PREVENTION OF MONEY LAUNDERING ACT (PMLA)
1. Context
A Special PMLA (Prevention of Money Laundering Act) Court in Ranchi on Thursday rejected the petition of former Jharkhand Chief Minister Hemant Soren to attend the upcoming budget session of the Assembly beginning on Friday.
PMLA Court judge Rajeev Ranjan rejected his plea to allow the Jharkhand Mukti Morcha (JMM) leader to be present in the House.
2. Why is the PMLA verdict under review?
Specific Concerns
- The PMLA's retrospective application, allowing for the prosecution of offences committed before the law's enactment, has been challenged as violative of the fundamental right against ex post facto laws.
- The PMLA places the burden of proof on the accused to establish innocence, a departure from the general principle of criminal law that presumes innocence until proven guilty.
- Critics argue that the PMLA's provisions are overly broad and draconian, giving the ED excessive powers to arrest, detain, and seize assets without adequate judicial oversight.
- The PMLA's lack of adequate safeguards against arbitrary actions and misuse of power has raised concerns about the potential for abuse of authority by the ED.
- The PMLA's provisions have been criticized for potentially infringing upon fundamental rights such as the right to personal liberty, the right to property, and the right against self-incrimination.
3. Money laundering
- Money laundering is the illegal process of making large amounts of money.
- This money is generated by criminal activity but may appear to come from a legitimate source.
- Criminal activities include drug trafficking, terrorist funding, illegal arms sales, smuggling, prostitution rings, insider trading, bribery and computer fraud schemes that produce large profits.
3.1. Different stages in money laundering
- Placement: The crime money is injected into the formal financial system.
- Layering: Money injected into the system is layered and spread over various transactions and book-keeping tricks to hide the source of origin.
- Integration: Laundered money is withdrawn from the legitimate account to be used for criminal purposes. Now, Money enters the financial system in such a way that the original association with the crime is disassociated. The money now can be used by the offender as legitimate money.
3.2. Impact of Money Laundering on Economic Development
Money laundering can have a significant impact on economic development by:
- When money laundering occurs, it can undermine public confidence in banks and other financial institutions. This can lead to increased risk aversion and a decline in investment, which can hamper economic growth.
- Money laundering can distort economic activity by directing funds away from legitimate businesses and into criminal enterprises. This can lead to inefficient allocation of resources and slower economic growth.
- Money laundering can facilitate corruption by providing a means to conceal the proceeds of corrupt activities. This can weaken governance and undermine the rule of law, further hindering economic development.
- Money laundering can also lead to a loss of tax revenue, as criminals seek to evade taxes on their illicit gains. This can deprive governments of much-needed funds for essential services, such as education and healthcare.
- Money laundering is often used to finance organized crime groups, which can lead to an increase in violence and instability.
- Money laundering can also be used to finance terrorist activities, posing a serious threat to international security.
- Money laundering can also have a direct impact on individuals and businesses, who may lose money or be victims of fraud as a result of this crime.
4. Prevention of Money-Laundering Act, 2002 (PMLA)
The Prevention of Money-Laundering Act, 2002 (PMLA) is a comprehensive legislation enacted by the Indian Parliament to combat money laundering and other financial crimes. It aims to prevent the use of proceeds of crime, particularly those derived from drug trafficking, organized crime and corruption, from being laundered and utilized to finance further criminal activities or to gain legitimacy.
4.1. Key Features of the PMLA
- The PMLA prohibits the process of money laundering, defined as the act of concealing or disguising the proceeds of crime.
- The PMLA empowers the Enforcement Directorate (ED), the designated agency for investigating money laundering cases, to attach and seize property derived from or involved in money laundering.
- The PMLA provides for the confiscation of property that is involved in money laundering, even if it is not in the possession of the accused person.
- The PMLA grants the ED extensive powers to conduct searches, make arrests, and detain individuals suspected of money laundering.
- The PMLA facilitates international cooperation in combating money laundering through mutual legal assistance treaties and other mechanisms.
4.2. Significance of the PMLA
The PMLA has played a crucial role in strengthening India's anti-money laundering framework and enhancing its global standing in combating financial crimes. It has enabled the investigation and prosecution of numerous money laundering cases, leading to the recovery of substantial illicit funds.
4.3. Challenges in Implementing the PMLA
Despite its significance, the implementation of the PMLA has faced certain challenges, including:
- The PMLA and other laws, such as the Narcotics Drugs and Psychotropic Substances Act, have overlapping jurisdictions, which can lead to confusion and delays in investigations.
- There have been concerns about the lack of adequate safeguards against arbitrary actions and misuse of power under the PMLA.
- The ED faces resource constraints in terms of manpower and infrastructure, which can hamper its ability to effectively investigate and prosecute money laundering cases.
5.1. Functions and Roles of ED
- Money Laundering Investigations: The ED investigates cases involving money laundering, which is the process of concealing the origins of illegally obtained money to make it appear legitimate. It identifies and seizes properties and assets derived from illicit activities and prevents their further use.
- Foreign Exchange Violations: The ED is responsible for investigating cases related to violations of foreign exchange laws and regulations. It monitors and controls foreign exchange transactions to maintain the stability of the Indian rupee and prevent illegal activities such as smuggling and illegal money transfers.
- Financial Frauds: The ED also investigates and takes action against financial frauds, including bank frauds, Ponzi schemes, and other fraudulent activities affecting the Indian financial system. It works closely with other law enforcement agencies, such as the Central Bureau of Investigation (CBI), to tackle complex financial crimes.
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For Prelims: Prevention of Money Laundering Act, ED, CBI, Foreign Exchange Management Act,
For Mains:
1. Critically evaluate the Prevention of Money Laundering Act, 2002 (PMLA) in its effectiveness in combating money laundering in India. (250 Words)
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Previous Year Questions
1. Which one of the following is not correct in respect of Directorate of Enforcement? (CDS 2021)
A. It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance.
B. It enforces the Foreign Exchange Management Act, 1999.
C. It enforces the Prevention of Money Laundering Act, 2002.
D. It enforces the Prohibition of Benami Property Transaction Act, 1988.
2. The Prevention of Money Laundering Act, 2002 become effective since which one of the following dates? (UKPSC RO/ARO 2012)
A. July 2002 B. August 2003 C. July 2004 D. July 2005
3. FEMA (Foreign Exchange Management Act) was finally implemented in the year (UPPSC 2013)
A. 1991 B. 1997 C. 2000 D. 2007
4. The Foreign Exchange Regulation Act was replaced by the ______ in India. (SSC Steno 2020)
A. Foreign Exchange Currency Act
B. Foreign Exchange Finances Act
C. Foreign Exchange Funds Act
D. Foreign Exchange Management Act
5. "Central Bureau of Intelligence and Investigation" is listed in the __________ list given in the Seventh Schedule of the Constitution of India. (SSC CGL 2017)
A. Union B. State C. Global D. Concurrent
Answers: 1-D, 2-D, 3-C, 4-D, 5-A
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WILDLIFE PROTECTION ACT 1972
The Wildlife (Protection) Act of 1972 serves as a legal framework aimed at safeguarding various species of wild animals and plants, managing their habitats, and regulating and controlling trade in wildlife and wildlife products. It plays a crucial role in conservation efforts and biodiversity preservation in India.
Key Provisions
- The Act categorizes species into different schedules based on their conservation status, providing varying degrees of protection and monitoring by the government.
- India's accession to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) was facilitated by the Wildlife Act.
- The Act now extends to Jammu and Kashmir following the reorganization act.
Constitutional Framework
- The 42nd Amendment Act, 1976, transferred Forests and Protection of Wild Animals and Birds from the State to the Concurrent List.
- Article 51 A (g) mandates citizens to protect and improve the natural environment, including forests and wildlife.
- Article 48 A in the Directive Principles of State Policy emphasizes the state's duty to protect and improve the environment, safeguarding forests, and wildlife.
Schedules under the Act
- Schedule I: Encompasses endangered species requiring stringent protection, with severe penalties for violations. Hunting is prohibited except in cases of threat to human life or incurable disease.
- Schedule II: Includes species accorded high protection with trade prohibition.
- Schedule III & IV: Lists non-endangered species with hunting prohibition, but with lesser penalties compared to Schedules I and II.
- Schedule V: Contains vermin species that can be hunted, comprising Common Crows, Fruit Bats, Rats, and Mice.
- Schedule VI: Regulates the cultivation and trade of specified plants, requiring prior permission for cultivation, possession, sale, and transportation.
Examples of Protected Species
- Schedule I: Black Buck, Snow Leopard, Himalayan Bear, Asiatic Cheetah.
- Schedule II: Assamese Macaque, Himalayan Black Bear, Indian Cobra.
- Schedule III & IV: Chital (spotted deer), Bharal (blue sheep), Hyena, Sambhar (deer).
- Schedule V: Common Crows, Fruit Bats, Rats, Mice.
- Schedule VI: Beddomes’ cycad, Blue Vanda, Red Vanda, Kuth, Slipper orchids, Pitcher plant.
3. Initiatives and Challenges under the Wildlife (Protection) Act, 1972
Initiatives for Wildlife Development
- Project Tiger Conservation Launched in 1973, Project Tiger aims to conserve the tiger population with ongoing support from the Ministry of Environment, Forest, and Climate Change.
- Project Elephant Established in 1992, Project Elephant focuses on the protection and conservation of elephants.
- Wildlife Corridors These corridors, connecting protected areas, facilitate the movement of wildlife. India is planning its first urban wildlife corridor between New Delhi and Haryana to ensure safe passage for animals like leopards.
Challenges in Implementation
- Despite the Act's existence for over 50 years, many are still unaware of wildlife conservation's significance and the associated laws.
- Increasing human populations and encroachment into wildlife habitats result in heightened conflicts, often leading to illegal killing of wildlife.
- Despite stringent laws, India faces a significant challenge from poaching and illegal wildlife trade.
- Inadequate coordination between the forest department and other agencies hampers effective enforcement of the Act.
- Existing penalties for wildlife crimes may not serve as sufficient deterrents due to their low fines and sentences.
- Local community involvement is essential for successful conservation efforts, but it's often lacking.
- Climate Change poses a significant threat to wildlife habitats, necessitating consideration within the Act to mitigate its impacts.
Demand to amend section on hunting
Demand to declare wild boar as vermin
- Kerala is urging the Central Government to designate wild boar as vermin under Section 62 of the Wildlife Protection Act.
- This provision allows the Union Government to categorize any wild animal listed in Schedule II of the Act, which typically safeguards them from hunting, as vermin for a specified duration in a particular area or state.
- The declaration of an animal as vermin is warranted when it presents a significant threat to human life and agricultural crops.
- By attaining vermin status, wild boars would no longer be shielded from hunting regulations. This would empower both the state authorities and citizens to manage the wild boar population through culling measures, thereby safeguarding lives and livelihoods from the adverse impacts posed by this species.
- Kerala is grappling with an intensifying crisis of human-animal conflict, which has surged in recent years, posing grave risks to both lives and the state's agriculture. The situation reached a critical juncture when a radio-collared wild elephant intruded into a village in Wayanad, chasing villagers and tragically resulting in a fatal trampling incident.
- Government statistics from the period of 2022-23 revealed a stark reality: there were 8,873 reported incidents of wild animal attacks, with wild elephants accounting for 4,193, wild boars for 1,524, tigers for 193, leopards for 244, and bison for 32.
- Among these attacks, 27 fatalities were attributed to elephant encounters. Additionally, between 2017 and 2023, 20,957 instances of crop damage were recorded due to raids by wild animals, claiming the lives of 1,559 domestic animals, predominantly cattle.
- Wild boars, notorious for ravaging farmlands, stand out as particularly problematic. Despite previous appeals to declare them as vermin being rejected by the Centre, Kerala took a proactive step in 2022 by empowering local self-governing bodies to deploy licensed shooters to address wild boar incursions into agricultural areas and human settlements.
- However, this measure proved insufficient due to a lack of licensed shooters in villages and cumbersome procedures involving the forest department following each killing.
- Consequently, the state is once again advocating for wild boars to be declared as vermin. Such a designation would grant villagers the authority to manage the menace independently, circumventing the bureaucratic hurdles that have hindered effective mitigation efforts thus far.
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For Prelims: World life Protection Act, Climate Change, human-Animal Conflict, Article 48 A, Article 51 A
For Mains:
1. Critically examine the effectiveness of the Wildlife Protection Act (WPA), 1972, in addressing the increasing cases of human-animal conflict in India. (250 Words)
2. Discuss the potential economic benefits of ecotourism and sustainable wildlife management practices in India. (250 Words)
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Previous Year Questions
1. If a particular plant species is placed under Schedule VI of the Wildlife Protection Act, 1972, what is the implication? (UPSC 2020) (a) A licence is required to cultivate that plant. Answer: A |
MONETARY POLICY COMMITTEE (MPC)
Monetary policy refers to the actions and strategies undertaken by a country's central bank to control and regulate the supply of money, credit availability, and interest rates in an economy. Its primary goal is to achieve specific economic objectives, such as price stability, full employment, and sustainable economic growth.
Central banks use various tools to implement monetary policy, including:
Interest Rates: Adjusting the interest rates at which banks lend to each other (known as the federal funds rate in the United States) influences borrowing and spending in the economy.
Open Market Operations: Buying or selling government securities in the open market to regulate the money supply. When a central bank buys securities, it injects money into the system, and when it sells them, it reduces the money supply.
Reserve Requirements: Mandating the amount of reserves banks must hold, affecting their ability to lend money.
By influencing the availability and cost of money, central banks aim to stabilize prices, control inflation, encourage or discourage borrowing and spending, and promote economic growth. However, the effectiveness of monetary policy can be influenced by various factors such as global economic conditions, fiscal policies, and market expectations.
3.What is the primary objective of the monetary policy?
The primary objective of monetary policy typically revolves around maintaining price stability or controlling inflation within an economy. Central banks often set an inflation target, aiming to keep it at a moderate and steady level. Stable prices help in fostering confidence in the economy, encouraging investment, and ensuring that the value of money remains relatively constant over time.
However, while controlling inflation is often the primary goal, central banks might also consider other objectives, such as:
Full Employment: Some central banks have a secondary objective of supporting maximum employment or reducing unemployment rates.
Economic Growth: Encouraging sustainable economic growth by managing interest rates and credit availability to stimulate or cool down economic activity.
Exchange Rate Stability: In some cases, maintaining stable exchange rates might be an important consideration, especially for countries with open economies heavily reliant on international trade.
These additional objectives can vary depending on the economic conditions, priorities of the government, and the central bank's mandate. Nonetheless, ensuring price stability is typically the fundamental goal of most monetary policies, as it forms the basis for a healthy and growing economy.
4. Monetary Policy Committee (MPC)
- In line with the amended RBI Act, 1934, Section 45ZB grants authority to the central government to establish a six-member Monetary Policy Committee (MPC) responsible for determining the policy interest rate aimed at achieving the inflation target.
- The inaugural MPC was formed on September 29, 2016. Section 45ZB stipulates that "the Monetary Policy Committee will ascertain the Policy Rate necessary to meet the inflation target" and that "the decisions made by the Monetary Policy Committee will be obligatory for the Bank."
- According to Section 45ZB, the MPC comprises the RBI Governor as the ex officio chairperson, the Deputy Governor overseeing monetary policy, a Bank official nominated by the Central Board, and three individuals appointed by the central government.
- The individuals chosen by the central government must possess "capabilities, ethical standing, expertise, and experience in economics, banking, finance, or monetary policy" (Section 45ZC)
- The Monetary Policy Committee (MPC) plays a crucial role in managing inflation through its decisions on the policy interest rate.
- When inflation is too high, the MPC might decide to increase the policy interest rate. This action aims to make borrowing more expensive, which can reduce spending and investment in the economy.
- As a result, it could help decrease demand for goods and services, potentially curbing inflation.
- Conversely, when inflation is too low or the economy needs a boost, the MPC might decrease the policy interest rate.
- This move makes borrowing cheaper, encouraging businesses and individuals to spend and invest more, thus stimulating economic activity and potentially raising inflation closer to the target level.
- The MPC's goal is to use the policy interest rate as a tool to steer inflation toward a target set by the government or central bank.
- By monitoring economic indicators and assessing the current and expected inflation levels, the MPC makes informed decisions to maintain price stability within the economy
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For Prelims: Economic and Social Development
For Mains: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
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Previous Year Questions
1. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
2. Concerning the Indian economy, consider the following: (UPSC 2015)
Which of the above is/are component(s) of Monetary Policy? (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4 Answer: C 3. An increase in Bank Rate generally indicates: (UPSC 2013) (a) Market rate of interest is likely to fall. (b) Central bank is no longer making loans to commercial banks. (c) Central bank is following an easy money policy. (d) Central bank is following a tight money policy. Answer: (d) 4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 1. It decides the RBI's benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. Select the correct answer using the code given below: A. 1 only B. 1 and 2 only C. 3 only D. 2 and 3 only Answer: A |
RAISINA DIALOGUE 2024
- The Raisina Dialogue is an annual event focusing on geopolitics and geoeconomics, seeking to tackle the world's most pressing challenges. Held in New Delhi, the conference attracts participants from political, business, media, and civil society spheres.
- Described as a multi-stakeholder and cross-sectoral discussion, the Dialogue brings together heads of state, cabinet ministers, and local government officials.
- Additionally, thought leaders from the private sector, media, and academia actively participate in the event. The conference is organized by the Observer Research Foundation, a think tank based in Delhi, in collaboration with the Ministry of External Affairs
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Observer Research Foundation
The Observer Research Foundation (ORF) is a non-partisan, independent think tank based in India. It was founded in 1990 with the aim of conducting in-depth research, providing inclusive platforms, and investing in tomorrow's thought leaders today
ORF's mandate is to help discover and inform India's choices, and to carry Indian voices and ideas to forums shaping global debates. It provides non-partisan, independent analyses and inputs on matters of security, strategy, economy, development, energy, resources and global governance to diverse decision-makers (governments, business communities, academia, civil society). ORF has a team of researchers, analysts, and experts who conduct research on a wide range of issues. It also has a number of centers and programs that focus on specific areas, such as the Centre for Security, Strategy & Technology, the Centre for New Economic Diplomacy, and the Neighbourhood Studies Centre |
- he Raisina Dialogue, initiated in 2016, is a relatively recent but rapidly established annual conference in the field of international relations. It is organized by the Observer Research Foundation (ORF), a think tank based in New Delhi, India. The conference is held in partnership with the Ministry of External Affairs of India.
- The Raisina Dialogue has gained prominence as a significant platform for global leaders, policymakers, intellectuals, and experts to engage in discussions on key issues related to geopolitics and geoeconomics.
- It provides a forum for diverse stakeholders, including heads of state, cabinet ministers, local government officials, business leaders, media representatives, and academics, to exchange ideas and perspectives on the pressing challenges facing the world.
- Over the years, the Raisina Dialogue has grown in scale and influence, attracting participants from around the globe.
- Its multi-stakeholder and cross-sectoral approach contributes to the richness of the discussions, making it a valuable event for fostering international cooperation and understanding.
- The conference has become an integral part of the global diplomatic calendar, facilitating dialogue and collaboration on a wide range of issues affecting the international community
- The conference brings together a diverse array of participants, including heads of state, cabinet ministers, government officials, business leaders, academics, and media professionals. This high-level participation enhances the quality and impact of the discussions.
- The Raisina Dialogue is structured as a multi-stakeholder and cross-sectoral discussion. This inclusive approach allows for a comprehensive exploration of global challenges, bringing together perspectives from various sectors and fostering a more holistic understanding of complex issues
- With its primary focus on geopolitics and geoeconomics, the Raisina Dialogue addresses critical issues that have a significant impact on the global political and economic landscape. This ensures that the discussions are relevant and contribute to shaping policies and strategies.
- Being hosted in New Delhi, India, the conference provides a platform for discussions that reflect the perspectives of the South Asian region. The geopolitical significance of India adds a unique dimension to the dialogue, making it an important forum for understanding and addressing regional and global challenges
- The Raisina Dialogue serves as a diplomatic platform where leaders and policymakers can engage in candid and open discussions. It provides an opportunity for countries to express their views, build understanding, and explore avenues for cooperation, potentially contributing to conflict resolution and international collaboration
- Organized by the Observer Research Foundation, the conference benefits from the insights and expertise of a leading think tank. This ensures that the discussions are well-informed, research-driven, and contribute to shaping policy discourse
- Over the years, the Raisina Dialogue has gained recognition and increased global influence. Its growing importance is evident from the expanding participation of countries, organizations, and thought leaders, making it a key event in the international diplomatic calendar.
More than 2,500 participants from around 115 countries will be joining the conference in person. The Dialogue is expected to be viewed by millions across the world on various digital platforms.
The participants include ministers, former prime ministers and presidents, military commanders, technology leaders, academics, journalists, scholars on strategic affairs, and experts from leading think tanks
Source: Indianexpress
FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)
The Enforcement Directorate (ED) has issued a fresh look out circular (LOC) against edutech entrepreneur Byju Raveendran in an alleged violation of the Foreign Exchange Management Act (FEMA) amounting to ₹9,362.35 crore.
In November last year, the FEMA Adjudicating Authority had issued show-cause notices to Think & Learn Private Limited, which runs Byju’s, and Mr. Raveendran.
2.Foreign Exchange Management Act(FEMA)
The Foreign Exchange Management Act (FEMA) is an important piece of legislation in India that governs foreign exchange and payments.
Here is an overview of FEMA and its history:
FEMA replaced the Foreign Exchange Regulation Act (FERA) of 1973. FERA was considered stringent and primarily aimed at controlling and regulating foreign exchange in India. However, it was felt that the economic environment required a more liberalized and contemporary approach
FEMA was introduced in 1999 to replace FERA, aligning with the economic reforms and liberalization measures undertaken by the Indian government in the early 1990s. The primary objective was to promote external trade and payments and to facilitate foreign investment in India.
3.Key Features of FEMA
- FEMA brought about a more liberalized approach compared to its predecessor. It aimed to simplify and rationalize foreign exchange management, making it more conducive for foreign trade and investment
- FEMA distinguishes between current account transactions (related to trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements)
- FEMA provides a comprehensive regulatory framework for foreign exchange transactions and seeks to manage and regulate various aspects, including dealings in foreign exchange, export and import of currency, and opening and maintenance of foreign currency accounts
- The act empowers the Reserve Bank of India (RBI) to regulate foreign exchange transactions. It also prescribes penalties for contravention of its provisions to ensure compliance.
- FEMA establishes adjudicating authorities to hear cases related to violations. It also provides for the establishment of the Foreign Exchange Appellate Tribunal to hear appeals against the orders of the adjudicating authorities
- Since its enactment, FEMA has undergone several amendments to keep pace with changing economic scenarios and to address emerging challenges. Amendments have been made to enhance regulatory measures, facilitate ease of doing business, and align with international best practices
- One of the primary objectives of FEMA is to liberalize and facilitate foreign exchange transactions. It aims to simplify procedures and create a conducive environment for foreign trade and investment
- FEMA seeks to promote external trade and payments by providing a regulatory framework that governs the flow of foreign exchange in and out of the country. This includes facilitating imports and exports of goods and services
- FEMA is designed to encourage foreign direct investment (FDI) and foreign portfolio investment (FPI) by providing a transparent and predictable regulatory environment. The act lays down the rules and regulations governing the acquisition and transfer of immovable property by non-residents
- FEMA empowers the Reserve Bank of India (RBI) to manage and regulate the country's foreign exchange reserves effectively. This involves maintaining stability in the foreign exchange market and ensuring the availability of adequate reserves to meet external obligations
- FEMA distinguishes between current account transactions (related to day-to-day trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements). This helps in applying appropriate regulations to different types of transactions
- The act aims to establish a robust adjudication and enforcement mechanism to ensure compliance with its provisions. It provides for penalties and adjudicating authorities to address violations and maintain the integrity of the foreign exchange management system
- FEMA is designed to align with international best practices in the field of foreign exchange management. This alignment is essential for integrating India into the global economy and ensuring compatibility with international norms and standards
- The act allows for amendments to be made to its provisions to adapt to changing economic conditions and emerging challenges. This ensures that the regulatory framework remains relevant and effective in a dynamic global economic environment.
The Foreign Exchange Management Act (FEMA) in India has a wide applicability, covering various individuals, entities, and transactions involved in foreign exchange dealings. Here's a breakdown of its applicability:
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Residents and Non-Residents: FEMA applies to both residents and non-residents of India. Residents are individuals or entities ordinarily resident in India, while non-residents are those residing outside India.
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Indian Entities: Indian entities, including companies, partnerships, trusts, and other forms of organizations, are subject to FEMA regulations concerning foreign exchange transactions.
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Foreign Entities: Foreign entities, including companies, branches, subsidiaries, and other organizations, are also subject to FEMA regulations when conducting transactions involving Indian currency or assets in India.
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Foreign Exchange Transactions: FEMA governs various foreign exchange transactions, including the acquisition and transfer of foreign exchange, remittances, import and export of goods and services, external commercial borrowings, and investments in India by non-residents.
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Current and Capital Account Transactions: FEMA distinguishes between current account transactions and capital account transactions. Current account transactions include day-to-day trade in goods and services, while capital account transactions involve long-term investments and capital movements. FEMA applies different regulations to these types of transactions.
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Authorized Persons: FEMA designates certain individuals and entities as authorized persons, such as authorized dealers, authorized banks, and other financial institutions. These authorized persons play a crucial role in facilitating foreign exchange transactions and are responsible for complying with FEMA regulations.
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Regulatory Authorities: The Reserve Bank of India (RBI) is the primary regulatory authority responsible for administering FEMA and enforcing its provisions. The RBI issues regulations, notifications, and guidelines to ensure compliance with FEMA requirements.
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Penalties and Enforcement: FEMA establishes penalties for contravention of its provisions, including fines, confiscation of assets, and imprisonment. Adjudicating authorities and appellate tribunals are designated to hear cases related to violations and enforce compliance with FEMA regulations.
| Category | Description | Examples |
|---|---|---|
| Authorized Dealers (ADs) | Broadest category, authorized for a wide range of forex transactions. | State banks, commercial banks, co-operative banks, foreign banks. |
| Full-Fledged Money Changers (FFMCs) | Authorized to buy and sell foreign currency notes, travelers' cheques and foreign currency instruments. | Money exchange companies, authorized hotels. |
| Authorised Money Changers (AMCs) | Limited scope compared to FFMCs, can only buy and sell foreign currency notes and travelers' cheques. | Small money exchange booths, airport counters. |
| Authorized Banks | Specific banks authorized for limited forex transactions, like specific export-import transactions. | Export houses, financial institutions engaged in specific foreign exchange activities. |
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Previous Year Questions
1.Which one of the following groups of items is included in India’s foreign-exchange reserves? (UPSC CSE 2013) (a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries Answer: (b) Mains
1.Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (2021) |
BLUE CORNER NOTICE
Interpol releases seven distinct types of notices, including the Red Notice, Yellow Notice, Blue Notice, Black Notice, Green Notice, Orange Notice, and Purple Notice.
A Blue Corner Notice, also recognized as an "enquiry notice," enables law enforcement agencies in member states to exchange crucial crime-related details. This includes accessing an individual's criminal record, determining their location, and verifying their identity, among other relevant information. For example, in January 2020, Interpol issued a Blue Corner Notice to aid in locating the fugitive self-styled godman Nithyananda
3.How does it differ from a “red corner” notice?
- A member state can issue a red corner notice to apprehend a sought-after criminal, either through extradition or other lawful means.
- These notices are directed at individuals wanted by their respective national jurisdictions for either facing prosecution or serving a sentence, as indicated by an arrest warrant or court decision.
- It's important to note that the requesting country need not be the fugitive's home country; Interpol operates based on requests from countries where the alleged crime occurred.
- Unlike blue corner notices, which precede the filing of criminal charges, red corner notices typically follow criminal convictions.
- The person in question can be detained and arrested while traveling through a member state, and there may be additional adverse consequences such as the freezing of bank accounts.
- However, it's crucial to understand that Interpol lacks the authority to compel law enforcement in any country to arrest the subject of a red corner notice, as the exercise of such powers is entirely discretionary.
- In 2018, a red corner notice was issued against the elusive billionaire Nirav Modi in connection with the Punjab National Bank scam.
- However, in October 2022, Interpol declined a second request from India to issue such a notice for Gurpatwant Singh Pannun, identified by the Union Ministry of Home Affairs as a "terrorist."
- The agency cited insufficient information from India and highlighted the "clear political dimension" of Pannun's activities as reasons for the rejection
- While Interpol's Constitution explicitly prohibits engaging in activities of a political nature, critics argue that the organization has been lax in enforcing this prohibition.
- A significant portion of this criticism is directed at Russia, which has frequently issued notices and alerts for the arrest of individuals opposing the Kremlin. According to Freedom House, a U.S. rights organization, Russia is accountable for 38% of all publicly disclosed red notices.
- Various international human rights organizations, including those from China, Iran, Turkey, and Tunisia, have faced allegations of exploiting Interpol's notice system to serve authoritarian agendas.
- Responding to the growing censure, Interpol has strengthened oversight of its red notice system. However, concerns persist, especially regarding the issuance of blue notices, with experts noting that these notices are less likely to undergo thorough review before being made public. Interpol's data reveals a nearly twofold increase in the number of blue notices over the last decade.
- Countries like Turkey contend that exercising restraint in issuing notices hinders police cooperation and argue that external interference, particularly from the West, should not impede their internal affairs
PURCHASING MANAGERS INDEX (PMI)
- PMI is typically calculated through surveys of purchasing managers in various industries. These managers are asked about their perception of different aspects of business activity, including new orders, production levels, employment, supplier deliveries, and inventories.
- PMI is usually reported as a number between 0 and 100.
- A PMI value above 50 generally indicates expansion in the sector, while a value below 50 suggests contraction. The farther the PMI is from 50, the stronger the perceived expansion or contraction.
- PMI is considered a leading indicator because it provides insights into economic conditions before official economic data, such as GDP growth or employment figures, are released. It can be used to anticipate changes in economic activity.
- PMIs are calculated separately for manufacturing and services sectors. A Manufacturing PMI focuses on the manufacturing sector, while a Services PMI provides insights into the services sector. These sector-specific PMIs can give a more detailed view of the economy.
Components: PMI is composed of several components, including:
- New Orders: This component measures the number of new orders received by businesses. An increase in new orders often signals growing demand and economic expansion.
- Production: This component reflects changes in production levels. An increase suggests increased economic activity.
- Employment: The employment component indicates changes in the level of employment within the sector. An increase typically means job growth.
- Supplier Deliveries: This measures the speed at which suppliers can deliver materials. Slower deliveries may indicate supply chain issues or increased demand.
- Inventories: Inventory levels can be an indicator of expected demand. A decrease in inventories might suggest an expectation of rising demand.
- The Purchasing Managers' Index (PMI) is a significant economic indicator with several important implications and uses
- PMI serves as a barometer of the economic health of a country or region. A PMI above 50 generally indicates economic expansion, while a PMI below 50 suggests contraction.
- This provides a quick and easily understandable snapshot of the direction of economic activity, making it a valuable tool for assessing the overall economic climate.
- PMI is a leading indicator, meaning it often provides insights into economic conditions ahead of other official economic data, such as GDP growth or employment figures. As such, it is used by businesses, investors, and policymakers to anticipate changes in economic activity and make informed decisions
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Previous Year Questions
1.What does S & P 500 relate to? (UPSC CSE 2008) (a) Supercomputer Answer: (d) |
FAIR AND REMUNERATIVE PRICE (FRP)
- Fair and Remunerative Price (FRP) is the minimum price at which sugar mills are legally bound to purchase sugarcane from farmers in India.
- It is determined by the Cabinet Committee on Economic Affairs (CCEA) on the basis of recommendations of the Commission for Agricultural Costs and Prices (CACP).
- The FRP is based on a number of factors, including the cost of production, the demand and supply situation, and the international price of sugar
- The FRP was introduced in 2009 as a way to ensure that sugarcane farmers receive a fair price for their crop.
- Prior to the FRP, sugar mills were able to negotiate prices with farmers, which often resulted in low prices for farmers.
- The FRP has helped to improve the income of sugarcane farmers and has made sugarcane cultivation a more viable option for farmers.
- The FRP is revised annually, and the current FRP for the sugar season 2023-24 is Rs. 315 per quintal for a basic recovery rate of 10.25%
- This means that sugar mills must pay sugarcane farmers Rs. 315 per quintal for every 100 kilograms of sugarcane that they procure.
- The FRP is also adjusted for higher or lower recovery rates. For example, if the recovery rate is 10.5%, the FRP would be Rs. 321 per quintal.
- The FRP is an important policy instrument for ensuring the welfare of sugarcane farmers. It has helped to improve the income of sugarcane farmers and has made sugarcane cultivation a more viable option for farmers.
- The FRP is also a way to ensure that the sugar industry is sustainable in the long term
Here are some of the benefits of the FRP:
- It ensures that sugarcane farmers receive a fair price for their crop.
- It makes sugarcane cultivation a more viable option for farmers.
- It helps to stabilize the sugar industry.
- It provides a social safety net for sugarcane farmers.
