DAY – 36 ( INSTA REVISION TEST)INSTA REVISION PLAN 3.0, 2020

Solution: A

FDI in Automatic vs. Government Route

• Although FDI is allowed through automatic route in most of the sectors, certain areas such as defence, telecom, media, pharmaceuticals and insurance, government approval is required for foreign investors.
• Under government route, foreign investor has to take prior approval of respective ministry/department. Through automatic approval route, the investor just has to inform the RBI after the investment is made.
• There are nine sectors where FDI is prohibited and that includes lottery business, gambling and betting, chit funds, Nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.

Foreign direct investment (FDI) is when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they aren’t just bringing money with them, but also knowledge, skills and technology.

Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company.

Where is FDI made?

Foreign Direct Investments are commonly made in open economies that have skilled workforce and growth prospect. FDIs not only bring money with them but also skills, technology and knowledge.

FDI in India

FDI is an important monetary source for India’s economic development. Economic liberalisation started in India in the wake of the 1991 crisis and since then, FDI has steadily increased in the country. India, today is a part of top 100-club on Ease of Doing Business (EoDB) and globally ranks number 1 in the greenfield FDI ranking.

Routes through which India gets FDI

Automatic route: The non-resident or Indian company does not require prior nod of the RBI or government of India for FDI.

Govt route: The government’s approval is mandatory. The company will have to file an application through Foreign Investment Facilitation Portal, which facilitates single-window clearance. The application is then forwarded to the respective ministry, which will approve/reject the application in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce. DPIIT will issue the Standard Operating Procedure (SOP) for processing of applications under the existing FDI policy.

Solution: D

Who are the developing countries in the WTO?

China became a WTO member in 2001. By 2011, China became the second-largest economy in GDP terms, the first largest merchandise exporter, the fourth largest commercial services exporter and the first destination for inward FDI among developing countries.

So if China is forced to take on the duties of a developed country and forego the benefits of a developing country, the West could soon ask other developing countries that are ahead of China (at least in per capita terms) to do the same.

Who are the developing countries in the WTO?

There are no WTO definitions of “developed” and “developing” countries.

Members announce for themselves whether they are “developed” or “developing” countries.

However, other members can challenge the decision of a member to make use of provisions available to developing countries.

What are the advantages of “developing country” status?

Developing country status in the WTO brings certain rights. Developing country status ensures special and differential treatment (S&DT) or provisions which allow them more time to implement agreements and commitments, include measures to increase trading opportunities, safeguard their trade interests, and support to build capacity to handle disputes and implement technical standards.

WTO norms for recognition of Developed, Developing and LDCs:

Under the WTO system, generally, countries are designated as developed, developing, and least developed countries (LDCs).

The uneven level of development between developed and developing countries in the WTO is a well-recognised fact.

Article XVIII of the General Agreement on Tariffs and Trade (GATT)recognises that attaining the objectives of this agreement would require facilitating the progressive development of those countries that can only support low levels of development and are at the early stages of development.

Accordingly, countries self-designate themselves as ‘developing country’ to take advantage of provisions like Article XVIII of GATT and other special and differential treatment (S&DT) provisions in the WTO agreements.

These provisions are aimed at increasing trade opportunities for developing countries, ensuring longer transitional periods to comply with WTO obligations, and affording technical assistance to countries, among other things.

Solution: D

E-2020 initiative:

In May 2015, the World Health Assembly endorsed a new Global Technical Strategy for Malaria 2016-2030, setting ambitious goals aimed at dramatically lowering the global malaria burden over this 15-year period, with milestones along the way to track progress. A key milestone for 2020 is the elimination of malaria in at least 10 countries that had the disease in 2015. To meet this target, countries must reportzero indigenous cases in 2020.

Solution: B

Rising forex reserves and its importance

Context: Amid pandemic, India’s foreign exchange reserves are rising and are slated to hit the $500 billion mark soon.

In the month of May, forex reserves jumped by $12.4 billion to an all-time high of $493.48 billion (around Rs 37.30 lakh crore) for the week ended May 29.

Important fact for Prelims:

The level of foreign exchange reserves has steadily increased by 8,400 per cent from $5.8 billion as of March 1991 to the current level.

What are forex reserves?

Forex reserves are external assets in the form of gold, SDRs (special drawing rights of the IMF) and foreign currency assets (capital inflows to the capital markets, FDI and external commercial borrowings) accumulated by India and controlled by the Reserve Bank of India. 

Why they are important?

1. Official foreign exchange reserves are held in support of a range of objectives like supporting and maintaining confidence in the policies for monetary and exchange rate management including the capacity to intervene in support of the national or union currency.
2. It will also limit external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed.

Why are forex reserves rising despite the slowdown in the economy?

Rise in investment in foreign portfolio investors in Indian stocks and foreign direct investments (FDIs).

Fall in crude oil prices has brought down the oil import bill, saving the precious foreign exchange.

Overseas remittances and foreign travels have fallen steeply – down 61 per cent in April from $12.87 billion.

What’s the significance of rising forex reserves?

The rising forex reserves give a lot of comfort to the government and the Reserve Bank of India in managing India’s external and internal financial issues at a time when the economic growth is set to contract by 1.5 per cent in 2020-21.

It’s a big cushion in the event of any crisis on the economic front and enough to cover the import bill of the country for a year.

The rising reserves have also helped the rupee to strengthen against the dollar.

Reserves will provide a level of confidence to markets that a country can meet its external obligations, demonstrate the backing of domestic currency by external assets, assist the government in meeting its foreign exchange needs and external debt obligations and maintain a reserve for national disasters or emergencies.

Solution: A

Small finance banks:

• The small finance bank will primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

What they can do?

1. Take small deposits and disburse loans.
2. Distribute mutual funds, insurance products and other simple third-party financial products.
3. Lend 75% of their total adjusted net bank credit to priority sector.
4. Maximum loan size would be 10% of capital funds to single borrower, 15% to a group.
5. Minimum 50% of loans should be up to 25 lakhs.

What they cannot do?

1. Lend to big corporates and groups.
2. Cannot open branches with prior RBI approval for first five years.
3. Other financial activities of the promoter must not mingle with the bank.
4. It cannot set up subsidiaries to undertake non-banking financial services activities.
5. Cannot be a business correspondent of any bank.

Solution: A

Foreign Contribution (Regulation) Act (FCRA), 2010:

Foreign funding of voluntary organizations in India is regulated under FCRA act and is implemented by the Ministry of Home Affairs.

Under the Act, organizations require to register themselves every five years.

As per the amended FCRA rules, all NGOs registered or granted prior permission under FCRA are now required to upload details of foreign contributions received and utilized by them every three months on their website or the FCRA website.

• NGOs now need to file their annual returns online, with the hard copy version dispensed with. The annual returns must be placed quarterly on the NGO’s website or the FCRA website maintained by the home ministry.

Who can accept Foreign Contribution?

A person having a definite cultural, economic, educational, religious or social programme can accept foreign contribution after getting registration or prior permission from the Central Government.

Who cannot accept Foreign Contribution?

1. Election candidate
2. Member of any legislature (MP and MLAs)
3. Political party or office bearer thereof
4. Organization of a political nature
5. Correspondent, columnist, cartoonist, editor, owner, printer or publishers of a registered Newspaper.
6. Judge, government servant or employee of any corporation or any other body controlled on owned by the Government.
7. Association or company engaged in the production or broadcast of audio news, audio visual news or current affairs programmes through any electronic mode
8. Any other individuals or associations who have been specifically prohibited by the Central Government

What is the eligibility criteria for grant of registration?

The Association:

• must be registered (under the Societies Registration Act, 1860 or Indian Trusts Act 1882 or section 8 of Companies Act, 2013 etc.)
• normally be in existence for at least 3 years.
• has undertaken reasonable activity in its field for the benefit of the society.
• Has spent at least Rs.10,00,000/- (Rs. ten lakh) over the last three years on its activities.

What is ‘public interest’?

The FCRA regulates the receipt of funding from sources outside of India to NGOs working in India.

It prohibits receipt of foreign contribution “for any activities detrimental to the national interest”. 

• The Act specifies that NGOs require the government’s permission to receive funding from abroad.
• The government can refuse permission if it believes that the donation to the NGO will adversely affect “public interest” or the “economic interest of the state”.

This condition is manifestly overbroad. There is no clear guidance on what constitutes “public interest”.

Definition of foreign contribution:

It defines the term ‘foreign contribution’ to include currency, article other than gift for personal use and securities received from foreign source. While foreign hospitality refers to any offer from a foreign source to provide foreign travel, boarding, lodging, transportation or medical treatment cost.

Solution: C

What are Participatory Notes?

Participatory Notes or P-Notes (PNs) are financial instruments issued by a registered foreign institutional investor (FII) to an overseas investor who wishes to invest in Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India (SEBI).

 Key points:

• P-Notes are Offshore Derivative Investments (ODIs) with equity shares or debt securities as underlying assets.
• They provide liquidity to the investors as they can transfer the ownership by endorsement and delivery.
• While the FIIs have to report all such investments each quarter to SEBI, they need not disclose the identity of the actual investors. 

What are govt & regulator’s concerns?

The primary reason why P-Notes are worrying is because of the anonymous nature of the instrument as these investors could be beyond the reach of Indian regulators.

Further, there is a view that it is being used in money laundering with wealthy Indians, like the promoters of companies, using it to bring back unaccounted funds and to manipulate their stock prices.

Solution: A

Section 144:

It gives power to a District Magistrate, a sub- divisional Magistrate or any other Executive Magistrate on behalf of the State Government to issue an order to an individual or the general public in a particular place or area to “abstain from a certain act” or “to take certain order with respect to certain property in his possession or under his management”.

• This order can be passed against a particular individual or general public. The order can be passed even ex-parte.
• As held by the Supreme Court, mere apprehension of danger is not a sufficient ground to curb citizens’ rights by invoking Section 144 CrPC.

Implications:

1. Section 144 restricts carrying any sort of weapon in that area where it has been imposed and people can be detained for violating it. The maximum punishment for such an act is three years.
2. According to the order under this section, there shall be no movement of public and all educational institutions shall also remain closed and there will be a complete bar on holding any kind of public meetings or rallies during the period of operation of this order.
3. Section 144 also empowers the authorities to block the internet access but  Suspension of internet for indefinite period not permissible

Duration of Section 144 order:

No order under Section 144 shall remain in force for more than two months but the state government can extent the validity for two months and maximum up to six months. It can be withdrawn at any point of time if situation becomes normal.

As per the Section, the order can be passed only “if such Magistrate considers”, that the direction is likely to prevent:

• obstruction, annoyance or injury to any person lawfully employed.
• danger to human life, health or safety.
• disturbance of the public tranquility, or a riot or affray.

Solution: B

Foreign Portfolio Investment (FPI) is investment by non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc. The class of investors who make investment in these securities are known as Foreign Portfolio Investors.

FPI is induced by differences in equity price scenario, bond yield, growth prospects, interest rate, dividends or rate of return on capital in India’s financial assets.

SEBI has recently stipulated the criteria for Foreign Portfolio Investment. According to this, any equity investment by non-residents which is less than or equal to 10% of capital in a company is portfolio investment. While above this the investment will be counted as Foreign Direct Investment (FDI).

Investment by a foreign portfolio investor cannot exceed 10 per cent of the paid up capital of the Indian company. All FPI taken together cannot acquire more than 24 per cent of the paid up capital of an Indian Company. As per SEBI regulations, FPIs are not allowed to invest in unlisted shares and investment in unlisted entities will be treated as FDI.

Solution: B

MANAV: Human Atlas Initiative

• Department of Biotechnology (DBT) has launched MANAV: Human Atlas Initiative, towards improving knowledge on human physiology.
• It is a project funded by DBT.
• Aims at creating a database network of all tissues in the human body from the available scientific literature.
• It is a projectthat involvesscientific skill development for annotation, science outreach along with handling big data.
• The programme will involve gaining better biological insights through physiological and molecular mapping, develop disease models through predictive computing and have a wholistic analysis and finally drug discovery.

Solution: B

International Comparison Program

Context:

The World Bank has released new Purchasing Power Parities (PPPs) for reference year 2017, under International Comparison Program (ICP), that adjust for differences in the cost of living across economies of the World.

Globally 176 economies participated in 2017 cycle of ICP.

What is ICP?

International Comparison Program (ICP) is the largest worldwide data-collection initiative, under the guidance of UN Statistical Commission (UNSC).

• The goal is of producing Purchasing Power Parities (PPPs) which are vital for converting measures of economic activities to be comparable across economies.
• Along with the PPPs, the ICP also produces Price Level Indices (PLI) and other regionally comparable aggregates of GDP expenditure.
• The next ICP comparison will be conducted for reference year 2021.

India and the ICP:

• India has participated in almost all ICP rounds since its inception in 1970.
• The Ministry of Statistics and Programme Implementation is National Implementing Agency (NIA) for India, which has the responsibility of planning, coordinating and implementing national ICP activities.
• India has also been a co-Chair of the ICP Governing Board along with Statistics Austria for the ICP 2017 cycle.

Worldwide status:

• Purchasing Power Parities (PPPs) of Indian Rupee per US$ at Gross Domestic Product (GDP) level is now 20.65 in 2017 from 15.55 in 2011.
• Exchange Rate of US Dollar to Indian Rupee is now 65.12 from 46.67 during same period.
• Price Level Index (PLI)— the ratio of a PPP to its corresponding market exchange rate—is used to compare the price levels of economies, of India is 47.55 in 2017 from 42.99 in 2011.

India’s position:

1. In 2017, India retained and consolidated its global position, as the third largest economy, accounted for 6.7 percent ($8,051 billion out of World total of $119,547 billion) of global Gross Domestic Product (GDP) in terms of PPPs.
2. China (16.4%) and United States (16.3%), respectively.
3. India is also third largest economy in terms of its PPP-based share in global Actual Individual Consumption and Global Gross Capital Formation.

Solution: D

The current account on the balance of payments measures the inflow and outflow of goods, services, investment incomes and transfer payments.

The main components of the current account are:

1. Trade in goods (visible balance)
2. Trade in services (invisible balance), e.g. insurance and services
3. Investment incomes, e.g. dividends, interest and migrants remittances from abroad
4. Net transfers – e.g. International aid.

Solution: D

AMRUT mission:

Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is the new avatar of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). But, in a significant departure from the earlier mission, the Centre will not appraise individual projects.

The Mission will focus on the following Thrust Areas:

• Water Supply.
• Sewerage and septage management.
• Storm Water Drainage to reduce flooding
• Non-motorized Urban Transport.
• Green space/parks.

Solution: D

Here are some of the benefits of making the INR into a fully convertible currency:

Sign of Stable and Mature Markets

Regulators like to keep control over their territories. Free and open entry to an enormous number of global market participants would increase the risk of losing regulatory control due to large market size and a huge flow of capital. Opening up to a fully convertible currency is a solid sign that a country and its markets are stable and mature enough to handle the free and unrestricted movement of capital, which attracts investments making the economy better.

Increased Liquidity in Financial Markets

Full capital account convertibility opens up the country’s markets to global players including investors, businesses, and trade partners. This allows easy access to capital for different businesses and sectors, positively impacting a nation’s economy.

Improved Employment and Business Opportunities

With increased participation from global players, new businesses, strategic partnerships, and direct investments flourish. It also helps in the creation of new employment opportunities across various industry sectors, as well as nurturing entrepreneurship for new businesses.

Onshore Rupee Market Development

The growing international interest in the Indian rupee is evident from the development of offshore rupee markets in locations like Dubai, London, New York, and Singapore. Trading of the INR is still far lower than other currencies such as the euro. In 2018, INR contracts traded against the dollar an average of 11,666 times per day compared to 193,512 contracts converted from Euro to USD. Making the rupee fully convertible would enable greater trades and global flow of the Indian currency, helping national markets with improved liquidity, better regulatory purview, and reduced dependence and risks from offshore market participants.

Easy Access to Foreign Capital

Local businesses can benefit from easy access to foreign loans at comparatively lower costs—lower interest rates. Indian companies currently have to take the ADR/GDR route to list on foreign exchanges. After full convertibility, they will be able to directly raise equity capital from overseas markets.

Better Access to a Variety of Goods and Services

Amid current restrictions, one does not see much variety in India for foreign goods and services. Walmart (WMT) and Tesco stores aren’t that common, although a handful exist in partnership with local retail chains. Full convertibility will open doors for all global players to the Indian market, making it more competitive and better for consumers and the economy alike.

Progress in Multiple Industry Sectors

Sectors like insurance, fertilizers, retail, etc. have restrictions on foreign direct investments (FDIs). Full convertibility will open the doors of many big international players to invest in these sectors, enabling much-needed reforms and bringing variety to the Indian masses.

Outward Investments

Fancy buying a house on the coast of Florida or buying a million-dollar yacht in London? At present, any Indian individual or business would need permission from authorities to do so. After full convertibility, there will be no limits on the amounts exchanged and no need for approvals.

Improved Financial System

The Tarapore Committee, which was tasked with assessing the full convertibility of the rupee, has noted these benefits after full rupee convertibility, including:

• Indian businesses will be able to issue foreign currency-denominated debt to local Indian investors.
• Indian businesses will be able to hold foreign currency deposits in local Indian banks for capital requirements.
• Indian banks will be able to borrow and/or lend to foreign banks in foreign currencies.
• Easy options to buy/sell gold freely and offer gold-based deposits and loans with higher (or even uncapped) limits.

Solution: D

The second component under Ayushman Bharat is the Pradhan Mantri Jan Arogya Yojna or PM-JAY as it is popularly known.

Key Features of PM-JAY

• PM-JAY is the world’s largest health insurance/ assurance scheme fully financed by the government.
• It provides a cover of Rs. 5 lakhs per family per year for secondary and tertiary care hospitalization across public and private empanelled hospitals in India.
• Over 10.74 crore poor and vulnerable entitled families (approximately 50 crore beneficiaries) are eligible for these benefits.
• PM-JAY provides cashless access to health care services for the beneficiary at the point of service, that is, the hospital.
• PM-JAY envisions to help mitigate catastrophic expenditure on medical treatment which pushes nearly 6 crore Indians into poverty each year.
• It covers up to 3 days of pre-hospitalization and 15 days post-hospitalization expenses such as diagnostics and medicines.
• There is no restriction on the family size, age or gender.
• All pre–existing conditions are covered from day one.
• Benefits of the scheme are portable across the country i.e. a beneficiary can visit any empanelled public or private hospital in India to avail cashless treatment.
• Services include approximately 1,393 procedures covering all the costs related to treatment, including but not limited to drugs, supplies, diagnostic services, physician’s fees, room charges, surgeon charges, OT and ICU charges etc.
• Public hospitals are reimbursed for the healthcare services at par with the private hospitals.
• It subsumed the then existing Rashtriya Swasthya Bima Yojana (RSBY) which had been launched in 2008. The coverage mentioned under PM-JAY, therefore, also includes families that were covered in RSBY but are not present in the SECC 2011 database.

Solution: D

Current Account Deficit (CAD)

An increase in CAD as a ratio to GDP worsens the BoP by drawing down on forex reserves or building the potential to worsen it by increasing the external debt burden. Yet that has not been the case with CAD to GDP ratio significantly improving from 2009-14 to 2014-19 (Table 1). The improvement has continued going forward with the CAD to GDP ratio lower in the first half of 2019-20 as compared to 2018-19 (Figure 1).

Solution: D

Solution: B

Bedaquiline is the active substance in a new TB drug which is also sometimes known by the trade name of Sirturo. It belongs to a group of drugs known as diarrylquinolines. It is the first new TB drug for 40 years. Bedaquiline is the active substance in a new TB drug which is also sometimes known by the trade name of Sirturo. It belongs to a group of drugs known as diarrylquinolines. It is the first new TB drug for 40 years

Solution: A

The Vivad Se Vishwas scheme offers to settle pending direct tax-related disputes.

The scheme aims to resolve 483,000 direct tax-related disputes pending in various appellate forums.

The scheme offers waivers on interest and penalty if the disputed tax amount is paid before March 31, 2020. If a taxpayer is not able to pay direct taxes by March 31st then, he will get further time till June 30th. However, in that case, he would have to pay 10 percent more on the tax.

Vivad se Vishwas  scheme – no additional 10% amount, if payment made by June 30, 2020 was announced by Finance minister as a COVID relief measure.

Solution: C

The Windrush Scheme enables Commonwealth citizens, their children, and some other long term residents of the UK to obtain documentation confirming their status free of charge.

Solution: C

The government has announced that it was abolishing in “public interest” an anti-dumping duty that was levied on imports of a chemical called PTA.

Implications:

Domestic manufacturers of polyester have called the move a huge relief for the industry, claiming they had been fighting to remove the duty for four-and-a-half years.

What is PTA?

1. Purified Terephthalic Acid (PTA) is a crucial raw material used to make various products, including polyester fabrics.
2. PTA makes up for around 70-80% of a polyester product and is, therefore, important to those involved in the manufacture of man-made fabrics or their components.
3. This includes products like polyester staple fibre and spun yarn. Some sportswear, swimsuits, dresses, trousers, curtains, sofa covers, jackets, car seat covers and bed sheets have a certain proportion of polyester in them.

https://indianexpress.com/article/explained/budget-2020-nirmala-sitharaman-anti-dumping-duty-on-purified-terephthalic-6251132/

Solution: C

The Aathichoodi is a collection of single-line quotations written by Avvaiyar and organized in alphabetical order. There are 109 of these sacred lines which include insightful quotes expressed in simple words. It aims to inculcate good habits, discipline and doing good deeds.

https://www.outlookindia.com/newsscroll/fm-quotes-tamil-poetess-in-budget-speech/1723470

Solution: B

The 2019 G20 Osaka summit was the fourteenth meeting of the G20, a forum of 19 countries and the EU that together represent most of the world economy. It was the first G20 summit to be hosted by Japan.

The 19 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Republic of South Africa, Russia, Saudi Arabia, Turkey, United Kingdom, United States of America. Pakistan is not a member of G20

The recent G20 summits have focused not only on macro-economy and trade, but also on a wide range of global issues which have an immense impact on the global economy, such as development, climate change and energy, health, counter-terrorism, as well as migration and refugees.

Solution: A

The US remained India’s top trading partner for the second consecutive fiscal in 2019-20, which shows increasing economic ties between the two countries. According to the data of the commerce ministry, in 2019-20, the bilateral trade between the US and India stood at USD 88.75 billion as against USD 87.96 billion in 2018-19

https://m.economictimes.com/news/economy/foreign-trade/u-s-remains-indias-top-trading-partner-in-2019-20/articleshow/76924711.cms

Solution: D

Each year, the General Assembly elects five non-permanent members out of a total of 10, for a two-year term.

Distribution of seats: These 10 seats are distributed among the regions thus: five for African and Asian countries; one for Eastern European countries; two for Latin American and Caribbean countries; two for Western European and other countries.

India’s candidature for a non-permanent seat in the Security Council for the 2021-22 term has been endorsed unanimously by the Asia Pacific group, which comprises 55 countries, including Pakistan.

India has been a non-permanent member of the Security Council seven time previously: 1950-51, 1967-68, 1972-73, 1977-78, 1984-85, 1991-92 and 2011-12.