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GS Paper: GS3

  • Priority Sector Lending (PSL)

    The RBI has released a revised priority sector lending guidelines to augment funding to segments including start-ups and agriculture.

    New Priority Sector Lending (PSL) guidelines

    • Bank finance of up to ₹50 crores to start-ups, loans to farmers both for installation of solar power plants for Solarization of grid-connected agriculture pumps and for setting up compressed biogas (CBG) plants have been included as fresh categories eligible for finance under the priority sector.
    • This has come to align it with emerging national priorities and bring a sharper focus on inclusive development, after having wide-ranging discussions with all stakeholders.
    • It will enable better credit penetration to credit deficient areas, increase the lending to small and marginal farmers and weaker sections, boost credit to renewable energy, and health infrastructure
    • The targets prescribed for ‘small and marginal farmers’ and ‘weaker sections’ are being increased in a phased manner.
    • Higher credit limit has been specified for farmer producer organisations (FPOs)/farmers producers companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.

    Back2Basics: Priority Sector Lending

    • PSL is an important role given by the (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low-income groups and weaker sections.
    • This is essentially meant for an all-round development of the economy as opposed to focusing only on the financial sector.
    • The broad categories of priority sector for all scheduled commercial banks are as under:
    1. Agriculture and Allied Activities (Direct and Indirect finance)
    2. Small Scale Industries (Direct and Indirect Finance)
    3. Small Business / Service Enterprises
    4. Micro Credit
    5. Education loans
    6. Housing loans

  • What counts as ‘Act of God’?

    Amid disruptions caused by Covid-19, the Finance Minister has referred to an Act of God while businesses are looking at a legal provision, force majeure, to cut losses.

    Note the key differences between the Act of God and Force Majeure.

    Evoking “Act of God”

    • The force majeure or “Act of God” clause has its origins in the Napoleonic Code.
    • The finance ministry had issued an office memorandum inviting attention to the force majeure clause (FMC) in the 2017 Manual for Procurement of Goods issued by the Department of Expenditure.
    • It clarified that the pandemic should be considered a case of natural calamity and FMC may be invoked, wherever considered appropriate.

    What is a force majeure clause?

    • The law of contracts is built around a fundamental norm that the parties must perform the contract.
    • When a party fails to perform its part of the contract, the loss to the other party is made good.
    • However, the law carves out exceptions when the performance of the contract becomes impossible for the parties.
    • A force majeure clause is one such exception that releases the party of its obligations to an extent when events beyond their control take place and leave them unable to perform their part of the contract.
    • FMC is a clause that is present in most commercial contracts and is a carefully drafted legal arrangement in the event of a crisis.
    • When the clause is triggered, parties can decide to break from their obligations temporarily or permanently without necessarily breaching the contract.
    • Companies in such situations use the clause as a safe exit route, sometimes in opportunistic ways, without having to incur the penalty of breaching the contract.

    Difference between the two

    • Both concepts elicit the same consequences in law.
    • Generally, an “Act of God” is understood to include only natural unforeseen circumstances, whereas force majeure is wider in its ambit and includes both naturally occurring events and events that occur due to human intervention.

    What situations legally qualify for use of force majeure?

    • While some contracts have clauses with standard circumstances, some contracts would have specific circumstances that are more focused.
    • For example, a shipping contract would have a force majeure clause that could cover a natural disaster like a tsunami.
    • If an event is not described, then it is interpreted in a way that it falls in the same category of events that are described.
    • An FMC is negotiated by parties, and events that could potentially hamper the performance of the contract are catalogued.
    • It is not invoked just by expressing that an unforeseen event has occurred.
    • In case a contract does not have a force majeure clause, there are some protections in common law that can be invoked by parties.
    • For example, the Indian Contract Act, 1872 provides that a contract becomes void if it becomes impossible due to an event after the contract was signed that the party could not prevent.

    Global precedents dealing with COVID-19 pandemic

    • In China, where the Covid-19 outbreak originated, the Council for Promotion of International Trade is issuing force majeure certificates to businesses.
    • China’s Supreme People’s Court had recognised the 2002 SARS outbreak as a force majeure event.
    • Singapore enacted the Covid-19 (Temporary Measures) Act in April to provide relief to businesses that could not perform their contractual obligations due to the pandemic.
    • The Paris Commercial Court in July ruled that the pandemic could be equated to a force majeure event.
    • In the UK, the Financial Conduct Authority has brought in a test case before the High Court to look into business insurance contracts and interpret the standard wordings in such contracts.
    • The International Chamber of Commerce has developed a Model Code on the force majeure clause reflecting current international practice.

  • What is Project Dolphin?

    In his Independence Day Speech this year, PM has announced the government’s plan to launch a Project Dolphin. The proposed project is aimed at saving both river and marine dolphins.

    Project Dolphin

    • The Project will be on the lines of Project Tiger, which has helped increase the tiger population.
    • So far, the National Mission for Clean Ganga (NMCG), which implements the government’s flagship scheme Namami Gange, has been taking some initiatives for saving dolphins.
    • Now, Project Dolphin is expected to be implemented by the Ministry of Environment, Forest and Climate Change.

    About Gangetic Dolphin

    • The Gangetic river system is home to a vast variety of aquatic life, including the Gangetic dolphin (Platanista gangetica).
    • It is one of five species of river dolphin found around the world.
    • It is found mainly in the Indian subcontinent, particularly in Ganga-Brahmaputra-Meghna and Karnaphuli-Sangu river systems.
    • An adult dolphin could weigh between 70 kg and 90 kg. The breeding season of the Gangetic dolphin extends from January to June.
    • They feed on several species of fishes, invertebrates etc.

    Why is it important to save dolphins?

    • The construction of dams and barrages and increasing pollution has led to a decline in the population of aquatic animals in the rivers in general and of dolphins in particular.
    • Aquatic life is an indicator of the health of river ecosystems.
    • As the Gangetic dolphin is at the top of the food chain, protecting the species and its habitat will ensure

    Aquatic life as an indicator of the health of a river system

    • Globally, there have been such examples. For instance, the Rhine Action Plan (1987) of the International Commission for the Protection of the Rhine (ICPR) brought back the salmon.
    • The return of the migratory fish is taken as an indicator of the river’s improved health.
    • Salmon used to migrate from the North Sea to the Rhine every year and reproduce, but this stopped when pollution increased in the river.
    • After a chemical accident in 1986 that caused the death of fish and microorganisms, the Action Plan was launched.
    • This led to an improvement in the quality of the river water, and the salmons began to return.

    What has been done to save Gangetic dolphins so far?

    • Although efforts to save them were started in the mid-1980s, the estimates suggest the numbers have not risen as a result.
    • The Gangetic dolphin remains listed as Endangered by the IUCN.
    • After the launch of Ganga Action Plan in 1985, the government on November 24, 1986, included Gangetic dolphins in the First Schedule of the Indian Wildlife (Protection), Act 1972.
    • This was aimed at checking hunting and providing conservation facilities such as wildlife sanctuaries. For instance, Vikramshila Ganges Dolphin Sanctuary was established in Bihar under this Act.

    Conservation so far

    • The government has prepared The Conservation Action Plan for the Ganges River Dolphin 2010-2020.
    • It identified threats to Gangetic Dolphins and impact of river traffic, irrigation canals and depletion of prey-base on Dolphins populations.
    • On October 5, 2009, the then PM declared the Gangetic river dolphin as the national aquatic animal.
    • A notification was issued by the MoEFCC the following year. Now, the National Mission for Clean Ganga celebrates October 5 as National Ganga River Dolphin Day.

  • Vitamin-D Deficiency

    The pandemic-induced lockdown has confined people to their houses for five months now. The resultant lack of sunlight, followed by rains, has brought down the vitamin D levels to the lowest.

    Try this PYQ from CSP 2014:

    Q.Consider the following pairs:

    Vitamin Deficiency:: Disease

    1. Vitamin C::Scurvy
    2. Vitamin D:: Rickets
    3. Vitamin E:: Night blindness

    Which of the pairs given above is/are correctly matched?

    (a) 1 and 2 only

    (b) 3 only

    (c) 1, 2 and 3

    (d) None

    What is Vitamin-D?

    • Vitamin D is an essential vitamin that has myriad positive effects on several systems in the body.
    • Unlike other vitamins, it functions like a hormone and every cell in your body has a receptor for it.
    • It is sparsely found in certain fatty fish and fortified dairy products, and it is extremely difficult to get the Recommended Daily Intake (RDI) of 600-800 IU from diet alone.

    There are two main forms of vitamin D in the diet:

    – Vitamin D2 (Ergocalciferol) — found in plant foods like mushrooms.
    – Vitamin D3 (Cholecalciferol) — found in animal foods like salmon, cod and egg yolks.

    Common signs and symptoms of the deficiency

    Vitamin D deficiency is incredibly common and most people are unaware of it, as the symptoms are subtle and nonspecific.

    – Getting sick or infected often with common cold and flu, because of a weak immune system.
    – Fatigue and tiredness
    – Bone and muscle pains
    – Depression
    – Impaired wound healing
    – Bone loss and osteoporosis

    Sources of Vit. D

    • Sunlight is the best natural source of vitamin D. Sunlight synthesizes cholesterol into Vitamin D3.
    • Usually, 20 to 30 minutes of sun exposure between 10 am and 3 pm is adequate to meet daily requirements, in places with minimum pollution levels.

  • Black Holes Merger

    Billions of years ago, a collision between two black holes sent gravitational waves rippling through the universe. In 2019, signals from these waves were detected at the gravitational wave observatory LIGO (United States) and the detector Virgo (Italy).

    Try this PYQ:

    Q.Recently, scientists observed the merger of giant ‘blackholes’ billions of light-years away from the Earth. What is the significance of this observation?

    (a) ‘Higgs boson particles’ were detected.

    (b) ‘Gravitational waves’ were detected.

    (c) Possibility of inter-galactic space travel through ‘wormhole’ was confirmed.

    (d) It enabled the scientists to understand ‘singularity’.

    Why in news?

    • The cause of curiosity is the mass of one of the parent black holes, which defies traditional knowledge of how black holes are formed.

    What exactly was detected?

    • It was a signal from a gravitational wave, a relatively new field of discovery.
    • Gravitational waves are invisible ripples that form when a star explodes in a supernova; when two big stars orbit each other; and when two black holes merge.
    • Travelling at the speed of light, gravitational waves squeeze and stretch anything in their path.

    Detecting gravitational waves

    • Gravitational waves were proposed by Albert Einstein in his General Theory of Relativity over a century ago.
    • It was only in 2015, however, that the first gravitational wave was actually detected — by LIGO. Since then, there have been a number of subsequent detections of gravitational waves.
    • The signal detected at LIGO and Virgo, as described by the LIGO Collaboration, resembled “about four short wiggles” and lasted less than one-tenth of a second.

    Where did it come from?

    • Subsequent analysis suggested that GW190521 had most likely been generated by a merger of two black holes. The signal likely represented the instance that the two merged.
    • It was calculated to have come from roughly 17 billion light-years away, and from a time when the universe was about half its age.

    Some questions to verify

    • The findings led to further questions.
    • One of the two merging black holes falls in an “intermediate-mass” range — a misfit that cannot be explained by traditional knowledge of how black holes form.

    Why is it unusual?

    • All the black holes observed so far belong to either of two categories.
    • One category ranges between a few solar masses (one solar mass is the mass of our Sun) and tens of solar masses. These are thought to form when massive stars die.
    • The other category is of supermassive black holes. This range from hundreds of thousands, to billions of times that of our sun.
    • According to traditional knowledge, stars that could give birth to black holes between 65 and 120 solar masses do not do so — stars in this range blow themselves apart when they die, without collapsing into a black hole.

    Observing for the first time

    • In the merger leading to the GW190521 signal, the larger black hole was of 85 solar masses —well within this unexpected range, known as the pair-instability mass gap.
    • It is the first “intermediate-mass” black hole ever observed. (In fact, the smaller black hole to is borderline, at 66 solar masses.)
    • The two merged to create a new black hole of about 142 solar masses. Energy equivalent to eight solar masses was released in the form of gravitational waves, leading to the strongest ever wave detected by scientists so far.

    Possible reasons for its formation

    • The researchers suggest that the 85-solar-mass black hole was not the product of a collapsing star, but was itself the result of a previous merger.
    • Formed by a collision between two black holes, it is likely that the new black hole then merged with the 66-solar-mass black hole — leading to gravitational waves and the signal received by LIGO and Virgo.

  • [pib] NIDHI-EIR Programme

    A brochure featuring Entrepreneurs in Residence (EIR) under the National Initiative for Developing and Harnessing Innovations (NIDHI) programme was launched by Dept. of Science and Technology (DST).

    Try this MCQ:

    Q.The NIDHI-EIR Programme sometimes seen in news functions under the:

    a)Ministry of Science & Technology

    b)Ministry of Commerce and Industry

    c)Ministry of Finance

    d)Ministry of Micro, Small and Medium Enterprises

    About NIDHI-EIR

    • DST has announced a National Initiative for Developing and Harnessing Innovations (NIDHI) is an umbrella programme for nurturing ideas and innovations into successful startups.
    • EIR programme is one of the programs introduced under NIDHI to inspire the best talents to be entrepreneurs, to minimise the risk involved in pursuing start-ups, and to partially set off their opportunity costs of high paying jobs.
    • It provides tremendous opportunities for innovative entrepreneurs to expand their networks and get critical feedback on their ventures in order to promote their entrepreneurial career goals and aspirations.

    The opportunities under NIDHI-EIR program include:

    • Guidance from experienced, innovative and highly successful entrepreneurs on the business concept, strategy or venture and insight into specific industries or markets.
    • Best practices for starting a business and broaden the professional network.
    • Co-working spaces for developing the idea into a marketable product.

  • [pib] Global Innovation Index 2020

    India has climbed 4 spots and has been ranked 48thby the World Intellectual Property Organization (WIPO) in the Global Innovation Index 2020 rankings.

    Try this PYQ from CSP 2016:

    Q.India’s ranking in the ‘Ease of Doing Business Index’ is sometimes seen in the news. Which of the following has declared that ranking?

    a) Organization for Economic Cooperation and Development (OECD)

    b) World Economic Forum

    c) World Bank

    d) World Trade Organization (WTO)

    About the Global Innovation Index

    • The GII is an annual ranking of countries by their capacity for, and success in, innovation. It was started in 2007 by INSEAD and World Business a British magazine.
    • It is published by Cornell University, INSEAD, and the WIPO, in partnership with other organisations and institutions.
    • It is based on both subjective and objective data derived from several sources, including the International Telecommunication Union, the World Bank and the World Economic Forum.
    • The GII is commonly used by corporate and government officials to compare countries by their level of innovation.
    • The theme of the 2019 GII is Creating Healthy Lives – The Future of Medical Innovation, which aims to explore the role of medical innovation as it shapes the future of healthcare.

    Components of GII

    Five input pillars capture elements of the national economy that enable innovative activities under GII are:

    1. Institutions,
    2. Human capital and research,
    3. Infrastructure,
    4. Market sophistication, and
    5. Business sophistication.

    Two output pillars capture actual evidence of innovation outputs:

    1. Knowledge and technology outputs and
    2. Creative outputs

    India’s performance this year

    • In midst of the COVID -19 pandemic, it comes as uplifting news for India and is a testament of its robust R&D Ecosystem.
    • India was at the 52nd position in 2019 and was ranked 81st in the year 2015.
    • The WIPO had also accepted India as one of the leading innovation achievers of 2019 in the central and southern Asian region, as it has shown a consistent improvement in its innovation ranking for the last 5 years.

  • Reforms that will lead to economic Poorna Swaraj

    The article discusses the long term and short term strategy to deal with the disruption caused by the pandemic and using it to bring about the reform in various sectors.

    Context

    • The pain of COVID is real, GST shortfall of Rs 3 lakh crore, expected new bad loans of Rs 3 lakh crore, and a 25 per cent first quarter contraction of GDP.
    • COVID will end, the last quarter was unique, and COVID has created a policy window for overdue reform.

    3 Questions to be answered to determine short term measures

    • 1) Are we at the start, middle, or end of the virus?
    • This matters because life will be tentative until companies and individuals know where we are.
    • 2)Will companies will they save for a rainy day or live for today?
    • This matters because lower demand is fantastic for the environment but fatal for the economy (the paradox of thrift).
    • 3) Do we have an effective solution for professions that can’t be done without social distancing until the vaccine arrives?
    • All policy can do in the short run is ensure that disease doesn’t lead to death, unemployment doesn’t lead to hunger, and working capital problems don’t lead to bankruptcy.

    Factors in favour of India in the long run

    • Our post-COVID, post-Trump, post-China, post-GST, and post US Federal Reserve economic strategy must recognise factors in our favour.
    • China’s territorial arrogance may be premature.
    • China’s credit to GDP is an unsustainable 300 per cent, many of its big companies will not survive when faced with open market, and its domestic consumption is not sufficient to substitute for global trade.
    • China’s military overreach is unifying the region and creating coalitions and alliances that they will regret but India will enjoy.
    • Muted global growth means oil prices will remain low; this is a huge macroeconomic gift for a country like India.
    • The global digitisation supercycle creates insatiable demand for software talent which would be big advantage for India.
    • Over the next few decades, most rich countries will struggle to grow.
    • This forces investors to overprice growth. And because of our past sins, India is the only big country with decades of growth left.

    Reforms India need

    • Our problem is not jobs but productivity.
    • This needs compliance reform-taking an axe through our 67,000 compliances and 6,700 filings.
    • Labour law reform.
    • Banking reform: raising our credit to GDP ratio from 50 per cent to 100 per cent by licensing more banks and fixing existing ones.
    • Education reform.
    • Ease-of-doing-business reforms: reduce the number of ministries from 52 to 15.
    • Civil service reform:cut the number of people in Delhi with the rank of Secretary from 250+ to 50, a risk-averse bureaucracy must be sidestepped or overruled.

    Consider the question “The disruption caused by the pandemic offers a window for India to create enduring change through economic reforms to take advantage of the opportunity provided by the pandemic. Discuss.”

    Conclusion

    We should focus on creating climate change for our entrepreneurs, firms, and citizens with reforms that will give them economic Poorna Swaraj. And take our per capita income of $2,500 to $10,000 in five years. If not now, then when?

  • Issues with the Gopalakrishnan Committee Report

    The article highlights the importance of non-personal data collected by the government and lack of any reference to it in the Gopalakrishnan Committee report.

    Background

    • The Committee of Experts on the Non-Personal Data Governance Framework headed by K Gopalakrishnan has recommended making privately held non-personal data “open”.
    •  This has raised concerns about state interference in the private data ecoystem.

    Importance of data collected by government agencies

    • The report is a missed opportunity to address the governance frameworks around data created by government agencies.
    • Some of the most important non-personal data sets are held by the government, or result from taxpayer funding.
    • Such data can be useful in either framing public policy or creating and providing new services.

    Why government data should be open to citizens: 5 Reasons

    • First, the state should be transparent about information that it has. This will improve accountability.
    • Second, if taxpayer money has funded any of the data sets, then it is an obligation of the state to return the fruits of that funding to the taxpayer.
    • Third, by permitting the reuse of government data sets, we avoid the need for duplication.
    • Fourth, government data sets, curated according to publicly verified standards, can lead to increased confidence in data quality and increased usage.
    • Finally, free flow of information can have beneficial effects on society in general.

    Government policies promoting openness of data

    • The Right to Information (RTI) Act, 2005, mandates the disclosure of government data on a suo moto basis.
    • One of the nine pillars of the Digital India Policy is “information for all”.
    • The National Data Sharing and Accessibility Policy (NDSAP), 2012 requires all non-sensitive information held by public authorities to be made publicly accessible in machine readable formats (subject to conditions).
    • The government has also set up an Open Government Data Platform to provide open access to data sets held by ministries and other agencies of the government.
    • Various States have also either created their own data portals or have provided data sets to the Open Government Data Platform.

    Challenges in making the data open to society

    • There are two reasons for our failure to create an open data-based society.
    • The first is lack of clarity in some of the provisions of the NDSAP or the relevant implementation guidelines.
    • The second is the inability to enforce guidelines appropriately.
    • Data sets released by governments are often inconsistent, incomplete, outdated, published in non-machine readable or inconsistent formats, include duplicates, and lack quality (or any) metadata, thereby reducing re-usability.

    Issues with Gopalakrishnana Committee Report

    • The Gopalakrishnan Committee could have evaluated what is going wrong with existing policies and practice pertaining to government data.
    • The report is a missed opportunity to address the governance frameworks around non-personal data sets in a country created by government agencies, or those resulting from taxpayer money.
    • The report largely focuses on the dangers posed by data collection by private sector entities.
    • This has raised concerns about state interference in the private data ecoystem.
    • Many of the concerns that should be addressed in the report that are central to the governance of the data ecosystem have remained in the background.
    • For instance, India’s cybersecurity framework continues to be inadequate, while even the Justice B.N. Srikrishna Committee report of 2018 highlighted the need to restrict the growing power of the state to carry out surveillance.

    Consider the question “What are the key recommendation made by the Gopalakrishnan Committee for the regulation of non-personal data? What are the shortcomings in of the report in your opinion?”

    Conclusion

    Since data governance is a relatively new concept in India, the government would be better served in taking an incremental approach to any perceived problems. This should begin with reforming how the government itself deals with citizens’ data.

  • Green Term Ahead Market (GTAM)

    As a first step towards Greening the Indian short term power market, the  Ministry of Power and New & Renewable Energy (MNRE) has launched pan-India Green Term Ahead Market (GTAM) in electricity.

    About GTAM

    • GTAM is an alternative new model introduced for selling off the power by the renewable developers in the open market without getting into long term PPAs.
    • This would promote RE merchant capacity addition and help in achieving RE capacity addition targets of the country.

    Benefits of GTAM

    • It would lessen the burden on the RE-rich States and incentivize them to develop RE capacity beyond their own RPO.
    • It will benefit buyers of RE through competitive prices and transparent and flexible procurement. It will also benefit RE sellers by providing access to the pan- India market

    Key features

    • Transactions through GTAM will be bilateral in nature with clear identification of corresponding buyers and sellers, there will not be any difficulty in accounting for RPO.
    • GTAM contracts will be segregated into Solar RPO & Non-Solar RPO as RPO targets are also segregated.
    • Further, within the two segments, GTAM contracts will have Green Intraday, Day Ahead Contingency, Daily and Weekly Contracts
    • Green Intraday Contract & Day Ahead Contingency Contract – Bidding will take place on a 15-minute time-block wise MW basis.
    • Daily & Weekly Contracts – Bidding will take place on an MWh basis.
    • Price discovery will take place on a continuous basis i.e. price-time priority basis. Subsequently, looking at the market conditions open auction can be introduced for daily & weekly contracts.
    • Energy scheduled through GTAM contract shall be considered as deemed RPO compliance of the buyer.