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  • UN World Geospatial Information Congress (UNWGIC)

    UNWGIC

    PM has inaugurated the second United Nations World Geospatial Information Congress (UNWGIC) in Hyderabad.

    What is UNWGIC?

    • The first United Nations World Geospatial Information Congress was held in Deqing, Zhejiang Province, China in 2018.
    • The United Nation Committee of Experts on Global Geospatial Information Management (UN-GGIM) organizes the UNWGIC every four years.
    • It is hosted by the Ministry of Science and Technology of the Government of India.
    • The objectives are enhancing international collaboration among the Member States and relevant stakeholders in Geospatial information management and capacities.
    • The theme of UNWGIC 2022 is ‘Geo-Enabling the Global Village: No one should be left behind’.

    Objectives of UNWGIC

    • The move aims to provide high-quality and trustworthy geospatial data to support global and national policy agendas.
    • It also stresses international cooperation and coordination in the development of human data linked to geography.
    • It promotes societal development and well-being, addresses environmental and climate challenges, and embraces digital transformation and technological advancement.

    Why collaborate on geospatial technology?

    • Geospatial technology can be used to create intelligent maps and models which help to collect geographically referenced data.
    • Decisions based on the value and importance of resources, most of which are limited, can become easy through geospatial technology.
    • Intelligent maps and models can be created using geospatial technology.
    • It can be used to reveal spatial patterns hidden in large amounts of data that are complex to access collectively through mapping.

     

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  • 11th October 2022| Daily Answer Writing Enhancement(AWE)

    Topics for Today’s questions:

    GS-1          Modern Indian history from about the middle of the eighteenth century until the present – significant events, personalities, issues.

    GS-2        Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

    GS-3        Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

    GS-4         Philosophical basis of governance and probity; Information sharing and transparency in government, Right to Information, Codes of Ethics, Codes of Conduct, Citizen’s Charters, Work culture, Quality of service delivery, Utilization of public funds, challenges of corruption.

    Question 1)

     

    Q.1 Bal Gangadhar Tilak and Mahatma Gandhi were two of the stalwarts of the Indian National Movement. Do you think that Gandhian politics was, in a sense, the continuation of Tilak’s politics? (10 Marks)

     

    Question 2)

    Q.2 Despite being lauded for its patient centric approach, the implementation of the Mental Healthcare Act, 2017, remains sluggish and mired with various issues. Discuss. (10 Marks)

    Question 3)

    Q.3 The recently launched National Logistics Policy truly has the potential to be a game-changer in India’s infrastructure transformation. Discuss. (15 Marks)

    Question 4)  

    Q.4 Ethical foundations are as much responsible for good governance as the rule of law. Discuss why ethics is important for good governance and upholding the rule of law. (10 Marks)

     

    HOW TO ATTEMPT ANSWERS IN DAILY ANSWER WRITING ENHANCEMENT(AWE)?

    1. Daily 4 questions from General studies 1, 2, 3, and 4 will be provided to you.

    2. A Mentor’s Comment will be available for all answers. This can be used as a guidance tool but we encourage you to write original answers.

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    6. If you upload the answer on the same day like the answer of 11th  February is uploaded on 11th February then your answer will be checked within 72 hours. Also, reviews will be in the order of submission- First come first serve basis

    7. If you are writing answers late, for example, 11th February is uploaded on 13th February , then these answers will be evaluated as per the mentor’s schedule.

    8. We encourage you to write answers on the same day. However, if you are uploading an answer late then tag the mentor like @Staff so that the mentor is notified about your answer.

    *In case your answer is not reviewed, reply to your answer saying *NOT CHECKED*. 

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  • Migrant workers in India

    Migrant

    Context

    • India has used Aadhaar (digital identity) and UPI (digital payments) extensively to address the challenges of identification and financial inclusion in social protection delivery, particularly in the case of migrants.

    Who is a migrant worker?

    • A “migrant worker” is a person who either migrates within their home country or outside it to pursue work.
    • Usually, migrant workers do not have the intention to stay permanently in the country or region in which they work.
    • As per the census 2011, the total number of internal migrants in India is 36 crore or 37% of the country’s population.
    • The Economic Survey pegged the size of the migrant workforce at roughly 20 percent or over 10 crores in 2016.

    Migrant

    What are the problems faced by migrants?

    • Issues with finding local Employment: Most migrant workers have a seasonal nature of employment. During off-seasons, they struggle to feed their families. Repeated lockdowns made situations more difficult for migrants to find jobs in their localities. They faced travel restrictions which hindered their job search as well.
    • Lack of Insurance Benefits in a Pandemic Environment: Migrant workers work in precarious conditions with little wages and no access to government schemes and services. Poor and unsafe working and living conditions make them prone to diseases. Greater threats of occupational illnesses, nutritional diseases, alcoholism, HIV, and communicable diseases are rampant in the migrant workforce.
    • Issue of timely and Fair Payment of Wages: The informal workforce in India consists of more than 150.6 million regular and daily wage earners. Most of these workers are unaware of their rights as ‘migrant workers. Many unscrupulous agents coerce them and don’t pay minimum wages as per law.
    • Lack of portability of benefits: Migrants registered to claim access to benefits at one location lose access upon migration to a different location. This is especially true of access to entitlements under the PDS.  The ration card required to access benefits under the PDS is issued by state governments and is not portable across states.  This system excludes inter-state migrants from the PDS unless they surrender their card from the home state and get a new one from the host state.
    • Lack of affordable housing: The proportion of migrants in urban population is 47%. In 2015, the Ministry of Housing and Urban Affairs identified migrants in urban areas as the largest population needing housing in cities. There is inadequate supply of low-income ownership and rental housing options.

    Migrant

    Government steps for migrant workers

    • Pradhan Mantri Garib Kalyan Yojana: After the lockdown, Pradhan Mantri Garib Kalyan Yojana with a financial package of Rs. 1.7 lakh crore was launched to help poor, needy, and unorganized sector workers of the country.
    • PM SVANidhi Scheme: PM SVANidhi Scheme was launched to facilitate collateral-free working capital loans up to Rs.10,000/- of one-year tenure, to approximately, 50 lakh street vendors, to resume their businesses.
    • Pradhan Mantri Garib Kalyan Rojgar Abhiyan: In order to facilitate the employment of migrant workers who have gone back to their home state, Pradhan Mantri Garib Kalyan Rojgar Abhiyan was initiated in 116 districts in Mission Mode.
    • State migrant cell: Migrant workers’ Cell is being created to prepare a database of migrant workers in states with mapping.
    • eShram portal: It is a national database created to register the unorganised workers in the country, including the migrant workers.
    • National policy on migrant workers: NITI Aayog has been mandated to prepare a draft national policy on migrant workers to reimagine labour-capital relations while integrating the migrant workers within the formal workforce.

    How technology could provide Solutions?

    • Providing digital public infrastructure (DPI):  Digital public infrastructure systems that enable the effective provision of essential society-wide functions and services  can enable a paradigm shift, allowing governments to co-create solutions with the private sector and civil society.
    • Adopting Public private partnership models: There are three key areas where DPI can enable public-private partnerships (PPP) in the delivery of social protection of migrants,
    1. Awareness of entitlements: One barrier faced at the initial stage is lack of awareness of entitlements or of the need to reapply, when migrants move from one state to another. Jan Saathi is an application that provides migrants withinformation on eligible social security schemes. Organisations such as Haqdarshak not only inform potential beneficiaries about their eligibility for various schemes, Central or State, but also help them avail entitlements.
    2. Information about livelihoods and housing: The informal nature of the labour market makes access to affordable and safe living conditions a challenge, especially if the family migrates as a unit. Ministry of Housing and Urban Affairshas introduced the Affordable Rental Housing Complexes under PMAY-Urban but the availability of such facilities is inadequate compared to the number of migrants. Bandhu’s ecosystem of applications connect migrant workers directly with employers and housing providers, to give them more informed choices. Jobsgaar and MyRojgaar also play a similar role by connecting workers to employers.
    3. Healthy Grievance redressal Mechanism: Gram Vaani bridges the gap in grievance redressal by providing a platform where citizens can use Interactive Voice Response (IVR) to record their grievance in accessing entitlements. Aajeevika Bureau and The Working People’s Charter built the India Labourline to provide legal aid and mediation services to migrant workers.
    • Adopting a well-designed data: While a growing ecosystem of private players (NGOs, civil society organisations, not-for-profit and for-profit entities) are addressing these needs, well designed data exchanges can help unlock a strong public-private collaboration in the delivery of social protection.

    Migrant

    What more government can do to address the issue of migrants?

    • Creating centralized data: The state’s digital efforts are often in siloes and the need to maximize the use of data across schemes and departments is a high priority.
    • E-Shram: Initiatives such as direct benefit transfers and linking schemes for the portability of entitlements have shown promise. e-Shram, which is a national database of unorganized workers, aims to reduce access barriers to social protection for migrants.
    • Making portable entitlement: Recent announcements of API-based integration of e-Shram with the various state government labor departments and with the One Nation One Ration Card scheme are a step in that direction.
    • Working with the private sector: Enabling linkages of migrant data with the private sector can lead to benefits on the demand side, in the form of reduced transaction costs in identifying jobs, affordable housing, and redressal of grievances.
    • Engaging the private sector: Private players who have established relationships with these mobile populations can help the state in planning and forecasting the demand for benefits. An example of this is the digital payment ecosystem since the introduction of UPI.

    Conclusion

    • Digital technologies have potential solutions to problems and transform the livelihood of migrants. The need for adequate data protection and safeguards is essential for the implementation of any such initiative.

    Mains Question

    Q.Enlist the problem faced by migrant workers? Elaborate on how use of technology can solve the many problems of migrants.

     

  • Urban Challenge, Problems and Solutions

    Context

    • After flooding of major metropolitan cities of Bengaluru, Gurgaon and Delhi following heavy rainfall, the Centre has pointed to two cities – Davanagere and Agartala – as successful examples of cities that have curbed urban flooding.

    Why cities are  so important in India?

    • Drivers of Growth: Urbanisation has played and will continue to play a critical role in India’s growth story in the 21st century.
    • Cities are seen as GDP multipliers: By some estimates, Indian cities already contribute up to 70% of the country’s GDP. Yet, depending on which official estimates you use, India is just 26% or 31% urban. But there is growing evidence that India is more urban than is officially recognized.
    • Cities have more productivity: Well-functioning and diverse cities allow for the sharing and cross-pollination of ideas, which in turn drive greater productivity.

    Urban

    What are the Urban challenges?

    • Lack of Planning: current urban planning policies and practice have led to suboptimal use of land in Indian cities. This has multiple consequences. There is not enough floor space for accommodating migrants in search of economic opportunities; they make space for themselves in informal settlements. There is also not enough land in the public domain for developing adequate open spaces or augmenting infrastructure capacities.
    • Lack of Housing:The pandemic revealed that the cities’ economies rely on migrant populations in the formal and informal sectors. Workers in both markets move from rural to urban and urban to urban areas as they find better opportunities; they are mobile and need adequate rental options. Today, in most Indian cities, this demand is not met and leads to unaffordable options, pushing the poorer sections out to slums and other informal settlements.
    • Lack of Transport: Indian cities are infamous for their road congestion; three of them rank in the 10 most congested in the world according to the 2020 TomTom Travel Index with Mumbai ranking second. The existing public transportation systems are already overcrowded and of poor quality.
    • Lack of Public health: Like other health crises, the COVID-19 pandemic revealed the need to ensure adequate healthcare services and sanitation infrastructure for a healthy population in cities. In the initial months of the outbreak, the focus of health services shifted entirely towards addressing the novel coronavirus, leaving other health issues unaddressed and shutting down routine care services.
    • Impact on Environment: The causes for low air quality are multiple; vehicular movement and on-road congestion are major contributors. A safe and clean environment is key to good public health.
    • Problems faced by vulnerable sections: The economic shock and work from home guidelines changed migration patterns; workers in cities returned to their home towns and villages. Slum dwellers, with limited access to adequate infrastructure, and migrant workers, disenfranchised from social protection systems or daily wagers, were more vulnerable to this shock. In the medium and long term, it is difficult to predict what the job market will be in cities.

    Urban

    What can be done to address the urban challenges?

    • Future planning is necessary: Manage the spatial growth of cities and allow them to build more planned road networks for future horizontal expansion and revoke faulty policies that constrain the use of floor space to build vertically.
    • Housing for all scheme is important: Focus on providing public housing for the poor; India can learn from successful models in Singapore or Hong Kong and understand the strategic challenges of other international examples such as Mexico. India can also work toenable efficient rental markets
    • Holistic transport should be focused: Integrate formal and informal modes of transportation into holistic transportation strategies to ensure seamless mobility, as well as first and last mile connectivity.
    • Increasing funds to Cities: Decentralise fiscal powers to the local level and train city authorities so that they can make more strategic decisions in health expenditures or public health infrastructure, as well as gain the capacity to raise their own resources.
    • Need of a healthy Environment: Increase the number of open spaces in the public domain, maintain them and monitor their use. Prepare for disasters with robust framework of physical infrastructures, road networks and large open spaces. Build adequate infrastructure to support the sustainable development of emerging Tier-2 and Tier 3 towns.
    • More attention to vulnerable: Develop more systematic identification mechanisms of the urban poor to ameliorate the delivery of public services and social protection. Collect accurate data on migrant population and capture their socio-economic diversity to better address their needs. Monitor access to services, housing and jobs of the vulnerable communities in real time.

    Urban

    Conclusion

    • Urban infrastructure is crumbling day by day. In the next 25 years, cities will have more population than rural areas. Indian cities need urgent reform in order to unlock their economic potential and transform quality of life.

    Mains Question

    Q.Discuss the urban infrastructure challenges? What are the governments scheme and actions to address the urbanization challenges?

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  • Critical Minerals: Opprtunity for Aatmanirbharta in Energy security.

    Minerals

    Context

    • In his Independence Day address, Prime Minister Narendra Modi exhorted the country to pursue aatmanirbhar bharta in energy by focusing on clean energy technologies. Securing access to key critical minerals such as lithium, cobalt, nickel and rare earth metals is critical for building resilient and indigenous supply chains for clean energy technologies.

    Background 

    • Concerns over the pricing and availability of oil and gas in the wake of the Ukraine crisis continue to fuel global policy debates on energy security. However, the fragility of clean energy supply chains obscures pathways for countries to reduce dependence on fossil fuel.
    • Imported inflationary pressures through exposure to volatile oil and gas markets also pose risks to macroeconomic growth and stability, particularly for India, import ­dependent for around 85% of its oil and half of its gas needs.

    Minerals

    What are Critical Minerals?

    • Critical minerals are elements that are the building blocks of essential modern-day technologies, and are at risk of supply chain disruptions.
    • These minerals are now used everywhere from making mobile phones, computers to batteries, electric vehicles and green technologies like solar panels and wind turbines.
    • Based on their individual needs and strategic considerations, different countries create their own lists.
    • However, such lists mostly include graphite, lithium, cobalt, rare earths and silicon which is a key mineral for making computer chips, solar panels and batteries.
    • Aerospace, communications and defence industries also rely on several such minerals as they are used in manufacturing fighter jets, drones, radio sets and other critical equipment.

    Why is this resource critical?

    • As countries around the world scale up their transition towards clean energy and digital economy, these critical resources are key to the ecosystem that fuels this change.
    • Any supply shock can severely imperil the economy and strategic autonomy of a country over-dependent on others to procure critical minerals.
    • But these supply risks exist due to rare availability, growing demand and complex processing value chain.
    • Many times the complex supply chain can be disrupted by hostile regimes, or due to politically unstable regions.
    • They are critical as the world is fast shifting from a fossil fuel-intensive to a mineral-intensive energy system.

    MineralsWhat are Rare Earth Metals?

    • The rare earth elements (REE) are a set of seventeen metallic elements. These include the fifteen lanthanides on the periodic table plus scandium and yttrium.
    • Rare earth elements are an essential part of many high-tech devices.
    • They have a wide range of applications, especially high-tech consumer products, such as cellular telephones, computer hard drives, electric and hybrid vehicles, and flat-screen monitors and televisions.
    • Significant defense applications include electronic displays, guidance systems, lasers, and radar and sonar systems.
    • Rare earth minerals, with names like neodymium, praseodymium, and dysprosium, are crucial to the manufacture of magnets used in industries of the future, such as wind turbines and electric cars.

    Applications of REMs in various fields:

    • Electronics: Television screens, computers, cell phones, silicon chips, monitor displays, long-life rechargeable batteries, camera lenses, light-emitting diodes (LEDs), compact fluorescent lamps (CFLs), baggage scanners, marine propulsion systems.
    • Defense Sector: Rare earth elements play an essential role in our national defense. The military uses night-vision goggles, precision-guided weapons, communications equipment, GPS equipment, batteries, and other defense electronics. These give the United States military an enormous advantage. Rare earth metals are key ingredients for making the very hard alloys used in armored vehicles and projectiles that shatter upon impact.
    • Renewable Energy: Solar panels, Hybrid automobiles, wind turbines, next-generation rechargeable batteries, bio-fuel catalysts.
    • Manufacturing: High strength magnets, metal alloys, stress gauges, ceramic pigments, colorants in glassware, chemical oxidizing agent, polishing powders, plastics creation, as additives for strengthening other metals, automotive catalytic converters
    • Medical Science: Portable x-ray machines, x-ray tubes, magnetic resonance imagery (MRI) contrast agents, nuclear medicine imaging, cancer treatment applications, and for genetic screening tests, medical and dental lasers.
    • Technology: Lasers, optical glass, fiber optics, masers, radar detection devices, nuclear fuel rods, mercury-vapor lamps, highly reflective glass, computer memory, nuclear batteries, high-temperature superconductors.

    DO YOU KNOW?

    Metals such as cadmium, lead are often used in manufacturing plastic and over time can enter coastal waters. These are acutely harmful for coastal wildlife and humans.Different kinds of plastic releases different kinds of metals  that may release when exposed to water and UV lights.

    What are the challenges in accessing Critical minerals?

    • Deposits in geopolitically sensitive regions: Reserves are often concentrated in regions that are geopolitically sensitive or fare poorly from an ease of doing business perspective.
    • Controlled production:  A portion of existing production is controlled by geostrategic competitors. For example, China wields considerable influence in cobalt mining in the Democratic Republic of Congo through direct equity investments and its Belt and Road Initiative.
    • Agreements in advance from outside: Future mine production is often tied up in off take agreements, in advance, by buyers from other countries to cater to upcoming demand.

    MineralsA step taken by Indian government for sourcing strategic minerals

    • For sourcing of strategic minerals, the Indian government established Khanij Bidesh  India Limited (KABIL) in 2019 with the mandate to secure mineral supply for the domestic market.

    What is Khanij Bidesh India Limited (KABIL)?

    • Joint venture: A joint venture company namely Khanij Bidesh India Ltd. (KABIL)  set up with the participation of three Central Public Sector Enterprises namely, National Aluminium Company Ltd.(NALCO), Hindustan Copper Ltd.(HCL) and Mineral Exploration Company Ltd. (MECL).
    • Objective: The objective of constituting KABIL is to ensure a consistent supply of critical and strategic minerals to Indian domestic market. While KABIL would ensure mineral security of the Nation, it would also help in realizing the overall objective of import substitution.

    Suggestions based on Council on energy environment and water (CEEW) to achieve the objective of KABIL

    • Mapping out the domestic requirement: Figure out the mineral requirements of the domestic industry. This could best be accomplished by a task force which includes the ministries of power, new and renewable energy, heavy industry, and science and technology.
    • Clear road map for indigenous manufacturing: Five­ year road maps with clear targets for deployment and indigenous manufacturing across clean energy applications would provide visibility to domestic investors. Assess the technology mix that would support this deployment. On this basis, determine the quantities of minerals necessary to support indigenous manufacturing.
    • Better coordination between different stakeholders: Coordinate with the domestic industry to determine where strategic interventions by the government would be necessary for the purpose.KABIL could collaborate with industry to bolster its market intelligence capabilities for tracking global supply­ side developments.
    • Preemptive agreements through KABIL for reliable supply: If conducive investment opportunities don’t exist KABIL should pre­emptively sign off take agreements with global  mineral suppliers to secure future production. It could aggregate reliable supply of minerals for domestic requirements  and sign back ­to­ back sales agreements with the domestic industry .Such large scale centralised  national procurement could be done at preferential terms.
    • Joint Investment In mining assets to mitigate investment risks: The government should jointly invest in mining assets with geostrategic partners. KABIL should make equity investments in mining jurisdictions that private sector investors may deem too risky. It should leverage government­ to­ government partnerships to mitigate investment risks. This could be done through joint investments with sovereign entities from geostrategic partners or private sector entities with expertise in specific geographies.
    • Finding the alternatives: Technologies such as sodium ­ion batteries could reduce requirements for sourcing minerals from beyond India’s borders.  It could also propose co­ development of such technologies with geostrategic partners.
    • Developing policies on sustainable urban mining and recycling: Develop policies on urban mining aimed at recycling mineral inputs from deployments that have completed their useful life. These could help further reduce dependence on international sourcing.

    Conclusion

    • Besides Ukraine, other potential geopolitical flash points also exist against a backdrop of dwindling multilateral cooperation. India must act immediately and decisively to mitigate  these risks  to its energy security.

    Mains Question

    Q.What are critical minerals? Why the critical minerals are so important? What steps India can take to achieve the objective of Atmanirbhar Bharat in domestic mineral supply and thereby mitigating energy security risks?

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  • Economics Nobel for work on Role of Banks during Financial Crisis

    nobel

    The Nobel Prize for Economics in 2022 was awarded to Ben S Bernanke, Douglas W Diamond and Philip H Dybvig for research on banks and financial crises.

    Do you know?

    • The economics prize is not one of the original five awards created in the 1895 will of industrialist and dynamite inventor Alfred Nobel.
    • It was established by Sweden’s central bank and first awarded in 1969, its full and formal name being the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

    Why was the Nobel given to these three scholars?

    • The research of the three laureates has helped us understand the role of banks in the economy, particularly during financial crises.
    • Their research shows why avoiding a bank collapse is very important for the economy.

    Which bank did these scholars study?

    • In 1656, the then-king of Sweden approved the foundation of Sweden’s first bank, the Stockholms Banco, which also became the first bank to issue banknotes in Europe.
    • However, Banco over-issued notes leading to its liquidation in 1667.
    • In 1668, the Swedish Nobles decided to found the Riksens Standers Bank, which was later renamed as Sveriges Riksbank in 1867.
    • In 1968, on its tercentenary, the Sveriges Riksbank decided to award the economics prize in memory of Alfred Nobel.
    • The award itself was the result of an ongoing crisis and conflict between the central bank and the government.
    • The purpose of mentioning this history is to highlight how failures are central to banks.
    • Banks have failed ever since they were created.

    What does Ben Bernanke say about banking crises?

    • In the 1930s, the world economy faced a serious economic contraction called the Great Depression.
    • For many years, it was thought the Great Depression was due to a lack of policy stimulus.
    • The economist John Maynard Keynes had argued that monetary policy was ineffective in such crises as interest rates could not go lower than zero percent, and one needed a large fiscal stimulus.
    • Milton Friedman argued that central banks could create money even when interest rates were zero by buying assets, thereby increasing the money supply.

    Reasons behind the crisis

    • Bernanke said that while a lack of policy stimulus explains the contraction, it does not explain why the Great Depression continued for such a long time.
    • The economic contraction had led to a large number of bank failures.
    • His argument was that it was this large-scale failure of banks which prolonged the crisis.
    • Banks were not in a position to channel loans towards productive activities, leading to the crisis becoming more severe in the US.

    How is bank failure attributed to the financial crisis?

    • Banks have special insights into companies, and when a bank fails, all this information is lost.
    • A failed banking system takes many years to repair and the economy performs very poorly in this period.
    • This explains why the Great Depression became such a prolonged crisis.
    • Bernanke drew his analysis from a deep understanding of economic and monetary history.
    • This prize also shows the importance of history, which is becoming rarer in economic research.

    What are Diamond’s and Dybvig’s insights into banking crises?

    • Bernanke explained what happens when banks fail. But Diamond and Dybvig explained why banks fail.
    • In joint research, hence called the Diamond-Dybvig model, they explain that banks fail when depositors rush for their money.
    • In their model, banks are seen as financial intermediaries that intermediate funds from depositors to loan seekers.
    • The deposits are for shorter durations whereas loans are typically given for longer durations (technically called the maturity transformation function of banks).
    • The banks are seen as entities that help savers meet investors, and by channeling loans towards good projects, banks help an economy grow.

    How bank failure is related to depositors?

    • Banks are prone to runs by depositors.
    • In their research, they show that once there is a rumor about a bank’s weakness, it spreads like wildfire, causing a bank run, when depositors literally run for their funds to the bank.
    • As banks lend most of the funds towards long-term projects, the loans cannot be recalled easily to repay the depositors.
    • If the rumor is not addressed, it leads to eventual bank failure.

    Is it Nobel-worthy?

    • While many know this is basically how banks fail, the prize-winning duo formalized the model.
    • They also presented a solution for bank failures via deposit insurance, which was also introduced before their research.
    • In 1933, the US was the first country to adopt deposit insurance, followed by India in 1962.
    • Both adopted deposit insurance after a significant number of banks failed in these countries.

    What does the prize mean for Indian banking?

    • India has been facing sporadic banking crises from 2013 where few banks failed.
    • Bernanke’s research shows how once a crisis starts, it can prolong not just banking problems but also lower economic growth over time.
    • Diamond-Dybvig’s research shows how the weak performance of individual banks like the Punjab and Maharashtra Urban Cooperative Bank and Yes Bank lead to runs.
    • Such banks need to be bailed out by the government.
    • There was also the case of ICICI bank which faced a run in 2008 based on rumours, but the run was stalled by the central bank by issuing a notification assuring the sound health of the bank.

    You must know this!

    • Economist and former Reserve Bank of India (RBI) chief Raghuram Rajan seemed to have missed out on the award.
    • He is a leading scholar on banking and has written many research papers with this year’s awardee, Douglass Diamond.
    • The Nobel committee has cited 12 of his research papers, which are a significant contribution to the field of banking.

     

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  • [Burning Issue] Successes and Failures of GST after 5 years

    [Burning Issue] Successes and Failures of GST after 5 years

    Context

    • The monumental indirect tax reform, the Goods and Services Tax (GST), completed five years in existence in July 2022.
    • This burning issue edition would analyze the impacts of GST on the Indian economy and whether the reform has achieved its stated objectives or not.

    What is GST?

    • GST is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.
    • The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017. It is a single domestic indirect tax law for the entire country.
    • It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
    • Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

    What are the components of GST?

    There are three taxes applicable under this system:

    • CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra).
    • SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra).
    • IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

    Why was GST introduced?

    • Offer a win-win situation: The profound idea behind the implementation of GST was that it would offer a win-win situation for all stakeholders, be it the governments at the Centre or States, taxpayers, or tax administrators.
    • Address previous tax regime challenges: Previous indirect tax regime was marred by cascading effect of taxation, high tax evasion and informalisation. GST was a solution for all these negativities.
    • Benefit all stakeholders: Manufacturers and traders were to benefit from fewer and easier electronic tax filings, transparent rules, cost reduction and ease in record maintenance. Consumers would be paying lesser for the goods and services, and the government would generate more revenues by plugging revenue leakages through the adoption of efficient data analytic tools.

    Outcomes after 5 years of GST implementation

    (A) Positive outcomes

    • Reduced cascading effect: GST has mainly removed the cascading effect on the sale of goods and services. Removal of the cascading effect has impacted the cost of goods as the GST regime eliminates the tax on tax, and the cost of goods decreases.
    • Increase in the number of registrants: The ease of payments has improved over time with the technical glitches having been slowly sorted out, leading to a record number of GST registrants – increasing from 1.08 crore in April 2018 to 1.36 crore in 2022.
    • Increased revenue generation: The revenue gains have been significant. The system witnessed record GST collections on a month-on-month basis. For the past 11 months, GST collections have crossed Rs 1 lakh crores mark.
    • Improved EDB rankings: The introduction of GST has simplified business processes, tax administration and compliances in India. The Ease of Doing Business Index, a measure used by the World Bank Group in which ‘paying taxes’ is one of the important parameters used to determine country rankings, has shown significant change. India’s ranking during the last three years showed a sharp upward momentum from 100 in 2018 to 77 in 2019 and 63 in 2020 – a jump of 37 places in 3 years.
    • GST and technology: With the introduction of GST, the country adopted a pan-India technology platform. After the initial hiccups, the GST portal started handling registration and compliance functions with consummate ease. Also, the integration of the Customs/SEZ portal and sharing of data with other departments/regulators within the government helped explore the unexplored areas of data analytics and audit.
    • Robust unified e-way bill system: introduced in 2018, has facilitated dispensing with the archaic check-posts, thereby reducing supply chain lead time and associated costs for companies and helping the tax administration monitor tax compliances and potential revenue leakages better.
    • The introduction of e-invoicing: from October 2020, provided a system that allows real-time data reporting by taxpayers. The availability of real-time and relevant data helped in the detection of tax fraud and curbing evasion. Further, the standardized format and data reporting allowed the interoperability of data for multiple reports and filings.
    • Rate reshuffling: One of the important principles of the GST is a simplified rate structure. The government has made attempts to reshuffle the rates, with the number of goods in the 28% and 5% tax brackets coming down considerably in the previous five years.

    (B) Negative Outcomes

    • Politics influence the decision of the GST Council: Ideally, political affiliations should not matter in a Council set up to decide indirect taxes. During the Covid period, several of the 14 members of the groups who belong to parties different from the party ruling in the Centre, requested the Finance Minister to convene the GST meeting to help them manage their finances but none of the 17 members of the ruling group deemed it necessary.
    • Increase in inflation: During the 12 months preceding GST implementation, the Consumer Price Index (CPI) inflation was 3.66%, while it increased to 4.24% post-GST in the next 12 months.
    • Provisions for unregistered GST suppliers: The micro, small and medium enterprises (MSME) sector has been affected by the GST reforms because the large units have been reluctant to buy from them in the absence of input duty credit.
    • Reduced GDP rate: GDP growth rate, instead of rising, has fallen quarter-on-quarter from 8% in Q4 of 2017-18 to 3.1% in Q4 of 2019-20, just before the pandemic hit. Of course, the entire decline cannot be attributed to GST but it has contributed substantially to it by damaging the unorganized non-agriculture sector which is 31% of the GDP.
    • Operational difficulties: Due to the complexities and lack of clarity in official pronouncements, businesses and chartered accountants complain of difficulties. A company that operates nationally has to file forms monthly for each state of operation – adding up to hundreds of forms. 
    • Not truly one nation, one tax: While a category of good or service has one tax rate nationally, across goods and services there are many tax rates (at least 8). This goes counter to the requirement of GST that there be one tax rate but in an economy like India that is not feasible given the poverty and diversity of production structures.

    Way Forward

    • Refining the compliance system of GST: A GST in India continues to be a compliance burden with manifold filing obligations and lengthy returns. This has led to exorbitant compliance costs and efforts. An urgent need is to have rationalized, simplified, robust and reduced compliance conditions with sufficient scope for rectification and amendment to guarantee that correct disclosure can be made with the minimum difficulty and delay.
    • Improving the GSTN system: One of the big challenges is that the GST Network (GSTN) compliance portal is yet to reach full operating capacity. From a credit standpoint, the GSTN portal has not accomplished the capability to match the efficacy of invoices. This is perhaps the main reason for fraudulent activities and fake invoices. The basic idea behind the digitalization of returns was to guarantee accurate compliance, leading to an accurate streamlining of credit and taxes.
    • Further rate streamlining: A uniform and rationalized tax rate structure is a central characteristic of any effective GST legislation. Although the GST legislation has made some advances on this front, much work is needed to attain this target. Many nations implementing GST have only one rate for all items. From zero to 28%, India has seven rates, and this number goes up if we also take into account compensation rates. It would be better to reduce the GST tax rates to two or three.
    • HS codes: There is also the requirement to restructure the GST rate list and make it compatible with machine processing. The GST uses harmonized structure (HS) codes for classifying most items. All GST rates should confirm to HS’s six-digit standard description. 
    • Formation of the GST Appellate Tribunal: Even after half a decade of GST execution, the GST Appellate Tribunal is yet to be established. This has resulted in multiple court cases, heavy interest costs and GST refunds being trapped. The wait for the creation of a statutory appellate tribunal discourages the dispute resolution method. The GST has resulted in a sharp rise in litigation largely because of ambiguous legal stipulations and how officials have issued orders.
    • Increased investment in technology: With technology impacting all parts of the business, greater investment in technology for updating the user interface and making it simpler to use, especially for small and medium enterprises, could place the GST in India on par with the rest of the world and help accomplish the bigger goal of the ease of doing business.
    • Raising the exemption limit: The government must set small business firms free by lifting the exemption limit. As per GST data, out of 14 million registrations, companies with less than INR15 million annual turnover account for 84%, but contribute less than 7% of the tax collected. The exemption limit must be lifted to INR15 million for goods and services. This is a monthly turnover of INR1.5 million, which at 10% of the profit margin converts into just INR120,000.
    • Inclusion of fuels and real estate: Including natural gas/ATF under GST should be considered. Further reforms in the factor markets — land, real estate and energy — would require their inclusion in the GST. This is essential because while the economic reforms of the 1990s restructured the product market, the factor market reforms were incomplete.
    • Creation of federal institution: We need to create another institution in the form of a GST state secretariat that can bring together senior officers from the Centre and states in an institutional forum registered under the Society Act. This forum could also provide a common point of contact for trade and industry to redress grievances on non-policy matters.

    Conclusion

    • As Winton Churchill remarked ‘success is not final, failure is not fatal; it is the courage to continue that counts!’
    • Therefore, the GST reform has come a long way but still, multiple challenges are to be addressed to make it a success and achieve the objectives that were stated during its launch.  

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  • India’s Space economy

    India’s space economy is likely to be worth nearly $13 billion by 2025, with the satellite launch services segment set to witness the fastest growth due to increasing private participation.

    About the report

    • The report is released by the Indian Space Association (ISpA) and Ernst & Young.
    • It says that the growing demand for smaller satellites is set to boost satellite manufacturing in the country.
    • It will attract global start-ups in the sector to help incubate space tech companies to India.

    Key highlights

    • India’s space economy was pegged at $9.6 billion in 2020 and is expected to touch $12.8 billion by 2025.
    • In dollar terms, the satellite services and applications segment would be the largest with a turnover of $4.6 billion by 2025, followed by the ground segment at $4 billion.
    • Satellite manufacturing stands at $3.2 billion and launch services at $1 billion.
    • The launch services segment was pegged at $600 million in 2020 and is projected to grow at a compound annual growth rate of 13 percent to reach $1 billion by 2025.

    Key drivers of this demand

    • India has of over 100 space tech start-ups with investments in the segment touching $68 million in 2021.
    • The availability of low-cost satellite launch vehicles coupled with mass production will lead to demand from customers around the world.
    • Several companies are utilising cutting-edge technologies to develop innovative launch solutions in India.

    Where does India stand in the global space market?

    • As per SpaceTech Analytics, India is the sixth-largest player in the industry internationally having 3.6% of the world’s space-tech companies (as of 2021).
    • US holds the leader’s spot housing 56.4% of all companies in the space-tech ecosystem.
    • Other major players include UK (6.5%), Canada (5.3%), China (4.7%) and Germany (4.1%).
    • The Indian Space Industry was valued at $7 billion in 2019 and aspires to grow to $50 billion by 2024.

    Why does India matter in the global space-tech market?

    • The country’s standout feature is its cost-effectiveness.
    • India holds the distinction of being the first country to have reached the Mars’ orbit in its first attempt and at $75 million — way cheaper than Western standards.

    Future prospects of India’s private ‘Space’

    Ans. India may lead in space junk management

    • Almost 60-odd start-ups had registered with the Indian Space Research Organisation (ISRO) this year.
    • A majority of them were dealing in projects related to space debris management.
    • As space becomes more congested with satellites, the technology would thus help in managing ‘space junk’ (debris of old spacecraft and satellites).

    How is the private sector’s involvement regulated in India?

    • In June 2020, the Union government announced reforms in the space sector enabling more private players to provide end-to-end services.
    • The central idea was to bring forth a predictable policy and regulatory environment for them and additionally provide access to ISRO facilities and assets to improve their capacities.

    (1) Establishment of IN-SPACe

    • An announcement for the establishment of the Indian National Space Promotion and Authorisation Centre (IN-SPACe) was made.
    • It was mandated the task of promoting, authorising and licensing private players to carry out space activities.
    • As an oversight and regulatory body, it is responsible for devising mechanisms to offer sharing of technology, expertise, and facilities free of cost to promote non-government private entities (NGPEs).
    • IN-SPACe’s Monitoring and Promotion Directorate oversees NGPE’s activities as per prescribed regulations and reports back in case any corrective actions or resolutions are required.
    • ISRO shares its expertise in matters pertaining to quality and reliability protocols, documentation, and testing procedure through IN-SPACe’s ‘interface mechanism’.

    (2) Establishment of NSIL

    • Additionally, constituted in March 2019, New Space India Ltd (NSIL), is mandated to transfer the matured technologies developed by the ISRO to Indian industries.
    • All of them are under the purview of the Ministry of Defence.
    • Private sector’s involvement in the long term, as with other commercial sectors, is believed to help spur investment and expertise in the realm which is capital-intensive and demands high technology.

    Where does India lack?

    Ans. Undisputedly, it is the finances

    • The US and Canada were the highest receivers of space-related investment in 2021.
    • The US’s space budget was $41 billion in 2021, $23.3 billion of which was focused on NASA.
    • India’s total budgetary allocation for FY2022-23 towards the Department of Space was ₹13,700 crore ($172 million).
    • Further, as per Tracxn data, funding into the sector’s start-ups (in India) nearly tripled to $67.2 million on a year-over-year basis in 2021.

     

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