by the Cabinet committee in September 1994 while reviewing Drug Policy.
The Authority, interalia, has been entrusted with the task of fixation/revision of prices of pharmaceutical products (bulk drugs and formulations), enforcement of provisions of the Drugs (Prices Control) Order and monitoring of the prices of controlled and decontrolled drugs in the country.
Why are the prices of medicines rising ?
The reasons for rise in the prices of medicines are :
Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Prelims focus: about NBFC, Capital expenditure, Alternative Investment Funds
Mains focus: about the recent slowdown in the economy and measures taken by the govt. to check it
News: A series of measures taken by the government in the last few months to revive growth has started showing some results and the Centre will continue to support the industry and intervene as and when required, finance minister Nirmala Sitharaman said.
Background: India’s economic downturn had deepened in the September quarter with growth down to 4.5%, its slowest pace since March 2013. Tepid consumption and sluggish private investment has been the pain points for the economy.
Measures taken by the government to boost consumption and improve liquidity in the system.
What more is to be done?
Non-banking finance companies (NBFCs) are a fundamental part of the Indian financial system playing a significant role in nation building and financial inclusion. It plays a complementary role to the banking system in promoting financial inclusion. There are multiple varieties of NBFCs and so the sector demands a well-coordinated response from all stakeholders keeping in mind the differential contextual requirements of different categories of NBFCs.
The Non-Banking Financial Companies (NBFCs) are the financial institutions that offer the banking services, but do not comply with the legal definition of a bank, i.e. it does not hold a bank license. Both banks and NBFCs are financial intermediaries. NBFCs can lend and make investments. Hence, their activities are akin to that of banks. However, there are a few differences between NBFCs and banks:
Capital expenditure (Capex)
Capital expenditure has strong multiplier effects as it involves acquisition of assets such as land, buildings, machinery, and equipment.
Alternative Investment Funds
As defined in Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, AIFs refer to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP).
AIF does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities.
Hence, in India, AIFs are private funds which are otherwise not coming under the jurisdiction of any regulatory agency in India.
As per SEBI (AIF) Regulations, 2012, AIFs shall seek registration in one of the three categories:
Category I: Mainly invests in start- ups, SME’s or any other sector which Govt. considers economically and socially viable.
Category II: These include Alternative Investment Funds such as private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other Regulator
Category III : Alternative Investment Funds such as hedge funds or funds which trade with a view to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government or any other Regulator.
Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Prelims and Mains focus: about various indices and how they perform during fluctuations in the market
News: Tracking strong gains in the global markets, Indian benchmark indices rose significantly on Friday with the benchmark Sensex closing above the 41,000mark for the first time since November 28. The broader Nifty also managed to close above the psychological 12,000 mark.
What made the indices jump?
The news report on a possible trade deal between the U.S. and China and exit polls showing a comfortable win for Boris Johnson in the U.K. elections triggered gap-up start in the Nifty.
Reports suggested U.S. and China have arrived at a consensus on the first phase of their trade talks.
Other Asian indices
The effect was clearly visible across markets with Hang Seng gaining nearly 700 points while Nikkei was up almost 600 points. The benchmarks of most Asian markets ended with strong gains on Friday.
What is Nifty and Sensex?
In order to understand what is nifty and sensex, you need to understand the Indian stock exchanges first. Now, let’s discuss the two major stock exchanges in India i.e the ‘Bombay stock exchange’ and the ‘National stock exchange’ along with their indexes.
Bombay Stock Exchange (BSE)
Bombay stock exchange is an Indian stock exchange located at Dalal Street, Mumbai, Maharashtra.
It was established in 1875 and is Asia’s oldest stock exchange.
It is the world’s fastest stock exchange, with a median trade speed of 6 microseconds.
The BSE is the world’s 10th largest stock exchange with an overall market capitalization of $2.29 Trillion as of April 2018.
More than 5500 companies are publicly listed on the BSE.
What is an Index? Since there are thousands of company listed on a stock exchange, hence it’s really hard to track every single stock to evaluate the market performance at a time. Therefore, a smaller sample is taken which is the representative of the whole market. This small sample is called Index and it helps in the measurement of the value of a section of the stock market. The index is computed from the prices of selected stocks.
Sensex, also called BSE 30, is the market index consisting of 30 well-established and financially sound companies listed on Bombay Stock Exchange (BSE).
30 companies are selected on the basis of the free-float market capitalization.
These are different companies from the different sectors representing a sample of large, liquid and representative companies.
The base year of Sensex is 1978-79 and the base value is 100.
It is an indicator of market movement.
If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE has gone down. If Sensex goes up, it means that most of the major stocks in BSE went up during the given period.
For example, suppose the Sensex is 26,000 today. If Sensex drops to 25,950 tomorrow, it means that the majority of the 30 companies financial condition is not good i.e. their share price is falling.
National Stock Exchange (NSE):
The National Stock Exchange (NSE) is the leading stock exchange of India, located in Mumbai, Maharashtra, India. It was started to end the monopoly of the Bombay stock exchange in the Indian market.
NSE was established in 1992 as the first demutualized electronic exchange in the country.
It was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered the easy trading facility to the investors spread across the length and breadth of the country.
NSE has a total market capitalization of more than US$ 2.27 trillion, making it the world’s 11th-largest stock exchange as of April 2018.
NSE’s index, the NIFTY 50, is used extensively by investors in India and around the world as a barometer of the Indian capital markets.
Nifty, also called NIFTY 50, is the market index consisting of 50 well-established and financially sound companies listed on National Stock Exchange of India (NSE).
The base year is taken as 1995 and the base value is set to 1000.
Nifty is calculated using 50 large stocks which are actively traded on the NSE.
The 50 companies are selected on the basis of the free float market capitalization.
Here, the 50 top stocks are selected from different 24 sectors.
Nifty is owned and managed by India Index Services and Products (IISL)
Since inception in 1995, Nifty has given a return of 11.13% CAGR (till April 30, 2018).
NOTE: The Sensex and Nifty are both indicators of market movement. If the Sensex or Nifty go up, it means that most of the stocks in India went up during the given period. With respect to NIFTY and NSE, we can say that:
If Nifty goes up, this means that the stock price of most of the major stocks on NSE has gone up.
On the other hand, if nifty goes down, this tells you that the stock price of most of the major stocks on NSE has gone down.
When Sensex/Nifty increases, it shows the economic growth of the country. For example, during the Indian recession of 2008-09, the Sensex fell over 12000 points (-60%).
Importance of Market Index:
The market indexes are the barometer for the market behavior. It gives a general idea about whether most of the stocks have gone up or gone down.
Often, Market Index is used as a benchmark portfolio performance.
It is used as a reflector of investor’s sentiments.
Market indexes are used for sorting and comparison of the various companies.
Indices act as an underlying for Index Funds, Index Futures, and Options.
They are used in passive fund management by Index funds.
The index can give a comparison of returns on investments in stock markets as opposed to asset classes such as gold or debt.
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