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Type: Op-ed

  • POCSO Act

    In a recent judgement, Section 7 of POCSO Act was interpreted in a controversial way by the Nagpur Bench of the Bombay High Court. 

    Issue of the definition of sexual assault under POCSO Act

    • Recently, the Nagpur Bench of the Bombay High Court held that skin-to-skin contact is essential to constitute the offence defined under Section 7 of the Protection of Children from Sexual Offences Act, 2012 (POCSO Act).
    • Section 354 of the Indian Penal Code, 1860, which deals with outraging modesty of women and which provides for a lesser sentence, was held to be applicable in such cases.
    • This ruling raises several concerns.
    • The National Commission for Protection of Child Rights had asked the Maharashtra government to appeal this decision in the Supreme Court.
    • The Supreme Court has currently stayed the acquittal of the accused under this judgement.

    Concerns with the judgement

    • The Court held that the stringent nature of punishment provided for the offence required stricter proof and serious allegations.
    • The court said the punishment should be proportionate to the seriousness of the crime.
    • Nevertheless, while adjudging the seriousness of the offence the court has not given consideration to the fact that the victim, a minor, is entitled to greater protection.
    • The major concern is that the interpretation of the court seems to defeat the purpose of the POCSO Act.
    • Section 7 of POCSO defines sexual assault as “Whoever, with sexual intent touches the vagina, penis, anus or breast of the child or makes the child touch the vagina, penis, anus or breast of such person or any other person, or does any other act with sexual intent which involves physical contact without penetration is said to commit sexual assault.”
    •  The court has concluded that the touching of the breast without skin-to-skin contact is not similar to the abovementioned acts and, therefore, does not fall within this definition.
    • The court seems to have followed a rather pedantic approach to reach this conclusion.
    • The fact that the trauma of the child whose breasts were groped through a cloth could be of the same nature and severity as direct touching of the breast is not discussed.
    • And if the trauma is the same, the mere existence of cloth should not affect the applicability of the POCSO Act.

    Legislative history and object of POCSO Act

    POCSO Act

    • The POCSO Act was enacted with the specific intention of protecting children from sexual assault and sexual harassment.
    • It took into consideration the standards prescribed by the Convention on the Rights of the Child adopted by the General Assembly of the United Nations to which the Indian government acceded to on December 11, 1992.
    • The Act acknowledges the special vulnerability of children and that special protection, above and beyond that provided in the IPC, is required when the victim is a child.

    Conclusion

    If such an interpretation is followed, there is a threat that the POCSO Act in itself might become redundant as a wide range of sexually violative activities would be excluded from its ambit due to lack of skin-to-skin contact.

  • Global antitrust and the challenge of Big Tech

    The article deals with the issue of checking the misuse of monopoly power by the Big Tech while encouraging their positive externalities.

    Worldwide Investigations against Big Tech

    • Big Tech firms, especially Facebook and Google have been investigated worldwide, including in the European Union and the United States, on the abuse of monopolistic power.
    •  Comparisons are drawn with investigations in the U.S. on the telecom industry and the break-up of the AT&T.
    • However, there are important differences this time around.
    •  First, the information good that is being provided by the Internet firms of today, is largely non-rival.
    • Second, Internet firms operate globally, therefore, it is often difficult to lay down international rules of obligation and fulfilment.
    • Third, while it is debatable whether the goods and services provided by the Internet firms are excludable.
    • It is this factor that was leveraged by the Internet firms to provide search, navigation, and social connectivity with no charge to the consumers, and, consequently, making these services non-excludable.

    Monetisation model of Big Techs and isseus with it

    • Public goods should be provided by governments, but the information goods as described above are being provided by private firms.
    • This arrangement poses several problems.
    • First, private firms need to have monetisation models to cover the costs of providing their services.
    • So,  the Internet firms have resorted to personalised advertisements and third-party sharing of the personal data of their users for monetisation purposes.
    • Second, the strong network effects present in these Internet platforms warrant increasing the subscriber base and garnering as much market share as possible.
    • This results in near-monopoly of some firms in their defined markets.
    • These firms may resort to anti-competitive behaviour including acquiring rivals to vertically integrate; erecting entry barriers by refusing to interconnect and inter-operate with competing firms, and leveraging their capital base, thereby engaging in predatory pricing, and driving out competitors.

    Positive externalities and consumer surplus

    • Network effects create a huge consumer surplus.
    • Even without our knowledge, these Internet firms have now become an indispensable part of our lives.
    • There are positive externalities as well, for example, Google Maps Application Program Interface (APIs) is being used by almost all logistic transand port companies.
    • Facebook APIs are used for advertisement by almost all firms across the industry.
    • Google, recently announced that its Search is being expanded to provide accurate and timely information on vaccine distribution to enable quick recovery from the COVID-19 pandemic.

    Challenge of regulation

    • The question before policymakers is how to regulate these Internet firms from abusing their monopoly power while encouraging the positive externalities and consumer surplus they create.
    • It is often very difficult to prove that the firms engage in the abuse of their monopoly power.
    • Due to strong network effects, it is not possible to ban or curtail these services.

    Way forward

    • A traditional view is to subsidise the good that creates positive externalities.
    • Governments can provide tax subsidy to these Internet firms in return for their orderly behaviour in the marketplace.
    • Governments could explore mandating sharing of Non-Personal Data (NPD) owned by these firms for societal and economic well-being as pointed out in the expert committee on NPD.
    • The other way to control any abusive behaviour of the Internet firms is to use the power of public voice.
    • The huge public outcry and subsequent government actions have delayed the recent changes to privacy policy relating to the sharing of personal information between WhatsApp and its parent firm, Facebook.

    Consider the question “Services provided by the Internet firms have become indispensable part of our life, this leads to the problem of checking their monopoly power while encouraging their positive externalities and consumer surplus. In light of this, discuss the challenges posed by the Big Techs and suggest the ways to deal with them.”

    Conclusion

    While governments and regulators deal with these dilemmas the Internet firms should adhere to core ethical principles in conducting their businesses as firms that aim at super monopoly profits and are greedy to become powerhouses of the world, often end up in the ditch.

    Back2Basics:What is positive externality

    • A positive externality exists if the production and consumption of a good or service benefits a third party not directly involved in the market transaction.
    •  For example, education directly benefits the individual and also provides benefits to society as a whole through the provision of more informed and productive citizens.

    What is Network Effect

    • The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service.
    • The Internet is an example of the network effect. Initially, there were few users on the Internet since it was of little value to anyone outside of the military and some research scientists.
    • However, as more users gained access to the Internet, they produced more content, information, and services.
    • The development and improvement of websites attracted more users to connect and do business with each other.
    • As the Internet experienced increases in traffic, it offered more value, leading to a network effect.

  • Keep the wheels of economic recovery turning

    Ahead of the Budget, the article discusses the status of Indian economy and suggests the measures to be adopted in the budget to speed up the recovery.

    Estimates of damages and signs of economic recovery

    • The first advance estimates of national income published on January 7 project a contraction of 7.7% for real GDP.
    • The Q2 GDP estimates published by the National Statistical Office had suggested an economic recovery in India.
    • An improvement in the rate of contraction from 23.9% in Q1 to 7.5% in Q2 was seen as the beginning of a sustained recovery.
    • The Ministry of Finance, in its Monthly Economic Review highlighted it as signifying a ‘V’ shaped recovery and as a reflection of the resilience and robustness of the Indian economy.
    • The Monetary Policy Statement of the Reserve Bank of India (RBI) released on December 4, 2020 also projects positive growth in the remaining quarters of the financial year.

    State of the economy before pandemic

    • Growth rate of the economy had collapsed from 8.2% in Q4 of 2017-18 to a mere 3.1% in Q4 of 2019-20, sliding continuously for eight quarters.
    • The policy stance against this backdrop was premised on the hope that private corporate investment will pick up momentum sooner than later.
    • The RBI did the heavy lifting through five consecutive lowering of repo rate along with liquidity infusion programmes.
    • However, monetary-fiscal linkages are crucial to catalyse the demand.

    Crucial role played by the RBI

    • While being cautious of inflation, the RBI has decided to continue the accommodative stance in its latest monetary policy to support growth.
    • The CPI inflation after crossing 7% has cooled off to 4.6% in December.
    • Still, the real interest rates remain very low.
    • The efficacy of the new monetary framework (NMF) — the agreement between the RBI and Government of India in February 2016 to adopt inflation targeting in India — will be reviewed in March 2021, and we flag the need for revising the framework.
    • The RBI is continuing its liquidity infusion programmes including the on-tap Targeted Long Term Repo Operations (TLTRO).
    • This programme announced on October 9, 2020 for five stressed sectors has been extended to 26 stressed sectors notified under the Emergency Credit Line Guarantee Scheme (ECLGS 2.0).
    • The RBI is also continuing its ‘operation twist’  with Open Market Operations (OMO) of ₹10,000 crore scheduled for December 17, 2020.
    • Nevertheless, the RBI Governor has rightly pointed out that the signs of recovery are far from being broad-based.

    Stimulus for targeted state intervention

    • According to the International Monetary Fund’s Fiscal Monitor Database of Country Fiscal Measures, the fiscal stimulus for India is 1.8% of GDP.
    • The IMF, in its Fiscal Monitor, highlights the need to scale up public investment to ensure successful reopening, boost growth and prepare economies for the future.
    • What we need is stimulus not based on “business cycle” but from the perspective of much needed targeted state interventions in public health, education, agriculture and physical infrastructure, and to redress widening inequalities.
    • As private final consumption expenditure is sluggish, contracting 26.7% and 11% in Q1 and Q2, respectively, a “fiscal dominance” is expected in India for sustained economic recovery.
    • However, India cannot afford fiscal stimulus at the rates of advanced economies, due to a lack of fiscal space.

    Way forward

    • Plummeting private corporate investment in India is a matter of concern.
    • The fear of financial crowding out emanating from high fiscal deficit is misplaced in the context of India.
    • Economic recovery will be determined by the degree of containment of the pandemic and the sustained macroeconomic policies.
    •  Any abrupt withdrawal of ongoing economic policy support, both by the monetary and fiscal authorities, will be detrimental to growth in times of the pandemic.
    • The fiscal rules at the national and subnational government levels need to be made flexible.

    Consider the question “Recovery of Indian economy battered by the pandemic has not been complete. Suggest the fiscal measure to be adopted by the government to speed up the recovery.”

    Conclusion

    The fiscal stimulus needs to continue in FY 2021-22 to speed up India’s recovery along with the measures suggested above.

  • The right of life and environment

    The article highlights how climate change impacts the constitutional values and promises by affecting the vulnerable disproportionately and suggest the distinctly Indian paradigm of development.

    How democratic values are threatened by climate change

    • Over the last seven decades, India has made distinct progress, but many core development challenges persist and we are yet to fulfill our constitutional promise.
    • Climate change will only exacerbate existing inequalities through a range of cascading and coinciding crises.
    • These words from the Preamble — justice, liberty, equality, and fraternity — serve as reminders of the daunting path to achieving social democracy, especially in a warming world.
    • B R Ambedkar had said that to maintain democracy not merely in form, but also in fact it was essential not to be content with mere political democracy but to strive for social democracy as well.

    How climate change affects democratic values

    • Climate change is profoundly unjust.
    •  It will increasingly impinge upon our freedom of movement, and that it could deny equality of status and opportunity to millions of disadvantaged citizens like the forest-dwelling communities who have contributed least to the crisis and yet stand to be hit the hardest.
    • The evidence is clear that unless we rapidly move to reduce planet-warming greenhouse gas emissions, vast swathes of India could be inhospitable due to floods, droughts, heatwaves, and increasingly erratic and unpredictable monsoon rains.

    Call for action against climate change

    • The fraternity can particularly serve as a call to action for the powerful to direct their resources towards shaping India’s response to climate change and “assuring the dignity of the individual”, as framed in the Preamble.
    • Indian business and philanthropy can play a key role in building resilience by encouraging innovation, complementing the role of the state, and securing citizens’ legislated rights.
    • Climate philanthropy can help develop and pilot new solutions and inspire ambitious political action.
    • A plethora of opportunities are currently on the margins but could become mainstream drivers for the three key pillars of jobs, growth, and sustainability.
    • A distinctly Indian, climate-friendly development paradigm powered by clean energy could play an integral role in fostering social and economic justice by uplifting millions of Indians.
    • Our nation’s welfare depends on healing the broken relationship between a broken economy and a broken ecology.

    Constitutional mandate to protect the environment

    • The right to life enshrined in Article 21 is increasingly interpreted as a right to environment.
    • When this is read together with Articles 48A and 51A(g), there is a clear constitutional mandate to protect the environment that will only grow more important in the coming decades for citizens and the executive, legislature, and judiciary.
    • Central to these considerations is the need for a uniquely Indian climate narrative, one that is both by and for Indians.

    Consider the question “Our constitutional values must guide us to a distinctly Indian, climate-friendly development paradigm to fulfil the constitutional commitment to its citizens. Comment.”

    Conclusion

    India can build its own pathway to become a climate leader aiming to secure a future where both people and nature can thrive. Much of this work can be rooted in the constitutional framework that binds together millions of Indians despite their myriad differences — a framework that is progressive in scope and ambitious in vision.

  • Pursuing national interests, at the UN high table

    The article highlights India’s challenges at the UNSC in its 2 year stint.

    India’s agenda at the UNSC

    • India’s two-year non-permanent stint at the UNSC should be viewed as a once-in-a-decade opportunity to clearly identify and pursue its national interests regionally and globally.
    • India’s entry into the UNSC coincides with the emergence of a new world order.
    • Under new world order, there is systemic uncertainty, little care for global commons, absence of global leadership, the steady division of the world into rival blocs, pursuit of narrow national interests.
    • Efforts by Biden administration in the United States may go on to ameliorate some of the harsh impact of this global order.
    • The UNSC has also reached a point wherein its very relevance is in serious doubt.
    • India too is no longer an ardent believer in the fantastical claims about a perfect world at harmony with itself, nor is it a timid observer in global geopolitics.
    • India’s pursuit of its interests at the UNSC should, therefore, reflect its material and geopolitical limitations, and its energies should be focused on a clearly identified agenda.

    Factors determining India’s agenda at the UNSC

    1) Rivalry with China

    • India’s tenure at the UNSC comes in the wake of its growing military rivalry with China.
    • China’s opposition to having India chair the Counter-Terrorism Committee (CTC) in 2022 was a precursor to the things to come ahead.
    • The next two years will be key to ensure checking further Chinese incursions along the Line of Actual Control and building up enough infrastructure and mobilising sufficient forces in the forward areas.

    2) Relations with Russia

    • Greater Indian alignment with the West at the UNSC, an unavoidable outcome, could, however, widen the growing gulf between Russia and India.
    • It might not be possible for India to sit on the fence anymore.
    • Fence sitting would bring more harm than goodwill in an international system where battlelines are sharpening by the day.

    3) Terrorism issue

    • Terror is likely to be a major focus for India at the UNSC.
    • External Affairs Minister’s statement at the UNSC Ministerial Meeting on the 20th Anniversary of Security Council Resolution 1373 and the establishment of the Counter Terrorism Committee has set the stage for New Delhi’s approach on the issue.
    • India recently assumed the chair of the Taliban sanctions committee which assumes significance given the fast-moving developments in Afghanistan.
    • India must formulate its policy towards terrorism with far more diplomatic finesse and political nuance especially given that it is chairing the Taliban sanctions committee while courting the very same Taliban.

    4) Coalition of like-minded states and setting the agenda for next decade

    • India should use the forum and its engagement there to build coalitions among like-minded states and set out its priorities for the next decade — from climate change to non-proliferation.
    • India should use its bargaining power at the UNSC to pursue its national interests in other forums and domains as well.
    • India’s UNSC strategy should involve shaping the narrative and global policy engagement vis-à-vis — the Indo-Pacific.
    • Given India’s centrality in the Indo-Pacific region and the growing global interest in the concept, New Delhi would do well to take it upon itself to shape the narrative around it.
    • In doing so, it should, through the UNSC and other means, court Moscow once again and assuage its concerns about the Indo-Pacific.

    Way forward

    • India’s pursuit of its national interest at UNSC must also be tempered by the sobering fact that the UNSC is unlikely to admit new members any time soon, if ever at all.
    • A glance at the recent debates on UNSC reforms and the state of the international system today should tell us that bending over backwards to please the big five to gain entry into the UNSC will not make a difference.

    Consider the question “What agenda should India pursue at the UNSC in its two year non-permanent stint? What are the challenges in pursuing such agenda?”

    Conclusion

    India must focus its energies on what it can achieve during the short period that it would be in the UNSC rather than what it wishes happened.

  • Leveraging government-private thought partnerships

    Thought partnership between government and the external players can aid in informed policymaking. The article deals with these issues and suggest forging of more of such partnerships. 

    Government working together with external partners

    • Policymaking requires multiple rounds of consultations and co-working with different entities, including collaboration between the government and external partners.
    • Over the last few years, there has been increasing evidence of the government and external partners working together on complex policy problems.
    • The government has formalized the induction of private individuals into the system by opening up lateral entry.
    • Several central government ministries and entities, such as NITI Aayog, routinely recruit private individuals as consultants, officers on special duty, or young professionals.
    • Given the staggering vacancies in the central government, such support is critical since civil servants are generally overburdened and under-resourced.

    What is thought partnership and how it works

    • Thought partnerships are a structured mechanism for private entities to lend relevant strategic expertise to the government on policy design, evaluation, and implementation.
    • It is also not always feasible for the government itself to fund projects involving private partners, more so when such projects are unconventional thought partnerships.
    • Several domestic and international philanthropies and impact investing firms are already investing in critical sectors in developing countries including India.
    • However, much of this funding goes into supporting projects or interventions that work in limited, contextual settings rather than systemic or sectoral transformation programs.
    • It is here that philanthropies and impact investing firms can make a huge difference.

    Past thought partnerships

    • In 2005, the Ashok Lahiri Committee report stated that there was not enough knowledge about external capital flows and controls in India.
    • The committee’s recommendation resulted in the establishment of the National Institute of Public Finance and Policy, Department of Economic Affairs research program.
    • The program led to the creation of a rich body of world-class research on capital controls and flows in India that was used to inform government policy on the matter.
    • In 2015, the Ministry of Corporate Affairs constituted a research secretariat headed by the Vidhi Centre for Legal Policy, to support the Companies Law Committee to make “informed decisions”.
    • The National Institute of Financial Management is working with the Department of Economic Affairs to provide legal research and technical assistance on Indian and foreign financial markets, policy analysis, formulation as well as the conduct of impact assessment studies on decisions taken by the Securities and Exchange Board of India.

    Consider the question “What is thought partnership and how it could help in making informed policymaking? What are the challenges in forging thought partnerships?”

    Conclusion

    It is in the public interest that more thought partnerships are forged and funded to channel external expertise and skills towards finding scalable solutions to the pressing policy challenges the country faces.

  • Shipping sector in india

    The article deals with the problems faced by India’s shipping sector and suggests the measures to improve the shipping sector.

    Importance of shipping for economic growth

    • The major economies of the world have always realized the potential of shipping as a contributor to economic growth.
    • For instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI).
    • However, geographically, China is not as blessed as India, yet, seven of the top 10 container ports in the world are in China, according to the World Shipping Council.
    • What aided China’s growth are strong merchant marine and infrastructure to carry and handle merchandise all over the world.

    Lack of carrying capacity

    • All the shipping infrastructure in peninsular India only helps foreign shipping liners.
    • India has concentrated only on short-term solutions.
    • Foreign ship owners carry our inbound and outbound cargo. This is the case in container shipping too.
    • As a country, we have still not optimized our carrying capacity. 
    • Much of foreign currency is drained as transshipment and handling costs every day.
    • Due to this, members of our maritime business community have also preferred to be agents for foreign ship owners or container liners rather than becoming ship owners or container liners themselves.
    • As a result, there is a wide gap between carrying capacity and multi-folded cargo growth in the country.

    Way forward

    1) Regional cargo-specific ports

    • Instead of creating regional cargo-specific ports in peninsular India, we allowed similar infrastructural developments in multiple cargo-handling ports.
    • As a result, Indian ports compete for the same cargo.
    • We need to make our major ports cargo-specific, develop infrastructure on a par with global standards, and connect them with the hinterlands as well as international sea routes, they will automatically become transshipment hubs.
    • We need to only concentrate on developing the contributing ports to serve the regional transshipment hubs for which improving small-ship coastal operations is mandatory.

    2) Sagarmala

    • Sagarmala aims are port-led industrialization, development of world-class logistics institutions, and coastal community development.
    • Sagarmala will help in increasing domestic carrying capacity.
    • Shipbuilding, repair, and ownership are not preferred businesses in India and the small ship-owning community in India also prefer foreign registry instead of domestic registration.
    • If this has to change, there needs to be a change in the mindset of the authorities and the maritime business community.
    • ‘Make in India’ will result in multi-folded cargo growth in the country, we need ships to cater to domestic and international trade.
    • Short sea and river voyages should be encouraged.
    • Shipbuilding and owning should be encouraged by the Ministry.
    • The National Shipping Board is an independent advisory body for the Ministry of Shipping, where the Directorate General of Shipping (DGS) is a member.
    • The NSB should be able to question the functioning of the DGS, which is responsible for promoting carrying capacity in the country.
    • Coastal communities should be made ship owners.
    • This will initiate the carriage of cargo by shallow drafted small ships through coast and inland waterways.
    • Sagarmala should concentrate on consolidating the strength of the coastal youth and make them contribute to the nation’s economy with pride.

    Consider the question “How shipping contributes to the economic prosperity of a country? Suggest the steps need to be taken to develop its shipping sector.”

    Conclusion

    Shipping plays an important role in the economic development of a country. India needs to focus on developing it to achieve the economic prosperity.

  • The formidable challenge of reversing a liquidity glut

    The article highlights the challenge in dealing with the excess liquidity in the economy after the central banks injected liquidity by persuing unorthodox policies.

    Overview of policies adopted during 2008 financial crisis

    • Days after the crash of Lehman Brothers, the United States Congress approved an emergency bailout package of $700 billion in September 2008.
    • The amount was used to buy off mortgage-backed securities from banks, hedge funds and pension funds to avert further Lehman-type bankruptcies.
    • As a result, fresh money was injected into the banking system for it to resume normal credit operations and clean up balance sheets.
    • Subsequent actions of the US government and Federal Reserve blurred the distinction between fiscal and monetary policy.
    • ‘Quantitative easing’  was a term coined to describe unorthodox measures like a central bank buying off mortgages and loans, and thus taking credit risk onto its balance sheet.
    • So, quantitative easing was pursued by all the major central banks of the developed world.
    • Central banks embarked upon an aggressive money-printing spree. Assets on their books ballooned.

    Monetary response during pandemic subsequent liquidity glut

    • During the pandemic year more than a decade after the 2008 crisis, the West’s monetary spigots have been opened even more.
    • A liquidity glut has ensued.
    • While the rate of monetary expansion over this period has been healthy, neither employment nor economic output grew by even a fraction of that rate.
    • Central bank finds itself in the maze.

    RBI in a similar situation

    • The Reserve Bank of India (RBI) too finds itself in a similar predicament, where the way out of its liquidity glut is hazy.
    • Due to purchases of foreign exchange externally and of government bonds domestically, RBI’s balance sheet has ballooned by more 30% by August last year.
    • RBI has injected liquidity through long-term repo operations, which essentially provide long-term money at low overnight rates.
    • The Indian central bank has also provided implicit liquidity support to mutual funds.
    • However, the RBI has not quite ventured into taking credit risk onto its books, nor has it signalled a readiness to buy toxic assets.

    Liquidity glut and challenges associated with it

    • As a result of India’s liquidity glut, money is flowing in and out of the central bank to the tune of ₹7 trillion on a daily basis.
    • This has resulted in an anomaly: market lending rates have gone below RBI’s reverse repo rate, which is supposed to be the de facto floor.
    • Cheap money encourages to do foolish and risky things, which, if done widely and voluminously enough, can spell disaster for financial stability.
    • But, any hint of reducing the rate of money expansion threatens to cause panic and burst the bubble it blew.
    • So, when RBI tentatively tried to move market rates higher by announcing a reverse repo auction,the market reaction was one of panic all the same, and there was a spike in interest rates.
    • This caused the central bank to rethink its strategy.
    • To calm nervous bond traders, the governor has categorically said that liquidity support will continue as long as necessary.

    Way forward

    •  We need to plan an exit from the current glut.
    • One way out could be loan ₹5 trillion to the central government against shares of public sector undertakings, at a low rate of 3% for a period of five years to fund its huge deficit.
    • That will bypass markets and not cause any disruption to interest rates.

    Consider the question “Why the challenges posed by liquidity glut caused by the unorthodox policies adopted by the central bank in the aftermath of the pandemic? What are the challenges in reducing the liquidity?” 

    Conclusion

    Whatever the way out of this whirlpool of liquidity, it’s not going to be easy.

  • Agriculture credit

    India’s agriculture credit increased by 500% in the last decade, however, this increase in the credit has not been reflected in the condition of the farmers. The article deals with the issues with the agri-credit in India.

    Impact of credit on agriculture

    • Providing credit to small farmers at a reasonable rate has been the agenda of the Centre, the States, and the Reserve Bank of India (RBI) for decades.
    • However, the volume of credit has improved over the decades, its quality and impact on agriculture have only deteriorated.
    • In 2011-12, the target was ₹4.75-lakh crore; now, agri-credit has reached the target of ₹15-lakh crore in 2020-21 with an allocated subsidy of ₹21,175 crores.
    • Agricultural credit has become less efficient in delivering agricultural growth.

    Issues with agri-credit: small farmers left-out

    • In the last 10 years, agriculture credit increased by 500% but has not reached even 20% of the 12.56 crore small and marginal farmers.
    •  95% of tractors and other agri-implements sold in the country are being financed by non-banking financial companies, or NBFCs, at an 18% rate of interest.
    • The RBI has also questioned agricultural households with up to two hectares getting only about 15% of the subsidized outstanding loan from institutional sources (bank, co-operative society).
    •  As per the Agriculture Census, 2015-16, the total number of small and marginal farmers’ households in the country stood at 12.56 crore which makes up 86.1% of the total holdings.
    • As in the Situation Assessment Survey of Agricultural Households by the National Sample Survey Office (NSSO), the share of institutional loans rises with an increase in land possessed.
    • This shows that the bulk of subsidized agri-credit is grabbed by big farmers and agri-business companies.

    What are the reasons

    • A loose definition of agri-credit has led to the leakage of loans at subsidized rates to large companies in agri-business.
    • The RBI had set a cap that out of a bank’s overall adjusted net bank credit, 18% must go to the agriculture sector, and within this, 8% must go to small and marginal farmers and 4.5% for indirect loans, bank advances routinely breach the limit.
    • A review by the RBI’s internal working group in 2019 found that in some States, credit disbursal to the farm sector was higher than their agriculture gross domestic product (GDP) and the ratio of crop loans disbursed to input requirement was very unevenly distributed.
    •  This shows the diversion of credit for non-agriculture purposes.
    • One reason for this diversion is that subsidized credit disbursed at a 4%-7% rate of interest is being refinanced to small farmers, and in the open market at a rate of interest of up to 36%.

    Way forward

    • The way forward is to empower small and marginal farmers by ‘giving them direct income support on a per hectare basis rather than hugely subsidizing credit.
    • Streamlining the agri-credit system to facilitate higher crop loans to farmer producer organizations, or the FPOs of small farmers against commodity stocks can be a win-win model to spur agriculture growth’.
    • With mobile phone penetration among agricultural households in India being as high as 89.1%, efforts to improve institutional credit delivery through technology-driven solutions can reduce the extent of the financial exclusion of agricultural households
    • There is a need to reforming the land leasing framework and creating a national-level agency to build consensus among States and the Centre concerning agriculture credit reforms.

    Consider the question “Growth in the agriculture sector in India has not been commensurate with the growth in the agriculture credit. What are the reasons for this disparity? Suggest the measures to deal with the challenges in agri-credit delivery.”

    Conclusion

    Improving the access to credit at a reasonable rate will help in increasing their income but to do that reforms in credit delivery is the need of the hour.

  • New WhatsApp Privacy Policy

    Privacy policy update by the WhatsApp recently led to widespread protest from the user forcing company to put the update on hold. If India had made Personal Protection Bill into the law, the privacy policy update would have been illegal. The article deals with this issue.

    About WhatsApp

    • WhatsApp’s unique blend of text, audio, and voice messaging and calling platform.
    • In November 2014, WhatsApp adopted the Signal protocol for end-to-end encryption after its acquisition by Facebook.
    • WhatsApp has two billion users worldwide, of which 400 million are in India, the largest in any country.

    What the privacy policy update is about

    • The updated policy seeks consent from users to allow the platform to share their data with Facebook and its companies,
    • It means that WhatsApp would share transaction data, mobile device information, IP addresses, and other metadata on how users interact with businesses on WhatsApp.
    • Such sharing would be done with the user being notified before the start of a chat if the business uses Facebook to store and analyze data and the user would have the option of blocking the business.
    • The update would defy the principle of purpose limitation that has been the yardstick of addressing privacy concerns at a global level.

    What is the principle of purpose limitation

    • The Indian government has also sent a strong note to WhatsApp, seeking the company’s response to 14 queries.
    • This note has sent a clear message to WhatsApp to not subject Indian users to greater information security risks and vulnerabilities with the consolidation of data from WhatsApp and Facebook.
    • In the note, the government referred to the principle of purpose limitation provisions in the Personal Data Protection Bill (PDPB) currently being discussed by a joint select committee.
    • Had the bill been passed by now, WhatsApp’s move would have been illegal.
    • Provisions in the bill required that every data intermediary has to take explicit permission from the user whose data would be harvested.
    • Even the method of data classification into sensitive personal data and critical data has been defined and their processing possibilities mentioned in the bill.

    Way forward

    • The government should make the Personal Data Protection Bill into law so that such restrictive practices can never be introduced in the first place.
    • It is due to such law, WhatsApp did make an exception for its users in the European Union.
    • The Competition Commission of India should take note that this is a classic case of an organization using its near-monopolistic power to push through something that is not in the consumer interest.

    Consider the question “What is the principle of purpose limitation in the Personal Data Protection Bill? How it can help user protect its privacy?”

    Conclusion

    As Digital India expands and brings in more users from the current base of 70 crores, and more take to social media for communications and business, they must be ensured a safer digital space, given that most wouldn’t be aware of the reach of the data being generated.