Prizes and Awards

Padma Awards 2019

Padma Awards — one of the highest civilian Awards of the country, are conferred in three categories, namely, Padma Vibhushan, Padma Bhushan and Padma Shri. The Awards are given in various disciplines/ fields of activities, viz. art, social work, public affairs, science and engineering, trade and industry, medicine, literature and education, sports, civil service, etc. ‘Padma Vibhushan’ is awarded for exceptional and distinguished service; ‘Padma Bhushan’ for distinguished service of high order and ‘Padma Shri’ for distinguished service in any field. The awards are announced on the occasion of Republic Day every year.

These awards are conferred by the President of India at ceremonial functions which are held at Rashtrapati Bhawan usually around March/ April every year. This year the President of India has approved conferment of 112 Padma Awards including one duo case (in a duo case, the Award is counted as one) as per list below. The list comprises 4 Padma Vibhushan, 14 Padma Bhushan and 94 Padma Shri Awards.  21 of the awardees are women and the list also includes 11 persons from the category of foreigners/NRI/PIO/OCI, 3 posthumous awardees and 1 transgender person.

Bharat Ratna (3)

  1. Nanaji Deshmukh (posthumous)
  2. Dr. Bhupen Hazarika (posthumous)
  3. Pranab Mukherjee

Padma Vibhushan (4)

  1. Ms. Teejan Bai — Art-Vocals-Folk — Chhattisgarh
  2. Shri Ismail Omar Guelleh (Foreigner) —  Public Affairs — Djibouti
  3. Shri Anilkumar Manibhai Naik — Trade & Industry-Infrastructure — Maharashtra
  4. Shri Balwant Moreshwar Purandare — Art-Acting-Theatre — Maharashtra

Padma Bhushan (14)

  1. Shri John Chambers (Foreigner) — Trade & Industry-Technology — USA
  2. Shri Sukhdev Singh Dhindsa — Public Affairs — Punjab
  3. Shri Pravin Gordhan  (Foreigner) — Public Affairs — South Africa
  4. Shri Mahashay Dharam Pal Gulati  — Trade & Industry-Food Processing — Delhi
  5. Shri Darshan Lal Jain — Social Work — Haryana
  6. Shri Ashok Laxmanrao Kukade — Medicine-Affordable Healthcare — Maharashtra
  7. Shri Kariya Munda — Public Affairs — Jharkhand
  8. Shri Budhaditya Mukherjee — Art-Music-Sitar — West Bengal
  9. Shri Mohanlal Viswanathan Nair  — Art-Acting-Film  — Kerala
  10. Shri S Nambi Narayan — Science & Engineering-Space — Kerala
  11. Shri Kuldip Nayar (Posthumous) — Literature & Education (Journalism) — Delhi
  12. Ms. Bachendri Pal  — Sports-Mountaineering —  Uttarakhand
  13. Shri V K Shunglu  — Civil Service —  Delhi
  14. Shri Hukumdev Narayan Yadav  — Public Affairs — Bihar

Apart from the above 94 Padma Shree awards were conferred on distinguished Indians from different arena of life. Some of the well-known Padma Shree award winners are as follows:

  1. Shri Manoj Bajpayee — Art-Acting-Films — Maharashtra
  2. Shri Sunil Chhetri — Sports-Football — Telangana
  3. Muktaben Pankajkumar Dagli — Social Work-Divyang Welfare — Gujarat
  4. Shri Thanga Darlong — Art-Music-Flute — Tripura
  5. Shri Prabhu Deva — Art-Dance — Karnataka
  6. Rajkumari Devi — Others-Agriculture — Bihar
  7. Shri Baldev Singh Dhillon — Science & EngineeringAgriculture — Punjab
  8. Shri Gautam Gambhir — Sports-Cricket — Delhi
  9. Rohini Godbole — Science & Engineering-Nuclear — Karnataka
  10. Shri Sandeep Guleria — Medicine-Surgery — Delhi
  11. Shri K G Jayan — Art-Music-Bhakti — Kerala
  12. Shri Subhash Kak (Foreigner) — Science & Engineering-Technology — USA
  13. Shri Waman Kendre — Art-Acting-Theatre — Maharashtra
  14. Bombayla Devi Laishram — Sports-Archery — Manipur
  15. Shri Kailash Madbaiya — Literature & Education — Madhya Pradesh
  16. Gita Mehta (Foreigner) — Literature & Education — USA
  17. Shri Daitari Naik — Social Work — Odisha
  18. Shri Shankar Mahadevan Narayan — Art-Vocals-Films — Maharashtra
  19. Nartaki Natraj — Art-Dance-Bharatnatyam — Tamil Nadu
National Affairs

Corporate Sector spent over Rs 50.000 crore in corporate Social Responsibility CRISIL Report

According to a report by CRISIL Foundation, the CSR arm of credit rating agency CRISIL, Indian corporations spent over Rs 50,000 crore towards corporate social responsibility (CSR) between FY15 and FY18. The report estimated the total CSR expenditure by Indian corporates in FY18 at Rs 15,010 crore, with listed companies spending Rs 10,000 crore and unlisted companies spending Rs 5,010 crore on CSR.
Indian companies above a certain threshold are required to spend at least 2% of their net profit on social expenditure every year under the Companies Act of 2013. The Companies Act 2013 expects businesses to spend 2% of their three-year average profits on social initiatives. Even before the Act was put in place, companies recognized they need to think about more than just profits – and did so. But since CSR has become mandatory, companies have embraced social causes with a fervour. They now apply the same rigour to causes as diverse – as hunger, poverty, healthcare, education, cleanliness environmental sustainability, and rural development, as they bring

Some of the key findings of the study are that companies have spent Rs. 74.6 bn, an increase of 5.8% compared to the previous year. In FY18, companies spent 1.9% of their three-year average profits. The aggregate spends by MNC’s and institutionally owned entities were 2.0%, while it was 1.9% for promoter owned entities and 1.8% for PSUs. The number of companies meeting the 2% spend target has increased from 46 in FY16, 59 in FY 17 to 68 this year. The top ten companies contribute ~48 to the overall spend on CSR; in FY17, this was 47. Education continues to be the focus area for companies ~30% of the aggregate FY18 spend was made towards education projects. Other areas were rural development (13.3%), hunger, poverty and healthcare projects (20.6 percent).

Corporate Social Responsibility

Before enactment of Companies Act, 2013 Corporate Social Responsibility (CSR) expenditure is at the discretion of the corporate however after enactment of Section 135 of CSR Companies Act 2013 such expenditure is made mandatory for certain corporate

India is the only country so far, where CSR has been made mandatory.

Applicability to which CSR provisions applicable:

  1. Following below mention companies are required to constitute CSR Committee, If Company having following during Immediate Preceding financial year

Provisions of CSR apply to foreign branch/project office of foreign company:-

The Provisions of CSR are applicable to Foreign Company having Branch office or project in India if it fulfil the above given criteria. The criteria of Net Profit etc. apply only to business operations in India in case of foreign Company/ Project Office.

♦ When companies get ceases to comply with the provisions of CSR?

Every company which ceases to be a company covered above three conditions for Immediate preceding financial years shall not be required to:

  1. a) Constitute a CSR Committee; and
  2. b) Comply with the provisions contained in sub-sections (2) to (5) of the said section (to spent amount on CSR Activities).

Once company again fall within the limit provisions of CSR will be applicable on Company.

  1. CSR Committee

◊ Constitutions of CSR Committee: Company to which CSR is mandatory should constitute a CSR Committee to undertake and monitor CSR activities:

The CSR Committee shall consist of 3 (Three) or more Director, out of which at least one director shall be an Independent Director.

  • An Unlisted Public Company:This is covered under CSR provisions, but need not to have Independent Director on the CSR Committee.
  • Private Limited Company:which is covered under CSR provisions

√ Need not have Independent director on the CSR Committee

√ Can have CSR committee with only Two Directors.

  • In case of Foreign Company: The CSR committee should have at least Two person, out of which
  • One person shall be specified under section [2]380(1)(d) of the 2013 Act and
  • Another person nominated by the Foreign Company.

◊ CSR Committee Meeting:

  • Law is silent w.r.t. number of CSR Committee meetings in a year. But as per Secretarial Standard 1 clause no. 2.2 “Committees shall meet as often as necessarysubject to the minimum number and frequency stipulated by the Board or as prescribed by any law or authority.”
  • CSR Committee meeting can conduct business by passing of resolution by circulation.

Question for prelims

  1. Arrange the sectors in descending order as per their share of receipts from corporate social responsibility expenditure in India.
  2. How much the companies are required to spend on corporate social responsibility according to the Companies Act 2013?
  3. What is the ceiling above which it is mandatory for the companies to spend for corporate social responsibility?

National Affairs

BSNL is fast losing its place in emerging telecom market

While the wireless telecom market is growing fast in India, the Bharat Sanchar Nigam Limited (BSNL) is sliding fast in its service credibility and market share. The country’s overall rural wireless subscriber base increased to 528.48 million at the end of December 2018 compared to 521.59 million at the end of September 2018. The urban wireless subscriber base though declined marginally to 647.52 million from 647.70 million during the reported period. On the back of increase in rural subscribers, the percentage share of rural users increased to 44.94% in the overall wireless subscriber base. But in both the markets BSNL has continuously been a loser in last few years. BSNL has been making losses during the last five years. It has been now been overtaken by private operators areas.  in both the rural and urban areas. BSNL has lost its place of prestige as preeminent player in the telecom market because of lack of modernization , slow decision making, lack of thrust to upgrade infrastructure and human resources while private playerso have spread their reach with better tariffs and marketing skills.

BSNL has lost more than half of its wireless market share in rural areas in the last 10 years to private operators. As per data put out by Telecom Regulatory Authority of India (Trai), BSNL’s wireless market share in rural areas stood at 6.82% at the end of December 2018 against 15.36% at the end of June 2009.Even Reliance Jio, which launched its services in September 2016, has a higher rural market share than BSNL’s at 19.01%.

Today, Vodafone Idea is the leader in rural areas with a market share of 41.76%, followed by Bharti Airtel at 31.91%. In terms of percentage of rural subscribers in overall user base, BSNL ranks after the three private operators,   right at the bottom. Vodafone Idea has 52.71% rural subscribers in its user base, followed by Bharti Airtel with 49.56% and Reliance Jio at 35.87%. The share of rural subscribers in BSNL’s overall user base stands at 31.51%.

The private operators started venturing into rural areas with teledensity saturating in urban areas, they devised innovative packages for these markets too, and BSNL was not able to defend its turf. One of the most important reasons  for the decline of in rural market share of BSNL in recent times could be lack of 4G spectrum as people in rural areas also want access to high-speed internet. BSNL is finding it difficult to match  private operators which have got the latest infrastructure and technology. Unfortunately, there are not enough revenues to protect or expect for the state-run firm in rural areas. This

The woes of the BSNL do not end here. At its board meeting in March, an expert panel presented 10 proposals and three out of these have been approved by the state-owned telecom service. Due to a financial loss, telecom operator Bharat Sanchar Nigam Limited (BSNL) is likely to lay off as many as 54,000 employees from its workforce. Other proposals that were approved by the board include reduction of retirement age from the present 60 years to 58 years, Voluntary Retirement Scheme (VRS) for all employees aged 50 and above, and expediting the allocation of 4G spectrum to BSNL.

The VRS scheme and sacking employees is likely to have a huge impact on the employees as well as the ongoing elections therefore, it was decided to wait for the final call of the new government. The BSNL has a robust workforce of around 1,74,312 and removing 54,000 employees will see a 31% reduction in its workforce.

It is not that BSNL is making huge losses only, its productivity has also declined over the years. In February this year the company had incurred a loss of Rs 7,993 crore during the 2017-18 financial year. It is notable that BSNL became staff heavy over the years and therefore its productivity declined. Both PSU telecom companies BSNL and MTNL are both facing the burden of high salaries to their more than proportionate staff. Heavy salaries have become a heavy burden due to their bloated headcounts. BSNL has the largest number of employees among all the telecom operators, but, the company handles only 650 customers per employee, while MTNL handles just 160. These indicate far less productivity than their private sector peers. The companies are now expecting a bailout package from the government and thinking of monetizing assets for their survival.

Nothing is expected now before the elections. But it is a moot question whether government really would take decisive moves to rejuvenate the BSNL or move forward for its privatization. Telecom is an strategic sector and many believe that leaving telecom market completely to private sector has its own strategic risks. Other feel that the quality of service of BSNL cannot improve until and unless government offloads its share in it and right sizes the telecom operator. There is criticism from opposition parties that government is deliberately crippling the BSNL to help the private operators to gain market share. Whatever be the truth, it needs to be kept in mind that BSNL is one of the major employment providers in the core sector and its death would be a blow to an important PSU.

National Affairs

Bihar industrial investment policy 2016 Main Features

  • Achieve annual industrial development growth rate of 15%
  • Increase share of manufacturing sector to GSDP to 25% as envisaged in National Manufacturing Policy.
  • Attract on-ground investment of Rs. 15000 crore.
  • Create high-end infrastructure to attract investment in the state.
  • Eradicate regional industrial imbalance by uniformly extending the benefits of investment to all geographical areas of state.
  • Provide relatively more economic benefits to the priority sections of society such as SC, ST, Women, differently-abled, war widows, thirs gender, acid attack victims etc.
  • Ensure that industries facilitate skill development of local people so as to achieve the target of 15 million skilled youths as per the “seven commitments” of the state government.
  • Increase the competitiveness of MSMEs and adoption of “zero Defect Zero Effect” manufacturing practice.
National Affairs

India’s first railway university in Vadodara

The first railway university of the country, situated in Vadodara (Gujarat) was dedicated to the nation today (December 15) by Union Minister Piyush Goyal and Gujarat Chief Minister Vijay Rupani. The National Rail and Transportation Institute (NRTI) opened its doors to the first batch of 103 students from 20 states in two fully-residential undergraduate courses in September this year. The university has come into existence to fulfill the promise of the BJP-led government under PM Narendra Modi. The Rail Budget of 2014 had made a promise of establishing such a university. The university aims at enhancing efficiency, managerial and technological efficiency of Indian railways by education, training and research and also eventually to make India a major global player in the arena. The university would employ capable teachers and there may be collaboration with established management schools of India. Initially teachers are likely to come from Indian Business School, Hyderabad and XLRI School of Management and other reputed institutions.
The new university will function from the Pratap Vilas Palace of the erstwhile Gaekwad state, which houses National Academy of Indian Railways. The academy was shifted to Vadodara in 1952 from Premnagar, Dehradun where it was founded in 1930. Both the institutions will run from this campus till the time a greenfield campus will be set-up. The Ministry of Railways has identified a 100-acre plot in Vadodara for this purpose. Known as the ‘National Academy of Indian Railways’, Pratap Vilas Palace at Lalbaug, Vadodara was constructed between February 15, 1908 to July 30, 1914 by the British architect Charles F Stevens. The campus named after Pratapsinh Rao Gaekwad once house the ‘Railway Staff College’ which constitute 55 acres of land and is designed in Renaissance architecture. Pratapsinh Rao Gaekwad was the last and the 13th Maharaja of Baroda state.

International Current Affairs

The escalating trade war between the United States and China

The US- China trade war caught momentum since the beginning of 2018 as US president Donald Trump started taking measures to implement his promise during electoral campaign. He had promised to pressurise China to rectify trade distortions such as US high trade deficit with China (approx $300 billion) and lack of market access to US exports due to various restrictions and condition of technology transfer imposed on American companies investing in China. Trump had promised in his campaign to fix China’s “longtime abuse of the broken international system and unfair practices”.

The US has introduced tariffs on goods imported from China and China has retaliated by increasing tariffs on imports of American products. Starting in January 2018 the U.S imposed a tariff on solar panel imports, most of which are manufactured in China. On July 6, the U.S. specifically targeted China by imposed 25% tariffs on $34 billion of imported Chinese goods as part of Trump’s tariffs policy, which then led China to respond with similarly sized tariffs on U.S. products. A tariff on an additional $16 billion of Chinese imports was added in mid August, with China responding proportionately. A further tariff on $200 billion of Chinese goods is to go into effect on September 24, 2018 to which China plans to respond to with tariffs on $60 billion of US goods. The Trump administration said the tariffs were necessary to protect intellectual property of U.S. businesses, and to help reduce the U.S. trade deficit with China.

The U.S. administration is relying partly on Section 301 of the Trade Act of 1974 to prevent what it claims are unfair trade practices and theft of intellectual property. This gives the president the authority to unilaterally impose fines or other penalties on a trading partner if it is deemed to be unfairly harming U.S. business interests. Trump had already, in August 2017, opened a formal investigation into attacks on the intellectual property of the U.S. and its allies, the theft of which cost the U.S. alone an estimated $225–600 billion a year.

The goods affected by trade war between the US and China and the timeline is as follows:

Solar Panels- President Trump placed a 30% tariff on foreign solar panels on January 23, 2018, to be reduced to 15% after four years. China, the world leader in solar panel manufacture, decried the tariffs.

Washing Machine– On same day (Jan 2, 2018), tariffs of 20% were placed on washing machines for the first 1.2 million units imported during the year. In 2016, China exported $425 million worth of washers to the United States.

1,300 categories of new Chinese products charged with tariff in March 2018 – Trump asked the United States Trade Representative (USTR) investigate applying tariffs on US$50-60 billion worth of Chinese goods, on March 22. He relied on Section 301 of the Trade Act of 1974 for doing so, stating that the proposed tariffs were “a response to the unfair trade practices of China over the years”, including theft of U.S. intellectual property. Over 1,300 categories of Chinese imports were listed for tariffs, including aircraft parts, batteries, flat-panel televisions, medical devices, satellites, and various weapons.

China retaliated in April 2018 by putting higher tariffs on 128 American products- China responded on April 2 by imposing tariffs on 128 products it imports from America, including aluminum, airplanes, cars, pork, and soybeans (which have a 25% tariff), as well as fruit, nuts, and steel piping (15%). On April 5, Trump responded saying that he was considering another round of tariffs on an additional $100 billion of Chinese imports as Beijing retaliates. The next day the World Trade Organization received request from China for consultations on new U.S. tariffs.

Efforts of reconciliation

China promised to help reduce US trade deficit in May 2018 – Vice Premier Liu He, top economic adviser to Communist Party general secretary Xi Jinping, visited Washington from May 15 to 19 for further trade talks. It was reported on May 20 that Chinese officials had agreed to “substantially reduce” America’s trade deficit with China by committing to “significantly increase” its purchases of American goods. As a result, Treasury Secretary Steven Mnuchin announced that “We are putting the trade war on hold”. White House National Trade Council Director Peter Navarro, however, said that there was no “trade war,” but that it was a “trade dispute, fair and simple. We lost the trade war long ago.”

May 2018: further tightening by the US AFTER FAILED RECONCILIATION

25% tariff on $50 billion of Chinese goods – The White House announced on May 29 that it would impose a 25% tariff on $50 billion of Chinese goods with “industrially significant technology;” the full list of products affected to be announced by June 15. It also planned to impose investment restrictions and enhanced export controls on certain Chinese individuals and organizations to prevent them from acquiring U.S. technology. China said it would discontinue trade talks with Washington if it imposed trade sanctions.”

June 15 : Announcement of the US for more tightening

On June 15, Trump declared in a short White House statement that the United States would impose a 25% tariff on $50 billion of Chinese exports. $34 billion would start July 6, with a further $16 billion to begin at a later date. China’s Commerce Ministry accused the United States of launching a trade war and said China would respond in kind with similar tariffs for US imports, starting on July 6. Three days later, the White House declared that the United States would impose additional 10% tariffs on another $200 billion worth of Chinese imports if China retaliated against these U.S. tariffs. The list of products included in this round of tariffs was released on July 11 and was set to be implemented within 60 days.

China’s retaliation in July 2018

China retaliated almost immediately, threatening its own tariffs on $50 billion of U.S. goods, and claimed the United States had “launched a trade war.” Import and export markets in a number of nations feared the tariffs would disrupt supply chains which could “ripple around the globe.”

American tariffs on $34 billion of Chinese goods came into effect on July 6, 2018. China imposed retaliatory tariffs on US goods of a similar value. The tariffs accounted for 0.1% of the global gross domestic product. On July 10, U.S. released an initial list of the additional $200 billion of Chinese goods that would be subject to a 10% tariff. China vowed to retaliate with additional tariffs on American goods worth $60 billion annually two days later.

Trade war intensifies in August 2018

On August 8 the Office of the United States Trade Representative published it’s finalized list of 279 Chinese goods, worth $16 Billion, to be subject to a 25% tariff from August 23. China responded with its own tariffs of equal value when the American tariffs were implemented on August 23. On August 14 China filed a complaint with the World Trade Organisation (WTO), claiming that US tariffs on foreign solar panels clash with WTO ruling and have destabilised the international market for solar PV products. China claimed the resulting impact directly harmed China’s legitimate trade interests.

Reconciliation effort fails again

US Treasury Under Secretary David Malpass and Chinese Commerce Vice Minister Wang Shouwen met on August 22 in Washington DC in a bid to open up dialogue in response to the intensifying trade war, yet discussions ended with no resolution. By August 23, US implemented a further 25% of tariffs on $16 billion of goods as promised, which was reciprocated by China. China filed a new WTO complaint against the US as a result of this tariff escalation.

America puts additional tariffs in September 2018

On September 17 the US announced its 10% tariff on $200 billion worth of Chinese goods would begin on September 24, increasing to 25% by the end of the year. They also threatened tariffs on an additional $267 billion worth of imports if China retaliates, which China promptly did on September 18 with 10% tariffs on $60 billion of US imports. So far, China has either imposed or proposed tariffs on $110 billion of U.S. goods, representing most of its imports of American products.

The unending trade waris likely to affect global growth rate having spillover impact on trade, investment and employment. According to experts this does not augur well either for the economies or for the people. The producers and consumers both stand to lose and the green shoots of recovery after the global recession may be scuttled again. A negotiated solution is necessary to avert adverse consequences of the trade war which has the potential to drag most of the big economies in the whirlpool and quagmire of recession again.

Economic Development and Policies

ADB forecasts recovery in India’s GDP growth in 2018

The Asian Development Bank in its 2018 Asian Development Outlook released on April 11, 2018 raised its 2018 economic growth estimate for developing Asia from 5.8 percent to 6.0 percent citing solid export demand. However it pointed out that the U.S. protectionist measures and any retaliation against them could undermine trade in Asia. Further the bank said that the growth rate for Asia would moderate a little bit in 2019 to 5.9 per cent. According to ADB Strong external and domestic demand helped economies in the region expand by an average 6.1 percent last year.

According to the ADB forecast China’s economy is expected to grow 6.6 percent this year, faster than the bank’s prior estimate of 6.4 percent made in December and by 6.4 percent in 2019. China has set a growth target of around 6.5 percent this year, the same as last year, but it achieved a higher growth rate at 6.9 percent. But the ADB forecast that China’s growth will further moderate “as economic policy leans further toward financial stability and a more sustainable growth trajectory.”

By region, South Asia will remain the fastest growing in Asia Pacific, with the ADB pegging expansion this year at 7.0 percent and 7.2 percent in 2019. Despite growth easing to 6.6 percent in 2017, India’s economy is projected to bounce back to 7.3 percent in 2018 and to 7.6 percent in 2019 as the country’s new tax regime improves productivity. It said that banking reform and corporate deleveraging are also taking hold, which could reverse a downtrend in investment. Growth in Southeast Asia is forecast at 5.2 percent for this year and next, the same pace as 2017, while Central Asia is projected to slow to 4 percent in 2018 before picking up to 4.2 percent next year.

The ADB expressed apprehension that that although till now the protectionist trade measures by the United States has not made any remarkable dent in trade flows to and from Asia this year, the risks of the same happening cannot be ruled out. If trade war continues followed by action of the US and reaction, this could undermine the business and consumer optimism that underlies the regional outlook. It noted that China has blamed the United States for trade frictions amid escalating threats of tariffs on billions of dollars worth of goods between the world’s two biggest economies, sparked by U.S. frustration with China’s trade and intellectual property policies. Another risk to Asia’s growth, the ADB said, is “diminishing capital inflows if the U.S. Federal Reserve needs to raise interest rates faster than markets expect.” The Fed last raised rates in March and policymakers signaled two or three more hikes this year.

Business and Economy

Fitch keeps India rating at BBB- for 12th year

Fitch, one of the top three credit rating agencies of the world  has kept (27 April 2018) India’s sovereign rating unchanged at BBB-, the lowest investment grade for the 12th year with stable outlook. Despite giving a stable outlook, it has praised the implementation of the Goods and Services Tax (GST) in India, expressing hope that the new tax will drive the mid-term growth once the teething troubles are resolved. The agency said that the main reason of keeping credit rating at BBB- is India’s weak fiscal balances. It is same credit rating for the 12th year for India by Fitch.

It forecast India’s GDP growth to rebound to 7.3% in FY19 and 7.5% in FY20, as a “temporary drag will fade” caused by demonetisation and the GST in 2016 and 2017 respectively. Fitch said that India’s five-year average real GDP growth of 7.1% is the highest in the APAC region and among ‘BBB’ range peers. However, it pointed out that India’s Per capita GDP is the lowest among its ‘BBB’ range peers.

Fitch said that if the government reduces its debt over the medium term and achieves higher sustained investment and growth rates without the creation of macro imbalances, it would make a strong case for an upgrade in rating. It said that government debt amounted to 69% of GDP in FY18 (while ‘BBB’ median is 41% of GDP), while fiscal slippage of 0.3% of GDP in both FY18 and FY19 relative to the government’s own budget targets of last year, implies a government deficit of 7.1% of the GDP as against ‘BBB’ median: 2.1%.

The rating agency appreciated the Indian government’s measure to tackle NPAs as reflected by government’s decision to announce Rs 2.11 lakh crore for bank recapitalization. However, in the wake of recent fraud at Punjab National Bank, it warned that more capitalization may be needed. It also added that most of the capital injection is likely to be absorbed by losses associated with NPL (non-performing loans) resolution rather than rather than to fund new lending.

It may be recalled that nearly after 14 years another credit rating agency Moody’s had earlier upgraded India’s credit rating to Baa2 from the lowest investment grade of Baa3. However, both Fitch and S&P keep the rating unchanged.

What is credit Rating?

A credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or sovereign government.

A sovereign credit rating is the credit rating of a sovereign entity, such as a national government. The sovereign credit rating indicates the risk level of the investing environment of a country and is used by investors when looking to invest in particular jurisdictions, and also takes into account political risk. A rating expresses the likelihood that the rated party will go into default within a given time horizon. In general, a time horizon of one year or under is considered short term and anything above that is considered long term.

Credit rating is also done in case of a corporation’s financial instruments i.e. debt security such as a bond or a debenture, but also the corporations itself. Thus these institutions also rate corporate units, banks and their debt instruments.

Four most relied credit rating agencies of world

The four relied international credit rating institutions are Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings and DBRS (Dominion Bond Rating Service). They are the only four ratings agencies that are recognized by the European Central Bank (ECB) for determining collateral requirements for banks to borrow from the central bank. These are only four rating agencies which have received ECAI recognition from the European Central Bank (ECB). That designation indicates CRAs whose ratings can be used by the ECB to determine collateral requirements for borrowing from the ECB.  In recent years, DBRS’s sovereign ratings on European nations, including Portugal, Ireland and Italy, were used by the ECB for such purposes. The ECB uses a first, best rule among the four agencies that have the designated ECAI status, which means that it takes the highest rating among the four agencies – S&P, Moody’s, Fitch and DBRS – to determine haircuts and collateral requirements for borrowing. Ratings in Europe have been under close scrutiny, particularly the highest ratings given to countries like Spain, Ireland and Italy; because they affect how much banks can borrow against sovereign debt they hold.

The symbols used for credit Rating

While Moody’s, S&P and Fitch Ratings control approximately 95% of the credit ratings business, they are not the only rating agencies. DBRS’s long-term ratings scale is somewhat similar to Standard & Poor’s and Fitch Ratings with the words high and low replacing the + and −. It goes as follows, from excellent to poor: AAA, AA (high), AA, AA (low), A (high), A, A (low), BBB (high), BBB, BBB (low), BB (high), BB, BB (low), B (high), B, B (low), CCC (high), CCC, CCC (low), CC (high), CC, CC (low), C (high), C, C (low) and D. The short-term ratings often map to long-term ratings though there is room for exceptions at the high or low side of each equivalent.

Business and Economy

IMF predicts India to be the fastest growing economy this year

International Monetary Fund (IMF) has predicted (April 17) that India would be the fastest growing major economy in the world again in 2018. According to the IMF,   GDP growth of India is estimated to be 7.4 percent in 2018 and 7.8% in 2019. Since the Chinese economy is cooling and estimated by the Chinese government to have a growth rate between 6.5 to 7.0 percent in the next few years (a new normal), India is poised to regain its position as fastest-growing major economies. In its Spring 2018 report, IMF predicts that with growth “picking up” after falling sharply in the second quarter of 2017 due to “one-off factors”, India in 2018 and 2019 would re-emerge as fastest-growing major economies.IMF has predicted that China would grow respectively at 6.6% and 6.4% in the two years.

Among largest economies, IMF’s 2018 growth projections are 1.2% for Japan and 2.9% for the United States. US growth will be boosted in part by a largely temporary fiscal stimulus, which explains over one-third of our upgrade over last October for 2018 global growth. The overall global growth is expected to tick up to 3.9% in both 2018 and 2019.

IMF said that India has made progress on structural reforms in the recent past. Praising the implementation of the Goods and Services Tax (GST), IMF said that it will help India increase tax compliance, efficiency, and help reduce internal barriers. It is noteworthy that while IMF makes its projections on current year basis (January-December), India follows financial year (April-March).However, the IMF report has pointed out that realization of inclusiveness would still be a big challenge in the medium-term despite higher growth. Further the report cautioned that India’s high public debt and recent failure to achieve the budget’s deficit target call for continued fiscal consolidation into the medium term to further strengthen fiscal policy credibility.

National Affairs

India State of Forest Report 2017

According to  India State of Forest Report (ISFR) 2017, released by Union environment minister Harsh Vardhan on February 12, 2018. India’s total forest cover is 708,273 (about 21.54% of India’s total GA) and tree cover is 93,815 (about 2.85% of the total GA).Taken together, it marks an increase of about 1% Forest and tree cover in India since 2015 to 802,088 or about 24.39% of the country’s total geographical area (GA). The latest ISFR report also includes information about water bodies in forests. This is a new feature of the report. It  revealed that there has been an increase of 2,647 in the extent of water bodies in forest areas over the decade 2005-2015. According to the report, all the states and Union territories show an increase (in water bodies) except Arunachal Pradesh, Uttar Pradesh, Haryana and Bihar. The ISFR report is published every two years. The 2017 report is more comprehensive than the previous one as it is based on information from 633 districts compared with 589 covered in the 2015 report.

The top five states where forest cover grew are Andhra Pradesh (by 2,141, Karnataka (1,101, Kerala (1,043, Odisha (885 and Telangana (565, while the top five states where forest cover declined are Mizoram (by 531, Nagaland (450, Arunachal Pradesh (190, Tripura (164 and Meghalaya (116 According to the report,  Madhya Pradesh has the largest forest cover (77, 414 sq. km), followed by Arunachal Pradesh (66,964 sq. km), Chhattisgarh (55,547 sq. km) Odisha (51, 345 sq. km) and Maharashtra (50,682 sq. km). Forest cover in hill districts grew by 754, while tribal districts saw an increase of 86.89 in just the last two years, according to ISFR 2017. But, worryingly, forest cover in the northeastern region showed a decline of 630

India targets having 33% of its GA under forest cover. According to the report, at present 15 states and Union territories have more than 33% of their GA under forest cover. The report highlighted that about 40% of forest cover is contained in nine large patches across the country, each more than 10,000 in extent.

The report has also brought out some major concerns. Firstly among the top  states under forest and tree cover, forest and tree cover  has decreased since 2015 except Odisha. Second worrying trend is that the five states where the forest cover contracted the most are in the biodiversity rich northeastern region. This region  had witnessed a decrease in 2015 too from 2013, according to the previous report. Thirdly, it is observed from the report that the net increase in forest cover has been uneven as increase in net forest and tree cover was observed in areas less than 1,000 metre altitude, while in all other altitudinal zones small net decrease has been observed.

The report also revealed that 21,054 sq. km of non-forest area became forest area during the last two years, hinting that this may have been due to an increase in activities like plantation. However, 24,175 sq. km of forest area of different categories such as very dense forest and moderate forest turned into non-forest area due to deforestation or diversion of forest land for developmental projects.

Union environment minister said that   India ranks among the top 10 countries of the world in terms of forest area. But this fact needs to be seen in the conext of population density. None of the 9 countries in top 10 list has a population density of more than 150 persons per, compared with India’s 382 persons per However according to  the latest FAO report, India has reported the greatest annual net gain in forest area among the top ten countries, despite finishing at 8th rank.