What’s in today’s article?

• Why in news?
• What is Liberalised Remittance Scheme (LRS)?
• Background of LRS:
• Which transactions are allowed under the LRS?
• What are the Restrictions under LRS?
• What are the Recent Changes in LRS?
• News Summary: Banks readying systems to track spends on outward remittances
• What are the Challenges faced by Banks in new regime?
• Outward remittances under LRS

 

Why in news?

• Starting from July 1, the Reserve Bank of India plans to implement a 20% tax on the Liberalised Remittances Scheme (LRS). 
• As a result, banks are preparing their systems to monitor expenses made with international cards and collect the applicable tax on outward remittances.

 

What is Liberalised Remittance Scheme (LRS)?

• Liberalised Remittance Scheme (LRS) was brought out by the RBI in 2004.
• It allows resident individuals to remit a certain amount of money during a financial year to another country for investment and expenditure.
• According to the prevailing regulations, resident individuals may remit up to $250,000 per financial year.

 

Background of LRS:

• Resident Indians or people resident in India are allowed to transfer foreign currency under the foreign exchange regulations. 
  • The transfer of foreign currency outside India is governed by the Foreign Exchange Management Act, 1999 (FEMA).
• Hence, to regulate transferring of funds within a specified limit, RBI brought the LRS.

 

Which transactions are allowed under the LRS?

Image caption: Transactions  allowed under the LRS

• Apart from the areas highlighted in the above diagram, the remitted amount can also be invested in shares, debt instruments, and be used to buy immovable properties in overseas market. 
• Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.

 

What are the Restrictions under LRS?

• LRS restricts 
  • buying and selling of foreign exchange abroad, or purchase of lottery tickets or sweep stakes, proscribed magazines and so on, 
  • or any items that are restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
• Also, one cannot make remittances directly or indirectly to countries identified by the Financial Action Task Force as non-co-operative countries and territories.

 

What are the Recent Changes in LRS?

• Announcement in Budget 2023-24
  • Budget had proposed hiking the TCS rate to 20 per cent from 5 per cent above Rs 7 lakh threshold for all purposes other than education and medical treatment. 
  • Also, for overseas tour packages, the government had proposed hiking the TCS rate to 20 per cent from 5 per cent, without any threshold.
• Changes made
  • May 2023, the Government amended rules under the FEMA to bring in international credit card spends outside India under the LRS.
  • As a consequence, spending on international credit cards would have then attracted a higher rate of TCS (tax collected at source) at 20 per cent from July 1. 
  • However, later, the government clarified that any payments by an individual using their international debit or credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS.
    • TCS is a direct tax levy, which is collected by the seller of specified goods from the buyer and deposited to the government. 
  • TCS can be adjusted against the overall tax liability. It can be claimed as an income tax refund or a person can avail of credit while filing the ITR or calculating the advance taxes.
  • It will not apply on the payments for purchase of foreign goods and services from India.

Image Caption: How LRS works under new regime

• Rationale behind new system
  • Indians are now increasingly using credit and debit cards abroad instead of taking travellers cheques or forex cards.
  • Until now, there is no estimate of money spent through cards abroad.
  • The new system will enable the government to track high-value overseas transactions.

 

News Summary

What are the Challenges faced by Banks in new regime?

• Banks are facing difficulties in evaluating and collecting TCS exemptions for credit and debit card transactions conducted outside India.
  • RBI has decided to leave it up to the banks to handle the collection of the tax imposed by the government in the FY23-24 budget.
• Deducting TCS is not a hassle. The hassle is to take into account certain exemptions into the system.
  • The exemption of up to Rs 7 lakh created some confusion.

 

Outward remittances under LRS

Image Caption: Outward Remittances under LRS

• There was an outflow of $ 27.14 billion (over Rs 2.22 lakh crore) under the LRS route in FY23.

 

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Q1) What is Tax Collected at Source (TCS)?

Tax Collected at Source (TCS) is a tax levied by the government of India on certain specified transactions. It is a mechanism for collecting tax at the source from the buyer or licensee, rather than from the income earner or seller. The person collecting TCS is required to collect a prescribed percentage of the transaction value as tax and deposit it with the government.

 

Q2) What is Foreign Exchange Management Act, 1999 (FEMA)?

The Foreign Exchange Management Act, 1999 (FEMA) is a legislation enacted by the Parliament of India to consolidate and amend the laws relating to foreign exchange transactions, external trade, and payments. FEMA replaced the previous foreign exchange law, the Foreign Exchange Regulation Act (FERA) of 1973.

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Source: Banks readying systems to track spends on outward remittances | Economic times | Business Today

 

What’s in today’s article?

• Why in news?
• Why have India and Egypt rekindled their ties with each other?
• Key highlights of the visit

 

Why in news?

• PM Modi left for India after concluding his first-ever visit to Egypt where he held talks with President Abdel Fattah El-Sisi.

 

Why have India and Egypt rekindled their ties with each other?

A. Imperative for India

• Push to engage the Global South
  • Indian government is pushing hard to engage the Global South.
• Rekindling of the principles of non-alignment
  • India also wants to rekindle the principles of non-alignment that have come back to the fore during Russia – Ukraine war.
• Strategic weight of Egypt
  • With a population of almost 110 million, Egypt is situated at a location that straddles Africa and Asia.
  • It has a standing army that is the largest in the region, a capital that hosts the League of Arab States and a diplomatic presence that punches above its weight in global affairs.
  • India is keen on further expanding its ties with Egypt, a key player in the politics of both the Arab world as well as Africa. 
• Economic importance of Egypt
  • Egypt has boosted its attractiveness through a series of free trade agreements that span Africa (ACFTA; AGADIR; COMESA), Europe (EFTA), Latin America (MERCOSUR) and the Arab world (GAFTA).
  • It is also seen as a major gateway to markets in Africa and Europe.
• Egypt’s plans to develop the Suez Canal Economic Zone (SCZONE) into a global manufacturing hub
  • The ambitious plans to develop the Suez Canal Economic Zone into a global manufacturing hub are now gathering critical mass.
  • SCZONE sits astride both banks of the Suez Canal, a strategic waterway that connects the Mediterranean with the Red Sea to provide the shortest link between European and Asian markets.
  • China, as usual, has been the first to take advantage of the opportunities presented by SCZONE.
    • China views SCZONE as a vital part of its Belt and Road and Maritime Silk Road projects.
  • A deeper economic engagement with Egypt therefore acquires an additional strategic imperative.
• Resetting India’s ties with Muslim-majority countries
  • India’s ties with Muslim-majority countries were tested following controversial remarks made by then spokesperson of ruling party in June 2022.
  • That Egypt was one of the few countries from the Arab world which did not react officially to the controversial remarks.
• Other factors
  • India wants to draw huge amounts of capital from Gulf nations, curtail religious extremism by supporting moderate countries in the region and participate in the security politics of the area.
  • And in order to do all this, India has realised that Egypt is a key player. 
    • The country has remained fairly moderate over the years.
    • It shares strong ties with the UAE and Saudi Arabia.
    • It is located at a crucial geo-strategic location — 12 per cent of global trade passes through the Suez Canal.

B. Imperative for Egypt

• Cairo wants India’s help to tackle its battered economy. 
• The outbreak of the COVID-19 pandemic coupled with the implications of the Russia and Ukraine war has worsened its financial woes. 
• Inflation in the country is at a five-year high of over 30 per cent and it has approached the International Monetary Fund (IMF) for the fourth time in six years for a bailout.

 

Key highlights of the visit

• Order of the Nile award to PM Modi
  • Egyptian President Abdel Fattah El-Sisi conferred Modi with ‘Order of the Nile’ award, the country’s highest state honour.
    • This is the 13th such state honour that several countries have conferred upon PM Modi.
• MoUs/Agreements signed
  • An agreement to elevate the bilateral relationship to a "Strategic Partnership" was signed by the two leaders. 
  • Three MoUs in the fields of Agriculture, Archaeology & Antiquities and Competition Law were also signed.
• PM Modi extended an invitation to the (Egypt) President for the G20 Summit
  • Prime Minister Modi extended an invitation to the Egyptian President for the G20 Summit which is upcoming in September 2023.
• PM Modi visited the historic 11th-century Al-Hakim Mosque in Cairo
  • PM Modi also visited the historic 11th-century Al-Hakim Mosque in Cairo, which was restored with the help of India’s Dawoodi Bohra community.
    • The Dawoodi Bohra Muslims are a sect of followers of Islam who adhere to the Fatimi Ismaili Tayyibi school of thought. 
    • They are known to have originated from Egypt and later shifted to Yemen, before establishing a presence in India in the 11th century. 
    • They renovated the mosque from 1970 onwards and have been maintaining it since then.
  • The historic Mosque has been named after Al-Hakim bi-Amr Allah, the 16th Fatimid caliph and is an important religious and cultural site for the Dawoodi Bohra community.
• PM visits Heliopolis War Cemetery in Cairo
  • PM Modi also visited Heliopolis War Cemetery in Cairo to pay respects to Indian soldiers who laid down their lives during World War I.

 

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Q1) What is Heliopolis War Cemetery?

The Heliopolis War Cemetery is a cemetery located in Cairo, Egypt. It is a burial ground for soldiers who died during World War I and World War II. The cemetery is maintained by the Commonwealth War Graves Commission (CWGC), an organization responsible for commemorating the Commonwealth servicemen and women who died in the two world wars.

 

Q2) Where is Al-Hakim Mosque?

Al-Hakim Mosque, also known as the Mosque of Al-Hakim bi-Amr Allah, is located in Cairo, Egypt. The mosque was built during the 11th century (990-1013 AD) and is named after the Fatimid caliph Al-Hakim bi-Amr Allah, who commissioned its construction. It is considered one of the most important Islamic architectural landmarks in Cairo.

Source: PM Modi leaves for India after concluding historic state visits to US, Egypt | Ministry of External Affairs | Times Of India | Indian Express

 

What’s in Today’s Article?

• Why in News?
• About China-Pak Nuclear Deal (Details, Existing Plants, Implications of Deal, etc.)
• About NSG (Objectives, Members, Why India not a Member?)

 

Why in News?

• Recently, China and Pakistan signed an agreement for a 1,200 MW nuclear power plant in Pakistan.

 

About the China-Pakistan Nuclear Deal:

• On June 20, China and Pakistan signed an agreement for a 1,200 MW nuclear power plant in the Chashma nuclear complex in Pakistan.
  • This is the fifth reactor at the Chashma nuclear complex (C-5).
• C-5 will be the biggest reactor at Chashma, where China has already constructed four phases of the complex, with four reactors of around 325 MW each.
• It will use China’s Hualong One reactor, which has also been installed in two plants in Karachi.

 

How Many Nuclear Power Plants Has China Built for Pakistan?

• Pakistan is currently operating six China-built nuclear plants, four smaller reactors at the Chashma complex and two at the Karachi Nuclear Power Plant (KANUPP).
• Pakistan’s oldest reactor, the Canada-built KANUPP-1, is now decommissioned, while KANUPP-2 and KANUPP-3 both use 1,100 MW Chinese Hualong One reactors.
  • KANUPP-3, with a $2.7 billion investment, went fully online in the past year.
• According to Pakistan’s Ministry of Energy, faced with a continuing energy deficit, financial crisis and rising import bills, the country needs to urgently increase the share of renewables and nuclear energy.
• Currently, thermal sources account for 61% of the energy mix, while hydropower accounts for 24%, nuclear 12%, and wind and solar only 3%.
  • The Alternative and Renewable Energy Policy rolled out in 2019 envisages increasing the share of renewables to 30% by 2030.

 

Implications of the Recent China-Pak Nuclear Deal:

• China’s civilian nuclear projects with Pakistan have come under scrutiny because the Nuclear Suppliers Group (NSG) explicitly prohibits the transfer of nuclear technology by its members to countries that have not signed the nuclear Non-Proliferation Treaty (NPT).
• China has argued that the Chashma 3 and Chashma 4 reactors were conceived under its earlier Chashma deals with Pakistan that pre-dated its joining of the NSG.

 

How this deal is different from India-U.S. nuclear deal?

• India and the U.S. had to seek a waiver from the NSG for their civilian nuclear deal, which was granted in 2008. However, neither Pakistan nor China has got waiver for the current deal.
• Also, India was granted the waiver after India undertook a number of commitments such as:
  • placing facilities under International Atomic Energy Agency (IAEA) safeguards,
  • separating civilian and military nuclear programmes 
  • a continued moratorium on testing.
• Pakistan has not given such commitments for this deal.

 

About Nuclear Suppliers Group (NSG):

• The Nuclear Suppliers Group (NSG) is a multilateral export control regime and a group of nuclear supplier countries.
• The group seeks to prevent nuclear proliferation by controlling the export of materials, equipment and technology that can be used to manufacture nuclear weapons.
• The NSG was founded in response to the Indian nuclear test in May 1974 and first met in November 1975.
• It is an informal organization, and its guidelines are non-binding. Decisions, including on membership, are made by consensus.
• Currently, the NSG has 48 participating governments. The NSG chair for 2023 - 2024 is Brazil.

 

Why is India Not a Member of the NSG?

• India is a non-signatory to NPT –
  • Non-Proliferation Treaty (NPT) is an international treaty, which came into force in 1970.
  • The main objective of NPT is to prevent the spread of nuclear weapons and weapons technology.
  • All the participants of NSG are the signatory of NPT. India, Pakistan and Israel have not signed NPT.
  • India refused to sign NPT because the NPT defines nuclear weapons states as those that tested devices before 1967.
• Opposition from China –
  • While a majority of the 48-member group backed India's membership, China along with few other countries have opposed India's admission.
    • Other countries that are opposing India's inclusion in the NSG are Turkey, South Africa, Ireland and New Zealand.
  • Experts believe that China's resistance is to facilitate the entry of Pakistan, a close ally of China, in NSG.
    • China has even argued that if India can be let in without signing NPT, then Pakistan should be granted the membership as well.
    • However, track record of Pakistan is not good. US, in 2018, sanctioned 7 Pakistani nuclear firms for nuclear proliferation.
  • Since, NSG works on the basis of consensus, China's opposition is making it difficult for India to gain entry.

 

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Q1) What is the purpose of Wassenaar agreement?

The Wassenaar Arrangement is an export control regime with 42 participating states that promotes transparency of national export control regimes on conventional arms and dual-use goods and technologies.

Q2) What is the purpose of Missile Technology Control Regime (MTCR)?

The MTCR seeks to limit the risks of proliferation of weapons of mass destruction (WMD) by controlling exports of goods and technologies that could make a contribution to delivery systems (other than manned aircraft) for such weapons.

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Source: Explained | Does the China-Pakistan nuclear deal flout global rules? | NSG.ORG   

What’s in Today’s Article?

• Why in News?
• The Chandrayaan-3 Mission
• Chandrayaan-3 Payloads
• How will the Mission be Implemented?

 

Why in News?

• The Indian Space Research Organisation (ISRO) plans to retain the names of the Chandrayaan-2 lander (Vikram) and rover (Pragyan) for their Chandrayaan-3 equivalents as well.
• Following Chandrayaan-2, where a last-minute glitch led to the failure of the lander's (Vikram) soft landing attempt after a successful orbital insertion, another lunar mission (Chandrayaan-3) for demonstrating soft landing was proposed. 

 

The Chandrayaan-3 Mission:

• Chandrayaan-3 ("mooncraft") is a planned 3rd lunar exploration mission by the ISRO to demonstrate end-to-end capability in -
  • Safe landing (through the lander Vikram - after Vikram Sarabhai, the father of the Indian space programme) and
  • Roving (through the rover Pragyan) on the lunar surface.
• Unlike Chandrayaan-2, it will not have an orbiter and its propulsion module will behave like a communications relay satellite.
• Chandrayaan-3 interplanetary mission has three major modules: the Propulsion module, Lander module, and Rover.
• ISRO plans to launch the third moon mission in mid-July aboard the LVM3 (formerly GSLV Mk-III) rocket from Sriharikota.

 

Chandrayaan-3 Payloads:

• The propulsion module: It has Spectro-polarimetry of Habitable Planet Earth (SHAPE) payload to study the spectral and polarimetric measurements of Earth from lunar orbit.
• Lander payloads: It will have 4 payloads -
  • Radio Anatomy of Moon Bound Hypersensitive ionosphere and Atmosphere (RAMBHA) to study the temporal evolution of electron density in the Lunar ionosphere.
  • Chandra’s Surface Thermophysical Experiment (ChaSTE) to measure the thermal conductivity and temperature;
  • Instrument for Lunar Seismic Activity (ILSA) for measuring the seismicity around the landing site;
  • Langmuir Probe (LP) to estimate the plasma density and its variations.
• Rover payloads: Alpha Particle X-ray Spectrometer (APXS) and Laser Induced Breakdown Spectroscope (LIBS) for deriving the elemental composition in the vicinity of the landing site.

Image Caption: Difference between Chandrayaan-1 and Chandrayaan-2

 How will the Mission be Implemented?

• A propulsion module will carry the lander-rover configuration to a 100-km lunar orbit.
• Once the ‘Vikram’ lander module makes it safely to the moon, it will deploy ‘Pragyan’.
• Pragyan will carry out in-situ chemical analysis of the lunar surface during the course of its mobility.

 

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Q1) Who was Vikram Sarabhai?

Dr. Vikram Ambalal Sarabhai was an Indian physicist and astronomer who initiated space research and helped develop nuclear power in India. He is internationally regarded as the Father of the Indian Space Program.

 

Q2) What is GSLV Mk-III/LVM-3?

Geosynchronous Satellite Launch Vehicle Mark III/Launch Vehicle Mark-III is a 3-stage medium-lift launch vehicle developed by the ISRO. Primarily designed to launch communication satellites into geostationary orbit, it is also due to launch crewed missions under the Indian Human Spaceflight Programme (Gaganyaan).

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Source: Chandrayaan-3 | Lander Vikram, rover Pragyan to return for another tryst with the moon