BSC JUNE 2019 CURRENT AFFAIRS

Current topics of BSC Magazine of June 2019

April 4 Monetary Policy: The 16th meeting of the Monetary Policy Committee (MPC), constituted under Section 45ZB of the RBI Act, 1934, was held Apr 2-4. The meeting was chaired by RBI Governor Shaktikanta Das. Weakening of domestic growth impulses and global slowdown prompted Das to vote for a 25 basis points (bp) cut in interest rate. Four of the six MPC members voted in favour of a 25bp reduction in the policy rate. RBI reduced the repo rate, or the rate at which it lends to banks, by 25bp to 6 per cent -the lowest level in one year - on softening inflation. It was the second rate cut in a row. The marginal standing facility (MSF) was reduced to 6.25 per cent and the reverse repo rate to 5.75 per cent. The central bank, however, kept monetary policy stance 'neutral' over uncertainty over monsoon. The RBI has in the past faced criticism for largely overstating inflation, forecasts that were then used to underpin the MPC's hawkish policy stance and two interest rate hikes in 2018. Since the last policy in Feb 2019, there has been further weakening of domestic growth impulses, with global growth slowdown posing major headwinds to India's exports. Inflation has continued to surprise on the downside. CPI inflation for Jan and Feb averaged 2.3 per cent as against projection of 2.8 per cent for the Jan-Mar quarter of 2019 in the Feb policy. Accordingly, inflation for Q4 2018-19 in all likelihood is set to be lower than that projected in the Feb policy. Private consumption has been weakening as reflected in deceleration in the growth of passenger car sales and domestic air passenger traffic, weak performance of consumer durables and non-durables, and continuing contraction in non-oil non-gold imports. Investment demand was losing traction and a deceleration in exports may further impact investment activity With the inflation outlook looking benign and headline inflation expected to remain below target in the current year, it becomes necessary to address the challenges to sustained growth of the Indian economy. Overall financing conditions have continued to improve as reflected in the total flow of resources to the commercial sector. However, bank credit flows to micro and small as well as medium industries remain extremely weak. GDP growth for 2019-20 has been revised downward to 7.2 per cent-in the range of 6.8-7.1 per cent in H1 2019-20 and 7.3-7.4 per cent in H2. Nomura analysts stated that "contained inflation amid disappointing growth should create some space for further policy easing."

Rescue of Jet Airways: In early Jan, Jet Airways and its main lender, State Bank of India, met to with aircraft lessors to assure them  there was a plan to rescue the debt-laden carrier so it could pay them. The idea was to shore up confidence in one of India's biggest brands, squeezed by low fares and high costs. But some lessors quickly lost patience as the bank did not provide details and Jet's  founder Naresh Goyal angrily defied them to take back planes. The loss of aircraft and friction with lessors is just the latest major setback for Jet, which has been struggling for years, beset by an insurgent group of low-cost Indian competitors. Purchases of wide- body aircraft 13 years ago and ambitions for the international market may have set Jet on its current course. The foremost reason for the current crisis in the aviation industry is the govt's "reliance" on the private sector in achieving its ambitious Vision 2040, which has projected the country's air passenger traffic to grow to 1.I bn per year by 2040. If the present crisis is allowed to continue, it will lead to unprecedented unemployment crisis. A mere glance at the problems indicates that there is something seriously wrong with policy direction. There is also a need to put brakes on open sky policy' besides strict enforcement of bilateral agreements to make the business of domestic companies viable. It is clear that Jet Airways has become a test case in India with many dimensions involving lenders, vendors, employees, policy-makers and would-be partners or investors having varying interests and approaches. Despite Abu Dhabi's Etihad Airways PJSC taking a 24 per cent stake in the airline in 2013, Jet has been slipping deeper into negative equity for seven years. Had India's state-run banks insisted on a timely and substantial capital infusion, and had they credibly threatened to dilute Goyal's 51 per cent controlling stake by issuing themselves new shares when the inevitable debt default occurred, Jet would now be flying under a new owner. What we need is an ability to navigate the complex landscape that requires looking at the issue from various perspectives. About 16,000 employees have their handkerchiefs and megaphones ready. The country is in the thick of an election season amid a jobs crisis that the Opposition says is the biggest issue facing the country. The one good thing in the current atmosphere despite a jobs crisis in the country is that there is a demand for skilled workers. With aviation schemes like UDAAN, and India as an international hotspot, surely human capital is an asset. What this means is that the govt can turn some of that write-off into patient capital and hopefully turn a profit along with some public sector turnaround at a future date. It is also useful to remember that the govt is also a customer for airline services.

Rahul's NYAY scheme: Is Rahul Gandhi's minimum income scheme for the poor a breakthrough policy innovation to eradicate poverty or a path to fiscal and economic ruin? Nyuntam Aay Yojana (NYAY), announced by the Congress President Rahul Gandhi, is an income guarantee scheme being touted as the final attack on poverty. Under it, 72,000 will be provided to the poorest 5cr families or 25cr people in India. The announcement came days before the beginning of Lok Sabha elections 2019. Earlier, Prime Minister Narendra Modi had launched PM-KISAN, a minimum income guarantee scheme, in the Interim Budget 2019. Under it, Rs.6,000 will be given per year to small and marginal farmer families having combined land holding of up to 2 hectares. The NYAY scheme mentioned in the Congress election manifesto 2019 is expected to cover 20 per cent of the poorest families in India. The move would provide a safety net to the poor against shocks such as income fluctuation, lack of employment and health issues. Is it viable? The honest answer is that it depends. It depends on political courage to radically reconfigure policy and spending. If that courage is forthcoming, the minimum income scheme-NYAY, meaning justice could be redemptive, not just for the poor but for the entire nation. Minus the needed courage, the policy would be disastrous folly. Nyay would run up an annual bill of 23.60 lakh cr. That looks big but is only 1.7 per cent of GDP, which, for 2019-20, is put at 210 lakh cr. The trouble is India collects only a shade under 17 per cent of GDP as taxes, the Centre and the states combined. The last budget presented by the outgoing Modi govt put tax collection by the Centre at 12.2 per cent of GDP, of which about one-third is transferred to the states. Nyay would eat up more than a fifth of the Centre's net tax collections. It exceeds the entire explicit subsidy bill of the 2019-20 Budget and equals 13 per cent of the total govt expenditure. In short, Nyay just cannot be an add-on to existing expenditure, but must reconfigure assorted current expenditure, to make it fiscally sustainable. It is also worth asking as to why the Congress hasn't promised to increase the dismally low budgetary allocations for health and education. What would the poor do with the money if the nearest govt hospital is out of doctors, beds and medicines? They would be forced to go to a private hospital. The NYAY scheme wouldn't address the rot in the system unless it goes hand in hand with free, universal public health, education, and a robust PDS. But in a system where political parties source their funds and agenda from the corporate-financial oligarchy such an implementation of the NYAY scheme seems highly unlikely.

Lokpal appointed: A Lokpal is an anti-corruption authority or body of ombudsman who represents the public interest in country. The Lokpal and Lokayuktas Act was passed in 2013 with amendments in parliament, following the Jan Lokpal movement led by Anna Hazare in 2011. The Lokpal is responsible for enquiring into corruption charges at the national level while the Lokayukta performs the same function at the state level. Former Supreme Court judge, Justice Pinaki Chandra Ghose, has been appointed as the country's first Lokpal. Former Sashastra Seema Bal chief Archana Ramasundaram, former Maharashtra chief secretary Dinesh Kumar Jain and two others, Mahender Singh and Indrajeet Prasad Gautam, have been appointed as the ombudsman's non-judicial members. Justices Dilip B Bhosale, Pradip Kumar Mohanty, Abhilasha Kumari and Ajay Kumar Tripathi are the judicial members. The Lokpal Act is complicated. This could perhaps not be avoided, given that what was being attempted was a new and bold experiment to pull the anti corruption campaign out of oblivion. This law was badly needed, if only to lend a modicum of credibility to the process of enhancing the accountability of those in high places, who were cocking a snook at all efforts to demonstrate to the world that India is not second to any other nation in making its public administration clean and fair. The corruption of public servants in India has become such a menace that something drastically new had to be tried, and appointing the Lokpal at least partially meets this crying need. There is guarded optimism in a few quarters, and considerable cynicism in others, over the likely efficacy of the Lokpal. However, any high expectations that the new mechanism against corruption will measurably transform the scene seem misplaced. There are now three principal actors at the national level in the fight against graft: the Lokpal, the Central Vigilance Commission (CV and the Central Bureau Investigation (CBI). Some people have misgivings over the independence of the Lokpal. The Act creates a Prosecution Wing exclusively for the Lokpal. How will that body coordinate with the CBIs Director of Prosecution in respect of a matter handled by both of them? It is a common practice for complainants in India to dash off their complaints to a host of agencies. There is a distict prospect of a clash between the govt (which has greater powers of superintendence over the CBI than the Lokpal) and the Lokpal over a wide spectrum of issues. The Act gives the impression that superintendence over the CBI is shared by the Lokpal and the govt, and neither is in exclusive command of it. Can the Lokpal order the CBI to suspend its inquiry in respect of a complaint and report on it to the exclusion of the govt? The initial days are going to be difficult in terms of coordination.

Mission Shakti: Mission Shakti is a joint programme of the Defence Research and Development Organisation (DRDO) and the Indian Space Research Organisation (ISRO). As part of the mission, an anti-satellite (A-SAT) weapon was launched and targeted a low-Earth orbit (LEO) Indian satellite which had been decommissioned. The launch was carried out from DRDO'S testing range in Odisha's Balasore. India is only the fourth country to acquire the capability after the US Russia and China. LEO refers to an altitude up to 2,000km. A satellite in the LEO can monitor activities on the ground and water surfaces. Such a satellite can be used for espionage and pose serious threat to the country's security in instances of war. So the weapon was a necessity Besides, it is well within the international legal framework. India is a signatory to the 1967 Outer Space Treaty, and ratified it in 1982. The Treaty prohibits only weapons of mass destruction in outer space, not ordinary weapons. As for the clamour against debris, the test was done in the lower atmosphere to ensure that there is no space debris. India has a long-standing and rapidly growing space programme. It has expanded rapidly in the last few years. The Mangalyaan Mission to Mars was successfully launched Thereafter, the govt has sanctioned the Gaganyaan Mission, which will take Indians to the outer space. India has undertaken 102 spacecraft missions consisting of communication satellites, earth observation satellites, experimental satellites, navigation satellites etc. The test was done to verify that India has the capability to safeguard our space assets. Mission Shakti will not have any effect on India's status in the Missile Technology Control Regime (MTCR) or other such treaties. The acquisition of this A-SAT technology is also expected to have spinoffs that India can exploit for domestic and international commercial use. Mission Shakti's success will help in strengthening India's defence capabilities. Arms race in outer space should not be encouraged. India has always maintained that space must be used only for peaceful purposes. It is against the weaponisation of outer space and supports international efforts to reinforce the safety and security, of space-based assets. Coming as it does after the surgical strikes against Pakistan in 2016 and the Balakot air strike, Mission Shakti is expected to burnish the nationalist credentials of Prime Minister Narendra Modi and his NDA, which has been putting emphasis on indigenously developed technology, skills and enterprise. Several of the govt's programmes such as the Atal Innovation Mission stress the importance of scientific discoveries and inventions at the school and other levels.

Mueller investigation Report: The Mueller investigation report is unlikely to end the scandal around Russian interference in the 2016 US presidential election. Special counsel Robert S Mueller III was appointed on May 17, 2017, by Deputy Attorney General Rod J Rosenstein to investigate the Russian interference and whether the Russian govt coordinated with individuals associated with Donald Trump's campaign. The special counsel also examined whether President Trump obstructed justice by seeking to block the Russia investigation. On Mar 22, 2019, the special counsel submitted a confidential report on his findings to Attorney General William P Barr. Two days later, Barr relayed to Congress what he said were Mueller's principal conclusions. He said that the "principal conclusions" of the report stated definitively that Mueller did not establish evidence that President Trump's team or any associates of the Trump campaign had conspired with Russia to sway the 2016 election. The report paints a vivid picture of how the Russian govt is interfered in the 2016 presidential to election with hopes of helping Donald Trump win. Special Counsel Robert he Mueller found no "members of the is Trump campaign conspired" with the Kremlin, but on obstruction he wrote, "... while this report does not conclude  that the president committed a crime, it  also does not exonerate him." The report has damning details on how Trump tried to undermine the investigation. He wanted to fire Mueller, and when his then Attorney General Jeff Sessions failed to do so, he wanted him to shut the probe Trump didn't succeed as his staff resisted the orders. In one such instance, White House attorney Donald McGahn preferred to resign rather than carry out Trump's order to fire Mueller. Besides, the President had asked FBI Director James Comey to go easy on Michael Flynn, Trump's original pick for National Security Adviser. Comey was fired later. What Mueller has effectively done is to state the facts of Trump's efforts to obstruct the probe, while leaving unanswered the question of whether he obstructed justice. He has left the issue for Congress to decide. As soon as the report was out, Trump had claimed victory by tweeting: "For the haters and the radical left Democrats-Game over." But the House Judiciary Committee chair has issued a subpoena to the Justice Department to hand over the full report. Senator Elizabeth Warren, who is running for the Democratic presidential ticket, has called for impeachment proceedings against Trump. The President's legal troubles are also not over. A Senate Intelligence Committee investigation into the Russian interference scandal is still on. The Trump campaign is also being probed for alleged campaign finance violations. All this suggests a tough road is ahead for Trump, though Mueller stopped short of indicting him.

Malpass new World Bank President: The Executive Directors of the World Bank selected David R Malpass as President of the World Bank Group for a five-year term. The mission of the bank, which was created in 1944 and is collectively owned by nearly 200 countries, includes reducing global poverty, providing financial aid to needy countries and fighting the effects of climate change. Last year, it provided $20.5bn for projects involving renewable energy, agriculture and emissions management. The World Bank President is Chair of the Boards of Directors of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The President is also ex officio Chair of the Boards of Directors of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency(MIGA), and the Administrative Council of the International Centre for Settlement of Investment Disputes(ICSID). Malpass previously served as Under Secretary of the Treasury for International Affairs for the US. As Under Secretary, he represented the US in international settings and played a crucial role in several major World Bank Group reforms and initiatives, including the recent capital increase for IBRD and IFC. He also helped in advancing the Debt Transparency Initiative, adopted by the World Bank and IMF, to increase public disclosure of debt and thereby reduce the frequency and severity of debt crises. Prior to becoming Under Secretary Malpass was an international economist and founder of a macroeconomics research firm based in New York City. Earlier in his career, Malpass served as the US Deputy Assistant Secretary of the Treasury for Developing Nations and Deputy Assistant Secretary of State for Latin American Economic A ffairs. In these roles, he focused on an arrav economic, budget, and foreign political issues, such as the US' involvement multilateral institutions, including the World Bank. The Bank's priorities are in many ways at odds with those of US President Donald Trump, a vocal climate change skeptic who has also adopted a tough stance on countering China's economic prowess. Because Malpass, a former Bear Stearns economist, has questioned World Bank practices like lending money to China, Brazil and other relatively wealthy countries, many people saw his nomination as a sign that Trump hoped to bend the bank to his views. Still, Malpass, who has been deeply involved in the Trump administration's trade negotiations with China, might seek to scale back the bank's lending to the country, or at least try to pressure Beijing to be more transparent about the financing of its One Belt, One Road infrastructure initiative.

Julian Assange Arrested: In what could be seen as a covertly coordinated exercise involving Ecuador, the UK and the US, British police arrested Wikileaks' 47-year-old s Australian founder and publishera Julian Assange on the less-than-sensational charge of skipping bail. This has triggered a global debate on the future of free speech and whistle- blowers. Clearly, the way Assange was arrested inside the Ecuador Embassy in London, right after the Latin American country revoked the political asylum it had granted the anarchic activist in 2012 when he was charged with sėxual assault, points to an element ofpolitical motivation. Assange first made international headlines in Apr 2010, when WikiLeaks published confidential reports provided by Chelsea Manning, including Afghanistan and Iraq war logs. The US which wants to try Assange under its laws for allegedly assisting Army private Chelsea Manning to hack into a govt computer and steal classified data and for publishing WikiLeaks information illegally accessed from Hillary a Clinton's campaign computers has a swiftly unsealed a 2015 indictment against Assange WikiLeaks showed the world, its govts and mighty institutions that their acts cannot always be concealed; digital technologies empower civilians to break into their vaults and unearth secrets. This prospect has prompted govts to be more circumspect in their acts, businessses to be more transparent, and citizens to demand more accountability from the institutions they deal with. His arrest can give vested interests an undue advantage at a time when civil liberties are under stress in many countries, including the US, China and Russia. Assange was arrested because of what WikiLeaks had been doing for years and the impact it had on those in power. WikiLeaks has played catalyst to the greatest worldwide anti-corruption and transparency drive in recent decades. By creating an independent platform enabling activists and whistleblowers to share anonymous information related to governmental excesses, corporate corruption, and global diplomatic malpractice, it brought to light the enormity of these problems to the common citizen in an unprecedented manner. While the courts of law may pronounce Assange guilty as charged the onus is on us now, those that claim to take their liberty seriously, to decide who do we enable -our liberators or their oppressors? To be fair, Assange's ways of using the wrong ends of digital technology to obtain classified data has imperilled news gathering by traditional media and even denied them access to information which was otherwise accessible as regimes went paranoid after the exposes of the likes of WikiLeaks. Still, there is no reason to believe that the actions of WikiLeaks were against the greater common good. Assange's arrest could imperil fair media practices.

Image of a Black Hole revealed: The Event Horizon Telescope(EHT), which uses a network of telescopes around the globe to turn all of Earth into an enormous radio telescope, has taken the first direct image of a black hole. The light that makes up the image is not coming from the black hole - black holes do not emit any light, hence the name. Instead, the image shows the black hole's silhouette against a background of hot, glowing matter that is being inexorably pulled in by its powerful gravity. In 2017, the eight telescopes of the EHT collaboration observed two super massive black holes: the one at the centre of our galaxy, which is called Sagittarius A*, and the much larger behemoth at the centre of another galaxy called M87. This image shows the black hole in M87, which is 55mn light years away. "We're looking at a region that we've never looked at before, a region that we cannot really imagine being there," said EHT scientist Heino Falcke. A black hole is a region of space with a mass so large and dense that not even light can escape its gravitational attraction. Against the black backdrop of the inky beyond, capturing one is a near impossible task. But thanks to Stephen Hawking's groundbreaking work, we know that the colossal masses are not just black abysses. Not only are they able to emit huge jets of plasma, but their immense gravity pulls in streams of matter into its core. When matter approaches a black hole's event horizon - the point at which not even light can escape – it forms an orbiting disk. Matter in this disk will convert some of its energy to friction as it rubs against other particles of matter. This warms up the disk, just as we warm our hands on a cold day by rubbing them together. The closer the matter, the greater the friction. Matter closer to the event horizon glows brilliantly bright with the heat of hundreds of Suns. It is this light that the EHT detected, along with the "silhouette" of the black hole. The ring of light around the black hole looks a little lopsided, which is as expected Images of the Event Horizon are particularly important when it comes to testing general relativity, which governs the behaviour of gravity and very large objects. We know that it does not mesh with theories of quantum mechanics, which describes the very small, and the very edge of a super massive black hole, where gravity is more intense than anywhere else we know of, is the best place to stress test that disconnect. And this is the first direct evidence that event horizons are actually real. This first image is pushing back the limits of our knowledge. We have been studying black holes for so long that sometimes it is easy to forget that none of us have ever actually seen one. Finally, there is some real light on black hole.

100 years of Jallianwala Bagh: British Prime Minister Theresa May expressed "regret" in Parliament for the Jallianwala Bagh massacre, ahead of the 100th anniversary of the killings on Apr13. The massacre, which left over 300 Indians dead, is one of the deadliest in the history of India. It has often been said that Britain lost its empire the day when, a hundred years ago, Brigadier-General Reginald Dyer (55) commanding a regiment of 50 Gurkha and Baluchi riflemen, ordered firing without warning upon an unarmed crowd of over 15,000 Indians gathered at an enclosure called the Jallianwala Bagh in Amritsar, a stone's throw from the Golden Temple. Dyer had brought two armoured cars with mounted machine guns as well, but the entrance to the Bagh was too narrow to let them in. Perhaps to compensate for this shortcoming, Dyer directed his troops to fire wherever the crowd was densest. The firing ended only when the troops ran out of ammunition; most of the 1,650 rounds met their target, judging from the official tally of 379 dead and some 1,200 wounded. Why had the crowd gathered there? It was Baisakhi that day, a harvest festival popular in Punjab. Local residents in Amritsar decided to hold a meeting that day to discuss and protest against the confinement of Satya Pal and Saifuddin Kitchlew, two leaders fighting for Independence, and implementation of the Rowlatt Act, which armed the British government with powers to detain any person without trial. The Jallianwala Bagh massacre, followed by the feting and rewarding of its perpetrator, General Dyer, by the British public, removed all illusions about benign British rule in the country. It also marked the start of a liberation struggle like none other under Mahatma Gandhi. On May 30, 1919, Rabindranath Tagore renounced his knighthood in protest. Gandhi returned the Kaiser-i-Hind Gold medal given to him for his work during Boer war. British PM Theresa May's comment of deep regret in the House of Commons, when a debate on formal apology was going on, was much in line with her predecessor David Cameron's, who when in office described the Jallianwala Bagh massacre to be a deeply shameful event Therefore, these comments fall short of the formal apology desired by the impacted parties. The UK foreign office stated that such apologies would have financial implications. This suggests that the UK wants to stay afar from getting itself fully recognised for the wrongful acts it did in India and spare itself from any future liabilities, which may otherwise follow, once such an apology is made. In addition, it is worthy to mention that UK opposition leader Jeremy Corbyyn criticised his govt and demanded that "those who lost their lives in the massacre deserve a full, clear and unequivocal apology for what took place."

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THANKS BSC.   AND Mr. VINOTH, MADURAI