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Daily Current affairs 07 February 2019

UPSC - Daily Current Affair


Govt to set up unified authority for regulating financial services in IFSCs

The News

  • Recently, the Union Cabinet approved International Financial Services Centres Authority Bill, 2019 to set up a unified authority for regulating all financial services in international financial services centres (IFSCs) in the country.


About International Financial Services Centre (IFSC)

  • Financial centres that cater to customers outside their own jurisdiction are referred to as international (IFCs) or offshore Financial Centers (OFCs).
  • All these centres are ‘international’ in the sense that they deal with the flow of finance and financial products/services across borders.
  • An IFSC is thus a jurisdiction that provides world class financial services to non-residents and residents to the extent permissible under the current regulations.
  • It conducts business in a foreign currency (i.e. other than the domestic currency) of the location where the IFSC is located.
  • IFSCs in India:
    • The first IFSC in India was set up at GIFT City, Gandhinagar, Gujarat.
    • An IFSC seeks to bring to India, those types of financial services and transactions that are currently carried on outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions.
    • The policy objective behind establishing an IFSC in India is providing a platform for international financial services to operate from and to specialize in exports of high value-added International Financial Services.


Services provided by IFSCs:

  • Fund-raising services for individuals, corporations and governments
  • Asset management and global portfolio diversification undertaken by pension funds, insurance companies and mutual funds
  • Wealth management
  • Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms
  • Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching
  • Risk management operations such as insurance and reinsurance
  • Merger and acquisition activities among trans-national corporations


Who regulates the IFSCs at present?

  • Presently, Banking, Capital markets and Insurance sectors in IFSCs are regulated by multiple regulators - the Reserve Bank of India (RBI), the Securities Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI), respectively.


Need of unified financial regulator for IFSCs

  • The development of financial services and products in IFSCs would require focussed and dedicated regulatory interventions.
  • It also requires regular clarifications and frequent amendments in the existing regulations governing financial activities in IFSCs.
  • Hence, a draft International Financial Services Centres Authority Bill, 2019 has been prepared to set up a separate unified regulator for IFSCs to provide world class regulatory environment to financial market participants


Key Features of the International Financial Services Centres Authority Bill, 2019

  • Management of the Authority: The Authority shall consist of:
    • A Chairperson
    • One Member each to be nominated by the RBI, SEBI, IRDAI and the Pension Fund Regulatory and Development Authority(PFRDA)
    • Two members to be dominated by the Central Government
    • Two other whole-time or full-time or part-time members


  • Functions of the Authority:
    • Regulation of all such financial services, financial products and FIs in an IFSC which has already been permitted by the Financial Sector Regulators for IFSCs.
    • Regulation of such other financial products, financial services or FIs as may be notified by the Central Government from time to time.
    • Recommendation to the Central Government such other financial products, financial services and financial institutions which may be permitted in the IFSCs.


  • Powers of the Authority: All powers exercisable by the respective financial sector regulatory (viz. RBI, SEBI, IRDAI, and PFRDA etc.) under the respective Acts shall be solely exercised by the Authority in the IFSCs.


  • Transactions in foreign currency: The transactions of financial services in the IFSCs shall be done in the foreign currency as specified by the Authority in consultation with the Central Govt.


Significance of establishing an authority

  • This will result in providing world-class regulatory environment to market participants from an ease of doing business perspective.
  • The move is expected to better regulation and supervision of the financial entities.
  • The unified authority would also provide the much needed impetus to further development of IFSC in India in-sync with the global best practices.
  • This would also generate significant employment in the IFSCs in particular as well as financial sector in India as a whole.

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Section : Economics


Unregulated deposit schemes to be banned

The News

  • Recently, the Union Cabinet has approved the official amendments to the Banning of Unregulated Deposit Schemes Bill, 2018, which classifies any deposit scheme not registered with the government as an offence and shall ban it.


Some important terms

Unregulated deposit scheme

  • A deposit-taking scheme is defined as unregulated if it is not registered with regulators such as Ministry of Corporate Affairs (MCA), RBI, SEBI etc.

Deposit takers

  • Deposit taker is an individual, a group of individuals, or a company who asks for (solicits), or receives deposits.
  • Banks and entities incorporated under any law are not included as deposit takers.


News Context

  • Between 2015 and 2018, the CBI has registered 166 cases in chit funds and multi growth scams, most of which have been in West Bengal and Odisha.
  • In order to provide for a mechanism to ban unregulated deposit schemes and protect the interests of depositors, Banning of Unregulated Deposit Schemes Bill, 2018 was introduced in Lok Sabha in July 2018.
  • Later, the Bill was referred to Standing Committee on Finance (SCF), which submitted its report in January 2019.
  • Now, the Union Cabinet has approved amendments to the Banning of Unregulated Deposit Schemes Bill, 2018, based on the recommendations of the Standing Committee.

Note: Another bill introduced to tackle illicit deposit schemes is The Chit Funds (Amendment) Bill, 2018.


Who regulates the deposit schemes in India?

  • Nine regulators including the RBI, SEBI, the Ministry of Corporate Affairs, and the State governments regulate various deposit-taking schemes.
  • For example: RBI regulates deposits accepted by non-banking financial companies, SEBI regulates mutual funds, state and union territory governments regulate chit funds, among others.


The Banning of Unregulated Deposit Schemes Bill, 2018

  • The idea of legislation to ban such deposit taking activities was announced in the Budget 2016-17 and the bill was introduced in Lok Sabha in July 2018.
  • It provides for a mechanism to ban unregulated deposit schemes and protect the interests of depositors.
  • The Bill completely bans deposit takers from promoting, advertising or accepting deposits in any unregulated scheme.

Key Highlights of the Bill

  • The Bill provides for the appointment of Competent Authority, which has the powers similar to a civil court, including powers to attach properties of the deposit takers.
  • It also empowers police to search and seize any property believed to be connected with an offence under the Bill, with or without a warrant.
  • The Bill provides for the constitution of one or more Designated Courts in specified areas to tackle such cases.
  • It will enable creation of an Online Central Database, for collection and sharing of information on deposit-taking activities in the country.
  • Offences and penalties: The bill proposes to create three different types of offence:
    • Running of unregulated deposit schemes
    • Fraudulent default in regulated deposit schemes
    • Wrongful inducement (to persuade) in relation to unregulated deposit schemes


  • The amendments will further strengthen the Bill in its objective to effectively tackle the menace of illicit deposit-taking activities, and prevent such schemes from deceiving the poor and gullible.

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Section : Polity & Governance


RBI unlikely to transfer contingency fund to government

The News

  • The Reserve Bank of India (RBI) is unlikely to accept the demand of the government to pay more dividends out of the funds that was set aside for contingency reserves.


Understanding the contingencies fund

  • Contingencies fund of RBI is reserved by the central bank for unexpected, unforeseen expenditures faced by the bank.
  • The unforeseen or unexpected circumstances could arise:
    • From the rapid depreciation of the value of its domestic bond holdings
    • Exchange rate depreciation on its foreign exchange assets
    • Losses from open market operations involving the tweaking of the repo and reverse repo rates for managing the supply of money in the economy
    • It could the need of bailing out a commercial bank because of its collapse
  • Sources of income for of RBI out of which it sets aside contingencies fund:
    • The interest earnings on foreign currency assets such as bonds
    • Interest earned from loans and advances to central and state government
    • Interest from deposits held with foreign banks
    • Net interest earned from liquidity operations such as the difference between repo rate and reverse repo rate
  • Expenditures of RBI, contingencies reserve and dividend to the government:
    • The RBI utilizes a part of its earnings for printing currencies and supporting its operations and the remaining amount is transferred to the government as a dividend.
    • Sometimes, the RBI sets aside a part of its income for contingency funds, which leads to reduced dividend transfer to the government.
  • The reserves of RBI are a crucial part of the RBIs balance sheet, as they enable the RBI to tackle unexpected disruptions and instill faith in global investors.



  • Economic growth suffered a setback due to demonetisation and the implementation of the GST.
  • Moreover, the bankrupt banks and NBFCs are suffering a restriction on their lending, which has affected the business growth in the nation, particularly in the MSME sector.
  • To revive the economy, the government needs money to recapitalize such bankrupt banks and NBFCs.
  • In the meanwhile, a total of ₹27,330 crore, ₹13,140 crore in FY17 and ₹14,190 crore in FY18 was set aside by the RBI for the contingency fund, which reduced the dividend paid to the government.
  • Thus, having overspent already and in serious need for funds to get the economic machine reviving, the government demanded dividends from the RBI from the contingency fund.
  • However, the bank refused, which caused a deadlock between the RBI and the government.


News Summary

  • The government has again requested the RBI for providing an interim surplus for the financial year 2018-19 and transfer of the total amount withheld as contingencies fund in the FY 2016-17 and 2017-18.
  • According to the sources, the RBI is unlikely to transfer the fund from the contingencies reserves, as there was no precedence of such a dividend being paid from the reserved funds.
  • On the issue of dividends, a committee headed by former RBI Governor Bimal Jalan has already been formed to review the economic capital framework of the central bank.
  • Moreover, the RBI has now decided to conduct statutory audit of its account twice a year, so that it can transfer the surplus to the government as many times.

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Section : Economics


Kidneys grown in rats could pave way for human transplant

The News

  • In a significant step in regenerative medicine, Japanese researchers have successfully developed functional mouse kidneys inside rats using stem cells.


How did they do?

  • Japanese researchers have successfully developed functional kidneys in rat embryos using mouse stem cells.
  • In the 1st step, the researchers used the CRISPR/Cas9 technique to genetically silence rat embryos so that the rats did not grow kidney on their own.
  • Then the genetically modified blastocysts (clusters of cells formed after egg fertilization), of the rat embryo were inserted with pluripotent stem cells from mice.
  • The altered rat embryo was then implanted back into rat wombs to continue fertilization.
  • The stem cells then differentiated to form the missing kidney in the rats that was functional.



  • Chronic kidney disease is a public health issue with increasing life expectancy and prevalence of life style disorders like diabetes, hypertension etc.
  • Currently according to estimates the disease burden of chronic kidney diseases approximately 800 per million people in India.
  • The only hope for end stage renal disease is kidney transplant.
  • Thus this technique could potentially solve the demand-supply mismatch in kidney transplantation.


BASICS: About Stem Cells

  • Stem cells are mother cells that have the potential to become any type of cell in the body.
  • Stem cells have the ability to self-renew or multiply while maintaining the potential to develop into other types of cells.
  • Stem cells can become cells of the blood, heart, bones, skin, muscles, brain etc.


Types of stem cells

1. Totipotent Stem Cells

  • Totipotent stem cells are one of the most important stem cells types because they have the potential to develop into a new individual.
  • A few totipotent cells can form all the cell types in a body.
  • A fertilised egg is a totipotent stem cell and as such can develop into any specialised cell found in the organism.
  • The cells within the first couple of cell divisions after fertilization are the only cells that are totipotent. 


2. Pluripotent Stem Cells (PS cells)

  • These possess the capacity to divide for long periods and retain their ability to make all cell types within the organism.
  • Pluripotent cells can give rise to all of the cell types that make up the body.
  • The best known type of pluripotent stem cell is the one present in embryos. These are termed embryonic stem cells.


3. Induced Pluripotent Stem Cells

  • Pluripotent cells derived from adult human skin cells are termed induced pluripotent stem cells or iPS cells.


4. Fetal stem cells

  • These are obtained from tissues of a developing human fetus.
  • These cells have some characteristics of the tissues they are taken from.
  • For example, those taken from fetal muscles can make only muscle cells.
  • These are also called progenitor cells.


5. Adult stem cells (Multipotent)

  • These are obtained from some tissues of the adult body.
  • Multipotent cells can develop into more than one cell type but are more limited than pluripotent cells.
  • For example stem cells can be obtained from the bone marrow, which is a rich source of stem cells that can be used to treat some blood diseases and cancers.





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Section : Science & Tech


Tougher scanning, looser encryption

The News

  • The proposed amendments to Section 79 of the Information Technology Act, 2000 will have a significant impact on the way the intermediaries including social media companies and other internet companies operate in India.



  • In December 2018, the government released the draft Information Technology (Intermediaries Guidelines Amendment Rules) 2018 that seeks to amend the provision of section 79 of the Information Technology Act, 2000.
  • Section 79 of the Information Technology Act, 2000, deals with the ‘intermediaries’ liability’ regime in India.
  • The government felt the need to tinker with ‘intermediaries liability’ in the backdrop of increasing misuse of social media platforms and other websites to propagate violence, circulation of fake news, child porn and other objectionable content in India.



Intermediaries Liability regime in India: A backgrounder

Who are intermediaries?

  • According to Information Technology Act, 2000, an intermediary is defined as any person who on behalf of another person stores or transmits a message (information) or provides any service with respect to that message (information).
  • Primarily intermediaries include telecom service providers, internet service providers, cyber cafes, web-hosters, search engines, social media networks, messaging platforms, e-commerce websites, audio and video sharing sites, blogs, payment companies etc.


Intermediaries Liability

  • Section 79 in the Information Technology Act was brought by an amendment in 2008 to provide protection to intermediaries in India.
  • Accordingly, intermediaries are entities that allow sharing of information and not ‘publishers’ of information and thus are not liable for what a producer publishes or user accesses.
  • This ‘liability protection’ enables these platforms to freely help users publish, message, communicate, and sell information on the internet.
  • The only restriction is that the intermediaries perform ‘due diligence’ on content that is ‘grossly harmful’, ‘obscene’, racially, ethnically objectionable, or unlawful like pornographic, paedophilic, hateful, relating to money laundering etc.
  • With changing social media space and its growing use, the draft Information Technology (Intermediaries Guidelines Amendment Rules) 2018 seeks to enhance the ‘intermediary liability regime’.


Changes to ‘intermediaries’ liability’ and related issues

  • The proposed The Information Technology (Intermediaries Guidelines Amendment Rules) 2018 seeks to amend provisions under Section 79 of the Information technology Act.

1. Monitoring of content

  • According to draft, the online platforms or “intermediaries” must “deploy appropriate technologies to proactively identify, remove or disable access to unlawful content.
  • The unlawful content also includes those that threatens critical information infrastructure in India.
  • Critical information infrastructure include Power sector, Banking, Financial Institutions & Insurance, Information and Communication Technology, Transportation, E-governance and Strategic Public Enterprises
  • The online platforms would have to inform its users to refrain from hosting, uploading or sharing any content that is blasphemous, obscene, defamatory, "hateful or racially, ethnically objectionable" or those which threaten national security.


  • Technologies like AI and Machine Learning are not good enough to accurately understand human context and judge what is lawful and unlawful.
  • Proactive censorship may stand against the free speech guaranteed under Article 19 and right to privacy guaranteed under Part 3 of the constitution.
  • In the landmark Shreya Singhal case of 2015, the Supreme Court acknowledged the importance of protecting the intermediary to enable free speech in India.Thus, increasing the intermediary liability goes against the spirit of this judgment.


2. Traceability of content

  • According to the draft, the intermediary shall enable tracing out of originator/source of unlawful content on its platform.
  • The intermediaries shall within 72 hours provide​ ​such information or assistance as asked for by any government agency who are legally authorised.


  • The draft rule on traceability could break end-to-end encryption which is the core feature offered by some of the platforms like Whatsapp, Signal etc.


3. Corporate Office in India

  • The intermediaries with over 50 lakh active users in India shall have a permanent registered office and appoint a nodal person to coordinate with law enforcement agencies to ensure compliance.


  • In a country like India where there are more than 350 million internet users, it is difficult to ascertain who is an active user.


4. Ensuring compliance

  • The draft rule requires that the companies will have to inform their users at least once every month” that in case of non-compliance, their accounts and content would be removed.


  • This shifts the onus of ensuring compliance from government to a private party.


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Section : Polity & Governance


We need a leap in healthcare spending Editorial 7th Feb’19 TheHindu

Public health spending in India still very low:

  • The Central and State governments have introduced several innovations in the healthcare sector in recent times.
  • However, public health spending is only 1.15-1.5% of GDP.
  • Allocation for healthcare is merely 2.2% of the Budget.

High out-of-pocket expenditure (OOPE):

  • The out-of-pocket expenditure on health (where patients pay out of their own pockets) in India is very high at 67%.

Low per capita spending on health:

  • According to the National Health Profile of 2018, public per capita expenditure on health increased from Rs. 621 in 2009-10 to Rs. 1,112 in 2015-16.
  • As per some estimates, per capita spend on health may have risen to about Rs. 1,500 by 2018.
    • In dollar terms: This amounts to about $100 when adjusted for purchasing power parity (PPP).
  • Despite the doubling of per capita expenditure on health over six years, the figure is still abysmal.
  • Per capita spending on health in the Budget in India is Rs. 458 (adjusting for purchasing power parity, this is about $30).

Comparision with other countries:

  • The U.S.’s health expenditure is 18% of GDP, while India’s is still under 1.5%.
    • The U.S. spends $10,224 per capita on healthcare per year (2017 data). Federal Budget spending per capita on health in the U.S. is more than $3,000.
  • Healthcare costs in the US are too high but even other comparable developed countries spend half as much per capita as the US ($4,000-$5,000 per capita in the OECD countries).
  • This is much much more than what India spends.



Interim Budget falls short in the health sector in many ways

Health expenditure as share of total remained same as earlier: 

  • The Interim Budget does not adequately respond to the needs of the health sector.
  • The total allocation to healthcare is Rs. 61,398 crore.
  • While this is an increase of Rs. 7,000 crore from the previous Budget, there is no net increase since the total amount is 2.2% of the Budget, the same as the previous Budget.
  • The Rs. 6,400 crore allocated to PMJAY allocated for implementation of the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY) is not enough.

Low resources for programme on non-communicable diseases (NCDs):

  • The funding for non-communicable diseases programme of the National Programme for Prevention and Control of Cancer, Diabetes, Cardiovascular Diseases and Stroke (NPCDCS) is already low and has been further reduced.
  • There is no resource allocation for preventive oncology, diabetes and hypertension.
  • Prevention of chronic kidney disease, which affects 15-17% of the population, is not appropriately addressed.
  • Same is the case for the National Tobacco Control Programme (NTCP) and Drug De-addiction Programme (DDAP).
  • Lack of focus on screening and prevention on NCDs leads to huge private expenditure:
    • Example of cancer:
      • Due to lack of focus in preventive oncology in India, over 70% of cancers are diagnosed in stages III or IV. Treatment of advanced cancer costs three-four times more than treatment of early cancer. Also, cure rate is low and the death rate is high at advanced stages.
      • The standard health insurance policies cover cancer but only part of the treatment cost. As a consequence, either out-of-pocket expenditure goes up or patients drop out of treatment.
    • Example of kidney disease:
      • Chronic kidney disease leads to enormous social and economic burden for the community at large, in terms of burgeoning dialysis and transplant costs.
      • Costs will further rise and will not be sustainable unless we reduce chronic kidney disease incidence and prevalence through screening and prevention.



Ayushman Bharat

  1. Primary healthcare - Health and wellness centres:
  • In 2018, it was announced that nearly 1.5 lakh health and wellness centres would be set up under Ayushman Bharat
  • The mandate of these centres is preventive health, screening, and community-based management of basic health problems.
  •  Low resource allotment for these centers:
    • Under the National Urban Health Mission, an estimated Rs. 250 crore has been allocated for setting up health and wellness centres.
    • Under the National Rural Health Mission, Rs. 1,350 crore has been allocated for the same.
    • This amounts to an allocation of less than Rs. 1 lakh per year for each of the wellness centres.
    • This is a meagre amount.
  • Raise resources for these centers through higher taxes on sin goods:
    • NITI Aayog has proposed higher taxes on tobacco, alcohol and unhealthy food - the resources raised could be used to revamp the public and preventive health system.
    • However, the Interim Budget has not considered this proposal.
    • Adding tax on tobacco and alcohol, to fund NCD prevention strategies at health and wellness centres, should be considered by the government.
  1. Secondary and tertiary healthcare
  • PMJAY will provide a cover of up to Rs. 5 lakhs per family per year, for secondary and tertiary care hospitalization, for about 50 crore beneficiaries.
  • It will help reduce catastrophic expenditure for hospitalizations,
  • Comprehensive disease management must be done:
    • The 1,354 packages for various procedures in PMJAY must be linked to quality.
    • For various diseases, allocation should be realigned for disease management over a defined time period, not merely for episodes of care.



Conclusion - Need more public health expenditure, including on PMJAY:

  • Ayushman Bharat-PMJAY, a major innovation in universal healthcare that is being rolled out, will help reduce out-of-pocket expenditure in India.
  • The Rs. 6,400 crore allocated to PMJAY is not enough. The innovation in the scheme must be matched with a quantum leap in funding.
  • Improvement in health leads to faster GDP growth, since a healthy workforce contributes to productivity.
  • It is imperative to invest more for the long-term health of the nation.
  • The government’s goal, for a while, has been to increase public health spending to 2.5% of GDP.
  • To reach its target, the government should increase funding for health by 20-25% every year for the next five years or more.




GS Paper II: Social Issues

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Section : Editorial Analysis