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Current Affairs - 18 January 2017

General Affairs 

Not Unnatural For 2 Neighbouring Powers To Have Differences: PM Modi On China
  • Prime Minister Narendra Modi today set the tone for 2017 in India-China relations with a clear message -- that two large neighbouring countries may have differences but they need to show respect for each other's concerns. In his inaugural address to the government's flagship geopolitical meet - the Raisina Dialogue in Delhi, attended by representatives of 65 nations -- the Prime Minister said he saw the development of India and China as an "unprecedented opportunity for our two countries and the world".  

    "At the same time, it not unnatural for two large neighbouring powers to have some differences. Both countries need to show sensitivity and respect for each other's core concerns and interests," he said.

    Ties with China have been under increasing strain last year following China's resistance to India's admission into the elite Nuclear Suppliers Group. Strengthening its ties with Pakistan, China has blocked the listing of Jaish-e Mohammad chief Masood Azhar as a global terrorist by the United Nations -an area of priority for India.

    The Chinese media too, has taken a belligerent stance, warning India against using what it called the "Dalai Lama card" and said New Delhi was "shortsighted".

    At today's inaugural session of Raisina Dialogues, PM Modi also had a tough message for Pakistan. Dialogue, he told Pakistan, is only possible if it walks away from terror.

    "I want peaceful ties with entire South Asia," the Prime Minister said. "That vision led me to invite leaders of all SAARC nations including Pakistan, to my swearing-in. For this reason, I have also travelled to Lahore. But India alone cannot walk the path to peace. It also has to be Pakistan's journey ... Pakistan has to walk away from terror if it wants dialogue with India."

    The Raisina Dialogue is modelled on Singapore's Shangri La dialogue. This year, there are over 470 participants from 69 countries including UK foreign minister Boris Johnson , former Afghan President Hamid Karzai, former Australian Prime Minister Kevin Rudd and former Canadian Prime Minister Stephen Harper.

    Congress' Amarinder Singh Will Take On Chief Minister In Punjab Polls
    • It will be a battle of the heavyweights in Punjab's Lambi constituency as Congress' Punjab chief Captain Amarinder Singh takes on Chief Minister Parkash Singh Badal in the forthcoming polls.

      The Congress leadership in Delhi on Monday cleared Mr Singh's name for the seat after his request to contest the polls from the Lambi seat, a traditional stronghold of the Akali Dal's first family in Muktsar district.

      Congress seems to have gained more momentum with cricketer-turned politician Navjot Singh Singh, a former BJP lawmaker and its star campaigner, joining the Congress. He said that he was born a Congressman and it was his 'ghar wapsi'. He will fight from the Amaritsar East.

      The Congress on Monday also announced six more candidates and changed the nominations of four others brining in Mr Sidhu's associate and former hockey player Pargat Singh who will fight the polls from Jalandhar Cantt, and Jagbir Singh Brar to contest the Nakodar seat.  Former Punjab Information Commissioner Harinder Pal Singh (Harry) Mann has been given the ticket from Sanaur seat.

      Nominees for the pending seats of Amritsar South, Mansa and Ludhiana East will be announced by Tuesday.

      Also in contest and looking to make their mark, the Aam Aadmi Party has fielded its Punjab unit's co-in charge Jarnail Singh to take on the Congress and the Akali Dal strongmen from Lambi. AAP has fielded lawmaker Bhagwant Mann from the Jalalabad seat held by Deputy Chief Minister Sukhbir Badal where Congress has fielded its Ludhiana MP Ravneet Bittu.

      AAP's legal cell head Himmat Singh Shergill will fight from Majitha assembly seat, represented by state Revenue Minister Majithia.

      "This time, we will not allow Parkash Singh Badal, Sukhbir Singh Badal and Amarinder Singh a walkover. That is why we are fielding our strongest candidates against the three and (Bikram) Majithia to give them a taste of political dust," AAP chief Arvind Kejriwal had said.

    India Ranks At 60 Below China, Pak In Inclusive Development Index
    • India has been ranked 60th among 79 developing economies, below neighbouring China and Pakistan, in the inclusive development index, according to a WEF report.

      WEF's 'Inclusive Growth and Development Report 2017', released today, said that most countries are missing important opportunities to raise economic growth and reduce inequality at the same time because the growth model and measurement tools that have guided policymakers for decades require significant readjustment.

      The Inclusive Development Index (IDI) is based on 12 performance indicators. In order to provide a more complete measure of economic development than GDP growth alone, the index has three pillars -- Growth and Development, Inclusion and Inter-generational Equity, and Sustainability.

      Lithuania tops the list of 79 developing economies that also features Azerbaijan and Hungary at second and third positions, respectively.

      While India is placed at the 60th spot, many of the neighbouring nations are ahead in the rankings. China is ranked at the 15th position, Nepal (27th), Bangladesh (36th) and Pakistan (52nd).

      Two BRICS nations, Russia and Brazil, are at 13th and 30th places, respectively.

      Others in the top ten are Poland (4th), Romania (5th), Uruguay (6th), Latvia (7th), Panama (8th), Costa Rica (9th) and Chile (10th).

      "India, with a score of only 3.38, ranks 60th among the 79 developing economies on the IDI, despite the fact that its growth in GDP per capita is among the top 10 and labour productivity growth has been strong.

      "Poverty has also been falling, albeit from a high level," the report said.

      However, it noted that the country's debt-to-GDP ratio is high, raising some questions about the sustainability of government spending.

      Among the advanced economies, Norway is at the top, followed by Luxembourg (2nd), Switzerland (3th), Iceland (4th) and Denmark (5th).

      IDI scores are based on a scale of 1-7. Advanced and developing economy IDI scores are not strictly comparable due to different definitions of poverty.

    Will Overcome Chinese Hurdle Eventually, Says US, On India's NSG Membership
    • A day after China came out strongly against the Obama administration regarding India's membership bid to the elite Nuclear Suppliers Group or NSG, outgoing US envoy Richard Verma today exuded confidence that the Donald Trump government would be able to overcome the Chinese hurdle.

      Mr Verma said President Barack Obama, Secretary of State John Kerry and a lot of other people had worked in pushing India's membership to the elite Nuclear Suppliers Group and that the United States will continue to work on it.

      China had said yesterday that admission of non-NPT signatories in NSG cannot be a "farewell gift" for countries to give to each other. The Chinese reaction had come after the Obama administration asserted that Beijing was an "outlier" in the efforts to make India a member of the elite nuclear club.

      "This is something we will keep working on together. There is a lot of support for India's membership as we said we strongly support India's accession in the NSG.

      "These things are complicated, they take time, they are multilateral. We will have to continue to work with those countries including China which may have some concerns. But I believe, at the end of the day, we we will get there," Mr Verma said.

      The envoy, who is stepping down from the post before Republican Donald Trump takes over as American President on January 20, said the US has been strongly supporting India's bid at the NSG and other export control regimes besides its membership at a reformed UN Security Council and other international institutions.

      "All of these things have been very very important for President Obama and I believe they will continue to be top priority (of the Trump administration)," he told reporters on the sidelines of an event in New Delhi.

      China has been blocking India's membership bid for the 48-member group despite backing from majority members on the grounds that India is not a signatory to the nuclear non-proliferation treaty (NPT).

      "I just want to point out that NSG membership shall not be some kind of (a) farewell gift for countries to give to each other," a Chinese Foreign Ministry spokesperson said yesterday, taking a dig at the Obama administration.

      China is advocating a two-step approach for admission of countries who have not signed the NPT. As per the new stand announced by Beijing, it first wants to find a solution that is applicable to the admission of all non-NPT countries followed by discussions on admitting specific nations.

      Besides India, China is also interacting with Pakistan on the issue as Islamabad too applied for NSG membership after India.

    German Passport World's Strongest, India Ranks Ahead Of China
    • Indian passport has been ranked 78 in a global ranking of the world's most powerful passports which was topped by Germany. Germany topped the list with a visa-free score of 157 while Singapore overtakes South Korea and becomes the highest ranked Asian passport with a visa-free score of 156.

      India stands at 78th position with a visa-free score of 46, ahead of China and Pakistan which are ranked 58th and 94th on the list respectively.

      Afghanistan's is the least powerful passport with a visa-free score of just 23.

      The latest edition of the world's most popular Arton Capital's global ranking 'Passport Index' is based on cross-border access of national passports.

      The world's most popular online interactive tool which collects, displays and ranks the passports globally assigns a "visa-free score" according to the number of countries a passport holder can visit visa-free or with visa on arrival.

      "The desire to improve one's opportunity and security for their family transcends borders. As such, having a second citizenship has never been more relevant," said John Hanafin, CEO of Arton Capital.

      The newly added 'World Openness Score' (WOS) tracks the progression of freedom of mobility across the globe. The WOS in 2016 was 17,925. In the first month of 2017, the score has already increased to 17,948.

      "This trend shows opening of borders but will it continue? With the recent backlash against globalisation and ongoing immigration issues, the World Openness Score may be in danger of decline," the report said.

      In recent years, citizenship by investment has become a USD 2 billion industry, with over 20,000 investors seeking a second residency or citizenship around the globe every year.

    Business Affairs 

      Growth fears haunt stocks, Nifty ends below 8,400
      • Growth concern cast its shadow on the market as the flagship Sensex slipped marginally to close at 27,236 after IMF sharply lowered India's GDP estimate, with RIL proving to be a drag too.
        The multi-lateral agency had cut India's growth rate for the current fiscal to 6.6 per cent from its previous estimate of 7.6 per cent due to the temporary negative consumption shock of demonetisation, which made investors anxious.
        The Reliance stock was in a tight spot as spending worries surrounding its telecom venture took some sheen off its quarterly results.
        After opening higher, the 30-share BSE barometer hovered between 27,381.43 and 27,179.19 before ending at 27,235.66, showing a fall of 52.51 points, or 0.19 per cent. The gauge had gained 50.11 in Monday's trade.
        The 50-share Nifty index fell 14.80 points, or 0.18 per cent, to 8,398 after shuttling between 8,440.90 and 8,378.30. Key index heavyweights in metal, oil and gas, PSU, auto and banking sectors fell up to 1.52 per cent.
        Index major RIL reported a 3.6 per cent rise in its third quarter net profit. After making a weak opening, shares of the company lost 3.31 per cent to close at Rs 1,041.30.
        The ongoing corporate results and the Union budget are also making participants tread cautiously though the GST agreement provided some relief.
        Among the major losers, Coal India fell 2.14 per cent, ONGC 1.74 per cent, Adani Ports 1.68 per cent and HDFC 1.02 per cent. NTPC advanced 3.08 per cent, Asian Paints 2.72 per cent, Axis Bank 1.98 per cent, HUL 1.52 per cent and ITC 1.35 per cent.
        Sectorally, the bright spots were FMCG, power, IT, realty, technology and consumer durables.
        Foreign portfolio investors (FPIs) sold shares worth a net Rs 347.25 crore on Monday, as per provisional data. Overseas, Asian and European stocks were mixed as US financial markets remained shut Monday for Martin Luther King Junior Day.
        In Asia, Japan's Nikkei fell 1.48 per cent as investors remain cautious ahead of a Brexit speech by UK Prime Minister Theresa May and Donald Trump's inauguration as US President. However, Hong Kong rose 0.54 per cent and Shanghai gained 0.17 per cent. European indices were trading lower in their afternoon trade, with key indices in France, Germany and London falling by up to 0.64 per cent. 

        Demonetisation could be growth accelerator for CPG companies in the long run
        • The Government's demonetisation policy may have put brakes on the growth story of most consumer goods companies (CPG), but it has also given them enough reasons to be happy about in the long term.
          To begin with, the liquidity crunch has forced them to double their investments on direct distribution, that is, their sales teams are directly serving more retail outlets instead of negotiating with the wholesalers. This means that they are able to reach out to more retail outlets on their own which will surely boost higher volume growth in the long run.
          Though most of these companies were aggressively pushing direct distribution at one point, the momentum had slowed down considerably in the last few years due to slowdown of consumption. They had preferred to use the wholesale route (which offered them better discounts, but the wholesale industry was cash driven and the cash crunch brought business to a complete halt) or focused on fewer outlets and ensured that the quality of coverage was better.
          "Though it will entail higher costs, this is the apt time to conduct this exercise as the sales force will be able to approach more number of outlets directly as currently the off take is low,"  says an Edelweiss Securities report.
          According to the Edelweiss Report, direct distribution will give the CPG companies a better control over the trade channel as they will directly serve the retailers and would also give them access to better analytics as they would be able to collect more data related to consumer buying habits and faster moving products.
          However, the bigger upside would actually be an opportunity for the larger CPG companies to regain the market share they lost to regional (mostly unorganized) players in several markets.
          In a category like dairy for instance, almost 70% of market is under the control for unorganized players, 30% of the biscuit industry and 35% of the hair colour industry are also dominated by unorganized players.
          The biggest impact of demonetisation has been largely on smaller / local players who were out of the tax bracket. Also, these players are primarily served by wholesalers, where the impact has been the most.
          This, says the Edelweiss Report, will, to some extent, reduce competitiveness of local /unorganised players as some of them will not come under tax bracket and some may have to pay higher commission to wholesalers who are under taxation bracket now to compensate for their loss in margins.
          While the impact of direct distribution may be still a while away, the CPG companies are already visible gainers at modern retail stores and also on e-commerce platforms.
          The Edelweiss reports says that a company like Godrej Consumer whose modern retail sales constitutes around 7%-8% of its total sales is expecting the number to go up to 14%. The liquidity crunch has led a large section of the urban consumers to shop in modern retail stores as they enable card transactions.
          The demonetisation drive has also pushed the CPG companies to explore e-commerce as a retail platform more seriously.  Companies such as HUL have launched their Ayush range of Ayurvedic products first on online platforms before distributing them in traditional outlets.

        'Making New Silk Road 'Smart' can boost region's GDP by 4-7%'
        • Significant investments in technology will enable collaboration and spur economic growth in nations along the New Silk Road which in turn can boost the region's GDP by 4-7 per cent, says a World Economic Forum study.
          By focusing on the adoption and implementation of new technologies that improve infrastructure efficiency, companies could achieve real-time supply chain visibility, it said.
          That will also eliminate inconsistencies in customs clearances, reduce overall operating costs and increase the speed of goods transported along routes between Europe, Asia and beyond, it added.
          Small and medium-sized enterprises along the routes of the "One Belt, One Road" initiative often referred to as the New Silk Road can boost the GDP of their countries by 4 per cent to 7 per cent as a result of increased market access.
          Lack of access to global markets is currently their main impediment to growth.
          "Everything from the planning of services to the execution of supply chain operations can be improved by providing countries with new IT infrastructure able to manage small and big data for a steady flow of goods across this vast region," said Wolfgang Lehmacher, Director, Head of Supply Chain and Transport at the World Economic Forum.
          The study noted that IT infrastructure advances and innovative digital capabilities could significantly lower labour and other direct costs for companies.
          "Having the right technology in place is the only way that the New Silk Road will define the future of trade between East and West," said Gerry Mattios, Principal, Bain & Company, People's Republic of China, and co-author of the report.
          Through the One Belt, One Road initiative - one of the biggest infrastructure projects of the 21st century - China and partnering countries aim to transform and develop a region that holds 70 per cent of the global population and 55 per cent of the global GDP through improved trade and technology.

          SBI hits overseas debt market with $500 mn 5-year bond sale
          • The nation's largest lender State Bank of India has hit the international debt market with a benchmark issue to raise around $500 million as part of its $10-billion medium-term notes programme through a five-year dollar money sale. The SBI is in the international debt market with a benchmark issue to raise around $500 million in US dollar denominated bonds.
            The money will be raised through its London branch and will be listed on the Singapore Exchange, two investment banking sources said.
            When contacted State Bank refused to comment citing confidentiality clause as the market moving nature of the information. All the three international rating agencies have accorded investment grade ratings to the proposed $500 million bond sale by the country's largest lender SBI which has been away from the overseas debt market for some time now.
            SBI last raised overseas debt by issuing dollar denominated notes worth $300 million last September and prior to that in February 2014, it had raised $1.25 billion in another dollar money sale.
            The bank has so far raised $3.5 billion out of its $10 billion MTN programme, including $400 million in perpetual bonds.
            The bank had also concluded AT1 Basel III- compliant non-convertible, perpetual non-call five-year subordinated, unsecured notes at a coupon 5.5 per cent payable semi-annually under $10 billion RegS bond programme.
            Moody's has assigned a Baa3 rating to the senior unsecured notes, issued under its USD 10-billion MTN programme. The drawdown will be carried out from its London branch, and the bonds will be listed on the Singapore Stock Exchange, Moody's said in a statement. Fitch has also assigned 'BBB-' ratings to the programme that constitutes direct, unconditional, unsubordinated and unsecured obligations of the issuer.
            The issue will at all times rank pari-passu among themselves and with all other unsubordinated and unsecured obligations of State Bank, Fitch said, adding the tenor of the issue is expected to be around five years. S&P too assigned 'BBB-' long-term issue rating in line with the sovereign rating, to the proposed issue of SBI's senior unsecured notes. The rating on the notes reflects the long-term counterparty credit rating on SBI, S&P said.
            According to Moody's, SBI's final Baa3 rating incorporates a one-notch uplift due to its assumption of the bank's very high level of support from the government in a stressed situation. The assumption of high government support is based on a combination of SBI's large size and the critical role it plays in the country's banking system, representing around 16.3 per cent of system loans and 17.6 per cent of system deposits as of March 2016, its nationwide reach, and the government's 60.18 per cent ownership in the lender.
            Fitch said post this issue, SBI's core capitalisation is set to improve in the year to March 2017 from a core equity tier 1 ratio of 10.3 per cent in September 2016. Fitch said the bank is likely to receive around $835 million in new capital from the government shortly out of the total $1.1 billion earmarked for this fiscal, which is around 5 per cent of its 2015-16 equity and has plans to raise an additional $2.2 billion directly from the market, for which it has received shareholder approvals.

          CAG wants provision in GST law to seek any info for audit
          • As government prepares ground for roll-out of GST from July 1, CAG has demanded explicit provision in the law to empower the official auditor to call for any information for audit of Goods and Service Tax (GST) receipts and utilisation of their funds.
            While the Comptroller and Auditor General of India (CAG) by law audit any receipts in the Consolidated Funds of India, the GST Council is not in favour of giving powers to the official auditor under the new GST law to call for information outside of the GST tax receipt for audit.
            The GST Council, headed by Union Finance Minister Arun Jaitley and comprising representatives of all states, had in its meeting last month decided to keep out a provision from the Draft Model GST Law giving CAG powers to call for any other information for audit.
            Official sources said CAG Shashi Kant Sharma met Jaitley after the December 11 meeting of the GST Council to seek a modification in the draft law to include the word "any information" can be sought by auditors to facilitate audit.
            Section 16 of the CAG Act mandates the auditor to conduct audits of the receipts of governments, giving it no discretion in the matter.
            "It shall be the duty of CAG to audit all receipts which are payable into the Consolidated Fund of India and of each state and of each UT having a legislative assembly and to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon," the Section reads.
            Section 18 of the same Act provides that CAG the authority to require "any accounts, books, papers and other documents which deal with or form the basis of or otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may appoint for his inspection."
            Sources said the two sections read together provide CAG access to records of an assessee.
            Section 65 of the draft model GST law provides for power of CAG to call for information for audit. The section as it exists, provides that revenue officer would make available to the CAG "information, records and returns required for conduct of audit."
            Sources said CAG is of the opinion that it was important to provide enabling powers to departmental officers in the GST law to call for any other information to facilitate the audit.
            It felt that otherwise an assessee may legally challenge the calling for additional information for CAG audit, they said.
            The modified Section 65 of model GST law as suggested by the CAG states: "The proper officer shall, upon request made in this behalf, make available to the CAG or an officer authorised by him, information, records, and returns furnished under the Act and such other information as required for conduct of audit as required under the CAG's DPC Act".
            The CAG's DPC (Duties, Powers and Conditions of Service) Act provides that "it shall be the duty of the CAG to audit all receipts payable into the consolidated fund and to satisfy himself that the rules and procedures in relation receipts into the consolidates fund of India are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed".
            The government auditor was of the view that it is essential to check the accounts and records of assessees that form the basis for tax assessment.
            It said that CAG's (DPC) Act gives it the authority to access the "records of an assessee".
            The GST Council in its sixth meeting on December 11, 2016 was, however, not in favour of keeping the provision in the GST law.
            The GST Council, headed by Jaitley and having state representatives as members, have already agreed on CAG conducting an audit of tax receipts in the first five years to ascertain the amount of compensation to be paid to the states.
            The Council in its earlier meetings had said the Centre would compensate states for any revenue loss arising out of GST implementation for the first five years.
            The base year for calculating the revenue of a state has been kept at 2015-16 and a 14 per cent growth rate has been envisaged for calculating the likely revenue of each state in the first five years of implementation of GST.
            Post demonetisation, however, more states have expressed concerns of revenue loss and hence the compensation amount to be paid by Centre could go up.

          General Awareness

          India Ranks 92 in the Global Talent Competitiveness Index

            1. India dropped to 92nd rank in the Global Talent Competitiveness Index (GTCI) released by INSEAD in partnership with The Adecco Group and the Human Capital Leadership Institute of Singapore (HCLI). Last year India stood at 89.
              • The global index of talent competitiveness measures the ability of the countries to grow, attract and retain talent. The list was topped by Switzerland.
              India ranked worst among the five BRICS Nations
              South Africa67
              Top 10 nations in the Index
              3United Kingdom
              4United States
              Findings of the Report
              The report stated that among BRICS nations both India and China performed bad with deteriorating rank.
              • Though India is seen as the most emerging market as compared to other countries, still it could not show its potential in retaining and attracting talent. In terms of retaining and attracting talent, India was ranked at the lowest 104th and 114th, position.
              • The report also suggested that India’s position is not going to improve unless India boosts performance in its regulatory and market area which had ranking of 94 and 99 respectively compared to other nations.
              • It said that China and India has a great challenge to attract talent from abroad, in order to improve its position that will help to maintain a high skilled people profile. Many efficient talents still continues to leave the country for which India still experiences a brain drain.
              Global Talent Competitiveness Ranking of Cities
              For the first time the index also released a global talent competitiveness ranking of cities on the basis of their reputation and growing efforts in attracting, growing, and retaining global talent.
              • Among the Indian cities, only Mumbai made it to the list which was topped by Copenhagen.
              The top 10 global cities
              4San Francisco
              8Los Angeles
              About the Global Talent Competitiveness Index (GTCI)
              Global Talent Competitiveness Index (GTCI) was launched in 2003. It is an annual report that forms a basis of benchmarking for all nations. The report ranks 118 countries according to their ability to grow, attract and retain talent.
              • The report enables the government of the nations to develop strategies to overcome talent mismatches on the basis of the data and become competitive in the global market.
              • The 2017 GTCI study focuses on how technology is affecting talent competitiveness and the nature of work. It takes into account both the positive and negative aspect of the technology in work place.
              • Besides, in 2017 the index also launched a list for the first time based on the capability of the cities t retain and attract talent.

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