September 2018
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[op-ed snap] Reimagining financial reforms in India, 10 years after Great Recession


Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Financial Stability and Development Council (FSDC), Financial Sector Legislative Reforms Commission (FSLRC), Indian Financial Code

Mains level: The reasons behind the global financial crisis in 2008 and how to prevent such events in future


Role of NPA in global financial crisis

  1. Until Lehman Brothers filed for bankruptcy on 15 September 2008, home loans going bad in some pockets of the US seemed like a small problem for the world
  2. It was a local issue unlikely to cause a problem even for the US economy
  3. Banking regulators, as well as governments, did not worry too much even if a bank had a lot of small loans on their books
  4. With the bankruptcy of Lehman Brothers and the unfolding of the Global Financial Crisis (GFC), it came to be understood that mis-selling of financial products to consumers can create risks to the entire financial system

How the crisis deepened?

  1. By banks giving loans for nearly the entire value of the house being purchased, assuming that when house prices rise, the loan could be repaid, they created a risk
  2. When lots of banks gave lots of such loans, they created a risk for the banking sector
  3. And, when they created derivative products of these loans that were bought and sold to many other financial institutions, both in the US and globally, they created risks for the global financial system
  4. Once house prices started falling, home loans started going bad
  5. Foreclosure under the US law, or simply handing over the keys of the mortgaged house to the bank and walking away was the most rational step for borrowers to take
  6. As banks’ books started going bad and they sold their sub-prime loans to other parts of the financial system, the problem became widespread

Financial products need to be regulated

  1. What we receive by buying a financial product is a promise by a financial firm to pay us sometime in the future
  2. If this promise is not fulfilled by the firm there may be sheer fraud
  3. The firm may also go bankrupt and the entire financial system may collapse

Changes in legislation

  1. The post-GFC period saw a major re-haul of the financial sector laws and regulatory architecture
  2. The Dodd-Frank Act in the US, a new regulatory architecture in the UK in the form of “twin-peaks model’’ towards furthering prudential regulation and conduct regulation of market participants are some examples
  3. Financial regulators in Britain, Australia and many other countries had already moved away from sectoral models of regulation—such as separate banking regulators, insurance regulators, pensions regulator and so on—to regulators who looked at the different businesses and arms of a financial company that could involve banking, insurance, derivatives etc
  4. These now also started setting up systemic risk regulators, or macro-prudential regulators and gave them new powers

Indian financial system

  1. The Indian financial system was much less developed compared to the sophisticated ones that witnessed the crisis
  2. It was at the other end of the spectrum, where instead of worrying about sophisticated derivatives products being traded, most derivative products have restrictions or are banned, and the bulk of the population has no access to bank loans
  3. But each regulator looking at risks in her sector was unable to see risks arising across the financial sector as a whole
  4. IMF advocated that only permanent capital controls like those in India and China could protect countries from capital surges and capital flight

Steps taken by India

  1. To address the issue of financial stability the government of India created a non-statutory council of regulators, the Financial Stability and Development Council (FSDC)
  2. To enable changes in the way financial regulations are made, the Financial Sector Legislative Reforms Commission (FSLRC), set up by the Government of India, proposed the Indian Financial Code—a blueprint of a comprehensive law to create a reformed financial regulatory framework
  3. Though the Indian Financial Code was not tabled in Parliament as a single piece of legislation, many elements of the law were implemented. These included
  • the merger of the commodities regulator (Forwards Market Commission) with the securities market regulator (Sebi),
  • the shift of regulation of non-debt capital flows from RBI to the Ministry of Finance and the setting up of an inflation targeting regime and a Monetary Policy Committee of the RBI

Way Forward

  1. Today, without a framework for bankruptcy and orderly resolution for financial firms, India faces the risk that if a large private sector bank goes bankrupt, there is no legal way of dealing with it other than to force a public sector bank or insurance company like the Life Insurance Company to buy it out
  2. To serve the growing needs of the economy for debt, equity, payment systems, and innovations in financial products and services it is required that regulatory reform is undertaken with much greater speed
NPA Crisis

[op-ed snap] Nepal’s snub shows up Indian coercive power


Mains Paper 2: IR | India & its neighborhood- relations.

From UPSC perspective, the following things are important:

Prelims level: BIMSTEC, SAARC

Mains level: Nepal’s engagement with China in recent times and why it is a cause of concern for India


Nepal drifting away from India

  1. The India-Nepal relationship has seen a number of setbacks in recent times
  2. Nepal’s army did not participate in the joint military drill of the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) member-states that is currently underway in Pune
  3. In another widely noted development, the government in Kathmandu has concluded an agreement with China to gain access to Chinese ports, including Tianjin, Shenzhen, Lianyungang and Zhanjiang
  4. In contrast, the Nepalese army is preparing to leave for a 12-day military exercise with China in Chengdu later this month

What’s brewing in Nepal?

  1. These developments can be seen as Nepal’s legitimate response to India’s economic blockade of the land-locked nation in 2015-16
  2. Nepal’s desire to get access to alternative ports is eminently understandable in this context
  3. Its abrupt withdrawal from the Bimstec military exercise caused significant diplomatic embarrassment for India, which is trying to project the regional grouping as an alternative to the South Asian Association for Regional Cooperation (SAARC)
  4. Nepal PM’s decisions seems to be a straight pick from Maldivian President Abdulla Yameen’s playbook
  5. Yameen, who doesn’t hesitate to allow Chinese warships to dock in Malé, had earlier asked India to take back its naval helicopters

Is China a feasible option for Nepal?

  1. While Nepal will have alternative trade routes via China, those will not be competitive against the Kolkata port given the geography, distance and cost involved in sending goods via Chinese ports
  2. China cannot substitute for India in Nepal
  3. India has an open border with Nepal and Nepalese citizens work in India, marry Indians and serve in the Indian Army

Way forward for India

  1. India needs to develop sharper instruments to coerce hostile leadership in the neighbourhood
  2. The blockade was a blunt instrument which caused substantial harm to the common people
  3. The recent engagement with Pushpa Kamal Dahal, Nepal’s former prime minister and current ally of Oli, is a step in the right direction
Foreign Policy Watch: India-Nepal

[op-ed snap] An education that is in sync


Mains Paper 2: Governance | Issues relating to development & management of Social Sector/Services relating to Health, Education, Human Resources

From UPSC perspective, the following things are important:

Prelims level: Radhakrishnan Commission Report

Mains level: Status of humanities education in India and need of its integration with STEM courses


Increase in GER

  1. A survey by the All India Survey on Higher Education published in July this year shows that the gross enrolment ratio (GER) was 25.8% in 2017-18, up from 10% in 2004-05
  2. GER is the ratio (expressed as a percentage), of the total enrolment within a country in a specific level of education, regardless of age, to the population in the official age group corresponding to this level of education

GER in higher education

  1. For higher education, the survey calculates the ratio for the age group 18 to 23 years
  2. For India, the Survey gives the corresponding figure as 30%
  3. Though the GER for higher education in India is still less than what it is in developed countries, the growth rate is still quite impressive

Radhakrishnan Commission Report

  1. Just after Independence, a commission comprising educationists from India, the U.K. and the U.S., and chaired by Dr. S. Radhakrishnan, was formed
  2. It had to report on Indian University Education and suggest improvements and extensions that may be desirable to suit present and future requirements of the country
  3. Its report filed after its deliberations came to be known as the Radhakrishnan Commission Report (RCR)
  4. Philosophical deliberations in the report that are related to the content of higher education are still relevant today

Recommendations of RCR

  1. The RCR recommended a well-balanced education with ‘general’, ‘liberal’ and ‘occupational’ components
  2. Without all-round general (including liberal) education, one could not be expected to play roles expected of a citizen outside one’s immediate professional sphere
  3. The report advocated that general education and specialised/professional education should proceed together
  4. The study of languages should be given equal importance as one communicated to the outside world only through the medium of language

NAP report

  1. Recently this year, the National Academies Press (NAP) of the U.S. which represents the national academies of sciences, engineering and medicine published the report, “The Integration of the Humanities and Arts with Sciences, Engineering, and Medicine in Higher Education: Branches from the Same Tree”
  2. The report advocates integrating the teaching of humanities in STEM
  3. As in the NAP’s report, the purpose of higher education is to prepare graduates for work and life, as well as active and engaged citizenship
  4. This can be achieved only through the acquisition of knowledge, skills and competencies related to the profession they chose to specialise in and also written and oral communication skills, ability to work as a team, ethical decision making, critical thinking, and ability to apply knowledge in real world settings

Need for diversity in education

  1. Problems in a real-life setting are interdisciplinary and require an appreciation of related fields
  2. There are technical advances every day, influencing everyday life in diverse ways
  3. This is also leading to concerns about privacy, technology-driven social and workforce changes, and the evolving need for individuals to retrain themselves to remain in employment
  4. In such a scenario, it is important that professionals study the impact of innovations on society in a holistic manner
  5. Evidence shows that certain educational experiences that integrate the arts and humanities with STEM at the undergraduate level are associated with increased critical thinking abilities, higher order thinking and deeper learning, content mastery, creative problem solving, teamwork and communication skills

Indian scenario

  1. As far as the inclusion of elements of general education in the curriculum for undergraduates is concerned, the situation is mixed
  2. Several engineering, and science education and research institutes have embedded general education programmes at the undergraduate level
  3.  Such programmes are missing in most university-affiliated science colleges
  4. There are institutions that cater to a single stream which precludes the possibility of even an informal interaction between students and faculty with different specialisations

Way Forward

  1. The focus of undergraduate education should be on classical disciplines, with enough credits for general education
  2. It is time to bridge the divide between the two cultures in the education system and evolve a third culture where the two sides understand and appreciate each other
Higher Education – RUSA, NIRF, HEFA, etc.

Andhra launches e-Rythu to boost cashless farm ecosystem

Image Source


Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Particulars and utility of the app.

Mains level: AP and Telangana have always led the way for welfare of its farmers through various first-of-its kind initiatives in India.


e-Rythu App

  1. The government of Andhra Pradesh has launched a mobile platform, e-Rythu (e-farmer in Telugu) which will enable small-scale farmers to market their produce at reasonable prices.
  2. It aims to digitize agriculture marketplaces, payments, workflows, and provide farmers an easy and secure way to buy, sell and receive payments for agricultural products via their feature phones.
  3. The platform has been developed by MasterCard Labs for Financial Inclusion in Nairobi, Kenya, and has been customized for India use by the Labs team based at Pune.

Utility of the App

  1. The app will help farmers looking to sell their produce to connect with the right buyers more efficiently in local language and receive the best possible prices.
  2. Due to the small scale, and long travel distance from the places where they sell, most small and medium farmers in Andhra Pradesh suffer income losses.
  3. Additionally, since these farmers do not have a formal credit history, it is difficult for them to access any formal financial services.
  4. It will make horticulture markets more transparent for sellers, buyers, and other stakeholders, and pave the way for financial inclusion of millions of small and medium farmers in the state.
Agricultural Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Govt prohibits manufacture, supply, sale of 328 FDC drugs


Mains Paper 2: Governance | Issues relating to development & management of Social Sector/Services relating to Health, Education, Human Resources

From UPSC perspective, the following things are important:

Prelims level: FDCs

Mains level: Issues in Pharma Sector.


Ban on certain FDCs

  1. The government has prohibited the manufacture, sale or distribution of 328 fixed dose combination (FDC) drugs for human use with immediate effect.
  2. The health ministry’s ban on FDCs included painkillers, anti-diabetic, respiratory and gastro-intestinal medicines, covering 6,000 brands.
  3. Certain painkillers, antibiotics, antiseptics for treatment of mouth and throat conditions and anti-diabetic drugs got a relief but with some restrictions.

What are FDC drugs?

  1. An FDC drug includes two or more active pharmaceutical ingredients combined in a single dosage form, which is manufactured and distributed in fixed doses.
  2. The major advantage of FDCs is improved medication compliance by reducing the pill burden of patients.
  3. However if an adverse drug reaction occurs it may be difficult to identify the active ingredient responsible for causing the reaction.

Irrational FDCs

  1. The expert panel probing the efficacy of 349 banned FDCs gave its report to India’s top drug advisory body, the Drug Technical Advisory Board (DTAB).
  2. The panel after considering these drugs “irrational”, citing safety issues and lack of therapeutic justification, recommended continuing the ban.
  3. It also found that many FDCs were formulated without due diligence, with dosing mismatches that could result in toxicity.
  4. The Supreme Court has earlier suggested the DTAB to decide the fate of these drugs.
Pharma Sector – Drug Pricing, NPPA, FDC, Generics, etc.

[pib] TCIL, MEA sign MOU for pan Africa e-network project


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

From UPSC perspective, the following things are important:

Prelims level: E-VBAB, Pan-African e-Network Project

Mains level: India’s recent Africa focus and its strategic as well as economic importance



  1. Telecommunications Consultants India Ltd. (TCIL) signed an agreement with Ministry of External Affairs (MEA) for the implementation of e-VBAB Network Project.
  2. The two separate platforms,  will link various educational institutions and hospitals in India and the participating African countries.

E-VBAB Network Project

  1. E-VBAB Network Project is primarily a technological upgrade and extension of the Pan-African e-Network Project (Phase 1) which was implemented in 48 partner countries across Africa from 2009 till 2017.
  2. The Phase 1 of the Project successfully imparted tele-education and tele-medicine by linking educational institutions and hospitals in India with those from the participating African countries.
  3. The flagship e-VBAB project is a step towards capacity building in the field of education and medical science for all the 54 African Nations.
  4. It is fully funded by MEA, GoI and is envisaged to be implemented in 9 months followed by 5 years of operations and maintenance.
  5. The project aims to provide an opportunity for local employment and opens the door for access to education and medical expertise from India to African students, doctors, nurses and paramedical staff.
  6. It will also give an opportunity for Global acceptance of Indian University Education system and Indian medical Health services.

About Pan-African e-Network project

  1. Pan African e-Network project is an ICT project between India and the African Union that seeks to connect the 55 member states of the Union through a satellite and fibre-optic network to India and
  2. It is aimed to enable access and sharing of expertise between India and African states in the areas of tele-education, telemedicine, Voice over IP, infotainment, resource mapping, meteorological services, e-governance and e-commerce services.
  3. The e-network is made up of a large undersea cable network and satellite connectivity provided through C-Band transponders of the INTELSAT-904 or RASCOM satellites.
  4. The project is often described as Africa’s biggest ever in the ICT sector and is expected to extend ICT infrastructure to rural and previously underserved areas.
  5. The idea for the project came from the then President A P J Abdul Kalam who proposed such a network during his address to the Pan-African Parliament in Johannesburg in 2004.
  6. The project is seen as an example of India furthering its economic and strategic interests in Africa through the use of soft diplomacy and has been acclaimed as an instance of South-South cooperation, helping to overcome the digital divide in Africa.
Foreign Policy Watch: India-Africa

[pib] Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA)


Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: PM – AASHA and its components

Mains level: Various support schemes for farmers and their effectiveness



Giving a major boost to the pro-farmer initiatives of the Government and in keeping with its commitment and dedication for the Annadata, the Union Cabinet has approved a new Umbrella Scheme “Pradhan Mantri Annadata Aay Sanrakshan Abhiyan’ (PM-AASHA).

Why such Scheme?

  1. Increasing MSP is not adequate and it is more important that farmers should get full benefit of the announced MSP.
  2. For this, government realizes that it is essential that if price of the agriculture produce market is less than MSP, then govt. should purchase either at MSP or work in a manner to provide MSP for the farmers through some other mechanism.


  1. The Scheme is aimed at ensuring remunerative prices to the farmers for their produce as announced in the Union Budget for 2018.
  2. Government has already increased the MSP of kharif crops by following the principle of 1.5 times the cost of production.
  3. It is expected that the increase in MSP will be translated to farmer’s income by way of robust procurement mechanism in coordination with the State Governments.
  4. The new Umbrella Scheme includes the mechanism of ensuring remunerative prices to the farmers and is comprised of-
  • Price Support Scheme (PSS),
  • Price Deficiency Payment Scheme (PDPS)
  • Pilot of Private Procurement & Stockist Scheme (PPPS).
  1. The other existing schemes of Department of Food and Public Distribution (DFPD) for procurement of paddy, wheat and nutri-cereals/coarse grains and of Ministry of Textile for cotton and jute will be continued for providing MSP to farmers for these crops.

Pilot of Private Procurement & Stockist Scheme (PPPS)

  1. Cabinet has decided that for oilseeds, states have the option to roll out Private Procurement Stockist Scheme (PPSS) on pilot basis in selected district/APMC(s) of district involving the participation of private stockiest.
  2. The pilots district/selected APMC(s) of district will cover one or more crop of oilseeds for which MSP is notified.
  3. Since this is akin to PSS, in that in involves physical procurement of the notified commodity, it shall substitute PSS/PDPS in the pilot districts.
  4. The selected private agency shall procure the commodity at MSP in the notified markets during the notified period from the registered farmers in consonance with the PPSS Guidelines.
  5. But whenever the prices in the market fall below the notified MSP maximum service charges up to 15% of the notified MSP will be payable.

Price Support Scheme (PSS)

  1. In Price Support Scheme (PSS), physical procurement of pulses, oilseeds and Copra will be done by Central Nodal Agencies with proactive role of State governments.
  2. It is also decided that in addition to NAFED, Food Cooperation of India (FCI) will take up PSS operations in states /districts.
  3. The procurement expenditure and losses due to procurement will be borne by Central Government as per norms.

Price Deficiency Payment Scheme (PDPS)

  1. Under PDPS it is proposed to cover all oilseeds for which MSP is notified.
  2. In this direct payment of the difference between the MSP and the selling/modal price will be made to pre-registered farmers selling his produce in the notified market yard through a transparent auction process.
  3. All payment will be done directly into registered bank account of the farmer.
  4. This scheme does not involve any physical procurement of crops as farmers are paid the difference between the MSP price and Sale/modal price on disposal in notified market.
Agricultural Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Cabinet approves continuation of Capacity Development Scheme for the period 2017-18 to 2019-20


Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, the following things are important:

Prelims level: Capacity Development Scheme

Mains level: Importance of accurate data collection for better policy prescription.



The Cabinet Committee on Economic Affairs has approved continuation of the Capacity Development Scheme for the period 2017-18 to 2019-20.

Capacity Development Scheme

  1. The CDS is an Central Sector Scheme of MoSPI.
  2. The overall objective of the scheme is to augment infrastructural, technical as well as manpower resources for making available credible and timely Official Statistics for policy makers and public at large.
  3. The major ongoing activities under the CDS include augmenting resources for bringing out important statistical products, such as GDP, CPI , IIP etc.
  4. It includes other statistical classifications such as conducting various Socio-Economic surveys, capacity building and strengthening statistical coordination, and improving IT infrastructure.
  5. Periodic Labour Force Survey (PLFS), a continuous survey to assess quarterly labour data in urban areas and annual labour data for the whole country (urban and rural areas), was launched in April, 2017 under the scheme.

Sub-schemes under CDS

  1. The CDS has two Sub-schemes, Economic Census and Support for Statistical Strengthening (SSS).
  2. Under Economic Census, listing of all non-agricultural establishments is undertaken periodically, which forms the basis for conducting detailed socio-economic surveys.
  3. The last (6l) Economic Census was conducted during January, 2013 to April, 2014 and the Government now aims to conduct the Census once every three years in future.
  4. The SSS Sub-scheme is to strengthen State/ Sub-State level statistical systems/ infrastructure to facilitate development of a robust national system.
  5. Funds are released to States/ UTs for this purpose after detailed examination of their proposals.

More Surveys in basket

  1. In view of the requirement for better statistical coverage of sectors/areas, in addition to the regular ongoing activities, the Ministry proposes to also take up three new surveys under the CDS.
  2. These include Time Use Survey (TUS), Annual Survey of Service Sector Enterprises (ASSSE), and Annual Survey of Unincorporated Sector Enterprises (ASUSE).