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December 2018

Banking Sector Reforms

[op-ed snap] Building a framework for RBI surplus transfers


Mains Paper 3: Economy | Mobilization of resources

From the UPSC perspective, the following things are important:

Prelims level: Role of RBI & various functions performed by it

Mains level: Issue of transfer of surplus reserves and various factors associated with it


Tussle for RBI reserves

  1. Reserve Bank of India (RBI) governor has reiterated before a parliamentary panel the central bank’s well-known position that its reserves are “for periods of stress and not for meeting normal needs”
  2. A committee is set to go into the issue of an “economic capital framework” (ECF), or the reserves that the RBI must hold
  3. The RBI leadership and the government (along with the RBI board members with voting rights) are having entirely opposite views on this issue

International Norms vis a vis RBI

  1. The Bank of Japan transfers its surplus at 5%, Greece at 8%, and Turkey at 12%
  2. In the US, federal reserve banks, which were established by the Congress as the operating arms of the nation’s central banking system, are required by law to transfer net earnings to the US Treasury after providing for all necessary expenses of the reserve banks, legally required dividend payments, and maintaining a limited balance in a surplus fund
  3. In the case of the RBI, in effect, the entire surplus is transferred to the government after making provisions for two funds—Contingency Fund (CF) and Asset Development Funds (ADF)
  4. Though the RBI has a target of 12% (ratio of CF and ADF to total assets), it has not been able to maintain this and currently the ratio is about 7%

What should be the committee’s approach?

  1. The committee is required to design a framework for economic capital rather than a fixed or rigid formula for surplus transfer
  2. This framework should recognise that the roots of the autonomy of the central bank lie in it having the freedom to manage its balance sheet, not only in good times when it transfers a surplus but equally in times when it may incur losses
  3. This makes a case for a contingency fund that helps hedge the risk that is ever present, particularly when the balance sheet is exposed to the market

Issues being faced by RBI wrt reserves

  • There are cases of huge surplus (maintained with RBI as a deposit) or recourse to higher Ways and Means Advances (WMA)
  1. WMA and Overdraft (OD) have been accumulated over a prolonged period and makes them virtually a new form of borrowing, violating the very idea of providing respite from temporary cash mismatches
  2. Poor cash management of the government has adverse implications for liquidity management and debt management by the RBI
  3. Apart from this, it impacts the asset and liability of the RBI balance sheet and subsequently the RBI income and expenditure and consequently the profit and loss account
  4. The surplus transfer framework needs to recognize the dynamic and sometimes wayward cash management of the government
  • Another issue is the interim transfer of dividend to the government amounting to ₹10,000 crore during 2017-18 without the accounts being audited and before the finalisation of the profit and loss account
  1. One is not sure whether it is from gross income or from accumulated funds in CF and ADF
  2. There is no doubt that the government is the owner of the RBI and has all claims on the surplus funds, but how could the funds be transferred even before the annual accounts are finalised?
  3. The public does not know whether the RBI files quarterly or half-yearly audited accounts
  4. Both the government and the RBI are public institutions handling public policy and such practices are against the principles of transparency and integrity

Measures required

  1. The cash and debt management committee of the government and the RBI, which meets periodically, should look into the WMA requirements during the quarter and manage the cash flow in a non-disruptive manner
  2. If this exercise is followed in its true spirit, there will be no need for interim dividends, which are an attack on the very idea of a balance sheet
  3. The committee on ECF should look into the macroeconomic implication and financial market implication of such withdrawals from the accumulated funds for CF and ADF and also Currency and Gold Revaluation Accounts
  4. Any reduction in the liability side of the RBI by a possible withdrawal needs equivalent adjustment on the assets side. This monetary operation has to be transparent
  5. Any off-market operation has the colour of non-transparency and will raise questions on the integrity of the central bank
  6. It may be mentioned that the reduction in the asset side by selling these assets in the market will have an impact on the liquidity (both rupee and dollar) and thus on monetary management

Way forward

  1. The issue of surplus transfer takes into its sweep not just accounts but the entire gamut of issues related to a transparent monetary and fiscal interface
  2. This should be handled effectively keeping all such factors in mind

History- Important places, persons in news

[op-ed snap] A larger freedom


Mains Paper 1: History | All syllabus

From the UPSC perspective, the following things are important:

Prelims level: Gandhi’s role and initiatives in the freedom struggle

Mains level: Relevance of Gandhian thoughts in current context


Mahatma Gandhi’s freedom experiences

  1. Throughout his public life in India (1915-48), Gandhi devoted his energies to both the political campaign for India’s freedom as well as a range of socio-economic interventions that were clubbed under the rubric of constructive work
  2. Such activities included communal harmony, the removal of untouchability, sanitation, khadi, village industries and basic education or Nai Talim

Factors that influenced Gandhi’s activities

  1. Subsequent to the Poona Pact, in 1933-34, Gandhi undertook a countrywide campaign against untouchability
  2. His experiences and thinking in that period deeply informed the shape of constructive work in the 1930s
  3. First, during his travels, Gandhi witnessed the severe distress across agrarian India that was subjected to the economic consequences of the Great Depression
  4. Second, sharp political differences had emerged between Gandhi and the Congress leadership
  5. Third, Gandhi was influenced by the unhappy experience of running khadi activities under the umbrella of the Congress in the 1920s

Gandhi’s views

  1. Throughout the 1930s, Gandhi was concerned with the quality of freedom to be obtained in a future free India
  2. In a context where ordinary citizens had limited education, skills and resources, the challenge of economic justice demanded that the masses be able to participate as meaningful actors in the economy of the country
  3. It is this demand of justice that lead him to devote his attention to the needs of the village
  4. In order to devote himself to addressing the economic needs of rural India, Gandhi resigned from the Congress in 1934, founded the All-India Village Industries Association (AIVIA) and eventually moved to Sevagram
  5. It is also in the 1930s that Gandhi introduced his radical approach of Nai Talim that sought to make elementary education accessible, affordable and meaningful to all children

Emphasis on constructive work

  1. In and after 1942, in an atmosphere suffused with the potential for violence, Gandhi become increasingly convinced of the efficacy and urgency of constructive work
  2. While Gandhi met with lesser success in his constructive work compared with his political campaigns, he saw them as an indivisible whole
  3. Arguably, constructive work can be thought of as a different mode of politics

Gandhi’s relevance in today’s India

  1. An independent India rejected his economic model that placed the individual and the agrarian economy at the centre and instead took to industrial modernity
  2. But the questions that Gandhi sought to address through constructive work are very much alive today
  3. While the country has witnessed high growth rates in recent decades, both urban and rural India are plagued by the problems of social and economic inequality and injustice as well as the challenges posed by a multitude of environmental crises
  4. Much like his approach to non-violent politics, Gandhi’s thinking on constructive work also offers useful contemporary lessons to those willing to listen and heed

[op-ed snap] Shielding witnesses: on protection scheme


Mains Paper 2: Polity | Structure, organization & functioning of the Executive & the Judiciary

From the UPSC perspective, the following things are important:

Prelims level: Witness protection scheme

Mains level: Problems associated with the criminal justice system in India and their solutions


Witness protection programme

  1. Pending legislation by Parliament, the Supreme Court has asked States to implement a scheme framed by the Centre to protect witnesses in criminal trials from threat, intimidation and undue influence
  2. The need to protect witnesses has been emphasised by Law Commission reports and court judgments for years

Why witness protection is essential?

  1. Witnesses turning hostile is a major reason for most acquittals
  2. In the current system, there is little incentive for witnesses to turn up in court and testify against criminals
  3. Besides threats to their lives, they experience hostility and harassment while attending courts
  4. The tardy judicial process seldom takes into account the distance they have travelled or the time they have lost in attending court, only to be told they have to return another day

Particulars of the scheme

  1. It broadly classifies witnesses in need of protection into three types based on the threat assessment
  2. A witness protection order will be passed by a competent authority
  3. The scheme is to be funded by budgetary support from State governments and donations
  4. There will also be in camera trial, proximate physical protection and anonymising of testimony and references to witnesses in the records

Few challenges

  1. The real test will be the advanced forms of identity protection: giving witnesses a new identity, address and even ‘parentage’, with matching documents
  2. All this needs to be done without undermining their professional and property rights and educational qualifications
  3. There have been ad hoc steps such as those outlined for concealing the identity of witnesses in anti-terrorism and child-centric laws
  4. A few dedicated courtrooms for vulnerable witnesses, mostly child victims, are also functional
  5. However, expanding such facilities and implementing a comprehensive and credible witness protection programme will pose logistical and financial challenges
  6. The scheme is to be funded by budgetary support from State governments and donations
  7. This is at variance with the Law Commission’s recommendation in 2006 that the Centre and the States share the cost equally

Way forward

  1. The introduction of the scheme marks a leap forward
  2. The scheme could help strengthen India’s tottering criminal justice system

Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[pib] Agriculture Export Policy, 2018


Mains Paper 3: Economy | Effects of liberalization on the economy

From UPSC perspective, the following things are important:

Prelims level: Particulars of Agriculture Export Policy, 2018

Mains level: Measures towards doubling farmer’s income


  • The Union Cabinet has approved the Agriculture Export Policy, 2018 along with establishment of Monitoring Framework at Centre with Commerce as the nodal Department to oversee the implementation of Agriculture Export Policy.

Agriculture Export Policy, 2018

  1. In order to provide an impetus to agricultural exports, the Government has come out with this policy which is aimed at doubling the agricultural exports and integrating Indian farmers and agricultural products with the global value chains.
  2. The Policy has the vision to harness export potential of Indian agriculture, through suitable policy instruments, to make India global power in agriculture and raise farmers ‘income.


  1. To double agricultural exports from present ~US$ 30+ Billion to ~US$ 60+ Billion by 2022 and reach US$ 100 Billion in the next few years thereafter, with a stable trade policy regime.
  2. To diversify our export basket, destinations and boost high value and value added agricultural exports including focus on perishables.
  3. To promote novel, indigenous, organic, ethnic, traditional and non-traditional Agri products exports.
  4. To provide an institutional mechanism for pursuing market access, tackling barriers and deal with sanitary and phyto-sanitary issues.
  5. To strive to double India’s share in world agri exports by integrating with global value chain at the earliest.
  6. Enable farmers to get benefit of export opportunities in overseas market.

Elements of Agriculture Export Policy

The recommendations in the Agriculture Export Policy have been organised in two categories – Strategic and Operational – as detailed below:

I. Strategic

  • Policy measures
  • Infrastructure and logistics support
  • Holistic approach to boost exports
  • Greater involvement of State Governments in agri exports
  • Focus on Clusters
  • Promoting value-added export
  • Marketing and promotion of “Brand India

II. Operational

  • Attract private investments into production and processing
  • Establishment of strong quality regimen
  • Research & Development
  • Miscellaneous

Other Provisions

  1. The policy has been designed with extensive consultations with states that have agreed to remove a lot of restrictions, including mandi taxes, and APMC (Agricultural Produce Market Committee)-related conditions.
  2. Policy for sensitive farm goods such as onions will be reviewed from time to time.

Promoting Science and Technology – Missions,Policies & Schemes

[pib] National Mission on Interdisciplinary Cyber-Physical Systems


Mains Paper 3: Science & Technology | Developments and their applications and effects in everyday life.

From UPSC perspective, the following things are important:

Prelims level: NM-ICPS

Mains level: Particulars of the NM-ICPS


  • The Union Cabinet has approved the launching of National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS) to be implemented by Department of Science &Technology for a period of five years.


  1. CPS and its associated technologies, like Artificial Intelligence (Al), Internet of Things (loT), Machine Learning (ML),  Deep Learning (DP),  Big Data Analytics,  Robotics, Quantum Computing etc. have pervaded and is playing a transformative role in almost every field of human endeavour all most in all sectors.
  2. It has become imperative for government and industries to be prepared to adopt these emerging and disruptive technologies in order to remain competitive, drive societal progress, generate employment, foster economic growth and to improve the overall quality of life and sustainability of the environment.

National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS)

  1. The NM-ICPS is a comprehensive Mission which would address technology development, application development, human resource development & skill enhancement, entrepreneurship and start-up development in CPS and associated technologies.
  2. The Mission addresses the ever increasing technological requirements of the society, and takes into account the international trends and road maps of leading countries for the next generation technologies.
  3. It would be a Pan India Mission and covers entire gamut of India that includes Central Ministries, State Governments, Industry and Academia.
  4. The Mission will feed the Central Ministries/ Departments and State Govts and also the Industry to effectively use the CPS technologies in their projects and schemes for the benefit of the society.
  5. The mission implementation would develop and bring:
  • Cyber Physical Systems (CPS) and associated technologies within reach in the country,
  • adoption of CPS technologies to address India specific National / Regional issues,
  • produce Next Generation skilled manpower in CPS,
  • catalyze Translational Research,
  • accelerate entrepreneurship and start-up ecosystem development in CPS etc.

Implementation strategy

  1. The Mission aims at establishment of 15 numbers of Technology Innovation Hubs (TIH), six numbers of Application Innovation Hubs (AIH) and four numbers of Technology Translation Research Parks (TTRP).
  2. These Hubs & TTRPs will connect to Academics, Industry, Central Ministries and State Government in developing solutions at reputed academic, R&D and other organizations across the country in a hub and spoke model.
  3. A strategic approach involving a suitable mix of Academic, Industry and Government is proposed to be adopted.
  4. Strong Steering and Monitoring Mechanisms in the form of Mission Governing Board (MGB), Inter-Ministerial Coordination Committee (IMCC), Scientific Advisory Committee (SAC) and other Sub-Committees will guide and monitor the Mission implementation.

Benefits of the mission

  1. CPS is an integrated system of upcoming technology, which in turn is being taken up on priority basis by countries in the race for development.
  2. CPS will indeed bring a paradigm shift in entire skill sets requirement.
  3. The proposed Mission would act as an engine of growth that would benefit national initiatives in health, education, energy, environment, agriculture, strategic cum security, and industrial sectors, Industry 4.0, SMART Cities, SDGs etc.
  4. The job opportunities will be enhanced through the Mission by imparting advanced skills and generating skilled manpower as per the requirement of the industry/ society.
  5. As Innovation, Entrepreneurship and Start-up Ecosystem is an integral part of the proposed NM-ICPS, the start-ups will also create a number of technology driven job opportunities in CPS and allied areas.

Foreign Policy Watch: India-China

[pib] Exercise Hand-in-Hand 2018


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

From UPSC perspective, the following things are important:

Prelims level: Ex Hand-in-Hand

Mains level:  India-China mutual belief and indulgences for security cooperation


Exercise Hand-in-Hand

  1. Exercise Hand-in-Hand is conducted annually as part of military diplomacy and interaction between armies of India and China.
  2. The joint exercise for the year 2018 will be conducted from 10 to 23 December 2018 at Chengdu, China.
  3. The aim of the exercise is to build and promote close relations between armies of both the countries and to enhance ability of joint exercise commander to take military contingents of both nations under command.
  4. The exercise will involve tactical level operations in an International Counter Insurgency/ Counter Terrorist environment under UN mandate.

Air Pollution

India fourth largest contributor to carbon emission


Mains Paper 3: Environment | Conservation, environmental pollution and degradation, environmental impact assessment

From UPSC perspective, the following things are important:

Prelims level: Global Carbon Project

Mains level: Trends in global carbon emission


Coal use hampers

  1. This week, representatives from more than 190 countries have begun discussions at the UN Climate Change Conference (COP 24) in Katowice, Poland, on ways to equitably cut carbon emissions.
  2. However global carbon emissions are set to hit an all-time high of 37.1 billion tonnes of CO2 in 2018, according to researchers at the University of East Anglia (UEA) and the Global Carbon Project.
  3. India, the third-highest contributor, is projected to see emissions rise by 6.3% from 2017.
  4. The 2.7% projected global rise in 2018 has been driven by appreciable growth in coal use for the second year in a row, and sustained growth in oil and gas use.
  5. Though coal use contributed to the rise in 2018 from last year, it still remains below its historical high in 2013 but may exceed that if current growth continues.

China and US rocks global emission

  1. The 10 biggest emitters in 2018 are China, US, India, Russia, Japan, Germany, Iran, Saudi Arabia, South Korea, and Canada.
  2. The EU as a region of countries ranks third.
  3. China’s emissions accounted for 27% of the global total, having grown an estimated 4.7% in 2018 and reaching a new all-time high.
  4. Emissions in the US, which has withdrawn from its commitment to the Paris Agreement, account for 15% of the global total, and look set to have grown about 2.5% in 2018 after several years of decline.

About Global Carbon Project

  1. The Global Carbon Project (GCP) established in 2001 is the organisation that seeks to quantify global carbon emissions and their causes.
  2. The main object of the group has been to fully understand the carbon cycle.
  3. The project has brought together emissions experts and economists to tackle the problem of rising concentrations of greenhouse gases.
  4. It releases the Global Carbon Atlas, a tool for the visualization of data related to the global carbon cycle.

Intellectual Property Rights in India

Number of patents granted by India shot up by 50% in 2017: UN


Mains Paper 3: Science & Technology | Indigenization of technology & developing new technology

From UPSC perspective, the following things are important:

Prelims level: WIPO Report 2018

Mains level: India’s position in innovation and measures required to promote innovation culture.


  • The number of patents granted by India shot up by 50 per cent in 2017, keeping up a trend of steep increases, according to the UN’s World Intellectual Property Organisation (WIPO).

World Intellectual Property Report 2018

  1. The patents granted by India increased from 8,248 in 2016 to 12,387 last year, a/c to the WIPO’s World Intellectual Property Indicators 2018 report released in Geneva.
  2. Last year’s number was more than double the 6,022 patents granted in 2015, according to WIPO statistics.
  3. In 2016, 1,115 patents went to domestic individuals or entities and 7,133 to foreigners; And in 2015, 822 were granted to applicants in India and 5,200 to foreigners.
  4. While India ranked 10th in the number of patents given last year, no Indian company or university figures in last year’s global list of the top 50 patent applicants.
  5. Pharmaceuticals accounted for 15.7 per cent of the Indian domestic applications for patents last year, the report said.

China is at the Top

  1. China’s patent authority led the world in the number of patents granted with 420,144 and was followed by the US with 318,829, according to the WIPO.
  2. In just a few decades, China has constructed an IP system, encouraged homegrown innovation, joined the ranks of the world’s IP leaders – and is now driving worldwide growth in IP filings.
  3. China received 1.38 million patent applications – which are an indication of patents in the pipeline – more than double that of the US, which had 606,956 applications.

Why such rise?

  1. Demand for IP (intellectual property) protection is rising faster than the rate of global economic growth, illustrating that IP-backed innovation is an increasingly critical component of competition and commercial activity
  2. The WIPO said the steep increase in the number was driven by patents granted to foreigners, which accounted for 85 per cent of the total increase.
  3. Globally, 1.4 million patents were granted in 2017, the report estimated.

Navigate to this page for more readings on WIPO:

[Prelims Spotlight] World Intellectual Property Organisation (WIPO), Forest Carbon Partnership Facility(FCPF)