20TH OCTOBER CURRENT AFFAIRS

1. India-Sri Lanka Naval Exercise 2020

News: The Eighth Edition of annual Indian Navy (IN) – Sri Lanka Navy (SLN) bilateral maritime exercise SLINEX-20 is scheduled off Trincomalee.

About SLINEX-20

  • SLINEX-20 aims to enhance inter-operability, improve mutual understanding and exchange best practices and procedures for multi-faceted maritime operations between both navies.
  • In addition, the exercise will also showcase the capabilities of our indigenously constructed naval ships and aircraft. SLINEX series of exercise exemplifies the deep engagement between India and Sri Lanka which has strengthened mutual cooperation in the maritime domain.
  • Interaction between the SLN and IN has also grown significantly in recent years, in consonance with India’s policy of ‘Neighbourhood First’ and the vision of ‘Security and Growth for all in the Region (SAGAR)’.

2. Hybrid Fund

News: This news card is an based on originally FAQ published in TH.

Hybrid Fund

  • A hybrid fund is one that invests in both equity and bonds. So, such funds ought to help investors with their asset allocation decision. This refers to how you allocate your annual savings between equity and bond investments.
  • Suppose you are unsure of the proportion of equity and bond investments to have in your portfolio.
  • By investing in a hybrid fund, you could outsource your asset allocation decision to the manager of the fund, so the argument goes.
  • The issue is that each goal you pursue requires different asset allocation. For instance, the asset allocation for your child’s education portfolio must be different from your retirement portfolio.
  • Hybrid funds cannot consider your individual goal requirement as it is a collective investment vehicle.

Tax efficiency of the fund

  • Based on current tax laws, a hybrid fund that holds 65% or more in equity is considered as an equity fund.
  • So, if you redeem your units in such hybrid funds after a holding period of more than 12 months, you have to pay long-term capital gains tax of 10%.
  • If a hybrid fund holds less than 65% in equity, you have to pay 20% capital gains tax with indexation if you sell your units after a holding period of more than 36 months.

Stocks vs. Bonds vs. Equity

  • A stock represents a collection of shares in a company which is entitled to receive a fixed amount of dividend at the end of the relevant financial year which are mostly called Equity of the company.
  • Bonds term is associated with debt raised by the company from outsiders which carry a fixed ratio of return each year and can be earned as they are generally for a fixed period of time.
  • Bonds are actually loans that are secured by a specific physical asset.
  • It highlights the amount of debt taken with a promise to pay the principal amount in the future and periodically offering them the yields at a pre-decided percentage.
  • Equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of an asset.

3. Affordability of Nutritious Food in Rural India

News: It is a study authored by International Food Policy Research Institute economist Kalyani Raghunathan and others. The findings of the study were released recently.

Details:

  • Selecting the cheapest options from actual Indian diets — wheat, rice, bajra, milk, curd, onions, radish, spinach, bananas — the study calculated that a day’s meals would cost ₹45 (or ₹51 for an adult man).
  • Three out of four rural Indians cannot afford a nutritious diet. Even if they spent their entire income on food, almost two out of three of them would not have the money to pay for the cheapest possible diet that meets the requirements.
  • If they set aside just a third of their income for non-food expenses, 76% of rural Indians would not be able to afford the recommended diet. This does not even account for the meals of non-earning members of a household, such as children or older adults.

Importance:

  • The findings are significant in the light of the fact that India performs abysmally on many nutrition indicators even while the country claims to have achieved food security.
  • The latest Global Hunger Index showed that India has the world’s highest prevalence of child wasting, reflecting acute undernutrition.
  • On indicators that simply measure calorie intake, India performs relatively better, but they do not account for the nutrition value of those calories.

India’s Nutrition Guidelines:

  • The National Institute for Nutrition’s guidelines for a nutritionally adequate diet call for adult women to eat 330 gm of cereals and 75 gm of pulses a day, along with 300 gm of dairy, 100 gm of fruit, and 300 gm of vegetables, which should include at least 100 gm of dark green leafy vegetables.

The methodology used:

  • Unlike the Economic Survey’s ‘Thalinomics’, which provided a rosier picture of meal costs, this study uses the wages of unskilled workers who make up a larger proportion of the population than industrial workers, and includes items such as dairy, fruit and dark green leafy vegetables that are essential as per India’s official dietary guidelines.

4. International Day for the eradication of Poverty

 

News: Every year 17th October is observed as International Day for the eradication of Poverty. Its observance started in 1992 with the adoption of UN resolution. The theme for the year 2020 is “Acting Together to Achieve Social and Environmental Justice for All”

State of Poverty: Worldwide and India

  • Poverty Trends: More than 90% countries have reported a dip in per capita income because of Covid-19 and the ensuing economic disruptions. More than 115 million new poor have been added to the world, and their spread is universal, from the rich Europe to the already poor Asia and from rural to urban areas.
  • According to the latest “Poverty and Shared Prosperity Report” by the world bank, the Covid-19 pandemic is estimated to push an additional 88 million to 115 million people into extreme poverty this year, with the total rising to as many as 150 million by 2021.
  • Beyond Income Poverty: India and Nigeria are two countries that host the world’s largest number of poor. Here, the poor live in very ecologically fragile areas. This makes poverty not alone an income related aspect as economists and politicians consider.

Relation between Poverty and Ecology

  • In India, the poorest regions are invariably the forested areas of the country in states like Chhattisgarh, Jharkhand and Madhya Pradesh.
  • Some275 million people in India depend on forest for subsistence. In the country’s poorest regions, forests provide up to 30% of their total income. This is more than agriculture and other sources of income.
  • At the global level, just five countries—India, Bangladesh, Nigeria, Ethiopia and the Democratic Republic of Congo— account for half of the extreme poor in the world. Paradoxically, the above five countries, barring Congo, are also witnessing rapid economic growth.
  • Various estimates say the natural capital accounts for 9% of wealth globally, but it accounts for 47% of the wealth in low income countries. This shows the dependence of people on natural resources in developing and poor countries.

Poverty and Forest Dependence:

  • Food and Agriculture Organization (FAO)study shows that more than a billion people are forest-dependent, and most of them are below the poverty line. Most of them are in Africa and Asia.
  • The Geography of Poverty: The more the reliance on ecology/nature for survival, higher is the probability to be poor due to modern urban development.
  • Regional Shift: In 1990, half of the world’s poor lived in East Asia and the Pacific. At present, sub-Saharan Africa and South Asia host over 85% of the poor in the world. Further, 26 of the world’s 27 poorest countries are in sub-Saharan Africa.
  • In these regions, three-fourths of the total poor live in rural areas.
  • These places have a highly degraded ecology (due to increasing exploitation of natural resources for development). Most of the poor depend on natural resources like land, forests and livestock for survival. So, for them, the economy is all about ecology. Degradation of the ecology, thus, leads to poverty.
  • Ecology and Entitlement: According to the International Union of Forest Research Organizations, forestry contributes at least $539 billion directly to the world Gross Domestic Product (GDP).
  • Development has come with a heavy cost to the ecology. For instance, the latest the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) global assessment reported a decline in nature’s contributions to people since 1970. It clearly said that “extraction of provisioning services has increased, while provision of regulating and maintenance services has declined”.
  • According to a study by the United Nations Environment Programme (UNEP)(covering 140 countries), the globally produced capital per head doubled and human capital per head increased by about 13%, but the value of the stock of natural capital per head declined by nearly 40% in 1992-2014.
  • It means those who depend on the environment witnessed a decline in their assets thus triggering poverty.

Way Forward

  • The importance of ecology to overall world development including poverty eradication can be gauged from the fact that 86 out of 169 Sustainable Development Goalstargets directly or indirectly seek to reduce environmental damage or emphasize the critical role of natural resources and ecosystem services.
  • The deadline of “eradicating poverty” in all forms is just 10 years away (as per the SDG 2030 target). To achieve this goal itself makes “social and environmental” justice as the key to our poverty eradication plans and programmes. There are various reasons for environmental degradation that ultimately trigger poverty among the nature-dependent people. Climate change is the latest major factor.
  • We need to focus on the ecological dimension of poverty also. When income comes from ecology, access to it becomes the sole way to eradicate poverty. Both access and entitlement for nature dependent people remains a key focus for poverty eradication.