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Privatizing PSBs

This article is based on “The economic rationale of bank nationalisation” which was published in The Hindusthan Times on 10/04/2021. It...

12 Apr 2021 Mobilization of Resources
Potential of Lighthouses for Tourism: Sagarmala

Why in News The Union Ministry of Ports, Shipping and Waterways seeks to develop 65 lighthouses on public-private-partnership mode. Odisha’s...

12 Apr 2021 Mobilization of Resources
Fall in International Crude Oil Prices

Why in News Recent fall in international crude oil prices has reversed a six-month trend of rising auto fuel prices which saw the prices of petrol...

09 Apr 2021 Mobilization of Resources
Decline in Forex Reserves

Why in News According to the recent data from the Reserve Bank of India (RBI), India’s Foreign Exchange (Forex) reserves declined by USD 2.986...

05 Apr 2021 Mobilization of Resources
Oil Import Contracts

Why in News Amid tensions with Saudi Arabia over oil production cuts, the Indian government has asked its state refiners (IOC, BPCL and HPCL) to...

03 Apr 2021 Mobilization of Resources
India’s Merchandise Trade Deficit

Why in News Preliminary data released by the government showed that India's trade deficit in goods widened to USD 14.11 billion in March 2021 from...

03 Apr 2021 Mobilization of Resources
New Committee to Screen New Bank Licences

Why in News The Reserve Bank of India (RBI) has set up a five-member Standing External Advisory Committee (SEAC), headed by former RBI Deputy...

23 Mar 2021 Mobilization of Resources
Supplementary Demand for Grants

Why in News The Lok Sabha has passed supplementary demand for grants for the second batch (2020-2021). Key Points About: It is needed when the...

20 Mar 2021 Mobilization of Resources
Pradhan Mantri Swasthya Suraksha Nidhi

Why in News The Union Cabinet has approved the Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN) as a single non-lapsable reserve fund for Health from...

11 Mar 2021 Mobilization of Resources
Rationalisation of Railway Fares

Why in News The Parliamentary Standing Committee on Railways has suggested rationalisation of both freight and passenger fares. Key...

10 Mar 2021 Mobilization of Resources
New Umbrella Entity for Payment Systems

Why in News The private companies have shown interest in setting up New Umbrella Entities (NUEs) for payment systems - an idea floated by the...

09 Mar 2021 Mobilization of Resources
Amendment Of Insurance Ombudsman Rules, 2017

Why in News Recently, the Union government amended the Insurance Ombudsman Rules, 2017, bringing insurance brokers within the ambit of the Insurance...

05 Mar 2021 Mobilization of Resources
PLI Scheme for IT Hardware and Pharmaceuticals

Why in News Recently, the Union Cabinet has cleared Production-Linked incentive (PLI) schemes for pharmaceuticals and IT hardware, including...

26 Feb 2021 Mobilization of Resources
National Coal Index

Why in News Recently, the Ministry of Coal has started commercial auction of coal mines on a revenue share basis using the National Coal Index...

12 Feb 2021 Mobilization of Resources
Privatisation of Banks

Why in News The Union Budget 2021 has announced the privatisation of two public sector banks and one general insurance company in the upcoming...

11 Feb 2021 Mobilization of Resources
Impact of Crude Oil Price Hike

Why in News Recently, the price of Brent crude crossed the USD 60 per barrel mark after over a year. The rise in prices is because of production...

11 Feb 2021 Mobilization of Resources
Infrastructure Push

This article is based on “Infrastructure push now, fiscal consolidation later” which was published in The Hindu on 08/02/2021. It talks...

08 Feb 2021 Mobilization of Resources
Increased Farm Exports

Why in News According to the Ministry of Commerce and Industry, farm exports have registered 9.8% growth for the period of April-December...

05 Feb 2021 Mobilization of Resources
Fiscal Activism

This article is based on “It’s goodbye to fiscal orthodoxy” which was published in The Hindu on 03/02/2021. It talks about...

03 Feb 2021 Mobilization of Resources
Increased Fiscal Deficit

Why in News The government’s fiscal deficit has increased to Rs. 11.58 lakh crore or 145.5% of the Budget Estimate (BE) at the end of December...

01 Feb 2021 Mobilization of Resources

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		'title' => 'Privatizing PSBs',
		'description' => '<p>This article is based on <a href="https://www.hindustantimes.com/opinion/the-economic-rationale-of-bank-nationalisation-101618049387827.html" target="_blank" rel="noopener">&ldquo;The economic rationale of bank nationalisation&rdquo;</a> which was published in The Hindusthan Times on 10/04/2021. It talks about the pros and cons of PSBs remaining nationalized.</p>
<p>Banking plays a very important role and is the key driving force in any economy. However, in recent years, the Indian banking sector has witnessed multiple Public Sector Banks (PSBs) getting scammed and faced huge losses due to high Non-Performing Assets (NPAs).</p>
<p>Due to this, many economists have suggested the government privatizing PSBs and now the RBI and the government are contemplating privatizing banks in the sector.</p>
<p>However, before taking any decision, the government should actively consider the pros and cons of PSBs remaining nationalized.</p>
<h3>Arguments for Banks Remaining Nationalised</h3>
<ul style="list-style-type: square;">
<li><strong>Democratization of Banking:</strong> Banks in India were nationalized for the first time in 1969. Before which they had been lending 67% of their funds to industry and virtually nothing to agriculture. <br />
<ul style="list-style-type: square;">
<li>Also, the commercial banks couldn&rsquo;t lend money to farmers because they were only present in less than 1% of villages.</li>
<li>Farmers were unable to get bank loans just when the Green Revolution was getting underway and they needed credit to buy the expensive inputs required to increase output.</li>
<li>Thus, nationalizing banks helped in the democratization of banking services of the masses.</li>
</ul>
</li>
<li><strong>Undermining Social Welfare:</strong> Public banks open branches, ATMs, banking facilities, etc even in the non-profitable rural areas of India or the poorer sides where the possibility of getting big deposits or making money is less. <br />
<ul style="list-style-type: circle;">
<li>However, Private banks are not inclined to do so and they may prefer opening such facilities mostly in megacities or urban areas.</li>
<li>If the corporate sector is allowed to dominate banking again, profit will become the prime motive rather than the desire to serve the public.</li>
</ul>
</li>
<li><strong>International Precedent:</strong> Most East Asian success stories have been underpinned by financial systems effectively controlled by governments. <br />
<ul style="list-style-type: circle;">
<li>On the other hand, the governments of western countries, where banking is largely in the hands of the private sector, have had to rescue private banks from bankruptcy.</li>
</ul>
</li>
</ul>
<h3>Argument Against Banks Remaining Nationalized</h3>
<p>Privatization means selling whole or partially a government-owned company to the private sector or it simply means transferring ownership to the private sector. This step was taken as a part of a new economic policy, 1991 to liberalize India&rsquo;s economy from being a relatively closed economy.</p>
<p>However, in recent years, the following factors have been pushing the Government of India to privatize the nationalized banks.</p>
<ul style="list-style-type: square;">
<li><strong>Bulk of NPAs:</strong> The banking system is overburdened with the non-performing assets (NPAs) and the majority of which lies in the public sector banks.</li>
<li><strong>Lack of Regulatory Oversight:</strong> PSBs are dually controlled by RBI (under the <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener">RBI Act, 1934</a>) and Finance Ministry (under the <a href="/daily-updates/daily-news-editorials/co-operative-banking-in-india#:~:text=The%20banking%20related%20functions%20such,the%20Banking%20Regulation%20Act%2C%201949." target="_blank" rel="noopener">Banking Regulation Act, 1949</a>).
<ul style="list-style-type: circle;">
<li>Thus, RBI does not have all the powers over PSBs that it has over private sector banks, such as the power to revoke a banking license, merge a bank, shut down a bank, or penalize the board of directors.</li>
</ul>
</li>
<li><strong>Lack of Autonomy:</strong> Public sector bank boards are still not adequately professionalized, as the government still has a major say in board appointments.<br />
<ul style="list-style-type: circle;">
<li>This creates an issue of politicization and interference in the normal functioning of Banks.</li>
<li>This results in the practice called telephone banking, whereby the politicians ringing bank officials with instructions to lend money to their cronies.</li>
</ul>
</li>
<li><strong>Draining of Profits:</strong> Private banks are profit-driven whereas the business of PSBs is disrupted by government schemes like farm loan waivers etc.<br />
<ul style="list-style-type: circle;">
<li>In general, PSBs have to respond to public demand to finance unproductive projects.</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li><strong>Improving Governance:</strong> In order to improve the governance and management of PSBs, there is a need to implement the recommendations of the <a href="/to-the-points/paper3/merger-of-psbs" target="_blank" rel="noopener">PJ Nayak committee</a>.</li>
<li><strong>De-Risking Banks:</strong> There is a need to follow prudential norms for lending and effective resolution of NPAs. <br />
<ul style="list-style-type: circle;">
<li>In this context, the establishment of the <a href="/daily-updates/daily-news-analysis/bad-bank-1" target="_blank" rel="noopener">bad bank</a> and speedy resolution of NPAs through the <a href="/to-the-points/paper3/insolvency-and-bankruptcy-code-3" target="_blank" rel="noopener">Insolvency Bankruptcy Code</a> steps in the right direction.</li>
</ul>
</li>
<li><strong>Corporatization of PSBs</strong>: Rather than blind privatization, PSBs can be made into a corporation like Life Insurance Corporation (LIC). While maintaining government ownership, will give more autonomy to PSBs.</li>
</ul>
<h3>Conclusion</h3>
<p>Even though private sector banks have better balance sheets than PSBs, it is very important to consider that Privatization alone would not solve all of the problems faced by the sector. A better solution than privatization may well be giving PSBs autonomy to reform themselves and function free of political interference.</p>
<table border="1" style="width: 100%; border-collapse: collapse; background-color: #d3edf5; border-color: #3992ad;">
<tbody>
<tr>
<td style="width: 100%;"><em><strong>Drishti Mains Question</strong></em><br /><br />A better solution than privatization may well be giving Public Sector Banks autonomy to reform themselves and function free of political interference. Justify.</td>
</tr>
</tbody>
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		'article_id' => (int) 8125,
		'category_id' => (int) 21,
		'title' => 'Potential of Lighthouses for Tourism: Sagarmala',
		'description' => '<h3>Why in News</h3>
<p>The <strong>Union Ministry of Ports, Shipping and Waterways</strong> seeks to <strong>develop 65 lighthouses</strong> on public-private-partnership mode. <strong>Odisha&rsquo;s five lighthouses</strong> present huge potential for tourism.</p>
<ul style="list-style-type: square;">
<li>The Ministry wants to develop lighthouses as hubs of tourism under the <a href="/daily-updates/daily-news-analysis/sagarmala-seaplane-services" target="_blank" rel="noopener"><strong>Sagarmala project</strong></a>.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Five lighthouses of Odisha:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>&lsquo;False Point&rsquo; island lighthouse:</strong> It is situated off the Kendrapara coast. It is the British era lighthouse and its location close to massive <a href="/daily-updates/daily-news-analysis/coringa-mangroves#:~:text=Mangrove%20forests%20perform%20multiple%20ecological,sediment%20to%20form%20new%20land" target="_blank" rel="noopener"><strong>mangrove vegetation</strong></a> infested with <a href="/daily-updates/daily-news-analysis/world-crocodile-day" target="_blank" rel="noopener"><strong>crocodiles</strong></a> makes it an adventurous tourist place on the eastern coast.</li>
<li><strong>Paradip lighthouse:</strong> It also holds tourism potential because of its proximity to the port town and Cuttack and Bhubaneswar cities (100 km). It was commissioned in the 1980s.</li>
<li><strong>Gopalpur lighthouse:</strong> It is located in Ganjam district. If it is developed as a place of tourist interest, the <strong><a href="/daily-updates/daily-news-analysis/odisha-s-lake-conservation" target="_blank" rel="noopener">Chilika Lake</a> and the Gopalpur beach</strong> will be added attractions.</li>
<li><strong>Chandrabhaga lighthouse:</strong> It is 10 km from the world famous <a href="/to-the-points/paper1/konark-temple" target="_blank" rel="noopener"><strong>Konark temple</strong></a>. It had withstood the severity of cyclones such as the Super Cyclone (1999), Phailin (2013) and <a href="/daily-updates/daily-news-analysis/cyclone-fani" target="_blank" rel="noopener">Fani</a> (2019).</li>
<li><strong>Puri lighthouse:</strong> It is 4 km from the 12th century <a href="/daily-updates/daily-news-analysis/jagannath-temple" target="_blank" rel="noopener"><strong>Shree Jagannath Temple</strong></a>, which is also a tourist place.</li>
</ul>
</li>
<li><strong>Lighthouse Tourism in India:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Number of Lighthouses:</strong> India has as many as 189 lighthouses dotting its vast coastline including the Andaman and Nicobar Islands in the Bay of Bengal and Lakshadweep Islands in the Arabian Sea.</li>
<li><strong>Objectives for Promoting Lighthouse based Tourism:</strong><br />
<ul style="list-style-type: disc;">
<li>To <strong>enhance &amp; develop the existing lighthouses &amp; its surrounding areas</strong> into a Tourism Destination, Maritime Landmark, and Heritage Precinct.</li>
<li>To<strong> develop allied Maritime Infrastructure</strong> like National Maritime Museums &amp; National Lighthouse Museums.</li>
<li>To explore the possibilities of developing these projects under various modes including the possibilities of <strong>Public Private Partnership (PPP)</strong> by integrating commercially viable interventions at the feasible locations in order to make the project viable.</li>
</ul>
</li>
<li><strong>Advantages:</strong><br />
<ul style="list-style-type: circle;">
<li>The advantages behind creation of lighthouses into a tourism product are that it shall <strong>help in attracting tourists</strong> from across the world &amp; locally and thereby create a source of revenue for the government, <strong>employment opportunities for local people, increase in commerce</strong> through purchase and sale of goods and services, etc.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Sagarmala Project</strong></p>
<ul style="list-style-type: square;">
<li><strong>About:</strong> <br />
<ul style="list-style-type: circle;">
<li>The Sagarmala Programme was <strong>approved by the Union Cabinet in 2015</strong> which aims at holistic port infrastructure development along the 7,516-km long coastline through modernisation, mechanisation and computerisation.</li>
<li>The vision of the Sagarmala Programme is to <strong>reduce logistics cost for EXIM</strong> (Export-Import) and <strong>domestic trade</strong> with minimal infrastructure investment.</li>
<li>Sagarmala <strong>could boost India&rsquo;s merchandise exports</strong> to USD 110 billion by 2025 and create an estimated 10 million new jobs (four million in direct employment).</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1618224639_image4.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1618224639_image4.png" style="display: block; margin-left: auto; margin-right: auto;" width="753" height="295" /></a></p>
<ul style="list-style-type: square;">
<li><strong>Components of the Sagarmala Programme:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Port Modernization &amp; New Port Development:</strong> De-bottlenecking and capacity expansion of existing ports and development of new Greenfield ports.</li>
<li><strong>Port Connectivity Enhancement:</strong> Enhancing the connectivity of the ports to the hinterland, optimizing cost and time of cargo movement through multi-modal logistics solutions including domestic waterways (inland water transport and coastal shipping).</li>
<li><strong>Port-linked Industrialization:</strong> Developing port-proximate industrial clusters and Coastal Economic Zones to reduce logistics cost and time of EXIM and domestic cargo.</li>
<li><strong>Coastal Community Development:</strong> Promoting sustainable development of coastal communities through skill development &amp; livelihood generation activities, fisheries development, coastal tourism etc.</li>
<li><strong>Coastal Shipping &amp; Inland Waterways Transport:</strong> Impetus to move cargo through the sustainable and environment-friendly coastal and inland waterways mode.</li>
</ul>
</li>
</ul>
<p><strong>Public-Private Partnerships</strong></p>
<ul style="list-style-type: square;">
<li>Public-private partnerships involve <strong>collaboration between a government agency and a private-sector company</strong> that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers.</li>
<li>Financing a project through a public-private partnership can <strong>allow a project to be completed sooner or make it a possibility in the first place</strong>.</li>
<li>Public-private partnerships <strong>often involve concessions of tax</strong> or other operating revenue, protection from liability, or partial ownership rights over nominally public services and property <strong>to private sector</strong>, for-profit entities.</li>
<li>It can create <strong>complex principal-agent problems,</strong> such as corrupt dealings, pay-offs to political cronies, etc.</li>
<li><a href="/to-the-points/paper3/ppp-investment-model#:~:text=Public%2DPrivate%20Partnership%20Model%3A%20PPP,be%20completed%20with%20private%20funding." target="_blank" rel="noopener"><strong>Commonly adopted model of PPPs</strong></a> include Build-Operate-Transfer (BOT) ,Build-Own-Operate (BOO), Build-Operate-Lease-Transfer (BOLT), Design-Build-Finance-Operate-Transfer (DBFOT), Lease-Develop-Operate (LDO), Operate-Maintain-Transfer (OMT), etc.</li>
</ul>
</div>
<p><a href="https://www.thehindu.com/news/national/other-states/lighthouses-in-odisha-hold-huge-tourism-potential/article34296290.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
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		'article_id' => (int) 8115,
		'category_id' => (int) 21,
		'title' => 'Fall in International Crude Oil Prices',
		'description' => '<h3>Why in News</h3>
<p>Recent fall in international crude oil prices has reversed a <strong>six-month trend</strong> of <a href="/daily-updates/daily-news-analysis/impact-of-crude-oil-price-hike#:~:text=According%20to%20estimates%2C%20a%20one,54.8%20barrel%20for%20January%202021." target="_blank" rel="noopener"><strong>rising auto fuel prices</strong></a> which saw the prices of petrol and diesel hit all-time highs across the country.</p>
<ul style="list-style-type: square;">
<li>The price of <strong>Brent crude</strong> has <strong>fallen under USD 63 per barrel from a high of USD 70 per barrel in early March 2021</strong>.</li>
<li>Two crude oils which are either traded themselves or whose prices are reflected in other types of crude oil include <a href="/daily-updates/daily-news-analysis/oil-prices-below-zero" target="_blank" rel="noopener"><strong>West Texas Intermediate (WTI) and Brent</strong></a>.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Oil Pricing:</strong><br />
<ul style="list-style-type: square;">
<li>Generally, the <a href="/daily-updates/daily-news-analysis/talks-on-oil-cut-deal-at-g-20" target="_blank" rel="noopener"><strong>Organization of the Petroleum Exporting Countries (OPEC)</strong></a> used to work as a cartel and fix prices in a favourable band.<br />
<ul style="list-style-type: square;">
<li><strong>OPEC is led by Saudi Arabia</strong>, which is the largest exporter of crude oil in the world (single-handedly exporting 10% of the global demand).</li>
<li><strong>OPEC has a total of 13 Member Countries</strong> viz. Iran, Iraq, Kuwait, United Arab Emirates (UAE), Saudi Arabia, Algeria, Libya, Nigeria, Gabon, Equatorial Guinea, Republic of Congo, Angola, and Venezuela.</li>
</ul>
</li>
<li>OPEC <strong>could bring down prices by increasing oil production and raise prices by cutting production</strong>.</li>
<li>The<strong> global oil pricing mainly depends upon the partnership between the global oil exporters</strong> instead of a well-functioning competition.</li>
<li>Cutting oil production or completely shutting down an oil well is a difficult decision, because restarting it is immensely costly and complicated.<br />
<ul style="list-style-type: square;">
<li>Moreover, if a country cuts production, it risks losing market share if other countries do not follow the suit.</li>
</ul>
</li>
<li>Recently, OPEC has been working with Russia, as <a href="/daily-updates/daily-news-analysis/opec" target="_blank" rel="noopener"><strong>OPEC+</strong></a> to fix the global prices and supply.<br />
<ul style="list-style-type: square;">
<li>In 2016, OPEC allied with other top non-OPEC oil-exporting nations to form an even more powerful entity named OPEC+ or OPEC Plus.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Reason for the Fall:</strong><br />
<ul style="list-style-type: square;">
<li><strong>Resurgence in Covid Infections:</strong><br />
<ul style="list-style-type: square;">
<li>A recent resurgence in <strong>Covid-19 infections</strong> coupled with a decision by OPEC+ to <strong>increase crude oil production</strong> has contributed to a fall in crude oil prices. <br />
<ul style="list-style-type: square;">
<li>OPEC+ has announced a <strong>phased withdrawal of production cuts</strong> which would see total crude oil production by the group of countries rise by 1.1 million barrels per day by July 2021.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Recovery in Supply:</strong><br />
<ul style="list-style-type: square;">
<li>The <strong>recovery in supply without a similar recovery in demand</strong> has contributed to the recent correction in crude oil prices and that supply cuts were difficult to maintain for oil-producing countries given the global macroeconomic situation.<br />
<ul style="list-style-type: square;">
<li>Recent US data has also indicated that <strong>gasoline inventories are rising faster</strong> than the fall in crude oil inventories raising concerns of waning demand for petroleum products.</li>
<li><strong>US crude oil production capacity has recovered to about 11 million barrels per day</strong> after abnormally cold weather in February 2021 forced US crude oil output down to 9.7 million barrels per day.</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
<li><strong>Impact on India:</strong><br />
<ul style="list-style-type: square;">
<li><strong>Current Account Deficit:</strong> <br />
<ul style="list-style-type: square;">
<li>The <strong>decrease in oil prices will decrease the country&rsquo;s import bill,</strong> and will help in reducing its <a href="/daily-updates/daily-news-analysis/current-account-deficit" target="_blank" rel="noopener"><strong>current account deficit</strong></a> (excess of imports of goods and services over exports).<br />
<ul style="list-style-type: square;">
<li>According to estimates, a <strong>one-dollar increase in crude oil price increases the oil bill by around USD 1.6 billion per year</strong>.</li>
<li><strong>India imports 80% of its crude oil</strong> requirements.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Inflation:</strong> <br />
<ul style="list-style-type: square;">
<li>The <strong>decrease in crude prices could also also further decrease <a href="/daily-updates/daily-news-analysis/inflation-data-august-2020" target="_blank" rel="noopener">inflationary pressures</a></strong> that have been building up over the past few months.</li>
<li>This will increase the space for the <a href="/daily-updates/daily-news-analysis/rbi-monetary-policy-2021" target="_blank" rel="noopener"><strong>monetary policy committee</strong></a> to ease policy rates further.</li>
</ul>
</li>
<li><strong>Fiscal Health:</strong> <br />
<ul style="list-style-type: square;">
<li>If oil prices would have continued to increase, <strong>the government would have been forced to cut taxes on petroleum and diesel</strong> which might have caused <strong>loss of revenue</strong> and <strong>deteriorated its fiscal balance</strong>.</li>
<li>The revenue lost will erode the government&rsquo;s ability to spend or meet its fiscal commitments in the form of budgetary transfers to states, payment of dues and compensation for revenue shortfalls to state governments under the <a href="/to-the-points/paper3/goods-and-services-tax-gst-1" target="_blank" rel="noopener"><strong>Goods and Services Tax (GST)</strong></a> framework.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Brent and West Texas Intermediate (WTI)</strong></p>
<ul style="list-style-type: square;">
<li><strong>Origin:</strong><br />
<ul style="list-style-type: square;">
<li><strong>Brent crude oil originates from oil fields in the North Sea</strong> between the Shetland Islands and Norway.</li>
<li><strong>WTI is sourced from US oil fields,</strong> primarily in Texas, Louisiana, and North Dakota.</li>
</ul>
</li>
<li><strong>Light and Sweet:</strong><br />
<ul style="list-style-type: square;">
<li>Both oils are relatively light, but <strong>Brent has a slightly higher API gravity, making WTI the lighter of the two</strong>.<br />
<ul style="list-style-type: square;">
<li><strong>American Petroleum Institute (API) gravity</strong> is an indicator of the density of crude oil or refined products.</li>
</ul>
</li>
<li><strong>WTI with a lower sulphur content</strong> (0.24%) than Brent (0.37%), is considered <strong>"sweeter"</strong>.</li>
</ul>
</li>
<li><strong>Benchmark Prices:</strong><br />
<ul style="list-style-type: square;">
<li><strong>Brent crude price</strong> is the international benchmark price <strong>used by the OPEC</strong> while <strong>WTI crude price is a benchmark for US oil prices</strong>.</li>
<li>Since India imports primarily from OPEC countries, <strong>Brent is the benchmark for oil prices in India</strong>.</li>
</ul>
</li>
<li><strong>Cost of Shipping:</strong><br />
<ul style="list-style-type: square;">
<li><strong>Cost of shipping for Brent crude is typically lower,</strong> since it is produced near the sea and it can be put on ships immediately.</li>
<li><strong>Shipping of WTI is priced higher</strong> since it is produced in landlocked areas like Cushing, Oklahoma where the storage facilities are limited.</li>
</ul>
</li>
</ul>
</div>
<p><a href="https://indianexpress.com/article/explained/explained-why-crude-oil-prices-are-falling-and-how-it-will-impact-fuel-prices-in-india-7265507/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
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		'article_id' => (int) 8076,
		'category_id' => (int) 21,
		'title' => 'Decline in Forex Reserves',
		'description' => '<h3>Why in News</h3>
<p>According to the recent data from the <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener"><strong>Reserve Bank of India (RBI)</strong></a>, India&rsquo;s <a href="/daily-updates/daily-news-analysis/forex-reserves-2" target="_blank" rel="noopener"><strong>Foreign Exchange (Forex) reserves</strong></a> <strong>declined by USD 2.986 billion</strong> to reach USD 579.285 billion in the week ended <strong>26<sup>th</sup> March 2021.</strong></p>
<ul style="list-style-type: square;">
<li>The gold reserve component of the Forex Reserve increased whereas the other components - Special Drawing Rights (SDR), the Foreign Currency Assets (FCA) and the Reserve Position witnessed decline.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>About:</strong><br />
<ul style="list-style-type: circle;">
<li>Foreign exchange reserves are<strong> assets held on reserve by a central bank in foreign currencies,</strong> which can include bonds, treasury bills and other government securities.<br />
<ul style="list-style-type: disc;">
<li>It needs to be noted that <strong>most foreign exchange reserves are held in US dollars.</strong></li>
</ul>
</li>
</ul>
</li>
<li><strong>Objectives Behind Holding Forex Reserves:</strong><br />
<ul style="list-style-type: circle;">
<li>Supporting and maintaining<strong> confidence in the policies for <a href="/daily-updates/daily-news-analysis/monetary-policy-rbi#:~:text=The%20MPC%20is%20a%20statutory,the%20inflation%20target%20(4%25)." target="_blank" rel="noopener">monetary</a> and <a href="/daily-updates/daily-news-analysis/currency-exchange-rate-index" target="_blank" rel="noopener">exchange rate</a> management.</strong></li>
<li>Provides the<strong> capacity to intervene</strong> in support of the national or union currency.</li>
<li><strong>Limits external vulnerability</strong> by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed.</li>
</ul>
</li>
<li><strong>India&rsquo;s Forex Reserve include:</strong><br />
<ul style="list-style-type: circle;">
<li><a href="/daily-updates/daily-news-analysis/high-forex-reserves" target="_blank" rel="noopener"><strong>Foreign Currency Assets</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/rbi-s-gold-reserve-increased#:~:text=The%20RBI's%20total%20gold%20reserves,%2423.07%20billion%20in%20March%202019." target="_blank" rel="noopener"><strong>Gold reserves</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/special-drawing-rights-imf" target="_blank" rel="noopener"><strong>Special Drawing Rights</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/important-facts-for-prelims-13th-april-2019" target="_blank" rel="noopener"><strong>Reserve position with the IMF</strong></a></li>
</ul>
</li>
<li><strong>Foreign Currency Assets:</strong> <br />
<ul style="list-style-type: circle;">
<li>FCAs are assets that are <strong>valued based on a currency other than the country's own currency.</strong></li>
<li>FCA is the <strong>largest component of the forex reserve. </strong>It is<strong> expressed in dollar terms.</strong></li>
<li>The FCAs include the<strong> effect of appreciation or depreciation of non-US units</strong> like the euro, pound and yen held in the foreign exchange reserves.</li>
</ul>
</li>
<li><strong>Gold Reserves:</strong><br />
<ul style="list-style-type: circle;">
<li>Gold occupies a special position in the foreign reserves of central banks as it is widely stated to be<strong> held for reasons of diversification.</strong></li>
<li>Moreover, the unique property of gold is believed to be <strong>its ability to enhance the credibility of the central bank when it holds adequately</strong> and this has been proved time and again.</li>
<li>Gold compares extremely<strong> favorably to other traditional reserve assets with high-quality and liquidity</strong> helping Central Banks<strong> to preserve capital, diversify portfolios, mitigate risks</strong> on the medium/long-term.<br />
<ul style="list-style-type: disc;">
<li>Gold has <strong>consistently outperformed the average returns of other alternative financial assets.</strong></li>
</ul>
</li>
</ul>
</li>
<li><strong>Special Drawing Rights:</strong><br />
<ul style="list-style-type: circle;">
<li>The SDR is an <strong>international reserve asset, created by the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/international-monetary-fund-imf" target="_blank" rel="noopener">International Monetary Fund (IMF)</a> in 1969</strong> to supplement its member countries&rsquo; official reserves.</li>
<li>The SDR is neither a currency nor a claim on the IMF. Rather, it is <strong>a potential claim on the freely usable currencies of IMF members.</strong> SDRs can be exchanged for these currencies.</li>
<li>The <strong>value of the SDR is calculated from a weighted basket of major currencies,</strong> including the US dollar, the euro, Japanese yen, Chinese yuan, and British pound.</li>
<li>The<strong> interest rate on SDRs or (SDRi)</strong> is the interest paid to members on their SDR holdings.</li>
</ul>
</li>
<li><strong>Reserve Position in the International Monetary Fund:</strong><br />
<ul style="list-style-type: circle;">
<li>A reserve tranche position implies <strong>a portion of the required quota of currency each member country must provide to the IMF</strong> that can be utilized for its own purposes.</li>
<li>The reserve tranche is basically <strong>an emergency account that IMF members can access</strong> at any time without agreeing to conditions or paying a service fee.</li>
</ul>
</li>
</ul>
<p><a href="https://indianexpress.com/article/business/economy/after-a-rise-forex-reserves-decline-to-579-2-billion-7257722/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
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	(int) 4 => object(Cake\ORM\Entity) {

		'article_id' => (int) 8072,
		'category_id' => (int) 21,
		'title' => 'Oil Import Contracts',
		'description' => '<h3>Why in News</h3>
<p>Amid <strong>tensions with Saudi Arabia over oil production cuts,</strong> the <strong>Indian government has asked its state refiners (IOC, BPCL and HPCL)</strong> to look for<strong> oil supplies from outside the <a href="/daily-updates/daily-news-editorials/india-gulf-countries" target="_blank" rel="noopener">Middle East region</a></strong> and use <strong>collective bargaining power</strong> to get favourable terms.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Tension with Saudi Arabia:</strong><br />
<ul style="list-style-type: circle;">
<li>When oil prices started to rise in early 2021, <strong>India wanted Saudi Arabia to relax output controls</strong> but the Kingdom ignored its calls.</li>
<li>This has led to the Indian government pressing for diversification of the supply base.</li>
<li>Saudi Arabia and other <a href="/daily-updates/daily-news-analysis/opec" target="_blank" rel="noopener"><strong>OPEC (Organization of the Petroleum Exporting Countries)</strong></a> producers have been the mainstay suppliers of crude oil for India. But their terms have often been loaded against the buyers.<br />
<ul style="list-style-type: disc;">
<li>OPEC is a <strong>permanent intergovernmental organization of 13 oil-exporting developing nations</strong> that coordinates and unifies the petroleum policies of its Member countries.</li>
<li><strong>Member Countries:</strong> Iran, Iraq, Kuwait, United Arab Emirates (UAE), Saudi Arabia, Algeria, Libya, Nigeria, Gabon, Equatorial Guinea, Republic of Congo, Angola, and Venezuela.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Issues With the Contracts with OPEC Producers:</strong><br />
<ul style="list-style-type: circle;">
<li>Indian firms buy two-third of their purchases on term or fixed annual contracts.<br />
<ul style="list-style-type: disc;">
<li>These term contracts provide assured supplies of the contracted quantity but the <strong>pricing and other terms favour only the supplier.</strong></li>
</ul>
</li>
<li>The buyer has to indicate at least six weeks in advance of their intention to lift quantity out of the annual term contract in any month and has to pay an average official price announced by the producer.<br />
<ul style="list-style-type: disc;">
<li>While buyers have an obligation to lift all of the contracted quantity, Saudi Arabia and other producers have the option to reduce supplies in case OPEC decides to keep production artificially lower to boost prices.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Options for India:</strong><br />
<ul style="list-style-type: circle;">
<li>India needs<strong> pricing flexibility</strong> as well as the<strong> certainty of supply</strong> even during times when production falls due to any reason.<br />
<ul style="list-style-type: disc;">
<li>Besides, choice of time of supply and flexibility on quantity (ability to reduce or increase) is what India should be looking at.</li>
</ul>
</li>
<li>Indian refiners can look to <strong>reduce the quantity they buy through term contracts</strong> and <strong>instead buy more from the spot or current market.</strong></li>
<li>Buying from the <strong>spot market</strong> would ensure that India can take advantage of any fall in prices on any day and book quantities.<br />
<ul style="list-style-type: disc;">
<li>It&rsquo;s like the stock market where shares can be brought on a day or time when the prices are low.</li>
</ul>
</li>
<li><strong>State-owned refineries have also been asked to coordinate</strong> buying and also explore joint strategy with <strong>private refiners</strong> such as Reliance Industries and Nayara Energy.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>India and Oil Import</strong></p>
<ul style="list-style-type: square;">
<li>India is the <strong>world&rsquo;s third-largest consumer of oil.</strong></li>
<li>India imports <strong>85% of its total oil needs</strong> and is often <strong>vulnerable to global supply and price shocks.</strong></li>
<li>The <strong>Middle East accounts for 60% of all oil bought</strong> by India while Latin America and Africa are the other big supplier blocks.<br />
<ul style="list-style-type: circle;">
<li>In recent months, India has bought more<strong> oil from the USA</strong> and from newer sources such as <strong>Guyana,</strong> which has a large Indian diaspora.</li>
<li>However, due to its geographical proximity, the Middle East can supply cargoes in less time and at low freight rates.</li>
</ul>
</li>
</ul>
</div>
<p><a href="https://www.thehindu.com/business/india-asks-state-refiners-to-review-oil-import-contracts-with-saudi/article34223463.ece#:~:text=Amid%20tensions%20with%20Saudi%20Arabia,terms%2C%20a%20top%20official%20said." target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
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	(int) 5 => object(Cake\ORM\Entity) {

		'article_id' => (int) 8065,
		'category_id' => (int) 21,
		'title' => 'India’s Merchandise Trade Deficit',
		'description' => '<h3>Why in News</h3>
<p>Preliminary data released by the government showed that India's trade deficit in goods widened to USD 14.11 billion in March 2021 from USD 9.98 billion during March 2020.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Other Observations:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Merchandise Exports:</strong> India&rsquo;s <strong>merchandise exports</strong> in March 2021 were <strong>USD 34.0 billion as compared to USD 21.49 billion in March 2020,</strong> an increase of 58.23%.<br />
<ul style="list-style-type: disc;">
<li>For the first time ever in a month, Indian exports crossed USD 34 billion in March 2021.</li>
</ul>
</li>
<li><strong>Merchandise Imports:</strong> India&rsquo;s merchandise imports were USD 48.12 billion as compared to USD 31.47 billion in March 2020, an increase of 52.89%. <br />
<ul style="list-style-type: disc;">
<li>India is thus a <strong>net importer in March 2021,</strong> with a trade deficit of USD 14.11 billion.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Reasons for Increased Imports:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Relaxation in lockdown policy</strong> and <strong>start of economic activities</strong> are the main reasons for increase in demand for the goods and the import.</li>
<li>Also the rise in<strong> global trade</strong> has made the global supply chain active and the commerce is taking place.</li>
<li><strong>Oil import</strong> has increased due to opening up of the<strong> transportation sector.</strong></li>
</ul>
</li>
<li><strong>Trade Deficit:</strong> A trade deficit is an amount by which the cost of a country's imports exceeds its exports.<br />
<ul style="list-style-type: circle;">
<li>The<strong> trade deficit in goods</strong> shows a <strong>rise of demand in the economy.</strong></li>
<li>It is a part of the <a href="/daily-updates/daily-news-analysis/current-account-deficit" target="_blank" rel="noopener"><strong>Current Account Deficit.</strong></a></li>
</ul>
</li>
<li><strong>Current Account Deficit:</strong><br />
<ul style="list-style-type: circle;">
<li>The <strong>current account</strong> records<strong> exports and imports in goods and services and transfer payments.</strong> It represents a country&rsquo;s transactions with the rest of the world and, like the capital account, is a component of a country&rsquo;s <a href="/daily-updates/daily-news-analysis/strong-balance-of-payments" target="_blank" rel="noopener"><strong>Balance of Payments (BOP).</strong></a></li>
<li>There is a deficit in Current Account if the <strong>value of the goods and services imported exceeds the value of those exported.</strong></li>
<li>Major components are:<br />
<ul style="list-style-type: disc;">
<li><strong>Goods,</strong></li>
<li><strong>Services,</strong> and</li>
<li><strong>Net earnings on overseas investments (such as interests and dividend)</strong> and <strong>net transfer of payments</strong> over a period of time, such as <strong>remittances.</strong></li>
</ul>
</li>
<li>It is <strong>measured as a percentage of <a href="/daily-updates/daily-news-analysis/gdp-decreases-to-11-year-low" target="_blank" rel="noopener">Gross Domestic Product (GDP).</a></strong> The formulae for calculating Current Account Balance is:<br />
<ul style="list-style-type: disc;">
<li><strong>Current Account Balance = Trade gap + Net current transfers + Net income abroad.</strong></li>
<li>Trade gap = Exports &ndash; Imports</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Balance of Payments</strong></p>
<ul style="list-style-type: square;">
<li><strong>Definition:</strong><br />
<ul style="list-style-type: circle;">
<li>Balance of Payment (BoP) of a country can be defined as a <strong>systematic statement of all economic transactions of a country</strong> with the rest of the world during a specific period usually one year.</li>
</ul>
</li>
<li><strong>Components of BoP:</strong><br />
<ul style="list-style-type: circle;">
<li>For preparing BoP accounts, economic transactions between a country and rest of the world are grouped under - <strong>Current account, Capital account and Financial Account and Errors and Omissions.</strong> <br />
<ul style="list-style-type: disc;">
<li>It also shows changes in<a href="/daily-updates/daily-news-analysis/forex-reserves-2" target="_blank" rel="noopener"><strong> Foreign Exchange Reserves.</strong></a></li>
</ul>
</li>
<li><strong>Current Account:</strong> It shows <strong>export and import of visibles</strong> (also called merchandise or goods - represent trade balance) and<strong> invisibles</strong> (also called non-merchandise).<br />
<ul style="list-style-type: disc;">
<li>Invisibles include services, transfers and income.</li>
</ul>
</li>
<li><strong>Capital Account and Financial Account:</strong> It shows a capital expenditure and income for a country.<br />
<ul style="list-style-type: disc;">
<li>It gives a summary of the <strong>net flow of both private and public investment</strong> into an economy.</li>
<li><a href="/daily-updates/daily-news-analysis/rbi-eases-external-commercial-borrowing-framework" target="_blank" rel="noopener"><strong>External Commercial Borrowing (ECB)</strong></a>, <a href="/daily-updates/daily-news-analysis/rise-in-foreign-direct-investment" target="_blank" rel="noopener"><strong>Foreign Direct Investment</strong></a>, <a href="/daily-updates/daily-news-analysis/increase-in-foreign-portfolio-investment" target="_blank" rel="noopener"><strong>Foreign Portfolio Investment</strong></a>, etc form a part of capital account.</li>
</ul>
</li>
<li><strong>Errors and Omissions:</strong> Sometimes the balance of payment does not balance. This imbalance is shown in the BoP as errors and omissions. It reflects the country&rsquo;s inability to record all international transactions accurately.</li>
<li>Overall the<strong> BoP account can be a surplus or a deficit.</strong> <br />
<ul style="list-style-type: disc;">
<li>If there is a deficit then it can be bridged by taking money from the <strong>Foreign Exchange (Forex) Account.</strong></li>
<li>If the reserves in the forex account are falling short then this scenario is referred to as BoP crisis.</li>
</ul>
</li>
</ul>
</li>
</ul>
</div>
<p><a href="https://www.thehindu.com/business/march-trade-deficit-widens-to-1411-billion/article34218180.ece#:~:text=India's%20trade%20deficit%20in%20goods,%2448.12%20billion%2C%20the%20data%20showed." target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
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	(int) 6 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7995,
		'category_id' => (int) 21,
		'title' => 'New Committee to Screen New Bank Licences',
		'description' => '<h3>Why in News</h3>
<p>The <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener"><strong>Reserve Bank of India (RBI)</strong></a> has set up a five-member <strong>Standing External Advisory</strong> <strong>Committee (SEAC)</strong>, headed by former RBI Deputy Governor Shyamala Gopinath, <strong>for evaluating applications for universal banks and <a href="/to-the-points/paper3/small-finance-bank-1" target="_blank" rel="noopener">Small Finance Banks (SFBs)</a>.</strong></p>
<ul style="list-style-type: square;">
<li><strong>The Standing External Advisory Committee (SEAC)</strong> will be comprising eminent persons with experience in banking, financial sector and other relevant areas.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>About the Committee:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Tenure:</strong> The committee will have a tenure of three years.</li>
<li><strong>Secretariat of the Committee:</strong> The secretarial support to the committee would be provided by RBI&rsquo;s Department of Regulation.</li>
<li><strong>Functions:</strong> The applications for universal banks and SFBs will first be evaluated by the RBI to ensure prima facie eligibility of the applicants, after which the SEAC will evaluate the applications.</li>
</ul>
</li>
<li><strong>Small Finance Banks (SFBs):</strong><br />
<ul style="list-style-type: circle;">
<li>Small Finance Banks are the financial institutions which provide <strong>financial services to the unserved and unbanked region</strong> of the country.</li>
<li>They are registered as a public limited company under the Companies Act, 2013.</li>
<li><strong>Scope of Activities:</strong> <br />
<ul style="list-style-type: disc;">
<li>The small finance bank shall primarily undertake <strong>basic banking activities of acceptance of deposits and lending</strong> to small business units, small and marginal farmers, micro and small industries and unorganised sector entities.</li>
<li>It can also undertake other <strong>non-risk sharing simple financial services activities</strong>, not requiring any commitment of own funds, such as the distribution of mutual fund units, insurance products, pension products, etc.</li>
<li>The small finance bank can also become an <strong>Authorised Dealer in foreign exchange business</strong> for its clients&rsquo; requirements.</li>
<li>There will <strong>not be any restriction in the area of operations of SFBs</strong>; however, preference will be given to those applicants who, in the initial phase, set up the bank in a cluster of under-banked States/districts, such as in the North-East, East and Central regions of the country.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Universal Banks:</strong><br />
<ul style="list-style-type: circle;">
<li>Universal Banks are the financial entities like <strong>the commercial banks, Financial Institutions, <a href="/daily-updates/daily-news-analysis/4-tier-structure-for-regulation-of-nbfcs" target="_blank" rel="noopener">Non-Banking Financial Companies (NBFCs)</a></strong>, which undertake multiple financial activities under one roof, thereby creating a financial supermarket.</li>
<li>The entities focus on leveraging their large branch network and offer a wide range of services under a single brand name/Bank&rsquo;s name.</li>
<li>According to the guidelines on <strong>on-tap licensing of universal banks</strong> issued in August 2016, resident individuals and professionals having 10 years of experience in banking and finance at a senior level are eligible to promote universal banks.<br />
<ul style="list-style-type: disc;">
<li>However, large industrial houses are excluded as eligible entities but are permitted to invest in the banks up to 10%.</li>
<li>A<strong> non-operative financial holding company (NOFHC)</strong> has been made non-mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Related Development:</strong><br />
<ul style="list-style-type: circle;">
<li>Earlier, an internal working group of the RBI in 2020 had proposed an <strong>overhaul of licensing policy for private banks</strong> and suggested <a href="/daily-updates/daily-news-editorials/allowing-corporates-to-own-bank#:~:text=Pros%20of%20Allowing%20Corporates%20To%20Own%20Bank&amp;text=Currently%2C%20the%20government%20keeps%20picking,capital%20requirement%20can%20be%20fulfilled." target="_blank" rel="noopener"><strong>allowing large corporate and industrial houses to float banks</strong> </a>in India after suitable amendments to the <strong>Banking Regulation Act, 1949.</strong><br />
<ul style="list-style-type: disc;">
<li>However, former RBI Governor Raghuram Rajan has criticised the proposal saying it would lead to <strong>&ldquo;connected lending (a situation in which the bank's controlling owner extends loans of inferior quality at lower interest rates to himself or his connected parties)&rdquo;.</strong></li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Non-Operative Financial Holding Company</strong></p>
<ul style="list-style-type: square;">
<li>Non-Operative Financial Holding Company (NOFHC) means a <strong>non-deposit taking NBFC.</strong></li>
<li>As per the Banking Guidelines, promoter or promoter group will be permitted to set up a new bank only through a wholly-owned Non-operative Financial Holding Company (NOFHC).</li>
<li>Such NOHFC holds the Bank as well as all other financial services companies regulated by RBI or other financial sector regulators based on permissible regulatory prescriptions.</li>
</ul>
<p><strong>On-tap Licensing of Universal Bank</strong></p>
<ul style="list-style-type: square;">
<li>An &lsquo;on-tap&rsquo; facility means the RBI will accept applications and grant licenses for banks throughout the year.</li>
<li>The policy allows aspirants to apply for universal bank license at any time, subject to the fulfillment of the set conditions.</li>
</ul>
</div>
<p><a href="https://indianexpress.com/article/business/banking-and-finance/rbi-sets-up-5-member-panel-to-screen-new-bank-licences-7240437/" target="_blank" rel="noopener"><strong>Source:IE</strong></a></p>',
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	(int) 7 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7980,
		'category_id' => (int) 21,
		'title' => 'Supplementary Demand for Grants',
		'description' => '<h3>Why in News</h3>
<p>The Lok Sabha has passed <a href="/daily-updates/daily-news-analysis/supplementary-demands-for-grants" target="_blank" rel="noopener"><strong>supplementary demand for grants</strong></a> for the second batch (2020-2021).</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>About:</strong> It is needed when the amount authorised by the Parliament through the <a href="/daily-updates/daily-news-analysis/the-appropriation-bill" target="_blank" rel="noopener"><strong>appropriation act</strong></a> for a particular service for the current financial year is found to be <strong>insufficient</strong> for that year. <br />
<ul style="list-style-type: circle;">
<li>This grant is <strong>presented and passed by the Parliament before the end of the financial year.</strong></li>
</ul>
</li>
<li><strong>Constitutional Provisions: Article 115</strong> pertains to supplementary, additional or excess grants.</li>
<li><strong>Other Grants: </strong><br />
<ul style="list-style-type: circle;">
<li><strong>Additional Grant:</strong> It is granted when a need has arisen during the current financial year for additional expenditure upon some <strong>new service not contemplated in the budget</strong> for that year.</li>
<li><strong>Excess Grant :</strong> It is granted when <strong>money has been spent on any service during a financial year in excess of the amount granted f</strong>or that service in the budget for that year. It is<strong> voted by the Lok Sabha</strong> after the financial year. Before the demands for excess grants are submitted to the Lok Sabha for voting, they <strong>must be approved by the <a href="/current-affairs-news-analysis-editorials/news-editorials/26-09-2020/print" target="_blank" rel="noopener">Public Accounts Committee of Parliament.</a></strong></li>
<li><strong>Vote of Credit:</strong> It is <strong>granted for meeting an unexpected demand upon the resources of India,</strong> when on account of the magnitude or the indefinite character of the service, the demand cannot be stated with the details ordinarily given in a budget. Hence, it is like a blank cheque given to the Executive by the Lok Sabha.</li>
<li><strong>Exceptional Grant:</strong> It is<strong> granted for a special purpose</strong> and forms<strong> no part of the current service of any financial year.</strong></li>
<li><strong>Token Grant:</strong> It is granted when funds to meet the proposed expenditure on a new service can be made available by reappropriation. A demand for the grant of a token sum (of Re 1) is <strong>submitted to the vote of the Lok Sabha</strong> and if assented, funds are made available.<br />
<ul style="list-style-type: disc;">
<li><strong>Reappropriation</strong> involves transfer of funds from one head to another. It does not involve any additional expenditure.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Article 116</strong> of the Constitution pertains to <strong>Votes on account, votes of credit and exceptional grants.</strong></li>
<li>Supplementary, additional, excess and exceptional grants and vote of credit are <strong>regulated by the same procedure</strong> which is <strong>applicable in the case of a regular <a href="/to-the-points/paper3/government-budgeting" target="_blank" rel="noopener">budget.</a></strong></li>
</ul>
<p><a href="https://www.thehindu.com/news/national/parliament-proceedings-lok-sabha-passes-supplementary-demand-for-grants/article34101248.ece" target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
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	(int) 8 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7901,
		'category_id' => (int) 21,
		'title' => 'Pradhan Mantri Swasthya Suraksha Nidhi',
		'description' => '<h3>Why in News</h3>
<p>The Union Cabinet has approved the <strong>Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN)</strong> as<strong> a single non-lapsable reserve fund for Health</strong> from the proceeds of Health and Education Cess.</p>
<ul style="list-style-type: square;">
<li>The proceeds of<a href="/daily-updates/daily-news-editorials/system-of-cess-in-india" target="_blank" rel="noopener"><strong> Health and Education Cess</strong></a> are levied under <strong>Section 136-b of Finance Act, 2007.</strong></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Salient Features of the Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN):</strong><br />
<ul style="list-style-type: circle;">
<li>It is a non-lapsable reserve fund for Health in the<a href="/daily-updates/daily-news-analysis/mp-s-salaries-cut-and-mplads-suspended" target="_blank" rel="noopener"><strong> Public Account.</strong></a></li>
<li>Proceeds of share of health in the <strong>Health and Education Cess</strong> will be credited into PMSSN.</li>
<li>Accruals into the PMSSN will be utilized for the flagship schemes of the Ministry of Health &amp; Family Welfare namely,<br />
<ul style="list-style-type: disc;">
<li><strong><a href="/daily-updates/daily-news-editorials/ayushmanbharat" target="_blank" rel="noopener">Ayushman Bharat</a> - Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).</strong></li>
<li>Ayushman Bharat - <strong>Health and Wellness Centres (AB-HWCs).</strong></li>
<li><a href="/daily-updates/daily-news-analysis/national-health-mission-and-janani-suraksha-yojana" target="_blank" rel="noopener"><strong>National Health Mission.</strong></a></li>
<li><strong><a href="/daily-updates/daily-news-analysis/important-facts-for-prelims-11th-january-2019" target="_blank" rel="noopener">Pradhan Mantri Swasthya Suraksha Yojana</a> (PMSSY).</strong></li>
<li>Emergency &amp; disaster preparedness and <strong>responses during health emergencies.</strong></li>
<li>Any<strong> future programme/scheme</strong> that targets to achieve progress towards <a href="/to-the-points/paper3/sustainable-development-3" target="_blank" rel="noopener"><strong>Sustainable Development Goals (SDGs)</strong></a> and the targets set out in the <a href="/daily-updates/daily-news-analysis/national-digital-health-mission" target="_blank" rel="noopener"><strong>National Health Policy (NHP) 2017.</strong></a></li>
</ul>
</li>
<li><strong>Administration and maintenance</strong> of the PMSSN is entrusted to the <strong>Ministry of Health &amp; Family Welfare (MoHFW).</strong> <br />
<ul style="list-style-type: disc;">
<li>In any financial year, the expenditure on such schemes of the MoHFW would be initially incurred from the PMSSN and thereafter, from Gross Budgetary Support (GBS).</li>
</ul>
</li>
</ul>
</li>
<li><strong>Benefits of PMSSN:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Enhanced access to universal &amp; affordable health care</strong> through availability of earmarked resources, while ensuring that the amount does not lapse at the end of financial year.</li>
</ul>
</li>
<li><strong>Significance of Spending on Healthcare: </strong><br />
<ul style="list-style-type: circle;">
<li><strong>Improved Developmental Outcomes:</strong> From an economic standpoint, better health improves productivity, and reduces losses due to premature death, prolonged disability and early retirement.</li>
<li><strong>Enhance Opportunities:</strong> One extra year of population life expectancy raises GDP per capita by 4%, investment in health creates millions of jobs, largely for women, through a much needed expansion of the health workforce.</li>
</ul>
</li>
<li><strong>Health and Education Cess:</strong> <br />
<ul style="list-style-type: circle;">
<li>In the <strong>Budget speech 2018,</strong> the Finance Minister while announcing Ayushman Bharat Scheme, also announced<strong> replacement of existing 3% Education Cess by 4% Health and Education Cess.</strong><br />
<ul style="list-style-type: disc;">
<li>It is collected with the aim of addressing the educational and healthcare needs of rural families in India.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Cess</strong></p>
<ul style="list-style-type: square;">
<li>Different from the usual taxes and duties like excise and personal income tax, a <strong>Cess is imposed as an additional tax besides the existing tax (tax on tax)</strong> with a purpose of raising funds for a specific task.</li>
<li>The Union government is empowered to raise revenue through a gamut of levies, including taxes (both direct and indirect), surcharges, fees and cess.<br />
<ul style="list-style-type: circle;">
<li>A cess, generally paid by everyday public, is added to their basic tax liability paid as part of total tax paid.</li>
<li><strong>Article 270</strong> of the Constitution allows<strong> cess to be excluded from the purview of the divisible pool of taxes</strong> that the Union government must share with the States.</li>
</ul>
</li>
<li>Cess collected for a particular purpose <strong>cannot be used for or diverted to other purposes.</strong> A particular cess continues to be levied till the time the government collects enough funds for the purpose that it was introduced for.<br />
<ul style="list-style-type: circle;">
<li>For example, the <strong>Swachh Bharat cess</strong> (abolished in 2017) was levied by the government for cleanliness activities.</li>
</ul>
</li>
<li><strong>Difference between Surcharge and Cess: </strong><br />
<ul style="list-style-type: circle;">
<li><strong>Surcharge</strong> is <strong>an additional charge or tax levied on existing tax.</strong> The main surcharges are on personal income tax (on high income slabs and on super rich) and on corporate income tax.</li>
<li>Despite <strong>both are not shareable with state governments,</strong> surcharge can be kept with the <a href="/daily-updates/daily-news-analysis/mp-s-salaries-cut-and-mplads-suspended" target="_blank" rel="noopener"><strong>Consolidated Fund of India (CFI)</strong></a> and spent like any other taxes, the cess should be kept as a separate fund after allocating to CFI and can be spent only for a specific purpose.</li>
<li>A <strong>surcharge is discussed under Article 270</strong> and <strong>271</strong> of the Indian Constitution.</li>
<li>Unlike a cess, which is meant to raise revenue for a temporary need,<strong> surcharge is usually permanent in nature.</strong></li>
</ul>
</li>
</ul>
</div>
<p><a href="https://www.thehindu.com/news/national/cabinet-clears-non-lapsable-fund-for-health-care/article34036353.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
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	(int) 9 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7889,
		'category_id' => (int) 21,
		'title' => 'Rationalisation of Railway Fares',
		'description' => '<h3>Why in News</h3>
<ul style="list-style-type: square;">
<li>The <a href="/daily-updates/daily-news-analysis/extension-of-tenure-of-standing-committees" target="_blank" rel="noopener"><strong>Parliamentary Standing Committee</strong></a> on Railways has suggested <strong>rationalisation of both freight and passenger fares.</strong></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Committee&rsquo;s Observation:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Social Service Obligations:</strong><br />
<ul style="list-style-type: disc;">
<li>The <strong>losses incurred by the railways in passenger services purportedly due to the social service obligations</strong> which include pricing tickets at fares lower than costs and passenger concessions.</li>
<li>The railways incur losses to the tune of <strong>Rs. 35,000-38,000 crore a year</strong> in the passenger segment.</li>
</ul>
</li>
<li><strong>Effect of Covid:</strong><br />
<ul style="list-style-type: disc;">
<li>Revenues from passenger services further deteriorated due to suspension of operations during <strong><a href="/daily-updates/daily-news-editorials/comprehensive-action-plan-for-covid-19" target="_blank" rel="noopener">Covid-19</a>.</strong></li>
</ul>
</li>
<li><strong>Operating Ratio:</strong><br />
<ul style="list-style-type: disc;">
<li>Noted the regular deterioration in Railways <strong>Operating Ratio (OR).</strong></li>
<li><strong>OR</strong> indicates how much the Railways spend to earn a rupee. It helps determine the financial health of the Railways.</li>
<li>For example, an operating ratio of <strong>98.36% for 2019-20</strong>, indicates that to earn Rs. 100, the Railways will have to spend Rs. 98.36.<br />
<ul style="list-style-type: disc;">
<li>For <strong>2020-21</strong>, it is estimated to be <strong>131.4%</strong>.</li>
<li>For <strong>2021-22</strong>, Railways is targeting OR of <strong>96.15%</strong>.</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
<li><strong>Challenges in the Functioning of Railways:</strong><br />
<ul style="list-style-type: circle;">
<li>Indian Railways&rsquo; ills are as multifarious as they are well-known: <strong>bureaucratic,</strong> <strong>obese structure</strong> with a<strong> misconceived perception of</strong> <strong>public-service-obligation, warped investment priorities, capacity crunch on arterial routes</strong>, strained terminals, <strong>irrational fare &amp; freight structures.</strong></li>
<li>It has <strong>one of the highest rail freight charges in the world</strong>. This has also <strong>resulted in consumers moving to roadways</strong> for freight transportation, which is more convenient for them.</li>
<li>The predicament of the railways is that the <strong>profits earned from freight business are utilised to compensate for the losses incurred on passenger and other coaching services</strong>, thereby adversely affecting both freight and passenger business.</li>
</ul>
</li>
<li><strong>Committee&rsquo;s Suggestions:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Revisiting social service obligations</strong> and resuming services suspended during covid.</li>
<li><strong>Adjust Passengers Fares:</strong><br />
<ul style="list-style-type: disc;">
<li>Undertake <strong>&ldquo;prudent adjustment&rdquo;</strong> of passenger fares <strong>to reduce the burden on freight segments.</strong></li>
</ul>
</li>
<li><strong>Make Fares Demand-cum-Market Driven:</strong><br />
<ul style="list-style-type: disc;">
<li>Both passenger fares and freight rates have to be <strong>demand-cum-market driven</strong> and fixed differently for different segments.</li>
</ul>
</li>
<li><strong>Retain Customers:</strong><br />
<ul style="list-style-type: disc;">
<li>As the demand for transport is elastic in a competitive market the Railways should be mindful of the fact that <strong>any increase in fares should be confined to a certain limit depending upon the competition from other transport modes.</strong></li>
<li>The operational efficiencies of the railways in both freight and passenger business have to be leveraged to a greater extent so as to <strong>retain the customer base and enhance revenues.</strong></li>
</ul>
</li>
<li><strong>Strengthen Planning and Management:</strong><br />
<ul style="list-style-type: disc;">
<li>The railways should <strong>strengthen their planning, management and monetary mechanisms</strong> to earn substantial non-fare revenues through various methods/sources, already intended and put in place.<br />
<ul style="list-style-type: disc;">
<li><strong>For example:</strong> Dividends from its public sector undertakings, land lease, parking, sale of scrap, advertisements and publicity etc.</li>
</ul>
</li>
<li>Railway <strong>finances should be managed prudently</strong> so that the <strong>OR may reach at acceptable level</strong> in the near future.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Recent Steps</strong></p>
<ul style="list-style-type: square;">
<li><strong>Draft National Rail Plan:</strong><br />
<ul style="list-style-type: circle;">
<li>In December 2020 in an endeavour to address the inadequacies of capacity constraints and improve its modal share in the total freight ecosystem of the country, Indian Railways has come up with a Draft National Rail Plan.</li>
</ul>
</li>
<li><strong>Dedicated Freight Corridors:</strong><br />
<ul style="list-style-type: circle;">
<li>It is <a href="/daily-updates/daily-news-analysis/dedicated-freight-corridor-1" target="_blank" rel="noopener"><strong>a high speed and high capacity railway corridor</strong></a> that is exclusively meant for the transportation of freight, or in other words, goods and commodities.</li>
</ul>
</li>
<li><strong>Introduction of Policy for Private Passenger Trains Operations:</strong><br />
<ul style="list-style-type: circle;">
<li>In July 2020, Indian Railways initiated the process to allow <a href="/daily-updates/daily-news-editorials/privatizing-indian-railways#:~:text=Recently%2C%20the%20Indian%20Railways%20initiated,participation%20in%20passenger%20train%20operations." target="_blank" rel="noopener"><strong>private firms to operate passenger trains on its network through 151 new trains.</strong></a></li>
</ul>
</li>
<li><strong>Adarsh Station Scheme:</strong> <br />
<ul style="list-style-type: circle;">
<li>It aims to upgrade the suburban stations of India to <strong><a href="/daily-updates/daily-news-analysis/adarsh-station-scheme" target="_blank" rel="noopener">Adarsh stations</a>.</strong></li>
</ul>
</li>
<li><strong>Restructuring of the Railway Board and Merger of Different Railway Officer Cadres:</strong><br />
<ul style="list-style-type: circle;">
<li>In 2019-20, the government <a href="/current-affairs-news-analysis-editorials/news-editorials/16-01-2020" target="_blank" rel="noopener"><strong>approved the restructuring of the Indian Railways</strong></a>, including a reduction in the Board strength as well as the merger of the different cadres into a central service called the <strong>Indian Railway Management Service (IRMS).</strong></li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Subsidising the daily or frequent user can be done in the form of a <strong>direct-to-bank account</strong>, as is done in the case of several other government schemes. This will ensure the passengers pay a full price and<strong> the government&rsquo;s subsidy burden is reduced to only those classes who need it the most.</strong></li>
<li>As the country&rsquo;s growing transport market changes in character, the <strong>key demands would be an integrated multi-modal &lsquo;whole journey&rsquo; service.</strong> Railways&rsquo; passenger business strategy needs to aggressively target inter-city travel segments as its core business currently served by some 4,000 trains daily, addressing the acute shortage in supply of such services, substantially upgrading and accelerating them with modern pre-board and on-board services.</li>
</ul>
<p><a href="https://www.thehindu.com/todays-paper/tp-national/panel-for-tweak-in-rail-passenger-fares/article34024102.ece" target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
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	(int) 10 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7881,
		'category_id' => (int) 21,
		'title' => 'New Umbrella Entity for Payment Systems',
		'description' => '<h3>Why in News</h3>
<p>The <strong>private companies</strong> have shown interest in setting up <strong>New Umbrella Entities (NUEs)</strong> for payment systems - an idea floated by the <strong><a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener">Reserve Bank of India</a> (RBI).</strong></p>
<ul style="list-style-type: square;">
<li>The aim is to create an <strong>alternate mechanism</strong> to the existing <a href="/daily-updates/daily-news-analysis/upi-20-launched-by-npci" target="_blank" rel="noopener"><strong>National Payments Corporation of India (NPCI).</strong></a></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>New Umbrella Entities (NUEs):</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>About:</strong> NUEs will be a <strong>non-profit entity</strong> that will <strong>set-up, manage and operate new payment systems,</strong> especially in the retail space such as <a href="/daily-updates/daily-news-analysis/white-label-atm" target="_blank" rel="noopener"><strong>ATMs, white-label PoS</strong></a>; <a href="/daily-updates/daily-news-analysis/rise-in-digital-transactions" target="_blank" rel="noopener"><strong>Aadhaar-based payments and remittance services.</strong></a></li>
<li><strong>Functions Envisaged:</strong> <br />
<ul style="list-style-type: disc;">
<li>NUEs will develop <strong>new payment methods, standards and technologies.</strong></li>
<li>These will <strong>operate clearing and settlement systems, identify and manage relevant risks</strong> such as settlement, credit, liquidity and operation and<strong> preserve the integrity</strong> of the system.</li>
<li>These will <strong>monitor retail payment system developments and related issues</strong> in the country and internationally<strong> to avoid shocks, frauds</strong> and <strong>contagions</strong> that may adversely affect the system and the economy in general.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Need for NUEs:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Limitations of NPCI:</strong> Currently, the umbrella entity for providing retail payments system is NPCI, which is a non-profit entity, owned by banks. <br />
<ul style="list-style-type: disc;">
<li>NPCI operates settlement systems such as<strong> <a href="/daily-updates/daily-news-analysis/rise-in-digital-transactions" target="_blank" rel="noopener">UPI</a>, <a href="/daily-updates/daily-news-analysis/digital-transactions-in-india" target="_blank" rel="noopener">AEPS</a>, <a href="/daily-updates/daily-news-analysis/indian-digital-payment-system-outside-india" target="_blank" rel="noopener">RuPay</a>, <a href="/daily-updates/daily-news-analysis/all-about-the-fastag" target="_blank" rel="noopener">Fastag</a>,</strong> etc.</li>
<li>Players in the payments space have indicated the various pitfalls of NPCI being the only entity managing all of retail payments systems in India.</li>
</ul>
</li>
<li><strong>To Increase Competitiveness:</strong> RBI&rsquo;s plan to allow other organisations to set up umbrella entities for payments systems aims to expand the competitive landscape in this area. <br />
<ul style="list-style-type: disc;">
<li>Players planning to establish these NUE aim to get an even bigger share in the digital payments sector.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Framework Related to NUEs:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Owned and Controlled by Residents:</strong> The promoter or the promoter group for the NUE should be &lsquo;owned and controlled by residents&rsquo; with 3 years&rsquo; experience in the payments ecosystem.<br />
<ul style="list-style-type: disc;">
<li>The <strong>shareholding pattern should be diversified.</strong> Any entity holding more than 25% of the paid-up capital of the NUE will be deemed to be a promoter.</li>
</ul>
</li>
<li><strong>Capital:</strong> The umbrella entity shall have a minimum paid-up capital of Rs. 500 crore.<br />
<ul style="list-style-type: disc;">
<li>No single promoter or promoter group should have more than 40% investment in the capital of the entity.</li>
<li>A minimum net worth of Rs. 300 crore should be maintained at all times.</li>
</ul>
</li>
<li><strong>Governance Structure:</strong> The NUE should conform to the norms of corporate governance along with &lsquo;fit and proper&rsquo; criteria for persons to be appointed on its board.<br />
<ul style="list-style-type: disc;">
<li>The RBI retains the<strong> right to approve the appointment of directors</strong> as also to nominate a member on the board of the NUE.</li>
</ul>
</li>
<li><strong>Foreign Investment:</strong> Allowed in NUEs as long as they comply with the <a href="/daily-updates/daily-news-editorials/review-of-fdi-norms" target="_blank" rel="noopener"><strong>existing guidelines.</strong></a></li>
</ul>
</li>
</ul>
<p><a href="https://indianexpress.com/article/explained/explained-why-nue-marks-next-inflection-point-for-indias-payments-ecosystem-7219168/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
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	(int) 11 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7848,
		'category_id' => (int) 21,
		'title' => 'Amendment Of Insurance Ombudsman Rules, 2017',
		'description' => '<h3>Why in News</h3>
<p>Recently, the Union government amended the <strong>Insurance Ombudsman Rules, 2017, bringing insurance brokers within the ambit</strong> of the Insurance Ombudsman and also allowed policy holders to <strong>file online complaints.</strong></p>
<p>Key Points</p>
<ul style="list-style-type: square;">
<li><strong>About:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Enlarged the Scope Of Complaints:</strong> Earlier it was only disputes. Now the amended rules will cover even the <strong>deficiencies in service on the part of insurers, agents, brokers and other intermediaries.</strong></li>
<li><strong>Introduced ICT Enabled Complaint Redressal:</strong>
<ul style="list-style-type: disc;">
<li>Enables making <strong>complaints electronically.</strong></li>
<li><strong>Complaints management system</strong> to enable policyholders to track the status of their complaints online.</li>
<li><strong>Video-conferencing for hearings.</strong></li>
</ul>
</li>
<li>These amendments will strengthen the <strong>timeliness and cost-effectiveness</strong> of the mechanisms.</li>
</ul>
</li>
<li><strong>Empowering Ombudsman:</strong> <br />
<ul style="list-style-type: circle;">
<li>A number of amendments have been made for securing the independence and integrity of the ombudsman selection process, while also building in safeguards to secure the independence and impartiality of the appointed persons while serving as ombudsmen.</li>
<li>The selection committee will now include an <strong>individual with a track record</strong> of promoting consumer rights or advancing the cause of consumer protection in the insurance sector.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Insurance Ombudsman</strong></p>
<ul style="list-style-type: square;">
<li><strong>About:</strong> <br />
<ul style="list-style-type: circle;">
<li>In exercise of the powers conferred by the <strong>Insurance Regulatory and Development Authority Act, 1999</strong> and in accordance with the <strong>Redressal of Public Grievances Rules, 1998</strong>, the office of Insurance Ombudsman was established by the Central Government.</li>
<li>Its powers, functions, terms of office etc. were laid in <strong>Insurance Ombudsman Rules, 2017.</strong></li>
</ul>
</li>
<li><strong>Qualification:</strong> <br />
<ul style="list-style-type: circle;">
<li>An Ombudsman shall be selected from amongst persons having experience of the insurance industry, civil service, administrative service or judicial service.</li>
</ul>
</li>
<li><strong>Selection:</strong> <br />
<ul style="list-style-type: circle;">
<li>An Ombudsman shall be selected by a Selection Committee comprising of: <br />
<ul style="list-style-type: disc;">
<li>Chairperson of the <a href="/daily-updates/daily-news-editorials/insurance-sector-in-india" target="_blank" rel="noopener"><strong>Insurance Regulatory and Development Authority (IRDA)</strong></a> who is also the Chairman of the Selection Committee.</li>
<li>One representative each of the Life Insurance Council and the General Insurance Council from the Executive Council of Insurers.</li>
<li>A representative of the Government of India not below the rank of a Joint Secretary.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Term of Office:</strong> <br />
<ul style="list-style-type: circle;">
<li>Three years and it is eligible for reappointment provided that no person shall hold office as an Ombudsman after he has attained the age of seventy years.</li>
</ul>
</li>
<li><strong>Duties and Functions:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Mediation And Counselling:</strong> The Ombudsman shall act as counsellor and mediator relating to matters where there is written consent of the parties to the dispute.</li>
<li><strong>Grievance Redressal:</strong> The IRDAI may, at any time refer any complaint or dispute relating to insurance matters to the Insurance Ombudsman.</li>
</ul>
</li>
</ul>
</div>
<p><a href="https://www.thehindu.com/business/Industry/govt-brings-insurance-brokers-within-ombudsman-ambit/article33978203.ece" target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
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	(int) 12 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7786,
		'category_id' => (int) 21,
		'title' => 'PLI Scheme for IT Hardware and Pharmaceuticals',
		'description' => '<h3>Why in News</h3>
<p>Recently, the Union Cabinet has cleared <a href="/daily-updates/daily-news-analysis/pli-scheme-for-ten-more-sectors" target="_blank" rel="noopener"><strong>Production-Linked incentive (PLI)</strong></a> schemes for <a href="/daily-updates/daily-news-editorials/india-s-pharma-sector" target="_blank" rel="noopener"><strong>pharmaceuticals</strong></a> and<strong> IT hardware,</strong> including laptops, which would cost the government as much as Rs. 22,350 crore.</p>
<ul style="list-style-type: square;">
<li>Earlier, the government had announced the <a href="/daily-updates/daily-news-analysis/schemes-for-electronic-manufacturing" target="_blank" rel="noopener"><strong>PLI scheme for medical devices, mobile phones</strong></a> and specified active pharmaceutical ingredients, with a proposed outlay of Rs. 51,311 crore.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>PLI Scheme:</strong><br />
<ul style="list-style-type: circle;">
<li>It aims to give companies<strong> incentives on incremental sales</strong> from products manufactured in domestic units.</li>
<li>It invites foreign companies to set units in India, however, it also <strong>aims to encourage local companies</strong> to set up or expand existing manufacturing units.</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1614327847_image1.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1614327847_image1.png" style="display: block; margin-left: auto; margin-right: auto;" width="350" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li><strong>IT Hardware Sector:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>About:</strong><br />
<ul style="list-style-type: disc;">
<li>The scheme, worth Rs. 7350 crore, will <strong>offer 1-4% cash incentives</strong> on net incremental sales (over<strong> base year</strong> 2019-20) for IT products manufactured in India.</li>
<li>The <strong>Target Segments</strong> include Laptops, Tablets, All-in-One PCs and Servers.</li>
<li><strong>Duration:</strong> 4 years</li>
</ul>
</li>
<li><strong>Benefits:</strong><br />
<ul style="list-style-type: disc;">
<li>India will be well positioned as a global hub for <strong>Electronics System Design and Manufacturing (ESDM)</strong> on account of integration with global value chains, thereby becoming a destination for IT Hardware exports.</li>
<li><strong>Employment Generation</strong> potential of over 1,80,000 (direct and indirect) over 4 years.</li>
<li>Provide impetus to <strong>Domestic Value Addition</strong> for IT Hardware which is expected to <strong>rise to 20-25% by 2025.</strong></li>
</ul>
</li>
</ul>
</li>
<li><strong>Pharmaceutical Sector:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>About:</strong><br />
<ul style="list-style-type: disc;">
<li>The <strong>Rs. 6,940-crore PLI scheme implemented in 2020</strong> focuses on the critical bulk drugs, whereas <strong>this scheme is likely to focus on other types of bulk drugs.</strong></li>
<li>It intends to give <strong>incentives between 2020-21 and 2028-29 (9 years).</strong></li>
<li><strong>Drug manufacturers</strong> applying for the scheme will have to be registered in India and<strong> will be placed into one of three categories</strong> based on their Global Manufacturing Revenue (GMR).</li>
</ul>
</li>
<li><strong>Categories of Drugs Targeted by the Scheme:</strong><br />
<ul style="list-style-type: disc;">
<li><strong>First Category:</strong><br />
<ul style="list-style-type: disc;">
<li>It includes biopharmaceuticals, complex generics, patented and <a href="/daily-updates/daily-news-analysis/covid-19-and-the-orphan-drug-act" target="_blank" rel="noopener"><strong>orphan drugs</strong></a>, often expensive for which India relies a lot on multinational drug makers.</li>
</ul>
</li>
<li><strong>Second Category:</strong><br />
<ul style="list-style-type: disc;">
<li>It comprises <a href="/daily-updates/daily-news-analysis/report-on-active-pharmaceutical-ingredients-tifac" target="_blank" rel="noopener"><strong>Active Pharmaceutical Ingredients (APIs)</strong></a>, Key Starting Materials (KSMs) and Drug Intermediates (DIs).</li>
</ul>
</li>
<li><strong>Third Category:</strong> <br />
<ul style="list-style-type: disc;">
<li>It includes other critical repurposed, auto-immune, anti-<strong><a href="/daily-updates/daily-news-analysis/national-cancer-awareness-day#:~:text=According%20to%20the%20World%20Health,2018%20against%209.5%20million%20globally." target="_blank" rel="noopener">cancer</a></strong>, anti-diabetic, <a href="/loksabha-rajyasabha-discussions/hiv-new-hope" target="_blank" rel="noopener"><strong>anti-retroviral</strong></a>, anti-infective and <a href="/daily-updates/daily-news-analysis/higher-mortality-from-cardio-vascular-diseases" target="_blank" rel="noopener"><strong>cardiovascular</strong></a> drugs as well as in-vitro diagnostic devices and drugs not manufactured in India.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Incentives:</strong><br />
<ul style="list-style-type: disc;">
<li><strong>For First and Second Category:</strong><br />
<ul style="list-style-type: disc;">
<li><strong>10%</strong> of incremental sales value for the first four year of the scheme, followed by <strong>8%</strong> for the fifth year and<strong> 6%</strong> for the sixth year of production under the scheme.</li>
</ul>
</li>
<li><strong>For Third Category:</strong><br />
<ul style="list-style-type: disc;">
<li><strong>5%</strong> of incremental sales value for the first four years, <strong>4%</strong> for the fifth year and<strong> 3%</strong> for the sixth year.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Benefits of PLI in Pharmaceuticals:</strong><br />
<ul style="list-style-type: disc;">
<li><strong>Reduced Dependency on China:</strong><br />
<ul style="list-style-type: disc;">
<li>India&rsquo;s capabilities in APIs have reduced over the years, mostly due to<strong> cheaper alternatives from China.</strong></li>
<li>The pharmaceutical industry here is currently dependent on the bordering country for nearly <strong>70% of the bulk drugs it imports.</strong></li>
</ul>
</li>
<li><strong>Enhance Exports:</strong><br />
<ul style="list-style-type: disc;">
<li>The Indian pharmaceutical industry is the third-largest globally in terms of the volume term of production and is worth <strong>USD 40 billion in value.</strong></li>
<li>The country contributes <strong>3.5% of total drugs and medicines exported globally.</strong></li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
</ul>
<p><a href="https://indianexpress.com/article/india/govt-clears-pli-scheme-to-boost-manufacturing-of-laptops-tablets-pcs-7202926/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
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	(int) 13 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7677,
		'category_id' => (int) 21,
		'title' => 'National Coal Index',
		'description' => '<h3>Why in News</h3>
<p>Recently, the <strong>Ministry of Coal</strong> has started <strong>commercial auction of <a href="/to-the-points/paper3/coal-sector-in-india" target="_blank" rel="noopener">coal</a> mines </strong>on<strong> a revenue share basis </strong>using the<strong> National Coal Index (NCI).</strong></p>
<ul style="list-style-type: square;">
<li>NCI was <strong>rolled out in June 2020.</strong></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>About:</strong><br />
<ul style="list-style-type: circle;">
<li>It is a price index which <strong>reflects the change of price level of coal in a particular month relative to the fixed base year.</strong> <br />
<ul style="list-style-type: disc;">
<li>The base year for the NCI is <strong><a href="/to-the-points/paper3/government-budgeting" target="_blank" rel="noopener">Financial Year</a> 2017-18. </strong></li>
</ul>
</li>
</ul>
</li>
<li><strong>Compilation:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Prices of coal from all the sales channels of coal,</strong> including import, as existing today are taken into account for compiling the NCI.</li>
<li>The <strong>amount of revenue share</strong> per tonne of coal produced from auctioned blocks would be arrived at using the NCI by means of defined formula.</li>
</ul>
</li>
<li><strong>Sub-Indices:</strong> NCI is composed of a set of<strong> five</strong> sub-indices: <br />
<ul style="list-style-type: circle;">
<li>Three for <strong>Non Coking Coal</strong> and two for <strong>Coking Coal.</strong></li>
<li>The three sub-indices for Non Coking Coal are combined to arrive at the Index for Non Coking Coal and the two sub-indices for Coking Coal are combined to arrive at the Index for Coking Coal.</li>
<li>Thus,<strong> indices are separate for Non Coking and Coking Coal.</strong> <br />
<ul style="list-style-type: disc;">
<li>As per the grade of coal pertaining to a mine, the appropriate sub-index is used to arrive at the revenue share.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Coal</strong></p>
<ul style="list-style-type: square;">
<li>Coal is the most abundant fossil fuel which <strong>holds 55% of India's energy need.</strong></li>
<li>Based on the <strong>uses,</strong> coal is divided into <strong>two types:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Coking Coal:</strong><br />
<ul style="list-style-type: disc;">
<li>This type of coal when subjected to high temperature carbonisation i.e. heating in the absence of air to a temperature above 600 degree Celsius, <strong>forms a solid porous residue called coke.</strong> <br />
<ul style="list-style-type: disc;">
<li><strong>Coke</strong> is fed into a blast furnace along with iron ore and limestone to produce steel in steel plants.</li>
</ul>
</li>
<li>Coking coal is desired to be of<strong> low ash percentage.</strong></li>
<li><strong>Use:</strong> <br />
<ul style="list-style-type: disc;">
<li>Mainly used in steel making and metallurgical industries.</li>
<li>Also used for hard coke manufacturing.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Non Coking Coal:</strong><br />
<ul style="list-style-type: disc;">
<li>These are coals without coking properties.</li>
<li><strong>Use:</strong><br />
<ul style="list-style-type: disc;">
<li>This is the coal used in thermal power plants to generate electricity, so it is also known as <strong>steam coal or thermal coal.</strong></li>
<li>Also used for cement, fertilizer, glass, ceramic, paper, chemical and brick manufacturing, and for other heating purposes.</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
<li>Coal is <strong>also classified into four ranks: anthracite, bituminous, subbituminous, and lignite.</strong> The ranking <strong>depends on the types and amounts of carbon the coal contains </strong>and<strong> on the amount of heat energy</strong> the coal can produce.</li>
</ul>
</div>
<p><a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1697033" target="_blank" rel="noopener"><strong>Source:PIB</strong></a></p>',
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	(int) 14 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7666,
		'category_id' => (int) 21,
		'title' => 'Privatisation of Banks',
		'description' => '<h3>Why in News</h3>
<p>The <a href="/current-affairs-news-analysis-editorials/news-analysis/03-02-2021#:~:text=Key%20Points,(BE)%202021%2D22." target="_blank" rel="noopener"><strong>Union Budget 2021</strong></a> has announced the <strong>privatisation of two public sector banks and one general insurance company</strong> in the upcoming fiscal 2021-22.</p>
<ul style="list-style-type: square;">
<li>The move, coming after 51 years of<a href="/daily-updates/daily-news-editorials/50-years-of-nationalization-of-banks" target="_blank" rel="noopener"><strong> nationalisation of government-owned banks in 1969</strong></a>, will give the private sector a key role in the banking sector.</li>
<li>Presently, India has <strong>22 private banks </strong>and<strong> 10 <a href="/to-the-points/paper3/small-finance-bank-1" target="_blank" rel="noopener">small finance banks.</a></strong></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Background:</strong><br />
<ul style="list-style-type: circle;">
<li>The government decided to nationalise the <strong>14 largest private banks</strong> in 1969. The idea was to<strong> align the banking sector with the socialistic approach</strong> of the then government. <br />
<ul style="list-style-type: disc;">
<li>State Bank of India (SBI) had been nationalised in 1955 itself, and the insurance sector in 1956.</li>
</ul>
</li>
<li>Various governments in the last 20 years were for and against privatisation of Public Sector Undertaking (PSU) banks. In 2015, the government had suggested privatisation but the then <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener"><strong>Reserve Bank of India (RBI)</strong></a> Governor did not favour the idea.</li>
<li>The current steps of privatisation, along with setting up an <a href="/daily-updates/daily-news-editorials/bad-bank" target="_blank" rel="noopener"><strong>Asset Reconstruction Company (Bad Bank)</strong></a> entirely owned by banks, underline an<strong> approach of finding market-led solutions to challenges in the financial sector.</strong></li>
</ul>
</li>
<li><strong>Reason for Privatisation:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Degrading Financial Position of Public Sector Banks:</strong> <br />
<ul style="list-style-type: disc;">
<li>Years of capital injections and <strong>governance reforms have not been able to improve the financial position of public sector banks significantly.</strong></li>
<li>Many of them have <strong>higher levels of stressed assets</strong> than private banks, and also lag the latter on profitability, market capitalisation and dividend payment record.<a href="http://www.drishtiias.com/images/uploads/1613032203_image1.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1613032203_image1.png" style="display: block; margin-left: auto; margin-right: auto;" caption="false" width="697" height="310" /></a></li>
</ul>
</li>
<li><strong>Part of a Long-Term Project:</strong> <br />
<ul style="list-style-type: disc;">
<li>Privatisation of two public sector banks will set the ball rolling for a <strong>long-term project that envisages only a handful of state-owned banks,</strong> with the rest either consolidated with strong banks or privatised. <br />
<ul style="list-style-type: disc;">
<li>The <strong>initial plan of the government was to privatise four.</strong> Depending on the success with the first two, the government is likely to go for divestment in another two or three banks in the next financial year.</li>
</ul>
</li>
<li>This will free up the government, the majority owner, from continuing to provide equity support to the banks year after year. <br />
<ul style="list-style-type: disc;">
<li>Through a series of moves over the last few years, the government is now left with <strong>12 state-owned banks, from 28 earlier.</strong></li>
</ul>
</li>
</ul>
</li>
<li><strong>Strengthening Banks:</strong><br />
<ul style="list-style-type: disc;">
<li>The government is trying to<strong> strengthen the strong banks</strong> and also minimise their numbers through privatisation to reduce its burden of support.</li>
</ul>
</li>
<li><strong>Recommendations of Different Committees:</strong><br />
<ul style="list-style-type: disc;">
<li>Many committees had proposed bringing down the government stake in public banks below 51%:<br />
<ul style="list-style-type: disc;">
<li>The <strong><a href="/daily-updates/daily-news-analysis/amalgamation-of-three-public-sector-banks" target="_blank" rel="noopener">Narasimham Committee</a> proposed 33%.</strong></li>
<li>The<strong><a href="/to-the-points/paper3/merger-of-psbs" target="_blank" rel="noopener"> P J Nayak Committee</a> suggested below 50%.</strong></li>
</ul>
</li>
<li>An<a href="/daily-updates/daily-news-analysis/internal-working-group-recommendations-rbi" target="_blank" rel="noopener"><strong> RBI Working Group</strong></a> recently suggested the entry of business houses into the banking sector.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Selection of Banks:</strong><br />
<ul style="list-style-type: circle;">
<li>The two banks that will be privatised will be selected through a process in which <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/niti-aayog-national-institution-for-transforming-india" target="_blank" rel="noopener"><strong>NITI Aayog</strong></a> will make recommendations, which will be considered by a core group of secretaries on disinvestment and then the<strong> Alternative Mechanism (or Group of Ministers).</strong></li>
</ul>
</li>
<li><strong>Issues with PSU Banks:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>High Non-Performing Assets (NPAs):</strong> <br />
<ul style="list-style-type: disc;">
<li>After a series of mergers and equity injections by the government, the performance of public sector banks has shown improvement over the last couple of years. However, compared with private banks, they continue to have <strong>high <a href="/daily-updates/daily-news-editorials/lessons-from-npa-crisis" target="_blank" rel="noopener">NPAs</a> and stressed assets</strong> although this has started declining.</li>
</ul>
</li>
<li><strong>Impact of Covid:</strong><br />
<ul style="list-style-type: disc;">
<li>After the Covid-related regulatory relaxations are lifted, banks are expected to report higher NPAs and loan losses. <br />
<ul style="list-style-type: disc;">
<li>As per the RBI&rsquo;s recent <strong><a href="/daily-updates/daily-news-analysis/financial-stability-report-rbi-2" target="_blank" rel="noopener">Financial Stability Report</a>,</strong> gross NPA ratio of all commercial banks may increase from 7.5% in September 2020 to 13.5% by September 2021.</li>
</ul>
</li>
<li>This would mean the government would again need to inject equity into weak public sector banks.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Performance of Private Banks:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Rising Market Share:</strong><br />
<ul style="list-style-type: disc;">
<li>Private banks&rsquo; market share in loans has risen to 36% in 2020 from 21.26% in 2015, while public sector banks&rsquo; share has fallen to 59.8% from 74.28%.</li>
</ul>
</li>
<li><strong>Better Products and Services:</strong><br />
<ul style="list-style-type: disc;">
<li>Competition heated up after the RBI allowed more private banks since the 1990s. They have expanded the market share through <strong>new products, technology, and better services,</strong> and also attracted better valuations in stock markets.<br />
<ul style="list-style-type: disc;">
<li>HDFC Bank (set up in 1994) has a market capitalisation of Rs. 8.80 lakh crore while SBI commands just Rs. 3.50 lakh crore.</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
<li><strong>Issues with Private Banks:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Governance Issues:</strong> <br />
<ul style="list-style-type: disc;">
<li><a href="/daily-updates/daily-news-editorials/rediscovering-development-banks" target="_blank" rel="noopener"><strong>Industrial Credit and Investment Corporation of India (ICICI) Bank</strong></a> MD and CEO was sacked for allegedly extending dubious loans.</li>
<li><a href="/daily-updates/daily-news-editorials/the-yes-bank-crisis" target="_blank" rel="noopener"><strong>Yes Bank</strong></a> CEO was not given extension by the RBI and now faces investigations by various agencies.</li>
<li><a href="/daily-updates/daily-news-analysis/lakshmi-vilas-bank-crisis" target="_blank" rel="noopener"><strong>Lakshmi Vilas Bank faced operational issues</strong></a> and was recently merged with DBS Bank of Singapore.</li>
</ul>
</li>
<li><strong>Under-reported NPAs:</strong><br />
<ul style="list-style-type: disc;">
<li>When the RBI ordered an asset quality review of banks in 2015, many private sector banks, including Yes Bank, were found <strong>under-reporting NPAs.</strong></li>
</ul>
</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>In order to improve the governance and management of PSBs, there is a need to implement the recommendations of the<strong> PJ Nayak committee.</strong></li>
<li>Rather than blind privatisation, PSBs can be made into a corporation like <a href="/daily-updates/daily-news-analysis/initial-public-offer-lic" target="_blank" rel="noopener"><strong>Life Insurance Corporation (LIC)</strong></a>. While maintaining government ownership, this will give more autonomy to PSBs.</li>
</ul>
<p><a href="https://indianexpress.com/article/explained/privatisation-of-public-sector-banks-union-budget-npas-psu-7183446/" target="_blank" rel="noopener"><strong>Source:IE</strong></a></p>',
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		'article_id' => (int) 7665,
		'category_id' => (int) 21,
		'title' => 'Impact of Crude Oil Price Hike',
		'description' => '<h3>Why in News</h3>
<p>Recently, the<strong> price of Brent crude crossed the USD 60 per barrel mark after over a year.</strong> The rise in prices is<strong> because of production cuts</strong> by oil-producing countries and<strong> expectations of improvements in global demand</strong> as the <a href="/daily-updates/daily-news-editorials/covid-19-vaccine-distribution" target="_blank" rel="noopener"><strong>Covid-19 vaccine</strong></a> is rolled out across the world.</p>
<ul style="list-style-type: square;">
<li>In April 2020, the<a href="/daily-updates/daily-news-analysis/oil-prices-below-zero" target="_blank" rel="noopener"><strong> West Texas Intermediate (WTI) crude slipped below zero</strong></a> for the first time in history, to a negative USD 40.32 per barrel.</li>
<li><strong>Two crude oils</strong> which are either traded themselves or whose prices are reflected in other types of crude oil include <strong>West Texas Intermediate (WTI) and Brent.</strong></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Oil Pricing:</strong> <br />
<ul style="list-style-type: circle;">
<li>Generally, the <strong><a href="/daily-updates/daily-news-analysis/talks-on-oil-cut-deal-at-g-20" target="_blank" rel="noopener">Organization of the Petroleum Exporting Countries</a> (OPEC)</strong> used to<strong> work as a cartel</strong> and fix prices in a favourable band.<br />
<ul style="list-style-type: disc;">
<li><strong>OPEC is led by Saudi Arabia,</strong> which is the<strong> largest exporter of crude oil</strong> in the world (single-handedly exporting 10% of the global demand).</li>
<li>OPEC has a <strong>total of 13 Member Countries</strong> viz. Iran, Iraq, Kuwait, United Arab Emirates (UAE), Saudi Arabia, Algeria, Libya, Nigeria, Gabon, Equatorial Guinea, Republic of Congo, Angola, and Venezuela.</li>
</ul>
</li>
<li>OPEC <strong>could bring down prices by increasing oil production</strong> and raise prices by cutting production.</li>
<li>The global oil pricing mainly <strong>depends upon the partnership between the global oil exporters instead of a well-functioning competition.</strong></li>
<li>Cutting oil production or <strong>completely shutting down an oil well is a difficult decision,</strong> because restarting it is immensely costly and complicated.<br />
<ul style="list-style-type: disc;">
<li>Moreover, if a country cuts production, it risks losing market share if other countries do not follow the suit.</li>
</ul>
</li>
<li>Recently, OPEC has been working with Russia, as <a href="/daily-updates/daily-news-analysis/opec" target="_blank" rel="noopener"><strong>OPEC+</strong> </a>to fix the global prices and supply.<br />
<ul style="list-style-type: disc;">
<li>In 2016,<strong> OPEC allied with other top non-OPEC oil-exporting nations</strong> to form an even more powerful entity named OPEC+ or OPEC Plus.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Reasons for Present Price Hike:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Limited Supply:</strong> <br />
<ul style="list-style-type: disc;">
<li>Major oil-producing countries <strong>had cut oil production last year</strong> amid a sharp fall in demand due to the Covid-19 pandemic. <br />
<ul style="list-style-type: disc;">
<li>Saudi Arabia pledged extra supply cuts in February and March 2020 following reductions by other members of the<strong> Organization of the Petroleum Exporting Countries (OPEC)</strong> and its allies.</li>
</ul>
</li>
<li>In early January 2021, the <strong>OPEC and Russia</strong> (as OPEC+) agreed to <strong>cut back on oil production to increase prices.</strong></li>
</ul>
</li>
<li><strong>Rising Demand:</strong><br />
<ul style="list-style-type: disc;">
<li>The<strong> production and rollout of vaccines</strong> for Covid-19 and the <strong>rising consumption post the Covid lockdowns</strong> last year have both led to a revival in international crude oil prices.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Impact on India:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Current Account Deficit:</strong> The increase in oil prices will <strong>increase the country&rsquo;s import bill,</strong> and further <strong>disturb its current account deficit</strong> (excess of imports of goods and services over exports).<br />
<ul style="list-style-type: disc;">
<li>According to estimates, a one-dollar increase in crude oil price increases the oil bill by around USD 1.6 billion per year.</li>
<li><strong>India imports 80% of its crude oil requirements</strong> and the average price of Indian basket of crude oil has already risen to USD 54.8 barrel for January 2021.</li>
</ul>
</li>
<li><strong>Inflation:</strong> The increase in crude prices could also also further increase <a href="/daily-updates/daily-news-analysis/inflation-data-august-2020" target="_blank" rel="noopener"><strong>inflationary pressures</strong></a> that have been building up over the past few months.<br />
<ul style="list-style-type: disc;">
<li>This will <strong>decrease the space for the <a href="/daily-updates/daily-news-analysis/repo-rate-unchanged-1" target="_blank" rel="noopener">monetary policy committee</a> to ease policy rates</strong> further.</li>
<li>The government <strong>had hiked central taxes on petrol and diesel</strong> by Rs. 13 per litre and Rs. 11 per litre in 2020 to boost revenues amid lower economic activity.</li>
</ul>
</li>
<li><strong>Fiscal Health:</strong> If oil prices continue to increase, the government shall be forced to cut taxes on petroleum and diesel which may cause loss of revenue and deteriorate its <a href="/daily-updates/daily-news-analysis/increased-fiscal-deficit" target="_blank" rel="noopener"><strong>fiscal balance.</strong></a><br />
<ul style="list-style-type: disc;">
<li>The growth slowdown in the last two years has already resulted in a precarious fiscal situation because of tax revenue shortfalls.</li>
<li>The revenue lost will erode the government&rsquo;s ability to spend or meet its fiscal commitments in the form of budgetary transfers to states, payment of dues and compensation for revenue shortfalls to state governments under the <a href="/to-the-points/paper3/goods-and-services-tax-gst-1" target="_blank" rel="noopener"><strong>goods and services tax (GST)</strong></a> framework.</li>
</ul>
</li>
<li><strong>Positive Outcomes:</strong> However, there could be a positive side for India too from the oil price hike.<br />
<ul style="list-style-type: disc;">
<li>The value of Indian oil and gas companies could be positively impacted. The government could get greater value from <a href="/daily-updates/daily-news-analysis/government-s-disinvestment-plans" target="_blank" rel="noopener"><strong>disinvestment</strong></a> in Bharat Petroleum Corporation Limited.</li>
<li><strong>Remittances</strong> from the Persian Gulf could <strong>increase.</strong></li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Difference between Brent and WTI</strong></p>
<ul style="list-style-type: square;">
<li><strong>Origin:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Brent</strong> crude oil <strong>originates from oil fields in the North Sea</strong> between the Shetland Islands and Norway.</li>
<li><strong>West Texas Intermediate (WTI)</strong> is sourced from<strong> US oil fields,</strong> primarily in Texas, Louisiana, and North Dakota.</li>
</ul>
</li>
<li><strong>Light and Sweet:</strong><br />
<ul style="list-style-type: circle;">
<li>Both oils are relatively light, but<strong> Brent has a slightly higher API gravity,</strong> making WTI the lighter of the two.<br />
<ul style="list-style-type: disc;">
<li><strong>American Petroleum Institute (API) gravity</strong> is an indicator of the density of crude oil or refined products.</li>
</ul>
</li>
<li><strong>WTI with a lower sulphur content</strong> (0.24%) than Brent (0.37%), is <strong>considered "sweeter".</strong></li>
</ul>
</li>
<li><strong>Benchmark Prices:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Brent crude price</strong> is the international benchmark price <strong>used by the OPEC</strong> while <strong>WTI crude price</strong> is a benchmark for<strong> US oil prices.</strong></li>
<li>Since India imports primarily from OPEC countries, <strong>Brent is the benchmark for oil prices in India.</strong></li>
</ul>
</li>
<li><strong>Cost of Shipping:</strong><br />
<ul style="list-style-type: circle;">
<li>Cost of shipping <strong>for Brent crude is typically lower,</strong> since it is produced near the sea and it can be put on ships immediately.</li>
<li><strong>Shipping of WTI is priced higher</strong> since it is produced in landlocked areas like Cushing, Oklahoma where the storage facilities are limited.</li>
</ul>
</li>
</ul>
</div>
<p><a href="https://indianexpress.com/article/explained/crude-oil-price-rise-explained-7181078/" target="_blank" rel="noopener"><strong>Source:IE</strong></a></p>',
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	(int) 16 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7644,
		'category_id' => (int) 22,
		'title' => 'Infrastructure Push',
		'description' => '<div class="border">
<p>This article is based on <a href="https://www.thehindu.com/opinion/lead/infrastructure-push-now-fiscal-consolidation-later/article33776405.ece" target="_blank" rel="noopener"><strong>&ldquo;Infrastructure push now, fiscal consolidation later&rdquo;</strong> </a>which was published in The Hindu on 08/02/2021. It talks about the concerns related to infrastructure development in India.</p>
</div>
<p>Presently, the Indian economy is facing an acute economic crisis, triggered Covid-19 pandemic. The National Statistical Office has estimated that the economy would shrink by 7.7%. Against this background, <a href="/daily-updates/daily-news-analysis/budget-2021-highlights-infrastructure" target="_blank" rel="noopener"><strong>Budget 2021</strong></a> has provided a reasonable stimulus to infrastructure growth.</p>
<p>However, apart from concerns emanating from the rising fiscal deficit, infrastructure development in India has its own issues. Thus, if the Indian economy wants to reap intended benefits and minimize risks of contemplated fiscal stimulus, there is a need to carry out reforms that impede the development of Infrastructure.</p>
<h3>Some of the Proposed Budget Initiatives</h3>
<ul style="list-style-type: square;">
<li>Setting up of a Development Finance Institution (DFI) with an initial capital of ₹20,000 crores, to serve as a catalyst for facilitating infrastructure investment.</li>
<li>The budgeted increase in capital outlay would provide the central government&rsquo;s share to the <strong><a href="/loksabha-rajyasabha-discussions/the-big-picture-national-infrastructure-pipeline-nip-dashboard" target="_blank" rel="noopener">National Infrastructure Pipeline (NIP)</a>.</strong></li>
<li>An important initiative pertains to the launching of a National Monetisation Pipeline. <br />
<ul style="list-style-type: circle;">
<li>This would be the first practical step towards asset monetization.</li>
</ul>
</li>
<li>In order to manage the non-performing assets of public sector banks, there is a proposal to set up a Bad Bank.</li>
</ul>
<h3>Issues Related To Infrastructure Development</h3>
<ul style="list-style-type: square;">
<li><strong>Revenue Shortfall:</strong> Slippage in revenue estimates may not be ruled out on account of the realization of lower than anticipated increases in nominal GDP growth, direct tax buoyancy, and disinvestment targets.</li>
<li><strong>Lesser Funds With States:</strong> The Union government has accepted the<a href="/daily-updates/daily-news-analysis/j-k-and-15th-finance-commission#:~:text=The%2015th%20Finance%20Commission,April%202020%20to%20March%202025." target="_blank" rel="noopener"><strong> 15<sup>th</sup> Finance Commission report recommendation</strong></a>, according to which vertical share of tax devolution from the center to states has been reduced 42% to 41%.<br />
<ul style="list-style-type: circle;">
<li>Moreover, the central government increasingly resort to the imposition of cesses which are almost permanent have reduced the shareable pool.</li>
</ul>
</li>
<li><strong>Issues Associated With Burgeoning Fiscal Deficit:</strong> Infrastructure development in India will be funded by fiscal stimulus.<br />
<ul style="list-style-type: circle;">
<li>This can be reflected as the Centre has indicated taking the fiscal deficit to 4.5% of GDP by 2025-26.</li>
<li>However, the rising fiscal deficit can cause macro-economic stability issues like high inflation, crowding out, a downgrade of international ratings, etc.</li>
</ul>
</li>
<li><strong>Issues Associated With Bad Bank:</strong> Finding buyers for bad assets in a pandemic hit economy will be a challenge, especially when governments are facing the issue of containing the fiscal deficit.<br />
<ul style="list-style-type: circle;">
<li>Also, the <a href="/daily-updates/daily-news-editorials/bad-bank" target="_blank" rel="noopener"><strong>bad bank idea</strong></a> is like shifting loans from one government pocket (the public sector banks) to another (the bad bank).</li>
</ul>
</li>
<li><strong>Structural Problems:</strong> Due to land acquisition delays and litigation issues, the rate of implementation of projects is very slow on global standards. <br />
<ul style="list-style-type: circle;">
<li>Further, getting approvals are very difficult in terms of land access, environmental clearances, impending litigation in court delays the infrastructure projects.</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li><strong>Multi-Stakeholder Approach:</strong> The success of the infrastructure expansion plan would depend on other stakeholders of the pipeline playing their due role. <br />
<ul style="list-style-type: circle;">
<li>These include State governments and their public sector enterprises and the private sector.</li>
<li>In this context, the Fifteenth Finance Commission has recommended the setting up of a High-Powered Intergovernmental Group to re-examine the fiscal responsibility legislations of the Centre and States.</li>
</ul>
</li>
<li><strong>National Infrastructure Pipeline:</strong> The NIP is a step in the right direction. <br />
<ul style="list-style-type: circle;">
<li>However, there is a need to facilitate the assimilation of data and information from all the stakeholders like Central and State Governments, Urban Local Bodies, Banks and Financial Institution, PE funds, and private investors, both local and foreign on one platform to increase accountability and transparency in the infrastructure sector.</li>
</ul>
</li>
<li><strong>Banking Reforms:</strong> So long as Public sector bank managements remain beholden to politicians and bureaucrats, their deficit in professionalism will remain and subsequently, prudential norms in lending will continue to suffer. <br />
<ul style="list-style-type: circle;">
<li>Therefore, the debate regarding setting up a bad bank must be preceded by proper implementation of holistic reforms in the banking sector, as envisaged under the IndraDhanush plan.</li>
</ul>
</li>
</ul>
<h3>Conclusion</h3>
<p>Huge fiscal stimulus, provided by the government in the Budget 2021 is a step in the right direction. However, it needs to address structural and macroeconomic stability concerns, emanating from high public expenditure.</p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #f8fff7;">
<p><span style="color: #333399;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>If the Indian economy wants to reap intended benefits and minimize risks of contemplated fiscal stimulus, there is a need to carry out reforms that impede the development of Infrastructure. Analyze.</p>
</td>
</tr>
</tbody>
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	(int) 17 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7623,
		'category_id' => (int) 21,
		'title' => 'Increased Farm Exports',
		'description' => '<h3>Why in News</h3>
<p>According to the Ministry of Commerce and Industry, <strong>farm exports have registered 9.8% growth</strong> for the period of April-December 2020.</p>
<ul style="list-style-type: square;">
<li>Previously, the government of India launched the <a href="/daily-updates/daily-news-analysis/remission-of-duties-or-taxes-on-export-product" target="_blank" rel="noopener"><strong>Remission of Duties or Taxes on Export Product (RoDTEP)</strong></a> scheme replacing <a href="/daily-updates/daily-news-analysis/capping-of-meis-scheme-benefits" target="_blank" rel="noopener"><strong>Merchandise Exports from India Scheme (MEIS)</strong></a> to further improve exports.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Data for April-December 2020:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Overall merchandise exports:</strong> Registered 15.5% fall.</li>
<li><strong>Farm exports:</strong> Registered 9.8% growth.<br />
<ul style="list-style-type: disc;">
<li>Overall merchandise exports include all the goods manufactured in India while Farm exports include only the agricultural products.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Reasons For Growth in Farm Exports:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Rising International Prices:</strong><br />
<ul style="list-style-type: disc;">
<li><strong>Normalisation of Demands:</strong> <br />
<ul style="list-style-type: disc;">
<li>Due to steady normalisation of demand with most countries unlocking their economies after May 2020 and, at the same time, <strong>restoration of supply chains</strong> post-<a href="/daily-updates/daily-news-editorials/covid-19-vaccine-policy#:~:text=Although%20India%20will%20not%20need,vaccines%20need%20a%20booster%20dose." target="_blank" rel="noopener"><strong>Covid</strong></a> not keeping pace has made exports of many farm products from India competitive.</li>
<li>That includes <strong>non-basmati rice, sugar, oilseed meals, cotton and even <a href="/daily-updates/daily-news-analysis/india-s-potential-to-increase-cereals-export#:~:text=Rice%20(including%20Basmati%20and%20Non,during%20the%20year%202019%2D20." target="_blank" rel="noopener">wheat and other cereals (mainly maize)</a></strong>.</li>
<li>Earlier, the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/united-nations-1" target="_blank" rel="noopener"><strong>United Nations (UN) Food and Agricultural Organization (FAO)</strong></a>, released its latest <strong>Food Price Index (FPI)</strong> for January 2021, which showed that the <a href="/daily-updates/daily-news-analysis/world-food-price-index-fao" target="_blank" rel="noopener"><strong>FPI has increased from a 48-month-low to a 78-month-high</strong></a>.</li>
</ul>
</li>
<li><strong>Chinese Stockpiling:</strong> <br />
<ul style="list-style-type: disc;">
<li>Global prices have also been increased by Chinese stockpiling.</li>
<li>It had stepped up imports of everything &ndash; from maize, wheat, soyabean and barely to sugar and milk powder &ndash; <strong>to build strategic food reserves amid geopolitical tensions</strong>.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Dry Weather of Different Countries:</strong><br />
<ul style="list-style-type: disc;">
<li>The current export revival is equally a result of<strong> dry weather conditions</strong> in major producing countries such as <strong>Argentina, Brazil, Ukraine, Thailand and Vietnam</strong>.</li>
<li><strong>Russia</strong> (world&rsquo;s largest wheat exporter) and <strong>Argentina</strong> (No. 1 in soybean meal and No. 3 in maize) have even <strong>announced temporary suspension or taxes on grain shipments in response to high domestic food inflation</strong>.</li>
</ul>
</li>
<li><strong>India&rsquo;s Surplus Monsoon:</strong><br />
<ul style="list-style-type: disc;">
<li>India, on the other hand, hasn&rsquo;t faced serious weather issues; both 2019 and 2020 <strong>recorded surplus monsoon rainfall</strong> along with <strong>timely onset of winter</strong>.</li>
</ul>
</li>
<li><strong>Agriculture Exempted from Lockdown:</strong><br />
<ul style="list-style-type: disc;">
<li>Farmers harvested a bumper rabi crop during April-June, enabled by the government exempting agriculture-related activities from <a href="/daily-updates/daily-news-editorials/covid-19-and-lockdown#:~:text=The%20Government%20of%20India%20has,every%20country%20across%20the%20globe." target="_blank" rel="noopener"><strong>lockdown</strong></a> restrictions.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Significance of Rising Exports:</strong><br />
<ul style="list-style-type: circle;">
<li>If it sustains, it can help<strong> increase crop prices</strong> when the next rabi harvest is due from March 2021. This may be <strong>politically useful</strong> in a context of <a href="/daily-updates/daily-news-editorials/farmer-s-protest" target="_blank" rel="noopener"><strong>farm unrest</strong></a>.</li>
<li>It will help in achieving the USD <a href="/daily-updates/daily-news-analysis/india-to-become-fifth-largest-economy#:~:text=A%20recent%20report%20has%20revealed,GDP)%20by%20surpassing%20Japanese%20GDP." target="_blank" rel="noopener"><strong>5-trillion economy</strong></a> goal by India.</li>
<li>It will help achieve an ambitious target of <a href="/to-the-points/paper3/doubling-farmers-income-a-promise-to-be-fulfilled-by-2022" target="_blank" rel="noopener"><strong>doubling farmers' income</strong></a> by 2022.</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1612523182_image1.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1612523182_image1.png" width="741" height="404" style="display: block; margin-left: auto; margin-right: auto;" /></a></p>
<p><a href="https://indianexpress.com/article/india/farm-exports-india-covid-19-2020-7175200/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
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	(int) 18 => object(Cake\ORM\Entity) {

		'article_id' => (int) 7606,
		'category_id' => (int) 22,
		'title' => 'Fiscal Activism',
		'description' => '<div class="border">
<p>This article is based on <a href="https://www.thehindu.com/opinion/op-ed/its-goodbye-to-fiscal-orthodoxy/article33734312.ece" target="_blank" rel="noopener"><strong>&ldquo;It&rsquo;s goodbye to fiscal orthodoxy&rdquo;</strong> </a>which was published in The Hindu on 03/02/2021. It talks about government departure from rigid adherence to fiscal consolidation.</p>
</div>
<p>Affected by the Covid-19 pandemic, the flailing Indian economy is marked by contracting GDP requiring a push from the government. In this scenario, the government has resorted to Keynesian economics (government&rsquo;s spending rather than the free hand of the market).</p>
<p>The<a href="/current-affairs-news-analysis-editorials/news-analysis/03-02-2021#7605" target="_blank" rel="noopener"><strong> Budget 2021</strong></a> is a selective departure from the principles of the free market. The government adheres to market orthodoxy elements, such as privatization and a greater role for foreign direct investment but sought to spend more to spur growth.</p>
<p>This can be reflected by the fact that the Finance Minister&rsquo;s speech pledges to lower the fiscal deficit to 4.5% of GDP by 2025-26 and promised to introduce an amendment to the FRBM Act to formalize the new targets (the present target as per the <a href="/daily-updates/daily-news-analysis/flexibility-under-the-frbm-act" target="_blank" rel="noopener"><strong>FRBM Act</strong></a> is of 3%).</p>
<p>Thus, the Budget marks an important departure from one of the key tenets of the Washington Consensus, the framework for market-oriented economics that has dominated policy-making in most parts of the world. Though this is a step in the right direction, it has some key macroeconomic stability concerns.</p>
<p><a href="http://www.drishtiias.com/images/uploads/1612355811_image%200.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1612355811_image 0.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<h3>Departure From The Principles of Free-Market Economics</h3>
<ul style="list-style-type: square;">
<li><strong>Budget 2021 rests on six pillars:</strong> Health and well-being, physical &amp; financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation, and R&amp;D, and minimum government-maximum governance.</li>
<li>This will require a major increase in funding, not only from the Central Government but also from the states and the private sector. This can be reflected in some of the following highlights of the budget:
<ul style="list-style-type: circle;">
<li>The present budget presents <strong>a whopping 34.5% increase</strong> in budget allocation &mdash; Rs 5.54 lakh crore.</li>
<li>The Budget has proposed a new bad bank framework to deal with the problem of non-performing assets. Given the magnitude of NPA, a huge amount of capital will be required to finance it.</li>
<li>The government also announced the setting up of a development finance institution to provide long-term financing for infrastructure projects.</li>
</ul>
</li>
</ul>
<h3>Reasons for Departure From Fiscal Orthodoxy</h3>
<p><strong>Departure From Rigid Adherence To Fiscal Consolidation</strong></p>
<ul style="list-style-type: square;">
<li>The Economic Survey that preceded the Budget laid the groundwork for a departure from rigid adherence to fiscal consolidation.</li>
<li>It has a quote from <strong>economist Olivier Blanchard,</strong> &ldquo;If the interest rate paid by the government is less than the growth rate, then the intertemporal budget constraint facing the government no longer binds.&rdquo;</li>
<li>According to the Economic Survey, in the current situation, expansionary fiscal policy will boost growth, and given India&rsquo;s growth potential, we do not have to worry about debt sustainability until 2030.</li>
</ul>
<div class="border-bg">
<p><strong>Intertemporal Budget Constraint</strong></p>
<ul style="list-style-type: square;">
<li>The &ldquo;intertemporal budget constraint&rdquo; means that any debt outstanding today must be offset by a future source of revenue of income.</li>
<li>Blanchard was saying that intertemporal budget constraint doesn&rsquo;t apply if the Interest Rate-Growth Differential (IRGD), the difference between the interest rate and growth rate, becomes negative.</li>
<li>In the advanced economies, as interest rates have turned negative, Blanchard&rsquo;s condition has been met. So governments there do not have to worry that deficits will render public debt unsustainable.</li>
</ul>
</div>
<p><strong>Idea Supported By IMF &amp; World Bank</strong></p>
<ul style="list-style-type: square;">
<li>The International Monetary Fund (IMF) and the World Bank, both flag-bearers of the Washington Consensus, have been urging a departure from fiscal orthodoxy in the wake of the pandemic.</li>
<li>Both these institutions used to be wary of any increase in the public debt to GDP ratio beyond 100%.</li>
<li>Today, they are urging the advanced economies to spend more by running up deficits even when the debt to GDP ratio is poised to rise to 125% by the end of 2021.</li>
</ul>
<h3>Key Macroeconomic Stability Issues</h3>
<ul style="list-style-type: square;">
<li><strong>Inflation May Rise:</strong> There is a concern that a large fiscal deficit can fuel a rise in inflation.
<ul style="list-style-type: circle;">
<li>Further, it is more than likely that a change in the fiscal consolidation targets will require a change in the inflation target of 4% set for India&rsquo;s Reserve Bank. However, the Budget makes no mention of such a possibility.</li>
</ul>
</li>
<li><strong>Low Tax-to GDP Ratio:</strong> Another concern is that, with the tax to GDP ratio not rising as expected, the government has to focus on garnering more non-tax revenues through strategic disinvestment, privatization, and monetization of non-core assets.
<ul style="list-style-type: circle;">
<li>However, these measures have their own issues.</li>
</ul>
</li>
<li><strong>Disinvestment, A High-Risk Strategy:</strong> The sale of public assets has become crucial to a reduction in fiscal deficits in the years ahead. However, this is a high-risk strategy.
<ul style="list-style-type: circle;">
<li>For years now, revenues from disinvestment have fallen short of targets. For example, Air India&rsquo;s sale, which was begun in 2018, is still dragging on.</li>
<li>Moreover, selling public assets is politically contentious due to public sector unions and job losses.</li>
</ul>
</li>
<li><strong>Downgrade of Ratings:</strong> An important consideration is a fear that the rating agencies would downgrade India if total public debt crossed say, 10%-11% of GDP.
<ul style="list-style-type: circle;">
<li>That is a risk that cannot be wished away unless the rating agencies have decided to toe the IMF-World Bank line on fiscal deficits.</li>
</ul>
</li>
<li><strong>Conflicting With AtmaNirbharta:</strong> Moreover, large-scale privatization almost always involves substantial FDI. Increasing FDI will result in a large rise in foreign presence in the domestic economies.
<ul style="list-style-type: circle;">
<li>However, a rise in FDI may not reconcile with Atmanirbhar Bharat which connotes greater self-reliance and stronger Indian companies.</li>
</ul>
</li>
<li><strong>Crowding Out Effect:</strong> As the government adopts an expansionary fiscal policy stance and increases its spending to boost economic activity.
<ul style="list-style-type: circle;">
<li>This leads to an increase in interest rates. Increased interest rates affect private investment decisions.</li>
<li>A high magnitude of the crowding-out effect may even lead to lesser income in the economy.</li>
</ul>
</li>
</ul>
<h3>Conclusion</h3>
<p>A departure from fiscal orthodoxy is welcome. But the government needs to think of ways to make it more sustainable.</p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #fdfff2;">
<p><span style="color: #000080;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>Budget 2021 is a departure from a key tenet of the Washington Consensus. Analyze.</p>
</td>
</tr>
</tbody>
</table>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/THnDWC5xQEs" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p>This editorial is based on <a href="https://www.thehindu.com/opinion/editorial/getting-back-on-track/article33721360.ece" target="_blank" rel="noopener"><strong>&ldquo;Getting back on track: on Union Budget 2021&rdquo;</strong></a> published in The Hindu on February 2<sup>nd</sup>, 2020. Now watch this on our Youtube channel.</p>',
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		'article_id' => (int) 7586,
		'category_id' => (int) 21,
		'title' => 'Increased Fiscal Deficit',
		'description' => '<h3>Why in News</h3>
<p>The government&rsquo;s<a href="/daily-updates/daily-news-analysis/increased-fiscal-deficit#:~:text=The%20government%20describes%20fiscal%20deficit,)%20during%20a%20financial%20year%E2%80%9D." target="_blank" rel="noopener"><strong> fiscal deficit</strong></a> has increased to Rs. 11.58 lakh crore or <strong>145.5% of the Budget Estimate</strong> (BE) at the end of December 2020 (accounting for the first nine months of the year 2020-21) mainly on account of <strong>lower revenue realisation.</strong></p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Fiscal Deficit Target Fixed for 2020-21:</strong> The Centre had pegged the fiscal deficit at Rs. 7.96 lakh crore or <strong>3.5% of the <a href="/daily-updates/daily-news-analysis/gdp-decreases-to-11-year-low" target="_blank" rel="noopener">Gross Domestic Product (GDP)</a>. </strong></li>
<li><strong>Fiscal Deficit in 2019-2020:</strong> According to the data released by the<strong> Controller General of Accounts (CGA),</strong> the fiscal deficit at the end of December in the previous fiscal year was<strong> 132.4% of the BE of 2019-20.</strong></li>
<li><strong>Reasons for High Fiscal Deficit:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Lower Revenue Realisation:</strong><br />
<ul style="list-style-type: disc;">
<li>Because of disruptions in <strong>normal business activity</strong> following the<a href="/daily-updates/daily-news-editorials/comprehensive-action-plan-for-covid-19" target="_blank" rel="noopener"><strong> coronavirus pandemic</strong></a> and lockdowns.</li>
</ul>
</li>
<li><strong>Higher Expenditure:</strong><br />
<ul style="list-style-type: disc;">
<li>There has been a notable increase in revenue expenditure in<strong> food and public distribution and rural development</strong> which could be attributed to the government&rsquo;s pandemic relief programs.</li>
</ul>
</li>
</ul>
</li>
</ul>
<h3>Fiscal Deficit</h3>
<ul style="list-style-type: square;">
<li>The government describes fiscal deficit of India as <strong>&ldquo;the excess of total disbursements from the<a href="/daily-updates/daily-news-analysis/mp-s-salaries-cut-and-mplads-suspended#:~:text=Government%20Accounts-,Consolidated%20Fund,and%20all%20non%2Dtax%20revenues." target="_blank" rel="noopener"> Consolidated Fund of India</a>, excluding repayment of the debt, over total receipts into the Fund (excluding the debt receipts) during a financial year&rdquo;.</strong></li>
<li>In simple words, it is a <strong>shortfall in a government's income</strong> compared with its spending.<br />
<ul style="list-style-type: circle;">
<li>The government that has a fiscal deficit is<strong> spending beyond its means.</strong></li>
</ul>
</li>
<li>It is calculated as a percentage of <strong>Gross Domestic Product</strong> (GDP), or simply as total money spent in excess of income.<br />
<ul style="list-style-type: circle;">
<li>In either case, the income figure includes only taxes and other revenues and excludes <strong>money borrowed to make up the shortfall.</strong></li>
</ul>
</li>
<li><strong>Formula:</strong><br />
<ul style="list-style-type: circle;">
<li>Fiscal Deficit = Total <strong>expenditure</strong> of the government (capital and revenue expenditure) &ndash; Total<strong> income</strong> of the government (Revenue receipts + recovery of loans + other receipts).<br />
<ul style="list-style-type: disc;">
<li><strong>Expenditure component:</strong> The government in its Budget allocates funds for several works, including payments of salaries, pensions, etc. <strong>(revenue expenditure)</strong> and creation of assets such as infrastructure, development, etc. <strong>(capital expenditure).</strong></li>
<li><strong>Income component:</strong> The income component is made of two variables,<strong> revenue generated from taxes</strong> levied by the Centre and the<strong> income generated from non-tax variables.</strong><br />
<ul style="list-style-type: disc;">
<li>The taxable income consists of the amount generated from corporation tax, income tax, Customs duties, excise duties, <strong><a href="/to-the-points/paper3/goods-and-services-tax-gst-1" target="_blank" rel="noopener">GST</a></strong>, among others.</li>
<li>Meanwhile, the non-taxable income comes from external grants, interest receipts, dividends and profits, receipts from Union Territories, among others.</li>
</ul>
</li>
</ul>
</li>
<li>It is<strong> different from revenue deficit</strong> which is only related to revenue expenditure and revenue receipts of the government.</li>
<li>The government <strong>meets the fiscal deficit by borrowing money</strong>. In a way, the total borrowing requirements of the government in a financial year is equal to the fiscal deficit in that year.</li>
<li>A <strong>high fiscal deficit can also be good</strong> for the economy if the money spent goes into the creation of productive assets like highways, roads, ports and airports that boost economic growth and result in job creation.</li>
<li>The<strong><a href="/daily-updates/daily-news-analysis/wma-borrowings-of-states" target="_blank" rel="noopener"> Fiscal Responsibility and Budget Management Act</a>, 2003</strong> provides that the Centre should take appropriate measures to limit the <strong>fiscal deficit upto 3% of the GDP by 31<sup>st</sup> March, 2021.</strong></li>
<li>The <strong>NK Singh committee (set up in 2016)</strong> recommended that the government should target a fiscal deficit of 3% of the GDP in years up to 31st March, 2020, cut it to 2.8% in 2020-21 and to 2.5% by 2023.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Controller General of Accounts</strong></p>
<ul style="list-style-type: square;">
<li>It comes under the <strong>Department of Expenditure, Ministry of Finance.</strong></li>
<li>It is the<strong> Principal Accounting Adviser</strong> to the Government of India and is responsible for establishing and maintaining a technically sound Management Accounting System.</li>
<li>The Office of CGA prepares <strong>monthly and annual analysis of expenditure, revenues, borrowings and various fiscal indicators</strong> for the Union Government.</li>
</ul>
</div>
<p><a href="https://www.thehindu.com/news/national/news-channels-to-form-organisation-to-self-regulate-content/article29878439.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
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