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Subject: Indian Society

  • The tyranny of inequality  

    Why in the News?

    A recent study by Thomas Piketty and colleagues highlights a dramatic rise in wealth and income inequality in India over the past few decades, with a sharp increase particularly from 2014 to 2022.

    The analysis from ” Gallup World Poll (GWP) Survey (2019-23)” for India  

    Note: The GWP measures corruption through individual perceptions, asking respondents whether they believe corruption is widespread.
    • Income Inequality: The survey data indicates a significant rise in income inequality, with the top 1% controlling over 40% of total wealth in India, a stark increase from 12.5% in 1980.
      • The top 1% of income earners now receive 22.6% of the country’s total pre-tax income, up from 7.3% in 1980.
    • Rent-Seeking Behavior: The persistence of rent-seeking behavior among wealthy investors, which diverts resources from productive uses to securing unwarranted gains from government entities.
    • Judicial Trust and Corruption: Trust in the judiciary can play a significant role in curbing corruption. Higher trust correlates with lower perceived corruption levels.
    • Mutual Fund vs Fixed deposits: Speculative investments, such as mutual funds, largely drive income inequality, while savings in fixed deposits and post offices help curb it.
    • Inequality promotes corruption: The study finds that higher income inequality causes widespread corruption, while greater confidence in the judiciary helps reduce it.

    What is our present methodology for counting inequality?

    • Piketty’s Measure: Thomas Piketty’s measure compares the income share of the top 1% to that of the bottom 50%. This highlights the growing disparity in income distribution effectively.
    • Consumption vs Income Inequality: Inequality is traditionally measured using consumption expenditure surveys by the National Sample Survey Office (NSSO). However, consumption inequality tends to be lower than income inequality.
    • Use of Multiple Data Sources: Researchers often combine data from various sources, including national accounts, tax data, and recent surveys like the Periodic Labour Force Surveys (PLFS) and Consumer Pyramid Household Survey (CPHS).
    • Gini Index and Other Metrics: The Gini index is frequently used to quantify inequality, but it has limitations, being less sensitive to changes at the income distribution extremes.

    Issues Associated with measuring income inequality:

    • Data quality and availability: There has been a noted decline in the reliability of household surveys since 2011-12, making it difficult to obtain accurate and comparable data. For example, The 55th NSS round showed a dramatic decline in poverty estimates, which many experts deemed misleading due to the survey’s methodological flaws.
    • Underreporting of wealth: Surveys may underreport wealthier households’ consumption, leading to inaccurate inequality assessments. For example, the Household Consumption Expenditure Survey (HCES) 2022-23 reported a significant drop in rural and urban poverty levels. However, critics argue that these figures may not accurately reflect the reality of wealthier households
    • Comparability with other countries: India’s reliance on consumption data rather than income data can result in mischaracterization as a low-inequality country in international comparisons.
    • Focus on labor income: Some reports focus only on labor income, ignoring other income sources and skewing the understanding of overall inequality. For example, studies have shown that the income share of the top 10% in India has grown significantly, while labour income alone does not reflect this concentration adequately
    • Complexity of income dynamics: Accurately assessing inequality is challenging due to the influence of economic policies, globalization, and market forces. For instance, Researchers have noted that the absence of comprehensive tax data beyond 2017-18 adds uncertainty to the analysis of income inequality trends

    Way forward: 

    • Improve Data Collection and Methodologies: There is an urgent need to enhance the quality and reliability of household surveys and other data sources.
    • Broadening Income Metrics Beyond Labor Income: To better capture the full spectrum of income inequality, it’s essential to include non-labor income sources, such as capital gains, property income, and speculative investments.

    Mains PYQ:

    Q It is argued that the strategy of inclusive growth is intended to meet the objective of inclusiveness and sustainability together. Comment on this statement. (UPSC IAS/2019)

  • Labor conditions in southern states  

    Why in the News?

    Migrant workers from various parts of India are gradually becoming a noticeable presence in the agricultural fields of Tamil Nadu’s Cauvery delta, often called the granary of South India.

    Migrants in Tamil Nadu’s Cauvery Delta

    • Labour Shortage in Agriculture: The Cauvery Delta, known as the granary of South India, is experiencing a significant shortage of farmhands as the younger generation moves away from agriculture. This has led to a reliance on migrant workers, particularly from states like West Bengal and Bihar, who are skilled in paddy transplanting and harvesting.
    • Economic Dynamics: Migrant labourers are filling the labour gap during agricultural seasons, working in groups and completing tasks more quickly than local labourers. They charge around ₹4,500 to ₹5,000 per acre, compared to local workers who earn ₹600 per day.
    • Sociocultural Integration: While there hasn’t been significant tension between migrant workers and local labourers, the integration of migrants into the agricultural workforce is still evolving.
      • Local labour unions acknowledge the presence of migrant workers but do not see it as a widespread issue yet, partly due to the ongoing mechanization of agriculture and changing job preferences among the local youth.

    Dependence on Migrant Workers in Kerala

    • Shift in Labor Sources: Kerala has seen a growing dependence on migrant workers from northern and eastern states, including West Bengal and Bihar, to fill labour shortages in various sectors, including agriculture.
      • A recent study by the Gulati Institute of Finance and Taxation estimated the number of inter-state migrant workers in Kerala at 2.5 million, equivalent to 7% of the state’s population.
    • Economic Factors: High wage differentials between Kerala and the migrants’ home states, along with a robust urban economy, have made Kerala an attractive destination for migrant labourers.

    External Migration from Uttar Pradesh to Maharashtra

    • High Migration Rate: Uttar Pradesh tops the list for inter-state job-related migration to Maharashtra, with over 5.7% of migrants moving for employment purposes between 2020 and 2021.
    • Concentration of Migrants: Within Maharashtra, districts such as Mumbai and Thane have the highest concentrations of migrants from Uttar Pradesh.

    How does the proposed ‘quota-for-local’ Bill impact migrant workers?

    • uction in the already precarious employment options available to migrants, who often fill lower-skilled positions.
    • Increased Competition: The migrant workers might face intensified competition for fewer available roles, particularly in sectors where they have traditionally been employed, such as delivery services and hospitality.
    • Economic Migration: The bill could lead to a demographic shift in the labor market. Migrants may choose to relocate to states with more inclusive hiring practices, impacting the state’s economy and workforce diversity.
    • Exploitation Risks: The present Bill could make migrants more vulnerable to exploitation, as companies may feel less inclined to hire them, leading to further marginalization of these workers.
    • Industry Concerns: Business leaders and industry representatives have expressed concerns that the bill could deter investment and talent from flowing into Karnataka, potentially leading to job losses and reduced economic growth. The focus should be on skills rather than reservations.

    What measures can be taken to protect migrant workers from exploitation?

    • Right to Change Employers: States need to ensure that migrant workers have the freedom to change employers without facing penalties, which can reduce their vulnerability to abuse and exploitation.
    • Empower Migrant workers: The government/ Private sector needs to provide comprehensive information regarding workers’ rights, including recruitment processes, legal protections, and avenues for reporting abuse.
      • Strengthening labor laws and legal assistance with counseling services that protect migrant workers and ensure strict enforcement through regular inspections of workplaces is a need of the hour.
    • Social Security and Housing Access: States need to ensure that migrant workers have access to social services, housing, and healthcare, which can help mitigate their vulnerabilities.
      • NITI Aayog in its report ”India’s Booming Gig and Platform Economy” has said that fiscal incentives such as tax breaks or startup grants may be provided for businesses that provide livelihood opportunities where women constitute a substantial portion of their workers.
    • International Cooperation: Encourage countries to adopt and implement international standards and conventions that protect the rights of migrant workers, promoting safe and ethical recruitment practices.

    Lack of Proper Data and Registration

    • Historical Data Gaps: The last comprehensive survey on internal migration was conducted as part of the National Sample Survey in 2007-08, with the Census 2011 data only partially released in 2020.
    • Absence of Real-Time Data: During the COVID-19 lockdown, the Indian government did not collect data on the deaths or job losses of internal migrants. The Ministry of Labour and Employment confirmed that it maintained no records of migrant workers who lost their jobs or lives during this period.

    Legislation: 

    The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 was enacted to protect the rights and regulate the conditions of service for migrant workers who move between states in India for employment.

    Implementation Challenges

    • Lack of Awareness: Many migrant workers are unaware of their rights under the Act, leading to exploitation and poor working conditions.
    • Inadequate Enforcement: There is often insufficient enforcement of the Act by state governments, resulting in widespread violations and the continued presence of migrant workers in informal and unregulated sectors.
    • Data Gaps: The absence of accurate data on the number of inter-state migrant workers complicates enforcement and the provision of services.

    Way forward: 

    • Promote Sustainable Employment and Skill Development in Source Regions: To reduce the over-reliance on migrant labour and address labour shortages in sectors like agriculture, the government should focus on creating sustainable employment opportunities in the migrants’ home states.
    • Promote Sustainable Employment and Skill Development in Source Regions: The government should create a real-time migrant data system linked with Aadhaar, enabling targeted policies, social security, and effective crisis response for internal migrants.

    Mains PYQ:

    Q Discuss the changes in the trends of labour migration within and outside India in the last four decades. (UPSC IAS/2015)

  • [16th August 2024] The Hindu Op-ed:  An obstinate refusal to focus on welfare

    [16th August 2024] The Hindu Op-ed:  An obstinate refusal to focus on welfare

    PYQ Relevance:

    Mains:

    Q. 1 Performance of welfare schemes that are implemented for vulnerable sections is not so effective due to absence of their awareness and active involvement at all stages of policy process. Discuss. (UPSC IAS/2014) 

    Q. 2 Hunger and Poverty are the biggest challenges for good governance in India still today. Evaluate how far successive governments have progressed in dealing with these humongous problems. Suggest measures for improvement. (UPSC IAS/2017) 

    Note4Students: 

    Mains: Underfunding issues related to welfare schemes;

    Mentor comments:  The government’s stubborn refusal to prioritize welfare is baffling, especially in a country where, according to its own data, around 34% of the population survives on less than ₹100 a day, and over 81 crore people depend on free foodgrains to make ends meet. The National Democratic Alliance (NDA) in its current term, NDA 3.0, seems to be perpetuating the trend set in its previous two terms by cutting back on welfare allocations, as evidenced by the analysis below based on Budget documents.

    Let’s learn!

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    Why in the News? 

    On the welfare front, the government has once again failed to boost expenditure on crucial welfare schemes that support the country’s marginalized populations.

    Underfunding issues related to welfare schemes:

    • Declining Budget Allocations as per GDP%: Both MGNREGA and NFSA have seen continuous declines in their budget allocations as a share of GDP since 2014-15, with MGNREGA’s allocation dropping from 0.29% to 0.26% and NFSA’s from 0.72% to 0.63%.
      • The combined budget allocation for MGNREGA and NFSA has decreased by 25% since 2014-15, highlighting a long-term trend of underfunding these essential welfare schemes. 
    • Stagnating Real Wages and Increased Demand: With stagnating rural real wages and increased demand for work under MGNREGA, the current budget does not account for the rising number of person-days generated, which increased by 5.74 crore in the first quarter of the financial year.  
    • Neglect of Vulnerable Groups: The National Social Assistance Programme, which provides monetary support to vulnerable groups such as widows, the elderly, and disabled individuals, has not seen any increase in its allocation. Its budget remains stagnant at ₹200 per month for the elderly and ₹300 for widows, despite inflation and the rising cost of living.  
    • Chronic Malnutrition Rates: Over 50% of children under the age of five in India suffer from chronic malnutrition, with anaemia rates in women and children significantly higher than the global average—20% and 15%, respectively.  
    • Declining Budget Allocations: The budget allocation for the Saksham Anganwadi and Poshan 2.0 schemes has decreased by more than 50% since 2014-15, dropping from 0.13% of GDP to 0.06% of GDP. This reduction in funding undermines the effectiveness of these programs aimed at combating child malnutrition and hunger.
    • Mid-Day Meal (MDM) Programme: The MDM programme, which provides meals to about 12 crore children, has also seen its funding halved since 2014-15 as a share of GDP. 
      • Despite its success in improving attendance and nutritional outcomes, the lack of adequate funding limits its potential to address hunger effectively.
    • Education Funding Decline: The share of central expenditure on education (primary and secondary) has declined from 0.37% of GDP in 2014-15 to 0.22% today.  
    • Health Budget Allocation: While the budget allocation for health has seen a slight increase from 0.25% to 0.28% of GDP since 2014-15, this increase is still inadequate given the high out-of-pocket health expenses that push millions into poverty each year.

    What Government can do?

    • Increase Budget Allocations to Meet Actual Needs: The government should significantly increase the budget allocations for welfare schemes such as MGNREGA and NFSA to ensure they meet the actual demand for employment and food security.
      • For instance, allocating at least ₹2 lakh crore for MGNREGA, which is approximately 1% of GDP, would help clear pending dues and provide adequate employment opportunities for rural households. This increase would not only address the immediate needs of the population but also stimulate rural economic growth by enhancing purchasing power and consumption.
    • Implement Targeted Policy Reforms and Monitoring Mechanisms: The need to establish robust monitoring systems to track the effectiveness and utilization of funds allocated to welfare schemes is crucial.
      • The government should implement targeted policy reforms that focus on the specific needs of vulnerable groups, such as widows, the elderly, and disabled individuals, ensuring that their support systems are adequately funded and responsive to inflation and rising living costs.  

    Conclusion: The government must increase budget allocations for welfare schemes and implement targeted reforms with effective monitoring to address underfunding, ensuring vulnerable groups receive necessary support amidst rising costs.

  • Freedom from dependence, a new era in health care

    Why in the News?

    India’s healthcare since globalization has improved greatly, and is globally recognized due to skilled professionals, effective policies, and strong institutions which draw patients from over 147 countries.

    Economic implications of being a preferred Medical Destination:

    • Foreign Exchange Savings: India saves billions in foreign exchange as fewer Indians need to travel abroad for advanced medical treatments.
    • Revenue Generation: The influx of international patients generates over $9 billion annually, contributing to economic growth.
    • Job Creation: The medical tourism sector creates employment opportunities in healthcare, hospitality, transportation, and pharmaceuticals.
    • Cost-Effective Treatments: India’s affordable yet high-quality medical services attract patients globally, further boosting the economy.

    What are the challenges? 

    • Shortage of Healthcare Professionals
        • Current Shortage: India is estimated to be short of around 600,000 doctors, leading to a doctor-patient ratio of approximately 0.7 doctors per 1,000 people, which is significantly lower than the World Health Organization’s recommended ratio of 1 doctor per 1,000 people.  
        • Future Demand: By 2030, the demand for healthcare professionals in India is expected to double, driven by an ageing population and the increasing burden of non-communicable diseases.
    • Inadequate Public Healthcare Spending
        • Low Expenditure: As of 2021-22, India’s public healthcare expenditure stood at 2.1% of GDP, which is significantly lower than that of many developed countries, For instance, countries like Japan and France spend about 10% of their GDP on healthcare, while the United States spends 16.9%.
        • Comparison with Neighbors: Even neighbouring countries like Bangladesh and Pakistan allocate over 3% of their GDP to public healthcare.
    • Unequal Access to Healthcare
        • Urban-Rural Disparity: There is a stark disparity in healthcare access between urban and rural areas. Rural regions often lack basic healthcare facilities, leading to limited access to quality services for a significant portion of the population.  
        • Healthcare Infrastructure: India’s healthcare infrastructure is inadequate to meet the growing demands of its population. For instance, India has one of the lowest per capita bed counts in the world, with only about 0.5 hospital beds per 1,000 people, compared to the OECD average of 4.7 beds per 1,000 people.
    • High Out-of-Pocket Expenditure
      • Financial Burden: Approximately 75% of healthcare expenditure in India is borne out-of-pocket by individuals and families.

    Need for a Strong Vision (Way forward)

    • “Heal in India” Initiative: The Prime Minister’s vision of “Heal in India” emphasizes positioning India as a global healthcare leader. This initiative is not merely a slogan but a strategic approach to enhance India’s reputation as a preferred medical destination.
    • Youth Engagement: Inspiring the youth to pursue careers in healthcare is crucial for sustaining growth in this sector. By encouraging innovation and entrepreneurship among young Indians, the country can ensure a robust healthcare system.
    • Investment in Public Healthcare: Increase public healthcare spending to improve infrastructure, especially in rural areas, and bridge the urban-rural disparity.
    • Focus on Medical Device Manufacturing: Promote domestic production of medical devices under the “Make in India” initiative to reduce dependency on imports.

    Mains PYQ:

    Q Appropriate local community-level healthcare intervention is a prerequisite to achieve ‘Health for All’ in India. Explain. (UPSC IAS/2018)

  • [10th August 2024] The Hindu Op-ed: Refugee rights, the gendered nature of displacement

    [10th August 2024] The Hindu Op-ed: Refugee rights, the gendered nature of displacement

    PYQ Relevance:

    Mains:

    Q1 “Refugees should not be turned back to the country where they would face persecution or human right violation”. Examine the statement with reference to ethical dimension being violated by the nation claiming to be democratic with open society.  (UPSC IAS/2021) 

    Q2 Cross-border movement of insurgents is only one of the several security challenges facing the policing of the border in North-East India. Examine the various challenges currently emanating across the India-Myanmar border. Also, discuss the steps to counter the challenges. (UPSC IAS/2019) 

    Note4Students: 

    Mains: Conventions and Rights;

    Mentor comments:  By the end of June 2023, 110 million people worldwide were forcibly displaced due to persecution, conflict, violence, and severe disruptions to public order. This included 36.4 million refugees (30.5 million under UNHCR and 5.94 million Palestine refugees under UNRWA), 62.1 million internally displaced persons, 6.08 million asylum seekers, and 5.6 million Venezuelans needing protection. Additionally, millions of stateless individuals lack nationality and basic rights. In the first half of 2023, 90% of new displacements arose from major crises in Afghanistan, the DRC, Latin America, Myanmar, Somalia, Sudan, and Ukraine.

    Let’s learn!

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    Why in the News? 

    Armed conflict, violence, human rights abuses, and persecution force millions globally to escape their homes and homelands, resulting in their status as ‘displaced people’.

    Challenges Faced by Female Refugee 

    • India as a Refugee-Receiving Nation: India has hosted over 200,000 diverse refugee groups since independence. As of January 31, 2022, 46,000 refugees and asylum-seekers were registered with UNHCR India, with 46% being women and girls.
    • Gendered Responsibilities: Women and girls in refugee populations are disproportionately burdened with caregiving responsibilities for children, the elderly, and family sustenance. They are often the last to flee conflict zones, carrying the additional responsibility of managing family survival.
    • Impact on Physical and Mental Health: The gendered nature of displacement severely impacts the physical and mental well-being of refugee women. They face numerous stressors, including the loss of partners and children, hardships of camp life, altered family dynamics, and reduced safety.
    • Increased Risk of Gender-Based Abuse: Refugee women are exposed to heightened risks of gender-based violence, including transactional sex, due to prolonged conflict, disrupted social support systems, and socio-economic challenges.
    • Psychological and Psychosocial Conditions: Displaced women are particularly susceptible to psychological disorders such as PTSD, anxiety, and depression. They are twice as likely to experience PTSD and four times more likely to suffer from depression compared to male counterparts. For example, a study in Darfur, Sudan, found 72% of displaced women affected by PTSD and distress.

    Conventions and Rights  

    • UNCRPD Recognition:
      • The UN Convention on the Rights of Persons with Disabilities (UNCRPD) recognizes ‘psychosocial disability’ as long-term mental or intellectual impairments that hinder full participation in society.
      • Article 6 of the UNCRPD mandates protection against multiple discrimination faced by women and girls with disabilities and ensures their full enjoyment of human rights.
    • India’s Ratification and Legislation:
      • India ratified the UNCRPD and enacted the Rights of Persons with Disabilities Act, 2016 (RPWDA).
      • While the term ‘psychosocial disability’ is not explicitly used in Indian law, “mental illness” is recognized and covered under the RPWDA.
      • The RPWDA guarantees various rights to persons with disabilities, including the right to health care (Section 25) and equal rights for women with disabilities (Section 4).
    • Absence of Legal Framework: India is not a signatory to the 1951 Refugee Convention and its 1967 Protocol. There is no specific domestic legislation addressing refugees, particularly those with disabilities.
    • Right to Life and Health: The Supreme Court of India has upheld the right to life under Article 21, which includes the right to health, for refugees.

    Way forward: 

    • Enact Comprehensive Legislation: Need to introduce a uniform legal framework that specifically addresses the rights and protections of refugees, with provisions for those with disabilities, aligning with international commitments like the 2030 Agenda.
    • Inclusive Policy Implementation: The government should integrate refugees with disabilities into existing and new national policies and programs, ensuring accessible services and participation in decision-making processes.

  • Counting the ‘poor’ having nutritional deficiency       

    Why in the news?

    The National Sample Survey Office has released the Household Consumption Expenditure Survey (HCES) report for 2022-23, along with public access to unit-level data on household expenditures.

    What does the recent NSSO Report tell us?

    • The report utilizes various definitions of poverty established by past committees, with the poverty line (PL) being anchored to calorie norms of 2,400 kcal for rural and 2,100 kcal for urban areas as per the Lakdawala Committee. The Rangarajan Committee’s approach considers broader normative levels, including non-food expenses.
    • The average per capita calorie requirement (PCCR) is estimated at 2,172 kcal for rural and 2,135 kcal for urban populations. The report highlights that the average per capita calorie intake (PCCI) for the poorest segments falls significantly below these requirements, indicating nutritional deficiencies.
    • The total monthly per capita consumption expenditure (MPCE) thresholds are set at ₹2,197 for rural and ₹3,077 for urban areas, with proportions of the population identified as ‘poor’ being 17.1% in rural and 14% in urban contexts. If non-food expenditures for the poorest 10% are considered, these thresholds rise, increasing the proportion of the deprived.

    Approach for measurement is the Issue:

    • Defining Poverty: The report defines the poor based on MPCE, which is linked to the ability to purchase essential food and non-food items.
      • The reliance on MPCE does not adequately address nutritional needs. While the poverty line is linked to the ability to purchase food and non-food items.
    • Caloric Requirement Calculation: The PCCR is derived from the ICMR-National Institute of Nutrition’s latest recommendations, weighted by the population distribution across age-sex-activity categories.
      • The ICMR-National Institute of Nutrition’s (ICMR-NIN) recommendations for caloric requirements in India are derived from the Recommended Dietary Allowances (RDA) for Indians.
      • The RDA does not adequately account for regional and cultural differences in dietary habits and food availability.
    • Fractile Class Analysis: Households are categorized into 20 fractile classes based on MPCE, allowing for the calculation of average PCCI and MPCE for each class.
      • Each fractile class represents 5% of the population, allowing for a detailed understanding of expenditure distribution and nutritional intake variations within the population
      • MPCE reflects consumption patterns but does not capture the full spectrum of economic well-being or deprivation.
    • State-Specific Adjustments: The all-India thresholds are adjusted for regional price differences to derive state-specific MPCE thresholds.
      • The methodology for deriving state-specific MPCE thresholds relies on regional price indexes, which can vary significantly in their construction and accuracy.

    Recommendations for Improving Nutritional Levels (Way Forward) 

    • Nutritional Schemes: Govt. needs to develop and expand schemes specifically aimed at improving the nutritional intake of the poorest households.
    • Awareness and Education: Govt. should increase awareness about nutrition and healthy eating practices among low-income households.
    • Subsidized Food Programs: Need to enhance access to subsidised food items to ensure that households can meet their caloric and nutritional needs.
    • Monitoring and evaluation: Govt. should establish robust mechanisms to monitor the effectiveness of nutritional interventions and adjust strategies as necessary.

    Conclusion: ​​The NSSO HCES 2022-23 report reveals significant nutritional deficiencies among the poorest. To align with SDG goals, expanding targeted nutritional schemes, subsidized food programs, and robust monitoring is essential.

    Mains PYQ: 

    Q How far do you agree with the view that the focus on the lack of availability of food as the main cause of hunger takes the attention away from ineffective human development policies in India? (2013)

  • [6th August 2024] The Hindu Op-ed: The social benefits of stock market speculation

    [6th August 2024] The Hindu Op-ed: The social benefits of stock market speculation

    PYQ Relevance:

    Mains:

    Q1 Comment on the important changes introduced in respect of the Long-term Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in the Union Budget for 2018-2019. (UPSC IAS/2018) 

    Q2 Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (UPSC IAS/2021) 

    Prelims: 

    Under which of the following circumstances may ‘capital gains’ arise? (2012)
    1. When there is an increase in the sales of a product 
    2. When there is a natural increase in the value of the property owned 
    3. When you purchase a painting and there is a growth in its value due to an increase in its popularity 
    Select the correct answer using the codes given below: 
    (a) 1 only 
    (b) 2 and 3 only 
    (c) 2 only 
    (d) 1, 2 and 3

    Note4Students: 

    Prelims: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG);

    Mains: Impact of gambling instincts on the stock market;

    Mentor comments: In India, capital gains are classified into two categories based on the holding period of assets. Short-Term Capital Gains (STCG) apply to assets held for 12 months or less, taxed at a rate of 15% for listed equity shares. In contrast, Long-Term Capital Gains (LTCG) are applicable when assets are held for more than 12 months, taxed at 10% for gains exceeding ₹1 lakh, with no indexation benefits. This framework encourages long-term investment while imposing higher tax rates on short-term trading activities.

    Let’s learn!

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    Why in the News? 

    The Indian government has increased taxes on both short-term and long-term capital gains from stock market investments in its latest Budget, along with raising the securities transaction tax on derivatives trading.

    How capital gains occur

    Definition of Capital Gains: Capital gains are profits earned from the sale of an asset that has increased in value over the holding period. This occurs when the selling price exceeds the original purchase price.
    • Market Dynamics: In a perfect market where future cash flows are accurately forecasted, capital gains would not exist, as assets would be bought and sold at their fair value. However, in reality, uncertainty leads to mispricing, allowing investors to buy undervalued assets and realize gains when their true value is recognized.
    • Investor Behavior: Investors who allocate capital efficiently into undervalued businesses can earn capital gains when others recognize the fair value of those businesses. Conversely, those who misallocate capital into overvalued assets may incur capital losses.
    • Economic Implications: Efficient capital allocation is crucial for economic prosperity. Misallocation, such as investing in sectors with low demand (e.g., cruise ships during a pandemic), can lead to overall economic inefficiency and resource wastage.
    • Taxation and Incentives: A uniform tax on capital gains may help mitigate resource misallocation, but it can also impact private investment incentives and overall economic growth.  

    Impact of gambling instincts on the stock market

    • Increased Retail Participation: The Economic Survey 2023-24 highlights that the surge in retail investor participation in Futures and Options (F&O) trading is largely driven by inherent “gambling instincts.” 
      • This is evidenced by the rapid growth in trading volumes, with retail traders’ share in derivatives trading rising from 2% in 2018 to 41% in 2024.
    • Potential for High Returns: Derivatives trading offers the allure of outsized gains, which appeals to investors seeking quick profits.  
    • High Risk of Losses: Despite the appeal of quick profits, the reality is stark; a study by the Securities and Exchange Board of India (SEBI) found that 89% of individual traders in the equity F&O segment suffered losses, with average losses of ₹1.1 lakh in FY22.  

    Gambling instincts are worse for derivatives

    • Complexity and Misunderstanding: Derivatives are often misunderstood due to their complexity. This lack of understanding leads to a negative perception because many do not grasp their practical benefits and risk management functions.
    • Speculative Nature: The speculative aspect of derivatives trading can resemble gambling, especially when neither party intends to buy or sell the underlying asset. This speculative behaviour is seen as risky and irresponsible, contributing to the negative reputation of derivatives.
    • Risk Transfer: Derivatives allow for the transfer of risk from one group of investors to another. While this risk management is beneficial, the perception that some investors profit from others’ risk aversion can be seen as exploitative or opportunistic.
    • Market Impact: Just as with active trading in the cash market, speculative trading in derivatives can be socially beneficial by providing liquidity and risk management tools. However, the public often overlooks these benefits and focuses on the perceived destabilizing effects and the potential for large, rapid losses, which can harm individual investors and financial markets.

    Way forward: 

    • Investor Education: Need to implement comprehensive educational programs for investors to improve their understanding of derivatives and capital markets.  
    • Transparency in Trading: Need to increase transparency in derivatives markets by requiring more detailed disclosures about trading strategies, potential risks, and the impact of speculative trades.  

  • The issue of institutional violence, addressing it   

    Why in the News?

    India’s election had 642 million voters, mostly women, but few candidates focused on women’s safety, failing to address the pervasive institutional violence that millions of survivors endure daily.

    Gender-based Violence: Prolonged and Institutional 

    • Judicial and Police Challenges: A significant barrier to justice is the perception among police officers that complaints of gender-based violence are often baseless as per the report published in 2019 by J-PAL, a global policy think tank.
      • Survivors frequently encounter a judicial process that is lengthy and traumatizing, which perpetuates a cycle of violence and silence.
    • Silence Among Survivors: Many women endure violence in silence due to societal stigma and fear of further victimization. 
      • National Crime Records Bureau reported 405,861 cases of crimes against women in 2021, including 32,033 cases of rape. However, these figures are believed to represent only a fraction of the actual incidents due to underreporting driven by societal stigma and fear of retaliation

    Problems in Rural India

    • Caste and Gender Dynamics: In rural areas, the dominance of male and upper-caste individuals in local governance (panchayats) creates additional barriers for women seeking justice.
      • The socio-cultural norms often discourage women from reporting violence, as divorce and legal recourse are rarely options available to them.
    • Access to Justice: The backlog of court cases (estimated at 40 million) disproportionately affects survivors from marginalized communities, making it even more difficult for them to seek redress.

    Strong laws: 

    • The Dowry Prohibition Act 1961: Made giving and receiving dowry a crime
    • The Criminal Law (Amendment) Act 2013: Introduced new offences like stalking, voyeurism, and acid attacks
    • The Protection of Women from Domestic Violence Act 2005: Defines domestic violence and provides legal recourse for survivors.

    Issue of Weak Implementation of Law: 

    • Ineffective Enforcement: Despite having strong laws, the enforcement is often inadequate. For example, there are approximately 40 million pending court cases in India, leading to significant delays in justice.
    • Corruption and Indifference: Corruption within law enforcement and the judiciary hampers the implementation of laws. Police officials may exhibit insensitivity towards marginalized communities, leading to a lack of trust in the system.
    • Administrative Fragmentation: The structure of local governance, particularly through panchayats, is often disempowered and fragmented. This limits their capacity to address local issues effectively, as they lack the necessary funds and authority to implement programs that meet community needs.
    • Lack of Coordination: Multiple departmental organizations operate separately, leading to a lack of coordinated action.
      • For instance, local officials may be unable to address pressing community issues due to rigid departmental mandates that do not align with the actual needs of the population.
    • Inadequate Resources and Training: Many implementing organizations suffer from inadequate staffing and lack of expertise.
      • For example, while there may be a sufficient number of government personnel, they often lack the necessary training and resources to execute their duties effectively.
    • Cultural and Societal Barriers: Societal attitudes and stigma surrounding issues like gender-based violence can lead to underreporting and a reluctance to seek help.

    Way forward: 

    • Enhance Law Enforcement Training: Need to implement comprehensive training programs for police and judicial personnel focused on gender sensitivity, trauma-informed responses, and the legal rights of survivors.
    • Empower Local Communities: Engage community leaders and organizations to create support networks for survivors of gender-based violence. This can include establishing helplines, counseling services, and safe spaces for women to seek help without fear of stigma or retaliation.

    Mains PYQ:

    Q Women empowerment in India needs gender budgeting. What are the requirements and status of gender budgeting in the Indian context? (2016)

  • On doorstep delivery of alcohol       

    Why in the News?

    Delhi, Karnataka, Haryana, Punjab, Tamil Nadu, Goa, and Kerala are considering or have considered allowing doorstep delivery of alcohol through platforms such as Swiggy, BigBasket, and Zomato.

    Arguments in favour of Online Delivery of Alcohol:

    • Revenue Generation: Excise taxes on alcohol sales can help generate significant revenue for Central and State governments.
    • Reduce Drunk-Driving Incidents: Doorstep delivery can potentially reduce drunk-driving incidents and prevent road traffic crashes and injuries.
    • Access and Safety for Women:  Doorstep delivery may reduce on-premise violence against women and allow women to access alcohol without facing social stigma.

    Arguments against Online Delivery of Alcohol:

    • Economic Costs vs. Benefits: The costs due to alcohol use often exceed the economic benefits from alcohol sales.
    • Increased Consumption and Binge Drinking: The availability of alcohol on-demand can increase consumption, promote binge drinking, and lead to alcohol-related harms.
    • Public Health Concerns: Alcohol is associated with various health risks including cancers, mental illnesses, liver disease, and increased risk of inter-partner violence.

    Consumption of Liquor in India:

    • India is the sixth-largest alcohol market worldwide with $52 billion in revenue.
    • Per capita alcohol consumption has increased from 1.6 litres in 2003-2005 to 5.5 litres in 2016-2018.
    • According to a 2019 survey, there were about 16 crore alcohol users in India in 2018.
    • Of these, 5.7 crore frequently consumed alcohol leading to social or interpersonal problems, and 2.9 crore were dependent users requiring therapeutic intervention.

    Can such a system make it safer for women to access alcohol?

    • Doorstep delivery may help women access alcohol without dealing with social stigma.
    • There is some evidence that it could reduce on-premise violence against women, as seen in Kerala. However, domestic violence related to alcohol use is rampant, and the overall safety of women cannot be presumed.

    How should governments regulate liquor consumption? (Way forward)

    • Restrict Availability and Marketing: Implement policies to limit the availability and marketing of alcohol.
    • Higher Taxes: Increase taxes on alcohol to deter consumption and generate revenue.
    • Enforce Drunk-Driving Laws: Strengthen the enforcement of drunk-driving laws with stringent penalties.
    • Invest in Treatment Programs: Allocate funds for psychosocial treatments of alcohol-use disorders and mental health initiatives.
    • Monitor and Evaluate Impact: Governments should work with health departments to monitor and evaluate the impact of doorstep delivery on alcohol consumption and revise policies if necessary.
    • Uniform Policy Standards: Develop more uniform policy standards and ensure better implementation grounded in public health priorities over revenue generation.

    Mains question for practice:

    Q Analyze the trends in alcohol consumption in India over the past two decades. How has this trend impacted public health and social dynamics? 10M

  • [5th August 2024] The Hindu Op-ed: The psychology of extravagance

    [5th August 2024] The Hindu Op-ed: The psychology of extravagance

    PYQ Relevance:

    Mains:

    Q1 Critically discuss the objectives of Bhoodan and Gramdan movements initiated by Acharya Vinoba Bhave and their success.  (UPSC IAS/2013) 

    Q2 Can the vicious cycle of gender inequality, poverty and malnutrition be broken through microfinancing of women SHGs? Explain with examples.  (UPSC IAS/2021) 

    Note4Students: 

    Mains: Reason behind the inequality in India ;

    Mentor comments: Inequality in India is characterized by significant disparities in wealth and income distribution. The richest 1% of the population owns over 58% of the nation’s wealth, while the bottom 50% holds merely 3%. Factors contributing to this inequality include caste, gender, and regional disparities. Women, for instance, earn 34% less than men and own only 2% of agricultural land despite comprising 42% of the agricultural workforce. The COVID-19 pandemic exacerbated these inequalities, with the wealth of billionaires increasing while poverty deepened for many.

    Let’s learn!

    __

    Why in the News? 

    In their March 2024 study, “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj,” economists Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi report that in 2022-23, the top 1% of the population held 22.6% of the total income and 40.1% of the total wealth in India.

    A case of gross disproportion as per study

    • Income and Wealth Distribution: In 2022-23, the top 1% of India’s population received 22.6% of national income and owned 40.1% of total wealth. This marks the highest levels of inequality recorded since 1961, indicating a stark concentration of wealth among the richest individuals, with the top 0.1% earning nearly 10% of national income.
    • Comparison with Historical Context: The report suggests that the current inequality levels are greater than those during the British colonial rule, with the top 10% of the population owning 65% of total wealth. In contrast, the bottom 50% holds only 6.4% of total wealth and earns 15% of national income.
    • Wealth of the Wealthy: The wealthiest 10,000 individuals possess an average of ₹22.6 billion, which is approximately 16,763 times the average wealth of an Indian.  
    • Start of inequality: The rise in inequality began in the 1980s with economic liberalization, accelerating after the 1991 reforms. The share of the bottom 50% in national income dropped significantly, while the income share of the top 10% increased dramatically during the same period.

    The reason behind the inequality: 

    • Economic Liberalization: The economic reforms initiated in the 1990s led to rapid growth in certain sectors, particularly in urban areas, while rural and less developed regions lagged behind.  
    • Lack of Inclusive Growth: Economic growth has not been inclusive, with benefits disproportionately favouring certain sectors and geographic regions. For instance, the service sector, which significantly contributes to GDP, is concentrated in a few states like Maharashtra and Karnataka.
    • High Unemployment and Underemployment: A lack of sufficient job creation and the prevalence of underemployment contribute to low productivity and income levels among the majority of the population
    • Caste and Gender Discrimination: Social stratification based on caste and gender continues to limit access to opportunities for marginalized groups. For example, upper castes hold a disproportionate share of wealth, while Scheduled Castes and Scheduled Tribes have significantly lower ownership of assets.
    • Educational Disparities: Access to quality education is uneven, with lower-income groups often lacking the resources to attain higher education, which is crucial for upward mobility. This educational gap perpetuates income inequality.
    • Regional Imbalances: Certain states in India are significantly more developed than others, leading to disparities in income and wealth distribution. For instance, five states own about 50% of the country’s total wealth, Maharashtra (17% of the country’s wealth share) Uttar Pradesh (11.6%), Kerala (7.4%), Tamil Nadu and Haryana

    Way forward

    • Redistribution of Wealth: The funds generated from increased taxation should be directed towards social programs that improve access to education, healthcare, and nutrition for lower-income groups. 
    • Invest in Rural Development: Need to focus on targeted investments in rural areas which can help bridge the gap between urban and rural economies.
    • Promote Quality Education and Skill Development: Expanding access to quality education and vocational training for marginalized communities can empower individuals and enhance their employability.