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The Hindu 29 August 2019

UPSC - Daily Current Affair

SL. NO.

TOPICS

THE HINDU

PAGE NO.

1

Cabinet eases rules for FDI in retail, media

01

2

Nod for sugar export subsidy

15

3

Payment issues on S-400 deal resolved

12

4

Hardly the brick and mortar of a revival

10

5

Democracy & its discontents

11

 

Title

1. Cabinet eases rules for FDI in retail, media  (The Hindu, Page 01)

Syllabus 

Prelims: Economy

Mains: G.S. II in Economy

Theme

Changes in FDI Policy

Highlights

Context

  • The Union Cabinet has recently approved the proposal for Review of Foreign Direct Investment on various sectors.

 

Background

  • FDI is a major driver of economic growth and a source of finance for the economic development of the country. Government has put in place an investor friendly policy on FDI, under which FDI up to 100% is permitted on the automatic route in most sectors/ activities. FDI policy provisions have been progressively liberalized across various sectors in recent years to make India an attractive investment destination.

  • In Union Budget 2019-20, Finance Minister proposed to further consolidate the gains under FDI in order to make India a more attractive FDI destination leading to benefits of increased investments, employment and growth. Accordingly, the Government has decided to introduce a number of amendments in the FDI Policy.

 

Coal Mining

  • Present FDI Policy:  100% FDI under automatic route is allowed for coal & lignite mining for captive consumption by power projects, iron & steel and cement units. Further, 100% FDI under automatic route is also permitted for setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal from its coal processing plants in the open market and shall supply the washed coal to those parties who are supplying raw coal to coal processing plants for washing. Recent Amendments: It has been decided to permit 100% FDI under automatic route in coal mining for open sale, besides creating associated processing infrastructure. "Associated Processing Infrastructure" would include coal washery, crushing, coal handling, and separation. 

  • Likely Impact: This would help in create an efficient coal market, usher in competition and reduce the coal imports. It is also expected to help India gain access to high-end technology for underground mining used by the global miners.

 

Contract Manufacturing

  • Meaning: Contract manufacturing is a contract between a company and a manufacturer to make a certain number of components or products for the company in a specified period of time. The goods created will be under the company’s label or brand. 

  • Present Policy: The present FDI policy provides for 100% FDI under automatic route in manufacturing sector. There is no specific provision for Contract Manufacturing in the Policy.

  • Recent Amendments: In order to provide clarity on contract manufacturing, it has been decided to allow 100% FDI under automatic route in contract manufacturing in India as well. 

  • Likely impact: So far, an electronics or pharmaceutical companies had to buy their products from the contract manufacturers based in other countries. The recent move by the Government would attract the contract manufacturers to set their base in India and boost Make in India initiative.

 

Single Brand Retail Trading (SBRT)

  • Present Policy: Currently, the FDI policy states that a single-brand retail company with more than 51% FDI needs to source 30% of its goods from within India. Further, as regards local sourcing requirement, the same can be met as an average during the first 5 years, and thereafter annually towards its India operations. The present policy requires that SBRT entities have to operate through brick and mortar stores before starting retail trading of that brand through e-commerce.

  • Recent amendments: With a view to provide greater flexibility and ease of operations to SBRT entities, it has been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported.

  • Further, restriction on the SBRTs on trading through e-commerce creates an artificial restriction and is out of sync with current market practices. It has therefore been decided that retail trading through online trade can also be undertaken prior to opening of brick and mortar stores, subject to the condition that the entity opens brick and mortar stores within 2 years from date of start of online retail.

  • Likely impact: This would encourage the foreign brands such as Apple, Oppo, Oneplus to manufacture, sell and exports goods from India.

 

Digital Media

  • Present Policy: The present FDI policy provides for 49% FDI under approval route in broadcasting content services—up-linking of news and current affairs television channels. Further, 26 percent foreign investment is allowed in print media—publishing of newspaper and periodicals dealing with news and current affairs as well as publishing of Indian editions of foreign magazines dealing with news and current affairs.  The FDI Policy made no mention of digital media. So there was no clarity on whether foreign direct investment was permitted, and to what extent, in digital news media companies.

  • Recent amendments:  It has been decided to permit 26% FDI under government route for uploading/ streaming of News & Current Affairs through Digital Media, on the lines of print media.

 

Title

2. Nod for sugar export subsidy (The Hindu, Page 15)

Syllabus 

Prelims: Economy

Mains: G.S. III in Economy

Theme

Sugar export subsidy

Highlights

Context: 

  • The Cabinet Committee on Economic Affairs has given its approval for providing a lump sum export subsidy  at around Rs. 10,500 per Metric Tonne (MT) to sugar mills for the sugar season 2019-20. 

  • The lump sum export subsidy will be provided for expenses on marketing costs including handling, upgrading and other processing costs, costs of international and internal transport and freight charges on export

 

Background: 

  • The sugar Industry is grappling with serious concerns related to low domestic prices of sugar, low international prices of sugar, various policies controlling the procurement and pricing of raw material and finished product.  The main reason for the present problems of the sugar Industry can be attributed to mismatch between Demand and supply of Sugar. While, the Production of Sugar has continued to increase, however its demand has declined in the last 2 years. The Production of sugar increased to around 35 Million tonnes in 2018-19, but the demand has remained stagnant at around 25 million tonnes.

  • In this regard, the sugar season 2019-20 is expected to commence with an opening stock of about 142 Lakh Metric Tonne (LMT) and season end stock are expected to be about 162 LMT.

  • Further, the recent problem in the Sugar Industry has led to payment crisis wherein the sugar mills have not been able to pay the FRP (fair and Remunerative Prices) to the sugarcane farmers. The Sugar Industry is presently staring at cane arrears of more than 20,000 crores.

 

Recent Announcement

  • Against this backdrop, the Government seeks to incentivise the sugar mills to export the surplus sugar stock. This would not only reduce the quantity of sugar in the domestic market but would also lead to increase in the sugar prices. Such an increase in the sugar prices would enable the sugarcane mills to clear their dues to the farmers.

  • The subsidy package would facilitate the export of up to 60 lakh tonnes in 2019-20.

  • The Government has stated that the  subsidy would be directly credited into farmers’ account on behalf of mills against cane price dues.

 

Title

3. Payment issues on S-400 deal resolved (The Hindu, Page 12)

Syllabus 

Prelims: Current Events of International Importance

Mains: G.S. II in International Relations

Theme

S-400 Missile System

Highlights

  • The S-400 Triumf can engage all types of aerial targets such as aircraft, ballistic and cruise missiles, unmanned aerial vehicles (UAV), which are within the range of 400km, at an altitude of up to 30km.

  • The missile system integrates multifunction radar, autonomous detection and targeting systems, anti-aircraft missile systems, launchers, and command and control centre. It can provide a layered defence as it is capable of firing three types of missiles.

  • It can track 100 airborne targets and is considered way ahead of the American THAAD (Terminal High Altitude Area Defence) system, though both are different weapon systems.

  • President Donald Trump signed into law the Countering America’s Adversaries through Sanctions Act (CAATSA), which specifically targets Russia, Iran, and North Korea.

  • Almost all major Russian defence manufacturing and export companies/entities including Almaz-Antey Air and Space Defence Corporation JSC, the manufacturers of the S-400 system, are on the list. So therefore, any Indian entity would have been targeted for US sanctions for trading with the mentioned Russia companies.

  • U.S. had agreed towards providing India a waiver from sanctions for purchasing the S-400 Missile system, but U.S. recently withdrew this agreement for waiver.

 

Title

4. Hardly the brick and mortar of a revival (The Hindu, Page 10)

Syllabus 

Prelims: Economy

Mains: G.S. III in Economy

Theme

RBI surplus transfer is a stopgap measure

Highlights

Context:

  • Presently, the Indian Economy is facing economic slowdown as evident in the declining the GDP growth rate. The decline in the GDP growth rate could be attributed to both supply side factor i.e. declining Investment as well as demand side factor i.e. declining consumption expenditure.

  • The economic revival would require government to focus on both demand side i.e. boost consumption expenditure as well as supply side i.e. enhance investment rates in the Indian Economy.

  • However, the article highlights that that the Government is erroneously focusing only on supply side factor without taking into account the demand side factor. It is to be noted that investment rates in the economy cannot pick up unless the demand for the goods and services increases.

 

Consumption Expenditure in India

  • The Consumption Expenditure in India accounts for almost 60% of India's GDP. Hence, decline in the consumption expenditure would have greater impact on India's GDP as compared to the decline in the Investment rates. 

  • Presently, there is broad base decline in the consumption expenditure across various sectors of the economy ranging from automobiles to biscuits. It is to be noted that there has been decline in the demand even for commonly used household goods such as salty snacks, soaps, packaged tea etc. 

  • This clearly highlights that the household budgets of the poor and middle class is under strain which has in turn forced them to cut down the expenditure on such commonly bought goods.

 

Reasons for decline in Consumption Expenditure

  • Lack of Inclusive Growth: Inclusive growth is quite critical for sustaining the higher consumption expenditure. However, the growth trajectory in India has benefitted only a small section of India's society in the recent times leading to income inequalities. Further, there has been increase in unemployment levels leading to reduced income levels of the people.

  • Government Policies: The Government policies such as demonetisation and GST has adversely impacted the informal sector which employs the majority of India's workforce. Further, the decline in the informal sector activity has reduced the demand leading to adverse impact on the investment by the formal sector. This has in turn reinforced poor job creation and low demand leading to vicious economic cycle.

  • Agrarian distress: The agriculture sector in India is presently staring at distress due to a number of structural problems leading to poor income levels of the farmers and hence reduced demand for the goods and services in the rural areas.

 

Poor response of the Government

  • The Government has erroneously focused on supply side measures in order to enhance the investment rates. For instance, recently the Finance minister unveiled a number of measures to boost the economy. Most of the measures emphasize on increasing the investment rates.

  • For example, the government has decided to infuse Rs 70,000 crores into Public sector Banks (PSBs) so as to enhance credit creation and investment rates in the Indian Economy. However, it may not lead to higher investment rates since the private sector is reluctant is invest due to lower demand.

  • On similar lines, the government has decided to exempt the FPIs from the higher surcharge which it had earlier imposed during the Union Budget 2019. This is unlikely to have affect since it would not boost the demand in the economy.

 

Way forward

  • The Government has to realise that the Indian economy would not get the necessary thrust unless the demand side factor is addressed.

  • The Union budget 2019 has failed to provide fiscal stimulus to address this problem. In this regard, the article recommends that there has to be massive increase in the public expenditure in the rural areas particularly on MGNREGA. Such an enhanced expenditure would have local multiplier effect in the form of creation of employment opportunities, higher income levels and consequently higher demand.

 

Title

5. Democracy & its discontents (The Hindu, Page 11)

Syllabus 

Prelims: Polity & Governance

Mains: G.S. II in Polity & Governance

Theme

Problems in democracy 

Highlights

  • The U.K., France and the U.S. have provided models for electoral democracies everywhere.However now, their democratic institutions are facing issues.

  • European governments are mostly the outcome of a bargaining process with other parliamentary parties, which in turn is influenced by a variety of institutional arrangements.. Thus many countries cannot form stable governments because the largest party does not command a majority..

  • The Coalitions are unstable and due to lack of proper majority the Parliaments are unable to pass laws.

 

Constitutional provisions in India for democracy:

  • The Preamble clearly mentions that India will be a democratic country.  ‘Democracy’ is associated with the freedom of choice of the people. The term democracy as used in the Preamble not only means political democracy, but also social and economic democracy. In fact, political democracy serves to achieve social and economic democracy. 

  • It is a method of government by discussion and persuasion. A democratic society is always open to new ideas and criticism equally. It does not bind the society with any one mode of living or preference. A democratic value is about openness and equality and right of every individual to be. 

  • The ideal of a democratic republic enshrined in the Preamble has been best secured by the Constitution by the adoption of universal adult suffrage by providing complete equality between the sexes not only before the law but also in the political sphere and providing a set fundamental rights.

  • Fundamental Rights are meant for promoting the idea of democracy.

 

DEMOCRACY IN INDIA:

  • India has a great Constitution and  free and fair elections are conducted. 

  • The Indian  Parliament has passed many landmark laws since Independence and it has been seen recently that with a strong government at the Centre, the Parliament has passed a slew of big laws recently.

  • The most recent is the change in the governance set-up of Jammu and Kashmir,  the Indian government has justified its bold reduction of powers of Jammu and Kashmir’s elected Assembly on the grounds that democracy was not functioning within the State and benefits of good governance were not reaching the citizens. The removal of art 370 resulted in the government declaring Jammu and Kashmir into a Union Territory with a legislature, and carve out Ladakh region as another Union Territory, but without a legislature.

  • Apart from this the govt  has also passed many landmark laws like the Right to Privacy, The sec 377 case on LGBTQ rights,the POSCO act on child rights,The NOTA judgement, the GST laws etc.

  • However we see that a govt that enjoys majority in a country also has some limitations:

 

WHAT ARE THE PROBLEMS OF A MAJORITARIAN DEMOCRACY?

  • The policy of such a govt is not designed to find solutions for complex problems with many points of view and it becomes as authoritarian as a dictatorial one. It can deny minorities their rights for their views to be considered while framing laws and resolving contentious issues. Thus, a government elected by a majority can justify the exclusion of the minority.

  • Thus such a government reduces its own effectiveness. 

  • Those dissatisfied with the governments’ decisions go to courts wherever courts are independent, like in India. However, courts are not set up to find policy solutions to complex problems and must interpret the laws as written. In India, many have complained that courts are venturing into matters of governance that they should not.This also leads to a conflict between the views of the govt and that of the courts and thus increases the time for such laws to pass. This is a sign that something is missing in India’s democracy.

 

WHAT IS THE SOLUTION?

  • Good governance requires effective methods for people’s participation. For example: Referendums of the entire electorate give an illusion of good democracy — that the people have been consulted. 

  • In this, Politicians on both sides of a referendum will run populist campaigns appealing to the basest of instincts to sway the opinions of the masses. 

  • Whereas, when the issue is complex, voters should be educated about what they are voting for. 

  • There are some instances however where we see that referendums have caused more issues than providing solutions.For example : During BREXIT in England,52% wanted Britain to leave the European Union versus 48% that did not .

 

The Best concept of a democracy:

  • At the bottom is the public space:  in this space people must be free to speak up if they want to. If they are supplemented by information and support of the social media, this base can expand.

  • Seeing that the democratic governance is slipping into ineffectual log-jams, it is tempting to close down the public space at the bottom, or to impose a majoritarian view from above to strengthen the government. There is fear that India may be slipping down this path, which may strengthen government on the ground, while stifling democratic governance. It is the road to ‘maximum government, minimum governance’.

  • On the top is the layer of constitutional institutions — parliaments, courts, etc 

  • Political middles are thinning in democracies everywhere. People want change. Radical parties of the Right and Left are gaining support. These parties are ideologically committed.

  • A Right-wing political party believes that certain social orders and hierarchies are inevitable, natural, normal, or desirableAn example of a Right party in India is the BJP.

  • Left-wing politics supports social equality and egalitarianism, often in opposition to social hierarchy. It typically involves a concern for those in society whom its adherents perceive as disadvantaged relative to others as well as a belief that there are unjustified inequalities that need to be reduced or abolished.An example of a LEFT party is the CPI and the CPM and a party in India which is ideologically non committed is the Congress.

  • The solution for strengthening governance and democracy at the same time is to strengthen the middle layer of institutions within democracies that lie between the open public sphere and formal government institutions. 

  • These are spaces where citizens with diverse views can listen to each other, and understand the whole system of which they are only parts. Neither elected assemblies nor social media provide such spaces. Sadly it is seen that even think tanks have become divided along ideological and partisan lines.

 

What can be done to strengthen democracy in India ?

  • It is imperative for India to build intermediate level, unofficial or semi-official institutions for non-partisan deliberation amongst concerned citizens. The government must give more space for such institutions to form and operate.

 

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