9 PM Current Affairs Brief – September 12th, 2018


Download the compilation of all summaries of all the news articles here


GS-2

Nepal reset

Nepal reset

News:

1.Nepal decided to stay away from multilateral Military Exercise (MILEX – 2018) proposed during BIMSTEC Summit.

Important Facts:

2.Multilateral exercise was proposed by Indian PM during BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) summit in Kathmandu last month.
3.Nepal’s denial to participate in MILEX signals its reluctance , towards its  security role as decided during BIMSTEC summit.

4.India has raised the concern after Nepal gave assent to participate in a 12-day long exercise with China scheduled this month.
5.It has been argued, the response provided by India during adoption of New Nepali constitution and supporting Madhesi demand, provided an edge to China over India.
6.India has done exceptionally well on foreign policy front despite having issues with economic policies.
7.However, this could be an opportunity for China to increase its footprint in Nepal in its economic sphere.
8.Beijing may  also offer the big projects that India wouldn’t be able to match.
9.What India needs to do:

  • Should warn Nepal about the danger of falling into the China’s debt trap.
    Expedite hydro-power development projects in Nepal which is at stand still since long, such as Pancheswar, Arun III and Upper Karnali.
  • Bring Indian private sectors in infrastructure development rather than depending on public sector undertaking.
  • Take concrete steps to shape BBIN (Bangladesh-Bhutan-India-Nepal framework) motor vehicle agreement.

10.Need of the  hour for India is to offer alternative to Chinese projects.

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Combining cooperation with competition

Combining cooperation with competition

News

1.A two day informal summit between Indian Prime Minister and Chinese President took place in the central Chinese city of Wuhan in April 2018, has to be seen in the wider development in the backdrop of Indo-Pacific region

Important facts

2.India and China are able to manage their differences as both of them need to concentrate on their economic development.
3.New Delhi would do well in areas of same ideas, while not compromising on its border security.

Issues Between India and China

a)One Belt One Road (OBOR)

  • India has not joined the China led OBOR initiative or the Belt and Road initiative (BRI), due to its own concerns about violation of its sovereignty via
  • CPEC (China Pakistan Economic Corridor) in J & K.
    India firmly believes that connectivity initiative must be based on universally recognised international norms, good governance,rule of law, openness, transparency, and equity.
  • The development must be in a manner that respects sovereignty and territorial integrity.

b) .Doklam issue
China had started construction of Road in Doklam region of Bhutan (territory claimed by China) to which India had objected, leading to tensions between them..

  • Both countries pulled back their troops before Indian PM travelled to China for BRICS Summit in September 2017.
  • Doklam crisis resolved but Chinese troops are still patrolling on the Sino-Indian border as China tests both Indian defence and its resolve.

    c) Indian Ocean Region (IOR)
  • India is worried about China’s so-called “String of Pearls” strategy under which it has already helped in constructing port and port facilities at Gwadar in Pakistan, Hambantota in Sri Lanka, and Chittagong in Bangladesh and Kyaukpyu in Myanmar.

Setting up of Chinese base in Djibouti has further aggravated the Indian concerns in IOR.

(d) Trade between India and China

  • India comes under a huge trade deficit with China. •In 2017 total trade between India and China reached to a historic high of $84.44 billion, and increased Up to $51.75billion in China favour.

Outcome of Wuhan summit

  • Strategic guidance issued to respective militaries to strengthen communication and effectiveness in management of border affairs
  • China also announced that, it  would decrease tariffs on 28 medicines including cancer drugs from India, however this  will take time in implementation.

(e) Other concerns

China is also increasing its  presence in Gulf region and in Africa. The Gulf region is home to a huge Indian Diaspora and India has always had upper hand in this region.

  • India had also shown its displeasure on growing chinese presence in IOR at the Shangri-La Dialogue, 2018 in Singapore.
  • India has also advocated for  equal access as a right under International Law to all countries in South China Sea, where various countries are in direct contention with China over territorial issues.
  • Additionally, China’s ‘all weather friendship’ with Pakistan is worrisome for India, especially as it has been alleged to supply nuclear weapons and missiles to Pakistan.
  • China has also repeatedly blocked India’s bid for membership to NSG.

4. Steps taken by India

  • India has resumed Quadrilateral initiative (Military exercise of India, Australia, Japan, US), which was cancelled in 2007, because of China’s protests against it.
  • The setting up of a tri-services command by India in the A & N Islands gives it an unmatched reach in the region.

5. Way forward

  • India needs to develop coherent policy to deal with China’s growing presence in its immediate neighbourhood.
  • India should use multilateral forums like the BRICS and AIIB (where both of them are members) as a tool to resolve crisis. .
    On the border issue too, India needs to have a Standard Operating Procedure for future.
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GS 3

Law to protect HIV/AIDS patients take effect

Law to protect HIV/AIDS patients take effect

News

  • Human Immunodeficiency Virus and Acquired Immune Deficiency Syndrome (Prevention and Control) Act, 2017 has been notified by government, to be brought in force.

Important facts

  • In India, 0.26% of the people, between the age group of 15 and 49 years, are HIV positive.
  • 21 lakh people in India are currently HIV positive.
  • India ranks third in the world in the number of HIV patients.

Features of the Act

  • Propagation of hatred or physical violence against HIV person will get jail term of 2 years and Rs 1 lakh as fine.
  • It will bring private institutions like health care facilities, educational institutions, and workplaces under its ambit.
  • Even a private firm discriminating against a person living with HIV/AIDS can be taken to court.
  • The act also makes a provision for a fine of Rs 1 lakh for disclosing the HIV status of a person, if done in the absence of any court order.
  • The act guarantees several rights for the people living with HIV/AIDS, like the right to property, the right to employment, and the right to hold public offices.
  • Ensures free treatment and counseling for all persons affected by AIDS
  • The act puts the onus of implementing the act, controlling the spread of the disease, treating People living with HIV AIDS, and creating wellness schemes, on the States along with the Centre.
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Number of people suffering from hunger increasing, UN report

Number of people suffering from hunger increasing, UN report

News:

  1. UN  has released report, “The State of Food Security and Nutrition in the World” to highlight undernutrition and hunger in the world.

Important Facts:

2. The report has been jointly prepared by UN International Fund for Agricultural Development, World Food Programme, World Health Organisation and UN Children Fund.

3. Key Findings

  • Hunger- starved people climbed 8 year high since 2009 to 821 million  in 2017.
  • Under nutrition and food insecurity increased since 2014 in all parts of Europe and North America.
  • Hunger is worse in countries where agriculture is highly sensitive to severe drought and where high share of population depends on farming.
  • Conflict in nations like Yemen and economic crises in countries like Venezuela have restricted people’s access to food.
  • 151 million children aged under 5  are stunted due to malnutrition in 2017, compared to 165 million in 2012.
  • Globally, Africa and Asia accounted for 39% and 55%  of all stunted children, respectively.
  • One in three women of reproductive age globally is affected by anaemia and no region has shown a decline in this.
  • Less than half  ( 40.7%) of the percentage of infants aged below 6 months were exclusively breastfed.
  • Adult obesity is worsening and  is more significant in North America, but Africa and Asia are also experiencing an upward trend.

4. Key drivers behind the rise in hunger:

  • Climate variability affecting rainfall patterns and agricultural seasons.
  • Climate extremes such as droughts and floods where high share of population depends on farming.
  • Conflicts and economic slowdown in countries.
  • Difficulty in sourcing nutritious food resulting in obesity.

5. Way Forward:

  • Urgent local and global action to address the multiple forms of malnutrition to achieve Sustainable Development Goal (SDG 2 ) of Zero Hunger by 2030.
  • Leaders must redouble efforts to cut the use of fossil fuels
  • Commit funds to help poor countries adapt to climate crises.
  • Policies must pay special attention to vulnerable groups like infants, school-aged children, and women.
  • Sustainable shift  towards nutrition-sensitive agriculture.
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How localization of data will affect firms, consumers

How localization of data will affect firms, consumers

News:

  1. RBI directed payment firms to submit fortnightly updates on the progress made on storing data in India.

Payment Firms: Enterprises which handle transactions from digital payment systems to promote cashless mode of money transfer, e.g. by credit and debit cards.

Important Facts:

2. Recently released  draft e-commerce policy and the Srikrishna report talks about data localization.

3. About data localization

  • It is the practice of storing data on any device that is physically present within the borders of the country where the data is generated.
  • Free flow of digital data is restricted by some governments. Data localization is promoted to protect security across borders. 

4. RBI data localization norms:

  • RBI directed all system providers to store the entire data relating to payment systems operated by them in a system only in India.
  • This data should include the full end-to-end transaction details/ information collected/ carried/processed as part of the message/payment instruction.
  • For the overseas leg of a transaction, the data may be stored in the foreign country.

5. Rationale for the RBI regulation

  • Access to data stored by system providers and third-party vendors in the payments ecosystem will ensure better monitoring.

6. Consequences of data localization norms:

  • Payment firms have to abide by the laws framed by the government and RBI.
  • Global digital payments like Visa, American EXpress, Facebook,Paypal, Mastercard and Google will be impacted.
  • Google recently agreed to comply with the RBI’s data localization norms.

7. Arguments for data localization:

  • It will help law enforcement agencies to detect crime and  gather evidence for prosecution as accessing information locally is easier than from foreign entities abroad.
  • It will  help avoid the vulnerabilities of relying on fibre optic cable network.
  • It will  prevent foreign surveillance of critical personal data.

8. Arguments against data localization:

  • Splintering the internet by data localization weakens the data security measures globally.
  • The Cyber Security Report 2017 reported that businesses in India were most at risk to cyber security attacks.
  • Thus, a mandatory border control provision by data localisation may not be the solution to avoiding security breach incidents.
  • As foreign governments use sophisticated malware to spy, forcing data storage within the country’s boundaries may not offer it any better protection.
  • Huge costs are involved to fulfill  data localisation requirements.

9.. Way forward:

  • Robust security measures at par with global industry standards are needed  along with the push towards data localization.
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Avoidable suspense

Avoidable suspense

News

  1. SEBI board will meet to give final shape to FPI regulations.

Important Facts

2. Total portfolio investment in Indian Market is estimated at $450 billion.

3. Asset Managers Roundtable of India  (AMRI) warned that SEBI circular disqualifies $75 billion of portfolio investment.

Background

4. On April 10th, SEBI in a circular issued new structural guidelines for FPIs of certain category.

5. The FPI norms have been in the news in the recent past with overseas investors objecting to the circular issued in April.

6. SEBI asked a working group headed by H.R. Khan to look into the concerns expressed by FPIs and give suggestion.

7. SEBI has put out the Panel’s recommendation for public opinion.

Analysis of Circular

8. The Circular issued to enhance Know Your Client Norms ended up imposing a blanket ban on certain types of investments where NRIs, PIOs or OCIs were investors.

9. Critics argued that the circular disallowed NRI and OCI from managing investment on behalf of foreign investor but the circular was

  • In accordance to FPI regulation in 2014.
  • SEBI never had an objection to NRIs and RIs managing FPIs, provided they did not invest their own fund through them.
  • ‘The only restriction was that a significant part of the investment could not be proprietary fund because that would make the investment managers as Beneficial Owners(BO)

10. Circular laid down that NRIs and OCIs cannot be beneficial owners in FPI else they have to be liquidated.

  • Allowing these investors to hold substantial stakes in FPIs would be akin to allowing them a back door entry in to Indian Market.

11.   Ceiling to invest in a stock

  • FPI: 24% of paid up capital.
  • NRI: 10% of paid up capital.

12. Primary intention of the circular was to identify a natural person as the owner of each FPI such that round tripping could be curbed.

13. The circular tried to pin the Beneficial Owner of each FPI by rule laid down in Prevention of Money Laundering Act (PMLA).

14.   Who are beneficial owners?

  • 25 % FPI if investor is a company.
  • 15% if investor is a partnership firm, trust or person.

HR Khan Committee Recommendations

15.   Acknowledged that using PMLA for identifying BO is not right.

  • Recommended that the threshold for identifying BO can be 25% of the Asset under Management (AUM) in case of a single NRI/OCI/RI.
  • AUM of entities should be below 50%.
  • In case these entities hold more than the prescribed limit, they have to liquidate the portion of assets exceeding the limit or transfer it to someone else.

16. The committee recommended for the extension of the deadline for complying with the circular. It also recommended a 180 day window if the investor breaches the threshold fund.

Conclusion

  1. Attempts to curb Round-tripping is important but treating all FPIs with Indian origin managers as potential conduit of illicit money is unwise.
  2.   This could have been avoided if SEBI had dialogue with the stakeholders.
  3.   Policy uncertainty and sharp about turns should be avoided as it dents India’s credibility among global investors.
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India’s first missile tracking ship is readying for sea trials

India’s first missile tracking ship is readying for sea trials

News

  1. India’s first nuclear missile tracking ship is ready for sea trials.

Important Facts

2. India’s secretive nuclear missile tracking ship, which will become part of missile shield.

3. It is undergoing harbour trials, which has been completed in less than five years and is set to be delivered by December.

4. Specification of tracking ship

  • Built by Hindustan Shipyard Limited (HSL), this hi-tech vessel will enter elite global club.
  • It is one of the largest warships built at an Indian yard, weighing in at 15,000 ton.
  • A project of 750 crore, with high secrecy on details, including the capabilities and systems on board.
  • A naval vessel has a mystery name VC11184, formal name will be given after decommissioning.
  • Ship haves the capacity of carrying 300 strong crew with hi-tech gadgets and communication equipment.
  • It is powered by two engines, and a large deck capable of helicopter landing.

5. It has been built for the National Technical research Oorganization (NTRO) and Technical Intelligence Agency (TIA), which works under PMO.

6. HSL

  • It was set up in 1941
  • It is going to build five fleet support ships costing ₹9,000 crore
  • HSL has finalised the request for proposal for design collaborator for construction of two Special Operation Vessels called mini submarines.
  • HSL is also banking on the order for medium refit of Russia-made third Sindhughosh class submarine INS Sindhuratna for which it has submitted technical bids.

7. Visakhapatnam as a hub

  • It is considered as a strategic location on the East Coast for the Indian defence forces.
  • It is home for Ship Building Centre to build nuclear powered submarine INS Arihant class, Naval Alternate Operational Base at Rambilli.
  • It is the second naval base after Eastern Naval Command headquarters, training centre for Marine Commandos and headquarters of the submarine arm.
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Small loans could turn bad: Rajan

Small loans could turn bad: Rajan

News

Raghuram Rajan reports on NPA (non-performing asset) to parliament estimate committee

Definition: 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.

 Issue

  • Concern regarding NPA of public sector bank that has increased from 2.83 lakh crore in 2014 to around 12 lakh crore in 2018.

Important facts

Causes of NPA

Global problems

  • Due to high growth rate during the period of 2006 to 08, banks overestimation of future in giving loan led to NPA
  • Global financial crisis (2008) and slowdown of Indian economy

Governance problem

  • Governance problem like fear of investigation and slow decision making in sectors like power  mines and real estate
  • Negligence by government regulatory body in assessing NPA problem

Problem with banking sector

  • Banking sector was not willing to take investigation for bad loans due to fear from investing agencies
  • Corruption and malfeasance in the working of public sector banks
  • Banks were ineffective in bringing high profile fraud for taking appropriate action

Problem caused by investor

  • Lack of interest from promoters to invest after projects get delayed
  • Diversification of funds to unrelated business by investor
  • Restructuring norms were being misused by investors
  • Fraud done by big investors like Vijay Mallya and Nirav Modi

Causes of NPA rising despite  asset quality review (AQR) by RBI

  • Projects that were not revived (restructured) by banks led to increase in NPA
  • Risk laden banking sector were not willing to restructure the loans. Delay in the process of clearing bank books due to judicial process
  • Loopholes in bankruptcy code which made promoters take undue advantage of laws and regulators.
  • Government has not recapitalized banks with urgency
  • Reforming governance of public sector bank had  limited impact
  • Poor skill resource of public sector bank officials.
  • Restructuring schemes such as Asset Reconstruction Companies for NPA had limited impact.
  • What RBI could have done Raised more concerns about unorganized lending
  • Pushed for early enactment of bankruptcy law

Future threats  of NPA from Small loans

  • MUDRA  and kisan credit card loans may turn NPAs in future. 6.37 lakh crore has been given under Mudra scheme through public sector banks, regional rural banks and micro finance institution without collateral
  • CGS (Credit guarantee scheme) for MSME (medium small micro enterprise) sector by SIDBI (small industrial development bank of India) has grown in liability
  • The outstanding amount on kisan credit card is amounting to Rs.1.6 trillion through 20.3 million cards and has potential to become NPA
Micro Units Development and Refinance Agency Bank (or MUDRA Bank) is a public sector financial institution in India. It provides loans at low rates to micro-finance institutions and non-banking financial institutions which then provide credit to MSMEs

 

Small Industries Development Bank of India (SIDBI) is a development financial institution in India, Its purpose is to provide refinance facilities and short term lending to industries, and serves as the principal financial institution in the Micro, Small and Medium Enterprises (MSME) sector

 

Suggestion to prevent recurrence of NPA

Governance in public sector

  • Recommendation of P.J Naik committee should be implemented in reforming public sector banks
  • Skill  deficit in PSB should be rectified at earliest.
  • Appointments at higher posts  should be made through bank board bureau.

Risk evaluation

  • Improve the process of risk evaluation
  • Risk management processes need substantial improvement
  • Cyber risks need greater attention
  • Potential NPA risks have to be mitigated wherever possible.

Government intervention

  • Improve governance of PSB and distance them from government interference

Judicial intervention

  • Out of court restructuring process and bankruptcy process need to be strengthened and made speedy
  • Loopholes in bankruptcy code should be fixed at earliest

Ambitious target and loan waiver

  • Mudra and kisan credit card loans need to be examined more closely for potential credit risk
  • Loan waivers destroy the credit culture, which  needs to be addressed
  • Government should refrain from ambitious credit target or waiving loan of farmers
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