Daily Current Affairs for UPSC CSE
Topics Covered
- Health Star Rating
- Global Financial Stability Report
- Corporate Defence Mechanism against Hostile take over
1 . Health Star Rating
Context : The “health star rating” system that the Food Safety Standards Authority of India (FSSAI) plans to adopt in order to help consumers reduce their intake of unhealthy foods is “not evidence-based” and has failed to alter buyer behaviour, claim over 40 global experts in a letter to Union Health Minister Mansukh Mandaviya.
About Health Star Rating System
- FSSAI decided to adopt the “health-star rating system” for packaged foods just like the bureau of energy efficiency has for electronic appliances.
- As per the ‘Health Star’ rating system, packaged foods will display the number of stars on the front of the pack, indicating how healthy or unhealthy it is depending upon the amount of salt, sugar and fat it has.
- Health star rating was one of five types of labels that were considered, including traffic light signs, a nutrition score and warning symbols.
- The HSR format ranks a packaged food item based on salt, sugar, and fat content and the rating will be printed on the front of the package.
- The decision was based on the recommendations of a study by the IIM-Ahmedabad the regulator had commissioned in September 2021.
Criticisms
- These experts have said the health star rating (HSR) system adopted in countries like Australia and New Zealand has not resulted into any meaningful behaviour change and that eight years after their implementation there is “still no evidence of HSRs having a significant impact on the nutritional quality of people’s food and beverage purchases
- Secondly, the nutrition researchers and academics argue that the HSR system “misrepresents nutrition science. They explain that the underlying premise of the HSR is that positive ingredients such as fruits and nuts can offset negative nutrients such as calories, saturated fat, total sugar, sodium to calculate the number of stars ascribed to a product. This algorithm of adding and subtracting nutrients does not fit with understanding of biology. For example, the presence of fruit in a fruit drink juice does not offset the impacts of added sugar in the body. There is no empirical evidence to suggest that adding these ingredients will lessen the negative impact of these foods on the body,” the letter asserts. The letter has raised questions over the IIM-Ahmedabad study and called its conclusions “completely wrong from a scientific perspective”.
- Experts argue that “warning labels” instead have been most effective in various countries.
2 . World Economic Outlook
Context : The IMF on Tuesday cut its forecast for India GDP growth in the current fiscal year to 8.2%, a 0.8 percentage point reduction from January, as it downgraded the outlook for global growth citing the economic impact of the Russia-Ukraine war.
About World Economic Outlook
- A Survey by the IMF staff usually published twice a year.
- It presents IMF staff economists’ analyses of global economic developments during the near and medium term.
Details of the Report
- The International Monetary Fund’s latest World Economic Outlook projected India’s economy to expand by 6.9% next year, putting it on course to be the fastest growing large economy over the two years.
- World output is now projected to grow by 3.6% this calendar year and next, slowing sharply from the 6.1% expansion seen in 2021.
- “The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution,” the IMF said forecasting a massive 35% contraction for Ukraine in 2022. The conflict, the Fund noted, would contribute not only to a “significant slowdown” in 2022, but also to inflation — via trade, commodity markets and financial channels.
- The IMF said Japan and India were seeing “notable” growth forecast downgrades in the Asia region, partly because of lower net exports and weaker domestic demand, with higher oil prices expected to weigh down consumption and investment.
- India was “suffering like many other countries as a consequence of the war and negative terms of trade shock” due to higher food and energy prices weighing down trade balances. External demand was also softening as the rest of the world’s growth was impacted
3 . Corporate Defence Mechanism against Hostile take over
Context : Tesla CEO Elon Musk’s bid to acquire Twitter was partially thwarted on Saturday with the microblogging platform deploying the ‘poison pill’ mechanism. The ‘poison pill’ mechanism is used to dilute shares of a company so that activist investors looking for hostile takeovers will incur a massive expenditure. Besides, this will make the process cumbersome.
How did Twitter deploy the ‘poison pill’?
- Twitter put forth a shareholder rights plan that would be triggered if an entity acquires a stake of 15% or more. The plan would allow existing shareholders, excluding the acquiring entity — Mr. Musk in this case — to purchase additional shares at a discounted rate, making it difficult for the acquirer to establish a majority stake in the company.
- The move would additionally reduce the likelihood of an entity acquiring control of the company without paying the other shareholders an appropriate premium.
- It was meant to buy more time as the company’s board endeavours “to make informed judgements and take actions that are in best interest of shareholders.”
What are the other defence mechanisms?
- Publicly listed companies across the globe often witness threats of hostile takeovers, which take place through a back-door accumulation of shares; in other words, acquiring sizeable shares from the open market than from the management. However, with time, listed companies have been able to come up with several defence mechanisms to prevent such takeovers. Some of them include:
- The greenmail defence: It involves the target company repurchasing its own shares at a premium and in a quantity enough to prevent a hostile takeover.
- The crown jewel defence: This mechanism involves the target company spinning-off its crown jewel unit, or its most valued asset, in order to make the acquisition less desirable for the acquirer. The asset could be the unit that is most profitable in the company, or is important for future profitability, or produces the flagship product of the company.
- The pac-man defence: Here one prevents a hostile takeover by initiating a reverse takeover. It involves the target company making an offer to the acquire the company that commenced the takeover bid. The target company could make use of its ‘war chest’ or securing finances from outside for the reverse takeover bid.
- The white knight defence: In case a company’s board finds itself in a situation that it cannot prevent a hostile takeover, it seeks a more accommodative and cordial firm to acquire a controlling stake from the hostile acquirer. The ‘White Knight’ agrees to restructure the company adhering largely to the desires of the target company’s board, also providing a fair consideration.