December 2018
M T W T F S S
« Nov   Jan »
 12
3456789
10111213141516
17181920212223
24252627282930
31  

[op-ed snap] India’s shadow-bank risks put even China in the shade

Note4students

Mains Paper 3: Economy | Mobilization of resources

From the UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Shadow lending and its role in maintaining balance in the economy


Context

Shadow lending

  1. “Shadow lending” is a useful catch-all for firms and financial instruments that, just like banks, turn shorter-term liabilities into longer-term assets
  2. But unlike banks, they don’t have access to liquidity from the central bank. They borrow wholesale
  3. When they take deposits, customers don’t enjoy the protection of deposit insurance
  4. In those two key respects, India’s non-bank finance firms fit the International Monetary Fund’s description of shadow banking

How does shadow lending work?

  1. The universe of more than 11,000 Indian shadow lenders draws its sustenance from formal banks, as well as from companies and individuals looking to deploy short-term surpluses
  2. As yield-seeking capital comes into mutual funds, their managers buy commercial paper issued by operating finance companies (OpCo) as well as subscribe to bonds issued by the finance firms’ holding companies (HoldCo)
  3. The OpCo lends to home buyers, small businesses, and students as well as property developers, while the HoldCo brings in the funds borrowed from mutual funds as equity in OpCo
  4. The minimum capital requirement of 15% of risk-weighted assets is easily met even as shadow lenders’ balance sheets expand by 20% or more

Role of shadow lending in the Indian economy

  1. The shadow lenders, pumping out 30% of all new credit over the past three years, are the reason why the Indian economy isn’t withering for lack of finance, despite a serious banking crisis
  2. 11 out of 21 state-run banks are languishing in a regulatory prison and the central bank wants them to boost their depleted equity before they can meaningfully expand their loan books again
  3. Small businesses are using loans against a property to meet their working capital needs
  4. Traders are getting finance by pledging warehouse receipts

Comparison with China

  1. At 14 % of GDP, India’s shadow-banking universe is much smaller than the 70% ratio in China
  2. While Beijing has successfully shrunk the industry from 87% of GDP at the end of 2016 a drop of 17 percentage points—India can’t afford the non-bank lenders to stumble even accidentally
  3. If they retreat, capital-constrained local banks won’t be able to take up the slack
  4. Nor will an indebted Indian government be able to offset a resulting economic slowdown

Way forward

  1. China’s shadow banking may be a lot bigger than India’s, but India’s is already too big to fail
  2. India’s financing arrangements are far more rudimentary than the opaque Wall Street world of asset-backed commercial paper; structured investment vehicles; subprime residential mortgage-backed securities; and collateralized debt obligations
Banking Sector Reforms

[op-ed snap] India’s 1st step towards EVs raises concerns too

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From the UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Electric vehicle ecosystem in India and issues related to it


Context

Guidelines for EV charging stations

  1. The guidelines released recently by the power ministry for setting up charging infrastructure will go a long way in allaying the apprehensions of existing and prospective manufacturers of electric vehicles in India
  2. The guidelines can be considered the first major step taken by India to push electric mobility

Positive steps

  1. The decision to allow private charging stations to be set up at residences and offices will surely encourage potential buyers of electric vehicles
  2. Also, that an individual setting up a station will not require a licence and power distribution companies will set up a connection on a priority basis are welcome steps
  3. The fact that most of the charging stations in the first stage will be established in megacities such as Delhi and Mumbai is also indicative of the government’s resolve to reduce vehicular pollution in leading urban centres
  4. Most of these cities have recorded alarming levels of pollution in the last few years and the lack of charging infrastructure has been the major roadblock for would-be buyers of electric vehicles

Things that are missing

  1. The guidelines will not fully assuage concerns of the customers and manufacturers
  2. Basic things, such as the incentives on offer for an individual or a corporate entity for setting up charging stations, were not mentioned
  3. Also, there is a lack of clarity on issues such as who will provide the land for the charging stations, and whether it would be given by the government at a discounted rate
  4. The guidelines have also left out the Chinese standard of charging known as GB/T when Chinese companies are leading vehicle manufacturing across the globe

Other concerns

  1. Most electric cars, buses, two- and three-wheelers running on Indian roads at the moment are compatible with the Chinese standards as opposed to the Japanese CHAdeMO, or the CCS of standards of the Europeans and Americans
  2. So, what happens to these vehicles when these new fast-charging stations come up?
  3. Chinese companies like SAIC Motor and BYD have been making high-quality electric vehicles, while most of the Japanese, American and European manufacturers are yet to develop an affordable electric powertrain
  4. Reports suggest that the government may also resort to levying an additional cess on traditional vehicles to generate funds to offer incentives for electric vehicles
  5. This is unfair to the industry as vehicle manufacturers have invested heavily to comply with the new safety, efficiency and fuel efficiency norms
  6. Funds to promote electric mobility should be generated from existing extra taxes levied on diesel vehicles, or the government should reduce the goods and services tax on vehicles to 18% from 28%, before imposing a new cess

Way forward

  1. Our policymakers need to understand that Chinese companies may help develop the electric vehicle ecosystem in India just like the Japanese ones did when the internal combustion engine manufacturing ecosystem was being established almost three decades ago
  2. Recently released guidelines for setting up charging infrastructure leaves a lot of questions unanswered and will not fully assuage concerns of customers and manufacturers
Electric and Hybrid Cars – FAME, National Electric Mobility Mission, etc.

[op-ed snap] Policeman, train thyself

Note4students

Mains Paper 3: Internal Security | Various Security forces & agencies & their mandate

From the UPSC perspective, the following things are important:

Prelims level: Intelligence Bureau

Mains level: The urgent need for police reforms in India


Context

Police officials meet

  1. This month, the most senior police officials from across the country will gather to discuss important matters of national concern
  2. With them will be a smattering of the senior bureaucracy and visiting ministers
  3. The meeting is a closed-door affair under the aegis of the Intelligence Bureau
  4. Given the feverish attention they have received from the media, it is no surprise that this year’s hot topics include fake news, lynchings, and the newly-invented but undefined “urban naxal”
  5. Beyond these external threats are the perennial internal infirmities of policing arising out of multiple injuries inflicted on the police by themselves and the political executive. These have endured and festered

Acoountability in question

  1. There is too much long-term evidence to deny the depth of the malady
  2. The Emergency, the violence against Sikhs in 1984, the Gujarat violence of 2002, the repeated accusations of extra-judicial killings and excess use of force, the selective use of process to target minorities and opponents of the establishment, the frequent failures of intelligence and the inability to ensure an environment of safety for women have all been too well documented to bear denial

What can police officers do for reforming the system?

  • Closing ranks against criticism
  1. Today, the leadership resists accountability, hides behind Sections like 197, refuses to face up to the use of torture yet swears they do more to “discipline” their own than any other service
  2. Ideally, senior police officers should welcome as allies the human rights commissions and the newly-minted Police Complaints Authorities rather than strongly resist and disobey their attempts at ensuring accountability wherever possible
  • Taking steps towards people’s participation
  1. Working with the people they are meant to serve rather than in isolated splendour is another sure means of arriving at better policing
  2. Police stations must be reclaimed as the public utilities they are, rather than the unapproachable bastions they have become
  3. Localised policing plans can be made in consultation with the public
  4. Beat policing, as has been successfully managed in Kerala, can become a universal means of being visible and keeping in touch with the community
  5. Police personnel of all ranks can be incentivised to live within the communities they serve rather than in “lines” that re-enforce a defensive sub-culture that views the public with suspicion
  • Better training
  1. Training is a singular gateway to checking for bad seeds and creating skilled individuals
  2. Presently, even the fanciest brick-and-mortar training institutions reinforce a regimentation of the mind over knowledge and initiative
  3. Manned all too often by side-lined, unskilled and often disgruntled teachers, course content privileges marching and drill over testing for prejudice, imparting forensic and conflict resolution skills, or seriously inculcating constitutional values
  4. It would take very little for the collective leadership to prioritise the reform of training
  • Recalibrating staff connections
  1. Democratic policing must be able to demonstrate democratic values — like equality
  2. The “orderly” system and other similarly demeaning duties forced on trained police personnel symbolise unrecognised talent, inferiority and an unwillingness among the leadership to acknowledge the constabulary as colleagues
  3. The real mental and class distance between officers and men leaves room for outside allegiances to fill the vacuum of influence
  4. Loyalty wanes, unequal and rough treatment within translates into a similar treatment of the public
  5. The effort to recalibrate the relationship from one of master and servant to professional collegiality can only come from the top

Way forward

  1. Above all this, the senior management needs to re-imagine the police not in the colonial image that requires them to cling to power rather than principle but as a law-upholding service that creates an environment within which each one of us and indeed each individual police person can enjoy his or her fundamental rights to the fullest
Police Reforms – SC directives, NPC, other committees reports

Centre to give Indian Forest Act a facelift

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Indian Forest Act, 1927

Mains level:  Amending the colonial era definition acts and policies


News

  • The MoEFCC has started the process of “comprehensively amending” the backbone of forest governance in India—the Indian Forest Act, 1927 (IFA).

Weeding out process

  1. The process would involve the examination of all the sections of the Act.
  2. The obsolete provisions will be weeded out and provisions fit for the present will be introduced.
  3. The amendments will also include definitions of terms like forests, pollution, ecological services etc.
  4. There is no definition of forest in any Indian law pertaining to forest or its governance.

Defining Forests

  1. According to the 1996 Supreme Court order, the dictionary definition of the word forest is taken to be the legal definition too.
  2. This description covers all statutorily recognised forests, whether designated as reserved, protected or otherwise for the purpose of Section 2(i) of the Forest Conservation Act (1980).
  3. The term forest land, occurring in Section 2, will not only include forest as understood in the dictionary sense, but also any area recorded as forest in the government record irrespective of the ownership.

Impact of amendment

  1. The legal definition of forests will have huge ramifications on the conservation of forests as well as the implementation of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006.
  2. The amendments will include changes to punishments and fines prescribed in the IFA, incorporate provisions related to carbon sequestering, ecological services etc.

Why such move?

  1. The provisions of IFA, like the amount of the fines prescribed for violating the law, were set according to that time and they are very low for today.
  2. Moreover, many laws concerning forest government have been implemented since 1927, with this amendment we will try to address conflicts which might be there in these laws with respect to the IFA.
  3. Many reports like the MB Shah report of 2010 and the TSR Subramanian report of 2015, have talked about amending the IFA.

Recent amendments in the IFA

  1. The Indian Forest Act, 1927 was amended to add new changes to transform the bamboo sector.
  2. Before, bamboo was categorised as a tree. As a result, felled or extracted bamboo, whether found in or brought from a forest, was considered as “timber”.
  3. The Act empowered state governments to regulate the trade and movement of bamboo.
  4. After amending Section 2(7) of Indian Forest Act, 1927, bamboo is no longer a tree and felled bamboo too is not timber.
  5. So any bamboo grown in private or homestead land by millions of farmers does not require a felling permission or transit permission from any state forest department.

Back2Basics

Indian Forest Act, 1927 (IFA)

  1. The Indian Forest Act, 1927 was largely based on the British made Indian Forest Act of 1878.
  2. Both the 1878 act and the 1927 one sought to consolidate and reserve the areas having forest cover, or significant wildlife, to regulate movement and transit of forest produce, and duty leviable on timber and other forest produce.
  3. It also defines the procedure to be followed for declaring an area to be a Reserved Forest, a Protected Forest or a Village Forest.
  4. It defines what is a forest offence, what are the acts prohibited inside a Reserved Forest, and penalties leviable on violation of the provisions of the Act.
  5. Reserved Forest is an area mass of land duly notified under the provisions of India Forest Act or the State Forest Acts having full degree of protection. In Reserved Forests, all activities are prohibited unless permitted.
Forest Conservation Efforts – NFP, Western Ghats, etc.

US confirms pull out from INF treaty

Note4students

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: Intermediate-Range Nuclear Forces (INF) Treaty

Mains level:  USA’s disregard of bilateral and multilateral treaties


News

  • The United States of America will pull out of the Intermediate-Range Nuclear Forces (INF) Treaty, confirmed Russian authorities.

Background

  1. Washington publicly announced its plans to withdraw from the treaty (INF) already in October.
  2. Through high-level bilateral channels it was confirmed that this decision was final and there wasn’t any attempt to initiate dialogue.

Provisions of the treaty

  1. Under the INF treaty, the US and Soviet Union agreed not to develop, produce, possess or deploy any ground-based ballistic and cruise missiles that have a range between 500 and 5,500 km.
  2. It exempted the air-launched and sea-based missile systems in the same range.
  3. The INF treaty helped address the fears of an imminent nuclear war in Europe.
  4. It also built some trust between Washington and Moscow and contributed to the end of the Cold War.

Loopholes in the treaty

  1. It left the other nuclear weapon powers free to develop ground-based intermediate-range forces
  2. In the age of nuclear superpowers, it did not seem to matter.
  3. Since then, many countries have developed missiles in the range of 500 to 5,500 km, including India, Pakistan and North Korea.
  4. Nearly 90 per cent of China’s vast missile armoury — estimated at around 2,000 rockets — is in the intermediate range and would be illegal if Beijing were to be a part of the INF treaty.

Root cause of USA’s withdrawal

  1. Although the US cites Russian violations of the INF treaty as the immediate cause for the withdrawal, coping with China’s massive rocket force appears to be the more important reason for the decision.
  2. The expansive Chinese land-based intermediate range missile forces threaten the American naval ships deployed in the Western Pacific and target US military bases in Japan.
  3. The vulnerability of American military presence in the Pacific to Chinese missiles, in turn, undermines the credibility of American security commitment to its Asian allies.
Foreign Policy Watch: India-United States

[pib] E-Drishti Software

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways, etc.

From UPSC perspective, the following things are important:

Prelims level: E-Drishti

Mains level: Ensuring punctuality of Railways


News

  • An ‘e-Drishti’ interface has been unveiled for the Union Railway Ministry.

E-Drishti Software

  1. The E-Drishti software is developed by Centre for Railway Information Systems (CRIS).
  2. This software includes an interface which provides summary information on punctuality of trains for the previous day.
  3. There is also an interface which provides information on current train running on the Indian Railway network.
  4. In addition, there are interfaces providing details of freight earning, freight loading and passenger earnings for the previous day & month and cumulative for the year, in comparison to the corresponding period of the previous year.

A punctuality drive

  1. Punctuality of passenger carrying trains is being also monitored rigorously to improve punctuality performance on a daily basis at Divisional, Zonal and Railway Board levels.
  2. To ensure running of trains right time when pairing trains are running late, scratch rakes are inducted and rakes are standardized to the extent operationally feasible.
  3. Besides, punctuality drives are launched from time to time and staff involved in train operations is sensitized.
  4. In addition, Zonal Railways have also been advised to have better coordination with Civil and Police authorities of states to deal with situations arising out of law and order problems.
Railway Reforms

[pib] Reusable Rocket Technology

Note4students

Mains Paper 3: Science & Technology | Awareness in the fields of IT, Space, Computers, robotics etc.

From UPSC perspective, the following things are important:

Prelims level: Reusable Launch Vehicle (RLV)

Mains level:  Importance of RLV in ISRO missions


News

  • ISRO is working on reusable technology for reducing the cost of access to space including the development of a winged body unmanned reusable launch vehicle (RLV) for launching payloads into low earth orbits.

ISRO’s Prototype RLV

  1. ISRO has successfully developed a scaled down (1:5) technology demonstration version of Reusable Launch Vehicle – Technology Demonstrator (RLV-TD) vehicle.
  2. It has successfully carried out the first experimental mission on May 23, 2016 from Satish Dhawan Space Centre, Sriharikota.
  3. In this mission, critical technologies such as autonomous navigation, guidance & control and reusable thermal protection system have been successfully demonstrated.

Challenges Ahead

  1. Development of Reusable Launch Vehicles is a technical challenge and it involves the development of many cutting edge technologies.
  2. A series of technology demonstration missions would be required to validate these technologies.
  3. In the next phase, an autonomous runway landing experiment is planned releasing the RLV-TD vehicle from a helicopter to demonstrate the runway approach and landing capability.
  4. This will be followed by an end-to-end orbital re-entry mission demonstration using a Technology Demonstration Vehicle boosted by propulsion systems.
ISRO Missions and Discoveries

[pib] NITI Aayog releases Strategy for New India @ 75

Note4students

Mains Paper 3: Economy | Indian Economy Issues relating to planning

From the UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Role of planning in an economy and need of bringing planning back in vogue


News

  • The NITI Aayog has unveiled its comprehensive national Strategy for New India, which defines clear objectives for 2022-23.

Strategy for New India @ 75

  1. It is a detailed exposition across forty-one crucial areas that recognize the progress already made, identifies binding constraints, and suggests the way forward for achieving the clearly stated objectives.
  2. It is an attempt to bring innovation, technology, enterprise and efficient management together, at the core of policy formulation and implementation.
  3. It will encourage discussion and debate, and invite feedback for further refining our policy approach.

Four Sections Discussed

The forty-one chapters in the document have been dis-aggregated under four sections: Drivers, Infrastructure, Inclusion and Governance.

  • The first section on Drivers focuses on the engines of economic performance with chapters on growth and employment, doubling of farmers’ incomes; upgrading the science, technology and innovation eco-system; and promoting sunrise sectors like fintech and tourism.
  • The second section on Infrastructure deals with the physical foundations of growth which are crucial to enhancing the competitiveness of Indian business as also ensuring the citizens’ ease of living.
  • The third section on Inclusion deals with the urgent task of investing in the capabilities of all of India’s citizens. The three themes in this section revolve around the dimensions of health, education and mainstreaming of traditionally marginalized sections of the population.
  • The final section on Governance delves deep into how the governance structures can be streamlined and processes optimized to achieve better developmental outcomes.
NITI Aayog’s Assessment