Poverty Line

How are poverty numbers calculated

Widespread poverty is the biggest challenge for India’s policymakers. The government has drawn criticism for its inability to tackle the menace despite high economic growth. Some estimates place the number of poor at 40% of the population. 

How is the poverty line defined?

The concept of poverty is associated with socially perceived deprivation with respect to basic human needs. Historically, India has followed a poverty line, which is based on a minimum number of calories that an individual should consume and a rupee amount was calculated on this basis. The existing rural and urban official poverty lines were originally defined in terms of per capita total consumer expenditure (PCTE) at 1973-74 market prices and is adjusted over time and across states for changes in prices.

The method still retains the original 1973-74 all-India reference poverty line baskets (PLB) of goods and services. These PLBs were derived separately for rural and urban areas, anchored in per capita calorie norms of 2400 (rural) and 2100 (urban) per day. People whose PCTE is below the required minimum are considered to be below the poverty line.

What is the international poverty line?

The common international poverty line is based on an income of around $1 a day. In 2008, the World Bank revised the figure to $1.25 at the 2005 purchasing power parity.

What is the new way to define the poor?

As the earlier estimates of poverty have been largely perceived as inadequate, a committee led by Suresh Tendulkar came up with a new way to define the poor. Tendulkar moved away from calorie anchor while testing the adequacy of actual food expenditure. The method uses same consumption basket for rural and urban poor, but applies different price levels of rural and urban areas to arrive at the poverty estimate. The major departure from the original method is the provision for including expenditure on health and education.

Does India need to redefine poor?

With India hitting a high growth trajectory, the living standards and consumption patterns in both urban and rural areas have changed, while existing data continues to use consumption baskets that reflect trends prevalent in 1973-74. Earlier poverty mechanisms also assumed that basic social services like health and education would be supplied by the state, therefore even as both were covered in base year 1973-74, no account was taken for the change in the proportion of expenditure in these services since then.

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Offshore Banking Unit

Offshore Banking Unit

What is offshore banking unit?

Offshore banking unit (OBU) is the branch of an Indian bank located in a special economic zone (SEZ), with a special set of rules aimed at facilitating exports from the region. As laws define it, it’s a “deemed foreign branch” of the parent bank situated within India, and it undertakes international banking business involving foreign currency denominated assets and liabilities.

The concept comes from the practice prevalent in several global financial centres. Here an OBU can accept foreign currency for business but not domestic deposits from local residents. This was conceived to prevent competition between local and offshore banking sectors.

What was the need for OBUs?

In addition to providing power, tax and other incentives to SEZs, policymakers felt a need to provide SEZ developers access to global money markets at international rates. So in 2002, RBI instituted OBUs, which would be virtually foreign branches of Indian banks. These would be exempt from CRR, SLR and few other regulatory requirements.

RBI regulations make it mandatory for OBUs to deal in foreign exchange, source their foreign currency funds externally, follow all prudential norms applicable to overseas branches and are entitled for IT exemptions. Thus in many respects, they are free from the monetary controls of the country.

What price, freedom from regulations?

In the eight years that they have been operational, concerns have been raised that, funding by OBUs to SEZs would lead to increase in external debt of India. Also, some have suggested that OBUs as vehicles for extending dollar loans have no use as long as they are restricted to doing business only in the zones in which are they located.

This would create an unnecessary regulatory arbitrage like booking business because there is some arbitrage advantage on offer. Anyways, ground realities could not be more different. Hardly a handful of banks have set up their OBUs, so the argument looks very far fetched.

SEZ, itself as a concept has been struggling, given the issues that SEZ developers have faced over acquiring land from farmers.

What is the future of OBUs?

Most international financial centres still house OBUs, so saying they are not required may be incorrect. However, some analysts have said OBUs are losing relevance at a time of increasing globalisation.

They say OBUs will be of no use after the economy opens up fully and the rupee is fully convertible. These experts argue for one or two OBUs, instead of having several of them spread across the country.

Mangalyaan (MARS ORBITER MISSION)

Mars Orbiter Mission is India's first interplanetary mission to planet Mars with an orbiter craft designed to orbit Mars in an elliptical orbit. The Mission is primarily technological mission considering the critical mission operations and stringent requirements on propulsion and other bus systems of spacecraft. 

Mission Objectives One of the main objectives of the first Indian mission to Mars is to develop the technologies required for design, planning, management and operations of an interplanetary mission. Following are the major objectives of the mission: A. Technological Objectives: Design and realisation of a Mars orbiter with a capability to survive and perform Earth bound manoeuvres, cruise phase of 300 days, Mars orbit insertion / capture, and on-orbit phase around Mars. Deep space communication, navigation, mission planning and management. Incorporate autonomous features to handle contingency situations. B. Scientific Objectives: Exploration of Mars surface features, morphology, mineralogy and Martian atmosphere by indigenous scientific instruments.