đŸ’„Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

GS Paper: GS3

  • Luhman 16A: A binary brown-dwarf system

    A group of international astrophysicists have identified cloud bands on the surface of Luhman 16A, one of a pair of binary brown dwarfs in the Vela constellation.

    Space terminology has gained importance in prelims. The Luhman 16A coupled with few more examples of space concepts like binary star and dwarf star are discussed in this newscard.

    Luhman 16A

    • Luhman 16 is a binary star system, the third closest system to the Sun after Alpha Centauri and Barnard’s star.
    • At a distance of about 6.5 light-years from the Sun, this pair of brown dwarfs referred to as Luhman 16A and Luhman 16B orbit each other, casting a dim light.
    • Brown dwarfs are also called failed stars because their masses are intermediate to the largest planets and the smallest main sequence stars.
    • Their masses being too small, they are unable to sustain fusion of their hydrogen to produce energy.
    • It is believed that some of the more massive brown dwarfs fuse deuterium or lithium and glow faintly.

    The cloud band over Luhman

    • The group, by using the Very Large Telescope at European Southern Observatory, Chile, found that Luhman 16A had band-like clouds in its atmosphere, whereas the same was not true of Luhman 16B.
    • Many astronomers detected polarization of brown dwarfs.
    • But what is special in the newest study of Luhman 16 is that the researchers have found the actual structure of the clouds — that they form bands over one of the pair.
    • Understanding the cloud system over a brown dwarf can shed light on the pressure, temperature and climate on the surface of the celestial body.

    Why it has made into a headline?

    • The researchers have used an idea put forth nearly two decades ago by Indian astrophysicist Sujan Sengupta, who works at the Indian Institute of Astrophysics, Bengaluru.
    • Sengupta had propounded the light emitted by a cloudy brown dwarf, or reflected off an extrasolar planet, will be polarized.
    • He then suggested that a polarimetric technique could serve as a potential tool to probe the environment of these objects.

    Back2Basics: Binary Star System

    • A binary star is a star system consisting of two stars orbiting around their common barycenter.
    • Systems of two or more stars are called multiple star systems.
    • These systems, especially when more distant, often appear to the unaided eye as a single point of light, and are then revealed as multiple by other means.
    • Binary star systems are very important in astrophysics because calculations of their orbits allow the masses of their component stars to be directly determined.

  • [pib] Data on Energy Savings

    The Union Ministry of Power has released a Report on “Impact of energy efficiency measures for the year 2018-19”.

    Things to note:

    1) UJALA Scheme

    2) PAT Scheme

    3) Standards & Labeling Programme

    Possible mains question:

    Q. Discuss the role of Bureau of Energy Efficiency (BEE) in “institutionalizing” energy efficiency services in India.

    About the report

    • This report was prepared by an Expert agency PWC Ltd, who was engaged by the Bureau of Energy Efficiency (BEE).
    • The objective of this study is to evaluate the performance and impact of all the key energy efficiency programmes in India, in terms of total energy saved and the related reduction in CO2 emissions.

    Data on energy savings

    • With our energy efficiency initiatives, we have already reduced the energy intensity of our economy by 20% compared to 2005 levels. This includes both the Supply Side and Demand Side sectors of the economy.
    • The implementation of various energy efficiency schemes has led to total electricity savings to the tune of 113.16 Billion Units in 2018-19, which is 9.39% of the net electricity consumption.
    • Energy savings (electrical + thermal), achieved in the energy-consuming sectors is to the tune of 16.54 Mtoe, which is 2.84% of the net total energy consumption in 2018-19.
    • Overall this has translated into savings worth INR 89,122 crores against last year’s savings of INR 53,627 crore.
    • These efforts have also contributed to reducing 151.74 Million Tonnes of CO2 emissions, whereas last year this number was 108 MTCO2.

    (Note: Mtoe= million Tonne of Oil Equivalent)

    What led to this significant savings?

    • The study has identified the following major programmes, viz. Perform, Achieve and Trade Scheme, Standards &Labelling Programme, UJALA Programme, Municipal Demand Side Management Programme, etc.
    • There is huge capacity still for bringing efficiencies especially in MSME sector and a Housing sector that has now been taken up.

    About the Bureau of Energy Efficiency (BEE)

    • The Bureau of Energy Efficiency is an agency under the Ministry of Power created in March 2002 under the provisions of the nation’s 2001 Energy Conservation Act.
    • Its function is to develop programs which will increase the conservation and efficient use of energy in India.
    • The mission of BEE is to “institutionalize” energy efficiency services, enable delivery mechanisms in the country and provide leadership to energy efficiency in all sectors of the country.

    Back2Basics

    1) PAT Scheme

    • Perform Achieve and Trade (PAT) scheme is a flagship programme of the Bureau of Energy Efficiency under the National Mission for Enhanced Energy Efficiency (NMEEE).
    • NMEEE is one of the eight national missions under the National Action Plan on Climate Change (NAPCC) launched in the year 2008.
    • The scheme aims to reduce specific energy consumption in energy-intensive industries through certification of excess energy saving which can be traded.
    • It refers to the calculation of Specific Energy Consumption (SEC) in the baseline year and projected SEC in the target year covering different forms of net energy going into the boundary of the designated consumers’ plant and the products leaving it over a particular cycle.
    • Those eight Energy Intensive Sectors included are Chlor-alkali, Pulp & Paper, Textile, Aluminum, and Thermal Power plants, Fertilizer, Iron & Steel and Cement.

    2) Standards & Labeling Programme

    • It is one of the major thrust areas of BEE.
    • A key objective of this scheme is to provide the consumer with an informed choice about the energy-saving and thereby the cost-saving potential of the relevant marketed product.
    • The scheme targets display of energy performance labels on high energy end-use equipment & appliances and lay down minimum energy performance standards.

    3) UJALA Scheme

    • Launched in 2015, the Unnat Jyoti by Affordable LEDs for All (UJALA), in a short span of time, has emerged as the world’s largest domestic lighting programme.
    • The main objective is to promote efficient lighting, enhance awareness on using efficient equipment which reduces electricity bills and helps preserve the environment.
    • The Electricity Distribution Company and Energy Efficiency Services Limited (EESL) a public sector body of the Ministry of Power is implementing the programme.

  • [pib] Energy-efficient Photodetector for Security Application

    Indian scientists have fabricated an economical and energy-efficient wafer-scale photodetector using gold – silicon interface, for security applications.

    A basic question on the working principle of Photodetectors can be asked in the Prelims.

    What are Photodetectors?

    • Photodetectors, also called photosensors, are sensors of light or other electromagnetic radiation.
    • A photodetector has a p–n (positive-negative) junction that converts light photons into the current.
    • The absorbed photons make electron-hole pairs in the depletion region.
    • Photodiodes and phototransistors are a few examples of photodetectors. Solar cells convert some of the light energy absorbed into electrical energy.
    • The material cost and the intricate fabrication processes involved in realizing high-performance detectors make them unaffordable for day to day applications.

    Applications

    • Photodetectors are the heart of any optoelectronic circuit that can detect light.
    • They are employed for a wide variety of applications ranging from controlling automatic lighting in supermarkets to detecting radiation from the outer galaxy as well as security-related applications.
    • They range from simple devices that automatically open supermarket doors, to receivers on the TV remote controls.

    What did Indian researchers achieve?

    • The scientists have fabricated gold (Au) – silicon (Si) interface, which showed high sensitivity towards light demonstrating the photodetection action.
    • The Au–Si interface was brought about by galvanic deposition, a technique for electroplating of metals, wherein water-based solutions (electrolytes) are used, which contain the metals to be deposited as ions.
    • In addition, a nanostructured Au film also was deposited on top of p-type silicide (having an excess of positive charges), which acts as a charge collector.

    Benefits

    • Being a solution-based technique, the method is highly economical and enabled large-area fabrication without compromising the detector response.
    • The process is quick, taking only minutes to fabricate a detector of any arbitrary area and exhibited a rapid response of 40 microseconds.
    • This photodetector displayed long-term environmental stability.
    • The Indian invention provides a simple and cost-effective solution-based fabrication method for high-performance photodetector.
    • It could help detect weak scattered light as an indication of unwanted activity.

  • Is the perpetual bond a suitable option to raise money?

    The government is exploring ways to raise money to deal with the destruction caused by COVID pandemic. One of the suggestion is the monetisation of fiscal deficit. But this article looks into an alternative approach of issuing bonds based on the idea of Consol bond issued by the British government during WW 2. So, how much amount needs to be raised? and why a perpetual bond like Consol bond is a suitable option for India? Read to know!

    A gathering financial storm

    • India projected a deficit of â‚č7.96-lakh crore in the Budget before the pandemic.
    • Adding to the above concern: 1) Off-balance sheet borrowings of 1% of GDP. 2) The overly excessive target of â‚č2.1 lakh crore through disinvestments.
    • Thus, financial deficit number is set to grow by a wide margin owing to corona crisis.
    • There will be revenue shrinkage from the coming depression that will most certainly be accompanied by a lack of appetite for disinvestment.

    Need for stimulus package and measures taken by the RBI

    • In addition to the expenditure that was planned, the government has to spend anywhere between â‚č5-lakh crore and â‚č6-lakh crore as a stimulus package.
    • The stimulus provided by the government so far and recent announcements by the Reserve Bank of India (RBI) achieved little.
    • All the RBI’s schemes are contingent on the availability of risk capital, the market for which has completely collapsed.
    • The government and the RBI have tried several times to increase lending to below investment grade micro, small and medium enterprises, but have come up short each time.
    • Furthermore, while the 60% increase in ways and means limits for States is a welcome move, many States have already asked for doubling the limits due to the shortages in indirect taxation collections from Goods and Services Tax, fuel and liquor.
    • The government and the central bank need to understand that half measures will do more harm than good.

    What is the Consol Bond?

    • Consol bond is a form of British government bond that has no maturity and that pays a fixed coupon.
    • Consols are basically rare examples of actual perpetual bonds.
    • The bonds were issued in 1917 as the government sought to raise more money to finance the ongoing cost of the First World War.

    So, why bond like Consol Bonds is a good option for India?

    • There is no denying the fact that the traditional option of monetising the deficit by having the central bank buy government bonds is one worth pursuing.
    • Citizens’ active participation is ensured in Consol Bond type alternative.
    • Furthermore, with the fall of real estate and given the lack of safe havens outside of gold, the bond would offer a dual benefit as a risk-free investment for retail investors.
    • When instrumented, it would be issued by the central government on a perpetual basis with a right to call it back when it seems fit.
    • An attractive coupon rate for the bond or tax rebates could also be an incentive for investors.
    • The government can consider a phased redemption of these bonds after the economy is put back on a path of high growth.

    The solution of bond offered here could be a valuable addition in points to the answer to the question which asks about the ways to raise money. Consider the question, “Economic devastation caused by the COVID pandemic has forced the government to explore the various ways to raise the money. Discuss the options available with the government and issues associated with the options.”

    Conclusion

    Politicians and epidemiologists across the world have used the word “war” to describe the situation the world is currently in. So, to raise the money to fight this war against Covid-19, we can take the cue from past and issue bond based on the Consol bond.

    Back2Basics: What is fiscal deficit?

    • A fiscal deficit is a shortfall in a government’s income compared with its spending.
    • The government that has a fiscal deficit is spending beyond its means.
    • A fiscal deficit is calculated as a percentage of gross domestic product (GDP).
    • There can be different types of deficit in a budget depending upon the types of receipts and expenditure we take into consideration. Accordingly, there are three concepts of the deficit, namely-
    • Revenue deficit = Total revenue expenditure – Total revenue receipts.
    • Fiscal deficit = Total expenditure – Total receipts excluding borrowings.
    • Primary deficit = Fiscal deficit-Interest payments.
    • Primary deficit shows how much government borrowing is going to meet expenses other than interest payments.
    • Thus, zero primary deficits mean that the government has to resort to borrowing only to make interest payments.
    • To know the amount of borrowing on account of current expenditure over revenue, we need to calculate the primary deficit.
    • Thus, the primary deficit is equal to fiscal deficit less interest payments.

    Perpetual Bonds

    • A perpetual bond, also known as a “consol bond” or “prep,” is fixed income security with no maturity date.
    • This type of bond is often considered a type of equity, rather than debt. One major drawback to these types of bonds is that they are not redeemable.
    • However, the major benefit of them is that they pay a steady stream of interest payments forever.
    • Perpetual bonds exist within a small niche of the bond market.
    • This is mainly due to the fact that there are very few entities that are safe enough for investors to invest in a bond where the principal will never be repaid.
    • AT-1 bonds which were recently in news due to YES bank failure is an example of a perpetual bond.

     

  • Stimulus package conundrum

    There are many suggestions and expectations around the stimulus package deal to revive the economy crippled post corona pandemic. While everyone agrees over the need of stimulus but there are several opinions and suggestion around the various aspects of the package like size, time, source of revenue etc. But we must be mindful of the pitfalls and constraints while thinking about the stimulus package. So, what are the suggestion and expectation and what are the limitations? Read to know!

    1. Supply-side constraints on stimulus

    • It is argued that a fiscal stimulus package has to follow the timeline.
    • But you cannot ‘stimulate’ an economy during a supply-side lockdown.
    • And that there are ‘announcement effects’ — both good and bad — that go with the stimulus.
    • So, any ‘good stimulus’ can only come into effect post lockdown and extensive consultations are on with everyone for that.

    2. What should be the size of the stimulus package?

    • While thinking about the stimulus, we cannot forget that government revenues too will be seriously hit.
    • The government revenue will be hit by 2-3% of GDP, given that disinvestment target itself is 1% of GDP and the realisation is likely to be close to zero in the current financial year.
    • So, the effective fiscal deficit is going to be somewhere around 7.5 % if you take into account all the off-balance sheet borrowings.
    • The U.S. government has set aside $2 trillion for bailouts or 9% of its GDP.
    • India’s starting point is going to be at around 7.5% of GDP fiscal deficit, then how much more can we afford on top of that?
    • On top of this is all the ‘merit expenditure’ on health and direct income support to the poor cannot be reduced.
    • Can we still formulate a stimulus package comprising 10% of GDP, to be footed by the Central government alone?

      Monetising the deficit and debt-to-GDP ratio

    • From 1947 to 1997, the Central government always routinely monetised its deficit, without leading to high rates of inflation, much less hyperinflation.
    • The Fiscal Responsibility and Budget Management (FRBM) limits are hardly a success and routinely all governments have broken the barrier.
    • Other countries with huge debt-to-GDP ratios like Japan (>200%) and U.S. (125%) get away with barely a rap on the knuckles.
    • But India is pulled up for minor slippages on a 70% debt-GDP ratio.

    3. Should we pay attention to needs and forget about affordability?

    • Some have argued that bailouts should be based on need and not affordability.
    • Can printing money be a solution out of this situation?
    • Possible dangers of printing money: The currency could plunge, inflation soar high and rating agencies could downgrade us to junk.
    • So, shouldn’t there be a more nuanced approach to what constitutes a ‘good’ stimulus?

    4. The problem of low credit flow despite high liquidity

    • There is a lot of liquidity in the economy, but limited credit is flowing due to anaemic lending.
    • Thus, another mantra being espoused is that bank managers should be incentivised to lend and the government should indemnify loans given during this period.
    • This could well lead to bogus companies springing up overnight to grab the stimulus in collusion with banks.
    • The government owes about â‚č1 lakh crore on tax refunds and also had promised to make up for any difference to the States, if the GST did not grow by 14% per annum.
    • This is the time for it to transfer this to the States as a grant, for one year, to offset the revenue loss to States.

    5. Should we go to the IMF?

    • There is talk of going to the International Monetary Fund (IMF).
    • Do we really need the IMF’s bailout which comes with conditions when there is no foreign exchange crisis for financing rupee expenditure?
    • Moreover, there is a perceived global stigma attached to doing so.
    • Won’t the conditionality-led cure be worse than the disease?

    Consider the following question based on the issue “Economic crises accentuate the role of governments. Covid-19 has not been different. In light of the above statement, discuss the various issues that the government faced while coming up with a stimulus package to revive the economy. What are the sources of revenue to be tapped by the government?”

    Conclusion

    Fate is what happens to us. Destiny is what we make in spite of our fate. India’s destiny appears relatively safe, if we cast the mind’s eye around the globe. Lifting the lockdown will be the first step towards a good stimulus and one does need to un-handcuff a billion people to save their lives too.

  • Co-operative banks can use SARFAESI Act to recover dues: Supreme Court

    A five-judge Constitution Bench of the Supreme Court (SC) has ruled that all co-operative banks in the country could make use of the SARFAESI Act to make recovery against defaulting persons.

    Possible mains question:

    What is the SARFAESI Act, 2002? Discuss its various provisions and efficacy to curb Non-Performing Assets (NPAs)?

    What is Sarfaesi Act, 2002?

    • Sarfaesi is an acronym for Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest.
    • It allows banks and other financial institution to auction residential or commercial properties (of Defaulter) to recover loans.
    • The first asset reconstruction company (ARC) of India, ARCIL, was set up under this act.
    • Under this act secured creditors (banks or financial institutions) have rights for enforcement of security interest under section 13 of SARFAESI Act, 2002.

    Provisions of the Act

    • If the borrower of financial assistance makes any default in repayment of a loan or any instalment and his account is classified as NPA by secured creditor, then secured creditor may require before the expiry of a period of limitation by written notice.
    • The act does not apply to unsecured loans, loans below â‚č100,000 or where remaining debt is below 20% of the original principal.
    • This law allowed the creation of asset reconstruction companies (ARC) and allowed banks to sell their non-performing assets to ARC’s (which are regulated by the RBI).
    • Banks are allowed to take possession of the collateral property and sell it without the permission of a court.

    To summarize, the SARFAESI Act empowers financial institutions to ‘seize and desist’. They should give a notice to the defaulting borrower asking to repay the amount within 60 days.

    If the debtor doesn’t comply, the bank can resort to one of the three following measures:

    1) Take possession of loan security

    2) Sell or lease or assign the right over the security

    3) Manage the asset or appoint someone to manage the same

    Ambit of the Act

    • The recent judgment said that the SARFAESI Act qualifies the test of legislative competence, as well as the definition, cannot be said to be beyond the competence of the Parliament.
    • In 2013, the Gujarat High Court had, while hearing a challenge to the amendment of Banking Regulation Act of 1949, to include cooperative societies as financial institutions, ruled it null and void.
    • The high court had then agreed with the submissions of the petitioners who had argued that Sarfaesi would not be applicable to cooperative banks formed under the state law.
    • The Delhi High Court had, on the other hand, ruled that the cooperative banks and societies were for all purposes banks and financial institutions and thus were allowed to use Sarfaesi to make recoveries against defaulters.
    • In its judgment, the apex court held that all such cooperative banks involved in the activities related to banking are covered within the meaning of ‘banking company’.

  • ‘Lost at Home’ Report by UNICEF

    More than five million people were internally displaced in India due to natural disasters, conflict and violence in 2019, constituting the highest number of new internal displacements in the world.

    Try to answer:

    ‘Environmental migrant’ is an issue that globally countries should start taking seriously. Discuss the statement with respect to India which already ranks high in climate vulnerability.

    The ‘Lost at Home’ Report

    • The report is published by the UN Children’s Fund (UNICEF).
    • It says that almost 33 million new displacements were recorded in 2019 — around 25 million were due to natural disasters and 8.5 million as a consequence of conflict and violence.
    • Of these, there were 12 million new displacements involving children, including around 3.8 million of them caused by conflict and violence, and 8.2 million due to disasters linked mostly to weather-related events.
    • The report said that natural disasters resulted in more new displacements than conflict and violence.
    • Almost 10 million new displacements in 2019 were recorded in East Asia and the Pacific (39 %) — and almost the same number in South Asia (9.5 million).
    • The report looks at the risks internally displaced children face —child labour, child marriage, trafficking among them — and the actions urgently needed to protect them.

    Displacement in India

    • India, the Philippines, Bangladesh and China all suffered from natural disasters leading to displacement in the millions, which accounted for 69% of global disaster-induced displacements.
    • These were overwhelmingly caused by extreme conditions created by dangerous storms and floods.
    • In India, the total number of new internal displacements in 2019 stood at 5,037,000 – including 5,018,000 due to natural disasters and 19,000 because of conflict and violence.

    Global Scenario

    • India is followed by the Philippines, Bangladesh and China.
    • The Philippines accounted for 4.27 million new internal displacements due to natural disasters, conflict and violence, Bangladesh 4.08 million and China 4.03 million.
    • The largest number of internally displaced children due to conflict is found in the Middle East and North Africa (MENA) and sub-Saharan Africa.
    • Internally displaced persons are concentrated in two regions — the Middle East and North Africa and West and Central Africa.
    • The MENA region recorded over 12 million IDPs as a result of conflict and violence at the end of 2019. Almost all of them lived in just three countries — Syria, Yemen, and Iraq — and around 5 million were children.

    What makes the situation worse?

    • The COVID-19 pandemic is only making a critical situation worse.
    • Camps or informal settlements are often overcrowded and lack adequate hygiene and health services.
    • Physical distancing is often not possible, creating conditions that are highly conducive to the spread of the disease, the report said.

  • GARUD portal for fast-track approval to COVID-19 related drone operations

    Civil Aviation Ministry and DGCA have launched the GARUD (portal for providing fast track conditional exemptions to government agencies for COVID-19 related drone operations.

    Possible prelim question:

    The Garud Portal which sometimes finds mention in the news is related to-

    a) Air travel of defence personnel

    b) Airlifting of the stranded Indian citizens

    c) Registration of Remotely-piloted aircraft system (RPAS)

    d) None of these

    GARUD portal

    • GARUD is an acronym for ‘Government Authorisation for Relief Using Drones’.
    • The objective of the portal is to assist governmental entities in seeking exemption for COVID-19 related Remotely-piloted aircraft system (RPAS) operations.
    • The Civil Aviation Ministry has clarified that any violation of provisions will make the conditional exemption null and void and will lead to penal action.

  • [pib] Study of flowering plant endemism of Northern Western Ghats

    Scientists at the Agharkar Research Institute (ARI), Pune have come up with plant data of the Northern Western Ghats which indicates that plateaus, in addition to the forests, should be prioritized for the conservation of the Northern Western Ghats.

    Last year one  species from our newscard : Species in news: Hump-backed Mahseer made it into the CSP 2019.  The ‘Abutilon ranadei’ flower in the newscard creates such a vibe yet again.

    A stand-alone species being mentioned in the news for the first time often find their way into the prelims. Make a special note here.

    Why conserve Plateaus?

    • The Western Ghats of India is one of the global biodiversity hotspots owing to the endemism that is sheltered by a chain of mountains.
    • The northern part of this along with the Konkan region is considerably different from its southern and central counterparts on account of lesser precipitation and extended dry season.
    • It is the plateaus and the cliffs that harbour most of the endemic species.

    What did the study find?

    • The study found that the Northern Western Ghats has 181 local endemic plant species, including four monospecific genera.
    • They have found that a majority of the endemic species are therophytes, which complete their life cycle in a short period during monsoon.
    • A notable geographical feature of the Northern Western Ghats is the presence of plateaus and cliffs that display maximum endemic species, unlike forests.
    • It is the region of rapid diversification of specific herbaceous endemic genera like Ceropegia, Glyphochloa, Dipcadi, and Eriocaulon.

    One such specie is-

    Abutilon ranadei

    • Abutilon ranadei is a shrub, measuring 2.5-3.5 m high and bears star-shaped hairs.
    • It is a Critically Endangered endemic species from the northern Western Ghats.

    Bonus:

    Consider the following pairs:

    Wildlife Naturally found in
    1. Blue-finned Mahseer Cauvery River
    2. Irrawaddy Dolphin Chambal River
    3. Rusty-spotted Cat Eastern Ghats

    Which of the pairs given above are correctly matched?

    (a) 1 and 2 only

    b) 2 and 3 only

    c) 1 and 3 only

    d) 1, 2 and 3

  • Pathways to design a resilient economy

    The pandemic of COVID is a watershed moment in the way we look at the world. Truly, the future vocabularies will consist of ‘Pre COVID world’ and ‘Post COVID world’. Undoubtedly, the economic system shall be deeply affected by the COVID wave. The focus of this article is to redesign our economy through new 7 golden rules in the aftermath of Covid-19. As we read these ideas we also come across the faults that lie at the bottom of the present system. This is our opportunity to design a resilient and just system. So, what is the way forward to achieve this? Read to know!

    • When complex systems come to catastrophes, they re-emerge in distinctly new forms.
    • The COVID-19 global pandemic is a catastrophe, both for human lives and our complex
    • Economists cannot predict in what form the economy will emerge from it. But we can develop principles for what lies ahead.

    7 Radical ideas to build back economy

    The COVID-19 catastrophe has challenged the tenets of economics that have dominated public policy for the past 50 years.

    Here are seven radical ideas emerging as pathways to build a more resilient economy and a more just society.

    1. Time to rethink GDP as a measure of growth

    • The obsession with GDP as the measure of progress has been challenged often, but its challengers were dismissed.
    • Now, Nobel laureates in economics-Joseph Stiglitz, Amartya Sen, Abhijit Banerjee, Esther Duflo and others-are calling upon to rethink the fundamentals of economics, especially the purpose of GDP.
    • A five-point ‘de-growth’ manifesto by 170 Dutch academics has gone viral amidst the heightened Internet buzz during the lockdown.
    • Goals for human progress must be reset.

    2. Opening boundaries is not always good

    • Boundary-lessness is a mantra for hyper-globalisers. Boundaries, they say, impede flows of trade, finance, and people.
    • However, since countries are at different stages of economic development, and have different compositions of resources, they must follow different paths to progress.
    • According to systems’ theory, sub-systems within complex systems must have boundaries around them, be permeable ones, so that the sub-systems can maintain their own integrity and evolve.
    • This is the explanation from systems science for the breakdown of the World Trade Organization (WTO).
    • In WTO system, all countries were expected to open their borders.
    • Opening borders caused harm to countries at different stages of development.
    • Now COVID-19 has given another reason to maintain sufficient boundaries.

    3. Role of the government is indispensable

    • Ronald Reagan’s dictum, “Government is not the solution… Government is the problem”, has been upended by COVID-19.
    • Even capitalist corporations who wanted governments out of the way to make it easy for them to do business are lining up for government bailouts.

    4. Problems caused by marketization

    • The “market” is not the best solution.
    • Money is a convenient currency for managing markets and for conducting transactions.
    • Whenever goods and services are left to markets, those who do not have money to obtain what they need are at loss.
    • Moreover, by a process of “cumulative causation”, those who have money and power can acquire even more in markets.
    • The “marketization” of economies has contributed to the increasing inequalities in wealth over the last 50 years, which Thomas Piketty and others have documented.

    5. Focus on citizen welfare, not consumer welfare

    • In economies, human beings are consumers and producers. In societies, they are citizens.
    • Citizens have a broader set of needs than consumers.
    • Citizens’ needs cannot be fulfilled merely by enabling them to consume more goods and services.
    • They value justice, dignity, and societal harmony too.
    • Economists’ evaluations of the benefits of free trade, and competition policy too, which are based on consumer welfare alone.
    • Such evaluations fail to account for negative impacts on what citizens value.

    6. Competition Vs. Collaboration

    • Competition must be restrained: Collaboration is essential for progress.
    • Faith in “Darwinian competition”, with the survival of only the fittest, underlies many problems of modern societies and economies.
    • Blind faith in competition misses the reality that human capabilities have advanced more than other species’ have, by evolving institutions for collective action.
    • Further progress, to achieve the Sustainable Development Goals will require collaboration among scientists in different disciplines and among diverse stakeholders, and collaboration among sovereign countries.
    • Improvement in abilities to share and govern common resources have become essential for human survival in the 21st century.

    7. Public ownership of technologies

    • We are living in an era of knowledge.
    • Just as those who owned more land used to have more power before, now those who own knowledge have more power and wealth than the rest.
    • Intellectual property monopolies are producing enormous wealth for their owners, though many were developed on the back of huge public investments.
    • Moreover, powerful technologies can be used for benign or malign purposes.
    • It is imperative to evolve new institutions for public ownership of technologies and for the regulation of their use.

    How to walk the talk?

    • COVID-19 has revealed structural weaknesses in the global economy. Putting more liquidity in the system as was done in case of 2008 crisis will not be sufficient.
    • The system is in the need of paradigm change.
    • 1. Coordination among experts
    • Experts need to work together with keeping in mind the larger picture.
    • The economic system cannot be redesigned by domain experts devising solutions within their silos.
    • 2. Focus on innovation
    • Innovations are required at many levels to create a more resilient and just world.
    • Innovations will be required in business models too, not just for business survival but also to move businesses out of the 20th-century paradigm that “the business of business must be only business”. 

    The UPSC can ask a question based on the issues discussed here. Consider this question- “COVID has upended the global economy in such a way that it would need an overhaul. The basic tenets of the global economic order would undergo a revaluation. In light of the above statements examine the factors that contributed to the vulnerability of the Indian economy. Suggest the ways to make it more resilient and just.”

    Conclusion

    The redesign of economies, of businesses, and our lives, must begin with questions about purpose. What is the purpose of economic growth? What is the purpose of businesses and other institutions? What is the purpose of our lives? What needs, and whose needs, do institutions, and each of us, fulfil by our existence?