Economy One Year Current Affairs (Set-4)

Table of Contents

Topics to discuss

Base Erosion and Profit Shifting
NIRVIK Scheme
Noble Prize in Economics
National Start up Advisory Council
Social Stock Exchange
Fugitive Economic Offender
Advance Price Agreement
Currency Swap Agreement
Generalised System of Preference

UPSC 2016) The term ‘Base Erosion and Profit Shifting’ is sometimes seen in the news in the context of

mining operation by multinational companies in resource-rich but backward areas
curbing of the tax evasion by multinational companies
exploitation of genetic resources of a country by multinational companies
lack of consideration of environmental costs in the planning and implementation of developmental projects

WHY IN NEWS

Base Erosion and Profit Shifting

It is a tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.
India has recently ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
India was part of the Ad Hoc Group of more than 100 countries and jurisdictions from G20, OECD, BEPS associates and other interested countries, which worked on an equal footing on the finalization of the text of the Multilateral
Organisation for Economic Co-operation and Development (OECD)
It is an intergovernmental economic organization founded in 1961 to stimulate economic progress and world trade.
It has 36 members, the latest member being Lithuania which joined it in 2018.
India is a not a member, but is among its key partners.

WHY IN NEWS

NIRVIK Scheme

Export Credit Guarantee Corporation of India (ECGC) has introduced the Export Credit Insurance Scheme (ECIS) called NIRVIK to enhance loan availability and ease the lending process.
It is an insurance cover guarantee that will cover up to 90% of the principal and The cover will include both pre and post-shipment credit.
The ECGC currently provides credit guarantee of up to 60% loss
The enhanced cover will ensure that Foreign and Rupee export credit interest rates will be below 4% and 8% respectively for exporters

Export Credit Guarantee Corporation of India

ECGC Ltd is wholly owned by the Ministry of Commerce and Industry.
The Government of India had initially set up Export Risks Insurance Corporation in 1957.
After the introduction of insurance covers to banks during the period 1962-64, the name was changed to Export Credit & Guarantee Corporation Ltd in 1964.
Its objective was to promote exports from the country by providing credit risk insurance and related services for exports.

WHY IN NEWS

Noble Prize in Economics

Indian-American economist Abhijit Banerjee has won the 2019 Nobel Prize in Economics, along with Esther Duflo of the Massachusetts Institute of Technology and Michael Kremer of Harvard University “for their experimental approach to alleviating global poverty.”

More in News

Their new experiment-based approach- called Randomised Control Trials (RCTs) has transformed development economics.
RCTs break larger questions about policy interventions into smaller, easier to test studies.
For example, the big questions like ‘poverty’ are broken down into its various dimensions like–poor health, inadequate education, etc.
Within poor health, they look at nutrition, provisioning of medicines, and vaccination, etc. Within vaccinations, they try to conduct various experiments and, based on such “evidence”, decide what needs to be done.

Q) Which of the statement is correct regarding the National Start up Advisory Council?

NSAC aims to build a strong ecosystem for nurturing innovation and start ups in the country
It is headed by Union Commerce and Industry secretary.

Which of the above statements is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2

WHY IN NEWS

National Start up Advisory Council

NSAC aims to build a strong ecosystem for nurturing innovation and startups in the country

Composition of the NSAC

Chairperson: Minster for Commerce & Industry.
Ex-officio members: Nominated by the concerned Ministries/Departments/Organisations, not below the rank of Joint Secretary to the Government of India.
Non-official members: Nominated by Central Government (for a term of 2 years), from various categories like founder of successful start ups
Convener of the Council: Joint Secretary, Department for Promotion of Industry and Internal Trade

WHY IN NEWS

Social Stock Exchange

In budget session, Finance Minister proposed a social stock exchange (SSE) under the regulatory ambit of the Securities Exchange Board of India (SEBI) to support social enterprises and non profits in raising funds
It is an electronic fundraising platform that allows investors to buy shares in a social enterprise that has been vetted by the exchange.
Social enterprise is a revenue-generating business whose primary objective is to achieve a social objective, for example, providing healthcare or clean energy.
It will act as crowd-sourcing platforms for fund-raising by non-profit entities aimed at impact investment and transparency.

Globally, at least ten SSEs have been set up
Q) Which of the statement is correct regarding the Fugitive Economic Offender?

A person can be named an offender if there is an arrest warrant against him or her for involvement in economic offences involving at least Rs. 1000 crore or more and has fled from India to escape legal action
Nirav Modi became the 1^stperson to be declared as Fugitive Economic Offender

Which of the above statements is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2

WHY IN NEWS

Fugitive Economic Offender

A special court has declared Nirav Modi, the key accused in the $2 billion Punjab National Bank (PNB) fraud case, a fugitive economic offender, on a plea of the Enforcement Directorate

FEO – Definition

A person can be named an offender under the law if there is an arrest warrant against him or her for involvement in economic offences involving at least Rs. 100 crore or more and has fled from India to escape legal action

FEO – Procedure

The investigating agencies have to file an application in a Special Court under the Prevention of Money-Laundering Act containing details of the properties to be confiscated, and any information about the person’s whereabouts.
The Special Court will issue a notice for the person to appear at a specified place and date at least six weeks from the issue of notice.
Proceedings will be terminated if the person appears. If not the person would be declared as a Fugitive Economic Offender based on the evidence filed by the investigating agencies
The person who is declared as a Fugitive Economic Offender can challenge the proclamation in the High Court within 30 days of such declaration

WHY IN NEWS

Advance Price Agreement

An APA is an agreement between a taxpayer and the tax authority determining the Transfer Pricing methodology for pricing the tax payer’s international transactions for future years
An APA provides certainty with respect to the tax outcome of the tax payer’s international transactions.

More about APA

The Finance Act, 2012, inserted sections 92CC and 92 CD in the ITA to provide the legal basis for APA in India.
An APA can be one of the three types – unilateral, bilateral and multilateral:
Unilateral APA is an APA that involves only the taxpayer and the tax authority of the country where the taxpayer is located.
Bilateral APA (BAPA) is an APA that involves the tax payer, associated enterprise (AE) of the taxpayer in the foreign country, tax authority of the country where the taxpayer is located and the foreign tax authority.
Multilateral APA (MAPA) is an APA that involves the taxpayer, two or more AEs of the tax payer in different foreign countries, tax authority of the country where the taxpayer is located and the tax authorities of AEs

WHY IN NEWS

Currency Swap Arrangement

With an objective to strengthen financial stability and economic cooperation, the Reserve Bank of India has revised the framework on currency swap arrangement for SAARC countries till 2022.

Currency Swap Arrangement

This is an arrangement, between two friendly countries, which have regular, substantial or increasing trade, to basically involve in trading in their own local currencies, where both pay for import and export trade, at the pre-determined rates of exchange, without bringing in third country currency like the US Dollar.
In such arrangements no third country currency is involved, thereby eliminating the need to worry about exchange variations.
Currency swap agreement can be bilateral or multilateral

WHY IN NEWS

Generalised System of Preference

The United States of America (USA) President Donald Trump had terminated India’s designation as a beneficiary developing nation under the GSP (Generalized System of Preference) trade program with effect from 5th June

Basics Generalised System of Preference

It is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.
The objective of GSP was to give development support to poor countries by promoting exports from them into the developed countries.
GSP promotes sustainable development in beneficiary countries by helping these countries to increase and diversify their trade with the United States.