17-20 June 2022 The Hindu Newspaper Analysis

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Which of the following resources fall under the category of Capital Goods?
1. Buildings
2. Machinery
3. Labour

Select the correct answer using the code given below:

  •  1 and 2 only
  •  2 and 3 only
  •  1 and 3 only
  •  All of the above

Which of the following correctly defines the Nash equilibrium?

  •  A strategy being better for a participant, no matter how that participant’s opponents may play
  •  For any given event 80% of outcomes result from 20% of all causes
  •  A majority of scientific publications in a field of study come from a small number of authors
  •  No participant can gain by a unilateral change of strategy

Which of the following statement correctly defies the term ‘gig worker’?

  •  Workers outside the traditional employer-employee relationship
  •  Labour working without appropriate remuneration
  •  An employee with written contract of employment for a fixed period
  •  Workers not covered by the social security schemes of the government

All about small Finance Banks :- The Small Finance Bank (SFB) is a private financial institution intended to further the objective of financial inclusion by primarily undertaking basic banking activities of acceptance of deposits and lending to un-served and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities, but without any restriction in the area of operations, unlike Regional Rural Banks or Local Area Banks.

Timeline : Small Finance Banks were created pursuant to the announcement in Union Budget 2014-2015, presented on July 10, 2014. RBI issued the Guidelines on 27 November 2014 for licensing and regulation of SFBs. On 16 September 2015, RBI decided to grant “in-principle” approval to 10 applicants to set up small finance banks under the Guidelines issued on November 27, 2014.

Who Recommended the Formation of SFB’s :- The concept of small finance banks was also one of the recommendations in the 2009 Report – A Hundred Small Steps – of the Committee on Financial Sector Reforms headed by Dr. Raghu Ram Rajan.

Minimum Capital Requirement :- The small finance bank will be required to use the words “Small Finance Bank” in its name in order to differentiate it from other banks. The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore.

Who can Open these SFB’s:- Resident individuals/professionals with 10 years of experience in banking and finance and companies and societies owned and controlled by residents will be eligible to set up small finance banks.

Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.

Do they Follow PSL norms :- The target group of SFBs are similar to that of Local Area Banks. They are required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank. At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh.

2) All about WTO – Ministerial Conference – 12

What is the WTO and the Ministerial Conference

The World Trade Organization is the only international organization that deals with the rules of trade between countries. Founded in 1995, the WTO is run by its 164 members, and according to its rules, all decisions are taken through consensus and any member can exercise a veto.

The Ministerial Conference is the WTO’s top decision-making body and usually meets every two years. All members of the WTO are involved in the MC and they can take decisions on all matters covered under any multilateral trade agreements.

The WTO’s 12th Ministerial Conference was held in Geneva from 12-17 June.

Key Takeaways of 12th MC:-

  1. Curtailing harmful fishing subsidies

The WTO passed a multilateral agreement that would curb ‘harmful’ subsidies on illegal, unreported and unregulated fishing for the next four years, to better protect global fish stocks. Since 2001, member states have been negotiating the banning of subsidies that promote overfishing.

Is India affected :
India and other developing countries were able to win some concessions in this agreement. They successfully lobbied to remove a section of the proposal that would threaten some subsidies which would assist small-scale artisanal fishing. Artisanal and traditional farmers would not face any restrictions under this agreement.

Critics argued that this agreement would only restrict and not eradicate subsidies on illegal fishing. 

2. Global Food Security :

Members agreed to a binding decision to exempt food purchased by the UN’s World Food Programme (WFP) for humanitarian purposes, from any export restrictions.

In light of the global food shortages and rising prices caused by the war between Ukraine and Russia, the group’s members issued a declaration on the importance of trade in global food security and that they would avoid bans on food exports.

However, countries would be allowed to restrict food supplies to ensure domestic food security needs.

India’s key demand to allow it to export food from its public stockholdings to other countries will reportedly be discussed in the next Ministerial Conference in 2023.

3. E-commerce transactions :- India has asked the WTO to review the extension of the moratorium on custom duties on e-commerce transactions, which include digitally-traded goods and services.

WTO members had first agreed to not impose custom duties on electronic transmissions in 1998, when the internet was still relatively new. The moratorium has been periodically extended since then.

4. Covid-19 vaccine production :- WTO members agreed to temporarily waive intellectual property patents on Covid-19 vaccines without the consent of the patent holder for 5 years, so that they can more easily manufacture them domestically.

The current agreement is a watered down version of the original proposal made by India and South Africa in 2020. They had wanted broader intellectual property waivers on vaccines, treatments and tests.

The waiver agreed by the WTO was criticized by advocacy groups for being narrow in scope, as it did not cover all medical tools like diagnostics and treatments.

3) What is Stagflation :- Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e., inflation).

Stagflation can be alternatively defined as a period of inflation combined with a decline in the gross domestic product (GDP).

  • Stagflation refers to an economy that is experiencing a simultaneous increase in inflation and stagnation of economic output.
  • Stagflation was first recognized during the 1970s when many developed economies experienced rapid inflation and high unemployment as a result of an oil shock.
  • The prevailing economic theory at the time could not easily explain how stagflation could occur.

4) Explainer : The move to link credit cards with UPI

The Reserve Bank of India (RBI) has proposed to allow linking of credit cards with the Unifi.ed Payments Interface (UPI) platform. The move is part of the central bank’s efforts to enhance the scope of UPI.

RBI Governor Shaktikanta Das stated that RuPay credit cards issued by the RBI promoted National Payments Corporation of India (NPCI) will be enabled first, and will become available after system developments.

The UPI, also managed by the NPCI, was first introduced in 2016.

What is Merchant Discount Rate and how does it impact Indian businesses?

MDR (Merchant Discount Rate) is basically a fee that a merchant is charged by their issuing bank for accepting payments from their customers via credit and debit cards. ‌

MDR compensates the bank issuing the card, the bank which installs the PoS (Point of Sale) terminal and network providers (MasterCard and Visa), and payment gateways for their services.

MDR charges are proportionally shared between the merchant and the bank, and the charges are expressed as a percentage of the transaction amount.

5. Why are cryptocurrencies crashing?

It may not be possible to pinpoint the exact reasons why investors are fleeing cryptocurrencies at the moment.

Most analysts believe that the fall in the price of cryptocurrencies is in line with the fall in prices of stocks and other assets as central banks such as the U.S. Federal Reserve tighten monetary policy to fight price rise.
As central banks withdraw liquidity from the market, there’s less money chasing assets, which in turn causes the prices of assets to drop.

Others believe that the crash could also mark the popping of the bubble that has driven the prices of cryptocurrencies to stratospheric levels.

6. FATF ‘GREY’ List :- The FATF GREY list is prepared by the Financial Action Task Force (FATF), an intergovernmental body formed to combat money laundering.

It was established in July 1989 by the G7 Summit at the Arche de la Defense in France as part of the group’s efforts to curb drug trafficking.

The FATF is headquartered in Paris and has two official languages: English and French. It also has a French name: Groupe d’action financière (GAFI). 

It periodically lists out countries and jurisdictions that are identified as having strategic deficiencies in their regimes to counter money laundering or Terror Financing. The list is referred to as the FATF grey list.

To identify non-complying countries, FATF has maintained the FATF blacklist or the “Call for action” countries and the FATF grey list or the “Other monitored jurisdictions” since 2000.

The FATF blacklist is the agency’s official list of “Non-Cooperative Countries or Territories” (NCCTs) which it judges to be non-cooperative in the global fight against money laundering and terrorist financing.

7. Russia’s gateway to global waters

The Treaty of Küçük Kaynarca

  • The Treaty was signed in 1774 between the Russian and Ottoman Empires after the 1768-74 war between the two.
  • The treaty is considered to have had a significant impact on the global balance of power in the 18th century.
  • As part of the treaty, Russia got access to the Black Sea through the Kerch and Azov seaports.
  • The treaty marked the start of the decline of the Ottoman Empire and the arrival of the Russians, under Catherine the Great, as a major power in the Black Sea region.
  • Through this treaty, Russia also got the official status of being the protector of the Orthodox Christians of the Ottoman Empire.
    • This clause also meant that the Crimean Khanate, which had declared independence from the Ottomans, became dependent on Russia.
  • In 1783, Prince Grigory Potemkin, a Grand Admiral in the imperial Russian army annexed the Crimean Peninsula in the name of protecting its Christians amidst violent clashes between Christians and Crimean Tatars.
    • The annexation guaranteed seamless access to the Black Sea’s warm waters to Russia, thereby helping it become a strong naval power.
    • Many find parallels between the 18th century annexation of Crimea and the 2014 annexation which helped Russia retain Sevastopol, which hosts its Black Sea fleet and uses Crimea as a platform for force projection.

Latest developments in Russia-Ukraine conflict

  • Post its full scale invasion of Ukraine, Russia has further tightened its grip over the Black Sea.
  • Russia has gained control over the entire Sea of Azov coast and other port cities such as Mariupol, Berdyansk and Kherson.

Significance of Black Sea to Russia

Image Source: The Hindu

Image Source: The Hindu

  • The Black Sea is important for Russia due to various geo-economic reasons
  • Russia’s ports in the Arctic Ocean do not guarantee its connectivity to the rest of the world.
    • Russia’s key gateway to the global waters is through the Black Sea, which opens into the Mediterranean Sea through the Bosphorus and Dardanelles Straits.
  • At present, Russia’s only naval base outside the erstwhile Soviet Union territories is located in Syria’s Tartus in the Mediterranean Sea.
    • Russia acknowledges the fact that the Mediterranean sea is currently dominated by NATO and is looking for ways to enhance its presence in the region.
    • This makes it even more important for Russia to continue to retain its stronghold over the Black Sea.
  • The Black Sea also plays a crucial role in Russia’s economy as it provides the much needed connectivity for Russia to export its hydrocarbons and grains to Turkey and other Asian countries.
  • During the Soviet period, Russia dominated the Black Sea, which was then regarded as the ‘Soviet Lake’.
    • Balck sea bordering countries such as Ukraine and Georgia were Soviet republics while Bulgaria and Romania were part of the Soviet-led Eastern bloc.
    • The only country that was out of the Soviet sphere in the Black Sea region during the Cold War was Turkey and despite Turkey’s control over Bosphorus and Dardanelles Straits, the 1936 Montreux Convention provided Russia and other Black Sea countries get access to the straits for both commercial and military purposes.
  • The change in the balance of power post the breakdown of the Soviet Union has worked in the favour of NATO with Bulgaria and Romania joining NATO and Ukraine and Georgia also being offered NATO membership.
    • However, Russia undertook a military intervention in Georgia which ended the country’s NATO dream. And through the annexation of Crimea and the invasion of Ukraine, Russia has reasserted its influence over its southern waters.

8. Are the unemployment numbers reliable?

On June 14, the National Statistical Office (NSO), which functions under the Union Ministry of Statistics and Programme Implementation, released the annual report on the basis of the Periodic Labour Force Survey (PLFS) conducted during July 2020-June 2021.

Though conducted amid the first lockdown, the survey said the unemployment rate saw a decrease from 4.8% in 2019-20 to 4.2% in 2020-21, meaning that 4.2% of adults who looked out for jobs could not get any work in rural and urban areas of the country in 2020-21.

In rural areas, the rate is 3.3% while in urban areas the unemployment rate was recorded at 6.7%.

What does the Data Include : The PLFS gives estimates of key employment and unemployment indicators like the Labour Force Participation Rates (LFPR), Worker Population Ratio (WPR) and Unemployment Rate (UR).

Problem with the Data:- Experts have raised questions about the approach and methodology of the PLFS.

Migration is the only thing happening in the country. Everyone is moving. To say that there is no change from the previous years is unacceptable.

The country needs reasonable good data for evidence-based policies to address issues such as unemployment and farmers’ distress.

9. Why is Agnipath under widespread attack?

What is the scheme :- Agnipath or Tour of Duty will be the only mode of recruitment of soldiers, sailors, and airmen from now on. It envisages enlisting youths aged between 17.5 years and 21 years — the upper limit has been extended to 23 years this year after protests — for a period of just four years, also counting their training time.

At the expiry of their contract, only 25% of these soldiers, to be known as Agniveers, will be re-enlisted for regular military service.

Monetary structure of the Scheme :- While the salary package of Agniveers will be around ₹4.76 lakh in the first year which can go up to ₹6.92 lakh in the fourth year, these short-term soldiers will also be offered a contributory severance package besides non-contributory death and disability compensation.

They will not be eligible for pension or gratuity.

Other Extended Benefits after the recent protests : the Union Ministry of Education said it would offer a three-year degree programme to these enlistees in order to make them employable once out of service. As protests rocked the country, the Ministry of Home Affairs, on Saturday, announced its decision to reserve 10% of vacancies in the Central Armed Police Forces (CAPFs) and the Assam Rifles to Agniveers

The Defence Minister also approved of a proposal to earmark 10% of vacancies in Coast Guard, defence civilian jobs and in the defence PSUs for Agniveers provided they meet the eligibility criteria. 

What, according to its supporters, are the scheme’s benefits?

  1. this ‘transformational’ initiative will make the forces lean and much younger, with the average age of the soldier brought down to about 25 from the present 32 years
  2. It will also ensure the availability of a larger share of budget outlay for capital expenditure for the acquisition of hi-tech equipment and platforms because the outlay for pension payout will drop considerably over time
  3. Military training at a young age would make these men returning to the civilian world more disciplined and employable, advocates of the scheme argue.

Why are there protests across States?

  1. veterans have flayed the scheme as an effort to scrimp and save on revenue expenditure at the expense of the forces’ operational efficiency or fighting capabilities.
  2. Four years is too short a time for a conscript to acquire the skills essential for operating sophisticated systems in the technology-intensive Navy and Air Force. 
  3. For the Army, which has a regimental system, it is feared to impair the unit’s cohesiveness as the soldier on a short-term contract could remain ‘risk-averse’.
  4. There are also apprehensions about this path leading to the militarisation of society.
  5. Some say that it’s unfair to the potential recruit as well, as the absence of a continued employment guarantee at the expiry of four years when he’s still in his 20s and without the skillsets or credentials required to make the cut in the civilian/corporate world, could be demoralising
  6. Agnipath cuts at the root of social security and dignity that have lured rural Indian youth to the military fatigue, argue the scheme’s detractors.

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