Daily PT Capsule Feb 25

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Daily PT Capsule UPSC Civil Services
Daily PT Capsule UPSC Civil Services

A formal definition for a start-up

The government had recently announced the launch of Start-up India, Stand-Up India campaign. The Start-Up India Action Plan provided incentives for the start-up community in the form of tax breaks, lesser compliance and shut-down procedures, 10,000 crore corpus fund. The government has finally come up with a formal definition for start-ups so that no grey areas remain in seeking benefits  under the name of start-ups.

The government has set out the definition of a ‘start-up’ so that only deserving companies can be able to gain from the ‘Startup India Action Plan’ and to “create a conducive environment for startups in India”.

A government notification says that to be able to benefit from the plan, a ‘start-up’ should have at least 20% equity funding by any incubation, angel or private equity fund, and an accelerator or angel network duly registered with SEBI should be endorsing the innovative nature of the business.

Only the companies that fulfil these conditions would be considered as start-ups up to five years from the date of incorporation till the time that their turnover exceeds Rs 25 crore.

In order to recognising a company as a start-up, the government will use a mobile application/portal until the launch of which, the Department of industrial policy and promotion (DIPP) will be planning an alternative.

Analysis

Why start-ups are important for economy?

1) Revolutionary Products – India has witnessed an IT and telecom revolution. The launch and penetration of smart phones has changed the way services are delivered to end user. For such low cost innovation to continue there is a need for fostering a start-up ecosystem.

2) Impact on surrounding areas – Apart from delivering value to their customers, startups have a direct impact on the cities they make their homes. Infosys has impacted Bangalore and Alibaba has changed Hangzhou. What Google has done to Mountain View and how Microsoft transformed Redmond are case studies in themselves.

3) Quality Employment – Start-ups provide employment opportunities for youth and new employment patterns emerge. Demand and employment opportunities for engineers saw a steep rise after Bangalore became an IT hub.  Local youth had new opportunities to pursue, and experienced talent started moving to these cities in pursuit of a challenging and high-growth career.

Source: Business Standard, YourStory

 

India approves Chabahar port plan

India approved a $150 million project to develop the strategic Iranian port of Chabahar, which includes a transit route to Afghanistan bypassing neighbouring Pakistan. India had already signed a Memorandum of Understanding (MOU) with the Iran government in May 2015, but the deal had been stuck since then.

Analysis

Where is the Chahbahar port? – The Port of Chabahar (or Chah Bahar) is a seaport in Chah Bahar in southeastern Iran. Its location lies in the Gulf of Oman. It is the only Iranian port with direct access to the ocean. The port was partially built by India in the 1990s to provide access to Afghanistan and Central Asia, bypassing Pakistan.

Image: TheHinduGwadar and Chabahar Port

What is its Geo-political significance? – China has been developing the Gwadar port in Pakistan and connecting it with the China-Pakistan Economic Corridor.  Gwadar is part of China’s String of Pearls Strategy, seen as an attempt to circle India by building port infrastructure in Indian ocean. The development of Chabahar port is critical for India to counter this strategy.

Chabahar port also provides India an access to Afghanistan and Central  Asia.

Recommendation to make wilful defaulters public

The Standing Committee on Finance recommended that state-owned banks make public the names of their respective top 30 stressed accounts involving wilful defaulters.

This will act as a deterrent and enable banks to withstand pressure and interference from various quarters in dealing with the promoters for recoveries or sanctioning further loans, the committee said in its report tabled in Parliament on 24th February.

For this, the committee recommended the government amend the RBI Act and other laws and guidelines.

Wilful defaulters owe PSU banks a total of Rs.64,335 crore or 21 per cent of total non-performing assets, (NPA), according to the report.

The committee also recommended that specially-tasked committees be mandated to continually monitor the status of large loan portfolios and submit periodical reports to government and Parliament on the findings.

Analysis

Who is a wilful defaulter? – A wilful defaulter is somebody who has essentially not used the fund for the purpose it has been borrowed or when he has not repaid when he can do so; when he has siphoned off the funds or when he disposed of the assets pledged for availing of loan without the bank’s knowledge.

What is the standing committee on finance? – The system of departmentally related standing committees was instituted by Parliament in 1993. Currently, there are 24 such committees, organised on the lines of departments and ministries. Standing committee on finance is one of them. Other committees are on home affairs, defence etc. These standing committees examine bills that are referred to them. They also examine the expenditure plans of ministries in the Union Budget. In addition, they may examine the working of the departments and various schemes of the government.

Each committee has 31 members: 21 from Lok Sabha and 10 from Rajya Sabha. Parties are allocated seats based on their strength in Parliament. The final membership is decided based on the MP’s area of interest as well as their party’s decision on allocating the seats.

Source: TheHindu,  Rediff

 

Incentivising cashless transaction  

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for introduction of steps for promotion of payments through cards and digital means. The move aims at reducing cash transactions.

Several short term (to be implemented within one year) and medium term measures (to be implemented within two years) have been approved for implementation by the Government Ministries/ Departments/ Organisations.

1) Steps for withdrawal of surcharge/service charge/ convenience fee on card/ digital payments currently imposed by various Government Departments/organisations and introduction of appropriate acceptance infrastructure in Government Departments/ organisations.

2) Rationalization of Merchant Discount Rate (MDR) on card transactions and a differentiated MDR framework for some key transaction segments

3) Mandating payments beyond a prescribed threshold only in card/ digital mode

4) Introduction of formulae linked acceptance infrastructure by the stakeholders of certain card products

5) Rationalisation of telecom service charges for digital financial transactions

6) Promotion of mobile banking

7) Creation of necessary assurance mechanisms for quick resolution of fraudulent transactions and review the payments ecosystem in the country.

Analysis

What is the benefit of cashless transactions? – Promotion of payments through cards and digital means will be instrumental in reducing tax avoidance, migration of Government payments and collections to cashless mode, discourage transactions in cash by providing access to financial payment services to the citizens to conduct transactions through card/ digital means and shifting payment ecosystem from cash dominated to non-cash/less cash payments.

What are some of the initiatives of the government? – While the payment system initiatives taken in the form of Electronic Clearing Service Scheme, National Electronic Funds Transfer, Real Time Gross Settlement Scheme etc. have been impressive, the benefits of modern card/ digital payment systems are yet to reach all sections of the society.

The introduction of the Payment and Settlement Systems Act, 2007 has resulted in deeper acceptance and penetration of modern card/ digital payment systems in the country, Aadhaar Enabled Payment Systems (AEPS) has been brought to effect to leverage upon biometric verification and a domestic card network namely, RuPay.

The Reserve Bank of India has also recently approved licences for setting up of Payments Banks with the objective of greater financial inclusion by the Payments Banks by providing small savings accounts and payments/ remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities.

Source: PIB

 

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