Note4Students
From UPSC perspective, the following things are important :
Prelims level: Export led growth
Mains level: Paper 3- Contribution of export in the growth
To aim for achieving high growth rate by focusing only on the domestic consumption and domestic demand could result in failure. The article argues for the focus on export to achieve the objective of growth.
Domestic-demand led growth and its limitations
- The debate in India has focused on domestic-demand led growth.
- But there is no known model of domestic demand/consumption-led growth, anywhere that has delivered quick, sustained, and high rates of economic growth for developing countries.
- India’s GDP growth of over 6 per cent after 1991 was associated with real export growth of about 11 per cent.
- Moreover, domestic-demand led growth requires more public spending, tax cuts, private investment, and/or financial sector reforms: which is not feasible in the present context due to pandemic.
- Consumption growth will be limited by the fact that household debt has grown rapidly in the last few years.
- Consumption now can grow only if incomes grow.
- Government spending could be a short run option, but COVID has limited that possibility.
Why India should not follow advanced countries’ fiscal policies
- India’s interest rates are not at zero and are unlikely to be so because of persistent inflation.
- India’s borrowing is still considered risky which is reflected in ratings.
- The favourable interest rate-growth differential that supports expansionary policy in the advanced countries is absent in India.
- India may well have scope for expansionary fiscal policy in the short run but not as a medium run growth strategy.
Why India should focus on export
- Given all the above factors, India does not have the luxury of abandoning export orientation because the alternatives are so limited.
- India’s market is too small to sustain any kind of serious import substitution strategy.
- Small size of the market makes it difficult to offer investors the domestic market as bait and incentivising them to export.
- India’s big, unexploited opportunities are in unskilled labour exports.
- India is vastly under-exporting relative to its labour force.
- Because China’s wages are rising as it has become richer, it has vacated about $140 billion in exports in unskilled-labour intensive sectors.
- Post-COVID, the move of investors away from China will probably accelerate to hedge against supply chain disruptions.
- India did not take advantage of the first China opportunity, now, a second opportunity stemming from geo-politics should be seized by India.
- As India contemplates atmanirbharta, two deeper advantages of export orientation are always worth remembering.
- 1) Foreign demand will always be bigger than domestic demand for any country.
- 2) If domestic producers are competitive internationally, they will be competitive domestically and domestic consumers and firms will also benefit.
Why openness of ecnonomy is important
- Exploiting this opportunity in unskilled exports requires more not less openness.
- To be internationally competitive, many parts and components have to be imported from so many different sources.
- One indicator is the foreign or import contribution to exports.
- China and Vietnam at the time of their export boom in textiles and clothing suggests that exports were highly dependent on imports (between 40 and 45 per cent).
- In contrast, India’s import share is about 16 per cent.
- Achieving Chinese and Vietnamese levels of success will therefore require greater imports and openness.
Way forward
- Export success will require genuine easing of costs of trading and doing business in India.
- In the case of clothing, a key policy change in India will be to eliminate tariffs on all inputs.
- It will also require signing free trade agreements with Europe that still impose high duties on India’s clothing export, while Bangladeshi and Vietnamese exports which enjoy preferential access to world markets.
Consider the question “As India contemplates atmanirbharta, we should not forget that export dynamism is essential for the rapid and sustained high economic growth. Comment.”
Conclusion
In sum, resisting the misleading allure of the domestic market, India should zealously boost export performance and deploy all means to achieve that. Pursuing rapid export growth in manufacturing and services should be an obsession with self-evident justification.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: The Quad
Mains level: Paper 2- Fourth factors the Quad must consider about Asia
The article highlights the 4 issues related to the history and geopolitics of Asian that the Quad members should pay attention to while formulating the future course of action.
The 4 factors
If the Quad is to prosper as a geopolitical construct, it would do well to heed four lessons drawn from the long arc of Asia’s history and geopolitics.
1) Lack of existence of Indo-Pacific system
- There has never been Indo-Pacific system ever since the rise of the port-based kingdoms of Indochina in the first half of the second millennium.
- There were two Asian systems — an Indian Ocean system and an East Asian system — with intricate sub-regional balances.
- The effort by a U.S. to artificially manufacture to combine the Indo and the Pacific into a unitary system is unlikely to succeed.
2) Lack of peaceful existence dominated by any power
- The Indo-Pacific region possesses no prior experience of long period of peace, prosperity and stability engineered from its maritime fringes.
- Rather, dynamic long cycles of Chinese influence radiating outwards have alternated with sharp periods of turmoil.
- The of ASEAN-centred multilateralism is more in tune with regional tradition and historical circumstance.
- For their part, the Indo-Pacific’s ‘flanking powers’, India and Japan, have never balanced Chinese power throughout their illustrious histories.
3) India must use its leverage judiciously
- The sea lines of communication constitute the important links connecting Indian Ocean to the Western Pacific.
- It is also a valuable arena of leverage vis-à-vis Chinese shipping and resource flows.
- This leverage must be wielded judiciously on India’s terms, not on the Quad’s terms.
- The Quad, after all, has little to offer materially with regard to New Delhi’s continental two-front dilemma.
- However, ceding this chokepoint leverage will invite overwhelming Chinese pressure against the full range of India’s South Asian interests — to which the other Quad members possess neither will nor desire to answer.
4) Check on China’s India Ocean Ambitions
- The Quad has a valuable role to play as a check on China’s Indian Ocean ambitions.
- India must develop ingrained habits of interoperable cooperation with its Quad partners.
- This interoperable cooperation could pre-emptively dissuade China from mounting a naval challenge in its backyard.
Conclusion
The Quad must consider these factors while formulating the future course of action.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Bond markets, SLR
Mains level: Paper 3- Issues with the financial markets in India
The article discusses the themes of the recently published books by Viral Acharya and Urjit Patel. Both the books deal with the issues with the financial markets in India
Context
- Two recently published books by Viral Acharya and Urjit Patel throws light on the issues with India’s finance market and role of RBI and the government.
Importance of financial markets
- Banks along with bond and equity markets oversee the matching of savers with borrowers.
- Without financial markets, businesses would be restricted to investing out of retained earnings alone.
- The financial markets have to satisfy the return appetites of savers while minimising their risk exposure.
Undue preference to fiscal interest of the government
- A major theme of Acharya’s book is the rampant subjugation of the financial and monetary infrastructure to the fiscal interests of the government.
- Consider, for example, the conduct of monetary policy.
- Since bank assets are marked to market, cuts in interest rates induce treasury gains for banks that effectively recapitalises them.
- Consequently, rate cuts are preferred by governments needing to inject capital into public sector banks (PSBs).
- For the same reasons, liquidity injections, which raise bond prices, are preferred to liquidity absorptions.
- Fiscal compulsions of government can induce liquidity policies that have the opposite effect on the rate-setting by the MPC.
- This contradiction is further complicated by the fact that the RBI is also the debt management agency for the government.
- As a debt management agency, RBI’s key tasks is to sell government bonds at the highest possible price.
- Pressures for regulatory forbearance in recognising NPAs often arise from the government wanting to avoid having to recapitalise PSBs.
- The sameexplains the fact that stock exchanges in India having a 30-day disclosure norm for registered borrowers who default on their bank loans.
- The standard in developed capital markets is immediate disclosure.
- But that would induce an overnight rating downgrade of the concerned borrower thereby triggering additional capital provisioning needs for the lending bank.
Conflict in government owning the PSBs
- Patel’s book deals with conflicts inherent in the state owning the banks that control about three-fourth of total banking assets in India.
- The primary problem with PSBs is that governments have used them as tools for macroeconomic management.
- PSBs are regularly used for resource mobilisation to finance fiscal deficits.
- The government often announces credit policies rather than having the banks allocate credit based on risk-return management criteria.
- PSBs are the favoured instrument for meeting employment targets, supporting farmers through loan write-offs, etc.
What are the implications of government owning PSBs
- This kind of state interface naturally induces extreme levels of moral hazard in the behaviour of both debtors and creditors.
- PSBs are not incentivised to exercise due diligence since they expect regulatory forbearance and recapitalisation in the event of rising NPAs.
- The dilution of efficiency-based principles for banking has implications for all borrowers.
- Creditworthy borrowers pay the risk premia to cover the riskiness due to unhealthy borrowers.
- The worsening risk pool of borrowers is partly to blame for the fact that long term borrowing rates have remained stubbornly high despite repeated rate cuts by the MPC over the past 18 months.
3 Problems and 3 Reforms
Problems
- There are three obvious problems with the existing architecture.
- The first is the state ownership of banks.
- The second is the chronically high fiscal deficit run by the consolidated public sector.
- The third is the widespread perception that market regulators work under close government direction.
Reforms
- Dealing with this will require, at a minimum, three reforms.
- First, there has to be a wholehearted attempt at privatisation of PSBs.
- Second, the RBI needs to be relieved of its public debt management role.
- Third, the RBI has to be empowered to act independently of the government.
Conclusion
The growth of firms, which is a key driver of productivity and growth, requires well-functioning financial markets. India has a lot of work to do.
Back2Basics: How cuts in interest rates induce treasury gains for banks?
- Falling rates across the debt markets increase the demand for instruments that pay higher interest.
- At this stage, prices of bonds which banks had bought when interest rates were high rise.
- Hence, the value of government securities that banks have bought for the SLR requirement rises.
- This increases profits as banks record the market value of these securities in their books.
- Under this process, called marking to market, organisations record profits/losses in their books on a daily basis without actually booking any profit or loss.
- So, more SLR bonds the bank holds, the higher its mark-to-market profit.
- The other reasons bank profits rise when interest rates fall are pick-up in growth as companies borrow at lower rates as well as improvement in liquidity.
Source:-
https://www.businesstoday.in/moneytoday/banking/banks-to-make-huge-treasury-gains-on-bonds-on-rbi-rate-cut/story/193552.html
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CRISPR-Cas9
Mains level: Paper 3- CRISPR-Cas9-Important tool in gene editing
The Nobel Prize in Chemistry for 2020 has been awarded for the discovery of CRISPR Cas9. The two scientists have pioneered the use of CRISPR – Cas9 (CRISPR-associated protein 9) system as a gene-editing tool.
Background of discovery of CRISPR
- In 1987a group of Japanese researchers observed an unusual homologous DNA sequence bearing direct repeats with spacing in a eubacterial gene.
- In subsequent years CRISPR was discovered and showed to be a bacterial adaptive immune system and to act on DNA targets.
- A notable discovery on the use of CRISPR as a gene-editing tool was by a Lithuanian biochemist, Virginijus Šikšnys, in 2012.
- Šikšnys showed that Cas9 could cut purified DNA in a test tube, the same discovery for which both Charpentier and Doudna were given the credit.
- Thus, the exclusion of Siksnys from this year’s Nobel is going to raise discussions.
Issue of gene-edited babies
- The world was alarmed by such a mission in 2018 when Chinese scientist edited genes in human embryos using the CRISPR-Cas9 system which resulted in the birth of twin girls.
- The incident became known as the case of the first gene-edited babies of the world.
- Following the incident, the World Health Organization formed a panel of gene-editing experts.
- The expert panel suggested a central registry of all human genome editing research in order to create an open and transparent database of ongoing work.
Guidelines and regulations in India
- In India, several rules, guidelines, and policies are notified under the Environment Protection Act, 1986 to regulate genetically modified organisms.
- The above Act and the National Ethical Guidelines for Biomedical and Health Research involving human participants, 2017, by the Indian Council of Medical Research (ICMR), and the Biomedical and Health Research Regulation Bill implies regulation of the gene-editing process.
- This is especially so in the usage of its language “modification, deletion or removal of parts of heritable material”.
- However, there is no explicit mention of the term gene editing.
Consider the question “What is CRISPR-Cas9? How it helps in the gene-editing? What are the concerns with use of it for gene-editing?”
Conclusion
It is time that India came up with a specific law to ban germline editing and put out guidelines for conducting gene-editing research giving rise to modified organisms.
Back2Basics: What is CRISPR?
- CRISPRs: “CRISPR” stands for “clusters of regularly interspaced short palindromic repeats.”
- It is a specialized region of DNA with two distinct characteristics: the presence of nucleotide repeats and spacers.
- Repeated sequences of nucleotides — the building blocks of DNA — are distributed throughout a CRISPR region.
- Spacers are bits of DNA that are interspersed among these repeated sequences.
- In the case of bacteria, the spacers are taken from viruses that previously attacked the organism.
- They serve as a bank of memories, which enables bacteria to recognize the viruses and fight off future attacks.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Delhi air-pollution issue
The article suggests the three-pronged strategy to deal with the emission from transportation and highlights the importance of coordination at various level to deal with the issue of pollution.
Anti-pollution campaign in Delhi
- With air pollution returning to pre-COVID levels, the Delhi administration has launched a major anti-pollution campaign this month.
- The campaign is focused on cutting the deadly smoke from thermal plants and brick kilns in the National Capital Region as well as on chemical treatment of stubble burning from nearby States.
Abating emission from transportation
- Delhi’s long-term solution will depend importantly also on abating emissions from transportation.
- Delhi needs a 65% reduction to meet the national standards for PM2.5.
- Vehicles, including trucks and two-wheelers, contribute 20%-40% of the PM2.5 concentrations.
- Tackling vehicle emissions would be one part of the agenda, as in comparable situations in Bangkok, Beijing, and Mexico City.
Three-part action to combat emissions from transportation
- A three-part action comprises emissions standards, public transport, and electric vehicles.
1) Stricter enforcement of emission controls
- Two-wheelers and three-wheelers were as important as cars and lorries in Beijing’s experience.
- Bangkok ramped up inspection and maintenance to cut emissions.
- The first order of business is to implement the national standards.
2) Strengthening public transport
- Bus Rapid Transit (BRT) around the world show how the sizeable investment cost is more than offset by the benefits, and that financing pays off.
- Delhi has lessons from its BRT experience in designating better BRT lanes, improving the ticketing system and synchronising with the Metro.
- The Supreme Court’s ruling to increase Delhi’s bus fleet and align it with the Metro network must be carried out.
- The ‘odd-even’ number plate policy can help, but the system should reduce exemptions, allow a longer implementation period, and complement it with other measures.
3) Adoption of electric vehicle: A long term solution
- Subsidies and investment will be needed to ensure that EVs are used to a meaningful scale.
- The Delhi government’s three-year policy aims to make EVs account for a quarter of the new vehicles registered in the capital by 2024.
- EVs will gain from purchase incentives, scrappage benefits on older vehicles, loans at favourable interest and a waiver of road taxes.
Need for coordination at various level
- Transport solutions need to be one part of pollution abatement that includes industry and agriculture.
- Delhi’s own actions will not work if the pollution from neighbouring States is not addressed head on.
- Technical solutions need to be underpinned by coordination and transparency across Central, State, and local governments.
- Public opinion matters.
- Citizen participation and the media are vital for sharing the message on pollution and health, using data such as those from the Central Pollution Control Board.
Conclusion
- It is a matter of prioritising people’s health and a brighter future. Once the pandemic is over, Delhi must not stumble into yet another public health emergency. The time to act is now.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: LTRO, Bonds
Mains level: Paper 30- Measures by the RBI to assure the Government bond holders
The article highlights the measures taken by the RBI in the recent MPC meeting to assure the buyers of the Government bonds and ensuring the policy rate transmission.
Dealing with the rate transmission issue and why it matters
- The gap between the repo rate and the average lending rate of banks is at a record high.
- So, the RBI and the MPC focused on improving rate transmission.
- This gap can be broken up into two parts:
- The first is the gap between the RBI-set repo rate and the rate at which the government of India borrows (the GSec yield).
- It is also called the “term premium” can be influenced by the RBI’s actions.
- The second is the gap between the GSec yield and the rate at which individuals or private firms borrow.
- This gap reflects risk aversion in the financial system and a lack of capacity.
- The RBI has avoided directly influencing the term premium, perhaps to maintain its credibility and independence, staying clear of accusations that it is financing the government’s fiscal deficit.
- However, unless the rate at which the government borrows comes down borrowing costs for the whole economy will stay elevated.
Challenge of Balance-of-Payment surplus (i.e. excess dollars)
- Over the past few months, the country’s foreign currency reserves have been growing at an unprecedented rapid pace.
- This means that India is getting far more dollars than it needs. Three factors are responsible for this.
- 1) Some short-term factors responsible are weak imports and a faster normalisation of exports.
- 2) There have also been structural shifts in India’s economic policy which point to a persistent BoP surplus.
- In addition to low energy prices, policies supporting Atmanirbhar Bharat mean lower imports and the push towards making India a participant in global value chains mean higher exports.
- 3) At the same time, India’s capital account is being opened up: The special-category government of India bonds, for example.
Why BoP surplus is opportunity
- When the excess dollar inflows turn into a deluge, as they have over the past six months, the supply of rupees in the domestic economy also becomes excessive.
- If the RBI can direct this surplus into government bonds, it can maintain its independence and credibility, and at the same time achieve its target of rate transmission.
Measures by the RBI to assure the bond market
- The buyers of government bonds need to feel reassured of not getting hurt by the volatility in bond prices.
- When bond prices rise, the yields fall, and vice versa.
- Banks parking trillions of rupees with the RBI at 3.35 per cent overnight would earn nearly 6 per cent if they bought government bonds.
- That they did not was because they were afraid of the bond prices falling, which would offset the gains from higher rates.
- The increase in the Hold-To-Maturity limits by the RBI by one year to March 2022, has assured the banks that they need not fear booking interim losses if bond prices are volatile.
- The announcement that the RBI would purchase state and central government bonds on the market (even if in small sizes) would provide further comfort.
- The change in assessment of inflation should help buyers of government bonds take the risk.
- Banks or other bond investors that refrained from purchasing government bonds because they felt the RBI would increase interest rates at some point to comply with its legal mandate, would be reassured by this clear communication.
- The targeted refinancing operations (TLTRO) should help bring down borrowing rates in the targeted industries.
Conclusion
Economic challenges may persist for the foreseeable future. The economic scars of the last six months are likely to take time to heal. The RBI and the MPC, which have been proactive, creative and accommodative so far, may have to stay so for a while longer.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSP. SAP
Mains level: Paper 3- Issues with the MSP regime
The author analyses the inefficiencies in the MSP regime while comparing it with the sugar sector and the milk sector. The recent agri-reform in the opinion of the author could help to make the Indian agriculture more efficient.
MSP system Vs. Market-driven system
- MSP regime was the creation of the era of scarcity in the mid-1960s.
- Indian agriculture has, since then, turned the corner from scarcity to surplus.
- In a surplus economy, unless we make agriculture demand-driven, the MSP route can spell financial disaster.
- This transition is about changing the pricing mix — how much of it should be state-supported and how much market-driven.
- The new laws are trying to increase the relative role of markets without dismantling the MSP system.
- Currently, no system is perfect, be it the one based on MSP or that led by the markets, but the MSP system is much more costly and inefficient.
- The market-led system will be more sustainable provided we can “get the markets right”.
Issues with the MSP
- A perusal of the MSP dominated system of rice and wheat shows that the stocks with the government are way above the buffer stock norms.
- The economic cost (to FCI) of procured rice comes to about Rs 37/kg and that of wheat is around Rs 27/kg.
- No wonder, market prices of rice and wheat are much lower than the economic cost incurred by the FCI.
- So, grain stocks with the FCI cannot be exported without a subsidy[i.e. export below the cost], which invites WTO’s objections.
- The FCI’s burden is touching Rs 3 lakh crore which is not reflected in the Central budget as the FCI is asked to borrow more and more.
- The FCI can reduce costs if it uses policy instruments like “put options”.
2 Lessons: from sugarcane and milk pricing
1) Populism resulted in making sugar industry globally non-competitive
- In the case of sugarcane, the government announces a “fair and remunerative price” (FRP) [not MSP]to be paid by sugar factories [not paid by the Government].
- While some states like Uttar Pradesh announces its own “state advised price” (SAP).
- The sheer populism of SAP has resulted in cane arrears amounting to more than Rs 8,000 crore, with large surpluses of sugar that can’t be exported.
- This sector has, consequently, become globally non-competitive.
- Unless sugarcane pricing follows the C Rangarajan Committee’s recommendations the problems of the sugar sector will not go away.
2) Success story of milk sector
- In the case of milk co-operatives, pricing is done by the company in consultation with milk federations.
- It is more in the nature of a contract price.
- It competes with private companies, be it Nestle, Hatsun or Schreiber Dynamix dairies.
- The milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane.
- Today, India is the largest producer of milk — 187 million tonnes annually.
So, how the recent reforms will help the farmers
- As a result of changes in farm laws in the next three to five years companies will be encouraged to build efficient supply lines somewhat on the lines of milk.
- These supply lines — be it with farmers producer organisations (FPOs) or through aggregators — will, of course, be created in states where these companies find the right investment climate.
- These companies will help raise productivity, similar to what has happened in the poultry sector.
- Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.
Conclusion
The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere, the recent reforms are the steps in this direction.
Back2Basic: What is MSP
- Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
- The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- The minimum support prices are a guarantee price for their produce from the Government.
- The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
- In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
What are ‘put options’
- Put options give holders of the option the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
- Put options are available on a wide range of assets, including stocks, indexes, commodities, and currencies.
- Put option prices are impacted by changes in the price of the underlying asset, the option strike price, time decay, interest rates, and volatility.
- Put options increase in value as the underlying asset falls in price, as volatility of the underlying asset price increases, and as interest rates decline.
- They lose value as the underlying asset increases in price, as volatility of the underlying asset price decreases, as interest rates rise, and as the time to expiration nears.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Definition of urban area
Mains level: Paper 2- Need for new definition of urban area
The article the need for liberal and realistic definition of the ‘urban’ area in the next Census and mention the implications of such change.
2 ways to define urban areas
1) Statutory town
- These towns are defined by state governments and place India’s urbanisation rate at 26.7%.
- A statutory town includes all places with a municipality, corporation, cantonment board or notified town area committee.
2) Census-based criteria
- Census adopts three criteria to define what is urban.
- The three criteria are:
- i) a minimum population of 5,000;
- ii) at least 75% of the male main working population engaged in non-agricultural pursuits, and
- iii) a density of population of at least 400 persons per sq km
- This, coupled with statutory towns, pegs India’s urbanisation rate at 31%.
- Total number of towns (state and census) stands at 7,933, together constituting a 377-mn population.
Why there is a need for changing the definition of ‘urban’
- There is growing evidence—mostly from satellite imagery—that India is way more urban than the 2011 Census estimate.
- This is quite plausible because there is a large sum of money allocated for rural development, and it is in the interest of state governments to under-represent urbanisation.
- Besides, the Census’s stringent definition was first carved out in 1961 which do not reflect the realities of the 21st century.
- India won’t be alone in changing these definitions for Census 2021.
- Many countries, such as China, Iran, the UK, among others, have changed the definition of ‘urban’ from one census to another.
Getting the right picture of urbanisation
- A more liberal and realistic definition in the upcoming census will present the actual picture of urbanisation.
- For instance, if we just use the population density criteria like 37 other countries, with the 400 people per sq km threshold, we will add around 500 mn people to the urban share of the population.
- This pegs the urbanisation rate at over 70%!
What will be its implications?
- First, the budgetary allocation will reflect the reality and scales will balance between rural and urban areas.
- Second, the urban areas will not be governed through rural governance structures of Panchayati Raj Institutions.
- Third basic urban infrastructure like sewerage networks, fire services, building regulations, high-density housing, transit-oriented development, piped drinking water supply.
- Fourth, these newly defined urban areas could act as a new source of revenue for funding local infrastructure development.
- This would ease pressure on state finances.
- Lastly, the rethink of urban definition would have an impact on the regional and national economy.
- These newly defined urban areas will open them to new infrastructure such as railway lines, discom services, highway connectivity, creation of higher education institutes which will together increase the connectivity and resource capability at the local level.
- This will not only boost the local economy but also ease pressure on bigger cities and help in cluster level development.
Conclusion
A rethink of urban definition in Census 2021, particularly with some degrowth in urban areas due to Covid, will bode well for India for coming decades in more ways than one.
Source:-
https://www.financialexpress.com/opinion/redefining-cities-a-new-urban-consensus/2102154/
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: ART Bill
Mains level: Paper 2- Concerns with the ART Bill
There are several issues with the Assisted Reproductive Technology Bill and these issues need consideration before the passage of the Bill.
What the Bill aims to achieve
- Union Health Minister introduced the Assisted Reproductive Technology (Regulation) Bill, 2020 (Bill) in the Lok Sabha.
- Its aim is to regulate ART banks and clinics, allow safe and ethical practice of ARTs and protect women and children from exploitation.
- The Bill was introduced to supplement the Surrogacy (Regulation) Bill, 2019 (SRB), which awaits consideration by the Rajya Sabha after review by two parliamentary committees.
Concerns with the Bill
1) Exclusion in the access of ART
- .The Bill allows for a married heterosexual couple and a woman above the age of marriage to use ARTs.
- It excludes single men, cohabiting heterosexual couples and LGBTQI individuals and couples from accessing ARTs.
- This violates Article 14 of the Constitution and the right to privacy jurisprudence of Puttaswamy, where the Supreme Court held that “ the liberty of procreation, the choice of a family life” concerned all individuals irrespective of their social status and were aspects of privacy.
- In Navtej Johar case, Justice Chandrachud exhorted the state to take positive steps for equal protection for same-sex couples.
- Unlike the SRB, there is no prohibition on foreign citizens accessing ARTs.
- Foreigners can access ART but not Indian citizens in loving relationships.
- This fails to reflect the true spirit of the Constitution.
2) Consent
- The ART Bill does little to protect the egg donor.
- Harvesting of eggs is an invasive process which, if performed incorrectly, can result in death.
- The Bill requires an egg donor’s written consent but does not provide for her counselling or the ability to withdraw her consent before or during the procedure.
- She receives no compensation or reimbursement of expenses for loss of salary, time and effort.
- Failing to pay for bodily services constitutes unfree labour, which is prohibited by Article 23 of the Constitution.
- The commissioning parties only need to obtain an insurance policy in her name for medical complications or death; no amount or duration is specified.
- The egg donor’s interests are subordinated in a Bill proposed in her name.
- The Bill restricts egg donation to a married woman with a child (at least three years old).
3) Threat of eugenics
- The Bill requires pre-implantation genetic testing.
- If the embryo suffers from “pre-existing, heritable, life-threatening or genetic diseases”, it can be donated for research with the commissioning parties’ permission.
- These disorders need specification or the Bill risks promoting an impermissible programme of eugenics.
4) Overlap with Surrogacy Regulation
- There is considerable overlap between ART and SRB sectors. Yet the Bills do not work in tandem.
- Core ART processes are left undefined; several of these are defined in the SRB.
- Definitions of commissioning “couple”, “infertility”, “ART clinics” and “banks” need to be synchronised between the Bills.
- A single woman cannot commission surrogacy but can access ART.
- The Bill designates surrogacy boards under the SRB to function as advisory bodies for ART, which is desirable.
- However, both Bills set up multiple bodies for registration which will result in duplication or lack of regulation (e.g. surrogacy clinic is not required to report surrogacy to National Registry).
- Also, the same offending behaviours under both Bills are punished differently + punishments under the SRB are greater.
- Offences under the Bill are bailable but not under the SRB.
- Finally, records have to be maintained for 10 years under the Bill but for 25 years under the SRB.
- The same actions taken by a surrogacy clinic and ART clinic attract varied regulation.
Other concerns
- Children born from ART do not have the right to know their parentage, which is crucial to their best interests and protected under previous drafts.
- There is no distinction between ART banks and ART clinics, given that gamete donation is not compensated, economically viability of ART Banks raises a question.
- In previous drafts, gametes could not be gifted between known friends and relatives if this is not changed, gamete shortage is likely.
- The Bill’s prohibition on the sale, transfer, or use of gametes and embryos is poorly worded and will confuse foreign and domestic parents relying on donated gametes.
- Unusually, the Bill requires all bodies to be bound by the directions of central and state governments in the national interest, friendly relations with foreign states, public order, decency or morality — being broadly phrased, it undermines their independence.
Way forward
- The Bill to maintain a grievance cell but clinics must instead have ethics committees.
- Mandated counselling services should also be independent of the clinic.
- The poor enforcement of the PCPNDT Act, 1994, demonstrates that enhanced punishments do not secure compliance — lawyers and judges also lack medical expertise.
- Patients already sue fertility clinics in consumer redressal fora, which is preferable to criminal courts.
Conclusion
The Bill raises several constitutional, medico-legal, ethical and regulatory concerns, affecting millions and must be thoroughly reviewed before passage.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Declining private investment in the infrastructure and ways to boost it
Declining private investment in the infrastructure needs policy overhaul. The article suggests the changes in the policy and approach on the part of the government to achieve the sustainable 40 per cent private investment in the infrastructure.
Declining private investment in infrastructure
Currently, private financing into the infrastructure sector has declined to around 20 per cent of the total funding.
Reasons for the decline are-
- 1) the crisis in the non-banking finance sector.
- 2) the financial challenges faced by infrastructure companies.
- 3) the inadequately developed Indian market for infrastructure financing.
- The Economic Survey 2017-18 has assessed India’s infrastructure financing needs at $4.5 trillion by 2040.
- Reviving private investment flows into infrastructure to around 40 per cent will be key to attaining this threshold.
Actions need to be taken to revive the private investment in infrastructure
- The Vijay Kelkar committee had put out a balanced report in 2015 on overhauling the PPP ecosystem, including governance reform, institutional redesign, and capacity-building.
Ramping up private investments in infrastructure will need action on two fronts:
- 1) Refreshing institutions and policies for channelling financing.
- 2) Providing a stable, durable, and empowering ecosystem for private players to partner with government entities.
1) Institutions and policies for channelling financing
- Due to long-duration profitability cycles of infrastructure projects, successful PPP requires stable revenue flow assurances and a settled ecosystem to investors over long periods.
- This could be achieved means of policy stability, assurances possibly secured by law.
- PPP contracts also need to provide for mid-course corrections to factor in uncertainties including utilisation patterns, as well as the creation of competing infra assets.
- Government partners in PPP arrangements need to ensure that open-ended arrangement that might entail unforeseeable risk are minimised for the private investor, including aspects such as land availability and community acceptance.
2) Institution and policies for financing
- There is a need to change the culture and attitude towards the conjoining of government entities and private partners.
- Kelkar committee has stated that there needs to be an approach of “give and take” and the Government should avoid a purely transactional approach.
- Government should avoid trying to minimise risk to themselves by passing on uncertain elements in a project — like the land acquisition risk — to the private partner.
- This attitudinal change can be achieved by amending the Prevention of Corruption Act to encompass modern-day requirements, including factoring in the need for government agents to take calibrated risks while engaging with the private sector.
- The private partners also need to be incentivised to focus on project outcomes, with guard-rails in place to discourage rent-seeking behaviour.
- In sum, risk avoidance by the public entity and rent-seeking by the private partner are the twin challenges that need to be carefully addressed.
- On the regulatory front, a compelling need would be to promulgate a PPP legislation which can provide a robust legal ecosystem and procedural comfort.
Consider the question “Declining private investment in the infrastructure has several implications for the economy. In ligh of this, examine the factor for such decline and suggest the measures to boost the private investment in the infrastructure.”
Conclusion
After we emerge out of this pandemic, a focus area for public policy has to be the creation of a modern-day, sustainable and resilient infrastructure. . Designing a fresh approach and creating a stable policy environment that provides comfort and incentives to private investors will be key to attaining this goal.
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From UPSC perspective, the following things are important :
Prelims level: Provision in labour codes
Mains level: Paper 2- Provisions for gig workers and platform workers in the labour codes
The article examines the provision made for the platform workers and the gig workers in the labour codes passed by the Parliament recently and explains the issues with it.
Context
- The three new labour codes passed by Parliament recently acknowledge platform and gig workers as new occupational categories in the making.
Definition issue
- The specific issues of working in factories, the duration of time needed on a factory floor, and associated issues are recognised as the parameters for defining an ideal worker.
- The Code on Wages, 2019, tries to expand this idea by using ‘wages’ as the primary definition of who an ‘employee’ is.
- Yet, the terms ‘gig worker’, ‘platform worker’ and ‘gig economy’ not defined with in connection with their wages.
- The new Code on Social Security allows a platform worker to be defined by their vulnerability — not their labour, nor the vulnerabilities of platform work.
Issues with the code
- Since the laws are prescriptive, what is written within them creates the limits to what rights can be demanded, and how these rights can be demanded.
- Platform delivery people can claim benefits, but not labour rights.
- This distinction makes them beneficiaries of State programmes.
- This does not allow them to go to court to demand better and stable pay, or regulate the algorithms that assign the tasks.
- This also means that the government or courts cannot pull up platform companies for lapses[ ex. choice of pay, work hours etc].
Benefits with no guarantee
- In the Code on Social Security, 2020, platform workers are now eligible for benefits like maternity benefits, life and disability cover, old age protection, provident fund, employment injury benefits, and so on.
- None of these are secure benefits.
- This means that from time to time, the Central government can formulate welfare schemes that cover these aspects of personal and work security, but they are not guaranteed.
- Actualising these benefits will depend on the political will at the Central and State government-levels and how unions elicit political support.
- The language in the Code is open enough to imply that platform companies can be called upon to contribute either solely or with the government.
Consider the question “What are the provisions for gig workers and platform workers in the new labour code? What are the issues with the provision?”
Conclusion
The ‘platform worker’ identity has the potential to grow in power and scope, but it will be mediated by politicians, election years, rates of under-employment, and large, investment- heavy technology companies that are notorious for not complying with local laws.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: H-1B term
Mains level: Paper 2- H-1B visa issue
Trump administration’s two moves on the visa could have implication for both India and corporate America. It needs to be seen whether the situations will remain the same after the Presidential elections in the U.S.
Context
- The U.S. President announced a hike in the salaries for those arriving in the U.S. on H-1B or skilled-worker visas.
Implications for India
- This hike is expected to cut visa applications by around 33%.
- Trump administration has in its earlier executive actions banned the issuance of new skilled worker visas and new green cards.
- India’s export of services to the U.S. is estimated to be at $29.6 billion in 2018, 4.9% more than in 2017, and 134% more than 2008 levels.
- The U.S. has been issuing 85,000 H-1B visas annually, of which 20,000 are given to graduate students and 65,000 to private sector applicants, approximately 70% of which are granted to Indian nationals.
- The visa issuance ban, combined with the mandatory salary floor soon to be instituted, will seriously hit U.S. imports of services from India.
Criticism of the move
- A federal judge in the Northern District of California blocked the enforcement of the new visa ban, ruling that the President “exceeded his authority” under the U.S. Constitution.
- Google CEO hit out at the ban, saying, “Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today.”
Consider the question “What makes the H-1B visa important for India? What are the implications of the recent rise in the salary floor by the U.S. for the visa on India?”
Conclusion
While the ban and floor limit on salary come in the election milieu, India should prepare for the after election scenario.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Social media and challenges
The article discusses the threat posed by the spread of misinformation on the internet and suggests the steps to tackle it.
Warning for India
- The U.S.’s experience with the Internet should serve as a stark warning to India.
- Most Americans now get their news from dubious Internet sources.
- This resulted in hardening of political stances and the acute polarisation of the average American’s viewpoint.
- For India, the danger is that like the U.S., such extreme polarisation can happen in a few short years.
- There are anywhere between 500 million and 700 million people are now newly online, almost all from towns and rural areas.
Use of targeted algorithm
- Social networks such as Facebook, WhatsApp, and Twitter have become the source of news for the people, but these have no journalistic norms.
- The spread of the misinformation or news has been greatly enhanced by the highly targeted algorithms that these companies use.
- They are likely to bombard users with information that serves to reinforce what the algorithm thinks the searcher needs to know.
- As they familiarise themselves with the Internet, newly online Indians are bound to fall prey to algorithms that social network firms use.
Steps to control the misinformation on the internet
- 1) Tech firms are already under fire from all quarters, nonetheless, we need to act.
- They are struggling to meet calls to contain the online spread of misinformation and hate speech.
- 2) Unlike the U.S., India might need to chart its own path by regulating these firm before they proliferate.
- In the U.S., these issues were not sufficiently legislated for and have existed for over a decade.
- Free speech is inherent in the Constitution of many democracies, including India’s.
- This means that new Indian legislation needs to preserve free speech while still applying pressure to make sure that Internet content is filtered for accuracy, and sometimes, plain decency.
- 3) The third issue is corporate responsibility.
- Facebook, for instance, has started to address this matter by publishing ‘transparency reports’ and setting up an ‘oversight board’.
- But we cannot ignore the fact that these numbers reflect judgements that are made behind closed doors.
- What should be regulatory attempts to influence the transparency are instead being converted into secret corporate processes.
- We have no way of knowing the extent of biases that may be inherent inside each firm.
- The fact that their main algorithms target advertising and hyper-personalisation of content makes them further suspect as arbiters of balanced news.
- This means that those who use social media platforms must pull in another direction to maintain access to a range of sources and views.
Consider the question “What are the factors responsible for the spread of misinformation on social media and suggest the measures to tackle it.”
Conclusion
We need strong intervention now. Else, in addition to the media, which has largely been the responsible fourth estate, we may well witness the creation of an unmanageable fifth estate in the form of Big Tech.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various provisions of labour code
Mains level: Paper 2- Labour code reforms
The article highlights the key provision of the labour code and how it will help in removing the various hurdles faced by the key stakeholders.
Increase in the threshold for closure/lay-off and its impact
- The Industrial Relations Code 2020 increased the threshold for retrenchment/closure or lay-off without requiring government approval, from 100 to 300 workers.
- This will help in addressing the matter of expansion of the firms.
- In 2014, Rajasthan had increased the threshold of taking prior permission of the government before retrenchment.
- The reform has helped firms to set up larger operations in Rajasthan, and the same amendment was followed by 15 states.
Fixed Term Employment(FTE): Ensuring flexibility and tackling exploitation
- In many jobs employees are required for a few months such as infrastructure projects, textiles and garments, food and agro-processing, etc.
- However, the contractual employment workforce is quite often exploited with respect to wages, social security, and working conditions as well as welfare facilities.
- Fixed Term Employment is an intervention to enable the hiring of employees directly instead of hiring through contractors, which will ensure flexibility.
- For employees, all statutory entitlements and service conditions equivalent to those of a regular employee have now been made applicable.
- The Code on Industrial Relations also extends the benefit of gratuity even for an FTE contract of one year, which is five years in the case of regular employees.
Strengthening the formal economy
- The inclusion of the gig and platform workers in the Social Security Code 2020 is a step towards strengthening the formal economy.
- The provision for insurance coverage has been extended to plantation workers, and free annual health check-ups and a bipartite safety committee has been introduced for establishments such as factories, mines and plantation sectors in place of hazardous factories.
- The ESIC and EPFO requirements will now apply to establishments employing less than 10 and 20 workers respectively on a volunteer basis.
Ensuring female labour force participation
- Falling women’s workforce participation in India has been a matter of concern for a long time.
- Female labour force participation is a driver of growth and, therefore, participation rates indicate the potential for a country to grow more rapidly.
- The new Code ensures the employment of women in night shifts for all types of work.
Expansions of the provisions for migrant workers
- The Occupational Health, Safety & Working Conditions Code expands the definition of a migrant worker.
- The expanded definition includes workers who would be directly employed by the employer besides those employed through a contractor.
- Also a migrant, who comes on his own to the destination state, can declare himself a migrant worker by registering on an electronic portal.
- Registration on the portal has been simplified and there is no requirement of any other document except Aadhaar.
- For de-licencing/de-registration, it is mandated to notify registering officers about the closure of their establishment and certify payment of dues to all employed workers.
- This will ensure that workers will not be exploited even during the closure of the concerned establishment.
Other provisions
- The introduction of a concept of conducting web-based inspections can be seen as an attempt of matching corporate needs in the digital world.
- The provision for a 14-day notice period before strikes and lockdowns would allow both workers and employers to attempt resolving the issues.
- The codes also promote lifelong learning mechanism to match the evolving skill sets required for technology and process changes through the introduction of a reskilling fund.
Consider the question “What are the various provision added in the three labour code and how it will help revive the economy and tackle barriers in the expansion of firms?”
Conclusion
The reform measures address basic needs — to revive the economy and tackle barriers in the expansion of firms. Moreover, they promote the employment of women as well as reskilling of the workforce for the deployment of migrants.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: List 2 and List 3 of the Constitution
Mains level: Paper 2- Legal challenges Agri Acts 2020 could face
Farm Acts passed by the Parliament could face the legal hurdle in the court when challenged on its constitutional basis. This article explains the issue.
Background
- Recently, Parliament passed three acts related to agriculture. These Acts are-
- 1) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
- 2) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.
- 3) The Essential Commodities (Amendment) Act, 2020.
- This has led to the question: Does the Union government have the authority to legislate on what are rightfully the affairs of States?
Why agriculture is considered as States’ prerogative
- Agriculture is a State subject in the Constitution, listed as Entry 14 in the State List (List II).
- Entry 26 in the State List refers to “trade and commerce within the State”.
- Entry 27 in the State List refers to “production, supply and distribution of goods”.
- Entry 28 refers to “markets and fairs”.
- For these reasons, intra-State marketing in agriculture was always considered a legislative prerogative of States.
What was the legal basis used by the Parliament to pass the Farm Acts
- The central government invoked Entry 33 in the Concurrent List (List III).
- Entry 26 and 27 in List II are listed as “subject to the provisions of Entry 33 of List III”.
Entry 33 in List III: Trade and commerce in, and the production, supply and distribution of, — (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) foodstuffs, including edible oilseeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unginned, and cotton seed; and (e) raw jute.
Historical background of “Entry 33” of Concurrent List
- Entry 33, in its present form, was inserted in List III through the Constitution (Third Amendment) Act, 1954 after heated constitutional debates.
- The contention of the dissent was the following:
- As per Article 369 in the original version of the Constitution, the responsibility of agricultural trade and commerce within a State was temporarily entrusted to the Union government for a period of five years beginning from 1950.
- The 1954 Amendment attempted to change this into a permanent feature in the Constitution.
- According to dissident “if matters enumerated in Article 369 in were placed in List III, State autonomy would be rendered illusory and State powers and rights would be progressively pulverised…”.
- While another dissident argued that “passage of the Bill would transform the Indian Constitution into a “unitary Constitution” instead of a “federal Constitution” and reduce “all the States’ powers into municipal powers”.
- Notwithstanding the strong dissenting voices, the Bill was passed.
Let’s look into the related Supreme Court Judgments
- In many of its judgments after 1954, the Supreme Court of India has upheld the legislative powers of States in intra-State agricultural marketing.
- Most notable was the ruling of the five-judge Constitution Bench in I.T.C. Limited vs. Agricultural Produce Market Committee (APMC) and Others, 2002.
- The Tobacco Board Act, 1975 had brought the development of the tobacco industry under the Centre.
- However, Bihar’s APMC Act continued to list tobacco as an agricultural produce.
- In this case, the question was if the APMC in Monghyr could charge a levy on ITC for the purchase of unprocessed tobacco leaves from growers.
- An earlier judgment had held that the State APMC Act will be repugnant to the Central Act, and hence was ultra vires.
- But the Constitution Bench upheld the validity of the State APMC Act, and ruled that market fees can be charged from ITC under the State APMC Act.
Consider the question “Examine the validity of legal basis used by the Parliament to pass the Farm Acts. Why it could face the legal challenge?”
Conclusion
It was unwise on the part of the Centre to use Entry 33 in List III to push the Farm Bills. Such adventurism weakens the spirit of federal cooperation that India needs in this hour of crisis. Second, agriculture is exclusively a State subject.
Back2Basics: Read more about 3 Agricultural Acts passed by the Parliament here-
[Burning Issue] Agricultural Reform Bills, 2020
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Asset Reconstruction Company
Mains level: https://indianexpress.com/article/opinion/columns/insolvency-law-ibc-corporate-debt-resolution-bankruptcy-code-nirmala-sitharaman-6704399/
The article argues for the greater role to Asset Reconstruction Companies by allowing them to invest in the equity [shares] of the distressed companies.
Context
- In a recently released paper “Indian Banks: A time to reform” Viral Acharya and Raghuram Rajan argued for a greater role for Asset Reconstruction Companies.
- They argue that when there are fewer bids in a bankruptcy auction, the value on loans is better realised if read an asset reconstruction company takes over the borrower and places the firm under new management.
Current limits on the role of ARC
- The RBI limited the role of ARC to participation in resolutions under the Insolvency and Bankruptcy Code, 2016 (IBC) only by partnering with an equity investor, which is the resolution applicant.
- If the application succeeds, the equity investor would acquire the shares, while the ARC trust would acquire the debt.
Background of the ARCs
- Some stakeholders are asking for extending the role of ARCs by allowing direct invest in the equity of distressed companies through IBC resolution just like private equity funds.
- The RBI doesn’t appear to favour such an extended role for ARCs.
- This is due to the uninspiring performance of the Asset Reconstruction Companies in the past.
- At the time of the Asian Financial Crisis, India’s non-performing assets stood at a whopping 14.4 per cent.
- It was in this context that the Narasimham Committee (1998) recommended setting up an ARC specifically for purchasing NPAs from banks and financial institutions.
- Subsequently, the SARFAESI Act, 2002 created the legal framework for establishing multiple private ARCs.
- This policy achieved only modest success.
- The maximum average recovery by ARCs as a percentage of total bank claims stood at 21.5 per cent in 2010.
- Since then, it has steadily declined and reached 2.3 per cent in 2018.
- This low recovery could be the result of collateral disposal rather than genuine business turnarounds [i.e. operating the business and turning it profitable].
Need for extending the role of ARCs
- In 2002, India lacked an effective bankruptcy system.
- There was no market for corporate control of distressed firms.
- ARCs were originally designed for this peculiar institutional ecosystem.
- They were required to hand over the distressed business back to the original promoter once they had generated enough value to repay the debt.
- Consequently, ARCs had little incentive to turn around distressed businesses.
- This situation completely changed in 2016 as the IBC seeks to maximise the value of distressed businesses through a market for corporate control.
- ARCs should be able to fully participate in this market and attempt successful turnarounds by acquiring strategic control over distressed businesses.
- In a solvent company, shareholders have stronger incentives than creditors to maximise enterprise value.
- This is because an increase in enterprise value automatically increases the value of its equity.
- In contrast, creditors do not benefit from increases in enterprise value beyond their individual claims.
- If ARCs could hold more equity instead of debt in the resolved company, they would also have a stronger incentive to take strategic control to ensure successful turnaround.
Way forward
- The law should enable ARCs to invest in a distressed company’s equity, whether by infusing fresh capital or by converting debt into equity.
- Effectively, an ARC should act more like a private equity fund, as Acharya and Rajan suggested.
- This in turn would make the market for corporate control under IBC deeper and more liquid, improving ex-ante recovery rates for banks.
Consider the question “What are Asset Reconstruction Companies? How allowing the ARCs to invest in equity of distressed companies under IBC help successful turnaround of the distressed business?”
Conclusion
- If only ARCs are allowed to directly participate in IBC resolutions by infusing equity, they could emerge as the most efficient vehicle for turning around distressed Indian businesses.
Back2Basics: Difference between debt and equity
- Debt market and equity market are two broad categories of investment available in the general investment milieu.
- Equity markets trade in shares or stocks of the company listed on the stock exchanges.
- A stock in a company indicates a unit in the ownership of the company.
- As shareholders, you become part owners of the company.
- The largest shareholder, with 50% or more shares, becomes the owner of the company.
- Equity markets are riskier than debt markets.
- Debt is a form of borrowed capital.
- The central or state governments raise money from the market by issuing government securities or bonds.
- In effect, the government is borrowing money from you and will pay interest to you at regular intervals.
- The principal amount is returned on maturity.
- In the same way, a company raises money from the market by selling debt market securities such as corporate bonds.
- The debt market is made up of bonds issued by government authorities and companies.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Labour Code Bills
Mains level: Paper 2- Issues with the labour laws
Increase in the jobs without employment security
- Between 2004-05 and 2017-18, the share of salaried workers outside agriculture without any written contract increased from 60 per cent to 71 per cent.
- Even in private and public limited companies, this share increased from 59 per cent to 71 per cent.
- In the government and the public sector the share of such workers increasing from 27 per cent to 45 per cent over the period.
- Many of the wage jobs in the organised sector came through contractors.
- In organised manufacturing, the reported share of contract labour increased from 13 per cent in 1995-06 to 36 per cent in 2017-18.
Policy response
- A policy to deal with the problem of employment security was much needed.
- The response came in the form the three revised labour Code Bills — on Industrial Relations, Occupational Safety, Health and Working Conditions, and Social Security.
- These were introduced in Parliament in the Monsoon Session, and approved on September 23.
- These three labour codes, along with the Code on Wages approved earlier, touch the lives of every Indian worker.
“Fixed term” worker
- In 2018, the government amended the Standing Orders on Employment Act and introduced the category of “fixed term” worker.
- That category creates a permanent cadre of temporary workers, with no prospects of career growth and job security.
Changes and issues with the Bills
- 1) Government had rationalised fixed-term employment by arguing that industries had resorted to the third-party engagement of contract labour to get around the rigidities in firing workers.
- But that has not stopped the Codes from further liberalising the provisions relating to employment of contract labour and making their regulation applicable only in establishments employing 50 or more workers, instead of 20 or more.
- 2) The key provisions which regulate the employment of inter-state migrant workers have been further diluted and made applicable only to establishments employing 10 or more such workers, compared to five earlier.
- 3) Along with the provisions of retrenchment, the applicability of the Standing Orders, which regulate the categorisation as well as the terms of employment of workers in establishments, has also been raised from 100 to 300 workers.
- 4) The threshold for factories has now been doubled — from 10 to 20 workers with power — thereby eliminating a large number of important regulatory provisions for the smaller factories.
- 5) Relevant governments have been given much more leeway in exempting establishments from the applicability of a whole range of provisions in the Code.
- 6) Inspection provisions have been diluted in all the Codes and will no longer even be complaints based.
- 7) The changes have also made legal industrial action a virtual impossibility, and the presence of unions less possible.
Conclusion
Informality contributes to inequality and to conditions which make sustainable growth impossible, and economic recovery more difficult. It also creates conditions in which employers under-invest in workers’ capacities and workers are not invested in a company’s future — leading to low productivity and lack of competitiveness.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: APMC Act, Companies Act, ECA 1955
Mains level: Paper 3- Reforms in various sectors of economy
The article discusses the issues faced by the various sectors of the economy and how the reform measures introduced by the government could help these sectors.
Exploitation of farmers and consumers
- The Indian farmer has bee treated as captive sources of producing cheap food grain while living at subsistence levels.
- There was no freedom to choose the point of sale for his produce, he could not decide the price of his product and had no say in selecting the buyer.
- The end consumer was equally short-changed with frequent cycles of persistent high inflation.
- The only beneficiaries of this perverse system were middlemen who thrived under political protection.
How reforms will help farmers
- The stifling nature of the Essential Commodities Act and the APMC Act have both been removed.
- Contract farming is now nationally enabled, allowing private investment to come in.
- Private investment will bring in technology, modern equipment, better seeds, know-how for in-between-season crops, improved yields, better logistics and freer access to national and international markets.
- The Indian farm sector will now finally begin to see the benefits of economies of scale.
Need for the reforms in various sectors
- There were 44 different labour laws with more than 1,200 sections and clauses that demanded compliance if one even thought of becoming an entrepreneur.
- Different inspectors and departments administered these laws and this stunted many entrepreneurs.
- The Companies Act of 2013 completely paralysed risk-taking and quick decision-making among the private wealth creators.
- There were a large number of organisations that called themselves “banks” but were completely outside the ambit of RBI regulation.
- The politicians who controlled these banks were the primary obstacles in introducing any reforms in these sectors.
- Indian mainstream banks, contrary to international norms, had a peculiar practice of “grossing” their bilateral liabilities rather than “netting”.
- As per estimates, this locked anywhere between Rs 50,000 to Rs 70,000 crore funds.
Reforms made by the government
- In place of the 44 central labour laws, the Parliament has now put in place four labour codes that are much simpler — the Code on Wages, the Industrial Relations Code, the Social Security Code and the Occupational Safety, Health and Working Conditions Code.
- The bilateral banking netting law has been passed and a large corpus of unproductive capital has been freed to be deployed in the market.
- Cooperative banks will now be regulated by the RBI and its customers will have the same protections as those of other regular banks.
- The problematic sections of the Companies Act 2013 have been done away with and the fear of criminal prosecution gone.
Conclusion
The reforms in various sectors of the economy are bound to help the faster recovery of the economy as well as help the farmers realising their full potential.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Quad members
Mains level: Paper 2- Future course of action for Quad
The article discusses the future course of action for the Quad and issues it faces in the present circumstances.
Evolution of the Quad
- In 2007, the Quad (the United States, Japan, India, and Australia) was an idea whose time had not yet come.
- The global financial crisis was yet to happen as America continued to enjoy its ‘unipolar moment’.
- The American still expected China to become a ‘responsible stake-holder’.
- America required Chinese goodwill in handling issues with North Korea and Iran, and the War on Terror.
- Japan and Australia were riding the China Boom to prosperity.
- If India was ambivalent at the time, it was because this mirrored the uncertainties of others.
China’s reaction and naval expansion
- When the idea of Quad was barely on the table; the Chinese, labelled it as an Asian version of the North Atlantic Treaty Organization.
- The real reason for China’s hyperreaction was out of concern that such a grouping would “out” China’s plans for naval expansion by focusing on the Indo-Pacific maritime space.
- Once the idea of Quad 1.0 had died down, China advanced a new claim — the Nine-Dash Line — in the South China Sea.
- It undertook the rapid kind of warship building activity
- It built its first overseas base in Djibouti.
- It started systematically to explore the surface and sub-surface environment in the Indian Ocean beyond the Malacca Straits.
- China’s dismissal of the Arbitral Award in the dispute with the Philippines on the South China Sea and its militarization of the islands has given a second chance to the Quad.
Quad: A plurilateral mechanism
- The Quad nations need to better explain that the Indo-Pacific Vision is an overarching framework being discussed in a transparent manner.
- They should also explain that the objective of Indo-Pacific vision is of advancing everyone’s economic and security interests.
- The Quad is a plurilateral mechanism between countries that share interest on specific matters.
- In 2016, China itself established a Quadrilateral Cooperation and Coordination Mechanism with Afghanistan, Pakistan and Tajikistan.
- The Quad is no exception.
Way forward
- The forthcoming Ministerial Quad meeting will be an opportunity to define the idea and chart a future path.
- Needless provocation of China should be avoided.
- Other countries might be invited to join in the future.
- An outreach to the Indian Ocean littoral states is especially important since there are reports from some quarters suggesting that India is seeking to deny access to some extra-regional countries through the Indian Ocean.
Conclusion
A positive agenda built around collective action in humanitarian assistance and disaster relief, monitoring shipping for search and rescue or anti-piracy operations, infrastructure assistance to climatically vulnerable states, connectivity initiatives and similar activities, will re-assure the littoral States that the Quad will be a factor for regional benefit, and a far cry from Chinese allegations that it is some sort of a military alliance.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Eight Schedule
Mains level: Paper 2- Eighth Schedule and related issues
The article discusses the issues with excessive attention given to Hindi and how the neglect of another language could lead to the loss of language and the way of life associated with it as well.
Debate in Constituent Assembly and issues in the adoption of Hindi
- The issue of adopting a national language could not be resolved when the Constituent Assembly began drafting India’s Constitution.
- Members from the Hindi-speaking provinces who moved a number of pro-Hindi amendments and argued for adopting Hindi as the sole national language.
- Widespread resistance to the imposition of Hindi led to the passage of the Official Languages Act of 1963, which provided for the continued use of English for all official purposes.
- Hindi became the sole working language of the Union government by 1965 with the State governments free to function in the language of their choice.
- The constitutional directive for the Union government to encourage the spread of Hindi was retained within Central government entities in non-Hindi-speaking States.
Issues with the Eighth Schedule
- According to the 2001 Census, India has 30 languages that are spoken by more than a million people each.
- The Constitution lists 22 languages and protects them in the eighth schedule.
- Many languages are kept out of this schedule even if they deserve to be included.
- This includes Tulu which is spoken by over 1.8 million people and has inscriptions dating back to the 14th and 15th centuries.
- While Hindi, a much younger Indo-Aryan language, has been gaining prominence since before independence.
- When a refined language loses its status in literary and daily interactions, the way of life associated with it also vanishes.
- The Census found that while Hindi is the fastest growing language, the number of speakers of other languages has dropped.
Way forward
- While discussing Hindi and its use, let us also focus on the merit of other Indian languages.
- Instead of focusing on one national language, we should learn a language beyond the mother tongue and get to know a different way of life too.
Conclusion
If we don’t protect and promote other well-evolved or endangered and indigenous languages, our future generations may end up never understanding their ‘real’ roots and culture
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