Polity & Governance
- Demonetisation beneficial, but its implementation may weaken GDP growth: Moody’s
- Airtel launches India’s first payments bank
- Govt asks NABARD to disburse Rs 21,000 crore to farmers
Science & Technology
- India ranks 138 in 2016 ICT Development Index
- IAF’s Upgraded Jaguar DARIN III aircraft receives IOC
- China successfully launches fourth data satellite
Key Facts for Prelims
- New chairman of NHAI
- 2016 International Press Freedom Award
Polity & Governance
Demonetisation beneficial, but its implementation may weaken GDP growth: Moody’s
In its latest report, credit rating agency Moody’s has said the move to ban old Rs 500/1000 notes is affecting all sectors of the economy to various extent, with banks being the key beneficiaries.
- The report is titled ‘Indian Credit — Demonetisation Is Beneficial for Indian Government and Banks; Implementation Challenges Will Disrupt Economic Activity’.
As per the report, what will be the effects of demonetization?
- Demonetisation will significantly disrupt economic activity and lead to weaker growth in near-term, though in the long run it can boost tax revenues and translate into faster fiscal consolidation.
- There will be a loss of wealth for individuals and corporates with unreported income, as some will choose not to deposit funds back into the formal financial system to avoid disclosing the sources of these funds.
- In the immediate period, demonetisation would significantly disrupt economic activity, resulting in temporarily weaker consumption and GDP growth.
- Households and businesses will experience liquidity shortages as cash is taken out of the system, with a daily limit on the amount in old notes that can be exchanged into new notes.
- Corporates will see economic activity decline, with lower sales volumes and cash flows, with those directly exposed to retail sales most affected.
- However, greater formalisation of economic and financial activity would ultimately help broaden the tax base and expand usage of the financial system, which would be credit positive.
- Banks would benefit significantly from a move towards digital payments, given their role as intermediaries for such transactions. Rising bank deposits could lower lending rates, a positive for the banks.
- In the nearer term, however, the asset quality will deteriorate for banks and non-bank finance companies, as the economic disruption will significantly impact the ability of borrowers to repay loans, in particular for the loans against property, commercial vehicles and micro finance sectors.
- A prolonged disruption could also have a more significant impact on asset quality, as both corporate and small-and medium-sized enterprise customers have a limited ability to withstand a sustained period of economic weakness.
- In the medium term, the impact on businesses will depend on how quickly liquidity returns to the system and transaction flows are restored. The government could prevent the same amount of cash returning into the system, in an effort to increase the use of non-cash transactions and digital payments.
- This would improve the overall operating environment for doing business in India — by improving the ease and speed at which payments reach manufacturers and reducing corruption — but would prolong the economic disruption.
- However, consumption in India is still largely cash-driven, and a move towards digital payments would require a likely gradual change in consumer habits.
Airtel launches India’s first payments bank
Airtel Payments Bank Limited or Airtel Bank became the first payments bank in the country to launch live banking services in Rajasthan.
- The pilot phase of the Airtel bank launched in Rajasthan aims at testing systems and processes ahead of a full-scale pan Indian launch.
- Airtel Payments Bank is a subsidiary of Bharti Airtel Limited. Mahindra Bank holds 19.9% stake in it.
- Customers can open bank accounts by using Aadhaar based e-KYC. Airtel subscriber’s mobile number will function as a bank account number.
- The bank will accept deposits not exceeding Rs 1 lakh. It cannot perform lending activities, except while giving loans to its employees on approval of the board.
- It intends to give an interest rate of 7.25% per annum on deposits in savings accounts.
- It will be offering customers the convenience of cashless purchase of goods/services using their bank accounts/wallets, contributing to of financial inclusion and banking for all.
- Though payment banks are allowed to issue debit card facility, but Airtel Payments Bank will be not offering this facility right now.
In August 2015, RBI had had given in-principle approval to 11 applicants to set up payments bank by February 2017. So far, out of these 11 applicants, Tech Mahindra Ltd, Cholamandalam Investment and Finance Co, and billionaire Dilip Shanghvi have opted out.
RBI guidelines for payment banks:
According to RBI guidelines issued in November 2014,
- A payments bank will maintain cash reserve ratio with the central bank.
- Apart from it, they will be required to invest minimum 75% of their deposits in statutory liquidity ratio eligible government securities with maturity up to one year and
- Hold maximum 25% in current and time deposits with other scheduled commercial banks for operational purposes and liquidity management.
Govt asks NABARD to disburse Rs 21,000 crore to farmers
Government has allowed National Bank for Agriculture and Rural Development (NABARD) to disburse Rs 21,000 crore to cash-starved farmers, helping them sow winter crops like wheat ahead of the sowing season.
- The NABARD will disburse the money to farm cooperatives for onward payments to farmers.
Need of the move:
- The move is aimed at easing liquidity crisis facing farmers who were left with very little cash to buy seeds and fertilizers for winter crops due to restrictions placed on bank withdrawals post demonetisation.
- The government’s demonetisation move, which swept away 86% of currency in circulation, has badly hit farmers leaving them without cash just ahead of the sowing season. This has also threatened crop production in a year that came after two successive years of drought. More than 40% small and marginal farmers get crop loans from cooperative institutions.
- The sanction of Rs 21,000 crore to the district central cooperative banks (DCCBs) will enable them to pass on or grant funds to the primary agriculture cooperatives.
- This will then help in meeting crop loan requirements of farmers in Rabi season.
- This will help in smooth flow of credit for farmers to enable them to undertake rabi requirements.
National Bank for Agriculture and Rural Development (NABARD) is an apex development and specialized bank established in July 1982 by an act by the parliament of India.
- It is one of the premier agencies providing developmental credit in rural areas.
- NABARD is India’s specialised bank for Agriculture and Rural Development in India.
- Its main focus is to uplift rural India by increasing the credit flow for elevation of agriculture & rural non-farm sector.
- It was established based on the recommendations of the Committee set up by the Reserve Bank of India (RBI) under the chairmanship of Shri B. shivaraman.
- It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC).
- The Bank has been accredited with “matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India”.
- NABARD is active in developing financial inclusion policy and is a member of the Alliance for Financial Inclusion.
- It also looks after the development of the cottage industry, small industry and village industry, and other rural industries.
Science & Technology
India ranks 138 in 2016 ICT Development Index
India has been ranked 138th in the 2016 ICT Development Index out of a total of 175 countries. In 2015, India ranked 135th position.
- The report was launched as part of the annual Measuring the Information Society Report for 2016 of the International Telecommunications Union (ITU).
About the index:
- The ICT Development Index (IDI) rankings compare the state of ICT development across countries. It is published annually by the UN ITU.
- The IDI is based on 11 ICT indicators, grouped in three sub-indices: access, use and skills.
- It is standard tool that governments, operators, researchers, development agencies and others can use to measure the digital divide and compare ICT performance within and across countries.
Highlights of the report:
- The list is topped by South Korea (1st), Iceland (2nd), Denmark (3rd), Switzerland (4th) and United Kingdom (5th).
- The lowest on the list is Niger (175), Chad (174), Guinea-Bissau (173), South Sudan (172) and Burundi (171).
- European and countries in Americas region have made significant progress in ICT development.
- In the Asia Pacific region, India is ranked at 26 out of the 34 countries. 9 countries in region remained least concerned. Africa was named as the worst performing region.
- India’s score has improved from 2.50 in 2015 to 2.69 in 2016.
- In terms of sub-indices access, India ranks 139 in 2016 as against 140 in 2015; use sub index, India has moved up to 142 in 2016 from 143 in 2015; skills sub index, India ranked 122.
- Broadband access in India has become cheaper compared to the year 2015, but the data caps are among the most highest and restrictive in the world.
- In India over 40% of the population still does not own a mobile phone. There is also a significant gender gap in mobile phone access in India.
- Besides, there is lack of mobile ownership seen in lower income category, and among those who are not educated. People in rural regions are more likely to not own a mobile phone.
- Fixed line telephone subscriptions have gone down in India, and now only two people in a hundred have a landline.
- However, mobile phone subscriptions, computers in households, amount of available bandwidth, and access to an internet connection have all seen increase in India.
- The percentage of users on the internet has gone up from 21% in 2014 to 26% of the population in 2015.
As per the report, what should India do?
- For improving the IDI, India needs to improve internet access to the underserved to reduce digital divide.
- There is also a need to change the definition of the minimum broadband speed.
- The FUP (fair usage policy) levels must be relaxed which are among the most restrictive in the world. Efforts should be taken to promote the use of mobile phones in rural areas.
- Besides more efforts must be taken to increase access of mobile phones to more women.
IAF’s Upgraded Jaguar DARIN III aircraft receives IOC
The upgraded Jaguar DARIN III twin-seat aircraft has received Initial Operation Clearance (IOC).
- It is considered as a significant milestone for the country’s military aviation sector.
- DARIN III aircraft is an upgraded DARIN I Standard Jaguar.
- Hindustan Aeronautics Limited (HAL) has upgraded 3 DARIN I Standard Jaguars to DARIN III Standard. The aircraft is now equipped with world class avionics system.
- HAL’s Mission and Combat System Research and Design Centre (MCSRDC) had carried out total design and development of aircraft and modification was done at Overhaul Division.
- Besides HAL, certification agencies, trial team of ASTE and other agencies were involved in the upgrade programme.
- The upgrade incorporates new state-of-the-art avionics architecture including the Open System Architecture Mission Computer (OSAMC), Fire Control Radar, Solid State Digital Video Recording System (SSDVRS), Autopilot with Alt Select & HNAV and Identification of Friend or Foe (IFF) and more.
DARIN I Standard Jaguar is an Anglo-French jet attack aircraft. It was originally used by the French Air Force and British Royal Air Force in the close air support and nuclear strike role. It is still in service with Indian Air Force and its fleet is based at the Ambala air force station.[Ref: Economic Times]
China successfully launches fourth data satellite
China has successfully launched its fourth data satellite named Tianlian I-04 to achieve global network operation that will provide data relay, measurement and control services for its manned spacecraft.
- The satellite was launched on board of Long March-3C carrier rocket from the Xichang Satellite Launch Centre in southwest Sichuan province.
- Tianlian I-04 has been developed by the China Academy of Space Technology under the China Aerospace Science and Technology Corporation.
- The satellite seeks to achieve global network operation that will provide data relay, measurement and control services for its manned spacecraft.
- The network will also offer data relay services for the country’s medium- and low-Earth orbiting resources satellites, control support and measurement for spacecraft launches.
- Tianlian I and CTDRS-1 is a Chinese data tracking and relay communications satellite series. Functionally, it is similar to US Tracking and Data Relay Satellite System.
- China had launched its first data relay satellite the Tianlian I-01, in April 2008.
- The second and third relay satellite was launched in July 2011 and July 2012 respectively.
Key Facts for Prelims
New chairman of NHAI
- Yudhvir Singh Malik has been appointed as new Chairman of National Highways Authority of India (NHAI).
- The National Highways Authority of India (NHAI) is an autonomous agency of the Government of India.
- It is responsible for management of a network of over 70,000 km of National Highways in India.
- It is a nodal agency of the Ministry of Road Transport and Highways.
- The NHAI was created through the promulgation of the National Highways Authority of India Act, 1988. In February 1995, the Authority was formally made an autonomous body.
- It is responsible for the development, maintenance, management and operation of National Highways.
2016 International Press Freedom Award
- Indian journalist Malini Subramaniam was conferred with the 2016 International Press Freedom Award.
- She has been honored for her reporting from the Naxal-infested Bastar area and for the commitment to a free press.
- The International Press Freedom Award honors journalists or their publications around the world for showing courage in defending press freedom despite facing attacks, threats or imprisonment.
- The award was established in 1991 and is administered by the Committee to Protect Journalists (CPJ), an independent NGO based in New York, US.
- In addition to recognizing individuals, CPJ seeks to focus local and international media coverage on countries where violations of press freedom are particularly serious.