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17 January, 2020

24 Min Read

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Paper Topics Subject
GS-I Tipu Sultan Modern History
GS-II Mental Health Act, 2017
India to host SCO meet
China-Myanmar Economic Corridor (CMEC) International Relations
Capital Punishment
GS-III Current Account Deficit (CAD) Economic Issues
Debt Linked Savings Scheme (DLSS) Economic Issues
GS-I : Modern History
Tipu Sultan

Syllabus subtopic: Modern Indian history from about the middle of the eighteenth century until the present- significant events, personalities, issues

 

Prelims and Mains focus: about the controversy around Tipu Sultan of Mysore; his administration and religious policies

 

News: Even though the Karnataka State government is yet to officially announce its decision on whether lessons pertaining to Mysuru king Tipu Sultan should be dropped or retained, it is clear that the lessons will be retained for the 2020-2021 academic year.

 

Background

The controversy regarding the lessons on Tipu Sultan was raised by Madikeri MLA Appachu Ranjan who had written to the department seeking removal of the lessons terming Tipu a “fanatic”. Subject experts had argued that only “facts” pertaining to him were presented in the class six, seven and 10 textbooks and that he was “not glorified”.

 

Concerns:

The “removal” of Tipu from textbooks will fundamentally alter the history of early modern India, and make invisible one of the key individuals in the society and politics of South India in the second half of the 18th century, when the East India Company was rapidly expanding Britain’s colonial footprint over the country.

 

 

About Tipu Sultan (1750-1799)

Tipu Sultan, the Tiger of Mysore, was the Indian ruler who resisted the East India Company’s conquest of southern India. He had inherited the throne from his father Haidar Ali, who had driven out the previous Hindu dynasty.

He tried to build up an alliance to drive the British – ‘those oppressors of the human race’ – out of India and intrigued with the French in Paris and Mauritius. Tippu was instructed in military tactics by French officers in the employ of his father, Hyder Ali. In 1767 Tippu commanded a corps of cavalry against the Marathas in the Carnatic (Karnataka) region of western India, and he fought against the Marathas on several occasions between 1775 and 1779. 

He succeeded his father in December 1782 and in 1784 concluded peace with the British and assumed the title of sultan of Mysore. In 1789, however, he provoked British invasion by attacking their ally, the Raja of Travancore. By the Treaty of Seringapatam (March 1792) he had to cede half his dominions. 

He remained restless and allowed his negotiations with Revolutionary France to become known to the British. On that pretext the governor-general, Lord Mornington (later the marquess of Wellesley), launched the fourth Anglo- Mysore War. Seringapatam (now Srirangapatna), Tippu’s capital, was stormed by British-led forces on May 4, 1799, and Tippu died leading his troops in the breach

 

 

Conflicts with the British (Anglo-Mysore wars):

The Anglo–Mysore Wars were a series of four wars fought in India over the three decades of the 18th century between the British East India Company and the Kingdom of Mysore

First Anglo-Mysore War (1767-1769)

In 1767, Mysore was a powerful state under Hyder Ali. In 1769, the first Anglo-Mysore war was fought in which Haider Ali defeated the British and Treaty of Madras was signed between them. Haider Ali occupied almost the whole of Carnatic

Second Anglo-Mysore War (1780-1784)

Warren Hastings attacked French port Mahe, which was in Haider Ali’s territory. Haider Ali led a common front with Nizam and Marathas and captured Arcot (Capital of Carnatic State).

In July 1781, Haider Ali was defeated at Porto Novo by Eyre Coote and saved Madras. In December 1782, after the death of Haider Ali, the war was carried on by his son Tipu Sultan.

Tipu Sultan signed Treaty of Mangalore in March 1784 which ended the second Anglo-Mysore war.

 

 

Third Anglo-Mysore War (1789-1792)

The third war was fought between Tipu Sultan, and British East Indian Company began in 1789 and ended in Tipu’s defeated in 1792. In this war, Marathas and Nizam aided the British and Cornwallis captured Bangalore. The war ended by signing of Treaty of Seringapatna, between Tipu Sultan and Lord Cornwallis. In this treaty, Tipu ceded half of his territories and two of his son’s as a hostage of war.

 

 

Fourth Anglo-Mysore War (1799)

In Fourth War 1799, the British army led by Lord Wellesley attacked and defeated Tipu Sultan in a fierce war. He met a heroic death on 4th May 1799 while defending his capital Seringapatnam.

 

Tipu’s reform measures and administration:

Tipu was less worried about form and more about the substance of governance. He considered agriculture as the life blood of the nation and took steps for taking over derelict land and protection of the cultivator and his descendants. He had encouraged the farmers to cultivate commercial crops to overcome poverty and unemployment problems. He had several commercial depots in foreign countries such as Pegu, Muscat, Turkey and Istanbul for selling sandalwood. 

He introduced sericulture in Mysore on a large scale and maintained records about the cultivation of sericulture. He was primarily responsible for the construction of well laid out roads and communication facilities. He had given loans and subsidies to the farmers and provided the benefit of land revenue exemption. Tipu also promoted animal husbandry, horticulture, sericulture, social forestry and other branches of agriculture. 

Tipu wanted to develop the economy of Mysore State in a different way and make his citizens economically self-reliant and politically sovereign republics. He gave importance for the development of economic bonds between South India and the Persian Gulf. In a letter addressed to Chief of the factory at Muscat, Tipu had requested the Imam to send Dingies, a small vessel employed in the trade between Malabar Coast and Persian Gulf in return of rice produced in India. 

He wrote letters to Muscat to dispatch  expert shipbuilders to the Mysore territory. Maldive Islands continued to be an important naval dockyard during his time. Mangalore, Bhatkal, Coondapur and Tadadi became important naval centres of his times. Tipu also invited experts from Turkey, China, France and Iran and set up industries in Channapatna, Bidnur, Chitradurga, Bangalore and Srirangapatna. He had invited Chinese experts for improving sugar manufacturing in his territory. Pearl fisheries were encouraged by him in the Malabar coast. He sent a mission to France to import skilled workers and arsenals in 1785. 

He took measures to bring social reforms like ban on the use of liquor and all intoxicants, the ban on prostitution and the employment of female slaves in domestic service, the abolition of the Nayar practice of polyandry in Malabar and Coorg, the repeal of the custom of human sacrifice in the temple of Kali near Mysore town and restrictions on lavish extravagance for marriages, festivals and charities.

His administration saw a strong and well-organized central government, a well-knit district and provincial administration directly under the control of the centre, well-trained and disciplined civil, military and diplomatic services, uniform set of laws and the direct contact between the subjects and the state by the removal of intermediaries 

 

Tipu’s international diplomacy:

Tipu was greatly disappointed when he realized that local powers in India lacked national consciousness. Tipu tried his best to enlist the cooperation of both the Marathas and the Nizam, but none of them recognized the political sagacity and foresightedness of Tipu.

It was this factor which compelled him to develop friendly relations with foreign powers. He appointed trade agents and diplomatic missions to accomplish this goal of diplomacy. He tried to enlist the support of France, Turkey, Iran and Afghanistan, hoping to form a formidable front against the English by appealing to their religious sentiments. 

He had appealed to the French General to send a strong army of 10000 to be under the his authority within India. He was a member of Jacobin club of France. Tipu Sultan had strongly persuaded the French to assist him in the Third Mysore War against the British but they remained neutral because Tipu had initiated a war against the English at the wrong moment. 

Tipu made an attempt to cultivate diplomatic relations with the Ottoman Sultan and French King and assured them that they could share the British possessions in South India with him. Turkey did not have either the wish or the capacity to respond to Tipu’s diplomatic initiatives and France incurred severe loss in the war with Britain

 

Tipu’s religious idealism:

Tippu is being considered by many historians as a great secular ruler and a splendid supporter of Hindu temples. He consulted with astrologers of Ranganatha temple, Sreerangapattana before his every administrative or war attempts. He gifted the astrologers with lots of money. 

Believing, according to the predictions of astrologers, that he could  become the undisputed ruler of the whole of South India, after defeating the British, he performed all the suggested rituals in the Sri Ranganathaswamy Temple. It is only for the satisfaction of the Brahmin astrologers who used to study his horoscope that Tippu Sultan had patronised two temples. The wealth of many Hindu temple was confiscated before 1790 itself mainly to make up for the revenue loss  in the country.

By his six to eight years of presence in Malabar, the entire costal belt of the region converted to Islam. Some of the largest and wealthiest groups of families of Calicut were converted in mass to Islam. He renamed several places with Islamic tenor. His role in Malabar and Coorg region shows some elements of religious extremism and intolerance. 

But after being defeated in the first Anglo-Mysore war he started dealing cordially with the Hindus in his kingdom so as to avoid insurrection and get support in the face of the British power. The credit of re-consecration of Sharada idol made of sandalwood, the main deity at Sharada Peeta, Sringeri of Chikmagalur goes to him and his contributions to the Peeta are well documented.

When the Peeta came under attack from Maratha army when Sachidananda Bharathi was the pontiff, Tipu Sultan was waging a battle at Kannur in Kerala. On learning about the raid from the Marathas, he sent an army to Sringeri to drive away Marathas. The army was stationed at Sringeri to offer protection from further attacks. According to documentations Tipu brought back Sachidananda Bharathi again to Sringeri and offered donations in huge quantities and got consecrated a sandalwood idol of Sharada. 

Tipu Sultan was a ruler of the past and we cannot expect him to be Secular and tolerant in the modern sense. His history shows evidence of both statemenship and tolerance to Hindus along with persecution and forced conversions of Hindus. In his defence of Mysore against the British he showed the character of the highest order of Patriots. In his reformative and innovative measures he showed the character of a great administrative genius. There is enough evidence in history to celebrate or condemn Tipu Sultan.

But today there is an active project of communalizing history and there is focus on Politicising historical figures. In this project Tipu Sultan is a controversial figure as he can be interpreted both ways. In the interest of Indian National unity and to foster the genuine feeling of tolerance and brotherhood among communities it is better to look at the Tipu’s tolerant aspect rather than dividing the communities by bringing forth his intolerant measures. There is a need for constructive use of history

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GS-II :
Mental Health Act, 2017

Syllabus subtopic: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

 

Prelims and Mains focus: about the findings of the task force; The mental health act, 2017 and its significance; Mental health scenario in India

 

Context: More than two years after the Mental Health Act, 2017, was passed, life of the mentally ill in India, especially of women, has not improved.

 

Background

The joint task force was formed in 2018 by the Ministry of Health and Family Welfare, the Ministry of Social Justice and Empowerment, and Hans Foundation, a charitable trust. It reviewed and assessed the condition of those who had recovered from their illness, but were still languishing in mental homes for more than a year.

 

 

Findings of the joint task force

  • While the provisions of the Act discourage long-term institutionalization of the mentally ill, the government’s task force has found that around 36% of them were still lodged in mental hospitals, as they could not be rehabilitated, or because they were deserted by family members.

 

  • A recent directive of the Supreme Court and guidelines issued by the health ministry mandates that the period of stay in these institutions should not exceed six months.

 

  • On an average, the people were living in mental hospitals for six years, with the minimum duration as one year and the maximum 62 years. At least 48.4% of the participants had been living for between one and five years in these hospitals, accounting for the majority of users.

 

  • Shockingly, among long-stay users, 11.4% had been there for over quarter of a century, in effect, a better part of their lives had been spent within the confines of the mental homes, while 40 had spent 50 years or more.

 

  • They can all be discharged immediately, but where will they go? Nobody wants them. Institutions kept them on humanitarian grounds to prevent them from becoming homeless. To change this, we will have to first make the society more benevolent.

 

  • Gender differences were also observed in Uttar Pradesh and Jharkhand, where men on an average remained longer than women.

 

  • In Maharashtra, significant gender differences were observed with women hospitalized for more years than men, the report added. Pan- India, more women (54.26%) were  confined in state mental hospitals than men (45.74%).

 

  • The task force report said that surveyed people were diagnosed predominantly with schizophrenia (50.4%) followed by psychosis.

 

What did the task force recommend?

  • Institutions should not admit patients unless it is absolutely necessary. Re-integration with the family has higher success and those who do not have an family, can be placed in long-stay or halfway homes. Nobody should be hospitalised.

 

  • The task force has recommended constituting a national steering committee for inclusive living. The officials have found that complex multi-factorial social disadvantage, coupled with challenges in institutional care, accompanies their (patients) long-term stay at these facilities—a significant proportion has experienced homelessness.

 

  • The recommendations of the task force include entailing placements with the family and in community-based housing with supportive services and simultaneous enhancement of local-level mental health services. The aim of the report was to enable exit pathways and reintegrate such people into community living options.

 

About the Mental Health Act, 2017

 

 

 

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GS-II :
India to host SCO meet

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

 

Prelims and Mains focus: about the SCO meeting to be hosted by India this year; likely impact on Indo-Pak relations on the grouping and role of China

News: Prime Minister Imran Khan of Pakistan will be invited to participate in the Heads of Government Council meeting of the Shanghai Cooperation Organisation (SCO) that will be hosted in India this year, the Ministry of External Affairs said on Thursday. The invite move came hours after the UN Security Council discussed the situation in Kashmir.

 

Background

  • Prime Minister Khan who assumed office in 2018 has been a tough critic of India’s continued lockdown of Kashmir. He has also taken up the Citizenship (Amendment) Act 2019 and the National Register of Citizens both domestically and on global platforms.

 

  • Though his predecessor Nawaz Sharif had visited India in May 2014 for the “mini-SAARC summit”, Mr. Khan has not been invited to India till now. On Thursday, the Pakistani leader welcomed the discussion on Kashmir held at the UN Security Council in New York, saying that the meeting “reflects a recognition of the seriousness of the prevailing situation (in Kashmir).”

 

  • Wednesday’s meeting on Kashmir was the second such China-backed meeting on “The India-Pakistan Question” at the UNSC since India ended the special status of the erstwhile state of Jammu and Kashmir on August 5, 2019.

 

India-Pakistan at SCO

Since becoming full-time member of the SCO in 2017, both India and Pakistan have participated in multiple meetings of SCO and the Regional Anti-Terrorist Structure (RATS) despite hostilities and tension in Kashmir. The Heads of Government Council meeting is attended by the Prime Minister-level leaders of the member states that deliberate on the regional body’s economic and other pressing issues. The meeting also firms up SCO’s annual budget.

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GS-II : International Relations
China-Myanmar Economic Corridor (CMEC)

Syllabus subtopic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora.

 

Prelims and Mains focus: about China’s outreach to Myanmar and its significance; its impact on India; about CPEC; BRI

 

News: President Xi Jinping’s visit to Myanmar starting Friday promises to turn a region that was once known as the “back door” to China into a “highway” to the Bay of Bengal by launching multiple projects under the so-called China-Myanmar Economic Corridor. The CMEC, in turn, is being presented as a critical element of Beijing’s ambitious Belt and Road Initiative.

 

Context

China’s outreach to Myanmar is being viewed against the deterioration of Naypyidaw’s relations with the US and the West that have been critical of the country’s handling of the Rohingya problem. China, in contrast, has signalled some empathy and has also sought to mediate, if unsuccessfully, between Myanmar and Bangladesh.

 

Historical background

  • It was modern India that saw Burma, as Myanmar was known until recently, as the backdoor to China. The East India Company and the British Raj that developed the trade routes to China’s eastern seaboard through the Indo-Pacific, were eager to develop connectivity into Yunnan through Burma to promote trade between India and western China.

 

  • In the late 19th century, the Indian Railways surveyed the route for a railway line from the Arakan coast to Yunnan, but could never get going. China is now poised to realise that vision. Delhi, then, must find ways to take advantage of the new economic possibilities that CMEC opens up and cope with China’s new strategic salience in the Bay of Bengal.

 

About CMEC

  • It aims at greater connectivity between China’s southwestern province of Yunnan and the eastern Indian Ocean.

 

  • Like the China-Pakistan Economic Corridor (CPEC) that connects Beijing’s far western province of Xinjiang to Karachi and Gwadar on the Arabian Sea, the CMEC to the Bay of Bengal has begun to define the changing economic geography on India’s eastern flank.

 

  • And between the two is the China-Nepal Economic Corridor (CNEC). Unveiled by Xi during his visit to Nepal last year, it links Tibet to Nepal and knocks at the doors of the Gangetic plain.

 

  • Together the three corridors underline the economic rise of China and its impact on the subcontinent and its immediate periphery.

 

Other infrastructure projects to be discussed

  • In Myanmar to celebrate the 70th anniversary of the establishment of diplomatic relations between the two countries, Xi is expected to nudge his hosts to implement stalled Chinese infrastructure projects, consolidate Beijing’s status as the most important economic partner of Naypyidaw, and rejuvenate the historic special relationship between the two countries.

 

  • Among the major infrastructure projects under consideration are the development of a special economic zone and a deep-sea port at Kyaukpyu, the construction of a railway line from the China border to Mandalay in central Myanmar.

 

  • The railway will eventually branch out (like the economic corridor) to Kyaukpyu on the western seaboard of Myanmar and Yangon in the south where the Irrawaddy river flows into the Bay of Bengal. The railway line to Kyaukpyu will align with the twin pipeline system that has been carrying oil and natural gas to Kunming, the capital city of Yunnan, for some years.

 

  • Xi would also like to revive the hydel dam at Myitsone and the copper mining project that had to be suspended amidst the political backlash at the ground level against Chinese projects nearly a decade ago. He has managed to fend off similar opposition in Sri Lanka and will hope to do the same in Naypyidaw.

 

Significance of China’s partnership for Myanmar

  • For Naypyidaw, a stronger partnership with Beijing is certainly attractive amidst the current chill in the relationship with the West. Yet, as it prepares for elections later this year, Myanmar’s leadership is conscious of the likely criticism of Chinese projects within the country. In the last few years, Naypyidaw too has sought to negotiate hard on the terms of economic engagement with Beijing and Xi’s visit may reveal the extent of its success.

 

  • China is making the case that some of its BRI projects can help alleviate the Rohingya conflict by accelerating the development of the Arakan region. It is also offering projects to promote economic development in the conflict-prone northern frontiers of Myanmar that have long challenged the writ of the central government in the south.

 

  • Although there is much wrangling between the two countries over the terms of economic engagement — many projects have stalled in recent years because of political reservations in Myanmar.

 

How does China-Myanmar partnership impact India?

  • While there will be many twists and turns in China’s economic partnership with Myanmar, Delhi should be in no doubt about its evolution — towards greater interdependence. And as China’s economic stakes in the Bay of Bengal rise, so will Beijing’s political imperative to secure them through a larger maritime presence and naval engagement.

 

  • As the tranquil backwaters of the Bay of Bengal turn into a potential contested zone, the littorals of the bay have a stake in constructing a regional order that limits conflict and promotes cooperation across the Bay of Bengal. Delhi has every incentive to take the lead.

 

  • Instead of seeing itself in irreconcilable competition with Beijing in Myanmar, Delhi should focus on making more effective contribution to Myanmar’s development and security. India needs to focus on quickly completing its own infrastructure projects in Myanmar and develop a new strategy for commercial partnership with Naypyidaw that is in tune with India’s own capabilities and strengths.

 

  • Given the constraints on its own resources, Delhi would want to strengthen its collaboration with like-minded partners like Japan which has a growing economic presence in Myanmar.

 

  • Delhi also needs to bring fresh energy to the dormant dialogue with Beijing on the so-called BCIM corridor involving Bangladesh, China, India and Myanmar. Although India has rejected China’s BRI, it has left the door open for cooperation with China on the BCIM corridor. After all, there are no sovereignty issues involved in the development of regional collaboration.

 

  • While India must vigorously negotiate the terms of that collaboration, it needs to recognise that Beijing is merely building on the logic of geographic proximity between south western China, the eastern subcontinent and Myanmar. It was a logic that expressed itself in the form of the Southern Silk Road a few centuries ago.
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GS-II :
Capital Punishment

Syllabus subtopic:

  • Structure, organization and functioning of the Executive and the Judiciary, Ministries and Departments of the Government.
  • Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures.

Prelims and Mains focus: about the findings of the report regarding death penalty and its significance; about Project 39A; about capital punishment and the case for its abolishment

News: The number of death sentences awarded by trial courts in India saw a significant drop from 162 in 2018 to 102 in 2019, according to ‘Death Penalty in India: Annual Statistics Report 2018’, prepared by Project 39A of the National Law University, Delhi. The report is expected to be released on Friday.

 

Key highlights of the report

  • According to the report, 52.94 per cent of the 102 death penalties last year (54 death sentences) were given in cases involving sexual offences.

 

  • No death sentence was awarded in 11 states — Andhra Pradesh, Himachal Pradesh, Haryana, Delhi, Jammu and Kashmir, Arunachal Pradesh, Goa, Meghalaya, Mizoram, Nagaland and Sikkim — in 2019, while Rajasthan topped the list with 13 death sentences.

 

  • Madhya Pradesh, which recorded the most death sentences (22) in 2018, halved its tally to 11 in 2019, the report said. Arunachal Pradesh, Goa, Meghalaya, Mizoram, Nagaland and Sikkim have not awarded any death sentences in the last four years.

 

  • The death penalties awarded in 2018 were the highest in a calendar year since 2000, possibly as a result of amendments to the Prevention of Child Sexual Offences Act, extending the death sentence to non-homicidal crimes in cases of rape and gangrape of girls below the age of 12. Of the 54 death sentences involving sexual offences and murder, 70 per cent of the cases involved victims below the age of 12.

 

  • According to the report, High Courts in 2019 confirmed death sentence for 26 death row convicts — the highest in four years — and acquitted 32.

 

  • The Supreme Court, which decided the maximum death row cases (27) last year, confirmed death sentence for six persons and acquitted 10. The Supreme Court also directed a fresh trial in two cases after the High Courts confirmed death sentence, the report noted.

 

  • Death penalty cases were heard and decided in greater numbers in the Supreme Court last year due to changes in the listing procedure that former Chief Justice of India Ranjan Gogoi put in place.

 

  • With the 102 death sentences last year, there are a total of 378 prisoners on death row as of December 31, 2019.

 

About Project 39A by NLU Delhi

  • Project 39A is a research and litigation initiative focusing on the criminal justice system.
  • It works on issues around legal aid, torture, mental health in prisons and death penalty.

 

 

 

 

 

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GS-III : Economic Issues
Current Account Deficit (CAD)

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

 

Prelims and Mains focus: about the current account deficit and its significance; reasons for its contraction; about balance of payments; OPEC

 

News: Data released by the Reserve Bank of India (RBI) shows India’s current account deficit (CAD) reduced to 0.9% of GDP in the second quarter of 2019-20 from 2% in the first, primarily due to a lower trade deficit.

 

Is it a reason to cheer?

India’s CAD shrunk in the second quarter as imports contracted, while exports posted a modest growth. Given the current slowdown, lower imports point to weak demand rather than a better trade position.

 

 

What makes up current account?

Current account is essentially a record of all trade, net transfers and earning transactions of a country with the rest of the world. Therefore, current account has four essential components.

  1. The first is trade, the net value of goods and services.
  2. The second is net income, defined as income earned by residents from the rest of the world minus the income paid to foreigners.
  3. The third is direct transfers, which record net remittances, and
  4. the fourth is asset income.

Current account is said to be in surplus when the value of exports is greater than that of imports; it is in deficit when the value of imports is higher.

 

Why is it bad if the trade deficit is high?

International trade has become an important political economy issue in advanced economies such as the US and the UK. Developed economies have become concerned with the extent of their CADs and have used trade policies to reduce them. This isn’t new as mercantilism was widely practiced in the 16-18th centuries when countries focused on using state regulations to maximize exports to increase the wealth of a nation. Most countries want to export more goods than they import, implying that a country will get more income than it spends. India, maintains a high current account deficit along with a fiscal deficit.

 

What’s the reason for a contraction in India’s CAD?

India’s CAD contracted from $19 billion in the second quarter of 2018-19 to $6.3 billion during the corresponding period of 2019-20. The data shows that this contraction is primarily because of a lower trade deficit. Also, net services receipts have increased by 0.9%. So, while imports have shrunk, exports have posted a modest growth, leading to a contraction in CAD.

 

What about concerns regarding oil prices?

A major component of our import bill is crude. The value of our imports is sensitive to movements in global oil prices, which are contingent on geopolitical factors, besides economic considerations of the Organization of the Petroleum Exporting Countries (OPEC), an important player in the global oil market. Oil from Canada, Brazil and the US also plays an important role in determining overall supply and, thus, prices. Despite tensions in West Asia, prices have been subdued and are likely to remain comfortable due to the supply glut.

 

Is a contraction in CAD not a good thing?

A contraction in CAD may be good during a normal growth year, but it is a cause of concern during a slowdown. The bulk of India’s imports is for self-consumption, so their contraction is a sign of weak demand rather than of a better trade position. Low growth has led to lower imports. Once growth picks up, imports will rise. RBI should look at the value of the rupee and intervene to avoid its appreciation due to a lower CAD and net positive capital flows.

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GS-III : Economic Issues
Debt Linked Savings Scheme (DLSS)

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

 

Prelims and Mains focus: about DLSS and its advantages; AMFI; SEBI

 

News: The Mutual funds sector has asked the government to allow ‘Debt Linked Savings Scheme’ (DLSS) on the lines of Equity Linked Savings Scheme (ELSS) in order to channelize long-term savings of retail investors and deepen the corporate bond market.

 

Advantages of DLSS proposed by AMFI

  • DLSS will help small investors participate in bond markets at low costs and at a lower risk as compared to equity markets.

 

  • This will also bring debt oriented mutual funds on par with tax saving bank fixed deposits, where deduction is available under Section 80C of the Income Tax Act, 1961

 

Conditions on DLSS

  • AMFI said at least 80 per cent of the funds collected under DLSS should be invested in debentures and bonds of companies as permitted under SEBI Mutual Fund Regulations.

 

  • Pending investment of the funds in the required manner, the funds may be invested in short-term money market instruments or other liquid instruments or both, as may be permitted by SEBI.

 

About Association of Mutual Funds in India (AMFI)

  • It is the apex body of mutual funds, dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders.

 

  • AMFI, the association of SEBI registered mutual funds in India, was incorporated on August 22, 1995, as a non-profit organisation. It is dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders.

 

Asset Management Company (AMC): An asset management company (AMC) is a firm that invests pooled funds from clients, putting the capital to work through different investments including stocks, bonds, real estate, master limited partnerships, and more. Those that offer public mutual funds or exchange-traded funds (ETFs) are also known as investment companies or mutual fund companies.

 

 

Note: to read about the difference between the bond market and the equity market click on the link below.

 https://www.investopedia.com/ask/answers/071415/what-are-differences-between-debt-and-equity-markets.asp

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