The Hindu Newspaper 07/05/2020

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1)The Bhitari pillar inscription is related to

  •  a) Skandagupta
  •  b) Samudragupta
  •  c) Vikramaditya
  •  d) Chandragupta I

2) During the colonial period in India, what was the purpose of the Whitley Commission?

  •  a) To review the fitness of India for further political reforms
  •  b) To report on existing conditions of labour and to make recommendations
  •  c) To draw up a plan for financial reforms for India
  •  d) To develop a comprehensive scheme for Civil Services in India

3)Tholu Bommalata, is the traditional puppetry art form of

  •  a) Karnataka
  •  b) Tamil Nadu
  •  c) Telagana
  •  d) Andhra Pradesh

Map of the day:- Iron and Steel Plants

News:- ICRA downgrades Edelweiss debt

About ICRA:- ICRA Limited (ICRA) is an Indian independent and professional investment information and credit rating agency.

It was established in 1991, and was originally named Investment Information and Credit Rating Agency of India Limited (IICRA India).

2) All about NBFC :-

What is a Non-Banking Financial Company (NBFC)?

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/ stocks/ bonds/ debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/ purchase/ construction of immovable property. 

What does conducting financial activity as “principal business” mean?

Financial activity as principal business is when a company’s financial assets constitute more than 50 per cent of the total assets and income from financial assets constitute more than 50 per cent of the gross income. A company which fulfils both these criteria will be registered as NBFC by RBI.

NBFCs are doing functions similar to banks. What is difference between banks & NBFCs?

NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:

i. NBFC cannot accept demand deposits;

ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;

iii. deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

What are the powers of the Reserve Bank with regard to ‘Non-Bank Financial Companies’?

The Reserve Bank has been given the powers under the RBI Act 1934 to register, lay down policy, issue directions, inspect, regulate, supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of principal business.

The Reserve Bank can penalize NBFCs for violating the provisions of the RBI Act.

3) News:- A lab at the heart of U.S.-China virus spat

The Chinese laboratory named P-4 Laboratory in wuhan accused by top American officials of being the source of the  pandemic  conducts  research  on the world’s  most dangerous diseases.

The Wuhan institute houses the  largest  virus  bank in Asia which preserves more than  1,500  strains. The complex contains Asia’s  first  maximum security lab equipped to handle Class  4 pathogens (P4) such as Ebola.

News :- European economy faces historic recession

The EU forecast a historic recession on the  continent battered by the deadly  coronavirus  pandemic, as the U.S. and China escalated their  war of words over the origins of the disease.

All about Recession :- According to the National Bureau of Economic Research, a recession can be described as a significant decline in economic activity over an extended period of time, typically several months.

In the average recession, gross domestic product (GDP) is not the only thing shrinkingincomes, employment, industrial production, and retail sales tend to shrink as well. Economists generally consider two consecutive quarters of declining GDP as a recession.

How does this Happen:- The general economic model of a recession is that when unemployment rises, consumers are more likely to save than spend. This places pressure on businesses that rely on consumers’ income. As a result, company earnings and stock prices decline, which can fuel a negative cycle of economic decline and negative expectations of returns. So businesses reduce production and cut jobs which further accentuates the problem and initiates a vicious cycle.

Recession vs Depression :- Recession is when your neighbor loses their job. Depression is when you lose yours.

Economic depressions are much less common and more severe than recessions. “Although there is no exact definition, most economists agree that depressions entail little to no growth for more than a couple of years, significant increases in unemployment, a fall in production and a drastic decline in aggregate demand,” That means a Prolonged recession which occurs for couple of years or even decades is depression. Ex. The Great Economic Depression.

All about EU :- The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe.

The EU and European citizenship were established when the Maastricht Treaty (TEU) came into force in 1993.

The EU traces its origins to the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), established, respectively, by the 1951 Treaty of Paris and 1957 Treaty of Rome(TEFU).

The original members of what came to be known as the European Communities were the Inner Six: Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. 

The Euratom Treaty, officially the Treaty establishing the European Atomic Energy Community, established the European Atomic Energy Community. It was signed on 25 March 1957.

In 2007 , Lisbon Treaty was signed (came to force in 2009) . This amends the EURATOM, TEU and TEFU.

Article 50 of the Treaty on European Union, enacted by the Treaty of Lisbon on 1 December 2009, introduced for the first time a procedure for a member state to withdraw voluntarily from the EU.

News:Pigs die of suspected hog cholera  in  Meghalaya

Suspected hog cholera has killed  at  least  a  dozen pigs across two  districts of  Meghalaya.  This coincided with the death of more than 2,900 pigs in Assam due to African swine fever (AFS),  a first inthe Indian subcontinent. Officials in  Meghalaya have allegedly been silent on a possible outbreak of hog cholera, also  known as classical swine fever

Editorial of the Day :-

Rent control amidst pandemic

Background :- Amid Covid-19 there is a clarion  call made to landlords  by tenants to  ‘forgive’ rent for a  month or two —  especially for  poor  migrant families, who do not have other  housing options or savings.

Governments Approach:- As of now, governments are ‘ordering’ or requesting landlords to excuse rent and stop  evictions on  the basis of the Disaster  Management (DM) Act of 2005 but the Act does not have any  provisions  for demanding continuation  of rental  housing  arrangements.

The focus has to shift away from the DM  Act to  rent control acts that actually aim to  regulate  rental housing.

This is where some medium to long term  thinking on rent control laws in States,  as well as the Central government’s  Model Tenancy Act, 2019, could be useful. 

Why amendment / control is needed :- There is no legal obligation for landlords to excuse rent or not evict tenants in the current  pandemic, and this is also a situation that they  themselves cannot afford. 

Two things to be kept in Mind:-

First, we have to make the rent Act applicable across more and more tenancies. This means that  all tenancies, including those informal in nature, must get registered under the Act.

Second, the rent Acts, as well asthe Model  Tenancy Act, need a force majeure clause for  emergencies such as the pandemic.

Should we think only of Tenant:- We still need to consider that landlords may not  be able to afford a rent free month — they  need the rent for their own survival. 

For this, a mobilisation of housing, welfare and disaster funds is required to make up for this loss of rent.

Editorial : 2 A war like state and a bond to  the  rescue 

Central Idea :- Pulling the Economy out of Covid-19 Shocks.

Author says since people have termed Corona as a War , we need to look back at the war time finance methods.

Consol Bond:– One such method that has been used as early as the First World War is the Consol Bond.

 In 2014, the British government, a century after  the start of the First World War, paid out 10% of the total outstanding Consol bond debt.  The bonds, which paidout an interest of 5%, were issued in 1917 as the government sought to raise  more money to finance the ongoing cost of  the  First World War

Citizens were asked to invest with the advertising  messaging: “If you cannot fight, you can help your country by investing all you can in 5 per cent Exchequer Bonds.” 

Consol bonds inthe United Kingdom are owned bysmall investors, with over 70% holding less than £1,000. Furthe rmore, unlike PM-CARES, the  proceeds of the bonds could be used for  everything — from Personal Protective  Equipment for doctors to a stimulus for small  and medium sized enterprises. 

Why Console Bonds are Better Option:-

  • Our PM also want active participation of Citizens and thus can see Console bond as an alternative to RBI buying Govt. security.
  • Further more, with the fall of real estate and given the lack of safe havens outside of gold,  the bond would offer a dual benefit as a risk  free investment for retail investors.

Editorial 3 :- Resuscitating multilateralism with India’s  help

Author Says cooperation among nations will be  necessary. But there is aproblem: multilateralism is possibly at its weakest today, when theneed for it is more dire than ever before. Unless the  fundamental problem is addressed, no  meaningful fix will be possible. 

How to Reform Multilateralism:-

First, of course, is the need for reassurance and  policies that reflect a renewed commitment to the raison d’étre of  multilateralism. 

A protectionist US should show by example that it will strengthen the Global Supply chains.

Second, irrespective of the above, there is an urgent need for some strategic decoupling(we need to have some strategic boundaries as well), handled  smartly  in cooperation with other like minded countries. This will make us more secure.

Summarizing the above two points Third, flowing from the above, a multilateralism  that recognises the need for decoupling will  necessitate closer cooperation with some and distancing from others. 

This Revival of Multilateral will give Arole for India:-

  • As some constituencies in the West seek  a gradual decoupling from China, they  would be well served to look toward India. 
  • India could work closely with the  Alliance for Multilateralism (an initiative  launched by Germany and France) to shape both the alliance itself and the  reform agenda at large. 

Global confidence on a new type of managed Multilaterlism need to be revived and India should not let this opportunity go.

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