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Judiciary

Seize the opportunity: (The Hindu, Editorial)

Context:

  • The Supreme Court has recently ordered the Centre to frame a scheme to establish special courts exclusively to try cases against politicians.
  • The court has handed down many rulings that make legislators and holders of public office accountable for corruption.

What are factors to be taken into concern before setting up the special courts?

Special attention needs to be paid to three factors:

  • One factor is the necessity of having prosecutors who are not attached to any political party.
  • Solution: A directorate of prosecution, headed by a retired senior judge, who chooses prosecutors in turn vetted by the Chief Justice of the High Court, should be able to address this aspect.
  • The second factor is that the main trial will be obstructed by interim orders.
  • Experience has shown that political leaders are adept at finding legal counsel who file multifarious interim applications which stymie the trial; High Courts and the Supreme Court have sometimes failed to address these expeditiously.
  • Solution: This needs to be avoided, and can be if Chief Justices have a superintending mission.
  • Third concern expressed is to find funds to create the infrastructure and staffing for the special courts.
  • Solution: For that, the Finance Minister can devise a ‘Swachh Politics Bharat Bond’.

What are the drawbacks of setting up a separate court for politicians?

  • There is already a provision for special courts to try various classes of offences. Thus, creating a court for a class of people such as politicians is discriminatory.
  • Special courts will breach the law of equality.
  • While corruption charges against public servants are already being handled by special courts, it is an absurd question whether there can be special treatment for offences under the Indian Penal Code solely because the accused is a politician.
  • There is not enough judges and finance even to process the routine criminal cases, thus,  setting up special courts may add on to the expenditure.

What is the way out apart from setting up the special courts?

  • Article 14 permits classification based on criteria and nexus.
  • MPs and MLAs form a distinct class and their early trial is a democratic must.
  • They thus deserve to be given priority treatment regardless of special courts.
  • The Constitution, under Article 224A, provides for the reappointment of retired High Court Judges as ad hoc judges.
  • There is thus a large pool of judges of integrity and experience to choose from.

Article 224A:

  • 224 A. Appointment of retired Judges at sittings of High Courts.- The Chief Justice of a High Court for any State may at any time, with the previous consent of the President, request any person who has held the office of a Judge of that Court or of any other High Court to sit and act as a Judge of the High Court for that State, and every such person so requested shall, while so sitting and acting, be entitled to such allowances as the President may by order determine and have all the jurisdiction, powers and privileges of, but shall not otherwise be deemed to be, a Judge of that High Court:
  • Provided that nothing in this article shall be deemed to require any such person as aforesaid to sit and act as a Judge of that High Court unless he consents so to do.

Election commission and politicians involved in criminal cases:

  • The existing law for politicians involved in criminal cases disqualifies them and sentence to a jail term of two years or more from contesting elections for six years from the date of release from prison.
  • Election Commission favored a life term ban on MPs, MLAs from contesting election after being convicted in criminal cases.
  • But Commission supports the plea to the extent that there should be a mechanism for decriminalisation of politics.

Centre plans to set up more commercial courts: (The Hindu)

Context:

  • Union government proposed to establish commercial courts in districts to further improve the parameters of ease of doing business.

Indian’s performance within the legal framework according to the World Bank’s Ranking and the government’s take on it:

  • India’s performance has been varied within the legal framework.
  • The World Bank’s ranking marked “court system and proceedings in India” 4.5 out of a total of 5, but in management of cases, it was 1.5 out of 6.
  • India also fared well in alternative dispute redress mechanism and scored 2.5 out of a total of 3 marks.
  • The government is thus proposing amendments to facilitate the establishment of commercial courts, at the district level, in places where the High Courts have ordinary original civil jurisdiction.
  • The specified value of commercial disputes would be brought down so as to expand the scope of commercial adjudication effectively and expeditiously.

Constitution of commercial courts, commercial Dickson and commercial appellate division:

  • The Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015 constitutes a two layer set-up., i.e.
  • The Commercial Courts/Commercial Divisions; and
  • The Commercial Appellate Divisions.
  • Except where High Courts have ordinary original civil jurisdiction the State Governments are to set-up Commercial Courts at the District level.
  • And wherever the High Courts have ordinary original civil jurisdiction, the Chief Justice is to set-up a Commercial Division bench presided by a single Judge;
  • The Commercial Appellate Division presided by bench of two Judges is to be constituted by the Chief Justice of each of the High Courts,  to hear appeals from decisions of the Commercial Court or Commercial Division.

Definition:

  • The commercial courts attempts to cover a broad range of disputes within the scope of a ‘commercial dispute’.
  • The definition broadly covers commercial disputes arising from ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, export and import of merchandise or service, admiralty and maritime law, transactions relating to aircraft, etc.

Objectives of commercial courts:

  • The commercial courts provides for strict deadlines for conduct of case, filing of written statements, filing of documents, filing of written statements, etc.
  • Several new procedures have also been adopted by the The Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015  to make the process of hearing of the disputes faster.
  • The Act has also provided some detailed guidelines with respect to the factors which the Court has to consider when giving the direction about costs, that whether one party should bear all or some of the cost of the other party.

What is the way ahead?

  • Before establishing more commercial courts, there is a need for appointment of sufficient number of judges to the Courts, appropriate infrastructure is provided, salary of judges are dramatically increased to attract better talented, trained and competent persons who are selected, based on merit, to head these courts, and  change in the very mindset and attitude of both the judges and the lawyers functioning in the Courts.
  • The concept of commercial disputes and parameters are to be broadly discussed and explained do that there is not much of confusion.

Warring over disarmament in the UN: (Live Mint, Editorial)

Context:

The United Nations diplomats from all member-states gather to deliberate on disarmament and international security, promote national interest.

Introduction:

  • The deliberations of the First Committee have sought to bridge difference and seek common ground.
  • These events include tensions over North Korea between the US and China, differences over the Iran nuclear deal, and the Russian veto in the UN Security Council blocking the extension of the Joint Investigative Mechanism mandated to probe alleged chemical weapons use in Syria.
  • The biggest factor behind this year’s undiplomatic dust-up is the recently concluded Treaty on the Prohibition of Nuclear Weapons (TPNW).

Treaty on the Prohibition of Nuclear Weapons (TPNW):

  • The Treaty on the Prohibition of Nuclear Weapons, or the Nuclear Weapon Ban Treaty, is the first legally binding international agreement to comprehensively prohibit nuclear weapons.
  • For those nations that are party to it, the treaty prohibits the development, testing, production, stockpiling, stationing, transfer, use and threat of use of nuclear weapons, as well as assistance and encouragement to the prohibited activities.
  • It was signed and approved by 122 of the 123 participant nations, representing two-thirds of the nations in the UN.
  • The NWPT is the most significant multilateral development on nuclear arms control since the adoption of the Nuclear Non-Proliferation Treaty (NPT) in 1968. It has to be ratified by 50 countries to come into force.
  • The treaty has exacerbated rifts not only between the nuclear-armed states and the non-nuclear armed states but also members of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), the Non-Aligned Movement (NAM), and in some cases, between nuclear-armed states and their allies, which are protected by these weapons.
  • The NWPT is the most significant multilateral development on nuclear arms control since the adoption of the Nuclear Non-Proliferation Treaty (NPT) in 1968. It has to be ratified by 50 countries to come into force.

What’s missing in the treaty?

  • It does not offer a practical approach on how to prod nuclear weapons states to join it.
  • It contains no mechanism to verify the reduction and abolition of nuclear weapons.
  • It also does not provide a solution to the risk of nuclear weapons being used by accident or miscalculation, or by terrorists.

What can be the harmful threat of Nuclear Weapons?

On Environment:

  • Nuclear weapons are fundamentally different from conventional weapons because of the vast amounts of explosive energy they can release and the kinds of effects they produce, such as high temperatures and radiation.
  • The prompt effects of a nuclear explosion and fallout are well known through data gathered from the attacks on Hiroshima and Nagasaki
  • A special feature of a nuclear explosion is the emission of nuclear radiation, which may be separated into initial radiation and residual radiation. Initial radiation, also known as prompt radiation, consists of gamma rays and neutrons and  produced within a minute of the detonation
  • Gamma rays and neutrons can produce harmful effects in living organisms, a hazard that persists over considerable distances because of their ability to penetrate most structures.

Health effects of nuclear weapons:

  • The health effects of nuclear explosions are due primarily to air blast, thermal radiation, initial nuclear radiation, and residual nuclear radiation or fallout.
  • Nuclear explosions produce air-blast effects similar to those produced by conventional explosives. The shock wave can directly injure humans by rupturing eardrums or lungs or by hurling people at high speed, but most casualties occur because of collapsing structures and flying debri.
  • Thermal radiation. Unlike conventional explosions, a single nuclear explosion can generate an intense pulse of thermal radiation that can start fires and burn skin over large areas. In some cases, the fires ignited by the explosion can coalesce into a firestorm, preventing the escape of survivors. Though difficult to predict accurately, it is expected that thermal effects from a nuclear explosion would be the cause of significant casualties
  • Initial radiation. Nuclear detonations release large amounts of neutron and gamma radiation. Relative to other effects, initial radiation is an important cause of casualties only for low-yield explosions (less than 10 kilotons).
  • When a nuclear detonation occurs close to the ground surface, soil mixes with the highly radioactive fission products from the weapon. The debris is carried by the wind and falls back to Earth over a period of minutes to hours.
  • Cyber warfare emerged as a more potent tool as nations can be destroyed without killing a single human being.
  • Security concern: Nuclear weapons pose a direct threat to people everywhere. They breed fear and mistrust among nations.
  • Another long-term health effect is the induction of eye cataracts. This effect has been noted in the Japanese studies and also in a study of the Chernobyl cleanup workers.

The immediate effects of radiation include the following:

  • Central nervous system dysfunction (at very high doses);
  • Nausea, vomiting, and diarrhea from damage to the gastrointestinal tract, leading to potentially fatal dehydration and nutrition problems; and
  • Destruction of the body’s capacity to produce new blood cells, resulting in uncontrolled bleeding (because of the absence or severe reduction of platelets) and life-threatening infections (because of the absence or reduction of white blood cells

Global steps to ban nuclear weapons:

  • Recently, the United Nation signed pact to ban nuclear weapons.
  • 122 nations of the world came together to accept legal ban over nuclear weapons of mass destruction.
  • Failure of NPT, CTBT (1996) on the name of maintaining deterrence against opponent (MAD-Mutually agreed deterrence principle) cannot get more support from numerous countries.
  • It is clear that these weapons of mass destruction reach are not confined to a geographical boundary or country itself.
  • The approval ban over use of nuclear weapon is a landmark or paradigm shift in the direction of disarmament.
  • it prohibits or ban in totality production, stockpiling and use of nuclear weapons even underground explosions in all circumstances
  • It also ensures strong provisions to protect victims of extreme radiation and contamination of environment
  • It complements international ban on all categories of weapons of mass destruction following the prohibition of biological and chemical arms.

What is Nuclear Prohibition Treaty?

  • It creates a legal basis for proscribing nuclear weapons among adhering states.
  • The Treaty on the Prohibition of Nuclear Weapons prohibits States Parties from developing, testing, producing, manufacturing, acquiring, possessing, or stockpiling nuclear weapons or other nuclear explosive devices.
  • Signatories are barred from transferring or receiving nuclear weapons and other nuclear explosive devices control over such weapons, or any assistance with activities prohibited under the Treaty.
  • States are also prohibited from using or threatening to use nuclear weapons and other nuclear explosive devices.
  • States Parties cannot allow the stationing, installation, or deployment of nuclear weapons and other nuclear explosive devices in their territory.
  • In addition to the Treaty’s prohibitions, States Parties are obligated to provide victim assistance and help with environmental remediation efforts.

Conclusion:

India’s resolution on the role of science and technology in the context of international security and disarmament, which was adopted by consensus not only highlights India’s rule-shaping efforts but might also contribute to building a much-needed bonhomie among the disarmament community. This is a critical step to curb the war over disarmament.

International Relations

Beyond big game hunting: (The Hindu, Editorial)

Context

  • India by accepting the invitation to join the Quadrilateral grouping to provide alternative debt financing for countries in the Indo-Pacific, has taken a significant turn in its policy for the subcontinent.

The Quad pivot

  • The Japan-proposed, U.S.-endorsed plan, including Australia, it is necessary that India analyze the impact of this admission on all its relations.
  • As a growing economy with ambitious domestic targets, India’s own needs often clash with those of its neighbours.
  • More connectivity will eventually mean more competition, whether it is for trade, water resources, or energy.

Major concerns of Bhutan

  • In April, the International Monetary Fund’s world economic outlook had already put Bhutan at the top of South Asia in terms of the highest debt per capita, second only to Japan in all of Asia for indebtedness.
  • The budget figures attracted much criticism for the Bhutanese government, and opposition taunts that Bhutan could become the “Greece of South Asia” forced Prime Minister Tshering Tobgay to appoint a three-member committee.
  • Among the committee’s findings were that Bhutan’s external hydropower debt financed by India at 9-10% rates were piling up, with the first interest and principal payments expected in 2018, and construction delays, mainly due to Indian construction issues, were taking the debt up higher.
  • Several pleas to the Ministries of External Affairs and Power, the Cross Border Trade of Electricity (CBTE) guidelines issued by India had not been revised, putting severe restrictions on Bhutanese companies selling power, and on allowing them access to the power exchange with Bangladesh.
  • Given falling prices for energy all around, India could not sustain the Bhutanese demand that power tariffs be revised upwards.

The confusing state

  • India has also been ambivalent on tackling political issues in its region, often trapped between the more interventionist approach of the U.S., which has openly championed concerns over ‘democratic values’ and human rights in Sri Lanka, Maldives and Bangladesh, and the approach of China, which is to turn a blind eye to all but business and strategic interests.
  • In Nepal, India lost out to China when it allowed a five-month-long blockade at the border, calling for a more inclusive constitution to be implemented by Kathmandu — but in the case of Myanmar, it lost precious ground in Bangladesh when Mr. Modi refused to mention the Rohingya refugee situation during a visit to Nay Pyi Taw. In both cases, India reversed its stand, adding to the sense that it is unsure of its next steps when dealing with neighbours on political issues.

Will it of any benefit for India?

  • It is important to note that while Indian government’s new plan is to involve the U.S. and Japan in development projects in South Asia will yield the necessary finances, it will come at the cost of India’s leverage in its own backyard.
  • India’s counter to China’s persistent demand for a diplomatic mission in Thimphu.
  • In Sri Lanka, the U.S. and Japan will now partner in India’s efforts to counter China’s influence, but whereas India objected to Chinese naval presence in the Indian Ocean, it will not be able to object to an increase in U.S. naval warships and Japanese presence there.

The new oil game: (Indian Express, Editorial)

Context

  • The global importance of China’s oil imports will be an increasingly pressing worry for India

What will China do to mitigate its dependence on oil supplies from the Middle East?

  • China is the world’s largest net oil importer, comfortably outstripping the US, and much of its crude comes from countries in the Middle East, including Iran.
  • China consumes approximately 13 million barrels of oil a day (mbd). Of that, 60 per cent is imported of which 50 per cent (approximately 4 mbd) is sourced from the Middle East

What might be the consequences for India of such actions?

  • India has major strategic interests in the Middle East. Aside from its dependence on the region for oil, it has eight million citizens who remit approximately $70 billion annually.
  • A convulsion in the region would give India a massive logistic and financial headache.
  • This could sharpen into a severe migraine if China were in pole strategic position at that time. China plays a long game. We must track its moves assiduously

What are the alternatives available for the Chinese government?

  • The Chinese leadership is fully aware of this chink and has for years sought to mitigate the risk by investing in non-oil sources of energy.
  • They have, for instance, committed $340 billion over the next four years to solar and wind. This is more than any other country in the world.
  • They are operating 34 nuclear reactors and another 20 are under construction. And they have invested in long-term gas supply deals with Russia, Central Asia and Australia.
  • The reason is the surging demand for diesel/gasoline-fueled vehicles. Twenty-one million of them hit the road in 2016 alone. China is the largest importer of crude oil in the world today and will remain so for the foreseeable future.

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Economy

PSU banks may get ₹70,000 cr. via recap bonds in four months: (The Hindu)

Context:

The Finance Ministry may infuse about Rs. 70,000 crore through recapitalisation bonds in the NPA-hit public sector banks (PSBs) in the next four months.

Introduction:

  • Last month, Finance Minister Arun Jaitley had announced a Rs 2.11 lakh crore two-year roadmap for strengthening public sector banks.
  • The plan included re-capitalisation bonds of Rs 1.35 lakh crore.
  • Presently, the government is finalizing the structure of bonds and decision in this regard could be made very soon.
  • The latest figures shown in the ministry presentation put the increase in non-performing assets (NPAs) from financial year (FY) 2015 till June 2017 at Rs4.55 trillion.

Rationale behind decision by the government:

  • By infusing capital, the government is trying to partially improve the balance sheets of public sector banks.
  • This will also help banks write off some of the Rs 10 lakh crore bad loans currently on their books.
  • For tackling the problem of stressed assets.
  • The amount is expected to help put India’s banks on the path to recovery.

Means through which Recapitalization can be done:

  • The governments have recapitalized banks through various means. These can be mainly divided into direct capital infusion, issuance of public debt into banks either as a swap for bad assets or unrequited, and by assuming the bank’s liabilities.

Growing NPAs of public sector banks:

  • Non-performing assets (NPAs) of public sector banks alone have increased from Rs. 2.75 lakh crore as on March 2015 to Rs. 7.33 lakh crore as on June 2017.
  • Besides the bonds, the Minister announced banks would get about Rs. 18,000 crore under Indradhanush plan over the next two years.

What is Recapitalisation bonds?

  • Recapitalisation bonds are dedicated bonds to be issued at the behest of the government for recapitalizing the trouble hit Public Sector Banks (PSBs).
  • Recapitalization bonds are proposed as a part of the Rs 2.11 trillion capital infusion package declared by the government recently.
  • The term recapitalisation means giving equity money to cover debt of an entity.
  • In the case of PSBs, their NPAs (debts) will be replaced by equity capital from recapitalisation by the government.
  • Money obtained from the sale of the bonds will be injected into the PSBs as government equity funding.
  • Procedures for the issue of the bonds and the working mechanisms are yet to be decided by the government.

How the Recapitalisation Bond issue will work?

  • The bond, once issued by the holding company, will be subscribed by public sector banks themselves.
  • Fund from the issue of bonds will be used to subscribe shares of PSBs and will be treated as additional government equity or capital.
  • The capital of PSBs will be enhanced thereby helping them to tackle the present NPA problems.
  • Banks at present have adequate funds as the credit growth was low in the past few years. Banks have funds from the demonetization period deposits. At least 1 trillion rupees is supposed to be with the banking system where the depositors have to give explanation for the source of income.

How recapitalization will help banks to tackle the NPA problem?

  • The Public Sector Banks will get additional capital from the government from the issue of the bonds. The amount of capital to be obtained by each PSB will be determined later and it depends upon the depth of their NPA problem.
  • Banks once obtained the funds, can write-off the bad assets by using the fund from recapitalization.
  • As per the Basel III norms, there should be a minimum higher quality capital like equity capital.

What are Non Performing Assets (NPAs)?

  • A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
  • Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.
  • Substandard assets: Assets which has remained NPA for a period less than or equal to 12 months.
  • Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months.
  • Loss assets: As per RBI, Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.

What are the reasons for the rise of NPAs?

  • The banking sector has been facing the severe problems of the rising NPAs. Following are the major reasons:

External Factors:

  • Ineffective recovery tribunal: The government has set an array of recovery tribunals, which works for recovery of loans and advances, due to their carelessness and ineffectiveness in their work the bank suffers the consequence of non-recover, their by reducing their profitability and liquidity.
  • Natural calamities: Every now and then India is hit by major natural calamities thus making the borrowers unable to payback their loans.
  • Thus the bank has to make large amount of provisions in order to pay damages those loans, hence end up the fiscal with a reduced profit.
  • Industrial sickness: Inappropriate project handling , ineffective management , lack of adequate resources , lack of advance technology , day to day changing government policies produce industrial sickness.
  • Therefore the banks that finance those industries ultimately end up with a low recovery of their loans reducing their profit and liquidity.

Internal Factors:

  • Inappropriate technology: Proper Management Information System (MIS) and financial accounting system is not implemented in the banks, which leads to poor credit collection.
  • Improper analysis: The inappropriate strength, weakness, opportunity and threat analysis is another reason for increase in NPAs.
  • Poor Credit Appraisal: Deprived credit appraisal is an additional factor for the increase in NPAs, due to poor credit appraisal the bank gives advances to those who are not able to repay it back.

What steps has the government taken?

  • Mission Indradhanush: Government has launched ‘Mission Indradhanush’ to make the working of public sector bank more transparent and professional in order to curb the menace of NPA in future.
  • Insolvency and Bankruptcy Code, 2016 (IBC): It is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
  • Reserve Bank of India: RBI introduced number of measures in last few years  which include: tightening the Corporate Debt Restructuring (CDR) mechanism, setting up a Joint Lenders’ Forum, prodding banks to disclose the real picture of bad loans, asking them to increase provisioning for stressed assets, introducing a 5:25 scheme where loans are to be amortized over 25 years with refinancing option after every 5  years, and empowering them to take majority control in defaulting companies under the Strategic Debt Restructuring (SDR) scheme.

What is Bank recapitalization?

  • Bank recapitalization means recapitalising banks with new capital to improve their balance sheet.
  • The government, using different instruments to add capital into banks which undergoing credit deficiency.
  • Since the government is the biggest shareholder in public sector banks, the responsibility of infusing capital majorly lies with the government.

How Bank recapitalization takes place?

  • The recapitalisation plan comes into action when banks get caught in a situation where their liabilities are comparatively higher than their assets.
  • The liquidity with banks is a liability as it is the money deposited by customers, which needs to be paid sooner or later.
  • Due to this their balance-sheet weakens and banks find it difficult to raise capital from the open market.
  • Thus, the government, which is also the biggest shareholder, can infuse capital in banks by either buying new shares or by issuing bonds.

Why has Recapitalisation of the Banks Occurred?

  • Recapitalisation of the Banks occurs when:
  • People defaulted on loans and mortgages;
  • banks lent money (bought CDOs) to sub-prime mortgage companies in America who lost money;
  • falling house prices means that banks assets decline further and if they repossess homes it’s harder to get value of the original loan back, and
  • recession led to more defaults and losses.

Public sector versus private sector banks:

  • Mismanagement:  private banks owners, who have invested their own money and stand to lose it all in case of mismanagement, have a strong economic incentive.
  • It is a good effort compared to the almost complete negligence and gross mismanagement of books in the case of public sector banks.
  • Bad loans: private banks rarely face the problems of bad loans, which is a part and parcel of lending aggressively under a fractional reserve banking system.
  • But in the case of public sector banks, the implicit guarantee of their books by the government only adds to it the risk of moral hazard.
  • Taxpayer money: as nationalised banks are allowed to tap into taxpayer money whenever they are in deep financial trouble, they have very little reason to be careful while lending and more reason to take huge risks with their balance sheets.
  • Incidentally, the same happens whenever the government protects private sector banks from the negative consequences of their actions.

Decoding GST forms: (The Hindu)

Context

  • The Goods and Services Tax (GST) Council extended the deadlines for filing GSTR-2 and GSTR-3 forms for July by a month each to November 30 and December 11 respectively.                                                                                                             

What is a GSTR-1 form?

  • This serves as the master form for all subsequent forms for the return period. GSTR-1 assumes that a business transaction that needs to be recorded on it involves a supplier and a recipient.
  • The GSTR-1 deals with outward supplies. That is, it needs to be filled out by the supplier on a detailed basis, providing the invoice details of every transaction for the return period.
  • Normally, the GSTR-1, for any month, has to be filled by the 10th of the subsequent month.
  • The recipient’s form, detailing the inward supply, is to be auto-populated from the details provided by the supplier in his GSTR-1.

What is the GSTR-2 form?

  • The GSTR-2 is to be filled by the recipient with details of all inward supplies
  • Take the example of Company A supplying goods to Company B. Company A will log the details of the transaction in its GSTR-1. Company B will find these details auto-populated in its GSTR-2A.
  • However, Company B will also have to provide other details — such as inward supplies from unregistered companies — to complete its GSTR-2.
  • This has to be done by the 15th of the subsequent month.
  • In case the recipient disagrees regarding the details in the GSTR-2A form, then he can communicate his concerns to the supplier who has the option to modify the GSTR-1 or leave it as it is.

Are there any other major forms?

  • The GSTR-3 is simply an auto-populated form based on the details of the GSTR-1 and GSTR-2.
  • It represents a consolidated monthly return and contains the tax liability along with the tax collected on outward supplies and tax paid on inward supplies by a registered person or company.
  • The GSTR-3 has to be filled by the 20th of the next month.
  • The GST Council allowed companies to file a summary GSTR-3B form every month up to December to ease their compliance burden.

India is right to focus on ease of doing business: (Indian Express, Editorial)

Context

  • The World Bank Group’s Doing Business 2018 report ranks India at 100 out of 190 countries.
  • India’s jump in ease of doing business rankings will hopefully be a spur for further reforms, for a better business environment and greater prosperity for all

What is Distance to Frontier?

  • The distance to frontier score helps assess the absolute level of regulatory performance overtime.
  • It measures the distance of each economy to the “frontier”, which represents the best performance observed on each of the indicators across the economies in the Doing Business sample since 2005.
  • An economy’s distance t frontier is reflected on a scale from 0 to 100, where o represents the lowest performance and 100 represents the frontier.

What is Ease of Doing Business Index?

  • The Ease of doing business index is an index released by the World Bank Group in its Doing business report.
  • Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • New Zealand has topped the Ease of Doing Business rankings in 2017.

Where does India stand in the Ease of doing business index?

  • India ranked 130 among 190 countries however, has not made any improvement from the last year as its rank has been downgraded to 131.
  • This lack of improvement in the rankings though Indian Government was hoping to jump substantially this year has triggered a strong reaction and disappointment.
  • Though several reform measures have been taken by the Government, it feels they are not reflected in these rankings.
  • The only bright side in these rankings is that India has improved substantially in getting electricity for businesses and enforcing contracts.
  • Out of the 10 parameters, India has slipped down in 5 parameters and on other 3, there is a status quo.

Why India should not base its result on basis of this index?

  • World Bank index is based on limited data.
  • There is a disjunction between how things get done in India and Bank’s methodological approach. Many achievements have not been covered by the report due to methodological issues.
  • According to DIPP, Online filing and payment of returns at the Employee Provident Fund Organization has been implemented, but it was not considered by the World Bank, even after it shared “logs and voluminous evidence” of the same.
  • Bank’s report is based on data collected from very few cities.
  • Centre has only partial control over several of these sub-indices as it needs states support to bring the required legislations.
  • It does not directly measure more general conditions such as a nation’s proximity to large markets, quality of infrastructure, inflation, or crime.
  • Rankings are incompletely reflective of the significant transformation in the overall business environment in key areas such as openness to FDI, online procedures, MSME facilitation

What are the loopholes in the ease of doing business index?

  • In India’s case, the business environment in only Delhi and Mumbai are used to compile the national ranking.
  • These rankings also focus a lot more on the laws and rules that are on the books and do not necessarily capture the daily experiences of businesses.
  • The World Bank said while there has been substantial progress, India still lags in areas such as starting a business (156), enforcing contracts (164) and dealing with construction permits (181).

Larger challenges

  • The enforcement of contracts now takes longer than it did 15 years ago.
  • The procedures to start a business or secure a construction permit remain cumbersome.
  • Mumbai and Delhi cannot host the kind of large factories that India needs to generate adequate employment.
  • It is critical to have procedural reforms reach the surroundings and a road map be drafted for the larger legislative changes needed in matters such as land acquisition.
  • While foreign investors are important, the importance of domestic businesses cannot be ignored.

Demonetisation: A resounding success: (Live Mint, Editorial)

Context:

Massive economic reforms like demonetization cannot be measured solely by using economic parameters but need to take into account the structural shift that such reforms induce in society.

Introduction:

  • On the economic front a heated debate is under way whether demonetisation has been a success or not. Several reputed economists have pronounced their judgments on demonetization.
  • Dr Raghuram Rajan has mentioned that the short-term economic costs of demonetization would outweigh them and that there were alternatives available to achieve the main goals.
  • There is lack of scientific data and thorough analytical studies on the economic impact of demonetization
  • Societal and long-term economic changes are difficult to measure and require more reasoned, detailed, and patient analyses: this should increase our resolve to do deeper research rather than jumping to hasty, ill-informed conclusions.

What is the meaning of demonetization?

  • Demonetization is the act of stripping a currency unit of its status as legal tender.
  • It occurs whenever there is a change of national currency.
  • Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.
  • The opposite of demonetization is remonetization where a form of payment is restored as legal tender.
  • Demonetization can also be referred to as the process of moving people from a cash-based system to a cashless system

Background:

  • On November 8, 2016 Prime Minister announced that Rs 500 and Rs 1000 denomination notes will become invalid.
  • The government introduced new notes of Rs 2,000 and Rs 500 .
  • There was also no change effected in any other form of currency exchange like cheque, Demand draft (DD), payments made through credit cards and debit cards.
  • The move was taken to curb the menace of black money, fake notes and corruption by reducing the amount of cash available in the system.

Changes brought by demonetization:

  • To appreciate the changes that demonetisation brought about, there is need to carefully choose and measure the relevant short-term high-frequency indicators and a few emerging long-term indicators which point to the direction that the economy has since taken.

High-frequency and quantitative indicators include:

  1. Cash-to-GDP ratio: cash-to-GDP ratio is now down to 9.7%, from 11.3% pre-8 November last year. This cash is now in the banking system which has helped swell the current accounts and savings accounts balances of bank.
  2. Volume of digital payments,
  3. Number of new registered taxpayers, and
  4. Estimate of “unaccounted for” money and the number of tax notices sent indicate that demonetisation has generated material changes.
  • Apart from these economic factors, there is another more profound behavioural change that has been accomplished.
  • Indians are paying their taxes and moving towards a less-cash society.
  • GST and the implementation of the benami transactions Act make it even more difficult for anyone in the economic chain to opt out of the taxation system.

Demonetization measurement:

  • Massive reforms like demonetization cannot be measured solely by using economic parameters but need to take into account the structural shift that such reforms induce in society.
  • Societal and long-term economic changes are difficult to measure and require more reasoned, detailed, and patient analyses: this should increase our resolve to do deeper research rather than jumping to hasty, ill-informed conclusions.
  • Demonetization has provided Indian citizens a unique opportunity to re-imagine not only their currency, but also their own social mores, honesty, compliance with law, and their willingness to change and adapt to a more transparent and New India.

What are the consequences of demonetization?

Positive consequences:

  • The growth in the direct tax base.
  • The switch in the financial holdings of households from cash to bank deposits
  • The increased use of digital payment

Negative consequences:

  • The main negative economic consequence of demonetization has been the disruption of unorganized supply chains that are dependent on cash transactions.
  • Demonetisation leads to decline in economic growth to a three year low of 5.7 per cent.
  • RBI report had revealed that nearly 99 per cent of the scrapped currency notes had come back to the banks, and it would become 100 per cent if cash in the pipeline is accounted for.

What were the stated goals of demonetization?

  • To curb black money
  • To promote Digital Transactions
  • One of the objective was that the quantum of cash operating in the system must gradually come down
  • One of the stated objectives of demonetization was to increase the tax base.
  • One of the aims was to bring about a shift from a cash based economy towards more digital or electronic forms of transactions.
  • After demonetization, there was a spurt in electronic transactions through prepaid wallets, debit and credit cards, NEFT(National Electronic Fund Transfer).

National Electronic Fund Transfer (NEFT):

  • The NEFT is an electronic fund transfer system maintained by the Reserve Bank of India.
  • Started in 2005, NEFT is a facility enabling bank customers in India to transfer funds between any two NEFT-enabled bank accounts on a one-to-one basis.
  • Unlike Real-Time gross settlement (RTGS), fund transfers through the NEFT system do not occur in real-time basis.

Prelims Related News

Navy to use U.S. aircraft launch system in ship:

Context:

  • The Navy is likely to go with an advanced catapult-based aircraft launch mechanism (CATOBAR) from the U.S. for its second indigenous aircraft carrier (IAC-II).
  • India has been exploring the possibility of installing the U.S. electromagnetic aircraft launch system (EMALS).

What are the significance of EMALS?

  • While the older generation of CATOBAR was powered by a steam catapult, EMALS uses an electric motor-driven catapult instead, which allows the launch of much heavier aircraft and also reduces the stress on the aircraft.
  • EMALS will allow  to operate heavy surveillance aircraft in addition to heavy fighters.

What is the significance of IAC-II?

  • The Navy envisages the IAC-II to be around 65,000 tonnes.
  • It will be capable of carrying over 50 aircraft.
  • The Navy is also keen on nuclear propulsion, which would give it unlimited range and endurance

CATOBAR:

  • CATOBAR(Catapult Assisted Take-Off But Arrested Recovery or Catapult Assisted Take-Off Barrier Arrested Recovery) is a system used for the launch and recovery of aircraft from the deck of an aircraft carrier.
  • Under this technique, aircraft launch using a catapult-assisted take-off and land on the ship (the recovery phase) using arrestor wires.

It’s significance:

  • It provides greater flexibility in carrier operations, since it imposes less onerous design elements on fixed wing aircraft than alternative methods of launch and recovery such as STOVL or STOBAR, allowing for a greater payload for more ordinance and/or fuel.
  • CATOBAR can launch aircraft that lack a high thrust to weight ratio, including heavier non-fighter aircraft such as the E-2 Hawkeye and Grumman C-2 Greyhound.

INSV Tarini on second leg of circumnavigation:

Context:

The all-women crew of the Indian Navy sailboat, which is on a challenging expedition of circumnavigating the globe, left port city of Fremantle in Western Australia for its onward journey to New Zealand.

Introduction:

  • The vessel had reached Fremantle recently after completion of the first leg of its maiden voyage and is now headed to Lyttelton,  New Zealand.
  • The crew is being led by Lieutenant Commander Vartika Joshi.
  • The voyage titled Navika Sagar Parikrama began from Goa in September and is to be completed in March.
  • The distance will be covered in five legs, with stopovers at four ports — Fremantle (Australia), Lyttelton (New Zealand), Port Stanley (Falklands) and Cape Town (South Africa). The 55-foot  sailing  vessel, built indigenously, was inducted in the Navy early this year.
  • On October 23, the sailing vessel arrived at Fremantle Port, its first and only stopover in Australia, after completing the first leg of its maiden voyage to circumnavigate the globe.

INSV Tarini:

  • INSV Tarini is a 55-foot sailing vessel, which has been built indigenously, and inducted in the Indian Navy earlier this year.
  • INSV Tarini is a sloop built by Divar-based Aquarius Shipyard.
  • It is slated to be the platform for the Indian Navy’s first Indian all-women circumnavigation of the globe expedition.
  • It has Raymarine navigation suite and an array of satellite communication systems on board through which contact can be made from anywhere.

Naming of INSV Tarini :

  • INSV Tarini has been named after the Tara-Tarini hill shrine located on the Kumari hills on the banks of Rushikulya river in Ganjam district of Odisha. In Sanskrit, the word Tarini means both boat and saviour.
  • Tara-Tarini was the traditional patron deity for sailors and merchants of ancient Odisha, who is worshipped for safety and success at sea.

Marooned once more  (flood management)

Context

  • Chennai’s meeting with the northeast monsoon resulted into all-round relief since the water fortunes of more than eight million residents of the metropolitan region depend on this weather system.

What are the issues?

  • The larger issue of how the city deals with flood and drought cycles remains unaddressed.
  • Chennai is a lower elevation coastal city with very high population density. Scientific management should have ensured the preservation of the many traditional lake.
  • Successive governments allowed the mindless draining of wetlands and their conversion into expensive real estate, with catastrophic consequences.
  • Regrettably, the great flood two years ago, which left many dead and families impoverished, has not yielded a policy course correction.
  • Tamil Nadu, one of India’s most urbanized States, has a poor record in this area, resulting in fragile slums. New housing has mushroomed in Chennai’s suburbs, where municipal bodies are mired in incompetence and corruption.

What should be done?

  • Chennai should return to the traditional wisdom of creating tanks and lakes for water storage, and rejuvenating old silted ones, in order to harvest the floods and replenish depleted groundwater.
  • The finding from one study in 2013 shows that 27 tanks have totally disappeared and another 400 have lost almost their entire capacity. This underscores the need to revive such natural sponges.
  • Inviting the community to monitor the health of the tanks and lakes can keep out encroachers, who are often protected by patron-politicians.
  • These measures can work only when the deficit of good housing and civic infrastructure is actively addressed.

Way ahead

  • The priority for the State should be to integrate flood management using expert opinion and public consultation.
  • Remedial structures should be built for existing localities.
  • Poor waste management is exacerbating the problem by blocking drains, canals and lakes, while ill-planned road projects are cutting off flood flows. These have to be immediately addressed.
  • The tendency to treat floods and drought as events to dole out patronage is preventing Chennai from forging robust solutions.
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