Nov-16Eco Flashcards
Nov-16Eco-Index
- Demonetisation of Rs 500 and Rs 1000 notes
- Pradhan Mantri Garib Kalyan Yojana
- “Housing for All” in Rural Areas
- Ease of Doing Business Ranking Among States
- World Bank’s “Ease of Living” Index
- Entire Country Under National Food Security Act
- Pusa Arhar 16 to Bridge the Demand-Supply Gap
- Four-Level GST Rate Structure
- Global Microscope Report 2016
- Logistic Efficiency Enhancement Programme
- Pradhan Mantri YUVA Yojana
- Merchant Shipping Bill
- Independent Directors on Company Boards
- India as a Gas Based Economy
3.1. DEMONETISATION OF RS 500 AND RS 1000 NOTES
Why in news?
The PM of India announced that the 500 and 1000 Rs notes will no longer be a legal tender.
Background
Initially there were certain clues on the breaking of black money momentum, this can be seen when:
Black Money and Imposition of Tax Act 2015, came into force, where the disclosure of foreign black money within three months by paying 60% tax was passed.
Also under the Income Deceleration Scheme implemented earlier, citizens were allowed to declare their undisclosed income and pay the tax, surcharge and penalty amounting to 45% of the declared income.
Roll out of the Pradhan Mantri Jan Dhan Yojana, whereby
access to bank was made feasible.
Need of demonetization
To help eradicate circulation of fake currency, black money, terrorism and smuggling.
Lax tax-compliance and low tax to GDP ratio – In assessment year 2012-13, 39 lakh people bought a three-wheeler or a four-wheeler but only 4 lakh paid income tax above 5 lakh.
The primary reason for demonetisation was the massive rise in currency in circulation over the past one year. While the real gross domestic product rose by 7.56 per cent and inflation rose at 6 per cent, the currency in circulation rose by 15 per cent.
Lack of transparency in financial dealings.
High degree of correlation between crime and currency level in an economy.
Implications of Demonetization
A parallel black economy would collapse.
a. Of the Rs 17 lakh crore of total currency in circulation in the country, black money is estimated at mind-boggling Rs 3 lakh crore.
b. Counterfeit currency: Death blow to the counterfeit Indian currency syndicate operating both inside and outside the country.
On Employment: a large part of the Indian economy is still outside the banking system. So, the cash shortage will hurt the informal sector that does most of its transactions in cash.
On elections: It will reduce the Vote-for-Note politics making elections more clean and transparent.
On Economy:
a. First, it will bring more borrowings to the exchequer, improve inflation outlook and increase India’s gross domestic product (GDP).
b. Second, it will revive investment opportunities and give a fillip to infrastructure and the manufacturing sector.
c. Third, it will help reduce interest rates and lower income tax rate.
Real estate cleansing: An unexpected dip in land and property prices.
On Higher Education: will become more reachable as the black money from ‘high capitation fees’ is discouraged.
On security:
a. Terror financing: Terror financing is sourced through counterfeit currency and hawala transactions.
b. Kashmir unrest: The four-month-long unrest in Kashmir valley is on a backburner
c. North-East insurgency and Maoists: Black money is the oxygen for Maoists collected through donations, levy and extortions. The illicit money is used to purchase arms and ammunition
Challenges/ Criticism
Unorthodox methods being used and undeniable hardship borne by ordinary citizens are harshly criticised.
Lack of Proper Planning and implementation of public policy; and lack of required capacity of the government.
Population that does not have access to banking facility will face major inconvenience.
Replacing all the Rs.500 and Rs.1000 denomination notes, as ordered by the government, could cost the RBI at least Rs. 12000 crore.
The big players could go scot-free.
a. Substituting to digital currencies or valuables such as gold or diamonds by corrupt. But these substitutes are heavier and bulkier, more traceable and less widely accepte which means the criminals face higher costs and a greater risk of getting caught.
Way forward
Follow the example of Kenya - M-PESA, in partnership with Vodafone’s local operator Safaricom.
a. Cashless transactions have positively affected the household sector in Kenya which showed an increase of 5-30 per cent in income due to lessened travel time.
b. The system has also financed multiple start-up businesses with business transfers achieved through mobile payments from buyer to seller smoothly.
c. It has also integrated the traditionally un-banked population as over 80 per cent of the population use mobile phones as of 2016.
Less-Cash and Cash-less economy:
a. Success of demonetization depends upon how majority of citizens accept tax compliance. Economy based on digital payments, moving all transactions through tax net, becoming tax compliant, then remonetisation will create faster economic growth with merger of white and black economies.
Cyber-crime and remedial measure must be taken.
There need to be more customer-bank awareness and interaction on topics dealing with e-transactions.
All the political parties must come in consensus to get the maximum output of demonetisation.
Box–1-What is Demonetization?
It is a financial step where in a currency unit’s status as a legal tender is declared invalid.
This is usually done when old currencies are to be replaced with the news ones.
Box–2-A brief past:
Demonitisation was earlier done in 1978 When the government demonitised Rs. 1000, Rs. 5000 and Rs. 10000 notes.
This was done under the High Denomination Bank Note (Demonitisation) Act, 1978.
The difference between 1978 and 2016 Demonitisation is that the currency in circulation (of the higher denomination) is higher in 2016 than was in 1978
3.2. PRADHAN MANTRI GARIB KALYAN YOJANA
Why in news?
Taxation Laws (Second Amendment) Bill, 2016 proposes to introduce a scheme named the ‘Pradhan Mantri Garib Kalyan Yojana, 2016’. Features
Its aim is to use black-money collected post-demonetization in welfare schemes for the poor.
The government wants to give people an opportunity to pay taxes with penalties and declare undisclosed income through the proposed Pradhan Mantri Garib Kalyan Yojana (PMGKY).
PMGKY will allow people to deposit previously untaxed money by paying 50% of the total amount: 30% as tax and 10% as penalty on the undisclosed income, as well as 33% of the taxed amount as cess.
The declarant will also have to deposit 25% of undisclosed income in a deposit scheme to be notified by the RBI under the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016.
If the declarant refuses the option of using the government deposit scheme, 85% of the amount will be deducted as taxes and penalties.
For money that is found in raids, taxes and penalties of nearly 90% of the amount will be levied, leaving just 10% with the owner.
3.3. “HOUSING FOR ALL” IN RURAL AREAS
Why in News?
The Prime Minister has formally launched the “Housing for All” in rural areas scheme.
Under the scheme the Government proposes to provide an environmentally safe and secure pucca house to every rural household by 2022.
About the “Housing for All “in Rural Areas
It is named as the Pradhan Mantri Awaas Yojana (Gramin)- PMAY-G
PMAY-G is a major step forward in bringing together Skill India, Digital India, Make In India, IT/DBT Aadhaar platform and Pradhan Mantri Jan Dhan Yojana (PMJDY).
The implementation of housing developments in the rural areas of the nation will be done under the name of Gramin – Awaas Yojana.
As per the Ministry of Housing, the project cost will be shared by both the central government and the state govt.
Delhi and Chandigarh are the two cities which will not be covered under the scheme.
Objectives
In its first phase the target is to complete one crore houses by March 2019.
The programme targets the poor households and uses ICT and space technology to further confirm correct selection of beneficiaries and progress of work.
Provisions
There is a provision of Bank loan upto Rs. 70,000/-, if the beneficiary so desires.
Selection of beneficiaries -completely transparent process using the Socio Economic Census 2011 data and validating it through the Gram Sabha.
The programme provides for skilling 5 lakh Rural Masons by 2019 and allows over 200 different housing designs across the country based on a detailed study of housing typologies, environmental hazards and the households’ requirements.
Local materials will be used largely - along with a complete home with cooking space, electricity provision, LPG, toilet and bathing area, drinking water etc through convergence.
The payment process- will be through IT/DBT mode with Aadhaar linked Bank accounts with consent, to ensure complete transparency and accountability.
Skill training of Masons-There is a provision for orientation of beneficiaries. A 45 days on site hands-on skill training of Rural Masons helps poor households to move up the skilling ladder.
3.4. EASE OF DOING BUSINESS RANKING AMONG STATES
Background
The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry had given out
a 340-point Business Reform Action Plan (BRAP) for
States/UTs earlier this year.
The BRAP included recommendations for reforms on 58
regulatory processes, policies, practices or procedures
spread across 10 reform areas spanning the lifecycle of a
typical business.
The DIPP, in partnership with World Bank has studied the
extent to which states have implemented the BRAP.
This study was recently released in its Assessment of State
Implementation of Business Reforms 2015-16.
Key Findings
The rankings of states have changed considerably (See Table)
Andhra Pradesh and Telangana have jointly topped the rankings.
Major progress was made by states like Telangana, Haryana, and Uttarakhand.
While 12 states were ranked as leaders with 90-100% implementation record, 17 states and union territories, including Kerala, Goa and most north-eastern states, were ranked as laggards that need “jump -start” with 0-40% implementation record.
The national implementation average has improved from 32% to 48.93%.
Significance
The reordering of the ranking signals that competitive federalism is rapidly taking root as states move swiftly to showcase themselves as ideal investment destinations.
The rankings show greater acceptance of reform measures and seriousness about it among the states. For example, previously, only 7 states implemented more than 50% of the reforms proposed as against 17 this year. Further, last year, not a single state implemented more than 75% of reforms. But 16 states implemented more than 75% this year.
The study highlights the weakness in the World Bank’s methodology of measurement of Ease of Doing Business Index which is concentrated only on two cities- Delhi and Mumbai. India’s marginal improvement of only one place is attributed to this limitation as reforms taken by Indian states have been ignored.
It celebrates the achievements of the states and underscores the steps taken by them which could be emulated by others.
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3.5. WORLD BANK’S “EASE OF LIVING” INDEX
Why in News?
World Bank is all set to rank cities globally on a “ease of living” index.
This news comes at a time when the World Bank is planning to tweak the “ease of doing business” index.
What is it?
The index is being launched keeping in mind that as cities grow and expand, the ease of living becomes an important parameter.
The index could include categories on social inclusion, cost of living, public transport, housing, education, health, environment-friendliness, crime/safety, governance and corruption.
Where India Stands Now?
India was ranked a lowly 130 on the “ease of doing business” index 2016.
India has recommended the World Bank that reforms undertaken in the entire country and not just in Delhi and Mumbai be considered for the “Ease of Doing Business” Index.
The Ease of Doing business index measures how easy it is to setup new business in a particular country depending on different parameters such as getting a licence, infrastructure, govt. policy and so on.
3.6. ENTIRE COUNTRY UNDER NATIONAL FOOD SECURITY ACT
Why in News?
The Centre notified that the entire country has now come under the umbrella of National Food Security Act with Kerala and Tamil Nadu joining the bandwagon.
With this move, now 81.34 crore people will get wheat at Rs. 2/kg and rice at Rs. 3/kg.
Background
The National Food Security Act was enacted in 2013 with the aim to provide adequate quantity of quality food at affordable prices to the people.
The act provides food security by offering essential grains and cereals at rock bottom prices of Rs. 1, Rs. 2 and Rs. 3.
The public distribution system forms the most essential part of the implementation of this act.
There are two types of beneficiaries under the PDS: AAY (Antyodya Anna Yojana, launched in 2000) and priority households.
Every AAY household is entitled to get 35 kg of food grains every month while priority households (BPL families) are entitled to get five kg per person of food grains every month.
3.7. PUSA ARHAR 16 TO BRIDGE THE DEMAND-SUPPLY GAP
3.7. PUSA ARHAR 16 TO BRIDGE THE DEMAND-SUPPLY GAP
Why in News?
A high yielding pigeon pea variant, Pusa Arhar 16 has been developed by scientists at the Indian Agricultural Research Institute (IARI).
The new variety is expected to be rolled out commercially for production in January 2017.
This variety having lesser maturity period could be a game changer for inflation-wary policymakers and consumers alike.
Benefits
The new variety has a maturity period of 120 days instead of 160-270 days needed by varieties in use now.
It also needs less water and is suitable for mechanized harvesting.
Despite the fact that the new variety is dwarf (95cm to 120cm) as compared to the prevalent varieties (which are 2 metres of plant height), it gives the same 20 quintals/hectares yield. The high yields result from
high density planting.
In traditional varieties the flowers do not set pods at the same time while in Pusa Arhar 16, there is synchronous maturity making it easier for harvesting.
It is suitable both for intensive cultivation such as in Punjab as well as rain-fed areas of central India.
The new variety can help India achieve self-sufficiency in pulses in the next 2-3 years.
Adequate production can help bridge the demand–supply gap and be a sigh of relief for inflation wary policymakers.
Box–Background
India is the largest producer, consumer and importer of pulses.
Arhar or pigeon pea is one of the most widely consumed pulses in India.
The price of Arhar shot up to Rs. 200/kg in 2015 due to inadequate production. This also led to surge in imports.
3.8. FOUR-LEVEL GST RATE STRUCTURE
Why in News?
GST Council has reached a consensus and has
finalised four different GST tax slabs of 5, 12, 18
and 28 percent.
GST laws are to be finalised in this winter session
of the Parliament.
Major Takeaways
Most of the common consumption items and
food grains have been placed under zero tax rate
thereby insulating the people from inflationary
pressure.
There are two standard rates of 12 and 18 percent which would include bulk of goods and services. This also includes fast-moving consumer goods (FMCGs).
Services are most likely to get dearer as the one being taxed at 15 percent is expected to be put under the 18 percent slab.
White goods shall be taxed at 28 percent. These include washing machines, refrigerators, and LED TV sets.
Demerit and sin goods such as luxury cars, tobacco and aerated drinks will also be taxed at 28 percent. These goods will also attract cess for 5 years on top of 28 percent tax.
The cess thus collected along with the clean energy cess would be used to compensate the states for the losses arising out of transitioning to GST.
The cess would be charged such that the incidence of tax is not more than the existing 40-65 percent being charged now. (tobacco is taxed at 65 percent).
Tax rate on gold hasn’t been decided as of yet.
Positives
Consensus on GST tax rate between the centre and states is the first major step towards making its rollout possible by 1 April 2017.
The four-slab tax bracket is far from one nation, one tax regime. However, keeping in mind the diversity of the nation, it is being considered as the first step towards a single rate structure.
Tax rates have been decided such that the common man is least affected.
Exempting common consumption items from taxation also ensures that the GST rollout would not affect work done to curb CPI inflation in the past 2-3 years.
Tax compliance will increase since every transaction will be recorded at each stage by the GST infrastructure.
Criticisms
The multiple-tier tax regime is likely to create a complex tax structure, something which India was trying to get away from through GST.
Several registrations will be needed in each state making manufacturing and trade difficult.
One of the major challenges in front of the govt. is the classification of different goods under different tax
brackets.
There is also no clarity whether a nominal GST would be levied on the five petroleum products (i.e crude oil, natural gas, petrol, diesel and ATF).
Similarly, there is no clarity on GST rates for under construction properties or abatement on land.
Please refer to August 2016 Current Affairs booklet to know more about GST.
Box–1-What is Cess?
Cess is a type of tax that levied to fulfil a specific purpose.
The cesses collected do not go to the Consolidated Fund of India unlike the other taxes.
Funds from CFI can be used for any legitimate activity while a cess can only be used for the purpose it is charged for.
Box–2-Demand for Grant: It is the form in which estimates of expenditure from the Consolidated Fund of India included in the annual financial statement is to be voted upon in the Lok Sabha.
Capital-at Charge: Capital-at-charge represents the Central Government’s investment in the Railways by way of Loan Capital and value of the assets created there from.
3.9. GLOBAL MICROSCOPE REPORT 2016
Why in News?
India has been ranked third by the Global Microscope Report 2016.
The report assesses regulatory environment for financial inclusion across 12 different indicators and 55 countries.
Background
India has fared well in financial inclusion thanks to the steps taken in the past 10 years to modernize the financial sector.
One of the major catalysts for financial inclusion recently has been the Pradhan Mantri Jan Dhan Yojana.
The scheme helped open 100 million accounts for low incomes families in 2014 alone. This was assisted by the Aadhaar, national biometric identification programme. Total no. of accounts opened under the schemed reached 221 million by April 2016.
With the launch of UPI (Unique Payment Interface), RBI hopes to strengthen the payment system and digitize it as well.
3.10. LOGISTIC EFFICIENCY ENHANCEMENT PROGRAMME
Why in News?
The National Highway Authority of India has undertaken Detailed Project Reports (DPRs-survey) to critically examine the existing logistics infrastructure and destination of freight movement in the country under LEEP.
This is done so as to reduce cost and time of freight movement across 44 different freight corridors (economic corridors), inter corridors and feeder routes.
What is it?
LEEP stands for Logistics Efficiency Enhancement Programme which aims to enhance the freight transportation in India through improving cost, time, tracking and transferability of consignments through infrastructure, procedural and Information Technology (IT) interventions.
The programme has been undertaken under Bharat Pariyojana
In the first phase, DPRs of 15000 km is to be prepared.
In order to reduce the time of surveys, it has decided to use latest technologies such as LiDAR, Satellite mapping and Ground Penetration Radar (GPRs).
3.11. PRADHAN MANTRI YUVA YOJANA
Why in News?
Ministry of Skill Development and Entrepreneurship launched the Pradhan Mantri YUVA Yojana, its flagship scheme for entrepreneurship training and education at the Ministry’s second foundation day.
What is it?
The scheme spans over five years (2016-17 to 2020-21) with a project cost of Rs. 499.94 crore.
It will provide entrepreneurship education and training to over 7 lakh students in 5 years through 3050 Institutes.
The scheme will also include easy access to information, mentor network, credit, incubator, accelerator and advocacy to create a pathway for the youth.
The institutes under the PM’s YUVA Yojana include 2200 Institutes of Higher Learning (colleges, universities, and premier institutes), 300 schools, 500 ITIs and 50 Entrepreneurship Development Centres, through Massive Open Online Courses (MOOCs).
Other Initiatives of MSDE
The ministry has plans to disburse around Rs.7000 crore to states to help align them with the Centre’s skill development agenda.
The ministry has allocated around 3000 crore of 25% from the funds earmarked for the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) to the States, to achieve its target of training 10 million people over 4 years.
3.12. MERCHANT SHIPPING BILL
Why in news?
The Cabinet approved a new Merchant Shipping Bill, 2016. It provides for repealing of the Merchant Shipping Act, 1958, as well as the Coasting Vessels Act, 1838.
Key Features of Bill
Augmentation of Indian tonnage promotion
allowing substantially-owned vessels to be registered as Indian flag vessels;
recognising Indian controlled tonnage as a separate category;
development of coastal shipping in India by:-
dispensing with the requirement for issuing of licences to Indian flag vessels for coastal operation and for port clearance by the Customs authorities; and
making separate rules for coastal vessels to develop & promote coastal shipping.
Introduction of welfare measures for seafarers, such as:
seafarers held in captivity of pirates will receive wages till they are released and reach home back safely;
Registration of certain residuary category of vessels not covered under any statute and to make provisions for security-related aspects.
Incorporation of all International Maritime Organisation (IMO) Conventions/Protocols (see box)
The Coasting Vessels Act, 1838, which is an archaic legislation of the British era providing for registration of non-mechanically propelled vessels to a limited
jurisdiction of Saurashtra and Kutch, is proposed to be repealed since in the Merchant Shipping Bill 2016 provisions have been introduced for registration of all vessels for the whole of India.
Implications
Provisions of the Bill will simplify the law governing merchant shipping in India and will help India’s Sagarmala project and development of Coastal Economic zones. Redundant provisions will be dispensed with and the remaining provisions will stand consolidated and simplified so as to promote ease of doing business.
Box–the Intervention Convention 1969,
the Search and Rescue Convention 1979
the Protocol for Prevention of Pollution from Ships Annex VI to Marine Pollution Convention,
the Convention for Control and Management of Ships Ballast Water and Sediments, 2004,
the Nairobi Wreck Removal Convention, 2007,
the Salvage Convention 1989 and
the International Convention for Bunker Oil Pollution Damage, 2001.
3.13. INDEPENDENT DIRECTORS ON COMPANY BOARDS
Why in News?
The role of Independent Directors has come into news in the light of developments in Tata group relating to removal of Cyrus Mistry.
Before this, their role had hit the highlights in Satyam Scandal case for not being vigilant enough.
Who are Independent Directors?
‘Independent Director’(ID) refers to a non-executive director (but not the Managing Director of a company, nor any whole time director) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience
An ID must not have a conflict of interest and should not have any other pecuniary relationship with the company except only a pre-determined remuneration as a director on board.
Key responsibilities of IDs
To meet atleast once a year among themselves, without the presence of non-independent directors and management to review the performance of non-independent directors and the chairperson of the company.
To ensure company is being run on the sound principles of corporate governance.
To safeguard the interest of all stakeholders, particularly those of minority shareholders and balancing the conflicting interest of stakeholders.
Can IDs prevent mismanagement of a company?
IDs suffer from having inadequate knowledge about the company and rely on what the management tells them.
They have inadequate time to look at all aspects in details.
As such, IDs are not capable enough to prevent large scale fraud or mismanagement in a company.
Independent Directors and Companies Bill
The 2013 Act does not permit an Independent Director to have a pecuniary relationship with the company, other than his remuneration.
However, the 2016 Amendment Bill permits an Independent Director to have a monetary relationship, up to 10% of his total income, with the company. This amount may be modified by the central government.
Under the existing law, an independent director’s relative should not have been a senior employee of the company in the last three years. The proposed change in law seems to takes away this restriction.
However, concerns have been raised that these proposed changes in law strikes at the root of independence of directors
3.14. INDIA AS A GAS BASED ECONOMY
Why in news?
In Parliament, the government replied that natural gas is one of the cleanest and most environment friendly fuels having extremely low Carbon Dioxide emissions compared to other fuels like coal and oil.
Steps being taken to increase use of natural gas
Steps to ‘make India a gas based economy’
Development of Gas Sources either through Domestic gas Exploration & Production activities or through building up facilities to import natural gas in the form of LNG,
Development of Gas Pipeline Infrastructure and Secondary distribution network.
Development of gas consuming markets like Fertilizer, Power, Transport and Industries etc.
Steps to enhance domestic natural gas production through several policy initiatives such as:
Policy to grant relaxation, extension, and clarifications at development and production stage for early monetization of hydrocarbon discoveries
Marginal Field Policy- Discovered Small Field Policy
Uniform Licensing Policy-Hydrocarbon Exploration and Licensing Policy
Policy for Grant of Extension to small and medium sized discovered fields
Policy for Marketing Freedom for Gas Produced from Deepwater and Ultra Deepwater areas etc.; and
Policy on testing requirements for discoveries made under New Exploration and Licensing Policy (NELP) Blocks.
To incentivize gas production from difficult areas, Government has granted marketing, including pricing, freedom for the gas produced from difficult areas as well as under Hydrocarbon Exploration and Licensing Policy (HELP) under which acreages will be provided in future. Need for these steps
Natural gas is one of the cleanest and most environment friendly fuels having extremely low Carbon Dioxide emissions compared to other fuels like coal and oil.
The move towards a gas-based economy will not only showcase India’s commitment to climate change as a globally responsible economy, but will als0 draw huge investment to the sector, besides creating jobs.
India’s gas supply deficit is expected to widen from 78 million cubic metres a day (mscmd) this fiscal year to 117 mscmd in 2021-22. This can have significant economic, strategic and geopolitical implications. The implementation of these policy initiatives and other reform initiatives is expected to enhance domestic natural gas production
