Daily Current Affairs for IAS & UPSC Preparation

All current affairs available date-wise and month-wise. Watchout for Back2basics and Notes4students.

June 2017
« May    

Urban Transformation – Smart Cities, AMRUT, etc. Infrastructure

Government launches index to rank 116 cities on quality of life



Mains Paper 1: Social issues | Urbanization , their problems and remedies

From UPSC perspective, following things are important:

Prelims level: Particulars of the Index

Mains level: Important step for improving quality of life of the people. It will help State and Union Government to work more specifically on target areas


  1. What: The Union government has launched a liveability index which will rank the country’s 116 major cities on the basis of the quality of life they offer
  2. Name of the Index: City Liveability Index
  3. Range of the Index:  It will cover cities with population above one million, including the capital cities
  4. Aim of the Index: It will enable the cities know where they stand in terms of the quality of life and the interventions required to improve it

Parameters on which cities will be assessed

  1. The cities will be assessed on a comprehensive set of 79 paratmeters
  2. These includes (1) availability of roads, education, (2)healthcare, (3) mobility, (4)employment opportunities, (4) emergency response, (5) grievance redressal, (6)pollution, (7)availability of open and green spaces, (8) cultural and entertainment opportunities.


Centre clears 30 more cities for Smart Cities Mission



Mains Paper 1: Social issues | Urbanization, their problems and remedies

The newscard is based on Smart cities Mission. Few takeaways from this are as follows:

Prelims Level:  Make note of the names of the cities

Mains Level: Read the newscard to critically understand Smart City Mission.


  1. The Centre announced the names of 30 more smart cities
  2. These are Thiruvananthapuram, Naya Raipur and Rajkot
  3. Amaravati, Patna, Srinagar, Bengaluru, Shimla, Dehradun, Aizawl and Gangtok are among the state capitals included this time in the list
  4. Now there are 89 cities under the mission to develop 100 smart cities across India

Some places backed out

  1. New Town Kolkata was selected for the mission but withdrew after the West Bengal government announced its own Green City mission
  2. Mumbai too backed out from the fray


  1. Total investment of Rs 1.91 lakh crore has been proposed for the 89 cities under the mission
  2. 80% of the funds that will be spent in these 30 cities would be on area-based development (ABD) of a select pocket within these cities
  3. Of the proposed Rs 57,393 crore, the pan city spending on ICT solutions would be Rs 10,514 crore
  4. The Area Based Development (ABD) expenditure, allowed both for infrastructure and ICT, would be Rs 46,878 crore

Less allocation of funds

  1. In cities such as Thiruvananthapuram, Bengaluru, Shimla, Bilaspur and Tiruchirapalli, the investment on ABD would be 90% or more of total funds
  2. In the 59 mission cities selected prior to this, over 80% of the funds would go to only 2.7% of the total land as much of the expenditure has been proposed under ABD
  3. ABD accounts for over 10% of the area and population in case of quite a few cities

Smart City: A small area

  1. Under the Smart City Mission, a relatively small portion of each mission city is being chosen by the citizens and city governments for fixing the infrastructure deficit
  2. That is how urban development has been approached in countries like the US and others
  3. A significant share of the investment has been proposed on affordable housing projects, school and hospital projects, redevelopment of roads and Integrated Command and Control Centres

World drug report stresses drug-terror link


Mains Paper 3: Internal Security | Role of external state and non-state actors in creating challenges to internal security

The newscard has information on World Drug Report. Few takeaways are:

Prelims Level: Remember the name of the report and the releasing agency

Mains Level: Note down the points for a critical analysis in your Mains Answer

The points mentioned here can be used for Essay Writing as well


  1. A World Drug Report is released by the United Nations Office on Drugs and Crime
  2. It reiterates the important role drugs play in funding organised crime and stresses the link between drugs and terror

Patchy information?

  1. Terrorists and non-state armed groups are profiting from the drug trade
  2. By some estimates, up to 85% of opium poppy cultivation in Afghanistan is in territory under influence of the Taliban
  3. However, evidence on the organised crime-terrorism nexus remains patchy at best

ISIS and Drugs

  1. The Report refers to media reports to talk about claims that the Islamic State and other armed groups in Iraq and the Syrian Arab Republic produce and consume captagon tablet
  2. Captagon tablet is typically amphetamine mixed with caffeine
  3. The group operates in an area likely to be a manufacturing hub

Drugs in West Africa

  1. Boko Haram has helped drug traffickers smuggle heroin and cocaine across West Africa, says the report
  2. Some evidence suggests that Al-Qaida in the Islamic Maghreb has been involved in cannabis and cocaine trafficking, or protecting traffickers
  3. The report estimated that in 2015 about a quarter of a billion people used drugs


World drug report:

  1. The World Drug Report is a United Nations Office on Drugs and Crime annual publication
  2. It analyzes market trends, compiling detailed statistics on drug markets
  3. Using data, it helps draw conclusions about drugs as an issue needing intervention by government agencies around the world
  4. To celebrate 20 years since its inception, the World Drug Report 2017 presented a new five-booklet format
Pulses production – Subramanian Committee, Eco Survey, etc. Agriculture

[op-ed snap] The return of kisan politics



Op-ed discusses reasons behind farmer agitations across country and prevalent rural urban divide. Points can come in handy in mains answers related to this topic.

From UPSC perspective, following things are important:

Prelims level: National Sample Survey reports, MGNREGA, Minimum Support Prices

Mains level: Rural urban divide, issues with MSP and solutions to this issue



  1. The recent mobilisation of peasants is a fall-out of socio-economic trends related to India’s post-1991 growth pattern
  2. Urban India was the main winner of the post-1991 growth pattern, and rural India lagged behind
  3. The best data documenting these trajectories can be found in the National Sample Survey reports

What has caused this Mobilization?

(a) Widening Disparity:

  1. In 1993-1994, the monthly per capita expenditure (MPCE) in rural India was Rs 281, while the MPCE in urban India was Rs 458 (No need to remember exact data, you can quote it in mains as Urban MPCE was twice as rural)
  2. By 2007-2008: By that year, the average MPCE in rural India was Rs 772 (a 174 per cent increase over 1993-1994) while that of urban India had increased to Rs 1,472 (The gap still existed)
  3. The gap diminished somewhat between 2007-2008 and 2011-2012, with rural MPCE touching Rs 1,430 and the urban MPCE rising to 2,630 (But this was only marginal cover up)

Reasons for this disparity:

  1. This disparity is partly due to the slow growth of agriculture over the last decade
  2. Also due to government’s lack of interest in agriculture— declining investments in irrigation, diminishing fertilizer subsidies

(b) Role of MGNREGA:

  1. The MGNREGA is primarily meant for poor farmers
  2. The farmers who are not the scheme’s main beneficiaries have suffered from two years of drought

(c) Demonetisation effect:

  1. Peasants desperate for cash had to sell their produce at very low prices to traders
  2. They also ran into heavy debts with moneylenders charging an interest rate of more than 20 per cent; many were forced to sell their lands

What could have been done?

  1. Government should have maintained the Minimum Support Prices (MSPs) at a good level
  2. Especially the MSPs of pulses, in which poor farmers specialized.
RBI Notifications Finance and Banking

M-banking now under ombudsman’s purview



With digital banking gaining pace, RBI has also made various provisions in order to improve financial inclusion through these banking modes. News card discusses one such move.

From UPSC perspective, following things are important:

Prelims level: Banking Ombudsman Scheme 2006 (Read more about it in B2B)

Mains level: Measures taken to safeguard customer interests in era of digital banking, various schemes related to digital payments and their overall impact.


  1. The Reserve Bank of India has widened the scope of the Banking Ombudsman Scheme 2006
  2. A customer can now lodge a complaint against the bank for non-adherence to instructions related to mobile banking and electronic banking services

Pecuniary jurisdiction widened:

  1. The pecuniary jurisdiction of the Banking Ombudsman to pass an award has been increased from the existing Rs. 10 lakh to Rs. 20 lakh
  2. Compensation (not exceeding Rs. 1 lakh) can also be awarded by the Banking Ombudsman to the complainant for loss of time, expenses incurred as also harassment and mental anguish suffered by the complainant


Banking Ombudsman Scheme 2006

  1. The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks
  2. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services
  3. All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme
  4. The Banking Ombudsman can receive and consider any complaint relating to the following deficiency in banking services (including internet banking + now mobile banking)
  5. One can file a complaint before the Banking Ombudsman if the reply is not received from the bank within a period of one month after the bank concerned has received one s representation, or the bank rejects the complaint, or if the complainant is not satisfied with the reply given by the bank
  6. If one is not satisfied with the decision passed by the Banking Ombudsman, one can approach the appellate authority against the Banking Ombudsmen’s decision. Appellate Authority is vested with a Deputy Governor of the RBI

Panel to oversee progress in UN’s SDG



From UPSC perspective, following things are important:

Prelims level: Structure of the CSO

Mains level: The Article shows India’s commitment towards Sustainable Development Goals. It can be used as a good example of Seriousness of Indian Government.


  1. What: The Union Government will soon set up a high-level committee to oversee the country’s progress towards UN’s Sustainable Development Goals at ending poverty, fighting inequalities and tackling climate change
  2. This committee will be headed by the Chief Statistician of India
  3. Current Status: The Ministry of Statistics and Programme Implementation has already developed a list of draft national indicators to measure progress of SDGs
  4. Future Strategy: India will hold bi-annual reviews with the State governments for identifying good practices and challenges

What did India say in its Voluntary National Review Report submitted to the UN Forum on Sustainable Development?

  1. India is developing a dashboard with technical support from the UN Development Programme (UNDP) to “strengthen the mechanism” for monitoring progress on these global goals

Less than 3% of projects under mission completed



Mains Paper 1: Social issues | Urbanization , their problems and remedies

The newscard has some statistical information on the Smart Cities Mission. Some takeaways from this are:

Prelims Level: Not very Prelims worthy

Mains Level: Good points for writing a critical answer on Smart Cities Mission.


  1. Nearly two years after the Smart Cities Mission was launched, less than 3% of the projects proposed under the Mission have been completed
  2. The information is shared by the Union Urban Development Ministry

Some statistics

  1. The Smart Cities Mission covered 60 cities in the first two rounds
  2. A total of 2,313 projects have been proposed at a total cost of Rs.96,336 crore(No need to remember exact figures!)
  3. Of these, only 57 projects had been completed as of June 16, 2017

What about AMRUT and PMAY?

  1. June 25 will mark the second anniversary of two other Central government schemes for urban development:
  • The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and
  • The Pradhan Mantri Awas Yojana (Urban)
  1. The Ministry had approved a total investment of Rs.3,15,964 crore for the three schemes
  2. 11,705 projects had been approved, and of these, 5,493 were in the process of being executed

Massive investment

  1. These projects account for an investment of Rs.1,12,904 crore
  2. This is 36% of the total investment approved
  3. Such a high rate of project conversion is quite significant, given the past record of urban planning and implementation
  4. Under AMRUT, Rs.77,640 crore had been approved for 4,672 projects


Smart City:

  1. It is an urban development vision to integrate information and communication technology (ICT) and Internet of things (IoT) technology in a secure fashion to manage a city’s assets
  2. These assets include local departments’ information systems, schools, libraries, transportation systems, hospitals, power plants, water supply networks, waste management, law enforcement, and other community services
  3. A smart city is promoted to use urban informatics and technology to improve the efficiency of services
  4. ICT is used to enhance quality, performance and interactivity of urban services, to reduce costs and resource consumption and to improve contact between citizens and government
  5. Smart city applications are developed to manage urban flows and allow for real-time responses
Foreign Policy Watch: India-United States India Beyond its Neighbours

[op-ed snap] India, US and a five-point plan



Mains Paper 2: IR | Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

From UPSC perspective, following things are important:

Prelims level: Not Much

Mains level: Article talks about Future goals of India-US diplomacy.



  1. The Article is about the upcoming meet of Modi and Trump
  2. In this, writer is suggesting a five-point plan for future Indo-US Relations


Why India and US needs to engage with each other?

Geo-politics: The evolution of global geopolitics has led to an unprecedented convergence between the US and India.

Commercial advantage:The commercial imperative for closer ties is clear for American companies seeking to do business in the fastest growing large economy in the world. On the flipside, India’s strength in the services sector provides US companies with a deep competitive edge.

Strategic reasons: The strategic imperative for a deeper cooperation between the two countries is indisputable: China’s military build-up and its assertive posture in the Indo-Pacific, the need to address regional security threats in South Asia, and increasing cyber security challenges.


five commercial and strategic priorities that will continue to be the pillars of the US-India partnership which both governments should consider.

1.Building a forward-looking trade agenda

  1. The two countries will need to work on issues such as India’s IP standards and the immigration executive orders affecting high-skilled workers in the US
  2. “America First” and “Make in India” should not become matters of conflict


2.US-India defence partnership 

  1.  In 2016, the Government of India finalised the Logistics Exchange Memorandum of Agreement (LEMOA)
  2. And. the US government recognised India as “Major Defense Partner”
  3. India is undergoing a process of military modernisation and could choose to procure defence equipment produced in the US.
  4. Further defence equipment sales to India could help reduce the US-India trade deficit and improve the US’s defence-industrial manufacturing base.

3.Reinvigorate a US-India agriculture dialogue

  1. The aim of a high-level agriculture dialogue would be to reduce barriers and can be part of a streamlined US-India Strategic and Commercial Dialogue or combined with the US-India Trade Policy Forum.
  2. The US and India could create parliamentary exchanges among representatives from high agriculture production areas, establish scientific exchanges, and share best practices in food safety and nutrition.

4.Create an energy trade and technology initiative

  1. The purpose of this initiative would be to underscore the importance of growing US energy exports to meet India’s high demand.
  2. The initiative would also increase industry participation in bilateral dialogues for energy collaboration
  3. The Indian government should also implement a commercial mining framework to enable US companies to invest in the sector.

5.Building cooperation on health security:

  1. Both India and the US should reaffirm their commitment to global health security with emphasis on sharing best practices and technology, and a recognition of the role the private sector can play.
  2. They should work together on improving India’s implementation of its IPR policy and addressing specific areas of contention such as Section 3(d) under the Patent Act.
Low Priority News Items For UPSC, IAS Exam and Why

[23 June 2017] Low priority news items of the day

The [Low priority news items of the day] series of posts are aimed at increasing transparency wrt. mature aspirants and educating young aspirants (on what to leave/ assign lower priority and why).

Low priority news items of the day:


NATGRID can soon access PAN, I-T records

The Centre has empowered the National Intelligence Grid (NATGRID), the integrated mechanism to keep track of security-related data, to access the Income Tax department’s records on individual taxpayers as well as PAN card holders. NATGRID and the I-T department could sign a pact soon to operationalise the data sharing arrangement.

What is important in this news is covered here in this snippet. No need to go full monty on the original news.


India’s population could surpass that of China’s around 2024 and is projected to touch 1.5 billion in 2030, according to a U.N. report. India’s population may eventually see a decline after 2050 to 1.51 billion by 2100 but it will still be the most populous country in the world, the report said.

What is important in this news is covered here in this snippet. No need to go full monty on the original news.


Using NASA’s Hubble Telescope, astronomers have discovered a first-of-its-kind compact yet massive, disk-shaped ‘dead’ galaxy that stopped making stars just a few billion years after the Big Bang. The discovery challenges the current understanding of how massive galaxies form and evolve, researchers said.

un-named Galaxies,comets,planets and asteroids are generally irrelevant for the exam.

[op-ed snap] Realizing the India-US trade potential



Mains Paper 2: IR | Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

From UPSC perspective, following things are important:

Prelims level: Not Much

Mains level: The article talks about expectations that India and the US have from each other.



  1. India’s concerns regarding US trade policies will need to be addressed to improve the possibility of mutually beneficial access to India’s markets

India Demands from US on Trade front

  1. India demands for improved access to the US market for its workers
  2. Access to more H-1B visas
  3. To effectively engage in mutually beneficial talks, the US needs to recognize and address India’s concerns about American trade policy

Key US concerns with India’s trade environment

  1. Bilateral trade deficit between the two countries
  2. Enforcement of intellectual property rights
  3. Trump’s primary focus is demonstrating improved market access for US exporters

Expectations from the upcoming Modi-Trump Meet

  1. US should aim to loosen the standards and technical barriers it applies to Indian exports in precisely the manner it demands of India’s similar practices

The US needs to keep following aspects in mind when discussing trade policy issues with India

  1. India is reforming and simplifying its policy regime, particularly its inside-the-border trade measures
  2. India’s tariff regime on average is less restrictive than commonly presumed
  3. The demand from India’s growing middle class is slated to become the second-largest in the world within 10 years. This increase would create significant opportunity for US trade and employment
  4. India’s concerns regarding US trade policies will need to be addressed to improve the possibility of mutually beneficial access to India’s markets
Goods and Services Tax (GST) Finance and Banking

GST part of digitisation push, will broaden tax base: Urjit Patel


From UPSC perspective, following things are important:

Prelims level: Not Much

Mains level: Article presents the view of RBI Governor on the GST


  1. What: Reserve Bank of India Governor Urjit Patel has said that the GST will broaden the tax base, which in turn will lower the overall taxes in the long-term
  2. Besides creation of a national market, GST will also reduce many inefficiencies within the states while moving goods from within a state and also across the country
  3. What he said on fintech: he said with the emergence of technology-enabled innovation in financial services there will both opportunities and risks to financial sector stability
  4. And it need to be addressed by policy makers, regulators and supervisors, as many innovations have not been tested through a full financial cycle
  5. The country’s fintech industry has almost tripled its size since 2013 and the value of transactions has touched $30 billion already
Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc Agriculture

[op-ed snap] Debunking myths about the cattle rules



Mains Paper 3: Agriculture | Economics of animal-rearing

From UPSC perspective, following things are important:

Prelims level: Particulars of the PCA Act

Mains level: We have seen many articles criticizing recent cattle rules. It is a good counter article on cattle ban issue.It is very important to write balanced answers(covering both sides of the coin) in UPSC mains.



  1. The Article is about the provisions of The Prevention of Cruelty to Animals (Regulation of Livestock Market) Rules, 2017
  2. It talks about why there is no need to worry about these provisions

Why were these provisions criticized by the opposition?

  1. First, Opposition alleged that they are the product of government’s divisive agenda that is trying to push the creed and beliefs of the majority
  2. Second, the provisions of the Prevention of Cruelty to Animals Act, 1960 (PCA) have been used as a convenient method to implement above agenda

Origin of these new rules

  1. In July, 2016, the Supreme Court by the way of a final order directed the Union government to frame rules under Section 38 of the PCA
  2. Why: SC had constituted a committee to suggest solutions to stop cruelties from being perpetrated on animals
  3.  It was found that it is in the market that cruel practices like hot branding, cold branding, shearing, bishoping of horses, ear cutting in buffaloes, sealing teats of udder with adhesives, etc. actually happen
  4. So, the Animal Welfare Board of India prepared the draft rules incorporating all the suggestions made by the Supreme Court

Why is this criticism not necessary?

  1. These rules do not prevent anyone from eating beef
  2. They only regulate the sale and slaughter of cattle and certain other animals
  3. Therefore the purpose of these rules was not some sinister plot to push through a communal agenda but merely to comply with directions of the Supreme Court(as mentioned in the ‘Origin’ above.
Climate Change Policy Interventions – Paris Conference, GCF, etc. Climate Change

A law, this time for Antarctica



Mains Paper 2: IR | Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

The newscard has details on India’s expansion in Antarctica. Few takeaways are:

Prelims Level: Know about Antarctica Policy, Antarctica Treaty, Area for Prelims

Mains Level: Not very Mains rich


  1. Antarctica- the world’s only continent without countries and citizens- may see more tourists, over-exploited fisheries, disputes and crime
  2. India is drafting a dedicated Antarctica policy and a law that will likely be tabled in the winter session of Parliament

Why the Antarctica Policy?

  1. India, being among the countries that have acceded to the Antarctica Treaty, is expected to have a clear policy on the consequences of its activities in the region.
  2. Ministry of Earth Sciences was tasked with drafting the law

The Antarctica Treaty

  1. The treaty is framed to ensure in the interests of all mankind that Antarctica shall continue forever to be used exclusively for peaceful purposes
  2. Antarctica shall not become the scene or object of international discord
  3. To this end it prohibits military activity, except in support of science
  4. It prohibits nuclear explosions and the disposal of nuclear waste
  5. It promotes scientific research and the exchange of data
  6. The treaty holds all territorial claims in abeyance

What is the area? The pact applies to the area south of 60° south latitude, including all ice shelves and islands

Many pacts for region

  1. Related conventions such as the Conservation of Antarctic Seals (1972), and Conservation of Antarctic Marine Living Resources (1980) are appended to this treaty for protection
  2. These laws also mean that conventional concepts such as territories and jurisdictions do not hold good here

India’s infrastructural development in Antartica

  1. India is expanding its infrastructure development in Antarctica
  2. The government is rebuilding its station, Maitri, to make it bigger and last for at least 30 years
  3. Dakshin Gangotri is the first Indian base established in 1984
  4. It has weakened and become just a supply base


Conservation of Antarctic Marine Living Resources (1980):

  1. The Convention on the Conservation of Antarctic Marine Living Resources also called Commission for the Conservation of Antarctic Marine Living Resources
  2. It is part of the Antarctic Treaty System
  3. The Convention entered into force by the Commission for the Conservation of Antarctic Marine Living Resources
  4. It is headquartered in Tasmania, Australia
  5. The goal is to preserve marine life and environmental integrity in and near Antarctica
  6. Why? It was established in large part to concerns that an increase in krill catches in the Southern Ocean could have a serious impact on populations of other marine life which are dependent upon krill for food
  7. 2016 annual meeting held in Hobart, a Ross Sea marine park

PSLV will lock heavy weight Cartosat-2 into orbit today



Mains Paper 3: Science & Technology | Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights

The newscard has important information on the PSLV-C38 launch. Important takeaways are:

Prelims Level: Make note of PSLV, CARTOSAT-2,  

Mains Level: Not very Mains heavy


  1. ISRO is all set for the launch of the Polar Satellite Launch Vehicle carrying the Cartosat-2 series satellite, along with 30 co-passenger satellites
  2. The PSLV- C38 launch will take place at the Satish Dhawan Space Centre, Sriharikota

30 other satellites

  1. The 31 satellites, together weighing 955 kg, will be lifted into a 505-km polar sun synchronous orbit
  2. This will be the second highest number of satellites to be launched by ISRO using a single rocket

What is Cartosat-2?

  1. The Cartosat-2 is earth observation satellite and is weighing 712 kg
  2. It is the primary payload aboard PSLV-C38 and will be the first to be injected into orbit, 16 minutes from lift-off
  3. The imagery provided by the satellite will be used for cartographic applications, coastal land use and regulation, road network monitoring, water distribution, land use mapping and geographical information system applications
  4. Cartosat-2 is designed for a lifespan of five years

Countries concerned

  1. The PSLV-C38 payload includes a nano satellite designed and developed by the Noorul Islam University in Kanyakumari district
  2. The rest of the payload comprises 29 nano satellites from 14 countries — Austria, Belgium, Chile, the Czech republic, Finland, France, Germany, Italy, Japan, Latvia, Lithuania, Slovakia, United Kingdom and the U.S.
  3. They are being launched as part of the commercial pact between the Antrix Corporation, the commercial arm of ISRO, and the international customers



  1. Cartosat-2 is an Earth observation satellite in a sun-synchronous orbit
  2. The satellite was built, launched and maintained by the ISRO
  3. Weighing around 680 kg at launch, its applications will mainly be towards cartography in India
  4. Cartosat-2 carries a state-of-the-art panchromatic (PAN) camera that take black and white pictures of the earth in the visible region of the electromagnetic spectrum
  5. Cartosat-2 is an advanced remote sensing satellite capable of providing scene-specific spot imagery
  6. The data from the satellite will be used for detailed mapping and other cartographic applications at cadastral level, urban and rural infrastructure development and management, as well as applications in Land Information System (LIS) and Geographical Information System (GIS)
Financial Inclusion in India and Its Challenges Finance and Banking

[op-ed snap] Are farm loan waivers really so bad?



Op-ed discusses issue of farm loan waivers from economic as well as moral perspective. Can be asked in Paper IV-Ethics. Read and make notes.

From UPSC perspective, following things are important:

Prelims level: Government bonds, crowding out of investment, Agricultural Insurance Company of India, Subsistence agriculture

Mains level: Economic and moral aspects related to farm loan waivers, what led to this situation and how problem can be tackled.



  1. There has been a rising trend of farm loan waivers in country in recent times and after UP, Maharashtra and Punjab, Karnataka has also announced waivers for few categories of farmers.

What do farm loan waivers lead upto?

  1. Farm loan waiver undermines an honest credit culture, it impacts credit discipline, it blunts incentives for future borrowers to repay
  2. Waivers engender moral hazard.
  3. It also entails at the end of the day, transfer from taxpayers to borrowers
  4. On account of this, overall government borrowing goes up and yields on government bonds also are impacted
  5. It can also lead to the crowding out of private borrowers as higher government borrowing can lead to an increase in cost of borrowing for others

Present demands and reasons behind them:

  1. The present demands are an outcome of the fact that the government is willing to provide for “acts of God”, not for “acts of state”
  2. The policy framework for farm loans has a provision that when the Centre declares a drought, farm loans in officially designated “affected districts” are rolled over, initially for a year, up to a maximum of three years
  3. Farmers’ problems in 2016-17 are almost entirely the outcome of demonetisation: there was no clear geographical demarcation, and there has been no rolling over of loans

If loans are not waived?

  1. Agricultural loans by banks in India are compulsorily insured by the Agricultural Insurance Company of India (AIC)
  2. Its liabilities are back-stopped by the Centre through budgetary support
  3. Even if loans aren’t waived, there is no loss to banks
  4. In situations of widespread and acute farmer distress leading to substantial defaults, the Centre will have to step in and provide funds
  5. The difference is that waivers are borne by states, and defaults are borne by the Centre

How this all started?

  1. To improve farmer livelihoods and check food inflation, our agricultural strategy has been based upon persuading farmers to move away from traditional subsistence agriculture towards more commercial operations
  2. This entails farmers investing much more and taking higher risks

Economic consequences:

  1. Traditional farm finance sources like moneylenders can neither provide the requisite volume of funds nor do they allow enough margins to make risk-taking worthwhile
  2. Forcing farmers back to moneylenders will retard diversification, thereby increasing the risk of accelerating food inflation

The ‘sub-sovereign’ dilemma:

  1. At the heart of this problem are constitutional provisions
  2. Health of the banks is the Centre’s concern while the health of the farmers is that of the states (Center, state and concurrent lists)
  3. This division of responsibility is asymmetric in that if states protect the interest of farmers, they also protect banks; while the Centre can protect banks without concern for farmers

Possible solutions:

  1. The Centre and states need to work together to evolve a farm loan model which protects both farmers and banks without bringing politics into it
  2. This is the essence of “cooperative federalism
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