Mitras Analysis of News : 20-05-2017

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  1. Is India’s IT sector failing? (Indian Express)
  1. Beginning to the new GST regime (The Hindu)
  1. Bonn climate talks end amidst uncertainty (Down to Earth)
  1. Explained: Increased cyclonic activity linked to Ocean warming

 

 

Is India’s IT sector failing? (Indian Express)

 Synoptic line: It throws light on the disruptions that are being unleashed in India’s IT sector due to changing nature of IT Overviewdemands. (GS paper II)

  • The recent earnings release of major IT companies such as Infosys Ltd and Tata Consultancy Services Ltd have resulted in a raging debate about the future of India’s IT services companies.
  • There is need to realign the IT sector to fight back the disruptive changes that are being initiated on the daily basis.

Fault lines in India’s IT sector

  • The $150 billion Indian information technology sector, once India’s largest organized job creator, is now reluctant to hire.
  • Forget creating jobs, many companies in the sector are choosing to not even fill the vacancies left behind by the people who have moved on.
  • The reasons are simple: slow revenue growth and adoption of newer technologies, such as cloud computing and automation platforms, that have started replacing engineers.
  • The trend could help IT firms reduce their wage bill but boost the training costs of existing employees. It will also hurt the future prospects of the hundreds of thousands of engineers India produces every year.
  • Moreover, attrition rates of the companies are also bound to steeply rise in near future. Attritionin business means, the reduction in staff and employees in a company through normal means, such as retirement and resignation, the loss of customers or clients to old age.

Analysis of the situation

  • Make in India appears to be faltering in the very sector that was expected to be future-proof. The growth story of Indian information technology, powered mainly by private enterprise, faces uncertainty as deep job cuts seem to loom.
  • Besides, US President has acted on an election promise to tighten H1B visa norms, which will reduce margins.
  • The possible reasons of the high attrition rates are due to the losses to the failure of companies to reskill the workforce in a rapidly changing marketplace. Traditionally, IT was focused on the PC. Then the mobile phone took the driving seat, services migrated to the cloud, software to app ecosystems, fundamentally changing the industry. Now, embedded systems, nanotechnology, robotics, 3D printing, the Internet of Things, big data analytics, artificial intelligence and cognitive computing are driving it towards new frontiers, and the old will be left behind.
  • The forces behind attrition in IT will impinge on other sectors very soon, and many stable professions will go the way of travel agents, and stenographers if they do not evolve.
  • As IT companies are adopting newer technologies, they require employees that are skilled and have the required mindset, adaptability and resilience to learn and gain experience in new domain areas

Way ahead

  • The rise of cloud computing is making clients of IT firms reduce their dependence on engineers. This is because a bulk of applications are moving to servers hosted by firms such as Amazon and Microsoft Corp., leaving some engineers at IT firms only overseeing maintenance work.
  • That is not good news for India’s technology outsourcing sector, which is estimated by industry lobby Nasscom to be directly employing 3.5 million people. Hence, need of the hour is to reorient entire strategy to make the technical know-how in country more resilient and aligned to present demands.
  • There should be a regular review and revision of core competencies that are needed in present situation. This should begin with reviewing the college curriculum and making it more professionally responsive.
  • Government must intervene creatively to maintain the social fabric in the face of anticipated but unpredictable future shock. The unexpected attrition in the IT sector may be read as an early warning signal, presenting an opportunity to face the problem before it infects other sectors of the economy.

Question: What should be the line of reforms to recast India’s IT sector into flexible yet robust industry? What should be the move on part of policy makers?

 

 

Beginning to the new GST regime (The Hindu)

 Synoptic line: It throws light on the recent decision by GST council to finalise the tax rates under GST regime. (GS paper III)

Overview

  • The GST Council finalised four tax rates to apply on services including telecom, insurance, hotels and restaurants under the biggest tax reform since the Independence. The rates are in line with those finalised for goods.
  • With the fixing of standard rates and pruning of exemptions, the transition to a GST regime is well begun

Final rate Decision by GST council

  • GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
  • The Goods and Services Tax (GST) Council had recently finalised tax rates for all services, except lottery, under the new indirect tax regime to be rolled out from July 1. Those services already exempted from tax, such as healthcare and education, will continue to enjoy the concession.
  • The Goods and Services Tax (GST) finalised four tax rates of 5, 12, 18 and 28 per cent to apply on services including telecom, insurance, hotels and restaurants.
  • The draft rules, alongside clarity on tax rates, are crucial for India to realign its existing processes and reporting mechanisms to the requirements of the new regime.
  • Under the new structure, judging from the initial list of 1,211 items, the predominant share (43%) of goods will be taxed at 18%, while 17% and 14% of the notified items will fall under the 12% and 5% tax rate slabs, respectively. Around 7% of the items, which include essential goods such as milk, fruits, cereals and poultry, have been exempted from all taxes.
  • A significant share (19%) of goods, however, has been tucked under the highest tax slab of 28%: many of these cater to the daily needs of the growing middle class. Apart from these four regular tax slabs, additional cess taxes of varying rates have also been imposed on sin and luxury goods such as pan masala, cigarettes and sport utility vehicles to compensate the States for loss of revenue during the initial years.

A significant achievement

  • The biggest takeaway, though, is that despite pulls and pressures from disparate lobbies and the wrangling generally witnessed among states, the Council has managed to achieve an agreement on clubbing the bulk of the items into the two standard rates of 12 per cent and 18 per cent.
  • Winners and losers are sure to emerge as tax rates undergo a major revision. But overall, the government has said the new tax regime will be revenue-neutral. If so, the GST’s influence on private spending will possibly remain muted.
  • The four-slab structure of the GST regime gives it the look of a progressive tax code, in contrast to similar consumption-based taxes prevalent in other countries, which are essentially simple, flat taxes.
  • However, the new tax regime disappoints on earlier expectations that the top tax rate would be capped below 20% too. The middle class will now have to bear the brunt of higher prices.

Way ahead

  • The challenge going forward will be to prevent backdoor rigging of rates through additional levies that are completely discretionary. States that have added significantly to their debt burden in recent years must be kept in check. Or additional discretionary taxes would add to the overall tax burden and particularly compromise on tax predictability.
  • Lastly, the Centre and States must keep their pressing fiscal demands from influencing tax rates upwards in the future. Otherwise, the decision to do away with tax competition among States, in favour of a simple centralised tax system will serve no purpose.

Question What are the implications of finalizing the four rates under new GST regime? Will it have any discouraging impact on unhealthy goods such as junk foods and tobacco?

 

Bonn climate talks end amidst uncertainty (Down to Earth)

 Synoptic line: It throws light on recently concluded Bonn Climate talks. (GS paper III)

 

Overview

  • Recently Climate negotiators from nearly 200 nations gathered in Bonn, Germany, to discuss implementing the Paris Agreement to limit global warming and talk expressed confidence and optimism, despite the threat of an American exodus from agreements. The objective of the talk was to create a rule book by 2018 for implementation of the provisions of the Paris Agreement.
  • The events under “UNFCCC and special events” showcase the theme “Accelerating implementation of the Paris Agreement” and have been categorized as follows: Providing support, Promoting implementation, Enhancing ambition.
  • Climate talks concluded within three negotiating bodies-
  1. The Ad-hoc Working Group on Paris Agreement (APA),
  2. The Subsidiary Body for Scientific and Technological Advice (SBSTA) and
  3. The Subsidiary Body for Implementation (SBI).
  • The next Conference of Parties to the climate framework (COP23), to be held this November, will be organized by Fiji and hosted by Bonn.

The rulebook

  • The Paris Agreement set out the overarching goals and framework for international climate action, but left many details to be filled in later. These questions, collectively known as the Paris “rulebook”, include who should do what, by when, how and with what financial support.
  • The rulebook negotiating track is called the Ad-hoc Working Group on the Paris Agreement, or APA.
  • The work of the APA continues according to an agreed agenda, with working groups for each agenda item. These include:
  • “Agenda item 3” on the contents of and accounting for nationally determined contributions (NDCs);
  • “Agenda item 4” on how parties should communicate their adaptation efforts;
  • “Agenda item 5” on how parties will transparently report on action they take and on support they give to others;
  • “Agenda item 6” on a global stock take in 2023, where collective progress towards the Paris targets will be checked; and
  • “Agenda item 7” on how compliance with the Paris Agreement will be monitored.
  • Agenda item 8 covers other business, including the Adaptation Fund.

India, China takes the lead

  • Developments in China and India were pointed to as positive examples. “In China, coal consumption has been declining since 2013, and India has now declared that its planned coal-fired power plants are no longer needed. If the country fully implements recently announced policies, India would see a significant slowing in the growth of CO2 emissions over the next decade.
  • The fast-falling prices of renewable energy are a major driving force to switch to wind and solar power that are now competitive and being built at a much faster rate than coal power plants.
  • Ahead of COP in Bonn, the APA also agreed to conduct roundtables on elements of Nationally Determined Contribution (NDC), adaptation communication, transparency framework and global stocktake, after a divide between developed and developing countries over the same.
  • India’s intervention on equity in global stock take linking it with human development index, carbon budget and proposal of a different work stream on equity form part of the informal note on stocktaking.
  • According to the analysis, the positive developments in India and China significantly outweigh the potentially negative effects on emissions from the US Administration’s proposed rollbacks, estimated at around 0.4 GtCO2 by 2030.

Key outcomes of the Bonn climate talk

  • Within the APA, on matters relating to guidance on mitigation, adaptation communications, global stock take and transparency framework, Parties are requested to give focused submissions on elements and broad guidelines on different topics.
  • Negotiators worked to iron out details of a stock-taking exercise in 2018, which will measure progress toward the Paris goals, and to move forwards with the sticky issue of adaptation finance.
  • There was discussion over, how countries communicate their efforts with regards to mitigation and adaptation, climate finance, transfer of technology and capacity building, how they will be held accountable for their commitments, and how collective efforts will be reviewed (and ambition increased) over time.

Downside

  • There was absolutely no progress even at the level of discussions on agriculture.
  • Developing countries called budget extremely “mitigation centric”, as the funds for finance technology and adaptation were disproportionate compared to allocation of mitigation in the budget.
  • A few Parties expressed support of the US in the Paris Agreement even with a weaker revised NDC, although a few civil society groups held demonstrations on “No Backsliding” by the US. On a welcome note, the Parties including the EU, China and India expressed their commitment to climate change and gave a go ahead in implementing their climate commitments with or without the US.
  • The issue of leadership was a serious one at the inter-session with no Party appearing to take lead. However, the EU confirmed that it is collaborating with China and Canada to forge a collective leadership on climate change, though nothing has been decided till now.

Fiji’s vision for COP23

  • To advance the work of the UN Framework Convention on Climate Change and preserve the multilateral consensus for decisive action to address the underlying causes of climate change, respecting climate science.
  • To uphold and advance the Paris Agreement, ensure progress on the implementation guidelines and undertake consultations together with the Moroccan COP22 Presidency to design the process for the Facilitative Dialogue in 2018.
  • To build greater resilience for all vulnerable nations to the impacts of climate change, including extreme weather events and rising sea levels; to enable access to climate adaptation finance, renewable energy, clean water and affordable climate risk and disaster insurance; and to promote sustainable agriculture.
  • To forge a grand coalition to accelerate climate action before 2020 and beyond between civil society, the scientific community, the private sector and all levels of government, including cities and regions, as all are vulnerable and there is need to act.
  • To harness innovation, enterprise and investment to fast track the development and deployment of climate solutions that will build future economies with net zero greenhouse gas emissions, in an effort to limit the rise of global temperatures to 1.5 degrees Celsius above pre-industrial levels.
  • To draw a stronger link between the health of the world’s oceans and seas and the impacts of, and solutions to, climate change as part of a holistic approach to the protection of our planet.
  • To infuse COP23 with the Fijian’s Spirit of inclusiveness, friendliness and solidarity. A process of inclusive, participatory and transparent dialogue that builds empathy and leads to decision making for the collective good. By focusing on the benefits of action, this process will move the global climate agenda forward.

Way ahead

  • As the world is moving ahead, a consortium of countries particularly susceptible to the impacts of climate change. Delegates emphasized the benefits of developing renewable energies, such as the air will become cleaner, new jobs will be created, sustainable use of domestic resources will be improved, and countries would benefit financially.
  • By hosting CoP23 of climate talks, Fiji will use this event of UN climate summit to highlight the risks faced by low-lying countries in a warming world as Fiji are highly vulnerable to loss and damage, as climate change increases the intensity of cyclones and floods, increases sea levels, bleaches coral, and impacts fish stocks.

Note- issue previously covered on 10-05-2017.

 Question What are the possible future prospects of Paris pledge? Do you think that commitments undertaken in Paris will materialize?

 

Explained

Increased cyclonic activity linked to Ocean warming (GS paper III)

Introduction

  • Every year, typhoons over the western North Pacific the equivalent to hurricanes in the North Atlantic cause considerable damage in East and Southeast Asia.
  • Super Typhoon Haiyan of 2013, one of the strongest ocean storms ever recorded, devastated large portions of the Philippines.
  • A new study published in the journal Science Advances, suggests that under climate change, storms like Haiyan could get even stronger and more common by the end of this century.

Increased intensity of typhoons

  • The lifetime peak intensity of a typhoon is the maximum intensity the storm reaches during its entire lifetime.
  • Researchers examined various atmospheric and oceanic variables that might influence the rate of cyclone intensification.
  • They looked at atmospheric pressure, vertical wind shear, or the change in wind speed in one direction, and vorticity, or the spin of the atmosphere. Surprisingly, it was found that compared to those factors, ocean temperature most strongly correlated to the rate of cyclone intensification.
  • Specifically, how strongly and quickly a cyclone can grow depends on two oceanic factors: pre-storm sea surface temperature and the difference in temperature between the surface and subsurface.
  • A warmer sea surface generally provides more energy for storm development and thus favors higher intensification rates.
  • A large change in temperature from the surface to subsurface (ie, cooling with depth), however, can disrupt this flow of energy. That’s because strong winds drive turbulence in the upper ocean, which brings cold water up from below and cools the sea surface. Therefore, a smaller difference between surface and subsurface ocean temperature favors higher intensification rates.
  • On the other hand, the variations in the duration of typhoon intensification can be connected to sea surface temperatures associated with the naturally occurring phenomena known as El Nino-Southern Oscillation/Pacific Decadal Oscillation (ENSO/PDO). This is because in a positive phase of ENSO/PDO, warmer-than-normal sea surface temperatures over the central equatorial Pacific produce favorable atmospheric conditions for cyclone genesis near the equator and dateline.
  • This allows developing typhoons to grow for a longer period of time over the warm water before reaching land or cold water.
  • Hence, strong rise in typhoon peak intensity over the past 35 years or so (about five meters per second; equivalent to half a category in typhoon strength) can be mostly attributed to unusual local upper-ocean warming rates.

 Future vulnerabilities

  • It has been found that by year 2100, the temperature of the upper ocean will be more than 1.6 degrees Celsius higher than the baseline average of the 50-year period from 1955-2005 even under a moderate future scenario of greenhouse gas emissions.
  • The continued ocean warming provides more “fuel” for storm intensification. Using the statistical relationships built from observations, researchers projected that the intensity of typhoons in the western North Pacific will increase as much as 14% nearly the equivalent to an increase of one category by century’s end.

Question What are the possible threats to corals and coastal colonies due to increase in Ocean warming?

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