Current Affairs Analysis – 1.April.2020

“COVID-19 worst crisis since World War II“

Context :

The United Nations warned that the world countries face the most challenging crisis since World War II. The pandemic is expected to cause a recession that probably has no parallel in the recent past. The announcement was made by the UN Secretary-General Antonio Guterres during the launch of the “Report on the socioeconomic impacts of COVID-19” on 31 March.

Report Highlights :

UN stated that there is also a high risk that the combination of the disease and economic impact will contribute to enhanced instability, unrest, and conflict.
The report also highlighted that International Labor Organization (ILO) estimates for the year 2020 which stated 5-25 million jobs will be lost, with a corresponding loss of between $860 million and $3.4 trillion in labor income.
It pointed to the UN trade and development organization UNCTAD’s estimate of a 30-40% downward pressure on global foreign direct investment (FDI) flows in 2020.
It also recommended establishing a COVID-19 Response and Recovery Fund to support efforts in low- and middle-income countries, with the aim of swiftly enabling governments to tackle the crisis and promote recovery.

Source : the hindu

Ordinance to make PM CARES donations tax free

Context :

The government of India passed “Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020” on 31 March.

The Ordinance will give relief in compliance in filing income tax, Goods and Services Tax (GST), customs and central excise returns, to help taxpayers tide over the coronavirus (Covid-19)crisis.

Ordinance Highlights :

The ordinance provides relaxation in several compliances including the extension in deadline to 30 June to make investments in instruments such as National Savings Certificates, Public Provident Fund for claiming income tax benefits.
The Ordinance seeks amendment to the Income-tax (IT) Act, Benami Act.
It aims to amend the IT Act to enable a 100% deduction for donations made to the PM’s Citizen Assistance and Relief in Emergency Situations (PM CARES) Fund. It was set up to enable citizens to contribute to the government’s effort to curb the spread of the Coronavirus outbreak.
It will also provide an extension of various time limits for making various investments or payments including for claiming deduction under 80C, 80D, and 80G to 30 June 2020.
Contribution towards PM CARES Fund was eligible for a 50% deduction as it was notified under section 80G(5). Also, contributions to PM National Relief Fund and to CM’s Relief Fund/Lieutenant Governor’s Relief Fund in respect of any State/Union Territory (UT), were eligible for 100% deduction under Section 80G(1) read with clause (iii a) of section 80G(2).

source : pib

Merger of Banks

Context :

The Reserve Bank of India (RBI) announced that the merger of 10 state-run banks into four lenders came into effect on 1 April amid the lockdown triggered by coronavirus outbreak. The branches of merging banks will operate as of the banks in which the banks have been amalgamated.

Mergers include :

Punjab National Bank, Oriental Bank of Commerce and United Bank of India will combine to form the nation’s second-largest lender.
Canara Bank and Syndicate Bank will merge.
Union Bank of India will amalgamate with Andhra Bank and Corporation Bank.
Indian Bank will merge with Allahabad Bank.

Why merger is good? – Benefits for various stakeholders:

For Banks :

Small banks can gear up to international standards with innovative products and services with the accepted level of efficiency.
PSBs, which are geographically concentrated, can expand their coverage beyond their outreach.
A better and optimum size of the organization would help PSBs offer more and more products and services and help in integrated growth of the sector.
Consolidation also helps in improving the professional standards.
This will also end the unhealthy and intense competition going on even among public sector banks as of now.
In the global market, the Indian banks will gain greater recognition and higher rating.
The volume of inter-bank transactions will come down, resulting in saving of considerable time in clearing and reconciliation of accounts.
This will also reduce unnecessary interference by board members in day to day affairs of the banks.
After mergers, bargaining strength of bank staff will become more and visible.
Bank staff may look forward to better wages and service conditions in future.
The wide disparities between the staff of various banks in their service conditions and monetary benefits will narrow down.

For economy :

Reduction in the cost of doing business.
Technical inefficiency reduces.
The size of each business entity after merger is expected to add strength to the Indian Banking System in general and Public Sector Banks in particular.
After merger, Indian Banks can manage their liquidity – short term as well as long term – position comfortably.
Synergy of operations and scale of economy in the new entity will result in savings and higher profits.
A great number of posts of CMD, ED, GM and Zonal Managers will be abolished, resulting in savings of crores of Rupee.
Customers will have access to fewer banks offering them wider range of products at a lower cost.
Mergers can diversify risk management.

For government:

The burden on the central government to recapitalize the public sector banks again and again will come down substantially.
This will also help in meeting more stringent norms under BASEL III, especially capital adequacy ratio.
From regulatory perspective, monitoring and control of less number of banks will be easier after mergers.

Concerns associated with merger:

Problems to adjust top leadership in institutions and the unions.
Mergers will result in shifting/closure of many ATMs, Branches and controlling offices, as it is not prudent and economical to keep so many banks concentrated in several pockets, notably in urban and metropolitan centres.
Mergers will result in immediate job losses on account of large number of people taking VRS on one side and slow down or stoppage of further recruitment on the other. This will worsen the unemployment situation further and may create law and order problems and social disturbances.
Mergers will result in clash of different organizational cultures. Conflicts will arise in the area of systems and processes too.
When a big bank books huge loss or crumbles, there will be a big jolt in the entire banking industry. Its repercussions will be felt everywhere.

Source : the hindu

IESA sought ISRO type commission for electronics

Context :

The Indian Electronics and Semiconductor Association (IESA) asked the Government of India to set up a National Electronics Mission in lines with India’s space agency, Indian Space Research Organisation (ISRO).

With this, IESA aims to build a homegrown electronics ecosystem that would help the country reduce imports of semiconductor chips and sensors. With that, it aims to spearhead all the activities and for making India a design-led manufacturing hub for the world.
IESA also sought the Central government to allocate $1 billion for an Indian electronics system design and manufacturing (ESDM) Innovation fund. It aims to help startups design and build local electronics products.

IESA :

IESA is responsible for the development of a vibrant Indian Electronics and Semiconductor ecosystem. Its main objective is to establish “Brand India” that is recognized worldwide as a go-to destination for electronic products.
It also aims to bring the Indian government, industry, and academia on a common platform and jointly work to develop and promote Made-in-India products for the global markets.
The Chairman of IESA is Jitendra Chaddah, Senior Director, Operations and Strategic Relations, Intel India. The Vice-Chairman of IESA is Dr.Satya Gupta, CEO, Seedeyas Innovation.

Covid-19 and the Orphan Drug Act

Context :

The World Health Organisation (WHO) declared the Covid-19 outbreak a pandemic. However, the United States Food and Drug Administration (FDA) declared Covid-19 an orphan disease, or a rare disease.

Key Points :

The FDA granted Gilead Sciences orphan drug status for its antiviral drug, Remdesivir, on March 23, 2020.
- Originally developed to treat Ebola, the drug is now being tested for treating COVID-19. Clinical trials are already in Phase III.
But on March 25 Gilead announced that it had submitted a request to the FDA to remove its orphan drug designation for Remdesivir.
- Earlier, Gilead had sought the orphan status to the Remdesivir drug to expedite approval of the drug. However, advocates for global access to medicines, rejected the company’s argument.
- Gilead’s exorbitant pricing of its drug to treat hepatitis C and its drug to treat HIV also attracted attention in the past.
In recent years, drug companies have been accused of exploiting the law to reap profits, in sales.

Orphan Drug Act, 1983 :

Rare diseases became known as orphan diseases because drug companies were not interested in adopting them to develop treatments.
In the U.S., under the Orphan Drug Act, companies are provided incentives to develop therapies, or orphan drugs, for rare diseases.
The Act allows seven years of market exclusivity and financial incentives to innovators of these drugs. As a result, orphan drugs are often exorbitantly priced.
Privileges under the Act may be conferred to companies for drugs to treat a disease that affect less than 200,000 people in the U.S., or for a disease that affects more than 200,000 people but for which there is no hope of recovering R & D costs.
- The idea is that without these incentives, companies would find it difficult to recover their R&D costs given the small number of people suffering from the rare disease.