October 2020
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Banking Sector Reforms

SC asks govt to implement ‘interest waiver’ scheme at the earliest

Note4Students

From UPSC perspective, the following things are important :

Prelims level: NPA

Mains level: Paper 3- Implications of Supreme Court order in the loan waiver.

The article examines the implications of the Supreme Court order dealing with the loan waiver and ban on the recognition of the bad loan.

Significance of common man as a depositor

  • India’s Rs 144 lakh crore in bank deposits make our Rs 110 lakh crore in bank loans possible.
  • The “common man” is more likely a depositor than a borrower; banks have 21 crore deposit accounts but only 2.7 crore loan accounts.

Issues with the court order

  • The Supreme Court has weighed in on the waiver scheme and recognition of the bad loan.
  • Waiving interest dues or banning bad loan recognition is economically ignorant because more than 20 per cent of Indians are depositors while less than 2 per cent are borrowers.
  • It has nothing to with economic justice defined as the greatest good for the greatest number.
  • It sabotages economic justice because fiscally funding banking diverts money from education, health and skilling expenditure.
  •  It’s commercially ignorant because any “annualised effective rate” is adjusted for interest payment frequency.
  • Resources are finite with total central government expenditure at Rs 29 lakh crore, scarce as COVID creates a Rs 3 lakh crore GST shortfall and fragile our fiscal deficit may exceed 12 per cent.
  • Also, it is hardly what our Constitution imagined as the role of courts.
  • Our Constitution writers made a distinction between fundamental rights and directive principles was not a lack of ambition but a measured assessment of state capacity, resources and sequencing.
  • The Constitution also envisaged distinct roles for the judiciary, executive and legislature to balance samaj (society), bazaar (markets) and sarkar (government).
  • Courts have become less mindful of these two distinctions.

Cost of credit and availability issue in India

  • One of the reasons for small size of Indian enterprises in the availability and cost of credit in India.
  • India’s credit-to-GDP ratio stands at dismal  50 per cent  — Bihar is 12 per cent and Arunachal is 1 per cent.
  • The MSME lending is stuck at Rs 20 lakh crore — needs to rise to 100 per cent.
  • Despite lower inflation and fiscal discipline, most borrowers don’t get globally competitive interest rates due to high bad loans and financial statement uncertainty.
  • The availability of credit will not rise and cost will not fall till our banking system has strong competition, consistent regulation, effective supervision and non-fiscal sustainability.

Consider the question “How the crisis in the banking sector is different from the crisis in other sectors? Also, examine the issues with the Supreme Court order on the loan waiver and recongnition of bad loan ban?” 

Conclusion

Institutional immunity needs balancing of independence and accountability; rising citizen concern about mandates and appointments should trigger court introspection.

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Defence Sector – DPP, Missions, Schemes, Security Forces, etc.

Issues with dilution of offset condition for defence procurement

Note4Students

From UPSC perspective, the following things are important :

Prelims level: The offset clause

Mains level: Paper 3- Implications of dilutions of offset clause in defence procurement

The ‘offset clause’ could help the country achieve the technological expertise and consequently self-reliance. However, India recently relaxed some norms in the policy. The article discusses the stated reasons for tweaking and its implications for the defence manufacturing industry in India.

Context

  • Recently, the government diluted the “offset” policy in defence procurement, reportedly in response to a Comptroller and Auditor General (CAG) of India’s report tabled in Parliament last month.

Let’s understand ‘offset’ policy

  •  In order to safeguard national interest, most countries restrict trade in defence equipment and advanced technologies.
  • Yet, for commercial gains and for global technological recognition, governments and firms do like to expand the trade through negotiated bilateral sales.
  • Restrictions are often imposed on the buyer country on use, modification and resale of such equipment and technologies.
  • The product and technology compel buyers to stick to them for: the advantages of bulk purchase, and dependence on the supplier for spares and upgrades.
  • The price and the terms of the contract often reflect the government’s relative bargaining strength and also domestic political and economic considerations.
  • Large buyers such as India seek to exercise their “buying power” to secure not just the lowest price but also try to acquire the technology to upgrade domestic production and build R&D capabilities.
  • The offset clause — used globally — is the instrument for securing these goals.

Changes in the offset policy

  • Initiated in 2005, the offset clause has following requirements:
  • 1) Sourcing 30% of the value of the contract domestically.
  • 2) Indigenisation of production in a strict time frame.
  • 3) Training Indian professionals in high-tech skills, for promoting domestic R&D.
  • However, the policy has been tweaked many times since.
  • According to the recent CAG report,  between 2007 and 2018, the government reportedly signed 46 offset contracts worth ₹66,427 crore of investments.
  • However, the realised investments were merely 8%, or worth ₹5,457 crore.
  • Reportedly, technology transfer agreements in the offsets were not implemented, failing to accomplish the stated policy objective.
  • Recently, the government has changed this policy further so that the offset clause will not be applicable to bilateral deals and deals with a single (monopoly) seller, to begin with.

Implications of the changes in offset policy

  • The dilution means practically giving up the offset clause, and a setback to India’s prospects for boosting defence production and technological self-reliance.
  • The government, however, has defended the decision by claiming a cost advantage.
  • Howver, price is but one of many factors in such deals, as explained above.
  • The higher (upfront) cost of the agreement due to the offset clause would pay for itself by: reducing costs in the long term by indigenisation of production and the potential technology spill-overs for domestic industry.
  • Hence, giving up the offset clause is undoubtedly a severe setback.

How did offset policy work for aerospace industry?

  • Despite the heft of Hindustan Aeronautics Limited, India is a lightweight in global civilian aircraft manufacturing, as the public sector giant mostly devotes itself to defence production.
  • The National Civil Aircraft Development (NCAD) project — to come up with an indigenously designed Regional Transport Aircraft (RTA) — has remained a non-starter from day one.
  • However, with the introduction of the offset policy in 2005, things changed dramatically.
  • For contracts valued at ₹300 crore or more, 30% of it will result in offsets, implemented through Indian offset partners.
  • As aerospace imports rose rapidly, so did the exports via the offsets, by a whopping 544% in 2007, compared to the previous year.
  • By 2014, exports increased to $6.7 billion from a paltry $62.5 million in 2005, according to the United Nations Comtrade Database.
  • The offset clause enabled India to join the league of the world’s top 10 aerospace exporters; the only country without a major domestic aerospace firm.
  • However, exports reduced after the offset clause was relaxed, primarily when the threshold for the policy was raised from the hitherto ₹300 crore to ₹2000 crore, in 2016.
  • The offset exports fell to $1.5 billion by 2019.
  • The 2005 policy helped promote a vibrant aerospace cluster, mostly micro, small and medium enterprises (MSMEs) around Bengaluru.

Consider the question “How far has the offset clause been successful in enhancing the domestic capabilities of India in defence manufacturing? What are the challenges in achieving the objectives of the policy?”

Conclusion

There are successful examples to draw lessons from, as the aerospace industry episode demonstrates. India needs to re-conceive or re-imagine the offset clause in defence contracts with stricter enforcement of the deals, in national interest, and in order to aim for ‘Atma Nirbhar Bharat Abhiyaan’, or a self-reliant India.

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Police Reforms – SC directives, NPC, other committees reports

Reforms police in India need

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Police reforms

The article highlights the challenges facing the police force in India and suggests the measures to deal with them.

Urgency of the police reforms

  • In a well-ordered democracy, the police are supposed to be a disciplined force trained to uphold the law and enforce the functioning of democracy on constitutional lines.
  • However, police in India suffers from a triad of malaises:
  • 1) The lack of sensitisation of police personnel.
  • 2) Absence of accountability.
  • 3) Politicisation of the police.

Objectives of the reforms:

1) Police sensitisation about their role in society

  • The sensitisation module should aim at bringing about attitudinal change in police — especially pertaining to gender and power relations and police behaviour.
  • There has to be promptness of action and decency of behaviour.
  • They need to be trained in body language and strictly advised to refrain from abusive behaviour.
  • It is necessary to increase public confidence in the police by upgrading levels of police service delivery as well as by investigating and acting in cases of police misconduct.

2) Increasing accountability

  • Public confidence in police decreases when the public perceives that police abuses are not investigated effectively.
  • Enhancing accountability will improve police legitimacy and increase public confidence, which, in turn, will reinforce the integrity of the system.
  • The Police Ombudsman of Northern Ireland, the Danish Independent Police Complaints Authority are some examples of mechanisms for accountability of the police for acts of abuse of power.

3) De-politicisation of the police

  • Linked to accountability is de-politicisation of the police force.
  • This is a must for the effective functioning of the country’s criminal justice system.
  • The police, as the custodian of maintenance of law and order, must stay away from agenda-driven politics.

Need to resolve the structural issues

In order to achieve the above-stated objectives, structural issues within the force must be given priority.

1) Vacancies and fair representation to women

  • According to a report by Common Cause in 2019, the Indian police force is at only 77 per cent of its sanctioned strength.
  • India has 144 police personnel for one lakh population and, in some states, the figure is less than 100.
  • One in every five posts sanctioned in the Indian Police Service remains vacant.
  • In low and middle-rank posts, the vacancies of 5.28 lakh personnel account for nearly one-fourth of the total sanctioned strength of over 22 lakh.
  • A fully-staffed police force would only increase India’s police-to-population ratio to 185 against the UN recommended ratio of 222.
  • The police-to-people ratio should be improved by at least 50 per cent to meet the challenges faced by the force.
  • Women are grossly underrepresented in our police force at less than 7 per cent of our total police strength.
  • With the increase in the number of gender crimes, it has become a necessity to augment the strength of police by recruiting more and more women police personnel.
  • The situation in Uttar Pradesh is the worst where police are at roughly 50 per cent of sanctioned strength.
  • When the numbers are inadequate, police personnel are stretched, leading to shoddy policing.

2) Lack of in-service training

  • The existing police personnel are also not adequately trained. Less than 7 per cent police get in-service training.
  • Gujarat scores the lowest, with less than one per cent having received any in-service training.

3) Implementation of guidelines and recommendations

  • After the National Police Commission in 1977, several committees were set up, including the Gore Committee, Padmanabhaiah Committee and Malimath Committee.
  • These commissions and committees have made far-reaching recommendations.
  • The top police leadership should be selected by apolitical representatives and an impartial body as suggested by Dharma Vira Commission have farsighted implications.
  • It was a strong antidote to opportunistic appointments and transfers.
  • Recommendations of the commission, if implemented, along with the Supreme Court directives of 2006 by Justice Sabharwal, in true letter and spirit, will go a long way in police reform.

4) Reforms in criminal justice system

  • Reforms in the criminal justice system and separation of law and order from investigation and prosecution are the other areas that need the attention of the authorities.
  • These aspects have been highlighted by many commissions and committees constituted by the Centre.

Consider the question “What are the challenges facing the police force in the country? Suggest the measures to deal with these challenges.”

Conclusion

A new role and new philosophy have to be defined for the police to not only make it a capable and effective body but also one accountable to the law of the land and to the people whom they serve.

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Electoral Reforms In India

Govt. hikes poll expenditure ceiling by 10%

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Ceilings on Election expenditure

Mains level: Election expenditure and associated issues

The Law Ministry has increased the ceiling on poll expenditure for Assembly and Lok Sabha elections by 10% following a recommendation by the Election Commission in view of curbs imposed during the coronavirus pandemic.

Try answering this question:

Q.Ceiling on election expenses ends up being counterproductive and encourages candidates to under-report their expenditure. Critically analyse.

New ceiling on poll expenditure

  • The ceiling on poll expenditure varies across States, with candidates in Assembly elections in bigger States like Bihar, Uttar Pradesh, and Tamil Nadu now allowed to spend up to ₹30.8 lakhs as against ₹28 lakhs earlier.
  • For a candidate contesting a Lok Sabha poll in these States, the revised ceiling on poll expenditure is now ₹77 lakhs instead of the earlier amount of ₹70 lakhs.
  • Goa, Arunachal Pradesh, Sikkim and a few Union Territories, based on the size of their constituencies and population, have a lower ceiling on poll expenditure.
  • Here while the enhanced ceiling for a Lok Sabha candidate is now ₹59.4 lakhs those contesting an Assembly can spend up to ₹22 lakhs.

How are such ceilings made?

  • Such changes are made by amending the Conduct of Elections Rules.
  • The last time the expenditure ceiling was enhanced was in 2014 just ahead of the Lok Sabha polls.

What doesn’t account to Election expenditure?

  • The expenditure incurred by leaders of a political party on account of travel by air or by any other means of transport for propagating programme of the political party is not considered to be the election expenditure.
  • Any expenditure which is done for service of the Government and discharge of official duty is also not considered to be election expenditure.

Role of Election Commission

  • The EC imposes limits on campaign expenditure incurred by a candidate and not political parties.
  • However, it does not cover expenses incurred either by a party or the leader of a party for propagating the party’s programme.
  • Also, candidates must mandatorily file a true account of election expenses with the EC.
  • An incorrect account or expenditure beyond the ceiling can attract disqualification for up to three years as per Section 10A of The Representation of the People Act, 1951.

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North-East India – Security and Developmental Issues

Assam-Mizoram Boundary Dispute

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not Much

Mains level: Special provisions for North-east India

The Ministry of Home Affairs (MHA) has asked Assam and Mizoram to maintain peace and display “no aggressive posturing” after violent clashes took place at the border between the two States on Saturday night.

Can you recall the chronology of reorganization of the entire North-East region?

What is the issue?

  • Assam has had a boundary dispute with Mizoram for decades and several rounds of talks have been held since 1994-95 to solve the issue.
  • Till 1972, Mizoram was a part of Assam and acquired full statehood in 1987.
  • The 164.6 km-long border between the States runs along with Cachar, Hailakandi and Karimganj districts in Assam and Kolasib, Mamit and Aizawl districts in Mizoram.
  • There are several border areas where violence have been reported.

How complex is this dispute?

  • In the Northeast’s complex boundary equations, showdowns between Assam and Mizoram residents are less frequent than they are.
  • The boundary between present-day Assam and Mizoram, 165 km long today, dates back to the colonial era when Mizoram was known as Lushai Hills, a district of Assam.
  • The dispute stems from a notification of 1875 that differentiated Lushai Hills from the plains of Cachar, and another of 1933 that demarcates a boundary between Lushai Hills and Manipur.
  • Mizoram believes the boundary should be demarcated on the basis of the 1875 notification, which is derived from the Bengal Eastern Frontier Regulation (BEFR) Act, 1873.
  • Mizo leaders have argued in the past argued against the demarcation notified in 1933 because Mizo society was not consulted.

Other boundary disputes in North-East

During British rule, Assam included present-day Nagaland, Arunachal Pradesh and Meghalaya besides Mizoram, which became separate state one by one. Today, Assam has boundary problems with each of them.

  • Nagaland shares a 500-km boundary with Assam.
  • In two major incidents of violence in 1979 and 1985, at least 100 persons were killed. The boundary dispute is now in the Supreme Court
  • On the Assam-Arunachal Pradesh boundary (over 800 km), clashes were first reported in 1992, according to the same research paper.
  • Since then, there have been several accusations of illegal encroachment from both sides, and intermittent clashes. This boundary issue is being heard by the Supreme Court.
  • The 884-km Assam-Meghalaya boundary, too, witnesses flare-ups frequently. As per Meghalaya government statements, today there are 12 areas of dispute between the two states.

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Digital India Initiatives

Ghar Tak Fibre Scheme

Note4Students

From UPSC perspective, the following things are important :

Prelims level: FTTH, Ghar tak fibre

Mains level: Internet connectivity, Digital divide

The government’s ambitious ‘Ghar Tak Fibre’ scheme — which aims to connect all the villages with high-speed internet — is off to a slow start in poll-bound Bihar.

Note the features of FTTH connections. They make a perfect case for a statement based prelims question. Also, try this PYQ:

Q.Consider the following statements regarding optical fibres:

  1. A layer called the cladding, which has a refractive index more than that of the core, surrounds the core of the optical fibre.
  2. Light is propagated in an optical fibre by refraction and internal reflection.

Which of the above statements is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Ghar Tak Fibre scheme

  • The Scheme will be implemented by the Ministry of Electronics and Information Technology.
  • It aims to connect all 45,945 villages of Bihar with high-speed optical fibre internet by 31st March 2021.
  • Under the scheme, Bihar has to provide at least five fibre-to-the-home (FTTH) connections per village and at least one WiFi hotspot per village.

What is FTTH?

  • Fiber to the home (FTTH), also called fibre to the premises (FTTP), is the installation and use of optical fibre from a central point directly to individual buildings such as residences, apartment buildings and businesses to provide high-speed internet access.
  • FTTH dramatically increases connection speeds available to computer users compared with technologies now used in most places.
  • FTTH promises connection speeds of up to 100 megabits per second (Mbps).

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Coronavirus – Health and Governance Issues

Ayushman Sahakar Scheme

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Ayushman Sahakar Scheme

Mains level: Impact of coronovirus outbreak

The Agriculture Ministry has rolled out the Ayushman Sahakar Scheme to assist cooperatives in the creation of healthcare infrastructure in the country.

Can you find the peculiarity of this scheme? Yes. It’s the Agriculture and not the Health Ministry.

Ayushman Sahakar Scheme

  • The scheme is formulated by the National Cooperative Development Corporation (NCDC), the apex autonomous development finance institution under the Ministry of Agriculture and Farmers Welfare.
  • The scheme would give a boost to the provision of healthcare services by cooperatives.
  • It specifically covers establishment, modernization, expansion, repairs, renovation of hospital and healthcare and education infrastructure.

Why need such a scheme?

  • There is a huge need for medical and nursing education in rural areas. But the problem is a lack of infrastructure.
  • Co-ops find it difficult to access credit for such projects as banks may not give them loans for non-agricultural purposes.

Financing the scheme

  • NCDC would extend term loans to prospective cooperatives to the tune of Rs 10000 Crore in the coming years.
  • Any Cooperative Society with a suitable provision in its byelaws to undertake healthcare-related activities would be able to access the NCDC fund.
  • NCDC assistance will flow either through the State Governments/ UT Administrations or directly to the eligible cooperatives.
  • Apart from working capital and margin money to meet operational requirements, the scheme will also provide interest subvention of 1% to women majority cooperatives.

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Wildlife Conservation Efforts

Species in news: Lion-tailed Macaque

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Shravathi river, Macaque

Mains level: Not Much

The Union government allowed a geotechnical investigation that involved drilling of 12 boreholes inside Sharavathi Valley Lion-tailed Macaque Sanctuary in the Western Ghats in Karnataka.

Try this PYQ:

Which one of the following groups of animals belongs to the category of endangered species?

(a) Great Indian Bustard, Musk Deer, Red Panda, Asiatic Wild Ass

(b) Kashmir Stag, Cheetah, Blue Bull, Great Indian Bustard.

(c) Snow Leopard, Swamp Deer, Rhesus Monkey, Saras (Crane)

(d) Lion Tailed Macaque, Blue Bull, Hanuman Langur, Cheetah

About Lion-tailed Macaque

  • Endemic to rainforests of the Western Ghats, the Lion-tailed Macaque (Macaca Silenus) is an Endangered species, according to IUCN assessment.
  • It is listed in Appendix 1 of the Convention on International Trade in Endangered Species.
  • It is a Schedule 1 species under WPA, 1972 and thereby, accorded the highest protection under the Indian law.
  • Their total (global) population is 2,500 mature individuals.

Why in news?

  • Sharavathi is likely one of the most exploited rivers.
  • It flows for mere 132 km, but four major power projects on it produce 40 per cent of all hydroelectric power in Karnataka.
  • Yet, in an attempt to squeeze more power from the river flowing through the Western Ghats, a new pumped hydro-storage project has been proposed.
  • This will only intensify the cumulative adverse impact of previous projects on the biodiversity of the Sharavathi valley.
  • In particular, the impacts on the iconic Lion-tailed Macaque are likely to be huge.

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