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  • 09th July 2020 | Prelims Daily with Previous Year Questions

    [WpProQuiz 477]

    [WpProQuiz_toplist 476]

  • Rewriting the social contract to deal with the pandemic

    The article examines the theoretical basis on which the governments exercise power. That basis is encapsulated in the ‘social contract theory’. The role of government, however, came under the scanner in the pandemic in which the impact of pandemic was different for the different people.

    Social contract theory: Then and now

    • In the course of evolution, formed the concept of social groups and resultant rules they would abide by.
    • This is the most rudimentary form of what is known as the ‘social contract theory’.
    • When monarchies and empires prevailed, it was easy to understand a social contract.
    • But democratically elected governments have found it more difficult to derive the same legitimacy.
    • Modern society and modern governments also use the social contract theory to claim legitimacy for their actions.
    • The social contract comprises people agreeing to live as one under common laws and in enforcing those common laws justly.

    Modern-day governments’ approach

    • Modern-day governments fundamental credo is that society is best served if a government takes on an executive or sovereign power, with the consent of the people.
    • Governments also use the power democratically invested in them to decide what is in the best interest of the people.
    • Thus, there is a bending of individual free will towards the collective will.
    • So, the social contract is being used by modern governments to justify greater aggrandisement of power in the hands of the sovereign.

    Governments role in pandemic and social contract

    • The novel coronavirus pandemic has laid bare the falsity of this image.
    • Access to information about this pandemic has not been equal.
    • Access to resources to avoid the disease has not been equal.
    • And, of course, access to treatment has not been equal.
    • All this led to uneven impact of the pandemic on people belonging to the different strata of the society.

    Inequality and the impact of pandemic

    •  All societies have some measure of inequality.
    • However, in deeply unequal societies, where the Gini Coefficient exceeds 0.4, for instance, different strata of society will have very different needs to deal with a crisis of this nature.
    • We have seen societies with lower Gini Coefficients deal with the crisis far better.
    • This is because a uniform approach works perfectly when society is perfectly equal.

    Centralised or decentralised approach: Which is better to deal with pandemic?

    • The social contract which imbues a centralised sovereign with overreaching powers has clearly failed on this occasion.
    • The centralised sovereign will work well against a mighty external aggressor, but not against a microscopic pathogen.
    • What is required is not just a decentralised approach but also a state which is sensitive.

    Consider the question “The COVID pandemic has impacted the people with varying intensity and its impact was more on societies with more inequality. This highlights the centrality of the government. Critically examine.”

    Conclusion

    The novel coronavirus cannot be defeated by a centralised government. COVID-19 can only be defeated by an empowered populace. The social contract requires to be rewritten. It does not require anything drastic such as a revolution or anarchy. Rather, it only needs fundamental introspection and rethinking by the governing classes including bureaucrats.

    Oped-snap

    https://www.thehindu.com/opinion/lead/the-social-contract-needs-to-be-rewritten/article32025342.ece

  • Digitising the state

    This article examines the issues with governments account problems and their implications. It also suggests the ways to deal with the problems with data management in India.It is is line with the suggestions made by the CAG in this regard.

    Problem with government account keeping

    • The Union budget grew from Rs 197 crore in 1947 to Rs 30 lakh crore last year.
    • Total government expenditure may be higher than Rs 70 lakh crore. (states+union)
    • But the form and manner of keeping accounts have more or less remained unchanged since Independence.
    • Manual transactions and manual payments often lead to manually entered data at different stages in different databases on different systems.
    • This makes data unreliable, violates the principle of “single source of truth”.
    • This also sabotages transparency and good governance.

    Issues with computerisation by government

    • Government “computerisation” has often mechanised manual processes rather than “re-engineered processes”.
    • This has created siloed IT systems.
    • It has created various separate databases that lack modern data sharing protocols for organic linking like APIs (Application Programming Interfaces).
    • It leaves fiscal data being incomparable as basic as salary expenditure across states.
    • It creates the problem of obscurity in which large expenditures are booked under omnibus head called other.
    • Non-traceable actual expenditure against temporary advances drawn or funds drawn on contingent bills.
    • It creates the problem of misclassification so that grants in aid is classified as capital expenditure and bookings under suspense heads.

    3 Steps to deal with the issues

    1)  100% end-to-end data capture

    • All receipts and expenditure transactions including demands, assessment, and invoices should be received, processed, and paid electronically.

    2)  Data governance for standards

    •  Data standards are rules for describing and recording data elements with precise meanings that enable integration, sharing, and interoperability.
    • Prescribing data elements for all transactions will ensure standardisation.
    • This standardisation will clarify ambiguity, minimise redundant data, and create protocols for integration across different databases across entities receiving government funds.
    • It will also integrate entities collecting revenues on behalf of the government, and those discharging core functions on behalf of the government.
    • Government-wide data standards coupled with real-time data captured end-to-end will enable the use of cognitive intelligence tools like analytics, artificial intelligence, machine learning.
    • These tools, will support the establishment of budget baselines, detecting anomalies, data-driven project/activity costing, performance comparisons across departments and agencies, and benchmarking.

    3) Technology architecture

    • The element of technology architecture must ensure that all IT government systems should conform to a prescribed open architecture framework.
    • This framework should ensure robust security and maintaining privacy.

    How will these 3 steps help

    • It will help in recognising off-budget transactions, the last Union budget took steps towards this fiscal transparency and consolidation.
    • These steps will ensure business continuity: electronic records cannot be lost or misplaced like files or paper records.
    • It will also provide an incontrovertible audit trail.
    • It will enable Parliament and legislatures to draw “assurance” that each rupee due to the government has been collected, and each rupee has been spent for the purpose it was allocated.

    Consider the question “Government expenditure has increased manifold since 1947 but the form and manner of keeping data have remained more or less the same. In light of this examine the issues with payments, accounting and transactions data system of the government. Suggest the measures to improve it.”

    Conclusion

    A citizen-centric view of a single source of truth encompassing every rupee of public money would make the 299 remarkable people who wrote India’s Constitution proud of this 21st-century citizen empowerment innovation.

    Original Op-ed

    https://indianexpress.com/article/opinion/columns/digitising-the-state-6496692/

  • Need for a Bad Bank

    The idea of setting up a bad bank often comes up for debate, especially when stress in the banking sector is projected to rise in the near term.

    Practice question for mains:

    Q. What is a Bad Bank? Discuss how it can rescue the covid induced bad loans in India.

    COVID induced NPAs

    • Several economists and agencies project a recession in the Indian economy this year, due to the adverse effects of Covid-19 on economic activity.
    • This will hit the banking and financial sector in particular, as a slump in earnings of companies and individuals could lead to a jump in NPAs, reversing the early trends.
    • Various analysts suggest that in a couple of years, the proportion of stressed assets in the banking system could jump to as high as 18 per cent from around 11 per cent at present.
    • To tackle this upcoming challenge, the banking industry has proposed the setting up of a government-backed bad bank.

    What is the Bad Bank?

    • A bad bank is a bank set up to buy the bad loans and other illiquid holdings of another financial institution.
    • The entity holding significant NPAs will sell these holdings to the bad bank at market price.
    • By transferring such assets to the bad bank, the original institution may clear its balance sheet—although it will still be forced to take write-downs.
    • A bad bank structure may also assume the risky assets of a group of financial institutions, instead of a single bank.

    What is the recent proposal of a bad bank?

    • The banking sector, led by the Indian Banks Association (IBA), had in May submitted a proposal for setting up a bad bank to the finance ministry and the RBI.
    • The IBA proposed for having equity contribution from the government and the banks.
    • This was based on an idea proposed by a panel on faster resolution of stressed assets in public sector banks headed by former PNB Chairman Sunil Mehta.
    • This panel had proposed an asset management company (AMC), ‘Sashakt India Asset Management’, for resolving large bad loans two years ago.
    • There were talks about creating a bad bank in 2018 too, but it never took shape.

    What kind of NPA spike is expected during this outbreak?

    • The impact of Covid-19 and the associated policy response is likely to result in an additional Rs 1,67,000 crore of debt from the top 500 debt-heavy private sector borrowers turning delinquent between FY21 and FY22.
    • Given that 11.57 per cent of the outstanding debt is already stressed, the proportion of stressed debt is likely to increase to 18.21 per cent of the outstanding quantum.

    What is the government’s view over Bad Banks?

    • While the finance ministry has not formally submitted its view on the proposal, senior officials have indicated that it is not keen to infuse equity capital into a bad bank.
    • The government’s view is that bad loan resolution should happen in a market-led way, as there are many asset reconstruction companies already operating in the private space.
    • The government has significantly capitalized state-owned banks in recent years and pursued consolidation in the PSU banking space.
    • In the last three financial years, the government has infused equity of Rs 2.65 lakh crore into state-owned banks.
    • These steps, along with insolvency resolution under the IBC, are seen as adequate to tackle the challenge of bad loans.

    What is the RBI view?

    • The RBI has so far never come out favourably about the creation of a bad bank with other commercial banks as main promoters.
    • Former RBI Governor Raghuram Rajan had opposed the idea of setting up a bad bank with a majority stake by banks, arguing it would solve nothing.
    • Rajan argued that a government-funded bad bank would just shift loans “from one government pocket (the public sector banks) to another (the bad bank) and did not see how it would improve matters”.
    • Indeed, if the bad bank were in the public sector, the reluctance to act would merely be shifted to the bad bank.
    • Alternatively, if the bad bank were to be in the private sector, the reluctance of public sector banks to sell loans to the bad bank at a significant haircut would still prevail.

    Alternatives to a bad bank

    • Many experts argue that the enactment of IBC has reduced the need for having a bad bank, as a transparent and open process is available for all lenders to attempt insolvency resolution.
    • The view is that an IBC-led resolution, or sale of bad loans to ARCs already existing, is a better approach to tackle the NPA problem rather than a government-funded bad bank.

    Former RBI Deputy Governor Viral Acharya has proposed two models:

    1) Private Asset Management Company

    • The first model is a Private Asset Management Company (PAMC) which would be suitable for sectors where the stress is such that assets are likely to have economic value in the short run, with moderate levels of debt forgiveness.

    2) Setting up National Asset Management Company (NAMC)

    • The second model is a NAMC for sectors where the problem is not just of excess capacity, but possibly also of economically unviable assets in the short- to medium-term, such as in the power sector.
    • The NAMC would raise debt for its financing needs, keep a minority equity stake for the government, and bring in asset managers such as ARCs and private equity to manage and turn around the assets.

  • Postal Ballots in Elections

    The Election Commission has announced that it will allow those above the age of 65 as well as those under home or institutional quarantine to vote using postal ballots during the Bihar elections. Opposition parties are unhappy with the move and termed it unconstitutional.

    Try this question from CSP 2017:

    Q.Consider the following statements:

    1. The Election Commission of India is a five-member body.
    2. Union Ministry of Home Affairs decides the election schedule for the conduct of both general elections and bye-elections.
    3. Election Commission resolves the disputes relating to splits/mergers of recognized political parties.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 2 only

    (c) 2 and 3 only

    (d) 3 only

    What is Postal Voting?

    • A restricted set of voters can exercise postal voting.
    • Through this facility, a voter can cast her vote remotely by recording her preference on the ballot paper and sending it back to the election officer before counting.

    Who can avail of this facility?

    • Members of the armed forces like the Army, Navy and Air Force, members of the armed police force of a state (serving outside the state), government employees posted outside India and their spouses are entitled to vote only by post.
    • In other words, they can’t vote in person. Voters under preventive detention can also vote only by post.
    • Special voters such as the President of India, Vice President, Governors, Union Cabinet ministers, Speaker of the House and government officers on poll duty have the option to vote by post.
    • But they have to apply through a prescribed form to avail this facility.

    What about absentee voters?

    • Recently, the Law Ministry, at the Election Commission’s behest, introduced a new category of ‘absentee voters’, who can now also opt for postal voting.
    • These are voters employed in essential services and unable to cast their vote due to their service conditions.
    • Currently, officials of the Delhi Metro Rail Corporation, Northern Railway (Passenger and Freight) Services and media persons are notified as absentee voters.
    • Last month, senior citizens above the age of 65 and voters who test positive for COVID19 or are suspected to be COVID-affected were allowed to cast their vote by post.

    How are votes recorded by post?

    • The Returning Officer is supposed to print ballot papers within 24 hours of the last date of nomination withdrawal and dispatch them within a day.
    • This is done so that the ballot papers reach the concerned voter well before the polling date and she has enough time to send it back before the counting day.
    • Postal ballot papers for members of the Armed Forces are sent through their record offices.
    • For members of the armed police force of a state (serving outside the state), government employees posted outside India and their spouses, the ballot paper can be sent through post or electronically.
    • For remaining categories ballot papers can be delivered personally or through the post.

    Why political parties are divided over postal ballots?

    • Opposition parties are not against postal ballots.
    • They have objected to the EC’s decision to allow voters aged 65 and above and those infected or suspected to be infected with COVID19 to vote via postal ballots.
    • This change was effected without consulting political parties.
    • They fear that the move will lead to malpractices and foul play by those parties which are in power and having resources.

    Issues with the recent move

    • Allowing those aged 65 and above to vote by postal ballot violates secrecy in voting as a large segment of the population is uneducated and they might seek assistance from others.
    • This will end up disclosing their preferred candidate.
    • This also exposes them to “administrative influence or influence by the Government or the ruling party”.

  • Lithium Nucleosynthesis in Stars

    A forty-year-old puzzle regarding the production of lithium in stars has been solved by Indian researchers.

    Try this question from CSP 2013:

    Q.Consider the following phenomena:

    1. Size of the sun at dusk
    2. Colour of the sun at dawn
    3. Moon being visible at dawn
    4. Twinkle of stars in the sky
    5. Polestar being visible in the sky

    Which of the above are optical illusions?

    (a) 1, 2 and 3

    (b) 3, 4 and 5

    (c) 1, 2 and 4

    (d) 2, 3 and 5

    Lithium nucleosynthesis in Stars

    • Stars, as per known mechanisms of evolution, actually destroy lithium as they evolve into red giants.
    • Planets were known to have more lithium than their stars — as is the case with the Earth-Sun pair.
    • However, leading to a contradiction, some stars were found that were lithium-rich.
    • The new work by an Indian researcher shows that when stars grow beyond their Red Giant stage into what is known as the Red Clump stage, they produce lithium.
    • This is known as a Helium Flash and this is what enriches them with lithium.

    Studying lithium-rich stars

    • About 40 years ago, a few large stars were spotted that were lithium-rich.
    • This was followed by further discoveries of lithium-rich stars, and that posed a puzzle — if stars do not produce lithium, how do some stars develop to become lithium-rich.
    • The planet engulfment theory was quite popular. For example, Earth-like planets may increase the star’s lithium content when they plunge into [their] star’s atmosphere when the latter become Red Giants.

    Findings of the Indian research

    • Indian researchers have been working on this puzzle for nearly 20 years to devise a method of measuring lithium content using low-resolution spectra in a large number of stars.
    • The study demonstrated that lithium abundance enhancement among low mass giant stars is common.
    • Until now, it was believed that only about 1% of giants are lithium-rich.
    • Secondly, the team has shown that as the star evolves beyond the Red Giant stage, and before it reaches the Red Clump stage, there is a helium flash which produces an abundance of lithium.

    Back2Basics: Lithium

    • Lithium is a chemical element with the symbol Li and atomic number 3. It is a soft, silvery-white alkali metal. Under standard conditions, it is the lightest metal and the lightest solid element.
    • S light element commonly used today in communication device technology, it has an interesting story.
    • It was first produced in the Big Bang, around 13.7 billion years ago when the universe came into being, along with other elements.
    • While the abundance of other elements grew millions of times, the present abundance of lithium in the universe is only four times the original [Big Bang] value. It is actually destroyed in the stars.
    • The Sun, for instance, has about a factor of 100 lower amount of lithium than the Earth.

  • What is Equalization Levy?

    The government is not considering extending the deadline for payment of Equalization Levy by non-resident e-commerce players, even though a majority of them are yet to deposit the first instalment of the tax.

    Try this MCQ:

    Q.The Equalization Levy sometimes seen in news is related to:

    a) E-commerce

    b) Air Travel

    c) Imports Substitution

    d) None of these

    What is Equalization Levy?

    • Equalization Levy was introduced in India in 2016, with the intention of taxing the digital transactions i.e. the income accruing to foreign e-commerce companies from India.
    • It is aimed at taxing business to business transactions.

    The following services are currently covered under the EL:

    1. Online advertisement;
    2. Any provision for digital advertising space or facilities/ service for the purpose of online advertisement;

    Applicability

    Equalization Levy is a direct tax, which is withheld at the time of payment by the service recipient. The two conditions to be met to be liable to the levy:

    • The payment should be made to a non-resident service provider;
    • The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.

    Why it was introduced in India?

    • Over the last decade, IT has gone through an exponential expansion phase in India and globally.
    • This has led to an increase in the supply and procurement of digital services.
    • Consequently, this has given rise to various new business models, where there is a heavy reliance on digital and telecommunication networks.
    • As a result, the new business models have come with a set of new tax challenges in terms of nexus, characterization and valuation of data and user contribution.
    • To bring in clarity in this regard, the government introduced in the Budget 2016, the equalization levy.

  • Patrolling Points along LAC

    The standoffs between Indian and Chinese troops in Ladakh on the Line of Actual Control (LAC), where initial steps towards disengagement have taken place, are around a number of patrolling points or PPs in Galwan, Hot Springs and Gogra areas.

    Do you know?

    The Galwan River flows from the Aksai Chin region occupied by China in the UT of Ladakh.  It originates in the area of Samzungling on the eastern side of the Karakoram Range and flows west to join the Shyok River.  It is one of the upstream tributaries of the Indus River.

    What exactly are Patrolling Points?

    • PPs are patrolling points identified and marked on the LAC, which are patrolled with a stipulated frequency by the security forces.
    • They serve as a guide to the location of the LAC for the soldiers, acting as indicators of the extent of ‘actual control’ exercised on the territory by India.
    • By regularly patrolling up to these PPs, the Indian side is able to establish and assert its physical claim about the LAC.

    Are all the Patrolling Points numbered?

    • Some of the PPs are prominent and identifiable geographical features, such as a pass, or a nala junction where no numerals are given.
    • Only those PPs, where there are no prominent features, are numbered as in the case of PP14 in Galwan Valley.

    Do all Patrolling Points fall on the LAC?

    • Mostly, yes. Except for the Depsang plains in northern Ladakh, where PP10, PP11, PP11A, PP12 and PP13 – from Raki Nala to Jivan Nala – do not fall on the LAC.
    • These are short of the LAC, on the Indian side.

    Are these Patrolling Points not manned?

    • The PPs are not posts and thus not manned. Unlike on the Line of Control (LoC) with Pakistan, the border with China is not physically held by the Army all along.
    • They are just physical markers on the ground, chosen for their location and have no defensive potential or tactical importance for the Army.

    How is the claim asserted on LAC?

    • The claim is asserted by the Army or joint Army-ITBP patrols as they show more visible presence in these areas.
    • This is done by physically visiting PPs with a higher frequency, as the deployment has moved closer to the LAC and due to improved infrastructure.
    • As the Chinese may not see when the Indian patrols visit these PPs, they will leave come cigarette packets or food tins with Indian markings behind.
    • That lets the Chinese know that Indian soldiers had visited the place, which indicates that India was in control of these areas.

    Who has given these Patrolling Points?

    • These PPs have been identified by the high-powered China Study Group, starting from 1975 when patrolling limits for Indian forces were specified.
    • It is based on the LAC after the government accepted the concept in 1993, which is also marked on the maps with the Army in the border areas.
    • But the frequency of patrolling to PPs is not specified by the CSG – it is finalised by the Army Headquarters in New Delhi, based on the recommendations made by the Army and ITBP.

    PP under dispute

    • PPs 10 to 13 in Depsang sector, PP14 in Galwan, PP15 in Hot Spring, and PP17 and PP17A in Gogra are currently being disputed by both sides, where the standoffs have taken place in the past nine weeks.

  • [pib] Affordable Rental Housing Complexes (AHRCs) for Urban Migrants / Poor

    The Union Cabinet has given its approval for developing of Affordable Rental Housing Complexes (AHRCs). for urban migrants  / poor.

    Try this question from CSP 2015:

    “Pradhan Mantri Jan-Dhan Yojna’ has been launched for

    (a) Providing housing loan to poor people at cheaper interest rates

    (b) Promoting women’s Self-Help Groups in backward areas

    (c) Promoting financial inclusion in the country

    (d) Providing financial help to the marginalized communities

    AHRC

    • It is a sub-scheme under PM Awas Yojana – Urban.
    • Under the scheme, existing vacant government-funded housing complexes will be converted in ARHCs through Concession Agreements for 25 years.
    • The concessionaire will make the complexes livable by repair/retrofit and maintenance of rooms and filling up infrastructure gaps like water, sewer/ septage, sanitation, road etc.
    • States/UTs will select concessionaire through transparent bidding.
    • Complexes will revert to ULB after 25 years to restart next cycle like earlier or run on their own.

    Beneficiaries of the scheme

    • A large part of the workforce in manufacturing industries, service providers in hospitality, health, domestic/commercial establishments, and construction or other sectors, labourers, students etc. who come from rural areas or small towns seeking better opportunities will be the target beneficiary under ARHCs.

    Benefits of AHRCs

    • Usually, these migrants live in slums, informal/ unauthorized colonies or peri-urban areas to save rental charges.
    • They spend a lot of time on roads by walking/ cycling to workplaces, risking their lives to cut on the expenses.
    • ARHCs will create a new ecosystem in urban areas making housing available at affordable rent close to the place of work.
    • Investment under ARHCs is expected to create new job opportunities.
    • ARHCs will cut down unnecessary travel, congestion and pollution.

    Back2Basics: Pradhan Mantri Awas Yojana (PMAY)

    PMAY-Urban

    The PMAY- Urban Programme launched by the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), in Mission mode envisions provision of Housing for All by 2022. The Mission seeks to address the housing requirement of urban poor including slum dwellers through following programme verticals:

    • Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource
    • Promotion of Affordable Housing for weaker section through credit linked subsidy
    • Affordable Housing in Partnership with Public & Private sectors
    • Subsidy for beneficiary-led individual house construction /enhancement.

    PMAY-Rural

    • In pursuance to the goal – Housing for all by 2022, the rural housing scheme Indira Awas Yojana has been revamped to Pradhan Mantri Awaas Yojana – Gramin and approved during March 2016.
    • Under the scheme, financial assistance is provided for construction of a pucca house to all houseless and households living in dilapidated houses.
    • It is proposed that one crore households would be provided assistance for construction of pucca house under the project during the period from 2016-17 to 2018-19.
    • The scheme would be implemented in rural areas throughout India except for Delhi and Chandigarh. The cost of houses would be shared between the Centre and States.

  • [pib] Central Sector Scheme: Agriculture Infrastructure Fund

    The Union Cabinet has given its approval to a new pan India Central Sector Scheme-Agriculture Infrastructure Fund (CSS-AIF).

    Try this question from CSP 2018:

    Q.Increase in absolute and per capita real GNP does not connote a higher level of economic development, if:

    (a) Industrial output fails to keep pace with agriculture output.

    (b) Agriculture output fails to keep pace with industrial output.

    (c) Poverty and unemployment increase.

    (d) Imports grow faster than exports.

    Agriculture Infrastructure Fund

    • AIF aims to provide a medium – long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support.
    • Under the scheme, Rs. One Lakh Crore will be provided by banks and financial institutions as loans.
    • The beneficiaries will include Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), SHGs, Farmers etc among others.
    • The moratorium for repayment under this financing facility may vary subject to a minimum of 6 months and maximum of 2 years.

    Management of AIF

    • Agri Infra fund will be managed and monitored through an online Management Information System (MIS) platform.
    • The National, State and District level Monitoring Committees will be set up to ensure real-time monitoring and effective feedback.
    • The duration of the Scheme shall be from FY2020 to FY2029 (10 years).

    Benefits of the scheme

    • The Project by way of facilitating formal credit to farm and farm processing-based activities is expected to create numerous job opportunities in rural areas.
    • It will enable all the qualified entities to apply for a loan under the fund.

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