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[Op-ed snap] Welcome measure

Mains Paper 2 : Government Scheme/Policies |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : labour reforms


CONTEXT

In a welcome move, the Union government has announced a significant reduction in the contribution by workers and employers towards the employees’ state insurance (ESI) scheme.

Background

From July 1, the overall contribution to ESI is slated to decline from 6.5 per cent to 4 per cent, with employers’ contribution falling from 4.75 per cent to 3.25 per cent, and that of employees from 1.75 per cent to 0.75 per cent.

Benefits

Lower Cost of hiring and formal jobs – This decision, which lowers the cost of hiring for employers, should be seen in conjunction with recent initiatives such as the Pradhan Mantri Rojgar Protsahan Yojna (PMRPY) that aim to boost the creation of formal jobs by lowering the costs associated with formalisation.

Medical Care and cash benefits –The ESI Act provides for medical care and cash benefits in case of contingencies to employees drawing a salary up to Rs 21,000 per month. It is one of the pillars of the social security architecture in the country.

Issues

1.Its current cost structure is prohibitive.

2.Contribution far exceeds the benefits –

  • A look at its accounts shows that the current levels of contribution far exceed the benefits disbursed by it — in fact, only around half of the contributions are paid out as benefits.
  • For instance, in 2016-17, while total contributions stood at Rs 16,852 crore (including interest income of Rs 3,069 crore), total expenditure incurred for medical benefits was only a fraction at Rs 6,409 crore.
  • This growing divergence between collections and disbursement has led to a substantial build up of its reserves.
  • At the end of March 2018, its corpus stood at Rs 73,303 crore, up Rs 13,920 crore from last year.
  • Between 2012 and 2017, it earned Rs 19,993 crore as interest income alone on this corpus.
  • But this rise in income hasn’t translated to greater benefits.

3.Standing committee on labour’s report –

  • As the standing committee on labour noted in a report last year, people continue to be deprived of the benefits of the ESI scheme “due to lack of coverage of ESIC scheme, poor functioning of hospitals, etc”.
  • This suggests that contributions can be substantially lowered, while maintaining benefits at current levels.

Way Forward

  • Prohibitive mandatory contributions such as the provident fund/employee state insurance tend to act as deterrents to formalisation.
  • As the experience of PMRPY has shown, lowering these costs tends to have a positive impact on formalisation.
  • In fact, much of the recent rise in the EPFO subscriber base is on account of PMRPY.
  • Lowering costs further, or offering employees the choice of who handles their contributions, could accelerate the process further.
Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

[op-ed snap] A home in space

Mains Paper 3 : Awareness In The Fields Of It, Space, Computers, Robotics, Nano-Technology, Bio-Technology |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : ISRO is making giant leaps in space explorations. Space station may be the next.


CONTEXT

ISRO has declared its intention to build a permanent space station for itself, possibly in the next five to seven years. After the mission to moon and Mars and a proposed manned space flight before 2022, this is the next logical step for the agency.

ISRO’s aspirations

ISRO would be undertaking many prolonged space exploration projects and sending many astronauts into space, such that it would require a permanent station for itself.

History of Space mission

  • For four decades since its inception in the early 1960s, ISRO had, apart from building its capacities, focused primarily on harnessing space technologies for societal benefits.
  • Yash Pal, the first director of Space Application Centre in Ahmedabad, once described India’s space mission as “almost a sociological programme” as much as a technological programme.
  • Vikram Sarabhai, the father of India’s space programme, used to repeatedly make the point that India must be second to none in the application of advanced technologies to “the real problems of man and society”.
  • Even as late as in 2015, Prime Minister Narendra Modi got all government departments to sit down with ISRO and identify the areas where space technology could help them achieve their objectives.

Proven Capacity of ISRO

  • In the next phase, beginning this century, ISRO established itself as a reliable and economical launcher of commercial satellites.
  • It demonstrated its capabilities to launch all kinds of satellites and delivered close to 300 payloads of foreign countries in space in the last 12 years.
  • This service is likely to continue since it generates the much-needed revenue to fund ISRO’s various missions.

New Mission into space explorations

  • However, ISRO is signalling that it is now ready to take a leap into space exploration. Chandrayaan-2 and Gaganyaan are, in fact, heralding ISRO into this new phase.
  • There is a mission to the sun coming up next year, while another to Venus has also been announced.
  • More inter-planetary explorations, and possibly a human flight to the moon, are also in the pipeline.

The utility of space station

  • The space station is a facility India would need in the context of missions such as these and more.
  • NASA’s International Space Station, the only one functional right now, is slated to retire by 2025, or latest by 2028, and no replacement for it has been confirmed so far.
  • It is likely that future space stations would be commercial facilities, available to anyone for a fee. For an agency that is still to execute a successful human space flight, all this might seem a little premature.
  • And the proposed five to seven-year timeline to achieve it, surely, is ambitious. But ISRO is known to set ambitious targets, and achieve them as well.

[op-ed snap] Too good to be true’

Mains Paper 2 : Health & Education |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Prospects and concerns with draft national education policy


CONTEXT

Draft National Education Policy – From the perspective of higher education, its main strength is that it has got its basics right — it appears to have a reasonable understanding of existing problems, and offers a plausible picture of possible solutions that may take us towards a better future. Indeed, the DNEP comes as a refreshing shock to academics long accustomed to policy documents that are rooted in a stubborn denial of basic ground realities.

Proposals

1.Liberal and holistic – The most overarching is the acknowledgement that all education is, and ought to be envisioned as, “liberal” and holistic.

2. Public education – There is a strong re-affirmation of the state’s commitment to public education, much needed at a time when privatisation has seemed to be the overriding objective of governments.

3. Autonomy – Also welcome is the explicit assurance that institutional autonomy is not just a polite term for financial abandonment.

4. Ad- hoc and contractual appointments –  Finally, the recognition that rampant resort to ad hoc and contractual appointments has crippled higher education and must be stopped immediately will surely bring relief to teachers’ organisations agitating tirelessly on this very issue.

5.Core Vision –  The core vision based on a tripartite division of higher education into teaching universities, research universities, and optimally-sized multi-disciplinary undergraduate colleges is sound. T

6.National Research Foundation – The diagnoses and prescriptions for the key areas of governance and regulation are workable as initial starting points, as is the plan to create a National Research Foundation separate from regulatory bodies.

Concerns with draft policy

  1. Discrimination  and Exclusion – 
  • It is deeply disappointing that the DNEP has evaded this issue, with the question of Under-Represented Groups (URGs) making no appearance outside school education.
  • Caste discrimination has long been an important issue in higher education, and has received intense public attention in recent times, from Rohith Vemula to Payal Tadavi.
  • Moreover, national statistics unambiguously establish that Persons with Disability and Muslims are by far the leading URGs in higher education.

2. Protecting public higher educational institutions from undue governmental interference

  •  The proposed institutional framework for higher education — with the National Education Commission chaired by the prime minister at its apex — clearly implies even more governmental control with significantly higher levels of centralisation than what is already the case.
  • The DNEP should have included — but does not — a forthright proposal for dealing with this unavoidable problem.

 

[op-ed snap] Faint glimmer: On revival in industrial activity

Mains Paper 3 : Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Data regarding revival in industrial activity


CONTEXT

The tentative revival in industrial activity must be built on through prudent policy support.

Background

Industrial activity in the new financial year appears to have started on a healthier note than the trend witnessed in the last quarter of the previous fiscal, the government’s latest quick estimates show.

  1. Industrial output – Industrial output rose 3.4% in April, buoyed by a generally broad-based revival that saw electricity, mining and even manufacturing post faster growth .

2. Manufacturing output – In fact, manufacturing output growth, which had decelerated sharply from the pace of 8.2% in October to a revised level of less than 0.1% in March, rebounded to a four-month high of 2.8%.

3. Positive growth – A look at the use-based classification reveals that all six segments were in positive territory, with only infrastructure and construction goods marking a slowdown from both the earlier year and March levels and providing cause for some concern.

4. Capital Goods – Hearteningly, capital goods, a sector that serves as a closely tracked proxy for business spending intentions, posted a 2.5% expansion, snapping three straight months of contraction.

To be sure, the growth even in this key area trails the pace of 9.8% that was reported in April 2018 by a wide margin, and it would be premature to celebrate the single reading until a more abiding trend emerges in the coming months.

Hiccups along the way

1.Rise in CPI –

  • Price gains measured by the Consumer Price Index (CPI) quickened to 3.05% in May, from April’s 2.99%, as prices of vegetables and pulses jumped by 23% and 10% respectively in urban areas, contributing to a bump-up in food inflation.
  • The Reserve Bank of India had last week flagged the risks to the inflation trajectory from factors including spikes in vegetable prices and international fuel prices and marginally raised its CPI inflation projection for the fiscal first half to a 3% to 3.1% range.
  • While the inflation reading remains below the RBI’s inflation threshold of 4%, policymakers would need to keep a close watch on price trends, especially as global energy prices continue to remain volatile amid heightened geopolitical tensions in West Asia and uncertainty on the demand outlook owing to the ongoing China-U.S. trade spat.

2. Monsson Dependence – And while the monsoon is forecast to be normal this year, the actual rainfall and its spatial distribution will have a significant bearing on agricultural output and food prices. A fiscally prudent budget, with incentives to support the nascent industrial recovery, would surely tick several boxes at one go.

Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

[op-ed snap] The middle income illusion

Mains Paper 3 : Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Why middle income trap might only be a hypothesis and not a reality.


CONTEXT

The World Bank has a definition of middle income. It is a range of per capita income between $996 and $12,055, with $996 to $3,895 defined as lower-middle income and $3,895 to $12,055 defined as upper-middle income (the thresholds are often changed, these are 2019 levels).

With a per capita income of around $2,000, India is still a lower-middle income country and $12,055 is a long way off.

The issue with the estimation

Numbers are based on nominal exchange rates

  • These numbers are based on official exchange rates, the so-called nominal per capita GDP or Atlas method figures.
  • But a country’s per capita income is in local currency, that is, rupees.
  • Typically, when economists use the trap idea, they at PPP (purchasing power parity) dollars, using PPP exchange rates, not official exchange rates. India’s PPP per capita income is now around $7,000.
  • The grist to the mill is usually provided by empirical research, documenting the development experience of a diverse range of countries.

Reasons for such a trap

  • On the one hand, as countries attained middle-income status, they would be squeezed out of manufacturing and other dynamic sectors by poorer, lower-cost competitors.
  • On the other hand, they would lack the institutional, human, and technological capital to carve out niches higher up the value-added chain. Thus, pushed from below and unable to grasp the top, they would find themselves doomed to, well, middle-income status.

Faults in this assumption

  • Middle-income countries as a group continued to grow as fast or faster than the convergence standard demanded.”
  • First, a trap cannot be defined without referring to a time-frame.
  • The time series on PPP per capita is a bit more difficult to get than the official rate per capita.
  • With that caveat, take a look at the time series of any relatively more advanced country. Until a few decades ago (a cut-off in 1960 or 1970 will suffice), all these countries were stuck in middle-income traps.
  • Second, the middle-income trap is sometimes defined not with respect to an absolute threshold level of per capita income, but with per capita income expressed as a share of US per capita income.
  • Even if one uses this relative notion, the case of a middle-income trap existing has not been proven.

Conclusion

  • Does this mean there are no issues with the Indian economy? Certainly not. After the elections, with a new government in place, plenty of people have come up with agendas for reform. In most instances, these are not short-term quick fixes, but medium-term changes.
  • Therefore, they can rightly be called structural reforms, and the suggestions should be debated, accepted and implemented.
Economic Indicators-GDP, FD,etc

[op-ed snap] Saving childhoods

Mains Paper 2 : Laws, Institutions & Bodies Constituted For The Vulnerable Sections |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing

Mains level : Eliminating Child Labour from India


CONTEXT

On World Day Against Child Labour (June 12) in 2017, India ratified two core conventions of the International Labour Organization on child labour. It now has to double its efforts to ensure that the benefit of those conventions reaches the most vulnerable children.

Data regarding Child labours

  • As per the 2011 Census, in the age group 5-14 years, 10.1 million of 259.6 million constituted working children.
  • The decline rate is grossly insufficient to meet target 8.7 of the UN Sustainable Development Goals (SDGs), which is to end child labour in all forms by 2025. India therefore needs to embark on new and innovative approaches in its fight against child labour.

Impact of ratifications

The ratification of the core conventions on child labour gives rise to a range of priorities such as strengthening policy and legislative enforcement and building the capacities of government, workers’ and employers’ organisations as well as other partners at national, State and community levels..

Steps Forward

1. Investment in research

  • India should invest in enhancing its body of knowledge on child labour, emphasising quantitative information.
  • While there are many common factors across the spectrum, each sector and each demographical segment will have its own set of factors and drivers that push children into the labour market.
  • Such factors and drivers can only be identified and analysed through proper research, surveys and assessments.

2. Complementing SDGs

  • Eliminating child labour is firmly placed within Goal 8 of the SDGs.
  • A stronger nexus between the discourse on SDGs and the discourse on eliminating child labour can take the advantage of complementarities and synergies of a wide range of actors engaged in both areas of work.

3. Participation of Private Sector

  • The growing interest of the private sector is a great opportunity that has to be further utilised, particularly to leverage key influencers in domestic and multinational supply chains.
  • It is also a matter of competitive advantage for multi-nationals to ensure that child labour is effectively eliminated in their supply chains.
  • A sector-wide culture of child labour-free businesses has to be nurtured.

Conclusion

As the world of work is transforming and new actors are emerging, one cannot underestimate the importance of creating a sound and vibrant platform to bring together these actors. The fight against child labour is not just the responsibility of one, it is the responsibility of all.

Child Rights – POSCO, Child Labour Laws, NAPC, etc.

[op-ed snap] Squandering the gender dividend

Mains Paper 1 : Role Of Women & Women Organization |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Reasons for decline in women work force and possible solutions.


CONTEXT

  • If labour force survey data are to be believed, rural India is in the midst of a gender revolution in which nearly half the women who were in the workforce in 2004-5 had dropped out in 2017-18.
  • The 61st round of the National Sample Survey Office (NSSO) recorded 48.5% rural women above the age of 15 as being employed either as their major activity or as their subsidiary activity — but this number dropped to 23.7% in the recently released report of the Periodic Labour Force Survey (PLFS). 

Incremental decline

Rural Women data –Worker to population ratio (WPR) for rural women aged 15 and above had dropped from 48.5% in 2004-5 to 35.2% in 2011-12, and then to 23.7% in 2017-18.

Urban Women Data – In contrast, the WPR for urban women aged 15 and above declined only mildly, changing from 22.7% in 2004-5 to 19.5% in 2011-12, and to 18.2% in 2017-18.

Concerns regarding this data

  • If rising incomes lead households to decide that women’s time is better spent caring for home and children, that is their choice.
  • However, if women are unable to find work in a crowded labour market, reflecting disguised unemployment, that is a national tragedy.
  • Decline is not located primarily among the privileged sections – A comparison of rural female WPRs between 2004-5 and 2017-18 does not suggest that the decline is located primarily among the privileged sections of the rural population.
  • Concentration among lower education strata – More importantly, most of the decline in the WPR has taken place among women with low levels of education. For illiterate women, the WPR fell from 55% to 29.1% while that for women with secondary education fell from 30.5% to 15.6%.

Comparison with men

Easier for men to find a job –

  • Men’s participation in agriculture has also declined.
  • However, men were able to pick up work in other industries whereas women reduced their participation in other industries as well as agriculture — resulting in a lower WPR.
  • Mechanisation and land fragmentation have reduced agricultural work opportunities for both men and women.
  • Other work opportunities, except for work in public works programmes, are not easily open to women.
  • This challenge is particularly severe for rural women with moderate levels of education.
  • A man with class 10 education can be a postal carrier, a truck driver or a mechanic; these opportunities are not open to women.
  • Hence, it is not surprising that education is associated with a lower WPR for women; in 2016-17, 29.1% illiterate women were employed, compared to only 16% women with at least secondary education.
  • On-going experimental research at the National Council of Applied Economic Research’s National Data Innovation Centre (NCAER-NDIC) suggests a tremendous undercount of women’s work using standard labour force questions, particularly in rural areas.
  • Although women try to find whatever work they can, they are unable to gain employment at an intensive level that rises above our labour force survey thresholds. This suggests an enormous untapped pool of female workers that should not be ignored.

Possible solutions

1. Establishment of the Cabinet Committee on Employment and Skill Development –

  • Establishment of the Cabinet Committee on Employment and Skill Development is a welcome move by the new government.
  • It is to be hoped that this committee will take the issue of declining female employment as seriously as it does the issue of rising unemployment among the youth.

Development of transportation infrastructure – 

One of the most powerful ways in which public policies affect rural women’s participation in non-agricultural work is via the development of transportation infrastructure that allows rural women to seek work as sales clerks, nurses and factory workers in nearby towns.

Multi-Sectoral Reforms –

If the cabinet committee were to focus on multi-sectoral reforms that have a positive impact on women’s work opportunities, the potential gender dividend could be far greater than the much celebrated demographic dividend.

Women empowerment issues: Jobs,Reservation and education

[op-ed snap] Foreign policy challenges five years later

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

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Foreign policy challenges and their resolution


CONTEXT

As Prime Minister Narendra Modi begins his second term, the world looks more disorderly in 2019 than was the case five years ago.

Disruptive global Conditions

  • U.S. President Donald Trump’s election and the new dose of unpredictability in U.S. policy pronouncements;
  • The trade war between the U.S. and China which is becoming a technology war;
  • Brexit and the European Union’s internal preoccupations;
  • Erosion of U.S.-Russia arms control agreements and the likelihood of a new arms race covering nuclear, space and cyber domains;
  • The U.S.’s withdrawal from the Iran nuclear deal and growing tensions between Saudi Arabia and Iran are some of the developments that add to the complexity of India’s principal foreign policy challenge of dealing with the rise of China.

Redefining neighbourhood

New neighbourhood emphasis –  Since an invitation to Pakistan was out of the question, leaders from the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) countries (Bangladesh, Bhutan, Nepal, Sri Lanka, Myanmar and Thailand) with Kyrgyzstan, added as current Shanghai Cooperation Organisation chair, highlighted a new neighbourhood emphasis.

Ways to develop prosperous neighbourhood

  • Multi-pronged diplomatic efforts and being generous as the larger economy.
  • It also needs a more confident and coordinated approach in handling neighbourhood organisations — SAARC, BIMSTEC, the Bangladesh, the Bhutan, India, Nepal Initiative, the Bangladesh-China-India-Myanmar Forum for Regional Cooperation, the Indian Ocean Rim Association.
  • This should be preferably in tandem with bilateralism because our bilateral relations provide us with significant advantages.
  • With all our neighbours, ties of kinship, culture and language among the people straddle boundaries, making the role of governments in States bordering neighbours vital in fostering closer linkages.
  • This means investing attention in State governments, both at the political and bureaucratic levels.

Managing China and the U.S.

India and China

  • The informal summit in Wuhan restored a semblance of calm but does not address the long-term implications of the growing gap between the two countries.
  • Meanwhile, there is the growing strategic rivalry between the U.S. and China unfolding on our doorstep. We no longer have the luxury of distance to be non-aligned.

India and USA

 Crude oil – As part of its policy on tightening sanctions pressure on Iran, the U.S. has terminated the sanctions waiver that had enabled India to import limited quantities of Iranian crude till last month.

GSP – The Generalised System of Preferences scheme has been withdrawn, adversely impacting about 12% of India’s exports to the U.S., as a sign of growing impatience with India’s inability to address the U.S.’s concerns regarding market access, tariff lines and recent changes in the e-commerce policy.

Sanctions under CAATSA – A third looming issue, perhaps the most critical, is the threat of sanctions under the Countering American Adversaries Through Sanctions Act (CAATSA), were India to proceed with the purchase of the S-400 air and missile defence system from Russia.

Huawei – Other potential tricky issues could relate to whether Huawei, which is currently the prime target in the U.S.-China technology war, is allowed to participate in the 5G trials (telecom) in India.

Afghanistan – The reconciliation talks between the U.S. and the Taliban as the U.S. negotiates its exit from Afghanistan raise New Delhi’s apprehensions about the Taliban’s return, constituting another potential irritant.

Way Ahead

Resource limitations – In a post-ideology age of promiscuity with rivalries unfolding around us, the harsh reality is that India lacks the ability to shape events around it on account of resource limitations.

Seasoned professional – These require domestic decisions in terms of expanding the foreign policy establishment though having a seasoned professional at the top does help.

Coordination among the different ministries and agencies – We need to ensure far more coordination among the different ministries and agencies than has been the case so far. Our record in implementation projects is patchy at best and needs urgent attention.

Focus on the neighbourhood – The focus on the neighbourhood is certainly desirable, for only if we can shape events here can we look beyond. However, the fact that China too is part of the neighbourhood compounds Mr. Modi’s foreign policy challenges in his second term.

External balancing – Employing external balancing to create a conducive regional environment is a new game that will also require building a new consensus at home.

Foreign Policy Watch: India-China

[op-ed snap] Artificial Intelligence, the law and the future

Mains Paper 3 : Awareness In The Fields Of It, Space, Computers, Robotics, Nano-Technology, Bio-Technology |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Regulation of AI


CONTEXT

In February, the Kerala police inducted a robot for police work. The same month, Chennai got its second robot-themed restaurant, where robots not only serve as waiters but also interact with customers in English and Tamil. In Ahmedabad, in December 2018, a cardiologist performed the world’s first in-human telerobotic coronary intervention on a patient nearly 32 km away. All these examples symbolise the arrival of Artificial Intelligence (AI) in our everyday lives.

Need for regulation of AI

  • If AI is not regulated properly, it is bound to have unmanageable implications. Example – Imagine, for instance, that electricity supply suddenly stops while a robot is performing a surgery, and access to a doctor is lost?
  • All countries, including India, need to be legally prepared to face such kind of disruptive technology.

Challenges of AI

Predicting and analysing legal issues and their solutions, however, is not that simple.

Existential Questions

  • What if an AI-based driverless car gets into an accident that causes harm to humans or damages property?
  • Who should the courts hold liable for the same?
  • Can AI be thought to have knowingly or carelessly caused bodily injury to another?
  • Can robots act as a witness or as a tool for committing various crimes?
  • Scenario in other countries –In the U.S., there is a lot of discussion about the regulation of AI. Germany has come up with ethical rules for autonomous vehicles stipulating that human life should always have priority over property or animal life. China, Japan and Korea are following Germany in developing a law on self-driven cars.
  • In India, NITI Aayog released a policy paper, ‘National Strategy for Artificial Intelligence’, in June 2018, which considered the importance of AI in different sectors.
  • The Budget 2019 also proposed to launch a national programme on AI.
  • No comprehensive legislation to regulate this growing industry has been formulated in the country till date.

Legal personality of AI

  • Definition of AI – First we need a legal definition of AI.
  • Establishing legal personality – Also, given the importance of intention in India’s criminal law jurisprudence, it is essential to establish the legal personality of AI (which means AI will have a bundle of rights and obligations), and whether any sort of intention can be attributed to it.
  • Ensuring liability – To answer the question on liability, since AI is considered to be inanimate, a strict liability scheme that holds the producer or manufacturer of the product liable for harm, regardless of the fault, might be an approach to consider.
  • Privacy Rights – Since privacy is a fundamental right, certain rules to regulate the usage of data possessed by an AI entity should be framed as part of the Personal Data Protection Bill, 2018.

Conclusion

  • Reducing traffic accidents – Traffic accidents lead to about 400 deaths a day in India, 90% of which are caused by preventable human errors. Autonomous vehicles that rely on AI can reduce this significantly, through smart warnings and preventive and defensive techniques.
  • Availability of doctors – Patients sometimes die due to non-availability of specialised doctors. AI can reduce the distance between patients and doctors.
  • But as futurist Gray Scott says, “The real question is, when will we draft an artificial intelligence bill of rights? What will that consist of? And who will get to decide that?”
Armed Forces (Special Powers) Act

[op-ed snap] A new India for farmers

Mains Paper 3 : Economics Of Animal-Rearing |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : These hard times are asking for innovative ways to secure farmers livelihoods.


CONTEXT

After half a century, India is under a major locust attack from breeding grounds in Balochistan, Pakistan. Other international tidings are also not favourable for Indian farmers. In 2014, crude prices had hit rock bottom and the government received a bonanza of a few lakh crore. Circumstances have changed today: India’s finances are in a perilous state and we face the spectre of a drought.

1.US-China trade dispute – The escalation of the US-China trade dispute is pushing the world towards a prolonged economic stagnation.

2.Crude prices – President Donald Trump is also engineering a conflict in the strait of Hormuz to jack up crude prices.

3.Pressure on India to import US agriculture commodities  – In the aftermath of the imposition of duties on US agriculture produce by China, there are fears that the US government will pressure India to import US agriculture commodities like livestock feed, chicken and milk products — and, the country will succumb to such pressure.

4.Regional Comprehensive Economic Partnership (RCEP) – On the eastern front, the commerce ministry is all prepared to sign the Regional Comprehensive Economic Partnership (RCEP), which will commit the country to become a gateway for Asian agriculture imports. We are also being sucked into a similar treaty with the EU.

5.Climate change and GDP-led policy – But now all these combine with a system that fails to value climate change-related externalities. Besides, they also persist with the GDP-led policy modelling. All this is literally killing us.

  • The government’s inflation-targeting priorities obviate all possibilities of it passing all of the escalating costs (diesel, LPG, food) to the consumers.
  • The complexities in MSP procurement and fertiliser prices will compound the morass of stagnating food prices.
7.PM Kisan –
  • “PM Kisan” is a wonderful initiative of the government, but there is an apprehension that it may be funded by withdrawing resources from existing agriculture initiatives and programmes.
  • Farmers have shown repeatedly that they are easily distracted from livelihood issues. They must now be prepared for a precarious future.

 

Vision for government

  •  Governments, notorious for rolling out policies that can’t be implemented, generate truckloads of paperwork but are loathe to document failure.
  • Till such time the system doesn’t record failure and establish accountability, framing new policies would be like playing a game of dice.
  • Case Study – For example, the policy on food parks has failed and private investments in the agriculture value chain remain elusive. The bureaucracy, having only dealt in food shortages, is clueless on how to respond to food surpluses and fluctuations while farmers have been quick to respond to market signals. This has created new problems, which lead to unprecedented number of farmer agitations and suicides.

Ways to improve farmer livelihoods

  • To improve farmer livelihoods, it’s absolutely essential to quickly resolve issues of the animal husbandry sector.
  • Incidentally, 80 per cent of the stray cattle on the roads today are Holstein, Jersey and basically crossbreeds.
  • A clear distinction can be made between these foreign breeds and the pure desi .This is how the New India can be visualised.
Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc

[op-ed snap] Is NITI Aayog old wine in a new bottle?

Mains Paper 2 : Statutory, Regulatory & Various Quasi-Judicial Bodies |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : nothing much

Mains level : Need of reforms in Niti Ayog


CONTEXT

There must be a review of what the think tank has achieved to adopt the new role described in its charter

Under scrutiny

Now, when the country’s economy has not performed to the high expectations Mr. Modi had created, and citizens’ aspirations for ‘ache din’ have not been realised, the performance of the NITI Aayog is under scrutiny, as it should be.

History of reforms

Dr. Singh declared that reform of the Planning Commission was long overdue.

Planning Commission Reforms

  • An outline was drawn of a substantially reformed institution which would, in Dr. Singh’s words, have a capability for “systems reform” rather than making of Five-Year Plans, and which would have the “power of persuasion” without providing budgets.
  • A commission chaired by C. Rangarajan, then chief economic adviser to the Prime Minister, examined budgetary processes, divisions of responsibilities between the Finance Ministry and the Planning Commission, and distinctions between ‘plan’ and ‘non-plan’ expenditures.
  • Chief Ministers retorted that the Planning Commission must improve its ability to understand their needs and to develop ideas that they would want to adopt because they accepted the ideas as good for them, not because they would have to if they wanted the money.

A good starting point

  • The NITI Aayog charter is a good starting point for a new journey in transforming the governance of the Indian economy.
  • The NITI Aayog and the government would do well to conduct an open-minded review of what NITI Aayog has achieved so far to adopt the new role described in its charter — that of a catalyst of change in a complex, federal, socioeconomic system.
  • And assess whether it has transformed its capabilities sufficiently to become an effective systems reformer and persuader of stakeholders, rather than merely an announcer of lofty multi-year goals and manager of projects, which many suspect it is.

Concerns regarding independence

  • There is deep concern that NITI Aayog has lost its integrity as an independent institution to guide the government; that it has become a mouthpiece of the government and an implementer of the government’s projects.
  • Many insist that NITI Aayog must have the ability to independently evaluate the government’s programmes at the Centre and in the States.
  • Some recall that an Independent Evaluation Office set up in the last days of the UPA-II government was swiftly closed by the NDA government.
  • Others counter that the Planning Commission had a Programme Evaluation Organisation all along and which continues. They miss the need for a fundamental transformation in the approach to planning and change.

Way Forward

  • The transformational approach to planning and implementation that 21st century India needs, which is alluded to in NITI’s charter, requires evaluations and course-corrections in the midst of action.
  • It requires new methods to speed up ‘organisational learning’ amongst stakeholders in the system who must make plans together and implement them together.
  • The NITI Aayog’s charter has provided a new bottle.
  • It points to the need for new methods of cooperative learning and cooperative implementation by stakeholders, who are not controlled by any central body of technical experts with political and/or budgetary authority over them.

Conclusion

Merely filling this new bottle with old ideas of budgets, controls and expert solutions from above will not transform India. The debate about NITI Aayog’s efficacy must focus on whether or not it is performing the new role it must, and what progress it has made in acquiring capabilities to perform this role, rather than slipping back into the ruts of yesterday’s debates about the need for a Planning Commission.

NITI Aayog’s Assessment

[op-ed snap] St. Petersburg consensus: On Russia-China bonhomie

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

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : increasing cooperation between Russia and China


CONTEXT

Russia and China are strengthening ties amid tensions with the U.S.

Background

  • The bonhomie between China’s and Russia’s leaders at the St. Petersburg International Economic Forum last week was demonstrable.
  • In a sign of the heightened tensions between the U.S. and the two countries, Russia’s annual investment gathering was boycotted by the U.S. Ambassador to Russia, Jon Huntsman.
  • His absence was ascribed to the prevailing environment in Russia for foreign entrepreneurs, typified by the detention of U.S. private equity investor Michael Calvey on allegations of fraud.

Cooperation between China and Russia

  • Conversely, the Chinese telecommunications equipment manufacturer Huawei signed an agreement with Russia’s principal mobile operator to start 5G networks, in a rebuff to Washington’s attempts to isolate the firm internationally.
  • Russian President Vladimir Putin and his Chinese counterpart Xi Jinping made it clear in St. Petersburg that the tensions with the West had only drawn them closer.

Reasons for rift with USA

  • Annexation of Crimea – The rift with Russia began with Moscow’s annexation of Crimea in 2014 and the stand-off in eastern Ukraine that continues.
  • Opposition to the 1,200-km-long Nord Stream 2 gas pipeline –  Russia’s tensions with the U.S. and some EU countries stem also from their opposition to the 1,200-km-long Nord Stream 2 gas pipeline from Russia to Germany.
  • U.S. objections draw in part from its eagerness to export liquefied natural gas to Europe, besides thwarting Moscow’s ambition to dominate the region’s energy market.
  • Russian meddling in the 2016 U.S. presidential election – Far more sensitive has been U.S. Special Counsel Robert Mueller’s inquiry into possible Russian meddling in the 2016 U.S. presidential election.
  • Blacklisting of Huawei – Washington’s blacklisting of Huawei, prohibiting it from selling technology to the U.S. and barring domestic firms from supplying semiconductors to Beijing, falls into a class of its own among international trade disputes.

Historic high in bilatral relations

  • Amid these tensions, in St. Petersburg Mr. Xi and Mr. Putin emphasised that bilateral relations were at a historic high, marked by increased diplomatic and strategic cooperation.
  • China participated in Russian military exercises on its eastern border last September, marking a watershed. Moscow and Beijing, hostile rivals of the Cold War era, have for a while been adopting common positions at the UN Security Council on critical international issues.
  • Bilateral relations are also guided by pragmatism.
  • Central Asia – Russia appears realistic about the growing Chinese economic clout in Central Asia, once firmly in its sphere of influence, thanks to China’s massive infrastructure investments under the Belt and Road Initiative.
  • Northern Sea Route – Chinese cooperation would moreover prove critical for Russia’s elaborate plans to exploit the Northern Sea Route along the Arctic as an alternative transportation hub.

Conclusion

International sanctions have not been very effective in isolating Russia. European states, notably Germany, recognise the importance of engaging with Russia to contain Mr. Putin’s expansionist aims. Equally, President Donald Trump’s “America first” policy is compelling potential rivals to make common cause.

Foreign Policy Watch: India-United States

[op-ed snap] Slippery slope

Mains Paper 3 : issues relating to planning, mobilization of resources |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NBFC

Mains level : Crisis of NBFC institutions


CONTEXT

NBFC crisis could accentuate contagion risk in the financial sector. Cabinet committee on investment and growth must address it.

Background

  • The woes of non-banking finance companies and housing finance companies continue to reverberate through the financial system.
  • A few days ago, Dewan Housing Finance Corporation defaulted on its interest obligations. Its short-term rating has been cut to default.

Crisis in NBFC sector

  • Financial conditions have worsened with spreads of NBFC bonds rising significantly in the recent past.
  • At one level, the argument can be made that lenders are re-evaluating their risk.
  • That the market is discriminating between the better-rated NBFCs and those whose balance sheets appear problematic.
  • And, that an intervention at this stage will create problems of moral hazard. But, there is genuine concern that the DHFL default can “accentuate contagion risk in the financial sector”, as noted by the investment house CLSA in a note.
  • This needs to be addressed.

A solution to this problem

  • A possible solution is for the RBI to open a special borrowing window to provide liquidity to NBFCs/HFCs.
  • As was done during the financial crisis of 2008, the central bank, under sections 17 and 18 of the RBI act, can provide short term liquidity to NBFCs, till financial conditions normalise.
  • But, the RBI doesn’t seem inclined towards this route, presumably because it will be difficult to differentiate between NBFCs.
  • It could also nudge banks to increase their lending to NBFCs.

Steps taken by RBI

  • To this effect, it has already eased norms for maintaining risk weights on bank lending to NBFCs.
  • Further easing of systemic liquidity could boost flows to NBFCs.

Challenges

  • The question is will risk-averse banks lend?
  • Part of the problem is that the difficulty in differentiating between illiquid NBFCs from those that are insolvent.
  • To address this, some have advocated for an asset quality review to reveal the true state of NBFCs’ books.
  • While this will address issues of information asymmetry, such a move may end up prolonging the crisis.
  • Perhaps, the RBI could identify systemically important NBFCs and backstop them through banks.

Conclusion

But the larger issue of resolution of financial firms remains. Situations such as the current one warrant swift resolution so that problems remain contained. Perhaps, the newly formed cabinet committee on investment and growth could contemplate bringing back the FRDI bill, with modifications to address contentious issues like the bail-in clause and deposit insurance.

Banking Sector Reforms

[op-ed snap] The only mantra

Mains Paper 3 : Indian Economy |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Resolution of underlying economic challenges should be the foremost agenda.


CONTEXT

India’s problem is not unemployment — this has bounced in the low and narrow range of 4-7 per cent for 50 years — but employed poverty. Our traditional labour market shock absorbers — farm employment and self-employment — are dying because kids born after 1991 are unaccepting of self-exploitation and recognise the wage premiums, identity, dignity, soft skills, apprenticeship effect, and financial inclusion of formal jobs.

1.Poor Formalisation –

India’s 6.3 crore enterprises only convert to 12 lakh GST registrants, 10 lakh provident fund payers, and 19,500 companies with a paid up capital of Rs 10 crore or more because of our regulatory cholesterol — 58,000-plus compliances, 3000-plus filing, and 5000-plus changes every year.

2. Facilitating ease of business –

We need massive ease-of-doing business that rationalises (cuts down ministries, compliances, and filings), simplifies (adopts a universal enterprise number and one labour code) and digitises (adopts a paperless, presenceless and cashless process for all employer compliance by shifting from uploads to websites to an API architecture with straight-through-processing).

3. Reverse payroll wedge

  • India’s labour laws have an insane reverse payroll wedge — employers are forced to deduct 40 per cent-plus of gross wages from chithi waali salary (gross wages) for employees with monthly wages up to Rs 25,000.
  • Yet, haath waali salary (net wages) are only 9 per cent lower for employees with monthly wages above Rs 25,000.
  • This wedge murders formalisation and confiscates property from the poor; all wages belong to employees in a cost-to-company world.

Need of competition to fix  Reverse payroll wedge

  • Fixing this wedge needs competition; EPFO is the world’s most expensive government securities mutual fund (300-plus basis points for administration fees) and Employees’ State Insurance (ESI) is the world’s most expensive health insurance programme (less than 50 per cent of contributions are paid out as benefits).
  • The reform agenda is clear — employee contribution must be made optional, employees must choose who handles their employer contributions, and social security programme fees must be capped to their costs.
  • One driver of 20 million new social security payers has been the Pradhan Mantri Rojgar Protsahan Yojna — this partial reimbursement to employers for incremental low-wage employees has incentivised social security enrolment, is easy to verify, and hard to fudge and should be extended for a fixed period of three years.

4.Challenges before skill development

  • Our skill development system faces the difficult trinity of cost, quality and quantity combining with challenging changes to the world of education.
  • In a world where Google knows everything, knowing is not as important as lifelong learning and hard skills become a necessary but not sufficient condition for the wage premium.

Lack of Apprenticeships –

Apprenticeships are the future of learning, yet India only has 5 lakh apprentices instead of 1.5 crore (if we use Germany’s number of 2.7 per cent of the labour force).

Ways to improve Apprenticeship –

  • Changes could include merging the two central government initiatives, Regional Directorates Of Apprenticeship Training (RDAT) and Board of Apprentice Training (BOAT), operate effective online matching platforms and reinforcing the regulatory legitimacy of apprenticeships as classrooms to overcome the trust deficit with employers.
  • Most importantly, we must enable degree-linked apprentices (skill universities await clearance for linking apprentices to degrees via distance and online delivery).
  • There must also be a focus on financialisation reform and sustainable competition.
  • Fairly-priced capital catalyses formalisation, yet India’s credit to GDP ratio is 50 per cent (rich countries are at 100 per cent). Sadly, Arunachal Pradesh is at one per cent and Bihar is 17 per cent.
  • Lowering our cost of money has begun but sustainably targeting a higher credit to GDP ratio needs more bank licences, fixing the governance at nationalised banks, blunting the asset liability mismatch at NBFCs (some irrationally funded 30 per cent of their balance sheet with commercial paper) and restoring the sanctity of the 270-day IBC bankruptcy deadline.
  • More Indian enterprises need formal financial credit — capital investment and working capital availability drive productivity — without replicating the rash lending between 2008 and 2014 that gave us Rs 14 lakh crore worth of bad loans. 

6.Labour as a state subject

We should consider making labour a state subject and must continue the decentralisation of funds, functions and functionaries to states while simultaneously creating accountability, capabilities and resources in city governance.

Conclusion

The 67 per cent-plus turnout in our recent election not only reflect the invisible threads that hold India together but capture an aspiration that breaks with India’s economic past. This dua needs policy to pray to the one god of formal jobs.

Economic Indicators-GDP, FD,etc

[op-ed snap] Welfare policy and Modi 2.0

Mains Paper 2 : Health & Education |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Instead of launching new schems focus should be on strengthening existing infrastructure.


CONTEXT

Housing, sanitation, gas connections (Ujjwala), direct benefit transfers (DBT), income support (PM-Kisan) — contrary to early indications, the Narendra Modi government’s first term proved to be far more welfarist than was expected of a government that campaigned on the slogan of minimum government.

Analysis of welfare projects

1.Technology and bureaucracy

  •  Early in its tenure, the government embraced Aadhaar and DBT with gusto. And in its last few months, it began the transition to basic income support through PM-Kisan.
  • Underlying this approach is the assumption that technology can substitute for an incompetent and corrupt welfare bureaucracy.
  • Moving money directly to beneficiary accounts removes bureaucratic layers and tightens monitoring, thus improving efficiency and curbing corruption.

The flaw in design –

  • But recent studies show that rather than reducing bureaucracy, getting the DBT architecture right requires significant bureaucratic intervention. From opening accounts to promoting financial literacy and facilitating bank transactions, local bureaucrats are critical to DBT.
  • Getting the DBT architecture right requires bureaucrats to engage citizens and coordinate across departments — a skill that Indian bureaucrats simply do not posses.

Examples from other countries –

Countries like Brazil and Mexico have invested in large cadres of social workers at the local government level to do just this.

Way ahead

  • Building a competent welfare bureaucracy,-The success of welfare programmes in Modi 2.0 will depend on willingness to recognise that building a competent welfare bureaucracy, even if its only task is to move money, will require empowering local governments with skills and resources.
  • Challenges with Digitised welfare systems
  • Digitised efficiency risks casting citizens as passive recipients of government largesse rather than active claimants of rights.
  • Digitised welfare systems genuinely risk closing off spaces for citizens to complain, protest and demand accountability when rights are denied.

Case study –  Consider the many documented instances of using coercive threats (cutting ration and electricity) to meet Swachh Bharat goals. This is not to argue against administrative efficiency, rather to highlight risks that need resolution.

2. Analysis of Ayushman Bharat

Second, with Ayushman Bharat, Modi 1.0 took a significant step towards engineering an architectural shift in India’s welfare system, away from direct provisioning (government running hospitals and schools) towards financing citizens (through income support and health insurance) and regulating private providers.

Challenges

  • But can a state that struggles with routine tasks regulate a sector as complex as healthcare?
  • Consider this. In the United States, medicare employs 6,000 staff to cover 44 million beneficiaries who handle insurance audits, pricing, and anti-trust cases.
  • The staffing requirement, at equivalent levels in Uttar Pradesh alone, would amount to 10,000 employees.

Strengthening health care infrastructure –

  • Importantly, in a sector like health where predatory practices are rife, well-functioning government hospitals are a necessary check and balance. Regulation cannot be a substitute for investing in public systems.
  • Ayushman Bharat must be complemented with a concerted focus on strengthening public hospitals.

3. Balance in Centre-state relations

This multiplicity of central schemes has served to entrench a silo-driven, one-size-fits-all approach that is inefficient as it fails to capture state-specific needs.

Way Ahead to balance centre state relation

  • But, sensible rationalisation needs a coherent framework.
  • The World Bank’s social protection analysis calls for developing a national social protection strategy with a core basket of schemes that states can adapt to their needs.
  • Greater flexibility to states was also recommended by the Niti Aayog’s chief ministers sub committee report in 2016.
  • Implementing these recommendations will require a radical shift in the role of the central government away from designing and controlling schemes to strategic thinking and supporting states.
  • There are obvious trade-offs with administrative efficiency from centralised schemes that will need to be negotiated.

4. Education Policy

  • Finally, no government can afford to ignore India’s learning crisis.
  • Yet this was one of the most under-prioritised areas in Modi 1.0’s welfare agenda.
  • The newly-released national education policy emphasises the urgent need to ensure all students achieve foundational literacy and numeracy.
  • This needs to be adopted and implemented in mission mode.

Conclusion

The difficult task of building a high quality, 21stcentury welfare state awaits Modi 2.0. India doesn’t need new schemes, rather it needs consolidation and balancing between competing welfare strategies. Getting this right will require significant investments in state capacity. This is the welfare challenge for Modi 2.0.

Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

[op-ed snap] Ocean of neighbours

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

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Revival of bimstec is a strategic step in view of neighbourhood integration Policy.


CONTEXT

Prime Minister Narendra Modi’s first visit abroad in his second term to Maldives and Sri Lanka is being billed as the reaffirmation of Delhi’s traditional diplomatic emphasis on “neighbourhood first”.

Focus on ocean Island states

  • The visit to Male and Colombo offers the opportunity to firmly place the Indian Ocean island states into India’s regional geography.
  • Modi must now expand the ambit of the strategy to draw in Madagascar, Comoros, Reunion and Diego Garcia. Reunion is part of France and Diego Garcia hosts a major American military facility.
  • Similarly, Delhi should focus on a number of small islands that dot the sea lines of communication in the eastern Indian Ocean — the Cocos and Keeling islands belonging to Australia come readily to mind.

Dysfunctioning SAARC

  • At the only SAARC summit during his first term, held in Kathmandu at the end of 2014, Modi saw the forum’s dysfunction.
  • It could not wrap up regional connectivity agreements negotiated for years before, thanks to Pakistan’s decision to pull the plug at the last minute.
  • With SAARC going nowhere, Modi turned to the BIMSTEC grouping, invited its leaders to join the BRICS summit at Goa during 2016, and again last month for the inauguration of Modi’s second term.
  • Delhi should have no problem recognising that Islamabad is not ready for economic integration with India; it wants a settlement of the Kashmir question to precede any economic and political cooperation with India. That might take a while.

Revival of BIMSTEC

  • Modi’s focus on BIMSTEC was as much about rediscovering a forgotten regional organisation as it was about putting the Bay of Bengal on India’s mental map.
  • Over the last few years, Colombo has been persistent in claiming an “Indian Ocean identity” rather than a South Asian identity.
  • The future of the Maldives, sitting astride one of the world’s busiest sea lines of communication, is in the Indian Ocean.
  • Both of them are acutely conscious of their growing maritime salience and have not been hesitant to develop all-round political leverage.

Realities to be acknowledged

  • First, it needs to recognise that island states and territories — including the smallest pieces of real estate — are coming into strategic play amidst the return of great power rivalry to the littoral.
  • Second, the island states in the south western Indian Ocean form a coherent group and must be dealt within an integrated framework.
  • In eastern Indian Ocean, a focus on developing the Andaman Islands opens up possibilities for sub-regional cooperation with Thailand, Indonesia and Singapore.
  • Third, India needs to develop its own national capabilities — especially in the delivery of strategic economic and security assistance to the island states. Without that the ambitious goals identified under the SAGAR vision will remain elusive.

Conclusion

Finally, in his SAGAR vision, Modi signalled India’s readiness to work with other powers in promoting regional prosperity and security. There are big possibilities for collaboration with France, the US, Australia and Japan in different corners of the Indian Ocean. The joint bidding by India and Japan for the development of East Container Terminal in the Colombo port underlines the potential.

Foreign Policy Watch: India-SAARC Nations

[op-ed snap] Eye on growth

Mains Paper 3 : Mobilization Of Resources |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Rate cut signals economy is in crisis and measures are required to boost growth.


CONTEXT

As was expected, the monetary policy committee (MPC) of the Reserve Bank of India delivered its third consecutive rate cut of 25 basis points, citing significant weakness in growth impulses.

Background

  • The repo rate now stands at 5.75 per cent. Significantly, all six members of the MPC, including Viral Acharya and Chetan Ghate who had earlier voted against monetary easing, opted not only for a loose monetary policy, but also a shift in stance from neutral to accommodative, opening the door for more rate cuts in the future.
  • The message is clear: Inflation remains contained, while the slowdown in economic activity is deeper than what was believed.

Inflation Front

  • On the inflation front, recent data points towards a broad-based pick up in prices of several food items, increasing the prospects of higher retail inflation in the coming months.
  • However, the MPC isn’t perturbed, as it expects a larger reversal in prices during autumn and winter.
  • Further, with demand weakening, core inflation has moderated, as have households expectations of three months ahead inflation.
  • The RBI now expects retail inflation at 3-3.1 per cent in the first half of FY20, rising thereafter to 3.4-3.7 per cent in the second half, well within the 4 (+/-2) per cent band.

Reasons to worry

  • In the economy though, there is reason to worry.
  • In February, the RBI had projected the economy to grow at 7.4 per cent in FY20.
  • It then lowered its forecast to 7.2 per cent in the April, and has now cut it to 7 per cent.
  • But with the underlying drivers of growth sputtering, private consumption, investment and export growth remain subdued, and with limited fiscal space, achieving even this may be difficult.

Does transmission work?

Questions –

  •  Will cuts in the repo rate translate to lower lending rates?
  • Will it boost consumption and investment demand?
  • In the policy document, the RBI noted that while the transmission of the previous two repo cuts was 21 bps to the lending rate on fresh rupee loans, the lending rate on outstanding loans increased by 4 bps as “past loans continue to be priced at higher rates”.

Optimistic notion –

  • Perhaps, with liquidity moving into surplus mode — liquidity in the system turned into an average daily surplus of Rs 66,000 crore after being in deficit in April and most of May — transmission will improve.
  • The decision to review the liquidity management framework by constituting an internal working group is a positive signal.

Conclusion

The dovish tone of the policy increases the likelihood of another rate cut in August, presumably once concerns over fiscal slippage are addressed after the budget is presented, and greater clarity emerges on the monsoon. Further rate cuts though will depend on the extent of the growth slowdown and the trajectory of inflation.

RBI Notifications

[op-ed snap] Breaking the algorithm

Mains Paper 3 : Cyber Security |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Algorithm collusion should be monitored to promote transparent market.


CONTEXT

Businesses are increasingly utilising algorithms to improve their pricing models, enhance customer experience and optimise business processes. Governments are employing algorithms to detect crime and determine fines. Consumers are benefitting from personalised services and lower prices. However, algorithms have also raised concerns such as collusions and malfunctioning, privacy, competition issues, and information asymmetry.

  • Automated systems have now made it easier for firms to achieve collusive outcomes without formal agreement or human interaction, thereby signalling anti-competitive behaviour.
  • This results in “tacit algorithmic collusion”, an outcome which is still not covered by existing competition law.

Case study –  This can occur in non-oligopolistic markets too. In 2015, US Federal Trade Commission fined David Topkins (former e-commerce executive of a company selling online posters and frames), for fixing the price of certain posters sold through Amazon Marketplace using complex algorithms, impacting consumer welfare and competition adversely. 

Security Concerns from collusion alogotithm

1.Negligence of private data

  • In order to enjoy services at low or zero price, consumers neglect the value of their data.
  • Access to easily procurable data such as Facebook “likes” can be used to target only advantageous customers circumventing anti-discrimination mechanisms.

2.Ransomware attack –

  • Application of advanced algorithms have also resulted in an increase in ransomware attacks.
  • A devastating cyber attack — the WannaCry ransomware attack — hit the world in May 2017, affecting around 2,30,000 computers across 150 countries.

3.Competition –

  • Important concerns pertain to “competition” as well.
  • Processing of large datasets through dynamic algorithms generate real-time data “feedback loops”, impacting competition adversely.
  • As more users visit select platforms, not only more data, but data with greater reliability is collected, allowing firms to more effectively target customers. Consequently, more users feedback into this loop. 

Case Study – That Google has been estimated to charge a higher cost-per-click (CPC) than Bing, a competitor, suggests that advertisers attribute a higher probability of converting a viewer of Google’s ads into a customer.

4. Complexity of system –

  • Then, we have evolving machine-learning algorithms ranging from voice recognition systems to self-driving cars.
  • Even high-profile programmers/developers may not be able to trace the working of such algorithms making nearly impossible the identification of any anti-competitive practice.

Conclusion

A rethink of public policy is absolutely essential if non-desirable impacts of artificial intelligence on human race are to be arrested.

Cyber Security – CERTs, Policy, etc

[op-ed snap] Caught napping

Mains Paper 2 : Health & Education |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nipah virus

Mains level : State should be proactuve to contain spread of nipah virus.


CONTEXT

A year after Kerala’s prompt action quickly brought the deadly Nipah virus infection outbreak under check in two districts (Kozhikode and Malappuram), the State has once again shown alacrity in dealing with a reported case.

Background

  • A 23-year-old student admitted to a private hospital in Ernakulam on May 30 tested positive for the virus on June 4.
  • But even as the government was awaiting confirmation from the National Institute of Virology, Pune, steps had been taken to prevent the spread of the disease by tracing the contacts, setting up isolation wards and public engagement.
  • Containing the spread of the Nipah virus is important as the mortality rate was 89% last year, according to a paper in the journal Emerging Infectious Diseases.
  • The source of infection in the index case (student) remains unknown.

Circulation of virus

  • Due to fruit bats -If Kerala was taken by surprise by the first outbreak last year, its recurrence strongly suggests that the virus is in circulation in fruit bats.
  • After all, the virus isolated from four people and three fruit bats (Pteropus medius) last year from Kerala clearly indicated that the carrier of the Nipah virus which caused the outbreak was the fruit bat, according to the paper in Emerging Infectious Diseases.
  • The similarity between human and bat virus – Analysing the evolutionary relationships, the study found 99.7-100% similarity between the virus in humans and bats.
  • The confirmation of the source and the recurrence mean that Kerala must be alert to the possibility of frequent outbreaks.

Lack of proactiveness on part of the state

  • Even in the absence of hard evidence of the source of the virus till a few days ago, fruit bats were widely believed to be the likely candidates.
  •  No continuous monitoring and surveillance – That being so and considering the very high mortality rate when infected with the virus, it is shocking that Kerala had not undertaken continuous monitoring and surveillance for the virus in fruit bats.
  • Absence of a public health protection agency -One reason for the failure could be the absence of a public health protection agency, which the government has been in the process of formulating for over five years, to track such infective agents before they strike.

Way Forward

Not only should Kerala get this agency up and running soon, it should also equip the Institute of Advanced Virology in Thiruvananthapuram to undertake testing of dangerous pathogens. Known for high health indicators, Kerala cannot lag behind on the infectious diseases front.

Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

[op-ed snap] Bolster the first line of defence”

Mains Paper 3 : Social Media Networks & Internal Security |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Police reforms are the key stone for internal security.


CONTEXT

In the wake of the 26/11 terrorist attack in 2008, a slew of measures were taken to strengthen the police forces, reinforce coastal security and decentralise the deployment of National Security Guard. However, after that, a complacency of sorts seems to have set in, mainly because there has been no major terrorist attack since then. Whatever upgradation of police has happened during the intervening period has essentially been of a cosmetic nature.

Challenges ahead for Police Forces 

1.ISIS –

  • The ISIS, which is committed to spreading “volcanoes of jihad” everywhere, recently perpetrated a horrific attack in Sri Lanka.
  • The organisation has made significant inroads in Tamil Nadu and Kerala and has sympathisers in other areas of the country.
  • It recently announced a separate branch, Wilayah-e-Hind, to focus on the Subcontinent.
  • In the neighborhood, the ISIS has support bases in Bangladesh and Maldives. The government has been playing down the ISIS’s threat.
  • It has been arguing that considering the huge Muslim population of the country, a very small percentage has been drawn to or got involved in the ISIS’s activities.
  • That may be true, but a small percentage of a huge population works out to a significant number and it would be naïve to ignore the threat.

Pakistan and militancy –

  • Pakistan has taken some half-hearted measures against terrorist formations in the country, which are euphemistically called non-state actors — largely due to pressure from the Financial Action Task Force (FATF.)
  • These measures are more for show than substance.
  • Besides, the ISI has been, for years, making well-orchestrated attempts to revive militancy in Punjab and trying to disrupt our economy by flooding the country with counterfeit currency.

Way Forward

  • It is necessary, therefore, that the country’s internal security is beefed up.
  • The first responders to a terrorist attack or a law and order problem is the police and, unfortunately, it is in a shambles.
  • Police infrastructure — its manpower, transport, communications and forensic resources — require substantial augmentation.
  • The directions given by the Supreme Court in 2006 appear to have created a fierce reaction in the establishment and led to a consolidation of, to use Marxist jargon, counterrevolutionary forces.
  • The government must appreciate that any effort to strengthen national security without reforming, reorganising or restructuring the police would be an exercise in futility.
Internal Security Architecture Shortcomings – Key Forces, NIA, IB, CCTNS, etc.