Daily News Simplified - DNS · 3/15/2020 · 1. Low budgetary allocation: o India’s defense budget for 2020-2021 is be $73.65 billion. However, officials and analysts are warning

Daily News Simplified - DNS 15 03 20

Notes

SL. NO. TOPICS

THE HINDU PAGE NO.

1 MP’s panel concerned at Defense fund shortfall 11

2 Economic impact of COVID-19 (FAQ)

COVID-19 hurts Textile exports 14, 13

3 Coronavirus | How does soap use help in tackling COVID-19? 14

4 Yes banks and Bonds ( FAQ, Page number 14) 14

5 TIFR study reveals role of glucose in regulating liver functions,

ageing 15

6

7

Dated: 15. March. 2020 DNS Notes - Revision

Title MP’s panel concerned at Defense fund shortfall (Page number 11)

Syllabus GS III: Security

Theme Parliamentary Standing Committee on Defence report on defence budget

Highlights MP’s panel concerned at Defence fund shortfall Context:

• There is a widening gap between projections and allocations in the outlay for the defence sector and this in turn has negatively impacted the modernization of defence forces.

Causes of problems: 1. Low budgetary allocation:

o India’s defense budget for 2020-2021 is be $73.65 billion. However, officials and analysts are warning the amount is unlikely to meet new demands for weapons purchases and military modernization, as India is set to spend about 90 percent if its defense funds on existing obligations.

o Of the total budget, $18.52 billion is for weapons purchases; $32.7 billion is for maintenance of the military’s weapons inventory, pay and allowances, infrastructure, and recurring expenses; and $21.91 billion is for defense pensions.

o The capital budget leaves no room for any big-ticket weapons purchase, as over 90 percent of the allocation capital funds will be spent for past defense contracts’ committed liabilities.

o The limited procurement spending is expected to directly impact “Make in India" defense projects, a policy meant to boost the local economy under the ruling National Democratic Alliance government.

o Moreover, the ministry of defense has requested for a non-lapsable defense capital modernization fund for arms acquisition. The finance ministry has rejected this request.

2. Result of low allocation


The Army, Navy and IAF got just 60%, 56% and 46% respectively of their projected requirements under capital outlay. The capital outlay shortfall was Rs 17,757 crore for Army, Rs 15,692 crore for Navy and Rs 41,925 crore for IAF.

o Both the Navy and the IAF have a situation where their committed liabilities are more than their share of the capital allocation in the Budget. To offset this, the Services have been forced to defer payment of committed liabilities of the Defense Public Sector Undertakings (DPSU) among other measures.

o The implications of shortfall in miscellaneous expenditure include inability to operationalization of Defense Space Agency (DSA), Defense Cyber Agency (DCYA) and Armed Forces Special Operations Division (AFSOD).

o Other implications are lower operational readiness of Andaman and Nicobar Command (ANC) ships due to impact on annual refit plans, maintenance of SIGINT (Signal Intelligence) equipment and administration of training institutes and operational units

The Parliamentary Standing Committee on Defence (SCOD) o It is a department related standing committee (DRSC) of selected members of

parliament, constituted by the Parliament of India, for the purpose of legislative oversight of the defence policies and decision making of the Ministry of Defence (MOD).

o It is one of the 24 DRSCs that have been mandated with the onerous task of ministry specific oversight.

o The committee consists of thirty one members, twenty one elected by Lok Sabha, and not more than ten members of Rajya Sabha.

o The members are elected every year from amongst its members of respective houses according to the principle of proportional representation by means of single transferable vote.

o The chairperson is appointed by the Lok Sabha speaker. The term of office of the members is one year. A minister is not eligible to become a member of


the committee. If a member after his election to the committee becomes a Minister, he ceases to be a member from the date of such appointment.

o The committee currently is headed by MP Kalraj Mishra, succeeding MP Maj Gen BC Khanduri (Retd.)

Personal Notes


Title Economic impact of COVID-19 (FAQ, Page Number 14) COVID-19 hurts Textile exports (Page Number 13)

Syllabus GS I: Social Issues GS III: Economy

Theme Negative consequences of COVID-19 on economy

Highlights Context:

• This article highlights the impact on global economy if the stain of COVID-19 Virus stays in the atmosphere for long. The virus has disrupted India’s supply chain thereby impacting its economy. Let us understand viewpoint of this article.

Is there a chance of global economy slipping into recession?

• Analysts fear that the global economy may tip into a recession unless the virus turns out to be seasonal. A recession sets in when the economy shows two consecutive quarters of contraction.

• Uncertainty and global panic created by the virus has impacted economic decision making around the world and this will impact the overall GDP of the world.

• India has already seen the shocks at stock market (BSE & NIFTY) as there was free fall of market indices resulting in heavy loss for investors.

• Various financial institutions have estimated the world GDP growth for 2020 to decline from the previous prediction of IMF at 2.9%.

• As per UN’s United Nations Conference on Trade and Development (UNCTAD), the virus outbreak could cost the global economy up to $2-trillion this year and that the pandemic could cause a recession in some countries causing global economic growth to clock in below 2.5%.

Why are the impacts on textile and clothing exporters in India? • Supply chain disruptions have been witnessed due to COVID-19 resulting in fall

in exports and cancellation of international events. • According to the Cotton Textiles Export Promotion Council (Texprocil), 11

countries buy 41% of India’s cotton yarn exports and these countries have reported COVID-19 cases. Because of this, Yarn exports are down by 30% in Jan-Feb 2020 as compared to Jan-Feb of 2019.

• Further, there is also a sharp fall in cotton yarn exports to China, Iran, Korea and Vietnam.

• The Cotton Textiles Export Promotion Council, popularly known as TEXPROCIL has been the international face of cotton textiles from India facilitating exports worldwide. In wake of the virus, TEXPROCIL has also called off flagship event - Ind-Texpo 2020.

• TEXPROCIL has a membership of around 3,000 companies spread across major textile clusters in India. Its members are well established manufacturers and


exporters of cotton textile products like Cotton, Yarns, Fabrics and Home Textiles.

• The Council provides export promotional services to over 3,000 members including composite mills, spinning units, weaving units, knitting units, process houses and merchant exporters.

• The Apparel Export Promotion Council had asked garment exporters who mainly depend on China to explore other countries for their export other than China.

Does breaking of supply chain effect global economy? • The world at present is more integrated and this has created a network of supply

chain which helps economic growth. Now because of the virus, this supply chain of world economy is being affected thereby halting most of trade which generally used to take place.

• Because of disrupted supply chain, components of various products are not being assembled and this is even leading to closing of some factories. So, there are unknown economic consequences of the virus.

• Many people are currently being quarantined and this is also impacting the workforce around the world especially Europe as the centre of COVID-19 has shifted from China to Europe within months because of the pandemic nature of the virus.

Which industries have been impacted? • When the news of COVID-19 was reported from Wuhan in China, it immediately

affected the Indian pharmaceutical, automobile and mobile phone industries as India depends on China for supplies of components in these sectors.

• The Indian pharma industry, which depends on China for 70% of raw materials needed to manufacture drugs in India, has seen input costs go up by 50% as of February this year.

• The pesticides sector is another that has been affected as manufacturers depend on China for raw materials. India has enough stocks as of now but farmers may soon face pesticide availability issues unless the situation resolves quickly.

• It has also impacted Indian gem and jewellery market because of closure of markets of China and Hong Kong. If the ban on exports continues till April, 2020, then the loss can be estimated at around 1-billion dollars. This is because Indian gems and jewellery sector depends on these two foreign markets for 70% of its exports.

• Even the Software Industry will be hit if travelling bans continue in major MNCs as most of the decision making are done in the west including USA. USA has declared national emergency and this will further complicate problems for the Software Industry and people working in the sector.


• Travel and Hospitality Sector are severely impacted as most countries are lock down mode and are in the state of self quarantine including India. United States has halted all in-bound travel from Europe. India has temporarily stopped grant of visas except for emergency situations. Even people are avoiding foreign travel unless required in emergency situation. This has severely affected the travel industry including aviation and tourism including hotels.

• Even shared mobility in India has been impacted because of the virus. • Micro-expenses which contribute significantly to an economy, such as a cab fare

or buying snacks for a commute are also impacted. Even Disneyworld has brought down its shutters temporarily to help prevent the spread of the virus

• Sports Industry has faced the brunt. Probable Truncation of IPL will cost millions. Major sports events around the world has been cancelled. Even questions are now raised over the probability of Olympics being held in Japan.

• In football, all Union of European Football Association (UEFA) competitions, including the Champions League and Europa League matches, have been postponed. Formula 1 has called off the first race of the season, the Australian Grand Prix. In golf, the PGA has cancelled its Players’ Championship.

• The U.S. basketball association, the National Basketball Association (NBA) suspended its season’s events indefinitely while the body that conducts college championships for the sport, the National Collegiate Athletic Association (NCAA), has cancelled both its men’s and women’s upcoming events.

Is there a silver lining at all? • It is said that after the Severe Acute Respiratory Syndrome (SARS) epidemic in

China in 2003, shoppers began to prefer buying online, to avoid crowded spaces and that e-commerce major Alibaba’s fortunes zoomed after this.

• Digital shopping may see even more traction. With schools shutting down temporarily, online learning platforms are likely to get a boost.



Personal Notes

Title Coronavirus | How does soap use help in tackling COVID-19? (FAQ, Page Number 14)

Syllabus Prelims: Science and Technology GS I: Social Issues

Theme The mechanism behind how soap acts against the virus.

Highlights Context:

• As the number of Covid-19 cases have passed 1.5 lakh globally with more than 5,760 deaths, various measures have been mentioned to reduce the risk of infection.

What does WHO guidelines say?

• Guidelines by the World Health Organization specify that one of the ways to reduce the risk of infection is by regularly and thoroughly cleaning one’s hands with an alcohol-based hand rub or washing them with soap and water. Regular washing becomes important as the virus tends to be viable from hours to more than a day on different surfaces that are regularly touched with hands.

How does washing with soap help get rid of the coronavirus?

• The dirt on our hands contains innumerable viruses and bacteria. Washing with water without using soap helps reduce the amount of microbes but does not remove most of the virus and bacteria completely. Using soap, therefore, becomes far more effective in removing microbes.

What is the mechanism though which sopas destroy the Virus?


• Viruses such as coronavirus, influenza-causing viruses, Ebola, Zika have their genetic material encased in a layer of fat called the lipid envelop. Soap molecules are pin-shaped with a head that is water-loving (hydrophilic) and a tail that is oil-loving (oleophilic). Being oleophilic, the tail portion of the molecule tends to have an affinity for and ‘competes’ with the lipids in the virus envelope. Since the chemical bonds holding the virus together are not very strong, the long oleophilic tail gets inserted into the envelope and tends to have a ‘crowbar’ effect that breaks the lipid envelope of the virus. The tail also competes with the bond that binds the RNA and the lipid envelop thus dissolving the virus into its components which are then removed by water.

Do all viruses have the lipid layer?

• No, certain viruses do not have the lipid envelop and are called the non-enveloped viruses. Rotavirus which causes severe diarrhoea, poliovirus, adenovirus that cause pneumonia and even human papillomavirus (HPV) do not contain the lipid envelop.

How do alcohol-based hand sanitisers help get rid of coronavirus?

• Like soap, the alcohol present in hand sanitisers dissolve the lipid envelop, thus inactivating the virus. In addition, the alcohol also tends to change the shape or denature the mushroom-shaped protein structures that stick out of the lipid envelop.

• The mushroom-shaped protein structures help the virus to bind to special structures found on human cells and enter the cells.

• To be effective, the sanitisers should contain at least 60% alcohol.


But is there a comparison between both of them?

• Unlike soap lather, the alcohol does not come in contact with all parts of the hand. So care needs to be taken to use sufficient amount of sanitiser to increase the coverage.

• Unlike water, alcohol run does not remove the dead viruses from the hand. While a sanitiser can quickly reduce the number of microbes, it does not get rid of all types of germs, and is “not as effective when hands are visibly dirty or greasy”.


Personal Notes

Title Yes banks and Bonds (FAQ, Page number 14)

Syllabus GS III: Economy

Theme AT1 bonds and their validity in Basel framework

Highlights Additional Tier 1 Bonds

• AT1 bonds, also known as Additional Tier 1 bonds, are unsecured perpetual bonds issued by banks to shore up their capital base to meet Basel III requirements.

Basel III Norms • According to Basel Committee on Banking Supervision "Basel III is a

comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector".

• This was done to reduce vulnerabilities of banks from financial crisis especially after financial crisis of 2008.


• Basel III or Basel 3 released in December, 2010 is the third in the series of Basel Accords. These accords deal with risk management aspects for the banking sector.

• The BASEL norms have three aims: Make the banking sector strong enough to withstand economic and financial stress; reduce risk in the system, and improve transparency in banks.

RBI’s version on Basel III Norms • The RBI’s version of Basel III norms requires Indian banks to hold a minimum

capital amounting to 11.5% of their risk-weighted loans. Of this, about 9% is supposed to be the bank’s core capital (called Tier 1), with 5.5% in equity.

• AT1 bonds are issued by banks to supplement their permanent or Tier 1 capital which is mainly made up of equity shares.

• Risk-weighted assets are used to determine the minimum amount of capital that must be held by banks and other financial institutions in order to reduce the risk of insolvency. The capital requirement is based on a risk assessment for each type of bank asset.

• For example, a loan that is secured by a letter of credit is considered to be riskier and, thus, requires more capital than a mortgage loan that is secured with collateral.

Why are AT1 bonds ‘perpetual’? • AT1 bonds are supposed to remain permanently with the bank and pay

investors interest for perpetuity. In practise though, these bonds have a ‘call option’ after 5 or 10 years that banks use to retire one set of AT1 bonds and issue another.

Can AT1 Bonds be written off completely? • The contract terms for AT1 bonds mention clearly that the value of these bonds

can be completely written off if the bank’s capital ratios fall below certain regulatory thresholds.

• The write-off also kicks in if the RBI decides that the bank is beyond the “Point of Non Viability” or needs a public sector capital infusion to survive.

• This is the clause that the RBI seems to have originally invoked in the Yes Bank case. So, even though bond-holders generally come higher in the pecking order of stakeholders than equity shareholders in most situations, AT1 bonds incorporate special situations where their contract terms allow for their holders to suffer write-offs before equity shareholders.

When can interest be not given for AT1 Bonds? • Banks can partly or fully skip interest payments for AT1 Bonds for any year if

the bank’s Tier 1 capital ratios fall below the RBI’s thresholds. • If the bank makes losses and has insufficient reserves. • Bank can also reduce the principal value of these bonds temporarily or for

good, if its equity Tier 1 ratio falls below specified limits.


• When a bank is failing, the RBI can decide on a complete write-down of its AT1 bonds or convert them into equity if it feels that it has reached the point of non-viability.

How did Retail Investors purchase these AT1 Bonds of Yes Bank? • Retail investors were sold these high-value bonds (the face value is Rs. 10 lakh

each) as high-return alternatives to fixed deposits, as they were offering 2-3% higher interest than FDs.

• Some investors also bought them through their brokers based on their high yields in the secondary market.

Personal Notes

Title TIFR study reveals role of glucose in regulating liver functions, ageing (Page number 15)

Syllabus GS III: Science and Technology

Theme SIRT1 enzyme and its role in regulating metabolism.

Highlights With reference to SIRT1 enzyme, consider the following statements: 1. Sirtuin 1 is a protein that in humans is encoded by the SIRT1 gene. 2. It is associated with regulation of metabolic activities.

Which of the statements given above is/are correct ? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither, 1 nor 2 Answer: C


Context: SIRT1 has become hot topic because it has been found to be associated with regulation of metabolic activities and also ageing. A study by researchers from Tata Institute of Fundamental Research, Mumbai (TIFR) has found that glucose controls the function of SIRT1 directly. what can be the consequences of such controls? Absence: A shortage or absence of this control can lead to a diabetic-like state, Excess: while excess feeding and sustained low levels of SIRT1 can lead to obesity and enhanced ageing.

Personal Notes

Documents

Daily News Simplified - DNS · 3/15/2020 · 1. Low budgetary allocation: o India’s defense budget for 2020-2021 is be $73.65 billion. However, officials and analysts are warning