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GS 2 India and neighbors

The crossroads at the Doklam plateau :

(The Hindu, Editorial) (Building of Crossroads)

Context :

  • Bhutan and India share a special and unique relationship, but none are as strong as the ones laid down on the ground: 1,500 km, to be precise, of roads that have been built by India across the Himalayan kingdom’s most difficult mountains and passes.

Background :

  • Since 1960, when Bhutan’s King Jigme Wangchuk entrusted the then Prime Minister, Jigme Dorji, with modernizing the country, that had formerly stayed closed to the world, those roads built and maintained by the Indian Border Roads Organization (BRO) under Project Dantak have brought the countries together for more than one reason.
  • All the new roads that Bhutan proposed to construct were being aligned to run southwards towards India from the main centers of Bhutan.
  • Not a single road was planned to be constructed to the Tibetan (Chinese) border.
  • When the Chinese presented a fork in the road, Bhutan stood firm maintaining an independent stand.
  • Within some years, during the India-China war of 1962, Bhutan showed its sympathies definitely lay with India, but it still wouldn’t bargain on that independent stand.

Current situation :

  • India seeks to understand the Chinese government’s intentions in the Doklam stand-off.
  • Seen in the context of deteriorating relations between New Delhi and Beijing for the past three years, or in terms of China’s own global ambitions, and India need to show its Asian neighbours its muscular might.
  • But any explanation that does not consider China’s desire to draw space between India and Bhutan in the ongoing stand-off will be inadequate, and simplistic at best.
  • With the latest stand-off, that includes the cancellation of the Nathu La route, China appears to be back in the eastern great game that Bhutan has become, or an “egg between two rocks”, as a senior Bhutanese commentator described it.
  • By triggering a situation where Indian soldiers occupy land that isn’t India’s for a prolonged period, Beijing may have actually planned to show up India’s intentions in an unfavourable light to the people of Bhutan.

All eyes on India :

  • India must also be mindful that other neighbours are watching the Doklam stand-off closely.
  • It would be short-sighted not to recognize that Bhutan is at one tri-junction with India and China, but Nepal, Myanmar and Pakistan too have tri-junctions with both countries, and China’s reference to “third country” presence in Pakistan-occupied Kashmir is putting a spotlight on all of these.
  • Bhutan is also the only country in the region that joined India in its boycott of Chinese President Xi Jinping’s marquee project, the Belt and Road Initiative.
  • In China’s thinking, any reassessment of Bhutan’s unique ties with India, forged all those decades ago in asphalt and concrete, would be not only a prize, but possible payback.
  • While Indian commentary has focused on the Modi government’s bilateral problems with Beijing, India must calibrate both its message and its military moves in order to keep Bhutan on track with the special ties they share.

Parliament and State Legislatures

Context of the contest :  

(The Hindu, Editorial) (The selection of President, camaraderie of the political class)

Context :

  • The election to the posts of President and Vice President is a moment when contested democracy gives way to broad agreement and the camaraderie of the political class.
  • Felicitation of new elected President
  • On July 25, the newly elected President of India Ram Nath Kovind was sworn in at the Central Hall of Parliament.
  • The function was attended by Members of Parliament cutting across party lines and Chief Ministers who represented different political persuasions.

Farewell to Outgoing President  :

  • Earlier, last Sunday, a cross-section of MPs attended a touching farewell to outgoing President Pranab Mukherjee, a man associated with Indian parliamentary democracy since 1969.
  • Choice of President: not unanimous
  • Not all those who attended both functions had voted for either President Kovind or President Mukherjee.
  • Unsuccessful candidates were included C.D. Deshmukh, H.R.
  • Khanna, K. Subba Rao, Tridib Chaudhuri, Bhairon Singh Shekhawat and P.A. Sangma.
  • However, the mere fact that the presidency was contested didn’t either diminish the office or ensure unending controversy over the person of the Head of State.
  • The respect and dignity of that office has always been maintained by all shades of political opinion.

Reasons :

  • The holder of a constitutional office such as the President or Vice President is not expected to be another battering ram on behalf of the Prime Minister and the ruling dispensation.
  • The Head of State is expected to adhere to the letter of the Constitution.
  • The only occasion the President can somewhat exercise his discretion is in selecting the Prime Minister in the event of a fractured election verdict.

Government policies

India rejects OIC move on vigilantism  :

(India rejects OIC concern)

Context :

  • India rejected the resolutions of the Organization of Islamic Cooperation (OIC) that had expressed concern about the recent attacks on people by cow-vigilante groups.

Statement by Ministry of External Affairs(MEA)

  • An official statement from the MEA stated that the resolutions adopted at the Organization’s latest foreign ministers’ meeting were “factually incorrect”.
  • India notes with remorse that the Organization of the Islamic Cooperation, during its 44th Session of the Council of Foreign Ministers, has again adopted certain resolutions which contain factually incorrect and misleading references to matters internal to India.
  • The matter included the Indian State of Jammu and Kashmir, which is an integral part of India.
  • The MEA added, “the OIC has no locus standi on India’s internal affairs.
  • We strongly advise the OIC to refrain from making such references in future.”

‘India’s concerns slowing RCEP talks’ :

(RCEP sluggish talks concerns India)

Context :

  • India’s reservations regarding the potential adverse impact of eliminating duties on its local manufacturing and job creation is understood to be slowing down the Regional Comprehensive Economic Partnership (RCEP) negotiations.


  • The RCEP is a proposed mega Free Trade Agreement (FTA) involving 16 Asia Pacific nations including India and China.
  • The RCEP aims to liberalize investment norms in the region, besides boosting trade by dismantling most tariff and nontariff barriers.
  • Asia Pacific is a fast growing region, but trade between countries in the region is affected by several barriers.
  • If RCEP talks are not concluded quickly and these barriers are not eliminated, the region will miss out on many opportunities.

Rising concerns :

  • Indian companies and industry bodies, including Confederation of Indian Industries (CII), flagged their concerns.
  • The Centre’s ‘Make In India’ initiative to boost manufacturing and job creation can get hit by a hurried pact.
  • Post India’s FTA with ASEAN, Japan and Korea, India’s trade deficit with them have increased, and the government needs to take this into account during RCEP negotiations.
  • Eliminating duties under the RCEP will impact many sectors including steel, aluminum, auto-components, many engineering items and readymade garments.
  • India is ought to highlight the need for removal of non-tariff barriers including those in China.

GS 3 Indian Economy. Canotte Chicago Bulls Planning, Growth and Employment

Govt. may not split Air India for stake sale :

Govt. may not split Air India


  • The central government may not sell Air India’s domestic and international operations separately.

Introduction :

  • The government’s concern is that Air India’s valuation may take a hit if hives off Air India into two companies and invites bids for its domestic and international operations.
  • This might come as a hurdle to low-cost airline IndiGo’s plan to acquire its international operations.
  • “Air India’s business cannot be split merely based on an expression of interest from a single private player. If we sell lucrative assets separately, it will make the divestment of the domestic unit and subsidiaries tricky,” said Aviation Ministry official.
  • The government’s plan to disinvest from its debt-laden flag carrier got a boost with Indigo, the country’s biggest airline by market share; expressing interest in buying astake in Air India a day after the cabinet approved a proposal to dilute state ownership in the company.

Zero duty to hit Indian dairy industry :

Context : 15 crore farmers will be impacted by FTA

Introduction :

  • The Indian dairy sector, providing livelihood to 15 crore farmers, would be severely hit if import duties on milk products were eliminated under any Free Trade Agreement (FTA) including the Regional Comprehensive Economic Partnership(RCEP), according to the local dairy cooperative Amul.
  • Farmer’s organsiations have threatened to hold nationwide protest if the dairy sector is opened up under the RCEP- the proposed mega-regional FTA involving 16 Asia Pacifica nations including India- or any other FTA including those proposed separately with Australia and New Zealand.

Key points :

  • Presently, the duty on milk and milk products ranges from 40% to 60%, which gives the local industry enough protection to build its competitiveness.
  • Against the 15 crore dairy farmers in India, there were only 12,000 of them in New Zealand and 6,300 in Australia.

RCEP in India :

  • RCEP involves the Association of Southeast Asian Nations, South Korea, Japan, China, India, Australia and New Zealand, with the emphasis centered on facilitating open trade without tariffs, duties and quotas that can stimulate commerce and benefit all sides.
  • The current round of negotiations is crucial as members are expected to finalise the broad contours of the agreement.
  • It will include members making their second round of offers on tariff reduction on goods, nations deciding on investment rules, as well as India going against ASEAN and China on market access for the services trade. The RCEP, aims to liberalise investment norms as well as boost trade by eliminating/drastically reducing import duties on goods and bringing down ‘barriers’ in the service sector.
  • The 16 nations account for a combined GDP of close to $ 50 tillion( about 40% of the world’s GDP) and are home to around 3.5 billion people

Background :

  • The RCEP was built upon the existing ASEAN+1 FTAs with the spirit to strengthen economic linkages and to enhance trade and investment related activities as well as to contribute to minimising development gap among the parties.
  • In August 2012, the 16 Economic Ministers endorsed the Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership.
  • The RCEP negotiations were launched by Leaders from 10 ASEAN Member States (Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam) and six ASEAN FTA partners (Australia, People’s Republic of China, India, Japan, Republic of Korea, and New Zealand) during the 21st ASEAN Summit and Related Summits in Phnom Penh, Cambodia in November 2012. The RCEP negotiations commenced in early 2013.
  • The objective of launching RCEP negotiations is to achieve a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement among the ASEAN Member States and ASEAN’s FTA partners.
  • The Association of Southeast Asian Nations (ASEAN) has free trade agreements with six partners namely People’s Republic of China (ACFTA), Republic of Korea (AKFTA), Japan (AJCEP), India (AIFTA) as well as Australia and New Zealand (AANZFTA).
  • Its market estimated to cover three billion people, to account for 40% of world trade.

    Transfer unclaimed accruals to fund: IRDA :

Senior citizens welfare fund to benefit Context :

  • Insurance companies can no longer retain unclaimed amounts of policyholders if those accruals are more than 10 years old. Such sums need to be, instead, transferred to the Senior Citizens’ Welfare Fund (SCWF) of the Centre.

Introduction :

  • All insurers having unclaimed amounts of policyholders for a period of more than 10 years as on September 30, 2017 need to transfer the same to the SCWF on or before March 1, 2018.
  • The direction from the Insurance Regulatory and Development Authority of India has come in the backdrop of the amendment made in April to the Senior Citizens’ Welfare Fund Rules.
  • The amendment expanded the purview beyond the unclaimed amounts in small savings and other savings schemes of the Centre, PPF, and EPF.
  • It brought in unclaimed amount lying with banks, including cooperative banks and RRBs, dividend accounts, deposits and debentures of companies coming under the Companies Act, insurance companies and Coal Mines PF.
  • Sectoral watchdog Insurance Regulatory and Development Authority of India (Irdai) has asked insurance companies to get details of such accounts and the prescribed format in which the unclaimed deposits have to be submitted from Department of Financial Services

Key points :

  • The Centre brought in Senior Citizens’ Welfare Fund Act, 2015 (SCWF) as part of the Finance Act, 2015, which mandates transfer of unclaimed amounts of policyholders to the fund (SCWF) after a period of 10 years.
  • There are rules under the SCWF, specifying about the entities required to transfer such amounts to the fund and its administration. The rules apply to all life, general and health insurers.

A greater market role in bankruptcy process :

(Live Mint, Editorial) (A smart expenditure for bankruptcy process)

Context :

  • To tackle private investment in India, the government should come up with a bankruptcy law which would help businesses exit sooner and capital to be reassigned faster to productive firms, thereby improving economic output and employment.

Introduction :

  • India’s new bankruptcy law, circulated last year, while marking a positive departure from the old and fragmented system that existed earlier, is far from ideal.
  • This new law provides for appointing an insolvency professional (IP) to conduct the process.
  • But research has shown that this approach leads to higher bankruptcy costs.
  • It also leaves too much discretion in the hands of the IP who, in India’s case, is likely to have much less knowledge and experience in this domain.
  • Furthermore, the National Company Law Tribunal (NCLT), the adjudicating authority for all corporate default cases, would be tasked with resolving as many as 25,000 bankruptcy cases over and above other corporate cases.
  • And it may take more than seven years for the NCLT to clear these many cases.

The proposed solution :

  • Recently economists have proposed a radical, market-friendly approach to the resolution of the bankruptcy process.
  • According to the proposal, a much better bankruptcy system would be one that encourages decentralization, reduces the role of courts or insolvency professionals, and allows for a greater role for the markets.
  • In this system, the courts would only have a supervisory role.
  • This would do away with the need to establish and maintain specialized bankruptcy courts, insolvency professional agencies, or even experts for operating the firm.
  • It would also remove the scope for discretionary decisions by IPs.

Suggestion :

  • For India to improve its rankings in the doing business index, it is not enough to simply have a bankruptcy code in place.
  • The code must be strong, decentralized, less costly, inclusive and speedy.
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