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GS Paper: GS3

  • The many layers to agricultural discontent

    Farmers protest against the Farm laws is based on the multiple reasons. The article analyses these concerns of the protesting farmers.

    Three farm laws and response to it

    • Three Farm Bills were passed by the Central government in September 2020.
    • In the process, the regulatory role the state played hitherto with regard to these issues was watered down to a great extent.
    • Apart from complex challenges that rural India confronts today, there is a substantial body of studies that demonstrates how the vagaries of the market and the role of the middlemen reinforce agrarian distress in India.
    • However, organised farmers’ bodies are not in sync with the reasoning of the government.

    Role of the states

    • There is a debate around the constitutional provisions with regard to the respective domains of the State and the Union with regard to agricultural marketing,
    • However, issues affecting the farming community have a far greater bearing on the States relative to the Centre.
    • Ideally, given its immediacy, the States are the apt agencies to respond to a host of concerns faced by the farming community, which includes agricultural marketing.
    • While enacting the Farm Bills, the Centre extended little consideration to the sensitivity of the States.

    Role of APMC

    • In Punjab and Haryana, tweaking the APMC system and its resultant bearing on Minimum Support Price (MSP) is seen by the farmers as a threat to an assured sale of their produce at a price.
    • MSP system provides a cushion, wherein the farmer can anticipate the cost of opting for these crops and tap the necessary supports through channels he has been familiar with.
    • Farmers are apprehensive of the vagaries of a competitive market where he would eventually be beholden to the large players including monopolies.
    • There is widespread apprehension that the measures proposed by the Farm Acts in addition to the existing agrarian distress, are only going to make the lot of the farmer even more precarious.
    • All across the country, the farming community is prone to sympathise with the demand to scrap the new laws, as they have little to offer to them in a positive sense.

    Conclusion

    Those with large holdings and produce for the market — are spearheading the present stand-off against the Farm Bills, as it affects them very deeply. But farming distress is shared in common by the different strata within the farming community, even though it has a differential impact on them.

  • Perils of profits based economic recovery

    The economies across the world are showing recovery driven by profits. However, one cannot neglect the implication of such recovery for the long term growth given the pressure such recovery has been exerting on the labour markets. The article deals with this issue.

    3 Ways to look at GDP

    • The first is what they tell us about the past.
    • Here, the news has generally been better-than-expected.
    • The US and India saw a much stronger recovery last quarter than previously envisioned.
    • The second is sectoral, production side-agriculture, manufacturing, services- and the functional, expenditure side consumption, investment, net exports.
    • But there’s a third way — the income side.
    • Value addition must ultimately accrue to the different factors of production.
    • On the income side, therefore, GDP is simply the sum of profits, wages and indirect taxes.

    Profit-driven growth and impact on employment

    • The economic recovery in many parts of the world is driven disproportionately by capital than labour.
    • In India, the net profits of listed companies grew 25 per cent (in real terms) last quarter. This despite revenues shrinking.
    • Revenue shrank because firms aggressively cut costs, including employee compensation.
    • This implies that if listed company profits are growing 25 per cent, and yet GDP contracted 7.5 per cent, it reveals (by construction) significant pressure on profits of unlisted SMEs, wages and employment.
    • Labour market pressures are evident in India too.
    • Household demand for MGNREGA remains very elevated, suggesting significant labour market slack.
    • The employment rate in some labour market surveys still reveal about 14 million fewer employed compared to February, and nominal wage growth across a universe of 4,000 listed firms has slowed from about 10 per cent to 3 per cent over the last six quarters.

    Why this matters

    • It may be rational for any one firm to boost profits by cutting employee compensation.
    • But if every firm pursued that strategy, that simply reduces future aggregate demand and profitability for all firms.
    • This is quintessential fallacy of composition that Keynes enumerated.
    • Weak demand, in turn, disincentivises re-hiring, reinforcing the risks of settling into a sub-optimal equilibrium.

    Need to remain vigilant about labour market

    • Remaining vigilant about labour markets is particularly important for India.
    • Private consumption was increasingly financed by households running down savings and taking on debt pre-COVID-19.
    • Consequently, if job-market pressures induce households into perceiving this shock as a quasi-permanent hit on incomes, households will be incentivised to save, not spend in the future.

    Way forward for fiscal consolidation

    • While economic momentum is expected to slow as pent-up demand wears off, the level of output will progressively reach pre-COVID levels as the economy normalises.
    • The question is what will drive growth after that?
    • India’s fiscal response has been restrained thus far, with the Centre’s total spending similar to last year and state capex under pressure.
    • It’s therefore important for the Centre to step up spending in the remaining months.
    • More importantly, public investment, and a large infrastructure push, must be the leitmotif of the next budget.
    • This will be crucial to boost demand, create jobs, crowd-in private investment and improve the economy’s external competitiveness.
    • If higher infrastructure spending is financed by higher asset sales, the headline fiscal deficit (which matters for bond markets and interest rates) can be slowly reduced, even as the underlying fiscal impulse (which matters for growth and jobs) remains positive.
    • This is the only way to undertake fiscal consolidation without incurring a fiscal drag.
    • Monetary policy has led the charge in 2020. But with inflation continuing to remain sticky and elevated, the RBI has fewer degrees of freedom going forward.

    Conclusion

    The stronger-than-expected GDP print is very encouraging. But this is the start of a long journey back. Much, therefore, remains to be done. The excitement around the vaccine shouldn’t obscure this fundamental premise.

  • HL-2M Tokamak: The Artificial Sun of China

    China successfully powered up its “artificial sun” nuclear fusion reactor for the first time marking a great advance in the country’s nuclear power research capabilities.

    Scratch your school basics to answer this PYQ:

    Q.The known forces of nature can be divided into four classes, viz, gravity, electromagnetism, weak nuclear force and strong nuclear force.

    With reference to them, which one of the following statements is not correct? (CSP 2012)

    (a) Gravity is the strongest of the four

    (b) Electromagnetism act only on particles with an electric charge

    (c) Weak nuclear force causes radioactivity

    (d) Strong nuclear force holds protons and neutrons inside the nuclear of an atom.

    HL-2M Tokamak

    • The HL-2M Tokamak reactor is China’s largest and most advanced nuclear fusion experimental research device.
    • The mission is named Experimental Advanced Superconducting Tokamak (EAST).
    • Located in Sichuan province and completed late last year, the reactor is often called an “artificial sun” on account of the enormous heat and power it produces.
    • It uses a powerful magnetic field to fuse hot plasma and can reach temperatures of over 150 million degrees Celsius- approximately ten times hotter than the core of the sun.
    • Scientists hope that the device can potentially unlock a powerful clean energy source.

    Back2Basics: Nuclear Fusion

    • Nuclear fusion is a reaction in which two or more atomic nuclei are combined to form one or more different atomic nuclei and subatomic particles (neutrons or protons).
    • Fusion is the process by which the sun and other stars generate light and heat. It is a nuclear process, where energy is produced by smashing together light atoms.
    • It is the opposite reaction of fission, where heavy elements like Uranium and Thorium are split apart.

    Nuclear Fusion Reaction

    • For a nuclear fusion reaction to occur, it is necessary to bring two nuclei so close that nuclear forces become active and glue the nuclei together.
    • Nuclear forces are small-distance forces and have to act against the electrostatic forces where positively charged nuclei repel each other.
    • This is the reason nuclear fusion reactions occur mostly in high density, high-temperature environment (millions of degree Celsius) which is practically very difficult to achieve under laboratory conditions.

  • [pib] The Cancer Genome Atlas (TCGA)

    The Ministry of Science & Technology has inaugurated the 2nd Cancer Genome Atlas (TCGA) 2020 Conference.

    Do you know?

    According to the World Cancer Report by the WHO, one in 10 Indians develops cancer during their lifetime and one in 15 dies of the disease!

    The Cancer Genome Atlas

    • The Cancer Genome Atlas (TCGA) is a landmark project started in 2005 by the US-based National Cancer Institute (NCI) and the National Human Genome Research Institute (NHGRI).
    • The idea was to make a catalogue of the genetic mutations that cause cancer.
    • This meant collecting tumour samples and blood samples (known as the germline) from patients and processing them using gene sequencing and bioinformatics.
    • The TCGA is a continuing effort even after fifteen years and has generated over 2.5 petabytes of data for over 11,000 patients.
    • This data is available to researchers all around the world and has been used to develop new approaches to diagnose, treat and prevent cancer.

    Indian Cancer Genome Atlas (ICGA)

    • On similar lines, the establishment of an ICGA has been initiated by a consortium of key stakeholders in India led by CSIR in which several government agencies, cancer hospitals, academic institutions and private sector partners.
    • It is aimed at improving clinical outcomes in cancer and other chronic diseases.

    Why need such Atlas?

    • Diverse molecular mechanisms- including genetic and lifestyle factors contribute to cancer, posing significant challenges to treatment.
    • Therefore, it is necessary to better understand the underlying factors- patient by patient.
    • In this context, it is important to create an indigenous, open-source and comprehensive database of molecular profiles of all cancer prevalent in Indian population.

  • Operation Trident and its significance

    Every year, India celebrates December 4 as Navy Day to commemorate Operation Trident – a key offensive during the 1971 India-Pakistan War. This year, it is the 50th anniversary of the victory in the 1971 War.

    This newscard is crucial for the CAPF aspirants. It hardly holds any importance for CS prelims. But the grit, glory and honour of our armed forces is a matter of pride that every CS aspirants should know.

    Operation Trident

    • The India-Pakistan War of 1971 had begun on December 3, when the Pakistan Air Force launched pre-emptive strikes on airfields in Western India.
    • Following the Battle of Longewala, the Indian Navy inflicted heavy damage on Pakistani vessels in Karachi harbour.
    • India responded by formally declaring war in the wee hours of December 4.
    • On December 4, under Operation Trident, the Indian Navy sank three vessels near the Pakistani port city of Karachi.
    • The Indian Air Force also played a crucial role, when Karachi’s Kemari oil tanks were strafed by the IAF on the same day in an independent operation which it did not claim.

  • In farmers’ protests, the core is procurement

     

    Context

    • Farmers’ protests have erupted once again in north India, their main worry is about a possible withdrawal of the Minimum Support Price (MSP) and a dismantling of the public procurement of grains.

    Why farmers in Punjab and Haryana are protesting

    • Farmers in Punjab and Haryana are heavily dependent on public procurement and assured price through MSP.
    • Nearly 88% of the paddy production and 70% of the wheat production in Punjab and Haryana (in 2017-18 and 2018-19) has been absorbed through public procurement [Food Grains Bulletin and Agricultural Statistics at a Glance, Government of India].
    • In contrast, in the other major paddy States such as Andhra Pradesh, Telangana, Odisha and Uttar Pradesh, only 44% of the rice production is procured by public agencies.
    •  In the major wheat States of Madhya Pradesh and Uttar Pradesh, only 23% of the production is procured by public agencies.

    Government needs to continue procurement

    • If farmers of Punjab and Haryana need the procurement system, the government needs it even more.
    • This is because of its obligations under the PDS and the National Food Security Act (NFSA).
    • Support under the NFSA is a legal and rights-based entitlement.
    • There are nearly 80 crore NFSA beneficiaries and an additional eight crore migrants who need to be supported under the PDS.
    • In the last three years, nearly 40% of the total paddy production in the country and 32% of wheat production has been procured by public agencies to supply the PDS.
    • Thus, the government has little option but to continue its procurement from these States in the foreseeable future.

    Way forward

    • Therefore, it is imperative that the government reaches out to the farmer groups and assures them of the indispensability of MSP-procurement system.
    • The government needs to start this initiative immediately to allay their legitimate concerns.
    • Two of the major limitations in the laws that need to be addressed immediately:
    • 1) The absence of a regulatory mechanism to ensure fair play by private players vis-à-vis farmers.
    • 2) The lack of transparency in trade area transactions.

    Conclusion

    The severe trust deficit that resulted from the way the Farm Bills have been rushed through needs to be addressed by adopting a conciliatory approach towards farmers and the States.

  • Trade-offs for growth revival: Why India’s policymakers need a new roadmap

    The article weighs in the policy options with the Indian policymakers to revive the India economy. This leads to the trilemma of managing the exchange rate, controlling the inflation and maintaining the capital account open all at the same time.

    A brief overview of 1991 economic reforms

    • The crisis in 1991 was centred on the balance-of-payments.
    • Allowing the Indian rupee to fall from an artificially high level  was a key part of the solution.
    • Since the reforms, the Indian rupee has steadily depreciated, roughly according to a market-determined equilibrium.
    • Extraordinarily high tariff barriers were reduced, allowing for welfare gains from greater international trade.
    • Reforms of the domestic economy that increased market orientation was, in some sense, opportunistically combined with these externally-oriented measures.

    What should be India’s foreign economic policy

    • In terms of connections to the rest of the world, however, it is less clear what the right policy mix should be.
    • We can think of three types of international flows: labour, goods and services, and capital.

    1) Internation flow of Indian labour

    • India has benefited from being able to send workers with a variety of skills to different types of economies: construction workers and nurses in the Persian Gulf, software engineers in the US, and so on.
    • Direct benefits came from large remittances back to India.
    • The pandemic and US immigration policy, have had some major impacts on this international connectivity, but new vaccines and a change in the US president are likely to reverse these shocks.
    • In any case, there is not much that Indian policymakers can do or need to do on this front.

    2) Trade in Goods and Service

    • India has been able to grow its exports, both in a variety of agricultural and manufactured commodities and in services, from software services to tourism.
    • It has been reasonably competitive in a range of goods and services.
    • It was only in the last few years, even before the pandemic, have Indian exports struggled to register growth.
    • Whereas the export powerhouses of East Asia consistently ran surpluses on the current account of the balance of payments, India has mostly run deficits, albeit manageable ones.

    3) Capital Flow: Area where policymakers have option

    • Current account deficits have to be covered somehow, though various forms of foreign capital.
    • Whereas economic theory and economic policymakers mostly agree on the benefits of international trade in goods and services there is less of a consensus on the benefits of international capital flows.
    • Capital flows can raise fears of instability if they are reversed, or make exports less competitive if they push up the value of the rupee. 
    • The country is a relatively attractive destination for foreign capital, both FDI and portfolio investment.
    • But, these flows can make Indian exports less competitive if the rupee appreciates too much, requiring domestic demand to do more of the work of absorbing increased output.

    Lesson from Japan

    • Right now, India is trying to build its manufacturing capacity by raising tariffs, in an old-style push for import substitution.
    • It is also providing direct incentives, such as the new scheme rewarding increases in production.
    • Arguably, this did work in Japan in the 1960s, but it is not clear if India is well-off enough to sustain that domestic strategy.
    • In addition, the lack of competitive discipline exporting can hinder the achievement of acceptable quality levels.

    Way forward

    • Capital controls to some extent can help mitigate the risk in this situation.
    • The Reserve Bank of India do more to keep the rupee at competitive levels, by accumulating foreign exchange reserves.

    Consider the question “In terms of links with the rest of the global economy, it is less clear what the right policy mix should be. Do you agree with the view that focus on simultaneously managing the exchange rate and domestic inflation while maintaining an open capital account would help in the revival of India’s economic growth

    Conclusion

    Lurking under the surface of these issues is the trilemma of being unable to simultaneously manage the exchange rate and domestic inflation while maintaining an open capital account, although foreign exchange reserves provide a way of softening the trade-offs. These are not new challenges, but they will need to be a focus for India’s policymakers as they seek renewed economic growth.

    Source:-

    https://www.financialexpress.com/opinion/trade-offs-for-growth-revival-why-indias-policymakers-need-a-new-roadmap/2142900/

  • Lottery, gambling, betting taxable under GST Act

    The Supreme Court has held that lottery, gambling and betting are taxable under the Goods and Services Tax (GST) Act.

    Try this question from CSP 2018:

    Q.Consider the following items:

    1. Cereal grains hulled
    2. Chicken eggs cooked
    3. Fish processed and canned
    4. Newspapers containing advertising material

    Which of the above items is/are exempt under GST (Goods and Services Tax)?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4

    What did the court say?

    • A three-judge Bench led by Justice Ashok Bhushan said the levy of GST on lotteries does not amount to “hostile discrimination”.
    • The court held that lottery, betting and gambling are “actionable claims” and come within the definition of ‘goods’ under Section 2(52) of the Central Goods and Services Tax Act, 2017.
    • Lottery, betting and gambling are well known concepts and have been in practice in this country since before Independence and were regulated and taxed by different legislations.

    Parliament to decide

    • The court said that the Parliament had an absolute power to go for an “inclusive definition” of the term ‘goods’ to include actionable claims like lottery, gambling and betting.
    • The court accepted the government’s stand that the Parliament has the competence to levy GST on lotteries under Article 246A (inserted after GST Act) of the Constitution.
    • The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws with respect to GST and expansive definition of goods given in Section 2(52).

    Must read:

    Goods and Services Tax

  • Surveyor-2 Spacecraft

    NASA has confirmed that the Near-Earth Object called 2020 SO is the rocket booster that helped lift the space agency’s Surveyor spacecraft toward the Moon in 1966.

    Try this PYQ:

    Consider the following phenomena:

    1. Size of the sun at dusk
    2. Colour of the sun at dawn
    3. Moon being visible at dawn
    4. Twinkle of stars in the sky
    5. Polestar being visible in the sky

    Which of the above are optical illusions?

    (a) 1, 2 and 3

    (b) 3, 4 and 5

    (c) 1, 2 and 4

    (d) 2, 3 and 5

    What is Surveyor-2?

    • The Surveyor-2 spacecraft was supposed to make a soft landing on the Moon’s surface in September 1966, during which time one of the three thrusters failed to ignite.
    • As a result of this the spacecraft started spinning and crashed on the surface.
    • The aim of the mission was to reconnoiter the lunar surface ahead of the Apollo missions that led to the first lunar landing in 1969.
    • While the spacecraft crashed into the Moon’s surface, the rocket booster disappeared into an unknown orbit around the Sun.

    How was the object determined to be the rocket booster?

    • Astronomers track asteroids using telescope to determine if there are potentially hazardous asteroids that pose a threat to the planet.
    • Therefore, it is also important for them to be able to distinguish between natural and artificial objects that orbit around the Sun.
    • The rocket booster has come “somewhat close” to the Earth in the past few decades.
    • One approach to the Earth in late 1966 was so close that the object was thought to have originated from Earth.
    • In September, the NASA-funded telescope detected it.

  • Arecibo Radio Telescope

    A massive radio telescope at Puerto Rico’s Arecibo Observatory — one of the world’s largest — collapsed on after sustaining severe damage, following 57 years of astronomical discoveries.

    Try this PYQ:

    Which of the following is/are cited by the scientists as evidence/evidence for the continued expansion of the universe?

    1. Detection of microwaves in space
    2. Observation of redshirt phenomenon in space
    3. Movement of asteroids in space
    4. Occurrence of supernova explosions in space

    Codes:

    (a) 1 and 2 only

    (b) 2 only

    (c) 1, 3 and 4

    (d) None of the above can be cited as evidence.

    Arecibo Telescope

    • The Arecibo Observatory, also known as the National Astronomy and Ionosphere Center (NAIC), was an observatory in Arecibo, Puerto Rico owned by the US National Science Foundation (NSF).
    • It was the world’s largest single-aperture telescope for 53 years, surpassed in July 2016 by the Five-hundred-meter Aperture Spherical Telescope (FAST) in China.
    • The second-largest single-dish radio telescope in the world, it had withstood many hurricanes and earthquakes since it was first built in 1963.

    Its contributions

    • Being the most powerful radar, scientists employed Arecibo to observe planets, asteroids and the ionosphere.
    • It made several discoveries over the decades, including finding prebiotic molecules in distant galaxies, the first exoplanets, and the first millisecond pulsar.
    • In 1967, Arecibo was able to discover that the planet Mercury rotates in 59 days and not 88 days as had been originally thought.
    • In the following decades, it also served as a hub in the search for extraterrestrial life, and would look for radio signals from alien civilizations.
    • In 1993, scientists Russell Hulse and Joseph Taylor were awarded the Nobel Prize in Physics for their work on the observatory in monitoring a binary pulsar.
    • It provided a strict test of Einstein’s Theory of General Relativity and the first evidence for the existence of gravitational waves.