CURRENT AFFAIRS 18 SEPTEMBER 2019

DAILY CURRENT AFFAIRS 18 SEPTEMBER 2019

BY SUMIT BHARDWAJ

IMPORTANT NEWS ARTICLES

ANALYSIS

1.Government to peg MGNREGA wages to inflation in bid to hike incomes(GS-2)

• CONTEXT:Staring at a slump in rural demand and a slowdown in the rural economy, the Centre plans to inject more money into the UPA’s flagship Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme by linking wages under the Act to an updated inflation index, which will be revised annually. It hopes this will increase wages, thus increasing purchasing power and reviving rural demand.
• However, some economists question whether linking wage rates to a better inflation index will be sufficient, given that MGNREGA workers get paid much lower than market rates.
• The national average wage of an MGNREGA worker is RS 178.44 per day, less than half of the RS 375 per day minimum wage recommended by a Labour Ministry panel earlier this year.
• In the first week of September, the Ministry of Statistics and Programme Implementation and the Labour Bureau informed the Rural Development Ministry that they had begun work to update the consumer price indices for rural areas (CPI-R) and agricultural labourers (CPI-AL) respectively.
• According to the latest Periodic Labour Force Survey, market wages for men were higher than MGNREGA wages by 74% in 2017-18, while for women, it was a 21% gap. “They must first increase the wages and subsequently ensure better inflation indexation. Otherwise, the impact will be minimal,” said Dr. Sinha.
• Droughts and floods in several States have led to an increased demand for work in the early part of the year, and the economic slowdown could spur demand again once the rabi planting season is over.
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MGNREGA:
MGNREGA History:

• In 1991, the P.V Narashima Rao government proposed a pilot scheme for generating employment in rural areas with the following goals:
• Employment Generation for agricultural labour during the lean season.
• Infrastructure Development
• Enhanced Food Security
• This scheme was called the Employment Assurance Scheme which later evolved into the MGNREGA after the merger with the Food for Work Programme in the early 2000s.

Objectives of MGNREGA:

• The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has the following objectives:
• Provide 100 days of guaranteed wage employment to rural unskilled labour
• Increase economic security
• Decrease migration of labour from rural to urban areas
• MGNREGA differentiates itself from earlier welfare schemes by taking a grassroots-driven approach to employment generation. The programmes under the act are demand driven and provide legal provisions for appeal in case, work is not provided or payments are delayed. The scheme is funded by the central government which bears the full cost of unskilled labour and 75% of the cost of material for works undertaken under this law. The central and state governments audit the works undertaken under this act through annual reports prepared by CEGC (Central Employment Guarantee Council) and the SEGC (State Employment Guarantee Councils). These reports have to be presented by the incumbent government in the legislature.

A few salient features of the scheme are:

• It gives a significant amount of control to the Gram Panchayats for managing public works, strengthening Panchayati Raj Institutions. Gram Sabhas are free to accept or reject recommendations from Intermediate and District Panchayats.
• It incorporates accountability in its operational guidelines and ensures compliance and transparency at all levels.
• Ever since the scheme was implemented, the number of jobs has increased by 240% in the past 10 years. The scheme has been successful in enhancing economic empowerment in rural India and helping overcome the exploitation of labour. The scheme has also diminished wage volatility and the gender pay gap in labour.
• This law and the employment guarantee schemes which are part of its provisions are important from the IAS exam point of view. UPSC aspirants should read about this government scheme in detail as questions related to this topic are asked in the Prelims exam and in General Studies paper II. The questions for government schemes like MGNREGA are classified under Welfare schemes, and the topic has a significant overlap with topics like human development, poverty and hunger.

Consumer Price Index CPI:

• It measures price changes from the perspective of a retail buyer.
• It measures changes over time in the level of retail prices of selected goods and services on which consumers of a defined group spend their incomes.
• Four types of CPI are as follows:
• CPI for Industrial Workers (IW).
• CPI for Agricultural Labourer (AL).Consumer Price Index for Agricultural Labourers and Rural Labourers (CPI(AL) & CPI(RL)) Labour Bureau has been compiling CPI Numbers for Agricultural Labourers since September, 1964.The base of CPI(AL) was 1960-61=100. ... CPI-AL is basically used for revising minimum wages for agricultural labour in different States
• CPI for Rural Labourer (RL).CPI for Agricultural and Rural labourers on base 1986-87=100 is a weighted average of 20 constituent state indices and it measures the extent of change in the retail prices of goods and services consumed by the agricultural and rural labourers as compared with the base period viz 86-87.
• CPI (Rural/Urban/Combined).
• Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the Central Statistical Organisation (CSO) in the Ministry of Statistics and Programme Implementation.
• Base Year for CPI is 2012

2.U.S., India keen to wrap up trade deal(GS-2)

• CONTEXT:In the run-up to the meeting in Houston between Prime Minister Narendra Modi and U.S. President Donald Trump, it appears that both countries are frantically working on ways to resolve long-disputed trade issues, especially relating to medical devices, agriculture, and e-commerce.
• It is learnt that U.S. Ambassador to India Kenneth I. Juster held a meeting with Commerce Minister Piyush Goyal on September 17 on these issues.
• The U.S. government’s demands, on behalf of its pharmaceutical companies, are for India to remove the price caps on medical devices, especially on bioabsorbable stents for the heart and the knee. Mr. Trump will visit Mr. Modi at the ‘Howdy Modi’ event in Houston for Indian-Americans on September 22.
• The U.S. government has also been batting for increased market access in India in the agricultural sector, and an easing of FDI norms and data localisation rules for foreign e-commerce companies.

‘Howdy Modi’ (BY LIVE MINT)

10 things to know about 'Howdy, Modi' rally:

1) The White House said Trump's visit would be a great opportunity to emphasize the strong ties between the people of the US and India, to reaffirm the strategic partnership between the world's oldest and largest democracies, and to discuss ways to deepen their energy and trade relationship.

2) PM Narendra Modi said that Trump's attendance at the Houston event highlighted the strength of ties between the two countries and was a recognition of the contribution of the Indian diaspora. "The special gesture of President @realDonaldTrump to join us in Houston highlights the strength of the relationship and recognition of the contribution of the Indian community to American society and economy. #HowdyModi," he said in a tweet.

3) The 'Howdy Modi' event will be held on September 22nd at the NRG Stadium in Houston, Texas at 10 am (local time).

4) Within three-weeks, tickets for the event is already sold out as over 50,000 attendees have already registered for the event though online registration. The organisers, Texas India Forum, have also closed a waitlist registration for free passes.

5) The term 'Howdy' is a shorthand for “How do you do?", used commonly in southwestern United States. Prime Minister Narendra Modi has previously addressed similar gatherings at Madison Square Garden in New York and the SAP Center in San Jose.

6) The Texas India Forum said the "Howdy Modi! Shared Dreams, Bright Futures" Community Summit attendees represent 48 states, coming together to emphasize the shared values and aspirations of two great nations whose partnership is important to global peace, prosperity, and human progress.

7) Hundreds of prominent business and community leaders from across America are expected to attend the event. Over 60 US lawmakers, including senior Democratic Congressman Steny Hoyer, are also expected to attend the event.

8) To showcase the diversity of the Indian-American community, the organizers have put together a 90-minute cultural extravaganza - "Woven: The Indian-American Story" - that will feature 400 artistes and community members from Texas and across the US. The program will start at 10 am before Prime Minister Narendra Modi’s address to the stadium.

9) The Houston event will be Modi's third major address to the Indian-American community after he became the prime minister in 2014 and the first after his re-election in May. The previous two were at the Madison Square Garden in New York in 2014 and the Silicon Valley in 2016. Both the events were attended by more than 20,000 people.

10) The crowd turnout is expected to be the largest for any Indian Prime Minister to address in North America and the largest for a democratically elected foreign leader in America.

3.Stocks slip on oil; Sensex declines 1.7%(GS-3)

CONTEXT:Concerns over the surge in crude oil prices and its impact on the economy kept equity investors on tenterhooks for a second straight session on Tuesday, with benchmark indices extending their slide.

The 30-stock BSE Sensex lost 642.22 points, or 1.7%, to close at 36,481.09, dragged down by auto and bank stocks that were among the biggest losers. The shares of all but three of the 30 companies declined. Hero MotoCorp was the worst performer, skidding 6.2%, followed by Tata Motors, which lost 5.1%.

The 50-share Nifty fell below the psychological 11,000-mark to close at 10,817.60, down 185.90 points, or 1.69%.

BSE Sensex :

What is the Sensex and how is it calculated

The Sensex measures the stock prices of 30 listed companies of the Bombay Stock Exchange. If the Sensex rises up, then it shows that the stock price of most companies of Bombay Stock Exchange (BSE) has increased and if the Sensex decreases; it shows that the stock price of most companies of BSE has dropped down. The main reason for the ups and downs in the Sensex is the fluctuations in the prices of these 30 companies.

The Sensex was launched by "Bombay Stock Exchange" (BSE) on January 1, 1986. It is one of India's major stock market indexes. It evaluates the fluctuations in stock prices of 30 companies. These 30 companies are big companies in terms of market value, turnover, profit etc. If the Sensex is rising, then it shows that the stock price of most companies of BSE is increasing and if the Sensex decreases, then it show that the share price of most of BSE companies is decreasing. The base year of the Sensex is 1978-79 and the base index value was set at 100.
How fluctuation of the Sensex is calculated?
Fluctuation in the Sensex is calculated on the basis of fluctuation in the share price of all the 30 listed companies. The value of the Sensex has been calculated on every minute basis.

List of Approved Stock Exchanges in India

Let's understand fluctuation of the Sensex with the help of an example:

Suppose that the Sensex is currently at 20000 points. For convenience, we assume that there are only 2 registered companies in BSE, one of which is named"Delta" and the other is "Gamma". 

Assume that the value of one share of “Delta” is Rs. 200 and it has a total outstanding share of 10000 whereas the value of one share of “Gamma” is Rs. 500 and its total outstanding share is 7500.

Both of these companies will have the total market capitalization of the BSE ( 200 x 10000)+(500 x 7500) = Rs. 57.50 lacs.

Now suppose that the next day the share price of the “Delta” company rises to 250 (25% hike), and the price of the “Gamma” company's shares decreases to 450 (10% slump). 

Now the total market capitalization of BSE at these new share prices will be: (250 x10000) + (450x 7500)= Rs. 58.75 lacs.

Due to the fluctuations in the prices of the two companies, the market capitalization of BSE rose to the level of 58.75 lacs form the previous level of Rs. 57.50 lacs; which is showing 2.17% increase in the market capitalization of the BSE.

So due to this increase in price the Sensex will reach 20434, which is 2.17% higher than 20000.

In the same way, if the share price of both companies falls, then the total market capitalization of BSE will decline.
This fluctuation in BSE keeps happening every minute. If the investors buy more share from the list of 30 companies then the share prices of the companies rises which is followed by the increment in the BSE capitalisation and if the shares of the 30 companies are sold by many investors then the share price falls and market capitalisation of the BSE decreases which is termed as the abatement in the Sensex.

image source:The Economic Times
What was the initial level of the Sensex?
The base year of the Sensex is 1978-79 and for this time the base index value was set at 100. This means that in 1978 the Sensex was considered at 100 points, which was at 113.28 points in 1979 and today it has crossed the 33000 points due to increase in the market value of Bombay Stock Exchange.

Why Share Price of the company fluctuates?
There is no particular reason responsible for the fluctuations in share prices in a company, but many factors are responsible for the fluctuation, if the price of shares of Reliance Industries increases, then it may be due to:
1. Announcement of investor favourable policy by Reliance which motivates investors to buy more shares of the company.

2. A favourable decision taken by the Central or State Government in the favor of Reliance Industries may increase the demand of the shares of Reliance. The people may think that the share price of the Reliance may go up in the future so the demand of the shares may shoot up.

In summary, it can be said that fluctuation in the Sensex depends on the fluctuation in the value of shares of 30 companies and the value of the shares of the 30 companies depend on the demand and supply of the shares of the company. If the demand of the shares is more than the supply, then price of the share will go up and vice-versa. The Sensex, which was 100 points in 1978, has crossed the 33,000 level today.

What is Nifty?
 
Nifty which is derived from National and Fifty is an equity benchmark index for the Indian Equity Market. It is one of the two major stock indices in India. Officially known as S&P CNX Nifty, it is operated by India Index Services and Products, which is a subsidiary of National Stock Exchange of India (popularly known as NSE).
 
Nifty was introduced by NSE on April 21, 1996. It represents the weighted average of 50 Indian Company Stocks across 24 sectors, which account for around 60% of the market capitalization.
 
How is Nifty calculated?
 
Nifty is calculated by free-float market capitalization weighted method. To do this calculation it also follows a mathematical formula to know the market capitalization. To derive the market capitalization, it multiplies equity with a price. While to derive free-float capitalization, equity capital which is multiplied by a price is further multiplied with IWF (Investible Weight Factors). IWF is a factor which determines the shares available for freely trading in the market. Nifty is determined on a daily basis by considering the current market value divided by base market capital, which is multiplied by Base Index Value of 1000.

4.New plant species found in Western Ghats(GS-1,3)

• CONTEXT:Researchers from the University College here have reported the discovery of a new plant species from the Western Ghats biodiversity hotspot. Classified as a sedge, the grass-like plant has been named Fimbristylis agasthyamalaensis, after the locality from which it was found.
• The researchers, including post doctoral fellow A.R.Viji and Assistant Professor T.S.Preetha, came across the species during an expedition to the marshy grasslands in the Ponmudi hills within the Agasthyamala Biosphere Reserve. The survey was part of a project funded by the Women Scientists Division of the Kerala State Council for Science, Technology and Environment (KSCSTE). The finding has been published in Phytotaxa, an international journal of botanical systematics and biodiversity.
• The authors have recommended a preliminary conservation assessment of the plant as ‘critically endangered,’ according to IUCN criteria. The report says the species is highly prone to wild grazing.
• The new species belongs to the Cyperaceae family. In India, the genus is represented by 122 species, of which 87 are reported from the Western Ghats. Many of the known Cyperaceae species are medicinal plants or used as fodder.

• Fimbristylis agasthyamalaensis

Western Ghats:

The Western Ghats are a mountain range running parallel along the western coast of India starting from Gujarat and ending in Tamil Nadu covering the states of Maharashtra, Goa, Karnataka and Kerala. The Ghats are often called the Great Escarpment of India and are also a UNESCO World Heritage site. The mountain range is also a “Hottest Hotspot” of biodiversity, being one of eight in the world. The Western Ghats contain 39 properties that include national parks, reserve forests and wildlife sanctuaries. The mountains of the range cover an area of approximately 140000 sq. km. It is 1600 km long interrupted only by a low mountain pass called the Palakkad Pass.

The Western Ghats are extremely important from several points of view. One is its geomorphic importance. It is older than the Himalayas and is considered an ‘evolutionary ecotone’ illustrating the “Out of Africa” and the “Out of India” hypotheses. The Ghats also have a major influence on the ecological and biophysical processes on the entire peninsula of India. They also influence the monsoon weather patterns across the country. They present a classic example of the tropical monsoon system. The mountains act as a barrier to the rain-laden southwest monsoon winds in late summer in India.

Another reason for the Ghats’ significance is the enormous diversity and abundance of species of flora and fauna in this region. Many of these species are also endemic to the region. There are 4 – 5 thousand plant species here out of which 650 tree species are found. And, out of the 650 tree species, 352 are endemic. There are also 179 amphibian species, 65% of which are endemic; 157 reptile species, 62% of which are endemic; and 219 fish species, 53% of which are endemic. There are many flagship mammal species also here. Some of the endangered species found here are Nilgiri Tahr, Lion-tailed Macaque and Nilgiri Langur.

IUCN:

The International Union for Conservation of Nature

• IUCN is a membership union uniquely composed of both government and civil society organisations.
• Created in 1948, it is the global authority on the status of the natural world and the measures needed to safeguard it.
• It is headquartered in Switzerland.
• The IUCN Red List of Threatened Species, is the world's most comprehensive inventory of the global conservation status of plant and animal species.
• It uses a set of quantitative criteria to evaluate the extinction risk of species. These criteria are relevant to most species and all regions of the world.
• The IUCN Red List Categories define the extinction risk of species assessed. Ninecategories extend from NE (Not Evaluated) to EX (Extinct). Critically Endangered (CR), Endangered (EN) and Vulnerable (VU) species are considered to be threatened with extinction.
• It is recognized as the most authoritative guide to the status of biological diversity.
• It is also a key indicator for the SDGs and Aichi Targets.

5.Despite hurdles, Vande Bharat Express to remain on track(GS-2)

CONTEXT:Plans to add 40 such semi-high-speed trains by 2022 remain on track, says Railway Board Chairman V.K. Yadav.

To bring some festive cheer for travellers, the Indian Railways plans to begin the second Vande Bharat Express on the Delhi-Katra route before Deepavali, Railway Board Chairman V.K. Yadav said on Tuesday.

Mr. Yadav said the plans to add 40 such semi-high-speed trains by 2022 remained on track despite a few hurdles, adding that the specifications of the new trains had been modified to also support sleeper class coaches as against only chair-car class coaches now.

Additionally, with regards to alleged vigilance inquiry being ordered for the Vande Bharat project, the Chairman said the inquiry was for some “irregularities” found at the Integral Coach Factory (ICF), but not specific to the Vande Bharat Express.

Vande Bharat Express :

It is India’s first indigenously built engineless semi-high speed train. Earlier, it was known by the name Train 18.

• It runs between Delhi and Varanasi at a maximum speed of 160 kmph.
• It has been built by the Integral Coach Factory, Chennai, in a record time of 20 months.
• The train is a 100% ‘Make in India’ project and is claimed to be built at half the cost of a similar train set that is imported.
• It is energy-efficient as its coaches will be fitted with LED lights. Coaches will have automatic doors and retractable footsteps.
• It will be inter-connected with fully sealed gangways along with a GPS-based Passenger Information System. It is provided with Bio toilets.

Integral Coach Factory (ICF):

Integral Coach Factory (ICF) is a manufacturer of rail coaches located in Chennai, Tamil Nadu, India. It was established in 1952, is owned and operated by the Indian Railways. It is located in the neighbourhood of Perambur. The ICF is one of the three rake production units of the Indian Railways, the other two being the Modern Coach Factory at Raebareli and the Rail Coach Factory at Kapurthala.

The coach factory primarily manufactures rolling stock for Indian Railways but also exports railway coaches to other countries. ICF set a new record produce 2503 coaches in the fiscal year 2017-2018. It became the world's largest railway coach manufacturer, rolling out 3,262 coaches in the fiscal year 2018-2019, up from 1,437 coaches in 2009-2010, expecting to produce 4,000 units in the fiscal year 2019–2020 .

A premier production unit of the Indian railways, the ICF manufactures a range of coaches, including Linke-Hofmann-Busch (LHB) ones, in addition to self-propelled train sets (SPTs) such as electrical multiple units (EMU)

6.UNDERSTANDING SEBI

• CONTEXT:IN THE NEWS RECENTLY

Securities and Exchange Board of India (SEBI):

About

• SEBI is a statutory body established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.
• The basic functions of the Securities and Exchange Board of India is to protect the interests of investors in securities and to promote and regulate the securities market.

Background

• Before SEBI came into existence, Controller of Capital Issues was the regulatory authority; it derived authority from the Capital Issues (Control) Act, 1947.
• In April, 1988 the SEBI was constituted as the regulator of capital markets in India under a resolution of the Government of India.
• Initially SEBI was a non statutory body without any statutory power.
• It became autonomous and given statutory powers by SEBI Act 1992.
• The headquarters of SEBI is situated in Mumbai. The regional offices of SEBI are located in Ahmedabad, Kolkata, Chennai and Delhi.

Structure

• SEBI Board consists of a Chairman and several other whole time and part time members.
• SEBI also appoints various committees, whenever required to look into the pressing issues of that time.

• Further, a Securities Appellate Tribunal (SAT) has been constituted to protect the interest of entities that feel aggrieved by SEBI’s decision.
• SAT consists of a Presiding Officer and two other Members.
• It has the same powers as vested in a civil court. Further, if any person feels aggrieved by SAT’s decision or order can appeal to the Supreme Court.

Securities Appellate Tribunal (SAT)

• SAT is a statutory body established under the provisions of the Securities and Exchange Board of India Act, 1992.
• It is to hear and dispose of appeals against orders passed by the Securities and Exchange Board of India or by an adjudicating officer under the Act; and to exercise jurisdiction, powers and authority conferred on the Tribunal by or under this Act or any other law for the time being in force.
• Consequent to government notification dated 27th May, 2014; SAT hears and disposes of appeals against orders passed by the Pension Fund Regulatory and Development Authority (PFRDA) under the PFRDA Act, 2013.
• Further, in terms of government notification dated 23rd March, 2015, SAT hears and disposes of appeals against orders passed by the Insurance Regulatory Development Authority of India (IRDAI) under the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and theInsurance Regulatory and Development Authority Act, 1999 and the Rules and Regulations framed there under.

Powers and Functions of SEBI

• SEBI is a quasi-legislative and quasi-judicial body which can draft regulations, conduct inquiries, pass rulings and impose penalties.
• It functions to fulfill the requirements of three categories –
  • Issuers – By providing a marketplace in which the issuers can increase their finance.
  • Investors – By ensuring safety and supply of precise and accurate information.
  • Intermediaries – By enabling a competitive professional market for intermediaries.
• By Securities Laws (Amendment) Act, 2014, SEBI is now able to regulate any money pooling scheme worth Rs. 100 cr. or more and attach assets in cases of non-compliance.
• SEBI Chairman has the authority to order "search and seizure operations". SEBI board can also seek information, such as telephone call data records, from any persons or entities in respect to any securities transaction being investigated by it.
• SEBI perform the function of registration and regulation of the working of venture capital funds and collective investment schemes including mutual funds.
• It also works for promoting and regulating self-regulatory organizations and prohibiting fraudulent and unfair trade practices relating to securities markets.

SEBI’s Achievements

• Prime Minister Manmohan Singh in 2006 said that eternal vigilance is the price of market stability and market growth. The regulator has kept the faith in its 25-year journey that has seen it steadily gain more powers to oversee India’s capital markets.
• It has ensured a well-functioning market and driven market development: dematerialisation of shares, shortening settlement cycles, initiating nationwide electronic trading, introducing risk management systems, establishing clearing corporations, nurturing the mutual fund industry and so on.
• Rightly, the regulator has earned respect from domestic and global investors for improving the efficacy of the market. After all, there have been no broker defaults after 2001.
• Initiating the process of consultation papers before framing regulation has also enhanced its credibility with stakeholders.
• Today, the Indian capital market can compares favorably with mature markets.
• New initiatives for improving analytical capabilities, strengthening surveillance & risk management and to promote research have been taken by SEBI in recent years to counter the volatility in market.

Issues with SEBI

• In recent years SEBI role became more complex, the capital markets regulator is at a crossroads.
• There is excessive focus on regulation of market conduct and lesser emphasis on prudential regulation.
• SEBI statutory enforcement powers are greater than its counterparts in the US and the UK as it is armed with far greater power to inflict serious economic injury.
• It can impose serious restraints on economic activity, this is done based on suspicion, leaving it to those affected to shoulder the burden of disproving the suspicion, somewhat like preventive detention.
• Its legislative powers are near absolute as the SEBI Act grants wide discretion to make subordinate legislation.
• The component of prior consultation with the market and a system of review of regulations to see if they have met the articulated purpose is substantially missing. As a result, the fear of the regulator is widespread.
• Regulation, either rules or enforcement, is far from perfect, particularly in areas like insider trading.
• The Securities offering documents are extraordinarily bulky and have substantially been reduced to formal compliance rather than resulting in substantive disclosures of high quality.(SOURCE :DRISHTI)