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  • Foreign Policy Watch: India-Pakistan

    [op-ed snap] Same country, different script

    op-ed snap | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 2-Foreign relations with Pakistan, Issues and need to resume the talks.

    Context

    Pakistan is changing significantly, which is good for itself and its neighbour as well.

    Changing Pakistan

    • Major stakeholders in favour of peace: The civil society, the political parties, and even the military establishment of Pakistan have come to favour peaceful and cooperative relations with India.
    • Both the power-centre on the same page: Both Islamabad and Rawalpindi, Pakistan’s two centres of power, are now on the same page in seeking “honourable peace” with New Delhi on the basis of “sovereign equality”.
      • Heavy price paid by Pakistan: There is a broad consensus in Pakistani society and polity that their country has paid a very heavy price by supporting the forces of Islamist extremism and terrorism.
      • The futility of using terrorism as foreign policy: There is also consensus that using terrorism for achieving mistaken foreign policy ends in Afghanistan and India.

    Conducive conditions for dialogues

    • Four factors have influenced the welcome winds of change in Pakistan.
    • First-Realisation that Pakistan has suffered a lot:
      • Harm at home and to the global image: There is the across-the-board realisation that Pakistan has suffered a lot, both domestically and in terms of damage to its global image, by supporting religious extremism and terrorism.
      • A large number of casualties: Terrorists have killed a shockingly large number of civilians -certainly far many more than in India. Several thousand soldiers have lost their lives in the army’s “war on terror”-more than the number of casualties in all the wars with India.
      • The threat of FATF blacklisting: Furthermore, Islamabad is under relentless pressure from the Financial Action Task Force (FATF) to act decisively and irreversibly against terrorist organisations.
    • Second-Decrease in religious radicalisation in Pakistan
      • The decrease in the financial support to radicalism: What has contributed to the diminished importance of religious radicalism is also the shrinking inflow of petrodollars from Saudi Arabia and Gulf countries that promoted this agenda.
      • The ideological influence of religious radicalisation on Pakistan’s civil society is clearly declining.
      • Change in Saudi Government Policy: Export of Wahhabism is no longer a foreign policy priority of the Saudi Arabian government.
      • Changing policies in UAE: The United Arab Emirates has gone a step further, under the leadership of Abu Dhabi’s Crown Prince Mohammed bin Zayed Al Nahyan, it is pursuing inter-religious tolerance with a zeal that has surprised Muslims and non-Muslims alike.
    • Third-Interest of China
      • Rise of China as an economic and security partner: The third factor is China, which has emerged as Pakistan’s most important economic and security partner.
      • The China-Pakistan Economic Corridor (CPEC) and BRI: The flagship projects under Beijing’s BRI has begun to modernise Pakistan’s infrastructure spectacularly, but its security is which could be threatened by terrorism is also the concern for China.
      • Connection with China’s Xinjiang Province: China has urged Pakistan’s ruling establishment to take firm steps to curb the activities of Islamist groups because they can easily foment trouble in China’s Muslim-majority Xinjiang province.
      • India-China relation factor: Beijing is also engaged in a steady effort to improve relations with New Delhi, in recognition of India’s rising economic and geopolitical stature in Asia and globally.
      • Possibility of India-China-Pakistan cooperation: China’s President Xi Jinping even mooted cooperation among China, India and Pakistan at Mamallapuram summit.
    • Fourth-Military establishment in favour of peace.
      • The military establishment seems to be fully convinced of the need for normalisation of India-Pakistan
      • Opening of Kartarpur Sahib Corridor: The opening of the Kartarpur Sahib Corridor, perhaps the greatest confidence-building measure between the two countries since 1947, is almost entirely due to Gen. Bajwa’s personal commitment to the project.
      • The economic crisis in Pakistan: Bajwa’s is also said to be convinced of the need to open the doors for economic and trade cooperation between the two countries given a serious economic crisis Pakistan is going through.
      • Discussion on the Kashmir issue: The Pakistan Army may also be ready to discuss a solution to the Kashmir issue on the basis of a formula Gen. Pervez Musharraf had discussed with PMs Atal Bihari Vajpayee and Dr Manmohan Singh.

    Conclusion

    India needs to seize the opportunity to resume the talks with Pakistan on all the contentious issues and try to resolve the disputes so that the improved relations could help both the countries and the neighbouring countries.

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  • WTO and India

    [op-ed of the day] Delhi-Davos disconnect-India must find ways to take advantage of new opportunities

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- Trade war, Globalization and effects on Indian economy.

    Context

    Given its increased heft in the global economic order, India ought to be at the leading edge of the current debate of the future of capitalism.

    The emergence of “stakeholder capitalism”

    • Interests of all shareholder: Klaus Schwab, who founded the World Economic Forum 50 years ago, wants capitalists to look beyond their shareholders and consider the interests of all the stakeholders.
      • Long overdue debate: Some hope that the debate on stakeholder capitalism is a long-overdue recognition of the capitalist excesses of recent decades.
    • Generating value for customers: Last August, the Business Roundtable in the US, which brings together some of the top American corporates, said American companies must now generate value for customers.
      • Invest in their employees.
      • Deal fairly with suppliers and support the communities in which they operate even as they service their shareholders.
    • Scepticism over “interests of all shareholders”: Sceptics say that this is a nice way of saying the right things, repackaging old ideas on corporate social responsibility and creating illusions about reforming capitalism.
      • Cynics insist that it will be business as usual for the world’s capitalists.
      • Reflection of deeper crisis: Beyond this divide between optimists and pessimists, the discourse on “stakeholder capitalism” is a reflection of the deeper crisis afflicting the global economy today.

    Three major challenges according to WEF

    • In its annual survey on global risks, the WEF has identified many challenges. Three of them stand out.
    • First Challenge: Polarised politics
      • In the US Trump is unlikely to be defensive.
      • While the dominant sentiments see Trump as the very embodiment of nationalism and populism that are polarising politics around the world.
      • Others point to the structural conditions that have bred these forces.
      • America’s working-class whose wages haven’t risen in decades, whose jobs are less secure than ever rallied behind Trump.
      • Politics in the US: Much the same happened in the British elections last year.
      • Tory leader Boris Johnson won a sweeping mandate by breaking into the working-class strongholds of the Labour Party.
    • Second Challenge: Trade war
      • Trump had a long record of denouncing free trade.
      • Many had hoped that Trump will moderate his anti-globalist rhetoric once in office.
      • Attack on a core principle of globalisation: Trump has taken a pickaxe to the core principles of the globalised economic order – free trade, open borders and multilateralism.
      • Renegotiating the treaties: The US has renegotiated a 25-year old trade agreement with America’s neighbours, Canada and Mexico.
      • The threat of all-out-trade war with China: Trump’s threat of an all-out trade war with China over the last couple of years has led to an interim agreement.
      • The agreement commits Beijing to reduce its trade surplus with the US by importing more.
      • The trade deficit of the US with EU: At Davos, Trump is expected to turn his ire on the EU, which has a near $200 billion trade surplus with the US.
    • Third challenge: Technology
      • War in technology domain: The trade wars among the world’s major capitalist centres is accentuated by the technological revolution, especially in the digital domain.
      • Need for coordination: The Davos report on global risks argues that the realisation of the full potential of new technologies depends on unprecedented coordination among all stakeholders.
      • Digital fragmentation: What is emerging instead is “digital fragmentation” marked by the extension of geopolitical and geo-economic rivalries into the new domain.
      • Digital issues have come to the front and centre of American arguments with Europe.

    Conclusion

    • India must find ways to take advantage of the new opportunities from the unfolding rearrangement of the global capitalist system.

     

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  • Foreign Policy Watch: India – EU

    [op-ed snap] Acting in concert

    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 3- India-EU relations and scope and areas of cooperation.

    Context

    The EU-India Strategic Partnership has come a long way in recent years. The relationship is based on long-standing shared values and interests. There are numerous opportunities to unleash the full potential of EU-India cooperation.

    India-EU Cooperation on Climate Change

    • The EU has committed to becoming carbon neutral by 2050.
    • But EU member states together only account for 9 per cent of global emissions.
    • Need to engage with the rest of the world:  EU-India cannot solve this problem unless they engage with the rest of the world to address it.
      • India’s commitment, as one of the biggest democracies in the world, is a key part of the solution.
      • The mixed outcome of the COP25 Climate Conference shows how much more remains to be done.
      • Clean Energy and Climate Partnership (CECP): In 2016 Prime Minister Narendra Modi and European leaders agreed on an EU-India Clean Energy and Climate Partnership (CECP).
      • EU and International Solar Alliance: In 2018, the EU joined efforts with the International Solar Alliance, headquartered in India.

    Cooperation in trade

    • Both are the members of WTO: India and EU both agree on the vital role of the World Trade Organisation (WTO) and the need to overcome the crisis of the dispute settlement system.
      • Ministerial dialogue: The launch of a regular ministerial dialogue on economic, trade and investment issues could give additional impetus to the relations.

    Cooperation on security

    • Indian Navy vessels are now escorting World Food Programme ships in the framework of the EU Atlanta operation against piracy off the coast of Somalia.
    • Cooperation on anti-terrorism: Counter-terrorism experts from Europe and India exchange experiences and best practices.
      • As a result, an enhanced working relationship between our police officers is taking shape.

    Digital economy and cyber

    • Need to deepen cooperation: EU and India should deepen cooperation to protect fundamental freedoms in cyberspace and the free flow of data – and counter the drift towards high-tech “de-coupling”.
    • India-EU does not want a split in cyberspace, forcing both to “choose sides” between competing systems and standards.
    • India and EU both believe in fair competition, based on global standards, for 5G, AI, big data and the internet of things.

    Conclusion

    There is much that the EU and India have accomplished in recent years. But there is even more to be done to further strengthen our dynamic dialogue and cooperation in all areas of mutual interest and as players on the world stage.

     

     

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    [op-ed snap] Redesigning India’s ailing data system

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- National accounting and problems in associated with the data collection and methods.

    Context

    As official statistics is a public good, giving information about the state of the economy and success of governance, it needs to be independent to be impartial.

    GDP calculation and its significance

    • What is GDP:
      • Assigning a value to products and services: In effect, it adds apples and oranges, tractors and sickles, trade, transport, storage and communication, real estate, banking and government services through the mechanism of value.
      • GDP covers all productive activity for producing goods and services, without duplication.
      • The System of National Accounting (SNA): It is designed to measure production, consumption, and accumulation of income and wealth for assessing the performance of the economy.
    • What is the significance of GDP data?
      • Influence the market: GDP data influence markets, signalling investment sentiments, the flow of funds and balance of payments.
      • The input-output relations impact productivity and allocation of resources.
      • Demand and supply influences prices, exchange rates, wage rates, employment and standard of living, affecting all walks of life.
    • Issues over the present series of GDP:
      • Nominal GDP: The data on GDP are initially estimated at a current price known as nominal GDP.
      • Real GDP: Nominal GDP minus the inflation effect is real GDP.
      • Price Index: There is a way of adjusting inflation effect through an appropriate price index.
      • Pricing series issue with the service sector: The present series encountered serious problems for the price adjustment, specifically for the services sector contributing about 60% of GDP.
      • Absence of price index: There is an absence of appropriate price indices for most service sectors.
      • What the absence of series means: The deflators used in the new series could not effectively separate out price effect from the current value to arrive at a real volume estimate at a constant price.
      • Methodical issue: Replacing Annual Survey of Industries (ASI) with the Ministry of Corporate Affairs MCA21 posed serious data and methodological issues.

    Need for the change in the approach of data collection

    • The approach for the collection of data remains largely the same for long.
      • Price and production indices are constructed using a fixed base Laspeyres Index.
      • The yield rate for paddy is estimated by crop cutting experiments.
      • The organisation of field surveys for collection of data on employment-unemployment, consumer expenditure, industrial output, assets and liabilities continue.
    • Why data collection for yields need to change?
      • Productivity and remunerative price of output are major concerns for agriculture.
      • Data collection from diverse factors: It is necessary to collect data on factors such as soil conditions, moisture, temperature, water and fertilizer use determining yield, the impact of intermediary and forward trade on farm gate price and so on.
      • Israel collects these data for analysis to support productivity.
      • Need to leverage the e-governance: The initiative under e-governance enabled the capturing of huge data, which need to be collated for their meaningful use for the production of official statistics.

    Data Logistics

    • Need of data from the other areas: Along with GDP, we need data to assess-
      • Inclusive growth.
      • Fourth-generation Industrial Revolution riding on the Internet of things.
      • Robotics-influencing employment and productivity.
      • Environmental protection.
      • Sustainable development and social welfare.
    • How to deal with the data inconsistency
      • We need systems which have the capability to sift through a huge volume of data seamlessly to look for reliability, validity, consistency and coherence.
      • Such a system is possible through a versatile data warehouse as a component of big–data technology.
      • Rangarajan Committee recommendation: Setting up of such system has been wanting as thoughtful and well-meaning key recommendations of the Rangarajan Commission and subsequent recommendations from 2006 onwards by successive National Statistical Commissions.

    Way forward

    • The need for a new system: The present national accounting and analytical framework miss out on many important dimensions of the economy.
      • We need a new framework for analysis for such a complex system and evolutionary process.
      • The system needs to take into account automation, robotisation and other labour-replacing technologies affecting profitability, structural change and general welfare.
    • Need to find alternative avenues for the unemployed and jobs lost: In order to inject efficiency and stability, there is a need to have detailed data on how: markets clear, prices are formed, risks build-up, institutions function and, in turn, influence the lifestyle of various sections of the people.
    • Knowing market microstructure: It is also needed to know in greater detail about market microstructure and optimality therein, the role of technology and advanced research, changing demand on human skills, and enterprise and organising ability.
    • Monopoly must be contained:  The loss caused to the economy through monopoly power, inefficient input-output mix, dumping, obsolete technology and product mix must be contained.
    • Ensure distribution of wealth: The consensus macroeconomic framework of analysis assumes symmetric income distribution and does not get into the depth of structural issues.
      • In the changed situation of availability of microdata, there is a need to build a system to integrate the micro with the macro, maintaining distributional characteristics.

    Conclusion

    Data is the new oil in the modern networked economy in pursuit of socio-economic development. The economics now is deeply rooted in data, measuring and impacting competitiveness, risks, opportunities and social welfare in an integrated manner, going much beyond macroeconomics. There is a need for commitment to producing these statistics transparently.

     

     

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  • Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

    [op-ed of the day] Equity’s weak pulse and commodified medicine

    op-ed snap | Governance | Mains Paper 2: Health & Education

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 2- Lack of coverage of the public health system, Role of private sector and regulation.

    Context

    As the government tries to overhaul the public health system in India, its time to take into account the advent and the role played by the private sector and its implications.

    The advent of the private sector

    • Increase in the role of the private sector in the post-Independence era: Post-Independence, the private sector increased its footprint in India.
      • Perpetual sub-optimal investments in public health allowed the private sector to capitalise, flourish, and increasingly gain the confidence of the masses.
      • The private sector went from having about 1,400 enterprises in 1950 to more than 10 lakh in 2010-11.
      • To doctors, this promised greater professional liberty, lesser restrictions, and higher incomes.
      • After liberalisation, the greater focus shifted to the lucrative tertiary-care sector and led to an onslaught of sophisticated private health care in cities.

    The dominance of the private sector and malpractices

    • The scale of dominance: Private sector has over 70% of the health-care workforce and 80% of allopathic doctors, has meant that it is scarcely possible for a health-care provider to function in defiance of its norms.
      • Pervasive malpractices: The pervasiveness of malpractices in this market has come to ensure that few could survive without condoning them.
      • Nexus of the private players: Players in this market, in much of their malpractices, have also learnt to function as a harmonious family.
      • Organised form to safeguard interest: The family plays its role in safeguarding its members, acquainting them with its norms and interests, and leveraging the power of its patriarchs to defend its interests in society.
      • Standards of success dictated by the markets: It is little wonder that the market has also come to dictate the avenues of aggrandisement and yardsticks of professional success for health-care professionals.
      • Benchmark of quality changed: Business finesse and social adroitness rather than clinical excellence and empathy become the touchstones of calibre in this market.

    Failure of the government

    • Absence of national system: The larger chunk of Indian health care (and health workforce) could not be brought under a “national system” having some form of overarching state control or involvement.
      • If such a system existed it could avail of essential health care without most people having to rely on a vagarious market, except as a luxury.
      • Example of the UK’s NHS: The National Health Service of the United Kingdom, remains the single largest health-care provider.
      • NHS employs nearly the entire health-care workforce.
      • NHS makes essential health care available to all practically free at the point of service.
    • Consequences of the absence of such system: The absence ensures is that the profit-driven private sector, the minor component, caters mainly to the affluent lot as largely a matter of deliberate choice rather than desperate compulsion.
      • Hopes of benefits of free-market belied: The Indian example, much like the United States’, bespeaks the failure of the idea that a free market will compel players to be more efficient.
      • The exploitation of the loops by the private players: Rather than increasing efficiency, the players have found it expedient to scrupulously exploit the prevailing cracks in the system and employ devious methods in order to maximise profits.

    Conclusion

    • Health-care providers, just like others, are moulded by their social surroundings. When necessary controls are loosened, the connatural vices are let loose; when the habitat is conducive to values, the right traits develop.
    • A system that starts off with health care as an overt tradable commodity it threatens the development of virtues in the system.
    • On the other hand, a system founded on the concept of equity cultivates a totally different culture of patient care.

     

     

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  • Make in India: Challenges & Prospects

    [op-ed snap] Why ‘Make in India’ has failed

    op-ed snap | Economics | Mains Paper 3: Issues relating growth and development, employment

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- 'Make in India' , its performance, and reasons for not delivering on the set goals.

    Context

    Five years after its launch its appropriate time to take the stock of the progress made by ‘Make in India’.

    Three major objectives of the initiative

    • First- Manufacturing growth rate at 12-14 %: The first objective is to increase the manufacturing sector’s growth rate to 12-14% per annum in order to increase the sector’s share in the economy.
    • Second-100 million jobs: The second objective is to create 100 million additional manufacturing jobs in the economy by 2022.
    • Third-increase manufacturing’s contribution to GDP to 25%: The third objective is to ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (revised to 2025) from the current 16%.

    Assessment of the progress made so far

    • As the policy changes were intended to usher growth in three key variables of the manufacturing sector — investments, output, and employment growth.
    • Progress on the investment front:
      • Slow growth: The last five years witnessed slow growth of investment in the economy.
      • This is more so when we consider capital investments in the manufacturing sector.
      • The decline in gross fixed capital formation: Gross fixed capital formation of the private sector declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14 (Economic Survey 2018-19).
      • Gross Fixed Capital Formation is the measure of aggregate investment.
      • Increase in private sector’s savings decrease in investment: Household savings have declined, while the private corporate sector’s savings have increased.
      • This is a scenario where the private sector’s savings have increased, but investments have decreased, despite policy measures to provide a good investment climate.
    • Progress on the output growth front:
      • Double-digit growth only in two quarters: The monthly index of industrial production (IIP) pertaining to manufacturing has registered double-digit growth rates only on two occasions during the period April 2012 to November 2019.
      • Below 3% for the most part: The data show that for a majority of the months, it was 3% or below and even negative for some months.
      • The negative growth implies a contraction of the sector.
    • Progress on the employment growth front:
      • No progress: The employment, especially industrial employment, has not grown to keep pace with the rate of new entries into the labour market.

    Problems with the policy

    • The initiative had two major lacunae.
    • First- Too much reliance on foreign capital: The bulk of these schemes relied too much on foreign capital for investments and global markets for produce.
      • This created an inbuilt uncertainty, as domestic production had to be planned according to the demand and supply conditions elsewhere.
    • Second-Lack of implementation: The policy implementers need to take into account the implications of implementation deficit in their decisions.
      • The result of such a policy oversight is evident in a large number of stalled projects in India.
      • The spate of policy announcements without having the preparedness to implement them is ‘policy casualness’.
      • ‘Make in India’ has been plagued by a large number of under-prepared initiatives.

    Three reasons why ‘Make in India’ failed to perform

    • Too-much ambitious goals: It set out too ambitious growth rates for the manufacturing sector to achieve.
      • Beyond capacity rate for the sector: An annual growth rate of 12-14% is well beyond the capacity of the industrial sector.
      • Overestimation of implementation capacity: To expect to build capabilities for such a quantum jump is perhaps an enormous overestimation of the implementation capacity of the government.
    • Dealing with too many sectors: The initiative brought in too many sectors into its fold.
      • Lack of policy focus: Bringing in too many sectors under its fold led to a loss of policy focus.
      • Lack of understanding of comparative advantages: Further, it was seen as a policy devoid of any understanding of the comparative advantages of the domestic economy.
    • Ill-timed launch
      • Given the uncertainties of the global economy and ever-rising trade protectionism, the initiative was spectacularly ill-timed.

    Conclusion

    • In order to revive the ‘Make in India’ there is a need to make necessary changes in the policy and root out the causes associated with the policy implementation.

     

     

     

     

     

     

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  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    [op-ed snap] A farm wish list for the budget

    op-ed snap | Agriculture | Mains Paper 3: Issues Related To Farm Subsidies & Msp,PDS, Buffer Stock & Food Security

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3-Rationalization of subsidies on food in PDS and Fertilizers and need to reform them.

    Context

    As finance minister presents the budget the FM need to ensure transparency and to fully account for the food subsidy.

    The excess buffer stock and need to reform

    • A buffer stock norm and actual stock: A buffer stock norm is at 21.4 million tonnes (mt).
      • Actual stock far exceeds the norm: The actual stocks of grains with the central pool stood at 75.5 mt.
      • Which is 3.5 times what the government needs to hold.
    • The economic cost of the excess stock: At its economic cost, the value of the excess stocks with the government stands at Rs 1.6 lakh crore.
      • Potential for revenue: There is no better place to find revenue for the FM than to liquidate these stocks.
      • Need for the reform in grain management system: Unless the grain management system is reformed, the inefficiency of the grain management system will keep on increasing and the nation will suffer.

    Food subsidy reforms

    • Link food prices to procurement price: It is the time to revise the central issue of price and link it to the procurement price-say at half the procurement price.
      • Limit the population coverage: There is a need to limit this highly subsidised food of Rs 3/kg for rice and Rs 2/kg of wheat to say 40 per cent of the population.
      • Move to DBT: The real fundamental reform would be to move towards direct cash transfers for the intended beneficiaries of food subsidy.

    Fertiliser subsidy reforms

    • Imbalance in the subsidisation: The real problem of this sector is the imbalance in the policy of fertiliser subsidisation.
      • While urea (N) is subsidised to the extent of 75 per cent of its cost, phosphatic (P) and potassic (K) fertilisers are subsidised only to the tune of about 25 per cent of their cost.
    • Consequences of this imbalance: The result is the highly imbalanced use of N, P and K on farmers’ fields. Which results in
      • Giving a very low fertiliser-to-grain response ratio.
      • Degrading the soil.
      • Degrading underground water.
      • Degrading the environment with excessive nitrogen use.
      • Discouragement to natural farming: The current fertiliser subsidy discourages those who want to pursue natural farming as they don’t get subsidy anywhere near the amount chemical-based fertilisers do.
    • Reforms: There are two ways in which the fertiliser subsidy regime can be reformed.
      • Bring nitrogenous fertiliser under NBS: The solution to the imbalance in use is to bring nitrogenous fertilisers under the Nutrient Based Subsidy (NBS) scheme.
      • Cash transfer based on per hectare basis: The second option is to move towards direct cash transfers for fertilisers on a per hectare basis, with some adjustment for irrigated tracts.
      • 50,000 Crore saving: The above-mentioned reforms could result in the saving of Rs. 50,000 crores to the public exchequer.

    Way forward

    • Investing the savings where it matters the most: The savings from the reforms could be invested in-
      • Better water management, especially drip irrigation.
      • Infrastructure for agri-markets.
      • Solar trees: The investments could also be made in setting up the solar trees in the farm to harvest solar power on farmer’s fields with buyback agreements for surplus production.

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  • Digital India Initiatives

    [op-ed of the day] Business possibilities in a world of digital payments

    op-ed snap | Economics | Mains Paper 3: Indigenization Of Technology

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3-Potentials of UPI in increasing digital payments.

    Context

    UPI has brought digital payments to the common man and it has immense scope for growth.

    Zero MDR rate

    • Recently the finance minister made the announcement of the zero merchant discount rate (MDR) policy for payments through RuPay debit cards and Unified Payments Interface (UPI) instruments.
    • What does it mean? This policy dictates that when a consumer pays a merchant using RuPay or UPI, the bank may not charge the merchant a commission on the sale value that it usually charges a merchant.
    • Criticism of the move: Critics of this policy lament that it would begin to reverse the progress India has made in recent years to expand the digital payments network.

    Some facts and figures

    • Setting up of NPCI: In 2008 the National Payments Corporation of India (NPCI) was set up as an umbrella organization for operating retail payments and settlements in India. 
    • UPI:  In 2016, NPCI introduced UPI.
      • UPI has since registered 100 million users.
      • UPI now clocks more than 1 billion transactions every month.
    • Growth prospects for mobile payments: According to the NITI Aayog, mobile payments in India are expected to grow nearly 20-fold to $190 billion in the next three years.
    • Digital payment for the common man: There are 1 billion mobile phone users in India.
    • 420 million users have a feature phone, these users can use the *99# USSD service to dial into 13 different languages.
    • Which would connect them to UPI and brings digital payments to the common man.

    Need for innovation

    • We are far behind: India is far behind china, where 55% of spending is done digitally, compared to only 11% in India.
      • The outlook for future growth is mind-boggling.
      • There is a need for innovation at three levels.
    • First level-Adoption
      • A better understanding of human behaviour, technology, use cases and dis-use cases will facilitate the 10x growth necessary in adoption rates to cover the entire population.
    • Second level-Policy
      • The government has the rare opportunity to develop a data-centric understanding of how the economy conducts itself and uses money, and can set taxes accordingly.
    • Third level-Technology
      • Voice for authentication: At the technology level, there is an opportunity to use voice as a means for authentication and conduct transactions across multiple local languages.
      • Data analysis: Copious amounts of data from payment transactions can be analysed to understand user needs and develop personalized loans and financial solutions at scale.

    Taking UPI to Global Level

    • UPI in Singapore and UAE: The NCPI is gearing up to take UPI to other countries, beginning with Singapore and the United Arab Emirates.
      • NCPI is working with its counterpart in Singapore, the Network for Electronic Transfers for Singapore, to bring UPI live in Singapore.
    • The low hanging fruit is to provide payment solutions to Indians travelling abroad.
    • Competition with global peers: The bigger and tougher game is to increase its usage among local people in countries outside India.
      • This would put UPI in competition with the likes of PayPal and Skrill.

    Conclusion

    We have seen just the tip, albeit a very substantial tip, of the digital payments iceberg. In the coming years, young business leaders of today must learn to uncover the iceberg itself.

     

     

     

     

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  • Banking Sector Reforms

    [op-ed snap] When the FRDI Bill Returns

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- Reforms in banking sector and financial stability, Deposit Insurance and its significance.

    Context

    The amendments to the FRDI Bill, 2017—now renamed the Financial Sector Development and Regulation (Resolution) Bill, 2019—are being worked out.

    Three crucial issues

    • Specifics are being worked out in the bill on three crucial issues.
      • First issue: The first issue is regarding the increase in the deposit insurance cover of customers.
      • Second issue: To iron out the contentious issues related to the bail-in clause
      • Third issue: To decide whether this resolution framework should apply to the public sector banks.
    • Advantages of the move: At a time when the public sector banks have come under the stress of bad loans, increasing the deposit insurance coverage limit would be a welcome approach.
      • Increasing the depositor’s confidence: The move will reinforce depositors’ confidence in the banking system in general, and the public sector banks in particular.

    The issue of the government “ownership” of the banks and financial stability

    • Ownership of government: The role of the “ownership” of banks towards financial stability is a much-debated issue in the country.
      • RBI is positive about govt. ownership: The Reserve Bank of India (RBI) has attributed a positive role to the government ownership of banks in attaining financial stability.
      • The issue of competitive neutrality: Committee to Draft Code on the Resolution of Financial Firms has blamed govt. ownership for causing a “lack of competitive neutrality” in the financial sector.
      • Need of level playing field: Committee argued for the need of a “level playing field” for both the public and private sector financial firms for the sake of competitive neutrality.
      • The concept of an overarching resolution framework for all financial firms gained traction.

    Would the all-encompassing Resolution Corporation be efficacious?

    • The FRDI Bill, 2017 sought to amend as many as 20 legislations for the diverse financial sector in this country, which is regulated by various institutions, like-
      • RBI for the banks and the non-banking financial corporations.
      • Insurance Regulatory and Development Authority (IRDA) for the insurance markets,
      • Securities and Exchange Board of India (SEBI) for securities markets and mutual funds.
      • The Pension Fund Regulatory and Development Authority for pension funds.
    • The pertinent question
      • The pertinent question is whether an all-encompassing resolution corporation can be really efficacious for the much-discussed financial stability of this country.

     

    Fundamental issues

    • Neutrality of ownership
      • Different motives behind operations: While private financial institutions are predominantly governed by profit motives, for the public sector agencies, various social obligations, such as “financial inclusion,” assume primacy.
      • Reason for commoner’s confidence: It is the sense of the government’s involvement (or ownership) that has forged commoners’ confidence to park their financial savings with them.
      • The move may end up destabilising the financial sector: If the sovereign guarantee and resolving power are taken away from the government domain to some resolution corporation, it may destabilise the financial system.
    • The Bail-in clause
      • Deposit over 1 lakh included in bail-in mechanism: The FRDI Bill 2017 suggests that deposit amounts over and above the cover limit (which currently is at one lakh) will be included in the bail-in mechanism.
      • Further, despite the RBI’s caution against financial instability, short-term debts and uncategorised client assets are also currently under this mechanism.
      • The falling growth rate of deposits: These provisions and the bill per se came against the backdrop of the Financial Stability Report, 2017 that revealed a 3.3% drop in the year-on-year growth rate of deposits for all scheduled banks in the country.

    Conclusion

    In the context of decelerating financial stability, the government needs to undertake these resolution reforms with caution that the reforms do not end-up eroding depositors’ faith in the domestic financial institutions.

     

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  • Foreign Policy Watch: India-Pakistan

    [op-ed snap] Seize the summit

    op-ed snap | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Relations with Pakistan and need to resume the talks to resolve the issues.

    Context

    India announced that it will invite all heads of government of Shanghai Co-operation Organisation member countries, including Pakistan.

    Significance of the invitation

    • First since 2014: The summit will assume significance should Pakistan Prime Minister accept the invitation.
      • As it will be the first by a head of government or state of that country to India since former Prime Minister Nawaz Sharif attended the swearing-in ceremony of Prime Minister in 2014.
    • Hopes belied: Nothing came from that meeting and hopes created by the invitation were belied.
    • Failed attempts to engage: Attempts to engage after that failed, including at a previous SCO summit at Ufa in 2015.

    Latest events that further reduced the engagement

    • Pulwama attack: First, there was the February 2019 Pulwama attack, India’s Balakot response, and Pakistan’s counter-response.
    • Article 370: After India did away with Jammu & Kashmir’s special status, India and Pakistan have downgraded even their diplomatic presence in each other’s countries.
    • Both the countries withdrew their high commissioners after the Article 370 issue.
    • Trade stopped completely: Bilateral trade, which had managed to survive earlier shocks to relations, has stopped completely.

    Opportunities presented by SCO summit

    • “Inputs of all stakeholders”: In deciding whether to accept the invitation, the Pakistan PM will have to take into consideration “inputs of all stakeholders”.
    • A polite way of saying that the final yes or no will rest with the Pakistan Army.
    • A chance for a high-level meeting: Even if Imran Khan stays away and sends a minister instead, it would still be a chance for a high-level bilateral meeting.
    • The world wants India and Pakistan to engage: The world wants India and Pakistan to engage, and this was evident in the way the UNSC refused to take up the Kashmir issue, saying it was not the forum for it.
    • Opportunity for India to make a start: India has declared several times recently that it wants to peel away from historical foreign policy baggage.
      • India should make a start with Pakistan by making it possible for such a meeting to take place.
    • Making acceptance of invitation easier: India can make it easier for the Pakistan Prime Minister to accept the invitation.
    • Resuming trade: A start could be made by resuming trade, which has ground to a dead halt
    • Sending High Commissioner back: India can start by sending India’s High Commissioner back to his office in Islamabad.

     Conclusion

    The SCO summit presents an opportunity for both the countries to end the long hiatus in the relations which is essential for both the countries to resolve the long-standing issues and progress of both the countries.

     

     

     

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