Prelims Objective Practices Questions

(I.) Which of the following constitute Capital Account?
1. External Commercial Borrowings
2. Portfolio investment
3. Bilateral loans
4. Remittances
Select the correct answer code:
A.) 1, 2, 3
B.) 1, 2, 4
C.) 2, 3, 4
D.) 1, 2, 3, 4

(II.) Which of the following entities are eligible to participate in the Call Money Markets, both as borrowers and lenders?
1. Payment Banks
2. Regional Rural Banks
3. Land Development Banks
4. Small Finance Banks
Select the correct answer code:
A.) 1, 2, 3
B.) 1, 2, 4
C.) 1, 3, 4
D.) 1, 2, 3, 4

(III.) EnVision mission is an orbital mission to Venus being developed by:-
A.) Indian Space Research Organisation (ISRO)
B.) European Space Agency (ESA)
C.) National Aeronautics and Space Administration (NASA)
D.) Japan Aerospace Exploration Agency (JAXA)

Mains Question:-
Q. To what extent are international organizations and collaborations effective in controlling terror financing across the globe? (150 words)

Approach:-

• Briefly explain ‘terror financing’
• Explain the need to curb terror financing
• Analyse the role of various international organisations and collaborations in controlling terror financing
• Give a forward looking conclusion

  ---

Prelims Specific Facts

1.) ‘MSP should continue till markets become efficient’

• Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices. The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). MSP is price fixed by Government of India to protect the producer – farmers – against excessive fall in price during bumper production years.
• In formulating the recommendations in respect of the level of minimum support prices and other non-price measures, the Commission takes into account, apart from a comprehensive view of the entire structure of the economy of a particular commodity or group of commodities, the following factors:-
  • Cost of production
  • Changes in input prices
  • Input-output price parity
  • Trends in market prices
  • Demand and supply
  • Inter-crop price parity
  • Effect on industrial cost structure
  • Effect on cost of living
  • Effect on general price level
  • International price situation
  • Parity between prices paid and prices received by the farmers.
  • Effect on issue prices and implications for subsidy
• Government announces minimum support prices (MSPs) for 22 mandated crops and fair and remunerative price (FRP) for sugarcane. The mandated crops are 14 crops of the kharif season, 6 rabi crops and two other commercial crops. In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively. The list of crops are as follows.
  • Cereals (7) –
    • paddy, wheat, barley, jowar, bajra, maize and ragi
  • Pulses (5) –
    • gram, arhar/tur, moong, urad and lentil
  • Oilseeds (8) –
    • groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed
  • Raw cotton
  • Raw jute
  • Copra
  • De-husked coconut
  • Sugarcane (Fair and remunerative price)
  • Virginia flu cured (VFC)
  • tobacco

2.) P.T. Usha, Ilaiyaraaja among four picked for Rajya Sabha

• Composition of the Council of States
  • The Council of States shall consist of twelve members to be nominated by the President in accordance with the provisions of clause ( 3 ); and not more than two hundred and thirty eight representatives of the States and of the Union territories

Editorial of the Day

Words from Bandung to relive in Bail and Delhi

• BRICS-G7 NATO
  • The fact that Mr. Modi agreed to join the summit showed India’s commitment to BRICS as an alternate grouping of economies spotlighted India’s refusal to shun Russia, and agreement to set aside the two-year stand-off with China’s People’s Liberation Army at the Line of Actual Control (LAC) in favour of multilateral meetings such as BRICS and the Shanghai Cooperation Organisation (SCO).
  • In ad Development Bank (NDB), that has approved about 17 loans totalling $5 billion for Russian energy and infrastructure projects, the “Contingent Reserve Arrangement” (CRA), and a BRICS Payments Task Force (BPTF) for coordination between their central banks for an alternative to the SWIFT payments system, Mr. Putin also proposed building a global reserve currency based on a “basket of currencies” and trading in local currencies. Russia also committed to providing more oil and coal supplies to BRICS countries, which will no doubt raise red flags in the West, as will the possible admission of countries such as Argentina and Iran that have applied to the BRICS mechanism.
  • In a number of statements, the G-7 (the U.S., the United Kingdom, Canada, France, Germany, Italy, Japan and the European Un ion) targetted Russia’s war in Ukraine and China’s economic aggression. However its outreach documents on “Resilient Democracies” and “Clean and Just Transitions towards Climate Neutrality” – the only ones that India and other invitees signed on to, were devoid of any mentions of either.
  • At the NATO meeting, however, there was little sign of any restraint as the group comprising the U.S., Canada and European countries committed to more NATO actions against “Russian aggression”. These included, for the first time, a reference to “systemic competition” from China as a challenge to NATO “interests, security and values”.
  • Perceived Russia-China alliance. The launch of another Indo-Pacific coalition of “Partners in the Blue Pacific” (PBP), i.e., the U.S., the U.K., Australia, New Zealand and Japan, in addition to last year’s Australia-U.K.-U.S. (AUKUS), is another signal of the U.S.’s growing focus on countries that it has military alliances with, against its adversaries.
• The direct message was that NATO would no longer consider Russian sensitivities on the subject of NATO expansion.
• India must lead
  • India has committed to a singular strategy, albeit a defensive one, that does not condone Russia for its attacks on Ukraine, but one that does not criticise it either.
    • First, India has joined China as global economies that have most increased their intake of Russian oil. where India continues to source fertilizer, cement and other commodities from Russia using different means, including even paying in the Chinese Yuan to circumvent sanctions.
    • Second, India is working to diversify its defence purchases from Russia, hostilities with China are high, and a strategic tilt towards the U.S. and Quad partners in the Indo-Pacific is growing. On the multilateral stage, too, India remains a balancing voice in the room.
• Gather the link-minded
  • These countries are more numerous than one can imagine. At the United Nations General Assembly, for example, a majority of 141 countries voted to castigate Russia for its invasion of Ukraine, but much fewer, only 93, voted to oust Russia from the Human Rights Council. Even more significantly, only 40 countries joined the U.S. independently-minded countries that do not see it in their own national interest to blandly choose one side over another. Instead of abstaining on every vote or being defensive about sanctions, therefore, India’s national interests would be better served by building a community of those like-minded countries (from South America to Africa, the Gulf to South Asia and to the Association of Southeast Asian Nations), who cannot afford the hostilities, and want to avoid the possibility of a global war at all costs.
• Words that matter
  • In 1955, it was in such a similar moment that India took leadership of (along with countries such as Indonesia and Egypt at the Asian African Conference of 29 newly in dependent nations, at Bandung), a conference that eventually led to the Non-Aligned Movement (NAM). “If all the world were to be divided up between these two big blocs what would be the result?”

2.) A ‘ no’ to pharma freebies, a ‘yes’ for public good

• Supreme Court of India in M/s Apex Laboratories Pvt. Ltd. vs Deputy Commissioner of Income Tax, Large Tax Payer Unit-II, on February 22, 2022 has struck a blow for public good. Justice Uday Umesh Lalit and Justice S. Ravindra Bhat dismissed the Special Leave Petition by Apex Laboratories to claim deduction on freebies given to doctors. Upholding a decision by the Madras High Court, the Bench said that the act of pharmaceutical companies giving freebies to doctors is clearly ‘prohibited by the law’. Further, it cannot be claimed as a deduction under Section 37(1) of the Income Tax Act, 1961.
• Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (‘Medical Council Regulations’), regulates the professional conduct of doctors in India. Regulation 6.8 of the Medical Council Regulations prohibits a doctor from receiving gifts, travel facilities, hospitality, cash or monetary grants from a pharmaceutical company. Acceptance of such freebies can lead to penal consequences on the part of the doctor – to the maximum extent, such that the doctor may be removed from the Medical Register for a period from three months to one year.
• Given that the Medical Council Regulations do not penalise pharmaceutical companies, they continue to claim deductions on expenditure incurred by them on these freebies. Therefore, the Central Board of Direct Tax (‘CBDT’) issued a circular on August 1, 2018, clarifying that any expenditure incurred on freebies, which is in violation of the Medical Council Regulations shall be inadmissible under Section 37(1).
• The SC also noted that the grant of freebies would further enhance drug prices, thereby creating a ‘perpetual publicly injurious cycle’.
• In conclusion, the SC held that the prohibition on the part of the doctors to accept freebies was also a prohibition on pharmaceutical companies. Therefore, pharmaceutical companies would not be allowed to claim expenditure prohibited under the Medical Council Regulations as tax deductible expenses.
• The Finance Bill, 2022, also proposes to insert a new Explanation 3 to Section 37 of the IT Act, which provides that expenses incurred to provide any benefit or perquisite or otherwise, in violation of any law, shall be inadmissible as expenditure under Section 37 of the IT Act.

Explainer of the Day

1.) India-EU : global dynamics

• CBAM: carbon-pricing system
  • ‘Fit-for-55’ packages
  • Carbon Border Adjustment Mechanism (CBAM), a carbon pricing system proposed for imports into the EU.
• The EU claims that CBAM is intended to reduce carbon leakage, create a level play field for EU producers and encourage producers in other countries to adopt cleaner technologies.
• He European Green Deal sets out a clear path towards realising the EU’s ambitious target of a 55% reduction in carbon emissions compared to 1990 levels by 2030, and to become a climate-neutral continent by 2050.
• CBAM stands for ‘Carbon Border Adjustment Mechanism’, which is the EU’s planned new carbon border tax.
• It will require importers of certain goods to the EU to purchase digital certificates for each tonne of carbon emissions embedded in their goods, the price of which will be based on the average weekly price of the EU’s Emissions Trading System (ETS) carbon permits.
• In its initial form, the CBAM will cover imports of aluminum, iron, steel, electricity, cement, and some fertilisers, however, there is scope for extending this further.
• The EU aims to use this tax to prevent so-called ‘carbon leakage’, whereby carbon intensive producers move their operations outside of the EU to avoid carbon regulation.

2.) The new rules to keep advertisements in check

• Defining a ‘valid’ advertisement
  • The guidelines lay down the conditions for non-misleading and valid advertisements. Briefly, an advertisement can be considered non-misleading if it contains true and honest representation of goods and does not exaggerate the accuracy, scientific validity or practical usefulness or capability. In case of unintentional lapse, the advertisement may still be considered as valid if the advertiser has taken prompt action in letting the consumer know the deficiency.
• It must be noted that rather than defining what constitutes a ‘misleading or invalid advertisement,’ the guidelines have sought to define ‘valid or non-misleading advertisement.’ This take on policy drafting significantly reduces the scope for exploitation of any inadvertent loopholes.
• Surrogate advertisements
  • “Surrogate advertisement” refers to the advertisement of goods in the shadow of other goods. For example, the advertisement of tobacco in the garb of pan masala. Advertisement of tobacco as such is prohibited by the law. While existing laws such as the Cigarettes and other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply, and Distribution) Act, 2003 already seeks to govern advertisements related to tobacco, manufacturers and advertisers have been able to circumvent the regulation through the grey area created by a surrogate advertisement. The guidelines seek to ensure that these grey areas are filled by the black letter of the law, completely disallowing any attempts to advertise products that are otherwise prohibited by law.

• Advertisements targeting children
  • Another important issue taken up by the new guidelines is the discouragement of “children targeted advertisements”.
  • Advertisements that condone, encourage, inspire or unreasonably emulate behaviour that could be dangerous for children or take advantage of children’s inexperience, credulity or sense of loyalty etc. have been prohibited.
  • A marketing strategy that seeks to aggressively play on the immaturity of the younger audience can invariably impinge upon their ‘right to choose’ as well as their right to be informed and protected against unsafe goods and services as well as unfair trade practices.
• Other reforms
  • The guidelines have also introduced the need to have “disclaimers in advertisements” to “clarify a claim made in such advertisement or make qualifications or resolve ambiguities therein in order to explain such claim in further detail.” Moreover, the advertiser must not “attempt to hide material information with respect to any claim made in such advertisement, the omission or absence of which is likely to make the advertisement deceptive or conceal its commercial intent”. The guidelines require that the disclaimer must be visible to normally sighted persons and prominently placed so that the consumer may read it carefully.

3.) Understanding the all time high in India’s trade deficit

• The chasm between exports and imports has widened in the first quarter of this year, with the cumulative trade deficit already hitting $70 billion, translating into an average of $23.3 billion a month.
• While Russia’s conflict with Ukraine has propped up commodity prices globally, the spill over effects of runaway inflation are hurting global growth prospects as well as trade demand. The ‘lacklustre’ exports in June reflect an underlying slowdown in external demand.
• India is not alone as even super-exporter Germany recorded its first trade deficit in 30 years this May, albeit a minor one.

4.) Verstehen

• The concept of Verstehen, which loosely translates to ‘understanding’ in German was made popular by Max Weber, one of the “founding fathers” of sociology.
• It argues that human actions cannot be analysed by merely adopting the research methods followed in natural sciences with ‘absolute objectivity’. Weber believed that the interpretation of human actions through recognition and empathy was crucial for a better understanding of social phenomena in society. Verstehen is the procedure by which sociologists gain access to the meanings behind human actions.

• Types of Verstehen –
  • Verstehen requires researchers to place themselves in the position of the individual observed to see and comprehend the meanings behind the person’s action and the meanings attached to the motivation, purpose or outcomes of their actions. This becomes important as actions can have different meanings in different cultures and societies. Without proper investigation, one is at risk of misinterpreting the data collected.
  • Weber distinguished between two types of understanding. The first is Aktuelles Verstehen or direct observational understanding, where a researcher observes what an individual was doing. Observation of a person cooking or writing could be an example of this. One can confirm and determine the meaning of the action by simply observing it. However, observational understanding alone is not sufficient to explain human action. Thus, empathetic understanding or Eklarendes Verstehen was also required.
• Here, a researcher attempts to understand the meanings attached to an act in terms of the motives that have given rise to it.
• Criticisms of the concept
  • The concept of Verstehen was criticised by scholars on two grounds. The interpretations arrived at through Verstehen could not be easily validated as the researcher’s understanding and biases influenced their interpretation of actions. Further, the concept still largely focused on society’s role in encouraging certain actions which then led to social changes.