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

Moody’s downgrade India’s Ratings

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not Much

Mains level: Signs of economic slowdown in the country

The Moody’s Investors Service downgraded the Government of India’s foreign-currency and local-currency long-term issuer ratings to “Baa3” from “Baa2”. It stated that the outlook remained “negative”.

Practice question for mains:

Q. Why India’s GDP growth rate is being labelled an overestimate yet again by the global credit rating agencies? Discuss this in context to the latest downgrade of Indian Economy as highlighted by the Moody’s.

Why this matters?

  • The Moody’s is historically the most optimistic rating agency about India.
  • This downgrade challenges India’s policymaking institutions.
  • They will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth.

What is the reason for this downgrade?

There are four main reasons why Moody’s has taken the decision:

  • Weak implementation of economic reforms since 2017
  • Relatively low economic growth over a sustained period
  • A significant deterioration in the fiscal position of governments (central and state)
  • And the rising stress in India’s financial sector

What does “negative” outlook mean?

  • The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system.
  • These could lead to more severe and prolonged erosion in fiscal strength than Moody’s current projections.
  • The ratings have highlighted persistent structural challenges to fast economic growth such as “weak infrastructure, rigidities in labour, land and product markets, and rising financial sector risks”.
  • In other words, a “negative” implies India could be rated down further.

Is the downgrade because of Covid-19 impact?

No. The pandemic has amplified vulnerabilities in India’s credit profile that were present and building prior to the shock, and which motivated the assignment of a negative outlook last year.

Then why did the downgrade happen?

  • More than two years ago, in November 2017, Moody’s had upgraded India’s rating to “Baa2” with a “stable” outlook.
  • At that time, it expected that effective implementation of key reforms would strengthen the sovereign’s credit profile through gradual but persistent measures.
  • But those hopes were belied. Since that upgrade in 2017, implementation of reforms has been relatively weak and has not resulted in material credit improvements, indicating limited policy effectiveness.
  • Each year, the central government has failed to meet its fiscal deficit (essentially the total borrowings from the market) target.
  • This has led to a steady accretion of total government debt.

What will be the implications of this downgrade?

  • Ratings are based on the overall health of the economy and the state of government finances.
  • When India’s sovereign rating is downgraded, it becomes costlier for the Indian government as well as all Indian companies to raise funds because now the world sees such debt as a riskier proposition.
  • A rating downgrade means that bonds issued by the Indian governments are now “riskier” than before.
  • The weaker economic growth and worsening fiscal health undermine a government’s ability to pay back.
  • Lower risk is better because it allows governments and companies of that country to raise debts at a lower rate of interest.

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International Space Agencies – Missions and Discoveries

Radio lights from Sun’s Corona

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Murchison Widefield Array (MWA), Nanoflares

Mains level: Coronal heating of Sun

A group of India scientists have recently discovered tiny flashes of radio light emanating from all over the Sun, which they say could help in explaining the long-pending coronal heating problem.

Possible prelim question:

The Murchison Widefield Array (MWA) Telescope recently seen in news is a landmark in observing: Gravitational Waves/Black Holes/Sun’s Corona/ etc..

What is Sun’s Corona?

  • The corona is the outermost part of the Sun’s atmosphere. It is the aura of plasma that surrounds the Sun and other stars.
  • The Sun’s corona extends millions of kilometres into outer space and is most easily seen during a total solar eclipse, but it is also observable with a coronagraph.
  • Spectroscopy measurements indicate strong ionization in the corona and a plasma temperature in excess of 1000000 Kelvin much hotter than the surface of the Sun.

Radio lights observed

  • These radio lights or signals result from beams of electrons accelerated in the aftermath of a magnetic explosion on the Sun.
  • While the magnetic explosions are not yet observable, these weak radio flashes are ‘smoking guns’ or the evidence for the same.
  • Hence it brought the researchers closer to explaining the coronal heating problem.

Their significance

  • These observations are the strongest evidence till date that the tiny magnetic explosions originally referred to as ‘nanoflares’ by eminent American solar astrophysicist Eugene Parker.
  • It is the possible phenomena that could be heating up the corona (the aura of plasma that surrounds the sun and other stars).

The Murchison Widefield Array (MWA)

  • The phenomenon of coronal heating has been known for the last 70 years, the availability of cutting edge data from the Murchison Widefield Array (MWA) radio telescope proved to be a game-changer.
  • The MWA is a low-frequency radio telescope, located at the Murchison Radio-astronomy Observatory (MRO) in Western Australia.
  • The MWA has been developed by an international collaboration, including partners from Australia, New Zealand, Japan, China, India, Canada and the United States.

Solving the mystery

  • The strength of the magnetic fields varies a lot from one place on the surface of the Sun to another, by more than a factor of 1,000.
  • But the corona is hot everywhere. So, this heating process has to work all over the corona, even in regions of weak magnetic fields.
  • Until now, the process of how this magnetic energy is deposited in the corona had remained a mystery.

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Tribes in News

Tribes in news: Changpa Tribe

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Pashmina Goats

Mains level: NA

The Chinese Army’s intrusion in Chumur and Demchok has left Ladakh’s nomadic herding Changpa community cut off from large parts of summer pastures.

Pashmina shawl is a landmark product of the Kashmir Valley. But make a note here. It carries only a BIS certification and not a Geographical Indicator.

Also try this PYQ from CSP 2014:

Q. With reference to ‘Changpa’ community of India, consider the following statement:

1. They live mainly in the State of Uttarakhand.
2. They rear the Pashmina goats that yield fine wool.
3. They are kept in the category of Scheduled Tribes.
Which of the statements given above is/are correct?

a) 1 only
b) 2 and 3 only
c) 3 only
d) 1, 2 and 3

Changpa Tribes

  • The Changpa of Ladakh is high altitude pastoralists, raising mainly yaks and goats.
  • Among the Ladakh Changpa, those who are still nomadic are known as Phalpa, and they take their herds from in the Hanley Valley to the village of Lato.
  • Hanley is home to six isolated settlements, where the sedentary Changpa, the Fangpa reside.
  • Despite their different lifestyles, both these groups intermarry.
  • The Changpa speak Changskhat, a dialect of Tibetan, and practice Tibetan Buddhism.

What is the issue?

  • The Chinese Army has taken over 16 kanals (two acres) of cultivable land in Chumur and advanced around 15 km inside Demchok, taking over traditional grazing pastures and cultivable lowlands.
  • In a cascading effect, this has resulted in a sharp rise in deaths of young Pashmina goats this year in the Korzok-Chumur belt of Changthang plateau in Ladakh.
  • This incursion has destabilized the annual seasonal migration of livestocks, including yaks and Pashmina goats.

Back2Basics: Pashmina

  • The Changthangi or Ladakh Pashmina is a breed of Cashmere goat native to the high plateau of Ladakh.
  • The much-valued wool from the Ladakh herds is essential for the prized Pashmina shawls woven in Kashmir and famous for their intricate handwork.
  • They survive on the grass in Ladakh, where temperatures plunge to as low as −20 °C.
  • These goats provide the wool for Kashmir’s famous pashmina shawls. Shawls made from Pashmina wool are considered very fine and are exported worldwide.
  • Bureau of Indian Standards (BIS) has recently published an Indian Standard for identification, marking and labelling of Pashmina products to certify its purity.

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Foreign Policy Watch: India-China

Depsang Plain near LAC

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Depsang Plain and its location

Mains level: India-China border skirmishes and their impacts on bilateral relations

Reports of a heavy Chinese presence at Depsang, an area at a crucial dip (called the Bulge) on the Line of Actual Control (LAC) have increased the recent tensions between Indian and Chinese troops.

For the Depsang Plain, a prelim based question is hardly possible. However one must know all the fronts of border disputes from mains perspective.

Depsang Plain

  • The “Depsang Plain” is one of the few places in the Western Sector where light armour (vehicles) would have ease of manoeuvre, so any Chinese buildup there is a cause for concern.
  • India controls the western portion of the plains as part of Ladakh, whereas the eastern portion is part of the Aksai Chin region, which is controlled by China and claimed by India.
  • The buildup invokes memories of both the 1962 war, when Chinese troops had occupied all of the Depsang plains.
  • More recently in April 2013, the PLA crossed the LAC and pitched tents on the Indian side for three weeks, before they agreed to pull out.

Also read:

[Burning Issue] India-China Skirmish in Ladakh

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Railway Reforms

The Deccan Queen Express

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Deccan Queen

Mains level: NA

The historic Deccan Queen train between Mumbai and Pune completed 90 years on June 1.

Take the opportunity to revise some of reformative measure in the Indian Railways taken through these years.  Click here to read more .

The Deccan Queen

  • The Deccan Queen was introduced between Mumbai and Pune on June 1, 1930 by the Great Indian Peninsula Railway (GIPR), the forerunner of the Central Railway.
  • This was the first deluxe train introduced to serve the two important cities of the region, and was named after Pune – also known as the “Queen of Deccan”.
  • It is among the rare Indian trains that have never been hauled using steam traction and were always electric-powered; on rare instances running on diesel.
  • The GIPR in the 1940s would run Race Special trains for Mumbai’s horse racing enthusiasts who would come to Pune on weekends and race days.
  • This train holds many a record, including that of being India’s first superfast train, first long-distance electric-hauled train, first vestibuled train, the first train to have a ‘women-only’ car, and the first train to feature a dining car.

Back2Basics: Railways in India

  • Indian Railways started its service 164 years ago on 16 April 1853.
  • The first railway proposals for India were made in Madras in 1832.
  • The first train was run over a stretch of 33 kilometres from Mumbai to Thane and was hauled by three steam locomotives named Sahib, Sindh and Sultan.
  • Indian Railway now has the 4th largest rail network in the world after the United States of America, China and Russia.

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Foreign Policy Watch: India-Africa

Fortifying the African outreach: Contrast in the approach adopted by China and India

Note4Students

From UPSC perspective, the following things are important :

Prelims level: e-ITEC COVID-19 Management Strategies Training Webinar

Mains level: Paper 2- India-Africa relation

As both India and China try and vie for increasing the influence in the African continent, the difference in the approach they adopted become evident. Both countries have been providing assistance in Africa amid the COVID pandemic. This article analyses the difference in the approach of the two countries.

Impact of covid pandemic in Africa

  • Although African countries moved quickly to curb the initial spread, they are still woefully ill-equipped to cope with a public health emergency.
  • They are facing shortages of masks, ventilators, and even basic necessities such as soap and water.
  • Such conditions have meant that Africa’s cycle of chronic external aid dependence continues.
  • Africa needs medical protective equipment and gear to support its front line public health workers.
  • India and China have increased their outreach to Africa through medical assistance.
  • Their efforts are directed to fill a part of the growing African need at a time when not many others have stepped in to help.

China’s donation diplomacy in Africa

  • China, being Africa’s largest trading partner, was quick to signal its intent to help Africa cope with the pandemic.
  • It despatched medical protective equipment, testing kits, ventilators, and medical masks to several African countries.
  • The primary motive of such donations has been to raise Beijing’s profile as a leading provider of humanitarian assistance and “public goods” in the global public health sector.
  • China’s billionaire philanthropy was also in full display when tech founder Jack Ma donated three rounds of anti-coronavirus supplies.
  • Chinese embassies across Africa have taken the lead by coordinating both public and private donations to local stakeholders.
  • However, the sub-optimal quality of China’s medical supplies and its deputing of medical experts have been a major cause for concern.

Let’s understand the objectives of China’s donation diplomacy

  • Beijing’s ‘donation diplomacy’ in Africa aims to achieve three immediate objectives:
  • 1) Shift the focus away from talking about the origins of the virus in Wuhan.
  • 2) Build goodwill overseas.
  • 3) Establish an image makeover.
  • For the most part, it succeeded in achieving these ends until China faced widespread backlash over the ill-treatment of African nationals in Guangzhou city.
  • The issue quickly grew into a full-blown political crisis for Beijing.

Let’s analyse the depth of China’s political influence in Africa

  • For the most part, China has been successful in controlling the Guangzhou narrative due to the depth of its political influence in Africa.
  • It is no secret that China relies heavily on diplomatic support and cooperation from African countries on key issues in multilateral fora.
  • For example, Beijing used African support for securing a win for Chinese candidates as the head of Food and Agriculture Organization (FAO) and in the World Health Organization (WHO).
  • On Africa’s part, the problem lies in the deep disjuncture and credibility gap between Africa’s governing class, the people, the media and civil society.
  • Even when criticisms have been levelled against Chinese indiscretions, it has hardly ever surfaced at the elite level.
  • Overall, China’s donation diplomacy towards Africa during COVID-19 has received mixed reactions, but Beijing’s advantage lies in its economic heft and political influence in Africa.

Understanding India’s diplomacy in Africa: Responsible and reliable global stakeholder

  • For India, the pandemic presents an opportunity to demonstrate its willingness and capacity to shoulder more responsibility.
  • The fact that even with limited resources, India can fight the virus at home while reaching out to developing countries in need is testament to India’s status as a responsible and reliable global stakeholder.
  • Nowhere has India’s developmental outreach been more evident than in Africa with the continent occupying a central place in Indian government’s foreign and economic policy in the last six years.
  • Africa has been the focus of India’s development assistance and also diplomatic outreach, as evident in plans to open 18 new embassies.
  • These efforts have been supplemented by an improved record of Indian project implementation in Africa.

Trade ties and cooperation amid pandemic

  • India’s role as ‘the pharmacy of the world’, as the supplier of low-cost, generic medicines is widely acknowledged.
  • Pharmaceutical products along with refined petroleum products account for 40% of India’s total exports to African markets.
  • India is sending consignments of essential medicines, including hydroxychloroquine (HCQ) and paracetamol, to 25 African countries in addition to doctors and paramedics at a total cost of around ₹600 million ($7.9 million) on a commercial and grant basis.
  • The initial beneficiaries were the African Indian Ocean island nations of Mauritius, the Seychelles, Comoros, and Madagascar under India’s ‘Mission Sagar’.
  • While transportation and logistics remain a concern, most of the consignments have already reached various African states.
  • A timely initiative has been the e-ITEC COVID-19 management strategies training webinars exclusively aimed at training health-care professionals from Africa and the SAARC nations and sharing of best practices by Indian health experts.
  • Nigeria, Kenya, Mauritius, and Namibia have been beneficiaries.
  • Across Africa, there is a keen interest to understand the developments and best practices in India because the two share similar socioeconomic and developmental challenges.
  • There is also growing interest in research and development in drugs and vaccines.
  • A few African countries such as Mauritius are pushing for health-care partnerships in traditional medicines and Ayurveda for boosting immunity.
  • The Indian community, especially in East African countries, has also been playing a crucial role in helping spread awareness.
  • Prominent Indian businessmen and companies in Nigeria and Kenya have donated money to the respective national emergency response funds.
  • Country-specific chapters of gurdwaras and temples have fed thousands of families by setting up community kitchens, helplines for seniors and distributing disinfectants and sanitisers.

The contrast between approaches adopted by India and China

  • Both India and China, through their respective health and donation diplomacy, are vying to carve a space and position for themselves as reliable partners of Africa in its time of need.
  • Burnishing their credentials as humanitarian champions is the name of the game.
  • But there are significant differences in the approaches.
  • For China, three aspects are critical:
  • 1) Money, political influence and elite level wealth creation.
  • 2) Strong state-to-state relations as opposed to people-to-people ties.
  • 3) Hard-infrastructure projects and resource extraction.
  • India’s approach, on the other hand, is one that focuses on building local capacities and an equal partnership with Africans and not merely with African elites concerned.

Consider the question “Both India and China have been playing an active role in the African continent and vying for the outreach there. But there is a fundamental difference in their approach. Comment.”

Conclusion

As these two powers rise in Africa, their two distinct models will come under even greater scrutiny. And both New Delhi and Beijing might find that they need to adapt to the rising aspirations of the African continent.

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

Problem of interest rate differential in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Policy rates

Mains level: Paper 3- Why interest differential could be a problem?

Do you remember Operation Twist by the RBI? what was being twisted there? It was the yield curve that was sought to be twisted. It had been aimed at reducing the gap between long term interest rates and short term policy rates. This article explains the impact such gap could have on the economy.

Why long term loans come with a higher interest rate?

  • Long term loans equate to long repayment periods.
  • More uncertainty during these long periods can translate to higher risks.
  • And to compensate for the high risks involved, banks quote higher interest rates when corporates borrow from them to build and operate stuff.
  • However, when banks borrow from the RBI they are borrowing over short intervals.
  • And so they get charged lower interest rates.

So, why banks are keeping interest rates high despite borrowing at low rates from the RBI?

  • Ever so often, the RBI cuts rates in the hopes of making loans more accessible to banks.
  • They are hoping banks will also extend this benevolence to their customers by cutting long term interest rates.
  • But right now, banks are scared.
  • They don’t think the corporates can pay back.
  • So they are keeping long term rates at elevated levels despite borrowing at consistently low rates from the RBI.

What happens when gap between long-term and short term interest rates widen?

  •  Capital wasn’t cheap to begin with for corporate borrowers, and it’s getting more expensive.
  • This comes just as migrant rural workers have been driven out of urban production centers because of shuttered factories.
  • Even if this labor is safely put back on, say, road construction, concessionaires [think private road contractors] might still go bankrupt before completing any projects.
  • That’s because their annuity payments from the government are linked to falling short-term policy rates, whereas their long-term borrowing costs are both high and sticky

To understand the issue of annuity payment and its relation with interest rates, let’s dig deeper into 3 types of models-

1. Build-Operate-Transfer (BOT) Model

  • So, NHAI is the National Highways Authority of India and is largely responsible for building and maintaining roads.
  • Its preferred method to get the job done is to deploy what is called the BOT model.
  • The Build-Operate-Transfer (BOT) model, as the name suggests is a way for NHAI to offload its responsibilities of road building to private contractors.
  • Under BOT model, private contractors build the road, operate it, make money off of collecting toll, and after about 10–15 years, they hand over the road back to NHAI.
  • There aren’t enough private contractors willing to bid for such projects because — hey, maintaining and operating a road is a pain.
  • Why pain?  You have to wait 15 years to recoup all the money you had to pour in to build the damn thing. That’s the pain.

2. Engineering, procurement and Construction (EPC) model

  • Under the EPC (Engineering, Procurement & Construction) model, NHAI pays private contractors first, so that they can help NHAI build the road.
  • The contractor does not operate or collect tolls here.
  • Instead, it can walk away scot-free with money in its coffers once it’s done building the road.
  • But it’s hard for the government to shore up all the resources required upfront.

3. Hybrid Annuity Model (HAM)- The middle path

  •  It’s a nice little mix of both EPC and BOT.
  • Under it, NHAI pays some money upfront in fixed installments usually, 40% of the project cost.
  • And the private contractor does his bit by putting up the rest and finishing the project.
  • However, once the construction is complete, the contractor does not make money off of collecting toll.
  • Instead, he transfers the assets over to NHAI.
  • So its incumbent on the government to pay the rest of the money once the project takes off.
  • And the payments are dependent on the asset created, the performance of the developer, and a few other things.
  • However, since the payouts usually last 15–20 years we need to find a way to determine what kind of money the government pays the contractor every 6 months.
  • And here’s the best way to think about this — So when the government pays the 40% upfront, it’s promising to pay the 60% sometime in the future.
  • It’s money they owe the contractor.

And, here is the crux of the matter

  • So when the repayments, are made, they’ll have to pay the principal and the interest.
  • The interest involves a fixed component (3%) and a variable component.
  • What is varible component? The variable component is effectively the short term policy rates.
  • So if the RBI keeps cutting these short term rates, private contractors get less money per instalment even if their roads are all nice and shiny.
  • And this can’t bode well for them because they probably put up the 60% back in the day by borrowing from another bank.
  • A bank that’s charging them long term interest rates that refuse to come down.

Conclusion

The widening gap between the short term policy rates and long term interest could easily spell the disaster for the entrepreneurs and in turn for the economy as a whole. The government should consider a special package for such entities given the unprecedented situations we found ourselves in.

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Foreign Policy Watch: India-Nepal

Time to revisit the special relationship with Nepal

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Treaty of Peace and Friendship between India and Nepal

Mains level: Paper 2-India-Nepal border issue

A new map released by Nepal delivered a blow to the India-Nepal relations. But this is hardly the first time this has happened. The article clears some cobwebs about Nepal’s foreign policy. First, it throws light on the past trend set by Nepal. And drawing on the past experience, it suggests the changes India should adopt in new framework to deal with Nepal.

Nepal’s new map: Yet another knock on India-Nepal relations

  • As the parliament in Nepal gets ready to approve a new map that will include parts of Indian territory in Uttarakhand, Delhi is bracing for yet another knock to a bilateral relationship.
  • Many in the Indian strategic community believe that the train wreck was avoidable.
  • But others view the collision between Delhi and Kathmandu as both inevitable and imminent.
  • Even if the territorial issue had been finessed, something else would have triggered the breakdown.

Bigger fissures in relation

  • A closer look suggests that the territorial dispute is merely a symptom of the structural changes.
  • These structural changes are unfolding in the external and internal context of the bilateral relationship.
  • The question, then, is not what Delhi could have done to prevent the current crisis.
  • It should be about looking ahead to build more sustainable ties with Kathmandu.

2 factors India must consider and depart from

  • Any new framework for engaging Kathmandu must involve two important departures from the past in Delhi.
  • 1) First is coming to terms with Nepal’s natural politics of balance.
  • 2) The other is the recognition that Delhi’s much-vaunted “special relationship” with Kathmandu is part of the problem.

Let’s look at the history of Nepal’s geopolitics

  • The founder of the modern Nepali state, Prithvi Narayan Shah, described Nepal as a “yam between two rocks”.
  • He was pointing to the essence of Nepal’s geographic condition between the dominant power in the Gangetic plains on the one hand and Tibet and the Qing empire on the other.
  • Contrary to the conventional wisdom in India, China has long been part of Kathmandu’s international relations.
  • As the East India Company gained ground at the turn of the 19th century, Nepal’s rulers made continuous offers to Beijing to act as China’s frontline against Calcutta’s expansion into the Himalayas.
  • Kathmandu also sought to build a coalition of Indian princes to counter the Company.
  • Even after it lost the first Anglo-Nepal war in 1816, Kathmandu kept up a continuous play between Calcutta and Beijing.
  • As the scales tilted in the Company’s favour after the First Opium War (1839-42), Nepal’s rulers warmed up to Calcutta.
  • When the 1857 Mutiny shook the Company, Kathmandu backed it and regained some of the territories it lost when the Raj replaced the Company.
  • As the fortunes of the Raj rose, Kathmandu rulers enjoyed the benefits of being Calcutta’s protectorate.
  • India inherited this framework but has found it impossible to sustain.

Why the Treaty of Peace and Friendship (1950) lost its appeal?

  • The 1950 Treaty of Peace and Friendship gave the illusion of continuity in Nepal’s protectorate relationship with the Raj and its successor, independent India.
  • That illusion was continuously chipped away amid the rise of mass politics in Nepal, growing Nepali nationalism, and Kathmandu’s acquisition of an international personality.
  • The 1950 Treaty, which proclaims an “everlasting friendship” between the two nations, has become the symbol of Indian hegemony in Nepal.
  • In a paradox, its security value for India has long been hollowed out.
  • It is a political millstone around India’s neck that Delhi is unwilling to shed for the fear of losing the “special relationship”.
  • Delhi has been trapped into a perennial political play among Kathmandu’s different factions and responding to Nepal’s China card.

Weakening of “special relationship”: Essence of Nepal’s foreign policy

  • Once the Chinese Communist Party consolidated its power in Tibet and offered assurances to Nepal, Kathmandu’s balancing impulses were back in play.
  • At the risk of oversimplification, Nepal’s foreign policy since the 1950s has, in essence, been about weakening the “special relationship” with India and building more cooperation with China.
  • Kathmandu has used different labels to package its desire for greater room for manoeuvre between its two giant neighbours — non-alignment, diversification, “zone of peace”, equidistance, and a Himalayan bridge between India and China.
  • The stronger China has become, the wider have Kathmandu’s options with India become.

Way forward

  • It makes no sense for Delhi to hanker after a “special relationship” that a large section of Kathmandu does not want.
  • If Delhi wants a normal and good neighbourly relationship with Kathmandu, it should put all major bilateral issues on the table for renegotiation.
  • Such issues should include the 1950 treaty, national treatment to Nepali citizens in India, trade and transit arrangements, the open border and visa-free travel.
  • Delhi should make it a priority to begin talks with Nepal on revising, replacing, or simply discarding the 1950 treaty.
  • It should negotiate a new set of mutually satisfactory arrangements.
  • India had conducted a similar exercise with Bhutan to replace the 1949 treaty during 2006-07.
  • The issues and political context are certainly more complicated in the case of Nepal.
  • It is better that Delhi bites the bullet and makes a fresh beginning with Kathmandu rather than let the relationship deteriorate.
  • No bilateral relationship between nations can be built on sentiment — whether it is based on faith, ideology or inheritance.
  • Only those rooted in shared interests will endure.
  • Rather than object to Kathmandu’s China ties, Delhi must focus on how to advance India’s relations with Nepal.
  • It should bet that the logic of Nepal’s economic geography, its pursuit of enlightened self-interest, and Kathmandu’s natural balancing politics, will continue to provide a strong framework for India’s future engagement with Nepal.

Conclusion

Discarding the appearances of the “special relationship” might, in fact, make it easier for Delhi to construct a more durable and interest-based partnership with Kathmandu that is rooted in realism and has strong popular support on both sides.

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Capital Markets: Challenges and Developments

What are Social Stock Exchanges?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Social Stock Exchanges (SSEs)

Mains level: NGOs and their funding issues

A working group constituted by the Securities and Exchange Board of India (SEBI) on Social Stock Exchanges (SSEs) has recommended allowing non-profit organisations to directly list on such platforms.

Practice questions for mains:

Q. What are Social Stock Exchanges? Discuss how it will help finance social enterprises in India.

What are Social Stock Exchanges (SSEs)?

  • An SSE is a platform which allows investors to buy shares in social enterprises vetted by an official exchange.
  • The Union Budget 2019 proposed setting up of first of its kind SSE in India.
  • The SSE will function as a common platform where social enterprises can raise funds from the public.
  • It will function on the lines of major stock exchanges like BSE and NSE. However, the purpose of the Social Stock Exchange will be different – not profit, but social welfare.
  • Under the regulatory ambit of SEBI, a listing of social enterprises and voluntary organizations will be undertaken so that they can raise capital as equity, debt or as units like a mutual fund.

Why SSEs?

  • India needs massive investments in the coming years to be able to meet the human development goals identified by global bodies like the UN.
  • This can’t be done through government expenditure alone. Private enterprises working in the social sector also need to step up their activities.
  • Currently, social enterprises are very active in India. However, they face challenges in raising funds.
  • One of the biggest hurdles they face is, apparently, the lack of trust from common investors.

Benefits

  • There is a great opportunity to unlock funds from donors, philanthropic foundations and CSR spenders, in the form of zero-coupon zero principal bonds. These bonds will be listed on the SSE.
  • At first, the SSE could become a repository of social enterprises and impact investors.
  • The registration could be done through a standard process.
  • The SEs could be categorized into different stages such as- Idea, growth stage and likewise, investors can also be grouped based on the type of investment.

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Coronavirus – Health and Governance Issues

PM Swanidhi Scheme for street vendors

Note4Students

From UPSC perspective, the following things are important :

Prelims level: PM Swanidhi Scheme

Mains level: Atmanirbhar Package

The Ministry of Housing and Urban Affairs has launched a micro-credit facility for street vendors under the Swanidhi Scheme.

Try this question from CSP 2016:

Q.Rashtriya Garima Abhiyaan’ is a national campaign to

(a) rehabilitate the homeless and destitute persons and provide then with suitable sources of livelihood

(b) release the sex workers from the practice and provide them with alternative sources of livelihood

(c) eradicate the practice of manual scavenging and rehabilitate the manual scavenger

(d) release the bonded labourers free their bondage and rehabilitate them

PM Swanidhi Scheme

  • The Pradhan Mantri Street Vendor’s Atmanirbhar Nidhi Scheme is aimed at benefiting over 50 lakh vendors who had their businesses operational on or before March 24.
  • The scheme was announced by Finance Minister as a part of the economic package for those affected by the COVID-19 pandemic and lockdown.
  • The loans are meant to help kick-start activity for vendors who have been left without any income since the lockdown was implemented on March 25.
  • The scheme is valid until March 2022.

Expected beneficiaries

  • This loan will be given to those who run shops on the roadside, handcart or streetcar.
  • Fruit-vegetable, laundry, saloon and paan shops are also included in this category.

Facilities provided under the scheme

  • The vendors will be able to apply for a working capital loan of up to ₹10,000, which is repayable in monthly instalments within a year.
  • On timely/early repayment of the loan, an interest subsidy of 7% per annum will be credited to the bank accounts of beneficiaries through direct benefit transfer on a six-monthly basis.
  • The loans would be without collateral. There will be no penalty on early repayment of the loan.

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RTI – CIC, RTI Backlog, etc.

PM-CARES is not a public authority under RTI Act

Note4Students

From UPSC perspective, the following things are important :

Prelims level: PM-CARES, Public Authority under RTI

Mains level: RTI issues

The PMO has refused to disclose details on the creation and operation of the PM-CARES Fund, telling a Right to Information applicant that the fund is “not a public authority” under the ambit of the RTI Act, 2005.

Practice question for mains:

Q. The PM-CARES fund is an old wine in a new bottle. Discuss its feasibility and how it is different in context to the PMNRF.

About PM-CARES Fund

  • The fund will be a public charitable trust under the name of ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’.
  • The PM is Chairman of this trust and members include the Defence Minister, Home Minister and Finance Minister.
  • Contributions to the fund will qualify as corporate social responsibility (CSR) spending that companies are mandated to make.
  • The Fund accepts micro-donations as well.

Not a public authority

  • The PMO cited a Supreme Court observation that indiscriminate and impractical demands under RTI Act for disclosure of all and sundry information would be counterproductive.
  • PM-CARES Fund is not a Public Authority under the ambit of Section 2(h) of the RTI Act, 2005.
  • However, relevant information in respect of PM-CARES Fund may be seen on its website.

Then, what makes an authority, Public?

The relevant section of the RTI Act defines a “public authority” as “any authority or body or institution of self-government established or constituted —

  • by or under the Constitution;
  • by any other law made by Parliament;
  • by any other law made by State Legislature;
  • by the notification issued or order made by the appropriate Government — and includes any (i) body owned, controlled or substantially financed; (ii) NGO substantially financed, directly or indirectly by funds provided by the appropriate govt.

Arguments against PM-CARES

  • The fund carries a public name, the composition of the trust, control, usage of an emblem, government domain name etc. that signifies it as a public authority.
  • PM is the ex-officio chairman of the Trust, while three cabinet ministers are ex-officio trustees.
  • The composition of the trust is enough to show that Government exercises substantive control over the trust, making it a public authority.

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Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc

Kisan Credit Cards (KCC) for 1.5 crore dairy farmers

Note4Students

From UPSC perspective, the following things are important :

Prelims level: KCC scheme

Mains level: KCC and its outreach

The Union Govt. is set to provide Kisan Credit Card (KCC) to 1.5 crore dairy farmers belonging to Milk Unions and Milk producing Companies within the next two months under a special drive.

We can expect multiple statements based prelim question here. Note the following features of the KCC from the newscard:

1. Year of its introduction (in rarest case)

2. Types of banks issuing KCC

3. Credit types extended under KCC

4. Sectors covered under KCC

What is Kisan Credit Card (KCC)?

  • KCC is a credit scheme introduced in August 1998 by banks to extend credit facilities to farmers.
  • This model scheme was prepared by the NABARD on the recommendations of R.V. GUPTA committee to provide term loans for agricultural needs
  • Participating institutions include all commercial banks, Regional Rural Banks, and state co-operative banks. The scheme has short term credit limits for crops and term loans.
  • KCC offering credit to the farmers is of two types: 1. Cash Credit 2. Term Credit (for allied activities such as pump sets, land development, plantation, drip irrigations).

Facilities under KCC

  • Credit card and passbook or credit card cum passbook provided to eligible farmers facilitate revolving cash credit facility.
  • Any number of withdrawals and repayments within a limit, which is fixed on the basis of operational land holding, cropping pattern and scale of finance can be made.
  • Each withdrawal has to be repaid within a maximum period of 12 months and the Card is valid for 3 to 5 years subject to annual review.
  • Conversion/reschedulement of loans is permissible in case of damage to crops due to natural calamities.
  • Crop loans disbursed under KCC Scheme for notified crops are covered under Rashtriya Krishi Bima Yojana, to protect farmers against loss of crop yield caused by natural calamities, pest attacks etc.

What’s’ in the bucket for Dairy Farmers?

  • Under the dairy cooperative movement, approximately 1.7 crore farmers are associated with 230 Milk Unions in the country.
  • In the first phase of this campaign, the target is to cover all farmers who are members of dairy cooperative societies and associated with different Milk Unions and who do not have KCC.
  • Although the general limit for KCC credit without collateral is Rs. 1.6 lakh, but for dairy farmers, it can be upto Rs.3 lakh.
  • This will ensure more credit availability for dairy farmers associated with Milk Unions as well as assuring repayment of loans to banks.

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Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

CHAMPIONS Platform to empower MSMEs

Note4Students

From UPSC perspective, the following things are important :

Prelims level: CHAMPIONS Portal

Mains level: Various moves to boost MSME sector

Recently PM has launched the technology platform CHAMPIONS as a one-stop-shop solution of MSME Ministry.

At the very first sight, the name CHAMPIONS creates a delusion. It looks more of an HRD initiative. Here lies the risk! Please cautiously make a personal note here. Demarcate all such initiatives on an A4 page.

CHAMPIONS Platform

  • CHAMPIONS stand for Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength.
  • 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.
  • 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.
  • This ICT based system is set up to help the MSMEs in a present difficult situation and also to handhold them to become national and international champions.

Detailed objectives

  • Grievance Redressal: To resolve the problems of MSMEs including those of finance, raw materials, labour, regulatory permissions etc particularly in the COVID created a difficult situation;
  • To help them capture new opportunities: including manufacturing of medical equipment and accessories like PPEs, masks, etc and supply them in National and International markets;
  • To identify and encourage the sparks:e. the potential MSMEs who are able to withstand the current situation and can become national and international champions.

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Terrorism and Challenges Related To It

What is Antifa Movement?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Antifa

Mains level: Racial antagonism across the world

As massive protests following the death of a person in racial discrimination continued to rock the US, President Donald Trump has announced that the alleged far-left group Antifa would be designated as a terrorist organisation by his government.

One can expect a similar prelims question:

Q. The Antifa movement recently seen in news is an: Free trade movement/Anti-terror movement etc.

Why the US seeks to ban Antifa?

  • Trump has blamed for the protests that have convulsed cities across the US,
  • Antifa is considered the loosely affiliated group of far-left anti-fascist activists.

Antifa: The group

  • Antifa is an acronym for ‘Anti-Fascist’. It is not an organisation with a leader nor does it have a defined structure or membership roles.
  • Antifa has been around for several decades, though accounts vary on its exact beginnings.
  • The term dates the term as far back as Nazi Germany, describing the etymology of ‘Antifa’ as “borrowed from German Antifa, short for antifaschistische ‘anti-fascist’.
  • Rather, Antifa is more of a movement of activists whose followers share a philosophy and tactics.
  • They have made their presence known at protests, including the “Unite the Right” rally in Charlottesville, Virginia, in 2017.

Its members

  • It is impossible to know how many people count themselves as members.
  • Its followers acknowledge that the movement is secretive, has no official leaders and is organised into autonomous local cells.
  • It is also only one in a constellation of activist movements that have come together in the past few years to oppose the far right.
  • Antifa members campaign against actions they view as authoritarian, homophobic, racist or xenophobic.

Activism over years

  • Antifa members typically dress in black and often wear a mask at their demonstrations, and follow far-left ideologies such as anti-capitalism.
  • The movement has been known to have a presence in the US in the 1980s.
  • It shot into prominence following the election of President Trump in 2016, with violence marking some of its protests and demonstrations.
  • Criticizing mainstream liberal politicians for not doing enough, Antifa members have often physically confronted their conservative opponents on the streets.
  • The group also participates in non-violent protests. Apart from public counter-protests, Antifa members run websites that track white extremist and ultra-right groups.

Criticisms

  • The movement has been widely criticised among the mainstream left and right.
  • Conservative publications and politicians routinely rail against supporters of Antifa, who they say are seeking to shut down peaceful expression of conservative views.

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Foreign Policy Watch: India-China

A phantom called the Line of Actual Control with China

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Ladakh Region, Pangong Lake.

Mains level: Paper 2- Border issue between India and China

Yet again, India and China are engaged in a standoff on the border. But why the issues persist even after four agreements with a view to solve the boundary problem? This article explains the problem in wording of the agreement. And also explains the lack of intent from China’s part.

Four agreements: vision of progress or strategic illusion?

  •  At the heart of India’s and China’s continued inability to make meaningful progress on the boundary issue are four agreements.
  • Those agreements were signed in September 1993, November 1996, April 2005 and October 2013 — between the two countries.
  • Ironically, India and China keep referring to these agreements as the bedrock of the vision of progress on the boundary question.
  • Unfortunately, these are deeply flawed agreements.
  • And also make the quest for settlement of the boundary question at best a strategic illusion and at worst a cynical diplomatic parlour trick.

Let’s look into LAC provision in 1993 and 1996 agreements

  • According to the 1993 agreement, “pending an ultimate solution”, “the two sides shall strictly respect and observe the LAC between the two sides No activities of either side shall overstep the LAC”.
  • Further, both the 1993 and the 1996 agreement—on confidence-building measures in the military field along the LAC— say they “will reduce or limit their respective military forces within mutually agreed geographical zones along the LAC.”
  • This was to apply to major categories of armaments and cover various other aspects as well, including air intrusions “within ten kilometres along the LAC”.

Okay, but where is the LAC?

  • The specification of this phantom LAC as the starting point and the central focus has made several key stipulations and articles of the four agreements effectively inoperable for more than a quarter of a century.
  • In fact, many of the articles have no bearing on the ground reality.
  • Article XII of the 1996 agreement, for instance, says, “This agreement is subject to ratification and shall enter into force on the date of exchange of instruments of ratification.”
  • It is not clear if and when that happened.
  • Nowhere in the 1993 agreement is there the provision to recognise the existing lines of deployment of the respective armies, as they were in 1993.
  • The agreement does not reflect any attempt to have each side recognise the other’s line of deployment of troops at the time it was signed.
  • That would have been the logical starting point.
  • If both armies are to respect the LAC, where is the line?
  • The ambiguity over the LAC has brought a prolonged sense of unease and uncertainty and thus exponentially contributed to the military build-up in those areas.
  • The absence of a definition of this line allows ever new and surreptitious advances on the ground.

What could have been done?

  • Had the 1993 agreement begun the exercise with the phrase “pending an ultimate solution, each side shall strictly respect and observe the line of existing control/deployment” instead of the “LAC”, it would have been more possible to keep the peace.
  • In such a case there would have been two existing lines of control on the map — one for the physical deployment of the Chinese troops and the other for the physical deployment of the Indian troops.
  • This would have rendered the areas between the two lines no man’s land, and would have ensured that the two armies were frozen in their positions.

The issue of two LAC in the eastern and western sector

  • The LAC is two hypothetical lines in the following two sectors-
  • 1) In the eastern sector, where the Chinese have not accepted the loosely defined McMahon line which follows the principle of watershed.
  • 2) The western sector, which is witnessing another episodic stand-off.
  • The first is what Indian troops consider the extent to which they can dominate through patrols, which is well beyond the point where they are actually deployed and present.
  • The second is what the Chinese think they effectively control, which is well south of the line they were positioned at in 1993.

Why map exchange didn’t happen for the western sector?

  • It is in this theatre of the militarily absurd that we should look at the outcome of the attempted exchange of maps in the western sector.
  • It is the sector where this round of confrontation continues between India and China.
  • This came after the exchange of maps in the middle sector.
  • In the middle sector, divergences were the least, i.e., the existing line and the Chinese and Indian idea of the LAC were more or less the same (in 2002).
  • The Foreign Secretary India and the head of the Chinese delegation, met in New Delhi in 2003 for sharing the map of the western sector.
  • It had been agreed that both sides would exchange maps to an agreed scale on each side’s perceptions of the location of the LAC in the western sector.
  • The idea was to superimpose the maps to see where the perceptions converged and, crucially, where they diverged.
  • Due to the contentious nature of the sector, it would provide a starting point, not the end point, to discuss how to reconcile divergences presumed to be significant, given Chinese military behaviour on the ground there.
  • Each side handed over its map to the other.
  • But, head of the Chinese delegation gave it a long, hard look, and wordlessly returned it.
  • They provided no reason for their action.
  • The meeting effectively ended there.

Consider the question “Examine the reasons for the persistent nature of the India-China border issue.”

Conclusion

By disregarding the map, China is not bound in any way by New Delhi’s perception of the LAC, and therefore does not have to limit liberty of action. This was evident then and is especially evident now. Because the nature of the terrain, deployment, and infrastructure and connectivity asymmetries in the border areas continue to be so starkly in China’s favour that it is clear that the Chinese are in no hurry to settle the boundary question. They see that the cost to India in keeping this question open suits them more than settling the issue.

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Oil and Gas Sector – HELP, Open Acreage Policy, etc.

Is India prepared for crude oil eventualities?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Import of crude oil and its proportion in total consumption.

Mains level: Paper 3- Energy security.

The era we are living in is reigned by the uncertainties. And the oil market is not immune to these uncertainties. Against this background, India’s energy security is discussed in this article. Switching to the “just in case” needs with respect to crude oil is suggested by the author. But, that would require capital. So, how could the problem of capital be solved? Read the article to know…

Switching from just in time to just in case

  • The post-COVID “world (will be) switching from just in time to just in case”  said economist Alan Kirman.
  • This is more so for the Indian petroleum sector.
  • The decision-makers of this sector should switch to a “just in case” policy mode.

Oil market: Land full of uncertainties

  • The oil market is in no man’s land. Few speak with conviction about its future trajectory.
  • Last month, it dropped into negative territory for a day in the USA.
  • But today the price of the same crude quality is above $30/barrel.
  • If one reads the commentary of experts, some predict that prices will soon cross $50/barrel while some predict price-crash to below $20/barrel.
  • The fine print of these reports is always caveated with the disclaimer, “it all depends” on one or more of the comparably uncertain variables.
  • These variables include economic growth, geopolitics — US-China relations, the timing of the development of an anti-COVID vaccine or a combination of all these variables.
  • The fact is no one really knows how the petroleum sector will fare in the “new normal” of the post-COVID world.

The problems policy-makers face: some known, some unknown

  • Policy-makers know that irrespective of the twists and turns in the petroleum market, India will need fossil fuels (coal, oil and gas) to drive its economic growth for at least the next decade, if not longer.
  • And that a sizeable percentage of these requirements will have to be imported.
  • The country does not have the geology to expect gushers especially in an environment of volatile (and relatively low) oil prices.
  • What must also be discomforting is the “known unknown” of the post-COVID stress.
  • They know that COVID has knocked the props from under the Indian economy.
  • They also know that every petroleum company, irrespective of whether it is in the private or public sector, will face an increasingly uncertain and challenging future business environment.
  • What they do not know is the nature of these challenges, and therefore, the conditions, sine qua non, for managing them.

Let’s look at some facts and figures of India’s crude oil requirements

  • India consumes around 50,00,000 barrels of crude oil every day.
  • Of that, it imports approximately 45,00,000 barrels/day making the country the third-largest crude market in the world.
  • Every month, on average, 70 loaded VLCC (very large crude carriers ) — accounting for 10 per cent of the global tanker market — bring crude oil to India.
  • Approximately 60 per cent of this oil is discharged in and around the Jamnagar area and then carried by pipelines to refineries in Jamnagar, Mathura, Panipat, Bina and Bhatinda.
  • And 50 per cent or so is sourced from Saudi Arabia, Kuwait, Abu Dhabi, Iran and Iraq.
  • It is against this background of post-COVID uncertainties and above facts India should consider switching to “just in case” policy mode.

Why should India consider switching to “just in case” policy mode?

We should analyse this by considering two scenarios

  • ONGC/OIL are strategically important PSUs.
  • Few have questioned the support to these two companies and the importance of harnessing our indigenous oil and gas reserves.
  • Until now, this support has been premised on the view that oil supplies are relatively scarce and that prices will trend upwards.

1) Low oil prices scenario

  • 1) We now need to ask: What if, “just in case” the oil market is structurally oversupplied and prices fall to such low levels that it makes no commercial sense for ONGC/OIL to expend public resources on “ high risk, high cost” exploration?
  • Oil and gas are, after all, tradables and can be purchased on the high seas.
  • Should they not, given this possibility, contemplate redefining their core purpose and perhaps pivot away from oil and gas towards clean energy?

2) Choking of supply lines scenario

  • Looked at through a different lens but with a “just in case” mindset, the preponderance of crude supplies sourced from countries facing deep political, economic and social tensions raises the question:
  • What if these domestic problems choked our access?
  • How would we manage the disruption?
  • Our decision-makers have worried about supply security for decades.
  • But the circumstances created by COVID are new.
  • The issue of strategic reserves could, for instance, acquire a different hue.
  • We have currently 11 days of reserve cover (5.33 million tonnes) with plans to increase it to 24 days (11.83 million tonnes).
  • Were we to decide to build up these reserves to levels comparable to other countries of between 70 to 100 days of import cover, the issue would be capital.
  • Given the slowdown of the economy and the pressures on the exchequer, the government would not have the financial resources to invest in the creation of additional facilities.
  • The only way this financial hurdle could be overcome is if the government and the private sector invest jointly.
  • This collaborative option would have to be considered to counter the “just in case” contingency of prolonged and major disruption.
  • And if indeed such an option were acceptable, it could be extended to cover trading, crude purchases, co-freighting, subject of course to anti-trust and competition rules.

Consider the example to understand the importance of “just in case” thinking

  • An example to embed the importance of “just in case” thinking can be drawn from the geopolitics of our neighbourhood.
  • What if the relations between India/Pakistan/China took an ugly turn?
  • What security measures should we contemplate to protect the petroleum assets located in Mumbai and Jamnagar?

Consider the question “Over the decades, India has been grappling with the issue of energy security. With the rising uncertainties around the world, the issue has gained more prominence. In light of this, suggest the ways to tide over the disruption in oil supplies.”

Conclusion

In the backdrop of COVID, when all hands on decks are needed to tackle the “urgent” task of reviving the economy, the government must not, in the process, lose sight of the “importance” of creating, if nothing else, the mindset of preparedness to respond to “just in case outcomes”.

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Coronavirus – Economic Issues

Using COVID crisis to reorient India towards reforms

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Provision for various sectors in stimulus package

Mains level: Paper 3-Comparison of of stimulus package of India with other economies.

Following the announcement of relief and stimulus package, the debate began over its various aspects. This article assesses the various aspects of the package and draws comparison with the package announced by the other countries. So, how does India fare compared with other countries?

Fiscal component of  stimulus package

  • According to the IMF-PT (policy tracker), the fiscal component of the Indian package is estimated to be at least 3.5 per cent of GDP as expenditure for poor households, migrant workers and agriculture.
  • There is an additional 0.5 per cent of GDP for states to spend unconditionally, bringing the fiscal package excluding loans to businesses to at least 4 per cent of GDP.
  • The support for businesses (MSMEs) is estimated to be 2.7 per cent of GDP.
  • Of this, at least 2 per cent of GDP is in the form of 100 per cent credit guarantees and equity infusion.

Comparison with major emerging economies

  • Among major developing economies, only Brazil -8 per cent of GDP– and Peru -7 per cent of GDP– have a fiscal stimulus higher than the 5 per cent level for India.
  • The Brazil estimate includes about 3 per cent of GDP as working capital loans to businesses and households.
  • The fiscal support level for some important emerging economies is — China 2.5 per cent of GDP and Indonesia 3.5 per cent.

Why it is difficult to segregate the stimulus package?

  • While comparing the fiscal stimulus packages across countries, it is important to understand that such packages are in the nature of additional spending and tax reliefs.
  • Which can work directly through aggregate demand or indirectly by mitigating risk and enhancing access to fund.
  • Access to fund is ensured in the nature of credit guarantees to financial institutions and non-financial enterprises
  • A large number of fiscal stimulus packages announced by different countries contain credit guarantees to financial institutions, SMEs, and agriculture.
  • Hence, it is difficult to segregate fiscal stimulus into its pure and impure components.
  • Most economists, and international organisations, recognise that fiscal stimulus consists of both the pure and impure.
  • And includes three broad items — a direct “above-the-line” component, a “below-the-line” component and guarantees of various forms primarily credit.
  • The choice of using only one component of the fiscal stimulus is selective and highly inappropriate.

India as a positive fiscal stimulus outlier

  • To put the packages into perspective, the average of all fiscal measures in the G24 developing economies is equal to 3.6 per cent.
  • No matter how the calculation is done, India is a positive fiscal stimulus outlier; by IMF-PT calculations.
  • The stimulus is close to the largest among major emerging market economies.

So, how much rich countries are spending?

  • The rich nations are spending more — they can afford to. Japan announced what may be the upper limit to the expansion — 21.1 per cent of GDP.
  • However, this does include large elements of loans and credit guarantees.
  • Through a combination of several fiscal measures (tax deferrals, credit guarantees, etc.) the US has pledged close to 13 per cent of GDP.
  • The European Union, on average, has pledged 4 per cent of GDP.
  • The average for advanced countries is around 6 per cent of GDP.

Significance of monetary policy change made by RBI

  • The monetary policy change in India is quite significant.
  • The change paves the way for internationally competitive monetary policy.
  •  That is, real interest rates comparable to those prevalent in competitor economies.
  • The repo rate now stands at 4 per cent, with inflation well contained.
  • This is substantially a much different, and much-improved RBI response than that what occurred in 2008-09.
  • At that time, as a monetary counter to the financial crisis, the RBI reduced the repo rate by 425 basis points to 4.75 per cent.
  • This was done over seven months and the prevailing CPI inflation rate was 10 per cent.

Economic reforms as a part of stimulus package

  • India has announced several economic reforms as a part of the stimulus package.
  • These are long-awaited — freeing up of the labour market, allowing farmers to sell their produce and land to who they choose, removal of archaic laws like the Essential Commodities Act, with the promise of more to come.
  • This is not an empty promise — the Centre will advance another 1.5 per cent of GDP to states to expand spending.
  • This advance will be conditional on them for undertaking long-pending reforms.
  • The Indian fiscal package is reformist, well-disciplined and provides focused support; and if needed, there is still room for additional measures.

Conclusion

The Indian fiscal package is reformist, well-disciplined and provides focused support; and if needed, there is still room for additional measures. We should use the crisis to re-orient India towards its long-awaited destiny.

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Telecom and Postal Sector – Spectrum Allocation, Call Drops, Predatory Pricing, etc

What is the National Numbering Plan?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: TRAI, National numbering plan

Mains level: National numbering plan

The Telecom Regulatory Authority of India (TRAI) has recommended that a new National Numbering Plan be issued at the earliest so that a uniquely identifiable number can be provided to every subscriber in India.

The TRAI and Telecom Disputes Settlement and Appellate Tribunal are quite often seen in the news.  Most recent was the dispute risen due to AGR dues.

TRAI has a wide range of jurisdiction over Telecoms. Keep a track on all such news.

National Numbering Plan

  • The management of numbering resources is governed by the National Numbering Plan.
  • The Department of Telecom administers the numbers for fixed and the mobile networks based on the ITU’s Telecommunication Standardization Sector (ITU-T) recommendations.
  • TRAI has recommended automated allocation of numbering resources be done using number management system software to speed up the process

Broadly, the TRAI has recommended:

  • switching to an 11-digit mobile number,
  • reallocation of mobile numbering resources surrendered by operators who have shut shop and
  • prefixing zero for all mobile calls made from fixed line

Issues with 11 digit number

  • TRAI said that some serious problems are anticipated with a change in the mobile number from 10 to 11 digits.
  • Migrating to 11 digits would require widespread modifications in the configuration of switches involving cost.
  • This would also cause inconvenience to the customers in the form of dialling extra digits and updating phone memory.
  • This could lead to more dialling errors, traffic, and loss of revenue to telecom operators.

Still, why need a plan as such?

  • The total number of telephone subscribers in India stands at 1,177.02 million with a teledensity of 87.45% at the end of January 2020.
  • This increasing digitization would pave the way towards the dream of digital India and mobile economy.
  • Thus, it has become necessary to review the utilization of numbering resources in the country.
  • Considering the above scenario the implementation of the TRAI’s recommendation with solutions to possible issues would help for sustainable growth of the telecommunication services.
  • Hence TRAI needs to review the utilization of the numbering resources and make some policy decisions to ensure that adequate resources are available for sustainable growth of the telecom services.

Back2Basics: Telecom Regulatory Authority of India (TRAI)

  • The TRAI is a statutory body set up under section 3 of the Telecom Regulatory Authority of India Act, 1997.
  • It is the regulator of the telecommunications and its tariffs in India.
  • The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI.
  • TRAI regularly issues orders and directions on various subjects such as tariffs, interconnections, quality of service, DTH services and mobile number portability.

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G20 : Economic Cooperation ahead

G-7

Note4Students

From UPSC perspective, the following things are important :

Prelims level: G-20, G-7 members

Mains level: Significance of the these groups of counries and their say in global economy

Calling the existing Group of Seven (G-7) club a “very outdated group of countries”, US Prez. Trump said that he wanted to include India, Russia, South Korea, and Australia in the group.

Note the members of G7 and G20. UPSC may puzzle you asking which G20 nation isn’t a member of G7.

The Group of 7

  • The G-7 or ‘Group of Seven’ includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
  • It is an intergovernmental organisation that was formed in 1975 by the top economies of the time as an informal forum to discuss pressing world issues.
  • Initially, it was formed as an effort by the US and its allies to discuss economic issues.
  • The G-7 forum now discusses several challenges such as oil prices and many pressing issues such as financial crises, terrorism, arms control, and drug trafficking.
  • It does not have a formal constitution or a fixed headquarters. The decisions taken by leaders during annual summits are non-binding.
  • Canada joined the group in 1976, and the European Union began attending in 1977.

Evolution of the G-7

  • When it started in 1975—with six members, Canada joining a year later—it represented about 70% of the world economy.
  • And it was a cosy club for tackling issues such as the response to oil shocks.
  • Now it accounts for about 40% of global gdp.
  • Since the global financial crisis of 2007-09 it has sometimes been overshadowed by the broader g20.
  • The G-7 became the G-8 in 1997 when Russia was invited to join.
  • In 2014, Russia was debarred after it took over Crimea.

Expelling Russia

  • The G-7 was known as the ‘G-8’ for several years after the original seven were joined by Russia in 1997.
  • The Group returned to being called G-7 after Russia was expelled as a member in 2014 following the latter’s annexation of the Crimea region of Ukraine.
  • Since his election in 2016, President Trump has suggested on several occasions that Russia be added again, given what he described as Moscow’s global strategic importance.

Why Trump wants to expand the G7 group?

1.Joint  front against China

  •  The expanded G7 is seen as an attempt by the US to form a joint front against China.
  • The US President has stepped up his criticism of the Asian powerhouse over a range of issues, from initially holding back information on the coronavirus outbreak to its actions on Taiwan and changes in Hong Kong’s special status.

2.Pressure  from G7 countries

  • Another reason is Trump has faced heat from other G7 members in the last two summits, for various controversial decisions taken by him such as pulling out from trade deals, the Iran nuclear deal as well as the Paris climate pact.
  • Trump’s “America First” policy and his attacks on key US allies over various trade and economic issues have created faultlines within the grouping.

3.Add more weight to the grouping’s profile. 

The participation and eventual inclusion of Australia, South Korea, Russia (not favoured by the UK) and India could certainly add more weight to the grouping’s profile.

Why G7 needs a revival?

  • The rise of India, China, and Brazil over the past few decades has reduced the G-7’s relevance, whose share in global GDP has now fallen to around 40%.

Relevance of G7 for India

  • India will get more voice, more influence and more power by entering the G7.
  • After UN Security Council (UNSC), this is the most influential grouping.
  • If the group is expanded it will collectively address the humongous issues created by the Wuhan virus,
  • Diplomatically, a seat at the high table could help New Delhi further its security and foreign policy interests, especially at the nuclear club and UN Security Council reform as well as protecting its interests in the Indian Ocean.

Challenges in India’s entry

1.Lack of consensus:

  • The decision to expand the grouping cannot be taken by the US alone.
  • Other members such as the UK, France, Germany, Italy, Japan and Canada, have to not only agree to Trump’s proposal to expand the grouping but also on the new members that he wants to add, said a diplomatic source of one of the G7 member countries.

2.Upset China:

  • China is upset at the plans to expand the G7, stating that such actions will result in the creation of a “small circle” against Beijing and thus such a plan is “doomed to fail”.
  • China will put pressure on G-7 countries

Discipline China, not isolate it

  • Trump’s motivation in expanding the G-7 to include India and Russia while keeping China out is transparent.
  • If keeping China out was not the intention, the G-7 could easily have dissolved themselves and revitalised the presently inert G-20.
  • There are, of course, good reasons why Xi Jinping’s China requires to be put on notice for its various acts of omission and commission and disrespect for international law.
  • However, disciplining China is one thing, isolating it quite another.
  • If the new group is viewed as yet another arrow in the China containment quiver, it would place India and most other members of the group in a spot.
  • Everyone wants China disciplined, few would like to be seen seeking its isolation.
  • Asia needs a law-abiding China, not a sullen China.
  • Japan and Australia, have serious concerns about China’s behaviour.
  • But they may not like the new group to be viewed purely as an anti-China gang-up.
  • That may well be the case with South Korea too.
  • Indeed, even India should tread cautiously.
  • India has more issues with China than most others in the group, spanning across economic and national security issues and yet it should seek a disciplined China, not an isolated one.

So, what should be on the agenda of the new group?

  • The proposed expanded G7 group should define its agenda in terms that would encourage China to return to the pre-Xi era of global good behaviour.
  • The G-7 came into being in the mid-1970s against the background of shocks to the global financial and energy markets.
  • The G-12(proposed expanded group)  would come into being against the background of a global economic crisis and the disruption to global trade caused both by protectionism and a pandemic.
  • The two items on the next summit agenda would have to be the global response to the COVID-19 pandemic, the rising tide of protectionism and mercantilism and the global economic slowdown.
  • The summit will have to come forward with some international dos and don’ts to deal with the challenge posed by these disruptions.
  • New rules should apply to both the US and China: These new rules of international conduct would have to apply to both China and the US.
  • Widening the agenda: To be able to alter China’s behaviour without isolating it, the expanded group will have to widen their agenda.
  • Widening involves going beyond the purely economic issues that the G-7 originally focused on, and include climate change, health care and human rights.

Back2Basics: The G-20

  • The G-20 is a larger group of countries, which also includes G7 members.
  • The G-20 was formed in 1999, in response to a felt need to bring more countries on board to address global economic concerns.
  • Apart from the G-7 countries, the G-20 comprises Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey.
  • Together, the G-20 countries make up around 80% of the world’s economy.
  • As opposed to the G-7, which discusses a broad range of issues, deliberations at the G-20 are confined to those concerning the global economy and financial markets.
  • India is slated to host a G-20 summit in 2022.

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Foreign Policy Watch: India-China

THAAD defence system

Note4Students

From UPSC perspective, the following things are important :

Prelims level: THAAD defence system

Mains level: THAAD and its features to define geopolitics

China has issued a statement reiterating its long-standing objections to the presence of the US THAAD missile defence system in South Korea.

Try this question from CSP 2018:

Q. What is “Terminal High Altitude Area Defense (THAAD)”, sometimes seen in the news?

(a) An Israeli radar system

(b) India’s indigenous anti-missile programme

(c) An American anti-missile system

(d) A defence collaboration between Japan and South Korea

What is THAAD?

  • THAAD is an acronym for Terminal High Altitude Area Defense, a transportable, ground-based missile defence system.
  • It is coupled with space-based and ground-based surveillance stations, which transfer data about the incoming missile and informs the THAAD interceptor missile of the threat type classification.
  • THAAD is alarmed about incoming missiles by space-based satellites with infrared sensors.
  • This anti-ballistic missile defence system has been designed and manufactured by the US company Lockheed Martin. South Korea is not the only country with the THAAD missile defence system.
  • It has been previously deployed in the UAE, Guam, Israel and Romania.

The South Korea-China controversy over THAAD

  • In South Korea, the THAAD missile defence system is operated by the US army stationed in the country.
  • The US had previously announced that the deployment of this missile defence system was a countermeasure against potential attacks by North Korea, particularly after the country had engaged in testing ballistic missiles.
  • In 2017, matters escalated in the Korean Peninsula after North Korea test-fired a few missiles in the direction of US bases in Japan.
  • Following this incident, the US amended its plans and moved the systems to its army base in Osan, South Korea while the final deployment site was being prepared.
  • These moves by the US and by extension, South Korea, particularly angered China.

China’s reservations against THAAD

  • China’s opposition has little to do with the missiles itself and is more about the system’s inbuilt advanced radar systems that could track China’s actions.
  • The controversy also has much to do with the geopolitics and complex conflicts in East Asia, with the US having a presence in the region particularly through its many military bases in Japan and South Korea.
  • According to some observers of East Asia, China believes the US exerts influence over South Korea and Japan and may interfere with Beijing’s long-term military, diplomatic and economic interests in the region.
  • The US and South Korea have consistently maintained that these missiles are only to counter potential threats by North Korea.
  • South Korea also issued a statement saying the number of missiles had not increased but had only been replaced with newer versions.

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