Daily Prelims Notes 14 December 2024

December 14, 2024
Posted by: OptimizeIAS Team
Category: DPN

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Daily Prelims Notes

14 December 2024

Table Of Contents

1. Sebi proposes allowing retail participation in algo trading

Sub: Eco

Sec :Capital Market

What is Algo trading?

Algo trading refers to orders generated using automated execution logic. Such trading provides significant advantages of timed and programmed order execution.

Algorithmic trading in India

Algorithmic trading was introduced and allowed in India in 2008 by the Securities and Exchange Board of India (Sebi).
Initially, it started with Direct Market Access (DMA) and was restricted to institutional investors only, but due to the cost advantage and better execution, the trading community welcomed it with open arms.

Benefits of Algorithmic Trading

Trades are executed at the best possible prices.
Trade order placement is instant and accurate (there is a high chance of execution at the desired levels).
Trades are timed correctly and instantly to avoid significant price changes.
Reduced transaction costs.
Simultaneous automated checks on multiple market conditions.
Reduced risk of manual errors when placing trades.
Algo-trading can be back tested using available historical and real-time data to see if it is a viable trading strategy.
Reduced the possibility of mistakes by human traders based on emotional and psychological factors.

2. Monitoring NCLT and NARCL Cases to Minimise Delays

Sub :Eco

Sec: Monetary Policy

Key Directives from the Finance Ministry

Close Monitoring of NCLT and NARCL Cases:
- Banks have been instructed by the Finance Ministry to closely track cases involving:
  - National Company Law Tribunal (NCLT)
  - National Asset Reconstruction Company Limited (NARCL)
- Objective: To minimise procedural delays and adjournments for faster resolution of stressed assets.

Integrated Portal Development

Ministry of Corporate Affairs Initiative:
- An integrated portal is being developed to facilitate seamless information sharing with banks regarding NCLT cases.
- Aim: Streamlined updates to enhance efficiency in case monitoring.

Bad Bank- A bad bank is an entity created to purchase and manage non-performing assets (NPAs) or bad loans from financial institutions. It provides banks with the opportunity to clean their balance sheets and focus on healthy lending.

It was first proposed in the 2016 Economic Survey. National Asset Reconstruction Company Limited (NARCL), established in 2021, is India’s first bad bank.

NARCL – India’s Bad Bank

Objective:
- Tackle large-value bad loans (over ₹500 crore).
- Facilitate resolution and liquidation through a structured mechanism.
Structure:
- NARCL: Aggregates and purchases NPAs from banks.
- IDRCL: Handles the resolution process under an arrangement with NARCL.
Funding:
- Pays 15% of loan value in cash; 85% in government-backed security receipts.
- State-owned banks hold a 51% stake; private banks own the rest.

National Company Law Tribunal (NCLT)

Nature: A quasi-judicial body handling corporate disputes of civil nature.
Established: June 1, 2016, under the Companies Act, 2013.
Recommendation Basis: Formed based on the recommendations of the Balakrishna Eradi Committee, which suggested reforms in insolvency and company winding-up procedures.

3. Maha Kumbh 2025 is ‘maha yagya of unity’, says PM in Prayagraj

Sub: History

Sec: Art and Culture

Context:

Prime Minister Narendra Modi emphasized the significance of the Maha Kumbh 2025 in Prayagraj, describing it as a “maha yagya of unity” that will elevate India’s spiritual and cultural identity.
Prime Minister launched the Sah’AI’yak’ Chatbot, an AI-based multilingual platform to assist devotees in 11 Indian languages.

About Kumbh Mela:

The Kumbh Mela (the festival of the sacred pitcher) is anchored in Hindu mythology.
KumbhMela is the largest peaceful congregation of pilgrims on earth, during which participants bathe or take a dip in a sacred river.
It is believed that the water of the river at these locations has been sanctified by the divine nectar, and bathing in it cleanses devotees of their sins and ensures liberation (moksha).
Primarily, this congregation includes Ascetics, Saints, Sadhus, Sadhvis, Kalpvasis, and pilgrims from all walks of life.
The Mela was included in the list of Intangible Cultural Heritage of Humanity by UNESCO in 2017.

When and where is it held:

Kumbh Mela is celebrated four times over a course of 12 years.
The geographical location of Kumbh Mela spans over four locations in India and the Mela site keeps rotating between one of the four pilgrimage places every three years:
- Haridwar on the Ganges in Uttarakhand.
- Ujjain on the Shipra in Madhya Pradesh.
- Nashik on the Godavari in Maharashtra.
- Prayagraj at the confluence of the Ganges, the Yamuna, and the mythical Sarasvati in Uttar Pradesh.

Historical background:

The Kumbh Mela finds its first historical references during the Maurya and Gupta periods, approximately from the 4th century BCE to the 6th century CE.
The medieval period witnessed the Maha Kumbh Mela evolving into a grander spectacle, with the inclusion of royal patronage and the flourishing of cultural traditions.
In 1565, Mughal Emperor Akbar forged an alliance with the Naga Sadhus, the ascetic warriors of the pilgrimage. Impressed by their discipline and martial traditions, Akbar granted the Nagas the right to lead the royal procession into the Kumbh.
British colonial administrator James Prinsep documented the Maha Kumbh Mela in the 19th century, offering descriptions of the ritualistic practices.

4. Added sugar in Nestle baby products complies with regulations: Nadda

Sub : Sci

Sec: Health

Context:

Union Health Minister J. P. Nadda clarified in the Lok Sabha that the added sugar in Nestle baby products complies with both Indian and global standards, as per the Food Safety and Standards (Foods for Infant Nutrition) Regulations, 2020.
He stated that the sugar limits specified in these regulations align with global standards set by the Codex Alimentarius, which incorporates recommendations from the World Health Organization (WHO).

Background:

Earlier, following media reports, the Food Safety and Standards Authority of India (FSSAI) took suo motu cognizance of a report by a Swiss NGO that raised concerns about the sugar content in wheat-based baby food products. The report questioned the addition of sugar to these products, which led to the regulatory review.

Food Safety and Standards Authority of India (FSSAI):

FSSAI is an autonomous statutory body established under the Food Safety and Standards Act, of 2006.
The Act of 2006, consolidates various laws related to food, such as the Prevention of Food Adulteration Act, 1954, the Fruit Products Order, 1955, the Meat Food Products Order, 1973, and other acts that were previously handled by different ministries and departments.
The Act also aims to establish a single reference point for all matters relating to food safety and standards, by moving from multi-level, multi-departmental control to a single line of command.
FSSAI is responsible for protecting and promoting public health by regulating and supervising food safety and quality in India, operating under the Ministry of Health & Family Welfare.
FSSAI has a headquarters in New Delhi and regional offices in eight zones across the country.

Functions and Powers:

Framing of regulations and standards for food products and additives.
Granting of licences and registration to food businesses.
Enforcement of food safety laws and regulations.
Monitoring and surveillance of food safety and quality.
Conducting risk assessment and scientific research on food safety issues.
Providing training and awareness on food safety and hygiene.
Promoting food fortification and organic food.

Codex Alimentarius:

The Codex Alimentarius is a collection of internationally recognized standards, codes of practice, guidelines, and other recommendations published by the Food and Agriculture Organization and World Health Organization relating to food, food production, food labelling, and food safety.

5. Addressing the Global Burden of Drowning: Insights from WHO’s First Global Status Report

Sub: Sci

Sec: Health

Why in News

The World Health Organization (WHO) released its first-ever Global Status Report on Drowning Prevention at an event in Geneva. The report provides critical insights into the global burden of drowning, emphasizing the need for urgent action to prevent these preventable deaths.

Key Highlights of the Report:

The report, developed in response to a World Health Assembly Resolution 76.18 (2023) and funded by Bloomberg Philanthropies.
Drowning Statistics: In 2021, 3,00,000 people died by drowning globally, equivalent to an estimated 30 deaths per hour. 92% of these deaths occurred in low- and middle-income countries, disproportionately affecting marginalized communities.
Regional Analysis: The WHO South-East Asia Region (which includes India) accounted for 83,000 deaths, representing 28% of the global burden.
Children and Youth at Risk: Children under 5 years accounted for the largest share of drowning deaths (24%). Additional 19% of deaths occurred among children aged 5–14 years, and 14% among young people aged 15–29 years.
Drowning is the 4th leading cause of death for children aged 1–4 years and the 3rd leading cause of death for children aged 5–14 years.

Challenges and Underreporting:

Deaths due to drowning caused by natural disasters (e.g., flooding) or water transport incidents are not fully captured due to insufficient data.
Vulnerability to flooding is rising because of climate change, with 75% of flood-related deaths attributed to drowning.
If current trends persist, over 2 million lives, mainly children, could be lost to drowning by 2050.

Key Recommendations:

Political Will and Investment: Strong political commitment and financial investment in drowning prevention are essential to save lives.
Daycare Services: Providing daycare facilities for preschool children can significantly reduce drowning risks.
Swimming Skills: Teaching basic swimming and water safety skills to schoolchildren can help protect millions of lives.
Legislative Action: Existing legislation often fails to address the scale of the drowning crisis, necessitating policy reforms and enforcement.

About World Health Organization:

Establishment: 7th April 1948 (celebrated as World Health Day)
Headquarters: Geneva, Switzerland
Objective: International health coordination and collaboration to improve public health globally.
Director-General: Dr. Tedros Adhanom Ghebreyesus (Ethiopia, since 2017).

Key Functions:

Monitoring health trends and emergencies globally.
Developing international health policies and standards.
Leading health campaigns like eradication of smallpox and polio.
Strengthening healthcare systems in member nations.

Governance Structure:

World Health Assembly (WHA): Decision-making body consisting of all 194 member states.
Executive Board: 34 health experts from member states implementing WHA decisions.
Director-General: Oversees daily functioning and initiatives.

6. Suspension of MFN Clause in India-Switzerland Tax Treaty

Sub: Eco

Sec: External sector

Why in News

The Swiss government has decided to suspend the Most Favoured Nation (MFN) clause under the Double Taxation Avoidance Agreement (DTAA) with India.

Background:

The decision involved 11 petitions, including one filed by Nestlé, challenging the automatic applicability of the MFN clause.
The Court ruled that the MFN benefits under DTAA do not apply automatically and require explicit notification under the Income Tax Act.
Switzerland issued a statement on December 11, 2023, acknowledging India’s interpretation of the MFN clause.
Effective January 1, 2025, Switzerland will suspend the MFN benefits for Indian entities, resulting in increased tax rates.

Implications of the Suspension:

Previous Benefits: Indian companies enjoyed a reduced tax rate of 5% on dividends and other incomes due to MFN provisions.
From 2025, the tax rate will revert to 10%, increasing tax liabilities for Indian businesses.
Key sectors impacted include financial services, pharmaceuticals, and IT, which have significant operations in Switzerland.
Indian firms may face reduced competitiveness compared to entities from countries still benefiting from MFN provisions.

Most Favoured Nation (MFN):

MFN is a principle in international trade that ensures equal treatment for all trading partners in terms of trade benefits.
Mandated under Article 1 of the General Agreement on Tariffs and Trade (GATT), 1994.
Applies to tariffs, import quotas, and other trade barriers for goods and services.
India has granted MFN status to all WTO members since joining in 1995.
Suspended MFN status for Pakistan in 2019 due to national security concerns.
MFN in Tax Treaties: Ensures non-discrimination in tax rates under DTAAs.
Benefits via the MFN clause require formal notification under domestic law (Section 90(1) of the Income Tax Act).

Double Taxation Avoidance Agreement (DTAA):

To prevent double taxation on the same income, facilitating cross-border investment and trade.
India has signed DTAAs with over 90 countries, including the USA, China, and Mauritius.
Covers various incomes such as salaries, business profits, and royalties.
MFN Clause in DTAA: If India agrees to a lower tax rate with a new OECD member, the same rate may apply to existing OECD members in specific treaties.
Conditions like mutual notification and OECD membership at the time of the treaty are required.

European Free Trade Association (EFTA):

Founded: 1960.
Purpose: Promotes free trade and economic integration among member states without forming a customs union.
Headquarters: Geneva, Switzerland.
Member Countries: Switzerland, Norway, Iceland and Liechtenstein.
EFTA negotiates free trade agreements (FTAs) globally, independently of the European Union (EU).
EFTA is not a member of the EU, but most members (except Switzerland) are part of the European Economic Area (EEA), allowing access to the EU single market.
Switzerland’s Role: Plays a key role in EFTA’s economic diplomacy while maintaining its non-EU stance.
Discussions under EFTA to finalize a Free Trade Agreement with India, focusing on industrial goods, intellectual property, and sustainable trade practices.
Why EFTA is Unique: Provides flexibility for countries not wanting to join the EU. Offers access to European markets while maintaining economic sovereignty.

India-Switzerland Relations:

Diplomatic Ties: Established in 1948, India-Switzerland relations are based on shared democratic values, neutrality, and mutual cooperation.
Bilateral trade was valued at around USD 25 billion in 2023, primarily in pharmaceuticals, chemicals, machinery, and precious metals.
Ongoing negotiations under the European Free Trade Association (EFTA) to finalize a Free Trade Agreement.
Double Taxation Avoidance Agreement (DTAA): Signed in 1994 to prevent double taxation and ensure tax transparency.
Automatic Exchange of Information (AEOI): Since 2019, Switzerland shares information on Indian account holders to curb black money.

Switzerland:

Capital: Bern
Largest City: Zurich
Bordering Countries: Germany (north), France (west), Italy (south), Austria and Liechtenstein (east)
Mountain Ranges: Swiss Alps, Jura Mountains
Major Rivers: Rhine, Rhone, Aare
Ranked 1st globally in the Global Innovation Index.
One of the world’s wealthiest nations by GDP per capita.
Major Industries: Pharmaceuticals, machinery, watches, banking, and financial services.
Export Strength: Known for exports of luxury watches (e.g., Rolex, Omega) and precision tools.
Currency: Swiss Franc (CHF)
Political System: Federal Republic with a direct democracy.
Neutrality: Switzerland has been a neutral state since the 1815 Congress of Vienna.
International Role: Headquarters of global organizations like the World Health Organization (WHO) and World Economic Forum (WEF) are based in Switzerland.