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Coronavirus – Economic Issues

JDY or NREGA card: What is better option for cash transfers?op-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : JAM

Mains level : Paper 3- Issues associated with JAM and options to deal with them.


JAM Trinity is one of the flagship policy of the government. In times of COVID crisis, this article highlights some limits of JAM trinity. Issues of inclusion error, exclusion error and even problem of transparency with JAM accounts are discussed. The NREGA cards instead of Jan Dhan account is suggested as the better option. Why is it so? Read to know more…

High hopes from JAM

  • The original formulation, in 2015, mentioned two possible forms of the JAM trinity: mobile banking and post office payments.
  • The second option never made much progress.
  • So, Aadhaar-enabled mobile banking became the supreme goal.
  • In January 2017, NITI Aayog CEO Amitabh Kant predicted the imminent demise of all cash-transfer paraphernalia other than mobiles.
  • These hopes reached new heights as the JAM project latched on to another flourishing narrative, universal basic income (UBI).
  • If you want to make cash transfers to everyone, what better platform can you have than Aadhaar, India’s unique biometric ID, doubling up as a permanent financial address?

Corona crisis belied the hopes from JAM

  • In the early days of the crisis, JAM was often invoked sometimes along with UBI as a possible tool of emergency relief.
  • But when the time actually came to make cash transfers to the poor, JAM turned out to be of little use.
  • The JAM had not gone beyond some fancy digital-payment systems for the privileged.
  • Poor people were still running from pillar to post to collect their meagre benefits from old-fashioned bank accounts.
  • Some also use the services of “business correspondents”, but those have little to do with JAM.
  • Sure enough, long bank queues and related hardships started to emerge, especially in rural areas where the density of banks is relatively low.
  • In a Dalberg survey conducted last month in 10 states, only 25% of poor households reported that it was “easy” to access cash benefits.

NREGA job Cards: A better option than Jan Dhan Account

  • The lead cash-relief measure in the national relief package consists of monthly transfers of ₹500 to women’s JDY accounts.
  • But is that a good idea?
  • Let’s compare women’s JDY accounts with another possible basis for cash transfers, at least in rural areas: the list of households that have a National Rural Employment Guarantee Act (NREGA) job card.
  • The numbers of accounts are roughly comparable: about 14 crore for NREGA job cards, and 12 crore or so for women’s JDY accounts in rural and semi-urban.

JDY approach fares poorly on the following 3 counts

1. Lack of transparency and clarity

  • JDY accounts are a mighty mess – the NREGA job-cards list is far more transparent and well-organised. 
  • During the frantic initial JDY wave, in 2014-15, banks opened JDY accounts en masse to meet the targets. Banking norms were not followed always.
  • Later on, a large proportion of JDY accounts – 40% in March 2017, down to 19% in January 2020– went “dormant” as customers were unable or unwilling to use them.

2. Large exclusion error

  • The cash transfers to women’s JDY accounts are likely to involve large exclusion errors.
  • According to a recent Yale study, less than half of poor adult women have a JDY account, an even lower proportion, 21%, know that they have a JDY account.
  • The NREGA job-card list is likely to have much better coverage of poor households.
  • The natural complementarity between NREGA and social security pensions covering more than four crore persons under the National Social Assistance Programme alone would further help to reduce exclusion errors.

3. Large inclusion error

  • Inclusion errors are also likely to be larger in the JDY approach.
  • Job cards are meant for rural workers, JDY accounts are for everyone.
  • National Election Studies 2019 data show that JDY beneficiaries tend to be better-off than NREGA beneficiaries. ( and still, they would get benefits i.e. inclusion error)
  • Earlier survey data suggest that the probability of having a JDY account is more or less the same for poor and non-poor households.

Comparison on reliability basis

  • There have been significant issues e.g. delayed, rejected, blocked or diverted payments with NREGA payments, often related to Aadhaar.
  • But then, numerous “direct benefit transfer” schemes –social security pensions, scholarships, maternity benefits, among others have faced similar problems, also reflected in official transaction data.
  • Both the Aadhaar Payment Bridge System(APBS) and the Aadhaar-enabled Payment System (AePS) are shot through with technical glitches.
  • Transfers to women’s JDY accounts are unlikely to be more reliable than transfers to job-card holders.

Cash in hand option

  • As far as effective payment is concerned, there is a further argument in favour of the NREGA job-cards list.
  • Unlike JDY accounts, it lends itself to the “cash-in-hand” method on-the-spot payment in cash, instead of bank payments as a possible fallback.
  • The reason is that the job-cards list is a transparent, recursive household list with village and gram panchayat identifiers, while the list of JDY accounts is an opaque list of individual bank accounts.
  • Cash-in-hand may seem like the antithesis of JAM, but this option may become important in the near future if the banking system comes under further stress.
  • There are precedents of effective use of the cash-in-hand method, notably in Odisha for pension payments, and in various states for NREGA wage payments.
  • Several states including Andhra Pradesh, Odisha and Tamil Nadu have already resorted to cash-in-hand for relief payments during the lockdown.

Consider the question, ” The need for financial inclusion is far more in times of corona crisis. Discuss opportunities and challenges with respect to policies like JAM trinity during corona pandemic. Suggest other alternatives for such transfers.”

Conclusion

There is nothing compelling about the use of women’s JDY accounts for cash relief. In fact, it is a bit of a shot in the dark. The government do well to consider other options for further relief majors, including a switch to the NREGA job-cards list in rural areas.

Coronavirus – Health and Governance Issues

Cooperative Federalism in the Time of Covid-19op-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Plan under DMA 2005

Mains level : Paper 2- Cooperative federalism amid Covid-19.


Federalism is part of Basic Structure (Doctrine) of the Constitution. The article is about the lack of cooperative federalism in some of the Central Government’s actions in its fight against the corona crisis. What are those actions? Read to know…

Opinion of political thinkers on federalism in India

  • K.C. Wheare notes, federalism traditionally signifies the independence of the Union and State governments of a country, in their own spheres.
  • The members of India’s Constituent Assembly carefully studied the Constitutions of other great federations like the US, Canada, Australia and Switzerland.
  • However, they adopted a ‘pick and choose’ policy to formulate a system suited uniquely to the Republic’s need.
  • As a result, India’s Constituent Assembly became the first-ever constituent body in the world to embrace what H. Birch and others have referred to as ‘cooperative federalism’.
  • ‘Cooperative federalism’ is administrative cooperation between the Centre and the States, and a partial dependence of the States upon payments from the Centre.
  • Accordingly, Indian constitutional law expert Granville Austin remarks that despite a strong Centre, cooperative federalism doesn’t necessarily result in weaker States.
  • He also said that the progress of the Republic rests upon active cooperation between the two.

Lack of consultation with States under DMA 2005

  • The zone classifications into ‘red’ and ‘orange’ has evoked sharp criticisms from several States.
  • The States have demanded more autonomy in making such classifications.
  • The Disaster Management Act of 2005 under which binding COVID-19 guidelines are being issued by the Centre to the States mandates consultation with the States.
  • The Act envisages the creation of a ‘National Plan’ under Section 11, as well as issuance of binding guidelines by the Centre to States under Section 6(2), in furtherance of the ‘National Plan’.
  • The ‘National Plan’ then is a broader vision document while the binding guidelines are its enforcement mechanism.
  • Now, Section 11(2) of the Act mandates State consultations before formulating a ‘National Plan’.
  • And when such binding guidelines are ultimately issued under it, they are expected to represent the views of the States.
  • However, the Centre has not formulated the ‘National Plan’, and has chosen instead to respond to COVID-19 through ad hoc binding guidelines issued to States.
  • Such guidelines thereby circumvent the legislative mandate of State consultations.
  • This selective application of the Act serves to concentrate all decision-making powers with the Centre.

Lack of funds

  • The Centre has declared that corporations donating to PM-CARES can avail CSR exemptions, but those donating towards any Chief Minister’s Relief Fund cannot.
  • This directly disincentivises donations to any Chief Minister’s Relief Fund.
  • And diverts crores in potential State revenues to PM-CARES; and makes the States largely dependent upon the Centre.
  • Further, the revenue streams of several States have dried up because of the liquor sale ban; negligible sale of petrol/diesel; no land dealings and registration of agreements.
  • States’ GST collections have also been severely affected with their dues still not disbursed by the Centre.
  • All this has made it difficult for States to defray expenses of salaries, pensions and welfare schemes.
  • As it is the States which act as first responders to the pandemic, supplying them with adequate funds becomes a pre-requisite in effectively tackling the crisis.
  • This requires the Centre to view the States as equals, and strengthen their capabilities, instead of increasing their dependence upon itself.

Consider the question-“Cooperative federalism is the key in the country’s fight against the corona pandemic. Critically examine.”

Conclusion

Keeping the spirit of cooperative federalism alive whether in consultation with the States or taking care of their finances is essential as the country is fighting the pandemic. The Centre must realise that we have the best chance of winning the war against pandemic when we are united.

Coronavirus – Health and Governance Issues

Legal aspects of using Disaster Management Act to deal with pandemicop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : DMA 2005, Residuary power of the Union legislature.

Mains level : Paper 2- Issues arising out of the use of the DMA 2005 to deal with the pandemic.


This article analyses the legal basis of application of the Disaster Management Act to deal with the pandemic by the Central Government. The Disaster Management Act had been enacted using the residuary power of the Union legislature. So, its application to deal with the pandemic gives rise to certain legal issues. Read to know more about such issues.

Two examples of why centralised approach may be counter-productive?

  • One, the Central government has classified all districts in the country as red, orange or green zones.
  • This classification was done in a bid to lift lockdown restrictions in an area-specific manner.
  • Some States/Union Territories objected to the classification of certain areas/districts as red zones on the ground that these areas are very large.
  • They pointed out that there was no need to keep economic activity on hold in an entire district when cases had been reported only from a small portion of that district.
  • Two, Kerala, probably the best-performing State in terms of its response to COVID-19, was sent a missive by the Central government to refrain from relaxing restrictions in the State.
  • The Central government did not trust the wisdom and judgment of the State government in the matter.

The federal scheme and residuary power to legislate

  • Under the federal scheme, Parliament can legislate on matters under the Union List (List I).
  • Stage legislatures can legislate on matters under the State List (List II).
  • And both Parliament and State legislatures can legislate on matters under the Concurrent List (List III).
  • The residuary power to legislate on matters that are not mentioned in either List II or List III vests with Parliament under Article 248 of the Constitution read with Entry 97 of List I.
  • Furthermore, the rule of harmonious construction dictates that the entries in the legislative lists must be interpreted harmoniously.
  • And in the event of any overlap between two or more entries, the specific subject matter contained in a particular entry must be deemed to have been excluded from another entry which may deal with a more general subject matter.
  • Finally, as per Articles 73 and 162, the executive power of the Centre and the States is co-extensive with their respective legislative powers.
  • Coextensive legislative and executive power means that the Central and State governments can only take executive actions in matters where Parliament and State legislatures, respectively, have powers to legislate.

So, which list contains Disaster Management?

  • Disaster management as a field of legislation does not find mention in either List II or List III.
  • Nor does any particular entry in List I specifically deal with this.
  • Thus, the Disaster Management Act could only have been enacted by Parliament in the exercise of its residuary powers of legislation under Article 248 read with Entry 97 of List I.

Legal problems in using Disaster Management Act for pandemic

  • The Disaster Management Act allows the Centre to issue guidelines, directions or orders to the States for mitigating the effects of any disaster.
  • The definition of ‘disaster’ under the Act is quite broad and, literally speaking, would include a pandemic too.
  • Such a reading of the Act would vest the Central government with powers to issue directions and guidelines to State governments for dealing with the pandemic in their States.
  • However, ‘public health and sanitation’ is a specific field of legislation under Entry 6 of List II.
  • This would imply that States have the exclusive right to legislate and act on matters concerning public health.
  • Thus, the Centre’s guidelines and directions to the States for dealing with the pandemic trench upon a field of legislation and executive action that is exclusively assigned to the States — public health.
  • The Supreme Court has held time and again that federalism is a basic feature of the Constitution and the States are sovereign.
  • The Disaster Management Act cannot be applied to pandemics in view of the fact that the power to legislate on public health is vested specifically and exclusively with the States.
  • Also, under Entry 29 of List III, both Parliament and State legislatures are competent to legislate on matters involving inter-State spread of contagious or infectious diseases.
  • Therefore, theoretically speaking, Parliament would be competent to pass a law that allows the Central government to issue directions to the States to prevent inter-State spread of a disease like COVID-19.
  • That law is not the Disaster Management Act which is concerned with disasters in general, and not pandemics in particular.
  • ‘Prevention of inter-State spread of contagious and infectious diseases’ being a specific legislative head provided in List III, the same must be deemed to have been excluded from Parliament’s residuary legislative powers.
  • Therefore, the Disaster Management Act, which has been enacted under Parliament’s residuary legislative powers, cannot be applied to the prevention of the inter-State spread of contagious and infectious diseases.

Role of Centre under Epidemic Diseases Act 1897

  • The Epidemic Diseases Act, 1897, has the objective of preventing “…the spread of dangerous epidemic diseases.”
  • However, under this Act, it is the State governments which have the prerogative to take appropriate measures for arresting the outbreak or spread of a contagious or infectious disease in their respective States.
  • The Central government’s powers are limited to taking measures for inspecting and detaining persons travelling out of or into the country.
  • Even if that Act were to be amended, it would not empower the Central government to issue directions to the States to contain the pandemic within the State.
  • It can only deal with the inter-State spread of the disease.

Consider the question, “Use of the Disaster Management Act to deal with the Covid-19 pandemic gave rise to certain legal issues. Examine them.”

Conclusion

Instead of resorting to the Epidemic Diseases Act which gives powers to the States, the Centre has applied the Disaster Management Act. The States are not legally bound to observe the directions/guidelines being issued by the Central government and would be well within their rights to challenge them before the apex court.


 

Foreign Policy Watch: India-Nepal

India-Nepal dispute over Kalapani RegionPriority 1

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Kalapani Region

Mains level : India-Nepal relations and the Chinese hinderance


Nepal has protested against India’s inauguration of a Himalayan link road built in a disputed territory which falls at a strategic three-way junction with Tibet and China. Kathmandu claims the highly strategic areas of Limpiyadhura and Kalapani, although Indian troops have been deployed there since the 1962 war.

Practice question for mains:

Q. The India-Nepal bilateral relations these days are increasingly seen through the lens of China factor. Examine.

Kalapani Region

  • Mapped within Uttarakhand is a 372-sq km area called Kalapani, bordering far-west Nepal and Tibet.
  • A treaty signed between Nepal and British India in 1816 determined the Makhali river, that runs through Kalapani, as the boundary between the two neighbours.
  • The Treaty of Sugauli concluded between British India and the Kingdom of Nepal in the year 1816, maps the Makhali river as the western boundary with India but different British maps showed the source of the tributary at different places which was mainly due to underdeveloped and less-defined surveying techniques used at that time.
  • However, the river has many tributaries that meet at Kalapani. For this reason, India claims that the river begins at Kalapani but Nepal says that it begins from Lipu Lekh pass, which is the source of most of its tributaries.
  • While the Nepal government and political parties have protested, India has said the new map does not revise the existing boundary with Nepal.
  • India claims that the river begins at Kalapani but Nepal says that it begins from Lipu Lekh pass, which is the source of most of its tributaries.

Legal Dimension of Issue

According to International Laws, the principles of avulsion and accretion are applicable in determining the borders when a boundary river changes course.

  • Avulsion: It is the pushing back of the shoreline by sudden, violent action of the elements, perceptible while in progress. Also it can be defined as the sudden and perceptible change in the land brought about by water, which may result in the addition or removal of land from a bank or shoreline.
  • Accretion: It is the process of growth or enlargement by a gradual buildup. It is the natural, slow and gradual deposit of soil by the water.

If the change of the river course is rapid – by avulsion – the boundary does not change. But if the river changes course gradually – that is, by accretion – the boundary changes accordingly.

Since, the Gandak change of course has been gradual, India claimed Susta as part of their territory as per international laws.

  • On several occasions, India has tried to resolve the issue through friendly and peaceful negotiations, but the Nepali leadership has always shown hesitation in resolving the issue.
  • In Nepal, the issue has become a tool for arousing strong public sentiment against India. Therefore, resolving the issue may not be in the best interest of Nepal’s domestic politics.

Significance for India

  • The Lipu Lekh pass serves strategic importance for India as a key point to monitor Chinese troop movement.
  • The link road via Lipulekh Himalayan Pass is also considered one of the shortest and most feasible trade routes between India and China.
  • The Nepalese reaction would probably have triggered in response to Chinese assertion.

An undefined boundary claimed by Nepal

  • Nepal’s western boundary with India was marked out in the Treaty of Sugauli between the East India Company and Nepal in 1816.
  • Nepali authorities claim that people living in the low-density area were included in the Census of Nepal until 58 years ago.
  • Five years ago, Nepali Foreign Minister Mahendra Bahadur Pande claimed that the late King Mahendra had “handed over the territory to India”.
  • By some accounts in Nepal, this allegedly took place in the wake of India-China War of 1962.

Treaty of Saguali

Foreign Policy Watch: India-China

Mapping: Pangong Tso LakePrelims Only


Helicopters of the Chinese Army came close to the border during the face-off with the Indian Army near Pangong Tso Lake in Eastern Ladakh last week.

Keep a watch on some facts related to the Pangong Tso Lake like nearby rivers, passes, Ramsar status etc.

Aircraft restricted near LAC

  • As per existing agreements between India and China, operation of fighter aircraft and armed helicopters is restricted to a distance from the LAC.
  • According to the Agreement on Maintenance of Peace and Tranquility along the LAC in India-China Border Area’ of 1996 combat aircraft (to include fighter, bomber, reconnaissance, military trainer, armed helicopter and other armed aircraft) shall not fly within 10 km of the LAC.

Pangong Tso Lake

  • Pangong Tso or Pangong Lake is an endorheic lake in the Himalayas situated at a height of about 4,350 m.
  • It is 134 km long and extends from India to the Tibetan Autonomous Region, China.
  • Approximately 60% of the length of the lake lies within the Tibetan Autonomous Region.
  • The lake is 5 km wide at its broadest point. All together it covers 604 sq.km.
  • During winter the lake freezes completely, despite being saline water.
  • It is not a part of the Indus river basin area and geographically a separate landlocked river basin.
  • Formerly, Pangong Tso had an outlet to Shyok River, a tributary of Indus River, but it was closed off due to natural damming.
  • The lake is in the process of being identified under the Ramsar Convention as a wetland of international importance.
  • This will be the first trans-boundary wetland in South Asia under the convention.

Back2Basics: India-China Border Dispute

The India-China borders disputes exist between three regions:

1) J&K region

  • The Aksai Chin sector which originally was a part of the state of Jammu and Kashmir is claimed by China as part of its autonomous Xinjiang region.
  • After the 1962 war, it is administered by China. It is the second-largest Indo-China border area covering over 38000 sq. km. However, it is uninhabited land.
  • While India claims the entire Aksai Chin territory as well as the Shaksgam valley (Indian Territory gifted to China by Pakistan), China contests Indian control over Daulat Beg Oldi (a tehsil in Leh south of Aksai China-it is believed to host the world’s highest airstrip).

2) Sikkim region

  • China has recognised India’s sovereignty over Sikkim and had initiated the trade at Nathu La pass.
  • However, this is the region where the Doklam standoff took place.

3) Arunachal Pradesh Region

  • The Arunachal Pradesh border that China still claims to be its own territory is the largest disputed area, covering around 90000 sq. km.
  • It was formally called North-East Frontier Agency.
  • During the 1962 war, the People’s Liberation Army occupied it but they announced a unilateral ceasefire and withdrew respecting the international boundary (Mcmahon Line).
  • However, it has continued to assert its claim over the territory.
GI(Geographical Indicator) Tags

GI tag for Sohrai Khovar painting, Telia RumalPrelims Only

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Telia Rumal, Sohrai Khovar painting

Mains level : Not Much


Jharkhand’s Sohrai Khovar painting and Telangana’s Telia Rumal were given the Geographical Indication (GI) tag by the Geographical Indications Registry.

This year, many GI tags have been allocated. A few of them to count are- Kashmir saffron, Manipur black rice, Gorakhpur terracotta, Kovilpatti kadalai mittai etc.  Check here for more.

Sohrai Khovar painting

  • The Sohrai Khovar painting is a traditional and ritualistic mural art being practised by local tribal women in the area of Hazaribagh district of Jharkhand.
  • The painting is primarily being practised only in the district of Hazaribagh. However, in recent years, for promotional purposes, it has been seen in other parts of Jharkhand.
  • It is prepared during local harvest and marriage seasons using local, naturally available soils of different colours in the area.
  • Traditionally painted on the walls of mud houses, they are now seen on other surfaces, too.
  • The style features a profusion of lines, dots, animal figures and plants, often representing religious iconography.
  • In recent years, the walls of important public places in Jharkhand, such as the Birsa Munda Airport in Ranchi, and the Hazaribagh and Tatanagar Railway Stations, among others, have been decorated with these paintings.

Telia Rumal

  • Telia Rumal cloth involves intricate handmade work with cotton loom displaying a variety of designs and motifs in three particular colours — red, black and white.
  • The Rumal can only be created using the traditional handloom process and not by any other mechanical means as otherwise, the very quality of the Rumal would be lost.
  • During the Nizam’s dynasty, Puttapaka, a small, backward village of the Telangana region of Andhra Pradesh had about 20 families engaged in handloom weaving, who were patronized by rich families and the Nizam rulers.
  • The officers working in the court of the Nizam would wear the Chituki Telia Rumal as a symbolic representation of status.
  • Telia Rumals were worn as a veil by princesses at the erstwhile court of the Nizam of Hyderabad, and as a turban cloth by Arabs in the Middle East.

Back2Basics: Geographical Indications in India

  • A Geographical Indication is used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
  • Such a name conveys an assurance of quality and distinctiveness which is essentially attributable to its origin in that defined geographical locality.
  • This tag is valid for a period of 10 years following which it can be renewed.
  • Recently the Union Minister of Commerce and Industry has launched the logo and tagline for the Geographical Indications (GI) of India.
  • The first product to get a GI tag in India was the Darjeeling tea in 2004.
  • The Geographical Indications of Goods (Registration and Protection) Act, 1999 (GI Act) is a sui generis Act for protection of GI in India.
  • India, as a member of the WTO enacted the Act to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights
  • Geographical Indications protection is granted through the TRIPS Agreement.
Food Safety Standards – FSSAI, food fortification, etc.

Spirulina Groundnut Chikki to boost immunityPrelims Only

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Spirulina Groundnut Chikki

Mains level : NA


The Mysuru-based Central Food Technological Research Institute, CFTRI has developed Spirulina groundnut Chikki that can provide micro-nutrients and boost the immunity of people during this time of the pandemic.

Beware, the Chikki so mentioned has no GI tag. What makes it significant is the Spirulina, a photosynthetic bacteria, which is suitable for human consumption.

Spirulina Groundnut Chikki

  • It is a snack that provides good micro-nutrients.
  • It has used Spirulina as well as the tasty, nourishing groundnuts to prepare Chikki that is rich in micro-nutrients such as Vitamin A, Beta Carotene and easily digestible algal proteins.
  • Other nutritious snacks of CFTRI such as Nutri mango fruit bar and cardamom flavoured water is also part of the food items supplied to the migrant labourers.
  • The mango bar is rich with carbohydrates, carotene, Vitamin C and Zinc to improve the immunity.
  • Cardamom flavoured water with traditional herbs to have immune booster qualities.

What is Spirulina?

  • Spirulina is an organism that grows in both fresh and saltwater.
  • It is a type of cyanobacteria, which is a family of single-celled microbes that are often referred to as blue-green algae.
  • It is used as a dietary supplement or whole food. It is also used as a feed supplement in the aquaculture, aquarium, and poultry industries.
  • Just like plants, cyanobacteria can produce energy from sunlight via a process called photosynthesis.
Coronavirus – Economic Issues

[pib] Atmanirbhar Bharat Abhiyan (Self-reliant India Mission)Govt. SchemesPIB

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Atmanirbhar Bharat Abhiyan

Mains level : Significance and need for such a mission


The PM has announced the Atma-nirbhar Bharat Abhiyan (or Self-reliant India Mission) and said that in the days to come the government would unveil the details of an economic package — worth Rs 20 lakh crore or 10% of India’s GDP in 2019-20 — aimed towards achieving this mission.

Try a question:

‘Doubling Farmer’s Income’ and ‘USD 5 trillion economy’  seems more like slogans today in wake of COVID pandemic. Comment on the statement with keeping in view the Atmanirbhar Bharat Abhiyan of the government.

Atmanirbhar Bharat: With a special package

  • PM has announced a special economic package and gave a clarion call for Self-reliant India.
  • The package will provide a much-needed boost towards achieving self-reliance.
  • This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10% of India’s GDP.
  • The package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, MSMEs, labourers, middle class, and industries, among others.

Five pillars of a self-reliant India

PM iterated that a self-reliant India will stand on five pillars viz.

1) Economy, which brings in quantum jump and not incremental change

2) Infrastructure, which should become the identity of India

3) System, based on 21st-century technology-driven arrangements

4) Vibrant Demography, which is our source of energy for a self-reliant India and

5) Demand, whereby the strength of our demand and supply chain should be utilized to full capacity

Is this a new package?

  • The PM did not give the details, but he specified that this calculation of Rs 20 lakh crore includes what the government has already announced and the steps taken by the RBI.
  • This means the total amount of additional money — that is over and above what the government would have spent even in the absence of a Covid crisis — will not be Rs 20 lakh crore.
  • It would be substantially less.

Why?

  • That’s because the PM has included the actions of RBI, India’s central bank, as part of the government’s “fiscal” package, even though only the government controls the fiscal policy and not the RBI (which controls the ‘monetary’ policy).
  • Government expenditure and RBI’s actions are neither the same nor can they be added in this manner.

What did the RBI provide earlier?

  • A rough estimate suggests that the RBI’s decisions have provided additional liquidity of Rs 5-6 lakh crore since the start of the Covid-19 crisis.
  • Add this to the Rs 1.7 lakh crore of the first fiscal relief package announced by the Centre on March 26. Together, the two already account for 40 per cent of the Rs 20-lakh crore package.
  • That leaves an effective amount of Rs 12 lakh crore.
  • However, if the government is including RBI’s liquidity decisions in the calculation, then the actual fresh spending by the government could be considerably lower than Rs 12 lakh crore.
  • That’s because RBI has been coming out with long term bond-buying operations (long term repo operation or LTRO, to infuse liquidity into the banking system) worth Rs 1 lakh crore at a time.
  • If for argument’s sake, RBI comes out with another LTRO of Rs 1 lakh crore, then the overall fiscal help falls by the same amount.

Why shouldn’t RBI’s package be included in the overall package?

  • That is because direct expenditure by a government — either by way of wage subsidy or direct benefit transfer or any, immediately and necessarily stimulates the economy.
  • In other words, that money necessarily reaches the people — either as someone’s salary or someone’s purchase.
  • But credit easing by the RBI — that is, making more money available to the banks so that they can lend to the broader economy — is not like government expenditure.
  • That’s because, especially in times of crisis, banks may take that money from RBI and elsewhere and, instead of lending it, park it back with the RBI.

Back2Basics: Long Term Repo Operations (LTRO)

  • The LTRO is a tool under which the RBI provides 1-3 year money to banks at the prevailing repo rate, accepting government securities with matching or higher tenure as the collateral.
  • Funds through LTRO are provided at the repo rate.
  • But usually, loans with higher maturity period (here like 1 year and 3 years) will have a higher interest rate compared to short term (repo) loans.
  • According to the RBI, the LTRO scheme will be in addition to the existing Liquidity Adjustment Facility (LAF) and the Marginal Standing Facility (MSF) operations.
  • The LAF and MSF are the two sets of liquidity operations by the RBI with the LAF having a number of tools like repo, reverse repo, term repo etc.

What are Repo and Reverse Repo rates?

  • The repo rate is the rate at which the RBI lends money to the banking system (or banks) for short durations.
  • The reverse repo rate is the rate at which banks can park their money with the RBI.
  • With both kinds of the repo, which is short for repurchase agreement, transactions happen via bonds — one party sells bonds to the other with the promise to buy them back (or repurchase them) at a later specified date.
  • In a growing economy, commercial banks need funds to lend to businesses.
  • One source of funds for such lending is the money they receive from common people who maintain savings deposits with the banks. Repo is another option.
Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

[pib] CHAMPIONS Portal for Indian MSMEsPIB

Note4Students

From UPSC perspective, the following things are important :

Prelims level : CHAMPIONS Portal

Mains level : Not Much


In a major initiative, Union Ministry of MSME has launched CHAMPIONS portal for assisting Indian MSMEs march into the big league as National and Global Champions.

MSME sector has been hit badly by COVID. Initiatives like CHAMPIONS portal are crucial for this sector.

CHAMPIONS Portal

  • ‘CHAMPIONS’ is a technology-driven Control Room-Cum-Management Information System.
  • The CHAMPIONS is an acronym for Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength
  • As the name suggests, the portal is basically for making the smaller units big by solving their grievances, encouraging, supporting, helping and handholding.
  • It is a technology-packed control room-cum-management information system.

Three basic objectives of the CHAMPIONS

1) How to help the MSMEs in this difficult situation in terms of finance, raw materials, labour, permissions, etc.

2) How to help them capture new opportunities like manufacturing of medical accessories and products like PPEs, masks, etc.

3) How to identify the sparks, i.e., the bright MSMEs who can not only withstand but can also become national and international champions.

Technology imbibed in the portal

  • In addition to ICT tools including telephone, internet and video conference, the system is enabled by Artificial Intelligence, Data Analytics and Machine Learning.
  • It is also fully integrated on a real-time basis with GOI’s main grievances portal CPGRAMS and MSME Ministry’s own other web-based mechanisms.
  • The entire ICT architecture is created in house with the help of NIC in no cost. Similarly, the physical infrastructure is created in one of the ministry’s dumping rooms in record time.

 A hub and spoke model of network

  • As part of the system, a network of control rooms is created in a Hub & Spoke Model.
  • The Hub is situated in New Delhi in the Secretary MSME’s office.
  • The spokes will be in the States in various offices and institutions of Ministry.
  • As of now, 66 state-level control rooms are created as part of the system.