Insights Daily Current Events, 03 February 2016

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Insights Daily Current Events, 03 February 2016


Paper 2 Topic: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

Zika (Update)

After the World Health Organization (WHO) designated the Zika virus and its suspected complications in newborns as a public health emergency of international concern, the Union Health Ministry of India has sounded an alert for Zika and appointed the National Centre for Disease Control (NCDC) as the nodal agency for investigation of any outbreak of the viral infection in India.

zika virus

About the National Centre for Disease Control:

  • It is an institute under the Indian Directorate General of Health Services, Ministry of Health and Family Welfare.
  • It was established in July 1963 for research in epidemiology and control of communicable diseases.
  • It was previously known as National Institute of Communicable Diseases.


Zika virus disease is an emerging viral disease transmitted through the bite of an infected Aedes mosquito. This is the same mosquito that is known to transmit infections like dengue and chikungunya.

  • World Health Organisation has reported 22 countries and territories in Americas from where local transmission of Zika virus has been reported.
  • Microcephaly in the newborn and other neurological syndromes (Guillain Barre Syndrome) have been found temporally associated with Zika virus infection.

sources: the hindu.


Paper 2 Topic: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

China revamps military command structure

In a major military reform, Chinese President Xi Jinping recently reorganised four army headquarters by replacing them with 15 new agencies under the Central Military Commission (CMC) headed by him, tightening his control over the world’s largest force.

  • The overhaul is aimed at moving away from an army-centric system towards a Western-style joint command in which the army, navy and air force are equally represented.
  • This is part of major reforms initiated by Xi to revamp the 2.3 million-strong and the world largest military, the People’s Liberation Army (PLA).


  • The new structure includes new commissions – discipline inspection, politics and law and science and technology – as well as the general office.
  • The reform includes formation of five more divisions, administration, auditing, international cooperation, reform, organisational structure and strategic planning.
  • There are six new departments, joint staff, political work, logistical support, equipment development, training, and national defence.
  • According to the new changes, the Eastern, Western, Northern, Southern and Central theatre commands will focus on joint combat. The CMC will exercise overall political, supervisory and administrative control over the armed forces.
  • The unified joint command system will end the army dominated set up with more role for airforce and navy.

sources: the hindu.


Paper 3 Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Govt sets up 2 panels to ensure consistency in tax policies

With a view to bring about consistency in taxation policy, Finance Ministry has set up two committees – one under Finance Minister and other under Revenue Secretary. The two committees would start functioning from April 1, 2016.

The two committees are:

  1. Tax Policy Council (TPC)
  2. Tax Policy Research Unit (TPRU)


  • It will be headed by the Union Finance Minister and will take important policy decisions.
  • The TPC would have nine members – Minister of State for Finance, NITI Aayog Vice-Chairman, Commerce Minister, Chief Economic Advisor and Finance Secretary. It would also have secretaries from the department of Revenue, DEA, DIPP and Ministry of Commerce.
  • The TPC aims to have a consistent and coherent approach to the issue of tax policy and will look at all the research findings coming from TPRU and suggest broad policy measures for taxation.


  • It will be headed by the Revenue Secretary and will be a multi disciplinary body.
  • TPRU will carry out studies on various topics of fiscal and tax policies and assist the TPC in taking appropriate policy decisions.
  • TPRU will prepare for every tax proposal an analysis of legislative intent, expected increase/decrease in tax collection and economic impact.
  • TPRU will comprise of officers from CBDT, CBEC as well as economists, statisticians, researchers and legal experts.

Taxation proposals of the two boards will be sent to the Finance Minister separately.


  • The decision to constitute these committees is based on the recommendation of the Tax Administration Reform Commission (TARC) that have in its First Report, identified handling of tax policy and related legislation as one of the areas in need of structural modifications.
  • Right now this is handled in the CBDT and the CBEC. Independently of the two boards, the Tax Research Unit (TRU) and Tax Policy and Legislation (TPL) wings also send proposals to the union Finance Minister.
  • To bring consistency, multidisciplinary inputs, and coherence in policy making, the TARC had recommended that a Tax Council supported by a common Tax Policy and Analysis (TPA) unit should be established to cater to needs of both direct and indirect taxes.
  • It also had recommended that Comprising tax administrators, economists, and other specialists such as statisticians, tax law experts, operation research specialists and social researchers should be set up for both the boards.

sources: the hindu, pib.


Paper 3 Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

RBI relaxes FDI norms to boost start-ups

The Reserve Bank of India (RBI) has relaxed several rules including foreign direct investment norms to boost start-up activity in the country.

New norms:

  • Now, start-ups are allowed to receive foreign venture capital investment irrespective of the sector in which they operate. Currently only Venture Capital Funds (VCF) and Indian Venture Capital Undertakings (IVCU) are eligible to raise foreign venture capital investments.
  • The new norms will enable transfer of shares from foreign venture capital investors to other residents or non-residents.
  • The process of dealing with delayed reporting of foreign direct investment (FDI)-related transaction has also been simplified by building a penalty structure into the regulations itself.
  • RBI has also tried to address the regulatory difficulties being faced by the promoters of a start-up by proposing to permit receipt of deferred consideration and enabling an escrow/indemnity arrangement. These clauses are generally insisted upon by an investor and the regulatory restrictions (under the current regime) acts as a roadblock for the start-ups.

RBI has also indicated that certain proposals are being considered and consulted with the government. These proposals include, permitting start-up enterprises to access rupee loans under External Commercial Borrowing (ECB) framework with relaxations in respect of eligible lenders, issuance of innovative FDI instruments like convertible notes by start-up enterprises and streamlining of overseas investment operations for start-up enterprises.

sources: the hindu.


Paper 2 Topic: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

New U.S. rule a blow to Indian pharma exporters

The U.S. government has come out with a new set of rules for the pharma sector, under which it is now mandatory for Active Pharmaceutical Ingredients (APIs) to be manufactured locally. At present, nearly 80 per cent of drug raw material requirement is met by India or China.

  • This move is expected to further inflate prices of drugs in the United States.

Implications of this decision:

  • The decision has already sent Indian pharmaceutical exporters into a tizzy, as it will significantly impact Indian drug exports.
  • The new decision will affect the Indian companies which have subsidiaries in the U.S. that procure APIs from their Indian counterparts and make the finished product in the U.S.
  • This would also seriously impact availability and prices of medicines in the United States. As of now, nearly 80% of the U.S. requirement for APIs is imported and due to these norms, the U.S. government procurement prices will go up significantly.

Practice so far:

  • So far, U.S.-based companies were allowed to procure Active Pharmaceutical Ingredients (APIs) from countries like India and China, make the fixed formulations (final product) in the U.S. and sell the drugs to the U.S. government.
  • It is also worth noting that Indian companies are not allowed to quote for government contracts in the U.S. since India is not a signatory to the WTO’s government procurement agreement.

Way ahead:

  • The issue also comes at a time when Indian API exports have been slowing down. Hence, Pharmexcil — India’s pharmaceutical Export Promotion Council — has approached the Commerce Ministry, requesting authorities to intervene and resolve the issue.
  • The commerce ministry has assured that it will take up this issue with the U.S. shortly. It said the government would first try to resolve this issue bilaterally, failing which it would consider approaching the World Trade Organisation’s dispute settlement panel.

sources: the hindu.


Paper 3 Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Companies Law Committee submits report to Government

The Companies Law Committee — constituted in June 2015 to make recommendations on the issues related to implementation of the Companies Act, 2013 — has submitted its report to the Government.

  • After extensive consultations with stakeholders and exhaustive deliberations, the Committee has proposed changes in 78 sections of the Companies Act, 2013 which, along with consequential changes, would result in about 100 amendments to the Act.
  • The recommendations cover significant areas of the Act, including definitions, raising of capital, accounts and audit, corporate governance, managerial remuneration, companies incorporated outside India and offences/ penalties.

Key recommendations:

  • The overall managerial remuneration payable by a public company should not exceed 11% of the net profits of that company except with the approval of the shareholders and the Central Government. Similar approvals are required for companies having inadequate or no profits.
  • The report recommends simpler regulatory regime by proposing removal of government approval for managerial remuneration with few additional disclosures. This would be in sync with international practices and reduce procedural delays.
  • The report recommends removal of restrictions on layering of subsidiaries since it was likely to have a substantial bearing on the functioning, structuring and the ability of companies to raise funds. Effectively, companies will be permitted to make investment through more than two layers of investment companies as per the report.
  • The Act specifies that an independent director must not have or had any pecuniary relationship with the company, its holding, subsidiary or associate company or their promoters or directors, during the two immediately preceding financial years or during the current financial year. Even minor pecuniary relationships were covered due to this provision even though such transactions may not impact independence of directors. The report proposes to introduce a threshold for pecuniary relationships in relation to qualification for an independent director. This would further ease the implementation of provision for appointment of independent director by companies.
  • Threshold has been proposed for punishment for fraud to avoid misuse of provision; frauds involving amounts below specified limits which do not involve public interest to be given differential treatment and compoundable. Penalty/fine proposed to be reduced in case of non-compliance with various sections of the Act.
  • The Committee also recommended certain changes specifically for encouraging start-ups which include reducing compliance burden on account of private placement procedure, permitting start-ups to raise deposits for its initial five years without any upper limits, to issue ESOPs to promoters working as employees etc.

The definitions of various terms are proposed to be amended / clarified:

A subsidiary company is defined as a company in which holding company controls the composition of the board of directors or exercise or controls more than one-half of the total share capital.

Similarly the term associate company would be defined to clarify that it covers company in which other company has a significant influence i.e. control of at least twenty percent of the total voting power or control of or participation in taking business decisions under an agreement.

Joint venture would be construed in the same manner as under Indian Accounting Standard 28 and would facilitate convergence.

sources: the hindu.