Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Police reforms
The police have been in the news for incidents involving violence and killings. These instances points to the urgent need for the implementation of the Supreme Court directives given in the Prakash Singh case. The article deals with the issues of delay in the implementation.
Need for immediate remedial measures
- Police has been in the news for incidents involving police brutalities like thrashing of a Dalit Ahirwar couple by the police Madhya Pradesh, torture and killing of father-son duo in Tamil Nadu and killing of gangster in UP.
- These incidents and several others show that we need immediate remedial measures.
Past attempts for police reforms
- The first serious attempt was when the National Police Commission (NPC) was set up in 1977.
- The NPC submitted eight reports to the Ministry of Home Affairs between 1979 and 1981.
- Seven of these reports were circulated to the States in 1983.
Prakash Sing Case
- No action was taken on the reports of the reports until 1996.
- In 1996 Prakash Singh, a retired IPS officer, filed a PIL in the apex court in 1996 demanding the implementation of the NPC’s recommendations.
- In 2006, the Supreme Court issued a slew of directives on police reform.
Status of implementation of directives by Staes
- The one directive that would hurt the most is the setting up of a State Security Commission (SSC) in each State.
- State Security Commission would divest the political leaders of the unbridled power that they wield at present.
- Of the States that constituted an SSC, only Andhra Pradesh and Karnataka have made SSC recommendations binding on the State government.
- Only six States provided a minimum tenure of two years to the Director General of Police (DGP).
- Many States have not implemented a single directive of the Supreme Court.
Way forward
- Expecting political will to implement police reforms is difficult to come by, it is for the judiciary to step in and enforce the directives it had passed.
- Fourteen years is too long a period for any further relaxation.
- The Court has to ensure that its directives are not dismissed lightly.
Consider the question “What are the issues facing police administration? What are the reasons for lack of full implementation of the directives given by the Supreme Court in the Prakash Singh case?
Conclusion
A bold step towards bringing down crimes is possible only when the politicians-criminals-police nexus is strangled.
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The article analyses some trends in India’s population growth as found in the Sample Registration System Statistical Report (2018).
Context
- There have been some encouraging trends in India’s population in the Sample Registration System (SRS) Statistical Report (2018) and global population projections made by the Institute of Health Metrics and Evaluation (IHME), US.
Declining TFR
- SRS report estimated the Total Fertility Rate (TFR), the number of children a mother would have at the current pattern of fertility during her lifetime, as 2.2 in the year 2018.
- It is estimated that replacement TFR of 2.1 would soon be, if not already, reached for India as a whole.
- As fertility declines, so does the population growth rate.
- This report estimated the natural annual population growth rate to be 1.38 per cent in 2018.
- A comparison of 2011 and 2018 SRS statistical reports shows that TFR declined from 2.4 to 2.2 during this period.
- Fertility declined in all major states.
- In 2011, 10 states had a fertility rate below the replacement rate. This increased to 14 states.
- The annual natural population growth rate also declined from 1.47 to 1.38 per cent during this period.
So, when will India’s population stabilise
- Duet to population momentum effect, a result of more people entering the reproductive age group of 15-49 years due to the past high-level of fertility, population stabilisation will take some time.
- The UN Population Division has estimated that India’s population would possibly peak at 161 crore around 2061.
- Recently, IHME estimated that it will peak at 160 crore in 2048.
- Some of this momentum effect can be mitigated if young people delay childbearing and space their children.
Factors affecting fertility rates
- Fertility largely depends upon social setting and programme strength.
- Programme strength is indicated by the unmet need for contraception, which has several components.
- The National Family Health Survey (2015-16) provides us estimates for the unmet need at 12.9 per cent and contraceptive prevalence of 53.5 per cent for India.
- Female education is a key indicator for social setting, higher the female education level, lower the fertility.
- As the literacy of women in the reproductive age group is improving rapidly, we can be sanguine about continued fertility reduction.
Declining sex ratio at birth: Cause for concerrn
- The SRS reports show that sex ratio at birth in India, measured as the number of females per 1,000 males, declined marginally from 906 in 2011 to 899 in 2018.
- Biologically normal sex ratio at birth is 950 females to 1,000 males.
- The UNFPA State of World Population 2020 estimated the sex ratio at birth in India as 910, lower than all the countries in the world except China.
- This is a cause for concern for following 2 reasons:
- 1) This adverse ratio results in a gross imbalance in the number of men and women.
- 2) Impact on marriage systems as well as other harms to women.
- Increasing female education and economic prosperity help to improve the ratio.
- It is hoped that a balanced sex ratio at birth could be realised over time, although this does not seem to be happening during the period 2011-18.
Conclusion
In conclusion, there is an urgent need to reach young people both for reproductive health education and services as well as to cultivate gender equity norms. This could reduce the effect of population momentum and accelerate progress towards reaching a more normal sex-ratio at birth. India’s population future depends on it.
Back2Basics: Total Fertility Rate and Replacement rate
- Total fertility rate (TFR) in simple terms refers to total number of children born or likely to be born to a woman in her life time if she were subject to the prevailing rate of age-specific fertility in the population.
- TFR of about 2.1 children per woman is called Replacement-level fertility (UN, Population Division).
- This value represents the average number of children a woman would need to have to reproduce herself by bearing a daughter who survives to childbearing age.
- If replacement level fertility is sustained over a sufficiently long period, each generation will exactly replace itself without any need for the country to balance the population by international migration.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various UN bodies
Mains level: Paper 2- Opportunity for India to push for institutional changes at the UN
The article analyses the changing geopolitical context against the background of the pandemic. China has been facing some challenges at the UN of late. Multilateralism faces an unprecedented crisis. This context provides an opportunity for India to push for reforms in international institutions.
China facing difficulty in elections to UN bodies
- Recently, India besting China in the elections for a seat on the UN’s Commission on the Status of Women (CSW).
- Soon after the CSW vote, it lost another election, this time to tiny Samoa for a seat on the UN Statistical Commission.
- And a couple of days ago, it just about managed to get elected to the UN High Rights Council, coming fourth out of five contestants for four vacancies.
- Earlier, China’s candidate had lost to a Singaporean in the race for DG World Intellectual Property Organization.
China’s strengths
- Taking advantage of its position as a member of the P-5 and as a huge aid giver, China made itself invincible in UN elections.
- It won among others, the top positions at the Food and Agriculture Organization (FAO), the UN Industrial Development Organization (UNIDO), the International Telecommunication Union (ITU) and the International Civil Aviation Organization (ICAO).
Historical background on China’s rise at the UN
- World War II saw strong U.S.-China collaboration against the Japanese, including U.S. operations conducted from India.
- Their bilateral ties saw the U.S. include the Chinese in a group of the most important countries for ensuring world peace post- World War II, along with the U.S., the USSR and the U.K.
- This enlarged into the P-5, with France being added by the UK at the San Francisco conference held in 1945 where the UN charter was finalised.
- The pure multilateralism of the League of Nations was thus infused with a multipolarity, with the U.S. as the sheet anchor.
Challenges to multilateralism and the need for reform in the international institutions
- Multilateralism is under stress due to COVID-19 pandemic and a certain disenchantment with globalisation.
- At the root is the rise of China and its challenge to U.S. global hegemony.
- But in the current scenario multilateralism backed by strong multipolarity in the need of the hour.
- This demands institutional reform in the UN Security Council (UNSC) and at the Bretton Woods Institutions.
- In this context, it is good that recently India, Germany, Japan and Brazil (G-4) have sought to refocus the UN on UNSC reform.
- As proponents of reform, they must remain focused and determined even if these changes do not happen easily or come soon.
- This is also the way forward for India which is not yet in the front row.
Way forward
- Earlier in the year, India was elected as a non-permanent member of the UNSC for a two-year term.
- India will also host the BRICS Summit next year and G-20 Summit in 2022.
- These are openings for India in collaborating the world in critical areas that require global cooperation especially climate change, pandemics and counter-terrorism.
- India also needs to invest in the UN with increased financial contributions in line with its share of the world economy and by placing its people in key multilateral positions.
Consider the question “The UN, which came into existence in different time fails to take into account the realities of the changing world. In light of this, examine the basis of India’s claim to a permanent seat at the UN. What are the challenges to India’s claim.”
Conclusion
Against the backdrop of pandemic and subsequent pushback against China at the UN, it is also an opportune moment for India and a Reformed Multilateralism.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Criteria for MSMEs
Mains level: Paper 3- Formalisation of MSMEs
The lack of formalisation has several implications for MSMEs. Registering them could help them in various ways. The article deals with the issue of formalisation.
Please read the link shared below for issues related to MSME
The missing large in MSMEs
Steps taken by Government to Formalize MSME
- UAM: In 2015, the government notified the Udyog Aadhaar Memorandum (UAM), an online filing system for MSMEs.
- As of January, 86 lakh MSMEs had registered on the UAM portal.
- In 2016, the government notified rules under which MSMEs had to furnish information relating to their enterprises, online, in an MSME databank.
- As of January, only 1.6 lakh units registered on it.
- A new process of classification and registration for small businesses took off on July 1 called as “Udyam”.
- As of October 1, the MSME ministry has confirmed that only 7 lakh registrations have taken place using the new system.Nudge by the government
- In an attempt to nudge more enterprises to become lifetime Udyam, the government has integrated the system with the Trade Receivables Electronic Discounting System (TReDS) and the Government e-Marketplace (GeM).
- In its updated Priority Sector Lending (PSL) guidelines, the RBI has established that for the purposes of PSL, MSMEs will be identified as per the gazette notification laying down the new process of classification and registration.
Addressing the concerns
- While the Udyam initiative holds more promise, it is important to assess if this will be detrimental to accessing formal finance.
- To this end, the government and RBI should consider whether the registration requirement can be exempted for units with investment and turnover that falls in the lower end of the criteria.
- In 2018, the International Finance Corporation estimated that the overall supply of finance from formal sources met only one-third of the credit demand of the MSME sector.
- Enabling strategies such as PSL could provide a fillip to priority sectors including MSMEs which require increased formal financing.
Conclusion
The costs of formalisation and compliance are high and onerous in many states in India. In such an ecosystem, there are perverse incentives to remaining small and informal. Governments’ efforts towards formalisation should be directed towards addressing these issues.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Need for multilateralism
Multilateralism faces several challenges at the time when it is needed the most. The article highlights the need for more of it in the face of global challenges.
Lack of international collaboration to deal with Covid
- As COVID-19 recognises no boundaries, one would have expected that countries with technological and financial capabilities, would agree to pool their resources together to work on an effective and affordable anti-virus vaccine.
- Instead, there are several parallel national efforts underway even as the World Health Organization (WHO) has put together a Covax alliance for the same purpose.
- Active collaboration would have enhanced our collective ability to overcome what has become a public health-cum-economic crisis.
- But we live in an era when nationalist urges, fuelled by a political opportunism, diminish the appeal of international cooperation.
- The post-pandemic world will have the awful dilemma of global integration without solidarity.
Trends in the global order that suggests the need for multilateralims
1) Global food crisis
- The World Food Program has been awarded this year’s Noble Peace Prize.
- The award is sending a message to the world — that we need multilateralism as an expression of international solidarity.
- According to the WFP, 132 million more people could become malnourished as a consequence of the pandemic.
- To the 690 million people who go to bed each night on an empty stomach, perhaps another 100 million or more will be added.
- The Nobel Prize to the WFP will hopefully nudge our collective conscience to come together and relieve this looming humanitarian crisis.
2) Despite issues, U.N. is still important
- The United Nations is at the centre of multilateral institutions and processes and kept alive the notion of international solidarity and cooperation.
- But it suffers from several disabilities due to the fault of its most powerful member countries.
- They have deprived the UN of resources.
- They have resisted efforts to institute long-overdue reforms.
- Its structure no longer reflects the changes in power equations that have taken place and country such as India continues to be denied permanent membership of the Security Council.
- And yet, the UN is now an essential part of the fabric of international relations for two reasons:
- 1) The salience of global issues has expanded.
- 2) The need for multilateral approaches in finding solutions has greatly increased.
3) Multilateral institutions have become platform for contestation
- In the network of multilateral institutions, several belong to the UN system, others are inter-governmental, still others may be non-governmental of a hybrid character.
- This network performs two important tasks:
- 1) Enable governance in areas which require coordination among nation-states.
- 2) Set norms to regulate the behaviour of states so as to avoid conflict and to ensure both equitable burden-sharing and, equally, a fair distribution of benefits.
- While there are multilateral institutions they have become platforms for contestations among their member states.
- There is recognition of the need to cooperate but this is seen as a compulsion rather than desirable.
4) Globalisation driven by technology will remain here
- Globalisation may have stalled, but as we become increasingly digitised, there will be more, not less, globalisation.
- The pandemic has triggered galloping globalisation in the digital economy.
- Globalisation is driven by technology and as long as the technology remains the key driver of economic growth, there is no escape from globalisation.
- In the contemporary world, the line separating the domestic from the external has become increasingly blurred.
- In tackling domestic challenges deeper external engagement is often indispensable. This is certainly true of climate change.
- The pandemic originated in a third country but soon raged across national borders.
- If there had been a robust and truly global early warning system, perhaps it could have been contained.
5) Interconnectedness of challenges
- We must also take into account the inter-connectedness among various challenges, for example, food, energy and water security are inter-linked with strong feedback loops.
- Enhancing food security may lead to diminished water and energy security.
- It may also have collateral impact on health security.
- It is in recognition of these inter-connections that the international community agreed on a set of Sustainable Development Goals (SDGs).
- The SDGs are cross-domain but also cross-national in character, and hence demand greater multilateral cooperation in order to succeed.
6) Need for more democratic world
- The lack of cooperation from even a single state may frustrate success in tackling a global challenge.
- A fresh pandemic may erupt in any remote corner of the world and spread throughout the globe.
- Prevention cannot be achieved through coercion, only through cooperation. It is only multilateralism that makes this possible.
Conclusion
It is a paradox that precisely at a time when the salience of cross-national and global challenges has significantly increased, nation-states are less willing to cooperate and collaborate in tackling them. So, there is a need for more of multilateralism to deal with the issues of global level.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Inflation targeting mechanism
Mains level: Paper 3- Issues with the inflation targeting mechanism of the RBI
The article analyses the recent changes signalled by the RBI in its policymaking.
Changes in the economic policymaking
- Recently the U.S. Fed declared that the Fed will not let inflation stand in the way of maximising employment.
- The reason for this was that the Phillips Curve, the relationship between inflation and unemployment, may no longer hold in the U.S. economy.
- This is significant, given that the Anglo-American economics has been dominated by Phillips Curve.
Why there was need for change in inflation targeting
- Data show that the model that currently guides India’s inflation control strategy may be quite irrelevant.
- This is seen in the recent behaviour of inflation.
- We know that output contracted by more than 23% in the first quarter of this year.
- Despite this staggering decline the inflation rate did not change,
- This was contrary to experience that inflation reflects an ‘over heating’ economy, one growing too fast in relation to its potential.
- This view represents the RBI’s official understanding of inflation, and presumably forms the basis of its policy of inflation targeting.
- It was endorsed by the Government of India when it legislated the modern monetary policy framework to enable the RBI to pursue inflation targeting.
- If the Phillips Curve, which the RBI’s approach internalises, exists, inflation should have decreased as India’s economy contracted during the lockdown.
- The current inflation targeting mechanism had been imagined with developing economies in mind.
- Inflation targeting mechanism is based on the idea that food prices are an important determinant of inflation along with imported inflation.
- Accordingly, a macroeconomic contraction need not lower inflation.
Role of food prices in India
- A recent working paper of the RBI’s research department suggested that a more eclectic model than the one that underlies inflation targeting does a better job of forecasting inflation in India.
- This model accepts a role for food prices, a possibility that is missed when embracing economic models developed in the western hemisphere, where food prices have stopped trending upwards over half a century ago.
Conclusion
The RBI shifting away from its rigid inflation targeting policy is in tune with the time and signals that the central bank is finally alive to India’s economy.
Back2Basics: What is Philips Curve?
- The Phillips curve is an economic concept, stating that inflation and unemployment have a stable and inverse relationship.
- The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment.
- However, the original concept has been somewhat disproven empirically due to the occurrence of stagflation in the 1970s, when there were high levels of both inflation and unemployment.
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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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