1. Nirmala Sitharaman’s economic package finale: All key announcements

Relevant for GS Prelims & Mains Paper III; Economics

With a combination of several reforms, fiscal and liquidity measures, finance minister Nirmala Sitharaman today completed the announcement of the last leg of the Rs. 20 lakh crore economic package announced by Prime Minister Narendra Modi earlier. To improve livelihood for the poor, the Modi government today hiked the MGNREGA budget hiked by an additional Rs. 40,000 crore. Sitharaman also announced that public sector enterprises or PSUs will exit non-strategic areas and private companies will be allowed to enter all sectors.

The finance minister also detailed the break-up of the Rs. 20 lakh crore package which includes liquidity measures of Rs. 8 lakh crore announced by the RBI earlier as well as the PM Gareeb Kalyan Yojna.

Highlights:

-The Modi government has split the Rs. 20 lakh crore economic package, which also includes previous measures taken by the finance ministry and the RBI, into five tranches. Total stimulus package is worth Rs. 20,97,053 crore

-RBI liquidity enhancement measures of Rs. 801,603 included in Rs. 20 lakh crore economic package

-Fourth and fifth tranche is worth Rs. 48,100 crore

-Stimulus measures announced in third part: Rs. 1.5 lakh crore

-Second tranche was worth Rs. 310,000 crore

-Economic package tranche 1 was worth Rs. 594,500 crore

-Stimulus measures from earlier announcements was worth Rs. 192,800 crore

-Revenue loss due to tax concession: Rs. 7,800 crore

-7 key areas — MGNREGA, health (rural and urban), education, business and Covid, decriminalisation of Companies Act, ease of doing business, public sector enterprises and state governments’ resources.

Improvement in State finances

 -This will give states extra resources of Rs. 4.28 lakh crore: FM

-Centre has decided to accede to the request and increased borrowing limits of states from 3% to 5% for 2020-21.

-States have so far borrowed only 14% of the limit authorised but 86% of the authorised borrowing remains unutilised.

-Revenue deficit grants to states worth Rs. 12,390 crore given on time in April and May, despite Centre’s stressed resources.

-Devolution of taxes worth Rs. 46,038 crore in April was given fully as if Budget estimates were valid, even though actual revenue shows unprecedented decline from Budget estimates.

Disinvestment

-Number of PSUs in strategic sectors will be maximum four. Others will be privatised or merged.

-In certain sectors, PSUs will be privatised.

-New policy to broadly categorise strategic sectors

-Public sector enterprise policy: All sectors will be open to private sectors also while PSUs will play an important role in defined areas.

Reduction in penalties

-Lower penalties for all defaults for small companies, one-person companies, producer companies and start-ups.

-Companies listing only NCDs on stock exchange will not be regarded as listed companies.

-Direct listing of securities in foreign jurisdictions permitted: FM

-The amendments in Companies Act will de-clog criminal courts and NCLT.

-Decriminalisation of Companies Act violations involving minor technical and procedural defaults, majority of compoundable offences sections to be shifted to internal adjudication mechanism: FM

-Minimum threshold to initiate insolvency proceedings raised to Rs. 1 crore from Rs. 1 lakh. This will largely insulate MSMEs.

-No fresh insolvency proceedings upto 1 year: FM

-Debts related to Covid shall be excluded from IBC

Educational reforms

-Top 100 universities will be permitted to automatically start online courses by May 30 this year.

-Education: Extensive use of radio, community radio and podcasts

-One TV channel will be earmarked for every class from 1 to 12.

-Online education during Covid: Provision for live telecast of interactive channels with experts through Skype.

Health

-Health and wellness centres in urban and rural areas will be increased: FM

-Public health expenditure will be increased: FM

-The central govt has already announced Rs. 15,000 crore healthcare funds. to fight Covid-19.

MGNREGA

-Govt to allocate additional Rs. 40,000 crore for MGNREGA to provide employment boost. It will help generate 300 crore person days in total.

Livelihood

-12 lakh EPFO subscribers withdrew Rs. 6,060 crore under the Covid pandemic withdrawal.

-Jan Dhan account: 20 crore women got more than Rs. 10,000 crores.

– PM Gareeb Kalyan Package Yojna: Direct benefit transfer has reached 8.9 crore farmers. Amount disbursed Rs. 16,394 crores.

-FM recalls PM Gareeb Kalyan Package Yojna

-Stock markets are expecting relief on long term capital gains tax (LTCG).

-The finance minister had announced some big-bang reforms yesterday related to coal, mining and defence manufacturing.

Source: livemint.com

2. The new Indian road to Lipu Lekh, Nepal’s protests, and the strategic importance of the area

Relevant for GS Prelims & Mains Paper II; IOBR

Army Chief General M M Naravane said on Friday (May 15) that Nepal’s protest against a newly built Indian road in Uttarakhand, up to Lipu Lekh pass on the China border, was at “someone else’s behest”.  His statement has been widely taken to mean that Nepal was acting as a proxy for China, at a time when tensions have spiked sharply on the LAC (Line of Actual Control) between the Chinese PLA and and the Indian Army at Ladakh.

When was road opened?

The road is far from the present scene of tension in Ladakh. It is on the route of the annual Kailash Masarovar Yatra, which goes through Uttarakhand’s Pithoragath district. Defence Minister Rajnath Singh, who inaugurated it on May 8, said the road, built by the Border Roads Organisation, was important for “strategic, religious and trade” reasons.

About the road

The 80 km road goes right up to the Lipu Lekh pass on the LAC, through which Kailash Mansarovar pilgrims exit India into China to reach the mountain and lake revered as the abode of Siva. The last section of 4 km of the road up to the pass still remains to be completed.

An official statement said what used to be a difficult trek to the gateway, situtated at 17,060 ft, would now be an easy road trip. Although some officials have said it should be possible to complete the entire distance from Delhi to Lipu Lekh in 2 days, the sharp rise in altitude from 6,000 ft at Ghatiabagarh, where the new road starts, may require a slower journey for better acclimatisation, at least for pilgrims.

The government has underlined that through this improved route, yatris do not need the alternative routes now available for the pilgrimage, one through the Nathu La border in Sikkim and the other via Nepal, which entailed “20 per cent land journeys on Indian roads and 80 per cent land journeys in China … the ratio has been reversed. Now pilgrims to Mansarovar will traverse 84 per cent land journeys on Indian roads and only 16 per cent in China.”

The new road is also expected to provide better connectivity to Indian traders for the India-China border trade at the Lipu Lekh pass between June and September every summer.

Importance of the road

Building roads leading to the contested LAC with China has been a fraught exercise for the government. The India China Border Roads as they are known, were conceptualised in the late 1990s by a consultative group called the China Studies Group, cleared at the highest level of the Cabinet Committee on Security, and given the go-ahead for construction in 1999.

But the deadlines were movable targets, and it was only in the wake of the 70-day Doklam stand-off with China in 2017, that India realised with shock that most of those roads had remained on the drawing board. In all those years, only 22 had been completed.

The Standing Committee on Defence, in its 2017-2018 report, noted that “the country, being surrounded by some difficult neighbours, with a view to keeping pace, construction of roads and development of adequate infrastructure along the borders is a vital necessity”.

The parliamentary committee demanded a higher budgetary allocations for the BRO. Another report on border roads, submitted by the Standing Committee in March 2019, flagged the ICBRs as a crucial element in “effective border management, security and development of infrastructure in inaccessible areas adjoining the China Border”.

Is Nepal’s objection new or sudden?

On the day the road was inaugurated, there was an outcry in Nepal.

The next day the Nepal Foreign Ministry issued a statement expressing disappointment over New Delhi’s “unilateral” act, which it said, went against the spirit of the bilateral “understanding… at the level of Prime Ministers” to sort out border issues through negotiations.

It asked India to “refrain from carrying out any activity inside the territory of Nepal.” The Indian envoy in Kathmandu was summoned by the Nepal Foreign Ministry.

Some in India ask why Nepal was silent through the time that the road was being built, and has objected to it now.

But Kathmandu has pointed out that it has brought up its concerns on the border issue several times, including in November 2019, when Delhi put out its new political map of India to show the bifurcation of Jammu & Kashmir.

Nepal’s objection then was the inclusion of Kalapani in the map, in which it is shown as part of Uttarakhand. The area falls in the trijunction between India, China and Nepal.

The publication of the map brought protesters out on the streets. The ruling Nepal Communist Party and the opposition Nepali Congress also protested. The Nepal government described India’s decision as “unilateral” and claimed that it would “defend its international border”, while the Ministry of External Affairs then said that map “accurately reflects the sovereign territory of India”.

Nepal is right in pointing out that the border issue is not new, and has come up now and again in the bilateral relationship since the 1960s.

India-China-Nepal

Since the 1962 war with China, India has deployed the ITBP at Kalapani, which is advantageously located at a height of over 20,000 ft and serves as an observation post for that area.

Nepal calls it an encroachment by the Indian security forces. Nepal has also been unhappy about the China-India trading post at Lipu Lekh, the earliest to be established between the two countries.

Shipkila in Himachal followed two years later, and Nathu La only in 2006.

Nepali youth protested in Kalapani, and there were protests in Nepal’s Parliament too when India and China agreed to increase border trade through Lipu Lekh during Prime Minister Narendra Modi’s visit to Beijing in 2016.

At the time, Global Times, an accurate barometer of what the Chinese state is thinking on any international issue, declared that Beijing should remain “neutral” and be mindful of the ”sensitivities in the India-Nepal relationship”.

A year later, during the Doklam crisis, a senior official in the Chinese Foreign Ministry raised temperatures by suggesting that India would not be able to do anything if the PLA decided to walk in “through Kalapani or into Kashmir, through PoK”, both trijunctions like Doklam.

Though China has said nothing about the road construction to Lipu Lekh, it has protested similar road building activity at other places on the Indian side close to the LAC, including Ladakh.

In view of all this, Kalapani and the approach to Lipu Lekh has only grown in strategic importance for India, especially as relations between the two countries have remained uneven over the last few years, and China has upped its game for influence in India’a neighbourhood.

India’s tacit support to a blockade of the landlocked country during protests over the new Constitution in Nepal by the Madhesi community was an inflection point in the relationship.

Despite the open border with India and the people to people contact through the hundreds of thousands of Nepali people who live and work in this country, the levels of distrust in Nepal about India have only increased.

For its part, India perceives Nepal to be tilting towards China under the leadership of Prime Minister K P Oli and his Nepal Communist Party. Responding to Nepal’s protests, India has said it is ready to discuss the matter at foreign secretary level talks between the two countries.

The talks were meant to be held earlier this year, but were put off due to the COVID outbreak.

Source: The Indian Express

3. Agri Market reforms announced

Relevant for GS Prelims & Mains Paper III; Economics

Making long-pending agricultural marketing reforms the centrepiece of the third tranche of the Atmanirbhar Bharat Abhiyan economic stimulus package, Union Finance Minister Nirmala Sitharaman announced plans to enact a central law to permit barrier-free inter-

State trade of farm commodities and ensure a legal framework to facilitate contract farming.

The third tranche also included plans to invest Rs. 1.5 lakh crore to build farm-gate infrastructure and support logistics needs for fishworkers, livestock farmers, vegetable growers, beekeepers and related activities, although this includes some previously budgeted money and extensions of existing schemes.

Deregulation of agri-produce

The Centre will deregulate the sale of six types of agricultural produce, including cereals, edible oils, oilseeds, pulses, onions and potatoes, by amending the Essential Commodities Act, 1955, Ms. Sitharaman said.

The Essential Commodities Act was enacted at a time of food scarcity, and needs to reflect current concerns, the Finance Minister said.

Stock limits will not be imposed on these commodities except in case of national calamity or famine or an extraordinary surge in prices, the Minister said, adding that even these stock limits would not apply to processors and exporters.

The Centre has been attempting to reform agricultural marketing through a model Act which it encourages States to adopt. However, it now intends to enact a central law to allow farmers to sell produce at attractive prices beyond the current mandi system, facilitating barrier-free inter-State trade and e-trading.

Asked how the Centre could enact a law on agricultural marketing, which remains on the State list, the Minister pointed out that inter-State trade falls in the central list.

Contract farming

She added that plans were underway to bring in a facilitative legal framework to oversee contract farming, which would provide farmers with assured sale prices and quantities even before the crop is sown and also allow private players to invest in inputs and technology in the agricultural sector.

Source: The Hindu

4. Government throws open defence production and mining sectors

Relevant for GS Prelims & Mains Paper III; Economics

Steps to indigenise defence production by banning the import of some weapons and platforms while hiking foreign direct investment into the sector were among the highlights of the fourth tranche of the Aatmanirbhar Bharat Abhiyan package, which seemed to focus more on industry reforms than any sort of economic stimulus.

Union Finance Minister Nirmala Sitharaman also announced measures to introduce commercial mining in the coal sector, liberalise the mineral sector, ease airspace restrictions and encourage private involvement in space and atomic energy projects.

In a bid to enhance self-reliance in defence production, Ms. Sitharaman said the Centre would notify a list of weapons and platforms that could not be imported, and widen it every year as domestic capacities grew.

A separate budget provision for domestic capital procurement would help reduce the defence import bill, she said, adding that indigenisation of imported spare parts would also be given priority. The FDI limit in defence manufacturing under automatic route will be raised from 49% to 74%.

In another major policy change, the Minister announced that Ordnance Factory Boards would be corporatised and eventually listed on the stock market to improve autonomy, efficiency and accountability, emphasising, however, that they would not be privatised.

The government monopoly on coal would be removed with the introduction of commercial mining, said Ms. Sitharaman, allowing any private player to bid for a coal block and sell it in the open market. Earlier, only captive consumers with end-use ownership could bid for coal blocks. Almost 50 blocks will be offered immediately, with no eligibility conditions for bidding, apart from upfront payment with a ceiling.

A revenue sharing mechanism instead of the earlier fixed price per tonne will introduce competition, transparency and private sector participation in the market, she said, adding that the private sector would also be allowed to participate in exploration. Coal gasification will be incentivised through rebate in revenue share. Infrastructure development worth Rs. 50,000 crore was promised.

The Centre also plans to introduce a seamless, composite exploration-cum-mining-cum-production regime for the mineral sector, with 500 mining blocks to be offered through an open and transparent auction process, including a joint auction of bauxite and coal blocks to enhance the competitiveness of the aluminium industry. The distinction between captive and non-captive mines will be removed to allow transfer of mining leases and sale of surplus unused mineral blocks.

Power distribution companies in union territories will be privatised.

With regard to civil aviation, Ms. Sitharaman said six more airports are up for auction on private public partnership mode, while additional private investment will be invited at 12 airports in a move expected to net Rs. 13,000 crore for the Airports Authority of India.

Steps will be taken to ease restrictions on Indian airspace, of which only 60% is currently available. This will save flying time and aviation fuel, leading to a Rs. 1,000 crore per year benefit for the sector. The tax regime is being rationalised to help make India a global hub for aircraft maintenance, report and overhaul.

Ms. Sitharaman also promised to create a level playing field for private players in the space sector, allowing them to use ISRO facilities and participate in future projects on space travel and planetary exploration. Public-private partnerships will also be introduced in the atomic energy sector, to set up a research reactor for production of medical isotopes and irradiation facilities for food preservation.

Source: The Hindu

Q. Recently, The 80 km road goes right up to the Lipu Lekh pass on the LAC was inaugurated by defence Minister Rajnath Singh. What are the “strategic, religious and trade” advantages of this road to India? Also, highlight the concerns of our Himalayan neighbour relating to this road. (GS Mains Paper II, 250 words, 15 marks)

Attempt this question by clicking on the link https://www.prepmate.in/question/18-05-2020/

PrepMate team will evaluate your answer. All PrepMate book readers can submit their answer.

Note: You will receive a confirmation e-mail for both the submission of your answer and it’s evaluation from our experts.