Daily Prelims Notes 29 December 2022
- December 29, 2022
- Posted by: OptimizeIAS Team
- Category: DPN
Daily Prelims Notes
29 December 2022
Table Of Contents
- Sarsa: Rivulet associated with pivotal moment in Guru Gobind Singh’s life, is dying
- India is all set to go for its first waste-to-hydrogen project
- India’s first project to conserve Nilgiri Tahr takes shape
- Heralds of early spring? Mango flowering observed in Odisha, Telangana a month sooner than usual
- Indian syrup linked to deaths in Uzbekistan
- Agra and Kohinoor
- How disputes among states resolved
- Maharashtra assembly passes bill to bring CM under Lokayukta
- Ministry of Housing and Urban Affairs launches 2 key initiatives
- Writ Petition
- Delegated legislation
- Hyper- Globalization
- Manufacturing sector -the FDI inflow
- Share Buyback
- Index provider Framework
- Creditors under IBC
1. Sarsa: Rivulet associated with pivotal moment in Guru Gobind Singh’s life, is dying
- As Sikhs across India and the rest of the world observe the 356th birth anniversary of Guru Gobind Singh, a rivulet in north India associated with a key moment in his life is gasping for breath.
- The Sarsa originates in the Shivalik hills in Himachal Pradesh.
- It flows through Solan district borders Punjab, enters Rupnagar district in Punjab and eventually flows into the Sutlej.
- On December 21, 1704, a pitched battle had taken place on the banks of the Sarsa between the Khalsa and Mughal armies.
- The Sarsa was where the Guru’s family got separated in the winter of 1704.
Pollution in river sarsa:
- The Baddi-Barotiwala-Nalagarh (BBN) industrial complex is spread over 380 square kilometres in the Solan district near the Sarsa.
- BBN hosted around 500 small, medium and large pharma units and accounted for 35 per cent of Asia’s total medicine production.
- Pharmaceutical waste being discharged either directly or indirectly into the Sarsa from the Baddi-Barotiwala-Nalagarh (BBN) industrial complex has affected the river’s biota and made the river water unfit for human use.
- The pharma waste could also be causing the area to become prone to antimicrobial resistance.
- The water of the Sirsa (or Sarsa) river, which flows downstream through Baddi, is black and emanates a foul odour.
What are the guidelines to prevent pollution?
- The Water (Prevention & Control of Pollution) Act, 1974 clearly lays down guidelines about the penalties to be imposed on those who are polluting water resources.
- Those who pollute water are liable for a prison sentence of up to six years under the Act.
- There is also the Air (Prevention and Control of Pollution) Act of 1981 which has to be followed.
2. India is all set to go for its first waste-to-hydrogen project
In the news:
- Pune Municipal Corporation (PMC) has partnered with business enterprise The Green Billions (TGBL) to manage its waste and generate it into useable green hydrogen. TGBL’s special purpose vehicle or subsidiary, Variate Pune Waste to Energy Private Ltd, will be undertaking the work.
India’s first waste-to-hydrogen project:
- The new facility for generating hydrogen from waste will solve two major problems:
- Inefficient waste management and
- carbon emissions.
- Variate Pune Waste to Energy Private Ltd will be managing and utilising the municipal waste of 350 tonnes per day (TPD) for generating hydrogen for 30 years.
- This waste will comprise biodegradable, non-biodegradable and domestic hazardous waste.
- The hydrogen generated at the facility will be utilised locally to help the city lower its emissions.
- With this project, Pune city can reduce up to 2.5 million tonnes carbon dioxide equivalent, over 3.8 million tonnes of waste would be diverted from the landfill/dumping site and more than 180,000 estimated households will be served directly.
The technology used in the plant:
- Optical sensor technology will be used for the purpose.
- The Refuse-Derived Fuel (RDF) from the waste would later be utilised to generate hydrogen using plasma gasification technology.
- The technology has been developed while closely working with the Bhabha Atomic Research Institute (BARC) and the Indian Institute of Science, Bengaluru.
- It is estimated that 150TPD RDF and 9MT tonnes of H2 would be generated out of 350 TPD waste.
Benefits of the waste-to-hydrogen plant:
- Production of green energy sources
- Efficient and sustainable waste management
- Reduction in carbon footprint
- Step to fulfil India’s climate goals
- Reduction in methane emissions with the reduction in landfill usage
Viability of Waste-to-hydrogen plants:
- Waste-to-Energy plants are viable only when the plant can process at least 300 TPD.
- WTE plants should be set up in large cities with a population above 2 million.
- The project will manage 350TPD waste for Pune, which has a population of more than 7 million.
- Mahatma Phule Renewable Energy & Infrastructure Technology (MAHAPREIT), a Maharashtra government undertaking, has proposed to offtake the hydrogen generated at the facility and develop logistical infrastructure for hydrogen transportation to industries for this.
3. India’s first project to conserve Nilgiri Tahr takes shape
- India’s first Nilgiri Tahr project to conserve the State animal of Tamil Nadu will be taken up at a cost of ₹25.14 crores.
About the project:
- Announced during the Tamilnadu state budget 2022-23.
- The project will be implemented over the span of five years- 2022-27.
- The project will have nine components, including bi-annual synchronised surveys across the division, diagnosis and treatment for affected individuals and the Shola grassland restoration pilot in Upper Bhavan.
- Project Nilgiri Tahr of Tamil Nadu Forest aims to restore the fragmented habitat, especially Shola grasslands where it thrives, reintroduce the Tahr population in its historic habitat and ensure proper rehabilitation facilities are provided.
About Nilgiri Tahr:
- The Nilgiri tahr (Nilgiritragus hylocrius) is an ungulate that is endemic to the Nilgiri Hills and the southern portion of the Western and Eastern Ghats in the states of Tamil Nadu and Kerala in southern India.
- It is the state animal of Tamil Nadu.
- Despite its local name, it is more closely related to the sheep of the genus Ovis than the ibex and wild goats of the genus Capra. It is the only species in the genus Nilgiritragus.
- Its population has been estimated at 3,122 in the wild, as per the WWF-India census of 2015.
- Eravikulam National Park is home to the largest population.
Distribution and habitat:
- The Nilgiri tahr can be found only in India.
- It inhabits the open montane grassland habitat of the South Western Ghats montane rain forests ecoregion.
- At elevations from 1,200 to 2,600 m (3,900 to 8,500 ft), the forests open into large grasslands interspersed with pockets of stunted forests, locally known as sholas.
- These grassland habitats are surrounded by dense forests at lower elevations.
- Primarily threatened by habitat loss and disturbance caused by invasive species, and in some sites by livestock grazing, poaching and fragmentation of the landscape.
4. Heralds of early spring? Mango flowering observed in Odisha, Telangana a month sooner than usual
- Mango flowering has started since the third week of December in Telangana and Odisha, which is at least a month sooner than the normal period of flowering.
- Unseasonal rainfall and a warmer-than-normal winter — both imprints of a changing climate — may be responsible for such anomalous flowering.
- This is because flowering requires warmth and humidity, which is readily available in Kerala during this period.
- From here the flowering spreads northward, and northwest India witnesses flowering last.
- Flowering usually happens after the coldest period of the season is ending, heralding spring.
- Under the influence of climate shift, early and delayed flowering is a characteristic feature of mango.
- Mango flowering is an important physiological event that sets the start of fruit production.
- Mango trees flower in response to the age of the last vegetative flush in tropical conditions.
- In contrast, cool inductive temperatures induce flowering under subtropical conditions.
Change in phenological pattern:
- Two of the most important factors determining the suitability of an area’s climate for mango are air temperature and rainfall.
- The sequence of phenological (plant growth) changes is either advanced or retarded with the rise and fall in temperature and the onset of wet and dry seasons.
- Climate change is likely to influence phenological patterns and indirectly vegetative and reproductive processes leading to reduced quality and quantity of production.
- Mango showers is a colloquial term to describe the occurrence of pre-monsoon rainfall.
- Sometimes, these rains are referred to generically as ‘April rains’ or ‘Summer showers’.
- They are notable across much of South and Southeast Asia, including India, and Cambodia.
- In southern Asia, these rains greatly influence human activities because of the control the rains have on crops that are culturally significant like mangoes and coffee.
- Their intensity can range from light showers to heavy and persistent thunderstorms.
- In India, mango showers occur as the result of thunderstorm development over the Bay of Bengal.
- They are also known as ‘Kaal Baisakhi’ in Bengal, as Bordoisila in Assam and as Cherry Blossom showers or Coffee Showers in Karnataka.
- Towards the close of summer, pre-monsoon showers are common, especially in Kerala, Karnataka and parts of Tamil Nadu in India.
- They help in the early ripening of mangoes and are hence often referred to as “Mango showers.”
5. Indian syrup linked to deaths in Uzbekistan
Subject: Science and Technology
- Uzbekistan’s Ministry of Health that at least 18 children have died in Samarkand after allegedly consuming an India-manufactured syrup, Doc-1 Max prepared by Noida-based Marion Biotech.
More about the news:
- After Gambia, an Indian syrup is linked to deaths of 18 kids in Uzbekistan.
- The laboratory tests of the preparation found the presence of the contaminant ethylene glycol. It said the medicine was consumed without prescription and in a higher dose by the children affected.
- The preliminary laboratory studies indicate the presence of ethylene glycol in a particular batch of the syrup. The substance is toxic and consuming 1-2 ml/kg of 95% concentrated solution can cause vomiting, fainting, convulsions, cardiovascular problems and acute kidney failure.
More about Uzbekistan:
- Uzbekistan is a doubly landlocked country located in Central Asia.
- It is surrounded by five landlocked countries i.e Kazakhstan to the north; Kyrgyzstan to the northeast; Tajikistan to the southeast; Afghanistan to the south; and Turkmenistan to the southwest.
- Uzbekistan is the only Central Asian state to border all the other four.
- It is one of two doubly landlocked countries in the world, the other being Liechtenstein.
- Its capital and largest city is Tashkent.
- It is the 56th largest country in the world by area and the 40th by population.
- The Koh-i-Noor is a large, colorless diamond that was found close to Guntur in the state, India, probably within the thirteenth century. It weighed 793 carats (158.6 g) uncut and was initially owned by the Kakatiya dynasty.
Timeline of Possession
- 14th Century AD: In the early 14th century, Alauddin Khilji, second ruler of the Turkic Khilji dynasty of the Delhi Sultanate, and his army began to rob the kingdoms of southern India. Malik Kafur, Khilji’s general, created a victorious raid on Warangal in 1310 when he probably acquired the diamond.
- 16Th Century AD : It remained within the Khilji family line and later passed to the succeeding dynasties of the Delhi Sultanate, till it came into the possession of Babur.
- 17th Century AD : Shah Jahan, the fifth Mughal emperor, had the stone placed into his ornate Peacock Throne. In 1658, his son and successor, Aurangzeb, confined the unwell emperor at nearby Agra Fort. Whereas within the possession of Aurangazeb, weight of the stone was reduced from 793 carats (158.6 g) to 186 carats (37.2 g). For this carelessness, Borgia was admonished and punished 10,000rupees.
- 18th century (1739 AD ) : Following the 1739 invasion of Delhi by Nader Shah, the Shah of Persia, the treasury of the Mughal Empire was plundered by his army in AN organized and through the acquisition of the Mughal nobility’s wealth. Besides a bunch of valuable things, together with the Daria-i-Noor, as well as the Peacock Throne, the Shah conjointly carried away the Koh-i-Noor.
- 18th Century (1747 AD): After the assassination of Nader Shah in 1747 and also the collapse of his empire, the stone came into the hands of one of his generals, Ahmad Shah Durrani, who later became the amir of Islamic State of Afghanistan.
- 19th Century (1813 AD): After ahmad Shah the Diamond came into possession of Ahmad Shah Durrani’s descendent Shauja Shah Durrani . Shah Shuja Durrani brought the Koh-i-door back to India in 1813 and gave it to Ranjit Singh (the founding father of the Sikh Empire). In exchange, Ranjit Singh helped Shah Shuja retreat to the throne of Islamic State of Afghanistan.
- 19th Century (1849 AD): On twenty-nine March 1849, following the conclusion of the Second Anglo-Sikh War, the dominion of Punjab was formally annexed to British India, and also the Last treaty of Lahore was signed, formally cession the Koh-i-Noor to Empress and the Maharaja’s other assets to the company.
Some Historical Facts about Agra and rulers of Agra:
- Agra was founded by Badal Singh in the year 1475.
- In the year 1506, Sikandar Lodi started the reign of the Delhi Sultanate in Agra.
- Agra became a major city for the Mughal Empire after the first battle of Panipat in 1526 .It was captured by Babur, after defeating the Lodhis.
- The original name of Babur was Zahiruddin Muhammad.He was the son of Omar Sheikh, the Timurid ruler of Farghana.
- With all the glory and wisdom of the Mughals, Agra remained the second capital of India from 1504 to 1658.
- Abul Fazl called it Darul Khilafat, and Delhi was Darul Sultanat
- Arjumand Bano Begum, was the real name of Mumtaz Mahal.
- Amanat Khan Shirazi was the famous calligraphist of the Mughals.
7. How disputes among states resolved
- The border dispute between Maharashtra and Karnataka is intensifying, with both states hardening their stance.
Mechanism for the disputes redressal between states:
- Centre as a neutral mediator
- Attempts are often made to resolve inter-state disputes with the cooperation of both sides, with the Centre working as a facilitator or a neutral mediator.
- For example, in the current case between Maharashtra and Karnataka, the Union Home minister met both the Chief Ministers and asked them to form a six-member team to address all boundary issues.
- If issues are resolved amicably, Parliament can bring a law to alter state boundaries.
- Eg., Bihar-Uttar Pradesh (Alteration of Boundaries) Act of 1968 and the Haryana-Uttar Pradesh (Alteration of Boundaries) Act of 1979 were brought in similar fashion.
- Judicial redressal
- The Supreme Court in its original jurisdiction decides disputes between states.
- Article 131 of the Constitution allows SC to have original jurisdiction in any dispute:
- Between the Government of India and one or more States.
- Between the Government of India and any State or States on one side and one or more other States on the other.
- Between two or more States.
- Article 131 of the Constitution allows SC to have original jurisdiction in any dispute:
- The Supreme Court in its original jurisdiction decides disputes between states.
- Inter-state Council
- Article 263 of the Constitution gives powers to the President to set up an Inter-state Council for resolution of disputes between states.
- The Council is envisaged as a forum for discussion between the states and the Centre.
- In 1988, the Sarkaria Commission suggested that the Council should exist as a permanent body, and in 1990 it came into existence through a Presidential Order.
- In 2021, the Centre reconstituted the Inter-state Council and the body now has 10 Union Ministers as permanent invitees.
- The standing committee of the Council has been reconstituted with the Home Minister as Chairman.
Some of the other inter-state disputes in India;
- In a reply to Parliament, in 2015, the Centre said that there are border disputes mostly arising out of claims and counter-claims over territories between Assam-Meghalaya; Assam-Nagaland; Assam-Mizoram; Assam-Arunachal Pradesh and Maharashtra- Karnataka.
8. Maharashtra assembly passes bill to bring CM under Lokayukta
- The Maharashtra Assembly unanimously passed the Maharashtra LokayuktaAct, 2022
More about the news:
- The Maharashtra Lokayukta Act, 2022 will give additional powers to the Lokayukta to direct state agencies to probe public servants, including the chief minister and state ministers.
- As per the Act, any present or former chief minister of Maharashtra can be investigated by the Lokayukta only if the motion for the same is passed by the Legislative Assembly by a two-thirds majority.
- Approval of the governor and views of the group of ministers appointed by the governor is required to conduct an inquiry into present or former ministers. Similarly, the approval of the Council chairperson or Assembly speaker is required to probe the Legislative member.
- The Lokayukta will require approval from the minister concerned to probe even the municipal corporator or sarpanch.
More about Lokpal and Lokayuktas Act 2013:
- The Act allows for the setting up of an anti-corruption ombudsman called Lokpal at the Centre and Lokauktas in the state..
- Composition: The Lokpal will consist of a chairperson and a maximum of eight members.
- Chairperson should have been a Chief Justice of India, or is or has been a judge of the Supreme Court, or an eminent person who fulfills eligibility criteria as specified.
- 50% of the members are to be judicial members provided that not less than 50% of the members belong to the Scheduled Castes, Scheduled Tribes, OBCs, minorities, and women.
- Inquiry Wing: Lokpal will have an Inquiry Wing for conducting preliminary inquiry into any offence alleged to have been committed by a public servant punishable under the Prevention of Corruption Act, 1988.
- Prosecution Wing: It will also have a Prosecution Wing for the prosecution of public servants in relation to any complaint by the Lokpal under this Act.
- The Lokpal will have the power of superintendence and direction over any investigation agency including CBI for cases referred to them by the ombudsman.
- As per the Act, the Lokpal can summon or question any public servant if there exists a prima facie case against the person, even before an investigation agency (such as vigilance or CBI) has begun the probe. Any officer of the CBI investigating a case referred to it by the Lokpal, shall not be transferred without the approval of the Lokpal.
- An investigation must be completed within six months. However, the Lokpal or Lokayukta may allow extensions of six months at a time provided the reasons for the need of such extensions are given in writing.
- Special courts will be instituted to conduct trials on cases referred by Lokpal.
- Jurisdiction of Lokpal: It covers a wide range of public servants — from the Prime Minister (PM), ministers and MP, to groups A,B,C,D officers of the central government including the chairperson and members of the Lokpal. However, there are some exceptions for PM:
- Lokpal cannot inquire into allegations against the PM relating to international relations, external and internal security, public order, atomic energy and space.
- Also, complaints against the PM are not to be probed unless the full Lokpal bench considers the initiation of inquiry and at least 2/3rds of the members approve it.
- Such an inquiry against the Prime Minister (if conducted) is to be held in camera and if the Lokpal comes to the conclusion that the complaint deserves to be dismissed, the records of the inquiry are not to be published or made available to anyone.
- Selection committee:
- Once the search committee submits its recommendation for the Lokpal and its members, a selection committee will consider those names and forward them to the President for his consideration.
- The five-member selection committee comprises the following –Prime Minister (chairperson), Lok Sabha Speaker, Leader of the Opposition, Chief Justice of India and An Eminent jurist nominated by the President.
9. Ministry of Housing and Urban Affairs launches 2 key initiatives
Context: Ministry of Housing and Urban Affairs launches 2 key initiatives to take India’s Urban Rejuvenation journey to next level. The two key initiatives of Ministry are ‘City Finance Rankings, 2022’ and ‘City Beauty Competition’.
About City Finance Rankings:
- City Finance Rankings, 2022 aim to evaluate, recognize and reward India’s cities (Urban Local Bodies or ULBs) on the basis of the quality of their current financial health and improvement over time in financial performance.
- The participating ULBs will be evaluated on 15 indicators across three key municipal finance assessment parameters, namely: (i) Resource Mobilization, (ii) Expenditure Performance and (iii) Fiscal Governance.
- The cities will be ranked at the national level on the basis of their scores under any one of the following four population categories: (i) Above 4 million (ii) Between 1-4 million (iii) 100K to 1 million (iv) Less than 100,000.
- The top 3 cities in each population category will be recognized and rewarded at the national level as well as within each state/state cluster.
- All 4500+ cities / urban local bodies (ULBs) across all states/UTs would be encouraged to participate in the City Finance Rankings 2022.
- The rankings will serve as a constant motivation for city/state officials to continue to implement municipal finance reforms.
About City Beauty Competition:
- City Beauty Competition aims to encourage and recognize the transformational efforts made by cities and wards in India to create beautiful, innovative and inclusive public spaces.
- Wards and public places of cities would be judged against the five broad pillars (i) accessibility (ii) amenities (iii) activities (iv) aesthetics and (v) ecology.
- The City Beauty Competition would felicitate most beautiful wards and beautiful public places at the city level.
- Entries by wards and cities would be evaluated by an Independent Jury that may comprise experts from different fields like urban planning, design, engineering, culture experts, environmentalists and others.
- Participation in the City Beauty Competition is voluntary.
Context: The Delhi high court refused the plea by the Indian Airlines Officers Association seeking pay and allowance arrears.
More about the News:
- The petitioner, in their plea, sought arrears of pay and allowances for the period of January 1, 1997 to July 31, 2006.
- Counsel for Air India said the airline has been privatised and the entire shareholding of the Government of India has been transferred to a wholly owned subsidiary of Tata Sons Pvt. Ltd and, therefore, the petition cannot lie under Article 226 of the Constitution as Air India was no longer a public body.
- Delhi High Court has refused to entertain a plea against Air India by the Indian Airlines Officers Association seeking pay and allowance arrears, saying the airline has ceased to be a government-controlled company and is no longer amenable to its writ jurisdiction.
- The court, while disposing of the petition, nonetheless clarified that the petitioner is free to take recourse to remedies available to them in law before an appropriate forum and Air India shall be responsible for clearing the dues if the claim succeeds.
About Writ Petition:
- A writ petition is filed when someone’s fundamental rights have been violated or they have been the victim of injustice.
- A writ is a written order issued in the name of the court.
- In the Indian legal system, you can file or draft a writ petition in the High Court under Article 226 and in the Supreme Court under Article 32 of the Indian Constitution.
- Article 32 is one of the fundamental rights listed in the Constitution that each citizen is entitled.
- Article 32 deals with the ‘Right to Constitutional Remedies’, or affirms the right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred in Part III of the Constitution.
- Only if fundamental rights is violated can a person can approach the Supreme Court directly under Article 32.
- Both the High Courts and the Supreme Court can be approached for violation or enactment of fundamental rights through five kinds of writs:
- Habeas corpus – related to personal liberty in cases of illegal detentions and wrongful arrests
- Mandamus — directing public officials, governments, courts to perform a statutory duty;
- Quo warranto — to show by what warrant is a person holding public office;
- Prohibition — directing judicial or quasi-judicial authorities to stop proceedings which it has no jurisdiction for; and
- Certiorari — re-examination of an order given by judicial, quasi-judicial or administrative authorities.
- When it comes to violation of fundamental rights, an individual can approach the High Court under Article 226 or the Supreme Court directly under Article 32. Article 226, however, is not a fundamental right like Article 32.
- Article 226 of the Constitution empowers a high court to issue writs including habeas corpus, mandamus, certiorari, prohibition and quo warranto for the enforcement of the fundamental rights of the citizens and for any other purpose.
- The phrase ‘for any other purpose’ refers to the enforcement of an ordinary legal right. This implies that the writ jurisdiction of the high court is wider than that of the SC.
- This is because the SC can issue writs only for the enforcement of fundamental rights and not for any other purpose, that is, it does not extend to a case where the breach of an ordinary legal right is alleged.
- The high court can issue writs to any person, authority and government not only within its territorial jurisdiction but also outside its territorial jurisdiction if the cause of action arises within its territorial jurisdiction.
Context: Rules made by Centre, State cannot exceed powers granted by parent statute says SC
More about the News:
- SC ruled on a Kerala electricity board appeal holds that delegated legislation, such as rules and regulations, must not supplant, exceed or be in non-compliance with the law they derive power from.
- Delegated legislation should not travel beyond the purview of the parent Act. If it does, it is ultra vires and cannot be given any effect.
- Ultra vires (acting beyond one’s legal powers) may arise in cases of simple excess of power, inconsistency with or sheer non-compliance with the procedural requirements of the parent law.
About Delegated legislation:
- When an entity or individual other than parliament creates a law, it is said to have “delegated legislation,” meaning that parliament has authorised the law’s creation.
- The authority is established in a parent act of parliament called a “enabling act,” which establishes the framework of the legislation and then delegate’s powers to others to make more comprehensive law in the field.
- An Act of Parliament establishes the framework for a particular law and typically includes a synopsis of the Act’s rationale.
- When Parliament delegates its legislative authority to the Executive or another subordinate body, that body or individuals within it are given the authority to add specifics to the enacted law.
- In this way, Parliament grants authority to others to make laws and guidelines through delegated legislation through essential enactment (such as an Act of Parliament). Any law passed by an authorised individual must have one of the justifications listed in the Act of Parliament as its basis.
- It can be necessary for legislative power to be delegated for any of the following reasons:
- to save pressure on parliamentary time
- the legislation is too technical or detailed to be suitable for parliamentary consideration
- to deal with rapidly changing or uncertain situations
- to allow for swift action in the case of an emergency.
Post-1990s era of hyper-globalization has come to an end.
- World War-I 1914-1918 ended the first “golden age” of globalisation between 1870 and 1914, when world trade in goods surged from 9% to 16% of GDP.
- By the time War War-II began in September 1939, the share of merchandise trade in global GDP had collapsed to 5.5%. It recovered gradually thereafter to reach the pre-World War-I levels only towards the late-1970s.
- Between 1990 and 2008, global trade in goods soared from 15.3% to 25.2% of world GDP- 2nd golden age of hyperglobalization
- That world – “happy age”, as Keynes would have called it – came to an end in 2022– which has seen not one, but two wars- Ukraine Russia war and China-US economic conflict.
- By 2020, world merchandise trade had dipped to 20.8% of GDP, and to 26.9% for both goods and services.
- The two conflicts cause greatest collateral damage to the global trading order–From production based on comparative advantage and gains from trade, it’s each nation for itself now.
- Hyper-globalization is the dramatic change in the size, scope, and velocity of globalization that began in the late 1990s and that continues into the beginning of the 21st century.
- It covers all three main dimensions of economic globalization, cultural globalization, and political globalization.
Difference between Globalization & Hyper-Globalisation
- The International Monetary Fund defines Globalization as a means that world trade and financial markets are becoming more integrated.
- Hyper-globalisation is used to describe the dramatic increase in international trade witnessed for about a decade and a half from the early 1990s. It led to an unprecedented movement of capital and of people.
- The main difference is the rate of speed at which the process of globalisation takes place.
Economics and trade theories:
French philosopher Montesquieu
- He said that “commerce is a cure for the most destructive prejudices” and “peace is the natural effect of trade”.
- Duox Commerce takes inspiration from Montesquieu, in propounding that trade makes men less prone to violence or irrational behaviour.
- Adam Smith’s theory of absolute cost advantage in international trade was evolved as a strong reaction to the restrictive and protectionist mercantilist views on international trade.
- He upheld in this theory the necessity of free trade as the only sound guarantee for progressive expansion of trade and increased prosperity of nations.
- Every country tends to specialize in the production and export of that commodity which it can produce most cheaply.
- When countries specialize on the basis of absolute advantage in costs, they stand to gain through international trade, just as a tailor does not make his own shoes and shoemaker does not stitch his own suit and both gain by exchanging shoes and suits.
- Ricardo’s widely acclaimed comparative advantage theory suggests that nations can gain an international trade advantage when they focus on producing goods that produce the lowest opportunity costs as compared to other nations.
- He illustrated this with an example of two countries producing two goods.
- Suppose it took 100 hours to make one unit of cloth and 120 hours for one unit of wine in England, whereas Portugal required only 90 hours for the former and 80 hours for the latter. Clearly, Portugal enjoyed absolute advantage producing both goods.
- Ricardo argued it still made sense for England to simply manufacture cloth and for Portugal to specialise in wine. It would result in 2.2 units of cloth and 2.125 units of wine being produced over 220 hours and 170 hours in England and Portugal respectively. The two were better off, then, producing one good (England cloth and Portugal wine) and importing the other.
- Belief in comparative advantage is what also propelled the second golden age – of “hyperglobalisation” – after 1990.
- Example- China’s share in world merchandise trade to have risen from 1.8% in 1990 to 11.1% in 2012. This, even as that of others fell: Germany (12% to 7.6%), the US (11.3% to 8.4%) and Japan (8.2% to 4.3%).
John Maynard Keynes:
- Keynes argued that inadequate overall demand could lead to prolonged periods of high unemployment.
- An economy’s output of goods and services is the sum of four components: consumption, investment, government purchases, and net exports (the difference between what a country sells to and buys from foreign countries) i.e. increase export and decrease import.
- Any increase in demand has to come from one of these four components thus, increasing national income and employment level.
13. Manufacturing sector -the FDI inflow
Despite the government’s effort to attract more investments in the manufacturing sector the FDI inflow is still tilted in favour of the services sector according to the India Ratings and Research (Ind-Ra).
- As per the World investment Report 2022 of United Nations Conference on Trade and Development (UNCTAD), India is among the top 10 (ranked 7) FDI destinations globally.
- Among the emerging market economies, India has done reasonably well in attracting FDIs. Only China has been consistently ahead of India.
- The highest FDI flowed into the services sector, followed by the manufacturing sector (excluding computer hardware) during April 2000 to March 2014 as well as during April 2014 to March 2022.
- While within services, FDI predominantly flowed into trading, telecommunications, banking/insurance, IT/business outsourcing and hotels/tourism, within manufacturing it remained concentrated in segments such as auto, chemicals, drugs and pharmaceuticals, metallurgical and food processing.
- FDIs are highly clustered around a few states.
- Of the total FDI inflow of $146.7 during October 2019 and March 2022, just four states attracted 83.0% of the FDI with Maharashtra accounting for 27.5%, Karnataka 23.9%, Gujarat 19.1% and Delhi 12.4%.
- As a result, three distinct FDI corridors have emerged– NCR of Delhi in the north, Maharashtra-Gujarat in the west and Karnataka-Tamil Nadu-Andhra Pradesh-Telangana in the South.
Foreign Direct Investment
- Any investment from an individual or firm that is located in a foreign country into a country is called Foreign Direct Investment. Generally, FDI is when a foreign entity acquires ownership or controlling stake in the shares of a company in one country, or establishes businesses there.
- It is different from foreign portfolio investment where the foreign entity merely buys equity shares of a company.
- Three Components:
- Equity capital is the foreign direct investor’s purchase of shares of an enterprise in a country other than its own.
- Reinvested earnings comprise the direct investors’ share of earnings not distributed as dividends by affiliates, or earnings not remitted to the direct investor. Such retained profits by affiliates are reinvested.
- Intra-company loans or intra-company debt transactions refer to short- or long-term borrowing and lending of funds between direct investors (or enterprises) and affiliate enterprises.
- Routes through which India gets FDI:
- Automatic Route: In this, the foreign entity does not require the prior approval of the government or the RBI.
- Government Route: In this, the foreign entity has to take the approval of the government.
- The Foreign Investment Facilitation Portal (FIFP) facilitates the single window clearance of applications which are through approval route.
- It is administered by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.
- India has received Foreign Direct Investment (FDI) inflows worth USD 339.55 billion in the last five years. It increased from USD 45.15 billion in 2014-15 to USD 81.97 billion in 2020-21.
- As per the World Investment Report 2021 by the UN Conference on Trade and Development (UNCTAD),India was the fifth-largest recipient of Foreign Direct Investment (FDI) inflows in the world in 2020.
- In the Financial Year 2020-21, India sees growth of 10% (to $82 bn) in Foreign Direct Investment (FDI). FDI equity investments rose 19% to $60 billion.
- In April 2020, the DPIIT came out with a new rule, which stated that the entity of any company that shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of such a country can invest only under the Government route. In other words, such entities can only invest following the approval of the Government of India.
- Financial year 2021-22
- Foreign Investment, consisting of foreign direct investment (FDI) and foreign portfolio investment (FPI), is the largest component of the capital account.
- Falling short of the pre pandemic level, the net foreign investment inflows (FIIs) – primarily driven by FDI – moderated to US$ 25.4 billion in H1: FY 22 compared to corresponding period of FY 21.
- Total foreign direct investment (FDI) inflow to India declined to $74.01 billion in the calendar year 2021 a decline of15 percent as compared to calendar year 2020,
- Sectors attracting highest FDI Equity Inflows-Computer Software & Hardware> Automobile Industry> Services Sector> Trading > Telecommunications
- Top FDI investing countries- Singapore>U.S.A.>Mauritius>Netherlands>Japan
Sebi remarked-Peter is paying taxes on behalf of Paul.
- SEBI remarked related to the taxation rules on share buybacks under which companies are paying the tax on behalf of promoters from funds which belong to shareholders.
- Some of the larger companies such as TCS, GAIL and Zydus Life Sciences, which made large buyback offers in 2022 have paid significant amounts as tax for shares purchased by promoters.
- A stock buyback is when a public company uses cash to buy shares of its own stock on the open market. A company may do this to return money to shareholders that it doesn’t need to fund operations and other investments.
- Companies do buybacks for various reasons, including company consolidation, equity value increase, and looking more financially attractive.
- The downside to buybacks is they are typically financed with debt, which can strain cash flow.
- Stock buybacks can have a mildly positive effect on the economy overall.
Tax law on share buyback:
- Section 115QA of the Income Tax Act introduced a buyback tax at the rate of 20 per cent to be paid by listed companies on the amount distributed by them during share buybacks.
- Prior, the onus of paying tax on such income was laid on the shareholder.
- The current mechanism of buyback tax appears to be tilted in favour of those shareholders who tender their shares and take exit from the company adversely impacting the interest of shareholders who do not wish to tender their shares under buyback. As a result, all the continuing shareholders have to share the burden of tax payable by the listed company on the buyback proceeds of the shares tendered by existing/tendering shareholders.
Dividend distribution tax and share buyback:
While tax on share buybacks have to be paid by companies, shareholders are responsible for paying tax on dividends received, following the abolishment of the dividend distribution tax in the Finance Act 2020.
Sebi proposes a regulatory framework for index providers for governance and administration of the financial benchmarks or indices in the domestic securities market.
About the Framework:
- The proposed regulation shall be applicable to index providers (both domestic and foreign) if the users of the index/products based on index are located in India
- Under the framework, the index providers offering indices for use in India will be required to register with Sebi for obtaining authorization for introduction of indices in the country.
- Index provider shall be a legal entity incorporated under Companies Act in the country of origin and should have a minimum net worth of Rs 25 crore.
- The index provider will have to constitute an oversight committee for reviewing existing index design and changes to benchmark methodology.
- Index providers must have policies and procedures to manage conflicts of interest and to protect the integrity and independence of various functions performed in connection with determination of indices.
- In case an index provider is engaged in any other activity, the activity of the index provider must be completely ring-fenced to prevent sharing or leakage of any sensitive information.
- Index providers must document and make available publicly the methodology for index calculation.
- The index providers must be assessed by independent external auditors to evaluate adherence to International Organization of Securities Commissions (IOSCO) principles once in two years.
- In the stock market, an index is essentially a method of measuring a change in value of a group of securities forming part of such an index.
- It performs several functions such as assisting the investors in understanding the health of the market and also enabling them to study the market sentiment, enabling performance measurement and benchmarking.
- Index providers are companies that design and calculate indexes.
- They have the responsibility to set the rules that decide what securities to include in each index, how the index will be managed and how securities will be added or removed from that index over time.
- In this process they also usually determine how stocks can be classified, e.g. is a particular stock a Healthcare or an Oil & Gas stock, or is it a Developed or Emerging market stock.
- Index providers license (sell) the rights to use their designs and calculations to ETF issuers who then copy the index as closely as they can to create a passive ETF.
- EXAMPLES OF INDEX PROVIDERS:
- Standard & Poors
- FTSE Russell
International Organization of Securities Commissions (IOSCO):
- Founded: April 1983
- Headquarters: Madrid, Spain
- IOSCO Asia Pacific Hub is located in Kuala Lumpur, Malaysia.
- It is the international organization that brings together the world’s securities regulators, covering more than 95% of the world’s securities markets, and is the global standard setter for the securities sector.
- It works closely with the G20 (Group of Twenty) and the Financial Stability Board (FSB) in setting up the standards for strengthening the securities markets.
- The IOSCO Objectives and Principles of Securities Regulation have been endorsed by FSB as one of the key standards for sound financial systems.
- IOSCO’s enforcement role extends to matters of interpretation of International Financial Reporting Standards (IFRS), where IOSCO maintains a (confidential) database of enforcement actions taken by member agencies.
- IFRS is an accounting standard that has been issued by the International Accounting Standards Board (IASB) with the objective of providing a common accounting language to increase transparency in the presentation of financial information.
- To cooperate in developing, implementing and promoting adherence to internationally recognized and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks;
- To enhance investor protection and promote investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct and in supervision of markets and market intermediaries; and
- To exchange information at both global and regional levels on their respective experiences in order to assist the development of markets, strengthen market infrastructure and implement appropriate regulation.
The Central Board of Indirect Taxes and Customs (CBIC) has allowed tax officers to recover reduced dues from bankrupt businesses.
- This clarifies how field officers would deal with tax dues, which are classified as operational credit under the Insolvency and Bankruptcy Code (IBC).
- Under IBC secured creditors and workmen whose wages are due, have a higher right on the proceeds of liquidation over that of operational creditors.
- NCLT and its appellate body are adjudicating authorities for bankruptcy proceedings which also cover government dues.
- IBC also adjudicates government dues pending under the Central GST Act or under existing laws against the corporate debtor.
- Section 84 of the CGST Act deals with a reduction in dues payable-Tax officers have to inform the taxpayer about reduction in the tax payable and proceed with the recovery.
- Commissioner GST has been authorized to reduce tax demands on the finalization of IBC proceedings in respect of the corporate debtor.
- Under the Insolvency and Bankruptcy Code, 2016, a “creditor” means any person to whom a debt is owed, and includes among others, a financial creditor, an operational creditor, a secured creditor, and an unsecured creditor.
- Section 3(30) of the IBC defines secured creditor to mean a creditor in favour of whom security interest is credited.
- Unsecured Creditors, like credit card issuers, suppliers, and some cash advance companies (although this is changing), do not hold a lien on its debtor’s property to assure payment of the debt if there is a default. The secured creditor holds priority on debt collection from the property on which it holds a lien.
- Financial Creditor-As per Section 5(7) “financial creditor” means any person to whom a financial debt is owed. As per Section 5(8) of the Code, “financial debt” means a debt along with interest, if any, which is disbursed against the consideration for the time value of money.
- Operational Creditor:
- As per Section 5(20), “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;
- As per Section 5(21) of the code, “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;
- The ‘Operational Creditors’ can be classified into three different classes for determining the manner in which the amount is to be distributed to them:
- Those who have ‘supplied goods’ and ‘rendered services’ and thereby entitled to payment.
- The employees who have ‘rendered services’ for which they are entitled to payment.
- The Central Government, the State Government, or the Local Authority who has not rendered any services but dues payable under any statute like Goods and Service Tax Act and generally termed as statutory dues.
- The dues payable towards “statutory dues” to the Government, Central or State or any local authority is also Operational debt, and the Government or the authority will be an Operational Creditor.
National Company Law Tribunal (NCLT):
- It is a successor body to the Company Law Board.
- It is a quasi-judicial body set up to govern companies established under the Companies Act, 2013.
- Powers of NCLT, 2013
- Mismanagement and Oppression
- Revival of Sick companies
- Winding up of Companies
Once NCLT admits the case for insolvency process under IBC, 2016 the case cannot be withdrawn even if the payment decides to settle. But SC using Art 142 (extraordinary constitutional provisions) can allow it.
National Company Law Appellate Tribunal (NCLAT)
- National Company Law Appellate Tribunal (NCLAT) was constituted under Section 410 of the Companies Act, 2013 for hearing appeals against the orders of National Company Law Tribunal(s) (NCLT), with effect from 1st June, 2016.
- Hear appeals against the orders passed by NCLT(s) under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC).
- Hear appeals against the orders passed by Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC.
- Hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India (CCI) – as per the amendment brought to Section 410 of the Companies Act, 2013.
- NCLAT is also the Appellate Tribunal to hear and dispose of appeals against the orders of the National Financial Reporting Authority.