Daily Prelims Notes 23 March 2022

Daily Prelims Notes

23 March 2022

Table Of Contents

1. Carbon Credit
2. Power generation in India
3. UN Biodiversity negotiations in Geneva
4. Merchandise Export
5. Saving Banks from a Black Swan
6. AtmaNirbhar Bharat- Open and Closed economy
7. Agricultural Credit
8. Infusion of Technologies in Agricultural Sector
9. War led energy jolt can lead the economy to recession
10. Misleading Ads and CCPA jurisdiction

1. Carbon Credit

Subject : Environment

Section : Climate Change

Context: Nurture. farm’s rice project generates 20,000 carbon credits

What Is a Carbon Credit?

• A carbon credit is a permit that allows the owner to emit a certain amount of carbon dioxide or other greenhouse gases. One credit permits the emission of one ton of carbon dioxide or the equivalent in other greenhouse gases.
• Countries that pollute are awarded credits that allow them to continue to pollute up to a certain limit. That limit is reduced periodically. Meanwhile, the countries may sell any unneeded credits to another company that needs them.

Significance of Carbon Credit

• Carbon credits were devised as a mechanism to reduce greenhouse gas emissions.
• Companies get a set number of credits, which decline over time. They can sell any excess to another company.
• Carbon credits create a monetary incentive for companies to reduce their carbon emissions. Those that cannot easily reduce emissions can still operate, at a higher financial cost.
• Carbon credits are based on the “cap-and-trade” model that was used to reduce sulfur pollution in the 1990s.

Background

• The United Nations’ Intergovernmental Panel on Climate Change (IPCC) developed a carbon credit proposal to reduce worldwide carbon emissions in a 1997 agreement known as the Kyoto Protocol. The agreement set binding emission reduction targets for the countries that signed it. Another agreement, known as the Marrakesh Accords, spelled out the rules for how the system would work.
• Kyoto protocol was revised in 2012 in an agreement known as the Doha Amendment, which was ratified as of October 2020, with 147 member nations having “deposited their instrument of acceptance”.
• Negotiators at the Glasgow COP26 climate change summit in November 2021 agreed to create a global carbon credit offset trading market.

What does the Kyoto protocol say on emission reduction?

The Kyoto Protocol aims to limit or reduce the greenhouse gas emissions by three market-based mechanisms – emissions trading, clean development mechanism and joint implementation.

1. Emissions trading– An advanced country “A” can acquire emission units from an advanced country “B” for meeting a part of their emission reduction target.
2. Clean development mechanism– An advanced country can implement emission reduction projects in a developing country to earn certified emission reduction (CER) credits which can be traded to achieve their reduction targets.
3. Joint implementation– An advanced country “A” and an advanced country “B” may take part in an emission-reduction project and count the resulting emission units towards meeting its Kyoto target.

What is Article 6 of Paris agreement?

• Article 6 of the Paris Agreement introduces provisions for using international carbon markets to facilitate fulfilment of Nationally Determined Contributions (NDCs) by countries.
• Article 6.2 provides an accounting framework for international cooperation and allows for the international transfer of carbon credits between countries.
• Article 6.4 establishes a central UN mechanism to trade credits from emissions reductions generated through specific projects.
• Article 6.8 establishes a work program for non-market approaches, such as applying taxes to discourage emissions.

2. Power generation in India

Subject : Economy

Section: Energy

Context: Govt to cut coal-based power share to 32% from 52% by 2030

Status of Power generation in India

Need for such move:

• The move is in line with the government’s COP26 pledge of achieving 500 gigawatts (GW) of installed capacity based on non-fossil fuel by 2030.
• This is in addition to its aim of increasing the share of renewable energy (RE) sources in power generation to 50 per cent during the same period.
• Costs of renewable power have reduced considerably and the lowest discovered tariff for solar power has been ₹1.99 per unit.
• Highly dependent on import for high grade coal
• Low productivity due to use of unscientific method

3. UN Biodiversity negotiations in Geneva

Subject : Environment

Section :Biodiversity

Context: A chair of the U.N. biodiversity negotiations underway in Switzerland expects agreement on a key target on raising protected areas, adding he saw support from the talks’ presidency, China, for the first time.

Background:

• Hundreds of negotiators arrived in the Swiss city of Geneva for final U.N. talks on an ambitious pact that aims to halt and reverse the loss of habitats for endangered species ahead of a summit in China (Kunming) later this year.
• At the centre of the talks is a call by the United Nations for countries to protect and conserve 30% of their territory by 2030 – a target known as “30 by 30”.
• Negotiators are also aiming to increase funding for protected areas as well as reforms to agriculture subsidies which are seen as a major cause of biodiversity loss.
• In a previous agreement, Strategic Plan for Biodiversity 2011-2020, signed in Aichi, Japan, in 2010, governments agreed on 20 targets to try to slow biodiversity loss and protect habitats by 2020.

Strategic Plan for Biodiversity 2011-2020

“Strategic Plan for Biodiversity 2011-2020”, provide a set of 20 ambitious yet achievable targets (divided into 5 sections: A to E), collectively known as the Aichi Targets for biodiversity.

The Aichi Biodiversity Targets are:

1. Strategic Goal A: Address the underlying causes of biodiversity loss by mainstreaming biodiversity across government and society
2. Strategic Goal B: Reduce the direct pressures on biodiversity and promote sustainable use.
3. Strategic Goal C: To improve the status of biodiversity by safeguarding ecosystems, species and genetic diversity
4. Strategic Goal D: Enhance the benefits to all from biodiversity and ecosystem services
5. Strategic Goal E: Enhance implementation through participatory planning, knowledge management and capacity building.

What is biodiversity?

 Biological diversity deals with the degree of nature’s variety in the biosphere. This variety can be observed at three levels; the genetic variability within a species, the variety of species within a community, and the organisation of species in an area into distinctive plant and animal communities constitutes ecosystem diversity

Types of biodiversity?

Genetic diversity: A single species might show high diversity at the genetic level over its distributional range. The genetic variation shown by the medicinal plant Rauwolfia vomitoria growing in different Himalayan ranges might be in terms of the potency and concentration of the active chemical (reserpine) that the plant produces. India has more than 50,000 genetically different strains of rice, and 1,000 varieties of mango.

Species diversity: The diversity at the species level. For example, the Western Ghats have greater amphibian species diversity than the Eastern Ghats.

Ecological diversity: At the ecosystem level, India, for instance, with its deserts, rain forests, mangroves, coral reefs, wetlands, estuaries, and alpine meadows has greater ecosystem diversity than a Scandinavian country like Norway.

Patterns of Biodiversity

Latitudinal gradients: In general, species diversity decreases as we move away from the equator towards the poles.

Altitude gradient: In general, species diversity decreases as we increase in altitude.

4. Merchandise Export

Subject : Economy

Section :External sector

Context:

The Economic Survey 2021-22 projected a GDP growth of 8-8.5 per cent in 2022-23, with exports playing a crucial role.

Content:

Merchandise export trends

• Merchandise exports touched an all-time high of $375 billion during April-February 2021-22 — more than yearly exports ever registered so far. India targeted to achieve a merchandise export of US$ 400 billion by 2021-22

India’s merchandise exports

• Top 5 Export Commodities (% share in total export)

Note- In 2020-21 top 5th good to be exported was electric machinery and equipment with total share in export at 2.8% and top 6th Organic chemicals with a share of 2.6%

• The USA remained the top export destination, followed by UAE and China. Belgium has replaced Malaysia and entered into the top 10 leading export destinations of India

Top 10 Export Destinations of India by % share

• India has diversified its export destinations in the last 25 years, yet more than 40% India’s exports are still accounted for by only 7 countries. Only eight products constitute more than 55 per cent of the country’s total exports, there is a critical need for product diversification.
• India, has been the largest software exporting country (WTO report 2021).

Concerns?

• Impact of Ukraine war-India does not have significant merchandise trade with Russia or Ukraine, however, exports of pharmaceuticals, telecom instruments, tea, coffee, marine products, etc are likely to be hit.
• The logistics cost in India (14 percent of GDP) is higher than that of developed countries (8-10 percent of GDP) (LEADS 2021 Report)
• Lack of diversification

Major Schemes & Initiatives to boost exports

• Remission of Duties and Taxes on Exported Products (RoDTEP)– Based on the globally accepted principle that taxes and duties should not be exported, this scheme is an improvement over Merchandise Exports from India Scheme (MEIS).This new scheme reimburses currently un-refunded Central, State, and Local taxes and duties incurred in the process of manufacture and distribution of exported products and thereby provides a level playing field to domestic industry abroad. Major components of taxes covered are electricity duty, value-added tax (VAT) on fuels used in transportation/ distribution, mandi tax, stamp duty, etc.
• Developing District as Export Hub-the focus is to make districts active stakeholders in the promotion of exports of goods/services produced/ manufactured in the district. District Export Promotion Committees (DEPCs) have been set up in each district. Products with export potential (including agricultural, geographical indication (GI) & toy clusters) have been identified in all 739 districts across the country.
• Production-Linked Incentive (PLI) scheme– for 14 key sectors starting from 2021-22. The scheme provides incentives to companies on incremental sales for products manufactured in domestic units, which is expected to create minimum production of over US$ 500 billion in 5 years. Automobiles and auto components, pharmaceutical drugs, telecom & networking products, electronic/ technology products, etc are  some of the sectors covered under the PLI scheme.
• Electronic Platform for Preferential Certificate of Origin (CoO)-In view of the COVID-19 crisis, on-boarding of FTAs/ preferential trade agreements (PTAs) was quickly done to allow electronic issuance to avoid physical movement.
• Infusion of capital in EXIM Bank
• Export Credit Guarantee Corporation of India Ltd. (ECGC) -provides insurance cover to banks against risks in export credit lending to the exporter borrowers.
• Export Promotion Capital Goods (EPCG) Scheme-In order to increase procurement of capital goods from indigenous manufacturers under the EPCG scheme, the government has reduced specific export obligations from 90 per cent to 75 percent of the normal export obligation
• The export promotion schemes such as Trade Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI), Special Economic Zone (SEZ) scheme, Emergency Credit Line Guarantee Scheme (ECLGS) and Advance Authorization Scheme continue to provide support to trade infrastructure and marketing.
• The Union Budget has increased capital expenditure by 35 per cent to crowd-in private investment, to enable a virtuous cycle of investment for developing integrated infrastructure.
• One Station-One Product- will complement the initiative of developing ‘Districts as Export Hubs’ and support the government efforts in diversifying the product basket of Indian exports.
• Emergency Credit Linked Guarantee Scheme (ECLGGS) up to March 2023 and infusion of funds into Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will benefit the MSME sector.
• Enabling an efficient Logistics eco-system to boost exports-
  • PM Gati Shakti National Master Plan-aims to provide multimodal connectivity to various economic zones and integrate the infrastructure linkages holistically for seamless movement of people, goods & services to improve logistics efficiency.
  • Others-introduction of FASTag, Turant Customs, mandatory RFID (Radio Frequency Identification) tagging at all EXIM bound containers, E-San chit, Indian Customs Enquiry for Trade Assistance and Knowledge (ICETRAK), ICEDASH (Indian Customs EDI Dashboard), Secured Logistics Document Exchange (SLDE), Import Clearance System, GHG Calculator etc. In order to ease maritime trade, efforts are being undertaken on development of port-specific master plans and a coordination mechanism for implementation of the same, upgradation of select Land Customs Stations (LCS) to Integrated Check Posts (ICPs), promoting Free Trade Warehousing Zones, etc.

5. Saving Banks from a Black Swan

Subject : Economy

Section: Banking and Monetary policy

Context:

Government-provided recapitalisation packages to save banks from a black swan.

Concept:

Black Swan event?

Nassim Nicholas Taleb, a former Wall Street trader, in his book ‘The Black Swan: The Impact of the Highly Improbable’ formulated the black swan theory.

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.

Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.

• Is so rare that even the possibility that it might occur is unknown
• Has a catastrophic impact when it does occur.
• Is explained in hindsight as if it were actually predictable

There are no limitations in the way a Black Swan event can manifest itself. It could be anything from a natural disaster to a war, a financial crash or the outbreak of a virus.

Trade-offs of bank recapitalisation

• Firms may benefit from improved discounted lifetime profits
• Households may be worse off because of lower government expenditure in social sectors:
  • As, government recapitalisation from budget allocation reduces funds available for social spending directly,
  • while issuing recapitalisation bonds reduce social spending  indirectly through interest spending and crowding out private investment.

How to make it more effective?

Banks’ recapitalisation could be most effective when followed with measures with increases monetary policy transmission, thus not reduce households and investment demands

• Flexible deposit / lending rates 
• Linking repo rate with deposit rate can address the issue and some banks are currently moving towards this system.
• High dependency on bank deposits for lending has resulted in interest-rate stickiness. Banks also need to look at other sources to fund lending such as issuance of debentures/commercial papers and borrowings from the capital market.
• Banks can move over to a variable interest rate structure on longer term deposits. 
• To strengthen monetary transmission, the government needs to proactively peg the small savings rate with the G-sec bond yields.
• The asset resolutions are expected to strengthen bank balance sheets and improve banks’ willingness to change their lending rates in tandem with the change in the policy rates.
• Faster implementation of linking interest rates under external benchmarks at least once in three months from the earlier practice of resetting interest rates once in a year under MCLR will greatly help in transmission of the RBI’s monetary policy.
• Less dependency on deposit interest income for lending
• Demand revival policies (via tax cuts or monetary expansion through an interest easing cycle) with appropriate and calibrated supply-side reform measures to achieve an optimal policy mix.

6. AtmaNirbhar Bharat- Open and Closed economy

Subject : Economy

Section : External sector

Context:

India is not favouring a closed economy by promoting AtmaNirbhar mission, and remains very deeply committed to greater integration with global flows and the regional networks according to the NITI Ayog.

‘Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)’

‘Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)’ with an economic stimulus package — worth Rs 20 lakh crores aimed towards achieving the mission.

The announced economic package is 10% of India’s Gross Domestic Product (GDP) in 2019-20.

The Self-Reliant India Mission aims towards cutting down import dependence by focussing on substitution while improving safety compliance and quality goods to gain global market share.

The Self-Reliance neither signifies any exclusionary or isolationist strategies but involves creation of a helping hand to the whole world.

The Mission is based on five pillars namely,

• Economy
• Infrastructure
• System
• Vibrant Demography
• Demand

The government recognised that the covid induced lockdowns and quarantines disrupted economic activity. Therefore, it quickly put in place economic safety nets along with several liberalisation policies mainly focused on value addition and further integration of the domestic economy with global supply chains.

Atmanirbhar Bharat was launched in various trenches:

The first tranche of Atmanirbhar Bharat Abhiyan

• Emergency W/C Facility for Businesses, incl MSMEs
• Subordinate Debt for Stressed MSMEs
• Fund for Funds for MSMEs
• EPF Support for Business & Workers
• Reduction in EPF rates
• Special liquidity Scheme for NBFC/HFC/MFIs
• Partial Credit Guarantee Scheme for 2.0 for Liabilities of NBFCs/MFIs
• Liquidity Injection for DISCOMs
• Reduction in TDS/TCS rates

The second tranche of Atmanirbhar Bharat Abhiyan

• Free Food Grain Supply to Migrant Workers for 2 Months
• Interest Subvention of Mudra Shishu Loans
• Special Credit Facility to Street Vendors
• Housing CLSS-MIG
• Additional Emergency Working Capital through NABARD
• Additional Credit Through KCC

The third tranche of Atmanirbhar Bharat Abhiyan 

• Food Micro Enterprises
• Pradhan Mantri MatsyaSampada Yojana
• TOP to TOTAL: Operation Greens
• Agri Infrastructure Fund
• Animal Husbandry Infrastructure Development Fund
• Promotion of Herbal Cultivation
• Beekeeping Initiative

Other major decisions taken under Atmanirbhar Bharat Abhiyan

• Self-reliance in defence production
  • Ban the import of several weapons and a separate budget provisioning for domestic capital procurement to help reduce the huge defence import bill.
  • Corporatize the Ordnance Factory Board to improve autonomy, accountability, and efficiency.
  • Increased FDI limit in the defence manufacturing under the automatic route from 49 percent to 74 percent.
• Aircraft and aerospace sector
  • Restrictions on the utilization of the Indian airspace will be eased so that civilian flying becomes more efficient.
  • Development of world-class airports through PPP,
  • The tax regime for Aircraft Maintenance, Repair, and Overhaul ecosystem is rationalized and the convergence between the defence sector and the civil MROs will be established to create economies of scale.
  • Boosting private participation in space activities. The private sector will be allowed to use ISRO facilities and other relevant assets to improve their capacities.

7. Agricultural Credit

Subject: Economy

Section: Agriculture

Context: Farmers seeking loans from private money lenders in Maharashtra increased by 27% and the loan amount raised by 42 % in 2021.

Concept:

• Majority of these farmers seeking loans are small and marginal farmers.
• Their dependence on private money lenders multiplied due to Covid-led lockdowns, closure of markets, and unseasonal rains. 
• However, licensed money lenders is just the tip of the iceberg and a huge numberof illegal private money lenders have tightened the noose around the necks of farmers in Maharashtra.
• Apart from agriculture and non-agricultural credit societies, the State allows licensed moneylenders to provide loans to individuals. For this purpose, licenses are issued by the office of the Commissioner for Co-operation and Registrar Co-operative Societies. In 2020, the number of license holder money lenders was 12,993 while in 2021 the number was 12,001.

Why Farmers seek loans?

According to NSS 77^th round data- The Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India, 2019, small landholding households avail loans for:

• medical expenditure for hospitalisation, doctor’s fees, purchase of medicines, medical diagnostic tests like scans, X-rays, ECG, EEG, and other pathological tests.
• consumption expenditures including the purchase of durable household assets, clothing for use of the household, etc.
• Crop failure and losses due to unseasonal rains have added to their problems.

Evolution of Agricultural Finance in India and Policy Milestones

The institutional framework of agricultural finance was shaped by the overarching demands of the nation. The evolution of agricultural credit policies and milestones can be broadly categorised into three distinctive phases.

Phase 1 (1951 – 1969)

1. The Government of India initiated the first five-year plan in 1951 with the thrust on developing the primary sector. The National Credit Council in a meeting held in July 1968 emphasised that commercial banks should increase their involvement in the financing of priority sectors, viz., agriculture and small-scale industries, sectors deemed as ‘national priority’.
2. In 1969, when the first phase of nationalisation of banks took place, there were 6955 public sector bank branches and the average population per branch office was 64,000. To boost rural development, the Reserve Bank of India had then prescribed 1:3 ratio for opening of branches in urban and rural/semi-urban centres.

Phase 2 (1970-1990)

1. The channel for institutional credit to agriculture during the first two decades of independence was the cooperative sector. With the nationalisation of commercial banks in 1969, the decade of 1970s marked the entry of commercial banks into agricultural credit. This period saw the introduction of the Lead Bank Scheme and regulatory prescription of Priority Sector Lending – two landmark development policies that have not only survived till date but have also served as the fuel for channelling agricultural credit and rural development.
2. The Regional Rural Bank Act, 1976 was enacted to provide sufficient banking and credit facility for agriculture and other rural sectors.
3. The National Bank for Agriculture and Rural Development (NABARD) came into existence in 1982, with the enactment of NABARD Act 1981, to promote agriculture and rural development.
4. NABARD, in 1992 introduced the Self-Help Group (SHG) model to further financial inclusion of the excluded segments.
5. In 1989, the Reserve Bank introduced the service area approach (SAA) and Annual Credit Plan (ACP) system as tools for reaching out to the rural areas.

Phase 3 (1991 onwards)

1. The economic reforms of the 1990s, started with the implementation of the first Narasimham Committee Report of 1991, emphasising financial soundness and operational efficiency of the financial sector – including that of rural financial institutions. The Reserve Bank of India gradually deregulated the interest rate regime to aid improvement in the operational efficiency of banks.
2. The first major nationwide farm loan waiver was announced in 1990 and the cost to the national exchequer was around ₹100 billion.
3. Pursuant to the 1995 Union Budget announcement, GoI established the Rural Infrastructure Development Fund (RIDF) with NABARD. RIDF was mainly meant for funding of rural infrastructure projects which in turn were supposed to deepen the credit absorption capacity in a state by giving loans to state governments and state-owned corporations. Scheduled commercial banks contribute to the corpus of the fund to the extent of their shortfall in achieving the priority sector lending target.
4. During 1992-93, NABARD started the pilot project on SHG-Bank Linkage programme – a partnership model involving SHGs, banks and NGOs. In the initial years, the scheme progressed slowly but picked up gradually.
5. The Kisan Credit Card (KCC) was introduced as a financial product in 1998 to provide hassle free credit to farmers.
6. The Union Government introduced the Ground Level Credit (GLC) policy in year 2003-04. Under this policy, GoI announces GLC targets for agriculture and allied sector in the Union budget every year which banks are required to achieve during the financial year. These targets are set region-wise, agency-wise (SCBs, RRBs & Cooperative banks) and loan category wise (crop and term loan).
7. vii. The year 2006 saw a host of developments. Pursuant to the budget announcement for 2006-07, the Union Government introduced the interest subvention scheme (ISS) for short term crop loans to enable farmers to avail farm credit at reduced interest rates. The Business Correspondents (BCs) and Business Facilitators (BFs) were rolled out for the first time by the Reserve Bank of India to further the cause of financial inclusion. NABARD introduced the Joint Liability Group (JLG) model, an extension of the earlier SHG model for reaching out to tenant farmers and share-croppers with access to credit.
8. Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS), 2008 announced by the Union Government involved waiving institutional debt for small farmers and a one-time settlement opportunity with 25 per cent rebate to other farmers. This massive write-off of agricultural loans involving ₹525.16 billion was envisaged to provide relief to the persistent problem of farmers’ indebtedness and alleviate the financial pressure faced by the farmers.
9. In 2009-10, the Government introduced the prompt repayment incentive (PRI) of 3 per cent under the ISS to bring down the effective rate of interest to 4 per cent to those farmers who repaid their loans on or before the due date to inculcate repayment habits.
10. In July 2012, the Priority Sector Lending (PSL) guidelines were revised by the Reserve Bank to widen the eligible activities. Again in April 2015, the guidelines were revamped based on the recommendations of the Internal Working Group (IWG). The salient features of the revamped PSL guidelines relating to agricultural sector are:
    1. The distinction between direct and indirect agricultural credit was dispensed with.
    2. A sub-target of 8 per cent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, was prescribed for small and marginal farmers.
    3. Focus shifted from ‘credit in agriculture’ to ‘credit for agriculture’.

 To know about Cooperative Banks, refer: https://optimizeias.com/co-operatives/

8. Infusion of Technologies in Agricultural Sector

Subject: Economy

Section: Agriculture

Context: Govt to provide financial assistance for drone purchase by custom hiring centres.

Concept:

• Steps were taken by the Centre to support State Govts via various schemes including the use of drones in agriculture and make drone technology affordable to farmers and other stakeholders of this sector.
• 75% grants for FPOs are provided for purchase of drone for its demonstration on the farmers’ fields.
• Financial assistance at 40% of the basic cost of drone and its attachments or Rs. 4 lakhs, whichever is less, is also provided for drone purchase by existing and new Custom Hiring Centres (CHCs) under cooperative society of farmers, FPOs and rural entrepreneurs. This will enhance agricultural services through drone application.
• Moreover, agricultural graduates establishing CHCs are eligible to receive financial assistance at 50% of the cost of the drone up to a maximum Rs. 5 lakhs.
• Besides, the Govt is implementing the National e-Governance Plan in Agriculture (NeGP-A).

Custom Hiring Centres (CHCs) Advantages:

• Provides access to small and marginal farmers to costly farm machinery
• Facilitates timeliness in farm operations and efficient use of inputs
• Promotes adoption of climate resilient practices and technologies by farmers because of availability of appropriate machines at reasonable hiring charges
• Reduction in cost of cultivation
• Provides work opportunities to skilled labour and small artisans

To know about Kisan Drones, refer: https://optimizeias.com/kisan-drones/

9. War led energy jolt can lead the economy to recession

Subject : Economy

Section: National income

Context:

The energy market shock following Russia’s invasion of Ukraine could tip the world into an economic recession, especially if the war drags on

Concept:

• When the economy contracts for two quarters in a row (or six months), this change is classified as a recession.
• The term denotes a business cycle contraction, when there is a general decline in economic activity and occurs when there is a widespread drop in spending (an adverse demand shock).
• When a country’s economy is healthy, it grows over time and its GDP or the value of the goods and services it produces — increases.
• The last time a number of countries entered a recessive phase was when the global financial crisis broke in 2007.
• A recession can become a depression if it lasts long enough, like in the late 1920s.

10. Misleading Ads and CCPA jurisdiction

Subject: Polity

Section: Statutory organization

Context: The Central Consumer Protection Authority (CCPA) has ordered discontinuation of certain misleading advertisements of Sensodyne toothpaste within seven days, and imposed a penalty of ₹10 lakh on the manufacturer

Concept:

• The Consumer protection Act of 2019 Indian Parliament, in August 2019, passed the landmark Consumer Protection Bill, 2019. COPRA is regarded as the ‘Magna Carta’ in the field of consumer protection
• The Eight Basic Consumer Rights: The Right to Basic Needs, 2. The Right to Safety, 3. The Right to Information, 4. The Right to Choose, 5. The Right to Representation, 6. The Right to Redress, 7. The Right to Consumer Education, 8. The Right to a Healthy Environment.

Highlights of the New Act:

• E-Commerce Transactions: The New Act has widened the definition of ‘consumer’. The definition now includes any person who buys any goods, whether through offline or online transactions, electronic means, teleshopping, direct selling or multi-level marketing.
• E-Filing of complaints: The New Act contains enabling provisions for consumers to file complaints electronically and for hearing and/or examining parties through video-conferencing
• Unfair Trade Practices: The New Act introduces a specific broad definition of Unfair Trade Practices, which also includes sharing of personal information given by the consumer in confidence, unless such disclosure is made in accordance with the provisions of any other law.

Misleading Advertisement:

The Act defines “misleading advertisement” in relation to any product or service, as “an advertisement, which—

(i) falsely describes such product or service; or

(ii) gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or

(iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or

(iv) deliberately conceals important information”.

Penalties for Misleading Advertisement:

• The CCPA may impose a penalty of up to INR 1,000,000 on a manufacturer or an endorser, for a false or misleading advertisement. The CCPA may also sentence them to imprisonment for up to two years for the same. In case of a subsequent offence, the fine may extend to INR 5,000,000 and imprisonment of up to five years.
• The CCPA can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to one year. For every subsequent offence, the period of prohibition may extend to three years.

Central Consumer Protection Authority (CCPA)

• The Consumer Protection Act, 2019 establishes the Central Consumer Protection Authority (CCPA) whose primary objective will be to promote, protect and enforce the rights of consumers.
• It will be empowered to conduct investigations into violation of consumer rightsand institute complaints / prosecution, order recall of unsafe goods and services, order discontinuation of unfair trade practices and misleading advertisements, impose penalties on manufacturers/endorsers/publishers of misleading advertisements.
• It will be headquartered in the National Capital Region of Delhi but the central government may set up regional offices in other parts of the country.

Composition:

• It will have a Chief Commissioner as head, and only two other commissioners as members — one of whom will deal with matters relating to goods while the other will look into cases relating to services.
• The CCPA will have an Investigation Wing that will be headed by a Director General.
• District Collectors too, will have the power to investigate complaints of violations of consumer rights, unfair trade practices, and false or misleading advertisements.
• The CCPA will have an investigation wing, headed by a Director General, which may conduct inquiry or investigation into consumer law violations.

Powers and Functions:

• Inquire or investigate into matters relating to violations of consumer rights or unfair trade practices suomotu, or on a complaint received, or on a direction from the central government.
• Recall goods or withdrawal of services that are “dangerous, hazardous or unsafe.
• Pass an order for refund the prices of goods or services so recalled to purchasers of such goods or services; discontinuation of practices which are unfair and prejudicial to consumer’s interest”.
• Impose a penalty up to Rs 10 lakh, with imprisonment up to two years, on the manufacturer or endorser of false and misleading advertisements. The penalty may go up to Rs 50 lakh, with imprisonment up to five years, for every subsequent offence committed by the same manufacturer or endorser.
• Ban the endorser of a false or misleading advertisement from making endorsement of any products or services in the future, for a period that may extend to one year. The ban may extend up to three years in every subsequent violation of the Act.
• File complaints of violation of consumer rights or unfair trade practices before the District Consumer Disputes Redressal Commission, State Consumer Disputes Redressal Commission, and the National Consumer Disputes Redressal Commission.

Consumer Disputes Redressal Commissions (CDRCs) 

• National Consumer Disputes Redressal Commission (NCDRC): A national level court works for the whole country and deals compensation claimed exceeds rupees one core. The National Commission is the Apex body of Consumer Courts; it is also the highest appellate court in the hierarchy.
• The National Consumer Disputes redressal Commission (NCDRC), is a quasi-judicial commission in India which was set up in 1988 under the Consumer Protection Act of 1986. Its head office is in New Delhi. The commission is headed by a sitting or retired judge of the Supreme Court of India.
• State Consumer Disputes Redressal Commission (SCDRC): A state level court works at the state level with cases where compensation claimed is above 20 lakhs but up to one core. The State Commission also has the appellate jurisdiction over the District Forum.
• District Consumer Disputes Redressal Forum (DCDRF): A district level court works at the district level with cases where the compensation claimed is up to 20 lakhs

Consumers can file complaints with the CDRCs regarding any of the following.

• Defective goods or services
• Overcharging or deceptive charging on goods and services
• Any unfair or restrictive trade practices
• Offering services or sale of goods which can be hazardous to life or not safe
• As per the new act, all the laws that apply for direct selling would also be applicable for E-Commerce.
• Consumers can file complaints from anywhere and they do not need to hire lawyer to represent their cases. For mediation, there will be strict timeline fixed in the rules.
• On misleading advertisements there is provision for jail term and fine for manufacturers.
• For the first time there will be an exclusive law dealing with Product Liability. A manufacturer or product service provider or product seller will now be responsible to compensate for injury or damage caused by defective product or deficiency in services.