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[op-ed snap] Growth prop On RBI repo rate cut

Note4Students

Mains Paper 3: Economic Development| Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

From UPSC perspective, the following things are important:

Prelims level: Basic knowledge of RBI’s open market operations.

Mains level: The news-card analyses the recent rate cut by RBI and its implications over the economy, in a brief manner.


Context

  • The RBI has recently cut the benchmark repo rate.
  • However, concerns over the fiscal deficit remains.

Change of stance

  • Barely four months after the Reserve Bank of India switched its monetary policy stance to one of ‘calibrated tightening’, signalling interest rates were set to trend higher, it has reversed direction.
  • Not only did the RBI’s monetary policy committee unanimously opt to revert to a ‘neutral’ posture, but the rate-setting panel unexpectedly decided, by a 4-2 majority, to cut the benchmark repo rate by 25 basis points, to 6.25%.

MPC’s reasoning has been fairly straightforward

  • With Consumer Price Index-based inflation having continued to slow and projected to stay well below the medium-term target of 4% till at least the October-December quarter, the MPC saw an opportune moment to pivot to a growth-supportive stance.
  • That there is a need to bolster economic momentum is evident from the RBI’s downward revision of the forecast for growth in the first half of the next fiscal year.
  • The projection has been lowered to a range of 7.2-7.4%, from 7.5% posited in the RBI’s December statement, as moderating global growth and slowing overseas demand add uncertainties to the prevailing domestic imbalances.
  • Specifically, production and import of capital goods, which is a key gauge of investment demand, contracted in November/December and credit flows to industry remain muted.
  • With an overall shortfall of 4% in rabi sowing across various crops, and storage in major reservoirs at just 44% of the full level, the slowdown in farm output growth may end up being more protracted.

Weakening of demand

  • The less-than-sanguine outlook for the rural economy is also reflected in the high-frequency indicators of the services sector.
  • Data on sales of both motorcycles and tractors in December underscore weakening demand in the hinterland.
  • This weakness in the farm sector is undergirding the unprecedented softness in food prices.
  • The December CPI data showed continuing deflation in food items.

MPC’s acknowledgment

  • While the RBI’s inflation calculus clearly benefits from the ongoing trend in price gains, the MPC is justifiably cognisant of the tenuousness of the assumptions it has made for its forward projections.
  • Importantly, while it has assumed a normal monsoon this year, the central bank acknowledges that any variation in geographic spread or uneven distribution in terms of time could roil the inflation outlook.

Way Forward

  • However, the RBI’s policy statement fails to make any mention of its hitherto abiding concern about fiscal prudence.
  • With the Interim Budget showing some slippage from the fiscal roadmap and projecting a budget deficit of 3.4% for both the current financial year and the next, the risk of government borrowing crowding out private investment demand remains tangibly real.
Monetary Policy Committee Notifications

[op-ed snap] The road to peace runs through Tehran

Note4Students

Mains Paper 2: International relations| India and its neighborhood- relations.

From UPSC perspective, the following things are important:

Prelims level: Basic knowledge of Afghanistan peace process.

Mains level: The news-card analyses the India and Iran’s role Afghanistan peace process, in a brief manner.


Context

  • An American military pull-out from Afghanistan is on the cards and the U.S. will want to leave behind a stable country.

Peace in Afghanistan, rallied on the support of regional powers

  • Any peace settlement in Afghanistan will stand a better chance of staying on the rails if it is supported by regional powers.
  • Ties between Afghanistan and its neighbours, including Iran, will impact the security of southern and western Asia.
  • Like India, Russia, China and the U.S., Iran would want to see a steady hand at the helm in Afghanistan.
  • While lacking military influence, India can build on its good ties with the U.S. and Iran to secure Afghanistan.

Iranian continuity

  • Iran is not a newcomer to regional diplomacy in Afghanistan.
  • First and foremost, India should try to dissuade the U.S. from dealing with Iran, Russia and China as enemies.
  • In fact, U.S. President’s perception of all three as foes is at odds with America’s earlier engagement with them to end its military campaign in Afghanistan.

Afghan peace process: 6+1 process

  • From 2014 to 2016, Washington and Moscow quietly arranged talks on the Afghan peace process.
  • The meetings, known as the 6+1 group, included representatives from Afghanistan, China, India, Iran, Pakistan, Russia, and the U.S.
  • The 6+1 process assumed that each of these countries was essential to the achievement of a political settlement in Afghanistan.
  • Moreover, last November, the U.S. and the Taliban joined for the first time the Russia-hosted conference in the hope of promoting a negotiated solution to achieve peace and national reconciliation in Afghanistan.

Negotiated settlement to ensure Afghanistan’s stability

  • Regional powers could put their weight behind a negotiated settlement that will ensure Afghanistan’s stability.
  • Iran, Russia and China — and the Central Asian states with which India and Afghanistan wish to cooperate in countering terrorism — fear of that continued instability in Afghanistan could spill over into their countries.
  • India will also be adversely affected if negotiations break down.
  • In that event, extremist exports from Pakistan to Afghanistan or India would probably increase.

India to explore the Iranian diplomatic options to secure Afghanistan

  • It could be worthwhile for India to explore the Iranian diplomatic options to secure Afghanistan.
  • On good terms with Tehran, New Delhi would gain by developing the Chabahar port in southern Iran.

International North-South Transport Corridor project

  • Looking beyond Chabahar, India, Iran and Russia were the founding countries of the International North-South Transport Corridor project as long ago as 2002.
  • The corridor is intended to increase connectivity between India, Iran, Russia, landlocked Afghanistan and Central Asia and Europe.
  • It would also advance their trading interests.

India’s role with the US

  • India could remind Washington about the past coincidence of American and Iranian interests on Afghanistan.
  • Together with the U.S. and India, Iran supported the overthrow of the Taliban in 2001.
  • In the international negotiations which followed in Bonn that year, Iran supported the installation of Hamid Karzai as President and favoured the exclusion of the Taliban from his government.

U.S.-Iran ties have often been fractious

  • As the U.S. imposed sanctions on Iran after 2005, Iran saw the Taliban countering American influence on its borders and gave them arms.
  • Iran continues to oppose the U.S.’s presence in Afghanistan, largely because it fears that American troops in Afghanistan could be used against it.
  • The U.S. and Iran could be advised of the mutual, and regional, advantages of improving ties.
  • Such advantages could range from stability in Afghanistan, and beyond, to increased trade prospects, especially in South and West Asia.

Afghanistan and Iran

  • To allay Iranian fears, Afghanistan recently said that it would not allow the U.S. to use its bases in the country to conduct any act of aggression against Iran.
  • Last December, Iran also held talks with the Taliban with the knowledge of the Afghan government.
  • In recent months Afghan officials have accused Iran, which the U.S. says is trying to extend its influence in western Afghanistan, of providing the Taliban with money, weapons and explosives.
  • Iran has denied the charge.

Win-win prospects

  • Iran could gain by strengthening trading ties with a secure Afghanistan.
  • In 2017 it supplanted Pakistan as Afghanistan’s largest trading partner.
  • At a time when Iran’s economy is weighed down by American sanctions, it would want to build up trade ties with neighbouring states.

The U.S. would also gain

  • Iran is the geopolitical hub connecting South, Central and West Asia and the Caucasus.
  • The Strait of Hormuz, that crucial conduit, links Iran westwards to the Persian Gulf and Europe, and eastwards to the Gulf of Oman, South and East Asia.
  • Moreover, an improvement in U.S.-Iran relations would be welcomed by America’s European allies, who are opposed to Washington’s unilateral sanctions on Iran.

Way Forward

  • The U.S. should not lose the chance to act in concert with Iran to improve Afghanistan’s security.
  • As the U.S. airs the idea of withdrawal from Afghanistan, now is the right time for India to act as the honest broker between them and to play a larger role in regional security.
  • The status of India and Iran as regional powers as well as the stability of South, Central, and West Asia would simultaneously be enhanced.
  • It is to be hoped that Mr. Trump’s display of America’s “superpower” in opposition to Iran — and Russia and China — will not block such an opportunity to stabilise Afghanistan.
Foreign Policy Watch: India-Afghanistan

[op-ed snap] Governing India’s many spaces

Note4Students

Mains Paper 3: Economic Development| Inclusive growth and issues arising from it.

From UPSC perspective, the following things are important:

Prelims level: Basic knowledge of India’s performance at different indices.

Mains level: The news-card analyses India’s performance at three important indices i.e. EDB, HDI and EPI, in a brief manner.


Context

  • As the general elections approaches in India, the experts look at the changes since 2014 in three indices for India.
  • These are the indices of the ‘Ease of Doing Business’ (EDB), ‘Human Development’ (HDI) and ‘Environmental Performance’ (EPI).
  • Published by separate international bodies, they are used to rank the world’s countries according to their performance in the related sphere.

‘Ease of Doing Business’: The business ecosystem

  • The EDB, an indicator put out by the World Bank, is meant mainly as an index of the effect of government regulations on running a business.
  • It is also meant to reflect the extent of property rights in a society.
  • Responses are sought from government officials, lawyers, business consultants, accountants and other professionals involved in providing advice on legal and regulatory compliance.

EDB ranking factors

A country’s ranking is based on the extent to which government regulations facilitate the following:

  •         starting a business,
  •         obtaining construction permits,
  •         getting an electricity connection,
  •         registering property,
  •         accessing credit,
  •         protection of investors,
  •         paying taxes,
  •         trading across borders,
  •         enforcement of contracts and
  •         resolving insolvency.

India’s performance at EDB rankings since 2014

  • The present government has set much at store by India’s improved ranking in terms of the EDB index.
  • The improvement is considerable. From a rank of 134 in 2014, India’s rank improved to 77 in 2018.
  • As 190 countries were ranked in 2018, India was in the top 50%.
  • The position is not spectacular but the improvement is noteworthy.

Limitations and Concerns

  • EDB has not been without controversy, with experts suggesting that in the past political bias may have crept into the ranking of countries.
  • Perhaps a bigger problem with the EDB is that it measures the effect of government regulations alone.
  • While it is important to take this aspect into account, in any situation the ease of doing business is dependent upon other factors too.
  • One of these is the availability of ‘producer services’, with electricity, water supply and waste management coming to mind.
  • There is little reason to believe that this infrastructure has improved in India in the last five years.
  • The Planning Commission used to release data on infrastructural investment, but we have had none since its demise.

Despite all these shortcomings, it is yet important to be concerned with the ease of doing business in India, an aspect that has been given little or no importance in public policy for over 50 years, and to note that the EDB ranking for the country shows significant improvement since 2014.

Human Development Index: A true measure

  • It is the result of a rare India-Pakistan collaboration in the global discourse on public policy, having been devised by Amartya Sen and Mahbub ul Haq for the United Nations Development Programme.
  • The HDI is a combination of indicators of income, health and education in a country.

HDI’s conceptual basis has been critiqued:

  • It has been pointed out that the index combines incommensurate categories, as income, health and education are not substitutes.
  • Second, while it does go beyond purely economic measures of progress, in that it looks at the health and education achievements in a population, it can say little about the ‘quality’ of development.

Data can tell us only a part of the story about people’s lives

  • For instance, it is increasingly clear that it is not enough simply to count how many children are in school.
  • We need also to know whether they are learning anything.
  • Nevertheless the HDI has now gained reasonable acceptance globally as indicative of the development strides a country has taken.

India’s performance at HDI rankings since 2014

  • India’s ranking at HDI has not altered since 2014.
  • India was ranked 130 in 2014, and has remained in the same place out of 185 countries in 2018.
  • It is of relevance here that India’s HDI ranking has not improved despite it being the world’s fastest growing major economy in recent years.
  • This despite income being a component of the index.
  • What this reveals is that an economy can grow fast without much progress in human development.
  • Also, India’s HDI position in the bottom third of countries points to how much it needs to progress to earn the label ‘the world’s largest democracy’.

Environmental Performance Index: The Environmental costs

  • The EPI is produced jointly by Yale and Columbia Universities in collaboration with the World Economic Forum.
  • The index ranks countries on 24 performance indicators across several ‘issue categories’, each of which fit under one of two overarching objectives, namely, environmental health and eco-system vitality.
  • The issue categories are air quality, water and sanitation, water resources, agriculture, forests, fisheries, biodiversity and habitat, and climate and energy.
  • These metrics are meant to serve as a gauge at a national level of how close countries are to accepted environmental policy goals.

India’s performance at EPI rankings since 2014

  • In 2018 India ranked 177 out of 180 countries, having slipped from an already very low rank of 155 in 2014.
  • The country is today among the worst performing on the environmental front and its ranking has worsened over the past five years.

Implications

  • We now have indicators of the progress India has made in the past five years in the three crucial spheres of business, human development and the natural environment.
  • A clear picture emerges whereby the government has aggressively pursued an improvement in the business environment.
  • This appears to have yielded fruit in terms of an improvement in the EDB index.
  • However, at a time when it has been the fastest growing economy in the world, India’s rank on human development has remained unchanged and on environmental performance has slipped close to the last place.

Conclusion

  • The present government has marginally lowered health and education expenditure as a share of national income and distinctly lowered environmental standards.
  • An instance of the latter would be the Coastal Regulation Zone Notification of 2018 which allows construction and tourism development on land earlier considered inviolable due to its ecological value.
  • This de-regulation is a setback for India.
  • It is only one instance of the failure to recognise the plunder of India’s natural capital taking place at an accelerated pace.
  • Rankings by themselves do not reveal the level of attainment but they do convey how far a country is from the global frontier.
Human Development Report by UNDP

Explained: The Dard Aryans of Ladakh: who are this tribe, what are their concerns?

Note4students

Mains Paper 2: Governance | Mechanisms, laws, institutions and Bodies constituted for the protection and betterment of the vulnerable sections

From UPSC perspective, the following things are important:

Prelims level: Dard Aryan Tribe

Mains level: Issue of extinction of PVTGs in India


Context

  1. ‘Dard Aryan’ is not among the list of notified Schedule Tribes, clarified the Tribal Affairs Ministry.
  2. The Ministry has not formally received any charter of demands from the concerned State Government for seeking financial help for preservation of their cultural heritage.

Who are the Dard Aryans?

  1. Some 200 km from Leh are the villages of Dha, Hanu, Garkone and Darchik on both sides of the Indus River, inhabited by the Buddhist Dard Tribes.
  2. The villages are together called the “Aryan valley”.
  3. The community now numbers about 4,000.
  4. The word ‘Dard’ is derived from a Sanskrit word, ‘Daradas’, which means people who live on hillsides.
  5. People of this region are culturally and linguistically different from those in other parts of Ladakh.
  6. There is a line of thought that the “Aryans of Ladakh” or the “Brokpas” might have descended from soldiers in Alexander’s army who had come to the region over 2,000 years ago.

Tradition and Customs

  1. They rear goat and sheep for milk and meat, and their festivals are based on the solar calendar.
  2. Their traditions go back 5,000 years; those who still follow the original customs worship trees, rivers and mountains.
  3. These tribals are mainly dependent on agriculture; the apricots grown here are considered among the best in the world and there are 12 varieties of grapes in the region.
  4. Grape-wine is very popular in the “Aryan valley”.

What Concerns these Dard Aryans?

I. Urbanization

  1. The tribals perceive a threat to the heritage of the community owing to modernization, migration and religious conversion.
  2. Of late, the Dard men have been migrating to other parts of the region (in search of livelihood) and marrying outside the tribe.
  3. The tribe is struggling to find a balance between modernity and traditional values.

II. Losing Identity

  1. Over the last few decades, many of them have embraced Islam or Buddhism.
  2. The community prohibits marriage with outsiders to keep the gene pool intact.

III. Geographic limitations

  1. Also, after the Kargil War, development work in this region has been restricted.
  2. Some of the areas of the Aryan valley are out of bounds for outsiders, since it borders Pakistan-occupied Kashmir.

IV. Lack of Education

  1. There are only three high schools in their villages and very limited resources for livelihood — mainly because of the harsh weather and difficult terrain.
  2. As such, they have no option but to migrate to cities for higher education and employment.

Addressing their Concerns

  1. They have demanded that the government set up a tribal hostel and declare the “Aryan valley” a heritage village to boost tourism.
  2. But the only way to sustain them is by giving them special status and helping make them self-sufficient so that they don’t have to migrate.
Tribal Development

[pib] Management of Ground Water

Note4students

Mains Paper 1: Geography| Distribution of key natural resources

From the UPSC perspective, the following things are important:

Prelims level: CGWB, NAQUIM

Mains level: Status of dams groundwater availability in India


News

Central Ground Water Board (CGWB)

  1. CGWB has been entrusted with the responsibilities of developing & disseminating technologies, monitoring national policies for the scientific and sustainable development and management of India’s ground water resources.
  2. It periodically takes up various studies which include ground water management studies, exploratory drilling programmes, monitoring ground water level and water quality through a network of ground water observation wells etc.
  3. The result collected is shared with the concerned States for taking up suitable ground water specific interventions.

National Aquifer Mapping and Management Programme (NAQUIM)

  1. The NAQUIM is an initiative of the Ministry of Water Resources for mapping and managing the entire aquifer systems in the country.
  2. It maintains the Hydrological Map of India.
  3. It aims:
  • to identify and map aquifers at the micro level,
  • to quantify the available groundwater resources, and
  • to propose plans appropriate to the scale of demand and aquifer characteristics, and institutional arrangements for participatory management.
  1. It was initiated as a part of the Ground Water Management and Regulation scheme to delineate and characterize the aquifers to develop plans for ground water management.
  2. The AQUIM project is implemented in six selected areas in different hydrogeological environs of the country as shown below:

Water Management – Institutional Reforms, Conservation Efforts, etc.

[pib] Abolition of Income-Tax Ombudsman and Indirect Tax Ombudsman

Note4students

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

From the UPSC perspective, the following things are important:

Prelims level: Office of the IT Ombudsman and its mandate

Mains level: India’s rising middle class and its impact on tax collections


News

  • The Union Cabinet chaired by PM has approved the proposal for Abolition of Institution of Income-Tax Ombudsman and Indirect Tax Ombudsman.

Who is Income Tax Ombudsman?

  1. It is an Independent body comprises of former tax officials or Indian Revenue Service Officials formed by the Government, empowered to address and settle tax payer’s grievances.
  2. The Ombudsman is governed by, and has to comply with the Income Tax Ombudsman Guidelines, 2006.
  3. At present, the Government has set-up Tax Ombudsman at 12 cities namely New Delhi, Mumbai, Chennai, Ahmedabad, Kanpur, Chandigarh, Pune, Kochi, Kolkata, Hyderabad, Bangalore and Bhopal.

Why such move?

  1. The Institution of Income-Tax Ombudsman was created in the year 2003 to deal with grievances of public related to settlement of complaints relating to Income Tax.
  2. However, the Institution of Ombudsman failed to achieve its objectives.
  3. It was observed that institution of new complaints have in turn fallen to single digits.
  4. Also, tax payers started preferring alternate methods of grievance redressal like CPGRAMS (Centralized Public Grievance Redress and Monitoring System), Aaykar Seva Kendras etc.
Tax Reforms

Unregulated deposit schemes to be banned

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:  Particulars of the Bill, Ponzi Schemes,

Mains level: The new bill seeks to protect investors from rising instances of scams


News

  • The Union Cabinet has approved the official amendments to an Act that classifies any deposit scheme not registered with the government as an offence and bans it.
  • The Banning of Unregulated Deposit Schemes Bill 2018 was introduced in Parliament on July 18, 2018 and was referred to the standing committee.

Banning of Unregulated Deposit Schemes Bill, 2018

  1. The Bill contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit scheme.
  2. The amendment bill aims to effectively tackle the menace of illicit deposit-taking activities, and prevent such schemes from duping poor and gullible people of their hard-earned savings.
  3. The principle is that the bill would make the activities an offence ex-ante rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags.
  4. It bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated scheme.

Provisions of the Bill

  1. The Bill has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
  2. The Bill provides for attachment of properties/assets by the competent authority, and subsequent realization of assets for repayment to depositors.
  3. The Bill provides for “severe punishment and heavy pecuniary fines” to act as a deterrent.
  4. The penalties could involve jail term as well as the sale of the offenders’ assets to pay back the defrauded party within set timelines.

Definition of Deposit Takers

  • Deposit Takers include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation.

Types of Offences

The Bill creates three different types of offences:

  • Running of unregulated deposit schemes,
  • Fraudulent default in regulated deposit schemes, and
  • Wrongful inducement in relation to unregulated deposit schemes.
Capital Markets: Challenges and Developments

Cabinet nod to setting up Agri-Market Infrastructure Fund

Note4students

Mains Paper 3: Agriculture| Transport and marketing of agricultural produce and issues and related constraints

From UPSC perspective, the following things are important:

Prelims level: AMIF

Mains level: Expected outcomes from the AMIF


News

  • The Cabinet Committee of Economic Affairs Chaired gave its approval for the creation of Agri-Market Infrastructure Fund (AMIF).

Agri-Market Infrastructure Fund (AMIF)

  1. AMIF  is a corpus of Rs. 2000 crore to be created with NABARD for development and up-gradation of agricultural marketing infrastructure in Gramin Agricultural Markets and Regulated Wholesale Markets.
  2. It will provide the State/UT Governments subsidized loan for their proposal for developing marketing infrastructure in 585 Agriculture Produce Market Committees (APMCs) and 10,000 Grameen Agricultural Markets (GrAMs).
  3. States may also access AMIF for innovative integrated market infrastructure projects including Hub and Spoke mode and in PPP mode.
  4. In these GrAMs, physical and basic infrastructure will be strengthened using MGNREGA and other Government Schemes.
  5. The Scheme being demand driven, its progress is subject to the demands from the States and proposals received from them.
Agricultural Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Delhi government launches Zero Fatality Corridor

Note4students

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: Zero Fatality Corridor

Mains level: Steps for curbing fatalities in road accidents in India


News

  • The Delhi state govt has launched the ‘Zero Fatality Corridor’ (ZFC) to assess the cause for crashes on the stretch in the Capital.

Zero Fatality Corridor (ZFC)

  1. ZFC is to be run in partnership with SaveLIFE Foundation, a leading road safety non-profit organization.
  2. The initiative is aimed at bringing down injuries and deaths due to road crashes.
  3. It is in line with Delhi government’s plan of action to reduce fatalities due to road crashes by 30 per cent by 2020.
  4. Through the ‘Zero Fatality Corridor’ pilot project the aim is to reduce the fatalities to near zero levels on this particular stretch.
  5. After evaluating the impact of the initiative, the model will be replicated in other parts of the city.

Why such move?

  1. As many as 1690 people were killed, and 6086 people were injured in 6515 road crashes in 2018, according to Delhi traffic police.
  2. The ZFC model of the non-profit is known for reducing road crash deaths by 30% on the Mumbai-Pune Expressway.
  3. It reduces deaths through a 360-degree intervention, road engineering, police enforcement, rapid emergency care and road-user engagement.
Road and Highway Safety – National Road Safety Policy, Good Samaritans, etc.