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  • Corporate Social Responsibility: Issues & Development

    Amendment to the CSR Rules

    | Governance | Mains Paper 2: Government Scheme/Policies

    The Corporate Affairs Ministry has amended the rules for Corporate Social Responsibility (CSR) expenditure to allow companies to undertake multi-year projects, and also require that all CSR implementing agencies be registered with the government.

    Q.What do you mean by CSR? Discuss the role of CSR activities in social transformation.

    What is Corporate Social Responsibility (CSR)?

    • CSR is a type of business self-regulation that aims to contribute to the societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethically-oriented practices.
    • It rests on the ideology of “give and take” i.e. to take scarce resources from the environment for running a business, and in turn to contribute towards economic, social, and environmental development.

    CSR in India

    • India is the first country in the world to make corporate social responsibility (CSR) mandatory, following an amendment to the Companies Act, 2013 in April 2014.
    • Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger as part of any CSR compliance.

    All companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more, are required to spend 2 per cent of their average profits of the previous three years on CSR activities every year.

    What are the new amendments?

    • The amended CSR rules allow companies to set off CSR expenditure above the required 2 percent expenditure in any fiscal year against required expenditure for up to three financial years.
    • There lies an ambiguity whether the rule would apply for expenditure undertaken prior to the amendment.
    • The government is thus allowing corporates that have in good faith incurred excess CSR expenditure in the past to set it off against future CSR expenditure requirements.

    Other key changes

    • The amended rules require that any corporation with a CSR obligation of Rs 10 crore or more for the three preceding financial years would be required to hire an independent agency to conduct an impact assessment of their entire project with outlays of Rs 1 crore or more.
    • Companies will be allowed to count 5 percent of the CSR expenditure for the year up to Rs 50 lakh on impact assessment towards CSR expenditure.

    What are the changes required for implementing agencies?

    • The new amendment restricts companies from authorizing either a Section 8 company or a registered public charitable trust to conduct CSR projects on their behalf.
    • A Section 8 company is a company registered with the purpose of promoting charitable causes, applies profits to promoting its objectives, and is prohibited from distributing dividends to shareholders.
    • Further, all such entities will have to be registered with the government by April 1.

    Impact of the move

    • The change would impact CSR programs of a number of large Indian companies that conduct projects through private trusts.
    • It would mean such private trusts would either have to be converted to registered public trusts or stop acting as CSR implementing agencies.

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

    ‘The Inequality Virus’ Report

    IOCR | Economics | Mains Paper 3: Inclusive Growth & Issues

    The ‘Inequality Virus Report’ was recently released on the opening day of the World Economic Forum in Davos.

    About the report

    • The Inequality Virus Report was released by Oxfam.
    • It inquired into different forms of inequities, including educational, gender and health during the pandemic.

    Highlights of the report

    ‘Rise’ in wealth

    • Indian billionaires increased their wealth by 35% during the lockdown to ₹ 3 trillion, ranking India after the U.S., China, Germany, Russia and France.
    • The wealth of just the top 11 billionaires during the pandemic could easily sustain the MGNREGS or the Health Ministry for the next 10 years, stated the report.
    • A person (no citation needed!) who emerged as the richest man in India and Asia, earned ₹90 crores an hour during the pandemic when around 24% of the people in the country were earning under ₹ 3,000 a month during the lockdown.
    • The increase in his wealth alone could keep 40 crores, informal workers, out of poverty for at least five months, said the report.

    Observations made

    Health: Only 6% of the poorest 20% have access to non-shared sources of improved sanitation, compared to 93.4 % of the top 20 %.

    Education: Till October, 32 crores students were hit by the closure of schools, of whom 84 % resided in rural areas and 70 %attended government schools. Dalits, Adivasis and Muslims were likely to see a higher rate of dropout. Girls were also most vulnerable as they were at risk of early and forced marriage, violence and early pregnancies, it noted.

    Gender: Unemployment of women rose by 15% from a pre-lockdown level of 18 %, which could result in a loss of India’s GDP of about 8 % or ₹15 trillion. Women who were employed before the lockdown were also 23.5 percentage points less likely to be re-employed compared to men in the post lockdown phase.

    Recommendations

    • It recommended reintroducing the wealth tax and affecting a one-time COVID-19 cess of 4% on taxable income of over ₹10 lakh to help the economy recover from the lockdown.
    • According to its estimate, a wealth tax on the nation’s 954 richest families could raise the equivalent of 1% of the GDP.

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  • Freedom of Speech – Defamation, Sedition, etc.

    Petition in SC seeks Guidelines for Electronic Media

    | Polity | Mains Paper 2: Indian Constitution – historical underpinnings, evolution, features, amendments, significant provisions and basic structure

    The Supreme Court has decided to examine a petition seeking the framing of guidelines outlining the broad regulatory paradigm within which the right to free speech of broadcasters and electronic media can be judicially regulated.

    What is the petition about?

    • The petition wants the court to consider substantial questions of law, including whether the electronic media enjoys greater freedom than ordinary citizens and whether they could only be subject to self-regulation.
    • It has questioned whether free speech entails misinformation, fake news, hate speech, propaganda, paid news, communal and derogatory reportage, incitement, etc.
    • It has asked whether regulation will amount to the curtailment of the Press if done within the parameters specified under “reasonable restrictions” of Article 19(2) of the Constitution.
    • The plea said the right to life and dignity envisaged the right of citizens to “free, fair and proportionate media reporting”.

    What is Article 19(2)?

    • This article authorizes the government to impose, by law, reasonable restrictions upon the freedom of speech and expression “in the interests of… public order.”
    • To understand the Supreme Court’s public order jurisprudence, it is important to break down the sub-clause into its component parts and focus upon their separate meanings.
    • Specifically, three terms are important: “reasonable restrictions”, “in the interests of”, and “public order”.
    • Clause (2) enables the legislature to impose certain restrictions on free speech under the following heads:
    1. Security of the State
    2. Friendly relations with foreign states
    3. Public order
    4. Decency and morality
    5. Contempt of court
    6. Defamation
    7. Incitement to an offense and
    8. Sovereignty and integrity of India
    • Reasonable restrictions on these grounds can be imposed only by a duly enacted law and not by executive action.

    The task before the court

    • The principal issue before the court is to bring about a balance between the right to freedom of speech and the expression of the media and various other rights.
    • These include the competing right to information of the citizenry, the right to reputation and dignity as well as the interest of preserving peace and harmony in the nation.

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  • Zoonotic Diseases: Medical Sciences Involved & Preventive Measures

    What is Herd Immunity?

    | Governance | Mains Paper 2: Health & Education

    The initial findings of the fifth round of serological survey conducted in Delhi suggest that over 56 percent of the people have developed antibodies against Covid-19 implying achievement of herd immunity.

    Herd Immunity

    • Herd immunity is when a large number of people are vaccinated against a disease, lowering the chances of others being infected by it.
    • When a sufficient percentage of a population is vaccinated, it slows the spread of disease.
    • It is also referred to as community immunity or herd protection.
    • The decline of disease incidence is greater than the proportion of individuals immunized because vaccination reduces the spread of an infectious agent by reducing the amount and/or duration of pathogen shedding by vaccines, retarding transmission.
    • The approach requires those exposed to the virus to build natural immunity and stop the human-to-human transmission. This will subsequently halt its spread.

    Sero-surveys in Delhi

    • The results of the latest serosurvey in Delhi have led researchers and experts to surmise that a large section of the city’s population has already developed antibodies against Covid-19.
    • The presence of antibodies among a large percentage of the population could be a reason for the decline in the daily number of Covid-19 cases.
    • As more people are able to resist infection, it will help to break the chain of transmission of the virus.
    • Five serological surveys have been carried out in Delhi so far, including the present one, which was conducted in January.
    • The survey conducted by NCDC in July last year suggested the presence of antibodies in 23 percent of those surveyed.
    • In August, the survey conducted by the Delhi government showed 29.1 percent had antibodies.

    The relevance of such surveys

    • Carrying out repeated serological surveillance on the same population gives an idea of how the disease is behaving.
    • It is always good to have surveillance regularly to understand the trends.
    • Having robust surveillance is always beneficial, it may not be too close, but it may help us in giving an idea, even of the natural history of the disease.

    What do the data suggest about herd immunity?

    • Many researchers believe that if 60 percent or more of the population has developed antibodies against Covid-19, there is a possibility of acquiring herd immunity.
    • In Delhi, it is quite indicative, as the number of cases is also going down. This shows that we are moving closer towards acquiring herd immunity.

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  • Leveraging government-private thought partnerships

    op-ed snap | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters

    Thought partnership between government and the external players can aid in informed policymaking. The article deals with these issues and suggest forging of more of such partnerships. 

    Government working together with external partners

    • Policymaking requires multiple rounds of consultations and co-working with different entities, including collaboration between the government and external partners.
    • Over the last few years, there has been increasing evidence of the government and external partners working together on complex policy problems.
    • The government has formalized the induction of private individuals into the system by opening up lateral entry.
    • Several central government ministries and entities, such as NITI Aayog, routinely recruit private individuals as consultants, officers on special duty, or young professionals.
    • Given the staggering vacancies in the central government, such support is critical since civil servants are generally overburdened and under-resourced.

    What is thought partnership and how it works

    • Thought partnerships are a structured mechanism for private entities to lend relevant strategic expertise to the government on policy design, evaluation, and implementation.
    • It is also not always feasible for the government itself to fund projects involving private partners, more so when such projects are unconventional thought partnerships.
    • Several domestic and international philanthropies and impact investing firms are already investing in critical sectors in developing countries including India.
    • However, much of this funding goes into supporting projects or interventions that work in limited, contextual settings rather than systemic or sectoral transformation programs.
    • It is here that philanthropies and impact investing firms can make a huge difference.

    Past thought partnerships

    • In 2005, the Ashok Lahiri Committee report stated that there was not enough knowledge about external capital flows and controls in India.
    • The committee’s recommendation resulted in the establishment of the National Institute of Public Finance and Policy, Department of Economic Affairs research program.
    • The program led to the creation of a rich body of world-class research on capital controls and flows in India that was used to inform government policy on the matter.
    • In 2015, the Ministry of Corporate Affairs constituted a research secretariat headed by the Vidhi Centre for Legal Policy, to support the Companies Law Committee to make “informed decisions”.
    • The National Institute of Financial Management is working with the Department of Economic Affairs to provide legal research and technical assistance on Indian and foreign financial markets, policy analysis, formulation as well as the conduct of impact assessment studies on decisions taken by the Securities and Exchange Board of India.

    Consider the question “What is thought partnership and how it could help in making informed policymaking? What are the challenges in forging thought partnerships?”

    Conclusion

    It is in the public interest that more thought partnerships are forged and funded to channel external expertise and skills towards finding scalable solutions to the pressing policy challenges the country faces.

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  • India’s Bid to a Permanent Seat at United Nations

    Intergovernmental Negotiations (IGN) at UNSC

    IOCR | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Seeking urgent reform of the United Nations Security Council (UNSC), India has highlighted the failure of the Intergovernmental Negotiations (IGN) since 13 years of its establishment.

    Note various countries in the various groups.

    What is the news?

    • India, along with Brazil, Japan and Germany are pressing for urgent reform of the UNSC and for a permanent seat in the reformed 15-member top organ of the world body.
    • India has said that the UNSC is finding itself unable to act effectively to address increasingly complex issues of international peace and security.
    • The UNSC lacks inclusivity of those who need to be members of the powerful organ of the world body.

    What is IGN?

    • The Intergovernmental Negotiations framework or IGN is a group of nation-states working within the United Nations to further reform of the UNSC.
    • The IGN is composed of several different international organizations, namely:
    1. African Union (55 member states)
    2. G4 nations (Brazil, Germany, India and Japan)
    3. Uniting for Consensus Group (UfC), also known as the “Coffee Club” (it aims to counter the bids for permanent seats proposed by G4 nations, includes Pakistan, Turkey, Canada, Spain and Italy)
    4. L69 Group of Developing Countries ( it includes developing countries from Africa, Latin America and the Caribbean, Asia and the Pacific)
    5. Arab League (six members: Egypt, Iraq, Jordan, Lebanon, Saudi Arabia, and Syria) and
    6. Caribbean Community ( a group of 15 member countries called CARICOM)

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  • Right To Privacy

    What is Non-price Competition?

    Prelims Only | Polity | Mains Paper 2: Indian Constitution – historical underpinnings, evolution, features, amendments, significant provisions and basic structure

    Data privacy can take the form of non-price competition and abuse of dominance can lower privacy protection, a study by the Competition Commission of India (CCI) has said.

    Try this PYQ:

    Q.Right to Privacy is protected as an intrinsic part of Right to Life and Personal Liberty. Which of the following in the Constitution of India correctly and appropriately imply the above statements?

    (a) Article 14 and the provisions under the 42nd Amendment to the Constitution

    (b) Article 17 and the Directive Principles of State Policy in Part IV

    (c) Article 21 and the freedoms guaranteed in Part III

    (d) Article 24 and the provisions under the 44th Amendment to the Constitution

    What is Non-price Competition?

    • Non-price competition is a marketing strategy “in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship”.
    • It often occurs in imperfectly competitive markets as it exists between two or more producers that sell goods and services at the same prices but compete through non-price measures.
    • Such measures include marketing schemes and greater quality or any sustainable competitive advantage other than price.

    What is CCI’s observation?

    • The CCI study made observations about non-price factors such as quality of service (QoS), data speeds etc. which are likely to be the new drivers of competitive rivalry between service providers in the telecom sector.
    • CCI noted that an aspect of data in the context of competition in digital communications market is the conflict between allowing access and protecting consumer privacy.

    Privacy at stake

    • Abuse of dominance can take the form of lowering the privacy protection and therefore fall within the ambit of antitrust as low privacy standard implies lack of consumer welfare.
    • Privacy can take the form of non-price competition, said the CCI.
    • On other non-price factors of competition, CCI found that consumers ranked network coverage at the top followed by customer service despite their Privacy.

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  • Port Infrastructure and Shipping Industry – Sagarmala Project, SDC, CEZ, etc.

    Shipping sector in india

    op-ed snap | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    The article deals with the problems faced by India’s shipping sector and suggests the measures to improve the shipping sector.

    Importance of shipping for economic growth

    • The major economies of the world have always realized the potential of shipping as a contributor to economic growth.
    • For instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI).
    • However, geographically, China is not as blessed as India, yet, seven of the top 10 container ports in the world are in China, according to the World Shipping Council.
    • What aided China’s growth are strong merchant marine and infrastructure to carry and handle merchandise all over the world.

    Lack of carrying capacity

    • All the shipping infrastructure in peninsular India only helps foreign shipping liners.
    • India has concentrated only on short-term solutions.
    • Foreign ship owners carry our inbound and outbound cargo. This is the case in container shipping too.
    • As a country, we have still not optimized our carrying capacity. 
    • Much of foreign currency is drained as transshipment and handling costs every day.
    • Due to this, members of our maritime business community have also preferred to be agents for foreign ship owners or container liners rather than becoming ship owners or container liners themselves.
    • As a result, there is a wide gap between carrying capacity and multi-folded cargo growth in the country.

    Way forward

    1) Regional cargo-specific ports

    • Instead of creating regional cargo-specific ports in peninsular India, we allowed similar infrastructural developments in multiple cargo-handling ports.
    • As a result, Indian ports compete for the same cargo.
    • We need to make our major ports cargo-specific, develop infrastructure on a par with global standards, and connect them with the hinterlands as well as international sea routes, they will automatically become transshipment hubs.
    • We need to only concentrate on developing the contributing ports to serve the regional transshipment hubs for which improving small-ship coastal operations is mandatory.

    2) Sagarmala

    • Sagarmala aims are port-led industrialization, development of world-class logistics institutions, and coastal community development.
    • Sagarmala will help in increasing domestic carrying capacity.
    • Shipbuilding, repair, and ownership are not preferred businesses in India and the small ship-owning community in India also prefer foreign registry instead of domestic registration.
    • If this has to change, there needs to be a change in the mindset of the authorities and the maritime business community.
    • ‘Make in India’ will result in multi-folded cargo growth in the country, we need ships to cater to domestic and international trade.
    • Short sea and river voyages should be encouraged.
    • Shipbuilding and owning should be encouraged by the Ministry.
    • The National Shipping Board is an independent advisory body for the Ministry of Shipping, where the Directorate General of Shipping (DGS) is a member.
    • The NSB should be able to question the functioning of the DGS, which is responsible for promoting carrying capacity in the country.
    • Coastal communities should be made ship owners.
    • This will initiate the carriage of cargo by shallow drafted small ships through coast and inland waterways.
    • Sagarmala should concentrate on consolidating the strength of the coastal youth and make them contribute to the nation’s economy with pride.

    Consider the question “How shipping contributes to the economic prosperity of a country? Suggest the steps need to be taken to develop its shipping sector.”

    Conclusion

    Shipping plays an important role in the economic development of a country. India needs to focus on developing it to achieve the economic prosperity.

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  • RBI Notifications

    The formidable challenge of reversing a liquidity glut

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    The article highlights the challenge in dealing with the excess liquidity in the economy after the central banks injected liquidity by persuing unorthodox policies.

    Overview of policies adopted during 2008 financial crisis

    • Days after the crash of Lehman Brothers, the United States Congress approved an emergency bailout package of $700 billion in September 2008.
    • The amount was used to buy off mortgage-backed securities from banks, hedge funds and pension funds to avert further Lehman-type bankruptcies.
    • As a result, fresh money was injected into the banking system for it to resume normal credit operations and clean up balance sheets.
    • Subsequent actions of the US government and Federal Reserve blurred the distinction between fiscal and monetary policy.
    • ‘Quantitative easing’  was a term coined to describe unorthodox measures like a central bank buying off mortgages and loans, and thus taking credit risk onto its balance sheet.
    • So, quantitative easing was pursued by all the major central banks of the developed world.
    • Central banks embarked upon an aggressive money-printing spree. Assets on their books ballooned.

    Monetary response during pandemic subsequent liquidity glut

    • During the pandemic year more than a decade after the 2008 crisis, the West’s monetary spigots have been opened even more.
    • A liquidity glut has ensued.
    • While the rate of monetary expansion over this period has been healthy, neither employment nor economic output grew by even a fraction of that rate.
    • Central bank finds itself in the maze.

    RBI in a similar situation

    • The Reserve Bank of India (RBI) too finds itself in a similar predicament, where the way out of its liquidity glut is hazy.
    • Due to purchases of foreign exchange externally and of government bonds domestically, RBI’s balance sheet has ballooned by more 30% by August last year.
    • RBI has injected liquidity through long-term repo operations, which essentially provide long-term money at low overnight rates.
    • The Indian central bank has also provided implicit liquidity support to mutual funds.
    • However, the RBI has not quite ventured into taking credit risk onto its books, nor has it signalled a readiness to buy toxic assets.

    Liquidity glut and challenges associated with it

    • As a result of India’s liquidity glut, money is flowing in and out of the central bank to the tune of ₹7 trillion on a daily basis.
    • This has resulted in an anomaly: market lending rates have gone below RBI’s reverse repo rate, which is supposed to be the de facto floor.
    • Cheap money encourages to do foolish and risky things, which, if done widely and voluminously enough, can spell disaster for financial stability.
    • But, any hint of reducing the rate of money expansion threatens to cause panic and burst the bubble it blew.
    • So, when RBI tentatively tried to move market rates higher by announcing a reverse repo auction,the market reaction was one of panic all the same, and there was a spike in interest rates.
    • This caused the central bank to rethink its strategy.
    • To calm nervous bond traders, the governor has categorically said that liquidity support will continue as long as necessary.

    Way forward

    •  We need to plan an exit from the current glut.
    • One way out could be loan ₹5 trillion to the central government against shares of public sector undertakings, at a low rate of 3% for a period of five years to fund its huge deficit.
    • That will bypass markets and not cause any disruption to interest rates.

    Consider the question “Why the challenges posed by liquidity glut caused by the unorthodox policies adopted by the central bank in the aftermath of the pandemic? What are the challenges in reducing the liquidity?” 

    Conclusion

    Whatever the way out of this whirlpool of liquidity, it’s not going to be easy.

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  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    Agriculture credit

    op-ed snap | Agriculture | Mains Paper 3: Issues Related To Farm Subsidies & Msp

    India’s agriculture credit increased by 500% in the last decade, however, this increase in the credit has not been reflected in the condition of the farmers. The article deals with the issues with the agri-credit in India.

    Impact of credit on agriculture

    • Providing credit to small farmers at a reasonable rate has been the agenda of the Centre, the States, and the Reserve Bank of India (RBI) for decades.
    • However, the volume of credit has improved over the decades, its quality and impact on agriculture have only deteriorated.
    • In 2011-12, the target was ₹4.75-lakh crore; now, agri-credit has reached the target of ₹15-lakh crore in 2020-21 with an allocated subsidy of ₹21,175 crores.
    • Agricultural credit has become less efficient in delivering agricultural growth.

    Issues with agri-credit: small farmers left-out

    • In the last 10 years, agriculture credit increased by 500% but has not reached even 20% of the 12.56 crore small and marginal farmers.
    •  95% of tractors and other agri-implements sold in the country are being financed by non-banking financial companies, or NBFCs, at an 18% rate of interest.
    • The RBI has also questioned agricultural households with up to two hectares getting only about 15% of the subsidized outstanding loan from institutional sources (bank, co-operative society).
    •  As per the Agriculture Census, 2015-16, the total number of small and marginal farmers’ households in the country stood at 12.56 crore which makes up 86.1% of the total holdings.
    • As in the Situation Assessment Survey of Agricultural Households by the National Sample Survey Office (NSSO), the share of institutional loans rises with an increase in land possessed.
    • This shows that the bulk of subsidized agri-credit is grabbed by big farmers and agri-business companies.

    What are the reasons

    • A loose definition of agri-credit has led to the leakage of loans at subsidized rates to large companies in agri-business.
    • The RBI had set a cap that out of a bank’s overall adjusted net bank credit, 18% must go to the agriculture sector, and within this, 8% must go to small and marginal farmers and 4.5% for indirect loans, bank advances routinely breach the limit.
    • A review by the RBI’s internal working group in 2019 found that in some States, credit disbursal to the farm sector was higher than their agriculture gross domestic product (GDP) and the ratio of crop loans disbursed to input requirement was very unevenly distributed.
    •  This shows the diversion of credit for non-agriculture purposes.
    • One reason for this diversion is that subsidized credit disbursed at a 4%-7% rate of interest is being refinanced to small farmers, and in the open market at a rate of interest of up to 36%.

    Way forward

    • The way forward is to empower small and marginal farmers by ‘giving them direct income support on a per hectare basis rather than hugely subsidizing credit.
    • Streamlining the agri-credit system to facilitate higher crop loans to farmer producer organizations, or the FPOs of small farmers against commodity stocks can be a win-win model to spur agriculture growth’.
    • With mobile phone penetration among agricultural households in India being as high as 89.1%, efforts to improve institutional credit delivery through technology-driven solutions can reduce the extent of the financial exclusion of agricultural households
    • There is a need to reforming the land leasing framework and creating a national-level agency to build consensus among States and the Centre concerning agriculture credit reforms.

    Consider the question “Growth in the agriculture sector in India has not been commensurate with the growth in the agriculture credit. What are the reasons for this disparity? Suggest the measures to deal with the challenges in agri-credit delivery.”

    Conclusion

    Improving the access to credit at a reasonable rate will help in increasing their income but to do that reforms in credit delivery is the need of the hour.

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