India daily

India today: 14/04/2018

1. Baisakhi

Context: Festival of Baisakhi is usually celebrated on April 13, but once in every 36 years the festival is celebrated on April 14. This year the occasion will be commemorated on April 14. It marks the advent of Baisakhi, which is an auspicious day primarily for the Sikh community, and is also known as Vaisakhi, Khalsa Sirjana Diwas, or the birth of Khalsa.

About Baisakhi:

  • The word is derived from ‘Baisakh’, which is the second month of the Sikh calendar (Nanakshahi calendar). It signifies a new year of harvest for the community.
  • The festival is primarily a thanksgiving day when farmers pay tribute to their deity for the harvest and pray for prosperity in future.
  • Sikhs follow a tradition named Aawat Pauni on Vaisakhi. People gather to harvest wheat that grew in the winter. Drums are played and people recite Punjabi doha (couplet) to the tune while harvestin on Baisakhi day.
  • Baisakhi also marks the birth of Khalsa, the collective body of all initiated Sikhs, also called the “Guru Panth”– the embodiment of the Guru. On March 30 in 1699, Guru Gobind Singh gathered his followers at his home in Anandpur Sahib, a city which is now home to several Gurdwaras. At this gathering, Khalsa was inaugurated.

The birth of five ‘K’s:

The five ‘K’s are the five principles of life that are to be followed by a true Khalsa. These include ‘Kesh’ or hair, which implies to leave the hair uncut to show acceptance towards the form that God intended humans to be in; ‘Kangha’ or wooden comb, as a symbol of cleanliness; the third of the marks of being a Sikh pronounced on Baisakhi day was ‘Kara’ or iron bracelet, as a mark to remind a Khalsa of self-restraint; ‘Kacchera’ or knee-length shorts, to be worn by a Khalsa for always being ready to enter battle on horseback; and ‘Kirpan’, a sword to defend oneself and the poor, the weak and the oppressed from all religions, castes and creeds.

Science behind Baisakhi:

  • The festival of Baisakhi is celebrated amongst farmers as the festival of harvest. The month of April is considered as the harvesting time for the Rabi Crops, the crops which are sown during winter seasons.
  • Since the photoperiod becomes larger, the short day plants start to flower and give fruits and grains, which are now ready to be harvested. Therefore, the farmers gear up in their fields and start harvesting the crops.

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2. e-FRRO scheme

Context: The government has launched the web-based application ‘e-FRRO’ (e-Foreigners Regional Registration Office) which aims to provide efficient visa related services online to foreigners visiting India.

About ‘e-FRRO’ scheme:

Aim: The e-FRRO scheme is aimed at building a centralized, transparent online platform for the foreigners to avail visa related services and to provide Faceless, Cashless and Paperless services to the foreigners with user friendly experience.

Features: under the scheme, foreigners would be able to get as many as 27 Visa and Immigration related services in India from the comfort of their place of stay. Using the e-FRRO application, foreigners can apply online on the portal and obtain the service(s) through email/post without appearing in person at the FRO/FRRO office.

Advantages of e-FRRO include facilitation of legitimate foreigners through “Digital India” vision of the Government, foreigners need not visit FRRO/FRO office – “Services from the comfort of home”, convenient and Time saving, exclusive dashboard for User friendly experience and Uniform & Standardized Services across the Country.

Significance of the scheme:

In 2017, more than one crore foreigners visited India and out of them approximately 3.6 lakhs had to visit FRRO offices spread across the country for various visa-related services. With the launch of the online e-FRRO scheme, their physical visit to the FRRO offices thus been obviated.

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3. Liberalised Remittance Scheme (LRS)

Context: The Reserve Bank has tightened reporting norms for the Liberalised Remittance Scheme (LRS). Now banks will be required to upload daily transaction-wise information undertaken by them under LRS.

What is it?

Under LRS, all resident individuals can freely remit $250,000 overseas every financial year for a permissible set of current or capital account transactions.

Permitted: Remittances are permitted for overseas education, travel, medical treatment and purchase of shares and property, apart from maintenance of relatives living abroad, gifting and donations. Individuals can also open, maintain and hold foreign currency accounts with overseas banks for carrying out transactions.

Not permitted: However, the rules do not allow remittances for trading on the foreign exchange markets, margin or margin calls to overseas exchanges and counterparties and the purchase of Foreign Currency Convertible Bonds issued by Indian companies abroad. Sending money to certain countries and entities is also barred. Under LRS, people can’t send money to countries identified as ‘non cooperative’ by the Financial Action Task Force. Remittances are also prohibited to entities identified as posing terrorist risks.

Why is it important?

The LRS represents India’s baby steps towards dismantling controls on foreign exchange movements in and out of the country. It has allowed large numbers of Indians to study abroad and diversify their portfolios from purely desi stocks and property.

Ideally speaking, capital controls in any form have no place in a liberalised economy. But for India, which is heavily dependent on imports of critical goods and perpetually spends more foreign exchange than it earns, it is difficult to free up remittances because of the havoc this can wreak on exchange rates.

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4. Inflation targeting

Context: Making a case for doing away with inflation targeting by the RBI, Economic Advisory Council to the Prime Minister (EAC-PM) member Surjit Bhalla recently said it has made zero impact on prices. Under the new policy framework, the RBI aims to contain inflation at 4% with a band of (+/-) 2%.

Concerns:

Average inflation in 2017-18 was 3.5%. India’s real interest rate is higher by 2.5%, which is 3rd highest in the world.

What is inflation targeting?

  • Inflation targeting is a monetary policy in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. It will have price stability as the main goal of monetary policy.
  • Many central banks adopted inflation targeting as a pragmatic response to the failure of other monetary policy regimes, such as those that targeted the money supply or the value of the currency in relation to another, presumably stable, currency.

Why it is good?

  • It will lead to increased transparency and accountability.
  • Policy will be linked to medium/long term goals, but with some short term flexibility.
  • With inflation targeting in place, people will tend to have low inflation expectations. If there was no inflation target, people could have higher inflation expectations, encouraging workers to demand higher wages and firms to put up prices.
  • It also helps in avoiding boom and bust cycles.
  • If inflation creeps up, then it can cause various economic costs such as uncertainty leading to lower investment, loss of international competitiveness and reduced value of savings. This can also be avoided with targeting.

Associated concerns:

Inflation targeting puts too much weight on inflation relative to other goals. Central Banks Start to Ignore More Pressing Problems. Inflation target reduces “flexibility”. It has the potential to constrain policy in some circumstances in which it would not be desirable to do so.

Not a panacea:

Inflation targeting has been successfully practiced in a growing number of countries over the past 20 years, and many more countries are moving toward this framework. Over time, inflation targeting has proven to be a flexible framework that has been resilient in changing circumstances, including during the recent global financial crisis. Individual countries, however, must assess their economies to determine whether inflation targeting is appropriate for them or if it can be tailored to suit their needs. For example, in many open economies, the exchange rate plays a pivotal role in stabilizing output and inflation. In such countries, policymakers must debate the appropriate role of the exchange rate and whether it should be subordinated to the inflation objective.

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5. Sovereign Gold Bond scheme

Context: The government of India has announced that the first tranche of Sovereign Gold Bond scheme for the current year 2018-19 will shortly be opened for subscription.

About the Sovereign Gold Bond Scheme:

The sovereign gold bond was introduced by the Government in 2015. While the Government introduced these bonds to help reduce India’s over dependence on gold imports, the move was also aimed at changing the habits of Indians from saving in physical form of gold to a paper form with Sovereign backing.

Key facts:

Eligibility: The bonds will be restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions.

Denomination and tenor: The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor will be for a period of 8 years with exit option from the 5th year to be exercised on the interest payment dates.

Minimum and Maximum limit: The minimum permissible investment limit will be 1 gram of gold, while the maximum limit will be 4 kg for individual, 4 kg for HUF and 20 kg for trusts and similar entities per fiscal (April-March) notified by the government from time to time.

Joint Holder: In case of joint holding, the investment limit of 4 kg will be applied to the first applicant only.

Collateral: Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.

 

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