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Current Affairs - 21 December 2017

General Affairs 

Air Force issues Rs 60000 crore tender for buying Tejas fighter aircrafts to HAL
  • In a major boost to Make in India, the Indian Air Force today issued a tender for buying 83 more LCA Tejas planes to the state owned Hindustan Aeronautics Limited (HAL).

    This would be the biggest contract to be awarded under the Make in India project by the Defence Ministry. The 83 Light Combat Aircrafts (LCA) would be procured from the Hindustan Aeronautics Limited and would make for the Mark 1A version of the plane.

    The project cost is expected to be over Rs 60,000 crore, senior defence ministry sources told India Today. The IAF has already placed orders for 20 LCA Mark 1 aircrafts which would be more of technology demonstrators but the IAF was more interested in having the LCA Mark 2, which would be a more capable and upgraded version of the indigenous plane in the making for over two decades.

    The HAL would first deliver the Mark 1 aircrafts to the IAF and then would produce the Mark 1A in the interim till the time it is ready with the Mark 2 version.

    The project would give a strong push to the indigenous fighter aircraft industry as this would be the first major bulk production order for the planes, Defence Ministry sources said.

Vijay Rupani not out: BJP likely to retain Gujarat CM till 2019 general election
  • It seems, Union minister Smriti Irani may be telling the truth while quashing reports of her leading the race to become the Gujarat CM - as BJP might retain Vijay Rupani as Chief Minister after all.

    Days after Union I&B and textiles minister Irani is a frontrunner to the top post in Modi's bastion, in a latest it seems Rupani is looking at another term.

    Not only Rupani but his aide and Gujarat Deputy Chief Minister Nitin Patel is also likely to continue with the post.

    Earlier, India Today reported that the party wants a new chief minister, who has a strong appeal with the public, can fulfil promises made to the electorate and turn a disparate-looking BJP into a cohesive force.

    Sources now say, the BJP in all likelihood will want Rupani and Patel to hold on to their posts until the 2019 general election.

    The source said Rupani was an acceptable face in the party and the BJP did well in the just ended Assembly elections.

    But there are grievances against Rupani and Patel, with the BJP seat tally not touching even 100 - compared to BJP President Amit Shah's repeated claims that it will win 150 seats.


    The saffron party lost a sizable number of seats in Saurashtra region where, in some districts, it failed to capture even a single seat.

    Among those said to be wanting to be Gujarat Chief Minister is Union Minister of State for Agriculture Purshottam Rupala, who has a good standing in the Patidar community.

    The others are union minister Mansukh Mandavia, another Patidar, and Rajya Sabha member Smriti Irani.

    "We are carrying out the necessary procedure for the new government to be formed. The central team from the party comprising observers like Arun Jaitely are here," said state BJP President Jitu Vaghani.

    But party sources admit that there will definitely be new faces in the new cabinet. "About a dozen new faces will join the ministry," said a party insider.

    The swearing in ceremony is likely to be held on Christmas Day and the most likely venue will be the Sabarmati riverfront.

China using satellite phones to spy on Indian security forces in Ladakh
  • After the diplomatic defeat in Doklam, China is on a 'spying mission' in the military encampment of Demchok in Leh. The village has been the site of frequent stand-offs between the Indian Army and the People's Liberation Army (PLA). 

    Ahead of the 20th round of India-China border talks between National Security Adviser Ajit Doval and China's State Councillor Yang Jiechi in New Delhi this week, intelligence sources told India Today that Beijing is using three Thuraya satellite phones, banned in India, to gather information about the Indian security apparatus in Ladakh. 

    The satphones were found active around 35 km northwest of Demchok from 3.45 pm to 3.41 pm on November 15, the sources said. While one of the satphones was in contact with three Chinese numbers, another Thuraya contacted 13989****05, which too was active in China, the intelligence sources added. Security agencies in Ladakh are on high alert after the revelation.  

    Though the three phones were active several times in Tibet and once inside Arunachal Pradesh in 2015, 2016 and even this year, they were not operational in Demchok, the sources further added.  According to Minister of State for Home Affairs Hansraj Ahir, it is not uncommon for neighbouring countries to spy on India. "Therefore, the Defence Ministry works in tandem with security and intelligence agencies to foil spying attempts. We won't let such spying missions succeed," he told India Today. 

    On the border talks with China, Ahir said, "NSA-level talks are routine to maintain relations with neighbouring countries. Such dialogues will continue."    

    Security expert and Major General (Retd.) GD Bakshi told India Today that China has been consolidating its military after President Xi Jinping became more powerful. General Bakshi too mentioned the satphone 'spying' incident. "Chinese troops are still in Doklam; India should not be complacent. China may intrude into some other sector and even Doklam to build pressure on India," he said. 

    General Bakshi suggested that India should strongly raise its concerns at the NSA-level talks without being dominated by the Chinese side. "Otherwise, China will continue with its domineering attitude."

National Security Advisor to meet Chinese counterpart on border negotiations
  • National Security Adviser Ajit Doval will host his Chinese counterpart and state councillor Yang Jiechi for the 20th round of annual boundary negotiations here on December 20-21.

    This is going to be the first meeting between the two special representatives since the Doklam face off.

    Doval, who is also the special representative for talks with China, met the Chinese state councillor and special representative Yang Jiechi on the sidelines of a BRICS NSA meeting in Beijing.

    On Tuesday, China had said that the Dokalam standoff posed a "major test" for the bilateral ties and lessons should be learnt from it to avoid a similar situation of its kind in the future.

    "This Special Representative meeting is not only a high- level channel for the border issue discussion but also the platform for strategic communication," Foreign Ministry spokesperson Hua Chunying told a media briefing.

    This also allows the two sides to exchange views on the international and regional issues of major concern, she said.

    "In 2017, China-India relations have maintained a good momentum generally but the Dokalam incident posed a major test for the two countries. We should learn lessons from this incident to avoid any further conflict of this kind in the future," Hua said.

Congress to rebuild its state organisations for 2019 parliamentary polls
  • After being reduced to four states in the country, the Congress party under its new chief Rahul Gandhi is set to first focus on rebuilding state organisations before strategising for the 2019 parliamentary polls.

    The Congress' big takeaway from the Gujarat polls is that a robust local leadership could have completely changed the party's prospects and with six state assembly elections slated for next year, the priority will be on a 'revival of states', senior party leaders told Mail Today.

    While the party is in power in Mizoram, Meghalaya and Karnataka, the local leadership in Rajasthan, Madhya Pradesh and Chhattisgarh have been silently doing the spadework over the past few years.

    On Tuesday, the Congress in Rajasthan yet again tasted success in the local body polls held across 26 districts, bagging as many as 27 out of 44 seats, whereas the BJP managed to grab only 16 seats.

    "People no longer trust political parties who come in at the last minute. It has to be a continued, sustained campaign against the ruling party's misgovernance and there has to be a direct connect with the masses that can come only by taking up their issues over a long period of time," Sachin Pilot, Rajasthan Congress president, told Mail Today.

    "In Rajasthan, I took charge in December 2013 and have led several campaigns since then. Over the past couple of years, we have been winning the local body polls one after the other. These are the polls that give a sense of the mood of the people," Pilot further said.

    Newly appointed chief of the Jharkhand Congress unit, Ajoy Kumar added, "The need to build a robust party organisation at the booth, block and district levels cannot be discounted. Rahul Gandhi has been insisting on this."

    "Some of our seniormost leaders in Gujarat lost, giving a big jolt to the party's overall performance. The campaign depended heavily on Rahul Gandhi's campaign whereas the local leadership and organisation came across as weak," said a senior party functionary reques-ting anonymity.

    "Though the states that go to polls next year are far better prepared, the message from Rahul Gandhi over the past year has been to focus on reviving state organisational structures," the leader added.

    "It is now set to intensify over the coming days. Neglected states such as Jharkhand that goes to polls in 2019 recently saw a complete overhaul in its leadership, bringing in new young faces like RPN Singh and Ajoy Kumar. The changes will take time to yield results."

    Party leaders claimed that though their preparedness is good in the northeastern states, the elections are directly influenced by the party that is in power at the Centre.

    "At present, there is a general apprehension that the ministry of development of Northeastern region under the BJP government will snip all funding if an Opposition party is elected," said a senior Congess leader who is monitoring the party's activities in the region.

    "After outgoing party president Sonia Gandhi took charge in 1998, we lost two parliamentary polls before finally forming the government at the Centre in 2004. Why is there so much pressure on Rahul Gandhi for instant delivery?" argued a Congress Working Committee (CWC) member.

    "All the polls that the Congress lost over the last few years have been blamed on him when he was neither party president nor the Prime Minister," he added.

Business Affairs

RBI takes action against Bank of India over bad loans, lender's share tanks 4%
  • In light of average bad loans of the public sector banks acceding "75.53 per cent" of their total worth - hitting a record Rs 9.5 trillion in June - the RBI seems to have started tightening the noose around state-owned banks. First in line is Bank of India (BOI) against whom the Reserve Bank of India (RBI) initiated a prompt corrective action on Wednesday. Under the corrective measures taken against the bank, it can now no longer issue fresh loans and also can't distribute dividends. With this, Bank of India's shares tanked by 4 per cent to Rs 174.2 on BSE after diving 5.3 per cent in the day time. Though banks are the main source of funding in India, the bad debt problem has not only made these financial institutions weak - and therefore creating a risk of capital erosion - but also diminished possibilities of new lending to relatively smaller companies.
    On the National Stock Exchange, the bank's share fell by 3.94 to Rs 174.1. In terms of equity volume, 4.57 lakh shares of the company were traded on BSE and over 44 lakh shares changed hands on NSE during the day. In a filing to stock exchanges, BoI said Reserve Bank of India has placed it under Prompt Corrective Action Framework, consequent to the onsite inspection under the risk based supervision model carried out for the year ended March 2017. "This is in view of high net NPA, insufficient CET1 Capital and negative ROA (return on asset) for two consequent years. This action will contribute to the overall improvement in risk management, asset quality, profitability, efficiency, etc of the bank," BoI said.
    At the end of March 2017, the banks asset quality worsened with gross nonperforming assets (NPAs) at 13.22 per cent, as against 13.07 per cent in the previous year. Net NPAs, however, improved to 6.90 per cent from 7.79 per cent. For the second quarter ended September, 2017-18, asset quality improved as gross NPAs declined marginally to 12.62 per cent of gross advances, from 13.45 per cent a year ago.
    The bulk of the country's bad loans comprise lending to large conglomerates, especially in the steel and infrastructure industry. The industry analysts are now even worrying about mounting bad loans in smaller firms, including retail, that they say would do little to encourage new loans to help fuel growth. The government on its part has enacted the Insolvency and Bankruptcy Code and recently brought an ordinance to introduce amendments in it, which could play an important role in addressing the non-performing assets (NPA) problem.  NPAs have also constrained the banks' ability to lend. Credit is an important ingredient of economic growth and the lack of credit could lead to economic contraction. It's not just public sector banks that are staring a mountain of NPAs; private sector banks are also taking a hit. 

HDFC Bank to raise Rs 24,000 crore through sale of shares to fund growth
  • HDFC Bank on Wednesday said its board had given nod to raise Rs 24,000 crore through a preferential issue of shares to its promoter HDFC Ltd and by issuing shares and depository receipts to fund the bank's growth plans. In a statement to BSE Limited and the National Stocks Exchange of India, the company said the decision was taken under Regulation 30 and provisions of the Securities and Exchange Board of India listing Obligations and Disclosure Requirements) Regulations, 2015. HDFC Bank is the second biggest lender in India in terms of asset-value, and has the lowest bad-loan ratio among India's top banks. Having a market capitalization of over $76 billion, the bank has been consistent in terms of growth at a time when public sector institutions in India are reeling under huge bad-loan ratio. As a favourite financial institution for investors, the bank has been described by the Reserve Bank of India as "too big to fail".
    The bank statement said it would hold a general meeting on February 19 to seek approval of its shareholders. "For this purpose, the board has authorized a special committee to decide terms and conditions," said the statement. According to the bank's fundraising plan, around Rs 8,500 crore worth of shares of the face value of Rs 2 each will be issued to mortgage lender and promoter HDFC Ltd, while the rest of the amount will be raised via issuance of equity shares, convertible securities, American Depositary Receipts and Global Depository Receipt (GDR) programme.
    Being one of the healthiest banks in India, HDFC Bank was also listed in New York State Exchange after it raised Rs 97.66 billion in equity capital in 2015. As per Reuters, HDFC Bank had a capital adequacy ratio of 15.1 per cent against a regulatory requirement of 10.25 per cent as of September end.  The stock of HDFC Bank was up 0.53 per cent at Rs 1,895.15 on the BSE on Wednesday. Overall, the stock has risen around 56 per cent on BSE and 28 per cent on Nifty this year.

Income gap between uber rich, poor have widened in India, says new research
  • In India, the rich have gotten richer, while the poor haven't had much luck. A new report by the World Inequality Lab, promoted by economists Thomas Piketty, Facundo Alvaredo, Lucas Chancel, Emmanuel Saez and Gabriel Zucman, underlines this stark reality of income inequality in India. Inequality in the country has risen substantially since the 1980s as India adopted globalization, and broke away from being a highly regulated economy with socialist underpinnings. There is now data to show that globalization has benefited just a tiny fraction of the population and its rising ride hasn't lifted all boats.
    In 2014, the share of national income captured by India's top 1 per cent of earners was 22 per cent - this share is higher than the 15 per cent share captured by the bottom 50 per cent. The share of the top 10 per cent of earners was around 54 per cent. Contrast this with 1980s and the starkness emerges: In 1983, the share of national income accruing to top earners was the lowest since tax records started in 1922. The top 1 per cent only accounted for 6 per cent of the national income, the top 10 per cent earned 30 per cent of national income while the bottom 50 per cent earned 24 per cent of national income.
    In 2014, those in the top 10 per cent earned five times the national average income of Euro 6,200;  the top 1 per cent received around Euro 1,34,600 per year on average, while the top 0.1 per cent received approximately Euro 5,33,700 - 22 and 86 times the average income for Indian adults, respectively.
    The World Inequality Lab promotes research on global inequality dynamics and maintains the World Wealth and Income Database, a database on the historical evolution of income and wealth. It is a collaborative effort involving 100 scholars across the world.  The authors of the new report said that the data combines all available economic data sources, including household surveys, tax receipts, and income and wealth national accounts, including offshore leaks, when available.
    The growth in income inequality, however, is not just an India phenomenon. The research found that income inequality has increased in nearly all world regions in recent decades. Since 1980, income inequality has increased in North America, China, and Russia as well. More moderately in Europe. Exceptions to this pattern include the Middle East, sub-Saharan Africa, and Brazil, where income inequality has remained relatively stable.
    The growing inequality clearly has political implications, Lucas Chancel told Business Today during a conversation. The rise of Donald Trump in the United States is an example. Governments have to invest more in education and health of the bottom 50 per cent to lessen this margin of inequality.
    Nevertheless, here lies a challenge.
    Since 1980, there have been large shifts in the ownership of capital.  "Net private capital -- the assets of individuals minus their debts -- has risen enormously in recent decades, but conversely, net public capital -- the assets of governments minus their debts -- has declined in nearly all countries since the 1980s due to large scale privatizations and rising public debts. Public capital is now approaching or below zero in rich countries. This exceptional situation by historical standards has strong implications on policy. In particular, it becomes extremely challenging for governments to invest in education, healthcare or environmental protection," the report stated.

More than 30,000 declared salary above Rs 1 crore; only 5 taxpayers earned over Rs 100 crore
  • The Income Tax Return Statistics released by the Income Tax Department for Assessment Year 2015-16 has revealed that more than 30,000 taxpayers earned over Rs 1 crore, whereas just 5 individuals had income in the range of Rs 100 - Rs 500 crore.  
    The number of individuals earning a salary income between Rs 1 crore to Rs 5 crore is at 28,919, while 1,228 taxpayers declared salaries ranging from Rs 5 crore to Rs 10 crore. There were 346 individuals with salary over Rs 10 crore but less than Rs 25 crore.
    The contribution of direct taxes in the total tax collection in 2016-17 has fallen below 50 per cent to 49.66 per cent for the first time since 2006-07.  This is despite a 15 per cent growth witnessed in the direct tax collection during the year. In the previous year, the contribution of direct taxes was 51 per cent of the total tax collection.
    Data released by the Central Board of Direct Taxes (CBDT) shows direct tax collection in 2016-17 was Rs 8.5 lakh crore compared to Rs 7.42 lakh crore in the previous year. The indirect tax collection in 2016-17 was Rs 8.6 lakh crore.
    The proportion of direct tax in total tax collections has been falling for the last couple of years. Direct tax collections as a percentage of total tax collection was 56.32 per cent in 2013-14, 56.16 per cent in 2014-15 and 51.03 per cent in 2015-16.
    The central government's decision to set up a seven-member committee to overhaul Direct Tax Code (DTC) may simplify the taxation slabs and reduce rates. The final DTC would also likely benefit the tax payers by increasing the exemption limit to Rs 5 lakh. Though the taxable amount may go up due to removal of all or most of the exemptions, the reduced tax rates are expected to actually bring down the total amount paid as income tax.
    The direct taxes have been in force in the country since 1961. The latest decision comes close on the heels of comments made by Prime Minister Narendra Modi during the annual conference of tax officers in September that the Income-tax Act, 1961, was drafted more than 50 years ago and it needed to be redrafted.
    "Accordingly, in order to review the Act and to draft a new direct tax law in consonance with economic needs of the country, the Government has constituted a task force," a finance ministry statement said on the formation of the new task force.
    The task force is headed by Arbind Modi, Member (legislation), CBDT. Arvind Subramanian, Chief Economic Adviser, will be a permanent special invitee in the Task Force. Other members of the of the task force include Girish Ahuja, practicing chartered accountant and non-official Director of State Bank of India; Rajiv Memani, Chairman & Regional Managing Partner of E&Y; Mukesh Patel, Practicing Tax Advocate, Ahmedabad; Mansi Kedia, Consultant, ICRIER, and G C Srivastava, retired IRS (1971 Batch) and Advocate.
    The task force would draft direct tax laws in line with tax laws prevalent in other countries, incorporating international best practices, and keeping in mind the economic needs of the country. The task force would submit its report to the government within six months.
    The Modi government, since assuming power in 2014, has already implemented general anti-avoidance rules GAAR. Finance Minister Arun Jaitley also promised in 2016 to lower corporate tax rate to 25 per cent during the course of 5 years. As of now, individual taxpayers with an annual income up to Rs 2.5 lakh are exempt from paying income tax.

    BPCL, IOC and HPCL respond to petrol pump chip scam with e-keys in fuel tankers and full automation of pumps
    • June this year was the hottest one in four years in North India, but it wasn't the soaring temperatures that caused frayed tempers. Instead India was reeling under the news of a petrol pump chip scam-fuel dispensing units at petrol pumps across the country had been fitted with a special remote-controlled chip that would release 20-50 ml less for every litre of petrol/diesel that a customer purchased.
      But since the electronic display would show the correct measure of fuel, customers had no way of knowing that they were being short-changed by 7-10% of fuel. As of December 1, over 100 retail outlets across India have been shut down on account of electronic chip manipulation in dispensing units.
      Lesson learnt the hard way, all the government-owned oil marketing companies (OMCs) are reportedly focussing on complete automation and real-time monitoring of all their outlets. Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) are now planning to introduce an "e-key" facility for tankers carrying fuel from depots to retail outlets.
      According to the Business Standard, tankers carrying fuel from terminals to dealer outlets would not just have global positioning system (GPS) tracking but also an electronic key (e-key). The tanker can then only be opened through a one-time password (OTP) at retail outlets. "Even if we have centralized GPS tracking, people can manipulate it and divert routes. In this case, if a particular tanker takes more time to reach the particular destination from a terminal, the dealer will need special permission from the companies other than the OTP," said an official close to the development to the daily. He added that the end-to-end automation involves tracking of fuel gone through nozzles and tanks and will also transfer data to the central system. The ministry of petroleum and natural gas is hopeful that this strategy will reduce adulteration and diversion of fuel.
      The e-key facility is already in place in 40-odd BPCL retail outlets in Delhi, and a tender to extend the facility to another 500 BPCL outlets will reportedly be floated early next year. The aim is to ensure real-time monitoring of all the retail outlets of government-owned OMCs-numbering 55,325 as of October-by December 2018. The OMCs will reportedly have to spend about Rs 4-5 lakh on automating each outlet, which will attract an overall investment of about Rs 2,000 crore in the marketing infrastructure. Currently, only around 20,000 retail outlets are automated.
      According to a written answer by petroleum minister Dharmendra Pradhan in the Lok Sabha on Monday, a total of 5,732 cases of short delivery of fuel had been registered in the last three financial years and the current year till September-end. Given that each retail outlet sells an average 170 kilolitres of fuel a month, this drive towards automation and real-time monitoring will save the OMCs a pretty penny.

    General Awareness

    Government policies and interventions for development in various sectors and issues arising out of their design and implementation. IIM Bill

    • Context: Parliament has unanimously passed the IIM Bill, 2017 that grants the Indian Institutes of Management the power to grant degrees instead of post-graduate diplomas. 

      Key features of the Bill:

      IIMs would become institutes of national importance with power to grant degrees.
      The boards of the institutes are proposed to be vested with full autonomy including the power to appoint chairperson as well as the director.
      Power to review the performance of each IIM is also vested with the board.
      Board to be the principal executive body of each institute.
      Chairperson of the board will be appointed by the board for a period of four years.
      Director of each IIM will be appointed by the board for a period of five years via a search-cum-selection panel. Once the bill becomes an act, the board is not required to seek the human resource development ministry’s approval for this.
      The Board will have the power to remove a director.
      The IIMs’ accounts will be audited by the Comptroller and Auditor General of India.
      There will be an IIM Coordination Forum to be notified by the central government. It shall function as an advisory body and will be headed by an eminent person.
      The bill says the central government may frame rules to give additional powers and duties to the IIM Boards and, it will decide the terms and condition of service of directors although the appointment will be made by the board. It will notify the IIM coordination forum to be headed by a eminent person.
      All rules and regulations framed either by the central government or the IIM Boards will need to be tabled in parliament.

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