[Current] March-Week3-Part2: Economy, Diplomacy related: RFPI Investors, CPSE Exchange Traded Funds, GSDP, Rohingya Migrants, ICANN control, OTBA scheme

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Economic Survey
  1. [Act 4] Economy Related
    1. E1: RBI: RFPI = FII + QFI
    2. E2: RBI: more banks can import gold under 80/20 rule
    3. E3: CPSE-ETF Exchange Traded Funds
    4. E4: State GSDP: Chindu feels something fishy
    5. E5: Gas Pricing postponed on EC order
  2. [Act 5] Diplomacy / International relation (IR) related
    1. D1: Indo-China: Economic Dialogue and IT Pact
    2. D2: Rohingya illegal migrants in India
    3. D3: USA hands over ICANN to world
  3. [Act 6] Misc:
    1. M1: OTBA scheme
    2. M2: Sports-New format of Hockey
    3. Mock MCQs

Part 1: deals with history, culture, EnB and Polity.(click me)
Part 2: deals with Economy, IR/Diplomacy and MCQs. (you’re on this page)

[Act 4] Economy Related

Five topics: RFPI, 80/20 rule, GSDP, CPSE-ETF, Gas pricing delayed

E1: RBI: RFPI = FII + QFI

Until now After RBI’s reform in Mar.’14
Two type of Foreign portfolio investors

  1. FII: Foreign institutional investor
  2. QFI: Qualified Foreign Investor
Now just one: REFI. Registered Foreign Portfolio Investor (RFPI)

REFI: Salient features?

  • Can buy and sell desi shares and debentures (via broker)
  • Can participate in disinvestment. (= can buy PSU shares of government- be it State or Central)
  • Can buy/sell Government bonds and Corporate bonds. (as per investment limits decided by authorities)
Government bonds Upto 25 billion USD
Corporate bonds Upto 51 billion.
  • These limits donot apply for NRIs.
  • Scheme Will become effective from 1/April/2014.

Benefits?

  • This Simplification will attract more capital inflows in India. (earlier there were separate limitations and registrations for FII vs QFI = headache, redtape)
  • More capital inflow=indirectly immunize our economy against the negative impact of American Fed Tapering.
  • Important: under Balance of Payment (BoP): the REFI investment will count undeR capital account (inflow.) BUT the profit/interest/dividend earned by such people will be considered as Current account outflow.
Current account Capital account
Profit interest dividend (outgoing). REFI investment (incoming)

E2: RBI: more banks can import gold under 80/20 rule

Background:

  • 2012-13: Current Account deficit (CAD) went as high as 88 Billion USD.
  • To  decrease this CAD, Government increased import duty on gold to 10% [so that import decreases]
  • August 2013: RBI launched 80:20 scheme. Under this scheme, an entity can import gold on condition that 20% of it will be exported back (=80% left for domestic use).

March 2014:

  • Until now only six banks were permitted to import gold under this.
  • RBI permitted some private banks to import gold under this scheme. (Axis, Kotak, Indus and Yes bank)

Result?

  • Will help gold jewelry exporters.
  • Will it raise CAD? Not much because our CAD for 2013-14 will be ~45 billion USD. (so it’s not that big 88 billion dollars in 2012. hence relaxation can be made.)

E3: CPSE-ETF Exchange Traded Funds

  • Think of EFT is one basket.
  • In this basket, Government puts its shares of 10 public sector understakings (PSUs) or Central Public Sector Enterprises (CPSE) e.g. ONC, GAIL, BEL.
  • Fund manager Goldman Sachs takes a knife and cut this ETF basket into smaller pieces worth Rs.10 each.
  • These small pieces are put on sale at stock exchange so, aam-juntaa can buy it. (minimum order has to be Rs.5000)
  • Hence called CPSE-ETF (Exchange traded funds)

Benefit

  • @Aam Juntaa: First time investor will get tax benefit under  Rajiv Gandhi Equity Savings Scheme.(upto Rs.50k)
  • @Government : this is one type of “disinvestment”, government’s shares are being sold to private players. CPSE-ETF will help government fetch around ~16 crore rupees.

E4: State GSDP: Chindu feels something fishy

  • GSDP= Gross State Domestic Product. (= in other words State’s GDP)
  • Central Statistics Office (CSO) calculates this.
  • National GDP will be higher than GSDP of States. Because it also counts output from sectors that donot belong to States. (e.g. Bombay high)
  • ~90% of national GDP is madeup of States’ GSDP.
  • Ya but why in news? Because Chindu suspects th at some states deliberately send exaggerated data to CSO to show their state’s GDP is awesome.
  • Therefore, Chindu has ordered CSO to cross check the data as soon as possible.

E5: Gas Pricing postponed on EC order

Rangarajan formula explained Long time ago

  • Government wanted to implement Ranga’s formula from 1/April/2014 (would have doubled the prices)
  • According to Ranga’s system, gas rates will be changed four times a year (=in each quarter). Pricing will be based on  12-month average of global rates and LNG import prices.
  • But EC denied.
  • Criticism:  sends a wrong signal to the global investor community about the policy framework

[Act 5] Diplomacy / International relation (IR) related

Three Topics: Indochina Economic Dialogue, Rohingya Migrants In India, USA-ICANN Control

D1: Indo-China: Economic Dialogue and IT Pact

Q. Write a note on  Sino-India Strategic economic dialogue. (200 words)

Apart from border issues, Sino-China relation is plagued by two major issues (1) Trade deficit on Indian side (2) China deliberately restricting the entry of Indian goods and services in its domestic market, via tarrif and non-tarrif barriers

  • 2010: both signed an agreement to hold strategic economic dialogue every year, to resolve these issues. Apart from India, only USA has such arrangement with China.
  • 2014: 3th round of talks in Delhi. It revolved around following topics:
  • Reducing India’s trade deficit with China- giving more market access to Indian Pharma and IT industries in China.
  • Within same week, India-China signed an MoU/IT pact. Under this pact, China agreed to assist Indian IT sector in their domestic market.
  • Infrastructure cooperation: China agreed to assist to infrastructure development in India, especially high-speed rail corridors.
  • improving bilateral investments
  • Developing counter strategy against two-US backed agreements TPP, TTIP because they are designed to keep China, India and other emerging economies from WTO talks.

Sidenotes:

TPP
  • Trans-Pacific Partnership (TPP)
  • Agreement is between US and Indo-Pacific countries like, Australia, New Zealand, Japan, Singapore, Malaysia, Brunei, Vietnam, Chile, Canada, Mexico and Peru.
  • India has not joined TPP but ASEAN-led RCEP (Regional Comprehensive Partnership) which does not demand labour reforms.
TTIP
  • Trans-Atlantic Trade and Investment Partnership
  • Agreement between US and EU, to boost trade between them.

D2: Rohingya illegal migrants in India

Q. Examine the problem Rohingya migrant influx in India and suggest remedies. [100 words]

Rohingya Muslims are illegally migrating to India via Bangladesh, due to on-going tussle with Buddhist in their native land, Rakhine in Myanmar. However, Indian authorities cannot sent them back because neither Myanmar or Bangladesh willing to recognizes them.

  • Some of these migrants involved with Lashkar-e-Toiba & other militant groups active in Chittagong hills in Bangladesh, who to use the plight of Rohingyas to increase hostility among India, Bangladesh and Myanmar.
  • LeT even created an outfit “Difa-E-Muslman” in Myanmar for this.

Suggestions:

  • Rohingya migrants in India need to be segregated, rehabilitated.
  • Indian authorities should negotiate the issue with Myanmar for their possible resettlement.
  • India should also ask UN Human rights council to intervene.

India should firmly spell that no state should evade its responsibility of giving protection and equal rights to its minority population.

~130 words.

Rohingyas migration map

D3: USA hands over ICANN to world

What is ICANN?

  • Internet Corporation for Assigned Names and Numbers. HQ: near Los Angeles.
  • ICANN is a non-profit corporation, manages internet protocol (IP) numbers and Domain name system (DNS).
  • Example: Yahoo.com (domain name) and 67.195.160.76 (IP address).
  • Domain name service (DNS) provides translation between that domain name vs IP addresses. so aam-juntaa doesn’t need to mugup the list of IP address for any website.

US control over ICANN:

  • ICANN works under contract of US dept. of commerce.
  • Mar 2014: Commerce department decide it’d not renew the contract. (Expires in Sep15). But instead, they asked ICANN to design new plan to run this system, with global-participation of  stakeholders across the world.

Why is US giving up control over ICANN:

  • Now USA thinks that Internet should run under global internet governance (!!) and defend the right to free speech.
  • However, its decision came after wide opposition by countries against US snooping/NSA-Snowden controversy. Great opposition by Brazil. Germany went on to declare separate European internet.

Impact on World

  • The impact of this decision depends upon the how and what alternative mechanism would be conceived by the international leaders.
  • China and Russia want to have internet under auspice of international organisation like UN or ITU, through which it can be regulated as well as constrained.

India’s stand?

  • India welcomed US decision.
  • India wants democratisation of internet with freedom of expression. (and measures to stop its misuse e.g. hate speech.)
  • India fears that US, Russia and China together may form an alternative mechanism that fulfils their own interest- something akin to UNSC/veto power.
  • India favours internet governance under a multi-lateral UN body, whose stake-holders are not from government but from civil society, academia and businesses.

[Act 6] Misc:

Lot can be added, but just focusing on two important developments. (PIN, books-authors-awards type news will be release separately later on.)

M1: OTBA scheme

Also known as “Rajiv Gandhi kitaab se copy karo yojana”

Q. List the salient features and benefits of OTBA scheme. [100 words]

Salient features:

  • CBSE has introduced Open Textbook Based Assessment (OTBA) in class 9th and 11th this year on experimental basis.
  • Under this mechanism, students are allowed to carry and use textbooks inside the exam-hall.
  • The questions will not be verbatim from the given book. They will teststudent’s ability to comprehend.

Benefits:

  • Relief from the burden of cramming the contents of textbooks. – break from rote learning.
  • Students can think beyond syllabus.
  • Students can acquire skill of information – processing, analysis and comprehension.

~80 words.

M2: Sports-New format of Hockey

  • by International Hockey Federation
  • To make the game more interesting and attract young audience.
  1. Before: 2 x 35 minutes = 70 minutes
  2. Now: 4 x 15 minutes = 60 minutes
  3. 40-second break after every penalty corner and a goal
  • Will be applicable to Champions trophy, world league, 2016 Rio Olympics and all other major tournaments.

Mock MCQs

Q1. Correct statements about Tablighi Jamat?

  1. It was an off-shoot of Muslim League to work in the religion, educational field.
  2. Bara Inambara was established by Tablighi Jamat Leaders for propagation of Islamic teachings.
  3. both A and B
  4. Neither A nor B

Q2: Find Incorrect Matches

  1. Rani ki Vaav: in Dilwara temples at Mt.Abu for religious bathing of Jains.
  2. Bara Imambara: Hyderabad based, Mughal Architecture.
  3. Anayottam Race: Bull cart race in Tamilnadu during Pongal.
  4. Timbuktu mausoleums: Islamic Architecture, in Mauritania in West Africa.

Answer choice:

  1. only 1 and 2
  2. only 3 and 4
  3. only 1, 3 and 4
  4. All of them

Q3. Find incorrect statements

  1. Indian Rhinos are classified as Critically endangered species.
  2. A rhino horn is made up of Keratin and hence incapable of regeneration.
  3. Female Indian Rhinos don’t have horns while African female rhinos have horns.
  4. Indian rhinos have one horn and three toes while African rhinos have two horns and two toes.

Answer choice:

  1. only 1 and 2
  2. only 2 and 4
  3. only 1, 3 and 4
  4. All of them

Q4. Which of the following species are found in the Temperate-Alpine climate of India?

  1. Blue sheep
  2. Tahr
  3. Golden Eagle
  4. Griffon Vulture

Answer choice:

  1. only 1 and 2
  2. only 2 and 4
  3. only 1, 3 and 4
  4. All of them

Q5. Which of the following is a critically endangered species in India?

  1. Himalayan Brown Bear
  2. Kalij Pheasant
  3. Himalayan Griffon Vulture
  4. Golden Eagle

Answer choice:

  1. only 1 and 2
  2. only 2 and 4
  3. only 1, 3 and 4
  4. None of them

Q6. Chagos island Archipelago

  1. is located in Caribbean sea, between Jamaica and Nicaragua.
  2. is a French overseas territory
  3. both A and B
  4. Neither A nor B

Q7. Find incorrect statements

  1. According to Representation of People’s Act, Any person convicted in any offence, cannot contest election for six years.
  2. In Lily Thomas vs Union of India (2013), Supreme court raised this limit to seven years for sitting MPs.
  3. In its latest report, Law commission has recommended raising this limit to eight years.

Answer choices

  1. only 1 and 2
  2. only 2 and 3
  3. only 1 and 3
  4. All of them.

Q8. For every resident enrolled, UID database contains:

  1. 16 digit unique number allotted to him
  2. his finger prints
  3. his iris image
  4. his facial image
  5. his blood group
  6. Height, weight and identification marks on body.

Answer choices

  1. 1234
  2. 2345
  3. 234
  4. All except 1 and 6

Q9. IF Supreme court allowed Police to access UID database, it may help in solving:

  1. a crime scene where fingerprints were found
  2. a crime scene where blood, semen, saliva or hairs were found.
  3. both A and B
  4. neither A nor B

Q10. Find correct statements about Registered Foreign Portfolio Investor (RFPI).

  1. This is the new category created by SEBI, to replace erstwhile QFIs
  2. They can invest in corporate bonds but not in government bonds
  3. Both A and B
  4. Neither A nor B

Q11. Which of the following is an example of transaction under Current Account of the Balance of Payment?

  1. Shares purchased by RFPI
  2. Government bonds purchased by RFPI
  3. Earnings of RFPI on their investments.
  4. None of Above

Q12. Correct statements

  1. If we combine the GSDP of all states, it’ll be higher than the national GDP.
  2. Instead of 80/20 rule on Gold import, Had RBI implemented 20/80 rule, theoretically, it’d reduce our trade deficit.
  3. Both A and B
  4. Neither A nor B

Q13. Correct statements about CPSE-ETF

  1. They’re called Exchange traded funds because investment has to be made in Rupees but dividiends are paid in dollars at the prevailing exchange rate on the given day.
  2. For the trading of CPSE-ETF in domestic market, ICICI is the fund manager and in American market, Goldman Sach is made the fund manager.
  3. Both A and B
  4. Neither A nor B

Mains answer writing practice

Question Marks Word limit
  1. Is “Dehorning” a viable solution to stop Rhino poaching in India? Justify your stand.
10 200
  1. List the salient features of Draft notification on Western Ghats ecologically sensitive areas.
5 100
  1. Examine the deficiency in Section 8 of RPA act and list the remedies suggested by Law commission.
10 200
  1. Discuss in brief the Registered Foreign Portfolio Investor (RFPI) scheme.
5 100
  1. Examine the problem Rohingya migrant influx in India and suggest remedies.
5 100
  1. Write a note on Sino-India Strategic economic dialogue.
10 200
  1. List the salient features and benefits of OTBA scheme.
5 100

Correct answers for the MCQs

  1. D all wrong
  2. D all wrong
  3. D all wrong
  4. D all of them found.
  5. D none of them critically endangered.
  6. D both wrong.
  7. B only 2 and 3 wrong.
  8. C only 234
  9. only A- fingerprints
  10. D both wrong
  11. C only. Money invested= capital, money earned = current.
  12. B only. 20/80 = you’ve to export 80% of the gold imported so yes it’ll reduce trade deficit.
  13. D. Both Wrong

Visit Mrunal.org/current for entire Archive weekly current affairs compilations published so far.

Mrunal recommends

34 Comments on “[Current] March-Week3-Part2: Economy, Diplomacy related: RFPI Investors, CPSE Exchange Traded Funds, GSDP, Rohingya Migrants, ICANN control, OTBA scheme”

  1. Thanks for discussing Rohingya case…

  2. Thanks a lot sir!

  3. Gratitude, it was really useful.

  4. Rohingya illegal migrants in India…….change BANGLADESH to MYANMAR……rohingyas of myanmar are creating problem

    1. my mistake it should be BANGLADESH only

  5. Q8. For every resident enrolled, UID database contains:

    16 digit unique number allotted to him
    his finger prints
    his iris image
    his facial image
    his blood group
    Height, weight and identification marks on body.

    the answer should be 1)1234

    1. my mistake…………the answer was right as UID is of 12 digit only

  6. You are doing a very well job sir thanks for showing a way…

  7. MY HEARTIEST THANKS TO SIR FOR MAKING US ABREAST REGARDING THE IMP. ISSUES IN BRIEF AND SYSTEMATIC MANNER.

  8. Thank you so much! Ever indebted :-)

  9. sorry mrunal… u r wrong abt otba.. i m the otba incharge of a vry reputed schl.. in otba they gv an entirely diff case study of 3-4 page.. nt relatd anyhw to buks.. nd students r not allowed to carry buks… dats ‘open text based assesment’… not ‘txtbook’…

  10. Mrunal sir
    Thank you so much
    I have nothing more to say
    I owe you so much.
    Thanks

  11. GREAT CONTRIBUTION SIR..

  12. Only 16 crore income from CPSE-ETF?

  13. Thank u sir:)

  14. Amazing………..

  15. This kind of articles are much helpful than answer writing competitions, thanks a ton sir..

  16. how can i download new article?

  17. rhino’s horn is made up of keratin and if cut in a way that doesn’t involves its skull, it will grow back.

  18. Mrunal,
    seems for Q7, the answer provided by you is not correct.
    “According to Representation of People’s Act, Any person convicted in any offence, cannot contest election for six years.” this statement is also wrong.
    Pls verify at below link:
    http://indiankanoon.org/doc/1784702/

    RPA section 8 doesn’t say about ALL offenses. It specifically mentions about ‘particular offenses’ mentioned in section 8(1), and particular offenses mentioned in section 8(2) and any other offenses that draw 2 years imprisonment as per 8(3) will not lead to the conclusion ”
    This means the offenses that are out of the lists of 8(1), 8(2) and those received less than 2 years imprisonment will not lead to conclusion – “cannot contest election for six years”

    Could you please verify and re-comment on this.

  19. some typo in above comment :

    Mrunal,
    seems for Q7, the answer provided by you is not correct.
    “According to Representation of People’s Act, Any person convicted in any offence, cannot contest election for six years.” this statement is also wrong.
    Pls verify at below link:
    http://indiankanoon.org/doc/1784702/

    RPA section 8 doesn’t say about ALL offenses. It specifically mentions about ‘particular offenses’ mentioned in section 8(1), and particular offenses mentioned in section 8(2) and any other offenses that draw 2 years imprisonment as per 8(3) will lead to conclusion “cannot contest election for six years”

    This means the offenses that are out of the lists of 8(1), 8(2) and those received less than 2 years imprisonment will not lead to conclusion – “cannot contest election for six years”

    Could you please verify and re-comment on this.

    1. yes Mohanrazz…u r right. It is actually 2 years case only..if anybody is convicted in a case with an imprisonment for less than 2 yrs..then he is not disqualified from contesting election.

  20. only one sentence for yours sincere effort…BRIGHTER THAN SUNSHINE SWEETER THAN HONEY….my preparation for IAS,,gets the required fuel from yours work

  21. Thank you very much for the topics you are bringing in…

  22. Hi Mrunal, could you please explain why in RFPI the profit earned will be counted in current account outflow but not inflow?

    Thanks

  23. Hello mrunal sir, i want to know that “have u apload the current affaits of month of jan & feb…?????” it needed or not….

  24. Mrunalbhai, your CSAT Katl ki subah countdown is malfunctioning sometimes. Right now showing 35 days to go! For a second I became happy, only to realise in the next second that only 31 days.

  25. Mrunal sir can you please explain why when a foreign investor (under RFPI) who invests in shares come under Capital account inflow and not under current account inflow ?

  26. tremendous efforts.

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