EDITORIALS & ARTICLES
14th May 2021
Israel’s Iron Dome
Recently, the videos on social media showed rockets fired from Gaza being intercepted by the Israeli Iron Dome air defence system.
Iron Dome
- It is a short-range, ground-to-air, air defence system.
- It includes a radar and Tamir interceptor missiles that track and neutralise any rockets or missiles aimed at Israeli targets.
- It is used for countering rockets, artillery & mortars (C-RAM) as well as aircraft, helicopters and unmanned aerial vehicles.
- It can protect deployed and manoeuvring forces, as well as the Forward Operating Base (FOB) and urban areas, against a wide range of indirect and aerial threats.
- The genesis of the Iron Dome goes back to the 2006 Israeli-Lebanon war, when the Hezbollah fired thousands of rockets into Israel.
- In 2007, Israel announced that its state-run Rafael Advance Systems would come up with a new air defence system to protect its cities and people.
- It was developed with Israel Aerospace Industries.
- The Iron Dome was deployed in 2011.
Working of Iron Dome System
- It has three main systems that work together to provide a shield over the area where it is deployed, handling multiple threats.
- It has a detection and tracking radar to spot any incoming threats, a battle management and weapon control system (BMC), and a missile firing unit.
- The BMC basically liaises between the radar and the interceptor missile.
- It is capable of being used in all weather conditions, including during the day and night.
What kind of systems does India have?
- India is in the process of buying S-400 air defence systems from Russia for over $5 billion.
- S400 has to cater to shooting down missiles, aircraft in some 300 to 400 km range.
- Presently, India has Akash short-range surface-to-air missiles, and Russian systems including Pechora.
S-400 Air Defence Systems
- The S-400 Triumf, (NATO calls it SA-21 Growler), is a mobile, surface-to-air missile system (SAM) designed by Russia.
- It is the most modern air defence system in the Russian arsenal meant for export.
- It is capable of destroying incoming hostile aircraft, missiles and even droneswithin a range of up to 400 km.
- It has a tracking capability of nearly 600 km.
- It has been designed to knock down flying targets, including those equipped with stealth technologies, at a distance of about 400 km.
- It is currently in production in Russia and will undergo a series of trials before its arrival in India by the end of 2021.
- It is also capable of taking out ballistic missiles and hypersonic targets.
- It is the most dangerous operationally deployed modern long-range SAM (MLR SAM) in the world, considered much ahead of the US-developed Terminal High Altitude Area Defense system (THAAD).
Housing Finance Companies (HFCs)
Over the last 18 months to 5 years, if bank customers have seen better transmission of rate cuts in their home loan rates on account of cut in marginal cost of lending rate (MCLR), the HFC customers have had limited benefit because of relatively smaller cuts in the prime lending rate (PLR).
What is Housing Finance Companies (HFCs)?
- It is a form of non-banking financial company which is engaged in the principal business of financing of acquisition or construction of houses.
- It is regulated by the National Housing Bank.
- It is under the direct supervision of the Reserve Bank of India (RBI) since August 2019.
- Any non-banking finance company can operate as a housing finance company, subject to the fulfillment of basic requirements as specified in the Companies Act, 1956.
- Under the Revised Framework, a HFC has been defined to mean a non-banking financial company engaged in the housing finance business and which fulfills the following conditions:
- Its financial assets (in the business of providing finance for housing) constitute not less than 60% of its total assets; and
- Out of the total assets (netted off by intangible assets), not less than 50% should be by way of housing financing for individuals.
Impact of cut in repo rate on home loan customers
- The cut in rates for existing customers depends on the reduction in MCLR by banks and in PLR by HFCs in response to a repo cut by RBI.
- The HFCs base their lending rates on PLR and offer a discount on it to customers.
- An upward or downward revision in PLR (in line with repo rate movement) impacts the lending rate of the existing customer.
- A cut in PLR is reflected in the effective rate for the customer within three months.
- For new customers, banks could reduce their spread over MCLR to offer an attractive rate.
How do HFCs keep their rates competitive for new customers?
- While there is a large gap between banks and HFCs when it comes to passing the benefit of a repo rate cut to existing borrowers, large HFCs compete with banks and offer similar rates to new customers.
- As HFC rates are benchmarked to PLR, they increase the discount on PLR for new customers.
- While both HFCs and banks offer the facility of switching to rates being offered to new customers after payment of conversion charge, a reduction in their PLR/MCLR would directly benefit borrowers.
Goa Maritime Symposium (GMS) – 2021
Recently, the Indian Navy hosted Goa Maritime Symposium (GMS) – 2021 under the aegis of Naval War College, Goa.
About Goa Maritime Symposium (GMS) – 2021
- It saw the participation of Naval representatives from 13 Indian Ocean Littoral countries, which included:
- India, Bangladesh, Comoros, Indonesia, Madagascar, Malaysia, Maldives, Mauritius, Myanmar, Seychelles, Singapore, Sri Lanka and Thailand.
- The theme for GMS-21 was focused on “Maritime Security and Emerging Non-Traditional Threats: A Case for Proactive Role for IOR Navies”.
- It will play a constructive role in bringing together the stakeholders who have a role in evolving strategies, policies and implementation mechanisms on the issues of common interest in maritime domain.
- The event provided a forum for the articulation of views on the crucial maritime issues, followed by theme-based discussions.
Significance of IOR to India
- There are IOR countries which are becoming globally competitive and are developing new technologies, including defence shipyards for design and shipbuilding.
- India sees the Indian Ocean Region as its zone of influence and has been extending assistance to countries in the region such as:
- Relief at the time of calamities like oil spills and cyclones
- Helping in hydrographic surveys and gifting patrols boats to countries to secure their exclusive economic zones
- New Delhi has also been building up its profile as a net security provider and partner of choice in the IOR.
- It is against the backdrop of China increasing its profile in the area with port calls by Chinese ships to countries along the eastern seaboard of Africa and others.
- India is developing a comprehensive Maritime Domain Awareness picture in the IOR, which has resulted in signing of Technical Agreements for sharing of ‘White Shipping Information’.
Indian Ocean Region
- The Indian Ocean region is one of growing geopolitical importance and is characterized by competition and intense rivalries involving both littoral states and external powers.
- The Indian Ocean is the world's third-largest ocean and constitutes about 20 percent of the water on the Earth's surface.
- It is bounded on the west by East Africa, on the north by India, on the east byAustralia, and on the south by the Southern Ocean off the coast of Antarctica.
1st BRICS Employment Working Group (EWG) Meeting
Recently, the Secretary of the Ministry of Labour and Employment has chaired the 1st BRICS Employment Working Group (EWG) Meeting.
- India has assumed BRICS Presidency for the year 2021.
Key Highlights of BRICS Employment Working Group (EWG)
- The prime agenda for the discussions were:
- Promoting Social Security Agreements amongst BRICS Nations;
- Formalization of labour markets;
- Participation of women in labour force; and
- Gig and platform workers – Role in labour market
- The participants were Brazil, Russia, India, China, South Africa and the representatives of International Labour Organization (ILO) and International Social Security Agency (ISSA).
- The Member Nations resolved to enter into dialogue and discussion with each other and take it forward towards signing of the agreements.
- The Social Security Agreement would help the international workers to port their benefit to their home countries thereby preventing loss of their hard earned money.
- The member countries resolved to promote participation of women in remunerative, productive and decent work and to extend social security cover to the women workers engaged in informal sector.
- The member nations discussed how the proliferation of Digital Labour Platforms is transforming the labour processes in the world of work.
International Social Security Agency (ISSA)
- It is the world’s leading international organization for social security institutions, government departments and agencies.
- It promotes excellence in social security administration through professional guidelines, expert knowledge, services and support to enable its members to develop dynamic social security systems and policy throughout the world.
- It was founded in 1927 under the auspices of the International Labour Organization.
- It has its headquarters in Geneva, Switzerland, in the International Labour Office (ILO).
Housing Finance Companies (HFCs)
Over the last 18 months to 5 years, if bank customers have seen better transmission of rate cuts in their home loan rates on account of cut in marginal cost of lending rate (MCLR), the HFC customers have had limited benefit because of relatively smaller cuts in the prime lending rate (PLR).
What is Housing Finance Companies (HFCs)?
- It is a form of non-banking financial company which is engaged in the principal business of financing of acquisition or construction of houses.
- It is regulated by the National Housing Bank.
- It is under the direct supervision of the Reserve Bank of India (RBI) since August 2019.
- Any non-banking finance company can operate as a housing finance company, subject to the fulfillment of basic requirements as specified in the Companies Act, 1956.
- Under the Revised Framework, a HFC has been defined to mean a non-banking financial company engaged in the housing finance business and which fulfills the following conditions:
- Its financial assets (in the business of providing finance for housing) constitute not less than 60% of its total assets; and
- Out of the total assets (netted off by intangible assets), not less than 50% should be by way of housing financing for individuals.
Impact of cut in repo rate on home loan customers
- The cut in rates for existing customers depends on the reduction in MCLR by banks and in PLR by HFCs in response to a repo cut by RBI.
- The HFCs base their lending rates on PLR and offer a discount on it to customers.
- An upward or downward revision in PLR (in line with repo rate movement) impacts the lending rate of the existing customer.
- A cut in PLR is reflected in the effective rate for the customer within three months.
- For new customers, banks could reduce their spread over MCLR to offer an attractive rate.
How do HFCs keep their rates competitive for new customers?
- While there is a large gap between banks and HFCs when it comes to passing the benefit of a repo rate cut to existing borrowers, large HFCs compete with banks and offer similar rates to new customers.
- As HFC rates are benchmarked to PLR, they increase the discount on PLR for new customers.
- While both HFCs and banks offer the facility of switching to rates being offered to new customers after payment of conversion charge, a reduction in their PLR/MCLR would directly benefit borrowers.
Remittances received by India
Recently, the World Bank has released the Migration and Development Brief which provides information regarding remittances received by various countries.
Key Highlights
- India received over USD 83 billion in remittances in 2020 which is a drop of just 0.2 per cent from the previous year.
- The report said India's remittances fell by just 0.2 per cent in 2020, with much of the decline due to a 17 per cent drop in remittances from the United Arab Emirates.
- Remittances outflow from India in 2020 was USD7 billion, against USD 7.5 billion in 2019
- China received USD 59.5 billion in remittances in 2020 against USD 68.3 billion the previous year.
- India and China are followed by Mexico (USD42.8 billion), the Philippines (USD34.9 billion), Egypt (USD29.6 billion), Pakistan (USD26 billion), France (USD24.4 billion) and Bangladesh (USD21 billion).
- In neighbouring Pakistan, remittances rose by about 17 per cent, with the biggest growth coming from Saudi Arabia, followed by the European Union countries and the United Arab Emirates.
- In Bangladesh, remittances also showed a brisk uptick in 2020 (18.4 per cent), and Sri Lanka witnessed remittance growth of 5.8 per cent.
- In contrast, remittances to Nepal fell by about two per cent, reflecting a 17 per cent decline in the first quarter of 2020.
- The officially recorded remittance flows to low- and middle-income countries reached USD540 billion in 2020, just 1.6 per cent below the 2019 total.
- The remittance inflows rose in Latin America and the Caribbean (6.5 per cent), South Asia (5.2 per cent) and the Middle East and North Africa (2.3 per cent).
- It fell for East Asia and the Pacific (7.9 per cent), for Europe and Central Asia (9.7 per cent), and for Sub-Saharan Africa (12.5 per cent).
- The decline in flows to Sub-Saharan Africa was almost entirely due to a 28 per cent decline in remittance flows to Nigeria.
- The remittance outflow was the maximum from the United States (USD68 billion), followed by UAE (USD43 billion), Saudi Arabia (USD34.5 billion), Switzerland (USD27.9 billion), Germany (USD22 billion), and China (USD18 billion).
What are Remittances?
- Remittances are funds transferred from migrants to their home country.
- They are the private savings of workers and families that are spent in the home country for food, clothing and other expenditures, and which drive the home economy.
- A typical remittance transaction takes place in three steps:
- The migrant sender pays the remittance to the sending agent using cash, check, money order, credit card, debit card, or a debit instruction sent by e-mail, phone, or through the Internet.
- The sending agency instructs its agent in the recipient’s country to deliver the remittance.
- The paying agent makes the payment to the beneficiary.
- The remittance flows tend to be more stable than capital flows, and they tend to be countercyclical i.e. increasing during economic downturns or after a natural disaster when private capital flows tend to decrease.
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