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International relations:

U.S. partnership vital in Asia-Pacific: India (The Hindu)

Context

The Indo-U.S. partnership helps maintain stability in the Asia-Pacific region, the External Affairs Ministry said here on Tuesday, hours after President Donald Trump announced the new National Security Strategy of the U.S. and described India as a “leading global player”.

Backdrop

The response came even as both sides held the inaugural India-U.S. Designations Dialogue focussing on specific groups and individuals responsible for cross-border terrorism against India.

Common objectives

  • As two responsible democracies, India and the U.S. share common objectives, including combating terrorism and promoting peace and security throughout the world.
  • A close partnership between India and the U.S. contributes to peace, stability and prosperity in the Indo-Pacific region as well as to the economic progress of the two countries
  • Tuesday also marked the first dialogue between India and the U.S. on terrorism-related designations.
  • Both sides exchanged information about the strategy to be followed to isolate and ban terrorism-related individuals and organisations.
  • India has been campaigning for banning Pakistan-based terror group Jaish-e-Mohammed’s chief Masood Azhar at the UN but has failed in its goal due to China’s opposition

India a leading global power, Pakistan needs to show it can be responsible for its nukes(Indian Express)

Context

Almost a year in office and after two bilateral meetings between Prime MinisterNarendraModi and US President Donald Trump, the US government on Tuesday marked out India’s emergence as a “global power” in its first National Security Strategy — a significant upgrade in Washington’s assessment of India in the last 15 years.

India’s importance in NSS

In 2015, in Obama administration’s last NSS, India’s role was described as a “regional provider of security” and in 2010, India was termed one of “21st century centers of influence”. In 2006, during George W Bush administration’s NSS, it had called India as one of “regional and global engines of growth” and in 2002, it was viewed as a “potential great democratic power of 21st century

India’s place in Trump’s NSS

India was mentioned eight times in Trump’s NSS, where it said: “A geopolitical competition between free and repressive visions of world order is taking place in the Indo-Pacific region, which stretches from the west coast of India to the western shores of the United States, represents the most populous and economically dynamic part of the world. The US interest in a free and open Indo-Pacific extends back to the earliest days of our republic.”

Strengthening the Quadrilateral

  • Putting strategic and defence partnership front and centre, the 68-page NSS document said: “We welcome India’s emergence as a leading global power and stronger strategic and defence partner. We will seek to increase quadrilateral cooperation with Japan, Australia, and India.”
  • The first quadrilateral meeting at the senior officials’ level took place in Manila last month, on the sidelines of the ASEAN and East Asia summits.
  • Expansion ofdefense and security cooperation with India, a Major Defense Partner of the United States, and support India’s growing relationships throughout the region.
  • The NSS made a special mention of India in the context of Indian Ocean security in tune with its strategic calculus on the Indo-Pacific region as outlined by US Secretary of State Rex Tillerson in October this year.

On Pakistan

  • On Pakistan, the Trump administration’s NSS said that it will “press” Islamabad to intensify its counter-terrorism efforts and demonstrate that it is a “responsible steward” of its nuclear assets
  • United States continues to face threats from “transnational terrorists and militants operating from within Pakistan
  • Insist that Pakistan take decisive action against militant and terrorist groups operating from its soil

On OBOR

  • “We will help South Asian nations maintain their sovereignty as China increases its influence in the region,” it said, in an oblique reference to Beijing’s ambitious Belt and Road initiative.
  • US will encourage the economic integration of Central and South Asia to promote prosperity and economic linkages that will bolster connectivity and trade

Pakistan’s response

  • Pakistan’s foreign ministry responded angrily and said that NSS has made “certain unsubstantiated allegations towards Pakistan”.
  • “Pakistan rejects such unfounded accusations that belie facts on ground and trivialize Pakistan’s efforts for fighting terrorism and our unmatched sacrifices to promote peace and stability in the region,” the Pakistan’s foreign ministry spokesperson Mohammad Faisal said.

In Fact: Why it is time for New Delhi to make Nepal feel ‘India-open’ (Indian Express)

Context

Nepal’s political leadership has often felt that India uses blockades of essential supplies to discipline the smaller country. With the China-leaning Left Alliance winning Nepal’s elections, India will have to work extra hard to repair the trust deficit.

The History

2002: Neutralising the Maoists

In October 2002, when Shyam Saran, then India’s ambassador to Indonesia, was appointed envoy to Nepal, then National Security Adviser Brajesh Mishra told him that his mandate was to bring the monarchy and political parties together to “neutralise the Maoists”. The worry in South Block was a possible “Red Corridor” into India.

Changing of ambassador

This was a little more than a year after the infamous 2001 Narayanhiti Palace massacre in Kathmandu, which left 10 members of the royal family dead and Nepal’s monarchical polity in chaos. Saran was India’s ambassador in Kathmandu for just 22 months before he became foreign secretary, but India’s priorities changed.

Change of Strategies

“What began as a valiant and mostly frustrating attempt to promote accord between the mainstream political parties and King Gyanendra ended with us switching to a strategy of bringing the political parties together with the Maoists to neutralise an autocratic monarchy instead,” Saran wrote in his magisterial 2017 book How India Sees the World: Kautilya to the 21st Century.

Left Alliance of Nepal

When the facts on the ground change, countries and leaders have to change their priorities as well. So, as India now watches with a sense of disquiet that Nepal’s elections, held between November and December, have been won by the “Left Alliance” led by New Delhi’s friend-turned-foe K P Sharma Oli, it must reinvent its strategy — just like Saran did more than a decade ago, to accommodate the Maoists.

Efforts from Nepal

  • Oli, during his last visit to India in February 2016 (the only one as the Prime Minister of Nepal) had sought to repair the damage caused in the relationship.
  • During that trip, he described the acrimony between India and Nepal since September 2015 as “misunderstandings”, and said that the “main mission” behind his visit to India was to “clear the misunderstanding” and take ties to the same level as in 2014, when Prime Minister NarendraModi had visited Nepal. That “misunderstanding” was not an ordinary one.

Problems with India: The Infamous Blockade

  • Nepal was faced with a massive economic and humanitarian crisis from September to December, 2015.
  • The reason was the infamous blockade at a crucial crossing on the border with India, which stopped fuel and food supplies to landlocked Nepal.
  • The impact scarred the Nepalese

No Efforts from India to resolve the blockade

While Kathmandu blamed India for the blockade, New Delhi sat by quietly, making no efforts to ameliorate the situation, instead citing the law and order situation in border areas which didn’t guarantee safe passage of trucks laden with fuel and essential supplies.

History of Blockades

This blockade brought back memories of another blockade that had occurred in 1989 during Rajiv Gandhi’s term, when a similar negative leverage was used after Nepal’s King Birendra imported anti-aircraft missiles from China. The blockade then had lasted for a year, from March 1989 until April 1990

India against Oli

Later, New Delhi’s hurried intervention in Nepal’s constitutional process, by its support to SushilKoirala against Oli in 2015, and by encouraging Pushpa Kamal Dahal ‘Prachanda’ to defect and align with the Nepali Congress in 2016, led to Oli’s rise

Oli’s tilt towards China

In the last two years, Kathmandu’s political class, led by Oli and others, used the blockade to rouse anti-India sentiments, playing the China card during political campaigning. With the Left Alliance in power, there will almost certainly be a more pronounced tilt towards Beijing. Both Oli and Prachanda have indicated this in their public statements.

Chinese Part

Roads and Highways

  • The Chinese, on their part, have been building a number of highways from the Tibetan side into Nepal
  • The Tibet railway has now been extended from Lhasa to Shigatse, and could make its way to Kathmandu

OBOR

While India’s plans are moving at a glacial pace, Kathmandu’s new regime may be tempted to play along to become a part of the Chinese One Belt One Road (OBOR) project

Chinese debt traps

It will be important for India to caution its interlocutors in Nepal to not walk into the debt traps that Sri Lanka, Maldives and even Pakistan have entered while dealing with Beijing.

The Problem

The tendency in India is to regard Nepal’s dependence on India for transit as leverage against it

But any exercise of this leverage only ends up intensifying anti-Indian sentiments… It reinforces the sense of siege that Nepalis feel — ‘India-locked’, as they call it

A Better Approach: India Open

  • A better approach would be to offer Nepal “national treatment” on the Indian transport network, allowing them the use of our roads and ports on the same terms as for Indian citizens and companies
  • The effort should be to convince Nepal that they are “India-open”, not “India-locked”.” It’s time for Delhi to make Nepal feel “India-open”.

Indian Constitution and Polity:

Privacy in cyberspace (Indian Express)

Context

Protecting individual rights should be at the core of data protection legislation

Report of the Data Protection Committee

When the government set up the committee on Data Protection in India, led by Justice B.N. Srikrishna, it said that the objective “is to ensure growth of the digital economy while keeping personal data of citizens secure and protected”.

Provisional Views

The Committee has recently released its provisional views on the formulation of a data protection framework and invited public comments

A Commendable job

The Committee does a commendable job on a number of counts

  • It has covered a wide range of issues pertaining to data protection and privacy
  • While it has looked at the issues from the prism of what is relevant in India, it has also brought in perspectives from other countries.

Scope for Strengthening

But there are some important ways in which the Committee can strengthen its final report.

Core Principles

First, it would be useful to anchor the report in some core principles.

  • The Committee must lay out the normative framework which we, as a nation, must aspire to with respect to data protection.
  • Technology will evolve rapidly and the law will need to keep pace with changes. But the overall vision of empowering the individual should be at the heart of all legislation.

Privacy has a value to the economy

Second, it would be important for the Committee to state that privacy is not just a right or a moral obligation, but it has value to the economy

  • It enhances trust and increases voluntary participation in the digital economy
  • In some places, the report appears to imply that while the ideal is important, practical considerations demand that we settle for less
  • While the question of balance is an important one, that should not be seen as a licence to be lenient to privacy-violating data practices

Privacy and Innovation link

There is a fundamental link between privacy and innovation

  • No one will innovate in a surveillance-oriented environment or in a place where an individual’s personal information is compromised
  • The ultimate control of data must reside with the individuals who generate it; they should be enabled to use, restrict or monetise it as they wish
  • Therefore, laws should enable the right kind of innovation — one that is user-centric and privacy-protecting

The medium to long-term challenges of building a data protection framework in any other diluted way will be very difficult to handle — for the individual, the entrepreneur and the government.

Data Protection Agency

  • Third, while the Committee has proposed the creation of a strong Data Protection Authority (DPA), there are some aspects that can make such an agency effective
  • Some of the recommendations, such as applying the law to both government and private data collectors, fines against violators and direct compensation to complainants, are progressive
  • But for the DPA to be effective, it must have the authority to impose penalties. The Right to Information Act, which grants such an authority to the information commissions, is a good example to learn from.

Practical Constraints

The report points out several practical constraints in the implementation of many of the rights it envisages — the challenges arising from the different ways data is currently stored, the burden of meeting privacy rights, the need for exemptions, etc. For this law to be successful, recognising and addressing these constraints is important.

Time period for Data Controllers

This brings up the need for allowing a time period for data controllers to fully comply with the new law. In the case of the RTI Act, there was a period of 120 days for government departments to comply

EU gives 2 years

The EU’s General Data Protection Regulation gives data controllers two years to prepare themselves to comply with the new regulation

Higher standards of data protection needed

  • The nature of personal data is such that once it is out in the public domain, it is nearly impossible to put the genie back in the bottle
  • This calls for getting data controllers to abide by higher standards of data protection, even if it means having a moratorium period that allows them to prepare themselves for such standards
  • In the long run, the costs of such compliance will be far lower than the potential damage that lenient exemptions to data controllers can cause.

Data Protection important

Increasingly, India is being seen as a pioneer in digital technologies

  • This rapid pace of transformation has raised larger questions around inclusion, data protection and privacy
  • The signalling value of a strong data protection law in India would be significant and will allow the country to lead by example
  • We need to think about the principles we adopt — from narrowly tailored exemptions to strong independent enforcement
  • Ultimately, this law will shape how secure individuals feel while engaging in the digital world, and the kind of innovation we will see in decades to come.

Parliament gives nod to IIM bill (The Hindu)

Context

Parliament on Tuesday unanimously passed a Bill to grant the Indian Institutes of Management the power to grant degrees instead of post-graduate diplomas.

The Bill features

  • As per the IIM Bill, 2017, a Board of Governors will appoint the Director of each IIM.
  • The Bill also allows students to acquire doctoral degrees from the IIMs.
  • The Bill, passed by the LokSabha earlier, was passed by the RajyaSabha on Tuesday.

Doctoral degrees

  • Earlier, fellowships of the IIMs were not regarded as Ph.D.s, which led students to complete their diplomas and go abroad if they wanted to earn a doctoral degree.
  • The hope is that the passage of this Bill will pave the way for more research at these prestigious institutions.
  • The Bill also confers on the 20 IIMs the status of institutions of national importance, granting them greater functional autonomy by restricting the role of the government in them.
  • Till now, the Centre had a role in the appointment of the chairpersons and directors to their Boards and also fixing the pay of the directors.
  • As per the IIM Bill, 2017, a Board of Governors will appoint the Director of each IIM.
  • A search-cum-selection-committee will recommend the names. And the director will be eligible for variable pay as determined by the Board

LS passes 2 bills to repeal 245 old laws

Context                                                                                  

The LokSabha   on Tuesday passed two Bills to  repeal 245 obsolete and archaic laws, including the 158-year-old  Calcutta Pilots Act of 1859 and the 1911 Prevention of Seditious Meeting Act.

A Progressive Move

The old and many irrelevant pre-independence laws were the “unfortunate part of the colonial legacy” and repealing them was a progressive move that reflects the “pro-reform” approach of the government.

The Acts

Hackney Carriage Act 1879
Some of the old acts that have been repealed are the Hackney Carriage Act 1879 which was legislated for the regulation and control of hackney-carriages, Dramatic Performance Act 1876 when theatre was being used a medium of protest against the British rule.
The Ganges Tolls Act, 1867
Another such old act which was repealed by the LokSabha was ‘The Ganges Tolls Act, 1867’ which provided for collecting toll “not exceeding 12 annas” on certain boats and steamers plying on the Ganga to improve navigation of the river between Allahabad (UP) and Dinapore (Bihar).

Repealing of laws earlier

Prasad said 1029 old laws were first repealed by Parliament in 1950 and the last time such old laws were abolished during the AtalBehari Vajpayee government that repealed old laws in 2004.

Two member panel set up

After the Modi government came to power a two-member panel was set up to look into the repealing of archaic laws and the panel also consulted the Centre and the state government before recommending the legislations to be repealed
Some 1824 acts were repealed after Prime Minister NarendraModi took over the reins of the government

Status unclear on the Prevention of Seditious Meeting Act, 1911 ?

When Prasad spoke on abolishing the Prevention of Seditious Meeting Act, 1911, he was needled by BJD MP TathagataSatpathy who alluded to the use of the sedition provision in the Indian Penal Code against opposition activists by the BJP governments in certain states.

To this, the Law Minister said that all senior ministers in the BJP government including the prime minister had vehemently opposed Emergency in 1975 and his government was in favour of the freedom of the press.

Patidar leader Hadrik Patel and JNU student union leader Kanhaiya Kumar too were booked for sedition.

Govt. defends special courts for politicians (The Hindu)

Context

Finance Minister ArunJaitley on Tuesday defended the government’s decision to set up fast track courts for dealing with criminal cases against politicians and said lawmakers should take the lead in setting an example.

Opposition to SC directive

Earlier, Opposition parties, led by the Congress and the Samajwadi Party, raised the issue of the Supreme Court’s recent directive to the Centre to draft a scheme for setting up fast track courts to deal exclusively with criminal cases involving legislators and politicians.

Goes against Article 14

  • Article 14 of the Constitution provides for equity before law and elected representatives are on a par with other citizens
  • While there were no special courts to fast-track the trial of terrorists and dreaded criminals, setting up such a court for elected representatives would create a misleading perception of politicians
  • He questioned the government’s affidavit supporting the fast-track courts.

Selective treatment

  • While there was no question of delaying prosecution of anyone, it would amount to profiling and excessive vilification of lawmakers if a perception was created that fast-track courts were needed only for the elected representatives
  • Singling out the elected representatives would create a perception that could be abused by the government of the day

Fast Track courts for all

The government, he said, should ensure that enough funds were allocated for creation of enough number of courts to fast-track trial of all

Social security:

Ensure level-playing field for the disabled in higher educational institutions: SC (The Hindu)

Context

Higher educational institutions, both government ones and those who take government aid, should ensure a level-playing field for disabled persons or face action for discrimination, the  Supreme Court warned

Appropriate statute

The Rights of Persons with Disabilities Act provides for not less than 5% reservation in seats during admissions

Bench’s views

  • A Bench of Justices A.K. Sikri and Ashok Bhushan cautioned that appropriate legal action would be initiated against defaulting educational institutions
  • A provision under the 2016 Act provided that persons with benchmark disabilities shall be given an upper age relaxation of five years for admission in institutions of higher education
  • A requirement is to ensure that a student with disability, after proper education, would be able to lead an independent, economically self-sufficient and fully participatory life

Directions given by SC

  • The apex court, in a 26-page judgment, directed the University Grants Commission (UGC) to constitute a committee to consider the feasibility of having guidelines for accessibility of students with disabilities in universities and colleges
  • The educational institutions concerned should submit a list of the number of disabled persons admitted in each course every year to the Chief Commissioner or State Commissioner under the Disabilities Act
  • Intimation about the number of admissions given to disabled students should be sent to the Bar Council of India (BCI)

3 key issues

Delivering a judgment on an 11-year-old PIL plea filed by the Disabled Rights Group, the Bench raised three key issues –

  • The non-implementation of reservation of seats in educational institutions as provided in the Disabilities Act
  • The lack of proper access for orthopedically disabled persons in educational institutions
  • The absence of provisions and facilities for teaching disabled persons

Centre examining health effects of e-cigarettes: Nadda (The Hindu)

Context

The government is examining the legal implications and health effects of e-cigarettes, Union Health Minister J.P. Nadda told the RajyaSabha on Tuesday

Groups constituted by government

Health Ministry had constituted three groups to study the various aspects of e-cigarettes

  • One was to study the legal implications of this e-nicotine drug induce system
  • another was to go into the health effects
  • the other was to study advocacy

All three sub-groups have given their reports. The Ministry is working on them

E-smoking

It referred to the practice of inhaling capsules of nicotine in a vaporised form after they were heated

  • This is actually an electronic nicotine delivery system. It has a nicotine capsule, which has no tobacco but nicotine that gives excitement as it hits the brain. Some countries have regulated e-smoking, while others have banned it

Internal security:

Seeing through a glass darkly: on combating terrorism (The Hindu Opinion)

Context

Terrorism

Different type of attacks

Recent attacks in Europe and parts of Asia, from 2015 to 2017 —

  • beginning with the attack on the Charlie Hebdo offices in Paris in January 2015
  • The major incidents at Brussels and Istanbul Ataturk airports as well as the Bastille Day attack in Nice, France, all in 2016, to the string of attacks in London, Stockholm, Barcelona and New York, in 2017 — are very different in structure and the morphology from attacks of an earlier period

ISIS – A different type of terror

  • A large number of terror attacks in the past three years have been attributed to the handiwork of the Islamic State (IS), and reveal its leaning towards the “nihilism” of SayyidQutb
  • It is this which distinguishes the IS from many of the other radical Islamist groups such as al-Qaeda and its affiliates. The IS’s recruitment techniques, especially its ability to proselytise over the Internet, including “direct to home jihad” as also its more sanguinary brand of violence, set it apart from earlier variants of radical Islamist terror

Other active terror outfits

Following terror groups have been equally active apart from ISIS

  • For example, al-Qaeda and its affiliates. The Boko Haram in Africa has been responsible for more killings than most people would realise. Closer home, the Afghan Taliban and the Haqqani network have carried out several spectacular attacks inside Afghanistan. The Tehrik-e-Taliban Pakistan (TTP) and the Lashkar-e-Jhangvi have carried out several attacks inside Pakistan

Most of these outfits continue to adopt earlier methodologies. The terror attack on a mosque in North Sinai, Egypt in November this year, which killed over 230 persons, is one such example

Problem with intelligence

One common fallacy is that intelligence agencies have remained static, are rooted in the past, and that their personnel are inadequately trained to handle current day intelligence task

Author’s contention: Author states that while there is room for improvement, it is a mistake to presume that intelligence agencies have not made rapid progress and kept up with the times. Intelligence agencies today are well-versed in the latest techniques of intelligence gathering and analysis

Methodology of intelligence agencies

  • Various types of intelligence: Agencies obtain vast amounts of information from both human and technical intelligence, not excluding signal intelligence and electronic intelligence, intelligence from satellites and photo reconnaissance, etc. This is apart from open source intelligence
  • Data mining: Agencies employ data mining techniques and are familiar with pattern recognition software. Today, noise and signals constitute valuable meta-data. Analysing meta-data has produced more precise information and intelligence than is possibly envisaged, and agencies well recognise the value and utility of this
  • Open source material: In addition, intelligence agencies have become highly adept in monitoring and exploiting open source material. Mapping and analysis of social networks is today a critical aspect of their work. This is especially useful when it comes to unearthing covert terror networks. Many intelligence agencies today have an extensive database of several thousands of terrorists and potential terrorists

Risk-prone agencies

Intelligence agencies, like many other organisations, are risk-prone. They do make mistakes. Intelligence analysts, like analysts in other fields, are particularly vulnerable. Problems also arise from inadequate sharing of intelligence across institutions and countries. All these, however, are a far cry from the charge of an inability or failure “to connect the dots”

What is the real problem?

  • No two situations are identical: The real problem is that when dealing with terrorism and terror networks, no two situations in the actual world are identical. The nature of threats is such that they continue to evolve all the time
    • Both the 2001 terror attack in New York and the November 2008 attack in Mumbai were one of a kind with few parallels at the time
  • Intelligence gap: Anticipating an attack of this nature remains in the area of an “intelligence gap” rather than an “intelligence failure”. Most experts explain an intelligence gap as one denoting an absence of intelligence output while an intelligence failure is one where, based on available evidence, no warning was issued

New challenges

Qualitative understanding of newer threats: One of the major challenges that all intelligence agencies face is a qualitative understanding of the newer, and many post-modern threats

  • New technology not enough: Anticipating such threats and their nature requires intelligence agencies to be constantly ahead of the curve. Anticipating newer threats is only partly facilitated by today’s technical advances such as new computing and communication technologies. However, these alone are not often enough to meet today’s intelligence needs.

What should be done?

  • As problems become more complicated, and as terror networks become even more sophisticated, there has to be recognition that the situation demands better understanding of factors that are at work
  • There is a case for far greater sharing of intelligence and information among intelligence agencies worldwide than it exists at present

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Economy:

CAG picks flaws in Centre’s accounting (The Hindu)

Context

The Comptroller and Auditor General of India (CAG) has highlighted several flaws in the Union government’s accounting procedures for the financial year 2015-16, which could have led to an understatement of the fiscal deficit and revenue deficit for that year

FRBM audit shows FY16 fiscal deficit possibly understated

Deferred Payments

The CAG Audit Report on the government’s compliance of the rules and targets set by the Fiscal Responsibility and Budget Management (FRBM) Act 2003 also highlighted the fact that the government had deferred payments amounting to more than ₹1.87 lakh crore in 2015-16, which would have also had an impact on its fiscal and revenue deficits for that year.

Underestimation in grants for creation of Capital Assets

As a result of deficiency in estimating the expenditure on grants for creation of capital assets, the provision included in the Budget at a Glance for grants for creation of capital assets was underestimated by ₹18,827 crore, which has also impacted the correct estimation of effective revenue deficit

Misclassification of Revenue Expenditure

  • Further, the report added that due to the misclassification of revenue expenditure as capital expenditure and vice versa, the revenue deficit was understated by ₹1,583 crore during financial year 2015-16
  • In addition to this, ₹20,911 crore collected under levies and cesses were not transferred to the relevant funds, which led to an “understatement of revenue/fiscal deficit by an equivalent amount” during 2015-16.

Pending Subsidy Claims

The report also found that, at the end of 2015-16, subsidy claims of ₹1,62,530 crore relating to fertiliser, food, and petroleum were pending, and that the devolution of taxes to the States was short by ₹24,942 crore that year, which had a bearing on the computation of the deficit ratios for that year.

Deferring Committed Liability

The practice of deferring committed liability on the ground that accounts are prepared on cash basis, while serving as an instrument to contain the current level of deficit, may not ensure inter-generational equity in fiscal management as envisaged in the [FRBM] Act.

Budgetary variances

The CAG also noted that there were several issues with the transparency of the government’s account statements.

No Disclosure of refunds in govt. accounts

Refunds of ₹1,29,482crore were made from gross direct tax collections in FY2015-16 but no corresponding disclosure was available in the government accounts

Govt. Failed to meet FRBM targets for 2015-2016

The CAG pointed out that the government had failed to meet the FRBM targets for 2015-16 on both the fiscal deficit and the revenue deficit, and that it had subsequently changed the targets and deadlines without making the relevant changes in the Act itself

Northeast policy to aid trade with ASEAN’ (The Hindu)

Context

The new Industrial Policy being framed for the development of industries in the northeast would prove catalytic to the trade with southeast Asian nations, according to the government.

Govt. to work on improving FDI inflow

The department-related Parliamentary Standing Committee on Commerce, in its report on trade with Association of South East Asian Nations (ASEAN), said that the Secretary, Department of Industrial Policy and Promotion (DIPP) had informed it that the department would work with ASEAN nations to improve FDI inflow.

How?

It would be done through:

  • Business Leaders’ Forums
  • CEOs’ forums and Invest India
  • and by further intensifying present efforts in this direction.

FDI stats

  • Of the $56 billion of FDI that came in in 2000-2017 from ASEAN countries, $54 billion was from Singapore.
  • The Committee said it was also told that outbound FDI from India to ASEAN countries is a substantial amount of $52 billion.

Need to bolster WTO process’ (The Hindu)

Context

The World Trade Organisation (WTO) process needs to be strengthened and taken forward as India has a strategic interest in the functioning of the multilateral trade system, according to Commerce Minister Suresh Prabhu.

Backdrop

Briefing members of Federation of Indian Chambers of Commerce and Industry in a closed-door meeting on the outcome of WTO’s recently held Buenos Aires meeting

Mini-ministerial meet

India would host a mini-ministerial (meeting of a few WTO member nations) in February to further its position on the multilateral trade body and to pursue its interest in a fruitful manner. FICCI informed this in a statement.

Objective of mini-ministerial meet

  • If you want to make sure that WTO becomes relevant to times that are changing, then we must also incorporate into WTO some of the very emerging important issues.
  • To get more support for food sovereignty and other issues including the ‘development agenda’ of the Doha Round talks.

WTO meet ended in impasse

  • The Buenos Aires meeting ended in an impasse with the US blocking the demands of over 100 developing nations, including India and China, on food security issues
  • The US had also questioned the centrality of development in multilateral trade negotiations.

Developed countries forming groups on “new issues” while India against including any such new issues

Developed countries have been taking the lead in forming groups to initiate discussions on ‘new issues’ such as e-commerce, investment facilitation and proposed norms relating to small firms, while India and other developing nations are insisting that such issues should be taken up for negotiations at the multilateral-level only after resolving the ongoing Doha Round’s outstanding issues such as the ones on food security.

Amendments to Companies Act passed; to ease compliance (The Hindu)

Context

A bill to amend the companies law to strengthen corporate governance standards, initiate strict action against defaulting companies, and help improve the ease of doing business in the country, was passed by Parliament on Tuesday

New law will ensure better corporate governance: Minister

  • The RajyaSabha passed the Companies (Amendment) Bill, 2017 by a voice vote. It was adopted by the LokSabha in July this year during the Monsoon Session
  • Replying to issues raised by the members during a discussion on the Bill, Minister of State for Corporate Affairs P.P. Chaudhary said the amendment would ensure better corporate governance and improve the ease of doing business.

The Bill

  • The Bill provides for more than 40 amendments to the Companies Act, 2013, which was passed during the previous UPA regime.
  • The Bill was introduced in the LokSabha in March 2016 and then referred to the Standing Committee on Finance. After taking into consideration the recommendations of the panel, the Cabinet had cleared a revised Bill in March this year.
  • The Companies Act, 2013 has already been amended once under the present government.

Procedures simplified

  • The latest legislation would help in simplifying procedures, make compliance easy, and take stringent action against defaulting companies.
  • The Minister dismissed apprehensions raised by members that the government was not doing enough to ensure that companies complied with the Corporate Social Responsibility (CSR) provisions.

‘Centre planning strategy to boost services exports’ (The Hindu)

Context

The government is formulating a new strategy to boost services exports by identifying new markets such as Latin America as well as services, including healthcare and financial services, which have tremendous potential in terms of exports and job creation, according to Commerce Minister Suresh Prabhu.

Backdrop

The Services Conclave, organised by CII in cooperation with the Commerce Ministry and Services Export Promotion Council

Healthcare among sectors with huge job potential: Prabhu

  • With manufacturing becoming increasingly automated, services would contribute more to employment generation
  • The Commerce Ministry, along with the EXIM Bank, was working on a strategy to define each market along with the kind of products that could be exported.

NitiAayog to set up Methanol Economy Fund (Indian Express)

Context

NitiAayog plans to set up a Methanol Economy Fund worth Rs 4,000-5,000 crore to promote production and use of the clean fuel. The government think is aiming at generation of the fuel by converting high ash content coal into methanol and such a plant is expected to be set up by Coal India.

Methanol fuel

We are going to use methanol fuel, which is cheaper, safer and pollution free

Our priority is to set up methanol production plants using coal and stranded gas assets

Methanol production in India

In India methanol can be produced at Rs 16-21 per litre.

Methanol can be used as an energy producing fuel, transportation fuel and cooking fuel, cutting down India’s oil import bill by an estimated 20 per cent over the next few years

Cabinet Note soon

NitiAayog plans to move a Cabinet note soon on the methanol economy and the plans to set up production plants

Future Plans

It expects that two plans can be commissioned in the next 3-4 years.

Better than CNG

Unlike CNG, using methanol as a transportation fuel would require minimal alteration in the vehicles.

China largest producer of methanol

China is the world’s largest producer of methanol, he added

Rail engines

The Aayog is also working on converting certain diesel-powered rail engines to work on methanol

Boats and ships also on methanol

Plans are underway to ensure that boats and ships used in the inland waterways initiative are also run on methanol.

Buses also

The Aayog is in discussion with companies such as Volvo and Tata to produce buses running on methanol.

Reveal, recognise, resolve (Indian Express)

Context

Gap between global banks and Indian banks on bad loan recovery is set to narrow

5 theories

There are five theories for why Indian banks recover so little of their bad loans

  1. The first suggests something cultural about repayment intentions of Indian borrowers
  2. The second theory suggests that many big bank loans are a child of political connections; this smells right
  3. The third theory suggests that many large Indian projects are gold-plated; indeed, many seem to have spent more money than needed
  4. The fourth theory suggests that Indian banks have not really been making loans but equity masquerading as debt
  5. The fifth theory — probably the most important — suggests the lack of a speedy and decisive bankruptcy process became an unfair advantage for large borrowers

A beneficial reboot

Bad loan recovery will not improve immediately but the ongoing reboot of our bad loan handling regime — revealing, recognising and resolving — will enable higher future recovery rates, modify entrepreneurial behaviour, and lower future incidence of bad loans

3R’s

Let’s look at the 3 R’s

Resolving: The Insolvency and Bankruptcy Code (IBC), a competent Insolvency and Bankruptcy Board (IBBI), and Bank IBC filings mean that Rs 3 lakh crore loans are under resolution

  • Some process tweaks are needed but a new Insolvency Law Committee is detailing them. The recent decision on eligibility for bidders was important because of the practically non-existent track record of repeated in-situ restructurings. More importantly, we don’t live in an economy but a society; the sustainability of big changes depends on their fairness.

Recognising: India is one of the 160 countries to sign up IFRS 9, a new international accounting standard born of the policy feeling that banks recognised bad loans too little and too late in the global financial crisis. IFRS 9 has three stages

  • A small provision is made when a loan is made for expected losses over the next 12 months. But this provision can rise quickly to the expected lifetime loss of the loan in two phases with borrower credit risk changes
  • Previously, loans to risky borrowers with higher interest rates meant higher bank income but no provision if creditworthiness declined
  • This complex change will be phased over five years, but the RBI’s Asset Quality Review, without changing rules, has already required banks to provide Rs 4.54 lakh crore extra for bad loans

Revealing: Banks, globally, improve recovery rates by “calling” loans (all future payments become due) immediately after the disclosure of payment misses or lower-case defaults (violations around information, ownership, liquidity or operational covenants)

  • Revealing defaults forces open lines of communication, enables good faith negotiation between borrowers and lenders, and shrinks the extended bankruptcy periods that destroy value
  • A good bankruptcy regime does not aim for liquidation but motivates a speedy renegotiation of financial viability if there is operational viability; this needs immediate, automatic and universal disclosure

Areas which need work

Two areas need more work:

  1. Governance at public-owned banks (Aristotle warned that when everybody owns everything, nobody takes care of anything): A great new book Capitalism without Capital by Jonathan Haskel and Stian Westlake suggests the rise of intangible assets makes corporate banking riskier; the Rs 2.1 lakh crore nationalised bank recapitalisation must come with surgery to their business model (no big corporate lending), culture (capping growth rates), and accountability (governance)
  2. Revealing defaults (sunshine is the best disinfectant): The second area of revealing defaulters needs reconciling conflicting legal, regulatory, liquidity, privacy, and fairness questions. But automatic, immediate and universal disclosure should be a goal reached through interim filters for timing (a small lag) and materiality

Review of wilful defaulter definition

It’s a flawed application of the legal concept of mensrea (meaning intention or state-of-mind and implies differentiating between murder and death by car accident) because loan taking and giving is by definition risk taking with a range of outcomes including default, restructuring and repayment

Solution: We need one definition of default, SEBI’s smart proposal for listed company defaults must be reinstated, and IBBI’s information utility activated

Way forward

China’s solutions are unacceptable — being listed on the government website of defaulters last week means that JiaYueting, the founder of $3 billion consumer electronics firm LeEco, can be restricted from using luxury hotels, private schools, golf courses, and airlines. But India’s status quo of even a loan classified as bad often not being known outside the bilateral relationship needs change

UIDAI tightens norms for Aadhaar-bank account linking (The Hindu)

Context

Following the  Airetel India- Aadhaar subsidy fiasco,the Unique Identification Authority of India (UIDAI) on Tuesday has tightened the norms for mapping Aadhaar number to a different bank account.

According to the latest rules, ‘explicitly informed consent’ from customers has been made compulsory

  • The National Payments Corporation of India (NPCI) will disable the override feature that UIDAI said was being misused by many banks while seeding Aadhaar to accounts without informed consent of residents.
  • As a result subsidy from the government was being credited to new accounts without their knowledge
  • The UIDAI further said that there have been complaints pertaining to customer verification

What was being done?

When an Aadhaar holder visits the telecom service provider for verifying his mobile number, as per Supreme Court’s Feb 6, 2017 order, the telecom firm is opening the customer’s payment bank account and puts that bank account on NPCI’s Aadhaar Payment Bridge, overriding the existing bank account. The mapping was done without the informed consent of the Aadhaar holder

Other problems

  • Similar problem was being faced when Aadhaar holders verified their bank accounts to comply with Prevention of Money Laundering rules (the last date for which is now March 31, 2018)
  • People, particularly in rural and remote areas, were being put to inconvenience as they were clueless about receipt of subsidy and also unable to withdraw the subsidy amount credited in payment bank accounts as payment banks are not having branches or cash out points in sufficient number in these areas
  • The UIDAI has notified changes to its rules to avoid further inconvenience to Aadhaar holders and to ensure that the Aadhaar collected for a purpose is not used for any other purpose without informed consent of the Aadhaar holders

Transit gambit: on e-way bill mechanism for transport of goods (The Hindu Editorial)

Context

The Centre needs to do more to ease the shift to e-way bills for transport of goods

The Centre needs to do more to ease the shift to e-way bills for transport of goods

Already grappling with the Goods and Services Tax transition, businesses are now anxious about how the roll-out of e-way bills will pan out

E-way Bill System

  • Starting February 1, all inter-State movement of goods worth over ₹50,000 will be tracked with the introduction of the e-way bill system under the GST regime
  • All consignments moving more than 10 km from their origin will require prior registration and generation of an e-way bill through the GST Network, which will be valid for varying durations depending on the distance travelled
  • While a few States have already imposed their own requirements for such bills since the GST roll-out in July, all States must implement the bill system for capturing intra-State trade by June 1

Conditions to implement

  • Therefore, a fully integrated tracking system for all taxable goods can be expected only then. This poses an interim headache for firms operating across States, as they will now face differing compliance requirements for inter-State trade and intra-State trade, depending on when individual States launch their own e-way bill systems
  • To be fair, inter-State movement of goods was also tracked under the VAT (value-added tax) regime, but intra-State transactions were not. Over 150 items of common use, including LPG cylinders, vegetables, foodgrain and jewellery, will be exempt from such transport permits, which can be checked by designated tax officials by intercepting a transporting vehicle
  • Goods moved on non-motorised conveyance, such as carts, have been left out.

Centre wants GST on fuel: ArunJaitley (The Hindu)

Context

The Centre favours including petroleum products within the ambit of the Goods and Services Tax (GST), but it would want a consensus among the States before taking such a step, Union Finance Minister ArunJaitley told the RajyaSabha on Tuesday.

Finance Minister, however, says a consensus from the States is required before taking such a step

  • During Question Hour, Congress leader and former Finance Minister P. Chidambaram sought to know the Centre’s position on bringing petrol and diesel under the GST.
  • He also sought to know why the prices of petrol and diesel did not decline with a fall in the global crude prices.

‘Issue a deal-breaker’

  • He said the previous UPA government in its draft GST Bill had kept petrol out of its ambit as it knew that the issue would be a deal-breaker between the Centre and the States.
  • He said the present government had persuaded the States to include petrol within the GST and the States reluctantly agreed to do so
  • However, it is only when the States demanded it and a consensus was formed, that it would be done.

Duties Imposes by the States

  • Responding to the charge that petrol and diesel prices were not coming down in line with global prices, Mr.Jaitley said it has to be kept in mind that a large number of duties on these products were imposed by the States.
  • On the Centres advice, many States had brought down these taxes but those ruled by the UPA (Congress and its allies) had not done so.
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