Daily Prelims Notes 21 December 2021

December 21, 2021
Posted by: OptimizeIAS Team
Category: DPN

Daily Prelims Notes

21 December 2021

Table Of Contents

1. Economically Weaker Sections (EWS)

Subject – Polity

Context – A three member-committee set up to examine the income criteria for determining the economically weaker sections (EWS) is expected to submit its report to the Centre within the next few days.

Concept –

The committee was set up after the Supreme Court questioned the income criteria for defining EWS, and termed it “arbitrary”, noting that the ceiling for determining EWS (Rs 8 lakh) is the same as the limit for determining the other backward classes (OBC) “creamy layer” for reservation for the children of people outside of government.
- At present, those with an annual income below Rs 8 lakh fall in the EWS category.
The 10% EWS quota was introduced under the 103rd Constitution (Amendment) Act, 2019 by amending Articles 15 and 16.
- It inserted Article 15 (6) and Article 16 (6).
It is for economic reservation in jobs and admissions in education institutes for Economically Weaker Sections (EWS).
It was enacted to promote the welfare of the poor not covered by the 50% reservation policy for Scheduled Castes (SCs), Scheduled Tribes (STs) and Socially and Educationally Backward Classes (SEBC).
It enables both Centre and the states to provide reservation to the EWS of society.

EWS reservation was granted based on the recommendations of a commission headed by Major General (retd) S R Sinho.
- The Sinho Commission recommended that all below poverty line (BPL) families within the general category as notified from time to time, and also all families whose annual family income from all sources is below the taxable limit, should be identified as EBCs (economically backward classes).
The present income ceiling of Rs 8 lakh fixed for EWS is the same as that for OBCs for quotas for people outside of government. For the OBC quota in government, there is a different criterion based on the ranks of the parents of the candidate. Outside of government, there is an income criterion, which was raised from Rs 6 lakh to Rs 8 lakh in 2017.

2. Multistate Cooperatives

Subject – Governance

Context – Union Home and Cooperation Minister Amit Shah announced that the Centre has decided to amend the Multi State Cooperative Societies (MSCS) Act, 2002 to “plug the loopholes in the Act”.

Concept –

Cooperatives are a state subject, but there are many societies such as those for sugar and milk, banks, milk unions etc whose members and areas of operation are spread across more than one state.
- The Multi State Cooperative Societies (MSCS) Act, 2002 was passed to govern such cooperatives.
They draw their membership from both states, and they are thus registered under the MSCS Act. Their board of directors has representation from all states they operate in.
Administrative and financial control of these societies is with the central registrar, with the law making it clear that no state government official can wield any control on them.
Maharashtra has the highest number at 567, followed by Uttar Pradesh (147) and New Delhi (133).
Credit societies constitute the bulk of registered societies at 610, followed by agro-based ones (which include sugar mills, spinning mills etc) at 244.
- There are 96 multistate cooperative dairies and 66 multistate cooperative banks.
The board of directors has control of all finances and administration. For expenditure above a certain level, the annual general body meeting of the society has to be called. The annual report of these societies has to be submitted either online or offline to the central registrar before September every year.
For state-registered societies, financial and administrative control rests with state registrars who exercise it through district- and tehsil-level officers.

Issues with the Act –

While the system for state-registered societies includes checks and balances at multiple layers to ensure transparency in the process, these layers do not exist in the case of multistate societies.
Unlike state cooperatives, which have to submit multiple reports to the state registrar, multistate cooperatives need not.
- The central registrar can only allow inspection of the societies under special conditions — a written request has to be sent to the office of the registrar by not less than one-third of the members of the board, or not less than one-fifth of the number of members of the society. Inspections can happen only after prior intimation to societies.
The on-ground infrastructure for central registrar is thin — there are no officers or offices at state level, with most work being carried out either online or through correspondence.
- For members of the societies, the only office where they can seek justice is in Delhi, with state authorities expressing their inability to do anything more than forwarding their complaints to the central registrar.
There have been instances across the country when credit societies have launched ponzi schemes taking advantage of these loopholes.

To know about Cooperative banks, please refer November 2021 DPN.

To know about Urban Co-operative Banks, please refer August 2021 DPN.

3. Chile Mapping

Subject – IR

Context – Leftist Gabriel Boric to become Chile’s youngest ever president

Concept –

Name	Geographical Location	Bordering Countries
Chile	A country in the western part of South America. It occupies a long, narrow strip of land between the Andes to the east and the Pacific Ocean to the west	Chile is the southernmost country in the world, the closest to Antarctica. Peru to the north, Bolivia to the northeast, Argentina to the east, Drake Passage in the far south.

Capital	National Language	Features	Biodiversity
Santiago	Spanish	It is situated within the Pacific Ring of Fire. Chile is among the longest north–south countries in the world.	Atacama Desert in the north and the Andes mountains to the east

4. World Economic Forum

Subject – IR

Context – Davos World Economic Forum called off due to Covid: Report

Concept –

The World Economic Forum is the International Organization for Public-Private Cooperation.
The Forum engages the foremost political, business, cultural and other leaders of society to shape global, regional and industry agendas.
It was established in 1971 as a not-for-profit foundation and is headquartered in Geneva, Switzerland. It is independent, impartial and not tied to any special interests.
The WEF is mostly known for its annual meeting at the end of January in Davos, a mountain resort in the eastern Alps region of Switzerland. The meeting brings together some 3,000 paying members and selected participants – among which are investors, business leaders, political leaders, economists, celebrities and journalists – for up to five days to discuss global issues across 500 sessions.

Reports by WEF –

Global Human Capital Index
Global Information Technology Report
Travel and Tourism Competitiveness Report
Global Competitiveness Report
Global Enabling Trade Report
Global Energy Architecture Performance Index Report
Global Environment Performance Index
World Power Language Index
Inclusive Development Index
Global Gender Gap Index
Global Risk Report
Energy Transition Index
Future of Jobs Report
Global Manufacturing Index

5. Fuel Taxes

Subject – Economy

Context – Centre rakes in Rs 3.72 lakh crore, low basic excise duty limits states’ share

Concept –

As of now LPG, kerosene, naphtha, furnace oil, and light diesel oil are under GST.
Five other petroleum products viz. crude oil, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel lie outside the GST.
Currently, taxes on petroleum products are levied by both the Centre and the states.
While the Centre levies excise duty, states levy value-added tax (VAT).
As per recommendation of the 15th Finance Commission, the Centre shares 41 per cent of the tax receipts with states for award period 2021–26.
States’ share in central petroleum taxes remained low as the basic excise duty was not raised as much as other duties were hiked.
Petroleum taxes with states are shared only out of basic excise duty. The Centre also levies additional excise duty and cesses on petroleum products.

Cess and Surcharges –

A cess is imposed on the base tax liability of a corporation or an individual taxpayer, for a specific purpose. Surcharge is a tax on tax that the Union government can use for whichever purpose it deems fit.
The issue of cess and surcharge is currently not within the mandate of the Finance Commission, as these collections are not part of the divisible pool.
The government will have to amend Article 269 and Article 270 of the Constitution to make these a part of the divisible pool.

6. Fertility Rate Decline in India

Subject – Governance

Context – India’s National Family Health Survey 2019-21 (NFHS-5) recorded a decline in the total fertility rate

Concept –

In a milestone, India’s National Family Health Survey 2019-21 (NFHS-5) recorded a decline in the total fertility rate (the average children a woman has) from 2.2 in the previous survey (2015-16) to 2 in the latest one.
- And here too, it was 1.6 in urban areas and 2.1 in a rural setting.
The dip in fertility is being attributed to a combination of factors, including better contraception initiatives and health and family welfare schemes from the Government.
- But a key factor is the education of the girl child and efforts to improve overall health and nutrition.
Across geographies there is a declining trend, but experts believe that India may still be on the path to becoming the most populous nation.
India has achieved replacement level fertility (pegged at 2.1), defined as the level at which the decline on a sustained basis would result in a generation replacing itself.
According to reports, five States with TFR above 2, were Bihar, Meghalaya, Uttar Pradesh, Jharkhand and Manipur.
TFR was the lowest in this survey in West Bengal, at 1.6.

7. Pillar-II Model Rules for Global Minimum Tax

Subject – IR

Context – OECD releases Pillar-II model rules for domestic implementation of 15% global minimum tax

Concept –

The Organisation for Economic Co-operation and Development (OECD) published detailed rules to assist in the implementation of new international tax system, which will ensure multinational enterprises (MNEs) will be subject to a minimum 15 per cent tax rate from 2023.
India is one among 137 countries that are signatory to new global tax regime.
They are drafted as model rules that provide a template that jurisdictions can translate into domestic law, which should assist them in implementing Pillar Two within the agreed time frame and in a co-ordinated manner.
The rules define the scope and set out the mechanism for the Global Anti-Base Erosion (GloBE) Rules under Pillar Two. These will assist countries to bring the GloBE rules into domestic legislation in 2022.
The minimum tax will apply to MNEs with revenue above €750 million and is estimated to generate around $150 billion in additional global tax revenues annually.
The model rules have kept the primary scope same as annual revenue of € 750 million for constituent entities that are members of an MNE Group with exclusions for a governmental entity, an international organisation, a non-profit organisation, a pension fund, an investment fund that is an ultimate parent entity, and a real estate investment vehicle that is an ultimate parent entity etc.
- The term ‘Permanent establishment’ has been defined as well under the model rules.

To know more about Global minimum tax, please refer June 2021 DPN.

To know about Pillar-1 and Pillar-2, please refer September 2021 DPN.

8. Derivative Trading

Subject – Economy

Context – Capital and commodity markets regulator Securities and Exchange Board of India (SEBI) has suspended futures and options trading for one year in a host of agricultural commodities including chana, mustardseed, crude palm oil, moong, paddy (Basmati), wheat and soyabean and its derivatives.

Concept –

Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset.
A derivative can trade on an exchange or over-the-counter.
Common derivatives include futures contracts, forwards, options, and swaps.

Options

An option gives the buyer the right, but not the obligation, to buy (or sell) an asset at a specific price at any time during the life of the contract.
They tend to be fairly complex, options contracts tend to be risky. Both call and put options generally come with the same degree of risk. When an investor buys a stock option, the only financial liability is the cost of the premium at the time the contract is purchased.
Options are based on the value of an underlying security such as a stock. As noted above, an options contract gives an investor the opportunity, but not the obligation, to buy or sell the asset at a specific price while the contract is still in effect. Investors don’t have to buy or sell the asset if they decide not to do so.

Futures

A futures contract gives the buyer the obligation to purchase a specific asset, and the seller to sell and deliver that asset at a specific future date unless the holder’s position is closed prior to expiration.
Options may be risky, but futures are riskier for the individual investor. Futures contracts involve maximum liability to both the buyer and the seller
A futures contract requires a buyer to purchase shares—and a seller to sell them—on a specific future date, unless the holder’s position is closed before the expiration date.
Futures contracts tend to be for large amounts of money. The obligation to sell or buy at a given price makes futures riskier by their nature.
They are preferred by speculators.

Swaps

Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forward contracts. The two commonly used swaps are:
- Interest rate swaps: These entail swapping only the interest related cash flows between the parties in the same currency and
- Currency swaps: These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite direction.

Forwards

Forward contracts or forwards are similar to futures, but they do not trade on an exchange.
These contracts only trade over-the-counter.

9. Series G Funding

Subject – Economy

Context – Funding blitz: Four start-ups raise over $1.2 billion from new, existing investors

Concept –

Every round of funding represents new opportunity for the business, but also presents the possibility of diluting the company’s equity and valuation.
Very few companies are going to make it to Series F funding or Series G funding, but it is possible. Some notable financial services have found themselves getting Series F or Series G funding, because capital is so inherent to the ways that they do business.
Series G is the 8th Fundraising event at a start-up (first one being seed fundraising round).
- Or it is the 9th Fundraising event (if there is a pre-series A between seed and series-A).
In the wake of the COVID-19 pandemic, more businesses have been entering the latter stages of funding to ensure that they survive without having to suffer heavy losses due to a lack of productivity or consumer power.
Some start-ups have found great success from these late stages of funding.
While the latter series of fundraising may feel like a level of failure for your start-up, it’s important to remember that every business is different and some endeavours can comfortably enter new rounds of funding for a variety of reasons that don’t signify that failure’s inevitable.

To know about Series A, B and C funding, please refer July 2021 DPN.

10. Three Decades of the Economic Reforms in India

Subject – Economy

Context – Reforms, growth, equity the only way to sustain high growth rate: C Rangarajan

Concept –

In 1980, per capita income of India and China was similar, but by 2020, China’s was $10,500 as against India’s $1,900.
India’s GDP growth increased to 6.2 per cent between 1992-93 and 2000-01 from earlier levels of 3.5 per cent.
- Between 2005-06 and 2007-08, it even touched a high 9.4 per cent.
On the balance of payment (BoP) front, the 10-year itch (of going to IMF for bail out) vanished.
Between 1993-94 and 2004- 05, poverty rates fell from 45.3 per cent to 37.2 per cent. In 2011-12, it fell further to 21.9 per cent.
India should grow its economy at 8-9 per cent for the next 21 years to become a developed nation.
Even to achieve its target of a $5-billion economy from $2.7 billion now, it will have to grow at 8-9 per cent for five consecutive years.

11. Article 167 of the Constitution

Subject – Polity

Context – WB Governor seeks information on State’s Pegasus probe panel

Concept –

Article 167 of the Constitution lays down the duties of the chief minister to furnish information to the Governor.
Article 167 of the Constitution says it is the Chief Minister’s duty to communicate to the Governor all decisions of the Council of Ministers relating to the administration and proposals for legislation.
It enjoins the Chief Minister to furnish such information relating to the administration as the Governor may call for.
If Governor wants to understand how schemes are being implemented, he can seek details from the Chief Minister instead of holding meetings in the districts.

12. Banks to offer OD of ₹5,000 to women SHG members

Subject – Economy

Context – Banks will offer ₹5,000 overdraft (OD) to verified women Self Help Group (SHG) members having Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts.

Concept –

Banks will offer ₹5,000 overdraft (OD) to verified women Self Help Group (SHG) members having Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts to meet their credit needs without insisting on security and end use amid the ongoing pandemic.
In this regard, the Indian Banks’ Association (IBA) has formulated a ₹5,000 OD scheme to provide hassle-free credit to low-income group/ underprivileged women within the existing PMJDY OD scheme of ₹10,000.
PMJDY provides access to various financial services such as basic savings bank account, need-based credit, remittance facility, insurance and pension to the excluded sections – weaker sections and low-income groups.

To know about Pradhan Mantri Jan-Dhan Yojana (PMJDY), please refer August 2021 DPN.

Facts about Pradhan Mantri Jan-Dhan Yojana (PMJDY)

As the calendar year draws to a close, the total number of beneficiaries under the Centre’s financial inclusion scheme, Pradhan Mantri Jan Dhan Yojana (PMJDY), has crossed the 44 crore mark.
The total number of accounts stood at 41.43 crore in the same period last year.
In terms of performance of States in implementing the scheme, Uttar Pradesh tops the list with highest number of accounts followed by Bihar.
More than half of the total beneficiaries are women, a majority of whom are from semi urban and rural areas.
Public sector banks (excluding regional rural banks) have over 21.70 crore accounts with them, accounting for a total balance of over ₹1-lakh crore
According to bankers, there has not been much increase in dormant accounts in the last two years, and many of the newly opened accounts have been witnessing some kind of transactions.
- According to the Reserve Bank of India’s guidelines, savings and current accounts will be classified as dormant if there are no transactions in the account for two years.
The average balance in Jan Dhan accounts hovers at about ₹2,700 across banks.

13. MCA 21

Subject – Governance

Context – ‘MCA21 portal: third version in the works’

Concept –

MCA21 is an e-Governance initiative of Ministry of Corporate Affairs (MCA), Government of India that enables an easy and secure access of the MCA services to the corporate entities, professionals and citizens of India.
It has made all company related information accessible to various stakeholders and the general public. It was launched in 2006.
The MCA21 application is designed to fully automate all processes related to the proactive enforcement and compliance of the legal requirements under the Companies Act, 1956, New Companies Act, 2013 and Limited Liability Partnership Act, 2008.
This will help the business community to meet their statutory obligations.
MCA 21 has been part of Mission Mode projects of the Government of India.
MCA21 Version 3.0 is part of the 2021 Budget announcement.
The MCA21 V3.0 in its entirety will not only improve the existing services and modules, but will also create new functionalities like e-adjudication, compliance management system, advanced helpdesk, feedback services, user dashboards, self-reporting tools and revamped master data services.
It comprises a revamped website, new email services for MCA Officers and two new modules, namely, e. Book and e. Consultation.