Repo and reverse repo rate reduced to 6% and 5.75% respectively The Monetary Policy Committee (MPC) released its first Bi-Monthly Monetary Policy Statement of 2019-20.[3] The policy repo rate (the rate at which the Reserve Bank of India (RBI) lends money to banks) was reduced from 6.25% to 6% by a majority vote of the members. Two of the six members voted to keep the rate unchanged. Other decisions of the MPC include:
The reverse repo rate (the rate at which the RBI borrows money from banks) was reduced from 6% to 5.75%. The marginal standing facility rate (the rate at which banks can borrow additional money) and the bank rate (the rate at which the RBI buys or rediscounts bills of exchange) were reduced from 6.5% to 6.25%. Further, RBI decided to maintain the “neutral” monetary policy stance.
Supreme Court struck down a circular issued by the RBI dated February 12, 2018.[4] The circular had laid down a framework for restructuring of stressed assets of over Rs 2,000 crore.[5]
As per the circular, the resolution plan for such restructuring had to be implemented within 180 days from (1) March 1, 2018 for existing defaults, or (2) the date of first default for any subsequent defaults.
The Supreme Court held the Circular to be outside the scope of the power given to it under Article 35AA of the Banking Regulation (Amendment) Act, 2017.[6] The Court reasoned that Section 35AA was proposed by the 2017 Act to authorise the RBI to issues directions only in relation to specific cases of default by specific debtors. It held that the RBI circular issued directions in relation to debtors in general and this was outside their scope of power. The court also held that consequently all IBC proceedings initiated under the RBI circular are quashed.
The RBI released the draft framework for Regulatory Sandbox for public feedback.[7] An inter-regulatory Working Group was setup in 2016 by the RBI to review the regulatory framework of the financial technology sector. It recommended introducing a framework for a regulatory sandbox.
The sandbox provides an environment which allows market participants to test new products, services or business models with customers in a controlled environment. The aim of the sandbox is to enable regulations that will facilitate delivery of low-cost financial products. Key features of the draft framework include:
Eligibility: The focus of the sandbox will be on encouraging innovations where (a) there is absence of governing regulations, (b) easing regulations can be an enabler for the proposed innovation, or (c) the proposed innovation can significantly ease delivery of financial services.
In view of the above, the draft framework identified an indicative list of innovative products, services and technologies which could be considered for testing under the sandbox. These include retail payments, money transfer services, mobile technology applicants, data analytics, financial advisory services, financial inclusion and cyber security products.
The draft framework also provided that the FinTech company should be incorporated in India and must meet the criteria of a start-up to be eligible for selection in the sandbox. Further, the entity should have a minimum net worth of fifty lakh rupees as per its latest audited balance sheet. Note that an entity is considered as a start-up if it (i) has been registered for a period of less than seven years, (ii) its turnover has not exceeded Rs. 25 crore for any of the financial years, and (iii) it is working towards innovation, development or improvement of products or processes or services.
Timeline of implementation: The sandbox process will consist of five stages spanning across 26 weeks. The stages include preliminary screening of product, test design, application assessment, testing and evaluation. The implementation will be overseen by the FinTech Unit at the RBI. Comments on the draft framework are invited till May 08, 2019.
The Central Board of Direct Taxes (CBDT) has invited comments on a report on profit attribution to Indian operations for taxation of non-residents in India.[8] Non-residents include: (i) persons residing in India for less than 182 days in a year, (ii) companies not registered under the Companies Act, 1956 or companies with their place of effective management outside India, or (iii) firms or associations with their management situated wholly outside India. As per the Income Tax Act, 1961, non-residents are required to pay tax on the income that they receive or accrue from their operations in India. This income is calculated based on the accounts maintained separately for such operations, or as a certain percentage of turnover, or as deemed fit by the Assessing Officer.
CBDT had constituted a Committee to examine the methodology for profit attribution to operations of non-residents. Key observations and recommendations of the Committee include:
Discretionary powers: The Committee observed that the Assessing Officers have a wide discretion in determination of income of non-residents. The officers use diverse methods of attributing profits which gives rise to uncertainty and tax disputes. It recommended the use of a uniform rule or an objective method for this purpose.
Profit attribution: The Committee recommended a three factor method using sales, employees, and assets for attribution of profit to an operation, where each factor has an equal weightage. Profit should be attributed to an operation by apportioning the profits derived from India using the three equally weighted factors. Profits derived from India should be calculated as a certain percentage of revenue, which is the higher of: (i) the global operational profit margin, or (ii) two percent.
Users: The Committee observed that users of an operation should also be taken into account for profit attribution in cases where users contribute significantly to profits, e.g. digital companies. Users can be a substitute to assets or employees, and supplement their role in creating profits. It recommended a 10% weightage to users in cases of low and medium user intensity business models with 30% weightage each for the other three factors. For high user intensity business models, it proposed a 20% weightage to users, with 30% weightage to sales and 25% weightage each to employees and assets.
About BRO: Functioning under the control of the Ministry of Defence since 2015, the BRO is engaged in road construction to provide connectivity to difficult and inaccessible regions in the border areas of the country. It is staffed by officers and troops drawn from the Indian Army’s Corps of Engineers, Electrical and Mechanical Engineers, Army Service Corps, Military Police and army personnel on extra regimental employment.
Engineering Service and personnel from the General Reserve Engineer Force (GREF) form the parent cadre of the Border Roads Organisation. Currently, the organisation maintains operations in twenty-one states, one UT (Andaman and Nicobar Islands), and neighbouring countries such as Afghanistan, Bhutan, Myanmar, and Sri Lanka. The BRO operates and maintains over 32,885 kilometres of roads and about 12,200 meters of permanent bridges in the country.
Significance of BRO: The Border Roads Organization has played a very important role in both maintenance of security and in the development of border areas. Most of the development in the North Eastern states of India can be attributed to the relentless work done by the BRO. Socio economic development in the most inaccessible nooks and corners of our country are a result of the infrastructural work undertaken by the BRO.
Apart from its work in India, the BRO has undertaken work in numerous countries thus having contributed immensely towards maintaining friendly and diplomatic relations. The highly-skilled BRO personnel undertook and successfully completed construction of the Delaram-Zaranj Highway in Afghanistan in 2008. The Farkhor and Ayni air bases of Tajikistan were also restored and repaired by the BRO.
The BRO works in close association with the Indian Army in cases of natural disasters. It is the brave men of the BRO who were responsible for much of the reconstruction work undertaken as a result of the 2004 Tsunami in Tamil Nadu, the 2010 Ladakh flash floods and even during the 2014 Jammu and Kashmir Floods.
Need for reforms: Despite attempts at reform, the BRO remains a divided organisation, with friction between BRO cadre officers, and army officers posted on deputation. The BRO cadre resents a large number of top executive and command positions going to the army.
About Basavanna: Basavanna was a 12th-century philosopher, statesman, Kannada poet and a social reformer during the reign of the Kalachuri-dynasty king Bijjala I in Karnataka, India. Basavanna spread social awareness through his poetry, popularly known as Vachanaas. Basavanna rejected gender or social discrimination, superstitions and rituals.
He introduced new public institutions such as the Anubhava Mantapa (or, the “hall of spiritual experience”), which welcomed men and women from all socio-economic backgrounds to discuss spiritual and mundane questions of life, in open.
As a leader, he developed and inspired a new devotional movement named Virashaivas, or “ardent, heroic worshippers of Shiva”. This movement shared its roots in the ongoing Tamil Bhakti movement, particularly the Shaiva Nayanars traditions, over the 7th- to 11th-century.
Basava championed devotional worship that rejected temple worship and rituals led by Brahmins, and replaced it with personalized direct worship of Shiva through practices such as individually worn icons and symbols like a small linga. Basaveshwara is the first Kannadiga in whose honour a commemorative coin has been minted in recognition of his social reforms. In November 2015, the Prime Minister of India Narendra Modi inaugurated the statue of Basaveshwara along the bank of the river Thames at Lambeth in London.
Basavanna and Sharana movement: The Sharana movement he presided over attracted people from all castes, and like most strands of the Bhakti movement, produced a corpus of literature, the vachanas, that unveiled the spiritual universe of the Veerashaiva saints. The egalitarianism of Basavanna’s Sharana movement was too radical for its times.
He set up the Anubhava Mandapa, where the Sharanas, drawn from different castes and communities, gathered and engaged in learning and discussions. Sharanas challenged the final bastion of the caste order: they organised a wedding where the bridegroom was from a lower caste, and the bride a Brahmin.
About Arctic council: 1996 – Ottawa declaration. It is an Intergovernmental forum which addresses issues faced by the Arctic governments and people living in the Arctic region
It is Not a treaty-based international organization but rather an international forum that operates on the basis of consensus. The decisions, recommendations or guidelines of the Arctic Council are non-enforceable and strictly the prerogative of the individual state. Its mandate explicitly excludes military security.
Organization structure: a) Chairmanship: rotated every two years once b) Secretariat: Rotated biennially with the Chairmanship of the Arctic Council It supports the Chair of the Arctic Council It manages logistics related to the biennial member states’ meetings and the more frequent SAO meetings. c) SAO ( Senior Arctic Official): a government representative, usually from a member states’ Ministry of Foreign Affairs. SAO guides and monitors Arctic Council activities in accordance with the decisions and instructions of the Arctic Council Foreign Ministers.
Who takes part? The Ottawa Declaration lists the following countries as Members of the Arctic Council: Canada, the Kingdom of Denmark, Finland, Iceland, Norway, the Russian Federation, Sweden and the United States.
In addition, six organizations representing Arctic indigenous peoples have status as Permanent Participants. The category of Permanent Participant was created to provide for active participation and full consultation with the Arctic indigenous peoples within the Council. They include: the Aleut International Association, the Arctic Athabaskan Council, Gwich’in Council International, the Inuit Circumpolar Council, Russian Association of Indigenous Peoples of the North and the Saami Council.
Observer status in the Arctic Council is open to non-Arctic states, along with inter-governmental, inter-parliamentary, global, regional and non-governmental organizations that the Council determines can contribute to its work. Arctic Council Observers primarily contribute through their engagement in the Council at the level of Working Groups.
Arctic Council working groups: Arctic Contaminants Action Program (ACAP)— strengthening and supporting mechanism to encourage national actions to reduce emissions and other releases of pollutants. Arctic Monitoring and Assessment Programme (AMAP) — monitors the Arctic environment, ecosystems and human populations, and provides scientific advice to support governments as they tackle pollution and adverse effects of climate change.
Conservation of Arctic Flora and Fauna (CAFF) — addresses the conservation of Arctic biodiversity, working to ensure the sustainability of the Arctic’s living resources. Emergency Prevention, Preparedness and Response (EPPR)— protect the Arctic environment from the threat or impact of an accidental release of pollutants or radionuclides.
Protection of the Arctic Marine Environment (PAME) –protection and sustainable use of the Arctic marine environment. Sustainable Development Working Group (SDWG) — works to advance sustainable development in the Arctic and to improve the conditions of Arctic communities as a whole
Key findings: A majority of human ancestry in Lakshadweep is largely derived from South Asia with minor influences from East and West Eurasia. There is a close genetic link of Lakshadweep islanders with people from Maldives, Sri Lanka and India.
Background: The islands were known to sailors since ancient times and historical documents say that the spread of Buddhism to these islands happened during 6th century B.C. and Islam was spread by in 661 A.D. by Arabians. Cholas ruled the islands in 11th century, Portuguese in 16th century, Ali Rajahs in 17th, Tipu Sultan in 18th before the British Raj of 19th century.
About Centre for Cellular and Molecular Biology: The Centre for Cellular & Molecular Biology (CCMB) is a premier research organization which conducts high quality basic research and trainings in frontier areas of modern biology, and promote centralized national facilities for new and modern techniques in the interdisciplinary areas of biology.
It was set up initially as a semi-autonomous Centre on April 1, 1977 with the Biochemistry Division of the then Regional Research Laboratory (presently, Indian Institute of Chemical Technology, IICT) Hyderabad. It is located in Hyderabad and operates under the aegis of the Council of Scientific and Industrial Research (CSIR). It is designated as “Center of Excellence” by the Global Molecular and Cell Biology Network, UNESCO.
What’s the issue? 21 Opposition parties had sought a review of Supreme Court verdict that increased counting of VVPAT slips to five random EVMs in each Assembly constituency. The Opposition wanted to increase the number to at least 25%. Petitioners pointed to large-scale tampering and selective malfunctioning of EVMs in the present Lok Sabha polls.
Background: Earlier, under the ECI guideline 16.6, only the VVPAT slips from one EVM in every Assembly segment/constituency was subjected to physical verification.
SC’s observations: VVPAT verification of five EVMs, rather than in 125 polling booths, was far more “viable at this point of time” in the Lok Sabha poll season. Verification of five EVMs would not be a drain on the ECI’s infrastructural resources and manpower. What is VVPAT? The Voter Verifiable Paper Audit Trail (VVPAT) is a method of providing feedback to voters using a ballot less voting system.
The VVPAT is an independent printer system attached with Electronic Voting Machine (EVM) that allows the voters to verify that their votes are cast as intended. It generates a paper slip every time a voter casts his vote, recording the party to whom the vote was made. The VVPAT slip is kept in a sealed cover. VVPAT slip counting takes place in the VVPAT counting booths under the close monitoring of the returning officer and direct oversight of the observer.
How does the VVPAT work? The voting in India is done using the Electronic Voting Machine (EVM) that is designed with two units: the control unit and the balloting unit.
The balloting unit of the machine has a list of candidate names and party symbols with a blue button next to it. The voter can press the button next to the candidate’s name they wish to vote for. When the voter casts the vote on the EVM, printer-like VVPAT apparatus linked to the EVM generates a slip showing serial number, name and symbol of the candidate to whom the vote was made.
With this slip, the voter can verify his casted vote. This VVPAT slip is displayed for 7 seconds before it’s automatically cut. The slip, once viewed, is cut and dropped into the drop box in the VVPAT machine and a beep will be heard. The VVPAT machines can only be accessed by the election officers in the rarest of rare cases.
Significance and the need for VVPATs: The VVPAT helps to detect potential election fraud or malfunction in the Electronic Voting Machine. It provides a means to audit the stored electronic results. It serves as an additional barrier to change or destroy votes.
The EVMs with VVPAT system ensure the accuracy of the voting system with fullest transparency and restores the confidence of the voters. EVMs and VVPATs also speed up the election process as counting votes on EVMs takes much lesser time than counting paper ballots.
What is the iran nuclear deal? Iran agreed to rein in its nuclear programme in a 2015 deal struck with the US, UK, Russia, China, France and Germany. Under the Joint Comprehensive Plan of Action (JCPoA) Tehran agreed to significantly cut its stores of centrifuges, enriched uranium and heavy-water, all key components for nuclear weapons. The JCPOA established the Joint Commission, with the negotiating parties all represented, to monitor implementation of the agreement.
Why did Iran agree to the deal? It had been hit with devastating economic sanctions by the United Nations, United States and the European Union that are estimated to have cost it tens of billions of pounds a year in lost oil export revenues. Billions in overseas assets had also been frozen.
Why has US pulled out of the deal? Trump and opponents to the deal say it is flawed because it gives Iran access to billions of dollars but does not address Iran’s support for groups the U.S. considers terrorists, like Hamas and Hezbollah. They note it also doesn’t curb Iran’s development of ballistic missiles and that the deal phases out by 2030. They say Iran has lied about its nuclear program in the past.
What are the implications of US sanctions on Iran? Other countries have promised to uphold it but their ability to do so will depend on how their companies can be firewalled from U.S. sanctions if they continue their engagement with Iran. The sanctions often referred to as “secondary sanctions”, which primarily target non-US companies engaging in business in or with Iran entirely outside US jurisdiction.
Other concerns: Iran can make things difficult for the U.S. in Afghanistan as also in Iraq and Syria. The U.S.’s ability to work with Russia in Syria or with China regarding North Korea will also be impacted.
And sooner or later, questions may be asked in Iran about why it should continue with other restrictions and inspections that it accepted under the JCPOA, which would have far-reaching implications for the global nuclear architecture. Coming after the rejection of the Trans-Pacific Partnership (TPP), the Paris climate change accord and the North American Free Trade Agreement, President’s decision further diminishes U.S. credibility.
Context: Purple frog could be soon designated as Kerala’s state amphibian. There is a proposal on this.
About Purple Frog: also known as Maveli frog or Pignose Frog. It is relatively round in shape as compared to other flattened frogs. Compared to other frogs it has a small head and an unusual pointed snout (muzzle). In most cases adults are dark purplish-grey in color.
For almost its entire life it lives in underground tunnels and comes out to surface for only a single day in a year to breed. Distribution: They were thought to be limited to south of the Palghat Gap (a pass which is located between Nilgiri Hills to north and Anaimalai Hills to south) in Western Ghats, but are now known to be quite widely distributed in Western Ghats.
The frog should rightly be called ‘living fossil’ as it is believed that they have co-existed with dinosaurs almost 70 million years ago. IUCN Red List: Their conservation status is endangered as per International Union for Conservation of Nature (IUCN).
Context: Countries worldwide are concerned over China’s vigorous quest for foreign military bases, including in Pakistan.
Rationale behind China quest: As the world’s second-largest economy (aggregate GDP of $13 trillion) and the second-largest annual defence budget ($250 billion), China has both the motivation and the means to acquire foreign military bases.
China’s transition follows the familiar dictum that flag follows trade. China’s advancement of projects such as the ‘One Belt, One Road’ Initiative (OBOR) will probably drive military overseas basing through a perceived need to provide security for OBOR projects. China will seek to establish additional military bases in countries with which it has a longstanding friendly relationship and similar strategic interests.
India’s response: That China and India compete for foreign military bases is not merely an extension of their very familiar rivalry but a definitive moment in their overall political evolution as modern states. India closely tracks the expansion of China’s military footprint in the Subcontinent and beyond in the Indian Ocean.
India’s response so far has developed along three axes. One is to counter potential threats from China’s military bases in its immediate neighbourhood. Second, to strengthen military partnerships with its friends and partners to balance China. The third is to emulate Beijing’s quest for foreign military presence.
India’s concerns: Pakistan has the precedent of hosting foreign military bases. Pakistan is undoubtedly China’s closest political and military partner. While there is no formal “base”, the integration of Pakistan into China’s military strategy and operations has steadily advanced.
The Pakistan army’s determination to limit India’s power means there is little political opposition to hosting Chinese bases and facilities. The depth of the anti-India alliance between the two “iron brothers” means Delhi can’t prevent Beijing developing bases and strategic military facilities — that perform a number of functions ranging from hosting PLA Navy warships to China’s satellite tracking.
How is India planning to counter china’s presence? Unlike in the past, when India operated as a lone ranger in the Indian Ocean, Delhi is now making its armed forces interoperable with its friends and partners. After prolonged reluctance, India has signed agreements with the US and France for mutual peacetime use of military bases. It is a matter of time before it signs such agreements with other powers like Japan and Australia. Delhi is also seeking access to military facilities in a number of countries.
Need: India’s growing and globalised economy is now close to $3 trillion and Delhi’s political ambition is to raise it to $5 trillion in the next five years. Delhi’s security imperatives are no longer limited to its borders and it needs to secure its widely dispersed interests with forward military presence in the Indo-Pacific.