Think and Learn, TLP Mains 2015, UPSC, UPSC Mains- Think and Learn-2015
TLP: GS Mains Synopsis [Day 86]
Q.1) What is meant by merchant banking? Discuss in detail the various functions performed by merchant bankers.
The Top Answer for this Question is written by – Rahul Agarwal
Ans) Merchant banking is the term used for the functions performed by financial institutions in the capital markets of an economy.
Merchant bankers usually work in the primary market segment where new securities are issued. They act as market makers, by helping companies judge the right price of their offerings, do the exercising of underwriting, and also help companies in finding rights targets and valuations for mergers and acquisition.
Some of the common functions of merchant bankers are:
A. Book building : It’s an exercise done when company want to raise money from stock market. Under book building, bids are invited from the investors so as to enable the price discovery of the offering.
B. Underwriting: Underwriting means assuring the sale of new stock by transferring risk on merchant bankers. In case a stock is under-subscribed, merchant bankers buy the remaining of the offerings.
C. Mergers and Acquisitions: often companies look right targets of mergers and acquisition, to expand their business and profitability. Merchant bankers provide their expertise in selection of right targets and right valuation for the deal.
Some of the well known merchant bankers are JP Morgan chase, Nomura Financial services, Merryl Lynch working in our country.
Q.2) What is meant by Corporate Governance? Write a note on mandatory recommendations of the Birla Committee.
The Top Answer for this Question is written by – Draconian
Ans) The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company’s relationship with its all stakeholders (financiers, customers, management, employees, government, and the community).
The corporate governance framework consists of
(1) explicit and implicit contracts between the company and the stakeholders for distribution of responsibilities, rights, and rewards,
(2) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles,
(3) procedures for proper supervision, control, and information-flows to serve as a system of checks-and-balances.
SEBI in 1999 set up a committee under Shri Kumar Mangalam Birla to promote and raise the standards of good corporate governance.It’s primary objective was to view corporate governance from the perspective of the investors and shareholders and to prepare a ‘Code’ to suit the Indian corporate environment.
The committee recognized three key constituents i.e. Shareholders, Board of Directors and Management, their roles and responsibilities and their rights in the context of good corporate governance .
The committee stated that the fundamental objective of corporate governance is the “enhancement of shareholder value, keeping in view the interests of other stakeholder under which it divided the recommendations into two categories, namely, mandatory and non-mandatory.
Mandatory are those which are absolutely essential for corporate governance can be defined with precision and can be enforced through the amendments which are as follows:
—? Applies to listed companies with paid up capital of Rs.3 crore and above and Composition of board of directors should be optimum combination of executive & non-executive directors.
—?Audit committee should contain 3 independent directors with one having financial and
accounting knowledge along with setup of Remuneration committee
–?The Board should hold at least 4 meetings in a year with maximum gap of 4 months between 2 meetings to review operational plans, capital budgets, quarterly results, minutes of committee’s meeting.
–?Director shall not be a member of more than 10 committee and shall not act as chairman of more than 5 committees across all companies
–? There should be a preparation of anytime review of discussion and analysis of report related to industry structure, opportunities, threats,risks, outlook, internal control system and any information regarding shareholders in regarding their investments should be conveyed to tthem
Q.3) What are the reasons which leads to internationalization of business and investment? What are the sources of international infrastructure financing?
The Top Answer for this Question is written by – Cosviny
Ans)
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Q.4) Critically evaluate India’s Free Trade Policy in the post-reform period.
The Top Answer for this Question is written by – Rahul Agarwal
Ans) India’s trade policy took a paradigm shift after 199 reforms from protectionist to more integrative to world economics. By becoming a party to world trade organization in 1994, certain progressive changes have been brought to trade policy, These are:
A. Quantitative barriers such as import -export quotas have been gradually abolished
B. Peak tariff duties from tunes of 90-100% have been reduced to 10-15% in a phased manner
C. canalization of products eg routing them through public sector units have been reduced to only limited industries like fertilizers and oil etc.
D. Rupee has been made convertible on current account.
E. Schemes like Focus market scheme, Focus product scheme have been launched to give incentive to Indian exports.
F. Special enclaves like SEZs and EPZs are created for export purpose.
Still, India’s total share in the world trade is to the tune of only 1-2%. Our exports have been contracted for last 10 months consecutively. We are running a wide trade deficit for a long time.Some of the reasons responsible are:
A. Lack of supporting infrastructure like power, port linkage
B. Lack of skills among labours required for manufacturing
C. Inverted duty structure eroding competitiveness
D. Stuck labor reforms discouraging business expansion
E. Ease of doing business in India is still far behind the comparable countries.
Thus, despite having a well drafted policy, our foreign trade is still more import oriented.
Q.5) “Development projects are considered as temples of modern India.” Justify your answer with reference to their impact on environment and health.
The Top Answer for this Question is written by –
Ans) Although, India has witnessed spectacular growth after independence, it is far behind in levels of development. There is stark inequality in Indian society, with vast stretches of tribal areas, villages, hilly areas etc are still grappling with lack of roads, connectivity, power , health services etc. Therefore, development projects are required to use our natural resources and our human capital for ensuring inclusive growth.
We need power plants for uninhibited supply to industries and farms, we need multi-purpose projects for ensuring irrigation, we require all weather roads for connectivity, and we need iron and steel plants for development of infrastructure. Thus, developmental project are rightly viewed as temples of modern India.
But it has also been observed that, these projects have largely been exploitative rather than transformative in nature. They are particularly damaging to environment and health of a region:
A. Cutting of forests for commissioning plants
B. Practices like open cast mining causing air and soil pollution
C. Discharge of toxic effluents in water bodies
D. Threat to the bio-diversity of a region
E. Exploiting tribal and rural people to work in unhealthy conditions.
Therefore, for developmental projects to be sustainable they need to be in harmony with environmental and social dimensions also. This could be ensured by:
A. Empowering PRIs to conduct credible environmental impact assessment
B. Strict enforcement of the polluters pay principle.
C. Creating a scientific land use program.
D. Ensuring proper monitoring for waste disposal by industries.
High Order Thinking
Q.1) NGOs have occupied a pivotal position in the democratic space of the Indian society and their contribution in areas of agriculture, education, health, ecology etc can’t be over emphasized. However, there is an urgent need to create a regulatory framework which can streamline the functioning of NGOs. Examine the issue in light of the recent move by the government to terminate the registration of some NGOs recently.
The Top Answer for this Question is written by – Cosviny
Ans)
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Q.2) The regulatory regime for the advertisement of consumer products leaves a lot to be desired in terms of legal and moral framework. The troika of manufacturer, licensing authority and advertisement agency should be held accountable for the false or unverified claims being made by celebrities for endorsing a product. Do you agree? Also, does in in your opinion any accountability be imposed on the celebrities who endorse such products? Examine in light of the recent Maggi controversy.
The Top Answer for this Question is written by – Sepoy No 1446
Ans) Consumer products directly affect the end users. Food products like Maggie,noodles,dairy products, chocolates and various “quick to make” products can have detrimental impact on health of consumers if they have to be of substandard and downgraded quality. Hence multilevel accountability needs to be ensured.
Manufacturer accountability: to ensure right ingredients are used,standard procedures are followed, quality check to be done for all primary and intermediary raw materials and a final quality check before releasing it into market. No false or misleading information to be circulated on packaging or in advertisements.
Licensing authority: like FSSAI or other regulators must have good quality labs and skilled manpower to evaluate the products coming out of factories. All claims must be confirmed by regulator. Necessary punitive actions and legislative methods must be enforced without any prejudice.
Ad Agency: must see the impact of their action.They should be in a position to do a preliminary check on all claims of “safe and reliable” product before dissemination of information in form of advertisements.
Celebrity responsibilities:
Constitution under article 19 gives freedom of expression, article 21 gives freedom to livelihood. Both are inherent in celebrity adopting a particular product through advertisements. Hence they are free to endorse a product.How ever they also a have social responsibility and more so because of their charisma and appeal which goes to distant corner of countries. Hence they must exercise caution and due deliberation before endorsing such products. They can seek certification through their PR,can contact regulating agencies and thus must convince themselves first before telling the entire world.
