Daily Prelims Notes 26 October 2020

October 26, 2020
Posted by: OptimizeIAS Team
Category: DPN

No Comments

Table Of Contents

1. GLOBAL WEALTH REPORT

Subject:International Report

Context: Credit Suisse has released the Global Wealth Report 2020.

Concept:

Credit Suisse is a financial services company based in Switzerland.
The Credit Suisse Global Wealth Report provides the most comprehensive and up-to-date coverage of information on household wealth worldwide.

Global Scenario:

In 2019, total global wealth rose by USD 36.3 trillion and wealth per adult reached USD 77,309, which is 8.5% more when compared to 2018.
As a consequence, the world has been better placed to absorb any losses from Covid-19 during 2020.
However, total household wealth dropped by USD 17.5 trillion between January and March 2020, a 4.4% decrease compared to the value at the end of 2019.
Asia Pacific is the highest contributor of household wealth.
Female workers have suffered disproportionately, partly because of their high representation in businesses and industries such as restaurants, hotels, personal service and retail that have been badly affected by the pandemic.

Indian Scenario:

Household wealth in India is dominated by property and other real assets, although financial assets have grown over time, now forming 22% of gross assets.
Stocks, bonds, bank deposits are some examples of financial assets.
The average wealth of Indian adults rose marginally to USD 17,420 at end-June 2020, as against USD 17,300 as of December 2019, showing some growth despite the Covid pandemic and lockdowns.
Wealth inequality remains quite high in India.
There is considerable poverty reflected in the fact that 73% of the adult population had wealth below USD 10,000 at the end of 2019.
At the other extreme, a small fraction of the population (2.3% of adults) had a net worth over USD 1,00,000.
With 4,593 ultra-high-net-worth individuals in the country as of end-2019, India came in fourth after the USA, China and Germany.
Between January and April 2020, unemployment rates approximately tripled in India to 24%.

2. ECLGS

Subject :Govt Schemes

Context : Government plans to extend the deadline for Emergency Credit Line Guarantee Scheme for MSME’s. Banks have sanctioned 62.52 percent of the targeted Rs. 3 lakh crore under this scheme till now.

Concept :

ECLGS was rolled out as part of the Centre’s Aatmanirbhar package in response to the Covid-19 crisis. The objective was to support small businesses struggling to meet their operational liabilities due to the imposition of a nationwide lockdown.
The ECLGS provides for the Guaranteed Emergency Credit Line (GECL) facility. The GECL is a loan for which 100% guarantee is provided by the National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs) – banks, financial institutions and Non-Banking Financial Companies (NBFCs).
The loans are extended in the form of additional working capital term loan facility in case of banks and additional term loan facility in case of NBFCs to eligible MSME enterprises and interested Pradhan Mantri Mudra Yojana (PMMY) borrowers.
First-time borrowers and Non-Performing Asset (NPA) accounts cannot raise funds under the scheme.
The tenor of loans provided under the GECL facility is four years from the date of disbursement.
A moratorium period of one year on the principal amount is provided.
Interest rates of banks and financial institutions have been capped at 9.25% per annum, while NBFCs can lend at a maximum of 14% per annum.
The Scheme is applicable to all loans sanctioned under the GECL facility during the period from, 23rd May 2020 to 31st October, 2020, or till an amount of Rs. 3 lakh crore is sanctioned under GECL, whichever is earlier.

3. AENIGMACHANNA GOLLUM

Subject : Environment

Context :Aenigmachannagollum, a dragon snakehead fish that lives in underground aquifers, and which first announced its surfacing in social media posts in 2018.

Concept :

Aenigmachanna Gollum has a surprisingly large number of primitive characters, and detailed molecular phylogenetic analyses including of its Mitochondrial DNA suggested an ancient separation from Channidae.
Many such species were earlier found in the aquifers of Kerala.
Many of these species are blind, pigment-less, and have peculiar morphological characters that are otherwise not seen in species occurring in surface waters.

Significance of the discovery

The presence of two unique endemic families of freshwater fish in a small region like Kerala is unparalleled and indicates the exceptional diversity and endemicity of fishes in this part of the world.
The members of Aenigmachannidae are “living fossils” and comprise an ancient Gondwanan lineage that survived the break-up of the supercontinent and the northward drift of the Indian subcontinent.

4. SCHEMES FOR EXPORT PROMOTION

Subject : Economy

Concept :

1. Remission of Duties or Taxes on Export Product :

The new scheme will be implemented from 1st January 2020 and will replace the existing Merchandise Exports from India Scheme (MEIS) and create a fully automated route for Input Tax Credit (ITC) in the GST to help increase exports in India.
It is expected to adequately incentivize exporters by reducing duties paid on exports and will initiate the refund of various taxes to exporters.
ITC is provided to set off tax paid on the purchase of raw materials, consumables, goods or services that were used in the manufacturing of goods or services. This helps in avoiding double taxation and the cascading effect of taxes.
By adopting to RoDTEP scheme, Indian exporters will be able to meet the international standards for exports as affordable testing and certification will be made available to exporters within the country instead of relying on international organizations.
Also under it, tax assessment is set to become fully automatic for exporters. Businesses will get access to their refunds for GST via an automatic refund-route.
This would increase the economy for the country and working capital for the enterprise.
RoDTEP is a WTO-consistent scheme under which indirect taxes on inputs are consumed in the production process.
In general, according to principle recognised in WTO, indirect taxes on exports are reimbursed.

2. Duty-Free Import Authorisation (DFIA):

DFIA is issued to allow duty free import of inputs, fuel, oil, energy sources, a catalyst which are required for production of export product.
The Directorate General of Foreign Trade, an agency under the Ministry of Commerce and Industry, by means of Public Notice, may exclude any product(s) from purview of DFIA.
Under the scheme, authorization is issued to allow duty free import of inputs.

3. Duty Drawback of Schemes:

Duty Drawback is the rebate of duty chargeable on imported material or excisable material used in the manufacturing of goods that are to be exported.
The exporter may claim drawback or refund of excise and customs duties paid by his suppliers.
Lower import duties will reduce the government spending under the duty drawback scheme.
Further, over-invoicing of exports will be avoided since there will be less possibilities of duty drawback from the government.

4. Export Promotion Capital Goods Scheme:

EPCG is a zero duty scheme which allows the import of capital goods such as machinery for preproduction, production and post production of export items.
The duty free import by an exporter has to be paid back in the form of an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date

5. Trade Infrastructure for Export Scheme (TIES):

The scheme would provide assistance for setting up and up-gradation of infrastructure projects with overwhelming export linkages like the Border Haats, Land customs stations, quality testing and certification labs, cold chains, trade promotion centres, dry ports, export warehousing and packaging, SEZs and ports/airports cargo terminuses.
The Central and State Agencies, including Export Promotion Councils, Commodities Boards, SEZ Authorities and Apex Trade Bodies recognised under the EXIM policy of Government of India; are eligible for financial support under this scheme.
The proposals of the implementing agencies for funding will be considered by an inter ministerial Empowered Committee.
An Empowered Committee has to periodically review the progress of the approved projects in the Scheme and will take necessary steps to ensure achievement of the objectives of the Scheme.
The Central Government funding will be in the form of grant-in-aid, normally not more than the equity being put in by the implementing agency or 50% of the total equity in the project.
In case of projects located in North Eastern States and Himalayan States including J&K, this grant can be up to 80% of the total equity.
The grant in aid shall, normally, be subject to a ceiling of Rs 20 Cr for each infrastructure project.

5. TARIFF / NON TARIFF BARRIERS

Subject: Economy

Concept:

Non-Tariff Barriers :

Direct Price Influences

Subsidies

Subsidies are the direct payments made by the government to domestic producers. It can take form of cash payments, low interest loans, government participation in ownership, tax incentives, etc.
Subsidies help in lowering down the cost of production of domestic goods as a result of which the prices also come down. It helps domestic producers to capture export markets by making their products cheaper in international markets.
Export subsidies under the WTO agreement are treated as unfair trade practice. The importing countries counter such subsidies by levying countervailing duties on imported goods so as to offset the impact of these subsidies.

Quantity Controls

Quotas

It refers to the direct restriction on the quantity of goods that can be imported into a country during any period of time.
In other words quotas limit the quantity of imports of any particular commodity coming into a country during a certain period of time. This is normally done through giving of import licenses to the importers. For example, the United States has a quota on cheese imports; India has a quota on import of gold.

Voluntary Export Restraints (VERs)

VERs are bilateral agreements instituted to restrain the rapid growth of exports of specific goods. Essentially, the government of country X asks the government of country Y to reduce its companies’ exports to country X voluntarily to help the importing country X to protect its domestic industry

Local Content Requirement

A local content requirement is a requirement that some fraction of the product must be produced locally or in the domestic market. The requirement can either be expressed in physical terms (60% of the parts of the product) or in value terms (60% of the value of the product). Thus, it ensures that if any company wants a contract from the government agency, it must ensure that at least a certain portion of the product must be produced or procured locally.
g: Domestic content Requirement under Jawaharlal Nehru National Solar Mission (JNNSM)

Legislation

Under this form of trade policy the government makes its purchases from domestic producers only.
This legislation forbids the government departments to make use of imported goods. However, the government may at times permits the use of imported products only if the price is below than that of the domestic producer.
The economic effect of local content requirement and buy local legislation is same as that of quota. It limits foreign competition thereby benefiting the domestic producers. The restrictions on imports raise the price of goods for the consumers.

Labelling and Testing Standards

Some countries require that goods entering into their boundaries must meet certain requirements in terms of packaging, labeling and testing standards. Such countries allow sale of only those goods which satisfy these standards.

Sanitary and Phytosanitary (SPS)

These measures are taken to protect against risks linked to food safety, animal health and plant protection or to prevent or limit damage within the territory of a country from the entry, establishment and spread of pests from a foreign country.

Specific Permission Requirements:

This measure requires that potential importers or exporters secure permission from governmental authorities. This involves the issuing of import or export licences which may be costly and time consuming.

Counter trade

The exchange of goods with goods between countries is referred to as countertrade. This practice is common in case of aerospace and defence industries whereby the importer country may not have enough foreign currency to pay for imports.

Administrative Barriers to Trade

Administrative barriers to trade are a special category of non-tariff barriers and their main sources are administrative regulations and procedures that have a restrictive effect on international trade.
Delays may be made with respect to issue of licences, customs valuation, and clearance of consignment of goods and so on.

Tariff Barriers

Tariff barriers- custom duties which make imported goods costlier than domestically manufactured goods.

Anti-dumping&Counter Vailing Duty (CVD):

Dumping in economics is a type of predatory pricing talked about particularly in the international commerce space. Dumping is said to happen when manufacturers or marketers export a product to another nation at a price that is lesser than the home country price or lesser than the production cost.
This is done with the intention of enhancing the market share in a foreign market or to remove competition. Government imposes Anti-dumping duty to nullify
Countervailing duties (CVDs) are trade import tariffs imposed to nullify the adverse effects of subsidies. They are imposed only under World Trade Organisation rules and are also called anti-subsidy duties.
Anti-dumping duties are levied on goods that are imported at a substantially low price whereas countervailing duties are levied on subsidized products in the originating or exporting country.