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Current Affairs 08 October 2022

CONTENTS

  1. India and UK Free Trade Agreement
  2. Strategic disinvestment of IDBI Bank
  3. Europe’s Digital Services Act
  4. Lassa fever

India and UK Free Trade Agreement


Context:

The India-U.K. Free Trade Agreement (FTA) may not be ready in time for its October-end deadline indicated both New Delhi and London, as India reacted sharply to British Home Secretary’s statement linking the FTA with migration issues and the U.K. government said “quality”, not “speed” would determine the FTA’s launch.

Relevance:

GS II- International Relations

Dimensions of the Article:

  1. What are Free Trade Agreements (FTAs)?
  2. Benefits of India-UK FTA
  3. Areas of cooperation between India and UK:
  4. Issues in India-UK relations

What are Free Trade Agreements (FTAs)?

Free Trade Agreements (FTAs) are the arrangements between two or more trading alliances that primarily agree to lessen or dispose of customs tariff and non-tariff barriers on substantial trade between them.

Key features of Free Trade Agreements (FTAs) are as follows:

  • The member nations of FTAs explicitly identify the duties and tariffs that are to be imposed on member countries when it comes to imports and exports.
  • FTAs typically cover trades in
    • merchandise — such as agricultural or industrial products
    • services — such as banking, construction, trading and so forth
    • intellectual property rights (IPRs)
    • investment
    • government procurement
    • competition policy and so on.
  • FTAs additionally, for the most part, provide criterion called the ‘Rules of Origin (RoO)’, required for the determination of product’s country of origin for the imposition of the preferential tariff on International trade.   Note: Rules of Origin (RoO) are enforced with the issuance of a Certificate of Origin (CoO) by authorized agencies of the trading partner.
  • FTAs act as an exception to the Most Favoured Nation principle adopted by WTO (World Trade Organization).
Benefits of India-UK FTA:
  • The FTA negotiations with the UK is expected to increase our exports in Leather, Textile, Jewellery and processed Agri products.
  • It also expected to register a quantum jump in the export of Marine Products through the recognition of 56 marine units of India.
  • The Mutual Recognition Agreements (MRAs) on Pharma could provide additional market access.
  • There is also great potential for increasing exports in service sectors like IT/ITES, Nursing, education, healthcare, including AYUSH and audio-visual services.
  • Observing that UK was a major trade partner of India with substantial bilateral volume of trade in goods and services, the cooperation extended across areas like tourism, tech, startups, education, climate change, etc.
  • The two nations were looking forward to a mutually beneficial trade deal with balanced concessions and market access package in a wide range of sectors.
  • It will also contribute in integrating value chains and help augment our mutual efforts to strengthen the resilience of supply chains.
Areas of cooperation between India and UK:
  • Institutionalised dialogues: India and UK have a number of bilateral dialogue mechanisms in place, covering a wide spectrum of areas including political, trade, education, science & technology, defence etc.
  • Trade: UK is among India’s major trading partners and during the year 2014-15, UK ranked 18th in the list of India’s top 25 trading partners. India’s main exports to the UK are garments and textiles, machinery and instruments, petroleum products, footwear and leather.
  • Services: As per UK’s Office for National Statistics, India-UK bilateral trade in services in the year 2014 amounted to approx. £2.5 billion.
  • Investment: UK is the 3rd largest inward investor in India, after Mauritius, and Singapore with a cumulative equity investment of US $22.56 billion.
  • Economic Dialogue: Bilateral mechanisms like India-UK Economic & Financial Dialogue (EFD) and India-UK Joint Economic and Trade Committee (JETCO) form the basis of institutional engagements between the two countries.
  • Education: Education is an important plank of the India-UK bilateral relationship. Over the last 10 years, the relationship has grown substantially with the introduction of bilateral mechanisms such as the India-UK Education Forum UK-India Education and Research Initiative (UKIERI).
  • Indian Students: UK has traditionally been a favourite destination for international students. At present, there are approximately 20,000 Indian students pursuing Undergraduate and Postgraduate courses in the UK.
  • Cultural Linkages: Cultural linkages between India and UK are deep and extensive, arising out of shared history between the two countries. There has been a gradual mainstreaming of Indian culture and absorption of Indian cuisine, cinema, languages, religion, philosophy, performing arts, etc.
  • Indian Diaspora: The India Diaspora in UK is one of the largest ethnic minority communities in the country, with the 2011 census recording approximately 1.5 million people of Indian origin in the UK equating to almost 1.8 percent of the population and contributing 6% of the country’s GDP.
  • Geopolitical Significance – The Indian Ocean is identified as a vital arena for closer defence and security cooperation between the two countries. Further, India needs UK’s support on international fora for its aim to have a permanent seat in UNSC and full membership of NSG.
Issues in India-UK relations
  • The UK does not have a government-to-government framework for arms sales to India, relying instead on commercial-led transactions.
  • UK is an active participant in Belt and Road Initiative of China for which India raised sovereignty issues.
  • Colonial hangover in public is affecting the policy makers of India to take decisions for close relations with UK.
  • Brexit raises major issues for Indian business:
    • Political uncertainty and oscillating business policy along with fluctuating market share and prospect.
    • Restructuring to set up EU subsidiaries of Indian companies.

Source: The Hindu


Strategic disinvestment of IDBI Bank


Context:

The government kicked off the process for the strategic disinvestment of IDBI Bank along with the transfer of management control, by issuing a preliminary information memorandum to invite expressions of interest from prospective buyers.

Relevance:

GS-III: Indian Economy (Growth and Development of Indian Economy, Fiscal Policy, Inclusive growth and issues therein, Budgeting)

Dimensions of the Article:

  1. What is Disinvestment?
  2. What is Strategic Disinvestment?
  3. Evolution of Disinvestment Policy in India
  4. Privatization in 2019 and onwards
  5. Issues related to Disinvestment
  6. Significance of the disinvestment

What is Disinvestment?

  • Disinvestment or divestiture refers to the government selling or liquidating its assets or stakes in PSE (public sector enterprise).
  • The Department for investment and public asset management (DIPAM) under Ministry of finance is the nodal agency for disinvestment
  • It is done when a PSU start incurring the loss of exchequer.
  • Disinvestment proceeds can help the government fund its fiscal deficit.

What is Strategic Disinvestment?

  • Strategic Disinvestment refers to the sale of a public sector holding/undertaking to a non-government entity and in most cases, to the private sector. It is done so by the government in order to relieve itself the burden of maintaining a non-performing public enterprise.
    • Unlike the simple disinvestment, strategic sale implies a kind of privatization.
  • The disinvestment commission defines strategic sale as the sale of a substantial portion of the Government shareholding of a central public sector enterprises (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.
  • Strategic disinvestment in India has been guided by the basic economic principle that the government should not be in the business to engage itself in manufacturing/producing goods and services in sectors where competitive markets have come of age.
  • The economic potential of such entities may be better discovered in the hands of the strategic investors due to various factors, e.g. infusion of capital, technology up-gradation and efficient management practices etc
Main objectives of Strategic Disinvestment in India
  • Meeting budgetary requirements
  • Reduce fiscal burden
  • Raise funds to finance growth and development projects
  • Improve market competitiveness and discipline
  • Transfer of commercial risks

Evolution of Disinvestment Policy in India

  • The liberalization reforms undertaken in 1991 ushered in an increased demand for privatization/ disinvestment of PSUs.
  • The new economic policy 1991 indicated that PSUs had shown a very negative rate of return on capital employed due to:
    • Subsidized price policy of public sector undertakings.
    • Under–utilization of capacity
    • Problems related to planning and construction of projects.
    • Problems of labour, personnel and management and lack of autonomy
  • In the initial phase, this was done through the sale of a minority stake in bundles through auction. This was followed by a separate sale for each company in the following years, a method popularly adopted till 1999-2000.
  • India adopted strategic sale as a policy measure in 1999-2000 with the sale of a substantial portion of government shareholding in identified Central PSEs (CPSEs) up to 50% or more, along with transfer of management control. This was started with the sale of 74 % of the Government’s equity in Modern Food Industries Limited (MFIL).
  • Thereafter, 12 PSUs (including four subsidiaries of PSUs), and 17 hotels of Indian Tourism Development Corporation (ITDC) were sold to private investors along with transfer of management control by the Government.
  • Another major shift in disinvestment policy was made in 2004-05 when it was decided that the government may “dilute its equity and raise resources to meet the social needs of the people”, a distinct departure from strategic sales.
  • Department of Investment and Public Asset Management (DIPAM) has laid down comprehensive guidelines on “Capital Restructuring of CPSEs” in May 2016 by addressing various aspects, such as payment of dividends, buyback of shares, issues of bonus shares and splitting of shares.

Privatization in 2019 and onwards

  • In November 2019, India launched its biggest privatization drive in more than a decade. An “in-principle” approval was accorded to reduce the government of India’s paid-up share capital below 51% in select Central Public Sector Enterprises (CPSEs).
  • Among the selected CPSEs, strategic disinvestment of the Government’s shareholding of 53.29% in Bharat Petroleum Corporation Ltd (BPCL) was approved which led to an increase in value of shareholders’ equity of BPCL by INR 33,000 crore when compared to its peer Hindustan Petroleum Corporation Limited (HPCL) and this reflects an increase in the overall value from anticipated gains from consequent improvements in the efficiency of BPCL when compared to HPCL which will continue to be under Government control.

Issues related to Disinvestment

  • It is against the socialist ideology of equal distribution of resources amongst the population.
  • It will lead to monopoly and oligopolistic practices by corporates.
  • Proceedings of disinvestment had been used to cater the fiscal deficit of the state which would lead unhealthy fiscal consolidation.
  • Private ownership does not guarantee the efficiency (Rangarajan Committee 1993).
  • Disinvestment exercise had been done by undervaluation of public assets and favoritism bidding, thereby, leading to loss of public exchequers.
  • Private ownership might overlook developmental region disparity in order to cut the cost of operation.

Significance of the disinvestment

  • Trade unionism and political interference often lead to halting of PSUs projects thereby hampering the efficiency in long run.
  • Problem of disguised unemployment and outdated skill in PSUs employee are the major cause of inefficiency.
  • Private prayers works out of Red Tapism bureaucratic mentality and focus on performance-driven culture and effectiveness (Disinvestment Commission 1996).
  • More robust competitive bidding leads to competition in private sectors to participate in PSUs.
  • Moreover, it ensuring that product service portfolio remains contemporary by developing/ acquiring technology.

-Source: The Hindu


Europe’s Digital Services Act


Context:

The European Union (EU) has given final approval to online safety-focused legislation called Digital Services Act (DSA), which is an overhaul of the region’s social media and e-commerce rules.

Relevance:

GS III- Cyber Security

Dimensions of the Article:

  1. What is the DSA, and to whom will it apply?
  2. What do the new rules state?

What is the DSA, and to whom will it apply?

  • The DSA will tightly regulate the way intermediaries, especially large platforms such as Google, Facebook, and YouTube, function when it comes to moderating user content.
    • Instead of letting platforms decide how to deal with abusive or illegal content, the DSA will lay down specific rules and obligations for these companies to follow.
  • According to the EU, DSA will apply to a “large category of online services, from simple websites to Internet infrastructure services and online platforms.”
    • The obligations for each of these will differ according to their size and role.
  • The legislation brings in its ambit platforms that provide Internet access, domain name registrars, hosting services such as cloud computing and web-hosting services.
    • But more importantly, very large online platforms (VLOPs) and very large online search engines (VLOSEs) will face “more stringent requirements.”
  • Any service with more than 45 million monthly active users in the EU will fall into this category.
    • Those with under 45 million monthly active users in the EU will be exempt from certain new obligations.
  • Once the DSA becomes law, each EU Member State will have the primary role in enforcing these, along with a new “European Board for Digital Services.”
  • The EU Commission will carry out “enhanced supervision and enforcement” for the VLOPs and VLOSEs.
    •  Penalties for breaching these rules could be huge — as high as 6% of the company’s global annual turnover.

What do the new rules state?

New procedures for faster removal:

  • Online platforms and intermediaries such as Facebook, Google, YouTube, etc will have to add “new procedures for faster removal” of content deemed illegal or harmful.
  • This can vary according to the laws of each EU Member State.
  • These platforms will have to clearly explain their policy on taking down content; users will be able to challenge these takedowns as well. Platforms will need to have a clear mechanism to help users flag content that is illegal. Platforms will have to cooperate with “trusted flaggers”.

Impose a duty of care:

  • Marketplaces such as Amazon will have to “impose a duty of care” on sellers who are using their platform to sell products online.
  • They will have to “collect and display information on the products and services sold in order to ensure that consumers are properly informed.”

Audit:

  • The DSA adds “an obligation for very large digital platforms and services to analyse systemic risks they create and to carry out risk reduction analysis”.
  • This audit for platforms like Google and Facebook will need to take place every year.

Independent vetted researchers:

  • The Act proposes to allow independent vetted researchers to have access to public data from these platforms to carry out studies to understand these risks better.

Misleading interfaces:

  • The DSA proposes to ban ‘Dark Patterns’ or “misleading interfaces” that are designed to trick users into doing something that they would not agree to otherwise.
  • This includes forcible pop-up pages, giving greater prominence to a particular choice, etc.
  • The proposed law requires that customers be offered a choice of a system which does not “recommend content based on their profiling”.

 Russia-Ukraine conflict:

  • The DSA incorporates a new crisis mechanism clause — it refers to the Russia-Ukraine conflict — which will be “activated by the Commission on the recommendation of the board of national Digital Services Coordinators”.
  • However, these special measures will only be in place for three months.

Protection for minors:

  • The law proposes stronger protection for minors, and aims to ban targeted advertising for them based on their personal data.

Transparency measures:

  • It also proposes “transparency measures for online platforms on a variety of issues, including on the algorithms used for recommending content or products to users”.

-Source: The Hindu


Lassa Fever & Key Findings


Context:

Recently a study has found that Climate change may aid the spread of Lassa fever, which is endemic to parts of west Africa, to the Central and Eastern parts of the African continent in the next 50 years.

Relevance:

GS II- Health

Dimensions of the article:

  1. Key Findings
  2. What is Lassa fever?
  3. How does it spread?
  4. Symptoms

Key Findings

  • There would be a 600% jump in the number of people exposed to the virus that causes Lassa fever.
  • The number of people at risk of exposure would rise to 453 million by 2050 and 700 million by 2070, up from about 92 million in 2022.
  • An estimated 80% of infections are mild or asymptomatic. But the remaining 20 % can cause haemorrhaging from the mouth and gut, low blood pressure and potential permanent hearing loss.
  • Temperature, rainfall and the presence of pastureland areas are key factors that contributed to the transmission of the Lassa virus.
  • If the virus is successfully introduced and propagated in a new ecologically suitable area, its growth would be limited over the first decades.

What is Lassa fever?

  • The Lassa fever-causing virus is found in West Africa and was first discovered in 1969 in Lassa, Nigeria.
  • The discovery of this disease was made after two nurses died in Nigeria.
  • The death rate associated with this disease is low, at around one per cent.
  • But the death rate is higher for certain individuals, such as pregnant women in their third trimester.
  • According to the European Centre for Disease Prevention and Control, about 80 per cent of the cases are asymptomatic and therefore remain undiagnosed. Some patients may need to be hospitalised and develop severe multi-system disease. Fifteen per cent of the hospitalised patients may die.

How does it spread?

  • The fever is spread by rats and is primarily found in countries in West Africa including Sierra Leone, Liberia, Guinea, and Nigeria where it is endemic.
  • A person can become infected if they come in contact with household items of food that is contaminated with the urine or feces of an infected rat.
  • It can also be spread, though rarely, if a person comes in contact with a sick person’s infected bodily fluids or through mucous membranes such as the eyes, nose or the mouth. Person-to-person transmission is more common in healthcare settings.
  • Even so, people don’t usually become contagious before symptoms appear and cannot transmit the infection through casual contact such as through hugging, shaking hands or sitting near someone who is infected.

Symptoms

  • Mild symptoms include slight fever, fatigue, weakness and headache and more serious symptoms include bleeding, difficulty breathing, vomiting, facial swelling, pain in the chest, back, and abdomen and shock.
  • Symptoms typically appear 1-3 weeks after exposure.
  • Death can occur from two weeks of the onset of symptoms, usually as a result of multi-organ failure.
  • The most common complication associated with the fever is deafness.

-Source: Down to Earth


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