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DAILY CURRENT AFFAIRS, 19 DECEMBER 2023

SUSPENSION OF MPs

 

1. Context

In a major escalation of tensions between the Opposition and the government, 78 MPs were suspended from both Houses of Parliament on Monday, taking the total number of suspended MPs in this session to 92. Opposition leaders termed it a “murder of democracy”.

Those suspended include the leader of the Congress in the Lok Sabha, Adhir Ranjan Chowdhury; Dravida Munnetra Kazhagam floor leader T.R. Baalu; former Union Minister Dayanidhi Maran; and Trinamool Congress leader Saugata Roy.

In the Rajya Sabha, almost 50% of the Opposition strength has been depleted.

14 MPs were suspended — 13 from the Lok Sabha and one from the Rajya Sabha.

2. Suspension of MPs

  • It is the role and duty of the Presiding officer- Speaker of Lok Sabha and Chairman of Rajya Sabha to maintain order so that the House can function smoothly.
  • In order to ensure that proceedings are conducted in the proper manner, the Speaker/Chairman is empowered to force a member to withdraw from the House.

3. Why do MPs disrupt Parliament?

  • Over the years, the presiding officers of the legislature and political leaders have discussed and identified four broad reasons leading to disorder in the legislature.
  • One reason is the lack of time available to MPs for raising important matters; a second is the "unresponsive attitude of the government and retaliatory posture by Treasury benches".
  • The other two reasons are deliberate disruption by parties for political or publicity purposes, and the absence of prompt action against MPs disrupting parliamentary proceedings.

4. Rules under which the Presiding Officer/Chairman acts

4.1 For Loksabha

Rule number 373 of the Rules of Procedure and Conduct of Business.

  • It empowers presiding officers to direct an MP to withdraw from the house for any disorderly conduct.
  • This rule says that any Member so ordered to withdraw shall remain absent during the remainder of the day's sitting.

Rule Number 374 and 374A

  • To deal with more recalcitrant (uncooperative)
  • Rule 374 empowers the Presiding officers to name the legislators of the MP who continue disrupting the House even after repeated warnings.
  • After that, the House can move a motion to suspend the MP for a period not exceeding the remainder of the session.
  • Rule 374A was incorporated into the Rule book in December 2001. The intention was to circumvent the necessity of adopting a motion for suspension.
  • Under this rule, the speaker can name an MP, who shall then automatically stand suspended for five days or the remaining part of the session, whichever is less.
  • Provided that the House may, at any time, on a motion being made, resolve that such suspension be terminated.

4.2 For Rajya Sabha

Rule 255 of the Rule Book of Rajya Sabha

It empowers the Chairman of Rajya Sabha to direct any Member to withdraw immediately from the House for any disorderly conduct. 

Rule 256

  • This rule empowers the Chairman to name the members who persistently disregard the authority of the Chair or abuse the rules of the Council.
  • After that, the House may adopt a motion suspending the Member for a period not exceeding the remainder of the session.
  • It should be noted that, unlike Lok Sabha (under rule 374A), Rajya Sabha can not suspend its members without passing a motion for the same.

5. Can courts intervene in a matter of suspension of MPs?

  • Article 122 of the Indian Constitution says parliamentary proceedings cannot be questioned before a court.
  • In some cases, however, courts have intervened in the procedural functioning of legislatures.
  • For example, the Maharashtra Legislative Assembly passed a resolution in its 2021 Monsoon Session suspending 12 BJP MLAs for a year.
  • The matter came before the supreme court, which held that the resolution was ineffective in law beyond the remainder of the Monsoon Session.

6. What has Parliament done to address these issues?

  • The government and not Parliament decides the parliamentary calendar.
  • Therefore, the decision about the time available with Parliament for discussions rests with the government.
  • The parliamentary procedure also prioritizes government business over other debates that take place in the legislature.
  • In this regard, Parliament has not updated its rules over the last 70 years to give Opposition parties a say in deciding the agenda for discussion.
  • The stance of political parties on uninterrupted parliamentary functioning depends on whether they belong to the ruling party/coalition or are in the opposition.
  • In 2001, Lok sabha amended its rules to give the speaker more powers to discipline MPs who disrupt House proceedings.

7. What is the legal basis for setting up the special committee?

  • The House can set up a committee and decide its terms of reference. It is entirely within its power.
  • A special committee could be formed by moving a motion for the establishment of such a committee and its terms of reference.
  • The offense will have to be defined before anyone can be punished for it.
    A committee that was similar to the one that was set up to investigate the cash-for-votes scandal in 2008 could be formed to investigate and punish an MP.
  • A mechanism to look into the “moral and ethical conduct of the members” already exists in the Ethics Committee of Lok Sabha.
  • However, the BJP does not want Rahul’s case to be “one of the many issues before the committee”.
  • Instead, it wants a special committee along the lines of the one constituted to look into the cash-for-query scandal in 2005.

Previous year Question

1. Regarding the office of the Lok Sabha speaker, consider the following statements: (UPSC 2012)
1. He/She holds the office during the pleasure of the President.
2. He/She need not be a member of the House at the time of his/her election but has to become a member of the House within six months from the date of his/her election.
3. If he/she intends to resign, the letter of his/her resignation has to be addressed to the Deputy Speaker.
Which of the statements given above is/are correct?
A.  1 and 2 only                 B.  3 only                 C.  1, 2 and 3                 D. None
Answer: B
The Speaker is elected by the members of Lok Sabha from amongst its members (as soon as may be, after its first sitting).

For Prelims & Mains

For Prelims: Lok Sabha, Rajya Sabha, Speaker of Lok Sabha, Chairman of Rajya Sabha, Rule Number 373, 374, and 374A of Lok Sabha, Rule 255 and Rule 256 of the Rule Book of Rajya Sabha, Special Committee.
For Mains: 1. The Indian Constitution has provisions for holding joint session of the two houses of the Parliament. Enumerate the occasions when this would normally happen and also the occasions when it cannot, with reasons thereof. (UPSC 2017).
Source: The Indian Express

OTHER BACKWARD CLASSES

1. Context

Less than 19% of the faculty at the All India Institute of Medical Sciences in Delhi belong to the Other Backward Classes (OBCs), as against the mandated 27% reservation for the community, show data presented in the Lok Sabha recently.

The situation is worse in many other AIIMS across the country, with the institute in Jodhpur having OBC representation at less than 9%.

The data were part of a report presented by a Committee on Welfare of Other Backward Classes constituted by Parliament, on the measures undertaken to secure representation of the community and its welfare at the AIIMS

2. Lack of Representation

The report highlighted the pervasive absence of OBC representation in high-ranking managerial roles and non-teaching positions. It pointed out a substantial backlog in OBC vacancies across various institutions. For instance, at AIIMS Delhi, OBC faculty members comprise 18.98% of the total faculty, totaling 161 out of 848 members.

In AIIMS Jodhpur, the representation of OBCs is 8.91%, while in Bhubaneswar it's 12.83%, and approximately 13.7% in Raipur and Rishikesh. Bhopal stands at 19.79%, with AIIMS Patna leading at 24%.

The Health Ministry attributed this situation to the challenge of finding reserved category candidates for senior faculty positions like professor, additional professor, and associate professor. Filling senior faculty roles in specialized departments is notably difficult, as candidates often prefer offers from corporate hospitals or foreign institutions over positions at AIIMS

3. About the sub-categorization of OBCs

  • The concept of sub-categorization of OBCs involves creating sub-groups within the larger OBC category for reservation purposes.
  • Currently, OBCs are granted 27% reservation in jobs and education under the central government.
  • However, there has been a debate over the equitable distribution of these benefits among the various OBC communities.
  • Some argue that a few affluent communities within the Central List of OBCs have disproportionately secured the majority of the reservation benefits.
  • Creating sub-categories aims to ensure a fairer distribution of representation among all OBC communities.

4. The Rohini Commission's Brief

  1. To examine the extent of inequitable distribution of reservation benefits among the OBC castes or communities included in the Central List.
  2. To devise a scientific approach for sub-categorization within the OBCs, including defining the mechanism, criteria, norms, and parameters.
  3. To identify respective castes, communities, sub-castes, or synonyms in the Central List of OBCs and classify them into their respective sub-categories.
  4. To study the Central List of OBCs and rectify any repetitions, ambiguities, inconsistencies, and errors.
  • The Commission's progress has faced various challenges, including the absence of data on the population of different communities to compare their representation in jobs and education.
  • Initially, the Commission had requested an all-India survey to estimate the caste-wise population of OBCs but later decided against it.
  • Additionally, the government has remained silent on the collection of OBC data in the Census, despite demands from OBC groups.

5. The Extent of OBC Recruitment in Central Jobs

  • As part of its findings, the Commission analyzed data from the preceding five years on OBC quota-based central jobs and admissions to central higher education institutions.
  • It revealed that a disproportionate number of jobs and educational seats went to a small fraction of OBC sub-castes, with 37% of the total OBC communities having no representation in jobs and educational institutions.
  • Regarding OBC representation in central jobs, as of March 17, the data showed that 20.26% of Group A to Group C employees were OBCs.
  • However, the representation drops to 16.88% in Group A, where the reservation for OBCs is 27%.
Image Source: The Indian Express

6.Way Forward

  • Despite the challenges faced, the Commission has made significant progress, including drafting a report on sub-categorization.
  • However, the final report is yet to be submitted. The extended tenure will provide the Commission with additional time to address the complexities of OBC sub-categorization and propose measures to achieve equitable distribution of reservation benefits among all OBC communities.
For Prelims: Rohini Commission, OBCs, Central List
For Mains: 
1. Discuss the role of the government in addressing the demand for the enumeration of OBCs in the Census and its potential impact on OBC representation and welfare." (250 Words)
 
 
Previous Year Questions
 
1. Who was appointed as the head of the OBC Sub-categorisation Commission?
(Maharashtra Talathi 2019) 
A. Justice Geeta Mittal
B. Justice Manjula Chellur
C. Justice Tahilramani
D. Justice G. Rohini
 
Answer: D
 
2. Which of the following pairs of list and contents is/are correctly matched? (UPSC CAPF 2019) 
1. State list                     Public health and sanitation
2. Union list                  Citizenship, naturalisation and aliens
3. Concurrent list          Legal, medical and other
Select the correct answer using the code given below:
A. 1 only             B. 1, 2 and 3          C.  2 and 3 only            D.  3 only
 
Answer: B
 
Source: The Indian Express

mRNA

 
1. Context
COVID-19 became the first-ever pandemic during which a vaccine could be quickly developed and deployed to prevent infections and deaths. Never-before-approved mRNA vaccines were used on humans and worked. The first two vaccines to be approved and deployed with this technology were rolled out by Pfizer and Moderna within a year. However, developing these vaccines would not have been possible without Katalin Karikó and Drew Weissman, whose breakthrough research laid the template in 2005 and ensured that mRNA vaccines were safe and did not lead to excessive inflammatory immune response. Both are winners of the Nobel Prize in Medicine or Physiology, 2023
 
2. What is mRNA?
Messenger RNA (mRNA) is a type of genetic material that plays a crucial role in the process of protein synthesis within cells.
It serves as an intermediary between DNA and proteins in the cell, carrying the genetic instructions needed to build proteins from the cell's nucleus to the ribosomes in the cytoplasm, where protein synthesis occurs
Key features and functions of mRNA:
  • mRNA carries genetic information from the DNA in the cell's nucleus to the ribosomes, which are the cellular machinery responsible for assembling proteins
  • The process of creating mRNA from a DNA template is called transcription. During transcription, a specific segment of DNA is used as a template to synthesize a complementary mRNA strand.
  • The mRNA strand is synthesized in such a way that it represents a copy of the genetic information encoded in the DNA, with thymine (T) in DNA being replaced by uracil (U) in mRNA
  • mRNA consists of a series of nucleotide triplets called codons. Each codon corresponds to a specific amino acid or serves as a start or stop signal for protein synthesis.
  • There are 64 possible codons, each specifying one of the 20 different amino acids used in protein synthesis
  • Once mRNA is synthesized, it exits the nucleus and moves to the cytoplasm, where ribosomes read the codons on the mRNA strand to assemble amino acids in the correct order, forming a polypeptide chain. This chain eventually folds into a functional protein.
  • mRNA is relatively short-lived within the cell. It is synthesized when needed for protein production and is then rapidly degraded once its role in protein synthesis is complete.
  • mRNA sequences can vary among individuals and among cells within an individual. This variability allows cells to produce specific proteins in response to various signals and environmental conditions.
3.mRNA Vaccine
mRNA vaccines are a groundbreaking type of vaccine that use synthetic messenger RNA (mRNA) to trigger an immune response in the body. Unlike traditional vaccines, which often contain weakened or inactivated forms of the pathogen (such as a virus) or pieces of it (such as proteins), mRNA vaccines do not contain the pathogen itself.
Instead, they provide the body with the genetic instructions (mRNA) needed to produce a harmless piece of the pathogen, typically a protein, which then stimulates an immune response
The first mRNA vaccine to receive emergency use authorization (EUA) and widespread use was the Pfizer-BioNTech COVID-19 vaccine. It was co-developed by the American pharmaceutical company Pfizer and the German biotechnology company BioNTech. The vaccine is known as BNT162b2 or Comirnaty
3.1.Function of mRNA vaccine
  • The function of an mRNA vaccine is to stimulate an immune response in the body against a specific pathogen, such as a virus, by introducing a small piece of synthetic messenger RNA (mRNA) that encodes a harmless piece of the pathogen's protein
  • Scientists design and synthesize a short piece of mRNA in the laboratory. This synthetic mRNA contains the genetic instructions for producing a specific protein that is found on the surface of the target pathogen
  • To protect the fragile mRNA and facilitate its entry into human cells, the synthetic mRNA is encapsulated in lipid nanoparticles. These lipid nanoparticles serve as delivery vehicles for the mRNA
  • The mRNA vaccine is administered to the recipient through a standard intramuscular injection, usually into the upper arm
  • The lipid nanoparticles containing the synthetic mRNA are taken up by host cells at the injection site
  • Once inside the host cells, the synthetic mRNA is recognized by the cell's protein synthesis machinery, including ribosomes.
  • The ribosomes read the mRNA sequence and start producing the specific protein encoded by the mRNA.
  • In the case of mRNA vaccines, this protein is a piece of the pathogen (e.g., a part of the spike protein of the virus).
  • The newly produced viral protein is displayed on the surface of the host cells. This protein is harmless and cannot cause the disease itself, but it serves as a marker for the immune system.
  • The immune system of the recipient recognizes the displayed viral protein as foreign and potentially harmful. This recognition triggers a robust immune response, including the production of antibodies specific to the viral protein
4. Why does mRNA make great Medicine?
 
  • Though mRNA has existed in our biological makeup for some time, it took extensive research spanning decades for scientists to grasp how cells identify and utilize mRNA in protein synthesis. Eventually, it became evident that mRNA held significant potential as a formidable medical tool.
  • Understanding how mRNAs encode proteins enables scientists to craft protein blueprints effortlessly. These blueprints can be adjusted to suit a patient's requirements, whether by creating entirely new mRNA recipes or tweaking existing ones for slight protein variations.
  • The scalability of producing mRNA treatments lies in the capacity of scientists to generate substantial quantities of mRNA in laboratory settings.
  • Unlike conventional drugs, where each compound possesses unique chemistry requiring distinct manufacturing techniques, the process to create one mRNA remains consistent across all types. It’s akin to mastering a basic risotto recipe, allowing for endless variations once the fundamentals are understood.
  • An advantage of using mRNAs as medicinal agents is the innate ability of cells to degrade them when they're no longer necessary.
  • Given their impermanence, adjusting doses to accommodate changing patient needs is easily achievable. Many diseases stem from cells producing incorrect proteins, mutant protein versions, or insufficient normal protein levels.
  • By delivering corrected mRNA blueprints to affected cells, scientists can facilitate the production of the proper proteins.
  • Exploration into mRNA's therapeutic potential spans various ailments like heart disease, neurodegenerative conditions, bone loss, and more. While most studies remain in early developmental stages, they hold promise for future treatments utilizing mRNA in protein replacement therapies.
  • For instance, one mRNA medication stimulates new blood vessel formation, aiding in the healing of wounds in diabetic patients with poor circulation and heightened amputation risks. Another example involves using mRNAs to address propionic acidaemia, a condition where children have low levels of two liver proteins crucial in preventing the accumulation of harmful by-products in the body.
  • The ability to tailor and produce mRNA easily amplifies their potential as effective, personalized therapies with fewer side effects, offering substantial aid to many individuals
5.Challenges to mRNA technology 
  • While mRNA (messenger RNA) technology has shown great promise, especially in the development of COVID-19 vaccines, it is not without its challenges and limitations
  •  mRNA molecules are inherently fragile and can degrade easily. This necessitates stringent storage and transportation requirements at very low temperatures for some mRNA vaccines, like the Pfizer-BioNTech and Moderna COVID-19 vaccines.
  • Maintaining the "cold chain" can be logistically challenging, especially in regions with limited infrastructure.
  • The production of mRNA vaccines, particularly for novel vaccines, can be costly. This cost can impact access to these vaccines, especially in lower-income countries
  • mRNA vaccines typically have a shorter shelf-life compared to some other types of vaccines. This can pose challenges in terms of distribution and administration, particularly in regions with limited healthcare infrastructure
6. Way forward

The potential for mRNA-based medicine extends beyond vaccines to prevent infectious diseases. One example is the use of mRNA to treat cancer.

Some mRNA cancer treatments work like vaccines by training your immune system to specifically target cancer cells. As cancer cells grow, they rapidly gain mutations in many genes. Cancer vaccines contain mRNA recipes based on mutations commonly found in certain types of tumours. When injected into the body, the mRNAs from the vaccines allow normal cells to make those mutated proteins and broadcast them to the immune system, ramping up production of antibodies. These antibodies bind to cancer cells and mark them for immune attack

 
For Prelims: Current events of national and international importance.
For Mains: General Studies III: Science and Technology- developments and their applications and effects in everyday life
 
Previous Year Questions
 
1.In the context of vaccines manufactured to prevent COVID-19 pandemic,
consider the following statements : (UPSC CSE 2022)
1. The Serum Institute of India produced COVID-19 vaccine named Covishield using mRNA platform.
2. Sputnik V vaccine is manufactured using vector based platform.
3. COVAXIN is an inactivated pathogen based vaccine.
Which of the statements given above are correct ?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer (B)
 
 
Source: indianexpress

ASSAM RIFLES

 
 
1. Context:
The Assam Rifles is planning critical operational changes so that it can be deployed for conventional roles along the Line of Actual Control (LAC) in contingencies while continuing to perform its traditional counter-insurgency duties in the Northeast and guarding the India-Myanmar border
2. Assam Rifles
  • The Assam Rifles, part of the central armed police forces (CAPFs) overseen by the Ministry of Home Affairs (MHA), is among the six CAPFs, which include the Central Reserve Police Force (CRPF), Border Security Force (BSF), Indo-Tibetan Border Police (ITBP), Central Industrial Security Force (CISF), and Sashastra Seema Bal (SSB).
  • The primary responsibilities of the Assam Rifles include upholding law and order in Northeast India alongside the Indian Army and safeguarding the Indo-Myanmar border. With over 63,000 personnel distributed across 46 battalions and additional administrative and training staff, it holds the distinction of being the sole paramilitary force operating with a dual control system.
  • Although the Ministry of Home Affairs manages the force administratively, the operational command rests with the Indian Army, operating under the Ministry of Defence.
  • This unique arrangement implies that while the MHA provides financial support and infrastructure, the Army is responsible for the deployment, transfers, postings, and secondment of Assam Rifles personnel.
  • Notably, the senior leadership, including positions from Director General to Inspector General and sector headquarters, comprises Army officers.
  • The force is overseen by a Lieutenant General from the Indian Army. Functionally, the Assam Rifles operates akin to a central paramilitary force (CPMF) with operational duties and structure resembling that of the Indian Army.
  • However, under the governance of the MHA, the recruitment, benefits, promotions, and retirement policies for Assam Rifles personnel adhere to the regulations formulated for CAPFs by the Ministry of Home Affairs
3.Assam rifles history
  • The Assam Rifles holds a storied history deeply entrenched in India's military heritage. Established in 1835 as the Cachar Levy, it originated primarily for safeguarding British tea estates and effectively maintaining law and order in the region.
  • Over time, its role expanded to encompass a broader territorial expanse, especially in the Northeastern frontier of India. Initially composed of tribal warriors, the unit evolved into what was known as the Assam Military Police in 1870. Subsequently, in 1917, it was renamed the Assam Rifles.
  • During World War I, the Assam Rifles played a pivotal role in various military campaigns, earning distinctions for their valor and service. Their contributions continued through World War II, where they were actively engaged in combat operations in Burma (present-day Myanmar).
  • Post-Independence, the Assam Rifles was formally inducted into the Indian paramilitary forces, undertaking multifaceted responsibilities. Its duties expanded to include maintaining law and order in the Northeastern states, countering insurgency, and guarding the porous Indo-Myanmar border.
  • The force has faced numerous challenges and conflicts, demonstrating exceptional bravery and resilience in combating insurgencies and protecting the nation's borders. Over the years, it has modernized its equipment, tactics, and training methodologies to align with contemporary security needs.
  • The Assam Rifles' legacy is characterized by its adaptability, gallantry in combat, and unwavering dedication to serving the nation's interests in the Northeastern region and along the Indo-Myanmar border
4. What has been the contribution of Assam Rifles?
 
The Assam Rifles has made substantial contributions across various domains:
  • Guarding the porous Indo-Myanmar border, the Assam Rifles plays a crucial role in maintaining territorial integrity, preventing illegal activities, and curbing cross-border movements
  • They have been actively involved in countering insurgencies and maintaining peace in the Northeastern states, tackling various militant groups, and supporting local law enforcement agencies
  • Beyond their primary security roles, the Assam Rifles engages in community welfare activities, providing aid during natural disasters, conducting medical camps, and participating in developmental projects to foster goodwill among local communities
  • They contribute significantly to maintaining law and order in conflict-prone areas, assisting civil authorities during emergencies and unrest, ensuring the safety of civilians, and aiding in disaster relief operations
  • The force has a rich history of military service, participating in major conflicts and wars, including both World Wars, exhibiting courage and dedication in various theaters of combat
  • The Assam Rifles conducts training programs for its personnel, focusing on enhancing skills in warfare, counterinsurgency tactics, border management, and disaster response, thereby strengthening their operational capabilities

The Line of Actual Control (LAC) refers to the de facto border between India and China in the Himalayan region. Unlike a formal border, the LAC is an unofficial demarcation line that separates the areas of control between the two countries. It came into existence after the 1962 Sino-Indian War and has since been a subject of occasional disputes and tensions between the two nations.

The LAC is not clearly defined in certain areas, leading to differing perceptions of where it lies, causing occasional standoffs and disagreements. Both countries have their own interpretations of the line, resulting in occasional incursions and confrontations along this boundary.

Efforts have been made over the years to clarify and manage the LAC to prevent escalations and maintain peace in the region, but a mutually agreed and clearly demarcated line has yet to be established. This lack of a clearly defined border has been a significant point of contention between India and China, contributing to geopolitical complexities in the region.

 

For Prelims: Current events of national and international importance.

For Mains: General Studies III: Various Security forces and agencies and their mandate.

 

Previous Year Questions

1.The Line of Actual Control (LAC) separates  (Karnataka Civil Police Constable 2020)

A.India and Pakistan

B.India and Afghanistan

C.India and Nepal

D.India and China

Answer (D)

2.LAC (Line of Actual Control) is an effective border between India and ______. (SSC CHSL 2020)

A.Pakistan

B.Bhutan

C.Sri Lanka

D.China

Answer (D)

 
Source: Indianexpress

VALUE INVESTING 

 
 
 
1. Context 
 
 
Recently, Warren Buffett boiled down value investing, the strategy that has helped him amass his wealth, in one sentence.
 
 

2. About Value Investing 

 

Value investing is an investment strategy based on the fundamental principle of buying assets - be it stocks, bonds, real estate, or any other investment vehicle - at a price significantly lower than their perceived intrinsic value. The core belief is that while market prices can fluctuate significantly in the short term, over the long run, they will eventually converge towards the true underlying value of the asset.

Key Pillars of Value Investing

  • Value investors attempt to estimate an asset's intrinsic value through a thorough analysis of financial statements, economic factors, and company management. This intrinsic value represents the asset's true worth, independent of market sentiment or short-term price fluctuations.
  • The core strategy revolves around identifying assets whose current market price is significantly below their estimated intrinsic value. This presents an opportunity to purchase undervalued assets at a discount, with the potential for significant future price appreciation as the market recognizes the asset's true worth.
  • Value investors are known for their patient and disciplined approach. They understand that market prices can be irrational in the short term, but over time, fundamentals tend to prevail and intrinsic value becomes the dominant factor. This necessitates a long-term investment horizon to allow sufficient time for price convergence.

 

Benjamin Graham was often referred to as the "father of value investing," Graham authored the seminal book "The Intelligent Investor," laying the foundation for modern value investing principles.
Warren Buffett is widely considered one of the most successful investors of all time, Buffett is a staunch proponent of value investing and famously follows the philosophy of buying "undervalued businesses at a sensible price."
 
 
 
2. How Value Investors Capture Profits

Value investing thrives on the fundamental belief that an asset's market price can stray significantly from its intrinsic value. This intrinsic value represents the asset's true worth, calculated as the discounted sum of its future cash flow. Imagine a company's stock with an intrinsic value of 100 rupees per share but currently trading at 60 rupees. This discrepancy between price and true worth presents a golden opportunity for value investors.

  1. Value investors meticulously research and analyze companies, searching for those whose market price significantly underestimates their intrinsic value. In our example, they'd identify the company whose stock trades at 60 rupees despite its true worth being 100 rupees.
  2. Once an undervalued asset is identified, the investor seizes the opportunity to purchase it at a discounted price. Buying the 60-rupee stock offers the potential for significant future gains.
  3. As more investors discover the undervalued asset, the market realizes the gap between its price and its true worth. This recognition drives up the asset's price, gradually moving it towards its intrinsic value.
  4. When the market price catches up to the asset's intrinsic value (or even surpasses it), the value investor can sell their holdings at a profit. In our scenario, selling the stock once it reaches its 100-rupee intrinsic value or higher would net the investor a 40-rupee profit (or potentially even more).

The Value vs. Efficiency

  • Value investors operate under the belief that price and intrinsic value can diverge for extended periods, offering profit opportunities.
  • This stance clashes with the efficient market hypothesis, which posits that markets efficiently incorporate all relevant information into asset prices, leaving little room for value hunters to exploit.
  • Proponents of the efficient market argue that modern markets, with their rapid information flow and sophisticated algorithms, often price assets close to their intrinsic value, making it difficult to find undervalued gems.

 

3. Judging Intrinsic Value in Value Investing

 

Understanding intrinsic value is the cornerstone of value investing. However, determining this true worth and navigating the gap between price and reality can be a complex dance.

  • Intrinsic value is not a fixed number; it's an estimate based on individual interpretations of future cash flows and potential growth. This subjectivity can lead to variations in valuations, creating opportunities for contrarian investors who see value overlooked by the majority. Buying at a discount due to such mispricing can be a lucrative strategy.
  • Recognizing the inherent uncertainty in value estimation, prudent investors seek a "margin of safety." This involves investing only when the price falls significantly below their estimated intrinsic value. This buffer protects potential miscalculations and ensures profits even if the asset's value rises less than expected.
  • Market panics, fueled by fear and irrationality, can be goldmines for value investors. During such times, quality assets may be dumped at bargain prices due to panic selling. By staying calm and recognizing the inherent value, value investors can snap up these undervalued gems, waiting patiently for the market to eventually recognize their true worth.
  • While growth investors focus on companies with high growth potential, their approach still hinges on the core principle of value investing. They seek to buy stocks at a price that reflects their future value, not just their current earnings. Overpaying for even a fast-growing stock can erode potential returns, highlighting the importance of a fair valuation even in the growth domain.

 

4. The Way Forward

 

Understanding the various factors influencing an asset's intrinsic value and its market price is crucial for value investors. By carefully navigating the uncertainties of estimation, capitalizing on market inefficiencies, and employing a prudent margin of safety, they can unlock significant profit opportunities, even in volatile markets.

 

For Prelims: value investing,  intrinsic value, Benjamin Graham, The Intelligent Investor
For Mains: 
1. Discuss the challenges faced by value investors in estimating intrinsic value. What are some key techniques and methodologies they employ to overcome these challenges? How do these techniques need to adapt to the evolving information landscape? (250 Words)

 

Previous Year Questions

1. Consider the following statements: (upsc 2023)

Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable.

Statement-II: InviTs are recognized as borrowers under the 'Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002'.

Which one of the following is correct in respect of the above statements?

(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-1

(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-1

(c) Statement-1 is correct but Statement-II is incorrect

(d) Statement-I is incorrect Statement-II is correct

 

2. In the context of finance, the term ‘beta’ refers to (upsc 2023)

(a) the process of simultaneous buying and selling of an asset from different platforms

(b) an investment strategy of a portfolio manager to balance risk versus reward

(c) a type of systemic risk that arises where perfect hedging is not possible

(d) a numeric value that measures the fluctuations of a stock to changes in the overall stock market

 

3. Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with referece to India? (upsc 2022)

(a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment.

(b) A foreign company investing in Indian and paying taxes to the country of its base on the profits arising out of its investment.

(c) An Indian company purchases tangible assests in a foreign country and sells such assets after their value increases and transfers the proceeds to India.

(d) A foreign compnay transfers shares and such shares derive their substantial value from assest located in India.

 

4.  Consider the following: (upsc 2021)

  1. Foreign currency convertible bonds
  2. Foreign institutional investment with certain conditions
  3. Global depository receipts
  4. Non-resident external deposits

Which of the above can be included in Foreign Direct Investments?

(a) 1, 2 and 3 only         (b) 3 only        (c) 2 and 4 only            (d) 1 and 4 only

 

5.  Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India? (upsc 2021)

(a) Diversion of resources to the purchase of real estate and investment in luxury housing

(b) Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.

(c) Large donations of political parties and growth of regionalism

(d) Loss of revenue to the State Exchequer due to tax evasion

 

6.  With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic? (upsc 2020)

(a) It is the investment through capital instruments essentially in a listed company.

(b) It is a largely non-debt creating capital flow.

(c) It is the investment which involves debt-servicing.

(d) It is the investment made by foreign institutional investors in the Government securities.

 

7.  With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? (upsc 2020)

  1. Quantitative restrictions on imports by foreign investors are prohibited.
  2. They apply to investment measures related to trade in both goods and services.
  3. They are not concerned with the regulation of foreign investment.

Select the correct answer using the code given below:

(a) 1 and 2 only         (b) 2 only            (c) 1 and 3 only         (d) 1, 2 and 3

 

8. Which of the following is not included in the assets of a commercial bank in India? (upsc 2019)

(a) Advances        (b) Deposits         (c) Investments       (d) Money at call and short notice

 

9. ‘Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and (upsc 2017)

(a) European Union

(b) Gulf Cooperation Council

(c) Organization for Economic Cooperation and Development

(d) Shanghai Cooperation Organization

 

Answers: 1-D, 2-D, 3-D, 4-A, 5-D, 6-B, 7-C, 8-B, 9-A

Mains

1. “Investment in infrastructure is essential for more rapid and inclusive economic growth.” Discuss in the light of India’s experience. (upsc 2021)
2. Explain the meaning of investment in an economy in terms of capital formation. Discuss the factors to be considered while designing a concession agreement between a public entity and a private entity.  (upsc 2020)
3. Foreign direct investment in the defence sector is now said to be liberalized. What influence this is expected to have on Indian defence and economy in the short and long-run? (upsc 2014)
4. Though India allowed Foreign Direct Investment (FDI) in what is called multi-brand retail through the joint venture route in September 2012, the FDI, even after a year, has not picked up. Discuss the reasons. (upsc 2013)
 
 
Source: The Hindu
SHAHI IDAGH-KRISHNA JANMABHOOMI DISPUTE
 
 
 
 
1. Context 
 
 
The Shahi Idgah, a three-domed mosque in Mathura, will be surveyed following the decision of the Allahabad High Court which permitted an application seeking the appointment of a court commission to inspect the Shahi Idgah mosque that stands adjacent to the Krishna Janmabhoomi temple in Mathura.
 

2. Judicial Order for Inspection

 

  • In a recent development, Justice Mayank Kumar has pronounced an order for the inspection of Shahi Idgah Jain. The directive emphasized the need to strictly maintain the sanctity of the campus during the execution of the commission.
  • A plea for a survey was submitted on behalf of the Hindu deity Shri Krishna and seven others. The original suit, currently pending before the court, asserts that the mosque was constructed over the birthplace of Shri Krishna, allegedly on the orders of Mughal emperor Aurangzeb in 1670.
  • Following the Babri Masjid judgment in 2019, a total of nine cases related to the Shri Krishna Janmabhoomi and Shahi Idgah Masjid have been filed in the Mathura court, reflecting ongoing disputes and legal actions.
  • In a significant development earlier this year, the Allahabad High Court took a proactive step by transferring all suits pending before the Mathura Court to itself. These suits encompass various reliefs concerning the Sri Krishna Janmabhoomi-Shahi Idgah Mosque dispute, consolidating the legal proceedings under its jurisdiction.

3. Masjid's Position in Legal Dispute

 

  • The U.P. Sunni Central Waqf Board and the Shahi Idgah Masjid Committee, representing the mosque's interests, presented their arguments in the High Court.
  • They asserted that the Shahi Idgah Masjid is not situated within the specified 13.37 acres of land at Katra Keshav Dev.
  • Additionally, they contended that there is no factual basis supporting the plaintiffs' claim that the birthplace of Lord Krishna is beneath the mosque.
  • According to them, the plaintiffs' assertions are mere guesswork and lack substantiation through any documentary evidence.
  • When the Committee of Management Trust of the Shahi Idgah Masjid sought a stay on the survey by approaching the Supreme Court, the apex court declined to provide relief.
  • Justice Sanjiv Khanna, presiding over a two-judge Bench, informed the mosque's advocate Huzefa Ahmadi that no stay would be granted at that stage.
  • The court encouraged the continuation of the survey process, with the option for the mosque to challenge any adverse order in the future.

 

4. What does the Places of Worship Act say? 

 

  • As the survey's details are being finalized, the mosque committee is citing the Places of Worship (Special Provisions) Act, 1991. According to this act, changing the character of any place of worship as it existed on August 15, 1947, is prohibited. The committee asserts that this legislation safeguards the status quo of religious places.
  • In 2020, the Vishwa Bhadra Pujari Purohit Mahasangh from Lucknow filed a petition in the Supreme Court challenging Section 4 of the 1991 Act. The petition argued that the Act infringes upon the rights of Hindus to protect their religious properties against encroachment by followers of another faith. The objective was to declare Section 4 as ultra vires.
  • The Jamiat Ulama-i-Hind countered the legal challenge by asserting that the Places of Worship Act prohibits the conversion of any place of worship, and its provisions are forward-looking. They argued that the Act aims to prevent future changes to the status of religious places and is consistent with the principles of secularism.
  • Referring to the M. Siddiq versus Suresh Das case, commonly known as the Babri Masjid-Ramjanmabhoomi verdict, the Supreme Court upheld the significance of the Places of Worship Act. The court emphasized that the Act imposes a non-derogable obligation to enforce the commitment to secularism as outlined in the Constitution.
 
 

5. Historical Background of the Land

 

  • The current survey stems from the Hindu representatives' demand for complete ownership of the land where the Keshava Deva temple once stood. The temple, initially built in 1618 during the reign of Jahangir by Bir Singh Bundela, was later destroyed on the orders of Mughal emperor Aurangzeb in 1670. Interestingly, the temple had received patronage from Aurangzeb's brother and rival, Dara Shukoh.
  • In 1815, Raja Patni Mal of Benaras purchased the 13.77-acre land from the East India Company. Subsequently, his descendants sold the land to Jugal Kishore Birla for ₹13,400. Jugal Kishore Birla established the Shri Krishna Janmabhoomi Trust, gaining ownership rights over the temple and the land.
  • In 1951, the 13.77-acre land was officially placed under the Shri Krishna Janmabhoomi Trust. A critical condition was imposed on the trust, ensuring that the trust property would never be sold or pledged.
  • In 1968, an agreement was forged between the Sri Krishna Janmasthan Seva Sangh and the Shahi Idgah Masjid Trust. As part of this settlement, the temple authority conceded a portion of the land to the Idgah. The agreement established a historical arrangement between the temple and the mosque. However, the current dispute arises as the temple petitioners now seek possession of the entire parcel of land, leading to the survey and legal proceedings.
 
 
For Prelims: Shahi Idgah mosque, Krishna Janmabhoomi temple, Babri Masjid judgment, the Places of Worship (Special Provisions) Act, 1991
For Mains: 
1. Discuss the role of the judiciary in resolving religious disputes in India. To what extent can the legal system balance the competing claims of different communities while upholding the principles of secularism and justice? (250 Words)
 
 
Previous Year Questions
 
1. The dispute relating to the Babri Masjid/Ramjanambhoomi before the Allahabad High Court (Lucknow Bench) is in the nature of a (45th BPSC Prelims 2002)
A. Writ Petition        B. Title Suit   C. Claim for Compensation        D. Judicial Review Petition 
 

2. Consider the following statements: (upsc 2020)

  1. The Constitution of India defines its ‘basic structure’ in terms of federalism, secularism, fundamental rights and democracy.
  2. The Constitution of India provides for ‘judicial review’ to safeguard the citizens’ liberties and to preserve the ideals on which the Constitution is based.

Which of the statements given above is/are correct?

(a) 1 only   (b) 2 only      (c) Both 1 and 2            (d) Neither 1 nor 2

Answers: 1-B, 2-D

Mains
 
1. What are the challenges to our cultural practices in the name of Secularism? (upsc 2019)
2. How the Indian concept of secularism is different from the Western model of secularism? Discuss. (upsc 2018)
 
Source: The Hindu 
 

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