(1st july 2019) The Hindu Editorials Notes for UPSC IAS or other State Exam(Arora IAS)

 

The Hindu Editorials Mains Sure Shot (1st july 2019)

GS-2 or GS-3

 

Question-Critically analyse the ongoing India-US trade discord and suggest the viable options.(250 words)

Context- US Secretary of State Mike Pompeo’s recent statement in New Delhi.

 

Present scenario:

• USA is India’s largest trading partner.
• But right from 2018, US has taken several unilateral actions against India’s exports.
• India has recently announced retaliatory move of increasing tariffs on 28 products imported from the US.
• India has become Tump’s most significant target after China.

 

US demand: ●Greater market access and removal of trade barriers in economic relationship.

• Note that these demands are a based on the investigational findings of two US agencies- USTR (United States Trade Representative) and the USITC (United States International Trade Commission).
• They had conducted investigation of India’s trade policies in 2013 and 2015.
• But here India can raise 3 issues of- propriety, procedures and substance.
• These three need to be understood by the government so as to prepare an appropriate response.

 

1. Propriety- It broadly means correct and acceptable behaviour. Here the investigations done by the US about India’s trade policies were done unilaterally i.e. solely based on its own domestic laws and that cannot be allowed in an age of multilateralism, where differences in policies between sovereign countries must be resolved in appropriate multilateral forums.

• This way of a stronger power to use its hegemony and resort to unilateral means should be eliminated.
• it was to uphold this spirit of materialism that GATT was established as an integral part of the post-global economic governance. (GATT was later replaced by WTO in 1995). so that any trade related dispute would be discussed in this multilateral forum.
• Both the issues that US investigated about India’s trade policy were covered under WTO.
• Therefore, according to propriety and global trade rules the American business concerns about India’s policies had to be discussed in the WTO through consultations among the WTO members.
• USA by avoiding the multilateral forum is only pushing itself into trade wars with different countries and this was one factor that had led to the economic depression of 1930s.

 

2. Following this, another issue that India has to rise is of procedure of conducting investigations. Because USA surpassed the WTO as an agency through which such investigations were to be carried out but instead the US government agencies were acting as not only investigators but also judge and jury to decide what actions to take against India.

• And the third issue is of substance because the investigations touch trade related issues that are covered by WTO agreements.

 

Conclusion- The India-US trade discord over trade stems from the deep-seated desire of US businesses to have a bigger footprint in Indian economy and to achieve this goal it is going beyond legitimate means. It is a complete disregard to the rule of law.

 

Way ahead- The government of India will have to focus on 2 fronts- 1. to remain engaged with its largest trade partner and 2. to also engage actively with the global community to make the US understand the imperatives of a rule-based trading system.

 

The Hindu Editorials Mains Sure Shot (1st july 2019)

GS-3

 

Question- In the view of the securities market in India, critically analyse SEBI’s new guidelines for mutual fund companies. (200 Words)

Context- SEBI regulations for mutual funds.

 

What is SEBI?

• The securities and exchange board of India is the regulator of the securities market in India. Its main function is to see the orderly functioning of the stock market and protecting the investors against any fraud.
• It has statutory powers through the SEBI Act,1992 and can issue guidelines to companies and credit rating agencies alike.
• Last month SEBI had issued strict guidelines to the credit rating agencies as they were seen guarding the interests of the issuers more than investors.
• This time SEBI has issued guidelines for the management of mutual funds.

 

What are mutual funds?

 

• It is a professionally managed investment fund where many investors put their money and the professionals then invest the money in securities and they share the returns.
• Mutual fund industry came under SEBI scanner because in the last few months some mutual fund companies postponed redemption of their fixed maturity plans (FMPs).

 

• To maintain the confidence of the investors in the securities market, SEBI came up with certain guidelines for the investors:

1. The mutual fund schemes will have to invest at least 20% of their fund in liquid assets like government securities.
2. They cannot invest more than 20% of their total assets in any one sector (currently the cap is 25%). Further in such sectors as housing and finance the cap is 10%.
3. SEBI has banned mutual fund companies from entering into any standstill agreements with companies.
4. It has also required that assets of mutual funds to be valued on market to market basis in order to better reflect the value of their investments.

 

Benefits:

 

• It will ensure the confidence of the investors in mutual funds.
• Mandatory investment in government securities will ensure liquidity.
• The cap on investment in any one sector will discipline the funds and force them to diversify their risk.

 

Way forward:

• The new guidelines of SEBI must be welcomed but it should also keep in mind that some investors are at times willing to take high risk for higher return so too much intervention is also not good.