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BY PROF. J.K. SHARMA
Q.1.India retains long-held position of top remittance destination of migrants: Comment.
A.1. Remittances to India from abroad rose in 2017 after declining for two consecutive years and touched $69 billion, still a little short of the $70.4 billion reached in 2014. Outflows of remittances from India too continued to rise reaching $5.7 billion, according to a World Bank report. With 9.9% increase in remittance inflows in 2017 India retained its long held position as the largest destination of remittances from international migrants, according to the Bank’s report titled ‘Migration and Remittance Outlook’. Of the $5.7 billion sent remitted by foreigners working in India, Bangladesh alone accounted for over $4 billion or about 71%.Data shows that Indians constitute the world’s largest diaspora population, making it the largest source of labour for the world market.In 2017, there were 16.4 million Indians living abroad. Mexico and Russia had 11.9 million and 11 million people respectively working in foreign countries. China has the fourth largest overseas population at slightly over 10 million.Although Bangladesh and Pakistan too have significant migrant populations, this doesn’t get reflected in their remittance receipts. Legal international migration is often seen as a rather costly economic investment and hence only relatively well-off sections of any country’s population are able to afford it. The increase in income levels in China and India and the ever increasing presence of the Indians in the Western world helps augment migration from these countries to the West. China received $64 billion from its overseas citizens. This was the world’s second highest and the two Asian neighbours accounted for more than one-fifth of the global remittances inflows, followed by the Philippines, Mexico and France. NRI’s, once not allowed to open an account in India in 1960s are now becoming important both in India and abroad, especially in Western countries. The are getting both financially and politically stronger. There were 12 countries from which India received in excess of $1 billion each. Among them, six are in West Asia, the region accounting for 55.6% of India’s total remittance receipts.Other than Bangladesh, Nepal and Sri Lanka received 17.9% and 9.1% respectively of remittances flowing out from India. Thus, these three neighbours got about 98% of remittances from India. India was the largest source of remittances to Bangladesh, accounting for about 30% of its total overseas remittances. In its latest Migration and Development Brief, the World Bank estimated that officially recorded remittances to low-and middle-income countries reached $466 billion in 2017.This was an increase of 8.5% over $429 billion in 2016.Global remittances, which include flows to high-income countries, grew 7% to $613 billion last year, from $573 billion in 2016, the bank said. The stronger than expected recovery in remittances is driven by growth in Europe, Russia and the US. The rebound in remittances, when valued in US dollars, was helped by higher oil prices and strengthening of euro and ruble, according to the World Bank Report.India continued to top in terms of receiving remittance, and was followed by China ($64 billion), the Philippines ($33 billion), Mexico ($31 billion), Nigeria ($22 billion), and Egypt ($20 billion).The Bank said remittances to South Asia grew moderately at 5.8% that is $117 billion.Reversing previous year’s sharp decline (8.9% in 2016), remittances to India in 2017 picked up sharply by 9.9%, the bank said. As against $62.7 billion in 2016, it received $69 billion last year.
Q.2. Economic development must account for women. Discuss.
A.2.This statement was made by IMF chief Christine Lagarde. The International Monetary Fund (IMF) was established as a consequence of the Great Depression of the 1930s.Its aim was to ensure the stability of the monetary system. But prosperity depends on the stability of social milieu and IMF chief Christine Lagarde’s comment that Prime Minister Modi should “pay more attention” to uplift the condition of women of India shows that IMF is conscious of its current role which may have larger aims in the changing context. Atrocities and heinous crimes against women are increasing all over India, one of the fastest growing economies in the world. These crimes unnerve the collective conscience of the global community from time to time. Lagarde was asked a pointed question about India’s economic reforms at a recent press conference: Has this been inclusive enough to benefit the women of the country? Lagarde responded bombastically to the question, then, clarified that it was her personal opinion and not an IMF official position.No rational human would justify such crimes. While she praised India’s recent economic reforms such as the GST rollout and enactment of the bankruptcy law, she was repulsed by the powerlessness of Indian women in the fastest growing economy. Indeed, growth will remain a statistical number unless fruits of development are evenly distributed in society. Lagarde termed the recent rape cases as “revolting” and disclosed her suggestions to PM Modi after his speech in Davos that “he had not mentioned the women of India enough”. India cannot progress unless it ensures dignified living conditions for another half of its population. Stringent punishments, including death for rape, could be a deterrent, but that alone would not stop atrocities against women. There is a need to transform society by empowering women. A start could be made by ensuring their adequate representation in Parliament — a promise of all governments make but soon forget.
Q.3. The falling rupee: Consider its implications./ A.3.The dollar is becoming more expensive. This means persons going abroad…..Q.4. Mahathir retakes Malaysia. Comment on this news headline./A.4. Dr. Mahathir Mohammed’s return to elective politics in Malaysia is a surprise and…
Q.3. The falling rupee: Consider its implications.
A.3.The dollar is becoming more expensive. This means persons going abroad must buy dollars or euros at higher rates and be prepared to spend more rupees abroad. Those with limited budgets feel the pinch. So also, parents paying for studies of their children abroad will have to pay more rupees for each dollar but people receiving dollars from abroad will feel good as they will get more rupees. A year ago the dollar was around Rs 66.82 .Since then the rupee has depreciated by 4.18 per cent against the dollar and from being the best-performing currency it has become the worst-performing currency in Asia. The reason is the dollar is gaining strength on news of a robust economic recovery in the US. The dollar index that measures its strength against major global currencies rose by 1.7 per cent to 92.03 in April 2018. The trend is likely to continue in the future months when joblessness in the US is reduced further and GDP growth rises steadily without inflation.There has been an outflow of FIIs (Foreign Institutional Investment) from the Indian market which is linked to the rupee’s growing weakness and the dollar’s strength as well as many other factors related to the corporate performance of companies in India. Only recently, the corporate earnings have started showing stable higher earnings. The RBI has been intervening in the forex markets to counteract the outflow and correct the volatility in the rupee’s value as forex reserves have declined by $2.5 billion to $423.58 billion. It has succeeded to an extent in bringing stability in the market by injecting dollars, and the rupee got somewhat stabilized. Experts, however, predict that the rupee is bound to slide more and get closer to Rs 70 per dollar. A weak rupee will surely help exports because the dollar prices of Indian exportable goods will become lower which will increase the competitiveness of Indian products. Low interest rates, currently not favored by the RBI, and weak currency are good for manufacturing growth and exports. It is good for our services exports and farmers also. But for infrastructure companies, especially power companies who import a lot of equipment, a weak currency is a curse because import costs will go up. Also, exports with significant import content such as the gems and jewellery will not do well as their cost will go up. India imports its huge gold requirements (700 to 800 tons) and raw semi-precious stones and pearls for its jewellery trade. Foreign equity investors would welcome a strong currency and low interest rates as it will increase the profits of companies and, therefore, the returns will be higher in dollar terms. For most people, however, a strong rupee is a sign of national economic strength. It indicates to them a healthy economy.The point in favour of a weak rupee is the improvement of international competitiveness of Indian exports. According to the Economic Survey 2018, manufacturing industry has not made great strides reflected in the declining manufacturing export-GDP ratio and manufacturing trade balance.‘Make in India’ initiative has also suffered due to the low competitiveness of manufactures in global markets. Indian economy’s competitiveness according to the Economic Survey has had to contend with real effective exchange rate appreciation of about 21 per cent since 2014 which means India’s exports have suffered and imports have flourished. This is because India has an open capital account, an independent monetary policy and an exchange rate objective. Foreign institutional investments are allowed into India and their outflow from India is not controlled and policy makers can do little about it.When the rupee was appreciating against the dollar, there was a huge inflow of FIIs which was not controlled. But since February 2018, FIIs worth Rs 12,491.36 crore invested in equities left India and Rs 2,771.36 crore invested in debt instruments flowed out. India’s Current Account Deficit because of India’s import of 70 per cent of its oil needs is increasing. It is slated to be 1.7 per cent of the GDP this fiscal year, can get bigger and is likely to put pressure on the rupee. Similarly, the fiscal deficit can get higher and fuel inflation which will lead to higher interest rates, not favored by FIIs due to their adverse impact on industrial growth.In general, FIIs are staying away from emerging markets. But in India’s case, the forthcoming general election is also creating volatility. It would be better if FIIs knew for sure that there would be a stable government at the Centre in 2019 and continuation of the same economic policies.
Q.4. Mahathir retakes Malaysia. Comment on this news headline.
A.4. Dr. Mahathir Mohammed’s return to elective politics in Malaysia is a surprise and greater surprise is the way he has made a comeback to power politics at the age 92 as the head a strange coalition winning a majority in Malaysian Parliament after fifteen years of political hibernation. His political ally is the wife of former Deputy Prime Minister who was barred from contesting on sodomy charges. The outgoing Prime Minister Najib seems to have failed to read the writing on the wall. For three years, Malaysia had been rocked by a scandal in which Najib had been accused of siphoning off state funds. The nation’s image had been besmirched Nearly ten per cent of the electorate, mostly ethnic Malays, stayed away from polling. That proved fatal for Najib in 30 swing seats.There was no Malayan political storm to lift up Najib’s electoral boat. He had made too many political adversaries because of penchant for rubbing off too many opposition politicians at the same time who joined hands to form a middle-of-the-road four-party front that gives adequate space to the country’s three main ethnic groups — the Malays, the Chinese and the Tamils. The 92-year challenger focused on the future while the incumbent, younger by three decades, resorted to desperate freebies to no avail. Mahathir’s alliance won elections to several provinces as well. What is of concern is that the hardline Islamist party Parti Islam Se-Malaysia has retained its voter base as the third force. Mahathir has promised to bring back development and boost the economy. Earlier, he ruled the country with iron hand for 22 years an ‘Asian Tiger’, that is economically an advancing state. His return to power means renewed Chinese interest in Malaysian infrastructure to raise its influence with another major ASEAN country after Indonesia and Philippines. Also, a rearrangement in supplies of arms may be expected because Mahathir had opted for Russian combat jets and submarines during his earlier regime. For India also opportunities for a close defence relationship on the basis of equipment commonality are likely to open up. Malaysia under Mahathir will look to balance China and explore the neighborhood for more opportunities.
Q.5. US drags India to WTO. Says it underreported market price support for wheat, rice. Explain and comment.
A.5.Notably, this is the first-ever COA notification under the WTO Agreement on Agriculture regarding another country’s measures. The US has dragged India to the World Trade Organization with the allegation that India has “substantially underreported” its market price support for wheat and rice.US Trade Representative Robert Lighthizer and Agriculture Secretary Sonny Perdue in a joint statement said the US had submitted a counter-notification in the WTO Committee on Agriculture (COA) on India’s market price support (MPS) for wheat and rice.Filed on May 4, 2018, this is the first-ever COA notification under the WTO Agreement on Agriculture regarding another country’s measures. According to the US calculations, India had “substantially underreported” its market price support for wheat and rice.“When calculated according to WTO Agreement on Agriculture methodology, India’s market price support for wheat and rice far exceeded its allowable levels of trade distorting domestic support,” said the US official.The US expected a robust discussion on how India implemented and notified its policies at the next COA meeting, which is scheduled for June 2018, said a media statement. Lighthizer said the US expected its trading partners to comply with the reporting requirements they agreed to when joining the WTO.“Accurate reporting and improved transparency of these programs is an important step in ensuring that our trading partners are living up to their WTO commitments and helps achieve more market-based outcomes through the multilateral trading system,” he said. American farmers are the most productive and competitive in the world, and with free and fair trade, they always did well in the international marketplace, Perdue said.“India represents a massive market, and we want greater access for US products, but India must be transparent about their practices. For trade to be free and fair, all parties must abide by their WTO commitments,” he averred. Based on publicly available information, the US on May 4, 2018 submitted a counter-notification in the WTO Committee on Agriculture on India’s market price support for wheat and rice.The US has identified several areas of potential concern with India’s notification of its market price support for rice and wheat. These include issues with the quantity of production used in market price support calculations, the exclusion of state-level bonuses from calculations of applied administered prices, exclusion from India’s notifications of information on the total value of production of wheat and rice and issues with currency conversions.
Q.6. IAS officers may get cadre only after course. Explain the reason for this change in the mode of cadre allocation for the Indian Administrative Services.
A.6.The Prime Minister’s Office proposes a major change in the policy of allocation of services and cadre for civil servants. At present, cadres are allocated according to rank a prospective IAS officer obtains in the entrance examination but the PMO thinks cadre should be allocated after the three-month foundation course. Nearly 1,000-odd candidates annually selected on passing their All India Civil Services Examination.The ministry of personnel has communicated to all cadre-controlling authorities and ministries for their comments on probationers’ allocation to the services and cadre based on their performance in the foundation course which, according to the PMO is a sounder basis for assessing candidates and their suitability to various cadres. Currently, civil servants are allocated cadre before the start of the Foundation Course .Civil servants for 24 services, including Indian Administrative Service, Indian Police Service, Indian Foreign Service, Indian Revenue Service and others, are allocated cadre and services before commencement of the foundation course, according to their rankings in the exam, conducted by the Union Public Service Commission depending on the states they are attached to even as they serve periodically at the Centre and are under its control for promotions and discipline.After the cadre and services are allocated, the IAS and IFS probationers undergo their foundation course at Lal Bahadur Shastri National Academy of Administration (LSBNAA) in Mussoorie. Probationers from other services are sent to academies in Mussoorie, Hyderabad and Bhopal. According to a recent communication of department of personnel and training to the cadre-controlling authorities states: “…. the PMO has desired to examine if service allocation/cadre allocation to probationers selected based on the examination be made after the foundation course”.Minister of State for personnel Jitendra Singh said: “There was a suggestion to this effect which has been followed up by eliciting the views of all stakeholders. At present, the issue is still in the consultation stage. There is nothing more to it.”The departments concerned have been asked to examine the feasibility of giving due weigh to performance in the foundation course and making service as well as cadre allocation to all-India services officers, based on the combined score obtained in the civil services examination and the foundation course. Several serving and retired civil servants have expressed mixed views on this proposal. They says it has both pros and cons.An officer said if the foundation course is made mandatory before the cadre/service selection, the probationers will start taking the course seriously. “A lot of newly selected civil servants take the foundation course as a mere formality because they have already been allocated cadre and services. When their marks and rank in UPSC and performance in foundation course will be at stake, they will take those three months seriously,” said an IAS officer. The foundation course is a final benchmark for service and cadre selection and “if a person who has studied hard to get top rankings in the UPSC exam somehow performs low in the foundation course, and if she is denied the cadre and service wanted or deserved, then it would be unfair for them,” opines another officer.