Daily Prelims Newsletter for upsc 28 Feb 2022

Daily Prelims Newsletter For UPSC
| RaghukulCS

28 Feb 2022-Monday

Table Of Contents

Table of Contents

India's abstention from the UN Security Council vote on Russia's invasion of Ukraine

What exactly is the problem?

India has voted against a UN Security Council resolution sponsored by the US that condemns Russia’s aggression against Ukraine, arguing that dialogue is the only way to resolve differences and disputes.

What is the purpose of the resolution?

The United Nations Security Council voted on draught resolution 8979, which was presented by the United States and Albania and co-sponsored by a number of other countries.

The resolution condemns Russia’s aggression against Ukraine and orders Russia to immediately cease using force against Ukraine and refrain from any further unlawful threat or use of force against any UN member state.

The resolution also stated that Russia must immediately withdraw all of its military forces from Ukraine’s territory within its internationally recognised borders.

It also requested that Moscow immediately reverse the decision regarding the status of certain areas of Ukraine’s Donetsk and Luhansk regions.

The resolution reaffirmed the Council’s commitment to Ukraine’s sovereignty, independence, unity, and territorial integrity within internationally recognised borders.

India did not vote on the draught resolution.

Russia, which presided over the UN Security Council meeting, vetoed the resolution, and China, along with the United Arab Emirates, abstained.

Despite the fact that the remaining 11 members of the UN Security Council, including the United States, the United Kingdom, and France, voted in favour of the resolution, it did not pass because Russia vetoed it.

What are the alternatives available to India?

India has four potential options from which to choose:

Russian aggression must be condemned.

Help Russia’s aggression

Maintain silence in the face of Russian aggression.

Express your displeasure and request diplomacy.

The first option pits India against Russia, while the second pits it against the United States and its allies.

The third option will be interpreted as pro-Russian, while the fourth option chosen is the least harmful.

However, abstaining from voting on a UN Security Council resolution condemning Russian aggression and calling for the withdrawal of Russian forces from Ukraine is a pro-Russian stance.

Why did India vote no?

Because it has strategic partners on both sides, India wishes to maintain a balance between the Western bloc led by the United States and Russia.

India’s track record has been one of maintaining a delicate balance between the West and Russia.

India recently abstained on a procedural vote on whether to discuss the Ukraine issue.

India has expressed deep concern about the recent turn of events in Ukraine.

It reiterated its call for an end to the violence.

It expressed its main concern about Indian nationals who are stranded in Ukraine, the majority of whom are students.

India mentioned “territoriality and sovereignty,” which was the modern global order based on the UN Charter, international law, and respect for states’ sovereignty and territorial integrity.

It also promoted diplomacy by urging the parties involved to return to the negotiating table.

Aside from the India-Russia defence and strategic partnership, Russia is India’s most trusted P-5 ally when it comes to vetoing intrusive Kashmir resolutions.

Moscow may or may not be able to moderate Chinese hostility toward New Delhi, but a strategic partnership between India and Russia may be able to temper New Delhi’s growing isolation in a friendless region.

What is the significance of India’s action?

The current Indian strategic landscape necessitates that India balance the two sides, but doing so without a subtle Russia tilt may be impossible at this time.

India’s position demonstrates unequivocally that, when it comes to geopolitics, New Delhi will prioritise interests over principles.

By abstaining, India retained the option of contacting relevant parties in an attempt to bridge the gap and find a middle ground in order to foster dialogue and diplomacy.

While India’s reluctance to take a stand against Russia is understandable, New Delhi must now consider whether its ambitions to be a leading power can be realised without a clear stance on a conflict that threatens global security.

Urban Employment Guarantee Schemes

Why in news?

The Rajasthan government has announced the launch of the Indira Gandhi Shahri Rozgar Guarantee Yojana, an urban employment guarantee scheme similar to the MGNREGA.

What is the history of India’s urban employment schemes?

The Swarna Jayanti Shahari Rozgar Yojana (SJSRY), which was launched in 1997, is an example of an urban employment scheme in India.

It provided self-employment and wage employment to the unemployed and underemployed urban poor.

The SJSRY was replaced in 2013 by the National Urban Livelihoods Mission (NULM).

However, none of them were job-guarantee programmes.

An urban version of MGNREGA is being considered by an increasing number of Indian state governments. These are some examples:

  • Kerala – Ayyankali Urban Employment Guarantee Scheme (Ayyankali Urban Employment Guarantee Scheme) (Ayyankali Urban
  • Odisha-Unnati, also known as the Urban Wage Employment Initiative, is a government initiative in Odisha.
  • Himachal Pradesh
  • MMSAGY stands for Mukhya Mantri Shahri Ajeevika Guarantee Yojna.
  • Mukhyamantri Yuva Swabhiman, Madhya Pradesh Yojana
  • Jharkhand
  • Mukhyamantri Shramik Yojana (Mukhyamantri Shramik Yojana)

Why are UEGs being sought now?

Worry among the urban poor is on the rise.

Urban areas typically have higher unemployment rates.

The urban poor are disproportionately affected by India’s persistently high inflation.

Low-wage, low-quality, informal work is prevalent.

MGNREGA and Prime Minister Garib Kalyan Rojgar Abhiyaan are two government schemes that prioritise rural unemployment and poverty.

Garib Kalyan Rojgar Abhiyaan, with a budget of Rs 50,000 crore, was launched in 2020 to increase employment and livelihood opportunities for migrant workers returning to villages in the aftermath of the Covid outbreak.

What should the design of a UEG look like?

Most UEGs appear to be merely an extension of MGNREGA to urban areas, but this cannot be the case.

The majority of rural unemployment is seasonal, but there is no such seasonality in urban unemployment.

The public works projects in which labour is involved are quite different from one another.

Another significant distinction is the capacity of Panchayati Raj Institutions in rural and urban areas, as urban local bodies are underfunded.

Model DUET- Jean Dreze, the MGNREGA’s drafter, has been writing about a Decentralized Urban Employment and Training System (DUET).

The state government creates and distributes ‘job stamps’ to approved public institutions such as schools, colleges, government departments, health centres, municipalities, neighbourhood associations, urban local bodies, and so on.

Each job stamp can be converted into one person-day of work within a specified time frame, with the work being arranged by an approved institution.

On presentation of job stamps and a due-form work certificate from the employer, the government may pay the wages (statutory minimum) directly to the worker’s account.

Unlike MGNREGA, DUET proposes to be for both unskilled and skilled workers, with a key component being the provision of training or skilling.

Should a national UEG be established?

A national-level UEG would necessitate a significant budget allocation.

A UEG programme that covers an estimated 20 million urban casual workers for 100 days at a wage rate of Rs 300 per day would cost the union government around Rs 1 lakh crore, according to a calculation.

MGNREGA and UEG are open admissions that the Indian economy has not been able to create as many well-paying jobs despite GDP growth rates of more than 8% on several occasions over the last two decades.

While such programmes and schemes may begin as relief measures, they are unlikely to be discontinued by any future government.

When one adds up all of the money spent on MGNREGA over the last 10 or 15 years, funding becomes an issue.

It is reasonable to ask why, if India had an extra Rs 1 lakh crore to spend, policymakers should spend it on a new UEG scheme rather than simply increasing the Budget allocation for MGNREGA.

Increasing MGNREGA would reduce distress migration and ensure that people in rural India are only enticed to migrate out when cities create well-paying jobs.

Sleight of Hand and Gold Imports

Why in the news?

Duty-free gold imports intended for export after value addition are being diverted to the domestic market, and this must be stopped.

What exactly is the problem?

Every year, an average of 170 tonnes of duty-free gold is imported, with the majority of it ending up in domestic consumption.

This equates to approximately $7 billion in imports, with a customs duty of $700 million and a GST of $300 million foregone each year.

The haul seized from exporters in Hyderabad, Gandhinagar, Mumbai, and Kolkata provides context for a phenomenon that is largely unnoticed.

The number of cases apprehended in these instances is surprisingly lower than the number of cases apprehended in traditional smuggling channels such as hand-carry and cross-border/sea routes.

How does it work?

The gold is purchased duty-free from a bank for export, and the manufacturer creates plain jewellery, which typically takes eight days, and sells it in the domestic market in exchange for a bar.

The bar would be returned to the manufacturer, indicating work-in-progress for exports.

Before the end of the 90th day, gold-coated jewellery with underlying copper is exported, and that batch is sold as plain jewellery in the domestic market.

In theory, the stock could be turned at least eight times before exporting and still earn the duty differential.

The entire machinery is well-organized and pre-planned, earning the approval of Indian Customs and legalising the export.

Regardless of the minimum value-addition standard in place, the value of the export shipment is kept low and, as a result, goes undetected in an online system monitored by risk protocols.

Many nominated banks/agencies have recently been penalised because they were the importers on record and, as a result, supplied gold to the exporters.

The buyer of duty-free gold is the source of the problem, not the nominated banks/agencies that supply gold to them.

The investigations conducted by the Directorate of Revenue Intelligence (DRI) highlight the differential duty liability on the nominated banks/agencies rather than the alleged fraudsters, the exporters.

What does the law require?

According to Customs law, there must be collusion or suppression of facts on the part of the importer in order to make a tax demand after two years of import.

Unfortunately, in the absence of any evidence, the cases do not stand up to legal scrutiny with the demand being slapped on the nominated bank/agency.

The exporter, on the other hand, is constantly tempted to repeat the mistake after escaping with a minor penalty and no duty demand.

Gold smuggling continues unabated under the regulators’ watch, making this a difficult task.

What is the exit strategy?

The only possible solution is to eliminate tax arbitrage and require that only GST registered jewellers or those with a unique ID for being a manufacturer for exports manufacture jewellery for export purposes.

There must be a mechanism in place that allows the designated agencies/banks to track the remittances received by the exporter.

The India International Bullion Exchange may be able to solve this problem by completely shifting the liability to the exporter.

Exporters should be required to purchase gold through an exchange platform in exchange for a duty bond and to link it to remittances.

Other’s News:

Price Changes in Tomatoes and Onions

The Economic Survey 2021-2022 investigates the reasons for price fluctuations in two staple vegetables, tomatoes and onions.

Tomatoes and onions are the most volatile commodities in Indian markets.

According to the Economic Survey, seasonality in production (Kharif and Rabi seasons) and irregular shocks all contribute equally to volatile prices.

Every year, the variation in supply puts upward pressure on prices due to seasonality in production.

Unseasonal rains and a prolonged drought triggered the unexpected price shocks for these two perishable commodities.

Institutions of Market Infrastructure

The Securities and Exchange Board of India (SEBI) fined the National Stock Exchange (NSE) for governance failures related to actions taken during the tenure of its former MD and CEO Chitra Ramkrishna.

Market Infrastructure Institutions include stock exchanges, depositories, and clearing houses (MIIs).

They are an important part of the nation’s vital economic infrastructure.

In 2010, a panel chaired by former RBI Governor Bimal Jalan was formed to investigate the issues surrounding the ownership and governance of MIIs.

The panel stated in its 2010 report that the term “infrastructure” would refer to the basic, underlying framework or features of a system.

It also stated that the term “market infrastructure” refers to such basic facilities and systems that serve this market.

The nucleus of the capital allocation system is made up of well-functioning MIIs. They are essential for economic growth and, like any other infrastructure institution, have a net positive impact on society.

MIIs are’systemically important’ in India due to their phenomenal growth in terms of market capitalisation of listed companies, capital raised and the number of investor accounts with brokers and depositories, and the value of assets held in depositories’ accounts.

Any failure of such a MII could result in even larger cataclysmic collapses, potentially resulting in a global economic downturn.

MIIs in India – The SEBI lists seven stock exchanges, including the BSE, NSE, Multi Commodity Exchange of India, and Metropolitan Stock Exchange of India.

MIIs are depositories tasked with the safekeeping of securities as well as their trading and transfer: The Central Depository Services Ltd. and The National Securities Depository Ltd.

The regulator also names seven clearing houses, one of which is the Multi Commodity Exchange Clearing Corporation.

Types of MIIs A stock exchange is a marketplace for the purchase, sale, and issuance of publicly traded company shares, bonds, and commodities.

A depository is a location or entity that stores financial securities in a dematerialized form.

It refers to a bank, organisation, or any other institution that holds and assists in the trading of securities.

Securities are held in depository accounts in the same way that funds are held in bank accounts.

A clearing house acts as a go-between for buyers and sellers of financial instruments.

It is a futures exchange agency or separate corporation in charge of settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery, and reporting trading data.

They aid in the validation and finalisation of securities trades, as well as ensuring that both buyers and sellers fulfil their obligations.

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