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GS Paper: GS3

  • In news: Pashmina Wool

    pashmina

    Traders of Pashmina shawls are complaining that “obsolete testing methods” have resulted in many of their export consignments being flagged for the presence of ‘Shahtoosh’ guard hair, which is obtained from endangered Tibetan antelopes.

    Shahtoosh, on the other hand, is the fine undercoat fibre obtained from the Tibetan Antelope, known locally as ‘Chiru’, a species living mainly in the northern parts of the Changthang Plateau in Tibet.  

    What is Pashmina?

    • Pashmina is a fine type of cashmere wool. The textiles made from it were first woven in Kashmir.
    • The wool comes from a number of different breeds of the cashmere goat; such as the changthangi or Kashmir pashmina goat from the Changthang Plateau in Tibet and part of the Ladakh region and few parts of Himachal Pradesh.
    • Often shawls called shahmina are made from this material in Kashmir and Nepal; these shawls are hand spun and woven from the very fine cashmere fibre.
    • Traditional producers of pashmina wool are people known as the Changpa.
    • Bureau of Indian Standards (BIS) has published an Indian Standard for identification, marking and labelling of the already GI tagged Pashmina products to certify its purity.

    About Pashmina goat

    • The Changthangi or Pashmina goat is a special breed of goat indigenous to the high altitude regions of Ladakh in Jammu and Kashmir.
    • They are raised for ultra-fine cashmere wool, known as Pashmina once woven. The Textiles are handspun and were first woven in Kashmir.
    • The Changthangi goat grows a thick warn undercoat which is the source of Kashmir Pashmina wool – the world’s finest cashmere measuring between 12-15 microns in fiber thickness.
    • These goats are generally domesticated and reared by nomadic communities called the Changpa in the Changthang region of Greater Ladakh.
    • The Changthangi goats have revitalized the economy of Changthang, Leh and Ladakh region.

     

    Try this PYQ:

    Q.With reference to ‘Changpa’ community of India, consider the following statement:

    1. They live mainly in the State of Uttarakhand.
    2. They rear the Pashmina goats that yield fine wool.
    3. They are kept in the category of Scheduled Tribes.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 3 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”80popdecv9″ question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

     

     

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  • Balancing the Free Speech and Social Media Regulation

    Social Media

    Context

    • Recently Facebook, one of the social media giant set up the Oversight Board, an independent body, which scrutinizes its ‘content moderation’ practices.

    What are the IT rules of 2021?

    • Regulating social media intermediaries (SMIs): World over, governments are grappling with the issue of regulating social media intermediaries (SMIs).
    • Addressing the issues of SMI controlling the free speech: Given the multitudinous nature of the problem the centrality of SMIs in shaping public discourse, the impact of their governance on the right to freedom of speech and expression, the magnitude of information they host and the constant technological innovations that impact their governance it is important for governments to update their regulatory framework to face emergent challenges.
    • Placing obligations on SMI: In a bid to keep up with these issues, India in 2021, replaced its decade old regulations on SMIs with the IT Rules, 2021 that were primarily aimed at placing obligations on SMIs to ensure an open, safe and trusted internet.

    Social Media

    What are the recent amendments?

    • Draft amendments in June 2022, the stated objectives of the amendments were threefold.
    1. Protecting the constitutional rights: There was a need to ensure that the interests and constitutional rights of netizens are not being contravened by big tech platforms,
    2. Grievance redressal: To strengthen the grievance redressal framework in the Rules,
    3. To avoid the dominance: That compliance with these should not impact early-stage Indian start-ups.
    • This translated into a set of proposed amendments that can be broadly classified into two categories.
    1. Additional obligation on SMI: The first category involved placing additional obligations on the SMIs to ensure better protection of user interests.
    2. Appellate mechanism: The second category involved the institution of an appellate mechanism for grievance redressal.

    Social Media

    Why social media is said to be double-edged sword?

    • Moderation of content by platforms: Social media platforms regularly manage user content on their website. They remove, priorities or suspend user accounts that violate the terms and conditions of their platforms.
    • Excessive power in government’s hands: In today’s online environment, however, the existing government control on online speech is unsustainable. Social media now has millions of users. Platforms have democratized public participation, and shape public discourse.
    • Platforms of democratic freedom: As such, large platforms have a substantial bearing on core democratic freedoms.
    • Hate speech on internet: Further, with the increasing reach of the Internet, its potential harms have also increased. There is more illegal and harmful content online today.
    • Disinformation campaigns: On social media during COVID19 and hate speech against the Rohingya in Myanmar are recent examples.

    What could be the balanced approach between free speech and regulation?

    • Government orders must be respected: Government orders to remove content must not only be necessary and proportionate, but must also comply with due process.
    • Example of DSA: The recent European Union (EU) Digital Services Act (DSA) is a good reference point. The DSA regulates intermediary liability in the EU. It requires government takedown orders to be proportionate and reasoned.
    • Platforms can challenge the governments order: The DSA also gives intermediaries an opportunity to challenge the government’s decision to block content and defend themselves. These processes will strongly secure free speech of online users. Most importantly, an intermediary law must devolve crucial social media content moderation decisions at the platform level.
    • An idea of co-regulation: Platforms must have the responsibility to regulate content under broad government guidelines. Instituting such a coregulatory framework will serve three functions.
    1. Platforms will retain reasonable autonomy over their terms of service: Coregulation will give them the flexibility to define the evolving standards of harmful content, thereby obviating the need for strict government mandates. This will promote free speech online because government oversight incentivizes platforms to engage in private censorship. Private censorship creates a chilling effect on user speech. In turn, it also scuttles online innovation, which is the backbone of the digital economy.
    2. Coregulation aligns government and platform interests: Online platforms themselves seek to promote platform speech and security so that their users have a free and safe experience. For instance, during the pandemic, platforms took varied measures to tackle disinformation. Incentivizing platforms to act as Good Samaritans will build healthy online environments.
    3. Outsourcing the content regulation: instituting coregulatory mechanisms allows the state to outsource content regulation to platforms, which are better equipped to tackle modern content moderation challenges.
    • Platforms must follow the due process of law: Platforms as content moderators have substantial control over the free speech rights of users. Whenever platforms remove content, or redress user grievance, their decisions must follow due process and be proportionate. They must adopt processes such as notice, hearing and reasoned orders while addressing user grievances.
    • Transparency in algorithm: Platform accountability can be increased through algorithmic transparency.

    Conclusion

    • The GACs must be re-looked because they concentrate censorship powers in the hands of government. A Digital India Act is expected to be the successor law to the IT Act. This is a perfect opportunity for the government to adopt a coregulatory model of speech regulation of online speech.

    Mains Question

    Q. Social media is a double-edged sword in the realm of free speech. Substantiate. Explain in detail the Idea of coregulation of social media.

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  • Challenges to International Cooperation on Counter-Terrorism

    Terrorism

    Context

    • India’s decision to host the special session of the United Nations Security Council’s Counter Terrorism Committee (UNSCCTC) last month held in Mumbai and New Delhi, it focused on new and emerging technologies is one of a number of events planned by the Government to give its counterterror diplomacy a greater push.

    What is Counter-Terrorism Committee (CTC)?

    • The CTC is a subsidiary body of the United Nations Security Council (UNSC).
    • The 15-member CTC was established at the same time to monitor the implementation of the resolution.
    • In the wake of the 11 September 2001 terrorist attacks in the US, the UNSC unanimously adopted resolution 1373. This among its provisions obliges all States

    Terrorism

    Read this Key important note: The Delhi Declaration on Terrorism

    • On day 2 of the Special Meeting, the Counter-Terrorism Committee (CTC) unanimously adopted the Delhi Declaration on countering the use of new and emerging technologies for terrorist purposes.
    • Among the listed items in the Declaration include the decision to continue to work on recommendations on the three themes of the Special meeting and the intention to develop a set of non-binding guiding principles to assist Member States to counter the threat posed by the use of new and emerging technologies for terrorist purposes.
    • The declaration aims to cover the main concerns surrounding the abuse of drones, social media platforms, and crowdfunding, and create guidelines that will help to tackle the growing issue.

    What are the challenges to build international Consensus on counter-terrorism?

    • Narrow Global War on Terrorism (GWOT): The first challenge is that the “Global War on Terrorism” (GWOT), as it was conceived by a post 9/11 United States is over with the last chapter written last year, as the United States negotiated with the Taliban, and then withdrew from Afghanistan.
    • Non-cooperation with India by USA and world: GWOT itself was built on an unequal campaign when India had asked for similar help to deal with the IC814 hijacking (December 1999) less than two years prior to the 9/11 attacks (with evidence now clear that those who the Atal Bihari Vajpayee government was forced to release were all terrorists who went on to help with planning, funding or providing safe havens to the al-Qaida leadership), its pleas fell on deaf ears in the U.S., the United Kingdom, the United Arab Emirates (UAE), and of course, Pakistan, all of whom were hit by the same terrorists in later years.
    • USA and China Escorting the Pakistan: Even after GWOT was launched, Pakistan’s role as the U.S.’s ally, and China’s “iron friend” ensured that the UNSC designations of those who threatened India the most, including Masood Azhar and Hafiz Saeed, never mentioned their role in attacks in India.
    • FATF is becoming toothless: The maximum India received in terms of global cooperation was actually from economic strictures that the Financial Action Task Force (FATF)’s grey list placed on Pakistan — Pakistan was cleared from this in October indicating that the global appetite to punish Pakistan for terrorism has petered out.
    • Realpolitik over Global problem: In addition, the weak international reaction to the Taliban’s takeover of Kabul, and its persecution of women and minorities in the country, demonstrate rising fatigue levels in dealing with “another country’s problems”.
    • Ineffective UNSC resolutions: The hard reality for India is that the future of counterterrorism cooperation is going to be less cooperative, and counterterror regimes such as the UNSC Resolutions 1267, 1373, etc. rendered outdated and toothless.

    How polarized world pose a challenge for fight against terrorism and the questions raised?

    • Distraction due to Russia-Ukraine war: War not only shifting the focus from terrorism but is also blurring the lines on what constitutes terrorism. The CTC meeting in Delhi, for example, was disrupted over Russia’s claims that the U.K. helped Ukraine launch drone attacks on Russia’s naval fleet in Sevastopol. The question remains: if drone attacks by Yemeni Houthis on the UAE and Saudi Arabia’s oil infrastructure were condemned as terrorist attacks, why was the line drawn for drone attacks on Russian ships in a port used for loading grain, or a bridge bombing that put so many civilian lives at risk?
    • Likely recruitment of Afghan soldiers in Ukraine war: On the other hand, Russia squares up the possible recruitment of the former Afghan republic’s National Army Commando Corps into its war in Ukraine, Would not these commandos who once fought Taliban terrorists, now qualify as terrorists themselves?
    • Divided UN security council: Away from the battle field, the polarisation has rendered the body tasked with global peace, paralysed, as the UNSC is unable to pass any meaningful resolutions that are not vetoed by Russia or western members, and China has been able to block as many as five terror designations requested by India and the U.S. Perhaps the biggest opportunity lost due to the UNSC’s other preoccupations has been the need to move forward on India’s proposal, of 1996, of the Comprehensive Convention on International Terrorism (CCIT).
    • Convention on International Terrorism is not accepted: While each conference, including the CTC meeting in Delhi, makes passing the CCIT a goal, very little progress has been made on the actual issues such as the definition of terrorism, concerns over human rights law conflicts, and the old debate on ‘freedom fighter vs terrorist’. Despite several changes in the draft made by India in 2016, consensus for the convention is still elusive

    What are New and emerging technology in terrorism?

    • Drone attacks: Emerging technologies and the weaponization of a number of different mechanisms for terrorism purposes. Drones are already being used to deliver funds, drugs, weapons, ammunition and even improvised explosive devices.
    • Possible bio-war: After the COVID19 pandemic, worries have grown about the use of biowarfare, and Gain of Function (GoF) research to mutate viruses and vectors which could be released into targeted populations.
    • AI and robotic soldiers: In a future that is already here, the use of artificial intelligence (AI) systems and robotic soldiers makes it even easier to perpetrate mass attacks while maintaining anonymity.
    • Cryptocurrency and terror Financing: Terror financing uses bitcoins and cryptocurrency, and terror communications use social media, the dark web and even gaming centres.

    Terrorism

    India’s opportunity to build global consensus

    • India is on forefront since long: India has been at the forefront for a call of global action against terrorism which is increasingly becoming a global phenomenon.
    • India will host No money for terror conference: New Delhi will host the third edition of the “No Money for Terror” (NMFT) conference that will look at tackling future modes of terror financing.
    • Using Global Counter Terrorism Architecture: In December, when India takes over the United Nations Security Council Presidency for the last time before its two-year term in the Council ends, India will chair a special briefing on the “Global Counter Terrorism Architecture”, looking at the challenges ahead.

    Terrorism

    Conclusion

    • With Taliban taking over Afghanistan, USA and west have practically withdrawn from global fight against terrorism. India’s efforts for global consensus on cross border terrorism is getting harder as world is polarizing. Fight against terrorism will be very arduous task for diplomacy of India.

    Mains Question

    There is no consensus on global definition of terrorism, discuss. How Indian diplomacy is trying to get global attention and consensus for fight against terrorism?

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  • Vikram-S: India’s first private sector rocket  

    vikram

    India’s first privately developed rocket, Vikram-S, is set for launch between November 12 and 16.

    Vikram-S

    • Vikram-S is India’s first privately developed rocket and is all set to be launched as part of the Prarambh space mission.
    • It is a single-stage sub-orbital launch vehicle which would carry three customer payloads and help test and validate the majority of the technologies in the Vikram series of space launch vehicles.
    • It was developed by the Hyderabad-based Skyroot Aerospace.
    • The Prarambh mission is aimed at carrying three payloads into space, including a 2.5-kilogram payload that has been developed by students from several countries.
    • Skyroot’s launch vehicles are named ‘Vikram’ as a tribute to the founder of the Indian space program and renowned scientist Vikram Sarabhai.

    Significance of the mission

    • With this mission, Skyroot is set to become the first private space company in India to launch a rocket into space.
    • It is heralding a new era for the space sector which was opened up in 2020 to facilitate private sector participation.
    • The Prarambh mission was extensively supported from ISRO and IN-SPACe (Indian National Space Promotion and Authorisation Centre).

    Back2Basics: IN-SPACE

    • The establishment of IN-SPACe was announced in June 2020.
    • It is an autonomous and single window nodal agency in the Department of Space for the promotion, encouragement and regulation of space activities of both government and private entities.
    • It also facilitates the usage of ISRO facilities by private entities.
    • It comprises technical experts for space activities along with safety expert, academic experts and legal and strategic experts from other departments.
    • It also comprises members from PMO and MEA of Government of India.

    Roles and Responsibilities

    • Space activities including building of launch vehicles and satellites and providing space based services as per the definition of space activities.
    • Sharing of space infrastructure and premises under the control of ISRO with due considerations to on-going activities.
    • Establishment of temporary facilities within premises under ISRO control based on safety norms and feasibility assessment

    How is it different from ANTRIX?

    • Antrix Corporation Limited (ACL), Bengaluru is a wholly-owned Government of India Company under the administrative control of the Department of Space.
    • It is as a marketing arm of ISRO for promotion and commercial exploitation of space products, technical consultancy services and transfer of technologies developed by ISRO.
    • Antrix is engaged in providing Space products and services to international customers worldwide.

    What about New Space India Limited (NSIL)?

    • It functions under the administrative control of the Department of Space (DOS).
    • It aims to commercially exploit the research and development work of ISRO Centres and constituent units of DOS.
    • The NSIL would enable Indian Industries to scale up high-technology manufacturing and production base for meeting the growing needs of the Indian space program.
    • It would further spur the growth of Indian Industries in the space sector.

     

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  • Declining Consumer Demand and Reluctant Investors

    Consumer Demand

    Context

    • In September, Finance Minister Nirmala Sitharaman was anguished that industry was holding back from investing in manufacturing despite a significant cut in corporate tax rates in 2019.

    Analyzing the corporate Investment since the pandemic

    • Less investment is not the result of losses: The slowdown in corporate investment did not happen because companies were making losses.
    • More profit but less investments by corporates: In fact, private companies, boosted by considerable tax cuts, made windfall profits. A State Bank of India analysis shows that tax cuts contributed 19% to the top line of companies during the pandemic. But this did not result in increased investments.
    • Dividends to shareholders: Before the pandemic, instead of investing in themselves, companies chose to reward shareholders with higher dividends.
    • Investment in equity and debt instead of Infrastructure: During the pandemic, they did not use the profits for paying out dividends; they retained a big chunk of the profits. However, instead of investing in buildings, plants and machinery, they invested in equity shares and debt instruments.
    • Corporate cited the slowdown in demand as reason for less investment: So, both before and after the outbreak, they shied away from capital investments. The hesitancy to invest can be explained by a slowdown in the demand side of the economy.
    • Corporates didn’t invest in long term returns sectors: Consumer demand started to decline the year before the pandemic and worsened after the COVID19 outbreak. This forced companies to use the increased profits to decrease their debts, pay dividends and invest in financial instruments instead of increasing productivity by making capital investments.

    Consumer Demand

    What is The current consumer’s demand situation?

    • Average Consumer sentiment index: Private companies invest when they are able to estimate profits, and that comes from demand. The Centre for Monitoring Indian Economy’s (CMIE) consumer sentiment index is still below pre-pandemic levels but is far higher than what was seen 12-18 months ago.
    • Buoyant Aggregate demand: RBI’s Monetary policy report dated September 30 says, Data for Q2 (ended Sept) indicate that aggregate demand remained buoyant, supported by the ongoing recovery in private consumption and investment demand. It shows that seasonally adjusted capacity utilization rose to 74.3% in Q1 the highest in the last three years.
    • High household savings: Along with household savings intentions remaining high, might hold the key to the investment cycle kicking in.

    Consumer Demand

    Statistic on demand and investment

    • New investment projects: The new investment projects announced as a % of GDP, since FY18, the share has remained below the 5% mark, compared to over 9% between FY05 and FY22.
    • Collection of corporate tax decreased: Corporate tax and income tax collected in India as a % of GDP after the cut in 2019, the share of corporate tax declined dramatically, while the share of income tax gradually increased.
    • Double burden on tax payers: The shift in tax burden from the corporates to the people came at a time of job losses and reduced income levels. This pushed more people into poverty.
    • Corporate profit increased after tax cut: Profit after tax earned by non-financial private companies in ₹ trillion after the tax cut, the profits of these companies rose to ₹4-5 trillion in the last two financial years from ₹1-2 trillion in many of the previous periods.
    • Increase and decrease in dividend to shareholders: Dividends paid by non-financial private companies as a share of profits earned after tax, Payouts to shareholders surged in FY20, the year before the pandemic, but reduced in the following years.
    • Profit retention increased: Retained profits as a % of profit after tax surged to 63% in FY22 the highest in a decade (limited companies were analyzed in FY22, so data are provisional).
    • Profits are invested in equities: In FY21, the debt-to-equity ratio came down to 0.86 the lowest in at least three decades. In FY22 (provisional data), it came down further to 0.71.
    • Year on year decline in capital investment: Year on year change in the investments of non-financial private companies in fixed assets such as buildings, plants, machinery, transport and infrastructure have declined in recent years. But the year on year change in investments in financial instruments such as equity, debt and mutual funds have surged.

    Consumer Demand

    Conclusion

    • Corporates are holding their pockets in hope of demand rise in future. However, this affects the post-pandemic recovery of economy. IMF and RBI was right to revise their growth forecast this year. Unequal recovery of economy have certainly affected the income levels of middle class. Government has taken a lot of step on supply side (corporate side and banking reform) but no intervention in revival of demand.

    Mains Question

    Q. Analyze the corporate investment pattern before and after the pandemic? What are the reasons for decline in corporate investment in fixed assets in economy since the pandemic?

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  • Species in news: Snow Leopard

    leopard

    The first-ever recording of the snow leopard from the Baltal-Zojila region has renewed the hope for the elusive predator in the higher altitudes of Jammu and Kashmir and Ladakh.

    Why in news?

    • Not much is known about the number of snow leopards in J&K and Ladakh.
    • The Snow Leopard Population Assessment of India (SPAI) has been concluded so far in Himachal Pradesh and Uttarakhand.
    • The estimated population of the great cat is 50 and 100 in these two States respectively.

    Snow Leopard

    • Snow leopards live in the mountainous regions of Central and Southern Asia.
    • In India, their geographical range encompasses a large part of the western Himalayas, including the UTs of J&K and Ladakh, Himachal Pradesh, Uttarakhand and Sikkim and Arunachal Pradesh in the eastern Himalayas.
    • Project Snow Leopard was launched in 2009 for strengthening wildlife conservation in the Himalayan high altitudes.
    • It aims at promoting a knowledge-based and adaptive conservation framework that fully involves the local communities, who share the snow leopard’s range, in conservation efforts.

    Conservation status

    • In the IUCN- Red List, the snow leopard is listed as Vulnerable.
    • In addition, the snow leopard, like all big cats, is also listed in Appendix I of the Convention on International Trade of Endangered Species (CITES).
    • In India, the snow leopard is listed under Schedule I of the Wildlife (Protection) Act, 1972, giving it the highest protection status under the country’s laws.

    Conservation Efforts by India

    • The Government of India has identified the snow leopard as a flagship species for the high altitude Himalayas.
    • India is also party to the Global Snow Leopard and Ecosystem Protection (GSLEP) Programme since 2013.
    • HimalSanrakshak: It is a community volunteer programme, to protect snow leopards, launched in October 2020.
    • In 2019, First National Protocol was also launched on Snow Leopard Population Assessment which has been very useful for monitoring populations.
    • SECURE Himalaya: Global Environment Facility (GEF)-United Nations Development Programme (UNDP) funded the project on conservation of high altitude biodiversity and reducing the dependency of local communities on the natural ecosystem.
    • Project Snow Leopard (PSL): It was launched in 2009 to promote an inclusive and participatory approach to conserve snow leopards and their habitat.
    • Snow Leopard is on the list of 21 critically endangered species for the recovery programme of the Ministry of Environment Forest & Climate Change.
    • Snow Leopard conservation breeding programme is undertaken at Padmaja Naidu Himalayan Zoological Park, Darjeeling, West Bengal.

    Global Snow Leopard and Ecosystem Protection (GSLEP) Programme

    • The GSLEP is a high-level inter-governmental alliance of all the 12 snow leopard range countries.
    • The snow leopard countries namely, India, Nepal, Bhutan, China, Mongolia, Russia, Pakistan, Afghanistan, Kyrgyzstan, Kazakhstan, Tajikistan, and Uzbekistan.
    • It majorly focuses on the need for awareness and understanding of the value of Snow Leopard for the ecosystem.

    Living Himalaya Network Initiative

    • Living Himalayas Initiative (LHI) is established as one of WWF’s global initiatives to bring about transformational conservation impact across the three Eastern Himalayan countries of Bhutan, India (North-East) and Nepal.
    • Objectives of LHI include adapting to climate change, connecting to habitat and saving iconic species.

     

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  • Price regulation of UPI

    UPI

    Context

    • The recent discussion paper by the RBI on charges in payment systems has triggered widespread public debate, especially on the zero-charge framework for UPI transactions.

    Know the basics- What is UPI?

    • UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions.
    • The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

    Why RBI wants to intervene?

    • Two important reasons:
    1. Goals of financial inclusion: Viewing digital payments as a public good and
    2. Addressing market failures: Such as the presence of dominant firms or externalities that may arise due to the two-sided nature of this market.
    • For both objectives, regulators might want to cap or set to zero the MDR or merchant discount rate (paid by merchants to their payments service provider) or the interchange fee (paid by the acquiring bank to the issuing bank), or both.

    UPI

    What is the present scenario of Pricing UPI?

    • Subsidies on operational cost: In the case of UPI, the government subsidizes the operational costs of facilitating UPI transactions, which is reportedly inadequate. In January 2022, the Payments Council of India reported that the industry expected a loss of Rs 5,500 crore.
    • Subsidies are inadequate: Even with a public good motive, in the absence of evidence, one cannot assume this to be the best allocation of limited government resources. As per the Indian Digital Payments Report (second quarter of 2022), the average ticket size of P2M transactions (person to merchant) on UPI is Rs 820. RBI’s estimated cost of Rs 2 for processing a Rs 800 transaction, is 0.25 per cent of the transaction value, much lower than the MDR cap set at 0.9 per cent for debit cards and an MDR of 2 per cent being pro- posed for RuPay credit cards on UPI.
    • Presently MDR is Zero: A floor MDR of 0.25 per cent is, therefore, not unreasonable. Arguably, these are substitutable services competing for the same pool of merchants. Policymakers must also bear in mind behavioural challenges in moving from zero MDR to a positive MDR. Anchored at a zero MDR since January 2020, merchants, especially ones with thin margins, may hesitate to accept an increase in MDR, even if they benefit on net terms.

    How RBI can regulate price?

    • Understanding what to regulate: In order to understand how and what to regulate, we borrow from the rationale followed for other two-sided markets that exhibit cross-platform externalities. consumers benefit more if the size of the merchant network accepting a payment instrument (for example, debit cards) is larger and, at the same time, merchants benefit more if many consumers use debit cards.
    • Recovering the cost from merchants: Card networks like Visa and Mastercard compete for banks, usually not too many, to issue their cards. Since the acquiring bank must pay the interchange fee, they recover these costs from merchants.
    • Regulating the interchange fee: In most jurisdictions, the interchange fee is regulated to prevent banks from charging exploitative rates and the MDR is left to be commercially determined. This is also done for administrative ease, since banks are fewer, while monitoring bank-merchant contracts can be onerous.
    • Charging the MDR: In the UPI parallel, involving payment service providers of payers and payees, the remitter and beneficiary banks as well as NPCI, RBI could either regulate the inter change fee between payment service providers or the merchant discount rate charged by them.
    • Deciding between MDR and interchange fee: The market for merchant acquisition is usually more competitive and can be left unregulated, and if necessary, the interchange fee between the two payment service providers can be regulated. If both markets are sufficiently competitive, regulation could mean establishing a floor/ cap charge. The decision what to regulate is, therefore, crucial.
    • Example of telecom industry: A related example is available in the telecom industry where facilities provision is regulated through the interconnection fee, while retail prices for the relatively competitive telecom services segment are left to the market. For externalities of the two-sided market to be internalized, the choice of instrument must be carefully evaluated.
    • Determining the actual price: The next step is to determine the price level, which is a lot trickier. Drawing from economic theory, the optimal level would depend on whether the regulator cares only about consumer welfare (as op- posed to total welfare), and whether the issuing and acquiring banks make positive margins on each transaction.

    UPI

    How digital payment is charged around the world and India’s requirement?

    • Example of PIX of Brazil: Pix, a two-year-old interoperable digital payments system in Brazil, provides a good comparison of how price setting might be considered in the UPI context. Pix does not regulate MDR, payment service providers have the freedom to set MDR, though in practice most banks currently don’t charge an MDR, largely to onboard more merchants on their platforms.
    • MDR appears less attractive: The indicated cost is R$ 0.01 for each 10 transfers, or 16 paise in Indian rupees for every s10 transactions. This is substantially lower than the costs estimated for India and is also perhaps the reason why payment service providers are not immediately inclined to recover costs through MDR.
    • Not hampering the innovation and investment: In general, benefits of regulatory intervention should outweigh the costs of intervening. The costs of intervening not only include the administrative costs, but also potential costs arising from setting the wrong interchange fee or cap, as well as any costs arising from the impact of the intervention on future investment and innovation in the market.

    Do you know what is Merchant Discount Rate?

    • Merchant Discount Rate (alternatively referred to as the Transaction Discount Rate or TDR) is the sum total of all the charges and taxes that a digital payment entails.
    • Simply put, it is a charge to a merchant by a bank for accepting payment from their customers in credit and debit cards every time a card gets swiped in their stores.
    • Similarly, MDR also includes the processing charges that a payments aggregator has to pay to online or mobile wallets or indeed to banks for their service.

    Do you know what is Merchant Discount Rate? Merchant Discount Rate (alternatively referred to as the Transaction Discount Rate or TDR) is the sum total of all the charges and taxes that a digital payment entails. Simply put, it is a charge to a merchant by a bank for accepting payment from their customers in credit and debit cards every time a card gets swiped in their stores. Similarly, MDR also includes the processing charges that a payments aggregator has to pay to online or mobile wallets or indeed to banks for their service.

    Conclusion

    • Policymakers must collect more data on costs of transfer, user preferences, both merchants and consumers, as well as undertake a thorough analysis of substitutability and competition in the digital payments sector, to put our best foot forward in helping achieve the potential of UPI in India.

    Mains Question

    Q. Explain the reasons for success of UPI in India? Analyze the Role of UPI in financial inclusion in India?

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  • Unscientific Highway Infrastructure: A Cause of Accidents

    Highway

    Context

    • In a March 2019 circular, the National Highways Authority of India (NHAI) raised the subject of premature issuance of completion certificates for national highway works. NHAI had noticed that, in certain cases, completion certificates had been issued even before the completion of works ‘up to the standards and specifications’ prescribed by the Ministry of Road Transport & Highways.

    Highway

    Status of National highways and deaths

    • 35 percent of all road deaths: NHAI is the principal organization responsible for construction of National Highways in India. National highways constitute a mere 2 percent of the country’s road network, but account for close to 35 percent of all road deaths.
    • Record 37 kms per day: The ministry has been taking credit for the pace at which national highways are being constructed. In the fiscal year 2021, it reached a record 37 kms per day. This has come down to 19.44 km per day in the first six months of the financial year 2022.

    What was the circular issued by NHAI?

    • Issuance of completion certificate: The circular forbade the issuance of such certificates, especially if non-completion resulted in ‘material inconveniences to users’ or affected their safety.
    • Likely cause of fatalities: Items such as road shoulders, road signs, markings, dressing of slopes, and road furniture were explicitly mentioned. circular was not taken with due seriousness by some authorized engineers. This negligence could have contributed to road crashes, probably resulting in fatalities.
    • Dereliction of duty by NHAI’s officials: The NHAI has now warned the delinquents that such behavior would be treated as a serious dereliction of duty and disciplinary action would be taken against officers issuing such certificates to incomplete road works. Additionally, the officers would be held personally liable in case of serious accidents that occur on such unfinished infrastructure.
    • Safety is better than pace of construction: The Minister for Road Transport & Highways stressed that it is necessary to build safer roads even if this decelerated the pace of construction.

    Highway

    Case study of NHAI’s road construction?

    • Death of Cyrus Mistry: Unfortunately, self-introspection by the NHAI in regard to safety failures and the large number of deaths on national highways was not in evidence in the aftermath of the death of Cyrus Mistry on the Ahmedabad-Mumbai national highway in September 2022.
    • Crash was result of poor infrastructure: In this instance, a seven-member forensic investigation team found that the car crash was the result of an infrastructure issue. The car in which Mistry was travelling happened to tragically hit a bridge that was faultily designed.
    • Invisible dividers: The bridge parapet was found to be protruding into the shoulder lane. Furthermore, the road with three lanes unexpectedly narrowed to a road with two lanes with a dangerous L-shaped concrete divider that had no proper paint on it.
    • Inadequate safety signs: Road signages were grossly inadequate, making that road stretch a ‘black spot’. This epithet is used for a road section where accidents are a frequent occurrence.
    • Expressways are constructed for more speed: The accident also raised issues of the excessive speed of the car that crashed. It was said that the car was travelling at a speed in excess of 100 km per hour. However, the minister himself has been in favour of higher speeds on Indian expressways and national highways. He proposed a speed limit of 140 kmph on expressways and at least 100 kmph on four-lane national highways. This, he stated, was advocated on account of considerable improvements in the quality of India’s highways that permit vehicles to go faster than in the past.
    • Speed limit safety needs to be revise: The minister was also critical of some judicial rulings that disallowed hiking speeds on national highways. However, in the light of certain facts repeatedly surfacing in regard to safety issues of national highways, it does appear that greater caution in regard to increasing speed needs to be taken.

    Critical analysis of NHAI’s road construction and maintenance

    • Rains and potholes: While the government claims that they are of international standard, a recent report highlighted the plight of road travelers on national highways post India’s monsoons. The rains have left the country’s arterial network in poor shape as they have become riddled with potholes.
    • Higher toll but poor roads: The cited report mentioned the Gurgaon-Jaipur stretch of NH-8, which, despite a hike in toll rates, remains incomplete and terribly potholed. The reason for this sorry state of affairs was revealed in a reply by the government to a parliamentary standing committee.
    • Insufficient maintenance: The budgetary provision for maintenance of national highways was a mere 40 percent of their own estimated standards. Clearly, maintenance of national highways was being discounted in favour of more kilometres of road construction. The shortfall of 60 percent of maintenance money was terribly high and resulted in the resources being thinly spread, making adequate maintenance intervention highly unlikely.
    • Inadequate budgetary allocation: The parliamentary committee pointed out in its report titled ‘Issues related to road sector’ that the shortfall in sufficient budgetary allocation was echoed in the poor quality of national highways often witnessed across the country. The committee emphasized that the maintenance of national highways was vitally significant in regard to safety and good average traffic speeds and ought to be given high priority. The issue had been repeatedly flagged by the committee.
    • NITI Aayog’s acknowledgement of poor infrastructure: Similarly, NITI Aayog, in its report titled ‘Strategy for New India @75’, advised that the government should earmark 10 percent of its annual budget for maintenance of roads and highways and move towards the developed country norm of marking 40 percent of the budget for road upkeep. It is evident that if national highways are not in shape, the economy of the country and the states takes a hit.

    Highway

    Conclusion

    • It is absolutely necessary for citizens to follow road safety norms but government cannot look away from its responsibility. Scientific road construction even at the cost of slow construction rate is non-negotiable for sake of accident prevention. Safety of citizens is prior to any world record.

  • Make-II Route of Defence Procurement

    The Army has approved sanction orders for the development of niche technology by the Indian industry under the Make-II route of defence procurement.

    What are Make-Category Projects?

    • The provision of ‘Make’ category of capital acquisition in Defence Procurement Procedure (DPP) is a vital pillar for realising the vision behind the ‘Make in India’ initiative.
    • It aims to foster indigenous capabilities through design & development of required defence equipment/product/systems or upgrades/ sub-systems/components /parts by both public and private sector in a faster time frame.

    ‘Make’ Procedure has following two sub-categories:

    1. Make-I (Government Funded): Projects under ‘Make-I’ sub-category will involve Government funding of 90%, released in a phased manner and based on the progress of the scheme, as per terms agreed between MoD and the vendor.
    2. Make-II (Industry Funded): Projects under ‘Make-II’ category will involve prototype development of equipment/ system/ platform or their upgrades or their sub-systems/ sub-assembly/assemblies/ components. They aim primarily for import substitution/innovative solutions, for which no Government funding will be provided for prototype development purposes.

     

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  • Poverty Estimate using National Family Health Survey

    Poverty

    Context

    • The recent release of the National family health survey (NFHS) data for 2019-21 allows for a detailed analysis of the progress in the reduction of absolute poverty and related determinants like nutrition.

    Poverty estimation in India

    • Planning Commission Expert Group (1962): It formulated the separate poverty lines for rural and urban areas at ₹20 and ₹25 per capita per year respectively.
    • VM Dandekar and N Rath (1971): They made the first systematic assessment, based on National Sample Survey (NSS) data. They suggested providing 2250 calories per day in both rural and urban areas.
    • YK Alagh Committee (1979): It constructed a poverty line for rural and urban areas on the basis of nutritional requirements and related consumption expenditure.
    • Lakdawala Committee (1993): It suggested that consumption expenditure should be calculated based on calorie consumption as earlier. State specific poverty lines should be constructed. It asked for discontinuation of scaling of poverty estimates based on National Accounts Statistics.
    • Tendulkar Committee (2009): The current official measures of poverty are based on the Tendulkar poverty line, fixed at daily expenditure of ₹27.2 in rural areas and ₹33.3 in urban areas is criticized by many for being too low.

    Poverty

    How poverty is estimated under NFHS?

    • Multidimensional poverty index: The NFHS surveys are part of a multinational attempt to provide estimates of a multidimensional poverty index. Its computation rests on estimates of poverty according to 10 different indicators:
    1. Nutrition
    2. Child mortality
    3. Years of schooling
    4. School attendance
    5. Cooking fuel
    6. Sanitation
    7. Drinking water
    8. Electricity
    9. Housing
    10. Assets
    • The deprivation index: the deprivation index for each indicator is the per cent poor (deprived) according to that indicator. The aggregation of the 10 indicators into one index involves legitimate issues of weighting, but individual components do not suffer from this drawback.

    Poverty

    What are the findings of NFHS?

    • Multidimensional poverty declined: at a compounded annual average rate of 4.8 per cent per year in 2005-2011 and more than double that pace at 10.3 per cent a year during 2011-2021.
    • Declining child mortality: There are some issues with the 2011 child-mortality data, but for each of the 10 components of the MPI index, the rate of decline in 2011-2021 is considerably faster than in 2005-2011.
    • Average decline in overall indicators: The average equally weighted decline for nine indicators was 1.9 per cent per annum in 2005-2011 and a rate of 16.6 per cent per annum, more than eight times higher in 2011-2021.
    • Consumption inequality decline: Every single household survey or analysis has shown that consumption inequality declined during 2011-2021. This is consistent with the above finding of highly inclusive growth during 2011-2021.

    Poverty

    What are the efforts behind inclusive growth and reduced poverty?

    • A major factor behind the inclusive nature of growth during 2011-2021 is the focus of government policies on each of the individual indicator’s indicative of a dignified standard of living. A direct impact of this dedicated fiscal push is that slow-moving variables such as housing, access to cooking fuel, sanitation, etc, have witnessed a remarkable increase.
    • Swachh Bharat Mission: The government’s Swachh Bharat mission in 2014-2021 constructed over 110 million toilets even if some were without easy access to water, many were.
    • Saubhagya Yojana: Similarly, close to one-third of Indians were deprived of electricity till as recently as 2014. It was only after a dedicated push (Saubhagya Yojana) that India managed to electrify every village, and eventually households. Electricity deprivation declined by a 28.2 per cent rate post-2014; between 2005 and 2011, the rate of decline was close to zero.
    • Jan Dhan Yojana: Another example is the Jan Dhan Yojana which made financial inclusion a reality in India, especially for women.
    • Ujjwala Yojana: On access to modern cooking fuel (through the Ujjwala Yojana), deprivation was nearly halved from 26 per cent to 14 per cent in just five years. The previous halving (2005/6 to 2015/16) took 10 years.
    • Awas Yojana: The affordable housing scheme (Awas Yojana) has meant that less than 14 per cent are now deprived, compared to thrice that number in 2011/12.
    • Jal Jeevan Mission: More recently, government has embarked on an ambitious project of ensuring universal access to piped water under the Jal Jeevan Mission. Rural piped water coverage was a little less than 17 per cent in 2019, but is now well above 54 per cent and expected to at least be near, if not meet, the 100 per cent target by 2024.

    Conclusion

    • Extreme poverty in India is surely on decline but pandemic have pushed people again back to the poverty. Pandemic have put the break on inclusive growth of people. Government must realize these and plan accordingly.

    Mains Question

    Q. Analyze the data of NFHS for poverty estimation in India? How government policies have helped to reduce the extreme poverty in India?

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