Note4Students
From UPSC perspective, the following things are important :
Prelims level: Export led growth
Mains level: Paper 3- Contribution of export in the growth
To aim for achieving high growth rate by focusing only on the domestic consumption and domestic demand could result in failure. The article argues for the focus on export to achieve the objective of growth.
Domestic-demand led growth and its limitations
- The debate in India has focused on domestic-demand led growth.
- But there is no known model of domestic demand/consumption-led growth, anywhere that has delivered quick, sustained, and high rates of economic growth for developing countries.
- India’s GDP growth of over 6 per cent after 1991 was associated with real export growth of about 11 per cent.
- Moreover, domestic-demand led growth requires more public spending, tax cuts, private investment, and/or financial sector reforms: which is not feasible in the present context due to pandemic.
- Consumption growth will be limited by the fact that household debt has grown rapidly in the last few years.
- Consumption now can grow only if incomes grow.
- Government spending could be a short run option, but COVID has limited that possibility.
Why India should not follow advanced countries’ fiscal policies
- India’s interest rates are not at zero and are unlikely to be so because of persistent inflation.
- India’s borrowing is still considered risky which is reflected in ratings.
- The favourable interest rate-growth differential that supports expansionary policy in the advanced countries is absent in India.
- India may well have scope for expansionary fiscal policy in the short run but not as a medium run growth strategy.
Why India should focus on export
- Given all the above factors, India does not have the luxury of abandoning export orientation because the alternatives are so limited.
- India’s market is too small to sustain any kind of serious import substitution strategy.
- Small size of the market makes it difficult to offer investors the domestic market as bait and incentivising them to export.
- India’s big, unexploited opportunities are in unskilled labour exports.
- India is vastly under-exporting relative to its labour force.
- Because China’s wages are rising as it has become richer, it has vacated about $140 billion in exports in unskilled-labour intensive sectors.
- Post-COVID, the move of investors away from China will probably accelerate to hedge against supply chain disruptions.
- India did not take advantage of the first China opportunity, now, a second opportunity stemming from geo-politics should be seized by India.
- As India contemplates atmanirbharta, two deeper advantages of export orientation are always worth remembering.
- 1) Foreign demand will always be bigger than domestic demand for any country.
- 2) If domestic producers are competitive internationally, they will be competitive domestically and domestic consumers and firms will also benefit.
Why openness of ecnonomy is important
- Exploiting this opportunity in unskilled exports requires more not less openness.
- To be internationally competitive, many parts and components have to be imported from so many different sources.
- One indicator is the foreign or import contribution to exports.
- China and Vietnam at the time of their export boom in textiles and clothing suggests that exports were highly dependent on imports (between 40 and 45 per cent).
- In contrast, India’s import share is about 16 per cent.
- Achieving Chinese and Vietnamese levels of success will therefore require greater imports and openness.
Way forward
- Export success will require genuine easing of costs of trading and doing business in India.
- In the case of clothing, a key policy change in India will be to eliminate tariffs on all inputs.
- It will also require signing free trade agreements with Europe that still impose high duties on India’s clothing export, while Bangladeshi and Vietnamese exports which enjoy preferential access to world markets.
Consider the question “As India contemplates atmanirbharta, we should not forget that export dynamism is essential for the rapid and sustained high economic growth. Comment.”
Conclusion
In sum, resisting the misleading allure of the domestic market, India should zealously boost export performance and deploy all means to achieve that. Pursuing rapid export growth in manufacturing and services should be an obsession with self-evident justification.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: The Quad
Mains level: Paper 2- Fourth factors the Quad must consider about Asia
The article highlights the 4 issues related to the history and geopolitics of Asian that the Quad members should pay attention to while formulating the future course of action.
The 4 factors
If the Quad is to prosper as a geopolitical construct, it would do well to heed four lessons drawn from the long arc of Asia’s history and geopolitics.
1) Lack of existence of Indo-Pacific system
- There has never been Indo-Pacific system ever since the rise of the port-based kingdoms of Indochina in the first half of the second millennium.
- There were two Asian systems — an Indian Ocean system and an East Asian system — with intricate sub-regional balances.
- The effort by a U.S. to artificially manufacture to combine the Indo and the Pacific into a unitary system is unlikely to succeed.
2) Lack of peaceful existence dominated by any power
- The Indo-Pacific region possesses no prior experience of long period of peace, prosperity and stability engineered from its maritime fringes.
- Rather, dynamic long cycles of Chinese influence radiating outwards have alternated with sharp periods of turmoil.
- The of ASEAN-centred multilateralism is more in tune with regional tradition and historical circumstance.
- For their part, the Indo-Pacific’s ‘flanking powers’, India and Japan, have never balanced Chinese power throughout their illustrious histories.
3) India must use its leverage judiciously
- The sea lines of communication constitute the important links connecting Indian Ocean to the Western Pacific.
- It is also a valuable arena of leverage vis-à-vis Chinese shipping and resource flows.
- This leverage must be wielded judiciously on India’s terms, not on the Quad’s terms.
- The Quad, after all, has little to offer materially with regard to New Delhi’s continental two-front dilemma.
- However, ceding this chokepoint leverage will invite overwhelming Chinese pressure against the full range of India’s South Asian interests — to which the other Quad members possess neither will nor desire to answer.
4) Check on China’s India Ocean Ambitions
- The Quad has a valuable role to play as a check on China’s Indian Ocean ambitions.
- India must develop ingrained habits of interoperable cooperation with its Quad partners.
- This interoperable cooperation could pre-emptively dissuade China from mounting a naval challenge in its backyard.
Conclusion
The Quad must consider these factors while formulating the future course of action.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Bond markets, SLR
Mains level: Paper 3- Issues with the financial markets in India
The article discusses the themes of the recently published books by Viral Acharya and Urjit Patel. Both the books deal with the issues with the financial markets in India
Context
- Two recently published books by Viral Acharya and Urjit Patel throws light on the issues with India’s finance market and role of RBI and the government.
Importance of financial markets
- Banks along with bond and equity markets oversee the matching of savers with borrowers.
- Without financial markets, businesses would be restricted to investing out of retained earnings alone.
- The financial markets have to satisfy the return appetites of savers while minimising their risk exposure.
Undue preference to fiscal interest of the government
- A major theme of Acharya’s book is the rampant subjugation of the financial and monetary infrastructure to the fiscal interests of the government.
- Consider, for example, the conduct of monetary policy.
- Since bank assets are marked to market, cuts in interest rates induce treasury gains for banks that effectively recapitalises them.
- Consequently, rate cuts are preferred by governments needing to inject capital into public sector banks (PSBs).
- For the same reasons, liquidity injections, which raise bond prices, are preferred to liquidity absorptions.
- Fiscal compulsions of government can induce liquidity policies that have the opposite effect on the rate-setting by the MPC.
- This contradiction is further complicated by the fact that the RBI is also the debt management agency for the government.
- As a debt management agency, RBI’s key tasks is to sell government bonds at the highest possible price.
- Pressures for regulatory forbearance in recognising NPAs often arise from the government wanting to avoid having to recapitalise PSBs.
- The sameexplains the fact that stock exchanges in India having a 30-day disclosure norm for registered borrowers who default on their bank loans.
- The standard in developed capital markets is immediate disclosure.
- But that would induce an overnight rating downgrade of the concerned borrower thereby triggering additional capital provisioning needs for the lending bank.
Conflict in government owning the PSBs
- Patel’s book deals with conflicts inherent in the state owning the banks that control about three-fourth of total banking assets in India.
- The primary problem with PSBs is that governments have used them as tools for macroeconomic management.
- PSBs are regularly used for resource mobilisation to finance fiscal deficits.
- The government often announces credit policies rather than having the banks allocate credit based on risk-return management criteria.
- PSBs are the favoured instrument for meeting employment targets, supporting farmers through loan write-offs, etc.
What are the implications of government owning PSBs
- This kind of state interface naturally induces extreme levels of moral hazard in the behaviour of both debtors and creditors.
- PSBs are not incentivised to exercise due diligence since they expect regulatory forbearance and recapitalisation in the event of rising NPAs.
- The dilution of efficiency-based principles for banking has implications for all borrowers.
- Creditworthy borrowers pay the risk premia to cover the riskiness due to unhealthy borrowers.
- The worsening risk pool of borrowers is partly to blame for the fact that long term borrowing rates have remained stubbornly high despite repeated rate cuts by the MPC over the past 18 months.
3 Problems and 3 Reforms
Problems
- There are three obvious problems with the existing architecture.
- The first is the state ownership of banks.
- The second is the chronically high fiscal deficit run by the consolidated public sector.
- The third is the widespread perception that market regulators work under close government direction.
Reforms
- Dealing with this will require, at a minimum, three reforms.
- First, there has to be a wholehearted attempt at privatisation of PSBs.
- Second, the RBI needs to be relieved of its public debt management role.
- Third, the RBI has to be empowered to act independently of the government.
Conclusion
The growth of firms, which is a key driver of productivity and growth, requires well-functioning financial markets. India has a lot of work to do.
Back2Basics: How cuts in interest rates induce treasury gains for banks?
- Falling rates across the debt markets increase the demand for instruments that pay higher interest.
- At this stage, prices of bonds which banks had bought when interest rates were high rise.
- Hence, the value of government securities that banks have bought for the SLR requirement rises.
- This increases profits as banks record the market value of these securities in their books.
- Under this process, called marking to market, organisations record profits/losses in their books on a daily basis without actually booking any profit or loss.
- So, more SLR bonds the bank holds, the higher its mark-to-market profit.
- The other reasons bank profits rise when interest rates fall are pick-up in growth as companies borrow at lower rates as well as improvement in liquidity.
Source:-
https://www.businesstoday.in/moneytoday/banking/banks-to-make-huge-treasury-gains-on-bonds-on-rbi-rate-cut/story/193552.html
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Auction Theory, Nobel Prizes
Mains level: Auction theory and its utility
This year, the Nobel Prize for Economics was awarded to Paul R Milgrom and Robert B Wilson for “improvements to auction theory and inventions of new auction formats”.
Do you remember the 2G spectrum scam, Coalgate scam etc. that rocked the nation? Can you relate this auction theory for bidding public assets to private entities?
What is Auction?
- Essentially, it is about how auctions lead to the discovery of the price of a commodity.
- Auction theory studies how auctions are designed, what rules govern them, how bidders behave and what outcomes are achieved.
- When one thinks of auctions, one typically imagines the auction of a bankrupt person’s property to pay off his creditors.
- Indeed, this is the oldest form of auction. This simple design of such an auction — the highest open bidder getting the property (or the commodity in question) — is intuitively appealing as well.
Evolving definitions of auction
- Over time, and especially over the last three decades, more and more goods and services have been brought under auction.
- The nature of these commodities differs sharply. For instance, a bankrupt person’s property is starkly different from the spectrum for radio or telecom use.
- Similarly, carbon dioxide emission credits are quite different from the spot market for buying electricity, which, in turn, is quite different from choosing which company should get the right to collect the local garbage.
- In other words, no one auction design fits all types of commodities or seller.
The Auction Theory
Three key variables need to be understood before we move to actual propositions.
(1) Rules of the auction
- Imagine participating in an auction. Your bidding behaviour is likely to differ if the rules stipulate open bids as against closed/sealed bids.
- The same applies to single bids versus multiple bids, or whether bids are made one after another or everyone bids at the same time.
(2) Commodity or service
- The second variable is the commodity or service being put up for auction. In essence, the question is how each bidder values an item.
- This is not always easy to ascertain. In terms of telecom spectrum, it might be easier to peg the right value for each bidder because most bidders are likely to put the spectrum to the same use.
- This is called the “common” value of an object.
(3) Uncertainty
- The third variable is uncertainty.
- For instance, which bidder has what information about the object, or even the value another bidder associates with the object.
The theory
- Wilson developed the theory for auctions of objects with a common value — a value which is uncertain beforehand but, in the end, is the same for everyone”.
- Wilson showed what the “winner’s curse” is in an auction and how it affects bidding.
- As shown in the illustration, it is possible to overbid — $50 when the real value is closer to $25. In doing so, one wins the auction but loses out in reality.
- Milgrom “formulated a more general theory of auctions that not only allows common values but also private values that vary from bidder to bidder”.
- He analysed the bidding strategies in a number of well-known auction formats, demonstrating that a format will give the seller higher expected revenue when bidders learn more about each other’s estimated values.
Significance of Auction theory
- Throughout history, countries have tried to allocate resources in various ways.
- Some have tried to do it through political markets, but this has often led to biased outcomes. For Ex: The rationing of essential goods worked in State-controlled economies. People who were close to the bureaucracy and the political class came out ahead of others.
- Lotteries are another way to allocate resources, but they do not ensure that scarce resources are allocated to people who value it the most.
- Auctions, for a good reason, have been the most common tool for thousands of years used by societies to allocate scarce resources.
- When potential buyers compete to purchase goods in an auction, it helps sellers discover those buyers who value the goods the most.
- Further, selling goods to the highest bidder also helps the seller maximise his or her revenues. So, both buyers and sellers benefit from auctions.
- Whether it is the auction of spectrum waves or the sale of fruits and vegetables, auctions are at the core of allocation of scarce resources in a market economy.
What are the criticisms levelled against auctions and what are the economists contribution?
1.Issue of Winner’s Curse
- The most common one is that auctions can lead buyers to overpay for resources whose value is uncertain to them.
- This criticism, popularly known as the ‘winner’s curse’, is based on a study that showed how buyers who overpaid for U.S. oil leases in the 1970s earned low returns. Dr. Wilson was the first to study this matter.
- The rational bidders may decide to underpay for resources in order to avoid the ‘winner’s curse’, and Dr. Wilson argued that sellers can get better bids for their goods if they share more information about it with potential buyers
2.Auction formats
- Economists traditionally working on auction theory believed that all auctions are the same when it comes to the revenues that they managed to bring in for sellers. The auction format, in other words, did not matter.
- This is known as the ‘revenue equivalence theorem’.
- But Dr. Milgrom showed that the auction format can actually have a huge impact on the revenues earned by sellers.
- The most famous case of an auction gone wrong for the seller was the spectrum auction in New Zealand in 1990.
- In what is called a ‘Vickrey auction’, where the winner of the auction is mandated to pay only the second-best bid, a company that bid NZ$1,00,000 eventually paid just NZ$6 and another that bid NZ$70,00,000 only paid NZ$5,000.
- In particular, Dr. Milgrom showed how Dutch auctions, in which the auctioneer lowers the price of the product until a buyer bids for it, can help sellers earn more revenues than English auctions.
- In the case of English auctions, the price rises based on higher bids submitted by competing buyers. But as soon as some of the bidders drop out of the auction as the price rises, the remaining bidders become more cautious about bidding higher prices.
Conclusion
- The contributions of Dr. Milgrom and Dr. Wilson have helped governments and private companies design their auctions better.
- This has, in turn, helped in the better allocation of scarce resources and offered more incentives for sellers to produce complex goods.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: FATF
Mains level: Money laundering and terror financing
Pakistan is unlikely to exit the Financial Action Task Force (FATF’s) greylist with this plenary session as well.
Practice question for mains:
Q.What is FATF? Discuss its role in combating global financial crimes and terror financing.
What is the FATF?
- FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
- The FATF Secretariat is housed at the OECD headquarters in Paris.
- It holds three Plenary meetings in the course of each of its 12-month rotating presidencies.
Why is Pakistan under its scanner?
- Pakistan has been under the FATF’s scanner since June 2018, when it was put on the Grey List for terror financing and money laundering risks.
- FATF and its partners such as the Asia Pacific Group (APG) are reviewing Pakistan’s processes, systems, and weaknesses on the basis of a standard matrix for anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.
- In June 2018, Pakistan gave a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime, and to address its strategic counter-terrorism financing-related deficiencies.
- Pakistan and the FATF then agreed on the monitoring of 27 indicators under a 10-point action plan, with specific deadlines.
- The understanding was that the successful implementation of the action plan, and its physical verification by the APG, would lead the FATF to move Pakistan out of the Grey List.
- However, Islamabad managed to satisfy the global watchdog over just five of them.
B2BASICS
What are the Black List and Grey List of the FATF?
FATF has 2 types of lists;
1. Black List
2. Grey List
1. Meaning of Black List: Only those countries are included in this list that FATF considers as uncooperative tax havens for terror funding. These countries are known as Non-Cooperative Countries or Territories (NCCTs). In other words; countries that are supporting terror funding and money laundering activities are placed in the Blacklist.
The FATF blacklist or OECD blacklist has been issued by the Financial Action Task Force since 2000 and lists countries which it judges to be non-cooperative in the global fight against money laundering and terror funding.
The FATF updates the blacklist regularly, adding or deleting entries.
(This map shows the countries included in the Greylist)
2. Meaning of Grey List: Those countries which are not considered as the safe heaven for supporting terror funding and money laundering; included in this list. The inclusion in this list is not as severe as blacklisted.
Now Grey list is a warning given to the country that it might come in Black list (Just like a yellow card in a football match). If a country is unable to curb mushrooming of terror funding and money laundering; it is shifted from grey list to black list by the FATF.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: FCRA
The Ministry of Home Affairs (MHA) has asked all NGOs seeking foreign donations to open a designated FCRA account at the State Bank of India’s New Delhi branch.
What is the FCRA?
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations. It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
What happens once registered?
- Registered associations can receive a foreign contribution for social, educational, religious, economic and cultural purposes.
- Filing of annual returns, on the lines of Income Tax, is compulsory.
- In 2015, the MHA notified new rules, which required NGOs to give an undertaking that the acceptance of foreign funds.
- It ruled that it is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.
- It also said all such NGOs would have to operate accounts in either nationalized or private banks which have core banking facilities to allow security agencies access on a real-time basis.
Who cannot receive foreign donations?
- Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
- However, in 2017 the MHA amended the 1976-repealed FCRA law paving the way for political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.
How else can receive foreign funding?
- The other way to receive foreign contributions is by applying for prior permission.
- It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.
- But the association should be registered under statutes such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956.
- A letter of commitment from the foreign donor specifying the amount and purpose is also required.
When is a registration suspended or cancelled?
- The MHA on inspection of accounts and on receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for 180 days.
- Until a decision is taken, the association cannot receive any fresh donation and cannot utilise more than 25% of the amount available in the designated bank account without the permission of the MHA.
- The MHA can cancel the registration of an organisation which will not be eligible for registration or grant of ‘prior permission’ for three years from the date of cancellation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: EVIN network
Mains level: Vaccination challenges for coronavirus
The eVIN network, which can track the latest vaccine stock position; the temperature at storage facility; geo-tag health centres; and maintain facility-level dashboard, is being repurposed for the delivery of the COVID-19 vaccine.
Try this question from CSP 2016:
Q.‘Mission Indradhanush’ launched by the Government of India pertains to:
(a) Immunization of children and pregnant women
(b) Construction of smart cities across the country
(c) India’s own search for the Earth-like planets in outer space
(d) New Educational Policy
What is eVIN network?
- The eVIN is an innovative technological solution aimed at strengthening immunization supply chain systems across the country.
- This is being implemented under the National Health Mission (NHM) by the Ministry of Health and Family Welfare.
- It aims to provide real-time information on vaccine stocks and flows, and storage temperatures across all cold chain points in the country.
- This system has been used during the COVID pandemic for ensuring the continuation of the essential immunization services and protecting our children and pregnant mothers against vaccine-preventable diseases.
Components of eVIN
- eVIN combines state-of-the-art technology, a strong IT infrastructure and trained human resource to enable real-time monitoring of stock and storage temperature of the vaccines kept in multiple locations across the country.
- At present, 23,507 cold chain points across 585 districts of 22 States and 2 UTs routinely use the eVIN technology for efficient vaccine logistics management.
Benefits of eVIN
- It has helped create a big data architecture that generates actionable analytics encouraging data-driven decision-making and consumption-based planning.
- It helps in maintaining optimum stocks of vaccines leading to cost savings. Vaccine availability at all times has increased to 99% in most health centres in India.
- While instances of stock-outs have reduced by 80%, the time taken to replenish stocks has also decreased by more than half, on an average.
- This has ensured that every child who reaches the immunization session site is immunized, and not turned back due to unavailability of vaccines.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Opposition event
Mains level: Not Much
Due to an event referred to as “opposition”, which takes place every two years and two months, Mars will shine the brightest.
Try this question from CSP 2017:
Q.Which region of Mars has a densely packed river deposit indicating this planet had water 3.5 billion years ago?
(a) Aeolis Dorsa (b) Tharsis (c) Olympus Mons (d) Hellas
What is the Opposition Event?
- ‘Opposition’ is the event when the sun, Earth and an outer planet (Mars in this case) are lined up, with the Earth in the middle.
- The time of opposition is the point when the outer planet is typically also at its closest distance to the Earth for a given year, and because it is close, the planet appears brighter in the sky.
- An opposition can occur anywhere along Mars’ orbit, but when it happens when the planet is also closest to the sun, it is also particularly close to the Earth.
- It will outshine Jupiter, becoming the third brightest object (moon and Venus are first and second, respectively) in the night sky during the month of October.
When does opposition happen?
- Earth and Mars orbit the sun at different distances (Mars is farther apart from the sun than Earth and therefore takes longer to complete one lap around the sun).
- In fact, the opposition can happen only for planets that are farther away from the sun than the Earth.
- In the case of Mars, roughly every two years, the Earth passes between sun and Mars, this is when the three are arranged in a straight line.
- Further, as the Earth and Mars orbit the sun, there comes a point when they are on the opposite sides of it, and hence very far apart. At its farthest, Mars is about 400 million km from the Earth.
- In case of opposition, however, Mars and Sun are on directly opposite sides of the Earth. In other words, the Earth, sun and Mars all lie in a straight line, with the Earth in the middle.
Logic behind the name
- As per NASA, from an individual’s perspective on the Earth, Mars rises in the east and after staying up all night, it sets in the west just as the sun rises in the east and sets in the west.
- Because from the perspective on Earth, the sun and Mars appear to be on the opposite sides of the sky, Mars is said to be in “opposition”.
- Essentially, the opposition is a reference to “opposing the sun” in the sky.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NSM, Supercomputing
Mains level: National Supercomputing Mission
The Centre for Development of Advanced Computing (C-DAC) has launched the second phase of the ambitious National Supercomputing Mission (NSM).
Tap to read more about National Supercomputing Mission (NSM):
[pib] National Supercomputing Mission (NSM)
National Supercomputing Mission (NSM)
- NSM is a proposed plan by GoI to create a cluster of seventy supercomputers connecting various academic and research institutions across India.
- In April 2015 the government approved the NSM with a total outlay of Rs.4500 crore for a period of 7 years.
- The mission was set up to provide the country with supercomputing infrastructure to meet the increased computational demands of academia, researchers, MSMEs, and startups by creating the capability design, manufacturing, of supercomputers indigenously in India.
- Currently, there are four supercomputers from India in the Top 500 list of supercomputers in the world.
Aims and objectives
- The target of the mission was set to establish a network of supercomputers ranging from a few Tera Flops (TF) to Hundreds of Tera Flops (TF) and three systems with greater than or equal to 3 Peta Flops (PF) in academic and research institutions of National importance across the country by 2022.
- This network of Supercomputers envisaging a total of 15-20 PF was approved in 2015 and was later revised to a total of 45 PF (45000 TFs), a jump of 6 times more compute power within the same cost and capable of solving large and complex computational problems.
What is a Supercomputer?
- A supercomputer is a computer with a high level of performance as compared to a general-purpose computer.
- The performance of a supercomputer is commonly measured in floating-point operations per second (FLOPS) instead of million instructions per second (MIPS).
- Since 2017, there are supercomputers which can perform over a hundred quadrillion FLOPS (petaFLOPS).
- Since November 2017, all of the world’s fastest 500 supercomputers run Linux-based operating systems.
Why do we need supercomputers?
- Tackle problems: Developed and almost-developed countries have begun ensuring high investments in supercomputers to boost their economies and tackle new social problems.
- These high-performance computers can simulate the real world, by processing massive amounts of data, making cars and planes safer, and more fuel-efficient and environment-friendly.
- They also aid in the extraction of new sources of oil and gas, development of alternative energy sources, and advancement in medical sciences.
- Disaster Management: Supercomputers have also helped weather forecasters to accurately predict severe storms, enable better mitigation planning and warning systems.
- They are also used by financial services, manufacturing and internet companies and infrastructure systems like water-supply networks, energy grids, and transportation.
- Future applications of artificial intelligence (AI) also depend on supercomputing.
- Due to the potential of this technology, countries like the US, China, France, Germany, Japan, and Russia have created national-level supercomputing strategies and are investing substantially in these programmes.
When did India initiate its efforts to build supercomputers?
- India’s supercomputer programme initiated in the late 1980s, when the United States ceased the export of a Cray Supercomputer due to technology embargos.
- This resulted in India setting up C-DAC in 1988, which in 1991, unveiled the prototype of PARAM 800, benchmarked at 5 Gflops. This supercomputer was the second-fastest in the world at that time.
- Since June 2018, the USA’s Summit is the fastest supercomputer in the world, taking away this position from China.
- As of January 2018, Pratyush and Mihir are the fastest supercomputers in India with a maximum speed of Peta Flops.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Federal structure
Mains level: Paper 2- Evolutio of Centre-State relation in India
Against the backdrop of the ongoing tussle between the states and the Centre over the issue of GST compensation, the article analyses the evolution of federalism and power-sharing in India.
GST and federalism
- At the first sign of stress, the nation unified in a singular system of taxation (GST) turned into a policy of every-state-for-itself.
- Evidence of seriously miscued revenue estimates without pragmatic tax rate, was accumulating at an alarming pace.
- The Comptroller and Auditor-General of India (CAG) recently revealed how a cess meant to remedy shortfalls in GST yields, was retained in central government revenues, in violation of all applicable norms.
- This revelation does little to build trust between the Centre and the States at a time when the States’ facing lack of resource and the central government is advising them to borrow.
- Some states believe that the onus of borrowing should rest with the central government.
Higher borrowing limit for states with conditions
- The central government sanctioned a higher borrowing limit for States through the current year.
- In the bargain, it imposed conditionalities:
- 1) Enforcing a singular standard for the implementation of policies across a vast and diverse country.
- 2) Improving India’s ranking as a place for “doing business”.
- States will have unconditional access to borrowings equivalent to half a percentage point of their gross output.
- But, subsequently, every tranche of a quarter point will be premised on progress in implementing the “one nation, one ration card” scheme, and improvements in the “ease of doing business”.
Federalism in India
- Aside from the contents and definitions sections, the word “federal” occurs in only one operational article of the Indian Constitution, in reference to the apex judicial body created in colonial times.
- When this body was transformed into the Supreme Court at the moment the Constitution came into force, the word seemingly lost all operative value.
- The distribution of powers and responsibilities between various tiers of the governmental system, was achieved without explicit recognition of federalism as a governing principle.
- In actual operational terms, the relationship of Centre and States followed different paradigms through various phases of politics.
- At the time of Independence, the distribution of powers between Centre and States was transformed into an internal discussion of the Congress.
Evolution of power-sharing and politics
- The “Congress system”, as the political scientist Rajni Kothari called it, was seen at one time to have sufficient internal flexibility and resilience to absorb all factional pressures.
- The first challenge came from the cultural terrain, compelling a reluctant national leadership to accept linguistic reorganisation of States.
- And then, as ambitions of nation-building through rapid industrialisation resulted in the possibility of a non-Congress politics.
- The Congress lost power in a number of key States in 1967.
- The polity moved into a new phase when politics was about “waves” at the national or state level either in favour of, or against the Congress.
- From 1989 onwards, politics settled into another distinct phase, when outcomes at the national level were the resultant of very separate State-level results.
Conclusion
Though federal structure could not be free from Centre-State power struggle, that struggle should not come into the development of the nation. In this context, it is the responsibility of the Centre to address the issues facing the state amid pandemic.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CRISPR-Cas9
Mains level: Paper 3- CRISPR-Cas9-Important tool in gene editing
The Nobel Prize in Chemistry for 2020 has been awarded for the discovery of CRISPR Cas9. The two scientists have pioneered the use of CRISPR – Cas9 (CRISPR-associated protein 9) system as a gene-editing tool.
Background of discovery of CRISPR
- In 1987a group of Japanese researchers observed an unusual homologous DNA sequence bearing direct repeats with spacing in a eubacterial gene.
- In subsequent years CRISPR was discovered and showed to be a bacterial adaptive immune system and to act on DNA targets.
- A notable discovery on the use of CRISPR as a gene-editing tool was by a Lithuanian biochemist, Virginijus Šikšnys, in 2012.
- Šikšnys showed that Cas9 could cut purified DNA in a test tube, the same discovery for which both Charpentier and Doudna were given the credit.
- Thus, the exclusion of Siksnys from this year’s Nobel is going to raise discussions.
Issue of gene-edited babies
- The world was alarmed by such a mission in 2018 when Chinese scientist edited genes in human embryos using the CRISPR-Cas9 system which resulted in the birth of twin girls.
- The incident became known as the case of the first gene-edited babies of the world.
- Following the incident, the World Health Organization formed a panel of gene-editing experts.
- The expert panel suggested a central registry of all human genome editing research in order to create an open and transparent database of ongoing work.
Guidelines and regulations in India
- In India, several rules, guidelines, and policies are notified under the Environment Protection Act, 1986 to regulate genetically modified organisms.
- The above Act and the National Ethical Guidelines for Biomedical and Health Research involving human participants, 2017, by the Indian Council of Medical Research (ICMR), and the Biomedical and Health Research Regulation Bill implies regulation of the gene-editing process.
- This is especially so in the usage of its language “modification, deletion or removal of parts of heritable material”.
- However, there is no explicit mention of the term gene editing.
Consider the question “What is CRISPR-Cas9? How it helps in the gene-editing? What are the concerns with use of it for gene-editing?”
Conclusion
It is time that India came up with a specific law to ban germline editing and put out guidelines for conducting gene-editing research giving rise to modified organisms.
Back2Basics: What is CRISPR?
- CRISPRs: “CRISPR” stands for “clusters of regularly interspaced short palindromic repeats.”
- It is a specialized region of DNA with two distinct characteristics: the presence of nucleotide repeats and spacers.
- Repeated sequences of nucleotides — the building blocks of DNA — are distributed throughout a CRISPR region.
- Spacers are bits of DNA that are interspersed among these repeated sequences.
- In the case of bacteria, the spacers are taken from viruses that previously attacked the organism.
- They serve as a bank of memories, which enables bacteria to recognize the viruses and fight off future attacks.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Delhi air-pollution issue
The article suggests the three-pronged strategy to deal with the emission from transportation and highlights the importance of coordination at various level to deal with the issue of pollution.
Anti-pollution campaign in Delhi
- With air pollution returning to pre-COVID levels, the Delhi administration has launched a major anti-pollution campaign this month.
- The campaign is focused on cutting the deadly smoke from thermal plants and brick kilns in the National Capital Region as well as on chemical treatment of stubble burning from nearby States.
Abating emission from transportation
- Delhi’s long-term solution will depend importantly also on abating emissions from transportation.
- Delhi needs a 65% reduction to meet the national standards for PM2.5.
- Vehicles, including trucks and two-wheelers, contribute 20%-40% of the PM2.5 concentrations.
- Tackling vehicle emissions would be one part of the agenda, as in comparable situations in Bangkok, Beijing, and Mexico City.
Three-part action to combat emissions from transportation
- A three-part action comprises emissions standards, public transport, and electric vehicles.
1) Stricter enforcement of emission controls
- Two-wheelers and three-wheelers were as important as cars and lorries in Beijing’s experience.
- Bangkok ramped up inspection and maintenance to cut emissions.
- The first order of business is to implement the national standards.
2) Strengthening public transport
- Bus Rapid Transit (BRT) around the world show how the sizeable investment cost is more than offset by the benefits, and that financing pays off.
- Delhi has lessons from its BRT experience in designating better BRT lanes, improving the ticketing system and synchronising with the Metro.
- The Supreme Court’s ruling to increase Delhi’s bus fleet and align it with the Metro network must be carried out.
- The ‘odd-even’ number plate policy can help, but the system should reduce exemptions, allow a longer implementation period, and complement it with other measures.
3) Adoption of electric vehicle: A long term solution
- Subsidies and investment will be needed to ensure that EVs are used to a meaningful scale.
- The Delhi government’s three-year policy aims to make EVs account for a quarter of the new vehicles registered in the capital by 2024.
- EVs will gain from purchase incentives, scrappage benefits on older vehicles, loans at favourable interest and a waiver of road taxes.
Need for coordination at various level
- Transport solutions need to be one part of pollution abatement that includes industry and agriculture.
- Delhi’s own actions will not work if the pollution from neighbouring States is not addressed head on.
- Technical solutions need to be underpinned by coordination and transparency across Central, State, and local governments.
- Public opinion matters.
- Citizen participation and the media are vital for sharing the message on pollution and health, using data such as those from the Central Pollution Control Board.
Conclusion
- It is a matter of prioritising people’s health and a brighter future. Once the pandemic is over, Delhi must not stumble into yet another public health emergency. The time to act is now.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Freedom of Navigation Operations
Mains level: Not Much
Indian Navy is scheduled to hold another Passage Exercise (PASSEX) with the US to undertake Freedom of Navigation Operations (FONOP).
Try this question:
Q.What do you mean by Freedom of Navigation Operations (FONOPs)? What are its legal backings? Discuss its significance.
Freedom of Navigation Operations
- FONOPs are closely linked to the concept of freedom of navigation, and in particular to the enforcement of relevant international law and customs regarding freedom of navigation.
- Freedom of navigation has been thoroughly practised and refined, and ultimately codified and accepted as international law under UNCLOS, in a legal process that was inclusive and consent-based.
- The drafting of UNCLOS was driven in part by states’ concerns that strong national maritime interests could lead to excessive maritime claims over coastal seas, which could threaten freedom of navigation.
- FONOPs are outgrowths of this development of international law, based on sovereign equality and international interdependence.
Significance of FONOPs
- FONOPs are a method of enforcing UNCLOS (United Nations Convention on the Law of the Sea) and avoiding these negative outcomes by reinforcing freedom of navigation through practice.
- It is exercised by sailing through all areas of the sea permitted under UNCLOS, and particularly those areas that states have attempted to close off to free navigation as defined under UNCLOS.
Back2Basics: UNCLOS
- The Law of the Sea Treaty formally known as the Third United Nations Convention on the Law of the Sea was adopted in 1982 at Montego Bay, Jamaica. It entered into force in 1994.
- The convention establishes a comprehensive set of rules governing the oceans and to replace previous U.N. Conventions on the Law of the Sea
- The convention defines the distance of 12 nautical miles from the baseline as Territorial Sea limit and a distance of 200 nautical miles distance as Exclusive Economic Zone limit.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Greater Male Connectivity Project
Mains level: India-Maldives Relations
Following up on India’s announcement of a $500 million package to the Maldives, the Exim Bank of India and the Maldives’s Ministry of Finance signed an agreement for $400 million in Male.
Try this question from 2014:
Q.Which one of the following pairs of islands is separated from each other by the ‘Ten Degree Channel’?
(a) Andaman and Nicobar
(b) Nicobar and Sumatra
(c) Maldives and Lakshadweep
(d) Sumatra and Java
Greater Male Connectivity Project
- The GMCP consists of a number of bridges and causeways to connect Male to Villingili, Thilafushi and Gulhifahu islands that span 6.7 km.
- It would ease much of the pressure of the main capital island of Male for commercial and residential purposes.
- When completed, the project would render the Chinese built Sinamale Friendship bridge connecting Male to two other islands, thus far the most visible infrastructure project in the islands.
- At present, India-assisted projects in the region include water and sewerage projects on 34 islands, reclamation project for the Addl island, a port on Gulhifalhu, airport redevelopment at Hanimadhoo, and a hospital and a cricket stadium in Hulhumale.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Femto Satellites, Micro-gravity
Mains level: Not Much
An experimental satellite developed by three students of Karur (TN) has been selected for launch in sub-orbital space by NASA.
Try this PYQ:
Q.The term ‘IndARC’, sometimes seen in the news, is the name of:
(a) An indigenously developed radar system inducted into Indian Defence
(b) India’s satellite to provide services to the countries of Indian Ocean Rim
(c) A scientific establishment set up by India in Antarctic region
(d) India’s underwater observatory to scientifically study the Arctic region
Indian Sat
- The Indian Sat is made of reinforced graphene polymer. It is 3 cm in size and weighs 64 gm.
- It has its own radio frequency communication to transmit and receive a signal from earth to outer space. The solar cells attached to the satellite generate power for it.
- The photographic film will absorb and measure the cosmic radiation inside the rocket.
- It would study the effect of reinforced graphene polymers in microgravity. It would be in sub-orbital space flight for a few minutes before landing in the ocean.
What is micro-gravity?
- The term micro-g environment is more or less synonymous with the terms weightlessness and zero-g, but with an emphasis on the fact that g-forces are never exactly zero—it is just very small.
- On the ISS, for example, the small g-forces come from tidal effects, gravity from objects other than the Earth, such as astronauts, the spacecraft, and the Sun, and, occasionally, air resistance.
Back2Basics: Femto-satellites
- Femto-satellites are satellites with a mass lower than 100 grams.
- These new categories of satellites are, by concept, low cost devices if they are based on Commercial-of-the-Shelf (COTS) components.
- Some examples of applications are related to low-cost missions with a short time of development.
Kalamsat
- Kalamsat was a communication satellite with a life span of two months launched in 2017.
- The nanosatellite is a 10cm cube weighing 1.2 kg.
- It will be the first to use the rocket’s fourth stage as an orbital platform.
- The fourth stage will be moved to higher circular orbit so as to establish an orbital platform for carrying out experiments.
- It is named after former Indian president Dr APJ Abdul Kalam and was built by an Indian high school student team, led by Rifath Sharook, an 18-year-old from the Tamil Nadu town of Pallapatti.
- It is the world’s lightest and first-ever 3D-printed satellite.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: RKA
Mains level: India's dailry potential
Rashtriya Kamdhenu Aayog (RKA) has started a nationwide campaign to celebrate “Kamdhenu Deepawali Abhiyan” this year on the occasion of Deepawali festival.
Try this PYQ:
Q.Consider the following statements:
- Agricultural soils release nitrogen oxides into the environment.
- Cattle release ammonia into the environment.
- Poultry industry releases reactive nitrogen compounds into the environment.
Which of the statements given above is/are correct?
(a) 1 and 3 only
(b) 2 and 3 only
(c) 2 only
(d) 1, 2 and 3
Rashtriya Kamdhenu Aayog (RKA)
- RKA has been constituted by PM for the conservation, protection and development of cows and their progeny and for giving direction to the cattle development programmes.
- It is a high powered permanent body to formulate policy and to provide direction to the implementation of schemes related to cattle so as to give more emphasis on livelihood generation.
Why need RKA?
- Livestock economy sustains nearly 73 million households in rural areas.
- Even though, the country is the largest producer of milk, the average milk yield in India is only 50% of the world average.
- The low productivity is largely due to deterioration in genetic stock, poor nutrition and unscientific management.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 293
Mains level: Paper 2- Federalism and GST
The GST has been hailed as the grand bargain and the success story of the federalism. But the economic disruption caused by the pandemic has put it to test. The article deals with the issue of GST compensation.
Compensating the loss of GST revenue: 2 options
- In the 41st meeting of the GST Council, the Union government had presented the states with two options.
- The Centre had estimated the states’ total loss of GST revenue at Rs 3 lakh crore, of which, Rs 65,000 crore was expected to accrue from the compensation cess.
- Of the remaining Rs 2.35 lakh crore, the loss due to the pandemic was estimated at Rs 1.28 lakh crore.
- The first option was to provide states a special window to borrow Rs 97,000 crore from the RBI, which was later revised to Rs 1.1 lakh crore.
- Under this option, both the interest payments and the repayments would be made from future collections of the compensation cess.
- In the second option, the entire shortfall of Rs 2.35 lakh crore could be borrowed from the market and the states would have to bear the interest costs, but the repayments would be adjusted against future collections of the cess.
- 10 states have rejected both the options and have stated that it is the Centre’s responsibility to compensate the states, and therefore, it should borrow.
Commitment of the Centre
- The minutes of the 7th and 8th GST Council meeting show that most of the states wanted the Centre to commit on paying compensation from the Consolidated Fund of India (CFI).
- On that demand the Union Finance Minister had stated that in case the amount in the GST compensation fund falls short of the compensation payable in any bi-monthly period, the GST Council shall decide the mode of raising additional resources including borrowing from the market which could be repaid by the collection of cess in the sixth year or further subsequent years.
- Thus, there was a clear commitment of the Centre on the issue of compensation and the method of recouping the loss.
Impact on the Centre-State relations
- The payment of compensation has plunged the Union-state relationship to a new low.
- First, not recognising the Centre’s commitment will make states wary of any future reforms involving an agreement with the Centre.
- Second, giving selective press statements to pressurise the states into accepting one or the other option does not infuse confidence.
- Third, there was a statement by the Union finance ministry officials that the GST Council does not have jurisdiction over-borrowing and borrowing is an individual state and Centre’s decision under Article 293 of the Constitution.
- If so, why were the two borrowing options presented to the states in the meeting of the Council?
Way forward
- It is the Centre’s commitment to find the compensation mechanism and borrowing is one of the options — that must be discussed in the Council.
- Furthermore, if the commitment of the Centre is recognised as admitted by the finance minister in the 7th GST council meeting, the Centre should take the responsibility to borrow.
- Both interest payments and repayment of the principal liability can be met from future collections from the cess.
Conclusion
This issue is of immense significance for the future of Centre-state relations. But pressuring states on the basis of political strength will have adverse consequences for the country’s federal structure.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: LTRO, Bonds
Mains level: Paper 30- Measures by the RBI to assure the Government bond holders
The article highlights the measures taken by the RBI in the recent MPC meeting to assure the buyers of the Government bonds and ensuring the policy rate transmission.
Dealing with the rate transmission issue and why it matters
- The gap between the repo rate and the average lending rate of banks is at a record high.
- So, the RBI and the MPC focused on improving rate transmission.
- This gap can be broken up into two parts:
- The first is the gap between the RBI-set repo rate and the rate at which the government of India borrows (the GSec yield).
- It is also called the “term premium” can be influenced by the RBI’s actions.
- The second is the gap between the GSec yield and the rate at which individuals or private firms borrow.
- This gap reflects risk aversion in the financial system and a lack of capacity.
- The RBI has avoided directly influencing the term premium, perhaps to maintain its credibility and independence, staying clear of accusations that it is financing the government’s fiscal deficit.
- However, unless the rate at which the government borrows comes down borrowing costs for the whole economy will stay elevated.
Challenge of Balance-of-Payment surplus (i.e. excess dollars)
- Over the past few months, the country’s foreign currency reserves have been growing at an unprecedented rapid pace.
- This means that India is getting far more dollars than it needs. Three factors are responsible for this.
- 1) Some short-term factors responsible are weak imports and a faster normalisation of exports.
- 2) There have also been structural shifts in India’s economic policy which point to a persistent BoP surplus.
- In addition to low energy prices, policies supporting Atmanirbhar Bharat mean lower imports and the push towards making India a participant in global value chains mean higher exports.
- 3) At the same time, India’s capital account is being opened up: The special-category government of India bonds, for example.
Why BoP surplus is opportunity
- When the excess dollar inflows turn into a deluge, as they have over the past six months, the supply of rupees in the domestic economy also becomes excessive.
- If the RBI can direct this surplus into government bonds, it can maintain its independence and credibility, and at the same time achieve its target of rate transmission.
Measures by the RBI to assure the bond market
- The buyers of government bonds need to feel reassured of not getting hurt by the volatility in bond prices.
- When bond prices rise, the yields fall, and vice versa.
- Banks parking trillions of rupees with the RBI at 3.35 per cent overnight would earn nearly 6 per cent if they bought government bonds.
- That they did not was because they were afraid of the bond prices falling, which would offset the gains from higher rates.
- The increase in the Hold-To-Maturity limits by the RBI by one year to March 2022, has assured the banks that they need not fear booking interim losses if bond prices are volatile.
- The announcement that the RBI would purchase state and central government bonds on the market (even if in small sizes) would provide further comfort.
- The change in assessment of inflation should help buyers of government bonds take the risk.
- Banks or other bond investors that refrained from purchasing government bonds because they felt the RBI would increase interest rates at some point to comply with its legal mandate, would be reassured by this clear communication.
- The targeted refinancing operations (TLTRO) should help bring down borrowing rates in the targeted industries.
Conclusion
Economic challenges may persist for the foreseeable future. The economic scars of the last six months are likely to take time to heal. The RBI and the MPC, which have been proactive, creative and accommodative so far, may have to stay so for a while longer.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSP. SAP
Mains level: Paper 3- Issues with the MSP regime
The author analyses the inefficiencies in the MSP regime while comparing it with the sugar sector and the milk sector. The recent agri-reform in the opinion of the author could help to make the Indian agriculture more efficient.
MSP system Vs. Market-driven system
- MSP regime was the creation of the era of scarcity in the mid-1960s.
- Indian agriculture has, since then, turned the corner from scarcity to surplus.
- In a surplus economy, unless we make agriculture demand-driven, the MSP route can spell financial disaster.
- This transition is about changing the pricing mix — how much of it should be state-supported and how much market-driven.
- The new laws are trying to increase the relative role of markets without dismantling the MSP system.
- Currently, no system is perfect, be it the one based on MSP or that led by the markets, but the MSP system is much more costly and inefficient.
- The market-led system will be more sustainable provided we can “get the markets right”.
Issues with the MSP
- A perusal of the MSP dominated system of rice and wheat shows that the stocks with the government are way above the buffer stock norms.
- The economic cost (to FCI) of procured rice comes to about Rs 37/kg and that of wheat is around Rs 27/kg.
- No wonder, market prices of rice and wheat are much lower than the economic cost incurred by the FCI.
- So, grain stocks with the FCI cannot be exported without a subsidy[i.e. export below the cost], which invites WTO’s objections.
- The FCI’s burden is touching Rs 3 lakh crore which is not reflected in the Central budget as the FCI is asked to borrow more and more.
- The FCI can reduce costs if it uses policy instruments like “put options”.
2 Lessons: from sugarcane and milk pricing
1) Populism resulted in making sugar industry globally non-competitive
- In the case of sugarcane, the government announces a “fair and remunerative price” (FRP) [not MSP]to be paid by sugar factories [not paid by the Government].
- While some states like Uttar Pradesh announces its own “state advised price” (SAP).
- The sheer populism of SAP has resulted in cane arrears amounting to more than Rs 8,000 crore, with large surpluses of sugar that can’t be exported.
- This sector has, consequently, become globally non-competitive.
- Unless sugarcane pricing follows the C Rangarajan Committee’s recommendations the problems of the sugar sector will not go away.
2) Success story of milk sector
- In the case of milk co-operatives, pricing is done by the company in consultation with milk federations.
- It is more in the nature of a contract price.
- It competes with private companies, be it Nestle, Hatsun or Schreiber Dynamix dairies.
- The milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane.
- Today, India is the largest producer of milk — 187 million tonnes annually.
So, how the recent reforms will help the farmers
- As a result of changes in farm laws in the next three to five years companies will be encouraged to build efficient supply lines somewhat on the lines of milk.
- These supply lines — be it with farmers producer organisations (FPOs) or through aggregators — will, of course, be created in states where these companies find the right investment climate.
- These companies will help raise productivity, similar to what has happened in the poultry sector.
- Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.
Conclusion
The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere, the recent reforms are the steps in this direction.
Back2Basic: What is MSP
- Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
- The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- The minimum support prices are a guarantee price for their produce from the Government.
- The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
- In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
What are ‘put options’
- Put options give holders of the option the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
- Put options are available on a wide range of assets, including stocks, indexes, commodities, and currencies.
- Put option prices are impacted by changes in the price of the underlying asset, the option strike price, time decay, interest rates, and volatility.
- Put options increase in value as the underlying asset falls in price, as volatility of the underlying asset price increases, and as interest rates decline.
- They lose value as the underlying asset increases in price, as volatility of the underlying asset price decreases, as interest rates rise, and as the time to expiration nears.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: RTI
Mains level: Pendency of RTI cases
Fifteen years after the Right to Information (RTI) Act came into force; more than 2.2 lakh cases are pending at the Central and State Information Commissions, which are the final courts of appeal under the transparency law.
Try this question:
Q.“RTI is a tool for empowering ordinary citizens and changing the culture of governance in India.” Discuss.
Right to Information
- RTI is an act of the parliament which sets out the rules and procedures regarding citizens’ right to information.
- It replaced the former Freedom of Information Act, 2002.
- Under the provisions of RTI Act, any citizen of India may request information from a “public authority” (a body of Government or “instrumentality of State”) which is required to reply expeditiously or within 30.
- In case of the matter involving a petitioner’s life and liberty, the information has to be provided within 48 hours.
- The Act also requires every public authority to computerize their records for wide dissemination and to proactively publish certain categories of information so that the citizens need minimum recourse to request for information formally.
Governing of RTI
The Right to information in India is governed by two major bodies:
- Central Information Commission (CIC) – Chief Information commissioner who heads all the central departments and ministries- with their own public information officers (PIO)s. CICs are directly under the President of India.
- State Information Commissions (SIC)– State Public Information Officers or SPIOs head over all the state department and ministries. The SPIO office is directly under the corresponding State Governor.
- State and CIC are independent bodies and CIC has no jurisdiction over the SIC.
Fundamental status of RTI
- RTI is a fundamental right for every citizen of India.
- Since RTI, is implicit in the Right to Freedom of Speech and Expression under Article 19 of the Indian Constitution, it is an implied fundamental right.
Limitation to RTI
- Information disclosure in India is restricted by the Official Secrets Act 1923 and various other special laws, which the new RTI Act relaxes.
- RTI has proven to be very useful but is also counteracted by the Whistle Blowers Protection Act, 2011.
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