Note4Students
From UPSC perspective, the following things are important :
Prelims level: CRAR
Mains level: Paper 3- Recapitalisation of PSBs
The article suggest the approach to deal with the problems banking in India faces.
Banking sector under stress
- Along with the other sectors, pandemic dealt a severe blow to the banking sector.
- Stress tests reported in the Financial Stability Report (FSR) indicate that the low ratio of capital to risk-adjusted-assets (CRAR) is likely to decline further.
- To revive the economy and resume sustained high growth, bold structural reforms will have to be combined with strong fiscal and monetary measures.
Declining credit growth: monetary challenge
- India’s credit-to-gross domestic product ratio is around 51%.
- 51% not too low compared to other countries at comparable levels of per capita income.
- However, the worry is that credit growth is declining rapidly.
- It is mainly attributable to rising risk aversion among lenders, reflecting the high and rising level of NPAs.
- Risk aversion spiked during the economic contraction.
Rising NPA of Public Sector Banks
- The FSR stress tests now indicate that the gross NPA ratio is likely to go up to as much as 13.5% by September 2021 in the report’s baseline case and 14.8% in the ‘severe stress’ case.
- Within the banking sector, conditions are much worse in public sector banks (PSBs) compared to private banks (PBs) or foreign banks (FBs).
- The gross NPA figure is forecast to rise to 16.2% for PSBs as compared to 7.9% and 5.4% for PBs and FBs in the baseline case.
- Clearly, high NPAs are primarily a problem for PSBs, which still account for 60% of India’s total bank credit.
Expanding banking sector: bypass PSBs and give a big push to private banking
- The recent report on Ownership and Corporate Structure for Indian Private Sector Banks submitted by an RBI internal working group (IWG) espouses this approach.
- The IWG’s main recommendation is to enable large corporations and industrial houses to acquire banking licences.
- The proposal has been strongly opposed by former governors and deputy governors of RBI, several former chief economic advisers, a former finance secretary, and, most significantly, all save one of the many experts the IWG consulted.
Four issues with the push to private banking
- 1) With an industry CRAR of only 12%, the proposed raising of the promoter share cap to 26% could potentially leverage the promoter’s investment by 32 times.
- The very high risk appetite generated by such leveraging would subject depositors to a high level of systemic risk, given the limited deposit insurance provided in India.
- 2) Excessive risk appetite would lead to imprudent lending, especially connected lending to group companies. Conglomerates always find ways around regulatory restrictions against such connected lending.
- 3) Three, a conglomerate’s bank would have access to insider information on borrower companies that compete with its group companies.
- 4) Conglomerate banks would lead to massive concentration of economic power and political influence against not just competing companies, but even the regulator.
Way forward
- A safer and cleaner option would be to help the country’s banking sector grow through simultaneous privatization and recapitalization of PSBs.
- However, these options do not change the ownership and governance structure of PSBs, which is what primarily is to blame for their poor performance.
- A better option is for PSBs to recapitalize themselves by raising fresh equity.
- It would be more prudent financially and also more acceptable politically to test this approach with one or two small PSBs.
Conclusion
Government should try to adopt the approach which reduces the risks associated with giving push to private players in the banking sector while making the PSBs more efficient.
Back2Basics: CRAR-Capital to risk-adjusted-assets
- The CRAR is the capital needed for a bank measured in terms of the assets (mostly loans) disbursed by the banks.
- Higher the assets, higher should be the capital by the bank.
- A notable feature of CRAR is that it measures capital adequacy in terms of the riskiness of the assets or loans given.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Working of HAM
Mains level: Paper 3- Hybrid Annuity Model and risks involved
The article explains the working of Hybrid Annuity Model in the road construction and the risks involved in the model.
Investment in road sector
- The central government has set a target of increasing the investment in infrastructure to over Rs 111 lakh crore over the period FY20-FY25.
- Within the transportation segment, projects worth Rs 36.7 lakh crore, constituting 55% of transportation infra, are for the road sector.
- The large investments planned in the road sector signifies its importance—it has a multiplier effect on the economy and provides large employment opportunities.
Models for the road sector
- Out of HAM (Hybrid Annuity Model) and BOT (Build, Operate and Transfer)—toll developers prefer the relatively lower risk HAM model.
- This is due to its various positives like lower equity requirements, provision for mobilisation advances, better right of way availability, inflation-linked adjustments for bid project cost, termination payments during the construction period and de-linking construction and operations.
- These HAM features have garnered a favourable response and mix of HAM awards has increased from 10% in FY16 to 48% in H1FY2021.
How HAM works and risks involved
- During the operations period for a HAM project, the recovery from authority is in the form of fixed annuity payments along with interest on balance accumulated annuity payments (calculated @300 bps over prevailing bank rate)
- The only major risk for HAM is the prevailing low bank rates adversely affecting the overall project viability and returns.
- Such interest receipts account for around 45% of total inflows.
- Low bank rate would thus reduce the overall inflows for a HAM project, thereby adversely affecting its debt coverage metrics and returns to the investors.
- The second problem is related to delayed and inadequate interest rate transmission—there is a transmission lag for the project loan (linked to MCLR of banks).
Changes in model concession agreement
- As per revised concession agreement dated November 10, 2020, interest rate on annuities will be equal to the average MCLR of top 5 scheduled commercial banks plus 1.25% instead of bank rate.
- With the average MCLR replacing the bank rate, there will be a natural hedge between the annuity inflows and interest costs,
- This will reduce the interest rate risks to a large extent, and that too without any delay.
- The other major revision is the grant payment from the authority which will now be paid in 10 instalments instead of five.
- The other major revision is the grant payment from the authority which will now be paid in 10 instalments instead of five.
- Thus, the spacing between the payment milestones is reduced.
- This will improve the cash conversion cycle for the contractors executing the HAM projects as their payments are back to back in nature.
- However, these changes will be applicable for new awards, and the fate of the existing HAM projects is hanging in the balance.
Conclusion
With improved attractiveness, HAM is expected to remain the mainstay for public-private partnership projects in the road sector.
Source:-
https://www.financialexpress.com/opinion/hamsome-gains/2171329/
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Vaccines for Covid-19
Mains level: Paper 2- Challenges in vaccination for Covid-19
The article explains the challenge in the vaccination program for the Covid-19 vaccine.
Issue of lack of data about the vaccine
- In the COVID vaccine roll out, there is no clear data for either of the two vaccines proposed for use in the programme.
- We do not know if they provide protection for life, for a year or six months, its efficacy among the elderly or the very sick or in stopping new infections.
- Getting such data requires at least three years and cannot be obtained in a few months.
Guidelines for implementing vaccine programme
- Given these limitations, the government has drawn up strategic guidelines for implementing an vaccine programme covering 30 crore people by July.
- The guidelines draw upon the knowledge of running national campaigns acquired over three decades of implementing the Universal Immunisation Programme.
- These guidelines detail the skills, roles and responsibilities of the required human resources, logistics for delivering vaccines at point of use, physical infrastructure, monitoring systems based on digital platforms and feedback systems for reporting adverse events.
- The approach involves 19 departments, donor organisations and NGOs at the national, state, district and block level.
- The guidelines also mention the priority criteria — caregivers, front line workers of the departments of health, defence, municipalities and transportation; persons above the age of 50 and those below 50 having diabetes, hypertension, cancers and lung diseases.
Issues with the guidelines
- Of the 28,932 cold chain points, half are in the five southern states, Maharashtra and Gujarat.
- Combined with poor human resources — doctors, nurses, pharmacists — a weak private sector, poor safety and hygiene standards, frequent power outages, poor infrastructure, the capacity to implement with the expected speed, quality and accuracy is daunting.
- The immunisation can disrupt routine health service delivery — antenatal care, national programmes like those pertaining to TB or other immunisation drives.
- While data for the above-50-year-olds is available in the electoral rolls, line listing of the under 50s with comorbidities can be challenging.
- Not only are urban-rural variations substantial, but urban areas have weak public health infrastructure and a multiple number of private providers due to the poor implementation of the Clinical Establishment Act, 2010.
- Patient tracking can be problematic.
- The non-availability of efficacy data could also impact the procurement and supply of vaccines, result in huge wastage, and can introduce scope for errors and duplication.
Way forward
- Central to the success of the roll out will be the confidence of the people in the vaccines.
- Coming out of this messy situation is necessary and one option — as adopted for the polio eradication programme — is to establish an independent team of experts under the aegis of the WHO to ensure the safety of the vaccine.
- This will create confidence in the community and international authorities as well.
Conclusion
it is important to understand that vaccination is an incomplete solution to ending the epidemic, since the virus is mutating. Adopting safe behaviour is.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Kisan Credit Cards
Mains level: Paper 3- Enhancing credit flow to small and marginal farmers
The budget could be an opportunity to increase the consumption which has been impacted by the pandemic and still continues to show the declining trends.
Continuing decline in consumption
- The first advance estimates of GDP for 2020-21 are much better than the earlier market consensus.
- The demand side, however, continues to be in a decline with private consumption falling by 9.5 per cent and its share in the overall GDP reducing by full 100 basis points.
- Per capita private consumption has contracted by 10.4 per cent, while capital formation has contracted by 14.5 per cent, with imports and exports also contracting.
- Only government consumption remains in positive territory.
What should be the growth in nominal GDP for 2021-22?
- In terms of specific numbers, the average growth in nominal GDP for the decade ending in 2013-14 was 15 per cent, but the average GDP deflator at 7.6 per cent far outpaced average real GDP at 6.8 per cent.
- For the six year period ending in 2019-20, average nominal GDP growth was 10.4 per cent, with real GDP growth of 6.8 per cent far outpacing the GDP deflator at 3.6 per cent.
- It is thus extremely important that we ensure that the current inflation trajectory is kept under control through policy interventions.
Policy recommendations for the farmers
1) Changing condition for renewal of loan on Kisan Credit Cards
- Out of the outstanding bank credit of about Rs 12 lakh crore to the agriculture and allied activities sector, Rs 7 lakh crore is for Kisan Credit Cards.
- The KCC portfolio of banks is under stress over the years due to a variety of factors like crop losses, unremunerated prices, debt waivers and the rigidity of the KCC product.
- Currently, the renewal of KCC loans with payment of both principal and interest ensures interest subvention.
- It is proposed that for renewal of KCC loans of small and marginal farmers and for loans of other categories of farmers for amounts up to Rs 3 lakh, the payment of interest must be a sufficient condition for renewal as with other loans.
- The above measure has the potential to reduce the credit cost for banks considerably on KCCs as NPAs can be prevented more easily and the interest rate on KCC loans can be further reduced.
2) Formalise tenancy and provide credit to tenant farmers
- There are 11.5 crore farmers who are PM-KISAN beneficiaries — 6.5 crore farmers have KCC.
- Thus, the remaining 4-5 crore could be land owning cultivators and at least 3-4 crore of such could be tenants/lessees/landless.
- Currently, such tenant farmers are not formalised into the credit deliveries of scheduled commercial banks.
- As of now, it requires state interventions for tenancy certificates which is only available in Andhra Pradesh.
- Formation of a SHG model under the Deen Dayal Antodoya Yojana will formalise tenancy even without formal documentation of tenancy.
- This will enable formal lending to take place to three crore landless farmers.
3) Increasing investment in health and education
- For health, it government could introduce medical savings account with a defined scheme to deduct interest from the savings account and pay towards a Mediclaim policy.
- For the record, the size of the health insurance is Rs 32,000 crore and the savings bank interest is Rs 1.15 lakh crore.
- The government should also consider exempting all retail and health insurance products from GST.
Three suggestions on the fiscal situation
- First,Withdraw all tax appeals.
- Second, accept all domestic arbitration decisions against government departments/agencies.
- Third, clear all outstanding dues to all parastatal agencies within a stipulated time.
- This will be a milestone structural administrative change that could be even thought of as a one-time balance sheet entry recognising liabilities and paying them off.
- As a consequence, we could jump multiple positions on the Ease of Doing Business rankings.
Conclusion
By implementing these steps in the budget the government could use this opportnity to stimulate the economy and aid the economic recovery.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Functions of the the judiciary
Mains level: Paper 2- Issues with the Supreme Court order suspending the implementation of the Farm acts
The article deals with the recent Supreme Court order in which it suspended the implementation of the Farm Acts. This order gives rise to several issues. The article deals with these issues.
What is the issue
- The Supreme Court has suspended the implementation of the farm laws.
- The court created a committee to ascertain the various grievances of the farmers.
- But the Supreme Court has not clarified the legal basis of this suspension.
What are the issues with the suspension?
- The court’s action, at first sight, is a violation of separation of powers.
- It also gives the misleading impression that a distributive conflict can be resolved by technical or judicial means.
- It is also not a court’s job to mediate a political dispute.
- Its job is to determine unconstitutionality or illegality.
- Even in suspending laws there needs to be some prima facie case that these lapses might have taken place.
- It has set a new precedent for putting on hold laws passed by Parliament without substantive hearings on the content of the laws.
- Also in appointing the committee, the court has violated the first rule of mediation: The mediators must be acceptable to all parties and appointed in consultation with them.
Conclusion
The Supreme Court order has given the government a setback while not addressing the concerns of the protesting farmers. The court needs to consider these facts and mend its implications.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: SAARC, USMCA, MERCOSUR, AfCFTA
Mains level: Paper 2- Revival of SAARC
The article examines the issues are making it difficult to function and suggests its revival.
Dysfunctional SAARC and its implications
- The year 2020 marked the sixth year since the leaders of the eight nations that make up SAARC were able to meet.
- India-Pakistan issues have impacted other meetings of SAARC as well.
- Inactive SAARC is making it easier for member countries, as well as international agencies, to deal with South Asia as a fragmented group.
- India’s refusal to allow Pakistan to host the SAARC summit is akin to giving Pakistan a ‘veto’ over the entire SAARC process.
- The events of 2020, particularly the novel coronavirus pandemic and China’s aggressions at the Line of Actual Control (LAC) shone a new spotlight on this mechanism.
- This should make the government review its position and reverse that trend.
Reasons India should review its position on SAARC
1) India attend other forums with Pakistan
- India continued to attend Shanghai Cooperation Organisation (SCO) meetings along with their Pakistani counterparts.
- While China’s incursions in Ladakh constituted the larger concern in the year, India did not decline to attend meetings with the Chinese leadership at the SCO, the Russia-India-China trilateral, the G-20 and others.
- No concerns over territorial claims stopped the government from engaging with Nepal either.
2) Pandemic caused challenges
- Reviving SAARC is crucial to countering the common challenges brought about by the pandemic.
- Studies have shown that South Asia’s experience of the pandemic has been unique from other regions of the world.
- This experience needs to be studied further in a comprehensive manner in order to counter future pandemics.
- Such an approach is also necessary for the distribution and further trials needed for vaccines, as well as developing cold storage chains for the vast market that South Asia represents.
3) Impact of the pandemic on economies of South Asia
- Apart from the overall GDP slowdown, global job cuts which will lead to an estimated 22% fall in revenue for migrant labour and expatriates from South Asian countries.
- World Bank have suggested that South Asian countries work as a collective to set standards for labour from the region, and also to promoting a more intra-regional, transnational approach towards tourism, citing successful examples including the ‘East Africa Single Joint Visa’ system.
- In the longer term, there will be a shift in priorities towards health security, food security, and job security, that will also benefit from an “all-of” South Asia approach.
- While it will be impossible for countries to cut themselves off from the global market entirely, regional initiatives will become the “Goldilocks option”.
4) Dealing with the China challenge
- In dealing with the challenge from China too, both at India’s borders and in its neighbourhood, a unified South Asian platform remains India’s most potent countermeasure.
- At the border, tensions with Pakistan and Nepal amplify the threat perception from China, while other SAARC members (minus Bhutan), all of whom are Belt and Road Initiative (BRI) partners of China will be hard placed to help individually.
- Significantly, from 2005-14, China actually wanted to join SAARC.
- Despite the rebuff, China has continued to push its way into South Asia.
Conclusion
Seen through Beijing’s prism, India’s SAARC neighbourhood may be a means to contain India, with the People’s Liberation Army strategies against India over the LAC at present, or in conjunction with Pakistan or Nepal at other disputed fronts in the future. New Delhi must find its own prism with which to view its South Asian neighbourhood as it should be: a unit that has a common future, and as a force-multiplier for India’s ambitions on the global stage.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India's relations with neighbouring countries
The article examines the issue of intervention in domestic politics by the external powers and the practical utilities of principles of non-intervention in the internal matters of neighbouring countries.
Political turmoil in Nepal and India’s reaction
- Nepal has been going through political crisis for some days now.
- India’s reluctance to be drawn into the political turmoil in Kathmandu has drawn much attention.
- India’s refusal is in contrast to Beijing’s active effort to preserve the unity of the ruling communist party in Kathmandu.
The principles of sovereignty and non-intervention and its violations
- India and China always insist that other countries should stop interfering in their respective internal affairs.
- But big nations always intervene in other nations but fend off potential threats to their own sovereignty.
- That does not prevent others from messing with India and Beijing.
- Intervention is part of international life; all powers — big and small — frequently violate the principle of sovereignty.
- The concept of national sovereignty was never absolute.
- Big nations tend to intervene more, and the smaller ones find ways to manage this through the politics of balancing against their large neighbours.
Analysing the causes of external interventions
- The pressure for external intervention often comes from major domestic constituencies within.
- For example, the conflict between Sinhala majority and Tamil minority in Sri Lanka produces political pressure on Delhi to intervene in Sri Lanka.
- The demand sometimes comes from outside.
- In Nepal, for example, elite competition sees different factions trying to mobilise external powers.
- In recent years, we have also seen the intense interaction between domestic power struggles and external powers like India and China.
- The Maldives is one example.
Factors responsible for intervention
- Given the nature of South Asia’s political geography, very few problems can be isolated within the territories of nations.
- There is also the tension between the shared cultural identity in the subcontinent.
- There is also the determination of the smaller nations to define a contemporary identity independent of India.
- The bitter legacies of Partition leave the domestic political dynamics of Bangladesh, India and Pakistan tied together.
- India’s relations with its smaller neighbours are also burdened by the legacy of India’s past hegemony and the emerging challenges to it.
What should be India’s regional policy?
- India can neither stand apart nor jump into every domestic conflict within the neighbourhood.
- It is always about political judgement about specific situations.
- Active and direct intervention in the domestic politics of neighbours must be a prudent exception rather than the rule in India’s regional diplomacy.
Conclusion
The subcontinent has historically been an integrated geopolitical space with a shared civilisational heritage. Equally true is the reality of multiple contemporary sovereignties within South Asia. In dealing with these twin realities, the principles guiding India’s engagement should be based on “mutual respect and mutual sensitivity”.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Marginal propensity to consume
Mains level: Paper 3- Economic recovery and India's New Deal Moment
The article explains the opportunity presented by the budget to steer the economy out of the uncertain territory.
3 characteristics of India’s economic recovery
- First, India has broken the link between virus proliferation and mobility earlier and more successfully than many countries.
- Second, the employment rate gradually improved till September but has weakened since then, even as the economy has progressively opened up.
- CMIE’s labour market survey still reveals 18 million fewer employed (about 5 per cent of the total employed) compared to pre-pandemic levels.
- A third phenomenon is large firms have endured the crisis better and are gaining market share at the expense of smaller firms.
- To the extent there is a migration of activity from the informal/SME firms to larger firms, tax collections and Sensex/Nifty earnings should get a boost, even holding the economic pie constant.
- Greater scale and formalisation undoubtedly augur well for medium-term productivity but could increase near-term labour market frictions and boost pricing power.
Increased prospects of K-shaped recovery
- Above 3 factors increases prospects of a K-shaped recovery from COVID, a phenomenon playing out globally.
- Households at the top of the pyramid are likely to have seen their incomes largely protected, and savings rates increased.
- Meanwhile, households at the bottom are likely to have witnessed permanent hits to jobs and incomes.
3 Implications of K-shaped recovery
- 1) What we are currently witnessing is pent-up demand from the upper-income households.
- However, households at the bottom have experienced a permanent loss of income in the forms of jobs and wage cuts, this will be a recurring drag on demand, if the labour market does not heal faster.
- 2) To the extent that COVID has triggered an effective income transfer from the poor to the rich, this will be demand-impeding in the steady state.
- This is explianed by the fact that marginal propensity to consume at the bottom is higher than that at the top, just as the marginal propensity to import at the top is higher than at the bottom.
- 3) If COVID-19 reduces competition or increases the inequality of incomes and opportunities, it could impinge on trend growth in developing economies by hurting productivity and tightening political economy constraints.
Factors that need to be considered to decide the policy response
- Policy need to look beyond the next few quarters and anticipate the state of the macro economy post this expression of pent-up demand.
- The key factor is wheather private sector starts re-investing and re-hiring.
- With manufacturing utilisation rates below 70 per cent pre-COVID, an investment revival, in turn, will depend crucially on the
- Exports should benefit from strengthening global growth as the world gets progressively vaccinated and more US fiscal stimulus.
Upcoming budget: India’s New Deal moment
- It’s against this backdrop that the upcoming budget presents India with its New Deal moment.
- Given the prevailing demand uncertainties, the budget represents an opportune moment for the Centre, in conjunction with the states, to embark on a large physical and social infrastructure push.
- This will simultaneously boost near-term aggregate demand, crowd in private investment, create jobs to soak up the unemployed, and improve the economy’s external competitiveness.
- Job creation, health and education, in turn, will be a start to help mitigate COVID-induced inequalities.
How to finance the investment?
- Gradual near-term consolidation coupled with a credible medium-term fiscal plan will be key to anchoring the bond market and underscoring an adherence to macro stability.
- How then can public investment increase meaningfully if the headline deficit (projected above 11 per cent of GDP) must come down?
- Public investment could be increased only if the public investment push is financed by aggressive asset sales-strategic sales, disinvestment, land and infrastructure monetisation.
- In this manner, expenditure to GDP can actually rise next year — generating an expansionary fiscal impulse to the economy — while automatic stabilisers are used to reduce the headline fiscal deficit.
Conclusion
India’s faster-than-expected rebound is very encouraging. But given labour market pressures and prospects of a K-shaped recovery around the world, the economy will need to be carefully nurtured and stoked. The budget presents a crucial opportunity to make a big down payment towards this end.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Taper tantrum
Mains level: Paper 3- Challenges ahead for the RBI in withdrawing expansionary policy measures
With the Indian economy showing green shoots, RBI has to face some fundamental challenges while withdrawing the expansionary measures.
Expansionary policy as a response to pandemic
- To manage the financial pressures unleashed by COVID-19, the RBI unleashed several measures.
- It reduced policy interest rates aggressively.
- It released an unprecedented amount of liquidity in the market.
- It instituted a slew of measures for targeted assistance to, especially distressed sectors.
Time to roll back the expansionary monetary policy
- As the Indian economy is showing the signs of recovery, the RBI must be planning for a non-disruptive exit out of the easy money regime.
- Reversing a crisis-driven expansionary policy has to be a deliberative process, with the timing and sequencing carefully planned.
- A big lesson of the global financial crisis is that any missteps on the exit path by way of commission, omission, or importantly communication, can be costly in macroeconomic terms.
Challenges RBI will face on the way out of expansionary monetary policy
1) Restraining inflation while supporting the recovery
- Inflation remained above the RBI’s target band for the past several months.
- According to the RBI’s own estimates, inflation is expected to remain above the band for the next several months.
- Yet, the MPC, in its recent review, decided against any rate action out of concerns for growth and financial stability.
- The MPC expects inflation to soften on its own in the weeks ahead.
- That outcome is not inevitable.
- Inflation could be pressured upwards by several factors even though there could be some apparent softening purely because of base effects.
- There is the risk that persistent high inflation expectations would result in food inflation getting more generalised.
- Core inflation could firm up because of rising input prices.
- ‘Excessive margins’, among the factors cited by the MPC as one of the causes of high inflation, may not disappear.
- Equally, there are concerns that the recovery, for all the positive signals, is still fragile.
- And there is heightened concern about an aggravated unemployment problem caused by big firms retrenching labour to cut costs.
2) Impact on savings
- RBI should also be concerned about the plight of savers who are being shortchanged by low-interest rates at a time of high inflation.
- Low-interest rates, its impact on inflation and economic recovery taken together make a complex cocktail of dilemmas for the RBI as it seeks to normalise the policy rates.
3) Withdraw excess liquidity at right time and to avoid ‘taper tantrum’
- Another related challenge will be to withdraw the ‘excess’ liquidity in good time.
- Banks are routinely depositing trillions of rupees with the RBI every day, evidencing that all the money that the central bank injected into the system is not doing much good anymore.
- Every financial crisis can be traced back to mispricing of risk.
- Mispricing of risk results when there is too much liquidity sloshing around the system for too long.
- It will drive investors into dodgy ventures and threaten financial stability.
- As the RBI seeks to guard financial stability by normalising liquidity, it will have to contend with possible market tantrums.
- The lesson from the taper tantrums in the U.S. is that the RBI will have to manage its communication as carefully as it does the liquidity withdrawal.
4) Stability of the rupee
- Next challenge for the RBI will be to restrain the rupee from appreciating out of line with fundamentals.
- Here, the RBI is confronted with a classic case of ‘the impossible trinity’.
- The impossible trinity deals with allowing free capital flows while simultaneously maintaining a stable exchange rate and restraining inflation.
- The current account surplus this year together with massive capital flows has meant an excess of dollars in the system putting upward pressure on already overvalued rupee.
- The RBI has absorbed nearly $90 billion this fiscal year to prevent exchange rate appreciation and to maintain the competitiveness of the rupee.
- The RBI’s ability to continue to intervene in the forex market will be constrained by its anxiety about how the resultant liquidity might aggravate inflation and the risk to financial stability.
Consider the question “What are the challenges ahead for the RBI while winding down the expansionary monetary policy measures that were announced to deal with the economic disruption of caused due to pandemic and subsequent lockdown.
Conclusion
It is better to be rough right, as Keynes said, than be precisely wrong. That should be the guiding principle for RBI as it navigates its way out of the crisis driven easy money policy.
Back2Basics: What is taper tantrum?
- Taper tantrum refers to the 2013 collective reactionary panic that triggered a spike in U.S. Treasury yields, after investors learned that the Federal Reserve was slowly putting the breaks on its quantitative easing (QE) program.
- The Fed announced that it would be reducing the pace of its purchases of Treasury bonds, to reduce the amount of money it was feeding into the economy.
- The ensuing rise in bond yields in reaction to the announcement was referred to as a taper tantrum in financial media.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Social sector expenditure as percentage of GDP
Mains level: Paper 2- Need to invest more in the social sector in the post pandemic world
The article highlights the need for more focus on the social sector in the post-Covid society and suggest ways to do the same.
Why focus on social sector
- No country has progressed without investing in the social sector.
- India is committed to achieving the Sustainable Development Goals (SDGs) by 2030, and social sector development is important in reaching them.
- Progress in this sector has intrinsic (for its own sake) and instrumental (for higher growth) value.
- It is needed even to build a $5 trillion economy faster.
India’s social sector expenditure
- India’s progress in the social sector has been much slower compared to its GDP growth.
- In the social sector expenditure, the share of education as a percentage of GDP has been stagnant around 2.8-3 per cent during 2014-15 to 2019-20.
- In the case of health, the expenditure as a percentage of GDP increased from 1.2 per cent to 1.5 per cent.
- This is lower than the required 2-3 per cent of GDP.
- An increase in health expenditure is also important to take care of the present and future pandemics.
- There are supply side problems regarding the health infrastructure.
- It is essential to have a huge increase in public expenditure on health and provide accessible, affordable and quality health coverage to all.
Following are some key issues in the social sector India needs to focus on.
1) The problem of undernutrition
- The NFHS-5 report shows that malnutrition level has reduced marginally in a few states and has worsened in some other states between 2015-16 and 2019-20.
- We can’t have a society with 35 per cent of our children suffering from malnutrition.
- Apart from undernutrition, obesity seems to be increasing in both rural and urban areas.
- There is a need to raise allocations for ICDS and other nutrition programmes.
- The determinants of nutrition are agriculture, health, women’s empowerment, including maternal and child practices, social protection, nutrition education, sanitation and drinking water.
- The Poshan Abhiyan is a good programme, but has to cover all these determinants with a multi-pronged approach to reduce undernutrition.
2) Quality education
- Quality education is key for raising human development.
- The pandemic has enhanced inequalities in education and has revealed the widening digital gap.
- Equality of opportunity in terms of quality education is the key for raising human development and for reducing inequalities in the labour market.
- Several committees have recommended that public expenditure on education should be at 6 per cent of GDP.
3) Social safety nets
- It is known that migrant workers were the most affected during the pandemic and that they do not have any safety nets.
- There is a need to have safety nets like an employment guarantee scheme for the urban poor and facilities for migrants.
- Similarly in rural areas, allocations to MGNREGA have to be increased because of the reverse migration.
4) Programs for vulnerable section need to be continued
- The government has done well in providing cooking gas through Ujjwala Yojana and electricity through Saubhagya Yojana, introducing programmes such as Swachh Bharat Abhiyan and initiatives for housing, financial inclusion and providing loans to the self-employed.
- These programmes have helped the vulnerable sections, particularly women.
- Another initiative of the government was to facilitate direct benefit transfers (DBT) for welfare schemes.
- These initiatives have to be continued.
Way forward
- The government should give more focus to the social sector with better policies and implementation.
- It has to work closely with the states in revitalising the social sector as major expenditures particularly on health and education are met by them.
- The 15th Finance Commission also seems to have mentioned that health expenditure should be increased to 2.1 per cent of GDP.
- The Commission may also suggest some incentives for states to increase health expenditure.
- Both Centre and states should have a five-year vision on the social sector.
Consider the question “No country has progressed without investing in the social sector. In the post pandemic world India needs to chart the plan to invest more in the sector. In light of this, examine the challenges in the social sector and suggest the ways to deal with them.
Conclusion
India, aspiring to be a global power, should have a harmonious and inclusive social sector development. This is also important for achieving the SDGs, reducing inequalities and building a $5 trillion economy faster.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Idea of universal basic income
Mains level: Paper 2- Remuneration to women for domestic work and issues with it
Recently, a political party promised salaries to housewives as a part of its electoral campaign in Tamil Nadu. This led to the debate on the issue. The article deals with the issue.
Salary for housework: Historical background
- Demand for wages against housework was first raised at the third National Women’s Liberation conference in Manchester, England.
- In 2012, the then minister for Women and Child development announced that the government was considering mandating a salary for housework to wives, from husbands.
- The purpose, once again, was to empower women financially and help them live with dignity.
Recognising the value of unpaid domestic work
- Time-use data from 2019 gathered by the National Sample Survey Organisation revealed that only about a quarter of men and boys above six years engaged in unpaid household chores, compared to over four-fifths of women.
- Every day, an average Indian male spends 1.5 hours per day in unpaid domestic work, compared to about five hours by a female.
- Housework demands effort and sacrifice, 365 days a year, 24/7.
Issues with paying for domestic work
- Asking men to pay for wives’ domestic work could further enhance their sense of entitlement.
- It may also put the additional onus on women to perform.
- There is a risk of formalising the patriarchal Indian family where the position of men stems from their being “providers” in the relationship.
Way forward
- Despite a legal provision, equal inheritance rights continue to be elusive for a majority of women.
- More than creating a new provision of salary for housework, we need to strengthen awareness, implementation and utilisation of other existing provisions.
- Starting from the right to reside in the marital home, to streedhan and haq meher, to coparcenary and inheritance rights as daughters and to basic services, free legal aid and maintenance in instances of violence and divorce.
- Women should be helped to reach their full potential through quality education, access and opportunities of work, gender-sensitive and harassment-free workplaces and attitudinal and behaviour change within families to make household chores more participative.
Conclusion
Just like we do not want women to commodify their reproductive services because of their inherently exploitative nature — we have, therefore, banned commercial surrogacy in the country — let us not allow commodification of housework and personal care.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSP, Public Procurement System
Mains level: Paper 3- Reasons for farmers concerns with MSP
The article explains the purpose of Minimum Support Price (MSP) and reasons for insecurity in farmers regarding its continuance.
Relation between MSP and time-bound procurement through PPS
- MSP, public procurement system (PPS) and a strict time-bound purchase of output brought to the PPS(through APMCs) form a package deal.
- Take out one aspect, the deal falls apart.
- For example, if you have MSP but not compulsory PPS, the support price becomes redundant.
- If you have MSP and PPS/APMC mandi but not strict time-bound purchase of the product brought to the PPS, the deal will fail.
Purpose of MSP
- At the launch of the Green Revolution, MSP and PPS were designed to assist the country in achieving its goal of food self-sufficiency, which was met by the early Seventies.
- The purpose of MSP and PPS/APMC is now two-fold.
- One, to maintain food self-sufficiency because crop diseases and weather conditions such as droughts.
- The second purpose is to ensure a reasonable, assured income to the farmers.
- The recommendation to dismantle FCI public procurement, made by the Shanta Kumar Committee in its 2015 report, displayed a lack of recognition of the importance of these two purposes.
Issues with the Farm bills
- The government’s assurance that MSP/APMC can co-exist with the big agro-business-controlled private markets is not tenable.
- A farmer who has reached a contract will not be legally allowed to take the product to APMC if the APMC mandi offered him/her a better price.
- The agro-business entity will take the non-compliant farmer to court, where the dispute resolution mechanism is stacked against the farmer due to the structural inequities of legal resources and social-cultural capital.
- The proposed dispute resolution mechanism increases the choice of the trader to trade and not of the farmer to sell.
- The central law will prevail in the private markets, while state laws will prevail in the APMC mandis.
- Two markets with two regulatory frameworks will create conditions for perpetual Centre-state conflicts.
- MSPs are announced for 23 crops but compulsory and timely public procurement, are provided mainly for two crops, wheat and rice, the support price does not work for the remaining 21 crops.
Challenge in defining MSP
- Farmers’ organisations are insisting on the Swaminathan Committee formula of C2+50 per cent.
- The MSP announced by the government is based on the A2+Fl+50 per cent formula.
- Unlike the C2+50 per cent formula, A2+Fl+50 formula does not cover all the costs of farming.
Conclusion
Agrarian reforms that recognise the importance of ecologically and economically sustainable agriculture are an absolute necessity. Such reforms would require more than merely changing the trade emphasis of existing laws. They will involve the creation of inclusive, transparent and well-informed laws compatible with these reforms.
Back2Basics: Understanding the cost formula
- M S Swaminathan committee recommended minimum support prices (MSP) for crops at levels “at least 50 per cent more than the weighted average cost of production”.
- The National Commission on Farmers did not elaborate on what really constituted “weighted average cost of production” in its report submitted in October 2006.
- The Commission for Agricultural Costs and Prices (CACP), on the other hand, gives three definitions of production costs: A2, A2+FL and C2.
- A2 costs basically cover all paid-out expenses, both in cash and in kind, incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel, irrigation, etc.
- A2+FL cover actual paid-out costs plus an imputed value of unpaid family labour.
- C2 costs are more comprehensive, accounting for the rentals and interest forgone on owned land and fixed capital assets respectively, on top of A2+FL.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Data Protection Authority
Mains level: Paper 2- Personal Data Protection Bill 2019 and issues with it
The Personal Data Protection Bill (2019) has several provisions which could have implications for the privacy of an individual. The article examines such provisions and highlights the need for further debate on the Bill.
Evolution of privacy as a fundamental right
- The Supreme Court in MP Sharma v. Satish Chandra (1954) and Kharak Singh v. Uttar Pradesh (1962) had declared that while in certain circumstances the privacy of individuals was to be protected, there was no constitutional right to privacy in and of itself.
- However, in Puttuswamy v India (2017) the Supreme Court accepted privacy as a fundamental right.
- This was an important development.
Rising importance of data
- The rising importance of data has pushed over 80 countries to pass national laws protecting the collection and use of their citizens’ data by companies and the government.
- The DPB will have huge commercial and political consequences for India.
- In India, the Personal Data Protection Bill 2019 (DPB) is currently under consideration by a parliamentary committee.
- According to Ernst and Young, emerging technologies in India will create $1 trillion in economic value by 2025.
- Much of this value will be founded on the creation, use, and sale of data, and the DPB will have immense implications as firms scramble to meet new privacy regulations.
Conditions for access to data and issues
- The bill establishes a number of conditions for companies to follow.
- For one, it would require digital firms to obtain permission from users before collecting their data.
- It also declares that users who provide data are, in effect, the owners of their own data.
- So that the users will be able to control the data their online selves produce, and may request firms to delete it, just as European internet-users’ “right to be forgotten”.
- But the bill stipulates that critical or sensitive personal data, related to information such as religion, or to matters of national security, must be accessible to the government if needed to protect national interest.
- Critics have suggested that such open-ended access could lead to misuse.
- Even B N Srikrishna, who chaired the committee that drafted the original bill has also expressed concerns about this provision.
- Other major concern is about Data Protection Authority (DPA).
Concerns about Data Protection Authority
- The bill outlines the establishment of a Data Protection Authority (DPA).
- The DPA will be charged with managing data collected by the Aadhaar programme.
- It will be led by a chairperson and six committee members, appointed by the central government on the recommendation of a selection committee.
- But this selection committee will be composed of senior civil servants, raising questions about the board’s independence.
- The government’s power to appoint and remove members at its discretion also stokes fears about its ability to influence this independent agency.
- Unlike similar institutions, such as the Reserve Bank of India or the Securities and Exchange Board, the DPA will not have an independent expert or member of the judiciary on its governing committee.
Consider the question “Discuss the various provision of Personal Data Protection Bill 2019 for the protection of individual’s privacy. What are the concerns over the various provisions of the Bill?”
Conclusion
The DPB is a unique opportunity for India, a country with some 740 million internet users, to forge a pathbreaking agenda that will act as a standard-setter in the still-developing field of national data protection legislation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Trends in the various data of NFHS
Mains level: Paper 2- Analysis of NFHS-5 data
The article analyses the data of NHFS-5 and try to factors responsible for the outcomes.
Analysing health and nutrition of child through NHFS-5
- The recently released fifth round of the National Family Health Survey (NFHS-5) provide insights into some dimensions of micro-development performance before COVID struck.
- The latest round only has data for 17 states and five Union territories.
- Madhya Pradesh, Uttar Pradesh, Punjab, Rajasthan and Tamil Nadu are notable exclusions.
- Many of the child-related outcomes are also determined by state-level implementation, therefore neither success nor failure can be attributed to state or the centre alone.
Let’s understand the data
- The NFHS has 42 indicators related to child’s health and nutrition.
- Indicators fall into nine categories and each of these can be divided into outcomes and inputs.
- For example, neonatal, infant and under-5 mortality rates can be thought of as outcomes.
- Similarly, all the nutrition indicators —stunting, wastage, excess wastage, underweight and overweight can also be classified as outcomes.
- In contrast, the post-natal care indicators relating to visits made by health workers and the extent and nature of feeding for the child can be classified as inputs.
Outcomes of the survey
- On the front of wasting (weight for height of children) these is an improvement because even though the gains were marginal, they reversed a negative trend between 2005 and 2015.
- India continues to be successful in preventing child deaths, but the health and nutrition of the surviving, living child has deteriorated, somewhat worryingly.
- India continued to make progress in preventing child-related deaths (neonatal, infants and under-5).
- The pace of improvement in child mortality slowed down relative to the previous 10 years (Fig.1).
- Figure 2 shows the six indicators where outcomes have deteriorated. These all relate to what happens after survival:
- The health (anaemia, diarrhoea, and acute respiratory illness (ARI)) and nutrition (stunting, and overweight) of the child deteriorated between 2015 and 2019.
- The absolute deterioration in health and nutrition indicators must be seen against the fact that they reversed the historic trends of steady improvements.
What explains the outcomes
- Implementation capacity of individual states probably played an important role.
- Sector-specific factors such as changing diets are also implicated.
- A broader deterioration in outcomes hints at the likelihood of a common factor, namely the macro-economic growth environment, which determines employment, incomes and opportunities.
- At the least, it is safe to conjecture that some of these outcomes are inconsistent with the narrative of a rapidly growing economy.
Conclusion
As discussed in Chapter 5 of the Economic Survey of 2015-16, perhaps the next big welfare initiative of the government should be a mission-mode focus on the well-being of the early child (and of course the mother), from the womb to the first five years, which research shows is critical for realising its long run potential as an individual.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Water usage for agriculture in India
Mains level: Paper 3- Need for RD in agriculture
The article highlight the need for more emphasis on agricultural R&D as a solution to the woes of the farmers.
India needs low-input high-output agriculture
- Amid farmers protest against farm acts, the current debates focus mainly on MSP, reducing farmers’ debt liabilities, reducing post-harvest losses, cash transfers and marketing reforms.
- India with entrenched poverty requires low-input, high-output agriculture; low input in terms of both natural resources and monetary inputs.
- Very little attention is being given to reducing the natural resource inputs — most critical being water —and agricultural R&D.
- This cannot be achieved without science and technology.
Following are the areas in which Indian agriculture needs R&D to reduce agriculture inputs
1) Water usage for agriculture
- India receives around 4,000 billion cubic meters (bcm) of rainfall, but a large part of it falls in the east.
- Moreover, most of the rain is received within 100 hours of torrential downpour, making water storage and irrigation critical for agriculture.
- India has one of the highest water usages for agriculture in the world — of the total 761 bcm withdrawals of water, 90.5 per cent goes into agriculture.
- In comparison, China uses 385.2 bcm (64.4 per cent) out of the total withdrawals of 598.1 bcm for agriculture.
- China’s per-unit land productivity in terms of crop production is almost two to three times more.
- The total estimated groundwater depletion in India is in the range of 122-199 bcm .
- The depletion is highest in Punjab, Haryana, and western UP.
2) Increasing the yields of coarse-grain crops and oilseed crops
- Years of intense research on yield increase and yield protection by breeding varieties and hybrids resistant to pests and pathogens have made wheat, rice and maize stable high yielders.
- Environmentalists suggest replacing rice with coarse grain crops — millets, sorghum etc.
- However, the yields of these crops are not comparable to those of wheat and rice even when protective irrigation is available.
- These crops have a serious R&D deficit leading to low yield potential as well as losses to pests and pathogens.
- This leaves us with pulses and oilseeds.
- In the 2017-18 fiscal year, India imported around Rs 76,000 crore worth of edible oils.
- Three oilseed crops (mustard, soybean, and groundnut) are already grown very extensively.
- Soybean and groundnut are legume crops and fix their nitrogen.
- All three crops not only provide edible oils but are also an excellent source of protein-rich seed or seed meal for livestock and poultry.
- Unfortunately, yields of the three crops are stagnating in India at around 1.1 tons per hectare, significantly lower than the global averages.
3) Genetic improvements of crops
- Pests and pathogens can be best tackled by agrochemicals or by genetic interventions.
- A recent global level study on crop losses in the main food security hotspots for five major crops showed significant losses to pests — on average for wheat 21.5 per cent, rice 20 per cent, maize 22.5 per cent, potato 17.2 per cent, and soybean 21.4 per cent.
- India is one of the lowest users of pesticides.
- In 2014, comparative use of pesticides in kilograms per hectare in some select countries/regions is as following: Africa 0.30, India 0.36, EU countries 3.09, China 14.82, and Japan 15.93.
- A more benign method for dealing with pests is through breeding.
- The Green Revolution technologies were based on the effective use of germplasm and strong phenotypic selections.
- Recombinant DNA technologies since the 1970s have brought forth unprecedented opportunities for genetic improvement of crops.
- Since 2000, genomes of all the major crops have been sequenced.
- The big challenge is in the effective utilisation of the enormous sequence data that is available.
- India’s efforts in all three areas are half-hearted.
Way forward
- Over the last 20 years, India has been spending between 0.7 to 0.8 per cent of its GDP on R&D.
- This is way below the percentage of GDP spent by the developing countries and Asia’s rapidly growing economies.
- There are structural issues like lack of competent human resources and lack of policy clarity.
- However, the biggest impediment to agricultural R&D has been overzealous opposition to the new technologies.
Consider the question “India needs low-input, high-output agriculture. This cannot be achieved without science and technology. In light of this, examine how R&D could play a role in the advancement of agriculture in India.”
Conclusion
Maybe the present crisis in agriculture would lead to a greater appreciation of the need for strong public supported R&D in agriculture.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India-U.S. relations and area of cooperation
The article explores the area of cooperation for India and the U.S. under a new administration in U.S. amid changing geopolitical realities.
China: Shared cause of concern
- The Biden administration’s approach to India will be shaped by its position towards China.
- There is a bipartisan change in the US’s attitude to China.
- The Biden administration will continue Trump administrations trade policy- reducing the trade deficit, ensuring a level-playing field, keeping a keen eye on technology rivalry etc.
- There are parallels in the concerns of India and the U.S. — invigorating the domestic economy and dealing with a rising rival.
- These concerns can translate into opportunities for both countries.
How India and U.S can convert concerns into opportunities
1) Cooperation in healthcare
- Healthcare is clearly an area that India can play up in bilateral relations.
- The two countries can also work with multilateral agencies across the spectrum of vaccine (including Covid vaccine) development, logistics and distribution.
- India produces around 20 per cent of the global requirement for generic drugs by volume and every third tablet of generics consumed in the US.
- The President-elect has indicated his commitment to providing better and affordable healthcare
- This could be an opportunity for the Indian pharma sector to play a role in reducing health costs of the American consumer.
- India can benefit from advancements in medical technologies, devices, new medicines and R&D capabilities, presenting opportunities for American companies.
2) Job creation through trade and exports
- Biden has set an ambitious target for US-India trade.
- Businesses in both countries are also looking for diversifying their manufacturing supply chains.
- This portends well for the creation of employment in manufacturing.
- An area where strategic considerations and imperatives of job creation converge is defence, especially since India has been designated a Major Defence Partner of the US.
3) Focus on infrastructure in both countries
- For the US, this can mean opportunities in India in transportation, power and other urban amenities.
- The US’s renewed focus on climate change should lead to greater cooperation with India in energy-related areas.
- Cooperation in energy-related areas includes more efficient energy dissemination and management (such as smart grids) to renewable energy technologies.
4) Enhance opportunities in 5G tech
- There is potential to enhance mutual opportunities in the 5G tech sector.
- Increased partnership between the two nations can accelerate the development of technology solutions, promote vendors in the 5G open ecosystem and drive economic growth.
- The two countries should engage in shaping the rules of a new order in this space.
- This also has an important strategic element when seen in the light of developments in the Indo-Pacific as well as China’s Belt and Road Initiative.
5) Multilateralism for cooperation in wider areas
- Once the Biden administration assumes office, we should expect the U.S.’s return to multilateralism.
- The Trans-Pacific Partnership aimed to create a rules-based order that all parties could subscribe to.
- With the ascendancy of the Indo-Pacific paradigm and the Quad and Quad Plus, a successor to the TPP could include a wider canvas.
- For India, this could mean cooperation beyond defence and security, including economics, technology and developments pertaining to the regional order.
Conclusion
Both countries should treat the economic and commercial dimension with as much priority as the strategic dimension. Both governments should embrace the prosperity-creating potential of such an approach.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Post-covid development model
The article discusses the themes of the post-covid world which will be somewhat more aware and mindful of the dangers of global dimension.
Collaborative model and public-private partnership
- A few weeks back, Prime Minister visited the private companies involved with the formulation of the anti-COVID vaccine.
- The PM’s visit was one more reminder of the critical importance of public-private partnerships.
- The PM signalled the government’s receptivity to external expert advice.
- The CEOs reaffirmed their commitment to partnering with the state to help address not just this medical crisis but also the many other social and humanitarian problems.
- The government has appreciated that the model for sustainable development in a post-COVID world must be a collaborative one.
- Businesses will repurpose their goals and look beyond profits.
Working together to deal with the crises of global dimensions
- COVID-19 was not the first, nor will it be the last crisis of global dimensions.
- The threat of global warming, for instance, hangs over our heads.
- Its impact is less immediate and for the present, at least less palpable.
- But it looms and its consequences are existential.
- COVID has offered, it is the tangible evidence that no one entity or group — the state, markets, businesses, entrepreneurs, scientists — can tackle existing and emergent economic and social problems on their own.
- They have to work together to resolve them.
Business uncertainties
- Businesses has been the uncertainty of operating in the post-COVID digital world.
- Every business leader has, in some form or other, expressed three types of uncertainties.
- 1) Is their business facing a hinge moment, necessitating the reimagining and re-engineering of their strategy and product portfolio?
- Or are they witnessing no more than another turn of the business cycle and that, once the vaccine is developed and distributed, the market will return to business as usual?
- Or will conditions necessitate a middle of the road approach: Stay the pre- COVID course but at the same time, speed up the pivot toward a new business model.
- Most business leaders are adopting this third hybrid path.
- The key to corporate success in a digital world in which a distinct incident could influence it, is the capability of leaders to think out of the box and to handle the unexpected.
- Financial, technological and human resources will be necessary, but they will not be sufficient.
Consider the question “The post-covid development model must be based on the cooperation underscored by the public-private partnership as the challenges that could emerge are not possible to be tackled by any on entitiy. Comment”
Conclusion
COVID has “obliterated the one remaining obstacle to a digital future — human attitudes”. Covid forced them to adopt and adapt. The challenge for our business leaders will be to navigate a pathway that sustains the benefits of these tools but without deepening the existing social and economic inequalities. Life is not digital for millions in our country.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CDS and Department of Military Affairs
Mains level: Paper 3- Creation of Theatre Commands and issues with it
The article examines issues of national security like the recent creation of a Department of Military Affairs (DMA) and a Chief of Defence Staff (CDS) and also some focus areas like Threatre Command.
Understanding the significance of DMA and CDS
- Through the creation of Chief of Defence Staff (CDS), the management of the armed forces, so far which was assigned to the civilian Defence Secretary, was brought under a military officer, the CDS.
- The designation of CDS as Secretary DMA made him the first military officer to be recognised as a functionary of the Government of India (GoI).
- With the DMA is now a part of the GoI, it would aid the resolution of organisational, hierarchical and financial issues faced by the military.
Recent steps taken by DMA
- The responsibility for accruing savings to fund defence expenditure has been placed on the DMA.
- DMA has floated two schemes aimed at reducing the defence pensions bill.
- One penalises officers seeking early release from service and another envisages a three-year “Tour of Duty” for jawans.
- Issues with these ideas:
- Penalising officers for early release is likely to harm morale.
- “Tour of Duty” will degrade the military’s combat-capability in today’s technology-intensive battle-space.
- The need here is that DMA must focus on military matters and leave the plans of financing national defence to finance ministry or the Niti Aayog. It will better serve it’s purpose.
Another area of needed reform – Theatre Command
- Theatre Commands stands for jointness and integration in the Indian military are varying degrees of synergy and cross-service cooperation between the military wings of Indian armed forces.
- Objectives of the creation of theatre command should be:
- To hand over the military’s warfighting functions to the Theatre Commanders, while retaining the support functions with service HQs.
- To combine India’s 17 widely-dispersed, single-service Commands into four or five mission/threat-oriented, geographically contiguous “Joint” or “Theatre Commands”.
- To place the appropriate warfighting resources of all three services directly under the command of the designated Theatre Commanders; and
- To achieve efficiency/economy by pooling of facilities and resources of the three services.
Advantages of Theatre Commands
- The Theatre Commanders and their staff will be trained and groomed in jointness.
- With that jointness, they will be able to plan operations and to employ land, maritime and air forces, regardless of the service to which they belong.
- For this to happen, radical changes are required in the content of our system of professional military education.
- The Theatre Commander will also have the benefit of advice from commanders representing each service.
Issues with Theatre Commands
- Two thorny issues are the chain of command of the Theatre Commanders and the relationship of the CDS (or his equivalent) with the service Chiefs.
- To avoid over-concentration of power in any single military functionary, the system followed by the US ensures that the chain of command runs from the President to the Secretary (Minister) of Defence and then, directly to the Theatre Commander.
- In India, the peacetime management of the armed forces is left to the MoD and the Chiefs of Staff Committee (COSC).
- However, during war, strategic guidance to the military, has always come from the PM.
- In the system of higher defence under implementation, ideally, the Defence Minister needs to be brought into the command/operational chain of the Theatre Commanders, with the CDS acting as his adviser.
- Due to frequency of elections and intensity of politics in India that no Defence Minister has had the time or inclination to devote his/her undivided attention to complex national security issues.
Consider the question “Examine the implications of the creation of Theatre Commands. What are the challenges in its creation.”
Conclusion
India’s military reforms are complex, the GoI needs to seriously consider the constitution of a Parliamentary Committee, with military advisers, to oversee and guide this transformational process.
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From UPSC perspective, the following things are important :
Prelims level: NSR
Mains level: Paper 2- Melting of Arctic ice cap and its geopolitical implications
Melting of the ice in the Arctic region has as much impact on the geopolitics as it has on the environment. The article explains in detail the geopolitics involved.
Melting of Arctic ice and its impact on climate
- Arctic region is warming up twice as fast as the global average.
- The ice cap is shrinking fast — since 1980, the volume of Arctic sea ice has declined by as much as 75 percent.
- The loss of ice and the warming waters will affect sea levels, salinity levels, and current and precipitation patterns.
- The Tundra is returning to the swamp, the permafrost is thawing, sudden storms are ravaging coastlines and wildfires are devastating interior Canada and Russia.
- The rich biodiversity of the Arctic region is under serious threat.
- These changes are making the survival of Arctic marine life, plants, and birds difficult while encouraging species from lower latitudes to move north.
- The Arctic is also home to about 40 different indigenous groups, whose culture, economy, and way of life are in danger of being swept away.
Opportunities in the melting of the Arctic
- The Northern Sea Route (NSR) which connects the North Atlantic to the North Pacific through a short polar arc was once not open for navigation.
- The melting ice has now made it a reality and a trickle of commercial cargo vessels have been going through every summer since the last decade.
- The opening of the Arctic presents huge commercial and economic opportunities, particularly in shipping, energy, fisheries, and mineral resources.
- Oil and natural gas deposits, estimated to be 22 percent of the world’s unexplored resources, mostly in the Arctic ocean, will be open to access along with mineral deposits.
Challenges in exploiting opportunities
- Navigation conditions are dangerous and restricted to the summer.
- There is a lack of deep-water ports, a need for ice-breakers, a shortage of workers trained for polar conditions, and high insurance costs.
- Mining and deep-sea drilling carry massive costs and environmental risks.
- Unlike Antarctica, the Arctic is not a global common and there is no overarching treaty that governs it, only the UN Convention of Law of the Sea (UNCLOS).
- Large parts of it are under the sovereignty of the five littoral states — Russia, Canada, Norway, Denmark (Greenland) and the US — and exploitation of the new resources is well within their rights.
Geopolitics of the Arctic
- Russia, Canada, Norway, and Denmark have put in overlapping claims for extended continental shelves.
- The US, not a party to UNCLOS, is unable to put in a formal claim but is under pressure to strengthen its Arctic presence.
- For the present, Russia is the dominant power, with the longest Arctic coastline, half the Arctic population, and a full-fledged strategic policy.
- Russia anticipates huge dividends from commercial traffic including through the use of its ports, pilots, and ice-breakers.
- China, playing for economic advantage, has moved in fast, projecting the Polar Silk Road as an extension of the BRI, and has invested heavily in ports, energy, undersea infrastructure, and mining projects.
What are the concerns for India
- India’s extensive coastline makes it vulnerable to the impact of Arctic warming on ocean currents, weather patterns, fisheries, and most importantly, our monsoon.
- Scientific research in Arctic developments, in which India has a good record, will contribute to our understanding of climatic changes in the Third Pole — the Himalayas.
- The strategic implications of an active China in the Arctic and it’s growing economic and strategic relationship with Russia are self-evident and need close monitoring.
Way forward
- India has observer status in the Arctic Council, which is the predominant inter-governmental forum for cooperation on the environment and development (though not the security) aspects of the Arctic.
- India should leverage its presence in Arctic Council for a strategic policy that encompassed economic, environmental, scientific, and political aspects.
Consider the question “Melting of the Arctic opens the door for geopolitical game in the region and India cannot be immune to its implications. In the context of this, examine the developments in the region and how it impacts India’s interests?”
Conclusion
India must strive to protect its interest and strive for strategic policy for the region.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NEP 2020
Mains level: Paper 2- Regulation of higher education through single regulator
The article deals with the idea of single regulator for higher education in the country and the challenges it could fece.
Recommendations for regulation of higher education
- Regulatory bodies came up in response to the rapid growth of private participation since the 1980s.
- Due to multiplicity of regulatory bodies in higher education, nearly all advisory panels appointed since 2005 have been asked for a single regulator.
- National Knowledge Commission (NKC) concluded in 2007 that the plethora of agencies attempting to control entry, operation, intake, price, size, output and exit had rendered the regulation of higher education ineffectual.
- The NKC recommended the setting up of an overarching Independent Regulatory Authority in Higher Education (IRAHE).
- A major concern of the Yash Pal Committee constituted in 2009 was compartmentalisation of academia.
- To promote such a dialogue, the Yash Pal committee recommended the creation of an apex body called the National Commission for Higher Education and Research (NCHER).
- TSR Subramanian committee in 2016 proposed an Act for setting up an Indian Regulatory Authority for Higher Education (IRAHE) to subsume all existing regulatory bodies in higher education.
- The draft national policy presented by the Kasturirangan Committee in 2019 proposed a National Higher Education Regulatory Authority (NHERA) as a common regulatory regime for entire higher education sector.
- The draft NEP 2020 proposed a Rashtriya Shiksha Aayog (RSA) to coordinate, direct and address inter-institutional overlaps and conflicts.
The regulatory regime under NEP 2020
- NEP 2020 has now a single regulator for all higher education barring medical and law education.
- It envisages an overarching Higher Education Commission of India (HECI), with four independent verticals comprising the National Higher Education Regulatory Council (NHERC), the National Accreditation Council (NAC), the Higher Education Grants Council (HEGC) and the General Education Council (GEC).
- The University Grants Commission (UGC) is to become HEGC while the other regulatory bodies will become professional standard setters.
Fragmented regulation of medical education to continue
- NEP-2020 provides for separate regulation for medical education.
- But it envisions healthcare education as an inter-disciplinary system.[Allopathic student to have a basic understanding of Ayurveda, Yoga etc and vice-versa]
- Multiple regulators in health education include the National Commission for Homoeopathy (NCH) and the National Commission for Indian System of Medicine (NCISM) and continuation of the Dental Council of India (DCI), Pharmacy Council of India (PCI) and the Indian Nursing Council (INC),
- Thus, making medical education inter-disciplinary would be difficult due to multiple regulators.
Lessons from the governance of medical education
- The above example demonstrate the difficulty in designing a single regulatory framework to take care of the domain-specific needs of even within healthcare education.
- But if accepted as a principle, it has the potential to delay, if not derail, the idea of a single regulator.
- And should that actually happen, the idea of reining in the regulators might mean abandoning the idea of regulation of regulators.
Issues with the single regulator proposed in NEP 2020
- The regulatory architecture proposed in the NEP is far too monolithic for a system of higher education serving a geographically, culturally and politically diverse country like ours.
- Even in the matter of privatisation, there is enormous diversity of players and practices.
- Historically too, private participation in the running of colleges has not followed a single pattern.
- To imagine that a uniform structure called Board of Governors can serve all different kinds of institutions across the country is flawed.
- Such a vision calls for better appreciation of what exists, no matter how worrisome a condition it is in.
Consider the question “What are the challenges in the regulation of higher education in the country? What are the concerns with the idea of single regulator for the regualtion of higher education in country?”
Conclusion
Before proceeding with the single regulator, the government need to pay attention to the issue of diversity in various aspects in the country.
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