DAILY NEWS ANALYSIS 05 DECEMBER
ECONOMY
Cabinet okays bond ETFs
The Union Cabinet approved the government’s plan to create and launch India’s first corporate bond exchange traded fund (ETF) — Bharat Bond ETF.
Features of Bharat Bond ETF:
- ETF will be a basket of bonds issued by CPSE/CPSU/CPFI/any other Government organization Bonds (Initially, all AAA rated bonds)
- Tradable on exchange
- Small unit size Rs 1,000
- Transparent NAV (Periodic live NAV during the day)
- Transparent Portfolio (Daily disclosure on website)
- Low cost (0.0005%)
Bharat Bond ETF Structure:
- Each ETF will have a fixed maturity date
- The ETF will track the underlying Index on risk replication basis, i.e. matching Credit Quality and Average Maturity of the Index
- Will invest in a portfolio of bonds of CPSE, CPSU, CPFI or any other Government organizations that matures on or before the maturity date of the ETF
- As of now, it will have 2 maturity series - 3 and 10 years. Each series will have a separate index of the same maturity series.
Index Methodology:
- Index will be constructed by an independent index provider – National Sock Exchange
- Different indices tracking specific maturity years - 3 and 10 years
Benefits of Bharat Bond ETF to investors:
- Bond ETF will provide safety (underlying bonds are issued by CPSEs and other Government owned entities), liquidity (tradability on exchange) and predictable tax efficient returns (target maturity structure).
- It will also provide access to retail investors to invest in bonds with smaller amount (as low as Rs. 1,000) thereby providing easy and low-cost access to bond markets.
- This will increase participation of retail investors who are currently not participating in bond markets due to liquidity and accessibility constraints.
- Tax efficiency compared to Bonds as coupons from the Bonds are taxed at marginal rates. Bond ETFs are taxed with the benefit of indexation, which significantly reduces the tax on capital gains for investor.
Bharat Bond ETF Benefits for CPSEs:
- Bond ETF would offer CPSEs, CPSUs, CPFIs and other Government organizations an additional source of meeting their borrowing requirements apart from bank financing.
- It will expand their investor base through retail and HNI participation, which can increase demand for their bonds. With increase in demand for their bonds, these issuers may be able to borrow at reduced cost thereby reducing their cost of borrowing over a period of time.
- Further, Bond ETF trading on the exchange will help in better price discovery of the underlying bonds.
- Since a broad debt calendar to assess the borrowing needs of the CPSEs would be prepared and approved each year, it would inculcate borrowing discipline in the CPSEs at least to the extent of this investment.
Developmental impact on Bond Markets:
- Target Maturity Bond ETF is expected to create a yield curve and a ladder of Bond ETFs with different maturities across calendar years.
- ETF is expected to create new eco-system - Market Makers, index providers and awareness amongst investors - for launching new Bond ETFs in India.
- This is expected to eventually increase the size of bond ETFs in India leading to achieving key objectives at a larger scale - deepening bond markets, enhancing retail participation and reducing borrowing costs.
Reference: https://www.thehindu.com/todays-paper/tp-business/cabinet-okays-bond-etfs/article30171718.ece
SECURITY
Nod for Data Protection Bill
The Union Cabinet approved the introduction of the Personal Data Protection Bill in Parliament. Sri Krishna Committee has prepared this bill.
Provisions of Data Protection Bill:
- The bill deals with the broad guidelines on the collection, storage, and processing of personal data, the consent of individuals, penalties and compensation, and a code of conduct.
- The draft bill classifies ‘sensitive personal data’ as including passwords, financial data, health data, sex life, sexual orientation, biometric data, genetic data, transgender status, intersex status, caste or tribe, and religious or political belief or affiliation.
- The draft bill says that such sensitive personal data can be processed only with the explicit consent of the person.
- Consent needs to be informed, clear, and specific, as defined by the bill itself.
- It has a provision for the right to be forgotten, where the person “shall have the right to restrict or prevent continuing disclosure of personal data”.
- Personal data is to be stored in India, but can be processed outside with the consent of the person.
- The draft bill also specifies penalties for not following its provisions, including a penalty of Rs. 5 crores or 2% of turnover, whichever is higher.
- Central government can categories of personal data as critical personal data, which will then be only processed in a server or data centre located in India.
References: https://www.thehindu.com/todays-paper/tp-business/nod-for-data-protection-bill/article30171716.ece
Perceptional differences over India-China border: Rajnath Singh
Defence Minister asserted that there are “perceptional differences” between India and China on the Line of Actual Control (LAC) but the two countries have a mechanism that prevents any escalation of conflict.
Line of Actual Control (LAC):
- The Line of Actual Control (LAC) is a demarcation line that separates Indian-controlled territory from Chinese-controlled territory in the former princely state of Jammu and Kashmir, formed after the 1962 war.
- It acts as the effective military border, which separates Indian controlled areas of Jammu and Kashmir from Aksai Chin.
- This border is not a legally recognized international boundary, but rather, is the practical boundary.
SOCIETY
‘Act against those who revealed victim’s name’
The Delhi High Court sought a response from the centre on a petition seeking action against certain media houses that revealed the identity of the Hyderabad rape victim.
Law on victim’s name disclosure:
Under Section 228A of the Indian Penal Code, disclosure of identity of victim of certain offences, including rape, is punishable with imprisonment of a term that may extend to two years and a fine.
AGRICULTURE
Govt. procured only 3% of pulses, oilseeds proposed for this season
Less than 3% of this season’s sanctioned amount of pulses and oilseeds have actually been procured so far under the once-hyped PM-AASHA scheme.
- Only 1.08 lakh tonnes out of targeted 37.59 lakh metric tonnes have been procured.
- Procurement has not even started in Uttar Pradesh, Madhya Pradesh and Odisha out of targeted 11 states.
About PM-AASHA:
- The Scheme is aimed at ensuring remunerative prices to the farmers for their produce as announced in the Union Budget for 2018.
- The new Umbrella Scheme includes the mechanism of ensuring remunerative prices to the farmers and is comprised of
- Price Support Scheme (PSS)
- Price Deficiency Payment Scheme (PDPS)
- Pilot of Private Procurement & Stockist Scheme (PPPS)
- For oilseeds, states have the option to roll out Private Procurement Stockist Scheme (PPSS) on pilot basis in selected districts/APMC(s) of district involving the participation of private stockiest.
- Increasing MSP is not adequate and it is more important that farmers should get full benefit of the announced MSP.
- In Price Support Scheme (PSS), physical procurement of pulses, oilseeds and Copra will be done by Central Nodal Agencies with proactive role of State governments.
- In addition to NAFED, Food Cooperation of India (FCI) will take up PSS operations in states /districts.
- Price Deficiency Payment Scheme this scheme (PDPS): Direct payment of the difference between the MSP and the selling/modal price will be made to pre-registered farmers selling his produce in the notified market yard through a transparent auction process. This scheme does not involve any physical procurement of crops as farmers are paid the difference between the MSP price and Sale/modal price on disposal in notified market.
- The main crops covered under the scheme this season are moong, urad, arhar, groundnut and soyabean.
ENVIRONMENT
Union Environment Ministry to challenge Uttarakhand forest notice
The Union Environment Ministry is likely to challenge a recent notification by the Uttarakhand Forest Department on its definition of a “deemed forest”.
About deemed forest:
- They refer to land tracts that appear to be a “forest”, but have not been notified so by the government or in historical records.
- They comprise about 1% of India’s forest land.
- The SC, in 1996 judgement, had broadened the definition of forest to include not just land classified as forest under forest or revenue departments, but also those that are forests according to the definition of a forest.
- The Supreme Court had ordered to states to identify neither recorded, nor notified forests and classify them as deemed forests.
Uttrakhand Government argument:
- In areas recorded as “deemed forest” only tracts 10 hectares and above and having a canopy density of greater than 60%, would be considered forest.
- The freedom to define which tracts of forest qualify as forest has been the prerogative of States since 1996.
International
U.S. House approves Uighur bill, demands sanctions on senior Chinese officials
The U.S. House of Representatives have overwhelmingly approved a bill that would require the Trump administration to toughen its response to China’s crackdown on its Muslim minority.
Provisions of the bill:
- It calls on President Donald Trump to impose sanctions for the first time on a member of China’s powerful politburo (executive committee for communist parties).
- It requires the U.S. president to condemn abuses against Muslims.
- It calls for the closure of mass detention camps in the north-western region of Xinjiang.
- It calls for sanctions against senior Chinese officials who it says are responsible.
Chinese Response:
- China urged the U.S. to immediately correct its mistake, to stop the above bill on Xinjiang from becoming law, to stop using Xinjiang as a way to interfere in China’s domestic affairs.
About Uighurs:
- The Uighurs live in Xinjiang, the largest and most western of China’s administrative regions, which is surrounded by Mongolia, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan and India.
- They are Muslim, speak a language close to Turkish, and are culturally and ethnically closer to Central Asia than the rest of China.
- Around a million Uighurs, Kazakhs and other Muslims have been bundled into internment camps, where they are allegedly being schooled into giving up their identity, and assimilate better in the communist country dominated by the Han Chinese.
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