short notes for competitive exams, november...

Short Notes for Competitive Exams, November 2016 2016

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CONTENTS

101. Legal status of demonetised notes

102. Direct impact of demonetisation

103. The Shanghai Cooperation Organization

104. Functions of Reserve Bank of India

105. Stubble recycling after harvesting of crops

106 MSS or market stabilisation scheme

107 Sixth Heart of Asia Conference

108. Is there a case for scrapping the Rajya Sabha?

109 What is black money?

110. Globalisation and rising demand to regulate it

111 Start of Midday meals

112 Consumption after demonetisation as in Dec.2016

113 Likely impact of GST on ecommerce

114 How does food credit mechanism work

115 Phishing and hacking

116 Aadhaar Enabled Payment System (AEPS)

117 Banking the rural sector

118 Managing the Que or waiting line

119 SEBI‟s proposed definition of „real estate‟ to include all

defined as „infrastructure‟ by Ministry of Finance

120 Simplifying exports

121 Cash to GDP ratios

122 Demonetization in India

123 Under reporting and misreporting of income

124. Biggest Land Monetisation Drive

125 2016 a growing trend against Globalisation

126 Value Capture Financing

127 The results of Presidential Elections of United States of

America ,2016

128 Estimated impact of Goods and Services Tax to be started latest

by September, 2017

129 Demonetisation of 8th November,2016

130 At a glance graphic of development indices of Uttar Pradesh

131 Estimated tax slot on various goods and services under GST


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101. Legal status of demonetised notes: When a currency ceases to be a

legal tender, it means is that the physical note stops being in circulation

for public usage. Issued notes are still valid, because they are promissory

notes issued by the Reserve Bank of India and guaranteed by the Central

government. Once they stop being legal tender, the precedent in India

(and also other common law countries) is that they continue to be

exchanged by the specified offices of the central bank.

As per the accounting policy, currency notes in circulation are

accounted in the Balance Sheet of the Reserve Bank of India as a

liability. The liability on account of the currency notes not returned till

the stipulated date will continue unless there is an ordinance / order from

the government to this effect. However, such an order can be

constitutionally challenged.

102. Direct impact of demonetisation announced on 8th November

2016: On November 8, 2016, Government demonetised large-

denomination notes of Rs. 500 and Rs. 1000. These constituted about

80 per cent of currency in circulation, resulting is a major cash crunch in

the country.

A limit of withdrawal from ATM was set at Rs 2000 per card. By

cheque one could withdraw Rs. 10,000 per day and Rs 20,000 per week .

This was later revised to Rs 24,000 per person per week from saving

account, and Rs. 50,000 per week from current account. There was no

limit on deposit of old currency notes in one‟s account. For exchange

of notes a limit of Rs. 4500 per person per day was set, which was

reduced to Rs 2000 per day, as it was being misused. Long queues at

bank branches and outside ATMs to withdraw cash, were seen causing

some unrest among customers. Further relaxation was allowed for Rs.

2.5 lakh for wedding, and Rs. 50,000 per week for whole sellers and

businesses. Of the `5 lakh crore that banks are estimated to have got in

deposits in less than two weeks, the State Bank of India group has

accounted for `1.5 lakh crore. Exchange of notes has already come down

from an average of `600 crore a day to `200 crore by the end of the

second week. It'll be impossible to hide large amounts of cash when it has been through the system the forced shift of retail and trade activities to cashless transactions. This shift is a one way street, for the same reason. It leaves a data trail. There already is, a massive shift from the black economy to white. This is a

revolution.

103. The Shanghai Cooperation Organization (SCO), also called the

Shanghai Pact, is a loose security and economic bloc led by Russia and


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China. Other members are Kazakhstan, Kyrgyzstan and Tajikistan. In

2016, Turkey said that it plans to join SCO as Turkey‟s membership of

European Union has not progressed for many years.

104. Functions of Reserve Bank of India: The preamble of the Reserve

Bank of India describes its basic functions as regulating the issue of

bank notes and keeping of reserves with a view to securing monetary

stability in India and generally to operate the currency and credit system

of the country to its advantage. In November 2016, the central bank's

role is seen to have got sidelined from the strategic and policy-oriented

dimensions to execution. This is because the Prime Minister announced

the decision on demonetisation of Rs 500 and 1000 currency notes, and

the Secretary, Economic Affairs, has been making all the remaining

announcements.

105. Stubble recycling : is a better alternative to its burning, that causes

air pollution. If the crop residue is retained, and the land is not tilled

after the harvest, it retains soil nutrients, does not cause air pollution,

and helps in restricting growth of weeds, insect and disease control can

be overcome with more effective distribution of pesticides and

herbicides.

106. MSS or market stabilisation scheme of Reserve Bank of India, that

had a ceiling of Rs 30,000 crore for issue of Bonds, has been permitted a

20 fold increase to neutralise excess liquidity from the banking system

that accumulated following the demonetisation of high value currency

notes. Bonds ceiling approved in December 2016 is Rs 6 lakh crore.

This will enable banks to earn some interest by investing the excess cash

in government bonds or Treasury Bills in the absence of a matching

credit demand. The interest on MSS bonds, which have fixed tenures,

will be borne by the government while the money will be impounded by

RBI. The government will issue fresh bonds to support the scheme.

107. 6th

Heart of India Conference was held in Amritsar, in December

2016. The 40 member meeting is on future of Afghanistan. There are 14

core member countries such as India, Pakistan, Turkey , China, Russia,

Iran, Saudi Arabia. In addition are 20 “supporting countries” including

United States, Britain, Canada, Australia, Japan, Norway and European

Union.


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108. Two reasons to do away with the Rajya Sabha include (a) the

frequent disruptions of the House, preventing it from transacting

business and the Rajya Sabha's (b) ability to frustrate the will of the

directly elected representatives in the Lok Sabha.

However, there also exist reasons to retain the Rajya Sabha (a) It

prevents hasty legislation by the Lok Sabha, by vetting the laws in a

more detached manner. The General Elections to the Lok Sabha could

be based on , national emotional surges, as seen in 1984 after Indira

Gandhi‟s assassination. (b) The composition of the Rajya Sabha

changes gradually as 1/3 seats are filled every two years by legislatures

in the States. This is part of the checks and balances framework

provided for the federal structure, by the Constitution. (c) A balance

needs to be maintained between the will of the people and the will of the

States.

109. What is Black Money? According to the white paper on Black

Money tabled in Parliament in May 2012, Black money is defined as

assets or resources that have neither been reported to the public

authorities at the time of their generation nor disclosed during its

possession. In the context of demonetization, black money is that

component of cash that has not been declared to authorities nor has any

tax been paid on it .

Money generated through illegitimate activities such as crime, drug

trade, terrorism and corruption is also termed as black money.

110. Globalization is a multidimensional process with economic,

political, cultural, and developmental dimensions. These dimensions

involve different interpretations.

a) Economic globalization involves increasing integration of

factors, goods, services and markets. This is involving

modifications of governance institutions.

b) Political globalization focuses on political organization and

activities and asks questions such as the extent to which

globalization has weakened or strengthened the state and its

capacities.

c) Globalization has presented an opportunity for growth and

development. Trade, Learning and Knowledge are assets for

economic growth. However, its pace needs to be slowed down

to dilute its impact on culture and society.


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d) The positive side of economic growth due to globalization is

that social equality of larger groups. Its negative side is

resources depletion, pollution, unemployment, disruption of

traditional social structures, new wave immigrants, large scale

criminality.

e) There is an increasing demand on state to solve the negative

impact of globalization while protecting the positive side. The

state is expected to evolve multiple of reforms for sustainable

development. Therefore pressure on government is to regulate

globalization. In 2016, this demand has expressed itself

through Brexit and Republican Party‟s victory in USA

Presidential Election of 2016.

111. Midday meals in India: a midday meal scheme was begun in some

municipal schools of Madras in 1920. A review of the experience of

midday meals in some municipal schools in 1955, persuaded then-chief

minister, K Kamaraj to adopt the scheme for the state in 1956. It

reached 87% of students by 1962. This was expanded by M G

Ramachandran to add extra nutrition.

112. After demonetisation, consumption as on 7th

December , 2016:

113. Likely impact of GST on ecommerce


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114. How does the food credit mechanism work?

Besides availing short term loans that are unsecured, FCI avails of a cash

credit limit (CCL), fixed by the RBI, that it borrows from banks through

a consortium led by the State Bank of India. These limits are fixed

against the value of food grain stocks held with the corporation. But

grain stocks, against which the credit is available, are often held by the

state-run agencies in food grains surplus states of Punjab and Haryana.

115. Phishing and hacking: Debit cards of about 3.2 million users of

a few prominent banks in India were compromised in October 2016.

Customers from 19 leading banks such as State Bank of India, ICICI

Bank, HDFC Bank and Axis Bank were reportedly affected. Numerous

cases of phishing, the practice of sending emails pretending to be from

reputable companies, to induce individuals to reveal personal

information such as passwords and credit card numbers online have been

reported.

116. Aadhaar Enabled Payment System (AEPS) AEPS is a bank led

model that varies from bank to bank. The 1.26 lakh bank mitras

services through a single bank as transactions of other banks through

their micro ATMs are often denied. Inter operability issues are being

worked through the National Payments Corporation of India (NPCI) and

the Unique Identification Authority of India (UIDAI). National

Common Mobility Card is being expedited. NPCI is already working to

roll out a contact less platform for travelling by any means of transport


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and enabling account based retail applications. Micro ATMs are to be

installed in about 1.55 lakh post offices, further strengthened with the

opening of Post Bank. While debit cards registered a growth of 64%

between October 2013 and October 2015, number of ATMs grew about

43% while point-of-sale machines increased nearly 28%.

117. Banking the rural sector: The National Payments Corporation of

India (NPCI) had developed the USSD technology (Unstructured

Supplementary Service Data) based service for feature phones through

which customers needed to dial *99# and enter short messages for basic

banking activities, such as balance enquiry and generating mini

statement. It enables a two-way connection between the consumer's

phone and the telecom service provider's computers. About 50 banks are

on this platform. The remitter must acquire a seven-digit Mobile Money

Identifier (MMID) and a Mobile Personal Identification Number (M-

PIN). The payee‟s details needed include his phone number and MMID,

his account number and IFS Code or just his Aadhar number

118. Managing the Que or Waiting Lines: In the 1985 paper, The

Psychology of Waiting Lines, former Harvard Business School

professor David Maister offered a few interesting clues, on behaviour of

people standing in queues, to facilitate better management of waiting

lines. The following is a list of Maister's propositions:

a) Occupied time feels shorter than unoccupied time People want to get

started Anxiety makes waits seem longer

b) Uncertain waits are longer than known, finite waits

c) Unfair waits are longer than equitable waits The more valuable the

service, the longer the customer will wait

d) Solo waits feel longer than group waits Often science discovers what

we all intuitively know. Our actions are based on this `knowledge'. In

that sense, Maister's research may appear to state the obvious. But the

point is, can we test these propositions in real life? Or do these

propositions cover all kinds of queue behaviours?

119. Proposed definition of real estate from SEBI : To amend the norms

and regulations of Real Estate Investment Trusts (REIT) , SEBI seeks to


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broaden the definition of `real estate' or `property' to include hotels,

hospitals, convention centres and all such rent-generating assets, notified

as infrastructure by the Ministry of Finance. The aim is to transparently

liberalise REIT holdings in Special Purpose Vehicles (SPVs) that are

multi-layered.

The current REIT regulations define a SPV as a company or firm

that holds not less than 80% of its assets directly in properties and does

not invest in other SPVs. SEBI‟s move is to limit REIT controlling

interest to not less than 50% in an SPV, so as to provide greater

operational flexibility . Besides, the Companies Act 2013 does allow a

company to invest through two layers of investment companies.

120. Simplifying Exports: The government plans to bring on a single

online platform about 200 agencies that issue certificates to exporters to

help them avail duty benefits at the destination or importing country.

The platform will ensure exporters are issued certificates in hours.

Depending on India's bilateral or multilateral trade agreement, there are

a host of organisations that issue certificate of origin to exporters. These

certificates establish that the goods are made locally, and are not third

country goods routed via India, to claim duty concessions from

importing countries. This is to rationalise transactions costs and boost

export by cutting down on delays. It is also expected to boost investment

in logistics and infrastructure to make India a global production hub.

121. India's cash to GDP ratio is estimated to be too high, at around

11%. But comparisons are made with countries at much higher levels of

development, with much smaller rural and unbanked populations. China

has a ratio of around 9.5%, Germany 8% and the US around 7.5%.

122. Demonetization in India: The High denomination notes banned in

1946 were reintroduced in 1954. In 1978, banknotes of Rs.1000, Rs.

5000 and Rs 10,000 were banned. New Rs. 500 notes were introduced in

1987 and Rs. 1,000 notes in 1998. In 1978 India's population was 667


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million; it is exactly double today. The Rs. 500 note has become the

denomination of choice for transactions. Between 2011 and 2016, the

number of Rs. 1,000 notes, and Rs 500 rose by 76% and 109%

respectively.

123. Under reporting and misreporting of income: In the Budget of

2016, Government had distinguished between „under reporting‟ of

income with a penalty of 50%, and a misreporting of income on which

200% tax was to be imposed. After demonetisation in November 2016,

if anyone deposits money in bank and pays normal tax (35%) on that for

the current year, it can only be treated as income from other sources.

“Income tax may not slap a penalty on those depositing cash in bank

account and claiming it to be current year's income as this is neither

underreporting nor misreporting.

124. Land Monetisation Drive: 74 loss-making public sector companies

identified by NITI Aayog . Some of the loss-making firms such as HMT,

NTC, Hindustan Photo films and ITI hold more than 100 acres of prime

land in metro cities. NBCC has written a letter to all loss-making firms

to share details of the land bank available with them. NBCC has been

appointed as the land management agency for disposing of real estate

assets of loss making firms and it will get 0.5% of the value realised

from disposal of such land as fee, subject to a cap of Rs. 1crore.

Government had come out with guidelines on closure of sick and loss

making state run enterprises and disposal of their assets, including land.

The land management agency will determine the current land use and its

suitability for industrial, manufacturing or some other purposes, the

guidelines said.


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125. A growing trend against Globalisation in 2016: Globalisation

began in 1990s, as a process through which diverse peoples of the world

create a world spanning framework of reference for the things that shape

their life. A new problem emerging from interdependence of the world

is an asymmetry between nationally determined governance decisions

that have an international impact. The people affected by such decisions

do not have a voice in these decisions shaping their lives.

Global interdependence deepens on a continuous basis and significant

being the following:

a) the ebb and flow of jihadi terror and the war against it,

b) the tectonic changes in geopolitics that alter the balance within

and between power blocs,

c) business disruptions funded by footloose venture capital,

d) climate change and agreements to combat it,

e) bird flu and fear of ebola,

f) smart phones dreamt up in a few countries, copied in others, and

craved and used around the world,

g) films that release simultaneously in every time zone,

h) Nobel prizes that set common standards for excellence,

i) Games such as Pokémons that Go in some countries and

frustratingly hold back in others


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j) with a million other shared commercial, scientific and cultural

links.

Globalisation is the process through which diverse peoples of the world

create a world spanning framework of reference for the things that shape

their life.

The Socialists countries do not like the term „globalisation‟. Their view

hails „internationalism‟ as being part of their exclusive political

philosophy, when the labour class would rule the world eventually after

having overthrown capitalism. Under Globalisation the socialists are

finding an opposite situation, when the capitalism process of cross

border flows of trade, capital, information, knowledge, technology,

cuisine, entertainment, business practices, accounting standards, legal

principles, culture and ideas are connecting the world.

Global integration has paved the way for the dominance of today's

rich world. Globalisation is helping China, India and much of Asia catch

up with the rich nations and empower billions to realise their innate

human potential, instead of struggling not to drown in the wretchedness

of poverty and malnutrition.

1. Two common trends in world history have been:

a) The first trend has been of migration to settle in different parts of

the world in groups that defend their territory and seek to annex new

territory, in an incessant struggle for domination of one group over

another and for control of resources. This resulted in kingdoms,

conquests and journeys of discovery, elimination of peoples, slavery

and empires.

b) The second trend has been the process of identifying the unifying

features of shared humanity that transcend divisions of tribe, locality,

nation, race and colour. This second tendency has resulted in

underdeveloped colonized nations, manifesting in works of

philosophy and fiction, theology and pop music, in shared universal

rights and obligations, revealed commitment to mutual help,

advancement of knowledge and pursuit of ( based on article in ET of 02.11.2016)


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126. Value Capture Financing: is a new model for financing of

infrastructure projects, in which Government recovers some value that

public investments generate for private landowners. It is based on the

principle that government develops public infrastructure leading to rapid

economic development of private companies and private land owners.

Therefore, through additional taxes imposed on such entities, the

government should be able to get additional finances to future projects

in the same area. The target agencies that could adopt value capture

financing include state governments, central ministries of urban

development, railways, road transport, department of industrial policy

and promotion, power and shipping. India has drafted its first National

Value Capture Policy Framework in 2016. Though state governments

have been using VCF tools, there was no policy till 2016.

127. The result of Presidential Election in USA, 2016


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129. Demonetisation on 8th

November 2016

130. At a glance graphic of development indices of Uttar Pradesh


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131. Estimated tax slot on various goods and services under GST ( Yet

to be finalised as on 15th

December, 2016

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