Daily Current Affairs for 14th October 2020

India’s economy to contract by 10.3%, says International Monetary Fund

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

With the country and world reeling under the impact of the coronavirus pandemic, the Indian economy is expected to grow at -10.3 % (i.e., a contraction) in 2020 as per the International Monetary Fund (IMF).

Key details

• Global growth is projected to be -4.4% (i.e., a contraction in output of 4.4%) for this year.
• World Economic Outlook released its October 2020 report titled, “A Long and Difficult Ascent”.
• The 2020 projection for India is a downgrade of -5.8 percentage points from the IMF’s June projection for the country.
• India is expected to rebound in 2021 with 8.8 percent growth – an upgrade of 2.8 percentage points.

Impact

• Revisions to the forecast are particularly large for India, where GDP contracted much more severely than expected in the second quarter
• Consumer prices in India are expected to grow at 4.9% this year and 3.7% in 2021. The current account balance is projected to grow by 0.3% this year and -0.9% (i.e., a contraction) next year.
• The labour market has become more polarized, with low-income workers, women and youth being hit harder.
• Along with subdued growth for the medium term, the stock of sovereign debt is expected to increase.

Way forward

• There is a need for greater international collaboration on tests, treatments and vaccines.

2025. If these are made available faster than accounted for in the IMF mode’s baseline scenario, it could mean an increase in global cumulative income by $ 9 trillion by the end of 2025.

• Policies should “aggressively” seek to limit persistent economic damage.

1. Governments should support incomes by well targeted cash transfers, wage subsidies and unemployment insurance.
2. For firms that are viable but vulnerable, support to such as tax deferrals, debt servicing moratoria, equity-like injections.

• Policies should aid workers’ transition to growing sectors (e.g. e-commerce) and away from sectors like travel which are likely to shrink.
• Other measures include support to governments via institutional grants, concession financing and debt relief “in some cases” so these governments can prioritize critical spending for health and transfers to the poor.
• Along with the necessary easing of monetary policy across the world, measures to prevent the buildup of financial risks over the medium should be pursued and “central bank independence should be safeguarded at all costs.”

What Is Gross Domestic Product (GDP)?

• Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
• As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
• GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate.
• GDP can be calculated in three ways, using expenditures, production, or incomes. It can be adjusted for inflation and population to provide deeper insights.
• Though it has limitations, GDP is a key tool to guide policymakers, investors, and businesses in strategic decision making.

What is Recession

• Recession is a slowdown or a massive contraction in economic activities. A significant fall in spending generally leads to a recession.
• Such a slowdown in economic activities may last for some quarters thereby completely hampering the growth of an economy. In such a situation, economic indicators such as GDP, corporate profits, employments, etc., fall.
• This creates a mess in the entire economy. To tackle the menace, economies generally react by loosening their monetary policies by infusing more money into the system, i.e., by increasing the money supply.

International Monetary Fund (IMF)

• The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
• Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-global membership.
• The IMF’s primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.
• The Fund’s mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.

---

Haryana allows MLAs to use ‘flag’ on official and personal vehicles

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations

Why in news?

Legislators in Haryana can use ‘flag’ on their official, private or even hired vehicles — a decision taken so that they can get “due recognition”.

Key details

• In case, the sitting MLA does not have any vehicle registered in his or her name, then the flag can be used on the private or hired vehicles.
• The decision was taken so that the MLAs can get “due recognition” in public. They had to face humiliation at toll plazas. On many occasions, there had been instances when they were asked to prove their identity.
• So, now alongwith the flag, MLAs will be given authorisation letters. It’s a recognition of an elected representative.
• As per protocol, MLA is equal or above the rank of Chief Secretary.

Flag Code of India

The Flag Code of India, 2002 is a compilation of all the laws, conventions, practices, instructions and guidelines that govern the display of the National Flag. Knowingly or unknowingly, many citizens violate the Flag Code.

Rules governing Display of National Flag by Citizens and, Private and Educational Organizations

• There is no restriction on the display of National Flag by members of the general public, private organizations, educational institutions, etc., provided they follow all the prescribed rules. The following important things have to be kept in mind:
• The flag should not be used for commercial purposes
• The flag should not be dipped to salute any person
• The flag should not be used as a portion of costume or uniform. It should not be embroidered or printed on cushions, handkerchiefs, napkins or any dress material
• No lettering of any kind should be put on the flag
• The flag should not be used as a receptacle for receiving, delivering, holding or carrying anything
• The flag should not be intentionally displayed with ‘saffron’ down
• The flag should not be used to cover a speaker’s desk and it should not be draped over a speaker’s platform

Display on Motor Cars

• The privilege of flying the National Flag on motor cars is limited to the following:

When a foreign dignitary travels in a car provided by Government, the National Flag will be flown on the right side of the car and the flag of the foreign country will be flown on the left side of the car.

Insult to the National Flag will attract a prison term of 3 years

As per Section 2 of ‘The Prevention of Insults to National Honour Act, 1971’– Whoever, in any public place or in any other place within public view, burns, mutilates, defaces, defiles, disfigures, destroys, tramples upon or otherwise shows disrespect to or brings into contempt (whether by words, either spoken or written, or by acts) the Indian National Flag or any part of it, shall be punished with imprisonment for a term which may extend to three years or with fine, or with both.

---

Pakistan likely to remain on FATF list

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations

Why in news?

Pakistan is unlikely to exit the Financial Action Task Force (FATF’s) greylist next week, when the plenary session of the Paris-based global terror-financing watchdog is held, after its latest evaluation saw it clear 21 of 27 action points, with six key areas outstanding where Pakistan has yet to show progress.

Key details

• There is still no consensus amongst the 39-member FATF, which includes the U.S., U.K., France, Germany, China and Russia, to blacklist Pakistan, despite its failure to meet its original deadline in September 2019, which would mean the group would maintain status quo and continue Pakistan on the greylist until February 2021.
• The International Co-operation Review Group (ICRG) of the FATF held a meeting to discuss the final recommendation to the watchdog’plenary session.
• Rather than going by mere statistics, if the member nations take cognisance of the inaction in cases like 26/11 Mumbai attacks, Pulwama attack and the Daniel Pearl murder case, an explanation may be sought from Pakistan.

Reason for continuance of greylist

• The six points of failure in the FATF’s 27-point action list include Pakistan’s lack of action against charitable organisations or NPOs (Non-profit organisations) connected to terror groups banned by the UN Security Council, and delays in prosecution of banned individuals and entities like Lashkar e Toiba chief Hafiz Saeed and LeT operations chief Zaki Ur Rahman Lakhvi, as well as Jaish-e- Mohammad chief Masood Azhar.
• The FATF process has also shown concern about 4,000 names that were on Pakistan’s Schedule-IV list under the Anti-Terrorism Act (ATA) being dropped in 2019.

Financial Action Task Force (FATF)

• The Financial Action Task Force is the global money laundering and terrorist financing watchdog.
• The Financial Action Task Force (FATF) was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering.
• In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
• In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.
• The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society.
• As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
• The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity.

FATF Blacklist and Greylist

• Since 2000, FATF has maintained the FATF blacklist (formally called the “Call for action”) and the FATF greylist (formally called the “Other monitored jurisdictions”)
• It was the common shorthand description for the FATF list of “Non-Cooperative Countries or Territories” (NCCTs).
• It lists countries which FATF judges to be non-cooperative in the global fight against money laundering and terrorist financing, calling them “Non-Cooperative Countries or Territories”
• Grey list is a warning given to the country that it might come in Black list.
• If a country is unable to curb mushrooming of terror funding and money laundering; it is shifted from grey list to black list by the FATF.

---

Single SBI branch for all FCRA accounts

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations

Why in news?

The Ministry of Home Affairs (MHA) has asked all NGOs seeking foreign donations to open a designated FCRA account at the State Bank of India’s New Delhi branch by March 31, 2021.

Key details

• In September, the Foreign Contribution (Regulation) Act, 2020 was amended by Parliament and a new provision that makes it mandatory for all non-government organisations and associations to receive foreign funds in a designated bank account at SBI’s New Delhi branch was inserted.
• As of now there are 22,434 such NGOs and associations active under the FCRA.
• An NGO will have to report the amount and source of foreign remittance received to the authorities.

Background

FCRA

On 20th September, the Foreign Contribution (Regulation) Amendment Bill, 2020 was introduced in Lok Sabha that broadly redefined terms related to acceptance, transfer, and utilisation of foreign contributions under the 2010 Act. The Bill was passed by Lok Sabha on 21st September and subsequently by Rajya Sabha on 23rd to ratify it.

Key amendments

• Prohibition on “public servant” from receiving foreign contributions

1. This will prohibit persons in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government, from receiving foreign contributions.
2. The reason for inclusion of “public servant” is to prevent those discharging public duty from being influenced through foreign funding and avoid any conflict of interest.

• Prohibition on transfer of foreign contribution

1. The Amendment Act prohibits persons authorized to receive foreign contributions under the Act from transferring such foreign contributions to any person.
2. Earlier, non-government organisations (NGOs) registered under Act were permitted to transfer the foreign contribution received by such NGO to:
   • any other registered NGO; and
   • any other unregistered person, with prior permission of the Ministry of Home Affairs (MHA).

• Lowering the cap on administrative expenses

1. The Amendment Act has amended section 8 of the Act to decrease the cap on using the foreign contribution for administrative expenses from 50% to 20%.
2. The amendment seems to promote utilisation of such funds towards the objective of the grant.

• Opening of bank account in State Bank of India, Delhi

1. Earlier under section 17 of Act, the foreign contribution recipient was permitted to receive foreign contribution in an account opened in any of the scheduled banks.
2. The Amendment Act substitutes section 17 of FCRA requiring the recipient of foreign contribution to receive such amount only in an account designated as “FCRA Account” opened in a branch of the State Bank of India (SBI) at New Delhi

• However, it provides flexibility to the recipient to also open another FCRA Account in any of the scheduled banks in India for the purpose of keeping or utilising the foreign contribution which has been received from its “FCRA Account” in the branch of SBI at New Delhi.

1. The intent of the amendment appears to be to centralise the inflow and routing of foreign contribution, making it easier for the Government to supervise and monitor the funds received.

• Power to prohibit a foreign contribution recipient from utilising/receiving its funds

1. Under the Act, if a person accepting foreign contributions is found guilty of violating any provisions of the Act, the unutilised or unreceived foreign contribution could be utilised or received, only with the prior approval of the Government.
2. The Amendment Act has now added a proviso to section 11 to provide that the Government may also restrict usage of unutilised foreign contribution if, based on a summary inquiry the Government believes that such person has contravened provisions of the Act.

• This amendment appears to be preventive and to enable the Government to preclude receipt and utilisation of foreign contributions when it finds that the recipient is prima-facie contravening the Act.
• Increase in the maximum limit for the period of suspension

1. Under the Act, the Government could suspend the registration of a person for a period not exceeding 180 days.
2. The Amendment Act has now amended section 13 of the Act to give the Government the power to suspend the registration certificate of a person for up to 360 days.

---

U.S aiming to build an Indo-Pacific NATO

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations

Why in news?

China claimed The United States was aiming to build an “Indo-Pacific NATO” that would be founded on the four-nation India, U.S., Japan and Australia grouping, in Beijing’s most high-profile criticism so far on the “Quad”.

In 2018, China dismissed the then recently-revived Quad and the Indo-Pacific concept as a “headline-grabbing idea” that would “dissipate like sea foam”

Background

• In November 2017, India, the US, Australia and Japan gave shape to the long-pending “Quad” coalition to work closely in the Indo-Pacific region. The move was seen as an attempt to contain China’s growing influence in the region.
• The US, Japan and Australia have also been pressing for a greater role by India in the Indo-Pacific region.
• The Indo-Pacific has been a major focus area of India’s foreign policy in the last few years and its strategy is pushing based on bringing peace and stability of the region.
• There has been concern in India over China’s fast expanding military and economic clout in the Indo-Pacific.

NATO

• The North Atlantic Treaty Organization also called the North Atlantic Alliance, is an intergovernmental military alliance between 30 North American and European countries.
• The organization implements the North Atlantic Treaty that was signed on 4 April 1949.
• NATO constitutes a system of collective defence whereby its independent member states agree to mutual defence in response to an attack by any external party.
• NATO’s Headquarters are located in Evere, Brussels, Belgium, while the headquarters of Allied Command Operations is near Mons, Belgium.
• Since its founding, the admission of new member states has increased the alliance from the original 12 countries to 30.
• The most recent member state to be added to NATO was North Macedonia on 27 March 2020.
• The combined military spending of all NATO members constitutes over 70% of the global total.
• Members agreed that their aim is to reach or maintain the target defense spending of at least 2% of GDP by 2024.