February 2019
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Banking Sector Reforms

[op-ed snap] Why India needs to set up a public credit registryop-ed snapPriority 1


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 Public credit registry (PCR).

Mains level:  Issues and challenges in the establishment of a public credit registry (PCR) and benefits arising from the same.



In its most recent policy statement, the monetary policy committee of the Reserve Bank of India (RBI) reduced the repurchase rate from 6.5% to 6.25%, mainly on account of low headline inflation and threats to domestic growth from global trade and geopolitical tensions.

Observations regarding current economic situation

  • One, the present level of growth owes itself primarily to public spending in infrastructure. Both private consumption and investment remain bleak.
  • Second, even though bank credit and overall financial flows remain robust, they are not broad-based. In other words, credit flows are focused on a few large enterprises even as a significant proportion of individuals and businesses remains out of the credit market.
  • Gross bank credit to micro and small enterprises reduced by 0.9% year-on-year in December. The micro, small and medium enterprises (MSME) sector employs approximately 111 million people in 63 million units across the country, contributing 31.6% to gross value added and 49.86% to the country’s exports.

Challenges in Reviving Growth

  • In order to revive private investment and consumption, there is a need to ensure greater credit disbursement to MSMEs.
  • But credit institutions face unique challenges. One, the credit market is characterized by information asymmetry, a situation where one party possesses more information about the transaction than others.
  • Borrowers have disproportionately more information about their financial situation and ability to repay the loan than the lenders.
  • There is also the problem of adverse selection, where safe borrowers are priced out of the credit market owing to their lack of credit history.
  • These market failures have partly been responsible for the inefficient allocation of credit in the economy, resulting in a rise in bad loans and sluggish economic growth.

Problems With current credit information system

  • At present, the credit information market in India, though mature, is highly fragmented.
    • Within the central bank, for instance, the Central Repository of Information on Large Credits (CRILC) provides timely information on credit deterioration of large loan accounts—those greater than 5 crore.
    • CRILC played a crucial role in the asset-quality review process initiated by RBI in 2015, which helped identify significant divergences in bad loans recognized by several commercial banks in their annual reports.
    • There are also four private credit information companies, which offer value-added services such as analytics and scoring to lenders and borrowers.
    • But these lack full and timely coverage, despite RBI mandating all its regulated entities to submit credit information to them.

Benefits of Public Credit Registry in reviving  growth

  •  A public credit registry (PCR), which would act as a central repository of information on credit data of individuals and businesses.
  • A public credit registry wouldn’t be constrained by any minimum threshold in loan requirement and would also collate comprehensive information—not just on bank credit, but also loans from non-banking financial companies, debentures, bonds, external commercial borrowings, utility payments and so forth—to provide a holistic picture of the borrower’s credit history.
  • Inclusion of ancillary information such as overdue utility payments, or overdue tax payments’ data from tax authorities, would help reduce the due diligence costs of lenders and foster financial inclusion by bringing into the fold all those who were previously left out of the credit market.
  • An added benefit would be the disintegration of information monopoly of some lenders.
  • A PCR will enable sharing of credit information mandated by law, fostering transparency and encouraging competition.
  • It will also enable efficient price discovery as the public availability of comprehensive credit information of the borrower will help lenders distinguish good ones from the bad.
  • The information architecture of the PCR must be consent-based, in compliance with the data protection laws of the country to prevent data abuse.

Way Forward

  • The Insolvency and Bankruptcy Code, though far from perfect, has started the process of unlocking the dead capital of bankrupt firms.
  • These funds will then flow back into the economy through credit.
  • The next logical step now is the establishment of a PCR.
  • This will not only ensure higher disbursement of credit to the MSME sector, thereby boosting employment and growth, but also help contain non-performing assets as lenders get access to better quality of information for their credit decisions.



Minority Issues – SC, ST, Dalits, OBC, Reservations, etc.

[op-ed snap] Without land or recourseop-ed snap


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: Various Forest Rights Acts and their provisions

Mains level: Supreme Court Order on  Eviction of forest dwellers and it’s constitutional validity



Supreme court has ordered the eviction of lakhs of people whose claims as forest dwellers have been rejected under the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, or FRA.

Ramifications of such decision

  • That this order negates the claims of citizens under special protection of the Constitution, viz. the Scheduled Tribes and other vulnerable communities already pushed by gross governmental neglect precariously to the edge, is another matter altogether.
  • The question centres on the responsibility of the Supreme Court in upholding constitutional claims and equal citizenship.

The background

  • The order in question was issued in the case of Wildlife First & Ors v. Ministry of Forest and Environment & Ors.
  • The question before the court as stated in the order of 2016 when the matter was last heard related to “the constitutional validity of the [FRA] and also the questions pertaining to the preservation of forests in the context of the above-mentioned Act.”
  • The details regarding claims made under the FRA that were placed before the court by the petitioner in 2016 showed that of the 44 lakh claims filed before appropriate authorities in the different States, 20.5 lakh claims (46.5%) were rejected.
  • Obviously, a claim in the context of the above-mentioned Act is based on an assertion that a claimant has been in possession of a certain parcel of land located in the forest areas.”
  • A claim is made either for individual or community rights by the people/communities covered by the FRA. This is a plain reading of the Act, which is unambiguous on this score.

New Order

  • In the present order of February 2019, the Supreme Court specifically directs governments in 21 States by name to carry out evictions of rejected claimants without further delay and report on or before July 12.

Reasons Behind rejecting claims

  • According to the 2014 report of the High-Level Committee on Socio-Economic, Health and Educational Status of Tribal Communities in India, constituted by the Government of India (Xaxa Committee), 60% of the forest area in the country is in tribal areas — protected by Article 19(5) and Schedules V and VI of the Constitution.
  • Xaxa Committee observed that “claims are being rejected without assigning reasons, or based on wrong interpretation of the ‘OTFD’ definition and the ‘dependence’ clause
    • Xaxa Committee observed that “claims are being rejected without assigning reasons, or based on wrong interpretation of the ‘OTFD’ definition and the ‘dependence’ clause,
    • because the land is wrongly considered as ‘not forest land’
    • only forest offence receipts are considered as adequate evidence.
    • The rejections are not being communicated to the claimants, and their right to appeal is not being explained to them nor its exercise facilitated.

Against The constitutional safeguards

  • The presence of Article 19(5)  in the Fundamental Rights, which specifically enjoins the state to make laws “for the protection of the interests of any Scheduled Tribe”, is vital.
  • Supreme Court ordered the eviction in complete disregard of this core and express fundamental right protection to Adivasis (as distinct from legal/statutory protection), which protects them from a range of state and non-state intrusions in Scheduled Areas as well as from the perennial threat of eviction from their homelands.


Supreme Court ordered the eviction in complete disregard of this core and express fundamental right protection to Adivasis (as distinct from legal/statutory protection), which protects them from a range of state and non-state intrusions in Scheduled Areas as well as from the perennial threat of eviction from their homelands


Women Safety Issues – Marital Rape, Domestic Violence, Swadhar, Nirbhaya Fund, etc.

Study blames Indian inheritance law reforms for spike in female foeticideIOCR


Mains Paper 1: Social Issues | Population & associated issues

From UPSC perspective, the following things are important:

Prelims level: Not Much

Mains level: Impact of legislative reforms on sex-ratio in India


  • India’s discriminatory and anti-women inheritance laws appear to have failed to mitigate society’s long-held preference for sons, according to a new study.
  • The findings are supported by the Economic Survey 2017-18, which found an estimated 63 million women–roughly the population of the UK is ‘missing’ in India.

About the Study

  1. The study was conducted by researchers at King’s College University, New York University and the University of Essex, and published in the Journal of Development Economics.
  2. It used data from three rounds of the National Family Health Survey (1991-92, 1998-9 and 2005-6) and the Rural Economic and Demographic Survey (REDS) 2006.

Son-biased fertility stopping behaviour

  1. Instead of change of law between 1970 to 1990 has inadvertently led to increased female foeticide and higher female infant-mortality rates, finds the 2018 study.
  2. It analysed that families desires for a second child if the first child was a girl.
  3. The study finds that girls born after legal reforms were 2-3 % more likely to die before reaching their first birthday, and 9 % more likely to have a younger sibling if the firstborn child was a girl.
  4. The researchers studied families living in five “early-reformer” states-Kerala, AP, TN, Maharashtra and Karnataka- which amended the Hindu Succession Act, 1956.
  5. These states allowed equal inheritance rights for women and men, at different dates between 1970 and 1990.

Hindu Succession Act, 1956

  1. Under the Hindu Succession Act, 1956, only sons had a direct right to ancestral property, excluding daughters from inheritance claims where the father did not leave a will.
  2. From the 1970s onwards, changes in inheritance legislation sought to empower women by strengthening their financial and social position and reducing dependence on male relatives.
  3. The traditional preference for sons was also supposed to lessen, because daughters, backed by possession of the family home, would be able to offer parents security in old age.
  4. Equally, this was expected to eradicate the dowry system, a key contributing factor to the perception of a daughter as a financial burden.

Son-preference entrenched, women remain dispossessed

  1. Instead, the reforms appear to have had “unintended” effects leading to the “elimination of girls”, as social norms that organise family structures and alliances have not kept pace with changes to the law, the study finds.
  2. Awarding inheritance rights to women makes parents more averse to having a daughter rather than a son,” the study says.
  3. This is because families fear that the cost of having a girl increases because property inherited by women risks falling into the control of her in-laws.

Why women remain dispossessed?

  1. Changes to inheritance law are therefore not likely to improve women’s income, since it’s unlikely the woman would get to control that new asset -which has now been acquired by her marital family.
  2. There also remains a strong incentive for parents to continue rewarding a son who works on and develops a family’s land, thus contributing to the family’s “wealth creation” and security for both parties later in life.
  3. Parents perceive the risk of upsetting a son by dispossessing him of the entire property as too high, one that could impact on the quality of their future care.
  4. Parents would want to avoid splitting up the property, making it less productive, since the only way of sharing between siblings is by selling the property and distributing the proceeds.

Contemporary trends

  1. The proportion of women inheriting property “did not increase significantly following the reform,” the study says.
  2. Although laws now allow women to make legal claims to property, very few make such a move, which is perceived as anti-social and rebellious.
  3. The family is a close knit-system, girls don’t want to go against parents and brothers and fight for property if they are denied it.
  4. The entire dowry system says that the daughters have already been given a share of the money, so they’re not entitled to the property.

Status Quo on Son Preference

  1. Up to 77% of Indian parents expect to live with their sons in old age, following a ‘Patrilocal’ system where sons remain in the family home after marriage while daughters leave to join their in-laws.
  2. As per this system, by remaining in and working on the ancestral land, plus caring for parents in old age, the son is usually ‘rewarded’ by inheriting the entire property after the parents’ death.
  3. Legal reforms mandating that parents must now share equal portions of the ancestral property with both sons and daughters appear to have not changed this dynamic.
  4. Son preference remains the status quo, suggesting that patriarchal traditions exert a stronger force on parents than legislation correcting historical gender biases.

Way Forward

  1. We need a multi-prong effort focused on empowerment, education and targeted social welfare schemes that work at various levels in society for adult women.
  2. Though the legislative reform is perceived as a property issue, it’s not really — there’s a deeply ingrained internalised bias in favour of the male child which needs to be addressed.
Food Processing Industry: Issues and Developments

Report flags growing threat of monoculture in crop productionIOCR


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: FAO report on Monoculture

Mains level: Monoculture: utility and impact on ecosystem


  • The Food and Agriculture Organization (FAO) has flagged the growing practice of monoculture —cultivation of a single crop at a given area in food production around the world.

FAO Report

  1. FAO published its latest report The State of the World’s Biodiversity for Food and Agriculture 
  2. Of more than 6,000 plant species cultivated for food production, fewer than 200 contribute significantly to food production globally, regionally or nationally,according to FAO’s .
  3. Only 9 plant species account for almost two-thirds of total crop production.
  4. These are using large quantities of external inputs such as pesticides, mineral fertilizers and fossil fuels,” the report said.

The report lists drivers of change affecting biodiversity for food and agriculture, including:

  • Population growth and urbanization
  • Over-exploitation and over-harvesting
  • Changes in land and water use and management
  • Pests, diseases and invasive alien species
  • Climate change
  • Pollution and external inputs
  • Natural disasters
  • Markets, trade and the private sector

Various Factors

  1. The first factor contributor majorly towards monoculture as people move to cities they tend to depend more on purchased foods, citing the example of Ecuador.
  2. They often also tend to lose ties with rural areas and rural foods, and increasingly opt for processed foods rather than fresh foods.
  3. This pressures producers to continuously grow or keep only a limited range of species, breeds and varieties of crops, livestock, trees, fish, etc.
  4. Individual holdings as well as wider productive landscapes become more homogeneous in terms of their genetics and physical structure, the report added.

Impact of Mono Cropping

  1. Such changes often affect the resilience of production systems and their role in biodiversity.
  2. Private food standards adopted by supermarkets and consumers have pushed farmers towards particular varieties and management procedures.
  3. International markets particularly be restrictive for market entry effectively debar the entry into the market of minor crops from developing countries.
  4. The emphasis on meat-based diets and the use of a narrow range of major cereals (maize, wheat and rice) is growing.
  5. The report predicts that the demand for standardised foods can reduce the diversity of crops and animals.

The diverse the better

  1. If a single variety is widely grown, a pest or disease to which it lacks resistance can lead to a dramatic fall in production.
  2. Diversifying crop cultivation, on the other hand, reduces risk of economic shocks.
  3. Integrating intercrops, hedgerows or cover crops, particularly legumes, into a system can reduce drought stress by helping to conserve water in the soil profile and help to replenish depleted soil fertility.
  4. Also crop diversification including rotation and intercropping and the use of diverse forage plants in pastureland, can reduce pest damage and weed invasions.
  5. The growing exploitation of land and water sources was eating in to integrated aquaculture, which in turn was pushing farmers towards monoculture.

The need of the hour

  • New supply systems
  • Improved public-private partnerships.
Microfinance Story of India

Labour Bureau files MUDRA job reportDOMR


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: PMMY

Mains level: Problem of Unemployment


  • The Labour Bureau has completed its survey on employment generated by the MUDRA loan scheme, giving the Centre a potential data tool to combat other reports showing a dismal scenario on jobs.

About MUDRA Scheme

  1. The Pradhan Mantri Mudra Yojana was introduced in April 2015 as an effort to extend affordable credit to micro and small enterprises.
  2. Loans up to Rs. 10 lakh are extended to these non-corporate, non-farm enterprises by the Micro Units Development and Refinance Agency (MUDRA) through last-mile financial institutions.
  3. So far, 15.56 crore loans worth a total of Rs. 7.23 lakh crore have been disbursed.
  4. In December 2017, faced with mounting criticism on the failure to create job opportunities, the Labour Ministry had asked the Labour Bureau to initiate the survey on jobs created through the MUDRA scheme.

NSSO survey

  1. The NSSO’s findings showed that unemployment hit a 45-year high of 6.1% in 2017-18.
  2. Central government ministers and officials have already attempted to use the MUDRA scheme’s performance to combat criticism based on the leaked NSSO job survey report.
  3. Some economists have advised caution in the interpretation of MUDRA data, especially as it relates to jobs.

Loan disbursal doesn’t ensure Job

  1. Every new loan certainly doesn’t imply creation of a new job.
  2. It is improbable that these loans are being given to those who were formerly unemployed.
  3. They are more likely being given to people who are moving to self employment from other jobs resulting in no new net job creation.
  4. Given that the average size of the loan disbursed under MUDRA is quite small, it is unlikely that the loan seekers are providing a job to anyone other than themselves.
Electoral Reforms In India

Indelible ink’s new challenger: invisible inkPrelims Only


From UPSC perspective, the following things are important:

Prelims level: Indelible and Invisible ink- Chemical composition

Mains level: Not Much


  • The Delhi-based National Physical Laboratory (NPL), the creator of indelible ink, has a new concern that, when applied on the finger, it doesn’t leave a trace.
  • It merely glows a bright orange when a low-intensity beam of ultraviolet light is shone on it.

Indelible Ink in India

  1. The ink was first used during India’s third General Elections in 1962. Indelible ink has been used in every General Election since
  2. At the time, the country’s election commission was having a tough time dealing with identity theft, as they soon discovered that there were duplicate or fake votes.

Chemical Composition

  1. Indelible ink is made of a chemical compound called silver nitrate.
  2. When applied to the skin and exposed to ultraviolet light, it leaves a mark that is almost impossible to wash off.
  3. The stain is so strong, in fact, it is only removed when the external skin cells are replaced
  4. When put on the skin, silver nitrate reacts with the salt present on it to form silver chloride.
  5. Silver chloride is not soluble in water, and clings to the skin. It cannot be washed off with soap and water.

Issues with it

  1. The indelible ink was formulated as a deterrent against voting twice.
  2. But strangely enough, voters in some countries found the stained finger rather unseemly.
  3. In India, we are proud to display our voter’s ink, but apparently in some countries people don’t want to display such a mark.

Invisible Ink

  1. The NPL prepared the ‘invisible ink’ as part of a pilot project mooted by the Mysore Paints and Varnish Ltd. (MVPL)
  2. It is a transparent liquid as an organic-inorganic mixture that was biodegradable and could be washed off in 48 hours.
  3. It works on the well-known principle of fluorescence — certain materials emit a characteristic glow when exposed to ultraviolet light.
  4. The NPL ink, however, glows only when exposed to a narrow band of frequencies of ultraviolet (UV) light.
  5. The NPL’s invisible ink experiment is linked to a larger project of creating security inks that could be used to make bank notes and documents, such as passports, more secure.
Minority Issues – SC, ST, Dalits, OBC, Reservations, etc.

SC eviction order likely to impact 1.89 mn forest familiesPriority 1


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:  Forest Rights Act (FRA)

Mains level: Issue over forest dwelling rights


SC orders Expulsion

  • The Supreme Court has ordered time-bound expulsion of all those families whose claims under the Forest Rights Act had been rejected by the authorities.
  • The country-wide data on 1.89 million households comes from the November 2018 report compiled by the Union tribal affairs ministry.
  • This is the total number of claims to forest lands that have been rejected under the Forest Rights Act across all 35 states and union territories.

Problems of OTFDs

  1. One of the major limitations of the FRA is the differentiated eligibility of ST and Other Traditional Forest Dwellers (OTFDs) claimants.
  2. This is compounded by the ambiguity in the wording of the Act that has disadvantaged the latter severely.
  3. OTFDs are required to prove continuous residence or dependence in the areas being claimed for three generations (75 years).
  4. This dates back to a period when most of these areas were under princely states or zamindars, with no survey or land demarcation, and no government records.
  5. Thus, these equally deserving communities are unable to produce documentary evidence to support their claims.

Explained: Forest Rights Act (FRA)

  1. The legislation was passed in December 2006 by the UPA govt.
  2. It concerns the rights of forest-dwelling communities to land and other resources, denied to them over decades as a result of the continuance of colonial forest laws in India.
  3. The Act grants legal recognition to the rights of traditional forest dwelling communities, partially correcting the injustice caused by the colonial forest laws.
  4. Eligibility to get rights under the Act is confined to those who “primarily reside in forests” and who depend on forests and forest land for a livelihood.
  5. Further, either the claimant must be a member of the Scheduled Tribes scheduled in that area or must have been residing in the forest for 75 years.

Various rights entitled

  1. Title Rights – Ownership to land that is cultivated by tribals or forest dwellers subject to a maximum of 4 hectares; ownership is only for land that is actually being cultivated by the concerned family, meaning that no new lands are granted.
  2. Use Rights – To minor forest produce (also including ownership), to grazing areas, to pastoralist routes, etc.
  3. Relief and Development Rights – To rehabilitation in case of illegal eviction or forced displacement; and to basic amenities, subject to restrictions for forest protection.
  4. Forest Management Rights – To protect forests and wildlife.

Agencies Involved

  1. The Act provides that the gram sabha, or village assembly, will initially pass a resolution recommending whose rights to which resources should be recognised.
  2. This resolution is then screened and approved at the level of the sub-division (or taluka) and subsequently at the district level.
  3. The screening committees consist of three government officials (Forest, Revenue and Tribal Welfare departments) and three elected members of the local body at that level. These committees also hear appeals.