Daily Prelims Notes 1 January 2021

January 1, 2021
Posted by: OptimizeIAS Team
Category: DPN

Daily Prelims Notes 1 January 2021

Table Of Contents

Subject : Economics

Context : India’s fiscal deficit shot up to 135.1% of the Budget target of nearly ₹8 lakh crore for 2020-21, in the 8 months from April to November 2020, as per data released by the Controller General of Accounts.

Concept :

Fiscal Deficit

The government describes fiscal deficit of India as “the excess of total disbursements from the Consolidated Fund of India, excluding repayment of the debt, over total receipts into the Fund (excluding the debt receipts) during a financial year”.
It is calculated as a percentage of Gross Domestic Product (GDP), or simply as total money spent in excess of income.
Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts).
Expenditure component: The government in its Budget allocates funds for several works, including payments of salaries, pensions, etc. (revenue expenditure) and creation of assets such as infrastructure, development, etc. (capital expenditure).
Income component: The income component is made of two variables, revenue generated from taxes levied by the Centre and the income generated from non-tax variables.
The taxable income consists of the amount generated from corporation tax, income tax, Customs duties, excise duties, GST, among others.
Meanwhile, the non-taxable income comes from external grants, interest receipts, dividends and profits, receipts from Union Territories, among others.
It is different from revenue deficit which is only related to revenue expenditure and revenue receipts of the government.
The government meets the fiscal deficit by borrowing money. In a way, the total borrowing requirements of the government in a financial year is equal to the fiscal deficit in that year.
A high fiscal deficit can also be good 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.
The Fiscal Responsibility and Budget Management Act, 2003 provides that the Centre should take appropriate measures to limit the fiscal deficit upto 3% of the GDP by 31st March, 2021.
The NK Singh committee (set up in 2016) recommended that the government should target a fiscal deficit of 3% of the GDP in years up to March 31, 2020 cut it to 2.8% in 2020-21 and to 2.5% by 2023.

Additional Information

Revenue deficit :

The revenue deficit mentions to the surplus of government’s revenue expenditure over the revenue receipts.
Revenue deficit = Revenue expenditure – Revenue Receipts
This deficit only incorporates current income and current expenses. A high degree of deficit symbolises that the government should reduce its expends.

Primary Deficit

A primary deficit is the amount of money that the government requires to borrow apart from the interest payments on the formerly borrowed loans.
The aim of quantifying the primary deficit is to concentrate on current fiscal imbalances.
To attain an approximate of borrowing on account of current expends overreaching revenues, we need to compute what has been known as the primary deficit. It is the fiscal deficit – the interest payments.
Gross primary deficit = Gross fiscal deficit – Net interest liabilities
Net interest liabilities comprise of interest payments – interest receipts by the government on net domestic lending.

2. CORE INDUSTRIES OUTPUT CONTRACTS

Subject : Economy

Context: Contracting for the ninth consecutive month, the output of eight core infrastructure sectors dropped by 2.6 per cent in November, 2020.

Concept :

The production of eight core sectors had recorded a growth of 0.7 per cent in November 2019, data released by the commerce and industry ministry showed.
Barring coal, fertiliser and electricity, all sectors — crude oil, natural gas, refinery products, steel and cement — recorded negative growth in November 2020.

Core Industries

Core industry can be defined as the main industry which has a multiplier effect on the economy.
In most countries, there is particular industry that seems to be backbone of all other industries and it qualifies to be the core industry.
The Eight Core Industries comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).
The eight Core Industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.
Weightage for Industries (In percentage)

Petroleum & Refinery production 28.04

Electricity generation 19.85

Steel production 17.92

Coal production 10.33

Crude Oil production 8.98

Natural Gas production 6.88

Cement production 5.37

Fertilizers production 2.63.

Additional Information

Index of Industrial Production

The Index of Industrial Production (IIP) is an index which details out the growth of various sectors in an economy such as mineral mining, electricity, manufacturing, etc.
It is compiled and published monthly by the Central Statistical Organisation (CSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends, i.e a lag of six weeks.
The Base Year of the Index of Eight Core Industries has been revised from the year 2004-05 to 2011-12 from April, 2017.

3. UPI BASED INNOVATIONS

Subject : Science & tech

Concept :

OPEN CREDIT ENABLEMENT NETWORK (OCEN)

OCEN is a credit protocol infrastructure, which will mediate the interactions between loan service providers, usually fintech and mainstream lenders, including all large banks and NBFCs.
It is developed by a think tank, Indian Software Products Industry Round Table (iSPIRT).
With this, a credit will become more accessible for a large number of entrepreneurs and small businesses in the country.
Private equity and venture capital players, angel investors, high net worth individuals and others also could be part of this exercise as investors.
There are already seven banks including SBI, HDFC Bank, ICICI Bank and Axis that are enrolled on Sahay GEM and, over time, presumably, others will enrol as well
Account Aggregators which will be using these APIs to embed credit offerings in their applications, and will be called ‘Loan Service Providers’, which will play a crucial role in democratizing access to credit, and lowering interest rates for customers.

Significance

The cost of lending being too high in India, small value loans becomes very unfeasible.
OCEN which seeks to connect lenders to marketplaces and thereby to borrowers is a technology system.
If implemented, the technology can democratize lending to micro-enterprises and street vendors in a big way.

SAHAY GEM PLATFORM

SAHAY platform, a new avenue has opened up to provide a solution to the working capital needs of MSMEs.
‘GeM-SAHAY’ can be utilised to provide frictionless financing for MSMEs on GeM(Government e Marketplace) where they can now get a loan at the point of acceptance of an order on the platform.
The country’s leading lenders are associated with the SAHAY platform .
It is a mix of the largest public sector bank SBI, leading private sector banks like ICICI Bank, HDFC Bank, Axis Bank ,IDFC First Bank and leading NBFC like Bajaj Finserv’

OPEN HEALTH SERVICES NETWORK

OHSN is the interface which governs the relationship between various market players in the healthcare ecosystem such as tele consult providers, pharmacies, or diagnostic centres on one side, and government or private apps and platforms on the other side.
Open Health Services Network (OHSN) is to be handled by the National Health Authority.
As in the case of OCEN, doctors, hospitals, pathology labs, pharmacies, etc, are free to join, and patients are then free to choose whose service they want to avail.
Since electronic health records are not always portable, standards will be laid down to ensure this, and a health data consent manager will ensure consent is taken and privacy maintained.
OHSN objectives ,

To establish baseline standards of care.

And to provide auditable and transparent processes governing the transfer of data and payments.

If these two objectives are met, the healthcare ecosystem as a whole can be made more accessible, secure, and efficient for both users and service providers.

4. MACROPHAGES

Subject : Science & technology

Context : Researchers at KarolinskaInstitutet in Sweden describe how different kinds of immune cells, called macrophages, develop in the lungs and which of them may be behind severe lung diseases.

Concept :

The structure of the lungs exposes them to viruses and bacteria from both the air and the blood.
Macrophages among other things, protect the lungs from such attacks.
But under certain conditions, lung macrophages can also contribute to severe lung diseases, such as chronic obstructive pulmonary disease (COPD) and COVID-19.

MACROPHAGES

Macrophages are important cells of the immune system that are formed in response to an infection or accumulating damaged or dead cells.
Macrophages are large, specialized cells that recognize, engulf and destroy target cells.
Macrophages are formed through the differentiation of monocytes, one of the major groups of white blood cells of the immune system.
When there is tissue damage or infection, the monocytes leave the bloodstream and enter the affected tissue or organ and undergo a series of changes to become macrophages.
These macrophages can modify themselves to form different structures in order to fight various different microbes and invaders.
The macrophages present in humans are around 21 micrometers in diameter. They can survive for months at a time. They are also involved in the development of non-specific or innate immunity.
Each of the macrophages has specific protein markers on the cell surface. Some examples include CD14, CD11b, EMR1, MAC-1/MAC-3, Lysozyme M, and CD68. These markers can be identified using a technical process called flow-cytometry.
Macrophages may have different names according to where they function in the body. For example, macrophages present in the brain are termed microglia and in the liver sinusoids, they are called Kupffer cells.

5. FOREIGNER’S TRIBUNAL

Subject : Governance

Context : After a year-and-a-half in a detention centre as ‘illegal foreigners’, the New Year has brought freedom and citizenship to Mohammad Nur Hussain, 34, his wife Sahera Begum, 26, and their two minor children, who have been declared Indians in a re-trial by a Foreigners’ Tribunal (FT).

Concept :

Foreigners Tribunal

In 1964, the govt brought in the Foreigners (Tribunals) Order.
Composition: Advocates not below the age of 35 years of age with at least 7 years of practice (or) Retired Judicial Officers from the Assam Judicial Service(for assam) (or) Retired IAS Officers (not below the rank of Secretary/Addl. Secretary) having experience in quasi-judicial works.

Who can setup these tribunals?

The Ministry of Home Affairs (MHA) has amended the Foreigners (Tribunals) Order, 1964, and has empowered district magistrates in all States and Union Territories to set up tribunals (quasi-judicial bodies) to decide whether a person staying illegally in India is a foreigner or not.
Earlier, the powers to constitute tribunals were vested only with the Centre.
Typically, the tribunals there have seen two kinds of cases: those concerning persons against whom a reference has been made by the border police and those whose names in the electoral roll has a “D”, or “doubtful”, marked against them.

Who can approach?

The amended order (Foreigners (Tribunal) Order, 2019) also empowers individuals to approach the Tribunals. Earlier, only the State administration could move the Tribunal against a suspect.

Process

Foreigners Tribunals, quasi-judicial authorities , have been deciding on matters pertaining to citizenship in order to identify foreigners.
The process begins by the border police or the Election Commission referring the case of a suspected foreigner to the Foreigners Tribunal.
The tribunal calls on the person to appear before it and prove that they are not a foreigner, and then passes an order in favour or against them.

6. AGRICULTURE INFRASTRUCTURE FUND

Subject : Economy

Concept :

It is a Pan India Central Sector Scheme-Agriculture Infrastructure Fund.
The scheme shall provide a medium – long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support.

Loans Provided from the fund

Under the scheme, Rs. One Lakh Crore will be provided by banks and financial institutions as loans to Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), Self Help Group (SHG), Farmers, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-entrepreneurs, Startups, Aggregation Infrastructure Providers and Central/State agency or Local Body sponsored Public Private Partnership Project
Loans will be disbursed in four years starting with sanction ofRs. 10,000 crore in the current year and Rs. 30,000 crore each in next three financial years.
All loans under this financing facility will have interest subvention of 3% per annum up to a limit of Rs. 2 crore.
This subvention will be available for a maximum period of seven years.
Further, credit guarantee coverage will be available for eligible borrowers from this financing facility under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crore.
The fee for this coverage will be paid by the Government. In case of FPOs the credit guarantee may be availed from the facility created under FPO promotion scheme of Department of Agriculture, Cooperation & Farmers Welfare (DACFW).
The total outflow as budgetary support from Government of India (GoI) will be Rs.10,736 crore:
Moratorium for repayment under this financing facility may vary subject to minimum of 6 months and maximum of 2 years.

Online Platform

Agri Infra fund will be managed and monitored through an online Management Information System (MIS) platform.
It will enable all the qualified entities to apply for loan under the fund. The online platform will also provide benefits such as transparency of interest rates offered by multiple banks, scheme details including interest subvention and credit guarantee offered, minimum documentation, faster approval process as also integration with other scheme benefits.

7. RoDTEP SCHEME

Subject : Government Schemes

Context : Benefit of Remission of Duties and Taxes on Exported Products (RoDTEP) scheme will be extended to all export goods from January 1, 2021, the finance ministry said in a statement

Concept :

Under the scheme, the embedded central, state and local duties or taxes will get refunded and credited in an exporter’s ledger account with customs.
This can be used to pay basic customs duty on imported goods. The credits can also be transferred to other importers, the ministry said.
So far refunds were not taking place, adversely impacting exports. India’s exports fell 8.74% in November, steeper than 5.12% dip in October at $23.52 billion.
The RoDTEP rates, conditions and exclusions under which it can be availed would be specified by the department of commerce, based on recommendation of the GK Pillai committee that are expected soon.

About RoDTEP Scheme

RoDTEP is a scheme for the Exporters to make Indian products cost-competitive and create a level playing field for them in the Global Market.
It has replaced the current Merchandise Exports from India Scheme, which is not in compliance with WTO norms and rules.
The new RoDTEP Scheme is fully WTO compliant scheme.
It will reimburse all the taxes/duties/levies being charged at the Central/State/Local level which are not currently refunded under any of the existing schemes but are incurred at the manufacturing and distribution process.

Merchandise Exports from India Scheme (MEIS)

MEIS was launched with an objective to enhance the export of notified goods manufactured in a country.
This scheme came into effect on 1 April 2015 through the Foreign Trade Policy and will be in existence till 2020.
MEIS intends to incentivise exports of goods manufactured in India or produced in India.
The incentives are for goods widely exported from India, industries producing or manufacturing such goods with a view to making Indian exports competitive.
The MEIS covers almost 5000 goods notified for the purpose of the scheme.

8. FATF

Subject: International Organizations

Context: The Financial Action Task Force (FATF) had deferred its once-a-decade evaluation of India’s anti-money laundering regime scheduled for this year, citing the COVID-19 pandemic, and indicated that the onsite review to be conducted by global experts may now take place in early 2021.

Concept:

The FATF undertakes peer reviews of each member on an ongoing basis to assess the implementation of its recommendations and provides a detailed analysis of each country’s system for preventing criminal abuse of the financial system.

About FATF

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7.
It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas.
The FATF Secretariat is housed at the OECD headquarters in Paris.

Roles and functions:

Initially it was established to examine and develop measures to combat money laundering.
In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.

Composition:

The FATF currently comprises 37 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe. It also has observers and associate members.

Blacklist and Grey list

Black List: Countries knowns as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
Considered in the grey list may face:

Economic sanctions from IMF, World Bank, ADB.

Problem in getting loans from IMF, World Bank, ADB and other countries.

Reduction in international trade.

International boycott.