7-july-2014 current affairs

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CURRENT AFFAIRS

JULY 2014

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TABLE OF CONTENTS

POLITY ...................................................................................................................................................................................... 5

Supreme Court Judgments and Rulings ............................................................................................................................................ 5

Shariat Courts have no legal Sanctity ...................................................................................................................................................................................... 5 Restraint on States for remission of life convicts .............................................................................................................................................................. 5 Pay revised wages for MGNREGA .............................................................................................................................................................................................. 6 SC narrows list of suspects in dowry deaths ....................................................................................................................................................................... 6

Administrative Reforms ........................................................................................................................................................................... 6

Collapse of buildings in Metro cities ........................................................................................................................................................................................ 6 Reforming India’s Intelligence Architecture ........................................................................................................................................................................ 7

Legislations and policies .......................................................................................................................................................................... 8

Need for a comprehensive Juvenile Justice Law ................................................................................................................................................................ 8 Fixed tenure for CJI: Law Commission .................................................................................................................................................................................... 9

Polity Miscellaneous .................................................................................................................................................................................. 9

Congress ineligible for LoP post: Attorney general .......................................................................................................................................................... 9 Panel set up for A.P. capital ........................................................................................................................................................................................................10

ECONOMICS .......................................................................................................................................................................... 11

State of the Indian Economy ............................................................................................................................................................... 11

Industrial Production rose 4.7% in May ..............................................................................................................................................................................11 Exports grow 10.2% in June ......................................................................................................................................................................................................11 Measures taken by the Government to address Inflation ...........................................................................................................................................12

Policy Guidelines by RBI ........................................................................................................................................................................ 12

RBI move will give boost to affordable housing segment ...........................................................................................................................................12 Debt sustainability at the State Level in India ...................................................................................................................................................................13 Captive Markets ...............................................................................................................................................................................................................................13 RBI working on bankruptcy exit system ..............................................................................................................................................................................14

Expert Group on Poverty Estimation – Rangarajan Panel Report ................................................................................... 14

Centre planning ‘reverse’ SEZs abroad for cheaper chemicals ........................................................................................... 16

Government to set up 16 NIMZs to boost manufacturing ..................................................................................................... 16

Government to take effective steps to revive SEZs.................................................................................................................... 17

Change in Labour laws gets cabinet nod ...................................................................................................................................... 18

Direct tax collection up ......................................................................................................................................................................... 19

REIT (Real Estate Investment Trusts) ............................................................................................................................................ 19

BSE forms advisory group on REITs ......................................................................................................................................................................................20

Revitalising MSME – A Roadmap ..................................................................................................................................................... 20

Differentiated Banks – An analysis .................................................................................................................................................. 21

SOCIAL ISSUES ..................................................................................................................................................................... 23

India 135 on HDI: UNHDR ................................................................................................................................................................... 23

Women Related ......................................................................................................................................................................................... 23

Most rape victims knew the culprits......................................................................................................................................................................................23 Keeping girls in school cuts child, maternal mortality ..................................................................................................................................................24

Disability Related ..................................................................................................................................................................................... 24

Rupee notes and coins to be made more accessible for the blind ...........................................................................................................................24 India becomes the first country in the world to ratify the Marrakesh convention .........................................................................................25

Social sector spending in annual budget ...................................................................................................................................... 25

Indian Urbanization happpening at a rate slower than expected .................................................................................... 26

HEALTH ................................................................................................................................................................................................... 27

Taxing the tobacco .................................................................................................................................................................................. 27

Findings of National Health Profile 2013 ..................................................................................................................................... 27

EDUCATION ............................................................................................................................................................................................. 28

Third Gender children should be included in schools .............................................................................................................. 28

Non-governmental panel on education ......................................................................................................................................... 28

Marginal Increase in spending on education in budget ........................................................................................................ 28

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ENVIRONEMENT ................................................................................................................................................................. 29

Forest Cover in India has Increased ................................................................................................................................................ 29

Field Trials allowed for 4 GM Crops ................................................................................................................................................ 29

EU may restrict genome editing of crops ...................................................................................................................................... 30

Plastic waste causing damage to marine ecosystems............................................................................................................. 30

Plan for navigation in Ganga under question ............................................................................................................................ 31

248 new species discovered in India in 2013 .............................................................................................................................. 31

Caribbean has lost 50% of its coral since 1970s ....................................................................................................................... 31

India to play a proactive role on Climate Change and evolve consensus on COP-2015 .......................................... 32

INDIA AND WORLD ........................................................................................................................................................... 33

BRICS Summit 2014 ................................................................................................................................................................................ 33

BRICS for a new bank ....................................................................................................................................................................................................................33 PM calls for UNSC, IMF reform .................................................................................................................................................................................................33

India & WTO Meet ................................................................................................................................................................................... 34

India links trade pact to food subsidies deal .....................................................................................................................................................................34 What is the Trade Facilitation Agreement (TFA)? ..........................................................................................................................................................34 What is the problem with Trade Facilitation Agreement (TFA)? ............................................................................................................................34 Why is India opposed to Trade Facilitation Agreement (TFA)? ...............................................................................................................................35 What does India want? .................................................................................................................................................................................................................35 India successfully challenges U.S. at WTO ...........................................................................................................................................................................35

India – China .............................................................................................................................................................................................. 36

China to let Indian experts monitor Brahmaputra in Tibet ........................................................................................................................................36 Three new dams ..............................................................................................................................................................................................................................36 Infrastructure parks ......................................................................................................................................................................................................................36 China’s PLA distributes new ‘battle maps’ in border areas ........................................................................................................................................37

India – Russia ............................................................................................................................................................................................. 37

Russia moots mega energy pipeline project with India ...............................................................................................................................................37 Russia’s role in India and China’s new entente: Opinion .............................................................................................................................................38

India – Bangladesh .................................................................................................................................................................................. 39

UN tribunal puts an end to 40-year-old India-Bangladesh maritime dispute ...................................................................................................39 A hand of Friendship: Opinion ..................................................................................................................................................................................................40

India – US ..................................................................................................................................................................................................... 40

India, U.S., Japan joint naval exercise in Pacific ................................................................................................................................................................40 Shadowboxing in India-U.S. ties: OPINION .........................................................................................................................................................................41

India – Pakistan ........................................................................................................................................................................................ 41

Pipeline to Pakistan may revive stalled mega projects ................................................................................................................................................41

India – Brazil .............................................................................................................................................................................................. 42

India, Brazil strengthen relations, sign 3 MoU ..................................................................................................................................................................42

India – Nepal .............................................................................................................................................................................................. 42

Indo-Nepal Joint Commission meets after 23 years .......................................................................................................................................................42

India – Singapore ..................................................................................................................................................................................... 43

Singapore to help India build ‘Smart Cities’ .......................................................................................................................................................................43

WORLD AFFAIRS ................................................................................................................................................................ 44

Sri Lanka Issues ........................................................................................................................................................................................ 44

U.N. urges Colombo to stop promotion of ‘faith-based hatred’ ................................................................................................................................44 Rajapaksa inducts war crimes experts in probe panel .................................................................................................................................................44

China Issues ................................................................................................................................................................................................ 45

Xi set for historic Sri Lanka visit ..............................................................................................................................................................................................45 ‘The China card’ ................................................................................................................................................................................................................................45

Iraq Issues .................................................................................................................................................................................................... 45

ISIS leader Abu Bakr al-Baghdadi urges Muslims worldwide to fight ...................................................................................................................45 What is a caliphate? .......................................................................................................................................................................................................................46 U.S. sends more troops to Iraq ..................................................................................................................................................................................................46 Why the crisis in Iraq is an opportunity for Kurds .........................................................................................................................................................46

Israel Palestine Issue .............................................................................................................................................................................. 47

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UN calls for immediate ceasefire .............................................................................................................................................................................................47 India’s Stand ......................................................................................................................................................................................................................................48

U.N. approves peacekeeping budget after tough debate ....................................................................................................... 48

Iran Issue ..................................................................................................................................................................................................... 48

Iran nuke talks to be extended till Nov 24 ..........................................................................................................................................................................48

MH 17 Crash ............................................................................................................................................................................................... 49

New Russia sanctions ....................................................................................................................................................................................................................50 Outrage in the skies: Opinion ....................................................................................................................................................................................................50

Japan’s defence policy shift slammed ............................................................................................................................................. 50

Elections in Indonesia ............................................................................................................................................................................ 51

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POLITY

SUPREME COURT JUDGMENTS AND RULINGS

SHARIAT COURTS HAVE NO LEGAL SANCTITY

• The Supreme Court has held that fatwas issued by Muslim shariat courts (Dar-ul-Qazas) do not have legal

sanctity and cannot be enforced if they infringed on the fundamental rights of an individual.

• The Bench said fatwas on rights, status and obligation of individual Muslims, in its opinion, would not be

permissible unless asked for by the person concerned or, in cases where the person is unable to do it, by the

person interested.

BACKGROUND

• A woman from Kukda village in Muzaffarnagar district of Uttar Pradesh was raped by her father-in-law,

following which the village panchayat passed a fatwa asking her to treat him as her husband.

• The Dar-ul-Uloom also declared that she had become ineligible to live with her husband. This was endorsed

by the All-India Muslim Personal Law Board as well.

ANALYSIS

• Personal laws ought to be administered by the regular law courts and cannot be enforced in derogation of

fundamental rights by religious courts that lack legal sanctity

• The judgment is a welcome step toward the gradual rationalisation and acclimatisation of our custom- driven

and extra-legal judicial system (which often works in contradiction to our established and widely regarded

constitutional values) to the contemporary realities of a modern democratic society — in which there is no

place for any kind of gender-based discrimination and dehumanising arbitrariness.

• The state can come to the rescue of an individual if he or she is being victimised in terms of a violation of

fundamental rights in the name of Sharia laws.

• The Supreme Court has preserved the religious character of these Sharia courts, noting that they do not

constitute a parallel judiciary, but an “informal justice delivery system with the objective of bringing about

amicable settlement between parties.” It is important that the Supreme Court’s intervention, at the instance

of a petitioner who wanted Sharia courts to be banned, is understood in the correct perspective.

• The judgment, no doubt, enforces the special legal sanctity of the Constitution. In the same vein, the

Supreme Court must reflect on the functioning of other “extra-legal” entities such as khap panchayats in

order to strengthen the foundation of the “rule of law”. The objective must be to build on the direction

shown by the Supreme Court and have an inspiring edifice in the form of a Uniform Civil Code.

RESTRAINT ON STATES FOR REMISSION OF LIFE CONVICTS

• The Supreme Court has restrained all State governments from releasing life convicts exercising their

remission powers.

• A five-judge Constitution Bench passed the restraint order till July 22, when the matter relating to the release

of life convicts in the Rajiv Gandhi assassination case would be taken up for hearing.

• The Bench, also issued notices to the States seeking their response by July 18 to seven questions, including

whether they could exercise their remission power under Section 435 Cr.P.C., even in a case investigated by

the CBI, as had been done by the Tamil Nadu government.

TAMIL NADU CASE

• On February 19, the Tamil Nadu Government passed an order proposing remission of life imprisonment

imposed on seven life convicts involved in the Rajiv Gandhi assassination case.

• The Centre filed a petition challenging the release. On February 20, the court directed the Tamil Nadu

government to maintain status quo on its decision to release the convicts in the Rajiv Gandhi assassination

case.

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PAY REVISED WAGES FOR MGNREGA

• The Supreme Court has directed all States to pay workers under the Mahatma Gandhi National Rural

Employment Act (MGNREGA) revised wages as per the notification issued by the Centre in February this year.

Refer Current Affairs material of February for more details

• It further asked the government to find a way out to end the disparity between the wages paid under the

MGNREGA and State-mandated rates under the Minimum Wages Act.

SC NARROWS LIST OF SUSPECTS IN DOWRY DEATHS

• The Supreme Court has held that only persons related to a husband by blood, marriage or adoption can be

prosecuted for dowry death offences.

RELEVANT SECTION OF IPC

• As per section 304-B of the Indian Penal Code when a woman dies in circumstances other than normal within

seven years of marriage, her husband or any relative of his should be deemed to have committed the offence

of dowry death if it was shown that the woman was subjected to cruelty or harassment by her husband, or by

any relative of her husband before her death.

ADMINISTRATIVE REFORMS

COLLAPSE OF BUILDINGS IN METRO CITIES

• Buildings in cities are collapsing with depressing regularity, and precious lives are being lost. Two recent tragic

incidents have yet again raised the issues of safety and accountability in building construction.

• Recently, on the outskirts of Chennai, an 11-storey building under construction collapsed, and some 61

people died. In Delhi, a four-storied building crumbled and 10 persons including five children lost their lives.

• The Tamil Nadu government has appointed a one-man commission headed by a retired High Court Judge to

investigate the incident and suggest measures to prevent such calamities in future

• Every time such accidents occur, the state rushes forth to form committees and enacts new rules, only to

ignore them later. Nothing has improved the situation on the ground, and the lessons have hardly been

learnt.

WHERE DOES THE PROBLEM LIE?

• The issue is not that of insufficient regulatory systems or safety standards, but that of non-compliance.

• For instance, in Chennai, building approval procedures for multi-storied buildings clearly mandate that the

regulatory authorities verify soil analysis reports, structural drawings, stability certificates and design

drawings before issuing approvals.

• Had the officials diligently scrutinised the drawings and the data, they could have detected the inadequacies,

if any, even before construction commenced. Periodic inspection of buildings would have helped spot

deviations and other problems at the construction stage. In Delhi, had the Corporation acted on residents’

complaints and taken prompt action, lives would have been saved.

• Frequent regularization of unauthorized constructions have emboldened violators and eroded the

compliance culture.

• Lack of transparency in approval processes, discretionary exemptions, and slack inspections have put the

interests of many apartment-buyers in peril.

• Construction workers often bear the worst of the effects, and lose lives and limbs.

• We need a zero-tolerance policy when it comes to unsafe building practices.

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REFORMING INDIA’S INTELLIGENCE ARCHITECTURE

• The agenda of intelligence reforms in India should be one of the three or four main priorities of the newly

appointed NSA Mr. Doval.

LEGAL BASIS FOR INTELLIGENCE GATHERING

• Activities of all major intelligence agencies should be founded on a legal basis. There should be a law or

separate laws to specify the existence, functions and jurisdiction of all such organisations.

• Though emerging initially from clandestine origins, this has been the pattern of evolution of all modern

intelligence organisations functioning in democratic countries. The CIA in the U.S. was provided legal status

by the National Security Act, 1947, the Russian FIS by the Law on Foreign Intelligence Organs, 1996, the MI-5

in U.K. by the Security Services Act, 1989 and the MI-6 by the Intelligence Services Act, 1994.

• Case in Point: In Harman &Hewitt vs U.K., the European Court of Human Rights ruled in 1992 that the ‘lack of

a statutory basis could be fatal to claims’ of an intelligence agency to justify that its actions ‘were in

accordance with the law.’

• With the Right to Information Act having become a reality in India, though some aspects of intelligence

activity and operations remain protected outside its ambit, unless we quickly provide legal status protection

to our agencies we could be waiting for a Harman & Hewitt to happen here as well.

DIFFERENT LEVELS OF OVERSIGHT

• Such legislation must provide a legal basis for different tiers of oversight and accountability of Intelligence

agencies — executive, financial and legislative.

• There is abundant evidence of modern practice to make a start. Following yardsticks of ‘good governance’

defined by the World Bank, the Geneva Centre for the Democratic Control of Armed Forces (DCAF), the

Human Rights Centre of Durham University, U.K., and the Norwegian Parliamentary Intelligence Oversight

Committee pioneered a joint exercise in 2005, which was documented in the monumental classic: ‘Making

Intelligence Accountable: Legal Standards and Best Practices for Oversight of Intelligence Agencies’ by Born &

Leigh.

• We need not follow prescriptions listed therein blindly but adapt the thrust and essence of advice selectively,

which may meet the objective of preventing misuse for political or personal agendas.

IMPROVE RECRUITMENT PROCEDURES

• Recruitment to intelligence organisations must be made open to induct the best available talent, and also to

cater to varied needs and different streams.

• Intelligence collection and operations are highly specialised functions, only some of which can be imparted

through systematic professional training.

• Language skills, in-depth knowledge of strategic issues, cultural mores of target countries, computer know-

how and other technological skills may all be needed at different stages of assessing any intelligence input.

• These capabilities cannot be developed overnight by everybody, or by personnel joining an intelligence

agency as a temporary haven. It has to be a lifetime profession where skills should be progressively honed.

• At present, our agencies are primarily staffed by police officers on deputation.

• This system should be changed quickly. Separate, specialized written examinations for entry could be

prescribed through the Union Public Service Commission (UPSC), with greater emphasis on subjects like

international relations, history, economics and military strategy.

IMPROVE INTELLIGENCE CO-ORDINATION

• Apex-level political decisions on security issues are taken by the Cabinet Committee on Security (CCS), which

is assisted by a core group of bureaucrats, including heads of Intelligence agencies.

• Discussions in the CCS and the core group tend to remain restricted to immediate or emergent security

problems. There is seldom the inclination to devote time to debate, analyse and develop long-term policy

options, strategies or consequences.

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• Though there is a National Security Council and an Advisory Board of experts to cater to some of these issues,

these bodies do not always meet regularly. Structural channels to utilise their inputs through pinpointed

action agendas have not fructified.

• There is a need to bring all central agencies under one umbrella to ensure seamless integration in their

operations, assessments and response.

CONCLUSION

• Intelligence reform cannot succeed unless it is dovetailed with police modernisation and both technological

and human capabilities of State police personnel are upgraded.

• Early resolution of the impasse over legislation pertaining to a National counter-terror mechanism, which

gives adequate teeth for rapid response without unduly raising apprehensions and treading on the toes of

State political leadership, needs to be worked out on priority.

LEGISLATIONS AND POLICIES

NEED FOR A COMPREHENSIVE JUVENILE JUSTICE LAW

BACKGROUND

• The Juvenile Justice (Care and Protection of Children) Act, 2000 (JJ Act) has been amended twice: in 2006 and

in 2011.

• More demands to amend the Act have been in the reckoning. There was, for instance, a public outcry

demanding more stringent punishment for the prime accused, a juvenile, in the Delhi gang rape case of 2012.

• Besides crimes committed by juveniles, violence against them is also emerging as an important issue which

needs to be redressed by strengthening the existing provisions

• Protracted inter-country adoption procedures in the existing JJ Act need urgent legislative resolution

• A secular gender-neutral adoption law for all people is required and that’s what the draft bill intends to

achieve.

SOME OF THE AMENDMENTS

• Government of India is now contemplating re-enacting a new JJ Act, 2014.

• The JJ Bill, 2014, seeks to enact a law by consolidating and amending the law relating to children who are in

need of care and protection.

• Principles of Hague incorporated: The draft incorporates the principles of the Hague Convention on

Protection of Children and Cooperation in Respect of Inter-Country Adoption (1993) which was absent in the

original JJ Act, 2000. The new JJ Bill, 2014, provides for application of the proposed Act in: cases involving

detention, prosecution or penalty of imprisonment; matters relating to apprehension, production before

court, disposal orders and restoration, procedures and decisions related to adoption of children, and

rehabilitation and reintegration of children who are in conflict with law or, as the case may be, in need of care

and protection under other such law.

• Change in definitions and nomenclatures: The word ‘juvenile’ has been replaced with the word ‘child’ and

the expression ‘juvenile in conflict with the law’ has been changed to ‘child in conflict with law.’

• While in the JJ Act, 2000, juveniles in conflict with the law are defined as the ‘accused’, the draft Bill identifies

a ‘child in conflict with law’ to be one who has been found by the Juvenile Justice Board to have actually

committed an offence.

• Internationally accepted principles: Chapter two is the most noteworthy characteristic of the proposed Bill,

providing for ‘Fundamental Principles for Care, Protection, Rehabilitation and Justice for Children’. It

incorporates internationally accepted principles of presumption of innocence, dignity and worth, family

responsibility, non-stigmatising semantics, privacy and confidentiality, repatriation and restoration, equality

and non-discrimination, and diversion and natural justice, among others.

• Children in conflict: A new procedure for handling children in conflict with law has been proposed. A

revamped Child Welfare Committee has been identified, empowered and given statutory functions.

Mandatory registration of childcare institutions has been provided. Observation, shelter and special homes

may be established by State governments.

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• CARA has been made a statutory body vested with functions of in-country and inter-country adoptions.

Section 58 of the draft Bill lays down special emphasis on inter-country adoptions, stating that all applications

for adoption shall be filed before a Principal Magistrate of the concerned jurisdiction where the registered

adoption agency is located.

• Media Restrictions: The proposed Bill also prohibits the media from disclosing the identity of children or

propagating any such information which would lead to identifying them. All reports relating to children are to

be treated as confidential.

• Corporal punishment and ragging, cruelty to children, employment of children for begging, adoption without

proper procedure, and sale or procurement of children for any purpose are all acts that are punishable under

the draft Bill.

SOME OF THE LACUNAE

• The proposed provision for adoption orders to be passed by the Principal Magistrate on the first date of

hearing itself, or within a period of two weeks, failing which it will be construed by the higher authority of the

Principal Magistrate, “as dereliction of duty”, does not seem to be practical for actual implementation.

• Judicial proceedings have to be regulated by the Code of Civil Procedure and no fast-track procedure that

bypasses rules of evidence can be proposed in contravention of law. Likewise, transgenders need adoption

rights. The JJ Bill must encompass these issues.

• Only a stringent implementation can provide a meaningful disposition to make it a true letter of law.

FIXED TENURE FOR CJI: LAW COMMISSION

• Three important recommendations made by Law Commission are: retirement age of 65 for Supreme Court

and High Court judges, a “cooling-off period” for judges after retirement and a fixed tenure for Chief Justice

of India.

• Commission has reasoned that the retirement age of Supreme Court judges was increased to 65 as an

“incentive” for High Court judges to leave the comfort of their hometowns and come to New Delhi. This

consideration is no longer relevant. The retirement age of High Court judges is 62. Elevation to the Supreme

Court guarantees them an additional three-year tenure.

• It has also recommended that it is time to introduce a three-year “cooling off” period for retired judges

before the take up positions offered by the government.

• It recommends that the Chief Justice of India should get a fixed tenure of two years in case their tenure as CJI

is less than two years. This step should be implemented from August 26, 2022 after the junior-most judge

currently serving in the Supreme Court, and who is slated to be CJI, retires.

ON JUDICIAL APPOINTMENT COMMISSION

• It says the JAC should be a seven-member body with the CJI as chairperson, and three Supreme Court judges.

• It has also noted the Law Minister should be the sole representative from the government side “to ensure

that the executive has a meaningful voice.

• It has recommended the JAC to have a “full-time” Secretariat headed by a retired High Court judge and a

“small investigating team” to verify the antecedents of the proposed candidates. This will do away with IB

investigations.

• It also wants the JAC to interview candidates in-camera; have the entire process “publicly disclosed” with

adequate safeguards in place to protect candidates' privacy; and publish annual report on appointments

made to ensure transparency.

POLITY MISCELLANEOUS

CONGRESS INELIGIBLE FOR LOP POST: ATTORNEY GENERAL

• Attorney General of India has given an opinion that Congress is ineligible for the post of Leader of Opposition

• As per AG, Congress lacks requisite one-tenth strength of Lok Sabha that is 55 seats.

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• Congress party on the other hand has been opposing the stand of the government citing that it would be

undemocratic to deny the status to the largest oppoisition.

• AG has cited the past precedence of J.L Nehru and Rajiv Gandhi- led government where no opposition party

had numbers to claim the post of LoP.

PANEL SET UP FOR A.P. CAPITAL

• AP Government has constituted a nine-member advisory committee to examine different aspects of

constructing a capital city as well as suggest an action plan for its development.

• Committee consists of 4 industrialists.

• In addition to these members, three prominent persons of national and international repute may be co-opted

as special invitees to the committee.

• Some of the matters on which the committee shall advise are: Conceptualisation of a vibrant, diverse and

inclusive city which is a magnet for skilled workforce; efficient use of natural resources – land, water and

energy – minimal commutes, green technologies, green spaces, water-fronts etc., that promotes smart and

sustainable urban development; urban planning etc.

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ECONOMICS

STATE OF THE INDIAN ECONOMY

INDUSTRIAL PRODUCTION ROSE 4.7% IN MAY

• The Index of Industrial Production (IIP) increased by 4.7% in May 2014 (year-on-year).

• In May grew by 4.7 per cent, the highest monthly rise since October 2012, giving further momentum to a

3.4 per cent rise in April and raising hope of a recovery.

ANALYSIS

• This is the highest increase in the index since October 2012; however, this is a very volatile series. The

rise in industrial production is driven by an increase in manufacturing, especially of consumer goods.

• The growth in October 2012 was 8.4 per cent, while industrial production had contracted 2.5 per cent in

May last year. The fact that 4.7 per cent growth is the next highest since the Index of Industrial

Production (IIP) clocked 8.4 per cent growth itself shows the tepid performance in between.

• Cumulative growth during April-May, the first two months of this financial year, was four per cent,

against a fall in output by 0.5 per cent in the first two months of 2013-14.

• If the trend persists, it would contribute to the government's projection of a 5.4 per cent economic

growth in 2014-15, after sub-five per cent in the previous two years. However, experts have doubts due

to the possibility of a bad monsoon and spiraling inflation.

• Experts said the rise was mainly due a low base-effect and some pick-up in mining activity and rise in the

production of automobiles. Better demand conditions abroad contributed and exports rose 12 per cent

in May.

• In the broad sectors of mining, manufacturing and electricity, the growth recorded in May was 2.7 per

cent against 2.6 per cent in April, 4.8 per cent against 2.5 per cent and 6.3 per cent against 11.9 per cent,

respectively.

• As we move ahead, we expect a gradual revival in industrial growth. Based on the impetus provided in

FY15 annual budget, we think a fresh leg of investments should give a push to industrial activity going

forward," said one of the bankers.

EXPORTS GROW 10.2% IN JUNE

• Exports grew at above 10 per cent year-on-year for the third month in a row in June, up 10.2 per cent to

$26.5 billion.

• Imports in June were in the black for the first time in 13 months, up 8.3 per cent to $38.2 billion,

according to official data released here on Wednesday.

• Monthly trade deficit rose marginally to $11.8 billion in June from $11.2 billion in May.

• The partial relaxation in gold import norms in May resulted in higher imports at $3.1 billion in June

against the average of $1.5 billion during the past 12 months.

• Gold imports in June were up 65 per cent.

• Export growth was the strongest in petro products at 38 per cent, followed by engineering goods that

grew 22 per cent. Electronic goods exports shrank (-) 25 per cent and gems and jewellery exports

contracted (-) 5 per cent in June.

• Chemicals imports were up 19 per cent and petroleum imports 11 per cent.

• Imports of transport equipment shrank (-) 11 per cent, machinery (-) 3.4 per cent and pearls and stones

(-) 2.2 per cent. The growth in oil imports is likely to have been led by the pace of recovery in industrial

output seen in June.

• In a statement on the trade data, Federation of Indian Export Organisations (FIEO) President said that

the continuance of the double digit growth in exports is positive and with encouraging Industrial Index of

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Production numbers for the month of May, he expects a further improved performance in months to

come.

• “The steps announced by the Finance Minister in the Union Budget including extension of 24 x 7 facility

for all export promotional schemes, single point interaction with customs as the hub for all exim

transactions online, institutionalization of export promotion mission and involvement of the States in the

export promotion will further facilitate exports besides reducing transaction costs”, he said pointing out

that the flow of credit to export sector is still in adequate.

• The smart rise of over 21 per cent in exports of engineering goods at $5.4 billion in June has come about

on the back of fast improving situation in the US economy, said EEPC India in a statement on the trade

data.

• “We are getting good number of orders from the U.S. so much so that our domestic manufacturing

infrastructure is not able to support the same.

• The problems like power outages in several states and raw material shortages along with issues of skilled

labour are coming in the way”, said EEPC India Chairman.

MEASURES TAKEN BY THE GOVERNMENT TO ADDRESS INFLATION

• The central government has taken the following steps to address food inflation: Import duty on wheat,

onion and pulses has been reduced to zero. The Minimum Export Price of onions was raised from USD

300 per tonne to USD 500 per tonne. Export of edible oils and pulses, with a few exceptions, has been

banned.

• In addition, the government has imposed stockholding limits on onions and potatoes under the Essential

Commodities Act, 1955.

• The government has approved the release of an additional 50 lakh tonnes of rice for Below Poverty Line

families and Above Poverty Line families from July 2014 to March 2015, or until the passing of the

National Food Security Act by the respective state/UT governments.

• The government intends to amend the Essential Commodities Act, 1955 and the Prevention of Black

Marketing and Maintenance of Supplies of Essential Commodities Act, 1980 to make hoarding a non-

bailable offence and to increase the limit of detention period.

POLICY GUIDELINES BY RBI

RBI MOVE WILL GIVE BOOST TO AFFORDABLE HOUSING SEGMENT

• The announcement by the Reserve Bank of India (RBI) clarifying issues regarding ‘affordable housing’ has

been welcomed by the real estate sector.

• Accordingly, home loans up to Rs.50 lakh in metros and Rs.40 lakh in non-metros given by banks from the

proceeds of long-term bonds of up to seven years maturity qualify as ‘affordable housing’ loans.

• It was also clarified that to qualify as affordable housing, the unit price could not exceed Rs.65 lakh in

metros and Rs.50 lakh in non-metros.

ANALYSIS

• It is expected that clubbing affordable housing with infrastructure and allowing priority sector lending will

allow the sector to finally access cheaper funding.

• “Allowing banks to raise long-term funds at cheaper rates, including through ECB, will help developers and

government agencies involved in affordable housing projects to increase the supply of housing and reduce

the demand-supply gap,”

• End-users will also benefit since the mortgage rates are expected to reduce for affordable units as costs

reduce for banks

• Developers are expected to launch smaller units to keep the overall ticket price within the parameters set

by the RBI.

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DEBT SUSTAINABILITY AT THE STATE LEVEL IN INDIA

• ISSUE – widening liabilities of state governments

• ‘’State governments will have to keep their primary expenditure under control in order to avoid their

increasing dependence on borrowed funds,’’ the RBI paper said.

• The debt position of some States continues to show signs of fiscal stress and increasing debt burden.

• The recent slowdown in growth momentum, which is likely to affect the revenue-raising capacity of the

state governments, may lead to further deterioration in debt position of these states.

• Stating this, a working paper of the Reserve Bank of India titled “Debt sustainability at the State level in

India’’ sounded a warning that the contingent liabilities, primarily in the form of issuance of guarantees by

the state governments, remained an area of concern. `

• The strong presence of contingent liabilities calls for a holistic assessment of debt position of states by

reckoning their off-budget fiscal position, including the impact of operations of state public sector

enterprises,’’ it said.

• Going forward, there could be downside risks in case the slowdown in growth momentum observed during

the last two years persisted, with its likely adverse implications for the revenue-raising capacity of the state

governments. Hence, the state governments “will have to keep their primary expenditure under control in

order to avoid their increasing dependence on borrowed funds,’’ the RBI paper said.

BACKGROUND

• The debt position of state governments deteriorated sharply between 1997-98 and 2003-04. It witnessed a

significant improvement from 2004-05 onwards, however. ``This has been attributed, among others, to the

implementation of fiscal rules through the enactment of Fiscal Responsibility and Budget Management

(FRBM) Acts/Fiscal Responsibility Legislations (FRLs) at the state level in early 2000s,’’ the paper said.

• Karnataka was the first to enact its FRBM Act in September 2002, followed by Kerala (2003), Tamil Nadu

(2003) and Punjab (2003). Other states also adopted these legislations to avail themselves of the benefits

under the incentive scheme recommended by the 12th Finance Commission.

• The adherence to these legislation was also supported by the implementation of Debt Swap Scheme (DSS)

from 2002-03 to 2004-05 and Debt Consolidation and Relief Facility (DCRF) from 2005-06 to 2009-10. These

two debt restructuring schemes provided debt relief through debt consolidation, and reduced the interest

burden on the states.

• In addition, a turnaround in interest rate cycle also contributed to a gradual reduction in effective interest

rates and debt servicing costs during this period. These developments were mirrored in lower debt-GDP

ratio at 26.6 per cent in end-March 2008, before declining further to 21.7 per cent in end-March 2013.

• However, at a disaggregated level, the debt-GSDP ratio was higher than 30 per cent level in Punjab, Uttar

Pradesh and West Bengal, while it exceeded 25 per cent level in Goa and Kerala. Odisha recorded a

remarkable improvement in its debt-GSDP ratio during the period 2004-05 to 2012-13.

• A disaggregated state-wise position in respect of various debt sustainability indicators for 17 non-special

category states revealed that most of the states had met two of the debt sustainability conditions during

(2004-05 to 2012-13).

• For instance, during this period, the rate of growth of public debt was lower than the growth rate of

nominal GSDP for all the states except Jharkhand.

• Similarly, the rate of growth of GSDP was higher than the effective interest rate in all the states.

• However, the third condition, i.e., the rate of growth of public debt should be lower than effective interest

rate, was met by only two states, viz., Bihar and Odisha.

CAPTIVE MARKETS

• From 1988-89 onwards, the weighted average yield on state government securities had been marginally

higher than that on the Central government securities. Before this period, these loans were intermediated

by the Central government.

• The ownership pattern of state government securities indicates a pre-dominance of commercial banks,

although their share in total outstanding state government securities has declined steadily from 78.5 per

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cent in end-March 1991 to 61.9 per cent in end-March 2000 and further to 51.1 per cent in end-March

2012.

• The share of insurance companies has, however, increased significantly during the same period. This is

indicative of captive market for state government securities and preference of long-term investors for these

securities due to higher yield vis-a-vis that on the Central government securities.

• There was evidence of a captive market for state government securities and long-term investors for these

securities due to their higher yield.

• This suggested that the investors perceived their investment in state government securities to be credit-risk

free. ``The state-specific fiscal performance- related risk factors are presumably not being factored in by the

investors.

RBI WORKING ON BANKRUPTCY EXIT SYSTEM

• In the absence of a good bankruptcy code in India, Reserve Bank is working on a system to enable

entrepreneurs seeking to exit insolvent business, a top official of the apex bank said.

• The official said that they have been thinking of creating a system so that people should voluntarily

withdraw from an unattractive business.

• Acknowledging the need for a good bankruptcy system in India, He further said that RBI has started

working on an enabling system for banks that will help those entrepreneurs seeking an honourable exit

from unattractive ventures, i.e. a voluntary withdrawal.

• While there is a talk of providing legal provision in the Companies Act in this regard, but the RBI would

like to work on examining the regulatory framework for the voluntary withdrawal by the entrepreneur,

he added.

Bad Loans

• Pointing to the problem of bad loans, he said, it is a known fact that the problem of stressed asset is

there. And particularly in the cases of public sector banks, the problem is more worrisome, though

private sector lenders have fared much better.

• “Reserve Bank has now provided a system of incentives and disincentives for following rules of the game

for Corporate Debt Restructuring (CDRs).”

• The problem of stressed assets earlier was in traditional sectors such as iron and steel, fertilisers etc. but

of late it is in infrastructure, he said.

• To identify stressed assets, RBI has established a Credit Central Repository of Information. It ensures

that if a large borrower defaults with one bank, the information about the same is passed on to the

other banks on quarterly basis, he said.

EXPERT GROUP ON POVERTY ESTIMATION – RANGARAJAN PANEL REPORT

• As per the Rangarajan panel’s estimates, three out of 10 in India would be poor. However, this

committee has considered an alternate view in estimating the poverty line by reference to the ability of

households to save.

• Consumption expenditure is the main criteria in the measurement of poverty line by Rangarajan

Committee. Any household failing to meet this level of consumption expenditure can be treated as a

poor household.

Basis of Poverty Line/Methodology:

The poverty line should be based on-

1. Food component

2. the normative level of expenditure for essential non-food items such as education, clothing, conveyance

and house rent,

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3. and behaviourally determined expenditure for other non-food items

Food expenses: Rangarajan Committee computed the average requirements of calories, proteins and fats based

on ICMR norms differentiated by age, gender and activity for all-India rural and urban regions to derive the

normative levels of nourishment.

These requirements were seen in conjunction with the emphasis on the policies and programmes for child-

nutrition support and on public provisioning of a range of public goods and services aimed at the amelioration of

the disease-environment facing the population.

Accordingly, energy requirement per person per day comes out as:

Rural areas Urban areas

Calories 2155 kcal (± 10%) 2090 kcal (± 10%)

Proteins 48 gm 50 gm

Fats 28 gm 26 gm

Based on this, for 25-30 % in rural areas and 15-20% in urban areas, the energy requirement is fulfilled (2011-

2012).

Non-food expenses: Rangarajan Committee considers the following to enlist non-food expenses:

(i) to be (at least minimally) educated

(ii) to escape avoidable diseases

(iii) to be adequately sheltered.

Accordingly, clothing expenses, rent, conveyance and education expenses are included in Non-food expenses.

Plus, it also considers the expenses on Non-food items that meet nutritional requirements.

After considering food and non-food expenses, the poverty line estimates come to be:

Consumption expenditure Rural areas (2011-12) Urban areas (2011-12)

Per capita per day Rs. 32 Rs. 47

Per capita per month Rs. 972 Rs. 1407

For a family of 5 per month Rs. 4860 Rs. 7035

• A panel headed by former PMEAC Chairman C. Rangarajan has dismissed the Tendulkar Committee

report on estimating poverty and said that the number of poor in India was much higher in 2011-12 at

29.5 per cent of the population, which means that three out of 10 persons are poor.

• The Rangarajan Committee was set up last year to

review the Tendulkar Committee methodology for

estimating poverty and clear the ambiguity over

the number of poor in the country.

• As per the Rangarajan panel estimates, poverty

stood at 38.2 per cent in 2009-10 and slid to 29.5

per cent in 2011-12.

• This is at variance with the Tendulkar methodology

under which poverty was estimated at 29.8 per

cent in 2009-10 and declined to 21.9 per cent in

2011-12.

• The Planning Commission’s estimates based on

Tendulkar Committee had drawn flak in

September 2011, when in an affidavit to the Supreme Court it was stated that households with per

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capita consumption of more than Rs. 33 in urban areas and Rs. 27 in rural areas would not be treated as

poor.

• As per Rangarajan panel estimates, a person spending less than Rs. 1,407 a month (Rs. 47/day) would be

considered poor in cities, as against the Tendulkar Committee’s suggestion of Rs. 1,000 a month (Rs.

33/day).

• In absolute terms, the number of poor in India stood at 36.3 crore in 2011-12, down from 45.4 crore in

2009-10, according to the panel.

ANALYSIS

• The current line is in consonance with the Global standards. “The World Bank also talks about purchasing

power parity terms. The minimum expenditure per day. They are talking about about USD 2 per day

whereas our estimates comes to USD 2.4. Therefore it (our poverty estimates) is in keeping with the

international standards“.

• Further, currently the benefits are not being provided on the basis of any poverty line as in the case of

food security law which would benefit 67 per cent of the population.

• Mr. Rangrajan believes that it is measure of poverty and measure of understanding how economy is

moving. But apart from it there is no immediate policy implication.

• He urged the people to look at the poverty line in terms of a household’s consumption expenditure per

month which is estimated at Rs 4,860 in villages and Rs 7,035 for cities for a family of five people.

• Apart from the private consumption expenditure, people also benefit from public expenditure on health,

education and other facilities, he said, adding: “poverty line is at appropriate level“.

CENTRE PLANNING ‘REVERSE’ SEZS ABROAD FOR CHEAPER CHEMICALS

• The government has proposed to set up reverse special economic zones (SEZs) in Iran and

Myanmar, from where Indian chemical industry can source its materials in a cost-effective manner.

• “We are writing to the ministry of external affairs soon and will be taking up the matter with the

respective governments to establish reverse SEZs which will prove to be a win-win situation,” Union

minister for chemicals & fertilisers said.

• The proposed reverse SEZs involve setting up industries in places where feedstock is available rather

than importing it to India.

• Kumar said the government has set up specially delineated investment regions in the form of PCPIRs

(petroleum, chemicals & petrochemicals investment regions) at Dahej, Gujarat, Visakhapatnam and

Kakinada in Andhra Pradesh, Paradip in Orissa and Cuddalore and Nagapattinam in Tamil Nadu.

• Steering committees are being formed to accelerate the implementation, he said while launching the

India Chem 2014 event.

• The minister also called upon the industry leaders to focus on exporting finished products and specialty

chemicals, moving away from the present composition of commodities and building blocks.

• He said the government will take decisions purely based on national interest. “While a fair margin of

profit is understandable, the projects proposed should also benefit the society and the nation at large by

way of generating employment, reducing pollution and contributing to the growth of the economy,” he

said.

• Kumar also said that government will take steps and may provide incentives in the forthcoming budget

to boost the chemical and petrochemicals industry.

GOVERNMENT TO SET UP 16 NIMZS TO BOOST MANUFACTURING

• The government has announced setting up of 16 national investment and manufacturing zones

(NIMZs) to boost economic growth.

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• Under the National Manufacturing Policy, the government has proposed setting up of NIMZs. The policy

aims at enhancing the share of manufacturing in GDP to 25 per cent within a decade and creating 100

million jobs.

• “In order to boost the manufacturing sector, the government has already announced setting up of 16

NIMZs,” the Economic Survey 2013-14, tabled in the Parliament, day said.

• Of 16 NIMZs, eight are along the Delhi-Mumbai Industrial Corridor (DMIC). Besides, eight other zones

have been given in-principle approval. They are proposed to come up in Nagpur, Chittoor, Medak,

Tumkur, Kolar, Bidar and Gulbarga.

• NIMZs are conceptualised as integrated industrial townships of at least 50 sq km (5,000 hectares) with

world class infrastructure. Besides it will have land use on the basis of zoning, clean and energy efficient

technology and necessary social infrastructure.

• Of 16 NIMZs, eight are along the Delhi-Mumbai Industrial Corridor (DMIC)

• The DMIC project, which is being developed with the help of Japan, would cover Uttar Pradesh, Haryana,

Rajasthan, Madhya Pradesh, Gujarat, and Maharashtra along the Western Dedicated Freight Corridor of

the Railways.

• “Land acquisition for the new industrial regions/areas as well as for the early bird projects identified for

development as model initiatives is in different stages of progress in different states.

• “The DMIC Trust has taken investment decisions on nine projects and action to implement them has

already been initiated by the DMICDC,” it said.

• On the lines of DMIC, the government has also proposed setting up Chennai—Bengaluru—Chitradurga

industrial corridor (CBIC), Bengaluru-Mumbai Economic corridor (BMEC) and Amritsar—Kolkata

Industrial Corridor (AKIC).

• Further, the survey said that to push the share of manufacturing in the overall GDP, there is a need to

capture the global market in sectors showing a rising trend in demand.

GOVERNMENT TO TAKE EFFECTIVE STEPS TO REVIVE SEZS

• Expressing commitment to revive special economic zones, the government on Thursday said it would

take “effective steps” to make them instruments of industrial production, economic growth, export

promotion and employment generation.

• “For achieving this, effective steps would be undertaken to operationalise the SEZs, to revive the

investors’ interest to develop better infrastructure and to effectively and efficiently use the available

unutilised land,” he said.

BACKGROUND

• Of the total 47,803 hectares of SEZ land notified, only 17,689 has been put to use so far, according to

ministry of commerce and industry data.

• SEZs contribute about one-third to the country’s total exports. They provide employment to about 15

lakh people.

• The Commerce Ministry is struggling to increase exports as the country’s shipments in the last three

years have been hovering around $300 billion. Of 566 formally approved SEZs, only 185 are in operation.

• Exports from these zones increased from Rs. 22,840 crore in 2005-06 to Rs. 4.94 lakh crore in 2013-14.

ANALYSIS

• Once major export and manufacturing hubs, SEZs started losing sheen after the imposition of Minimum

Alternate Tax (MAT) and Dividend Distribution Tax (DDT) in 2011 on them.

• Industry had asked the government to roll back the MAT on SEZs. They had said that the levy has

suppressed the potential of these zones as a tool to promote exports and generate employment.

• In 2011, government had imposed 18.5 per cent MAT on book profits of special economic zone

developers and units.

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• Although government last year announced an incentive package to revive these zones, several

developers have surrendered their projects as imposition of taxes has eliminated the incentives for

setting up SEZs and units in those zones.

CHANGE IN LABOUR LAWS GETS CABINET NOD

• Cabinet approves changes in three labour laws. According to news reports, the Cabinet approved

changes in three labour laws on July 30, 2014.

• These laws are: (a) the Factories Act, 1948, (b) the Apprentices Act, 1961, and (c) the Labour Laws

(Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988.

Key proposed amendments include:

• Factories Act Amendment: The 54 amendments cleared in the Factories Act include increasing the limit

of overtime for workers from 50 hours per quarter to 100 hours per quarter, improving safety of workers

and lifting relaxations on night shifts by women in factories. The changes also aim to prohibit pregnant

women and persons with disabilities from being assigned to machinery-in-motion and reducing the

eligibility for entitlement of annual leave-with-wages to 90 days from the current 240 days.

• More importantly, shifting the focus from the states, the Centre would now be empowered to make

rules on some of the provisions of the Act.

• Apprenticeship Act: Amendments to the Apprenticeship Act are expected to help Prime Minister

Narendra Modi fulfill his vision of implementing “Skill India” as 500 new trades, including IT-enabled

services, would be included in the scheme, allowing more employers to participate in training and

employment of such workers. Draconian provision that called for arrest and imprisonment of employers

who did not implement the Apprenticeship Act will now be dropped.

• Amendments to the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by

Certain Establishments) Act will exempt firms employing up to 40 workers from complying with labour

law regulations. These firms will now also be allowed to file a combined compliance report for 16 labour

laws, up from the current nine.

ANALYSIS

• Some of the problems with the amendments:

• Instead of suggesting that in globalised India, where workers ought to work for eight hours as per the

international norm, they suggest that Section 56 be amended to increase the working day to spreadover

10/ hours to 12 hours; that under Section 65(2), compulsory overtime be increased from 50 hours per

quarter to 100 hours, and that under Section 66, women not be allowed to work after 7 p.m., unless a

specific notification is issued qua a particular factory that is capable of demonstrating that it has facilities

in place to guarantee the safety of women workers. Thus, instead of statutorily making it the norm that

men and women work equal hours, women have been penalized

• Any person up to the age of 18 is a child under the Juvenile Justice Act. Under the Factories Act,

however, the ceiling continues at the obsolete level of 14 years. Moreover, the parents will be punished,

not the employer.

• The exclusion of contract workers, who now cover 75 per cent of the workforce, from the minimum

wages enforcement seems destined to continue. The failure of the Act to effectively cover home-based

and other forms of unorganised labour will also continue.

• Labourers demand the introduction of a ‘secret ballot’ for determination of trade union recognition. It is

unfortunate that even decades after independence, this simple democratic right remains elusive in the

amendment.

• They also demand that their right to go to court should not be restricted by the requirement that they

take permission from the government under Section 10 of the Industrial Disputes Act. Seeking such

permission delays litigation by years.

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DIRECT TAX COLLECTION UP

• Reasonable tax rates lead to voluntary compliance in paying taxes and government has means like

search and seizure to make people pay their dues, the Lok Sabha was informed .

• Finance Minister Arun Jaitley said while direct tax collections last year were over Rs. 6 lakh crore, this

year government plans to collect Rs. 7.36 lakh crore.

• Responding to a supplementary, he said a reasonable tax rate helps increase voluntary compliance

whereby people pay their taxes.

• But to ensure there is no evasion, government uses means like search and seizure to make people

comply.

• In the last three Financial Years, direct tax collections of the government have been increasing with

annual growth rates of 10.76 per cent, 13.10 per cent and 14.29 per cent.

• He also said direct tax to GDP ratio has been showing rising trend and the same has been 5.48 per cent,

5.52 per cent and 5.62 per cent for the three financial years of 2011-12, 2012-13 and 2013-14.

• He said both legislative and administrative measures are taken from time to time to combat tax evasion.

REIT (REAL ESTATE INVESTMENT TRUSTS)

• The Union Budget for 2014-15 has done a good turn for the languishing real estate sector that is

grappling with unsold inventory of finished projects and mounting debt.

• There are two proposals worthy of mention that will give a much-needed leg-up to the critical sector.

• First, Finance Minister Arun Jaitley increased the tax deduction for interest paid on housing loans by

individuals in self-occupied properties from the current Rs.1,50,000 to Rs.2,00,000 a year.

• This will lower the burden just that bit for middle-class tax payers with ongoing housing loan EMIs, and

also hopefully push those considering investing in a house into making that decision.

• With interest rates likely to trend down over the next year and real estate prices at a low ebb in most

cities, the higher deduction will be an important incentive for aspiring home-buyers.

• More interesting than this concession though is the clarity that the Budget brings to taxation of real

estate investment trusts, or REITS, which are akin to mutual funds in the stock market.

BACKGROUND

• REITS sell units to investors and use the money to invest in completed or almost-completed projects,

mainly commercial and retail, to earn rental income.

• This income is then distributed to unit-holders, and the units are listed and traded on the stock markets

like any other equity share.

ANALYSIS

• Mr. Jaitley has clarified that these units will be taxed in a manner similar to equity shares; more

importantly, he has granted pass-through status to REITS, which means they don’t have to pay corporate

tax.

• The Budget also clarifies that the sponsor (promoter) will be liable for capital gains tax not when he

exchanges his shares in the project for units from a trust but when he sells those units.

• These proposals are in line with market expectations and will certainly give a push to REITS, which are

important in more ways than one.

BENEFITS

• In the immediate term, REITS could help unlock for promoters capital invested in finished but idle

projects.

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• In the medium to long term, these trusts will help capital formation in the real estate business and

relieve the financing burden on banks, which are now stressed with non-performing real estate loans,

among others.

• REITS will also help domestic investors who cannot invest large sums of money but wish to have real

estate in their portfolio as they can invest in units that are expected to be priced as low as Rs.1,00,000 to

start with, going by draft guidelines of market regulator SEBI;

• The guidelines will be finalised once the Budget is passed by Parliament. Most important of all, the

advent of REITS will usher in global best practices into an industry that is in dire need of transparency in

its business practices.

BSE FORMS ADVISORY GROUP ON REITS

• The Bombay Stock Exchange (BSE) has launched an advisory group on REITs (real estate investment

trusts), which are aimed at attracting long-term funds to the cash-strapped realty sector from both

foreign as well as domestic investors.

• Finance Minister Arun Jaitley while presenting the budget last Thursday had announced tax incentives

like exemption from long-term capital gains tax to popularise REITs, which could be listed on the bourses

like company shares and allow retail and institutional investors to buy or sell those securities.

• “To orderly help develop the REITs and to make it popular among investing public, the exchange has

decided to make an 11-member advisory group of experts from real estate, securities market

participants like merchant bankers, legal professionals and consultants in real estate and will advise the

exchange relating the newly proposed framework on REITs,” BSE said in a statement.

• According to the realty industry players, REITs can attract a whopping USD 10 billion foreign funds into

the sector.

REVITALISING MSME – A ROADMAP

• This year’s budget has announced specific steps that provide a positive direction to the micro, small and

medium enterprises (MSME) sector for growth.

Steps that need to be taken

• One such long-overdue step is the announcement of revision of the existing definition. The threshold

limits of defining MSMEs were set way back in 2006 and, while global MSMEs are a lot larger than Indian

MSMEs, the definition makes it difficult to create linkages between MSMEs in India and the MSMEs

worldwide.

o Further, the present definition is based on investment in plant and machinery for the

manufacturing sector and investment in equipment for the service sector.

o Inflation has increased the cost of investment under both categories, and this strengthens the

case to expeditiously review the definition based on investment criteria.

o It would, therefore, be desirable to take into account turnover or employment or a combination

of both with an increase in investment threshold in the revised definition.

• Second, the budget has announced an investment allowance at 15 per cent for three years to

manufacturing companies that invest more than Rs.25 crore in plant and machinery.

o It would be more practical to make it cumulative for MSMEs for making an investment of Rs.25

crore within three years instead of one year.

o That way many more MSMEs would be able to meet the criteria and avail themselves of this

allowance.

• Third, access to finance remains a challenge for MSMEs.

o Setting up a committee to examine the financial architecture of MSMEs is welcome; however,

what is required is concrete recommendations for faster availability of credit at low cost.

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o For example, the committee could look at introducing rebated income tax for small start-up

businesses. Tax benefits could be further defined for a specified rebate proportion and specific

period to give the requisite impetus to the sector.

• Fourth, issues related to service tax for MSMEs are yet to be resolved.

o For instance, an increase in the threshold limit for levy of service tax is desirable. The limit could

be doubled to Rs.20 lakh.

o Besides, micro and small sectors could be exempted from the purview of service tax for rental

for their office/factory/warehouse premises for their own use. This would give relief to the

MSMEs and shore up their balance-sheets.

• Fifth, entrepreneurship has received a fillip in the budget with the setting up of the start-up fund of

Rs.200 crore for SC/ST and Rs.10,000 crore fund for equity and soft loans for SMEs as well as incubation

programme that would boost entrepreneurship. However, how exactly the fund would be modelled

needs to be seen and the criterion for disbursement needs to be set at the earliest.

• Sixth, the proposed entrepreneurship-friendly Bankruptcy Law is a much needed breather for the

industry, and will facilitate easy exit for loss-making units.

o The MSME Act, 2006 (Chapter VI Section 25), proposed to implement the exit policy for MSMEs

within a year’s time from the enactment of the Act.

o As a follow-up measure, the context was taken into consideration by the then Prime Minister’s

Task Force in 2010, which had proposed short-term and long-term measures to formulate the

exit policy for the MSMEs.

o Execution of a time-bound policy to allow MSMEs to exit would help them consolidate their

businesses and deploy scarce capital in other greenfield ventures.

• Seventh, start-up entrepreneurial ventures need early stage investments from angel investors and often

this is a stage when there is only an idea or just a business plan before venture capitalists comes in.

o Section 56, by taxing such investments, is preventing start-ups from getting funding and

encourages them to migrate abroad.

o It is further discriminatory as foreign investors are exempt.

o We suggest an exemption for investments below a certain threshold, say Rs.10 crore, in a

company in a financial year, by investors who are part of any recognised angel group such as NSE

and SEBI. This will help generate a dynamic entrepreneurial ecosystem.

• Eighth, adoption of latest technology is a challenge and an opportunity for the MSMEs.

o The sum of Rs.100 crore allocated to development of Technology Development Fund scheme

would certainly contribute to technology adoption by MSMEs.

o However, effective implementation would depend on scale and speed of integration of

departments and ministries at the Centre as well as State levels through e-platform.

o The framework for the fund needs to be specified in detail and it is equally important to

facilitate technology adoption that will enable MSMEs to align better with the global value chain

though similar e-platforms.

• Finally, the focus on SME development in the Northeast and Jammu & Kashmir, as announced in the

budget, will lead to balanced regional development, especially through better rail connectivity in the

Northeast.

DIFFERENTIATED BANKS – AN ANALYSIS

• The Reserve Bank of India on July 17 released two separate draft guidelines for licensing of two new

categories of banks — Payment Banks and Small Banks.

BACKGROUND

• Both Payments Banks and Small Banks are ‘niche’ or ‘differentiated’ banks with the common objective

of furthering financial inclusion.

• Small banks will provide a whole range of banking products — deposits and loans — but in a limited area

of operation.

• Payments Banks will provide a limited range of products such as acceptance of demand deposits and

remittances of funds, but will have a wide network of access points particularly in remote areas.

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• It is expected that they will supplement their own network with business correspondents and even

depend on network provided by others. Technology will be extensively used to add value.

IMPETUS TO LICENSE

• The impetus to licence ‘niche banks’ arises out of the need to spread financial inclusion in the country.

• It is estimated that almost 40 per cent of the population do not have access to any form of formal

banking. Spreading the banking habit, accompanied by financial literacy, is a priority.

• Launch of these niche banks is an important milestone in the journey towards inclusion. That anyway is

the hope.

• In January, the Nachiket Mor Committee mooted the idea of these differentiated banks as a means to

further inclusion. It laid down an ambitious road map for attaining specific goals of inclusion. The RBI

draft is partly derived from the committee’s recommendations.

• Viewed in another way, licensing these differentiated banks is a logical follow up of the licensing policy

for new private banks announced in 2013. Two applicants made the grade and the RBI decided to licence

banks at more frequent intervals. It is in that context that the idea of differentiated banks was mooted.

The latest budget has carried the idea forward.

COMMON FEATURES

• For both categories — Payments Banks and Small banks — the draft guidelines have some common

features. The minimum paid-up capital is Rs.100 crore.

• Promoters’ initial contribution will be at least 40 per cent to be locked in for five years. The draft

guidelines have prescribed a timeframe to bring down the promoters’ stake to 40 per cent within three

years, 30 per cent within 10 years and to 26 per cent within 12 years from the date of commencement of

the bank.

• Obviously, the promoters of these banks will be ‘fit and proper’ and have a successful track record of at

least five years in running their businesses.

• Days after the guidelines were announced, the main point of interest has been on who would be the first

to start these banks. According to the draft guidelines, entities eligible to start Payments Banks include

non-bank prepaid instrument issuers, non-banking finance companies, corporate business

correspondents, mobile telephone companies, supermarket chains and co-operatives.

• Those eligible to start Small Banks include individuals with ten years of experience in banking and

finance societies, NBFCs, microfinance institutions and local area banks.

CHALLENGES AHEAD

• There can be no two opinions on the value of these differentiated banks to the Indian financial system.

But the key question is how many serious promoters will finally emerge?

• The business model of Payments Banks may not be attractive enough. These banks can accept current

and savings bank deposits but cannot undertake lending activities.

• After meeting the reserve requirements (CRR and SLR) like any commercial bank, they will have to invest

in government securities. The returns in terms of the spread income may not be attractive enough.

• Although the guidelines do not say so, Payments Banks resemble ‘narrow’ banks entities, which were

required to park their incremental deposits only in government securities

• Small Banks have an uncanny resemblance to the local area banks, which were launched with much

fanfare in 1996. There were very few applicants in the first place, and by 2003, the RBI decided not to

issue fresh local area bank licences.

CONCLUSION

• Admittedly, what the RBI is thinking of are an entirely different breed of banks — with higher capital and

greater access to technology.

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SOCIAL ISSUES

INDIA 135 ON HDI: UNHDR

• According to the UN Human Development Report 2014, India ranks 135 on a list of 186 countries.

INDIA FAR BEHIND NEIGHBOURS ON KEY HEALTH INDICATORS

• Since 1990s countries like Nepal and Bangladesh have improved their human development indicators at a

faster pace than India.

• India has fallen behind most of its immediate neighbors on key health and quality of life indicators

• For example, in 1995, Bangladesh, Nepal, Bhutan and Pakistan were languishing far behind India in infant

mortality. However, by 2010, all of them except Pakistan had caught up and surpassed India’s figure of 48

deaths per 1,000 live births.

WHAT IS HDI?

• The Human Development Index is a composite index that measures income, education (average years of

education completed by adults, and expected years of education for children entering school) and health (life

expectancy). Since 1990, the UNDP has calculated an HDI for every country in the world and ranked them.

INDIA IS FAR BEHIND EVEN ON GENDER INEQUALITY

• The report also introduces a measure of gender development and, depressingly, it is not difficult to anticipate

India’s lowly place on the index, 127 on a list of 148 countries

• When inequality is factored in, India loses nearly 30% of its HDI value. India’s human development indicators

are also substantially different for men and women; the HDI for men alone is much higher at 0.627, while the

HDI for Indian women alone is just 0.519

• The gulf between workforce participation of men and women is one of the widest in India among the seven

countries of SARC.

ANALYSIS

• What the human development reports show in essence is India’s failure to properly utilize the wealth created

by its expanding economy, which doubled twice in the last two decades

• The report is a reminder that we need a progressive discourse that interrogates the state and compels it into

action more effectively.

WOMEN RELATED

MOST RAPE VICTIMS KNEW THE CULPRITS

• As per latest data released by NCRB, in almost 95 out of every 100 cases of rape registered last year, the

culprits were known to their victims

• A total of 33,707 cases of rape were registered under Section 376 of the IPC in the year and in 31,807 cases

(94.4 per cent) the culprits were known to their victims.

• While in 33.9 per cent of cases, the accused were neighbours, in 7.3 per cent of cases, the accused were

related to their victims.

• According to the report, the cases of “incest rapes” too are on rise with 536 cases being registered in 2013

compared to 392 in 2012. Shockingly, most of the victims are in the age group of 10-18 years

ANALYSIS

• Easy availability of sexually explicit literature and audio-video, especially through the internet and social

media, is fanning the suppressed sexual urge of men in society.

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• This urge for immediate gratification of sex continuously sends signals to one’s mind and [as a result] that

person does not hesitate in breaching the trust of the woman concerned,

• This situation cannot be dealt with merely by enacting laws. Society has to take strong initiatives to deal with

this situation

KEEPING GIRLS IN SCHOOL CUTS CHILD, MATERNAL MORTALITY

• As per WHO if all women were to complete primary education in the low- and middle-income countries,

there would be a 50 per cent drop in mortality of children aged under five years.

• According to a 2013 UNFPA report, globally, India has the largest number (95 million) of adolescent girls aged

10-17 years.

• And not surprisingly, in 2010, India had the highest number — 47 per cent (about 12 million) — of adolescent

pregnancies in the world. Globally, child marriage is an important driver of early pregnancies; about 90 per

cent of such pregnancies occur within marriage.

• Child marriage in India had all the well-documented problems — no contraceptive use before first childbirth,

high fertility (three or more births) a repeat childbirth in less than two years, multiple unwanted pregnancies,

and abortion.

• Having a baby much earlier in life combined with multiple pregnancies within a short span of time

exponentially increases the risk of child death

• There is a 50 per cent likelihood of stillbirth and death in the first week of life in babies born to mothers

younger than 20 years than in those aged 20-29 years.

• There is also about 20 per cent risk of maternal mortality in adolescent mothers. According to the WHO, 14

per cent (2.5 million) of all unsafe abortions in low- and middle-income countries are among mothers aged

15-19 years.

WHAT NEEDS TO BE DONE?

• A multi-pronged approach is needed to reduce the number of teenage pregnancies.

• First, increasing school enrolment even while reducing the dropout rate.

• Second, improving the quality of education.

• Third, providing girls with the much needed sex and reproductive education.

• Fourth, providing access to child-friendly health services.

• Finally, reducing the prevalence of child marriage.

DISABILITY RELATED

RUPEE NOTES AND COINS TO BE MADE MORE ACCESSIBLE FOR THE BLIND

• Finance Minister has promised in his maiden budget to make rupee notes and coins more accessible for the

blind

• This move echoes a broad commitment to correct long-standing disadvantages that arise out of physical

disabilities.

• This idea could be an outstanding example of the practical application of the concept of universal design

PROBLEMS WITH CURRENCY NOTES AND COINS

• The blind in India identify paper currency partially, as denominations-wise they come in different sizes — the

greater the value of a bank note, the larger the size.

• One cannot eliminate altogether the element of chance in identifying a rupee bill without an improvised

device.

• There are also other indicators on bank notes — various shapes displayed in raised print — to represent

particular denominations. These can be felt by touch only on new bank notes. But it can still be hard to

decipher the values they connote.

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• Similarly, there are in circulation today coins of the same denomination in different sizes (two rupees), as also

coins of different denominations in the same size (50 paise and one rupee). Besides, there are three types of

five-rupee coins, all of which can cause confusion to the blind.

• Wavy edges and hexagonal shapes were present in coins that have been withdrawn..

WAY AHEAD FOR THE RBI AND OTHER MINISTRIES

• There have been major Reserve Bank of India initiatives to promote equal access to banking for the disabled.

The installation of voice-activated features on all automated teller machines and the extension of

chequebook and locker facilities for the blind are some of them.

• India’s central bank further requires retail banks to recognise authorised guardians to enable people with

cerebral palsy and autism to operate their personal accounts

• The Ministries of Railways, Transport and Urban Development, and other arms of the government, should

take the cue from the Finance Minister’s proposal. A corollary to the creation of accessible currency notes

would be to design all buses and train compartments with provision for low floors and room for wheelchairs.

INDIA BECOMES THE FIRST COUNTRY IN THE WORLD TO RATIFY THE MARRAKESH

CONVENTION

• India has become the first country in the world to ratify the Marrakesh Convention that codifies exemptions

to copyrights to benefit blind and vision-impaired readers

WHAT IS MARRAKESH TREATY?

• The current treaty of the World Intellectual Property Organization removes legal restrictions on the

conversion of published works into any one among a range of alternative formats which the blind and vision-

impaired may access.

• Ratifying countries are required to enact domestic laws to overcome their own copyright limitations to

further this objective. The treaty also eases hurdles for cross-country exchange of books in different

formats so as to overcome the cost of duplication.

WHAT IMPACT IT WOULD HAVE ON INDIA?

• India amended its copyright law in 2012 broadly on the lines of the Marrakesh Treaty. Hence, the most direct

benefit from its ratification of the latter would be the access to literature that is converted overseas.

• WIPO has just launched the Accessible Books Consortium to provide technical support for the production of

suitable formats and to create a global database of such transcriptions and to encourage publishers to

participate in this initiative.

WAY AHEAD

• The full potential of this convention will be realised ultimately when large numbers of blind people have full

access to quality education, which is still a distant dream.

• The treaty will not enter into force internationally unless it is ratified by at least 20 countries. The lack of

backing from the United States from the beginning of the negotiations could prove to be a handicap in

canvassing wider support

• The government should now build on this momentum and enact the comprehensive and path-breaking law,

now before a Parliamentary Standing Committee, that could transform the lives of millions of people with

various disabilities.

SOCIAL SECTOR SPENDING IN ANNUAL BUDGET

RURAL DEVELOPMENT

• This year’s rural development budget has gone up from Rs. 61,810 crore (revised estimates for 2013-14) to

Rs. 83,696 crore, with Rs. 33,000 crore allocated to the Mahatma Gandhi National Rural Employment

Guarantee Scheme (MGNREGS) and Rs. 14,389 crore to Pradhan Mantri Gram Sadak Yojana.

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• The aim of total sanitation is expected to be achieved through Swatchh Bharat Abhiyan by 2019, the year of

150th birth anniversary of Mahatma Gandhi, at a cost of Rs 1,000 crore.

• A new Rs. 500-crore Deendayal Upadhyay Gram Jyoti Yojana will provide 24x7 power supply to rural area

DISABLED FRIENDLY SCHEMES/PROGRAMMES

• The government will extend the scheme of Assistance to Disabled Persons for the purchase and fitting of aids

and appliances (ADIP) to include contemporary aids and assistive devices.

• It proposes to establish a national-level institute for Universal Inclusive Design and Mental Health

Rehabilitation and also a Centre for Disability Sports.

• The government plans to print currency notes with Braille-like signs. Since the Braille presses in the

government and private sector are unable to meet the demand for textbooks, the government will provide

assistance to the States to establish 15 new Braille presses and modernise 10 existing Braille presses in the

current financial year.

WOMEN RELATED

• About Rs. 50 crore will be spent on pilot testing a scheme on safety for women in public road transport.

• An additional Rs. 150 crore will be spent by the Ministry of Home Affairs on a scheme to increase the safety

of women in large cities.

• Beti Bachao, Beti Padhao Yojana” will be a focussed scheme to overcome the apathy to the girl child.

HEALTHCARE

• With the aim of achieving health for all, the government proposes two key initiatives — free drug service and

free diagnostic service — to be taken up on priority, and universal access to early quality diagnosis and

treatment for TB patients.

• Two National Institutes of Ageing will be set up at AIIMS, New Delhi, and Madras Medical College, Chennai.

• There is a plan to set up four more AIIMS-like institutions in Andhra Pradesh, West Bengal, Vidarbha in

Maharashtra and Poorvanchal in U.P. for which Rs. 500 crore has been allocated.

• For the first time, the Central government will provide assistance to strengthen the States Drug Regulatory

and Food Regulatory Systems by creating new drug testing laboratories and strengthening the 31 existing

State laboratories.

• Fifteen model Rural Health Research Centres will be set up in the States, which will take up research on local

health issues concerning the rural population.

• The government proposes a national programme in mission mode to tackle malnutrition as the present

interventions are not adequate.

• A comprehensive strategy, including detailed methodology, costing, time lines and monitorable targets, will

be put in place within six months

INDIAN URBANIZATION HAPPPENING AT A RATE SLOWER THAN EXPECTED

• In 2050, India will be one of the least urbanized major countries, with Sri Lanka, Uganda, Cambodia, Nepal,

Kenya and Ethiopia for company, while China will be 76% urban

• This is contrary to the popular perception that India is rapidly urbanizing

• In 2050, the world will have 9.55 billion people and India with 1.62 billion people will be the most populous

country in the world

• India will add 400 million urban residents between now and 2050, and will account for a third of all urban

growth with China and Nigeria.

• While India has the world’s largest rural population now (857 million), the number of rural residents is

expected to decline by 52 million by 2050

• India will account for a quarter of the world’s rural population in 2050

• Delhi, the world’s 12th largest city in 1990 but its second largest city today (after Tokyo), will remain the

second largest in 2030 with a projected population of over 36 million people in the entire urban

agglomeration

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HEALTH

TAXING THE TOBACCO

• Union Finance Minister Arun Jaitley has increased the specific excise duty on cigarettes in the range of 11 to

72 per cent and by 10 per cent on chewing tobacco.

• The primary aim of this move is to discourage the consumption of tobacco in the country.

ANALYSIS

• While the revenue generated from tobacco sale will increase substantially, the primary objective of reducing

tobacco consumption may not be fully achieved.

• One of the most important shortcomings is the failure to tax bidis.

• Bidi consumption constitutes 35 to 40 per cent of total tobacco use in the country; it is far greater than the

number of cigarettes smoked.

• Bidis attract incredibly low tax — Rs.12 per 1,000 sticks and Rs.30 per 1,000 sticks for handmade and

machine-made products respectively; nearly 98 per cent of the bidis smoked are handmade. That means 52

to 70 per cent of bidis smoked in India have escaped even the meagre tax levied on them — either because

the manufacturer produces less than two million sticks a year or due to non-compliance — only accentuates

the lapse.

• 2010 study has shown that a 10 per cent hike in bidi price could cutconsumption by 9.2 per cent.

• The steep increase in the price of entry-level cigarettes without a concomitant increase in bidi prices may

result in product substitution.

• Also, an important measure that has been either ignored or overlooked is the elimination of the current

taxation system that is based on the length of the cigarette; cigarettes of different lengths are treated as

different products and attract varying specific duty. Despite the top two tiers — cigarettes of 75-85 mm and

over 85 mm lengths — being merged into a single tariff item, there still exists four tiers.

• The tax differential between the four tiers being more than substantial, there is a great possibility of smokers

shifting from longer to shorter length cigarettes; this defeats the very purpose of increasing tax to cut

consumption.

FINDINGS OF NATIONAL HEALTH PROFILE 2013

• As per the recently released National Health Profile, 2013 per capita private expenditure on health is three

to four times higher than per capita public expenditure in all major States — the exceptions being some

Northeastern States and Jammu and Kashmir.

• The expenditure on health has gone down from 4.3 per cent of the gross domestic product (GDP) in 2000 to

3.7 per cent in 2010

• Additionally, fund flow to the health sector is maximum by private funds at 71. 62 per cent as per 2008-09

estimates. Whereas, public funds had accounted only for 26.70 per cent.

PROBLEMS WITH INFANTICIDE

• Madhya Pradesh reported the maximum number of foeticide and infanticide cases, with Uttar Pradesh in the

second position followed by Maharashtra.

DEATHS DUE TO NON- COMMUNICABLE DISEASES ON AN INCREASE

• The number of cases of coronary heart disease was estimated to be nearly 3.6 crore for the year 2005, which

is expected to reach 6.1 crore by 2015.

• The number of cases of diabetes was estimated to be 3.1 crore in 2005 and expected to reach 4.6 crore in

2015.

• In 2013, there were 3,94,982 accidental deaths and 1,35,445 suicides and the maximum number of suicide

cases 46,635 was reported between the age group 15-29 years.

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EDUCATION

THIRD GENDER CHILDREN SHOULD BE INCLUDED IN SCHOOLS

• The Union Human Resource Development (HRD) Ministry has advised all States and Union Territories (UTs),

barring Jammu and Kashmir, to take appropriate action for the inclusion of “third gender’’ children among

socially and educationally backward classes for admission in educational institutions under the Sarva Shiksha

Abhiyan (SSA) to universalise elementary education.

• In a related development, the University Grants Commission has issued a circular that transgenders would be

included as third gender under the various scholarship and fellowship schemes of the Commission.

• The affirmative action provided for transgenders under the SSA is aimed at pushing up their literacy levels,

which is around 44 per cent as opposed to the national average of 74 per cent as recorded in the 2011

Census.

ANALYSIS

• These steps are is in keeping with the Supreme Court order of April 15, 2014, to treat and grant legal

recognition to the “third gender”

• According to data available, India has 4,90,000 transgenders but activists who have been fighting for their

rights maintain that many are still reluctant to declare themselves as the third gender because of the stigma

attached.

• Nevertheless this seems to be a step in the right direction, even though the government cannot stop at such

measures.

NON-GOVERNMENTAL PANEL ON EDUCATION

• The controversial teacher-turned-activist Dinanath Batra has said that he has formed a “non-governmental”

commission to “Indianise” education.

• This move is being seen as one to counter new government’s reported decision to set up a commission on

educational reforms

• The Non-Governmental Education Commission (NGEC) will have 31 members, including Mr. Batra

• As per claims the commission will introduce education models that are rooted in India’s culture.

• Some of the courses recommended under these models have already been introduced in a few universities

MARGINAL INCREASE IN SPENDING ON EDUCATION IN BUDGET

• The allocation for education has gone up only marginally: From Rs. 50,136.30 crore in the last fiscal to Rs.

55,115.10 crore in the Department of School Education and Literacy, and from Rs. 24,485 crore to Rs. 27,656

crore in Higher Education.

SOME OF THE INITIATIVES

• In Elementary Education, the priority will be to plug the gaps in ensuring minimal school infrastructure

facilities with particular focus on providing toilets and drinking water in all the girls’ schools in the first phase.

• Teacher training will get a new scheme christened after Pandit Madan Mohan Malviya with an allocation of

Rs. 500 crore and school curriculum will have a separate chapter on gender mainstreaming to sensitise

people towards the concerns of the girl child and women.

• The ongoing Madrasa Modernisation Programme of the government has got an additional Rs. 100 crore.

• The five new IITs proposed in this year’s Budget will be set up in Jammu & Kashmir, Chhattisgarh, Goa,

Andhra Pradesh and Kerala.

• The five States identified for setting up the new IIMs are Himachal Pradesh, Punjab, Bihar, Odisha and

Maharashtra.

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ENVIRONEMENT

FOREST COVER IN INDIA HAS INCREASED

• As per the Indian State of Forest Survey Report 2013, there has been an increase of 5,871 sq km of the

country’s forest area since 2011, even as moderately dense forest areas have depleted due to population

increase, grazing and encroachments.

• The total forest cover of the country is 69.79 million hectares or 21.23 per cent of the geographical area of

the country

• The tree cover is estimated to be 91,266 sq km or 9.13 million hectares, which is 2.78 per cent of the

country’s geographical area. The total forest and tree cover is estimated at 24.01 per cent, according to the

report.

• The maximum increase in forest cover is in West Bengal (3,810 sq km), followed by Odisha (1,444 sq km)

and Kerala (622 sq km) while Nagaland, Andhra Pradesh and Madhya Pradesh have lost forests due to

submergence, mining and shifting cultivation.

• The North-eastern States account for one-fourth of the country’s forest cover and there is a net decline of

627 sq km in the forest cover compared to 2011.

MANGROVE COVER

• Mangrove cover in the country has decreased by 34 sq km.

• Gujarat accounted for the largest increase in mangrove cover at 45 per cent, which is a solace considering

that vast tracts of mangroves have been cut down in that State.

ANALYSIS

• India’s National Forest Policy 1988 aims at maintaining 33 per cent of the geographical area under forest

and tree cover.

• The good news is that the country still has large patches of contiguous forests accounting for about 40 per

cent of the forest cover

• There has been a decrease in the growing stock both inside and outside forest areas and the main reason

for this is the loss of 1991 sq km of moderately dense forests. The total carbon stock in forests is estimated

to be 6,941 million tonnes and there is an increase of 278 million tonnes in the carbon stock of the country.

FIELD TRIALS ALLOWED FOR 4 GM CROPS

• The Genetic Engineering Approval Committee (GEAC) has given the green signal for field trials of genetically

modified (GM) rice, mustard, cotton, chickpea and brinjal.

• While the GEAC has approved the commercial release of Bt brinjal, it has been stayed by the Ministry of

Environment and the government would have to take a decision on this. The only GM crop approved for

release in India is cotton.

VIEWS IN FAVOUR OF FIELD TRIALS

• The panel believes that viability of GM crops will be known only if research is allowed in Indian conditions

• Most anxieties around the public health and environmental impact of GM crops, whether about pesticide-

resistant superweeds, “terminator seeds” that are designed to be sterile, or plants that contaminate their

“natural” neighbours and eradicate biodiversity, have been punctured by better research.

• GM crops hold great promise for small farmers, boosting yields and cutting pesticide costs. They have been

grown in the US, China, Brazil and many other countries, and the rising demands of food security and the

limits on land and water make it necessary to lean on science to raise yields. Even in India, farmers have

opted for Bt crops, pirating them when not available.

• The use of Bt cotton quadrupled the crop within a decade, making India a cotton-exporting country.

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WAY AHEAD

• Clearly, there can be no credible argument against scientific experiments in agriculture that advance the

goal of developing plant varieties that can withstand drought, resist pests and raise yields to feed the

growing world population.

• But this should be done through a transparent regulatory process that is free of ethical conflicts.

• Field trials in India, in which the State governments have a say, must ensure that there are sufficient

safeguards against such violations. If GM food is allowed to be sold to consumers, they must have the right

to know what they are buying, and labelling should be made mandatory.

EU MAY RESTRICT GENOME EDITING OF CROPS

• A fledgling technology to manipulate the genes of crops in order to make them less susceptible to disease

and more productive is at risk of falling foul of the European Union’s genetic modification rules

DIFFERENCE BETWEEN GENOME EDITING AND GENOME MODIFICATION

• Genome editing is different to genetic modification, because it does not usually involve transplanting genes

from one plant or species to another, but on pinpointing the genetic mutations that would occur naturally

through selective breeding. This means that, in most cases, it mimics natural actions and does not require

the wholesale transformation of genes with which GM is often associated.

• Genome editing typically involves finding the part of a plant genome that could be changed to render it less

vulnerable to disease, or resistant to certain herbicides, or increase yields or other desirable traits.

• Researchers use “molecular scissors” to break apart the genome and repair it, which is a process that occurs

naturally when plants are under attack from diseases and can throw up new mutations that enable the

plant to survive future attacks.

• As the processes mimic those of nature, but speeded up, the end result is the same as if the sort of selection

routinely practised by farmers for centuries had been used.

• Scientists believe there is huge potential for the technology because it avoids the slower, scattergun

approach of selective breeding.

VIEWS OF GREEN CAMPAIGNERS

• But Green campaigners are far from convinced with the arguments of scientists. They believe that while the

biotech sector has sought to trumpet the benefits and precision of gene editing, compared to existing GM

technology, there are many uncertainties as regards the impact of gene-edited organisms on the

environment and health.

LACK OF CLARITY ON LAWS

• Under EU laws, it is unclear whether gene editing should be treated in the same way as genetic

modification.

• GM crops are effectively banned in Europe, and licences to experiment in GM are rare and very expensive.

In some other parts of the world, most importantly the U.S., the regulations are much lighter and GM food

faces few barriers to animal and human consumption.

PLASTIC WASTE CAUSING DAMAGE TO MARINE ECOSYSTEMS

• As per a new report by the United Nations Environment Programme (UNEP) every year plastic waste costs

marine ecosystems $13 billion in damages.

• The estimated 10-20 million tonnes of plastic waste that finds its way into oceans, smothers coral reefs,

routinely entangles marine wildlife, and more insidiously, degrades into ‘microplastics’ that transfer toxins

into the food chain

• Microplastics (or plastic particles of 5mm diameter or less) are ingested by creatures ranging from sea birds

to mussels

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• The report titled ‘valuing plastics’ recommends that companies monitor plastic use, disclose their results

and increase resource efficiency and recycling.

• A growing source of microplastics is the cosmetic and personal care industry that has introduced plastic

particles of 5mm diameter or less in products such as toothpastes and showergels,

• Asia faces the highest environmental costs from plastic pollution because of the higher pollution intensity

levels of manufacturing and a lack of adequate waste management facilities.

ANALYSIS

• Companies must consider their plastic footprint just as they do their carbon footprint

• However, consumer goods companies have a poor track record of disclosing their plastic use. Of 100

companies assessed in the report, less than half reported any data relevant to plastic.

PLAN FOR NAVIGATION IN GANGA UNDER QUESTION

• Contradictory views emerged during the National Dialogue on Ganga (Ganga Manthan) with a majority of

stakeholders, including saints and NGOs, questioning the government plan for navigation and construction

of modern dams in the river basin.

• These stakeholders sought to know how the government would ensure a “continuous and uninterrupted”

(aviral and nirmal) flow of the river from Gangotri to Ganga Sagar if there are plans to build barrages and

bridges at every 100 kilometre to enable small ships to navigate.

• They also sought clarity on big dams that may come up in the river basin and development of ghats as

tourist destinations with introduction of house-boats.

• As per ‘Waterman’ Rajinder Singh there should be no new dams on the river and no new cement-concrete

constructions should be allowed on river land. River land should be identified, demarcated and notified and

banks should be forested.

NAVIGATION IDEA

• Transport Ministry has taken the decision on navigation of small ships between Varanasi and Hooghly for

which a loan had been sought from the World Bank.

• It is proposed to conduct dredging to provide a width of 45 m and 5 m draft (depth) to enable navigation of

small ships between Varanasi and Hooghly on the Ganga

248 NEW SPECIES DISCOVERED IN INDIA IN 2013

• The Zoological Survey of India has discovered 248 new animal species in different parts of the country in

2013.

• Of them, 162 are insects, 19 are arachnids, 36 are fish, five are amphibians and two are reptiles

• These rarest-of-rare species are found in small habitats and most of them are endangered

• Of the 1.4 million animal species that had been found across the world till December 2013, India, with over

96,000 finds, was home to 7 per cent,

• Among the new finds, the most interesting is a shieldtail snake, Rhinophis goweri, found in the Bodamalai

hills of Tamil Nadu.

• Of the five species of amphibians, three are found in the north-east — two in Arunachal Pradesh, one in

Meghalaya, one in the Eastern Ghats and one from Maharashtra

• The frog found in the Western Ghats in Maharashtra, Raorchestes ghatei, is a new species of shrub frog

which inhabits semi-evergreen forests and scrub patches.

CARIBBEAN HAS LOST 50% OF ITS CORAL SINCE 1970S

• As per a new report by the United Nations Environment Programme (UNEP) the Caribbean has lost at least

half its coral reefs since the 1970s

• One of the major reasons cited for the same is overfishing — in particular, the loss of parrotfish.

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• The mass die-out of another key marine grazer, the sea urchin, has also hit corals hard. A pathogen

introduced from ballast water discharged from bulk carrier ships is thought to have wiped out sea urchins in

the 1980s.

IMPORTANCE OF PARROTFISH AND URCHINS

• Large parrotfish graze down algae that can otherwise smother corals

• Marine grazers also seem to make reefs more resilient to hurricanes. For instance, the overfished reefs in

the Central Barrier in Belize declined by half after three hurricanes, while the better protected reefs in

Bermuda saw no coral loss after four hurricanes since 1984.

WORLDWIDE TREND

• Reefs around the world are indeed similarly shrinking

• The Great Barrier Reef in Australia has lost half to three-fourth of its live coral, and reefs in the East African

coast have shown great losses too.

INDIA TO PLAY A PROACTIVE ROLE ON CLIMATE CHANGE AND EVOLVE

CONSENSUS ON COP-2015

• Minister of State for Environment, Forests & Climate Change Shri Prakash Javadekar met with six member

France delegation led by Foreign Affairs and International Development Minister Mr. Laurent Fabius. During

the discussions Shri Javadekar said part of Green Climate Fund could be utilized to finance differential cost of

IPRs which would help developing countries adopt cutting-edge technologies and enable their transition into

climate resilient development

• During the discussions, Shri Javadekar assured India’s positive engagement in the climate change. He

highlighted initiatives taken by the Hon’ble Prime Minister in the State of Gujarat by setting up a separate

Department of Climate Change at the state level and other initiatives on solar and renewable energy

sources. Signifying India’s focus on Climate Change Shri Javadekar added that the new government had

changed the nomenclature of the Environment Ministry by adding “Climate change” to it. Shri Prakash

Javadekar also emphasized on the Government’s focus on poverty eradication and providing energy access

to all which would ensure Sustainable-Balanced development.

• Mr. Fabius appreciated the suggestions made by the Minister and hoped India would act as a bridge

between developed and developing countries in the series of discussions on the 2015 Agreement. The

French Minister extended an invitation to the Minister to attend forthcoming meetings in Paris (Major

Economies Forum) & Berlin (Petersburg Climate Dialogue). The two Ministers also discussed global

Environmental problems, responsibilities of Developed Countries, need for sustainable and balanced

Development, need for Poverty eradication and future road map for Climate change.

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INDIA AND WORLD

BRICS SUMMIT 2014

• The 6th annual BRICS summit was held from July 14 – July 16, 2014 in Fortaleza, Brazil.

• The meeting was attended by the head of the state of the five members – Brazil, Russia, India, China and

South Africa. Leaders from 11 countries were invited as guests for the event.

• Global political issues such as the unrest in Iraq and Ukraine and the surveillance of world leaders by the U.S.

National Security Agency found their way into the discussions at the BRICS summit along with major

economic issues, in the Fortaleza Declaration released by the leaders of the five nations on July 15, 2014.

• To that end, the sixth BRICS summit is likely to pose a bigger challenge to the West than previous summits. In

particular, BRICS countries announced the BRICS bank and contingency reserve fund as a counterpoint to the

U.S.-led World Bank and International Monetary Fund. But that is not all. Brazil also wants to set up a

challenge to currently calculated statistical indices.

• The BRICS grouping accounts for more than a quarter of the world’s land mass, 40 per cent of the world’s

population, and a combined GDP of $24 trillion at PPP.

BRICS FOR A NEW BANK

• What might have been dismissed as impossibility just five years ago is now a reality. Defying skeptics and

critics, five countries that between them account for 40 per cent of the world’s population and 20 per cent

of its GDP have signed an agreement to create a development bank to provide financial assistance to

developing countries and emerging market economies, mainly for infrastructure projects.

• As its name implies, the agreement for the New Development Bank, signed by Brazil, Russia, India, China and

South Africa at their sixth BRICS summit in Brazil, signals the start of a new global financial order that aims to

be more inclusive than the Western-focused International Monetary Fund and the World Bank.

• The $100 billion bank will have an initial subscribed capital of $50 billion. The five members managed to iron

out their differences to agree on an equal share for each in the bank, so no one member dominates the

institution. India and South Africa both wanted to host the headquarters. The eventual decision to locate it

in Shanghai was an acknowledgement that China’s is the biggest economy in the grouping.

• The Bank will also have an African Regional Centre in South Africa and India will assume the first presidency

of the bank. First mooted at the fourth BRICS summit in New Delhi in 2012, the Bank will certainly have an

impact on the existing arrangements put in place by the Breton Woods institutions, and will give more say to

smaller countries. But BRICS also appears to recognise that the NDB cannot replace the IMF, the World Bank

or the regional development banks. Thus, the Fortaleza Declaration describes the NDB as a “supplement to

the efforts of multilateral and regional financial institutions for global development.”

• A second financial instrument, the Contingency Reserve Arrangement of $100 billion, has been set up to help

developing economies tide over “short-term liquidity pressures, promote further BRICS cooperation,

strengthen the global financial safety net and complement existing international arrangements.”

• In its sixth year, BRICS has a new confidence, and it was more than apparent at the summit. The only world

grouping that is not region, security or trade-based, its members have come together with the

determination to create a more multilateral global order. China and Russia have backed the other three

BRICS members on the issue of UN reform and Security Council expansion.

PM CALLS FOR UNSC, IMF REFORM

• China’s President Xi Jinping on Tuesday invited Prime Minister Narendra Modi to visit China in November

and called for a “negotiated resolution” to the boundary dispute “at an early date” as the two leaders held

their first ever meeting in Brazil.

• In Fortaleza to attend the BRICS Summit, Mr. Modi and Mr. Xi met for 80 minutes — extending beyond the

scheduled 40 minutes — in what was described by officials as a substantive and frank discussion.

• Mr. Xi said he was looking forward to his September visit to India, and also welcomed Mr. Modi to visit China

in November when Beijing will host the APEC leaders’ meeting. It is possible that Mr. Modi may visit Beijing

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in December. The Chinese President said he was willing to work with Mr. Modi to “constantly enhance the

China-India strategic and cooperative partnership to a higher level and jointly safeguard our strategic period

of opportunities.” Both countries, he said, were “long lasting strategic and cooperative partners, rather than

rivals.” “If the two countries speak in one voice, the whole world will attentively listen; if the two countries

join hand in hand, the whole world will closely watch,” he said. Mr. Xi called for a “negotiated solution to the

border issues at an early date,” says the Xinhua news agency.

• Mr. Modi said there was a need for finding a solution and maintaining peace on the border. He made the

point that incidents on the border should not undermine relations.

INDIA & WTO MEET

INDIA LINKS TRADE PACT TO FOOD SUBSIDIES DEAL

• India at WTO General Council meeting in Geneva said that the failure of the trade body to work in the

interests of all its members and to deliver meaningfully on the “development” mandate of the Doha

Development Round would pose a far more serious risk to its credibility than any other factor.

• India suggested that the adoption of the Trade Facilitation Agreement (TFA) be postponed till satisfactory

progress is made on the issue of finding permanent protection for India’s minimum support prices to farmers

against the WTO subsidy caps that are benchmarked to food prices of the 1980s.

• India’s statement came after fellow WTO members accused India of being a spoilsport to have blocked the

TFA.

• India said it was not opposed to the TFA but demanded that other decisions of Bali be taken forward in the

same time frame and demanded that the “adoption of the TF Protocol be postponed till a permanent

solution on public stockholding for food security is found, the statement said.

• India proposed modifications to the Protocol, including setting December 31, 2014 as the deadline for

finding a permanent solution on public stockholding for food security.

• Other suggestions include the immediate establishment of an institutional mechanism such as a dedicated

Special Session of the Committee on Agriculture and the adoption of clear-cut procedures, timelines and

outcomes under this institutional mechanism to arrive at the permanent solution by the deadline. India

recommended a similar approach also on all other elements of the Bali including those for Least Developed

Countries.

• In its statement, India pointed out that the developing countries had accepted the Bali package in good faith

reassured by the renewed affirmation of commitment to the Doha Development Agenda and its

development dimension.

• But these expectations have been completely belied by the developments after the Bali Ministerial, India

said, adding that it has consistently pointed out its serious concern about the lack of progress on some of the

Bali outcomes and minimal movement on the others.

WHAT IS THE TRADE FACILITATION AGREEMENT (TFA)?

• The Trade Facilitation Agreement (TFA) targets to steadfast any drive of goods amongst nations by

cutting down administrative compulsions. The Trade Facilitation Agreement (TFA), being pushed by

several developed nations, will place commitments on all WTO members to modify their border

infrastructure and procedures to facilitate movement of goods.

WHAT IS THE PROBLEM WITH TRADE FACILITATION AGREEMENT (TFA)?

• The difficulty with Trade Facilitation Agreement (TFA) runs in a clause that says farm subsidies cannot be

more than 10% of the value of agricultural production. If the limit is violated, other participants can

contest it and also go on to levy trade sanctions on the nation. The developing nations would have a

difficulty with the solutions offered by the developed nations as without the subsidies the food security

of the developing nations could be genuinely damaged.

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WHY IS INDIA OPPOSED TO TRADE FACILITATION AGREEMENT (TFA)?

India’s Food Security Act, by law is now obligatory on the government and provides that the government will

deliver food to the weaker sections of the society at very low prices. Apart from offering subsidies to the

consumers, via the PDS (Public Distribution System), it also offers subsidies to the producers of food grains. Thus,

Government purchases food grains from farmers at a MSP (Minimum Support Price), and subsidizes inputs like

Electricity, Fertilizer, etc.

• Problem-1: The 10% cap on subsidies will not be feasible for India to accomplish. Also, the 10% cap

is computed based on 1986-88 prices when the prices of food grains were much lower. Thus, the cap

has to be revised on the basis of present prices of food-grains.

• Problem-2: For offering subsidized food, India will have to open up its own stock stores

to international supervision. Also, India will be unable to add protein/ heavy grains viz. say lentils, etc.

even if it wishes to, owing to riders in the peace clause.

• Problem-3: It appears biased as US offers farm subsidies to its farmers to the tune of more than $20

billion per year. While the WTO is binding the developing nations to protocols, the issue of subsidies by

developed nations like US appears to be kept off the table.

WHAT DOES INDIA WANT?

• India now wants a permanent solution to the issue of public stock holding of food-grains. G33 members

including China have supported India’s stand on the ability to subsidize agricultural production and

distribute it to the poor at low cost. India settled to the TFA in Bali only under the condition that interim

relief would be offered to the developing countries. India held that till 2017 no legal action/ sanction(s)

would be imposed on the developing countries, by which time a solution would be chalked out amongst

the nations.

• Nevertheless, this interim relief would not be applicable if such subsidies would lead to trade distortions

i.e. the prices of imports and exports cannot be affected by this. Recently, India clarified in a WTO

meeting on trade facilitation that it may not be able to support Trade Facilitation Agreement (TFA) at

present as there was not much progress on the issue of addressing concerns related to subsidies given

for public procurement of food-grains and food aid.

• The Bali Ministerial declaration had provided just a short-term relief to developing nations against

action by other countries in case it surpassed the current cap on agriculture subsidies (10% of total

production). It is worth recalling that in 2013 India decided not to agree to the ‘Peace Clause’ for

agriculture subsidies that the World Trade Organization (WTO) Director-General Roberto Azevedo had

proposed for Bali talks. India will not agree to any deal until it is clear that the proposed interim solution

will be available till a permanent solution to the issue of India’s Minimum Support Prices

(MSP) transgressing the WTO norms has been found and agreed to. India fears that fears that the

temporary solution might be difficult to implement as it is riddled with numerous conditions including

submission of various data related to production and subsidies.

INDIA SUCCESSFULLY CHALLENGES U.S. AT WTO

• A World Trade Organisation (WTO) Dispute Panel has ruled that the imposition of Countervailing Duty (CVD)

by the United States Department of Commerce (US DOC) on India’s exports of hot-rolled carbon steel flat

products is inconsistent with the law on subsidies.

• India has now said that it is evaluating all other products of Indian origin on which the U.S. has applied the

same provisions. This provision has been in existence in the U.S. for many years and India is the first country

to successfully challenge it, according to a release from the Commerce Ministry.

• The measures continue to be in force and adversely impact the Indian exports. India had challenged the

determinations made by the US DOC in various investigations and reviews, contending that its programmes

do not confer any subsidy on the Indian exporters. The provisions under challenge were that of US Tariff Act

and the Code of Federal Regulations as being inconsistent with the provisions of the WTO Subsidy

Agreement (ASCM).

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• The matter was taken up before the WTO Dispute Panel as the two parties could not resolve the issue

bilaterally. One of the major rulings in favour of India is that the Panel has held that the U.S. law mandating

accumulation of non-subsidised imports with subsidised imports while determining injury in a CVD

investigation is inconsistent with WTO obligations. This ruling potentially questions the validity of a number

of other CVD proceedings conducted by the United States on products of Indian origin.

• In addition to the above ruling, the Panel has held that the U.S. had no factual basis to hold that the grant of

mining rights for iron ore and coal was a subsidy. The Panel could not consider some of India’s claims such as

those relating to the methods of calculating the amount of subsidies and one relating to the application of

adverse fact available, the release said. The ruling is appealable before the WTO Appellate Body and the

decision to appeal against the same is currently under active consideration.

INDIA – CHINA

CHINA TO LET INDIAN EXPERTS MONITOR BRAHMAPUTRA IN TIBET

• China has for the first time formally agreed to allow Indian hydrological experts to conduct study tours in

Tibet to monitor the flows on the upper reaches of the Brahmaputra, according to a new agreement signed

during the visit of Vice-President Hamid Ansari.

• In a move to assuage India’s concerns about the ongoing dam projects on the upper reaches of the river —

known as the Yarlung Zangbo in Tibet — Beijing has formally agreed to allow India to “dispatch hydrological

experts” to conduct study tours “according to the principle of reciprocity”.

• China has in the past been sensitive about allowing access to Tibet, and Indian hydrological experts have, as

yet, not been allowed to formally visit the region to monitor the river’s flows.

• China also agreed to extend provision of hydrological data, from May 15 to October 15 every year on a daily

basis, adding 15 days to an earlier agreement. The data will be provided by three stations at Nugesha,

Yangcun and Nuxia in Tibet on the main stream of the river.

THREE NEW DAMS

• China last year gave the go-ahead for three new hydropower dams on the Yarlung Zangbo, ending a two-

year suspension on new projects. Beijing has said that the projects will not affect downstream flows, but a

lack of transparency on its plans has been a source of concern. China began construction on a 510-MW

project in Zangmu in 2010 — so far the only major project on the river’s main stream.

• The MoU builds upon an agreement to cooperate on transboundary rivers signed last year, providing

technical details such as the data transmission method, frequency and cost settlement. While China will

provide data on water flows, India will make available information on data utilisation in flood forecasting and

mitigation.

• The MoU on the Brahmaputra was among three agreements signed on Monday as Vice-President Hamid

Ansari held talks with his counterpart Li Yuanchao.

INFRASTRUCTURE PARKS

• Both countries have also formalised a framework for setting up China-dedicated infrastructure parks in India

and for a the first-ever training exchange programme for officials of both countries, between the Lal Bahadur

Shastri National Academy of Administration (LBSNAA), Mussoorie, and the China Executive Leadership

Academy (CELAP) in Shanghai.

• The industrial parks agreement envisages China exploring the possibility of setting up clusters in a range of

areas. The hope is that the move will boost Chinese investment into India and reduce the ballooning trade

deficit. An Industrial Park Cooperation Working Group, made up of an equal number of representatives from

both countries, will be set up to identify and agree upon the detailed modalities, with four locations already

being considered by China.

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CHINA’S PLA DISTRIBUTES NEW ‘BATTLE MAPS’ IN BORDER AREAS

• China’s People’s Liberation Army (PLA) has begun distributing as many as 15 million new “battle maps” to

troop units in western border regions — including the disputed Aksai Chin area — in an effort to enhance

patrolling to bolster Chinese territorial claims.

• The PLA Daily reported that the new maps — the first major update in maps in 30 years — were transferred

to “frontline troop units” on July 9, with 15 million “paper-made battle maps” slated for distribution under

the Lanzhou Military Area Command.

• The Lanzhou MAC is one of seven military regions. The entire Xinjiang region as well as the disputed Aksai

Chin area and the western section of the border with India fall under its command.

• In recent years, the Chinese government has issued a number of new maps to more clearly enforce China’s

territorial claims. Recently, maps issued showing in detail China’s claims on the disputed waters and islands

of the South China Sea angered several countries that are parties to the dispute.

• All official Chinese maps show the Aksai Chin region and all of Arunachal Pradesh as Chinese territory. This

has been the case, according to Chinese sources, since at least the early 1990s, shortly after Arunachal

Pradesh became a State in 1987, so the maps will not have any significant bearing on either territorial claims

or on the status of on-going negotiations to resolve the boundary dispute.

• Both India and China also have differing perceptions of where the Line of Actual Control (LAC) runs.

INDIA – RUSSIA

• Hailing Russia as “our country’s greatest friend,” Prime Minister Narendra Modi told Russian President

Vladimir Putin that India was committed to deepening ties between the two countries and to exploring new

areas of cooperation.

• Mr. Modi met the Russian President on the sidelines of the 6th BRICS summit in Fortaleza, Brazil, and invited

him to visit the Kudankulam nuclear power plant in Tamil Nadu.

• The two heads of nations discussed all major bilateral issues concerning strategic affairs, global political

matters, defence cooperation and economic ties during their meeting, during which Mr. Modi was

reportedly briefed about Russia’s position on the crisis in Ukraine.

• Mr. Modi said he looked forward to Mr. Putin’s visit to India in December, for the13th annual Indo-Russian

summit in New Delhi, and urged the Russian President to visit the Kudankulam nuclear power plant.

• The Ministry of External Affairs reported that Russian President Vladimir Putin’s upcoming visit to India,

tentatively scheduled for December, will outline the future of relations between the two countries. Commenting on Modi’s meeting with Putin on the sidelines of the BRICS summit, the ministry said the prime

minister “expressed deep appreciation for Russia’s long standing friendship and unstinting bilateral and

international support for India's economic development and security”.

• He “reaffirmed that relations with Russia will continue to enjoy the priority that they always had in India's

foreign policy. He reaffirmed our intention to further deepen and broad-base the strategic partnership”, the

ministry said.

RUSSIA MOOTS MEGA ENERGY PIPELINE PROJECT WITH INDIA

• Close on the heels of the recently concluded $400-billion mega gas pipeline deal between Russia and China,

Moscow wants to work on a pipeline to India “through the Himalayas” that could become the “biggest-ever

energy project in history”.

• On the sidelines of the BRICS summit in Brazil last week, Russian President Vladimir Putin and Prime Minister

Narendra Modi discussed the possibility of building another pipeline along the route of the planned TAPI

(Turkmenistan-Afghanistan-Pakistan-India), which would carry hydrocarbons to India.

• The project would take an estimated five years and approximately $40 billion to construct. “We are planning

to examine feasibility of the Indian initiative to construct a land pipeline which would run from Russia’s

southern border to India either along the projected TAPI route or through the Himalayas,” Russian

Ambassador Mr. Alexander Kadakin said.

• Mr. Kadakin marked out defence ties, valued at $35 billion and 22 future Russian-designed nuclear projects

as the areas for India-Russia future cooperation. Mr. Modi has also invited Mr. Putin to visit the Kudankulam

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nuclear project when he travels to India in December for the annual India-Russia summit to be held in New

Delhi.

RUSSIA’S ROLE IN INDIA AND CHINA’S NEW ENTENTE: OPINION

• Indian Prime Minister, Narendra Modi’s meeting with Chinese President Xi Jinping at the sidelines of the

BRICS summit in Brazil has drawn considerable attention, certainly for good. The meeting provides clues

about the direction of the relations between the two neighbours, relations between which belie a steady

pattern. Russia has long eyed warming of ties between the two Asian giants.

• Xi’s invitation to Modi to participate in APEC, a premier economic body in Asia-Pacific, has led to

considerable speculation about China’s real motives. Xi also invited India to be a founding member of Asian

Infrastructure Investment Bank. How far are these invitations backed by genuine political power of China? Is

the Chinese invitation a shrewd move to moderate some of India’s positions? Is it a move for a trade-off?

• There is speculation that China might have offered some concessions to India to bag the key deal –

establishing the bank in Shanghai. But a China-India trade-off is not that easy as it is constrained by

procedural as well as political hurdles.

• All APEC members have to approve a new member to the group. The political hurdles may be more difficult

to surmount. The US, which has recently increasingly asserted in the Asia-Pacific may view the Chinese offer

to India as a pawn in the strategic chess board antithetical to its interests.

• The US-China rivalry, rather than the differences between the US and India, or between India and China, may

impact the move. Even the Chinese intentions, and policy manoeuvres in this context, are yet to be weighed

upon in-depth by the Indian policymakers.

• Perhaps Russia is best suited to play a balancer in this case. Close to India and China, and a key player in

APEC and BRICS and regional organizations such as SCO, Russia will be positioned not only to forward the

interests of India but also help broker a deal between India and China.

• Russia has supported India’s bid for candidature for many international and regional organizations including

United Nations Security Council and Shanghai Cooperation Organization, even to the dislike of China.

Particularly in case of SCO, it is believed that India’s membership is withheld due to Chinese prevarication. Xi

during his meeting with Modi called for India’s active role in the regional organization. But, it is yet unclear,

whether Xi would support India’s membership of SCO.

• Russia’s role in crafting symmetry in India-China relations will be crucial. While working in tandem the three

countries can not only effectively address mutual differences but also help address international issues.

While Russia can persuade China to adopt a softer approach towards India’s integration with SCO and APEC,

India and China can support Russia in the crises in Ukraine or to help mete out the effects of the sanctions. It

is no surprise that the BRICS in its Brazil meeting expressed deep concern over crisis in Ukraine and called for

“comprehensive dialogue, the de-escalation of the conflict and restraint from all the actors involved, with a

view to finding a peaceful political solution.” Putin expressed satisfaction at the developments in the

summit and argued that the joint efforts will help prevent economic difficulties.

• Any trade-off between India and China will not be that easy. Mutual distrust creeps deep in bilateral

relations. As guardians of national interests, Xi and Modi may find it difficult to rise above the distrust-guided

national interests. But, it is not impossible. As hard-headed pragmatists they may find ways to address the

differences. Modi called for, and Xi agreed, for a peaceful and tranquil border. Modi invited China to invest

in infrastructure projects in India. Xi may appear less inscrutable than his predecessor, Hu Jintao, whose stoic

appearance befuddled many international leaders and observers. Xi appears more forward looking, and his

pleasant mien, may be an advantage for China. But, in international diplomacy, it is difficult to go by

appearance. To decipher things, one has to go deep and study between lines.

• The advantage for Modi and Xi is that they are in the real command in their countries. They are pro-business,

young, and dynamic. Each is aware of their core national interests and constraints behind realizing them. A

win-win trade-off between India and China will not dawn a new entente a bilateral relations, but will also

herald a new phase in international relations. A strengthened India-China relationship will further strengthen

Russia-India-China (RIC) relations, as well as BRICS, SCO and other important organizations such as G-20. By

the time Xi visits to India in September, one hopes some of the differences will be resolved.

• What role can Russia play in this new environment? Besides meeting Xi, Modi also met Russian President

Vladimir Putin. Russia is a known strategic partner of India and China, and has been consistent in supporting

India’s political ambitions. Add to this China’s willingness to support India in its bid for membership for APEC

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and SCO, the international politics will come to a full circle with possible rising of a new order. One of real

dampeners behind weakness of BRICS is India-China differences, and once this is addressed with trade-offs

between India and China, the group will emerge a new centre of attraction in the post-Cold War world with

implications for bilateral and international peace and security.

INDIA – BANGLADESH

UN TRIBUNAL PUTS AN END TO 40-YEAR-OLD INDIA-BANGLADESH MARITIME

DISPUTE

• The much-awaited verdict on the

dispute regarding the delimitation

of the maritime boundary

between India and Bangladesh

was delivered on Monday, with a

United Nations tribunal awarding

Bangladesh 19,467 sq. km of the

25,602 sq. km sea area of the Bay

of Bengal.

• The arbitral tribunal had informed

both the parties of the verdict on

Monday but an embargo

prevented it from being made

public before 24 hours. The

content of the verdict of the long-

standing dispute was announced

by Bangladesh Foreign Minister

A.H. Mahmood Ali.

• The verdict of the Permanent

Court of Arbitration (PCA) came

after nearly five years of

arguments and counter-

arguments, spot visit by judges

and examination of survey

reports.

• The tribunal verdict is binding on

all parties and there is no option

for appeal. However, according to

the rules of procedures, if any

party needs any interpretation of the verdict, it can make a request to the court within 30 days of receiving

the verdict and the interpretation would be made available within 45 days.

• Since India and Bangladesh had not chosen a dispute settlement forum under the Convention, the case was

decided by its default procedure and a 5-member Arbitration Tribunal was established under Annex VII of

the Convention for Delimitation of the Maritime Boundary between the two nations. The maritime boundary

so delimited covered the territorial sea, the exclusive economic zone (EEZ) and the continental shelf.

Bangladesh went in for arbitration over the delimitation of maritime boundary under the United Nations

Convention on Law of Sea (UNCLOS) on October 8 2009.The court concluded its hearings on December 18,

2013 in The Hague.

• The argument focused on issues including the location of the land boundary terminus, delimitation of the

territorial sea, exclusive economic zone, and the continental shelf within and beyond 200 nautical miles.

• A major bone of contention was New Moore Island, which has been claimed both by India and Bangladesh.

India had made the case that the Radcliff Award fixes the boundary in this sector as the midstream of the

main channel of the rivers Hariabhanga and Raimangal until it meets the Bay of Bengal. On this basis, India

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argued that the Land Boundary Terminus should lie to the east of New Moore Island. Bangladesh argued that

the Terminus should lie to the west of the Island.

• Bangladesh Foreign Minister Mahmud Ali said: “This is a victory of friendship between Bangladesh and India.

The maritime dispute between the two countries has come to an end following the verdict.” The verdict

would take the relationship between the two countries “one step forward,” he added. During External

Affairs Minister Sushma Swaraj’s recent visit to Dhaka, spokesperson of the Ministry Syed Akbaruddin said

both the countries would act in accordance with the verdict since they went to the court voluntarily.

A HAND OF FRIENDSHIP: OPINION

• The visit by External Affairs Minister Sushma Swaraj to Bangladesh saw the National Democratic Alliance

government start off on a positive note with India’s important eastern neighbour.

• New Delhi relaxed some visa rules for Bangladeshi nationals; the frequency of the cross-border train is to be

increased; there is to be a new bus service that will connect Guwahati and Shillong with Dhaka. India has also

committed to sharing 100 MW of power from the Palatana power project in Tripura. It is encouraging that

after an election campaign that bristled with negative references to Bangladesh, the new government has

chosen to follow in the footsteps of its predecessor in reaching out to Dhaka, even though the Manmohan

Singh government could not complete its own bilateral initiatives.

• Signaling broad continuity in ties, Ms. Swaraj has promised that her government would make efforts to take

those initiatives to their conclusion, even though, disappointingly for Bangladesh, she gave no time-frame.

With its majority in Parliament, the BJP needs only to convince itself that the Land Border agreement is

beneficial to both sides. On the Teesta river water-sharing agreement, the Modi government will need to

convince Mamata Banerjee, but it will take more than the phone call that the External Affairs Minister made

to the West Bengal Chief Minister. The clear message from the trip is that the new government, as the

previous one, places great importance on Dhaka-New Delhi relations. Ms. Swaraj even acknowledged the

UPA government’s contributions by saying that “a great deal has been accomplished in the... relationship in

the last few years,” including progress in the “areas of security, economic development, sub-regional

cooperation, opening of the Indian market to Bangladeshi goods, border infrastructure, energy and people-

to-people exchanges.” Dhaka’s cooperation will be critical to India’s Look East policy.

• Bangladesh will watch to see if the continuity with UPA extends to another trait: playing favorites with

Bangladesh’s political parties. India’s main engagement has to be with the government of Bangladesh. But as

Ms. Swaraj said in an interview, the effort must also be “to establish an inclusive partnership with

Bangladesh, and we want to do it by taking every section of [Bangladeshi] society into confidence.”

• The country has yet to emerge from a phase of great internal turmoil. Ms. Swaraj wisely refrained from

making any comments on the January elections, the credibility of which has been widely questioned. Her

meeting with Bangladesh National Party leader Khaleda Zia, although she is no longer Leader of the

Opposition, was a well-advised move, signaling that New Delhi still considers it a significant political party.

INDIA – US

INDIA, U.S., JAPAN JOINT NAVAL EXERCISE IN PACIFIC

• India, the United States and Japan are embarking on joint naval manoeuvres in the Pacific Ocean on

Thursday as part of the Malabar series of exercises.

• The exercise, in which 800 personnel from the Navy will participate, follows the U.S.’s strategic pivot to Asia

— a doctrine that will result in the shifting of a bulk of American naval assets in the Asia-Pacific over the next

decade.

• The shift in the U.S. military posture is seen as part of a new initiative to contain China. However, Indian

officials say that India will exercise its “strategic autonomy” but will not participate in a U.S. led counter-

China policy with Japan and Australia as partners.

• The Navy is fielding a frigate, a destroyer, and a supply vessel in the week-long exercise meant to focus on

anti-piracy and anti-terrorism operations. The three countries earlier participated in joint exercises in 2009,

and Singapore and Australia were also part of the manoeuvres in 2007.

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SHADOWBOXING IN INDIA-U.S. TIES: OPINION

• Something always seems to come in the way of India and the United States finding the groove in their

relationship. Attempts by the two sides to inject some enthusiasm into bilateral ties despite the spat over

the diplomat Devyani Khobragade and the U.S.’s past coldness toward Prime Minister Narendra Modi on the

issue of the Gujarat riots, seem jinxed.

• The revelation that the U.S. National Security Agency had sought and received official permission to put the

Bharatiya Janata Party under surveillance in 2010 is the latest hiccup. It overshadowed the visit by

Republican Senator John McCain, chairman of the House Committee on Foreign Affairs. The disclosures were

part of the latest cache of data released by whistle-blower Edward Snowden through The Washington Post.

• From what is available in the public domain so far, it is not clear what methods of surveillance were used,

and which particular individuals in the party were being targeted. That this was four years before the BJP

became the ruling party makes it curiouser. There is, however, nothing particularly surprising in the

disclosure. Virtually every country spies on every other and in the process spares no one of any importance.

Espionage is among the oldest professions. Only, the methods have become more advanced and a country’s

resources determine how advanced its technologies are. It is just that the U.S. gets ousted more frequently

than any other. Describing the surveillance as “unacceptable”, India summoned senior U.S. diplomats,

apparently to tick them off. But New Delhi cannot in all honesty say that it does not spy on political parties in

other countries, or even within. So the protest should not be mistaken for a moral stand that there should

be no espionage.

• What the revelations have done is to create further negativity about the U.S. in the Indian mind, thus making

it politically difficult for the two governments to put the past behind them quickly. As it is, a cloud hangs over

bilateral relations over the Khobragade episode. Though the Obama administration has made it clear that

the Prime Minister would receive a red-carpet welcome in Washington in September, the cancellation of a

visa to Mr. Modi when he was Chief Minister has not been forgotten.

• From all the outreach to India’s South Asian neighbours, and to China, Russia, France and Singapore, New

Delhi also seems to be sending out the message that its foreign policy priorities are different from its

predecessor’s. Assistant Secretary of State Nisha Biswal’s visit to make contact with the new government

was upstaged by the high-profile arrival of the Chinese Foreign Minister. But good U.S.-India ties are in the

“enlightened national interest” of both sides. A way must be found to break the ice before the September

Washington summit.

INDIA – PAKISTAN

PIPELINE TO PAKISTAN MAY

REVIVE STALLED MEGA PROJECTS

• India’s decision to pipe natural gas and

other petroleum products to Pakistan is

being seen as a first step that could lead to

the revival of two stalled mega

undertakings involving Islamabad — the

Iran-Pakistan-India (IPI) pipeline and the

Turkmenistan-Afghanistan-Pakistan-India

(TAPI) project.

• Attempts are going on for a pilot project

with Pakistan. If it succeeds, and there is a

genuine demonstration of goodwill from

Pakistan on all fronts, including security, it

could lead to the reconsideration of

stalled mega projects such as IPI and the

TAPI pipeline.

• The sources observed that a new gas

pipeline and a products pipeline to

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Pakistan from India was the brainchild of the Manmohan Singh government. The Modi administration has

been willing to carry forward the proposal.

• Instability in Pakistan’s Baluchistan, through which the proposed IPI would pass, coupled with the policy of

the United States so far to seek Iran’s political and economic isolation, have impeded the project. But

analysts say that the IPI could revive, should a breakthrough be achieved in the ongoing nuclear talks

between Iran and the six global powers — U.S., Russia, China, France, Britain and Germany. “There is already

a softening of stance towards Iran among international oil majors. A political deal, if it materialises, would

cement Tehran’s possible reintegration in the global economy and raise its regional standing in West Asia,”

the sources said.

INDIA – BRAZIL

INDIA, BRAZIL STRENGTHEN RELATIONS, SIGN 3 MOU

• In a move to strengthen bilateral relations between the two countries of Brazil and India, their premiers

Brazilian President Dilma Rousseff and Indian Prime Minister Narendra Modi signed three agreements.

• The two sides signed Memoranda of Understanding on environment; on cooperation in augmentation of a

Brazilian earth station for receiving and processing data from Indian Remote Sensing satellites; and on

cooperation in the establishment of a consultation mechanism on mobility and consular issues.

• The three agreements that were signed were:

o MoU on Cooperation in the Field of Environment: The collaboration is likely to be in the form of

exchange of information, documentation and collaborative projects in the field of biodiversity;

afforestation in arid areas; protection of wetlands and waste management, Water conservation.

Waste management will specifically include management of agricultural waste and electronic waste;

management of waste water management; use of bio-fuels; air and water quality management;

environmental information systems.

o MoU on Cooperation in the Establishment of a consultation mechanism on mobility and consular

issues.

o MoU on Cooperation in the Establishment of a consultation mechanism on mobility and consular

issues: As part of other agreements signed by the two countries, this would oversee the diplomatic

relations that the countries share.

• During the meeting, the two heads of nations agreed to take steps to further expand and diversify trade and

investment flows and deepen cooperation in agriculture and dairy science, conventional and renewable

energy, space research and application, defence, cyber security and environment conservation.

• They also agreed to intensify cooperation in international forums and multilateral institutions, including the

G20.

• As leaders of G4 countries, Mr. Modi and Ms. Rousseff called for urgent progress on reforms within the

United Nations, including the Security Council, by the year 2015, which will mark the 70th anniversary of the

U.N.

INDIA – NEPAL

INDO-NEPAL JOINT COMMISSION MEETS AFTER 23 YEARS

• A meeting of the India-Nepal Joint Commission, formed in 1987 with the aim of meeting every two years in

the two capitals, was held after 23 years, a fact stressed by Minister for External Affairs Minister Sushma

Swaraj, as demonstration of the new Indian government’s importance towards Nepal.

• For Nepal the added benefit was to reduce the huge trade deficit with India, he added. This was also noted

in the joint statement.

• In the 10-month period until mid-May this year, Nepal’s trade deficit with India had widened to NRs 337.53

billion (approximately Rs. 210 billion).

• In her meetings with Nepal’s leaders, including President Ram Baran Yadav, Prime Minister Sushil Koirala and

Speaker Subas Nembang, and Opposition leader Pushpa Kamal Dahal ‘Prachanda,’ Ms. Swaraj conveyed the

hope for timely and inclusive Constitution that is “acceptable to all.” Nepal’s Constituent Assembly is

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working to draft a new Constitution. The parties have set January 22 next year as deadline to promulgate the

new statute.

• During her meeting with Mr. Koirala, she said the two countries were poised for a “new beginning.” She met

leaders of the UCPN (Maoist) who have taken the upcoming Modi visit “very positively”, both Mr.

Akbaruddin and a Maoist leader said.

• Besides, India and Nepal agreed to review and update the Treaty of Peace and Friendship 1950, implement

the Bilateral Investment Promotion and Protection Agreement (BIPPA) and finalise the text of a Power Trade

Agreement at the earliest, a joint statement issued after a marathon meeting between the two sides said.

• The 26-point joint statement was issued after the meeting of the Nepal-India Joint Commission concluded.

The Joint Commission — co-chaired by the Foreign Ministers of the two countries — also directed the Nepal-

India Boundary Working Group to commence field works at the earliest to look into missing border pillars

and boundary disputes. Officials of the two nations said they realised the importance of harnessing the vast

hydropower potential of Nepal for mutual benefits.

INDIA – SINGAPORE

SINGAPORE TO HELP INDIA BUILD ‘SMART CITIES’

• Building on Prime Minister Narendra Modi’s theme of “smart cities” will be a key objective as Singapore’s

Foreign Affairs and Law Minister K. Shanmugam begins his India visit.

• Sources said the five-day visit dealt with “studying what are the priorities for the new government, while

finding ways to elevate the India-Singapore bilateral relationship.” In particular, Mr. Shanmugam spoke

about urban planning, water and waste management issues, where Singaporean expertise may be of use in

India’s quest for renewing its city infrastructure, as also new ideas for strategic investment in infrastructure

like the Mumbai port Singapore has contributed to.

• Singapore is also India’s highest source of FDI, investing approx $ 6 billion here last year.

• Other areas of co-operation included port management, low cost housing and river cleaning. There were

also discussions on celebrations to mark 50 years of diplomatic relations next year.

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WORLD AFFAIRS

SRI LANKA ISSUES

U.N. URGES COLOMBO TO STOP PROMOTION OF ‘FAITH-BASED HATRED’

• United Nations experts called on Sri Lanka to adopt urgent measures to stop promotion of racial and faith-

based hatred, and violence against Muslim and Christian communities by Buddhist groups with extremist

views, and bring perpetrators of such violence to justice.

• The U.N.’s call for religious tolerance from the U.N. experts comes a fortnight after the hard-line Bodu Bala

Sena (BBS) staged a large protest rally in Aluthgama that resulted in inter-communal violence, during which

four people died and about 80 were injured.

• Homes and shops owned by Muslims, as well as mosques were vandalised and some set ablaze. Amid

allegations that the BBS was backed by Defence Secretary Gotabhaya Rajapaksa, President Mahinda

Rajapaka’s brother, the Defence Secretary in a recent interview to Daily Mirror, a local newspaper here,

denied any involvement with the BBS and said he would resign if the alleged association is proven.

• Sri Lanka has been witnessing incidents of violent attacks against religious minorities in the last couple of

years. Over 350 violent attacks against Muslims and over 150 attacks against Christians have been reported

in Sri Lanka in the last two years, according to a press release from the Office of the High Commissioner for

Human Rights. Muslim and Christian communities are reportedly subjected to hate speech, discrimination,

attacks and acts of violence throughout Sri Lanka frequently, it said.

• Alongside the BBS, other groups promoting extremist views in Sri Lanka, such as the Sinhala Ravaya and the

Hela Bodu Powura, purport to be the protectors of Sinhala Buddhism.

• These extremist groups reportedly proclaim the racial superiority of Sinhala Buddhists and spread fear

among local population, for example, through allegations that Buddha statues are being bulldozed by

religious minorities, or that evangelical Christians are forcibly converting youths and sick patients in their

hospital beds, or that Muslims are smuggling drugs and birth control pills in order to destroy Sinhalese

people and prevent their reproduction.

• Terming such agenda “fascist ideology” Sri Lanka’s Justice Minister and Sri Lanka Muslim Congress (SLMC)

Leader Rauf Hakeem said, “The Islamophobia found in the West is being copied and edited to suit the local

context.”

• “A community pushed against the wall like this will suddenly become a fertile ground for outside forces,”

said Mr. Hakeem, whose SLMC is a constituent of President Mahinda Rajapaksa’s ruling coalition. Suggesting

that the BBS enjoyed political patronage, he said the organisation was being given a license to operate and

that the government should get its act together.

RAJAPAKSA INDUCTS WAR CRIMES EXPERTS IN PROBE PANEL

• President Mahinda Rajapaksa directed a Commission of Inquiry appointed by him to probe the roles of Sri

Lankan army and the rebel Tigers, during the nearly 30 year war, for alleged violation of international

humanitarian law.

• The announcement comes about three months after the U.N. Human Rights Council adopted a resolution

that calls for an international probe into Sri Lanka’s rights record. The Sri Lankan government has rejected

the inquiry and said it would not offer any cooperation. In August 2013, President Rajapaksa appointed a

commission to look into cases of disappearances after the brutal war that ended in 2009. The commission

has been holding public hearings in many parts of the country, including the island’s Northern Province, and

received over 15,000 complaints until January this year.

• The President has now roped in three war crimes experts to advise the commission during the probe. British

lawyers Desmond de Silva and Geoffrey Nice and U.S. law professor David Crane, on the advisory panel, are

all former U.N. war crimes prosecutors.

• The gazette notification, which announced the appointment of the international panel of experts, has also

expanded the mandate of the commission to include a probe into alleged war crimes. Part of the Lessons

Learnt and Reconciliation (LLRC) initiative of the Sri Lankan government, the Commission has been asked to

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investigate and report on “the principal facts and circumstances that led to the loss of civilian life during the

internal armed conflict that ended on the 19th May 2009.”

• The Sri Lankan government has consistently termed its armed forces’ role a “humanitarian operation”, a

position that Channel 4 documentaries challenged, drawing international attention to the issue. President

Rajapaksa has now asked the Commission to probe whether any person, group or institution directly or

indirectly bears responsibility in this regard.

• He has also asked the Commission to probe the LTTE’s role, over allegations of violation of international

humanitarian law, the use of civilians as human shields, recruitment of child soldiers and sources of finances.

CHINA ISSUES

XI SET FOR HISTORIC SRI LANKA VISIT

• China’s President Xi Jinping will this year become the first Chinese head of state to visit Sri Lanka in three

decades, underlining Beijing’s renewed push to deepen its strategic and economic presence in the

neighbourhood and in the Indian Ocean.

• Mr. Xi’s visit was discussed in Beijing this week as Sri Lankan Minister of Economic Development Basil

Rajapaksa, as the President’s Special Envoy, met with the Chinese leadership.

• The Chinese leader will become the first President to visit Sri Lanka since former leader Li Xiannian in 1986.

His visit assumes significance in the context of strengthening ties between the two countries, with China

investing heavily in the island nation

• A $500 million- built port built by the Chinese was inaugurated in Colombo last year giving Beijing a strong

foothold in one of the busiest international shipping routes in the world. With heavy investment in

infrastructure, including in a massive port it helped build in Hambantota along Sri Lanka’s southern coast,

China is said to have surpassed Japan and India as the biggest contributor to investments in the island

nation.

‘THE CHINA CARD’

• Foreign policy experts have often pointed to Sri Lanka playing the “China card” against India, which has

invested in some key projects in the neighbouring country, including a massive housing project targeting

50,000 homes in the war-torn north that it is currently engaged in.

• For Chinese President Xi, Sri Lanka has become a particularly important country as a crucial point on his

government’s signature “maritime silk road” economic initiative, which the President unveiled in October in

a bid to boost maritime connectivity and economic ties in the neighbourhood.

• Colombo is willing to fast track free trade negotiations with China emerging as “the largest single

development partner”. He also noted that there was a 140 per cent increase in tourist arrivals from China in

the past year.

IRAQ ISSUES

ISIS LEADER ABU BAKR AL-BAGHDADI URGES MUSLIMS WORLDWIDE TO FIGHT

• The leader of the Al Qaeda offshoot that has taken control of parts of Iraq and Syria has urged Muslims

around the world to fight to avenge wrongs committed against their religion.

• Abu Bakr al-Baghdadi, the head of the Islamic State - previously known as the Islamic State in Iraq and Syria

(ISIS) - issued the call to jihad, or holy war, in an audio message posted online, lasting nearly 20 minutes. It was his first purported message since the group proclaimed a 'caliphate' on the territory it has captured.

• Baghdadi named a string of countries, from Central African Republic to Myanmar (Burma), where he said

violations were being committed against Muslims.

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• He called on Muslims to immigrate to

the self-styled Islamic State, saying it

was their duty. ISIS claimed universal

authority throughout the Muslim

world, declaring Baghdadi its caliph - a

mediaeval title last widely recognised

in the Ottoman sultan deposed 90

years ago, after World War I. The

move followed a three-week drive for

territory by ISIS militants and their

allies among Iraqi's Sunni Muslim

minority.

• The caliphate aims to erase colonial-

era borders and defy the US and

Iranian-backed government of Shiite

Prime Minister Nouri al-Maliki in

Baghdad. It also poses a direct

challenge to the global leadership of

Al Qaeda, which has disowned ISIS,

and to conservative Gulf Arab Sunni

rulers, who already view the group as

a security threat

WHAT IS A CALIPHATE?

• A caliphate is essentially an Islamic state which resides over the entire Muslim faith. Its head of state is

called the caliph, who will interpret and implement the will of Allah on Earth.

• Sunnis and Shiites differ in their beliefs on how a caliph should be selected. Sunnis believe they are elected

by the people. Shiites believe a caliph should be an imam, a religious teacher, descended from the family of

the prophet Muhammad, and who is chosen by Allah.

• There are four recognised caliphates, with more than 100 caliphs serving since the death of the prophet

Muhammad in 632 AD.

• Caliphs from the first caliphate, the Rashidun Caliphate, were elected with subsequent caliphs appointed

though succession or takeovers. In theory, the declarations of a caliphate are binding for all Muslims;

however, their authority must be recognised for this to happen.

U.S. SENDS MORE TROOPS TO IRAQ

• The United States has increased its military presence in Iraq, ordering 300 more troops to the violence-

ravaged nation.

• ISIS militants have "continued to pose a legitimate threat to Baghdad and its environs." The new troops, 200

of whom arrived in Baghdad, will provide security for the U.S. Embassy, the Baghdad airport and other

facilities in Iraq, Pentagon spokesman Rear Adm. John Kirby said.

• The deployment includes "a detachment of helicopters and unmanned aerial vehicles, which will bolster

airfield and travel route security. The 300 troops are in addition to 300 U.S. advisers who will help train Iraq's

security forces. They will bring the total of American forces in Iraq to about 800 troops.

WHY THE CRISIS IN IRAQ IS AN OPPORTUNITY FOR KURDS

• With crisis comes opportunity: Iraq's Kurdistan region could hold a refe rendum for independence within

months, according to its president, Massoud Barzani. The rise of the Islamic State of Iraq and Syria (Isis) and

its takeover of Iraq's Sunni Arab heartlands means the Kurds now have the opportunity to maximise on

turmoil in Arab Iraq and achieve what almost every Kurd has ever dreamed of: a state of their own.

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• Historically, the Kurds have suffered massacres and genocide at the hands of successive Iraqi regimes. They

have been oppressed by their neighbours and, after the First World War, had statehood taken away from

them. Isis's takeover of Iraq's Sunni north means the Kurds can now go for it. They have the chance to

remedy past mistakes as well as fulfill longstanding objectives aimed at protecting the Kurdish people from

external threats and, further down the line, establishing an independent Kurdish state.

• Turmoil in Arab Iraq means Kurdistan is unlikely to have to deal with a militarily confrontational Baghdad

government, at least not any time soon. Baghdad's armed forces have been pushed to the south and their

capacity dramatically reduced, as portrayed by their reliance on Shia militias. Those militias operate

independently of the state and lack the capacity to deal with both the revitalised Sunni insurgency as well as

Kurdistan's effective armed forces, known as the Peshmerga.

• The future of Kirkuk and its vast oil reserves lies in the hands of the Kurdistan Regional Government. Over

the past 10 years, the federal government in Baghdad has either withdrawn or reduced the Kurds'

entitlement to the Iraqi national budget, but Kirkuk is an opportunity to eliminate Baghdad's capacity to

shackle the Kurds through punitive economic measures.

• Kurdistan may have won a historic battle for what has been described as both the crown jewel and

Jerusalem of Kurdistan. It can now secure its economic independence from Baghdad. Control of Kirkuk also

means the Kurds have the economic lynchpin for an independent state, should that be a desired option in

the future.

• With the support of regional powers, the Kurds could become powerful regional actors. Along with the

broader international community, regional players should support the Kurds through enhanced military

hardware and equipment, as well as political and diplomatic support. The Kurds have vast energy resources

that they need help in exporting, and the region needs a strategic and capable participant in the expanding

battle against extremism.

• Helping the Kurds fulfill the opportunity presented by Iraq's crisis – aimed at protecting Kurdistan's borders –

bringing them into the battle against Sunni militants in the longer run and creating a stable regional partner

means the crisis in Iraq can become an opportunity.

ISRAEL PALESTINE ISSUE

• As Israel’s aerial bombardment of Gaza continues to take toll of Palestinian lives; Washington offered to help

broker a truce. Diplomatic efforts to end the hostilities between Israel and Hamas militants gathered pace,

with U.S. President Barack Obama phoning Israeli Prime Minister Benjamin Netanyahu.

• But Mr. Netanyahu remained resolute, saying he would not end his campaign until he achieved his goal of

stopping the Hamas fire.

• But despite mounting international concerns, truce efforts were failing, according to Egypt, which has played

a key role in mediating previous Hamas-Israel ceasefires.

• “Egypt has communicated with all sides to halt violence against civilians and called on them to continue with

the truce agreement signed in November 2012,” the Foreign Ministry said. “Unfortunately, these efforts...

have met with stubbornness.”

• On the contrary, Israel has confirmed preparations are under way for a possible ground attack, with tanks

and artillery massed along the border and some 33,000 reserves mobilised out of the 40,000 approved by

the cabinet.

• Meanwhile, Hamas’s armed wing, the Ezzedine al-Qassam Brigades, kept up a steady stream of rocket fire on

central Israel, with sirens sending people fleeing for shelter in Jerusalem, Tel Aviv and even the northern port

city of Haifa.

UN CALLS FOR IMMEDIATE CEASEFIRE

• The UN Security Council has called for an "immediate and unconditional humanitarian ceasefire" in Gaza. An

emergency session backed a statement calling for a truce over the Muslim holiday of Eid al-Fitr "and

beyond".

• Both the Palestinian and Israeli envoys to the UN criticised the statement, for different reasons.

• More than 1,030 Palestinians, mostly civilians, and 43 Israeli soldiers and two Israeli civilians have been

killed. A Thai national in Israel has also died.

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• The UN Security Council endorsed a statement from Rwanda, the current president of the council, calling for

a "durable" truce based on an Egyptian initiative - under which a pause in hostilities would lead to

substantive talks on the future of Gaza, including the opening of Gaza's border crossings.

• The statement also emphasised that "civilian and humanitarian facilities, including those of the UN, must be

respected and protected”. It further stressed the need for "immediate provision of humanitarian assistance

to the Palestinian civilian population in the Gaza Strip”. The Palestinian representative at the UN, Riyad

Mansour, said the statement did not go far enough and that a formal resolution was needed demanding that

Israel withdraw its forces from Gaza. "They should have adopted a resolution a long time ago to condemn

this aggression and to call for this aggression to be stopped immediately," he said.

INDIA’S STAND

• The Indian position on the Gaza crisis has been muted, consistent with its ambivalent approach in recent

years of maintaining passive equidistance between the Israelis and Palestinians. The studied avoidance of

taking clear moral positions on the Palestinian issue hardly augurs well for a country with global aspirations,

as evidenced by New Delhi’s advocacy for membership in the United Nations Security Council.

• Pragmatism also demands that India weighs in strongly on the unresolved Israel-Palestinian issue, which is

the core of instability in West Asia — a region that is vital for India’s economy and energy security. Fears of a

blowback from Israel, which would undermine national security, in case India takes a more forthright

position on the Israel-Palestinian track, may be exaggerated, given the relationship of deep interdependence

that New Delhi and Tel Aviv have developed over the years.

U.N. APPROVES PEACEKEEPING BUDGET AFTER TOUGH DEBATE

• The U.N. General Assembly’s budget committee approved the budget for its far-flung peacekeeping missions

on July 3 after contentious negotiations pitting wealthy countries against developing nations.

• The dispute stopped the clock at midnight on June 30 and left missions in legal limbo for three days. The

dispute was over the amount of money that countries supplying troops to U.N. missions should receive per

soldier for extra expenses involved in their deployment, including training, vaccinations, overseas

allowances, uniforms and additional equipment.

• The overall budget for the fiscal year July 1, 2014-June 30, 2015 is estimated at $8.6 billion, an increase from

the $7.83 billion budget that expired on June 30. It covers 17 missions and about 100,000 peacekeepers.

• By way of comparison, the U.N. notes that this is less than one half of one per cent of world military

expenditures, which were estimated at $1.7 trillion in 2013.

• The Group of 77, which represents 132 mainly developing countries including all the major troop

contributing nations and China, wanted the U.N. to reimburse governments contributing troops $1,763 per

month per soldier, a huge rise from the average amount of $1,210 last year. The United States, the European

Union, Japan and South Korea, which pay the vast majority of peacekeeping costs, balked at the amount,

estimated at about $700 million this year.

• In a compromise proposed by the committee chair, the reimbursement level will raise effective July 1 to

$1,332 monthly per soldier the largest increase in 35 years at 17 percent and in steps to $1,410 on July 1,

2017.

• Western negotiators said the initial increase will cost about $200 million and will be offset by $200 million in

cuts from the budgets of the peacekeeping missions across Africa, the Middle East, on the India-Pakistan

border and in Haiti.

IRAN ISSUE

IRAN NUKE TALKS TO BE EXTENDED TILL NOV 24

• Iran and six world powers failed to meet their target date for cutting a nuclear deal but agreed to extend the

talks until Nov. 24 in a bid to overcome stubborn differences over the size and capacity of activities by

Tehran that could be used to make nuclear arms.

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• Months of exhausting negotiations were meant to culminate in an agreement that would limit programs;

Iran says it needs to produce energy and for other peaceful purposes but which can also be used to make

nuclear arms. In return, Tehran would have gotten progressive relief from all nuclear-related sanctions on its

economy.

• The main dispute remains over uranium enrichment up to last week, Iran, which insists it does not want

nuclear arms, pushed to be allowed to expand its enrichment program over the next eight years to a level

that would need about 190,000 current model centrifuges.

• With both the U.S. and Tehran facing pressure from powerful skeptics at home, the two sides tried to put a

good face at what had been accomplished, while acknowledging that full agreement was a distance away.

• "We have made tangible progress on some of the issues,” said EU foreign policy Chief Catherine Ashton, who

coordinated the talks on behalf of the U.S. Russia, China, Britain, France and Germany. But she cautioned of

“significant gaps on some core issues which will require more time and effort.”

• U.S. Secretary of State John Kerry, who flew into Vienna a week ago to try and advance the talks, said

stretching out the talks “is warranted by the progress we’ve made and the path forward we can envision,”

while a White House statement said that with the extension, there is a “credible prospect for a

comprehensive deal.”

• But the extra time also means that both the U.S. and Tehran will increasingly be negotiating not only with

each other but also those at home who have been vary of the current talks since they began early this year.

Negotiators for both sides will have to tread a fine line between offerings compromises needed to seal a deal

while placating domestic factions whose opposition to concessions could scuttle the diplomatic process.

• The officials said President Barack Obama continues to oppose new sanctions legislation before the talks

expire and would veto such legislation. But if the talks ultimately fail, officials said, the Obama

administration would support further sanctions against Iran.

• U.S. officials spoke of progress on reducing the proliferation dangers from a reactor that would produce

enough plutonium to arm several nuclear weapons if completed as planned. They also said headway was

made on repurposing an underground site that Iran had used for uranium enrichment like plutonium a

potential pathway to a nuclear bomb

• Iran now has about 20,000 centrifuges, with half of them operating. Iranian officials have recently signaled

they are ready to freeze that number for now. But Mr. Kerry said on Tuesday that Washington has made it

“crystal clear” that even 10,000 are too many. Diplomats say Washington wants no more than 2,000.

• Iran has received more than $6 billion of sanctions relief since late last year under an interim nuclear deal

and the U.S. officials said that Tehran would get access to an additional $2.8 billion of frozen assets during

the extended talks. But the officials, who demanded anonymity as a condition for briefing reporters, said

that Washington would continue to emphasize to businesses around the world that Iran isn’t open for

business.

MH 17 CRASH

• All 298 people aboard Malaysia Airlines Flight MH17 were killed when the airliner crashed on 17th July, 2014

in eastern Ukraine at Russia's border.

• Both pro-Russian rebels and the Ukrainian government denied shooting the aircraft down after US

authorities said intelligence analysis showed it had been hit by a surface-to-air missile.

• American intelligence officials said evidence suggested the rebels may have shot down the jet "by mistake",

and that no direct link to Russia had been found. However, Russia "created the conditions" for downing

flight MH17 by arming the rebels, the officials were quoted as saying by the Associated Press.

• Russia has repeatedly said Ukrainian government forces are to blame for the attack, but the US officials said

that Russian claims were "not plausible".

• Countries directly affected by the disaster, such as the Netherlands, Australia, and the UK, have been

concerned that the crash site was not properly sealed off, with the risk that valuable evidence could be put

at risk.

• The plane's "black box" flight recorders, which were handed over by rebels to Malaysian officials, will be

flown to a laboratory in the UK for analysis.

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NEW RUSSIA SANCTIONS

• European Union foreign ministers have announced they will impose more sanctions against Russia over its

alleged backing for the rebels - something Moscow denies.

• They said the list of individuals and groups covered by EU sanctions would be broadened and a new list

drawn up by EU ambassadors.

• Ministers will also ask the European Commission to look at an embargo on new arms sales to Russia and to

increase punitive measures against Russia in the financial and energy sectors. Both the EU and the US

imposed sanctions on Russia following its annexation of Crimea in March and the outbreak of hostilities in

eastern Ukraine.

• Meanwhile, the conflict between Ukrainian government forces and rebels has continued, with reports of

fighting round Donetsk and Luhansk. Ukrainian Interior Minister Arsen Avakov said the army had captured

the strategically important town of Severodonetsk, located some 140km (87 miles) from the key rebel

stronghold of Donetsk.

OUTRAGE IN THE SKIES: OPINION

• The tragic and outrageous shooting down of a Malaysian Airlines Boeing 777 aircraft on a flight from

Amsterdam to Kuala Lumpur over Ukrainian airspace on Thursday is a direct consequence of the ongoing

war in Ukraine. Even while offering solace to the family of the dead, the international community needs to

fix the responsibility for the firing of the missile that brought down the aircraft that was flying 33,000 feet

above sea level, with 298 people on board.

• There have been at least 20 such incidents since the 1940s, when aircraft have been struck down by a missile

or military jet. The blame game has already started among the Ukrainian government, the pro-Russian rebel

forces fighting the separatist war in the eastern part of the country, and Russia itself. There have been

previous instances of Ukraine’s military aircraft getting shot down in the same region

• It is surprising that some international carriers have been sticking to this dangerous airspace all these weeks

and months and only now have decided to steer clear of the zone. The Ukrainian rebels, the prime suspects,

were perhaps targeting another Ukrainian military aircraft expected at that time; they even claimed they

were in possession of missiles and had shot down a military aircraft.

• This ghastly tragedy could not have come at a worse time for Malaysian Airlines. Hardly four months ago,

went one of its aircraft missing while on its way from Kuala Lumpur to Beijing. Even debris has not been

found and there is no clue on what happened to it. The fallout of the war in Ukraine, in which Russia has

played a controversial role, has now become an even bigger international issue with the shooting down of

this aircraft.

• Some countries have already called for the United Nations to play a more decisive role in ending this conflict

and also taking charge of the investigation. There were a couple of other aircraft quite close to the site

where the Malaysian aircraft was shot down.

• Tragedies such as this only revive the demand for international aviation organisations to take a more active

and dynamic role in tracking or monitoring flights in the interests of the safety of passengers. Airlines will

have to accept such a monitoring mechanism sooner rather than later.

• The immediate need is to order a full-fledged international investigation into this tragedy, as demanded by

Malaysian Prime Minister Najib Tun Razak, perhaps headed by the International Civil Aviation Organisation.

JAPAN’S DEFENCE POLICY SHIFT SLAMMED

• China has slammed the move by Japanese Prime Minister Shinzo Abe’s government to reinterpret the

country’s Pacifist Constitution to enable a wider role for the Japanese military overseas, terming the decision

“a brutal violation” of the spirit of the post-Second World War Constitution.

• Mr. Abe’s Cabinet approved a reinterpretation of the post-war imposed Pacifist Constitution that severely

limited the use of the Japanese military, even when on overseas peacekeeping missions. The

reinterpretation now allows for “collective self-defence” that would permit Japan to come to the aid of its

allies overseas.

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• That the move came amid the most heightened tensions between China and Japan in many years over

disputed East China Sea islands and questions over war-time history has prompted analysts in Beijing to see

the reinterpretation as being directed at China.

• South Korea, which is also embroiled in renewed disputes with Japan over wartime history — the question of

Japanese occupation remains a sensitive issue in both China and South Korea — called on Tokyo to be

mindful of regional peace and stability.

• Chinese President Xi Jinping traveled to South Korea on a visit seen as rare by Beijing observers as he would

not be visiting any other country on his tour. Their recent disputes with Japan are also likely to figure during

the visit, with the recently warming of ties between the two countries coinciding with their spats with Japan.

• South Korean President Park Geun-hye hit out at Tokyo for taking a “retrogressive” attitude on the question

of wartime atrocities. Qu Xing, the head of the Foreign Ministry-affiliated China Institute for International

Studies, said both countries were “pressing Japan to correctly understand its historical issues and keep on

high alert against its right-leaning trail”.

ELECTIONS IN INDONESIA

• A long and complex electoral process in Indonesia finally concluded with the remarkable victory of Joko

Widodo, who was officially declared the winner in the presidential elections.

• An outsider to Indonesia’s entrenched military and political establishment, Jokowi, as he is known, had

never held national political office, and was unheard of until just nine years ago when he was elected

Mayor of Solo, a city in central Java. In the seven years that he held office, he transformed that densely

populated, run-down, crime-ridden city into a sparkling tourist destination, rebranding it as a hub of

Javanese art, heritage and culture. His runaway success there led to his taking over as Governor of

Jakarta in 2012 in an election that saw him unseat the incumbent, a veteran politician who had once

been the treasurer of Golkar, the party of Indonesia’s military ruler General Suharto.

• Jakarta’s problems were more challenging than Solo’s, but Jokowi’s popularity only grew. At first it was

not clear whether the Indonesian Democratic Party-Struggle (PDI-P), which had backed Jokowi for the

Jakarta election, would nominate him for the presidential election. But after party leader Megawati

Sukarnoputri stepped away from the race, his path was cleared. Jokowi and his vice-presidential running

mate won 53.15 per cent of the total vote; the rival team of Prabowo Subianto, a former military general

who belongs to the Great Indonesia Movement Party (Gerindra), got 46.8 per cent. Citing “massive

cheating” during the counting, Mr. Prabowo withdrew from the process. He has since appealed to the

Constitutional Court against the verdict, but is yet to produce evidence to back his allegations of massive

electoral fraud.

• Jokowi’s victory is significant for several reasons. In this election, more than in previous ones, Indonesian

voters have signalled that what they want is a clean break from the legacy of the Suharto dictatorship,

which ended in 1998. Another country in South East Asia, Thailand, is now back under military rule.

Further afield, in Pakistan, the elected government and the powerful military are still unable to

disentangle their locked horns.

• The rise of an outsider in Indonesian politics also owes itself to a system of decentralised governance

that enabled Jokowi to prove his credentials locally first, even though he still needed the aid of a

mainstream political party to ascend the national stage. But the real challenge is yet to begin. The PDP-I

is in an unwieldy coalition that backed Jokowi’s candidature, but even so has only 207 out of 560 seats in

the House of Representatives, while the Opposition coalition has 353 seats. With national expectations

running high, Jokowi will be on test from the day he takes office in October this year.

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7-july-2014 current affairs