There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Fifty Third Edition we are covering the following news:
Top executives from industrial materials firms are discussing why prices are rising and how to respond. China’s vast steel sector is conflicted between economic growth and a green agenda as the President tries to clean up the world’s top carbon emitter. The government is pushing for steel output to drop from a record of more than 1 billion tons, in a campaign triggered by Xi’s pledge to deliver a carbon neutral economy by 2060 but it has fired up prices and created a headache for policymakers fretting about surging inflation.
China produces well over half the world’s steel and the sector has long been targeted by the authorities for persistent pollution. The industry is also responsible for about 15% of the carbon that China spews into the atmosphere every year.
Steel mills have enjoyed a surge in profitability and the biggest has seen its Shanghai-listed shares advance almost 40% this year while the benchmark index has edged lower. Trying to keep production in check alongside stimulus-fueled demand has inevitably meant much higher prices. Steel coil in China, used in everything is the priciest it’s been since 2008. Aluminium has reached decade-highs. Strong demand is playing a big part along with supply cuts, as China’s economic rebound from the pandemic is heavily dependent on commodity-intensive sectors.
Allowing inflation to persist is a risk to the economy because it ends up sapping demand for products, or provoking the authorities to put restrictions on the monetary and fiscal measures that promote growth. It’s a global concern that obviously stretches far beyond steel as nations chart their course out of the pandemic. Steelmaking is vital to China’s economy, employing huge numbers, and the effect on prices of reining in supply shows how governments will have to tread a careful path as they restructure important industries.
China has ordered cuts in the key steelmaking hub of the country and vowed nationwide checks to make sure regions aren’t flouting capacity curbs. The government is considering an adjustment to taxes to bring in more overseas steel and plug any domestic shortfall but that’s complicated by a very strong rebound in the global steel market.
Why the Rupee is among biggest losers over the past few days?
The Indian Rupee hit a nine-month low of 75.4 against the US Dollar this week and has lost nearly 4.2 per cent over the last three weeks — one of the biggest losers among the emerging market currencies. The Rupee came under severe pressure over the last three weeks in line with the sharp rise in Covid-19 cases and RBI’s announcement, last week, to maintain fairly accommodative monetary policy and that it will inject liquidity through the Government Securities Acquisition Programme (G-SAP) programme — starting with Rs 1 lakh crore in the current quarter. As concerns are growing over the delay in recovery of the economy and normalisation, the Rupee has taken a hit.
From trading at a level of 72.38 to USD in March, the Rupee slipped to levels of 75.42 on Tuesday (afternoon trading hours) thereby witnessing a decline of 4.2 per cent in a matter of three weeks. This week, it lost 43 paisa to a dollar, hitting a nine-month low. Data shows the Rupee has been one of the biggest losers over the last three weeks as concerns are growing over rising Covid cases and its impact on economic activity across the country.
Market participants say the Rupee may hit levels of 77-78 over the next couple of months and that can be a cause of concern for importers, or other individuals who have planned expenditure in foreign currency.
With Covid numbers rising as of now, it continues to pose a threat to the pace of recovery and that is raising concerns over INR. A concern over economic activity and growth of the economy in turn is slowing down the pace of FPI inflows which provides a strong support to Rupee.
Auto sector’s role in India’s growth
In the past two decades or so the Indian auto sector has been witness to some considerable changes and transformations, things which were beyond imagination. While the IT sector might still be the star, the auto sector is not far behind. There have been three major advancements that can be given the credit for this transformation.
First, the advancement of the supplier ecosystem in India. Today, our suppliers — both homegrown as well as the MNC offshoots — can rub shoulders with the best in the world. Second, the build-quality of our products. Quality defects have reduced by a staggering 90 per cent and now compare favourably with most advanced markets. Third, and perhaps the most important, is our ability to design, engineer and develop world-class products completely in India. Scorpio, Indica, XUV500, Nano and Pulsar brought respect to India’s engineering capabilities. Today, every major carmaker has an engineering centre in India, and many have complete product development capability here. The frugality in product development also gives India a competitive edge.
The auto industry does a lot of good for the MSME sector which is a big employment generator for India and an important cog in the Indian economy. The MSME share of value-addition to a car is 35 per cent. Further, the automotive aftermarket provides economic opportunities to thousands of MSMEs. While no official count is available, one estimate puts the total number of MSMEs engaged in the auto value chain in the range of 25,000-30,000.
The Indian auto industry truly embodies the spirit of Atmanirbhar Bharat, and perhaps many other industries can take some lessons from it. The industry contributes 6.4 per cent to GDP, around 35 per cent to manufacturing GDP, supports over 8 million jobs directly (OEMs, suppliers and dealers) and as many as 30 million more in the value chain. It accounts for cumulative investments of $35 billion over last 10 years, and generates export revenue of $27 billion that is nearly 8 per cent of the total merchandise exports from India.
Tackling the second COVID wave
There was never any doubt that India will face a second wave of the COVID-19 pandemic. What was not known was when, and how big it would be. Now we know that the second wave is here. It is “faster and higher” — all that we hoped it would not be.
The newer variants of the virus have the potential to change the infectiousness both ways, and there is some early indication that the infectiousness has increased in the second wave. But this is unlikely to be an important reason for the large second wave. However, this is an area where constant vigilance is required. As many people have already been infected in the first wave, the pool of susceptibles should be smaller. Serosurveys also support this as they found that about 25 per cent of people had already been infected nationally. However, this is an average and hides significant variations by state, age and place of residence. Populations with lower seroprevalence become the potential pool for the second wave. With the removal of most restrictions, the probability of contact between individuals has risen sharply. We can all see crowded marketplaces, malls and restaurants; public transport is functional.
While the government may justify them on social, economic, religious and political grounds, it makes little sense to the public when crowding in public places is allowed, but curbs are imposed on individual freedom with curfews or weekend lockdowns. On top of this, there is a renewed emphasis on penalising individuals for their behavior, including not wearing a mask in their own car. The message to the public is that the onus of controlling this pandemic is now on individuals and not the government. This is not prudent. Even if the opening of society was to be done for various reasons, the public should have been prepared for such a change. It is inappropriate to blame individual community members, when there is no effective communication which explains the rationale behind the decisions taken.
There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Fifty First Edition we are covering the following news:
Recently, the central government introduced the Government of National Capital Territory of Delhi (Amendment) Bill, 2021 to amend the previous act of 1991, to better define the role of the Council of Ministers and the Lieutenant-Governor (LG) in Delhi. The Bill will most likely revive the tussle between the Centre and the Delhi government. The Constitution of India granted special status to Delhi among Union Territories (UTs) in the year 1991 through the 69th constitutional amendment which provided a governor and a council of ministers with appropriate powers. That’s when Delhi was named as the National Capital Territory (NCT) of Delhi.
But now the amendment in the bill will give discretionary powers to the LG of Delhi even in matters where the Legislative Assembly of Delhi is empowered to make laws. And the state government will require to obtain the opinion of the LG on their decisions before executive action is taken on those decisions. Thus, the elected government cannot take any action unless it obtains the LG opinion.
A government is often called upon to take urgent decisions and actions on issues concerning people’s welfare. The effect of this amendment will be that the government will not be able to act quickly on matters which it considers important. There can be no more effective way than this to hobble an elected government and make it ineffective. Moreover, the LG opinion is not time bounded which can lead to delay in executing the action. Specifically, this amendment nullifies the decision of the Supreme Court which has held that the elected government of Delhi can take all decisions within its jurisdiction and execute them without obtaining the concurrence of the LG. In case of a difference of opinion on a matter between the LG and the government, the former should make all efforts to resolve it and only in extreme cases should s/he refer the matter to the president for a decision. It is very surprising that after a constitution bench of the Supreme Court in 2018 settled the constitutional issues relating to the relationship between the Delhi government and the Union government in matters of governance, parliament has been called upon to amend the act to unsettle this relationship.
The AAP government has criticised the bill and has called it a move to curtail the powers of the state government because if amendments are passed, elections and the elected government in Delhi will become meaningless. Opposition parties have come in favour of the AAP government over the NCT Bill calling it to be ‘unconstitutional’. West Bengal Chief Minister extended support to the ‘struggle’ against the introduction of the Government of National Capital Territory of Delhi (Amendment) Bill, 2021 in Lok Sabha and called the move as “surgical strike on federal structure”.
Development Finance Institute approved
Whenever the government has put a greater thrust on building infrastructure and promoting investment in the country, the idea of setting up a development bank has played a key role. India’s first development bank was probably set up in 1949 with the name Industrial Finance Corporation of India (IFCI). Its main aim was to finance industrial investments in the country. Then in 1995, the World Bank promoted the Industrial Credit and Investment Corporation of India (ICICI) to finance modern and relatively large private corporate enterprises. In 1964, IDBI was set up as an apex body of all development institutions. But these banks were ultimately disbanded due to mounting problems of NPAs and lack of efficiency.
Now, the Union cabinet has once again started working on this idea and has cleared the setting up of a Development Finance Institution (DFI) for financing long term infrastructure and development projects of the country. During Budget 2021, it was mentioned that a national bank will be set up to fund infrastructure and developmental activities. This is now being implemented on ground by the government. The FM stressed on the fact that past attempts to have such institutions have not been very successful and we have ended up with no bank which could take up long-term risk and fund development. This has led to steep fall in long-term credit from a tenure of 10-15 to just 5 years. Hence, in order to promote investments on a larger scale in the country, the government has come up with effective measures in the structure of DFI so that the problems faced by past banks can be confronted. Earlier banks had started piling up huge NPAs allegedly caused by politically motivated lending and inadequate professionalism. These banks were converted into commercial banks after Narasimham Committee reports in 1991. The proposed DFI will have a professional board with persons of eminence. Moreover, DFI will have 50% non-official directors. It will also have certain tax benefits for a period of about 10 years.
To finance this bank, the government will undertake a capital infusion of about Rs 20,000 crore this year and an initial grant of Rs 5000 crore. Additional increments of grant will be made within the limit of Rs 5000 crore. The central government is also planning to issue some securities to DFI through which cost of funds can be brought down. This can help DFI leverage initial capital and draw funds from various sources. DFI will start with 100% government ownership and it will be gradually brought down to 26%.
The DFI will focus on providing long-term credit for the industrial growth of the country at comparatively lower rates. It will provide financial assistance for both public and private sector industries. The main objectives will be promotion of industrial growth, development of backward areas, generation of employment opportunities, raising exports and substituting imports, modernisation and improvement in technology and reduction in regional imbalance.
Democrats vow to vote on gun bills; Biden says ‘we have to act’
Democrats said they are pushing toward a vote on expanded gun control measures as the nation reels from its second mass shooting in a week. President Joe Biden said “we have to act,” but prospects for any major changes were dim, for now, in the closely divided Congress. Senate Majority Leader Chuck Schumer vowed to bring to the Senate floor legislation passed by the House that would require background checks for most gun sales and transfers. He said the Senate “must confront a devastating truth” after a lack of congressional action on the issue for almost three decades.
The Senate Judiciary Committee held a hearing Tuesday on proposals for gun control. It is unclear whether any of the bills up for consideration, most of them involving more restrictive background checks would have made a difference in the Colorado case. A 21-year-old man charged with killing eight people in the Atlanta area last week had purchased a 9 mm handgun hours before the murders, prompting advocates to push for longer waiting periods for purchases. The gun debate also highlights a larger difficulty for Senate Democrats as they try to move forward on gun legislation and other policy priorities of the Biden White House. With the filibuster in place, forcing a 60-vote threshold for most legislation, House-passed bills on issues like gun control and voting rights are effectively nonstarters unless Democrats secure significant GOP support.
Democrats say they feel the environment around gun legislation has evolved, especially since that last major push in 2013. They point to troubles at the National Rifle Association, the long-powerful advocacy group that poured tens of millions of dollars into electing Donald Trump in 2016. The organization has been weakened by infighting as well as legal tangles over its finances. “This is the moment to make our stand. NOW,” tweeted Murphy as details of the Colorado shooting emerged Monday evening. “Today, our movement is stronger than the gun lobby. They are weak. We are potent. Finally, a President and a Congress that supports gun reform.” Democrats are hoping there is a gradual political shift among voters as well. A Pew Research Center poll in September 2019 showed a wide majority of Americans, 88%, supported making private gun sales and sales at gun shows subject to background checks, which is what the House-passed bill would do. Ninety-three percent of Democrats and 82% of Republicans were in favor of the policy.
Ready to discuss bringing petrol, diesel under GST at next Council meet
Amidst outcry over high taxes on motor fuel, Finance Minister Nirmala Sitharaman said she would be “glad” to discuss the suggestion of bringing petrol and diesel under the ambit of the Goods and Services Tax at the next meeting of the GST Council. State levies and central excise duty account for more than half of the retail selling prices of petrol and diesel. For instance, taxes make up for 60 per cent of the present retail price of petrol of Rs 91.17 a litre in Delhi. Excise duty constitutes 36 per cent of the retail price. Over 53 per cent of the retail selling price of Rs 81.47 a litre for diesel in Delhi is made up of taxes. As much as 39 per cent of the retail price comprises central excise. Sitharaman said both the centre as well as state governments levy taxes on petrol and diesel.
However, the Centre shares its collection on the fuel with states. The GST Council, headed by Union Finance Minister and comprising state finance ministers, is the highest decision-making body regarding GST. Earlier in the day, members from the Opposition benches said high prices of diesel, petrol and LPG were hurting the common man across the country and asked the government to reduce their rates. Petrol and diesel prices are hovering at historic highs following a relentless increase in rates over the past nine months.
There have been calls by Opposition parties as well as sections of society to reduce excise duty to ease consumer pain. Supriya Sule (NCP) said the excise component in the prices of petrol is close to Rs 38 per litre while state value-added tax (VAT) is about Rs 19 per litre in Delhi. The government should consider slashing this high excise duty, she said. She urged the government to bring down prices of petrol, diesel and LPG cylinder. Ritesh Pandey (BSP) and Nama Nageswara Rao (TRS) too raised the issue of high prices of petrol and diesel. It is expected that this could reduce the price of petrol in the next GST meet but at the same time, it is a fall in government revenue and an increase in the deficit of the government so such a measure must only be taken after a thorough discussion and in no case should it be politicized to their advantage by any party to ensure a fair ruling in this matter.
There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Fiftieth Edition we are covering the following news:
A significantly important geopolitical activity has taken place , as after nearly 16 years, the strategic alliance of 4 countries-Japan, US, Australia and India called Quad organized its first prime ministerial level summit in the virtual mode. This development carries huge weight as all the four countries issued a joint-statement defining the goals and objectives of the alliance and are speaking in one voice. It is even important in the Indian context since there had been apprehensions with regards to India joining the Quad as an active member, given its tensions with the neighboring country China.
The opening remarks touched upon the issues of securing free and open access to Indo-Pacific region, the supply of vaccines and resilient supply and production chains. Most of the activities proposed in the summit strongly aimed at curbing the bullying behavior of China. For example, China maintained an aggressive military stance in Indo-pacific region: the border of Ladakh, Taiwan, South China Sea and Senkaku islands near Japan. China is also trying to push for its vaccines which are rather unreliable. In present times, China has the control of supply chains all across the world, which poses a big threat to the dependent nations. Quad aims to balance out the powers and diversify the operations to reduce the world dependency on China.
The summit laid down four major future operations which will act as its guiding principle. First, is maritime security and co-operation. Continuing on the Malabar naval exercises which took place last year, the cards for this year point at expansion by inviting non-Quad countries like France and UAE as well.
The second area of collaboration is on COVID-19 related issues. Quad is looking to launch an expansive vaccine program where vaccines will be developed in the US, manufactured in India, financed by Japan and supported by Australia.
The third area of cooperation is climate change, which has been gaining momentum under Joe Biden’s policy agenda. This is one area where the quad will try to corner china into delivering more. Working groups for climate change are expected to be announced soon.
The last area of economic and technological cooperation, indirectly recognizes China as a threat. The countries aim to break the monopoly of China, which produces 60% of the world’s rare earths, by focusing on increasing its procurement to diversify the production and supply chains across countries.
What’s behind Hong Kong election law changes
China’s rubber-stamp parliament, the National People’s Congress (NPC) approved a resolution to alter Hong Kong’s election law that many see as effectively ending the city’s already weakened local democracy and reducing the proportion of those directly elected.
A new vetting and screening committee will ensure Hong Kong institutions will be filled only with “patriots,” a term which China says includes people who love the country in its present-day form, led by the Communist Party. The move expands the size of both the Legislative Council, known as LegCo, and the Election Committee, a strongly pro-Beijing body responsible for electing Hong Kong’s chief executive.
The change will give Beijing-appointed politicians a greater say in running the Hong Kong Special Administrative Region (HKSAR), marking the biggest change since the handover in 1997. An increased number of pro-Beijing officials would weaken the power of the opposition to influence the city’s leadership. It will erode the political freedoms that distinguished Hong Kong from the mainland under the “one country, two systems” model.
The change is non-compliance with the Sino-British Joint Declaration according to China’s basic policies regarding Hong Kong “will remain unchanged for 50 years” and ensured a high degree of autonomy to Hong Kong. All major economies such as the USA, UK and Australia have condemned the act. The G7 group of nations have also expressed grave concerns at what they said was China’s decision to fundamentally erode democratic elements of the electoral system in Hong Kong.
Beijing was perturbed by violent anti government protests in 2019. Repressive measures have already hamstrung the Hong Kong opposition, with almost all of its major figures either in custody or self-exile. Remaining pro-democracy lawmakers quit and other activists have been arrested under the national security law on subversion charges that carry a possible maximum penalty of life in prison.
The change has been seen as a final nail in the coffin for Hong Kong’s pro-democracy movement and an erosion of autonomy. China must act in accordance with its legal obligations and respect fundamental rights and freedoms in Hong Kong.
Will the lifting of IBC suspension turn out to be a damp squib?
The insolvency invocation sections of the Insolvency and Bankruptcy Code (IBC) were suspended by a notification dated 5th June 2020, effective 25th March 2020. It is widely expected that the suspension will be lifted on 24th March 2021. However, a mere withdrawal of suspension without the implementation of additional frameworks that are under discussion i.e., Prepacks and Micro Small & Medium Enterprises (MSME) Regulations under section 240A, will make IBC a toothless tiger; several companies will get excluded from its ambit. The provision to Section 10A of the IBC states that no application shall ever be filed for initiation of the corporate insolvency resolution process (CIRP) of a corporate debtor (CD) for defaults during the Covid period. Thus, all defaults of the Covid period will be outside the purview.
The budget of 2021-22 had provided for the establishment of an asset reconstruction company i.e., a bad bank and an asset management company (AMC). Statement of several senior officials in the Government as well as the Indian Banks Association (IBA) indicates that loans greater than Rs 500 crore which have not been declared fraudulent will be transferred to the bad bank. It is highly likely that the underlying companies would not be subjected to IBC in the first instance, rather the AMC will try and either revive these companies or package the loans to an investor.
MSME will be outside the scope of IBC pending notification of the designated framework. The revised classification of MSME will preclude a plethora of companies from IBC. Additionally, the new criterion may result in litigation vis-à-vis MSME that is pending admission at National Company Law Tribunal. MSME as per definition is enterprises with plant & machinery up to Rs 50 crore and turnover up to Rs 250 crore. It is to be noted that the written down value of plant and machinery at the end of the previous year is to be considered (not original cost) and definition excludes land, buildings, furniture & fittings. Also, the turnover criterion does not include export sales. More than 99% of companies in India have a turnover of 250 crores or less, albeit the ones where the written down value of plant and machinery is greater than 50 crores and in distress will be amenable to IBC. Creditors of several companies had signed the Inter Creditor Agreement (ICA), pre-suspension, under Reserve Bank of India’s (RBI) June 7th Prudential Framework. Some of these corporates will continue negotiation under the framework of roping distressed asset investors. Also, most of the ICA cases will have loans greater than Rs 500 crore, resulting in their exposure being transferred to a bad bank.
Finally, the Hon’ble Supreme Court order states that “the accounts which were not declared as NPA till 31 August 2020 shall not be declared as such till further orders”. This has enabled several CDs to shift cash flows, from servicing lenders to payment of operational creditors, and thus the risk of a filing by an operational creditor has reduced substantially. The aforesaid probable exclusions will result in a significant reduction of filings under IBC. The endeavor of the Insolvency and Bankruptcy Board of India should be to introduce all the frameworks simultaneously on 25th March 2021. A number of judgments from the Hon’ble Supreme Court have lamented about the situation prior to the introduction of IBC. It is Important that the IBC updates its regulations time by time to ensure a safe and competitive market at all times for all businesses.
New norms for telecom companies
The Department of Telecommunications (DoT) has amended licensing conditions for telecom companies by including defence and national security as parameters in the purchase of telecom equipment for trusted sources. This means telecom companies can use telecom products only from trusted sources in their network and must take permission from the designated authority (National Cyber Security Coordinator) if they plan to upgrade their existing network using telecom equipment that has not been designated as a trusted product.
Hence this also means that the telecom companies will not be able to use equipment from non-trusted sources for the setting up or expanding of the network to utilise the 4G spectrum that they bought in the recently concluded spectrum auctions. More specifically this new move aims to include defence and national security as parameters when purchasing ‘trusted telecom products’ and sourcing equipment from ‘trusted telecom equipment sources’. The trusted telecom products/trusted telecom equipment source is simply a product, a company, or a technology that has been deemed safe by the government of a nation for use in its crucial and critical infrastructure. This new policy could potentially make it more difficult for Chinese telecom equipment vendors like Huawei and ZTE to supply equipment to Indian telecom players in the future as both Huawei and ZTE have been under global scrutiny for allegedly installing ‘backdoor’ or ‘trapdoor’ vulnerabilities and spying for the Chinese government and have been banned by several countries. And of the three telcos, almost 30 per cent of Bharti Airtel’s existing network comprises Chinese telecom equipment, it is as much as 40 per cent for Vodafone Idea. State-run telcos Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) to have equipment from Chinese vendors, including Huawei and ZTE, in their 3G and older networks.
These new norms will be implemented in June as lately, the Union cabinet approved the Production-Linked Incentive (PLI) scheme for the telecom sector to reduce imports and move towards self-reliance. Moreover, telecom equipment plays a vital role in telecom connectivity and data transfer, which has a direct impact on the national security of India therefore this change will help in strengthening the national security of India as well as demand for local equipment will rise which will further promote the vision of Make-in-India and Atma Nirbhar Bharat.
Anti – China protests in Myanmar
Ever since the military coup has taken over the democratically elected government of Myanmar, the people have been protesting over demand for restoration of the latter. At the same time, protestors have started expressing their anger towards China’s alleged support in the military’s action. With this, an unfortunate incident took place on Sunday, as many Chinese staff were injured and trapped in arson attacks by unidentified assailants on garment factories in Hlaingthaya suburb of Myanmar’s main city. Chinese embassy described the situation as “very severe” and it urged Myanmar to take further effective measures to stop all acts of violence, punish the perpetrators in accordance with the law and ensure the safety of life and property of Chinese companies and personnel in Myanmar. Security forces took a tough call and killed at least 22 anti-coup protesters in the poor, industrial Hlaingthaya. A further 16 protestors were killed in other places, the Assistance Association for Political Prisoners (AAPP) said, making it the bloodiest day since February 1 coup against elected leader Aung San Suu Kyi. As plumes of smoke rose from the industrial area, security forces opened fire on protestors in the suburb that is home to migrants from across the country. Martial law was imposed in Hlaingthaya and another district of Yangon, Myanmar’s commercial hub and former capital.
Army-run Myawadday television said security forces acted after four garment factories and a fertiliser plant were set ablaze and about 2,000 people had stopped fire engines from reaching them. The latest deaths would bring the toll from the protestors to 126, AAPP said. It said that more than 2,150 people had been detained by Saturday.
China is viewed as being supportive of the military junta that has taken power. Tatmadaw, the armed forces of Myanmar, has been relying on Beijing to shield them from the inevitable consequences in the UN from the Western nations, and possibly also offset incoming sanctions by expanding economic ties between the two neighbors. China has also played an increasingly important role in Myanmar. Chinese President Xi Jinping has vested interest in dozens of infrastructure projects key to his Belt and Road ambitions. During the Rohingya crisis, China was one of the few countries that stood behind the government. If it were to support the military government now, it could in fact help to get several stalled projects off the ground. Anti-Chinese sentiment has risen since the coup that plunged Myanmar into turmoil, with the opponents of the army takeover noting Beijing’s muted criticism compared to Western condemnation. One of the protest leaders even threatened the Chinese companies with future attacks if they did not respect the sovereignty of Myanmar people.
There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Ninth Edition we are covering the following news:
Why India has been downgraded from ‘free’ to ‘partly free’ by US Think tank
The US-based think tank Freedom House has downrated India from free to partially free. The think tank also expressed apprehensions that the world’s largest democracy is moving towards authoritarianism under the NDA government headed by Prime Minister Narendra Modi. Pointing to a decline in global democracy over the last 15 years, the report said that nearly 75% of the world’s population lived in a country that faced deterioration over the last year. While Finland, Norway and Sweden are the most free countries in the world, with a score of 100, and Tibet and Syria are the least free with a score of 1.
Freedom House, assesses every country with the help of about 125 analysts and more than 40 consultants. Scores are Based on firstly political rights indicators such as the electoral process, political pluralism and participation and government functioning and secondly on the basis of civil liberties indicators which are related to freedom of expression and belief, associational and organisational rights, the rule of law and personal autonomy and individual rights. Based on the total scores, countries are then declared as “free”, “partly free” or “not free”.
‘Freedom in the World Report 2021’ gave India a score of 67/100, declaring it partly free. India has fallen by four points since last year when it was still in the ‘free’ category due to “a crackdown on expressions of dissent by the media, academics, civil society groups, and protesters”. India appears to have abandoned its potential to serve as a global democratic leader. Some major reasons the report has stated for the fall in score:
Freedom of media – freedom of press has been compromised because of added government pressure on journalists, and there’s rising “activity” on campuses intent to disturb academic freedom.
Internet shutdown – In a year when social media censorship has been hotly seated, while the government shut down Internet connectivity in Kashmir and on Delhi’s borders, India’s Internet freedom score dropped to just 51.
Response to COVID -19 – Abrupt lockdown left millions of migrant workers displaced. Muslims were also scapegoated and blamed for the spread of the coronavirus and faced attacks by vigilante mobs.
Political pluralism – The government intensified its crackdown on protesters opposed to a discriminatory citizenship law and arrested dozens of journalists who aired criticism of the official pandemic response.
Laws – The report also made a note of Uttar Pradesh’s ‘love jihad’ law to prohibit forced religious conversion through interfaith marriage and said that a number of Muslim men had been arrested for allegedly forcing Hindu women to convert to Islam.
With India’s decline to Partly Free, less than 20 percent of the world’s population now lives in a Free country, the smallest proportion since 1995.
Indian economy out of technical recession
The Ministry of Statistics and Programme Implementation stated that the GDP in the third quarter of 2020-21 shows growth at 0.4 per cent. With this, the country’s economy is now out of a technical recession after the quarterly growth. The economy had shrunk by an unprecedented 24.4 per cent in the first quarter this fiscal following the coronavirus pandemic and resultant lockdowns. However, due to a spurt in economic activities in the second quarter, the GDP decline narrowed to 7.3 per cent. India has entered a “technical recession” in the first half of 2020-21 for the first time in its history. The technical recession occurs when GDP declines for two consecutive quarters. In the case of a nation’s economy, the term usually refers to back-to-back contractions in GDP.
To understand the technical recession in-depth, one must be able to distinguish between a recessionary phase and a recession. The recessionary phase is the counterpart of an expansionary phase. When the overall output of goods and services typically measured by the GDP increases from one quarter (or month) to another, the economy is said to be in an expansionary phase. And when the GDP contracts from one quarter to another, the economy is said to be in a recessionary phase. But when a recessionary phase sustains for long enough, it is called a recession. In other words, when the GDP contracts for a long enough period, the economy is said to be in a recession. But a technical recession is most often caused by a one-off event (in this case, the Covid-19 pandemic and the lockdowns imposed to combat it) and is generally shorter in duration.
Commenting on the growth numbers, the finance ministry said that real GDP growth has returned the economy to the pre-pandemic times of positive growth rates. It is also a reflection of a further strengthening of V-shaped recovery that began in Q2 of 2020-21 after a large GDP contraction in Q1 followed one of the most stringent lockdowns imposed by the government relative to other countries, it said. The V-shaped recovery has been driven by rebounds in private consumption and investments, the ministry said the initial policy choice of “lives over livelihoods” succeeded by “lives as well as livelihoods” is now bearing positive results.
Moreover, The Economic Survey 2020-21 also had expressed confidence that the Indian economy is poised for a smart V-shaped recovery, which will carry it through to a double-digit growth figure of 11% in real GDP, which would be the highest since Independence. The Indian economy has started to gain positive momentum in quarter 3 after it has seen investment demand grew by 2.6% and an increase in the centre’s capital expenditure. It is also speculated that the growth stimuli available from the union budget and the additional measures including the Production-Linked Incentive will lead to strong growth over the recovery horizon. And such recovery of activities has also been reinforced by some degree of the rollout of Covid-19 vaccines, and growing confidence in the market that things are getting back to normal.
USA’s New Afghan Peace Plan
After weeks of sensitive deliberation and confidential meetings, 2 secret Afghanistan documents have been leaked to the public signaling a massive push for a new peace agreement between the Taliban and the Afghan government that would facilitate the withdrawal of US troops from the 20-year war.
There were strong beliefs that the Biden administration will either adhere to former president Donald Trump’s deal with the Taliban, which would require the withdrawal of all remaining 2500 US troops in the country by May 1 or may consider extending it beyond early May or scrap the deal altogether. But the two documents published by Afghanistan’s TOLO News show that the Biden administration may be seeking an alternative deal of accelerated peace which could potentially set the stage for a troop withdrawal by the end in his first term.
The new proposal lays out a draft agreement meant to spur talks between Afghan government and the Taliban. The deal looks forward to the following plan of action to achieve the goal of peace restoration. Biden’s peace plan has kept open the possibility that the 2500-odd troops, currently deployed in Afghanistan, might stay on for a while. Under the earlier agreement with the Taliban, the US had promised to withdraw all troops by May 1 this year. Many in Washington believe that Trump administration wanted US leverage by proclaiming a confirmed date for withdrawal. In keeping the possibility open, Biden hopes to generate some leverage with the Taliban that has refused to abide by its commitment to reduce the levels of violence. The US is also building pressure on Afghan president Ashraf Ghani to establish the peace negotiations with Taliban. Washington is pressing the Taliban to accept an immediate agreement to reduce violence for 90 days that will provide the space for the peace initiative. This would help prevent any decisive radical activity in the heat of a deal by the Taliban with the support of Pakistan. Zalmay Khalilzad, the US representative to Afghanistan, has handed over a set of written peace proposals to both Kabul and the Taliban. Further, in a letter to Ghani, the US secretary of state Antony Blinken even stressed on the fact that US is not dictating terms to Afghan parties, but facilitating the movement towards an inclusive interim government, an agreement on the foundational principles for a new political order and a permanent and comprehensive ceasefire. The US is asking Turkey to convene a meeting of the government of Kabul and the Taliban to finalize a peace settlement. This new role for Turkey in Afghan peace process comes as a surprise for many, given a rather unsupportive stance of Joe Biden towards Turkey in his election campaign. The Biden administration is asking the UN to convene a meeting of the foreign ministers from China, Russia, Pakistan, Iran, India and the US to develop a unified approach to peace in Afghanistan.
The prospective deal sounds very promising for the Afghanistan problem but there are elements to it that might be unacceptable either to Kabul or Taliban or both as both are unwilling to share power between them. Moreover, it is highly skeptical that the Taliban will accept any dilution of the strict Islamic system that it wants to enforce. Hence, the initiative may not end the two-decade old US military intervention in Afghanistan but it is being viewed as a significant transition in Afghanistan’s violent contemporary history that has played a major role in South Asia’s regional and international relations.
Domicile based preferential policy of Haryana
This week, Haryana has legislated the domicile based reservation policy preferring residents of their state. The Employment of Local Candidates Bill 2020, passed by the Haryana assembly in November last year and now it has received the assent of the governor. The BJP-led coalition government had moved this bill as it was a poll promise of its alliance partner, the Jannayak Janata Party. And in the light of the farmers’ agitation, in which a lot of pressure was mounted on JJP to withdraw from the coalition, the assent to the legislation by the governor is being seen as a move to keep the alliance intact. This new law provides 75% of reservations in the private sector to job seekers from the state with a specified salary reserved for the local youth. This is applicable for all jobs with a monthly payment of up to Rs 50,000 and will be in effect for ten years and applies to all the Companies, Societies, Trusts, Limited Liability Partnership firms, Partnership Firm and any person employing ten or more persons and an entity.
The data from the Centre for Monitoring Indian Economy (CMIE) showed that the unemployment rate in Haryana was at 26.4 percent as of February 2021, which is the highest in the country. The state government claims that this bill will provide tremendous benefits to the private employers directly or indirectly through qualified and trained local force and enhance the efficacy of industry. It will discourage the influx of migrants seeking low-paid jobs. But on the other hand hiring experts said that implementation of such a scheme is likely to have a ripple effect in other states and lead to a rise in unemployment. Moreover Haryana is the manufacturing hub for sectors such as consumer electronics and automobiles. Further, IT sector firms and startups have a large presence in that region and will be worst hit by this sudden change in policy.
Such a mandate to provide 75% of new jobs to local youth in private establishments has raised three potential constitutional concerns. Firstly, a state law providing for reservation in private establishments based on a residence may not be constitutional as this is a power that is vested in the Parliament and not in any state legislature. Secondly, reservation to the extent of 75% may violate the guidelines laid down by the Supreme Court as it was decided earlier that a 50% reservation limit should not be breached. Thirdly, reservation in private institutions may violate their right to carry on an occupation or business freely.
Legal experts have described this law as unconstitutional as it creates a “policy of exclusion” to exclude the other people of the country. If every state adopts this policy then migrants can’t get a job or education anywhere else other than the state they were born in which violates their constitutional rights. This bill is constitutionally indefensible as the Constitution prohibits discrimination based on place of birth. The right to move freely in the country and reside and settle in any part of it, the right to carry out any trade or profession, is all established rights. Moreover, Haryana is not only the first state to adopt this policy as some other states have also enacted laws to provide reservation for their local youth in the private sector. These states include Maharashtra (up to 80% quota), Karnataka (75%), Andhra Pradesh (75%) and Madhya Pradesh (70%). However, many of these state laws have been challenged in court and, therefore, not implemented.
Lastly, it is often argued that giving preferential treatment to the residents of a state will help in the rightful allocation of the resources of the state and would encourage people to work within the boundaries of their state and also seen as a way to stop the migration of people from backward states to metropolitans, thereby reducing the burden on such cities. But such a kind of parochialism encourages regionalism and threatens the unity of the nation. The move to give reservation to the candidates born in the state itself runs against the spirit of constitutional equality and fraternity. It is more likely that such politically motivated steps would be overturned by the judiciary as has been done several times in the past. Also, the government is not an employment guaranteeing agency rather an authority that should create an environment through its policies that minimize inequalities in income, status, facilities and opportunities.
10,113 companies voluntarily shuttered operations during Apr 2020-Feb 2021 period
Considering the past activities of the COVID-19 virus in consideration and the crash of the economy due to disruption of all activities by the lockdown, the latest data available with the Ministry of Corporate Affairs (MCA) showed that a total of 10,113 companies were struck off under Section 248(2) of the Companies Act, 2013, in the current financial year till February specifically on a voluntary basis. Section 248(2) implies that the companies had shut their businesses voluntarily and not due to any penal action. The ministry administers the Act and maintains the registry of companies on the basis of documents and applications filed.
In a written reply to the Lok Sabha on Monday, Minister of State for Corporate Affairs Anurag Singh Thakur said the ministry does not maintain any record of the companies that have gone out of business. “A total of 10,113 companies during the year 2020-21 (from the month of April 2020 to February 2021) have been struck off under section 248(2) of the Act. MCA has not run any drive to strike off companies suo-moto during 2020-21,” he said.
As per the ministry’s data, a total of 2,394 companies were struck off in Delhi while the number stood at 1,936 companies in Uttar Pradesh. Tamil Nadu and Maharashtra saw a shutting down of 1,322 companies and 1,279 companies, respectively, during the April 2020-February 2021 period. The data was provided in response to a query by a member seeking state-wise details of the number of registered companies that have gone out of business during the year 2020-21.
In the wake of the pandemic, the central government had imposed a nationwide lockdown in late March 2020 to curb the spreading of coronavirus infections and the restrictions began to be eased in May that year. In the latter months, many states had also imposed restrictions on movements amid the number of spiraling coronavirus cases. With so many companies shutting down, it is obvious that there should be a visible impact on the employment rate and economy and an immediate recovery cannot be expected so soon.
CPSE assets sale to bring about a paradigm shift in infra
Finance Minister Nirmala Sitharaman on 9th March said monetization of CPSE assets is based on the principle of value creation for the government and investors and would bring about a paradigm shift in infrastructure augmentation and maintenance. Chairing the National Workshop with the states/UTs on Asset Monetisation organized by Niti Aayog, the minister sought the collaboration of states for the holistic development of infrastructure. She said India can become a USD 5 trillion economy, while striking the right balance between fiscal imperatives and socio-economic welfare, through active collaboration between the public and private sector.
“Asset Monetisation needs to be viewed not just as a funding mechanism, but as an overall strategy for bringing about a paradigm shift in infrastructure augmentation and maintenance,” she added. Sitharaman also underlined the government’s resolve for value creation and improvement in the productivity of brownfield infrastructure assets via innovative instruments. Observing that asset monetization is based on the principle of Value Creation for Government and investors, she said, “Our vision for Infrastructure is ultimately of, for and by our States. Without whose collaboration, holistic development of infrastructure is neither feasible nor impactful”.
Prime Minister Narendra Modi had last month said that 100 under-utilized or unutilized assets with public sector units (PSUs), such as those in the oil and gas and power sectors, will be monetized, creating Rs 2.5 lakh crore of investment opportunities. Sitharaman in her 2021-22 Budget speech had said monetizing operating public infrastructure assets is a very important financing option for new infrastructure construction. “A National Monetisation Pipeline of potential brownfield infrastructure assets will be launched. An asset monetization dashboard will also be created for tracking the progress and to provide visibility to investors,” she had said.
After a devastating year for the economy, it is imperative that the government ensures its assets are rightly balanced at all times helping maintain the balance in the private-public sector and at the same time manage its own pockets for efficient working of the economy.
There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Eighth Edition we are covering the following news:
Second phase of Covid-19 vaccination drive in India
India has started the second phase of Covid-19 vaccination drive that will cover 10 crore people across the country from Monday. Government has started the vaccination of people above 60 years and individuals above 45 years of age having comorbidities against coronavirus. Prime Minister Narendra Modi also joined the elite club of global leaders who had publicly received the Covid-19 vaccine and urged people to come out for vaccination in order to fight the deadly pandemic as he got vaccinated on the first day of the second phase of vaccination drive in India.
People with the presence of one of the 20 comorbidities, including diabetes and heart failure with hospital admission in the past one year, have been prioritised in this phase of the COVID-19 vaccination drive.
The simplified system of certifying people with these comorbidities within the 45-59 years age group was explained to the States Health Departments. The co-morbidities which have been prioritised include diabetes, heart failure with hospital admission in the past one year, post-cardiac transplant, moderate or severe valvular heart disease, end-stage kidney disease on haemodialysis, a severe respiratory disease with hospitalisation in the last two years, primary immunodeficiency diseases/HIV infection and angina and hypertension/diabetes on treatment.
An Advanced self-registration process is used under which the beneficiaries will be able to self-register in advance by downloading the CO-Win 2.0 portal and through other IT applications such as Arogya Setu etc. This app shows the government and private hospitals serving as COVID vaccination centres with the date and time of the available schedules. The beneficiary would be able to choose the CVC of his/her choice and book an appointment for vaccination.
According to the ministry,6.44 lakh people booked appointments on the Co-Win portal on the first day of the second phase to get vaccinated, and 25 lakh potential beneficiaries registered on the portal on the same day, out of which 50,000 were healthcare and frontline workers. So far, 1.47 crore vaccines have been administered in India.
Attorney General Refused to give Consent to Contempt Proceedings Against Ex CJI
The Attorney General for India, K.K.Venugopal, has declined his consent to initiate proceedings for criminal contempt against the nominated member of Rajya Sabha, Ranjan Gogoi, for the interview he gave at the India Today conclave on February 12. Venugopal agreed with transparency activist Saket Gokhale, who sought his consent, that Gogoi initially made some very strong statements about the judiciary and the Supreme Court of India during the event. But he added that the statements “apparently reflect his deep frustration with the ills that undoubtedly beset the justice delivery system”. Venugopal, who claimed that he watched the entirety of Gogoi’s interview, was of the view that what he said was for the good of the institution, and would not in any manner scandalise the court or lower its authority in the eyes of the public.
In the recent Prashant Bhushan case, Venugopal told the Supreme Court that nine former judges of the Supreme Court had said that there was corruption in higher judiciary and that seven of them made the remark immediately after their retirement. That the court did not use its suo motu powers to question those former judges was cited by Venugopal to justify dropping of the contempt of court case against Bhushan. By not agreeing with Venugopal, the court only confirmed its class bias. Venugopal’s consent for initiating cases against comedian Kunal Kamra and artist Rachita Taneja, while declining consent in the case of Gogoi, is being seen as a hidden understanding and appreciation of a class bias.
Under the Contempt of Courts Act and the pertinent rules, the Supreme Court can initiate criminal contempt proceedings either on its own motion or upon a petition filed by a private individual after obtaining consent of the attorney general or the solicitor general.
New Guidelines for Social Media, OTT platforms
As the influence of social media and OTT platforms in providing information to public is increasing, the govt. has unveiled its plan to enact greater oversight over social media platforms like Twitter and Facebook and also bring digital media and streaming platforms into a stricter regulatory net called the ‘Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules 2021’. The proposed changes may go down as the largest shake-up in the technology regulation space in nearly a decade. The new rules will require big social media companies to take down unlawful content within a specific time frame of being served either by a court order or notice of an appropriate government agency. The rules also carve out a separate category for sexual content under which an intermediary shall, within 24 hours, remove the offending content. These will come into effect the day these are notified for the most applicable entities, although a 3-month window would be given to significant social media intermediaries. The rules aim at tracking first originator by making it mandatory for significant social media messaging intermediaries like Whatsapp to enable the identification of “first originator” of the information to target people threatening the sovereignty and integrity of the country, the security of the state, friendly relations with foreign states, or public order or those committing offences relating to the above or in relation with rape, sexually explicit material or child sexual abuse material punishable with imprisonment for a term not less than five years. This move is aimed at tracking down people who use Whatsapp or Signal to spread fake news or carry out illegal activities, but at the same time, cyber experts fear that it may require companies to break their end-to-end encryption protocols and pave the way for a surveillance state.
The changes further include a ‘Code of Ethics and Procedure and Safeguards in Relation to Digital/ Online Media’. The rules under this code will apply to everyone from online news and digital media entities to OTT platforms like Netflix and Amazon Prime. Publishers of news on digital media will be required to observe ‘Norms of Journalistic Conduct of the Press Council of India and the Programme Code under the Cable Television Networks Regulation Act’ which is needed to provide a level playing field between the offline and digital media. To ensure adherence to the Code of Ethics, the govt. envisages the establishment of three- tier structure under which user grievances can be addressed through self-regulation and oversight. Although, the motive of regulating the digital content is welcomed by digital media houses, there have been concerns about the privacy of people and the cumbersome dispute redressal system involving bureaucratic controls which can threaten the freedom of press and free speech in the country.
4G Spectrum Auction ends
the govt. has completed the much awaited spectrum auction for 4G airwaves in a two-day event generating proceeds much higher than those estimated beforehand. The last spectrum auctions were held in 2016, when the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore. Although the govt. managed to sell only 965 MHz or about 40% of the spectrum that was put up for sale then and the total value of bids received was just Rs 65,789 crore, the need for a new spectrum auction had arisen because the validity of the airwaves bought by companies is set to expire in 2021. The govt. wrapped up an auction for fourth-generation or 4G airwaves generating Rs 77,815 crore in proceeds or about a fifth of spectrum value put on sale. It, however, claimed that the auction was a success as demand far exceeded its modest expectations. Reliance Jio Infocomm Ltd, India’s largest telco, emerged as the top bidder, cornering roughly three-fourths of the spectrum sold in two-day event. It has acquired 488.35 MHz of airwaves across three bands 800 MHz, 1800 MHz and 2300 MHz worth Rs 57,122.65 crore which is much higher than the industry estimates. Jio has about 98.8 MHz of spectrum expiring this year for which it was expected to shell out Rs 23,863.8 crore. Similarly, it was expected that Airtel would largely renew the spectrum in 900 MHz and 1800 MHz that’s due to expire this year, and its total outgo would be around Rs 13,500 crore. However, Airtel went a step ahead and acquired spectrum in 800 MHz, 2100 MHz and 2300 MHz as well worth Rs 18,699 crore. Vodafone, on the other hand, was modest by acquiring airwaves of just 11.9 MHz of spectrum for Rs 1,993.4 crore-much lower than the industry estimates. Telecos need to pay upfront 25% of the spectrum won in the 700 MHz, 800 MHz and 900 MHz and 50 % of the rest of the bands. The rest is to be paid in 16 annual installments after a two-year moratorium. According to DOT, the payment is to be made in 10 days post the issue of demand notice which is expected to be released within the next 7-10 days. The govt. will, however, just get Rs 19,000-20,000 crore in the year upto 31st march from the latest sale as auction rules allow operators to stagger payments. Still, the money will be crucial for the govt, as it stares a record fiscal deficit of 9.5% this year. Spectrum Usage Charges (SUC) for the spectrum acquired in this auction will be payable at the rate of 3% of Adjusted Gross Revenue (AGR) of the license, excluding revenue from wireline services.
Besides, it has also been told that 5G spectrum will be rolled out by the end of 2021 but not on a pan-India basis and only in select areas where the demand would justify the capex.
India-Pakistan jointly announce maintenance of ceasefire agreement
In an unexpected shift from geo-political tensions, India and Pakistan jointly announced that both the rival nations would cease firing across their shared border on either side of the Line of Control (LoC). The announcement came as a surprise to many as the military officials of both nations agreed to a cease-fire beginning from midnight of February 24-25, 2021. This step is the first in over almost 20 years to ease border tensions and a significant one considering that both nations gave a joint statement.
However, people following geopolitics had a decent bit of idea that something of this sort was about to happen. Beginning from Pakistan Army Chief Bajwa’s comment on “peace in all direction” to India allowing Pakistan PM Imran Khan to use India’s airspace for his Sri Lanka visit, signs were there for around a month.
The ceasefire is particularly important as several troops from both ends are regularly involved in war-like situations causing heavy damage to life and property.
One might think as to why Pakistan decided to review its stance against India. Beginning from the Kashmir issue, Pakistan has turned slightly soft understanding that the revocation of special status has taken place, life is gradually turning to normal in the union territories and only dialogue will lead to the solution. Secondly, Pakistan need vaccines to fight Covid-19 of which India can be a significant supplier considering it has already extended millions of doses to other neighbouring countries in the subcontinent.
The most substantial concern that experts note here is whether the announcement would stand or not? And if yes, then for how long? It’s not the first time that both nations have decided to cease firing.
Experts also believe this decision is not one taken merely by the military officials and it has to be backed by political support in one form or the other. A joint statement also points to the fact that the backchannel process was ongoing for several months possibly.
The announcement also comes as a relief to India as it has eased its border tensions with both Pakistan and China with the ongoing disengagement process in Ladakh. It relieves India of a two-front war with its neighbours during the ongoing pandemic that has seen a slight spike in the past couple of weeks.
US bombs facilities in Syria in retaliation
The United States government on Thursday launched airstrikes in Syria near the Syria-Iraq border following an order from President Joe Biden. This, therefore, became the 1st airstrike under Joe Biden’s presidency of over 42 days. According to the US, the airstrikes targeted facilities in the Al Bukamal region of Syria that had two allegedly Iran backed militias, namely Kait’ib Sayyid al-Shuhada (KSS) and Kait’ib Hezbollah (KH). The White House defended the airstrikes saying it would reduce the future risk of additional attacks in the coming weeks. As per initial reports, several fighters of the Iraqi armed group were wounded and at least 22 fighters were killed.
According to the Pentagon, the strikes were executed in retaliation to attacks on US interests at Erbil Airport in northern Iraq where a rocket attack killed a civilian contractor, wounded a U.S. service member and other coalition troops. The US forces were sent to the bordering region of Iraq and Syria by the President after his oath on 20th January 2021 to maintain peace in the region.
The direct impact of the airstrikes was seen in share markets worldwide that collapsed including the Indian market where benchmark index BSE Sensex fell around 1900 points i.e. 3.8% in intra-day trading. However, additional reasons of increasing bond yields and growing concern of pandemic in the past week also led to the fell.
The airstrikes deliver clear signals throughout the world that although Joe Biden would not be as aggressive as Donald Trump, he would not hesitate to come forward and launch strikes if it’s in the interest of the United States and American coalition personnel. It also creates an image of Joe Biden as a strong President who might launch attacks if required. There was a mild response from foreign ministers of Iran and Syria who spoke to each other and said the West should adhere to the U.N. Security Council resolution on Syria and that bombings on random places should be avoided.
The airstrikes would however have no impact on the Iran nuclear deal which is thought to be reinstated in the upcoming months. Iran is currently facing heavy sanctions from the past few years imposed by former President Donald Trump.
There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Seventh Edition we are covering the following news:
Govt inviting suggestions on the Blue Economy Policy
The ‘Blue Economy’ is an emerging concept that encourages better stewardship of our ocean or ‘blue’ resources. The Ministry of Earth Sciences (MoES) has rolled out the draft blue economy policy in the public domain, inviting suggestions and inputs from various stakeholders, including industry, NGOs, academia and citizens. It is in line with the Government of India’s Vision of New India by 2030. The draft, prepared by the economic advisory council to the Prime Minister outlines the vision and strategy that can be adopted by the government to utilise the plethora of oceanic resources available in the country. It aims to enhance the contribution of the blue economy to India’s GDP by around 4%, improve the lives of coastal communities, preserve marine biodiversity, and maintain the national security of marine areas and resources. Let’s see the essence of this policy.
The blue economy occupies a vital potential position in India’s economic growth.
It could well be the next multiplier of GDP and well-being, provided sustainability and socio-economic welfare are kept centre-stage. It emphasizes policies across several key sectors to achieve holistic growth of India’s economy. It aids the production of goods and services that have clear linkages with economic growth, environmental sustainability, and national security. It is understood as a subset of the national economy comprising an entire ocean resources system and human-made economic infrastructure in marine, maritime, and onshore coastal zones within the country’s legal jurisdiction.
Therefore, India’s draft blue economy policy is envisaged as a crucial framework towards unlocking the country’s potential for economic growth and welfare. Most importantly, it is the 17 sustainable development goal (SDG), also known as the Global Goal adopted by the United Nations member states including India. SDG 14 seeks to conserve and sustainably use the oceans, seas and marine resources for sustainable development. Several countries have undertaken initiatives to harness their blue economy. For instance, Australia, Brazil, the United Kingdom, United States, Russia, and Norway have developed dedicated national ocean policies with measurable outcomes and budgetary provisions. Canada and Australia have enacted legislation and established hierarchical institutions at federal and state levels to ensure progress and monitoring of their blue economy targets. With a draft blue economy policy framework of its own, India is now all set to harness the vast potential of its ocean resources.
CBDT to keep double tax avoidance, international practices in view on NRI tax residency
The Central Board of Direct Taxes (CBDT) is evaluating a number of facets together with double taxation avoidance, greatest practices by different nations, and tax treaties, earlier than arriving at a view on figuring out tax residency for non-resident Indians or NRIs having overstayed in India in FY 21. They want to make sure that it should not be the case that NRIs income becomes tax-free in India as well as their home country being a loss for both at the same time.
Measures or instructions taken by nations such because the US, UK, and others would even have to be thought-about such that the view India takes is in line with international friends. Several nations in Europe and the UK have initiated second or third waves of lockdowns due to resurgence in Covid 19 circumstances at the same time as vaccination drives have begun. CBDT also has to look at tax treaties before formalizing a view. However, the most important problem the Board is going through is an assortment of knowledge of the variety of folks having bought impacted by overstay and lack of readability of guidelines. The officials added that whereas international journey for many a part of FY 21 was barred and opened up later on in a restricted method, the precise quantity of people that could have stayed greater than 182 days could be robust to confirm. Data could be important for figuring out the size of reduction that the Board wants to present, and therefore formulate its response to the Supreme Court. The SC has given CBDT three weeks to determine on reduction to be granted to NRIs on the fee of revenue tax for the continued monetary year. It is listening to a petition filed by an NRI who had stayed more than 182 days in India due to the lockdown and subsequently could have to pay tax in India on his world revenue. The Board had issued a clarification in May final year for FY20, on the facet of residency beneath Section 6 of the I-T Act whereby numerous relaxations have been offered to NRIs who couldn’t journey again to their nation of labor or residence due to the lockdown. CBDT has not issued any round for fee of revenue tax by NRIs staying past 182 days in India due to the pandemic in FY 21.
A thorough study should ensure that these people don’t escape a tax liability from both nations thus adding some part to both countries depending on various facts of residence and the various treaties but even if a small proportion added, the government revenue will increase and at the same time justice served.
SEBI eases norms for IPO of large entities
The most unexpected announcement at Budget was the proposed disinvestment of Life Insurance Corporation of India (LIC) as the government proposed to sell a part of its holding in LIC by way of an IPO. They are hoping that the listing would bring discipline while allowing retail investors to participate in wealth creation. But the plan to sell the stake has been marked by complications given the sheer size of the state-run company.
To put things in perspective, just a 10 per cent share sale to the public is pegged to be at least Rs 1 lakh crore, which will be tough for the market to absorb. India’s largest financial institution with assets of over Rs 32 lakh crore facing hurdles before the IPO. To deal with it, market regulator SEBI has relaxed the norms to make the listing process easier and smooth for large entities like LIC, making it easier for the government to sell a part of its stake through IPO.
As per the new norms now, for any company with a post-issue market capital of above Rs 1 lakh crore, the IPO size will have to be Rs 10,000 crore plus 5 percent of the incremental market capitalisation amount. It means large companies can now divest a minimum of 5 per cent in the IPO, instead of 10 per cent. Further, they will get five years, instead of three, to raise the public float to 25 per cent. The Central government will hold at least 75% in LIC for the first five years post the IPO, and subsequently, hold at least 51% in the insurer at all times after five years of the proposed IPO. This move eases the minimum offer and public holding norms will allow the government more time to abide by rules and pave the way for the much-awaited mega float of Life Insurance Corporation (LIC). This would also encourage large firms to opt for listing.
The government is betting on diluting its stake in state-run LIC via an IPO in the coming fiscal in an attempt to garner enough non-tax revenues to narrow the country’s fiscal deficit. LIC, which is preparing for its IPO and is currently undergoing an evaluation process by actuarial firms, will be the biggest beneficiary of this relaxation by Sebi.
India begins probe to continue anti-dumping duty on some steel imports from China
India has begun an investigation on the need to continue an anti-dumping duty on the imports of certain seamless tubes, pipes, hollow profiles of iron and steel from China based on complaints filed by ISMT Limited and Jindal Saw Limited. The applicants have alleged that dumping of these products from China has continued even after the imposition of anti-dumping duty, and there has been a significant increase in the volume of imports. The duty on the product was first imposed in February 2017 and is set to expire on May 16 this year. As per the notification issued by the Directorate General of Trade Remedies (DGTR), there is a likelihood that such activities would continue if such duties were to expire or removed thus bringing us back to square one in our problem. The period of investigation is April 1, 2019, to September 30, 2020.
Based on the duly substantiated application of the applicants and having satisfied itself, on the basis of the prima facie evidence submitted by the domestic industry, substantiating the likelihood of continuation or recurrence of dumping and injury, DGTR had declared that it initiates a sunset review investigation.
The DGTR, the quasi-judicial investigation arm of the commerce and industry ministry, has also begun a separate sunset review anti-dumping investigation in imports of Viscose Staple Fibre from China and Indonesia based on a complaint filed by the Association of Man-Made Fibre Industry of India on behalf of Grasim Industries Limited. The duty was first imposed on July 26, 2010, and then extended. The existing duties will expire on August 7, 2021. The period of investigation for the present investigation is September 1, 2019, to October 31, 2020.
While the other country might not be very happy from such duties being charged but there seems to be no option left for us as we could either keep an outside nation happy or let our markets prosper or rather survive. As unethical as it could ever get in dumping, it is only fair for India to continue with such duties to protect its own interests first. It is hoped that the new investigation shall ensure that the duties continue if not to be increased.
The First Forum is an initiative that focuses on covering the latest happenings in a brief format. This is in lieu of the importance of knowledge about current happenings in this fast-changing world.
In the Eighty Third- Edition of The First Forum we would be covering the following topics:
2. Science and Technology
There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Sixth Edition we are covering the following news:
Chief Minister V Narayanasamy’s government plunged into a crisis with resignation of two more MLAs from the party and have pushed the Congress-DMK government below the majority mark in the Union Territory. At present, the Congress government has the support of 14 MLAs, while the opposition also has 14 MLAs including the three nominated MLAs of the BJP in the house which has 28 MLAs at present. The peculiar nature of Puducherry politics and the size of each assembly seat explains what makes it easier for legislators to shift their loyalties in this territory.
The latest developments are similar to the strategies that BJP had been applying in other states like Kerala and Tamil Nadu, ahead of the upcoming polls. BJP has been the beneficiary in the latest Puducherry crisis too like the earlier ones. Two MLAs that resigned have already joined BJP and one more is soon going to join. However, Narayansamy claimed that his government continues to enjoy the majority. The opposition in Puducherry said they would be meeting the governor soon seeking action if the Congress government refused to step down.
The entry of Kiran Bedi’s as Lt. Governor has been a factor to shake the status quo in Puducherry. Narayanasamy’s running feud with Kiran Bedi all through his stint as chief minister. He accused the L-G of overstepping her jurisdiction on several occasions. The fact that Bedi would summon ministers and officials during her surprise visits and issue directions did not go down well with the CM. The turf war deteriorated to such an extent that the CM even went to the extent of sitting on a dharna outside Raj Niwas.
Hours after the MLAs resigned, Bedi was replaced as the Lieutenant Governor of Puducherry, with the Telangana governor being given the additional charge of the UT. The reason is linked to the assembly polls due by May. Sources in the BJP say with this move just before the Puducherry election, the Congress has been robbed of its single biggest election issue. The Congress accuses Kiran Bedi of blocking every move of its government and putting up hurdles in its way. But now with her out of the way, the BJP can give a fight to Congress and win. But V Narayanasamy said that it is a victory in their fight for secularism. It is a victory for the people of Puducherry who are celebrating the removal of Kiran Bedi.
As for the only Congress government in South India right now, the future remains uncertain, multiple sources have said either they will manage the majority using the same resources used by BJP to weaken them or they will continue to rule the state until the government is dissolved by Delhi.
Indian alternative to Twitter-Koo
The government had asked Twitter to remove some accounts and controversial hashtag that spoke of an impending ‘genocide’ of farmers for allegedly promoting misinformation about the protests, adversely affecting public order. But the micro-blogging site reinstated the accounts and tweets on its own and later refused to go back on the decision, contending that it found no violation of its policy and it would violate the free speech of the people. Responding to the ongoing free speech debate between Twitter and the Indian government, it said that India has a robust mechanism for protection of freedom of speech and expression as this fundamental right is not absolute and it is subject to reasonable restrictions as mentioned in Article 19 (2) of the Constitution of India. It further said that non-compliance with government policies would invite penal action against Twitter. The stakes of Twitter are high in a country of 1.3 billion where it has millions of users and is ardently used by the Prime Minister, his cabinet ministers and other leaders to communicate with the public across the globe.
But when the largest microblogging site in the world has not responded favourably to the Government’s terms, the Indian Government then pushed an alternative in the market against Twitter. Koo app, an Indian alternative to Twitter, is creating a lot of buzzes lately. Recording more than 3 million downloads in just 24 hours, it has suddenly become the talk of the town with many big-ticket politicians and celebrities joining the platform in the wake of the government’s ongoing stand-off with Twitter. Most importantly, Koo has been recognised in a prestigious competition held by the Indian government itself under the Made-In-India initiative in August 2020 and won the Atma Nirbhar Bharat App Innovate Challenge which brought it under the limelight.
This move was taken to curb the way the platform Twitter allowed fake, unverified, anonymous content that raised doubts about its commitment to transparency and healthy conversation on that platform. Hence, Indian politicians are excited about the newly introduced Indian version of a microblogging site and are inviting everybody else to join the platform. But the only concern is using the Indian version of the microblogging site is being cut off from the rest of the world because the domestic audience would shift to this alternative app and the Indian audience may not be able to connect with the global audience in case they do not use other bigger microblogging sites.
Govt shortlists four mid-sized state-run banks for privatization
India’s government has shortlisted four mid-sized state-run banks for privatization, under a new push to sell state assets and shore up government revenues. Privatization of the banking sector, which is dominated by state-run behemoths with hundreds of thousands of employees, is politically risky because it could put jobs at risk. The four banks on the shortlist are Bank of Maharashtra, Bank of India, Indian Overseas Bank, and the Central Bank of India. Two of those banks will be selected for sale in the 2021-2022 financial year. The government is considering mid-sized to small banks for its first round of privatization to test the waters. In the coming years, it could also look at some of the country’s bigger banks. The government, however, will continue to hold a majority stake in India’s largest lender State Bank of India, which is seen as a ‘strategic bank’ for implementing initiatives such as expanding rural credit.
India’s deepest economic contraction on record caused by the pandemic is driving the push for bolder reforms. New Delhi also wants to overhaul a banking sector reeling under a heavy load of non-performing assets, which are likely to rise further once banks are allowed to categorize loans that soured during the pandemic as bad. Bank of India has a workforce of about 50,000 and Central Bank of India has 33,000 staff, while Indian Overseas Bank employs 26,000 and Bank of Maharashtra has about 13,000 employees, according to estimates from bank unions.
The government hopes that the Reserve Bank of India, the country’s banking regulator, will soon ease lending restrictions on Indian Overseas Bank after an improvement in the lender’s finances that could help its sale. Some economists said there could be a few takers for weak and small banks – saddled with bad assets – but that Modi should consider the sale of bigger banks like Punjab National Bank or Bank of Baroda. While past has proven that many times privatization helps improve the efficiency of the enterprises so it is expected that the customers can expect better service and better returns for investors both short term and long term.
China overtakes the US, becomes European Union’s biggest trading partner
China last year overtook the United States as the EU’s biggest trading partner, the EU statistics agency Eurostat said. According to news agency AFP, Britain which is no longer part of the European Union, was the third-largest trading partner for the bloc, behind China and the United States. The supremacy of China came after it suffered from the coronavirus pandemic during the first quarter but recovered vigorously with consumption even exceeding its level of a year ago at the end of 2020, AFP said. This helped drive sales of European products, particularly in the automobile and luxury goods sectors, while China’s exports to Europe benefited from strong demand for medical equipment and electronics.
The dethroning of the US comes as the EU and China are seeking to ratify a long-negotiated investment deal that would give European companies better access to the Chinese market. Eurostat said the trade volume with China reached 586 billion euros ($711 billion) in 2020, compared to 555 billion euros ($673 billion) for the US. The EU exports rose by 2.2 percent to 202.5 billion euros while at the same time, imports from the People’s Republic of China increased by 5.6 percent to 383.5 billion euros. EU exports to the United States fell by 13.2 percent in the same period and imports by 8.2 percent. In addition to the Covid-19 crisis, transatlantic trade has been impaired by a series of tit-for-tat feuds that have resulted in tariffs being on steel and products such as French champagne or Harley-Davidson motorcycles. Eurostat said trade with the UK plummeted in 2020, the year Britain officially left the bloc, though it was in a transition period to blunt the effects of Brexit until December 31. EU exports to the UK fell by 13.2 percent, while imports from across the channel dropped by 13.9 percent. While the Covid-19 can be given a reason to have had a rigged response on the entire global economy, but with the improving global condition different regions have different recovery rates so we can expect improving results everywhere apart from the export affected by Brexit in the European Union.
Rising brent crude oil prices and its impact on India
The price of Brent crude crossed the $60 per barrel mark after over a year. The price of Brent Crude has risen by over 50 per cent since the end of October after prices had remained around $40 per barrel for five months. The rise in prices is because major oil-producing countries had cut oil production last year amid a sharp fall in demand due to the Covid-19 pandemic. However oil-producing countries have continued to limit production despite an increase in prices with Saud Arabia cutting its oil production by 1 million barrels per day to strengthen crude oil prices. Expectations of strong improvements in demand with the global rollout of the Covid-19 vaccine have also put upward pressure on crude oil prices. Let’s see how this will impact India?
Rising crude prices may have a cascading impact on petrol and diesel prices in India, which have now hit a new record high which will further increase the fuel bill of the consumers. The increase in oil prices will increase the country’s import bill, and further, disturb its current account deficit (excess of imports of goods and services over exports). India imports 80 per cent of its crude oil requirements and the average price of Indian basket of crude oil has already risen to $54.8 barrel for January. This could also increase inflationary pressures that have been building up over the past few months and will decrease the space for the monetary policy committee to ease policy rates further. The government had hiked central taxes on petrol and diesel in 2020 to boost revenues amid lower economic activity. The increase in taxes had prevented consumers from getting the benefit of low fuel prices as international prices crashed during the first quarter of this fiscal and are now contributing to record high prices as international prices have recovered. Petrol and diesel prices in India are pegged to the international prices of the two products. If oil prices continue to increase like this, the government shall be forced to cut taxes on petroleum and diesel which may cause loss of revenue and deteriorate its fiscal balance. However, there could be a positive side to the oil price hike as the value of Indian oil and gas companies could be positively impacted. The government could get greater value from disinvestment in Bharat Petroleum Corporation Limited and remittances from the Persian Gulf could increase.