24 AUGUST 2019 || THE HINDU DAILY NEWS & CURRENT AFFAIRS ANALYSIS FOR UPSC, SSC, CAPF, CDS etc.

The Hindu Daily News Analysis

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Important Headlines

Front Page

  • Govt. responds to downturn with steps to boost growth.
  • Demonstrators gather at the Tsim Sha Tsui waterfront in Hong Kong on Friday as part of a 40 km­ long human chain to highlight their protest. They said they were inspired by the ‘Baltic Way’, when people in the Baltic states joined hands 30 years ago to protest Soviet control.

National

  • Capital Delhi ranks last in Niti Aayog’s assessment of water management.
  • U.P. CM allocates portfolios to Ministers inducted into his Cabinet. Yogi keeps Home and Revenue; Suresh Khanna gets Finance.

International

  • FATF group ‘blacklists’ Pakistan. 
  • Russian President Vladimir Putin said on Friday he has ordered the military to prepare a “symmetric response” after Washington tested a formerly banned missile.
  • Israel has carried out an airstrike on a weapons depot in Iraq that officials said was being used by Iran to move weapons to Syria.

    Business & Economy

    • China announces new tariffs on $75 bn worth U.S. imports.
    • Finance Minister Nirmala Sitharaman on Friday announced a slew of measures to boost demand in the auto sector.


      In-depth News Analysis

      1. 13 States, UTs improve their water management practices

      Background

      NITI Aayog has released the composite water management index 2.0 (CWMI 2.0).

      Details

      • To supplement the efforts of Jal Shakti Ministry, NITI Aayog has prepared the second Round of Composite Water Management Index.
      • The CWMI is an important tool to assess and improve the performance of States and Union Territories in efficient management of water resources.
      • This has been done through a first of its kind water data collection exercise in partnership with Ministry of Jal Shakti, Ministry of Rural Development and all the States/ Union Territories.
      • The index would provide useful information for the States and also for the concerned Central Ministries/Departments enabling them to formulate and implement suitable strategies for better management of water resources.
      • CWMI 2.0 ranks various states for the reference year 2017-18 as against the base year 2016-17.
      • NITI Aayog first launched and conceptualized the Composite Water Management Index in 2018 as a tool to instill the sense of cooperative and competitive federalism among the states.
      • This was a first ever attempt at creating a pan-India set of metrics that measured different dimensions of water management and use across the lifecycle of water.
      • The report was widely acknowledged and provided actionable guidance to States on where they were doing well absolutely and relatively and what they needed to focus on to secure their water future.
      • The states are ranked across nine themes and cover 25 states and two union territories.

      Findings of the report

      • An analysis by the NITI Aayog has revealed that, thirteen of the 27 States and Union Territories have improved their water management practices from last year.
      • On an average, 80% of the states assessed in the index over the last three years have improved their water management scores, with an average improvement of +5.2 points.
      • Gujarat topped the rankings for the second year in a row with a score of 75 out of a maximum of 100, though it dropped a point.
      • Gujarat, Andhra Pradesh, Madhya Pradesh, Goa and Karnataka have topped the Composite Water Management Index 2.0 for 2017-18 among non-Himalayan states.
      • Among Himalayan states, Himachal Pradesh, Uttarakhand, Tripura and Assam are on top of the index.
      • The Union Territories for the first time have submitted their data and Puducherry has been declared as the top ranker.

      2. Terror funding watchdog FATF Asia-Pacific Group ‘blacklists’ Pakistan

      Background

      Pakistan has been placed on the lowest rung, or “blacklist”, of the Financial Action Task Force’s Asia Pacific Group (APG) for non-compliance and non-enforcement of safeguards against terror financing  and money laundering.

      Details

      • APG met in Canberra from August 18 to 23, 2019 to discuss a five-year review of the Mutual Evaluation Report (MER) for Pakistan.
      • Countries under review during the current session included China, Chinese Taipei, Hong Kong, China, Pakistan, the Philippines and the Solomon Islands.
      • The Asia Pacific Group (APG) is one of nine regional affiliates of the FATF.
      • Following the meeting, APG decided to place Pakistan among countries requiring “enhanced, expedited follow-up”.
      • The FATF has found Pakistan non-compliant on 32 of 40 compliance parameters on money laundering and terror financing.
      • On 11 effectiveness parameters of money laundering and terror financing, Pakistan was adjudged low on 10.
      • Despite its efforts, Pakistan could not convince the 41-member panel to upgrade it on any parameter.
      • The APG process is one of three review processes that Pakistan faces in the next few months.
      • On September 5, the APG will meet again, to take forward the main 15-month process of Pakistan’s FATF evaluation, which will present its recommendations for the FATF plenary session in Paris from October 18 to 23, 2019.

      What are the consequences for Pakistan?

      • The placing does not bring any new punitive measures on Pakistan.
      • It will require quarterly reporting to the group on improvement in the country’s financial safeguards.
      • The Paris plenary will decide whether to remove Pakistan from the greylist, continue the listing, or downgrade it to a blacklist of non-cooperative countries.
      • At present, Pakistan is on the “grey list” of the FATF, a common group for countries that are termed “high risk and non-cooperative jurisdictions”.
      • Officials said the downgrade might not occur, given that any three countries in the FATF can veto it, and Pakistan is likely to secure the backing of China, Turkey and Malaysia.
      • However, the APG decision would make it difficult for Pakistan to extricate itself from the greylist.

      Pakistan’s response

      • In a statement, Pakistan’s Finance Ministry accepted that it had been placed in the enhanced followup, which requires it to report on a quarterly basis, but said that the term “blacklist” did not apply to the APG process.
      • It called the terminology “incorrect and baseless”.
      • Pakistani officials said that since the APG process only looked at Pakistan’s actions till October 2018, it did not represent the decisions taken in the past year, which will be considered by the next two reviews.

      3. Centre responds to downturn with steps to boost growth

      Background

      With Finance Minister Nirmala Sitharaman announcing a slew of measures to reduce the burden on the private sector, the government has come out on the front foot to try to boost the sector’s sentiments.

      Details

      • In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by the Finance Act (No 2) Act 2019 on long and short term capital gains arising from the transfer of equity shares. That is, the enhanced surcharge on FPIs goes and the pre-Budget position is restored.
      • However, the increased surcharge announced in the Budget would still apply to high net-worth individuals earning more than Rs. 2 crore a year.
      • In keeping with the overall push to allay private sector concerns, the Finance Minister also stressed that the government was in favour of penalties rather than prosecution.
      • According to the government, this 70,000 crore capital infusion will lead to about Rs. 5 lakh crore of fresh liquidity that can be loaned out. This, along with the strong push for repo rate linked loan products, is likely to benefit consumers borrowing to buy new homes, vehicles and durables.
      • The government has also significantly reined in the discretionary powers of the tax authorities. It was announced that from October 1 onwards, all notices and summons by the Income Tax Department would be generated by a centralised computer and would carry a unique code.
      • The accelerated depreciation of 15% (in addition to the existing 15%) for all vehicles acquired till March 31, 2020 and the deferment of the proposed increase in registration fee for new vehicles to June 2020 are positive measures that will boost sentiment and, it is to be hoped, translate into demand.

      Significance of the announcements

      • For the Indian economy that is downbeat in growth and in sentiment, the comprehensive package of measures announced by Finance Minister Nirmala Sitharaman is just the right boost. They:
          • address growth slowdown concerns
          • free up funds for investment and spending by banks, housing finance companies and MSMEs
          • undo some controversial proposals, in the budget and outside it, which were affecting sentiment in the markets and the corporate sector.
      • And, importantly, these have all been done without any significant financial burden on the government. Some of the measures promote the ease of doing business and even the ease of living for ordinary citizens.

      4. New body for infra projects

      Background

      • Finance Minister Nirmala Sitharaman announced a host of measures to boost economic growth which included the Centre’s proposal to set up a development financial institution (DFI) to meet the  infrastructure financing needs.
      • Over the years, some of the major development financial institutions were merged with their banking outfits such as ICICI and IDBI.
      • Reserve Bank of India had released a discussion paper on wholesale and long-term finance banks in 2017 in which it was observed that there was a decline in the share of the long-term assets, relative to total assets, on the banks’ balance sheets.
      • The RBI had said that specialised banks could cater to the wholesale and long-term financing needs of the growing economy and possibly fill the gap in long-term financing.

      Details

      • In order to improve access to long-term finance, it is proposed to establish an organisation to provide credit enhancement for infrastructure and housing projects, particularly in the context of India not having a development bank.
      • The government’s proposal is expected to solve the infrastructure financing needs of the country, since banks do not have the long-term funds to finance such projects.
      • The concern is that the Banks do not have long-term funds. The maturity of their liabilities is five years, on an average. So, funding infrastructure projects becomes difficult.
      • It is expected that establishment of DFI will enhance debt flow toward infra projects.

      5. Upfront capital for PSBs to boost loan growth

      Background

      Finance Minister Nirmala Sitharaman has announced upfront capital infusion of Rs 70,000 crore into public sector banks.

      Details

      • The move aimed at boosting lending and improving liquidity situation in the country.
      • It is expected to generate an additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore.
      • The government’s decision to provide capital to the public sector banks (PSBs) upfront will give them ‘growth capital’ apart from meeting regulatory requirements.
      • Bankers said the Rs. 70,000-crore is higher than the total capital requirements projected by banks.
      • Banks had projected their capital requirement for meeting regulatory requirement.
      • Since the government is providing more capital than required, the additional capital will be used to fund growth.
      • Many banks, which had reported the April-June earnings, saw their common equity tier-I capital depleted. These lenders will be benefited as their capital levels will improve.
      • In addition, this capital will also help the PSBs which are still under prompt corrective action (PCA)  framework of the RBI.
      • Out of the 12 banks that were under the restrictions due to PCA, six of them were removed from those restrictions, of which five of them are PSBs.
      • Banks that are still under the PCA are IDBI Bank, Central Bank of India, Dena Bank, Indian Overseas Bank and two Kolkata-based lenders — United Bank of India and UCO Bank.
      • This will benefit corporates, retail borrowers, MSME, small traders, etc.

      6. FM steps in to accelerate auto demand

      Background

      Finance Minister Nirmala Sitharaman announced a slew of measures to boost demand in the auto sector.

      Details

      • The announcements aimed at reducing any uncertainty that was dampening sentiments.
      • It was said that the government will now replace old vehicles with new ones.
      • It would serve to increase demand for the auto sector.
      • A higher depreciation of 30%, up from 15%, for all vehicles purchased from now till March 31, 2020.
      • Deferment of the higher one-time registration fees, mooted by the Ministry of Road Transport and Highways (MoRTH), till June 2020 was another significant announcement.
      • In July 2019, MoRTH had issued a draft notification that proposed to increase the registration charges for new IC engine powered vehicles to 5,000 from the current Rs.600.
      • This was met with intense resistance from the auto industry.
      • It was also announced that the government will look into other measures to boost demand in the sector, including a scrappage policy.
      • The government has clarified that BS-IV compliant vehicles purchased till March 31, 2020 would be allowed to remain operational for the full period of their registration.

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        theRADICAL news: 24 AUGUST 2019 || THE HINDU DAILY NEWS & CURRENT AFFAIRS ANALYSIS FOR UPSC, SSC, CAPF, CDS etc.
        24 AUGUST 2019 || THE HINDU DAILY NEWS & CURRENT AFFAIRS ANALYSIS FOR UPSC, SSC, CAPF, CDS etc.
        Get Daily News Analysis, Editorial Analysis and Current Affairs from The Hindu newspaper for free. The Hindu newspaper is one of the most important source for preparing GS/Gk for any competitive exam in India. This free Daily News Analysis, Editorial Analysis and Current Affairs from The Hindu newspaper will help you make notes for various competitive exams like SSC, CDS, UPSC Civil Services, UPSC CAPF, Banking, Railways RRBs, Insurance, UPSC IES, UPSC IFS, etc. This complete analysis contains both fact based news highlights for objective exams and in depth analysis of editorials and opinions for descriptive papers and essays in very easy and simplified language.
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