Current Affairs Jan 2016 Week-I UPSC Notes | EduRev

UPSC : Current Affairs Jan 2016 Week-I UPSC Notes | EduRev

 Page 1


 
 
Abhimanu 
Weekly current affairs Series 
 
 
 
 
 
Week: I, Jan 2016 
 
 
 
 
 
Abhimanu’s IAS Study Group 
Chandigarh 
 
Page 2


 
 
Abhimanu 
Weekly current affairs Series 
 
 
 
 
 
Week: I, Jan 2016 
 
 
 
 
 
Abhimanu’s IAS Study Group 
Chandigarh 
 
 
 
 
NATIONAL ECONOMIC AFFAIRS 
Medium-Term Debt Management Strategy (MTDS) 
?  The Reserve Bank of India, in consultation with the Government of India, has placed Medium-Term Debt 
Management Strategy (MTDS) for a period of three years (2015-16 to 2017-18).  
?  The strategy document contains the objectives, risk analysis of Government borrowings and strategy to be 
followed.  
?  MTDS has been prepared based on sound international practices and taking into account the domestic 
economic and financial conditions. 
? MTDS would be updated on an annual basis to reflect the emergent conditions. 
?  Government aim to better manage public borrowing, government plans to switch Rs 50,000 crore high cost 
debt each in year ending March 2017 and 2018 into instruments of longer term maturity
1
.  
?  It is expected that the borrowing cost in the domestic market is expected to be lower in fiscal year 2015-16 
due to reversal in the interest rate cycle. 
?  The main objective of this policy is  to smoothen redemptions, switching of short tenor bonds maturing at 
proximate years with long-tenor bonds will be undertaken and is expected to reduce rollover risks
2
. 
About debt management strategy 
? The objective of the debt management strategy (DMS)  is to secure the government’s  funding at all times at 
low cost over the medium /long term while avoiding excessive risk.  
?  The DMS has  been articulated in  medium-term for  a  period  of  three  years  and  it  may  be  reviewed 
annually and rolled over for the next three years.  
?  The scope of debt management strategy is restricted  to  active  elements  of  domestic  debt  management, 
i.e. ,  marketable  debt  of  the Central Government only.  
?  Over time, the scope would be progressively expanded to cover the entire stock of outstanding liabilities 
including external debt as well as General Government Debt including SDL.  
?  The debt  management  strategy  revolves  around  three  broad  pillars ,viz.,low  cost,  risk mitigation and 
market development.  
?  Low cost objective is attained by planned issuances and offer  of  appropriate  instruments  to  lower  cost  in  
medium  to  long-run,  market  conditions, preferences  of  various  investor  segments,  improved  
transparency  by  way  of  a detailed  issuance calendar.  
?   Following risk  management tools  have  been adopted  to  reduce  the  risk  associated with the sovereign 
debt: 
a)Adoption  of portfolio  management  practices  and  creating  prudent  debt  structure by  containing 
rollover risk through switches / buy back; 
                                                           
1
 because of less volatility in market than short term debts. 
2
Reinvest funds from a mature security into a new issue of the same or a similar security.So, if interest rate at the 
time of reinvesting is adverse, it may harm government interest.  
Page 3


 
 
Abhimanu 
Weekly current affairs Series 
 
 
 
 
 
Week: I, Jan 2016 
 
 
 
 
 
Abhimanu’s IAS Study Group 
Chandigarh 
 
 
 
 
NATIONAL ECONOMIC AFFAIRS 
Medium-Term Debt Management Strategy (MTDS) 
?  The Reserve Bank of India, in consultation with the Government of India, has placed Medium-Term Debt 
Management Strategy (MTDS) for a period of three years (2015-16 to 2017-18).  
?  The strategy document contains the objectives, risk analysis of Government borrowings and strategy to be 
followed.  
?  MTDS has been prepared based on sound international practices and taking into account the domestic 
economic and financial conditions. 
? MTDS would be updated on an annual basis to reflect the emergent conditions. 
?  Government aim to better manage public borrowing, government plans to switch Rs 50,000 crore high cost 
debt each in year ending March 2017 and 2018 into instruments of longer term maturity
1
.  
?  It is expected that the borrowing cost in the domestic market is expected to be lower in fiscal year 2015-16 
due to reversal in the interest rate cycle. 
?  The main objective of this policy is  to smoothen redemptions, switching of short tenor bonds maturing at 
proximate years with long-tenor bonds will be undertaken and is expected to reduce rollover risks
2
. 
About debt management strategy 
? The objective of the debt management strategy (DMS)  is to secure the government’s  funding at all times at 
low cost over the medium /long term while avoiding excessive risk.  
?  The DMS has  been articulated in  medium-term for  a  period  of  three  years  and  it  may  be  reviewed 
annually and rolled over for the next three years.  
?  The scope of debt management strategy is restricted  to  active  elements  of  domestic  debt  management, 
i.e. ,  marketable  debt  of  the Central Government only.  
?  Over time, the scope would be progressively expanded to cover the entire stock of outstanding liabilities 
including external debt as well as General Government Debt including SDL.  
?  The debt  management  strategy  revolves  around  three  broad  pillars ,viz.,low  cost,  risk mitigation and 
market development.  
?  Low cost objective is attained by planned issuances and offer  of  appropriate  instruments  to  lower  cost  in  
medium  to  long-run,  market  conditions, preferences  of  various  investor  segments,  improved  
transparency  by  way  of  a detailed  issuance calendar.  
?   Following risk  management tools  have  been adopted  to  reduce  the  risk  associated with the sovereign 
debt: 
a)Adoption  of portfolio  management  practices  and  creating  prudent  debt  structure by  containing 
rollover risk through switches / buy back; 
                                                           
1
 because of less volatility in market than short term debts. 
2
Reinvest funds from a mature security into a new issue of the same or a similar security.So, if interest rate at the 
time of reinvesting is adverse, it may harm government interest.  
 
 
b) Lowering interest rate risk by keeping floating rate debt low; 
c) Managing  foreign  currency  risk  by  issuing  debt  in  domestic  currency,  developing stable  domestic  
investor  base  and  calibrated  opening  of  G-sec  market to foreign investors; and 
d) Reducing rollover risks by elongation of maturity and establishing limits on security issuances and 
annual maturities. Reserve Bank, in consultation with the Government, will continue its effort in 
development of the G-sec market by a series of measures such as introducing new instruments, 
expanding the investor base, strengthening market infrastructure, etc. 
?  Scenario  analysis, which  contains  expected  cost  of  debt  based  on  the  assumptions  of  future interest  
and  exchange  rates  and  future  borrowing  needs, are  included.   
? Debt sustainability indicators, such as, debt to GDP, average time to maturity and interest expense to GDP are 
projected.   
? Stress  tests  of  the  debt  portfolio  on  the  basis  of  the  economic  and  financial shocks, to which the 
government are exposed, are conducted and indicate a very low level of stress.   
?  This confirms  that  the  debt  is  stable,  sustainable  over  medium  to  long  run. 
    The Big Impact Of China’s Slowdown 
China’s economic slowdown in 2015 will have important consequences for countries in the region and beyond. 
After three decades of double-digit growth, however, the weakening performance of the world’s second-largest 
economy is a significant source of concern—and not just for the Chinese.  
About Chinese crisis: 
?  Chinese crisis is mainly highlighted with fall in stock market and devaluation of yuan.  
?   Since 2010, Chinese authorities have eased restrictions on using borrowed money to invest in shares. 
?  Retail investors, who account for about 85% of trade in China, made risky investments often bypassing rules. 
?  Estimates say that borrowed money helped push the stock market 150% since June last year. This created a 
huge bubble around the Chinese stock market which was driven by borrowed money. 
?  Also, China’s slowdown is being driven largely by shrinking labour force and rising labour costs. 
?  So, when China's securities regulator put restrictions on it ,  Chinese stocks started  falling 
?   Recently, due to crisis in Europe, Chinese export to European nations falls . There is also a huge fall of overall 
Chinese export this year. China devalued its currency so that it can infuse more money to exporters which 
lead to cheap export. This devaluation helps Chinese export driven economy to come out of the crisis.  
?  There was  huge anticipation of Federal Reserve hike in interest rate. So, China devalued its currency as a 
possible measure as shock absorber. 
?  China wanted to get yuan into “SDR”, which is foreign reserve maintained by the IMF in Dollar, Pound, Yen 
and Euro. But Chinese currency is not yet fully market driven and transparent. The Chinese central bank 
wanted to have market driven currency exchange rate. This also results in devaluation of the Yuan. Finally in 
the end of the year IMF agree to add “yuan” in SDR basket. 
?  The Chinese economy is an export driven economy. China wanted to shift it toward consumer oriented 
industry. There is less consumerism in China. So this devaluation leads to more money to the people, which 
might increase consumer consumption. 
Analysis 
Impact on World Economy:  
?   China is the second biggest economy in the world. It has huge investment all over the world.  
?   Devaluation leads to less import of China, which affects prices of commodities like Crude Oil, Gold, Metal and 
Agriculture goods. China is the third largest importing nation.  
?   Debt ridden countries will suffer great loss. Because due to less investment, less growth and lower wages, 
less inflation. And this leads to suffering of borrower country. 
Page 4


 
 
Abhimanu 
Weekly current affairs Series 
 
 
 
 
 
Week: I, Jan 2016 
 
 
 
 
 
Abhimanu’s IAS Study Group 
Chandigarh 
 
 
 
 
NATIONAL ECONOMIC AFFAIRS 
Medium-Term Debt Management Strategy (MTDS) 
?  The Reserve Bank of India, in consultation with the Government of India, has placed Medium-Term Debt 
Management Strategy (MTDS) for a period of three years (2015-16 to 2017-18).  
?  The strategy document contains the objectives, risk analysis of Government borrowings and strategy to be 
followed.  
?  MTDS has been prepared based on sound international practices and taking into account the domestic 
economic and financial conditions. 
? MTDS would be updated on an annual basis to reflect the emergent conditions. 
?  Government aim to better manage public borrowing, government plans to switch Rs 50,000 crore high cost 
debt each in year ending March 2017 and 2018 into instruments of longer term maturity
1
.  
?  It is expected that the borrowing cost in the domestic market is expected to be lower in fiscal year 2015-16 
due to reversal in the interest rate cycle. 
?  The main objective of this policy is  to smoothen redemptions, switching of short tenor bonds maturing at 
proximate years with long-tenor bonds will be undertaken and is expected to reduce rollover risks
2
. 
About debt management strategy 
? The objective of the debt management strategy (DMS)  is to secure the government’s  funding at all times at 
low cost over the medium /long term while avoiding excessive risk.  
?  The DMS has  been articulated in  medium-term for  a  period  of  three  years  and  it  may  be  reviewed 
annually and rolled over for the next three years.  
?  The scope of debt management strategy is restricted  to  active  elements  of  domestic  debt  management, 
i.e. ,  marketable  debt  of  the Central Government only.  
?  Over time, the scope would be progressively expanded to cover the entire stock of outstanding liabilities 
including external debt as well as General Government Debt including SDL.  
?  The debt  management  strategy  revolves  around  three  broad  pillars ,viz.,low  cost,  risk mitigation and 
market development.  
?  Low cost objective is attained by planned issuances and offer  of  appropriate  instruments  to  lower  cost  in  
medium  to  long-run,  market  conditions, preferences  of  various  investor  segments,  improved  
transparency  by  way  of  a detailed  issuance calendar.  
?   Following risk  management tools  have  been adopted  to  reduce  the  risk  associated with the sovereign 
debt: 
a)Adoption  of portfolio  management  practices  and  creating  prudent  debt  structure by  containing 
rollover risk through switches / buy back; 
                                                           
1
 because of less volatility in market than short term debts. 
2
Reinvest funds from a mature security into a new issue of the same or a similar security.So, if interest rate at the 
time of reinvesting is adverse, it may harm government interest.  
 
 
b) Lowering interest rate risk by keeping floating rate debt low; 
c) Managing  foreign  currency  risk  by  issuing  debt  in  domestic  currency,  developing stable  domestic  
investor  base  and  calibrated  opening  of  G-sec  market to foreign investors; and 
d) Reducing rollover risks by elongation of maturity and establishing limits on security issuances and 
annual maturities. Reserve Bank, in consultation with the Government, will continue its effort in 
development of the G-sec market by a series of measures such as introducing new instruments, 
expanding the investor base, strengthening market infrastructure, etc. 
?  Scenario  analysis, which  contains  expected  cost  of  debt  based  on  the  assumptions  of  future interest  
and  exchange  rates  and  future  borrowing  needs, are  included.   
? Debt sustainability indicators, such as, debt to GDP, average time to maturity and interest expense to GDP are 
projected.   
? Stress  tests  of  the  debt  portfolio  on  the  basis  of  the  economic  and  financial shocks, to which the 
government are exposed, are conducted and indicate a very low level of stress.   
?  This confirms  that  the  debt  is  stable,  sustainable  over  medium  to  long  run. 
    The Big Impact Of China’s Slowdown 
China’s economic slowdown in 2015 will have important consequences for countries in the region and beyond. 
After three decades of double-digit growth, however, the weakening performance of the world’s second-largest 
economy is a significant source of concern—and not just for the Chinese.  
About Chinese crisis: 
?  Chinese crisis is mainly highlighted with fall in stock market and devaluation of yuan.  
?   Since 2010, Chinese authorities have eased restrictions on using borrowed money to invest in shares. 
?  Retail investors, who account for about 85% of trade in China, made risky investments often bypassing rules. 
?  Estimates say that borrowed money helped push the stock market 150% since June last year. This created a 
huge bubble around the Chinese stock market which was driven by borrowed money. 
?  Also, China’s slowdown is being driven largely by shrinking labour force and rising labour costs. 
?  So, when China's securities regulator put restrictions on it ,  Chinese stocks started  falling 
?   Recently, due to crisis in Europe, Chinese export to European nations falls . There is also a huge fall of overall 
Chinese export this year. China devalued its currency so that it can infuse more money to exporters which 
lead to cheap export. This devaluation helps Chinese export driven economy to come out of the crisis.  
?  There was  huge anticipation of Federal Reserve hike in interest rate. So, China devalued its currency as a 
possible measure as shock absorber. 
?  China wanted to get yuan into “SDR”, which is foreign reserve maintained by the IMF in Dollar, Pound, Yen 
and Euro. But Chinese currency is not yet fully market driven and transparent. The Chinese central bank 
wanted to have market driven currency exchange rate. This also results in devaluation of the Yuan. Finally in 
the end of the year IMF agree to add “yuan” in SDR basket. 
?  The Chinese economy is an export driven economy. China wanted to shift it toward consumer oriented 
industry. There is less consumerism in China. So this devaluation leads to more money to the people, which 
might increase consumer consumption. 
Analysis 
Impact on World Economy:  
?   China is the second biggest economy in the world. It has huge investment all over the world.  
?   Devaluation leads to less import of China, which affects prices of commodities like Crude Oil, Gold, Metal and 
Agriculture goods. China is the third largest importing nation.  
?   Debt ridden countries will suffer great loss. Because due to less investment, less growth and lower wages, 
less inflation. And this leads to suffering of borrower country. 
 
 
 
?  Countries that produce raw materials, such as copper, oil and minerals, for manufacturing in China are 
already seeing the biggest changes. China’s industrial slowdown means a corresponding reduction in world 
demand for these commodities. Countries such as Kazakhstan and Chile, whose economies are heavily 
concentrated in such sectors, are finding the contraction a serious challenge. 
?  But some countries also gained from this slowdown. Vietnam, for example, has greatly increased its 
production and exports of smartphones and consumer electronics—an area where China used to enjoy 
absolute dominance—partly by attracting more foreign direct investment 
Impact on India:  
?  Indian corporate investment in China will suffer like Automobile. 
?  India is one of main importer of Chinese goods. So in case China’s export will get cheaper it will be beneficial 
to India. But cheap export can also affect local industry. 
? China is not a major import partner of India. But if China crash lands, it would hit many companies that have a 
significant manufacturing base in China, especially US based companies. When US based companies are 
affected, contract for Indian IT services from US companies may shrink. It also leads to a pull-out of money 
from Foreign Portfolio Investors in India, which can then lead to a fall in the Indian stock markets and also the 
Indian rupee. 
Gain for India:  
?  India is going to be fastest growing country by surpassing china. So this crisis also shifts investors from China 
to India.  
?  India is a domestic consumption story. India is not an export driven economy like China. India produces and 
consume by itself. 
?  India is the youngest country in term of manpower. 
?  Fall in prices of crude oil and gold help India to maintain less current A/C deficit. 
?  But India have to reform its economy by tax reforms, land reforms, labor reforms and disinvestment in Indian 
bank in order to raise more capital. 
Conclusion 
As China’s slowdown is being driven largely by fundamental factors (especially a shrinking labour force and rising 
labour costs), it should be understood as part of a new normal for the world economy. Because the Chinese 
economy is so much larger now, even 6% growth today would contribute more to world output than 10% growth 
before the global financial crisis.For other countries, the best way to cope with a slowing China is to embrace the 
domestic reforms needed to reposition themselves within the global economy. 
Dialing……mains(General Study II: Effect of policies and politics of developed and developing countries on 
India’s interests) 
Question: 
Chinese economic slow down in 2015 has a big impact on global economy as well as on India. Crititcally examine. 
‘Swiss Challenge’ Route 
?   An expert committee has warned the government against using ‘Swiss Challenge’ approach for infrastructure 
investments in the country. This will make India’s ambitious plan to build new expressways across the country 
by adopting the ‘Swiss Challenge’ method uncertain. 
?   India plans to build 18,637 km expressways in a phased manner by 2022 under an official Master Plan for the 
National Expressway Network. An express highway is a controlled-access highway, generally six-lane or more, 
where entrance and exit are controlled by the use of slip roads. 
?   Since it is a difficult task to find builders to develop greenfield expressways, the government was keen on 
taking the ‘Swiss Challenge’ route to find bidders for building around 19,000 km expressways as per the 
master plan. 
Page 5


 
 
Abhimanu 
Weekly current affairs Series 
 
 
 
 
 
Week: I, Jan 2016 
 
 
 
 
 
Abhimanu’s IAS Study Group 
Chandigarh 
 
 
 
 
NATIONAL ECONOMIC AFFAIRS 
Medium-Term Debt Management Strategy (MTDS) 
?  The Reserve Bank of India, in consultation with the Government of India, has placed Medium-Term Debt 
Management Strategy (MTDS) for a period of three years (2015-16 to 2017-18).  
?  The strategy document contains the objectives, risk analysis of Government borrowings and strategy to be 
followed.  
?  MTDS has been prepared based on sound international practices and taking into account the domestic 
economic and financial conditions. 
? MTDS would be updated on an annual basis to reflect the emergent conditions. 
?  Government aim to better manage public borrowing, government plans to switch Rs 50,000 crore high cost 
debt each in year ending March 2017 and 2018 into instruments of longer term maturity
1
.  
?  It is expected that the borrowing cost in the domestic market is expected to be lower in fiscal year 2015-16 
due to reversal in the interest rate cycle. 
?  The main objective of this policy is  to smoothen redemptions, switching of short tenor bonds maturing at 
proximate years with long-tenor bonds will be undertaken and is expected to reduce rollover risks
2
. 
About debt management strategy 
? The objective of the debt management strategy (DMS)  is to secure the government’s  funding at all times at 
low cost over the medium /long term while avoiding excessive risk.  
?  The DMS has  been articulated in  medium-term for  a  period  of  three  years  and  it  may  be  reviewed 
annually and rolled over for the next three years.  
?  The scope of debt management strategy is restricted  to  active  elements  of  domestic  debt  management, 
i.e. ,  marketable  debt  of  the Central Government only.  
?  Over time, the scope would be progressively expanded to cover the entire stock of outstanding liabilities 
including external debt as well as General Government Debt including SDL.  
?  The debt  management  strategy  revolves  around  three  broad  pillars ,viz.,low  cost,  risk mitigation and 
market development.  
?  Low cost objective is attained by planned issuances and offer  of  appropriate  instruments  to  lower  cost  in  
medium  to  long-run,  market  conditions, preferences  of  various  investor  segments,  improved  
transparency  by  way  of  a detailed  issuance calendar.  
?   Following risk  management tools  have  been adopted  to  reduce  the  risk  associated with the sovereign 
debt: 
a)Adoption  of portfolio  management  practices  and  creating  prudent  debt  structure by  containing 
rollover risk through switches / buy back; 
                                                           
1
 because of less volatility in market than short term debts. 
2
Reinvest funds from a mature security into a new issue of the same or a similar security.So, if interest rate at the 
time of reinvesting is adverse, it may harm government interest.  
 
 
b) Lowering interest rate risk by keeping floating rate debt low; 
c) Managing  foreign  currency  risk  by  issuing  debt  in  domestic  currency,  developing stable  domestic  
investor  base  and  calibrated  opening  of  G-sec  market to foreign investors; and 
d) Reducing rollover risks by elongation of maturity and establishing limits on security issuances and 
annual maturities. Reserve Bank, in consultation with the Government, will continue its effort in 
development of the G-sec market by a series of measures such as introducing new instruments, 
expanding the investor base, strengthening market infrastructure, etc. 
?  Scenario  analysis, which  contains  expected  cost  of  debt  based  on  the  assumptions  of  future interest  
and  exchange  rates  and  future  borrowing  needs, are  included.   
? Debt sustainability indicators, such as, debt to GDP, average time to maturity and interest expense to GDP are 
projected.   
? Stress  tests  of  the  debt  portfolio  on  the  basis  of  the  economic  and  financial shocks, to which the 
government are exposed, are conducted and indicate a very low level of stress.   
?  This confirms  that  the  debt  is  stable,  sustainable  over  medium  to  long  run. 
    The Big Impact Of China’s Slowdown 
China’s economic slowdown in 2015 will have important consequences for countries in the region and beyond. 
After three decades of double-digit growth, however, the weakening performance of the world’s second-largest 
economy is a significant source of concern—and not just for the Chinese.  
About Chinese crisis: 
?  Chinese crisis is mainly highlighted with fall in stock market and devaluation of yuan.  
?   Since 2010, Chinese authorities have eased restrictions on using borrowed money to invest in shares. 
?  Retail investors, who account for about 85% of trade in China, made risky investments often bypassing rules. 
?  Estimates say that borrowed money helped push the stock market 150% since June last year. This created a 
huge bubble around the Chinese stock market which was driven by borrowed money. 
?  Also, China’s slowdown is being driven largely by shrinking labour force and rising labour costs. 
?  So, when China's securities regulator put restrictions on it ,  Chinese stocks started  falling 
?   Recently, due to crisis in Europe, Chinese export to European nations falls . There is also a huge fall of overall 
Chinese export this year. China devalued its currency so that it can infuse more money to exporters which 
lead to cheap export. This devaluation helps Chinese export driven economy to come out of the crisis.  
?  There was  huge anticipation of Federal Reserve hike in interest rate. So, China devalued its currency as a 
possible measure as shock absorber. 
?  China wanted to get yuan into “SDR”, which is foreign reserve maintained by the IMF in Dollar, Pound, Yen 
and Euro. But Chinese currency is not yet fully market driven and transparent. The Chinese central bank 
wanted to have market driven currency exchange rate. This also results in devaluation of the Yuan. Finally in 
the end of the year IMF agree to add “yuan” in SDR basket. 
?  The Chinese economy is an export driven economy. China wanted to shift it toward consumer oriented 
industry. There is less consumerism in China. So this devaluation leads to more money to the people, which 
might increase consumer consumption. 
Analysis 
Impact on World Economy:  
?   China is the second biggest economy in the world. It has huge investment all over the world.  
?   Devaluation leads to less import of China, which affects prices of commodities like Crude Oil, Gold, Metal and 
Agriculture goods. China is the third largest importing nation.  
?   Debt ridden countries will suffer great loss. Because due to less investment, less growth and lower wages, 
less inflation. And this leads to suffering of borrower country. 
 
 
 
?  Countries that produce raw materials, such as copper, oil and minerals, for manufacturing in China are 
already seeing the biggest changes. China’s industrial slowdown means a corresponding reduction in world 
demand for these commodities. Countries such as Kazakhstan and Chile, whose economies are heavily 
concentrated in such sectors, are finding the contraction a serious challenge. 
?  But some countries also gained from this slowdown. Vietnam, for example, has greatly increased its 
production and exports of smartphones and consumer electronics—an area where China used to enjoy 
absolute dominance—partly by attracting more foreign direct investment 
Impact on India:  
?  Indian corporate investment in China will suffer like Automobile. 
?  India is one of main importer of Chinese goods. So in case China’s export will get cheaper it will be beneficial 
to India. But cheap export can also affect local industry. 
? China is not a major import partner of India. But if China crash lands, it would hit many companies that have a 
significant manufacturing base in China, especially US based companies. When US based companies are 
affected, contract for Indian IT services from US companies may shrink. It also leads to a pull-out of money 
from Foreign Portfolio Investors in India, which can then lead to a fall in the Indian stock markets and also the 
Indian rupee. 
Gain for India:  
?  India is going to be fastest growing country by surpassing china. So this crisis also shifts investors from China 
to India.  
?  India is a domestic consumption story. India is not an export driven economy like China. India produces and 
consume by itself. 
?  India is the youngest country in term of manpower. 
?  Fall in prices of crude oil and gold help India to maintain less current A/C deficit. 
?  But India have to reform its economy by tax reforms, land reforms, labor reforms and disinvestment in Indian 
bank in order to raise more capital. 
Conclusion 
As China’s slowdown is being driven largely by fundamental factors (especially a shrinking labour force and rising 
labour costs), it should be understood as part of a new normal for the world economy. Because the Chinese 
economy is so much larger now, even 6% growth today would contribute more to world output than 10% growth 
before the global financial crisis.For other countries, the best way to cope with a slowing China is to embrace the 
domestic reforms needed to reposition themselves within the global economy. 
Dialing……mains(General Study II: Effect of policies and politics of developed and developing countries on 
India’s interests) 
Question: 
Chinese economic slow down in 2015 has a big impact on global economy as well as on India. Crititcally examine. 
‘Swiss Challenge’ Route 
?   An expert committee has warned the government against using ‘Swiss Challenge’ approach for infrastructure 
investments in the country. This will make India’s ambitious plan to build new expressways across the country 
by adopting the ‘Swiss Challenge’ method uncertain. 
?   India plans to build 18,637 km expressways in a phased manner by 2022 under an official Master Plan for the 
National Expressway Network. An express highway is a controlled-access highway, generally six-lane or more, 
where entrance and exit are controlled by the use of slip roads. 
?   Since it is a difficult task to find builders to develop greenfield expressways, the government was keen on 
taking the ‘Swiss Challenge’ route to find bidders for building around 19,000 km expressways as per the 
master plan. 
 
 
?   The Union government has identified building 16 Greenfield expressways at present. 
?   In December 2015, the Kelkar Panel on PPP revival had also asked the government to actively ‘discourage’ 
the ‘Swiss Challenge’ for auctioning infrastructure projects. 
About Swiss Challenge route: 
?  Swiss challenge method is a process of giving contracts. Any person with credentials can submit a 
development proposal to the government. That proposal will be made online and a second person can give 
suggestions to improve and beat that proposal. 
?  An expert committee will accept the best proposal and the original proposer will get a chance to accept it if it 
is an improvement on his proposal. 
? In case the original proposer is not able to match the more attractive and competing counter proposal, the 
project will be awarded to the counter-proposal. 
? The Swiss challenge method is one that has been used in India by various states including Karnataka, Andhra 
Pradesh, Rajasthan, Madhya Pradesh, Bihar, Punjab and Gujarat for roads and housing projects. 
? In 2009, the Supreme Court approved the method for award of contracts. 
Analysis: 
?  According to the panel, Swiss Challenge approaches bring information asymmetries in the procurement 
process and result in lack of transparency and in the fair and equal treatment of potential bidders in the 
procurement process. 
?  Given that governments sometimes lack an understanding of risks involved in a project, direct negotiations 
with private players can be fraught with downsides. In general, competitive bidding is the best method to get 
the most value on public-private partnership projects. The government might also end up granting significant 
concessions in the nature of viability gap funding, commercial exploitation of real estate, etc., without 
necessarily deriving durable and long-term social or economic benefits.  
? Governments need to have a strong legal and regulatory framework to award projects under the Swiss 
Challenge method. It can potentially foster crony capitalism, and allow companies space to employ dubious 
means to bag projects.  
?  But on the positive side the mains advantages are that it cuts red tape and shortens timelines, and promotes 
enterprise by rewarding the private sector for its ideas. The private sector brings innovation, technology and 
uniqueness to a project and an element of competition can be introduced by modifying the Challenge.  
?  Also, till now while giving projects, government officials have to pre-design them. Such a project development 
requires a huge amount of intellectual capacity and bandwidth. The economy today requires around Rs 5 lakh 
crore in investments per annum by the private sector in core and social infrastructure projects. So, swiss 
challenge can be a viable option.  
Dialing……mains (General Study III: Infrastructure) 
Question: 
The ‘Swiss method’ is innovative, but there are challenges in the Indian context. Explain. 
 
WTO Nairobi Summit, 2015 
10th Ministerial Conference (MC 10) of the World Trade Organization (WTO) ended in Nairobi. There were trade 
ministers from 162 countries. Many of the trade ministers felt left out of the key negotiations because of the 
one-upmanship and defiant attitude of developed countries like the United States and the European Union (EU). 
This summit ended with non confirmation of 14 years old Doha round pact, which can allow developing nation to 
use special safeguards to protect farmers against import surges. This is a big disappointment for India, as it is 
harmful for India's farmers interest. Only positive outcome for developing countries from this meeting is 
SSM(Special Safeguard Mechanism), which will protect their farmers. 
Highlights of the Summit: 
Read More
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