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September 2020

Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

Coordinated strategy between government and RBI


From UPSC perspective, the following things are important :

Prelims level : Monitory policy and fiscal policy

Mains level : Paper 3- Monetary and fiscal response.

The article analyses the relation between the response of fiscal authority and monetary authority to get the maximum payoff in the normal circumstance. But the pandemic would require different approach.

Coordination between monetary and fiscal authority in India

  • Coordination between monetary and fiscal authorities has been a thorny issue globally in recent years.
  • If there is perfect coordination between the monetary and fiscal policy then there should be statistically significant negative correlation between the two. 
  • In the Indian context, for the 30-year period till FY2020, relation between the change in the consolidated fiscal deficit and the change in the growth rate of broad money reveals no coordination, substantiating the dominance of fiscal over monetary policy.
  •  Non-coordination between the two in India is also constrained by several policy targets and fewer instruments.

Optimal combination of monetary and fiscal strategy

  • Both the government and the RBI have two options between them — either a contraction or an expansion.
  • Thus, we effectively have four policy options, and each of the options will have a particular benefit.
  • Our endeavour is to find out which policy option can result in a Nash Equilibrium.
  • A Nash equilibrium occurs when neither the government nor the RBI can increase its benefit by unilaterally changing its action.
  • The payoff scenarios are hypothesised as benefits accruing to the government and the RBI separately when they are deciding on either of the policy options: Contraction or expansion.
  •  The government favour an expansionary policy and gets maximum payoffs from a fiscal expansion, either with monetary expansion or contraction.
  • The monetary authority ideally wants to contract the economy to fight inflation and gets maximum payoffs from a monetary contraction.

So, what is optimal combination of fiscal and monetary strategy

  •  If the RBI opts for monetary expansion, the government also opts for expansion as the payoff is higher.
  • But this will compel the RBI to then opt for contraction, since that gives it a higher payoff.
  • Knowing this, the government’s best strategy will be then an expansion — so the outcome will always be a fiscal expansion with a simultaneous monetary contraction.
  •  This is the only Nash equilibrium for this game.

Responding to the pandemic

  • The current pandemic is resulting in behavioural changes of individuals in terms of risk-taking.
  • In the Indian context too, there are behavioural changes in terms of risk-taking.
  • Many of the current companies were also born during the financial crisis, like Uber (2009), Microsoft (1975), Disney (1923), General Motors (1908) and General Electric (1890).
  • Echoing such “procedural rationality” in the current unprecedented circumstances, we thus believe fiscal expansion and monetary expansion is the desirable outcome.


The RBI has been largely successful in communicating to the market about its intentions and we now expect the government to manage expectations with coordinated communication and leave matters of financing the fiscal deficit, through measures like monetisation, to the RBI.



Simply put, it is a situation where no player can increase his payoff by deviating alone (from the situation). That is,it is a situation where both players are involved in mutual best replies.

Foreign Policy Watch: India-United States

Finding alternative to non-alignment


From UPSC perspective, the following things are important :

Prelims level : NAM

Mains level : Paper 2- Finding alternative to non-alignment in India's foreign policy

The article analyses role of non-alignment in India’s foreign policy and India’s struggle to find the alternative to the non-alignment.


  • Non-alignment was a policy fashioned during the Cold War, to retain the autonomy of policy between two politico-military blocs.
  • The Non-Aligned Movement (NAM) provided a platform for newly independent developing nations to join together to protect this autonomy.
  • NAM campaigned for de-colonisation, universal nuclear disarmament and against apartheid.
  • After the end of the Cold War, the NAM countries were able to diversify their network of relationships across the erstwhile east-west divide.

Non-alignment and India’s foreign policy in the present context

  • For a few years now, non-alignment has not been projected by our policymakers as a tenet of India’s foreign policy.
  • India has not yet found a universally accepted alternative to the non-alignment yet.
  • “Strategic autonomy” as an alternative soon acquired a connotation similar to non-alignment, with an anti-U.S. tint.
  •  Multi-alignment has not found universal favour, since it may convey the impression of opportunism, whereas we seek strategic convergences.
  • Seeking issue-based partnerships or coalitions is a description that has not stuck.
  • “Advancing prosperity and influence” was a description External Affairs minister settled for, to describe the aspirations that our network of international partnerships seeks to further.

Role of geography and politics

  • Two major imperatives flow from India’s geography-1) economic and security interests in the Indo-Pacific space. 2) the strategic importance of the continental landmass to its north and west.
  • The Indo-Pacific has inspired the Act East policy of bilateral and multilateral engagements in Southeast Asia and East Asia and the Pacific.
  • Shared India-U.S. interests in dealing with the challenge from China in the maritime domain have been a strategic underpinning of the bilateral partnership since the early 2000s.

Issues in India’s engagement with the U.S.

  • In the immediate-term, Indian and U.S. perspectives are less convergent in India’s continental neighbourhood.
  • Connectivity and cooperation with Afghanistan and Central Asia need engagement with Iran and Russia, as well as with the Russia-China dynamics in the region.
  • Russia extends to the Eurasian landmass bordering India’s near and extended neighbourhood.
  • A close Russia-China partnership should move India to broad-base relations with Russia.
  • A strong stake in relations with India could reinforce Russia’s reluctance to be a junior partner of China.
  • As the U.S. confronts the challenge to its dominance from China, classical balance of power considerations would dictate accommodation with Russia.
  •  U.S. should see ties with India as a joint venture not an alliance in which they could pursue shared objectives to mutual benefit and accept that differences of perspectives will have to be addressed.
  • This template could have wider applicability for bilateral relations in today’s world order, which former could be described as militarily unipolar, economically multipolar and politically confused. 
  • The U.S. could acknowledge that India’s development of trade routes through Iran which could provide it route to Afghanistan and Central Asia, bypassing Pakistan and Russia, respectively.

Consider the question “India has not been able to find an alternative to NAM which has been described as the basic tenet of India’s foreign policy. Discuss.”


India should find the alternative to the non-alignment which accommodate its interest in relations with the U.S. at the same time allow it “strategic autonomy”.

Electoral Reforms In India

Making the local governance strong


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Electoral reforms and the importance of strong local governments.

The article analyses the issues faced by democracy in India and suggests the way out in the form of strong local governments.

Issues being faced by Indian democracy

1. Issue of use of money power

  • Around the world, electoral democracies face the issues of funding political parties and elections.
  • Money is required to win elections legitimately, even when people are not bribed to vote, which is illegitimate.
  • Communications with citizens can be very expensive.
  • Advertisements have to be paid for as well as teams of professionals for managing social media.
  • The race to raise more money for legitimate electioneering purposes can corrupt the process of funding parties and elections.
  • Solutions are not easy because the right to free speech cannot be denied.

2.Issues with deliberations by the representatives

  • Debates within India’s Parliament hardly inspire citizens’ confidence in their representatives’ ability to govern the country.
  • The problem in electoral democracies is also in the conduct of their deliberations when they come together.
  • This problem is not due to the quality of the individuals, it is inherent in the design of the process for electing representatives.
  • Representatives of the people must be chosen by smaller electorates within geographical constituencies.
  • But when they meet together in the national chamber, they are expected to govern the whole country.
  • They must shed the interest of their constituency and consider what will be best for the whole country.
  • Constituency favouring leads to challenges for equitable solutions for sharing of river waters, and to railway stations.
  • Electing good representatives to Assemblies is not enough to ensure good decisions will be made.

3.Role of political parties: Lack of inner democracies

  • Function of parties: Political parties in electoral democracies provide a solution to the problem of creating an alignment of views among representatives from hundreds of constituencies around the country.
  • A party’s point of view on fundamental matters can unite many.
  •  However, when there are too many parties and too many contradictory points of view to be accommodated within a coalition, governance can break down.
  • Therefore, political parties are not evil.
  • However, when political parties are not internally democratic, they become a source to amass power and wealth, and democratic nations suffer.

So, should we adopt direct form of democracy

  • For the reason stated above, it has become very difficult in representative democracies to arrive at good and fair decisions for the governance of a large state or country.
  • New Internet technologies make adoption of direct form of democracy possible.
  • But, if all voters have not understood what is at stake, they cannot decide well this is what happened in hasty Brexit referendum.

Way Forward

1.Need for the strong local governance

  • Complex issues, where many interests collide, must be resolved by reason, not settled by the numbers.
  •  Hence there is no alternative to good local governance, wherein citizens manage their local affairs democratically.
  • One-size solutions devised by experts at the centre cannot fit all.
  • Local systems solutions are essential to solve global systemic problems of environmental sustainability and inclusive growth.

2.Funding and Intra-Party Democracy related reforms

  • Electoral funding must be cleaned up, and democracy within political parties improved to make representative democracy work better.
  • This will require big changes to entrenched systems.
  • Citizens must appreciate that they have to be the source of solutions, and not become only the source of problems.
  • Citizens must learn to listen to each other’s perspectives in their villages and in their urban neighbourhoods.

What are the challenges the electoral process in India faces? Suggest the solution to the issues democracy in India faces.


Since India’s Independence 73 years ago when the power of government was transferred from a centre in London to a centre in Delhi, strong local governance remains the unfinished agenda to make India’s democracy strong and deep.

Water Management – Institutional Reforms, Conservation Efforts, etc.

Green-Blue Infrastructure Policy


From UPSC perspective, the following things are important :

Prelims level : Green-Blue Infrastructure

Mains level : Urban water resources management

The Delhi Development Authority (DDA) is holding public consultations for the preparation of the Master Plan for Delhi 2041 with special focus on water bodies and the land.

Try this question:      

Q.Urban water resources management is an uphill task for Indian cities. Discuss.

What is Green-Blue infrastructure?

  • ‘Blue’ infrastructure refers to water bodies like rivers, canals, ponds, wetlands, floodplains, and water treatment facilities; while ‘Green’ stands for trees, lawns, hedgerows, parks, fields, and forests.
  • The concept refers to urban planning where water bodies and land are interdependent, and grow with the help of each other while offering environmental and social benefits.

How does DDA plan to go ahead with it?

  • In the first stage, the DDA plans to deal with the multiplicity of agencies, which because of the special nature of the state, has plagued it for several years.
  • DDA wants the first map out the issues of jurisdiction, work being done by different agencies on drains and the areas around them.
  • Thereafter, a comprehensive policy will be drawn up, which would then act as the common direction for all agencies.

Why such a policy?

  • Delhi has around 50 big drains (blue areas) managed by different agencies, and due to their poor condition and encroachment, the land around (green areas) has also been affected.
  • DDA, along with other agencies, will integrate them and remove all sources of pollution by checking the outfall of untreated wastewater as well as the removal of existing pollutants.
  • A mix of mechanized and natural systems may be adopted, and dumping of solid wastes in any of these sites will be strictly prohibited by local bodies, through the imposition of penalties.

Major features

  • The land around these drains, carrying stormwater, will be declared as special buffer projects.
  • The network of connected green spaces would be developed in the form of green mobility circuits of pedestrian and cycling paths.
  • It will be developed along the drains to serve functional as well as leisure trips.

Challenges ahead

  • The biggest challenge is the multiplicity of agencies.
  • Secondly, cleaning of water bodies and drains has been a challenge for agencies in Delhi for years now.

Poverty Eradication – Definition, Debates, etc.

[pib] Global Indices to Drive Reforms and Growth (GIRG) Exercise


From UPSC perspective, the following things are important :

Prelims level : MPI and various other dimensions of poverty

Mains level : Not Much

NITI Aayog as the nodal agency has been assigned the responsibility of leveraging the monitoring mechanism of the Global Multidimensional Poverty Index (MPI) to drive reforms.

Try this PYQ:

Q.In a given year in India, official poverty lines are higher in some states than in others because (CSP 2019):

(a) Poverty rates vary from State to State

(b) Price levels vary from State to State

(c) Gross State Product varies from State to State

(d) Quality of public distribution varies from State to State

GIRG Exercise

  • Global MPI is part of GoI’s decision to monitor the performance of the country in 29 select Global Indices.
  • The objective of the exercise is to fulfil the need to measure and monitor India’s performance on various important social and economic parameters.
  • It would enable the utilization of these Indices as tools for self-improvement; bring about reforms in policies, while improving last-mile implementation of government schemes.
  • As the Nodal agency for the MPI, NITI Aayog has constituted a Multidimensional Poverty Index Coordination Committee (MPICC).

About Global MPI

  • Global MPI is an international measure of multidimensional poverty covering 107 developing countries.
  • It was first developed in 2010 by Oxford Poverty and Human Development Initiative (OPHI) and the UN Development Programme (UNDP) for UNDP’s Human Development Reports.
  • It is computed by scoring each surveyed household on 10 parameters based on -nutrition, child mortality, and years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing and household assets.
  • It utilizes the National Family Health Survey (NFHS) which is conducted under the aegis of the Ministry of Health and Family Welfare (MoHFW) and International Institute for Population Sciences (IIPS).

History- Important places, persons in news

[pib] Heritage of Punjab


From UPSC perspective, the following things are important :

Prelims level : Heritage of Punjab

Mains level : Not Much

The Ministry of Tourism’s DekhoApnaDesh Webinar series titled “Punjab- A historic perspective” has recently gone live.

Try this PYQ:

Q.Rivers that passes through Himachal Pradesh are: (CSP 2012)

(a) Beas and Chenab only

(b) Beas and Ravi only

(c) Chenab, Ravi, and Satluj only

(d) Beas, Chenab, Ravi, Satluj, and Yamuna

Heritage of Punjab

  • Punjab means ‘the land of Five Waters’ referring to the rivers Jhelum, Chenab, Ravi, Sutlej, and Beas.
  • Much of the Frontier was occupied by Maharaja Ranjit Singh also known as Sher-e-Punjab in the early 19th century and then taken over by the East India Company when it annexed Punjab in 1849.
  • The state is divided into three parts- Majha, Doaba and Malwa.
  • It’s many festivals–Teej, Lohri, Basant Panchami, Baisakhi and Hola Mahalla to name some are celebrations that mirror the farming ethos.
  • Historically, Punjab has played host to a number of ethnicities, including the Aryans, Persians, Greeks, Afghans and Mongols, thus bestowed with a rich tangible heritage.
  • The southeastern city of Punjab, Patiala was once a princely state established under Baba Ala Singh, a Jat Sikh chieftain. He laid the foundation of the fort and now, is located in the region around Qila Mubarak or the Fortunate Castle.
  • Important tourist attractions are Kali Temple, Baradari Garden, Sheesh Mahal, Gurudwara Dukh Niwaran Sahib, Qila Mubarak complex etc.

Holy shrines

  • The most sacred of Sikh shrines, the Golden Temple, is a major pilgrimage destination for devotees from around the world, as well as, an ever-increasing popular tourist attraction.
  • Construction of the Amrit Sarovar (pool of nectar) was initiated by Guru Amar Das, the third Guru, in 1570 and was completed by Guru Ram Das, the fourth Guru.
  • His successor, Guru Arjan Dev began work on the building after inviting Mian Mir, the Sufi saint, to lay its foundation stone in 1588.
  • Three years later, the Harimandar Sahib, or Darbar Sahib got completed.
  • In step with Sikhism’s basic tenet of universal brotherhood and all-inclusive ethos, the Golden Temple can be accessed from all directions.

Legend of Banda Bahadur

  • The city of Fatehgarh Sahib is of special significance to Sikhs. The word “Fatehgarh”, means “Town of Victory”.
  • It is so-called because, in 1710, Sikhs under the leadership of Baba Banda Singh Bahadur conquered the area and destroyed the Mughal fort.
  • Banda Bahadur announced the establishment of the Sikh rule in the city and an end to the tyranny of the Mughal rule which had spread terror and injustice.