IASbaba’s Daily Current Affairs – 25 June 2015

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Daily Current Affairs – June 25^th 2015

INTERNATIONAL

Australia to join China-led Asian Infrastructure Investment Bank (AIIB)

• It is stated that, Australia would join the new China-led AIIB as a founding member, contributing about $930 million to the financial institution of which India will be the second largest shareholder.
• Australia would contribute around A$930 million as paid-in capital to the AIIB over five years and will be the sixth largest shareholder. AIIB will have paid-in capital of $20 billion (A$25.2 billion) with total authorised capital of $100 billion (A$126.2 billion).
• This would also help Australia take advantage of the growth in infrastructure in the Asian region.
• According to a report, there was an estimated infrastructure financing gap of around $8 trillion in the Asian region over the current decade. The AIIB will be part of the solution to closing this gap.

Background:

What is The Asian Infrastructure Investment Bank (AIIB)?

• AIIB is an international financial institution proposed by the government of China in 2013 and was launched in Beijing in October 2014.The AIIB, which will be headquartered in Beijing.

Purpose

• The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia region. AIIB is regarded by some as a rival for the IMF, the World Bank and the Asian Development Bank (ADB),which are regarded as dominated by developed countries like the United States.

Key focus areas

• The AIIB, a modern knowledge-based institution, will focus on the development of infrastructure and other productive sectors in Asia, including energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban development and logistics, etc.
• AIIB will complement and cooperate with the existing multilateral development bank (MDBs) to jointly address the daunting infrastructure needs in Asia.

Courtesy – http://www.aiibank.org/ & Wikipedia

Connecting the Dots:

• How different is AIIB from other multilateral developmental banks like WB, IMF, ADB? Its merits and de-merits.
• Does The US Fear The Asian Infrastructure Investment Bank? What is the stance of European countries and Japan?
• How crucial is AIIB in propelling India’s growth?

NATIONAL

Dedicated Freight corridors

Advantages of the Freight Corridor

• The Eastern and Western Dedicated Freight Corridor (DFC) Project will significantly reduce transportation cost and benefit power plants, mines, ports, and boost trade and industry.
• Only electric trains operate on the Dedicated freight corridor hence this will reduce pollution or Green house gases.
• Would lead to greater speeds and increased efficiency, as the passenger traffic and freight (or goods) traffic will be separated.

Facts:

• The Western DFC starts from JNPT Mumbai and passes through Maharashtra, Gujarat, Rajasthan, Haryana, and terminates at Dadri in Uttar Pradesh. The total length will be about 1,500 km.
• The Eastern DFC starts from Sahnewal near Ludhiana in Punjab and passes through Haryana, Uttar Pradesh, Bihar and Jharkhand and terminates at Dankuni in West Bengal. The total length is about 1,856 km.
• The Cabinet had in February 2008 approved the construction of the freight corridor.

Connecting the Dots:

• Issues related to infrastructure Development – Financing, PPP challenges etc.
• What are the other industrial corridors like Delhi – Mumbai Industrial Corridor (DMIC) in partnership with Japan etc.? Co-relate this with Smart cities.
• Make note of Golden and Diamond Quadrilateral; North-South Corridors. How advantages

Solar systems mandatory on roof-tops

Proposal

• The Central government is likely to make it mandatory for buildings to install solar roof-top systems. The proposal is among the initiatives planned by the Government of India to support the massive solar capacity addition target (100 GW by 2022).
• The proposal is to amend building norms for mandatory provision of roof-top solar for new construction and 10 % renewable energy provision for end-customers under the new scheme of Ministry of Urban Development.

Mandatory roof-top solar in Indian States

• Mandatory roof-top solar is not new to India. Similar policies have earlier been formulated by the states of Haryana and Tamil Nadu.

Likely Reasons for Non-compliance of the mandate

• Though Central and state government subsidies are announced, they are not available.
• Net-metering exists on paper but the process for providing inter-connection has not yet been streamlined.
• Awareness and support from the public

Background

Jawaharlal Nehru National Solar Mission

• The Jawaharlal Nehru National Solar Mission was launched in 2010. The Mission has set the ambitious target of deploying 20,000 MW of grid connected solar power by 2022.
• It is aimed at reducing the cost of solar power generation in the country through (i) long term policy; (ii) large scale deployment goals; (iii) aggressive R&D; and (iv) domestic production of critical raw materials, components and products, as a result to achieve grid tariff parity by 2022.

Courtesy – Ministry of New and renewable Energy

Connecting the Dots:

• In the backdrop of increasing demand-supply gap in energy, what is the significance of renewable energy in India?
• Though Solar potential is immense in India, what are the challenges? What are the steps taken by the Government in this regard?

ECONOMICS

(Note: Though this article is factual, it will be helpful in the Exam. One needs to state important facts in Mains.)

India among top 10 FDI recipients

• According to the UNCTAD in its World Investment Report 2015, India for the first time has made it through top 10 recipients of foreign direct investment (FDI) since 2008.

Largest recipients of FDI

• China became the largest recipient of FDI in 2014 with $129 billion inflows, followed by Hong Kong (China) that received $103 billion and the U.S. with $92 billion. At 39%, Hong Kong saw the biggest surge in inflows during the year.
• Among the top 10 FDI recipients in the world, half are developing economies – Brazil, China, Hong Kong (China), India and Singapore.

 Position of India

• India has jumped to the 9th rank in 2014 with a 22% rise in FDI inflows to $34 billion. India was at the 15th position in the previous two years (2012 & 2013).
• But in terms of outward FDI flows, India has dropped out of the top 20 countries.
• India is the only BRIC (Brazil, Russia, India and China) country that hasn’t yet crossed the $50 billion-a-year FDI mark.
• In a development of significance to India, for the first time FDI inflows in to China’s services sector were greater than into its manufacturing sector.

Status of Other Countries

• Due to economic sanctions from the Western countries, Russia has dropped out of the top 10 as foreign investors exited its oil sector and other projects.
• The report records the big surge in investments from China into every region of the world, and especially in India’s neighbourhood. FDI inflows to Pakistan increased by 31% to $1.7 billion as a result of rising Chinese FDI flows in services. Further, Pakistan will benefit significantly from the China-Pakistan Industrial Corridor and associated Chinese investment in infrastructure and manufacturing in the overall context of implementing the “One Belt, One Road” strategy.
• In Sri Lanka, where China has become the largest source of FDI in recent years, FDI flows from it rose. A China-Sri Lanka FTA will be signed in June 2015. Moreover, if the implementation of the China-led 21st Century Maritime Silk Route Economic Belt gains ground, an increasing amount of Chinese investment will flow to Sri Lanka, particularly in large infrastructure projects.

Tax havens

• The report also found that developing countries lost $100 billion in tax revenues owing to investors routing FDI through tax havens such as Mauritius, and has made a strong case for multilateral action to address the issue.

Background:

What is FDI?

• An investment made by a company or entity based in one country, into a company or entity based in another country.
• Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation’s stock exchange.
• Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.

Tax Haven

• A country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment.
• Tax havens also provide little or no financial information to foreign tax authorities. Individuals and businesses that do not reside a tax haven can take advantage of these countries’ tax regimes to avoid paying taxes in their home countries.
• Tax havens do not require that an individual reside in or a business operate out of that country in order to benefit from its tax policies.

Courtesy – Investopedia

Connecting the Dots:

• What are the advantage and disadvantages of FDI, especially with reference to India?
• What do you understand by the term ‘hot money’? Its merits and de-merits.
• Allowing 100% FDI in key sectors like Railways, and increasing FDI from 26% to 49% in Defence, Insurance – is it beneficial for India?