💥UPSC 2026, 2027, 2028 UAP Mentorship (March Batch) + Access XFactor Notes & Microthemes PDF
Talk to mentor

Civilsdaily

Login

Type: op-ed snap

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

    From informal to the formal economy: The crooked road

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Share of informal economy in the country's economy.

    Mains level: Paper 3- Huge presence of the informal sector in the Indian economy and ways to formalise it.

    The article discusses the issues around the informal workforce in the economy. What are the factors responsible for the high informal sector in India? How is this sector responding in times of COVID? Are there some easy solutions to mainstream the informal sector into our formal economy? These are some of the points one should ponder upon while reading this article.

    The vulnerability of the informal workforce

    • Developing countries such as India are economically vulnerable to Covid-19 because of the presence of huge informal workforce.

    • Lack of protection: This vast informal workforce, which has no labour, social or health protection, is woefully ill-equipped to cope with the medical and economic shocks of the virus.

    The humongous size of the informal economy in India

    • Share of the informal sector: As per Periodic Labour Force Survey, 2017-18, 90.6 per cent of India’s workforce was informally employed.

    • This estimate includes those who are employed in informal enterprises (unincorporated small or unregistered enterprises).

    • It also includes informal workers in the formal sector (workers in the formal sector who are not provided any social security benefits by employers).

    • Take another example: Between 2004-05 and 2017-18, a period when India witnessed rapid economic growth, the share of the informal workforce witnessed only a marginal decline from 93.2 per cent to 90.6 per cent. 

    • Covid effect: Looking ahead, it is likely that informal employment will increase as workers who lose formal jobs during the COVID crisis try to find or create work (by resorting to self-employment) in the informal economy.

    • Also, formal enterprises are likely to continue hiring informal workers as they seek more flexibility and attempt to cut labour costs to cope with the COVID-19 induced economic uncertainty.

    Why is the informal more favourable over the formal?

    • The basic reason: necessity to eke out a subsistence living in the absence of alternative employment opportunities.

    • The ‘not so basic’ reasons: Some self-employed persons choose to be in the informal economy voluntarily to avoid registration or taxation.

    • Many are deterred by the costs of formalisation or don’t see much benefit from formalisation.

    • Finally, the phenomenon of informalisation of wage employment in the formal sector is a consequence of formal firms trying to avoid payroll taxes and employer’s contributions to social security or pensions to reduce labour costs.

    Some solution to smoothen the crooked road

    • A multi-pronged and comprehensive approach is needed to facilitate the transition.

    • Labour intensive growth: It requires creating more formal jobs through labour-intensive growth so that informal workers can move to these jobs.

    • Registering and taxing informal enterprises: The Indian experience of compelling informal firms to register and become tax compliant through demonetisation and introduction of GST formalised them only in a legal sense.

    • There is a need for increasing productivity of informal enterprises and incomes of the informal workforce by providing them with technical and business skills, infrastructure services, financial services, enterprise support and training to better compete in the markets.

    • Promoting the path to entrepreneurship in the informal economy.

    • Many informal enterprises would welcome efforts to reduce barriers to registration and related transaction costs as they expect to reap the benefits of formalising.

    • Reducing decent work deficit: This requires protecting informal workers by providing them a social protection floor, ensuring a set of basic working conditions (adequate living wages, limits on hours of work and safe and healthy workplaces).

    A direct question based on the issue of the informal sector can be asked by the UPSC, for ex- “There is a humongous presence of the informal sector in the Indian economy. What are the factors responsible for this? Suggest ways to transform the informal sector into the formal sector.”

    Conclusion

    Questions around the role of government and who bears the onus of protecting workers deserve careful consideration in the backdrop of the rising incidence of informal employment in the formal sector and the growth of the gig economy. It is apparent that in our relentless pursuit of economic growth, we have ignored the voices of India’s informal sector for too long.

    Back2Basics: What is the informal economy?

    • An informal economy (informal sector or grey economy) is the part of any economy that is neither taxed nor monitored by any form of government.
    • Although the informal sector makes up a significant portion of the economies in developing countries, it is sometimes stigmatized as troublesome and unmanageable.
    • However, the informal sector provides critical economic opportunities for the poor.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Coronavirus – Economic Issues

    Globalisation 2.0 after Covid-19

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Various economies of the world and their share in the world economy.

    Mains level: Paper 3- Impact of pandemic on globalisation.

    The article discusses the future of the Globalisation after Covid-19. Globalisation 2.0 which has been dominated by China will see several changes in the post-pandemic world. Investment decisions and Global Value Chains would undergo a paradigm shift. The article is concluded by expressing the hope that pandemic doesn’t end  Globalisation 2.0 but it will certainly usher in the new rules of capitalism.

    Globalisation 2.0 and issues with the flow of labour

    • What is Globalisation 2.0? In strictly economic terms, globalisation is about the free movement of capital, goods and labour across national borders.
    • Globalisation 2.0 began in the early 1980s and has lasted for four decades.
    • Under the 2.0 phenomenon, the labour flows were never as free as the movements of capital and goods.
    • This is because one does not necessarily see who produced the goods or capital coming into the borders.
    • But migrants are distinguishable, one can directly observe how ethnically, racially, religiously different they are from the mainstream.

    Rise of right-wing politics in the US and UK due to labour flows

    • Labour flows is a major reason for triggering right-wing politics of nativism in present times.
    • Donald Trump directed his political campaign against non-white immigrants, especially Hispanics and Muslims.
    • He criticised businessmen who, in search of lower costs, had made China the destination of their accumulated investments, transferring jobs away from America’s industrial heartland.
    • Thus, his policies to levy higher tariffs to curtail freer trade. These policies made sure that the American corporations bring capital back to the US.
    • In Europe, a similar politics has been led by the UK, though less vociferously.

    How China has benefited from Globalisation 2.0?

    • In 1980, China was the 48th largest economy in the world: with GDPs at roughly $200 billion, Indian and Chinese economies were similar in size.
    • In 2018, China, with a GDP of $13.6 trillion, was the second-largest economy in the world, behind the US ($20.5 trillion). But far ahead of Japan ($4.9 trillion), Germany ($4.0 trillion), Britain ($2.8 trillion), France ($2.8 trillion) and India ($2.7 trillion).
    • Not only in terms of GDP, but China had also become the largest trading nation in the world by 2018:
    • Exports: worth $2.5 trillion, substantially ahead of the US ($1.6 trillion).
    • FDI in China: In 2018, China attracted over $203 billion worth of net FDI, much more than India ($42 billion), and second only to the US ($258 billion).

    Is COVID-19 a sign of ending Globalisation 2.0?

    • Despite the pure economic logic of how easy it is to manufacture at scale in China, the global leader today are more concerned about the political overtones.
    • Given all the doubts about how China handled the information about the origins of the virus in Wuhan, anger against China in world capitals is evident.
    • Such anger can have impact on the rules of globalisation.
    • Strict regulation of labour laws: We can expect labour flows will now be more strictly regulated than before.
    • Political risks in investment decisions: Western investors will also have to factor in political risks in their investment decision-making.
    • National security concern: New concerns like what if China threatens supply disruptions for critical materials.
    • Instead of chasing lower labour costs, investors will either bring capital back to domestic shores or geographically restructure their supply chains.
    • To summarize it, Globalisation will not end, but it will be pushed into greater retreat. Thus, changing the rules of the BIG game of capitalism.

    A question based on the impact of the pandemic on the global trade, issues associated with and opportunities for India could be asked in the Mains Paper 3.

    Also the Idea of Globalisation is important from the aspect of paper 1 and Essay. “Globalisation’ vs ‘Nationalism’ was one of the topic in Essay paper in 2009.

    Conclusion

    For the foreseeable future, economic efficiency, the cornerstone of market-based systems, will not be high on priority. Politics will drive new economic policies, not market-based rationality.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

    Three dimensions of food security amid Covid-19

    op-ed snap | Agriculture | Mains Paper 3: PDS, Buffer Stock & Food Security

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: National Food Security Act.

    Mains level: Paper 3-Ensuring food security with all its dimension amid corona pandemic.

    The article discusses the three dimensions of food security-1)Availability 2)Acces 3) Absorption. The first two are also dependent on job security. All these are now being threatened by the pandemic. Ways to safeguard food security along with its 3 dimensions are suggested at the end of the article.

    1. Availability of food in the market

    • The first is the availability of food in the market, and this is seen as a function of production.
    • Fortunately, thanks to the Green Revolution, today we have enough food in the market and in government godowns.
    • This is a great accomplishment by Indian farmers who converted a “ship to mouth” situation to a “right to food” commitment.
    • Yet we cannot take farmers’ contributions in terms of sustaining production for granted.
    • Some special exemptions have been given to the agricultural sector, farmers are confronted at the moment with labour shortages.
    • But many of the inputs, including seeds, are expensive or unavailable, marketing arrangements including supply chains are not fully functional, pricing is not remunerative, and public procurement is also not adequate.
    • There is no room for complacency, as in the absence of demand, the lack of storage or value addition facilities, especially for perishable commodities, we do not yet know exactly what the impact of the current pandemic will be on the kharif sowing and food availability in the future.

    2. Access to food

    • The second dimension is the access to food, which is a function of purchasing power, as unless you are a farmer and grow your own food, others have to buy it.
    • Fortunately, the government, through the National Food Security Act (NFSA) and the PDS, has assured some additional food to every individual during this crisis.
    • Strengthening the food basket: This should be further strengthened and the food basket widened by including millets, pulses and oil.
    • Hidden hunger: Steps should also be taken to avoid hidden hunger caused by the deficiency of micronutrients in the diet.
    • In light of the closure of schools and anganwadi centres, and the consequent disruptions in the provision of midday meals or other nutritional inputs, it is important to pay attention to the life cycle approach advocated in the NFSA, particularly the first thousand days in a child’s life, when the cognitive abilities of the child are shaped.
    • We may otherwise see negative effects on nutritional security in the medium to longer term.

    After reading the article you’ll be able to answer the question such as this one- “In the ongoing crisis, maintaining the level of food security has become one of the most essential need. In light of the above statement, critically examine the priority areas for maintaining food security in the country. Suggest measures to make accessibility and availability of food easier for all.”

    Job security to ensure food security and access to food

    • Food security and access to nutritious, good quality food is also contingent on job security.
    • Today, a lot of people employed both on farms and in the non-farm sector are without jobs.
    • If job security is threatened, then so is food and nutrition security.
    • We have to ensure people do not lose their jobs, and one way of doing this will be to ensure value addition to primary products.
    • One example of such value addition is the Rice Biopark in Myanmar, wherein the straw, bran, and the entire biomass are utilised.
    • This would mean some attention to and investment in new technologies that can contribute to biomass utilisation.
    • The Amul model provides a good example from the dairy sector of improved incomes to milk producers through value addition.
    • Similar attention needs to be given to the horticulture sector on a priority basis.
    • Women farmers are at the forefront of horticulture and special attention needs to be given to both their technological and economic empowerment during this crisis.
    • A second pathway to livelihood security is strengthening the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
    • Need to cover skilled work: Given the lack of jobs and incomes during the COVID-19 crisis, it is imperative to expand the definition of work in MGNREGA to cover skilled work related to farmers and their farming activities.
    • This is particularly important for women farmers and workers, who should not just be given tasks of carrying stones or digging mud.
    • Apart from farming, they engage in a range of essential care tasks, including caring for children, the elderly and sick people.
    • These tasks, often invisible, need to be recognised as work and supported with appropriate education, including on nutrition.

    3. Absorption of food in the body and its utilisation

    • The third dimension of food security is the absorption of food in the body or its utilisation.
    • Absorption and utilisation of food is dependent importantly on sanitation, drinking water and other non-food factors, including public health services.
    • Ensuring that these services are functional depends on the capacities of the local panchayats and their coordination with other local bodies.
    • The lack of adequate clean water, in particular, has come to the fore in both rural areas and urban slums in the context of COVID-19, where one of the key measures for stopping transmission relates to frequent hand-washing.

    Food security threatened by pandemic

    • If we can ensure food availability, food access and food absorption, then we have a fairly robust system of food and nutrition security.
    • All the above dimensions are, however, now threatened by the novel coronavirus, as discussed earlier.
    • It is very critical to highlight the linkages between agriculture, nutrition and health.
    • The inability to harvest, transport and market perishable fruits and vegetables at remunerative prices during the current crisis has deprived farmers of incomes and livelihoods.
    • It has also deprived consumers of micronutrients in their diets.
    • Farmers making losses, and agriculture moving from being job-led to jobless, raise questions about the sustainability of the production cycle.
    • At the same time, this can have long-term consequences on nutrition and health security.

    A question based on the dimension of the food security can be asked by the UPSC for ex- “Food security involved the security of food in all three dimensions, availability of food, access to food and absorption of food. How far the food security act is effective in ensuring security in all three dimensions?”

    Conclusion

    India avoided what could have been a big famine in the 1960s through the help of technology and public policy, which actively worked with and supported farmers to achieve significant increases in yield. Through a combination of farmers’ cooperation, technological upgrading and favourable public policies in procurement, pricing and distribution, we can deal with the fallouts of the pandemic.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Coronavirus – Health and Governance Issues

    Strategy for calibrated opening of economy

    op-ed snap | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters,Health & Education

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Opportunity cost.

    Mains level: Paper 2- Easing the lockdown, strategy that could be adopted.

    The article discusses the performance of India so far and the strategy for reopening of the economy. Dividing the districts based on the number of cases and adopting a suitable approach for opening the economy there while keeping the spread of the virus in control is suggested in the article.

    India performing better

    • While the OECD countries are reeling under the COVID-19 impact, India is clearly ahead of the curve.
    • This is not merely in terms of the confirmed cases in the country but is also strongly reflected in very low mortality numbers (8.5 deaths per lakh population) compared to other nations (4,040 in the UK and 1,930 in the US).
    • While the first cases were reported in most hotspot countries and India around the same time (last week of January), today, the outbreak is far more manageable in India than in most other countries.
    • It was pragmatic for a resource-poor country to be pre-emptive and declare a national lockdown when the total number of cases were still low at 500.
    • The subsequent growth of the pandemic clearly shows a perceptible decline in the number of cases due to the lockdown.
    • Though stringent, this was much-needed and a timely policy intervention by the government.
    • It is important, however, to appreciate the high and growing opportunity costs that are involved during a lockdown.
    • We must brace ourselves for long-term pandemic management (18 to 24 months) with significant economic impact on our lives.

    Policy interventions by government and two major concerns

    • The immediate costs of the lockdown are borne by the most economically vulnerable people in society.
    • This perhaps was the rationale behind the first round of economic policy interventions announced by the finance minister within a few days of the lockdown.
    • They targeted front-loading of cash transfers through PM-Kisan, support to construction workers, self-help groups, food distribution through the public distribution system, among others.
    • Two major concerns: Beyond welfare concerns, there are significant growth concerns that are mounting with every day of economic inactivity in the country.
    • Companies are struggling to honour payroll and maintain their workforce against cancelling orders and declining demand for their goods and services.
    • These in turn will lead to greater delays and defaults in loan repayments, thereby further weakening the fragile banking sector and struggling credit markets.

    The RBI’s intervention and increasing damage to the economy

    • The Reserve Bank of India stepped in for some timely monetary interventions.
    • However, the longstanding climate of risk aversion within the banking sector will mean that transmission of these monetary interventions is unlikely to be timely or adequate.
    • All eyes are set expectantly in one direction.
    • Historically, when economies are faced with major calamities, governments step in to stabilise the environment and boost confidence within the business community.
    • We have seen this response from all major economies disrupted by COVID-19 over the last several weeks.
    • India will not be an exception to this as the government fine-tunes its strategy to support and kickstart our immobilised economy.
    • The opportunity cost of time, however, is ballooning with each passing day.
    • Just like the spread of the virus, we are up against the full force and power of compounding.
    • Mindful policy interventions, when timed well, can cut growing losses and the misfortune of many.

    How the states are performing against Covid-19?

    • While we have succeeded in slowing the growth of the virus at the national level, the true gains and pains are at the state and local level.
    • As the data reveals, currently we have three states that have made remarkable gains and “flattened the curve” of COVID cases.
    • These are Kerala, Haryana and Tamil Nadu where recoveries are growing and active cases are rapidly declining.
    • States like Karnataka and Telangana are improving their recovery rates consistently, despite fluctuations.
    • Every state and local administration has to keep eternal vigil and double down on containment and testing.
    • They have to aggressively improve their contact tracing efforts with the help of their police who are trained in debriefing, call record mapping and have more manpower than public health departments of local administrations.

    The article contains the policy and governance aspects which are important from Mains Paper-2, and economic issues such as the size of the package and opportunity cost of time involved are important from the Mains Paper-3 perspective. Take note of these issues.

    What should be the strategy?

    • Given the scale and variation in infection control across the country, our national strategy needs to be informed and calibrated.
    • Currently, there are more than 300 districts in the country which have reported zero COVID-19 cases.
    • This can be confirmed quickly with some random testing and the lockdown can be lifted effective immediately.
    • Then there are about 225 districts which have reported less than 10 cases each.
    • With adequate ring-fencing at the level of the block where these cases are reported, these districts too can afford to lift their lockdowns.
    • There are, however, approximately 30 districts across the country which have reported large numbers of confirmed cases and are identified as “hotspots”.
    • The lockdown in these places needs to continue with some relaxations for basic trade and essential services.
    • Not surprisingly, these “hotspots” are also important economic centres of the country.
    • The capacity of the local administration to develop and enforce appropriate strategies of containment, contact tracing and testing, should determine their decisions to ring-fence and isolate blocks while allowing other parts of the district/city to resume economic activity.

    Way forward

    • Given the uncertainty of the virus, we seem prepared for large hospitalisation and care if the need arises.
    • The efforts now must be to further contain the growth of the infection.
    • Acting against the power of compounding: If the current rate persists, we will reach over lakh cases within three weeks. That is the power of compounding we are against.
    • Public health support team: Beyond knowledge sharing across states and adopting successful containment strategies from each other, there is a role for the central government in providing “NSG-like” public health support teams to states that need them.
    • Economic package: On the economy front similarly, the central government’s timely economic package should flatten the curve of exponentially rising opportunity costs across the sectors.

    Conclusion

    Given the relative scale and virulence of the COVID-19 virus in India, the odds seem stacked in favour of a calibrated opening of the economy.

     

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Intellectual Property Rights in India

    Rethinking the role of Intellectual Property in Corona crisis

    op-ed snap | Science Tech | Mains Paper 3: Intellectual Property Rights

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: TRIPS.

    Mains level: Paper 3- How Covid-19 could impact the intellectual property rights?

    The article discusses the idea of creating a patent pool of the patents dealing with Covid-19. Such a patent pool will be effective in avoiding the possibility of the hostile response of societies towards patent rights. And also avoid the conflict between nations. corporations and international organisations.

    Purpose of patent rights

    • The purpose of creating and recognising patent rights is for the common public good, i.e., innovation should be made public in exchange for a limited monopoly.
    • Thus, patents need to be disclosed to the public in order to enable further research.
    • Should pandemics such as COVID-19be an exception to this?
    • With the outbreak of COVID-19, there are several innovations.
    • All these innovations may be the subject matter of patent applications around the world.
    • It will be a few years before patents are even granted.
    • However, friction already exists among various stakeholders.
    • For instance, one country made attempts to obtain exclusive rights to a vaccine being developed.
    • On the other hand, there are also collaborations taking place.
    • However, the spirit of collaborative solutions is only on the anvil.
    • The question that arises is whether the exclusivity that is recognised by patent rights will be detrimental to society.
    • Will patents create roadblocks or is there a solution?

    Possibility of conflicts over patent rights

    • Governments and international organisations need to arrive at a consensus in advance to ensure that the system is ready.
    • Procrastination would be disastrous.
    • Creating hindrances through exclusivity claims, in the wake of a pandemic, will result in dividing countries, corporations and international organisations.
    • This will not benefit patients and the world as a whole.
    • If patent owners create impediments on the strength of patent rights, the world will start despising patents and that is not a situation IP owners ought to be in.
    • Under the TRIPS (Trade-Related Aspects of Intellectual Property Rights) regime, there are several tools such as compulsory licensing that are available to ensure access to medicines.
    • However, beyond the laws, society needs to respect innovation.
    • To protect the sanctity and integrity of patent systems, and in order to ensure that an anti-IP sentiment is not generated globally, answers need to be found within the existing regime.
    • In exceptional circumstances such as these, there is a likelihood that societies may resort to extreme steps to protect themselves.
    • Before such ideas are floated, solutions should be created.

    The idea of creating a patent pool

    • One method by which aggregation and dissemination of innovative products can be ensured is by creating a patent pool.
    • Patent pools are usually effective in aggregating, administering and licensing patents related to specific areas of technology.
    • Such pools are usually managed by a central agency and the patents which become part of the pool are readily made available for licensing.
    • Some pools even publish the royalty rates payable for such licences.
    • Anyone who wishes to obtain a licence will be able to approach the pool, agree to the terms, and begin to manufacture and sell the products.
    • Such pools are prevalent in, for instance, standard essential patents related to telecom and digital innovations.
    • At the moment, individual efforts are being made by research organisations to create their own pools.
    • A more fruitful endeavour would be to create a global pool of COVID-19-related innovations, or innovations related to rare pandemics, in respect of vaccines and medicines.
    • This could be managed by a trustworthy international organisation.
    • All countries ought to have the right to implement these innovations without further permission from the patent-holders.
    • This would not require countries resorting to provisions such as compulsory licensing, state acquisition, etc.
    • Even if royalties are at a minimal level, the revenues would still be in billions of dollars owing to the large swathes of the population affected by the pandemic, who will need to be administered these products.

    Way forward

    • Creation of a pool and immediate licensing will ensure that there are hundreds of manufacturers across the world.
    • As a result, vaccines and medicines will be quickly available.
    • Such a pool needs the cooperation of not just countries and international organisations but also the hundreds of researchers, innovators, companies and universities involved.
    • Doha Declaration: Pooling of patent resources is also in line with the Doha Declaration on Public Health which is a part of the TRIPS agreement.
    • This declaration recognises the need for taking measures to ‘protect public health’ and ‘promote access to medicines’.

    A direct question on the issue can be asked by the UPSC, for ex-“Though IPRs have been provided to respect and protect the innovations and ideas, but in the wake of corona crisis, some strict provisions need to be changed. In light of the above statement, discuss the limitations of the exclusivity clause under the patents rights. And how can it be overcome in emergency situations?”

    Conclusion

    Public-private partnerships (PPP) need to be scaled up. Creation of the ‘PPP-pandemic patent pool’ at a global level, to pool all innovations, is the way forward. Let us not wait any longer.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Zoonotic Diseases: Medical Sciences Involved & Preventive Measures

    Plasma therapy is no silver bullet

    op-ed snap | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Convalescent plasma therapy.

    Mains level: Paper 3- What is plasma therapy and issues involved in its adoption.

    The article discusses the issues with convalescent plasma therapy. The therapy has been in the news as a cure to Covid-19. The lack of conclusive evidence is a major issue. There are certain risks involved in large scale adoption. All such issues are dealt with in detail here.

    Importance of scientific research in dealing with Covid-19

    • The COVID-19 pandemic has posed unprecedented challenges to governments, health professionals and the general public at large, around the world.
    • Every response, administrative, social, economic or medical is being subjected to intense public scrutiny, as it rightly should be in the spirit of mature democracy.
    • Scientific research in medicine is the only means to overcome novel and complex diseases such as COVID-19 and that too thrives on the same spirit of debate and criticism.
    • Difficulty in establishing protocols: The difference is that the standards of evidence required, to generate consensus and arrive at the most optimal protocols, are far more rigorous and time-taking than in most other walks of life.

    Issues with plasma therapy

    • The convalescent plasma therapy, that is being currently studied by the Indian Council of Medical Research, through open-label, randomised controlled trial to evaluate it for both safety and efficacy.
    • The problem with the therapy is of the lack of established protocols.
    • What is involved in therapy? The therapy involves infusing patients suffering from COVID-19 with plasma from recovered patients.
    • In theory, the antibodies of the recovered person may help that patient’s immune system fight the virus.
    • While showing great promise, it is a line of treatment that is yet to be validated for efficacy and safety and cannot be deployed widely without caution.
    • The current evidence to conclude anything about the true benefits of this therapy is very thin.
    • Till date, there have been only three published case series for convalescent plasma in COVID-19 with a cumulative of 19 patients.
    • Given the very small number of patients involved in these studies and a publication bias in medicine, we cannot conclude the therapy will work on all patients all the time or even believe that the convalescent plasma was the only reason for their improvement.
    • The most important principle in medical ethics is “do no harm”.
    • The transfusion of convalescent plasma is also not without risks, which range from mild reactions like fever, itching, to life-threatening allergic reactions and lung injury.
    • To recommend a therapy without studying it thoroughly with robust scientific methods may cause more harm than good.
    • Further, convalescent plasma therapy requires intensive resources, healthy COVID-19 survivors to donate, a blood bank with proper machinery and trained personnel to remove plasma, equipment to store it and testing facilities to make sure it has an adequate amount of antibodies.

    Need for the Randomised Controlled Trials (RCT)

    • To say with certainty whether a drug is truly effective or not, the gold standard in medicine is to conduct a randomised controlled trial.
    • In RCT half the patients get the experimental drug and the other half do not.
    • Only if patients in the first half show substantial improvement over those in the second half, it indicates the drug is beneficial.

    Exploring other options and focusing on health infrastructure

    • Too much focus on one approach can take away the focus from other important therapeutic modalities like the use of oxygen therapy, antivirals, and antibiotics for complicated hospital courses.
    • To overcome the pandemic comprehensively, we should focus on strengthening health systems at all levels, including referral systems, supply chain, logistics and inventory management.
    • We need to work on protecting our healthcare workers, improving prevention methods, promoting cough etiquettes, effective quarantining and accurate testing.

    A direct question based on the therapy like- “What is convalescent plasma therapy and what are the issues involved in its adoption?” can be asked by the UPSC.

    Conclusion

    Even these times of collective uncertainty are no reason to lower scientific temper. Science should be driven by reason and evidence with hope as a catalyst but not by either fear or populism. Pushing one or the other therapy without evidence or caution can only set back our larger fight against COVID-19.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Coronavirus – Economic Issues

    It is time to design clear rules for departure from accepted norms of fiscal prudence

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Deficit financing through the RBI. Deflation.

    Mains level: Paper 3- Necessity of stimulus package and risks involved in it.

    This editorial spells out the size of the stimulus package that would be required to restart the economy. It also discusses the possible sources that the government could tap to raise the revenue. Such huge expenditure is likely to result in the huge fiscal deficit which would necessitate that the stimulus is time-bound and transparent.

    Prospects of substantially negative growth

    • Arvind Subramanian has likened the current economic situation to a “pralay (deluge)”.
    • A deluge in which the government should spend more than even what it ought to in a rainy day.
    • India, the former chief economic adviser said that India must plan for a “substantially negative” growth this year that might require an additional fiscal expenditure of Rs 10 lakh crore.
    • Corporate indebtedness was already high before the lockdown.
    • Insolvency cases will mount further.
    • Even companies facing no significant cash flow issues wouldn’t invest in uncertain public health as well as the demand-constrained environment.
    • Banks, too, aren’t going to lend, no matter how much liquidity the Reserve Bank of India (RBI) may infuse.
    • The burden of non-performing assets, which is set to get heavier in the coming months, makes it impossible for them to finance an economic recovery.
    • Last, but not the least, are faced with layoffs and pay cuts, they would rather save and will be afraid to spend.

    Importance of government spending in the current situation

    • Under the circumstances, the onus for ensuring that the wheels of the economy start moving lies on the government.
    • There’s no guarantee of it happening even with all lockdown restrictions being lifted.
    • Without somebody to spend, the economy is in real danger of contraction, which will, in turn, worsen the problem of businesses going bust, joblessness and loan defaults that can spread to the entire financial services industry.

    No “3F” constraints and risk of deflationary shocks

    • The one consolation today is that India is not saddled with its traditional “3F” constraints — food, fuel and foreign exchange — which were triggers for inflation and balance of payments crises.
    • On the contrary, public foodgrain stocks are at an all-time high, global oil prices have crashed and there is no run on the rupee, unlike during the “taper tantrum” period of May-August 2013.
    • Risk of deflationary shock: The risks, if at all, are tilted more towards demand-side “deflationary shocks” than supply-side inflation concerns.

    How will the government manage the resources?

    • The finances of both the Centre and states are in a mess, with receipts from tax and non-tax sources hardly covering even existing expenditures.
    • But governments enjoy sovereign borrowing powers that allow fund-raising at rates below that of triple A-rated instruments issued by private corporates, more so in the present risk-averse scenario.
    • Also, there is the option of deficit financing (“printing money”) through the RBI subscribing to primary auctions of government securities.
    • There are, of course, costs in such powers being exercised.
    • Past precedents — whether the issuance of ad hoc Treasury Bills to the RBI prior to April 1997 or the stimulus package post the 2008 global financial crisis — do not inspire confidence.

    A question based on the stimulus package and its consequences can be framed, for ex- “Do you agree with the view that a stimulus package by the government to restart the economy is necessary? What are the options with the government to raise the money for such a package? What could the consequences of such a package on the economy in the future?”

    Conclusion

    This is the time to design clear rules for departure from accepted norms of fiscal prudence. Any stimulus has to be transparent and time-bound.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Coronavirus – Economic Issues

    Ease legal constraints on fiscal expenditure

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: FRBM Act provisions.

    Mains level: Paper 3-Legal provisions for the fiscal consolidation that needs to be changed for the the stimulus package in the wake of corona pandemic.

    The article discusses the two legal provisions that need to be changed in order to provide a fiscal stimulus of the size that could save the economy from collapse. Other major concern after the package would be the inflationary pressure resulting from government spending.

    The urgency of the fiscal package by the Centre

    • The longer the Centre dithers over a big-bang fiscal package to counter the adverse economic fallout of covid-19, the closer it risks pushing India’s economy to the precipice of disaster.
    • The nationwide lockdown has more or less paralysed commercial activity, our exit path looks dreadfully long-winded, and the distress being seen right now could just be an early sign of what is to come.
    • The suffering of citizens will likely expand once the shutdown’s second-order effects, which operate with a lag, begin to kick in.
    • Estimates of ₹10 trillion needed by way of fiscal relief, once seen as too much by some, could yet turn out to be too little.
    • Either way, preparatory work in terms of legal enablers should be done alongside the arithmetic

    Legal constraints in the way of the stimulus programme

    • There are two major constraints that we need to be relieved of—if only temporarily—for a stimulus programme to take shape.
    • The first is the Fiscal Responsibility and Budget Management (FRBM) Act of 2003.
    • And the second is the amendment done in 2016 of the Reserve Bank of India Act to give legislative cover to a flexible inflation-targeting framework that set our central bank the task of keeping India’s retail price index within a certain band.
    • Both of these were aimed at long-term economic stability but made no allowance for a robust fiscal response to the kind of crisis we now face.
    • It would be best if these were tweaked appropriately by a special session of Parliament.
    • If not, then ordinances should be issued to suspend specific restrictions for a while.

    Projections of fiscal deficit

    • Under the budget presented in February, the Centre’s fiscal deficit for 2020-21 was projected at 3.5% of gross domestic product (GDP).
    • This included a half percentage point deviation from the FRBM glide path allowed by the law’s contingency clause.
    • Total expenditure was placed at a little over ₹30.4 trillion, and receipts at ₹22.4 trillion-plus.
    • With tax revenues and asset-sale realizations expected to fall short, the fiscal gap could widen to about ₹10 trillion even without any extra spending.
    • Drastic cuts in expenditure could save some money, but even if a heavy axe is wielded on expenses, the government’s deficit this year would have to exceed twice the legal limit for a stimulus that saves the economy from collapse.
    • If this turns out to be a year of negative growth, as some fear, effecting a revival will only get harder.
    • For pre-emptive action, the government should use its parliamentary clout to permit a limitless deficit for 2020-21.

    A question based on the limits placed by the FRBM Act and the changes brought by the amendment to the RBI Act which mandated RBI with managing the inflation could be asked by the UPSC.

    Prospects of inflationary pressure and RBI’s mandate

    • An effort to spend our way out of an economic morass could prove inflationary if too much cash ends up chasing too few goods and services.
    • As we have undergone both demand and supply shocks, opinion is divided on whether prices will go haywire.
    • This risk would depend on how much cash gets pumped around at what point in time and the pace at which supplies are restored.
    • In other words, the inflation outlook is highly uncertain.
    • But should prices threaten to rise, it would be counterproductive of the central bank to tamp them down by tightening credit.
    • As of now, RBI’s mandate is to keep inflation at 4%, with a tolerance band of 2% on either side.
    • This target is valid till March 2021, but needs to be reviewed right away to let the central bank focus on growth.
    • The acceptable range could be widened and the time limit to achieve the goal lengthened as a special reprieve.

    Conclusion

    A few tweaks of the law must go alongside calculations of a stimulus package designed to relieve economic distress. The government should act on these quickly to save the day.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Foreign Policy Watch: India-SAARC Nations

    Common problems of South Asia call for collective efforts against Covid-19

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 2- Poor health infrastructure of SAARC countries and other common problems.

    The article discusses the various common features shared by the South Asians countries. One of them is the poor public healthcare infrastructure. So, the pandemic offers an opportunity to make the required policy changes. It also offers the opportunity for cooperation among the regional countries in dealing with Covid-19. These issues are discussed in the article.

    South Asian countries: Common features, common problems

    • South Asia, one of the world’s most populous regions, is also affected by the COVID-19 pandemic.
    • Both Karachi and Mumbai, among the world’s most densely populated cities, where we live and work, are being overwhelmed by cases.
    • While the death rate in these places may not be as alarming as in Europe and the U.S., the collateral damage of the lockdown is taking its own toll.
    • Common features of South Asia: While there are many differences amongst the countries of the region, there are also common features which impact the health of its people, some of them a result of our shared cultural and geopolitical history.
    • The collective experience of dealing with COVID-19 may provide important lessons, which transcend national boundaries.

    Poor healthcare system: a common problem

    • South Asian countries have invested very little in health.
    • This is reflected in our abysmally low health parameters.
    • It is interesting that Britain, which formulated our health policies before independence, went on to form one of the world’s strongest public health systems, the National Health Service.
    • Whereas its South Asian colonies chose to stray from that path.
    • This resulted in a dysfunctional public healthcare
    • Governments have also relinquished what ought to have been their primary duty, of health care provision, to the private sector.
    • Having become an industry, the focus of healthcare in the private sector is on profit rather than on people’s needs.
    • High treatment costs in private sector: Whilst privatisation has brought in advanced technology and expertise, the high costs of treatment in the private sector have resulted in impoverishment as most of the population has no insurance or third-party coverage, and pays out of pocket.
    • The sector has also been poorly regulated.
    • The result is that it is responsible for several excesses in its quest for profit.

    Other common features of the region

    • Hunger, malnutrition, poor sanitation and large-scale migration are features of this region.
    • Existing infectious diseases like TB, HIV and malaria have been worsened by emerging ones like dengue, chikungunya, healthcare-associated infections and antimicrobial resistance.
    • The region is also an epicentre of an epidemic of lifestyle diseases.
    • Conflicts and expenditure on defence: Constant internal and external conflicts in South Asia not only consume a large portion of national budgets but also divert the attention of the public and policymakers from healthcare needs.
    • Defence budgets take the largest share of national budgets, and obviously adversely impact social sector spending.
    • Underfunded public health is going to hinder region’s capacity to fight COVID-19.
    • The central role of religion: Religion continues to occupy a central space in the society and politics of the region.
    • Though it offers succour to many, religious dogma can impact health policy and health-seeking behaviour.
    • The refusal of devotees across Pakistan to avoid religious congregations during Ramadan despite the government’s orders has significantly fed the community spread of the virus.

    Opportunity for policy changes to address healthcare problems

    • COVID-19 has forced us to seriously reflect on our healthcare system.
    • This is welcome if it results in policy change.
    • Healthcare professionals and bodies must seize this opportunity to push our respective governments to address it seriously and not just as a pre-election strategy.
    • A long-term commitment to universal health care, with not only a national but also a regional and global focus, is needed.

    A question on this theme could be asked by the UPSC, for instance, “South Asian countries share the common problem of poor public healthcare infrastructure, which increases their vulnerability to the pandemic. But corona pandemic also offers an opportunity to improve the shortcoming in the health infrastructure and cooperation among the SAARC countries. Comment.”

    Regional strategy and cooperation needed

    • The SAARC heads of state have already offered help to one another.
    • A regional strategy has a better chance of controlling the pandemic than isolated national-level efforts.
    • The pooling of resources and sharing data may not only help flatten the curve but perhaps even develop into longer-term efforts towards effective treatment.
    • It is being speculated that our populations are behaving differently; that the BCG vaccine may be a protective influence.
    • Joint research into such areas can be a unifying point for SAARC.

    Conclusion

    It is in our collective interest to look at health security and not just national security. By the accident of their birth, South Asians have endured a lot. They merit better.

     

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Coronavirus – Economic Issues

    It will take fiscal boldness now to relieve financial distress

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Money multiplier.

    Mains level: Paper 3- Government spending to sustain the economy hit by the corona crisis.

    The article discusses the fiscal response of the government to deal with the corona crisis. Fiscal response to the 2008 financial crisis was higher in terms of GDP percentage. Also, a comparison with emerging peer economic indicates that India might be running the tighter fiscal policy in the time of crisis. The article suggests higher spending by going beyond the traditional fiscal space.

    A possible explanation for moderate fiscal response by the government

    • The Indian government has till now come up with an insipid fiscal response to the ongoing economic crisis.
    • Long battle: One view is that the government does not want to fire all its bullets in what threatens to be a long battle. It wants to time its interventions.
    • Weak public finances: The other possible explanation for this fiscal timidity is that India has entered this crisis with weak public finances.

    Comparison with finances at the 2008 financial crisis

    • The combined official fiscal deficit of the Union plus state governments was at its lowest level in many decades.
    • The economic boom of the preceding four years had led to higher tax collections pouring into the treasury.
    • The massive increase in spending announced in the budget of February 2008 was with an eye on the national election scheduled a year later, rather than in anticipation of a coming storm.
    • Then followed the second wave of fiscal expansion after the North Atlantic financial crisis hit Indian shores seven months later.
    • Back then, India’s effective fiscal stimulus over two years was a substantial 4.3% of gross domestic product (GDP).
    • In 2020, the crisis-driven spending plan announced by the government so far is less than 1% of GDP.
    • There could yet be a big fiscal push in the coming days.

    Tighter fiscal policy in crisis compared to other emerging economies

    • Some of the budget estimates released a few days ago by the International Monetary Fund are telling.
    • In 2018, the total fiscal deficit of the Indian government as a proportion of GDP was 2.4 percentage points higher than the average for Asian emerging markets.
    • India is expected to end 2020 with a total fiscal deficit that will be 2.5 percentage points lower than Asia’s average.
    • In other words, India ran a looser fiscal policy compared to the rest of Asia in normal times, but is likely to run a tighter fiscal policy than its regional peers in a crisis year.
    • Something similar can be seen in estimates for public debt.
    • Asian public debt as a proportion of GDP is expected to go up by nine percentage points in 2020.
    • The comparable figure for India is 2.9 percentage points. (These estimates are being cited with full knowledge that forecasting models break down during extreme events.)

    Funding extra expenditure through money creation

    • Lack of traditional fiscal space should not hold the government back in a crisis situation.
    • There are many options outside the consensus macro playbook.
    • Money creation: A commonly cited option right now is funding extra expenditure through money creation rather than borrowing.
    • The size of the Reserve Bank of India (RBI) balance sheet as a percentage of nominal GDP is close to its 35-year average.
    • There is scope for printing more money right now.
    • Lower inflationary pressure: And the inflationary consequences are likely to be muted because of the lower velocity of money amid a demand collapse.
    • Public finances in the future: Getting public finances back on track is a battle that lies in the future.
    • A rapid recovery in economic activity would be the best solution.
    • Otherwise, history tells us that countries have brought down their public debt numbers through some combination of financial repression, austerity, higher taxes and inflation.
    • Some element of capital controls could also be back in play.

    Need for increasing discretionary government spending

    • The collapse in tax revenues as the economy is shut down will automatically lead to a rise in India’s fiscal deficit.
    • However, there is a need for an increase in discretionary government spending as well.
    • Economists have shown that spending multipliers are higher than tax multipliers in India.
    • In other words, the increase in economic output for every unit increase in the fiscal deficit is higher when the government spends rather than changes tax rates.
    • State’s spending Vs. Union spending: Spending by states gives more bang for the buck than equivalent spending by the Union government.

    “Below the line measures” to support the economy

    • Also, there are options other than direct spending to support the economy.
    • Countries such as Germany, the UK, Italy, France and South Korea have complemented traditional fiscal expansions with “below the line” measures such as loans and guarantees to companies.
    • In an excellent recent study, analysts estimate that more than half of Indian corporate balances sheets will be unable to meet expenses with zero revenues.
    • They are careful to point out that their analysis is based on extreme assumptions that there is no fall in their wage bills, no revenues, and no access to fresh credit.

    One of the common suggestions we have been coming across is the spending by the government by printing money. In this article, the second important suggestion is below the line measures. Take note of these measures and options available with the government.

    Way forward

    • The poor need income support for their very survival. That should be at the top of any democratic government’s list of
    • However, protecting Indian companies from a financial collapse also matters, because otherwise, the economy will see a reduction in its capital stock, which will be needed both for a rapid recovery as well as job creation once the worst is over.
    • There are contagion risks in financial markets as well, going by what has happened to some mutual funds that were invested in bonds.

    Conclusion

    These are extraordinary times that require extraordinary measures. The danger from a delayed fiscal programme is that hysteresis may set in, as companies run out of money and supply chains are broken, damaging our economic prospects in the medium term.

     

     

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now